<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
---------------
<TABLE>
<S> <C> <C>
PARKER & PARSLEY 82-I, LTD. PARKER & PARSLEY 86-C, LTD. PARKER & PARSLEY 89-A, L.P.
PARKER & PARSLEY 82-II, LTD. PARKER & PARSLEY 87-A, LTD. PARKER & PARSLEY 90-A, L.P.
PARKER & PARSLEY 83-A, LTD. PARKER & PARSLEY 87-B, LTD. PARKER & PARSLEY 90-B, L.P.
PARKER & PARSLEY 83-B, LTD. PARKER & PARSLEY PRODUCING PROPERTIES 87-A, LTD. PARKER & PARSLEY 90-B CONV., L.P.
PARKER & PARSLEY 84-A, LTD. PARKER & PARSLEY PRODUCING PROPERTIES 87-B, LTD. PARKER & PARSLEY 90-C, L.P.
PARKER & PARSLEY 85-A, LTD. PARKER & PARSLEY 88-A, L.P. PARKER & PARSLEY 90-C CONV., L.P.
PARKER & PARSLEY 85-B, LTD. PARKER & PARSLEY 88-B, L.P. PARKER & PARSLEY 91-A, L.P.
PARKER & PARSLEY 86-A, LTD. PARKER & PARSLEY PRODUCING PROPERTIES 88-A, L.P. PARKER & PARSLEY 91-B, L.P.
PARKER & PARSLEY 86-B, LTD.
</TABLE>
(Name of the Issuer)
PIONEER NATURAL RESOURCES USA, INC.
(Name of Person(s) Filing Statement)
LIMITED PARTNERSHIP INTERESTS
(Title of Class of Securities)
Scott D. Sheffield WITH COPIES TO:
Pioneer Natural Resources USA, Inc. Robert L. Kimball
1400 Williams Square West Vinson & Elkins L.L.P.
5205 North O'Connor Blvd. 3700 Trammell Crow Center
Irving, Texas 75039 2001 Ross Avenue
(972) 444-9001 Dallas, Texas 75201
(214) 220-7700
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
This statement is filed in connection with (check the appropriate box):
a. [X] The filing of solicitation materials or an information
statement subject to Regulation 14A, Regulation 14C, or Rule
13e-3(c) under the Securities Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities
Act of 1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: [X]
CALCULATION OF FILING FEE
- --------------------------------------------------------------------------------
Transaction Valuation (1) Amount of Filing Fee (2)
------------------------- ------------------------
$47,500,000 $9,500
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)
(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
Amount previously paid: $9,500
Form or registration no.: Schedule 14A - Preliminary Proxy Statement
Filing Party: Pioneer Natural Resources USA, Inc.
Dated filed: __________, 1999
(1) For purposes of calculating the fee only. The transaction value is
based on the payment of approximately $47,500,000 by Pioneer Natural Resources
USA, Inc. to the partners of participating limited partnerships, other than
Pioneer USA, assuming 100% participation by those partnerships in the mergers.
(2) One fiftieth of one percent of the transaction value.
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<PAGE> 2
INTRODUCTION
This statement is filed by Pioneer Natural Resources USA, Inc., a
Delaware corporation and the affiliate of the issuer of the class of equity
securities that is the subject of the Rule 13e-3 transaction ("Pioneer USA").
Pioneer USA, its parent company Pioneer Natural Resources Company and 25
publicly-held limited partnerships in which Pioneer USA serves as general
partner (the "Partnerships"), have entered into an agreement and plan of merger
dated _______, 1999 (the "Merger Agreement"). Under the Merger Agreement, the
Partnerships will be merged with and into Pioneer USA and the partners of each
Partnership, other than Pioneer USA, will be entitled to receive an amount of
cash based on the Partnership's merger value. The merger value of each
Partnership is equal to its reserve value and its net working capital, in each
case as of June 30, 1999.
Concurrently with the filing of this statement, Pioneer USA is filing a
preliminary proxy statement with the Securities and Exchange Commission relating
to the solicitation of proxies for a special meeting of limited partners of the
Partnerships to be held to vote on a proposal to approve and adopt the Merger
Agreement and the transactions contemplated by the Merger Agreement. A copy of
the proxy statement is attached as Exhibit A hereto and is incorporated herein
by reference in its entirety. The cross reference sheet which follows shows the
location in the proxy statement of the information required to be included in
response to the items of this statement.
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<PAGE> 3
CROSS REFERENCE SHEET
(PURSUANT TO GENERAL INSTRUCTION F TO SCHEDULE 13E-3)
<TABLE>
<CAPTION>
SCHEDULE 13E-3 ITEM NUMBER AND CAPTION CAPTION IN PROXY STATEMENT
-------------------------------------- --------------------------
<S> <C>
Item 1. Issuer and Class of Security Subject to the
Transaction
(a)....................................................... Notice of Special Meeting of Limited Partners;
Summary
(b)....................................................... The exact title of the securities subject to the Rule 13e-
3 transaction are limited partnership interests.
Appendix A, Table 1
(c)....................................................... Summary -- Benefits to the Limited Partners --
Liquidity
(d)....................................................... Summary -- Benefits to the Limited Partners --
Acceleration of Value from Distributions; Appendix A,
Tables 4 and 6
(e)....................................................... *
(f)....................................................... Risk Factors -- Repurchase Rights Terminate on
Completion of the Mergers; Appendix A, Table 7
Item 2. Identity and Background This statement is filed by Pioneer USA, which is an
affiliate of the issuer of the class of equity securities
that is the subject of the Rule 13e-3 transaction.
Pioneer USA is incorporated in Delaware and is
engaged in the business of exploring for and producing
oil and gas. Its principal executive offices are located
at 1400 Williams Square West, 5205 North O'Connor
Blvd., Irving, Texas 75039.
(a)....................................................... Management
(b)....................................................... Management
(c)....................................................... Management
(d)....................................................... Management
(e) and (f)............................................... None of the persons with respect to whom information
is provided in response to this Item was, during the last
five years, convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors)
or was, during the last five years, a party to a civil
proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or
final order enjoining further violations of, or
prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
(g)....................................................... Each of the natural persons with respect to whom
information is provided in response to this Item is a
United States citizen.
</TABLE>
- --------------------------
* Inapplicable or answer negative
+ To be filed by amendment
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<PAGE> 4
<TABLE>
<CAPTION>
SCHEDULE 13E-3 ITEM NUMBER AND CAPTION CAPTION IN PROXY STATEMENT
-------------------------------------- --------------------------
<S> <C>
Item 3. Past Contacts, Transactions or
Negotiations
(a)(1).................................................... *
(a)(2).................................................... Special Factors -- Background of the Mergers
(b)....................................................... Special Factors -- Background of the Mergers
Item 4. Terms of the Transaction
(a)....................................................... Summary; The Mergers; The Merger Agreement
(b)....................................................... The Special Meetings -- Record Date; Voting Rights
and Proxies; -- Required Vote; Broker Non-Votes
Item 5. Plans or Proposals of the Issuer or Upon the consummations of the proposed Rule 13e-3
Affiliate transaction (the mergers), the separate existence of the
participating limited partnerships will cease.
(a)....................................................... *
(b)....................................................... Transactions Among the Partnerships, Pioneer, Pioneer
USA and Their Directors and Officers
(c)....................................................... *
(d)....................................................... *
(e)....................................................... *
(f)....................................................... The Mergers -- Termination of Registration and
Reporting Requirements
(g)....................................................... The Mergers -- Termination of Registration and
Reporting Requirements
Item 6. Source and Amounts of Funds or
Other Consideration
(a)....................................................... The Mergers -- Source of Funds
(b)....................................................... The Mergers -- Payment of Expenses
(c)....................................................... The Mergers -- Source of Funds
(d)....................................................... *
Item 7. Purpose(s), Alternatives, Reasons and
Effects
(a)....................................................... Special Factors -- Reasons for the Mergers
(b)....................................................... Special Factors -- Alternative Transactions to the
Mergers
(c)....................................................... Special Factors -- Background of the Mergers; --
Reasons for the Mergers
(d)....................................................... Summary -- Benefits to the Limited Partners; The
Mergers -- General; -- Distribution of Cash
Consideration; -- Material U.S. Federal Income Tax
Consequences; -- Accounting Treatment; -- No
Appraisal or Dissenter Rights
</TABLE>
- -------------------
* Inapplicable or answer negative
+ To be filed by amendment
-4-
<PAGE> 5
<TABLE>
<CAPTION>
SCHEDULE 13E-3 ITEM NUMBER AND CAPTION CAPTION IN PROXY STATEMENT
-------------------------------------- --------------------------
<S> <C>
Item 8. Fairness of the Transaction
(a)....................................................... Special Factors -- Recommendation of Pioneer USA
(b)....................................................... Special Factors -- Reasons for the Mergers; --
Recommendation of Pioneer USA; -- Fairness
Opinion; -- Alternative Transactions to the Mergers
(c)....................................................... The Special Meetings -- Record Date; Voting Rights
and Proxies; -- Required Vote, Broker Non-Votes
(d)....................................................... Risk Factors -- You Were Not Independently
Represented in Establishing the Terms of the Mergers;
Special Factors -- Fairness Opinion
(e)....................................................... Special Factors -- Recommendation of Pioneer USA;
Interests of Pioneer, Pioneer USA and Their Directors
and Officers -- Conflicting Duties of Pioneer USA,
Individually and as General Partner
(f)....................................................... *
Item 9. Reports, Opinions, Appraisals and
Certain Negotiations
(a)....................................................... Special Factors -- Fairness Opinion
(b)....................................................... Special Factors -- Fairness Opinion
(c)....................................................... A copy of the opinion of Robert A. Stanger & Co., Inc.
is attached as Appendix C to the Proxy Statement.
Item 10. Interest in Securities of the Issuer
(a)....................................................... Ownership of Partnership Interests
(b)....................................................... *
Item 11. Contracts, Arrangements or *
Understandings with Respect to the
Issuer's Securities
Item 12. Present Intention and
Recommendation of Certain Persons
with Regard to the Transaction
(a)....................................................... Special Factors -- Reasons for the Mergers; --
Recommendation of Pioneer USA; The Special
Meetings -- Time and Place; Purpose
(b)....................................................... Special Factors -- Reasons for the Mergers; --
Recommendation of Pioneer USA
Item 13. Other Provisions of the Transaction
(a)....................................................... The Mergers -- No Appraisal or Dissenter Rights
(b)....................................................... Special Factors -- Fairness Opinion; The Mergers --
Opinion of Limited Partners' Counsel
(c)....................................................... *
</TABLE>
- ------------
* Inapplicable or answer negative
+ To be filed by amendment
-5-
<PAGE> 6
<TABLE>
<CAPTION>
SCHEDULE 13E-3 ITEM NUMBER AND CAPTION CAPTION IN PROXY STATEMENT
-------------------------------------- --------------------------
<S> <C>
Item 14. Financial Information
(a)(1).................................................... Information supplements for each partnership
(a)(2).................................................... Information supplements for each partnership
(a)(3).................................................... *
(a)(4).................................................... Information supplements for each partnership
(b)....................................................... *
Item 15. Persons and Assets Employed,
Retained or Utilized
(a)....................................................... *
(b)....................................................... The Special Meetings -- Solicitation of Proxies
Item 16. Additional Information See the Proxy Statement.
Item 17. Material to be Filed as Exhibits Exhibit List
(a)....................................................... Exhibit 10.1. Credit Facility from which funds to pay
limited partners will be borrowed.
(b)....................................................... Exhibit 99.1. Opinion of Robert A. Stanger & Co., Inc.
dated _______, 1999 (attached to the Proxy Statement
as Appendix C).
(c)....................................................... *
(d)....................................................... Exhibit 99.2. Preliminary copies of Notice of Special
Meetings of Limited Partners and Proxy Statement
dated _________, 1999 for the Special Meetings of
Limited Partners to be held on or about December ___,
1999.
(e)....................................................... *
(f)....................................................... + Proxy solicitor agreement
</TABLE>
- -----------------
* Inapplicable or answer negative
+ To be filed by amendment
-6-
<PAGE> 7
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Date: September 8, 1999
-----------------------------
By: /s/ MARK L. WITHROW
------------------------------
MARK L. WITHROW, Executive
Vice President, General
Counsel and Secretary
of Pioneer Natural
Resources USA, Inc.
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<PAGE> 8
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
------- ------------
<S> <C>
10.1 Credit Facility from which funds to pay limited partners
will be borrowed.
99.2 Preliminary copies of Notice of Special Meetings
of Limited Partners and Proxy Statement dated __________,
1999 for the Special Meetings of Limited Partners to be
held on or about December __________, 1999.
</TABLE>
<PAGE> 1
[PRIMARY CREDIT FACILITY]
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SECOND AMENDED AND RESTATED CREDIT FACILITY AGREEMENT
by and among
PIONEER NATURAL RESOURCES COMPANY,
as BORROWER,
and
NATIONSBANK, N.A.,
as ADMINISTRATIVE AGENT,
and
CIBC INC.,
as DOCUMENTATION AGENT,
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as DOCUMENTATION AGENT,
and
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as SYNDICATION AGENT,
THE CO-AGENTS SIGNATORY HERETO,
and
THE OTHER LENDERS SIGNATORY HERETO
Dated as of March 19, 1999
---------------------
NATIONSBANC MONTGOMERY SECURITIES LLC,
as LEAD ARRANGER and BOOK MANAGER
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<PAGE> 2
SECOND AMENDED AND RESTATED CREDIT FACILITY AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT FACILITY AGREEMENT (herein
called this "Amendment and Restatement"), is made as of March 19, 1999, by and
among PIONEER NATURAL RESOURCES COMPANY, a Delaware corporation (the
"Borrower"), NATIONSBANK, N.A., as successor-by-merger to NationsBank of Texas,
N.A., as Administrative Agent and Collateral Agent, CIBC INC., as Documentation
Agent, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent, CHASE
BANK OF TEXAS, NATIONAL ASSOCIATION, as successor-in-interest to The Chase
Manhattan Bank, as Syndication Agent, the "Co-Agents" party to the Credit
Agreement (as herein defined), and the other Lenders from time to time parties
to the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders, the Managing Agents, the Collateral
Agent and the Co- Agents have heretofore entered into a certain Amended and
Restated Credit Facility Agreement - Primary Credit Facility, dated as of
December 18, 1997, as previously amended (herein the "Credit Agreement"); and
WHEREAS, the Borrower, the Lenders, the Managing Agents, the Collateral
Agent and the Co- Agents now intend to amend and restate the Credit Agreement;
and
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, each of the Borrower, the Lenders, the Managing
Agents, the Collateral Agent and the Co-Agents hereby agree as follows:
SECTION 1. Defined Terms. All capitalized terms used but not otherwise
defined herein shall have the meanings given in the Credit Agreement, as amended
and restated by the Amendment and Restatement.
SECTION 2. Amendments to Credit Agreement. Effective as of Effective
Date, the Credit Agreement is hereby amended and restated in its current form
with the following amendments:
a. The definitions of "Amendment Fee Rate", "Applicable
Rating Level", "Consolidated Interest Expense", "EBITDAX",
"Eurodollar Margin" and "Facility Fee Rate" in Section 1.1 of
the Credit Agreement are hereby amended and restated to read
in their entirety as follows:
" "Amendment Fee Rate" means 37.5 basis points."
" "Applicable Rating Level" means the level set forth below that
corresponds to the lowest of ratings issued from time to time by
Moody's and S&P, as applicable to Borrower's senior, unsecured
long-term debt:
<PAGE> 3
<TABLE>
<CAPTION>
=======================================================
Moody's S&P
- -------------------------------------------------------
<S> <C> <C>
Level I >= Baa3 >= BBB-
- -------------------------------------------------------
Level II Ba1 BB+
- -------------------------------------------------------
Level III Ba2 BB
- -------------------------------------------------------
Level IV <= Ba3 <= BB-
=======================================================
</TABLE>
For example, if the Moody's rating is Ba1 and the S&P rating is BB,
Level III shall apply.
For purposes of the foregoing, (i) ">=" means a rating more
favorable than or equal to; "<=" means a rating less favorable than or
equal to; (ii) if ratings for Borrower's senior unsecured long-term
debt shall not be available from S&P or Moody's, Level IV shall be
deemed applicable; (iii) if any of the Rating Agencies shall change its
ratings nomenclature prior to the date all Obligations have been paid
and the Commitments canceled, Borrower and the Lenders shall negotiate
in good faith to amend the references to specific ratings in this
definition to reflect such change, and pending such amendment, if an
appropriate Applicable Rating Level is otherwise not determinable based
upon the foregoing grid, the last Applicable Rating Level in effect at
the time of such change shall continue to apply."
" "Consolidated Interest Expense" means, for any period, total
interest expense, whether paid or accrued, of Borrower and its
Subsidiaries on a Consolidated basis, including, without limitation,
all commissions, discounts and other fees and charges owed with respect
to Letters of Credit."
" "EBITDAX" means, for any period the sum of the amounts for
such period of Consolidated net income (excluding gains and losses on
the sale of assets), Consolidated Interest Expense, depreciation
expense, depletion expense, amortization expense, federal and state
income taxes, exploration and abandonment expense and other non-cash
charges and expenses, all as determined on a Consolidated basis for
Borrower and its Subsidiaries.
" "Eurodollar Margin" means, on any date, with respect to each
Eurodollar Portion of a Revolving Loan, the sum of (i) the applicable
Senior Debt Margin plus (ii) the number of basis points per annum set
forth below based on the Applicable Rating Level and the applicable
Total Leverage Ratio:
<TABLE>
<CAPTION>
================================================================================
Total Leverage Ratio
- --------------------------------------------------------------------------------
Applicable 3.0 < "x" <= 4.0
Rating Level "x" <= 3.0 --- "x" > 4.0
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Level I 112.5 b.p. 125.0 b.p. 150.0 b.p.
- --------------------------------------------------------------------------------
Level II 137.5 b.p. 150.0 b.p. 200.0 b.p.
- --------------------------------------------------------------------------------
Level III 162.5 b.p. 187.5 b.p. 225.0 b.p.
- --------------------------------------------------------------------------------
Level IV 200.0 b.p. 225 b.p. 250.0 b.p.
- --------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 4
Changes in the Eurodollar Margin will occur automatically without prior
notice (x) upon the effectiveness of any change of the Applicable
Rating Level and (y) three (3) days following the earlier of (A) the
date the Borrower delivers the certificate in respect of the previous
Fiscal Quarter required pursuant to the second sentence of Subsection
5.1(b)(1) (provided that for purposes of this definition, the Borrower
shall be permitted to deliver a certificate sixty (60) days following a
Fiscal Year containing the information to be included in the
certificate to be delivered pursuant to Section 5.1(b)(1) except based
upon unaudited financial statements for such Fiscal Year) or 5.1(b)(2),
as the case may be and (B) sixty (60) days following the end of such
previous Fiscal Quarter in the event of a change in the Total Leverage
Ratio; provided that so long as the Debt Reduction Requirement is not
satisfied, the Eurodollar Margin shall be based on a Total Leverage
Ratio of greater than 4.0 to 1.0. Administrative Agent will give notice
promptly to Borrower and the Lenders of changes in the Eurodollar
Margin."
" "Facility Fee Rate" means, on any date that a facility fee is
due pursuant to Section 2.7, the number of basis points per annum set
forth below based on the Applicable Rating Level on such date;
provided, that notwithstanding the provisions of Section 2.7, the
facility fee payable to each Lender at the Facility Fee Rate pursuant
to Section 2.7 for any period shall be payable on the average daily
unused amount (which amount shall include any outstanding Swing Line
Advances or Competitive Bid Advances) of such Lender's Percentage Share
of the Facility Amount for such period:
<TABLE>
<CAPTION>
====================================================
Applicable Facility Fee Rate
Rating Level Margin
----------------------------------------------------
<S> <C>
Level I 37.5 b.p.
----------------------------------------------------
Level II 50.0 b.p.
----------------------------------------------------
Level III 50.0 b.p.
----------------------------------------------------
Level IV 50.0 b.p.
====================================================
</TABLE>
Changes in the Facility Fee Rate will occur automatically without prior
notice. Administrative Agent will give notice promptly to Borrower and
the Lenders of changes in the Facility Fee Rate."
b. Section 1.1 of the Credit Agreement is hereby amended by
inserting the following definitions of "Base Rate Margin",
"Consolidated Tangible Net Worth", " Debt Issuance", "Debt
Reduction Requirement", "Engineering Report", "Initial
Engineering Report", "Net Cash Proceeds", "Non-Recourse Debt",
"Properties", "Properties NPV", "Properties NPV to Total Debt
Ratio", "Public Notes", "Qualified Investments", "Security
Documents", "Senior Debt", "Senior Debt Margin", "Senior
Leverage Ratio", "Subordinated Debt" and "Total Leverage
Ratio" in appropriate alphabetical order:
3
<PAGE> 5
" "Base Rate Margin" means, on any date, with respect to each
Base Rate Portion of a Revolving Loan, the sum of (i) the applicable
Senior Debt Margin plus (ii) the greater of (A) the Eurodollar Margin
less 125 basis points or (B) zero."
" "Consolidated Tangible Net Worth" means (i) the Consolidated
shareholder's equity of Borrower and its Subsidiaries (determined in
accordance with GAAP), less (ii) the amount of Consolidated intangible
assets of Borrower and its Subsidiaries, plus (iii) the aggregate
amount of any non-cash write downs under Financial Accounting Standards
19, 109 and 121, on a consolidated basis, by Borrower and its
Subsidiaries after December 31, 1998."
" "Debt Issuance" means the sale or issuance after February 1,
1999, by Borrower or any Restricted Person of notes or other debt
securities for cash pursuant to a registration statement under the
Securities Act of 1933, as amended (the "Act"), or to qualified
institutional buyers in reliance on Rule 144A under the Act or pursuant
to a transaction effected as private placement pursuant to an exemption
to registration under the Act."
" "Debt Reduction Requirement" means that all of the following
requirements shall have occurred (i) the expiration or termination in
full of the commitments under, and the payment of all amounts under or
in respect of, the 364 Day Facility, (ii) the reduction of the
Commitments under this Agreement after February 1, 1999 by an aggregate
amount of at least $325,000,000 and the payment of all Consolidated
Total Funded Debt required to be paid as the result of such reduction
and (iii) the maintenance of the Total Leverage Ratio at less than or
equal to 4.25 to 1.00 for at least two consecutive Fiscal Quarters ,
except that solely for purposes of Subsection 2.9(g) hereof,
satisfaction of the Debt Reduction Requirement shall be determined
using the following clause (iii) in lieu of the foregoing clause (iii):
(iii) on the day on which the determination is made and after giving
pro forma effect to any transaction occurring on such day (including
repayment of Obligations to be made on such day) the ratio of (a)
Borrower's then Consolidated Total Funded Debt to (b) Borrower's
EBITDAX for the four (4) Fiscal Quarters most recently ended prior to
such day is less than or equal to 4.25 to 1, after adjusting such
EBITDAX on a pro forma basis for any assets or Property sold or
acquired after the beginning of such most recently ended four Fiscal
Quarters as if such assets or Property had been sold or acquired at the
beginning of such four most recently ended Fiscal Quarters; provided
that for purposes of the calculation in this clause (iii) for purposes
solely of Section 2.9(g) hereof, (1) EBITDAX for the four Fiscal
Quarters ending December 31, 1998 shall be deemed to be four times the
EBITDAX for the Fiscal Quarter ending on such date after adjusting such
EBITDAX on a pro forma basis for any assets or Property sold or
acquired after the beginning of such Fiscal Quarter as if such assets
or Property had been sold or acquired at the beginning of such Fiscal
Quarter, (2) EBITDAX for the four Fiscal Quarters ending March 31, 1999
shall be deemed to be two times the EBITDAX for the semi-annual period
ending on such date after adjusting such EBITDAX on a pro forma basis
for any assets or Property sold or acquired after the beginning of such
semi-annual period ending on such date as if such assets or Property
had been sold or acquired at the
4
<PAGE> 6
beginning of such semi-annual period ending on such date and (3)
EBITDAX for the four Fiscal Quarters ending June 30, 1999 shall be
deemed to be the product of 4/3rds times EBITDAX for the three Fiscal
Quarters ending on such date after adjusting such EBITDAX on a pro
forma basis for any assets or Property sold or acquired after the
beginning of such three Fiscal Quarters as if such assets or Property
had been sold or acquired at the beginning of such three Fiscal
Quarters."
" "Engineering Report" means the Initial Engineering Report and
each other engineering report delivered pursuant to Section 5.1(b)(4)."
" "Initial Engineering Report" means that certain engineering
report, delivered to the Administrative Agent on February 26, 1999
concerning the Properties."
" "Net Cash Proceeds" means the cash or cash equivalent proceeds
received by the Borrower or any Restricted Person as a result of (i) an
issuance of common stock, preferred stock or other equity of the
Borrower or any Restricted Person, (ii) a Debt Issuance, or (iii) a
sale of Property of Borrower or any Restricted Person, in each case
after deducting all of the following, as applicable, (a) legal fees
paid or reimbursed by Borrower or any Restricted Person and allocable
to such transaction, (b) underwriters' discounts, initial purchasers'
discounts, placement agent's fees, brokers' commissions and other
discounts, commissions or fees incurred in connection with such
transaction, to the extent paid or reimbursed by Borrower or any
Restricted Person, (c) registration fees, printer's fees and other
costs of sale paid or reimbursed by Borrower or any Restricted Person
in connection with such transaction, and (d) any reserves maintained by
Borrower or any Restricted Person for any closing cost adjustments or
similar contingencies in connection with such transaction. Proceeds of
any such transaction consisting of notes, stock, securities or other
non-cash assets or property shall not be included as Net Cash Proceeds;
provided, however, any cash or cash equivalents received as a result of
the sale, pledge or transfer of any such note, stock, securities or
other non-cash assets or property or as a payment on account of or
otherwise realized on account of principal or capital of any note,
stock, securities or other non-cash assets or property (but not
dividends, interest or operating income in respect of any assets or
property) shall be treated as cash or cash equivalent proceeds received
by Borrower or a Restricted Person at the time such cash or cash
equivalent is received by Borrower or any Restricted Person."
" "Properties" means, at the particular time in question, all
material oil and gas properties and reserves (which properties and
reserves shall be free of any Liens other than Permitted Liens) of the
Borrower and the Subsidiaries at such time and that were evaluated in
the Initial Engineering Report or, if applicable, the Engineering
Report and other information most recently provided by Borrower
pursuant to Section 5.1(b)(4)."
" "Properties NPV" means, at the particular time in question,
the net present value of the Borrower's and the Subsidiaries' proved
reserves included in the Properties set forth in either (i) the Initial
Engineering Report or (ii) if applicable, the Engineering Report most
recently provided by Borrower pursuant to Section 5.1(b)(4)."
5
<PAGE> 7
" "Properties NPV to Total Debt Ratio" means at any time the
ratio of (a) the Properties NPV to (b) Borrower's Total Debt."
" "Public Notes" means each of the following: (i) Borrower's
$150,000,000 8 7/8% Senior Notes due 2005, (ii) Borrower's $150,000,000
8 1/4% Senior Notes due 2007, (iii) Borrower's $350,000,000 6.50%
Senior Notes due 2008, (iv) Borrower's $250,000,000 7.20% Senior Notes
due 2028, together with all guaranties thereof and all notes issued
from time to time in replacement therefor and (v) any other publicly
tradeable notes, bonds or debentures outstanding as of February 1,
1999, which notes, bonds or debentures by their terms require that they
be secured equally and ratably with any collateral under this
Agreement."
" "Qualified Investments" means (i) the purchase by Borrower or
one of its Subsidiaries of Properties constituting proved reserves, or
(ii) capital expenditures made by Borrower or one of its Subsidiaries
to maintain, enhance or develop Properties constituting proved reserves
owned by Borrower or one of its Subsidiaries."
" "Security Documents" means, collectively, the Mortgage, Deed
of Trust, Assignment, Security Agreement and Financing Statement from
the Borrower or any of its Subsidiaries as the case may be, granted to
a Collateral Agent selected by the Administrative Agent and reasonably
acceptable to Borrower to secure equally and ratably the Obligations
and the Public Notes, substantially in the form attached hereto as
Exhibit Q with appropriate insertions (with any modifications necessary
to comply with applicable state laws or filing requirements), and any
and all further documents, financing statements, agreements and
instruments which may be required under applicable law, or which the
Agent may reasonably request, in order to satisfy the requirements of
Section 5.1(n)."
" "Senior Debt" means Total Funded Debt of the Borrower and its
Subsidiaries, other than Total Funded Debt that is Subordinated Debt."
" "Senior Debt Margin" means, on any date, the number of basis
points per annum set forth below based on the Senior Leverage Ratio on
such date:
<TABLE>
<CAPTION>
====================================================================
Senior Leverage Ratio "x" <= 4.25 "x" > 4.25
--------------------------------------------------------------------
<S> <C> <C>
On or before August 3, 1999 0 b.p. 25.0 b.p.
--------------------------------------------------------------------
After August 3, 1999 0 b.p. 50.0 b.p.
====================================================================
</TABLE>
Changes in the Senior Debt Margin will occur automatically without
prior notice three (3) days following the earlier of (A) the date the
Borrower delivers the certificate in respect of the previous Fiscal
Quarter required pursuant to the second sentence of Subsection
5.1(b)(1) (provided that for purposes of this definition, the Borrower
shall be permitted to deliver a certificate sixty (60) days following a
Fiscal Year containing the information
6
<PAGE> 8
to be included in the certificate to be delivered pursuant to Section
5.1(b)(1) except based upon unaudited financial statements for such
Fiscal Year) or 5.1(b)(2), as the case may be and (B) sixty (60) days
following the end of such previous Fiscal Quarter; provided that so
long as the Debt Reduction Requirement is not satisfied, the Senior
Debt Margin shall be based on a Senior Leverage Ratio of greater than
4.25 to 1.0."
" "Senior Leverage Ratio" means at any time the ratio of (a)
Borrower's then Consolidated Senior Debt to (b) Borrower's EBITDAX;
provided that for purposes of the foregoing calculation, EBITDAX for
any Fiscal Quarter shall be deemed to be four times the EBITDAX for
such Fiscal Quarter."
" "Subordinated Debt" means all unsecured Debt of the Borrower
for money borrowed which is subordinated in right of payment to the
payment of all Obligations, upon customary terms satisfactory to the
Administrative Agent."
" "Total Leverage Ratio" means at any time the ratio of (a)
Borrower's then Consolidated Total Funded Debt to (b) Borrower's
EBITDAX; provided that for purposes of the foregoing calculation,
EBITDAX for any Fiscal Quarter shall be deemed to be four times the
EBITDAX for such Fiscal Quarter."
c. Section 1.1 of the Credit Agreement is hereby amended by
deleting the following definitions of "Commitment
Utilization", "Commitment Utilization Level" and
"Commitment Utilization Margin" in their entirety.
d. The definition of "Debt" in Section 1.1 of the Credit
Agreement is hereby amended by adding the following to the end
of clause (h) before the semicolon: "and the amount of
deferred revenue attributable to any forward sale of
production or Properties for which such Person has directly or
indirectly received payment in advance."
e. Section 2.9 of the Credit Agreement is hereby amended
and restated to read in its entirety as follows:
" Section 2.9 Termination and Reduction of Commitments;
Mandatory Prepayments.
(a) Unless previously terminated, the Commitments shall
terminate on the Maturity Date.
(b) Borrower may at any time terminate, or from time to time
reduce, the Commitments; provided that (i) each reduction of the
Commitments shall be in an amount that is an integral multiple of
$1,000,000 and not less than $5,000,000 and (ii) Borrower shall not
terminate or reduce the Commitments if, after giving effect to any
concurrent prepayment of the Loans in accordance with Section 2.10, the
sum of (i) all Lenders' Revolving Loan Advances (including any
Revolving Loan Advances to be made but not yet made pursuant to a
Request for Advance) outstanding at any time plus (ii) the LC
7
<PAGE> 9
Obligations of all Lenders at such time plus (iii) all Swing Line
Advances to Borrower plus (iv) all Lenders' Competitive Bid Advances
outstanding at such time, would exceed the total Commitments.
(c) Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under paragraph (b) of
this Section at least two Business Days prior to the effective date of
such termination or reduction, specifying such election and the
effective date thereof. Promptly following receipt of any notice, the
Administrative Agent shall advise the Lenders of the contents thereof.
Each notice delivered by Borrower pursuant to this Section shall be
irrevocable; provided that a notice of termination of the Commitments
delivered by Borrower may state that such notice is conditioned upon
the effectiveness of other credit facilities, in which case such notice
may be revoked by Borrower (by notice to the Administrative Agent on or
prior to the specified effective date) if such condition is not
satisfied. Any termination or reduction of the Commitments shall be
permanent.
(d) Upon the issuance of Debt permitted pursuant to Section
5.2(a)(5), (i) the Commitments automatically and permanently shall be
reduced by, (ii) the Loan Commitments of each Lender automatically and
permanently shall be reduced on a pro-rata basis in an amount
sufficient to reduce the aggregate amount of such Loan Commitments by,
and (iii) the Borrower shall make a mandatory prepayment on the Loans
on or within ten (10) days of such issuance in, an amount equal to 100%
of the Net Cash Proceeds received by Borrower in connection with such
issuance.
(e) Upon the issuance of any common stock, preferred stock or
other equity of the Borrower or any Restricted Subsidiary, (i) the
Commitments automatically and permanently shall be reduced by, and the
Loan Commitments of each Lender automatically and permanently shall be
reduced on a pro-rata basis in an amount sufficient to reduce the
aggregate amount of such Loan Commitments by, an amount equal to 50% of
the Net Cash Proceeds received by Borrower in connection with such
issuance and (ii) the Borrower shall make a mandatory prepayment on the
Loans on or within ten (10) days of such issuance in an amount equal to
75% of the Net Cash Proceeds received by Borrower in connection with
such issuance. In addition, unless Borrower provides evidence
acceptable to the Administrative Agent that the Borrower and its
Restricted Subsidiaries have made Qualified Investments in an amount of
at least 25% of the Net Cash Proceeds of such issuance on or within 120
days after the date of such issuance, then (x) the Commitments
automatically and permanently shall be reduced by and (y) the Loan
Commitments of each Lender automatically and permanently shall be
reduced on a pro-rata basis in an amount sufficient to reduce the
aggregate amount of such Loan Commitments by an amount equal to the
difference of 25% of the Net Cash Proceeds received by Borrower in
connection with such issuance minus the amount of such Qualified
Investments of such proceeds by the Borrower and its Restricted
Subsidiaries during such 120 day period.
8
<PAGE> 10
(f) Upon the sale, transfer, conveyance or assignments of any
Properties of Borrower or its Restricted Subsidiaries, (i) the
Commitments automatically and permanently shall be reduced by, and (ii)
the Loan Commitments of each Lender automatically and permanently shall
be reduced on a pro-rata basis in an amount sufficient to reduce the
aggregate amount of such Loan Commitments by, 100% of the Net Cash
Proceeds in excess of $25,000,000 in the aggregate for all such sales
after February 1, 1999 received by Borrower in connection with such
sale, transfer, assignment or conveyance and the Borrower shall make
mandatory prepayments on the Loans on or within ten (10) days of such
sale, transfer, assignment or conveyance to the extent necessary so
that after giving effect to such mandatory prepayments the sum of (a)
all Lenders' Revolving Loan Advances (including any Revolving Loan
Advances to be made but not yet made pursuant to a Request for Advance)
outstanding at any time plus (b) the LC Obligations of all Lenders at
such time plus (c) all Swing Line Advances to Borrower plus (d) all
Lenders' Competitive Bid Advances outstanding at such time, would not
exceed the total Commitments.
(g) Notwithstanding anything to the contrary contained in this
Agreement, no reduction in the Commitments or Loan Commitments shall be
required pursuant to the provisions of paragraphs (d), (e), and (f) of
this Section 2.9 to the extent that, and so long as, the Borrower has
satisfied the Debt Reduction Requirement and no Default has occurred
and is continuing.
(h) Notwithstanding any other provision of this Agreement, if
during the period commencing February 1, 1999 and ending December 31,
1999 the aggregate reductions in Commitments pursuant to the foregoing
subsections of this Section 2.9 is less than $325,000,000, on December
31, 1999 the Commitments shall be automatically reduced by the
remainder of (i) $325,000,000 minus (ii) the total of all reductions in
the Commitment pursuant to the foregoing subsections of this Section
2.9 during such period, and Borrower shall make a mandatory prepayment
on December 31, 1999 in an amount sufficient to cause the sum of (i)
all Lenders' Revolving Loan Advances (including any Revolving Loan
Advances to be made but not yet made pursuant to a Request for Advance)
outstanding at such time plus (ii) the LC Obligations of all Lenders at
such time plus (iii) all outstanding Swing Line Advances to Borrower
plus (iv) all Lenders' Competitive Bid Advances outstanding at such
time not to exceed the Total Commitments after giving effect to such
reduction.
(i) Each reduction in Commitments pursuant to this Section 2.9
shall be made ratably among the Lenders in accordance with their
respective Commitments on the date of such reduction.
(j) To the extent that the Canadian Credit Facility contains
requirements to reduce the Commitment Amount (as defined in the
Canadian Credit Facility) and the Commitments (as defined in the
Canadian Credit Facility) and to make prepayments in the circumstances
described in the foregoing subsections (d), (e) and (f) of this Section
2.9,
9
<PAGE> 11
then the percentages 100%, 75% and 25%, respectively, in such
subsections (d), (e) and (f) shall be deemed reduced to 80%, 60% and
20%, respectively."
f. Section 4.1(h) of the Credit Agreement is hereby
amended by inserting at the end of Section 4.1(h) the
following sentence:
"There are no statements or conclusions in any Engineering Report which
are based upon or include misleading information or fail to take into
account material information regarding the matters reported therein, it
being understood that (1) each Engineering Report is necessarily based
upon professional opinions, estimates and projections and (2) Borrower
does not warrant that such opinions, estimates and projections will
ultimately prove to have been accurate."
g. Section 5.1(b) of the Credit Agreement is hereby
amended by inserting after Section 5.1(b)(3) of the Credit
Agreement the following Sections 5.1(b)(4):
" (4) By August 15th and February 15th of each Fiscal Year,
an Engineering Report prepared by the Borrower
covering all Properties constituting proved reserves
as of June 30th and December 31st, respectively, of
such Fiscal Year, based upon the Designated Lenders'
Assumptions. No later than thirty (30) days prior to
the date that an Engineering Report is required to be
delivered by Borrower pursuant to this subsection
5.1(b)(4), Administrative Agent (i) shall have
obtained from each of NationsBank, N.A., CIBC Inc.,
Morgan Guaranty Trust Company of New York, and Chase
Bank of Texas, National Association, as successor-in-
interest to The Chase Manhattan Bank, which is a
Lender under this Agreement on such day, each such
Lender's assumptions regarding future commodity
prices, including, as applicable, annual escalations
thereof or average prices for each future year, and
such Lender's discount factor for discounting to
present value future net revenues in each case as
utilized by such Lender in making its normal and
customary evaluation of the net present value of oil
and gas reserves of its borrowers generally and (ii)
shall have determined and provided to the Borrower
the average of such future price assumptions and
discount factors provided to the Administrative Agent
by such Lenders (such average being herein called the
"Designated Lenders' Assumptions").
h. Section 5.1 of the Credit Agreement is hereby amended
by inserting the following Section 5.1(n) after Section 5.1(m)
of the Credit Agreement:
" (n) Springing Lien. In the event that (i) any Event of
Default has occurred and is continuing or (ii) at any time after August
3, 1999 the sum of (A) aggregate Commitments under this Agreement plus
(B) the aggregate "Commitments" under the 364 Day Credit Facility,
exceeds $775,000,000, then, without affecting in any way any
10
<PAGE> 12
other rights of the Lenders hereunder, the Administrative Agent, at the
direction of the Required Lenders, may request that the Borrower, and
the Borrower agrees to:
(i) duly execute and deliver to the
Administrative Agent (or such other Person designated by the
Administrative Agent) the Security Documents and cause each
such Security Document to be filed, registered and recorded,
as the law may require or the Administrative Agent may
request, in each jurisdiction where so required or requested,
and deliver to the Administrative Agent an acknowledgment
copy, or other evidence satisfactory to it, of each such
filing, registration and recordation, in order to mortgage,
assign, grant a security interest in and pledge to the
Administrative Agent (or such other Person designated by the
Administrative Agent), acting on behalf of the Lenders, all of
the Borrower's and the Restricted Subsidiaries' right, title
and interest in and to the Properties located in the United
States, and the proceeds thereof, having a Properties NPV, as
of the date of the most recent Engineering Report, of 80% of
the aggregate Properties NPV attributable to Properties
located in the United States (the "Collateral") in such
request, and to perfect and evidence the first priority of all
such Security Documents (subject to liens and encumbrances
permitted by the terms of such instruments); provided that the
Borrower shall not, and shall not permit any of its
Subsidiaries to, on or after the Effective Date enter into any
amendment of any such contract or agreement, or enter into any
other contract or agreement, that in either case would result
in any additional such material consent, authorization or
approval requirement; and
(ii) deliver to the Administrative Agent,
within 30 days of such request for delivery of the Security
Documents (or, if a Person other than the Administrative Agent
is to act as collateral agent under the Security Documents, if
later, within fifteen (15) days of the designation and
acceptance by such Person of the collateral agency), evidence
acceptable to the Administrative Agent, in its reasonable
discretion, indicating that Security Documents covering 80% of
the Properties NPV attributable to the Properties located in
the United States have been executed, acknowledged, filed,
registered and recorded, as the law may require or the Agent
may request, in each jurisdiction where so required or
requested.
Borrower further agrees to execute, or cause its Subsidiaries to
execute, any and all further documents, financing statements,
agreements and instruments, and take all further actions (including
filing Uniform Commercial Code financing statements), which may be
required under applicable law, or which the Administrative Agent may
reasonably request, in order to effectuate the transactions
contemplated by this Section 5.1(n) and in order to grant, preserve,
protect and perfect the validity and first priority of any security
interests created pursuant to the Security Documents. Borrower will
also provide and cause its Subsidiaries to provide at their own expense
to the Administrative Agent such title records or opinions as may be in
the files of Borrower or its Subsidiaries and operating agreements and
other instruments and documents relating to the Properties covered by
the Security
11
<PAGE> 13
Documents then in the possession of the Borrower or any Subsidiary as
the Administrative Agent may reasonably request. At such time as no
Event of Default is continuing and Borrower is satisfying the Debt
Reduction Requirement, upon request by Borrower to Administrative
Agent, Administrative Agent shall advise the Collateral Agent, pursuant
to the terms of the Security Documents, to terminate all Security
Documents and release all Liens created thereby."
i. Subsection 5.2(a)(5) of the Credit Agreement is
hereby amended and restated to read in its entirety as
follows:
" (5) Debt, other than Debt otherwise permitted by
another subparagraph of this Section 5.2(a), which,
at the time incurred, is (i) at prevailing market
rates of interest and contains covenants and
conditions and events of default no more onerous to
Designated Entities than the terms of this Agreement;
provided, that no Default or Event of Default either
(A) exists at the time of the issuance of such Debt
and (B) will result from, and be continuing after,
the incurrence of such Debt; provided further, that
in the case of a Debt Issuance, if Borrower is not
satisfying the Debt Reduction Requirement immediately
prior to the incurrence of Debt under such Debt
Issuance, such Debt shall have a final maturity after
August 7, 2002 and be on terms and conditions
reasonably acceptable to the Administrative Agent."
j. Section 5.2(e) of the Credit Agreement is amended and
restated to read in its entirety as follows:
" (e) Limitation on Dividends and Other Restricted
Payments. The Borrower will not and will not permit
any of its Subsidiaries to pay or declare dividends
(other than stock dividends) on, or repurchase, the
Borrower's capital stock in excess of $10,000,000 in
the aggregate for all such payments and purchases in
any Fiscal Year. Borrower will not, and will not
permit any Restricted Subsidiary to, make any other
Restricted Payments in excess of $5,000,000 in the
aggregate for all such Restricted Payments during any
Fiscal Year; provided, however, that in the event
that any Unrestricted Subsidiary of Borrower is
redesignated to be a Restricted Subsidiary of
Borrower for purposes of this Agreement, then for
purposes of redetermining compliance with this
Section, all Restricted Payments made to such
Unrestricted Subsidiary shall be deducted from the
aggregate total of all Restricted payments made
during such Fiscal Year. No Restricted Payment may be
made (1) if the Obligations shall exceed the Facility
Amount, (2) if any Default or Event of Default shall
have occurred and be continuing, or (3) if as a
result thereof, any Default or Event of Default shall
occur and be continuing."
12
<PAGE> 14
k. Subsection 5.2 of the Credit Agreement is amended by
adding the following Section 5.2(m).
"(m) "At any time that the Borrower is not satisfying the
Debt Reduction Requirement, the Borrower will not,
and will not permit any of its Subsidiaries to, sell,
transfer, assign or otherwise convey any Property
(other than to the Borrower or one of its
Subsidiaries) to the extent the aggregate value of
non-cash consideration for all sales, transfers,
assignments and other conveyances of any Property
(other than to the Borrower or one of its
Subsidiaries) received on and after February 1, 1999
has exceeded or would exceed $25,000,000 in the
aggregate. As used herein, the term "non-cash
consideration" means any consideration given by or on
behalf of the purchaser of Property other than cash,
any cash equivalent or any other asset to the extent
that at the time in question such other asset has
been converted (by collection, sale or otherwise)
into cash or any cash equivalent. The value of any
such non-cash consideration shall be its fair market
value at the time that the contract for such sale,
transfer, assignment or other conveyance is entered
into, which fair market value shall be determined (i)
by reference to market quotations in the case of
publicly traded securities or other consideration of
the type which is subject to market quotations, (ii)
if clause (i) is not applicable, by the value for
such consideration set forth in such contract by the
parties or (iii) if neither (i) or (ii) is
applicable, by a resolution of the board of directors
of the Borrower.
l. Section 5.3(a) of the Credit Agreement is hereby
amended and restated to read in its entirety as follows:
" (a) Senior Leverage Ratio. Borrower's Consolidated Senior
Leverage Ratio will not (i) as of the last day of the Fiscal Quarters
ending March 31, 1999, June 30, 1999 and September 30, 1999, be greater
than 5.75 to 1.0, (ii) as of the last day of the Fiscal Quarters ending
December 31, 1999 and March 31, 2000, be greater than 4.25 to 1.0, and
(iii) as of the last day of any Fiscal Quarter ending on or after June
30, 2000, be greater than 3.50 to 1.00."
m. Section 5.3(b) of the Credit Agreement is hereby
amended and restated to read in its entirety as follows:
" (b) Total Leverage Ratio. Borrower's Consolidated Total
Leverage Ratio will not (i) as of the last day of all Fiscal Quarters
ending prior to June 30, 2000, be greater than 5.75 to 1.00, and (ii)
as of the last day of any Fiscal Quarter ending on or after June 30,
2000, be greater than 4.25 to 1.00."
n. Section 5.3 of the Credit Agreement is hereby amended
by inserting after Section 5.3(b) of the Credit Agreement the
following Sections 5.3(c) and 5.3(d):
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<PAGE> 15
" (c) Minimum Consolidated Tangible Net Worth. Borrower
will not permit its Consolidated Tangible Net Worth as of the end of
any Fiscal Quarter, commencing with the Fiscal Quarter ending March 31,
1999, to be less than (i) $600,000,000 plus (ii) an amount equal to 50%
of the sum of Borrower's and its Subsidiaries' Consolidated net income
for each Fiscal Quarter, beginning with the Fiscal Quarter ending March
31, 1999, during which such Consolidated net income is greater than $0
plus (iii) an amount equal to 85% of the net cash proceeds received by
the Borrower and its Subsidiaries from the issuance of any common
stock, preferred stock or other equity for each Fiscal Quarter,
beginning with the Fiscal Quarter ending March 31, 1999.
(b) Properties NPV to Total Debt Ratio. Borrower's
Properties NPV to Total Debt Ratio will not as of the end of any Fiscal
Quarter ending either June 30th or December 31st, commencing with the
Fiscal Quarter ending December 31, 1998, be less than 1.25 to 1.00."
o. The Credit Agreement is hereby amended by replacing
Exhibit I to the Credit Agreement with Exhibit I to this
Amendment and Restatement.
p. The Credit Agreement is hereby amended by replacing
Exhibit J to the Credit Agreement with Exhibit J to this
Amendment and Restatement.
q. The Credit Agreement is hereby amended by inserting
Exhibit Q to this Amendment and Restatement as Exhibit Q to
the Credit Agreement following Exhibit P to the Credit
Agreement.
r. The Credit Agreement is hereby amended by replacing
Schedule 3 to the Credit Agreement with Schedule 3 to this
Amendment and Restatement.
s. The Credit Agreement is hereby amended by replacing
Schedule 4 to the Credit Agreement with Schedule 4 to this
Amendment and Restatement.
t. Schedule 5 to the Credit Agreement is hereby amended
by replacing Schedule 5 to the Credit Agreement with Schedule
5 to this Amendment and Restatement.
SECTION 3. Additional Commitments. In the event that Canadian Imperial
Bank of Commerce, The Bank of Nova Scotia, Royal Bank of Canada, The Chase
Manhattan Bank of Canada, Morgan Guaranty Trust Company of New York,
NationsBank, N.A., The Toronto-Dominion Bank, First Union National Bank, and
Wachovia Bank, N.A., or their respective Affiliates shall each agree to increase
their Commitments hereunder by $37,954,477, $37,954,477, $37,954,477,
$33,210,167, $33,210,167, $33,210,167, $33,210,167, $14,232,929, and
$14,232,929, respectively, (such Lenders and their Affiliates herein the
"Increasing Lenders") by advising the Administrative Agent in writing that they
have so agreed to increase their Commitments hereunder and the Canadian Credit
Facility is terminated by the Effective Date of this Amendment and Restatement,
then (i) the Credit Agreement is further amended as provided in this Section 3,
(ii) the Increasing Lenders (but not the other Lenders) shall make a Revolving
Loan
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<PAGE> 16
Advance on the Effective Date (herein the "Effective Date Revolving Loan
Advance") equal to their respective pro rata share, which Effective Date
Revolving Loan Advance will be in an amount necessary to pay, and will be used
for the purpose of paying, the outstanding Obligations under the Canadian Credit
Facility, (iii) such Effective Date Revolving Loan Advances will be Revolving
Loan Advances for all purposes of the Credit Agreement, (iv) the Increasing
Lenders, the Borrower and the Administrative Agent will cooperate to select
Eurodollar Interest Periods for such Effective Date Revolving Loan Advances that
are similar to the Eurodollar Interest Periods for the Revolving Loan Advances
outstanding under the Credit Agreement on the Effective Date of this Amendment
and (v) the Borrower shall deliver to the Administrative Agent a Guaranty from
(A) Pioneer Natural Resources Canada, Inc., (B) Pioneer Natural Resources
(Argentina) S.A., and (C) Pioneer Natural Resources (Tierra del Fuego) S.A. If
such Increasing Lenders do not each so agree to increase their respective
Commitments hereunder by such date, then the provisions of this Section 3 only
of this Amendment and Restatement shall be of no force or effect.
A. The definition of Facility Amount in Section 1.1 of the Credit
Agreement is hereby amended and restated to read in its entirety as follows:
" "Facility Amount" means the aggregate amount of the
Commitments (which amount shall be $1,350,169,958 on March 19, 1999),
as such amount may be reduced from time to time pursuant to the terms
of this Agreement."
B. The Credit Agreement is amended by replacing Schedule 1 to the Credit
Agreement with Schedule 1 to this Amendment and Restatement.
C. In lieu of the definition of "Debt Reduction Requirement" added to the
Credit Agreement pursuant to Section 2.B above, the following definition shall
be added:
" "Debt Reduction Requirement" means that all of the following
requirements shall have occurred (i) the expiration or termination in
full of the commitments under, and the payment of all amounts under or
in respect of, the 364 Day Facility, (ii) the reduction of the
Commitments under this Agreement after February 1, 1999 by an aggregate
amount of at least $410,000,000 and the payment of all Consolidated
Total Funded Debt required to be paid as the result of such reduction
and (iii) the maintenance of the Total Leverage Ratio at less than or
equal to 4.25 to 1.00 for at least two consecutive Fiscal Quarters ,
except that solely for purposes of Subsection 2.9(g) hereof,
satisfaction of the Debt Reduction Requirement shall be determined
using the following clause (iii) in lieu of the foregoing clause (iii):
(iii) on the day on which the determination is made and after giving
pro forma effect to any transaction occurring on such day (including
repayment of Obligations to be made on such day) the ratio of (a)
Borrower's then Consolidated Total Funded Debt to (b) Borrower's
EBITDAX for the four (4) Fiscal Quarters most recently ended prior to
such day is less than or equal to 4.25 to 1, after adjusting such
EBITDAX on a pro forma basis for any assets or Property sold or
acquired after the beginning of such most recently ended four Fiscal
Quarters as if such assets or Property had been sold or acquired at the
beginning of such four most recently ended Fiscal Quarters; provided
that for purposes of the calculation in this clause (iii) for purposes
solely of Section 2.9(g) hereof, (1) EBITDAX for the four Fiscal
Quarters ending December 31, 1998 shall be
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<PAGE> 17
deemed to be four times the EBITDAX for the Fiscal Quarter ending on
such date after adjusting such EBITDAX on a pro forma basis for any
assets or Property sold or acquired after the beginning of such Fiscal
Quarter as if such assets or Property had been sold or acquired at the
beginning of such Fiscal Quarter, (2) EBITDAX for the four Fiscal
Quarters ending March 31, 1999 shall be deemed to be two times the
EBITDAX for the semi-annual period ending on such date after adjusting
such EBITDAX on a pro forma basis for any assets or Property sold or
acquired after the beginning of such semi-annual period ending on such
date as if such assets or Property had been sold or acquired at the
beginning of such semi-annual period ending on such date and (3)
EBITDAX for the four Fiscal Quarters ending June 30, 1999 shall be
deemed to be the product of 4/3rds times EBITDAX for the three Fiscal
Quarters ending on such date after adjusting such EBITDAX on a pro
forma basis for any assets or Property sold or acquired after the
beginning of such three Fiscal Quarters as if such assets or Property
had been sold or acquired at the beginning of such three Fiscal
Quarters."
D. In lieu of Subsection 2.9(h) added to the Credit Agreement pursuant to
Section 2.E above, the following Subsection 2.9(h) shall be added:
" (h) Notwithstanding any other provision of this
Agreement, if during the period commencing March 19, 1999 and ending
December 31, 1999 the aggregate reductions in Commitments pursuant to
the foregoing subsection of this Section 2.9 is less than $410,000,000,
on December 31, 1999 on such date the Commitments shall be
automatically reduced by the remainder of (i) $410,000,000 minus (ii)
the total of all reductions in the Commitment pursuant to the foregoing
subsections of this Section 2.9 on or prior to December 31, 1999, and
Borrower shall make a mandatory prepayment on December 31, 1999 in an
amount sufficient to cause the sum of (i) all Lenders' Revolving Loan
Advances (including any Revolving Loan Advances to be made but not yet
made pursuant to a Request for Advance) outstanding at such time plus
(ii) the LC Obligations of all Lenders at such time plus (iii) all
Swing Line Advances to Borrower plus (iv) all Lenders' Competitive Bid
Advances outstanding at such time not to exceed the Total Commitments
after giving effect to such reduction."
E. In lieu of the Subsection 5.1(n) added to the Credit Agreement pursuant
to Section 2H above, the following subsection shall be added:
" (n) Springing Lien. In the event that (i) any Event of
Default has occurred and is continuing or (ii) at any time after August
3, 1999 the sum of (A) aggregate Commitments under this Agreement plus
(B) the aggregate "Commitments" under the 364 Day Credit Facility,
exceeds $1,050,000,000, then, without affecting in any way any other
rights of the Lenders hereunder, the Administrative Agent, at the
direction of the Required Lenders, may request that the Borrower, and
the Borrower agrees to:
(i) duly execute and deliver to the
Administrative Agent (or such other Person designated by the
Administrative Agent) the Security Documents and cause each
such Security Document to be filed, registered and
16
<PAGE> 18
recorded, as the law may require or the Administrative Agent
may request, in each jurisdiction where so required or
requested, and deliver to the Administrative Agent an
acknowledgment copy, or other evidence satisfactory to it, of
each such filing, registration and recordation, in order to
mortgage, assign, grant a security interest in and pledge to
the Administrative Agent (or such other Person designated by
the Administrative Agent), acting on behalf of the Lenders,
all of the Borrower's and the Restricted Subsidiaries' right,
title and interest in and to the Properties located in the
United States, and the proceeds thereof, having a Properties
NPV, as of the date of the most recent Engineering Report, of
80% of the aggregate Properties NPV attributable to Properties
located in the United States (the "Collateral") in such
request, and to perfect and evidence the first priority of all
such Security Documents (subject to liens and encumbrances
permitted by the terms of such instruments); provided that the
Borrower shall not, and shall not permit any of its
Subsidiaries to, on or after the Effective Date enter into any
amendment of any such contract or agreement, or enter into any
other contract or agreement, that in either case would result
in any additional such material consent, authorization or
approval requirement; and
(ii) deliver to the Administrative Agent,
within 30 days of such request for delivery of the Security
Documents (or, if a Person other than the Administrative Agent
is to act as collateral agent under the Security Documents, if
later, within fifteen (15) days of the designation and
acceptance by such Person of the collateral agency), evidence
acceptable to the Administrative Agent, in its reasonable
discretion, indicating that Security Documents covering 80% of
the Properties NPV attributable to the Properties located in
the United States have been executed, acknowledged, filed,
registered and recorded, as the law may require or the Agent
may request, in each jurisdiction where so required or
requested.
Borrower further agrees to execute, or cause its Subsidiaries to
execute, any and all further documents, financing statements,
agreements and instruments, and take all further actions (including
filing Uniform Commercial Code financing statements), which may be
required under applicable law, or which the Administrative Agent may
reasonably request, in order to effectuate the transactions
contemplated by this Section 5.1(n) and in order to grant, preserve,
protect and perfect the validity and first priority of any security
interests created pursuant to the Security Documents. Borrower will
also provide and cause its Subsidiaries to provide at their own expense
to the Administrative Agent such title records or opinions as may be in
the files of Borrower or its Subsidiaries and operating agreements and
other instruments and documents relating to the Properties covered by
the Security Documents then in the possession of the Borrower or any
Subsidiary as the Administrative Agent may reasonably request. At such
time as no Event of Default is continuing and Borrower is satisfying
the Debt Reduction Requirement, upon request by Borrower to
Administrative Agent, Administrative Agent shall advise the Collateral
Agent, pursuant to the terms of the Security Documents, to terminate
all Security Documents and release all Liens created thereby."
17
<PAGE> 19
F. Subsection 2.9(j) added to the Credit Agreement pursuant to Section 2E
above is deleted from the Credit Agreement in its entirety.
SECTION 4. Representations and Warranties. To confirm each Lender's
understanding concerning Borrower and its businesses, properties and
obligations, and to induce the Managing Agents, the Collateral Agent, the
Co-Agents and each Lender to enter into this Amendment and Restatement, the
Borrower hereby reaffirms to the Managing Agents, the Collateral Agent, the
Co-Agents and each Lender that, as of the date hereof, its representations and
warranties contained in Section 4.1 of the Credit Agreement (as amended by this
Amendment and Restatement) and in the other Loan Documents to which it is a
party (except to the extent such representations and warranties relate solely to
an earlier date) are true and correct and additionally represents and warrants
as follows:
A. The execution and delivery of this Amendment and Restatement and the
performance by the Borrower and the Restricted Subsidiaries of their
respective obligations under this Amendment and Restatement, the Credit
Agreement and the other Loan Documents, as amended hereby, are within
the Borrower's or such Restricted Subsidiaries' corporate or
partnership powers, have been duly authorized by all necessary
corporate or partnership action, have received all necessary
governmental approval (if any shall be required), and do not and will
not contravene or conflict with any provision of law or of the
Borrower's or such Restricted Subsidiaries' charter or bylaws or
partnership agreement or of any contractual restriction, law or
governmental regulation or court decree or order binding on or
affecting the Borrower or such Restricted Subsidiary.
B. This Amendment and Restatement and the Credit Agreement as amended
hereby are, and the other Loan Documents when duly executed and
delivered will be, legal, valid and binding obligations of the Borrower
and each Restricted Subsidiary which is a party hereto or thereto,
enforceable in accordance with their terms except as such enforcement
may be limited by bankruptcy, insolvency or similar laws of general
application relating to the enforcement of creditors' rights generally
and by general principles of equity.
SECTION 5. Conditions to Effectiveness. The effectiveness of this
Amendment and Restatement is conditioned upon receipt by the Administrative
Agent of all the following documents and items, each in form and substance
reasonably satisfactory to the Administrative Agent:
A. this Amendment and Restatement executed by the Borrower and
the Required Lenders.
B. Delivery of the Initial Engineering Report.
C. Payment to Administrative Agent for the account of each Lender
which executes and delivers a copy of this Amendment and
Restatement to the Administrative Agent on or before March 19,
1999, of a non-refundable amendment fee payable to each such
Lender determined by applying the Amendment Fee Rate to such
Lender's Percentage Share of the Facility Amount as of the
date of this Amendment and Restatement.
D. Payment to Administrative Agent for the account of NationsBanc
Montgomery Securities LLC, as sole arranger and book manager,
a non-refundable advisory fee in the amount set
18
<PAGE> 20
forth in that certain Commitment/Fee Letter, dated February 4,
1999 between NationsBanc Montgomery Securities LLC and the
Borrower.
E. Delivery of favorable opinions of counsel for Borrower and the
Restricted Subsidiaries, in form and substance acceptable to
the Administrative Agent, in its sole discretion.
F. Unless the Canadian Credit Facility shall have terminated, the
Required Lenders (as defined in the Canadian Credit Facility)
shall have consented to this Amendment, it being agreed by the
parties hereto that such consent may require reductions in
commitments and paydowns under the Canadian Credit Facility
similar to the reductions and paydowns required by Sections
2.9(d), (e) and (f) added by Section 2E above and to the
extent permitted by Section 2.9(j) added by Section 2E above.
H. Such other documents or items that the Administrative Agent
may reasonably request.
SECTION 6. Reaffirmation of Credit Agreement. This Amendment and
Restatement constitutes a "Loan Document" as defined in the Credit Agreement and
shall be deemed to be an amendment and restatement of the Credit Agreement, and
the Credit Agreement, as amended and restated hereby, is hereby ratified,
approved and confirmed in each and every respect. All references to the Credit
Agreement or the Credit Facility Agreement in any other document, instrument,
agreement or writing shall hereafter be deemed to refer to this Amendment and
Restatement.
SECTION 7. Parties in Interest. All grants, covenants and agreements
contained in this Amendment and Restatement shall bind and inure to the benefit
of the parties thereto and their respective successors and assigns; provided,
however, that no Restricted Subsidiary may assign or transfer any of its rights
or delegate any of its duties or obligations under this Amendment and
Restatement or any Loan Document without the prior written consent of all
Lenders.
SECTION 8. Counterparts. This Amendment and Restatement may be
separately executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to constitute one and the same Amendment and Restatement.
SECTION 9. GOVERNING LAW. THIS AMENDMENT AND RESTATEMENT AND THE OTHER
LOAN DOCUMENTS SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE UNDER THE LAWS OF
THE STATE OF TEXAS AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF
AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. CHAPTER 15 OF TEXAS
REVISED CIVIL STATUTES ANNOTATED ARTICLE 5069 (WHICH REGULATES CERTAIN REVOLVING
CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) DOES NOT APPLY TO THIS
AMENDMENT AND RESTATEMENT OR TO THE NOTES.
SECTION 10. Severability. If any term or provision of this Amendment
and Restatement or of any Loan Document shall be determined to be illegal or
unenforceable in any jurisdiction, such term or
19
<PAGE> 21
provision shall, as to such jurisdiction, be illegal or unenforceable, without
affecting the remaining terms or provisions in that jurisdiction or the legality
or enforceability of such terms or provisions in any other jurisdiction.
SECTION 11. WAIVER OF JURY TRIAL, PUNITIVE DAMAGES. EACH OF THE
BORROWER, AGENTS AND LENDERS HEREBY (I) IRREVOCABLY WAIVES, TO THE MAXIMUM
EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION, DIRECTLY OR INDIRECTLY, AT ANY TIME ARISING OUT OF,
UNDER OR IN CONNECTION WITH THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED
THEREBY OR ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY; (II) IRREVOCABLY
WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO
CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES; (III) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR
COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED
THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVERS; AND (IV) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO
THIS AMENDMENT AND RESTATEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS CONTAINED IN THIS SECTION.
SECTION 12. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AMENDMENT
AND RESTATEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENTS, THE
LENDERS OR THE BORROWER SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE
COURTS OF THE STATE OF TEXAS OR IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF TEXAS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE COLLATERAL
AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER
PROPERTY MAY BE FOUND. BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND THE UNITED STATES DISTRICT
COURT FOR THE NORTHERN DISTRICT OF TEXAS FOR THE PURPOSE OF ANY SUCH LITIGATION
AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH SUCH LITIGATION. BORROWER FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF TEXAS. FOR THE PURPOSE OF ANY
ACTION OR PROCEEDING INSTITUTED IN THE FEDERAL OR STATE COURTS OF TEXAS, EACH
RESTRICTED SUBSIDIARY OF THE BORROWER HEREBY IRREVOCABLY DESIGNATES BORROWER
WITH OFFICES ON THE DATE HEREOF AT 1400 WILLIAMS
20
<PAGE> 22
SQUARE WEST, 5205 NORTH O'CONNOR BOULEVARD, IRVING, TEXAS 75039 TO RECEIVE FOR
AND ON BEHALF OF SUCH RESTRICTED SUBSIDIARY, SERVICE OF PROCESS IN TEXAS.
BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY
FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH
SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION
OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, BORROWER HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AMENDMENT AND RESTATEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 13. Effectiveness. This Amendment and Restatement shall become
effective as of March 19, 1999 ("Effective Date"), when counterparts hereof
executed on behalf of the Borrower and the Required Lenders (or notice thereof
satisfactory to the Agent) shall have been received by the Administrative Agent,
and all conditions set forth in Section 4 hereof have been fulfilled.
SECTION 14. Entire Agreement. THIS WRITTEN AMENDMENT AND RESTATEMENT
AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
21
<PAGE> 23
IN WITNESS WHEREOF, this Amendment and Restatement is executed as of
the date first written above.
BORROWER:
PIONEER NATURAL RESOURCES
COMPANY
By:
-----------------------------------------
Name: M. Garrett Smith
Title: Executive Vice President and Chief
Financial Officer
S-1
<PAGE> 24
LENDERS:
NATIONSBANK, N.A., successor-by-merger
to NationsBank of Texas, N.A., individually
and as Administrative Agent and as Collateral
Agent
By:
-------------------------------------------
Name:
Title:
S-2
<PAGE> 25
CIBC INC., individually and as
Documentation Agent
By:
-------------------------------------------
Name:
Title:
S-3
<PAGE> 26
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, individually
and as Documentation Agent
By:
-------------------------------------------
Name:
Title:
S-4
<PAGE> 27
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as successor-in-interest to
The Chase Manhattan Bank, individually and as
Syndication Agent
By:
-------------------------------------------
Name:
Title:
S-5
<PAGE> 28
[SIGNATURE PAGE S-6 INTENTIONALLY OMITTED]
S-6
<PAGE> 29
THE BANK OF NEW YORK, individually
and as Co-Agent
By:
-------------------------------------------
Name:
Title:
S-7
<PAGE> 30
THE BANK OF NOVA SCOTIA,
individually and as Co-Agent
By:
-------------------------------------------
Name:
Title:
S-8
<PAGE> 31
ROYAL BANK OF CANADA, individually
and as Co-Agent
By:
-------------------------------------------
Name:
Title:
S-9
<PAGE> 32
UNION BANK OF CALIFORNIA, N.A.,
individually and as Co-Agent
By:
-------------------------------------------
Name:
Title:
S-10
<PAGE> 33
WELLS FARGO BANK, N.A.,
individually and as Co-Agent
By:
-------------------------------------------
Name:
Title:
S-11
<PAGE> 34
BANK ONE, TEXAS, N.A., individually
By:
-------------------------------------------
Name:
Title:
S-12
<PAGE> 35
DEN NORSKE BANK ASA, individually and
as Lead Manager
By:
-------------------------------------------
Name:
Title:
By:
-------------------------------------------
Name:
Title:
S-13
<PAGE> 36
PARIBAS, individually and as Lead Manager
By:
-------------------------------------------
Name:
Title:
By:
-------------------------------------------
Name:
Title:
S-14
<PAGE> 37
FIRST UNION NATIONAL BANK,
individually and as Lead Manager
By:
-------------------------------------------
Name:
Title:
S-15
<PAGE> 38
BANKERS TRUST COMPANY, as a Lender
By:
-------------------------------------------
Name:
Title:
S-16
<PAGE> 39
CREDIT AGRICOLE INDOSUEZ, as a
Lender
By:
-------------------------------------------
Name:
Title:
By:
-------------------------------------------
Name:
Title:
S-17
<PAGE> 40
NATEXIS BANQUE, as a Lender
By:
-------------------------------------------
Name:
Title:
By:
-------------------------------------------
Name:
Title:
S-18
<PAGE> 41
TORONTO DOMINION (TEXAS), INC., as
a Lender
By:
-------------------------------------------
Name:
Title:
S-19
<PAGE> 42
THE TOYO TRUST & BANKING CO.,
LTD., as a Lender
By:
-------------------------------------------
Name:
Title:
S-20
<PAGE> 43
WACHOVIA BANK, N.A., as a Lender
By:
-------------------------------------------
Name:
Title:
S-21
<PAGE> 44
THE DAI-ICHI KANGYO BANK, LTD.,
NEW YORK BRANCH, as a Lender
By:
-------------------------------------------
Name:
Title:
S-22
<PAGE> 45
THE SANWA BANK, LIMITED, as a
Lender
By:
-------------------------------------------
Name:
Title:
S-23
<PAGE> 46
KBC BANK N.V., as a Lender
By:
-------------------------------------------
Name:
Title:
By:
-------------------------------------------
Name:
Title:
S-24
<PAGE> 47
Exhibit I
Organization Chart of Borrower and its Subsidiaries
Exhibit I - Page 1
<PAGE> 48
Exhibit J
Form of Designated Officer's Certificate
Reference is made to (i) the Primary Credit Facility pursuant to that
certain Second Amended and Restated Credit Facility Agreement dated as of March
19, 1999, by and among Borrower, NationsBank, N.A., as Administrative Agent,
CIBC Inc., as Documentation Agent, Morgan Guaranty Trust Company of New York, as
Documentation Agent, Chase Bank of Texas, National Association, as
successor-in-interest to The Chase Manhattan Bank, as Syndication Agent, the
Co-Agents party thereto, and the Lenders from time to time parties thereto (the
"Primary Credit Agreement") and (ii) the 364 Day Credit Facility pursuant to
that certain Second Amended and Restated Credit Facility Agreement dated as of
March 19, 1999, by and among Borrower, NationsBank, N.A., as Administrative
Agent, CIBC Inc., as Documentation Agent, Morgan Guaranty Trust Company of New
York, as Documentation Agent, Chase Bank of Texas, National Association, as
successor-in-interest to The Chase Manhattan Bank, as Syndication Agent, the Co-
Agents party thereto, and the Lenders from time to time parties thereto (the
"364 Day Credit Agreement" and, together with the Primary Credit Facility, the
"Credit Agreements"). Terms which are defined in the Credit Agreements and which
are used but not defined herein are used herein with the meanings given them in
the Credit Agreements.
This Certificate is furnished pursuant to Section 5.1(b)(2) of the
Credit Agreements. Together herewith the Borrower is furnishing to Managing
Agents, the Co-Agents and each Lender the Borrower's [FINANCIAL STATEMENTS] (the
"Financial Statements") as of (the "Reporting Date"). The Borrower hereby
represents, warrants, and acknowledges to Agents and each Lender that:
(a) the Designated Officer of the Borrower signing this instrument
is a duly elected, qualified and acting officer of the
Borrower;
(b) the Financial Statements are accurate and complete and satisfy
the requirements of the Credit Agreements;
(c) attached as Schedule I hereto is a schedule of calculations
showing compliance (or noncompliance, as the case may be) as
of the Reporting Date with the requirements of Sections 5.2(e)
and 5.3 of the Credit Agreements; and
(d) on the Reporting Date, the Borrower was, and on the date
hereof the Borrower is, in full compliance with the disclosure
requirements of Section 5.1(d) of the Credit Agreements, and
no Default otherwise existed on the Reporting Date or
otherwise exists on the date of this Certificate [except for
Default(s) under Section(s)________ of the Credit Agreements,
which [is/are] more fully described on a schedule attached
hereto].
Exhibit J - Page 1
<PAGE> 49
The Designated Officer of the Borrower signing this instrument hereby
certifies that he has reviewed the Loan Documents and the Financial Statements
and has otherwise undertaken such inquiry as is in his opinion necessary to
enable him to express an informed opinion with respect to the above
representations, warranties and acknowledgments of the Borrower and, to the best
of his knowledge, such representations, warranties, and acknowledgments are
true, correct and complete.
PIONEER NATURAL RESOURCES
COMPANY
By:
-------------------------------------------
Name:
Title:
Date:
-----------------------------------------
Exhibit J - Page 2
<PAGE> 50
Schedule I
================================================================================
COMPLIANCE WITH COVENANTS AS OF . ($ in 000's)
-------------
================================================================================
A. SENIOR LEVERAGE RATIO =========
Minimum ratio allowed : 1
=========
B. TOTAL LEVERAGE RATIO =========
Minimum ratio allowed : 1
=========
C. CONSOLIDATED TANGIBLE NET WORTH =========
Minimum allowed
[D. PROPERTIES NPV TO TOTAL DEBT RATIO =========
Minimum ratio allowed : 1 ](1)
=========
E. RESTRICTED PAYMENTS DURING PRECEDING FISCAL QUARTER =========
================================================================================
COMPUTATION OF FINANCIAL REQUIREMENTS AND RATIOS AS OF
----------
================================================================================
A. SENIOR LEVERAGE RATIO (Section 5.3(a)) ($ in 000's)
(i) SENIOR DEBT:
(a) Consolidated Total Debt: $
----------
(b) Less Subordinated Debt: $
----------
SENIOR DEBT: $
---------
- -------------------
(1) Properties NPV to Total Debt Ratio only calculated for Fiscal Quarters
ending June 30th and December 31st of each Fiscal Year
Exhibit J - Page 3
<PAGE> 51
(ii) EBITDAX $
========
SENIOR LEVERAGE RATIO ((i)(ii))
========
Minimum ratio allowed :1
=========
B. TOTAL LEVERAGE RATIO (Section 5.3(B)) ($ in 000's)
(i) CONSOLIDATED TOTAL DEBT : $
--------
(ii) EBITDAX $
========
TOTAL LEVERAGE RATIO ((i)(ii))
========
Minimum ratio allowed :1
=========
C. CONSOLIDATED TANGIBLE NET WORTH (Section 5.3(c)) ($ in 000's)
CONSOLIDATED TANGIBLE NET WORTH
(i) Consolidated shareholder's equity of
Borrower and its Subsidiaries $
--------
(ii) Less Consolidated intangible assets of
Borrower and its Subsidiaries $
--------
(iii) Plus aggregate amount of any non-cash write downs,
on a consolidated basis, by Borrower and its
Subsidiaries $
--------
(iv) Plus 50% of the sum of Borrower's and its Subsidiaries
Consolidated net income for each Fiscal Quarter beginning
with the fiscal quarter ending March 31, 1999 $
--------
(iv) Plus 85% of the net cash proceeds received by the Borrower
and its Subsidiaries from the issuance of any common
stock, preferred stock or other equity for each Fiscal
Quarter beginning with the Fiscal Quarter ending
March 31, 1999. $
--------
CONSOLIDATED TANGIBLE NET WORTH $
========
Minimum allowed
========
[D. PROPERTIES NPV TO TOTAL DEBT RATIO ========
(i) PROPERTIES NPV $
--------
Exhibit J - Page 4
<PAGE> 52
(ii) TOTAL DEBT $
=======
PROPERTIES TO TOTAL DEBT RATIO ((i)(ii))
=======
Minimum ratio allowed :1 ](2)
=========
- -------------------------
(2) Properties NPV to Total Debt Ratio only calculated for Fiscal
Quarters ending June 30th and December 31st of each Fiscal
Year
Exhibit J - Page 5
<PAGE> 53
Exhibit Q
[Form of]
MORTGAGE, DEED OF TRUST, ASSIGNMENT, SECURITY
AGREEMENT AND FINANCING STATEMENT
FROM
---------------------------------
(Taxpayer I.D. No._________)
TO
____________________, Trustee
AND
____________________, Trustee
AND
______________________________,
as Collateral Agent
(Taxpayer I.D. No.________)
Dated as of ________________, 1999
- --------------------------------------------------------------------------------
"THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS."
"THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES."
"THE OIL AND GAS INTERESTS INCLUDED IN THE MORTGAGED PROPERTY WILL BE FINANCED
AT THE WELLHEADS OF THE WELLS LOCATED ON THE PROPERTIES DESCRIBED IN EXHIBIT A
HERETO, AND THIS FINANCING STATEMENT IS TO BE FILED FOR RECORD, AMONG OTHER
PLACES, IN THE REAL ESTATE RECORDS."
"THOSE PORTIONS OF THE MORTGAGED PROPERTY WHICH ARE MINERALS OR OTHER SUBSTANCES
OF VALUE WHICH MAY BE EXTRACTED FROM THE EARTH (INCLUDING, WITHOUT LIMITATION,
OIL AND GAS), AND THE ACCOUNTS RELATING THERETO, WILL BE FINANCED AT THE
WELLHEADS OF THE WELLS LOCATED ON THE PROPERTIES
Exhibit Q - Page 1
<PAGE> 54
DESCRIBED IN EXHIBIT A HERETO, AND THIS FINANCING STATEMENT IS TO BE FILED FOR
RECORD, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS."
"THE MORTGAGOR HAS AN INTEREST OF RECORD IN THE REAL ESTATE CONCERNED,
WHICH IS DESCRIBED IN EXHIBIT A HERETO."
"THIS INSTRUMENT IS A LINE OF CREDIT MORTGAGE."
"SOME OF THE PERSONAL PROPERTY CONSTITUTING A PORTION OF THE MORTGAGED PROPERTY
IS OR IS TO BE AFFIXED TO THE PROPERTIES DESCRIBED IN EXHIBIT A HERETO, AND THIS
FINANCING STATEMENT IS TO BE FILED FOR RECORD, AMONG OTHER PLACES, IN THE REAL
ESTATE RECORDS."
"A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF SALE MAY
ALLOW THE MORTGAGEE TO TAKE THE MORTGAGED PROPERTY AND SELL IT WITHOUT
GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE MORTGAGOR
UNDER THIS MORTGAGE."
"THE AMOUNT INVOLVED IS $200 OR MORE."
THIS INSTRUMENT WAS PREPARED BY AND
WHEN RECORDED AND/OR FILED
RETURN TO:
Francis R. Bradley, III, Esq.
Mayer, Brown & Platt
700 Louisiana, Suite 3600
Houston, TX 77002
Exhibit Q - Page 2
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MORTGAGE, DEED OF TRUST, ASSIGNMENT, SECURITY
AGREEMENT AND FINANCING STATEMENT
THIS MORTGAGE, DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND
FINANCING STATEMENT, dated as of , 1999, is from
_______________________________, a _________________ (herein called the
"Mortgagor"), to_________________________________ ____________________________
and __________________________, of _____________, _________________, as Trustees
(herein collectively called the "Trustees"), and ___________________, a
______________, having is principal place of business at ________________,
_____________ _____ as collateral agent (herein, in such capacity, together with
any successor(s) thereto in such capacity, called the "Collateral Agent") for
the Lenders and the Noteholders.
1. For all purposes of this instrument, unless the context otherwise
requires:
A. "Borrower" shall mean the "Borrower" as defined in the
Primary Credit Agreement (hereinafter defined) [and the 364-Day Credit Agreement
(hereinafter defined)].
B. "Credit Agreement Notes" shall mean the "Notes" as defined
in the Primary Credit Agreement [and the "Notes" as defined in the 364-Day
Credit Agreement].
C. "Encumbrance" shall mean any irregularity in title, lien,
security interest, pledge, charge, encumbrance, claim, burden or defect.
D. "Hydrocarbons" shall mean oil, gas and other liquid or
gaseous hydrocarbons.
E. "Indenture Notes" shall mean each of the following: (i)
Borrower's $150,000,000 8 7/8% Senior Notes due 2005, (ii) Borrower's
$150,000,000 8 1/4% Senior Notes due 2007, (iii) Borrower's $350,000,000 6.50%
Senior Notes due 2008, (iv) Borrower's $250,000,000 7.20% Senior Notes due 2028,
and (v) and other publicly tradeable notes, bonds or debentures outstanding as
of February 1, 1999, which notes, bonds or debentures by their terms require
that they be secured equally and ratably with this instrument.
F. "Indenture Trustees" means each of the trustees from time
to time appointed pursuant to the terms of any indenture or similar agreement
governing any of the Indenture Notes.
G. "lands described in Exhibit A" shall include any lands
which are either described in Exhibit A or the description of which is
incorporated in Exhibit A by reference to another instrument or document, and
shall also include any lands now or hereafter unitized or pooled with lands
which are either described in Exhibit A or the description of which is
incorporated in Exhibit A by reference.
H. "Lenders" shall mean the "Lenders" as defined in the
Primary Credit Agreement [and the "Lenders" as defined in the 364-Day Credit
Agreement].
I. "Mortgaged Property" shall mean the properties, rights and
interests hereinafter described and defined as the Mortgaged Property.
Exhibit Q - Page 3
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J. "Noteholders" means any owner or holder of any of the
Indenture Notes from time to time.
K. "oil and gas leases" shall include oil, gas and mineral
leases, subleases and assignments thereof, operating rights, and shall also
include subleases and assignments of operating rights.
L. "Operating Equipment" shall mean all surface or subsurface
machinery, goods, equipment, fixtures, inventory, facilities, supplies or other
property of whatsoever kind or nature (excluding drilling rigs, trucks,
automotive equipment or other property taken to the premises to drill a well or
for other similar temporary uses) now or hereafter located on or under any of
the lands described in Exhibit A which are useful for the production, gathering,
treatment, processing, storage or transportation of Hydrocarbons (together with
all accessions, additions and attachments to any thereof), including, but not by
way of limitation, all oil wells, gas wells, water wells, injection wells,
casing, tubing, tubular goods, rods, pumping units and engines, christmas trees,
platforms, derricks, separators, compressors, gun barrels, flow lines, tanks,
gas systems (for gathering, treating and compression), pipelines (including
gathering lines, laterals and trunklines), chemicals, solutions, water systems
(for treating, disposal and injection), power plants, poles, lines,
transformers, starters and controllers, machine shops, tools, storage yards and
equipment stored therein, buildings and camps, telegraph, telephone and other
communication systems, roads, loading docks, loading racks and shipping
facilities.
M. "Permitted Encumbrances" shall mean any or all of the
following:
(i) Lessors' royalties, overriding royalties,
production payments, net profits interests and similar burdens on
production from the Mortgaged Property;
(ii) Encumbrances that arise under operating
agreements to secure payment of amounts which are not delinquent and
are of a type and nature customary in the oil and gas industry;
(iii) Encumbrances that arise as a result of pooling
and unitization agreements, declarations, orders or laws to secure
payment of amounts which are not delinquent;
(iv) Encumbrances securing payments to mechanics and
materialmen and Encumbrances securing payment of taxes, assessments or
other governmental charges or levies that, in either case, are not
delinquent or, if delinquent, are being contested in good faith in the
normal course of business;
(v) consents to assignment by governmental
authorities (a) that are obtained on or prior to the date hereof or (b)
that are customarily obtained after the consummation of the
transactions of the nature contemplated by this instrument;
(vi) farmouts, after payment interest and
conventional rights of reassignment, of a type and nature customary in
the oil and gas industry, obligating the Mortgagor to assign or
reassign its interest in any portion of the Mortgaged Property to a
third party, including
Exhibit Q - Page 4
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in the event it intends to release or abandon such interest prior to
the expiration of the primary term or other termination of such
interest;
(vii) easements, rights-of-way, servitudes, permits,
surface leases, surface use restrictions and other surface uses and
impediments on, over or in respect of any of the Mortgaged Property
that are not such as to interfere materially with the operation, value
or use of any of the Mortgaged Property;
(viii) calls on or preferential rights to purchase
production, of a type and nature and at a pricing structure customary
in the oil and gas industry, held by parties other than the Mortgagor
and its Subsidiaries;
(ix) covenants, conditions and other terms of the oil
and gas leases and contracts, such covenants, conditions and terms of a
type and nature customary in the oil and gas business, included in the
Mortgaged Property;
(x) such Encumbrances as the Trustees have expressly
waived in writing;
(xi) rights reserved to or vested in any municipality
or governmental, tribal, statutory or public authority to control or
regulate any of the Mortgaged Property in any manner, and all
applicable laws, rules and orders of any municipality or governmental
or tribal authority;
(xii) such Encumbrances which are validly existing
and binding upon the Mortgagor's interest in the particular Mortgaged
Properties as of the date of this Mortgage;
(xiii) Encumbrances permitted pursuant to Section
5.2(b) of [either of] the Credit Agreement[s];
(xiv) judgment liens (A) in existence less than 15
days after the entry thereof or (B) which execution has been stayed or
the payment of which is covered in full (subject to a customary
deductible) by insurance;
(xv) contractual obligations terminable upon no more
than 90 days' prior notice to the counterparty thereunder providing for
the sale of Hydrocarbons produced from the Mortgaged Properties;
(xvi) Encumbrances created under this instrument; and
(xvii) all other Encumbrances affecting any portion
of the Mortgaged Property that individually or in the aggregate are not
such as to interfere materially with the operation, value or use of any
of the Mortgaged Property.
N. "Production Sale Contracts" shall mean contracts now in
effect, or hereafter entered into by the Mortgagor, or entered into by the
Mortgagor's predecessors in interest, for the sale,
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purchase, exchange, gathering, transportation, treating or processing of
Hydrocarbons produced from the lands described in Exhibit A attached hereto and
made a part hereof.
O. "Secured Indebtedness" shall have the meaning set forth in
Section 1.2 hereof.
NOW, THEREFORE, the Mortgagor, for and in consideration of the premises
and of the debts and trusts hereinafter mentioned, has granted, bargained, sold,
warranted, mortgaged, assigned, transferred and conveyed, and by these presents
does grant, bargain, sell, warrant, mortgage, assign, transfer and convey unto
the Trustees, in trust, with power of sale, for use and benefit of the
Collateral Agent for the equal and ratable benefit of the holders of the Secured
Indebtedness, all the Mortgagor's right, title and interest, whether now owned
or hereafter acquired, in and to all of the hereinafter described properties,
rights and interests; and, insofar as such properties, rights and interests
consist of equipment, general intangibles, accounts, contract rights, inventory,
fixtures, proceeds of collateral or any other personal property of a kind or
character defined in or subject to the applicable provisions of the Uniform
Commercial Code (as in effect in the appropriate jurisdiction with respect to
each of said properties, rights and interests), the Mortgagor hereby grants to
said Trustees, for the use and benefit of the Collateral Agent for the equal and
ratable benefit of the holders of the Secured Indebtedness, a security interest
therein; namely:
(a) the lands described in Exhibit A, and the oil and gas
leases, the fee, mineral, overriding royalty, royalty and other
interests which are specifically described in Exhibit A,
(b) the presently existing and (subject to the terms of
Section 2.6 hereof) hereafter arising unitization, unit operating,
communitization and pooling agreements and the properties covered and
the units created thereby (including, without limitation, all units
formed under orders, regulations, rules, approvals, decisions or other
official acts of any federal, state or other governmental agency having
jurisdiction) which are specifically described in Exhibit A or which
relate to any of the properties and interests specifically described in
Exhibit A,
(c) the Hydrocarbons which are in, under, upon, produced or to
be produced from the lands described in Exhibit A,
(d) the Production Sale Contracts, and
(e) the Operating Equipment,
together with any and all corrections or amendments to, or renewals, extensions
or ratifications of, or replacements or substitutions for, any of the same, or
any instrument relating thereto, and all accounts, contracts, contract rights,
options, nominee agreements, operating agreements, processing agreements, farmin
agreements, farmout agreements, joint venture agreements, exploration
agreements, bottomhole agreements, dryhole agreements, support agreements,
acreage contribution agreements, insurance policies, title opinions, title
abstracts, title materials and information, files, records, writings, data
bases, information, systems, logs, well cores, fluid samples, production data
and reports, well testing data and reports, maps, seismic and geophysical,
geological and chemical data and information, interpretative and analytical
reports of any kind or nature, including, without limitation, reserve studies
and reserve evaluations, (to the extent
Exhibit Q - Page 6
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the assignment or release of such agreements, opinions, data, information
systems, logs, cores, samples, and reports is not restricted by any contract or
agreement which is of a type and nature customary in the oil and gas industry)
rights-of-way, franchises, easements, servitudes, surface leases, permits,
licenses, tenements, hereditaments, appurtenances, general intangibles, rents,
issues, profits, products and proceeds, whether now or hereafter existing or
arising, used or useful in connection with, covering, relating to, or arising
from or in connection with, any of the aforesaid in this granting clause
referenced, and all other things of value and incident thereto (including,
without limitation, any and all liens, lien rights, security interests and other
rights and interests) which the Mortgagor might at any time have or be entitled
to, all the aforesaid properties, rights and interests, together with any
additions thereto which may be subjected to the lien and security interest of
this instrument by means of supplements hereto, being hereinafter called the
"Mortgaged Property."
Subject, however, to (i) the restrictions, exceptions, reservations,
conditions, limitations, interests and other matters, if any, set forth or
referred to in the specific descriptions of such properties and interests in
Exhibit A (including all presently existing royalties, overriding royalties,
payments out of production and other burdens which are referred to in Exhibit A
and which are taken into consideration in computing any percentage, decimal or
fractional interest as set forth in Exhibit A), any Permitted Encumbrances, (ii)
the assignment of production contained in Article III hereof, but only insofar
and so long as said assignment of production is not inoperative under the
provisions of Section 3.1 hereof, and (iii) the condition that none of the
Trustees, the Collateral Agent, the Agents, the Lenders, the Noteholders or any
part thereof shall be liable in any respect for the performance of any covenant
or obligation of the Mortgagor in respect of the Mortgaged Property.
TO HAVE AND TO HOLD the Mortgaged Property unto the Trustees forever to
secure the payment of the Secured Indebtedness and to secure the performance of
the obligations of the Mortgagor herein contained.
The Mortgagor, in consideration of the premises, hereby covenants and
agrees with the Trustees and the Collateral Agent as follows:
ARTICLE I
Indebtedness Secured
1.1 Items of Indebtedness Secured. The following items of indebtedness
are secured hereby:
(a) that certain Second Amended and Restated Credit Facility
Agreement - [Primary Facility], dated as of March 19, 1999, by and
among Pioneer Natural Resources Company (the "Borrower"), NationsBank,
N.A., as Administrative Agent (the "Administrative Agent"), CIBC Inc.,
as Documentation Agent, Morgan Guaranty Trust Company of New York, as
Documentation Agent, Chase Bank of Texas, National Association, as
successor-in-interest to The Chase Manhattan Bank, as Syndication
Agent, the Co-Agents party thereto, and the Lenders from time to time
parties thereto (herein, as the same may be amended, supplemented,
restated or otherwise modified, the "Primary Credit Agreement"), which
includes, without limitation, the Notes (as defined in the Primary
Credit
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Agreement), Obligations (as defined in the Primary Credit Agreement)
and liabilities of the Borrower under and in connection with the
Primary Credit Agreement;
(b) [that certain Second Amended and Restated Credit Facility
Agreement - [364-Day Facility], dated as of March 19, 1999, by and
among Borrower, the Administrative Agent, CIBC Inc., as Documentation
Agent, Morgan Guaranty Trust Company of New York, as Documentation
Agent, Chase Bank of Texas, National Association, as
successor-in-interest to The Chase Manhattan Bank, as Syndication
Agent, the Co-Agents party thereto, and the Lenders from time to time
parties thereto (herein, as the same may be amended, supplemented,
restated or otherwise modified, the "364-Day Credit Agreement", and
together with the Primary Credit Agreement, the "Credit Agreements"),
which includes, without limitation, the Notes (as defined in the
364-Day Credit Agreement), Obligations (as defined in the 364-Day
Credit Agreement) and liabilities of the Borrower under and in
connection with the 364-Day Credit Agreement;
(c)] The Indenture Notes;
(d) Any promissory note taken in extension or renewal of or in
replacement or substitution for any of the Credit Agreement Notes or
the Indenture Notes; and
(e) Any sums advanced or expenses or costs incurred by the
Trustees or the Collateral Agent which are made or incurred pursuant
to, or permitted by, the terms hereof, plus interest thereon at the
rate herein specified or otherwise agreed upon, from the date of the
advances or the incurring of such expenses or costs until reimbursed.
1.2 Secured Indebtedness Defined. All the above items of indebtedness
are hereinafter collectively referred to as the "Secured Indebtedness."
ARTICLE II
Particular Covenants and Warranties
of the Mortgagor
2.1 Payment of the Secured Indebtedness. The Mortgagor will duly and
punctually pay the Secured Indebtedness, including each and every obligation
owing on account of the Credit Agreement Notes and the Indenture Notes.
2.2 Warranties. The Mortgagor warrants and represents to the Trustees
and the Collateral Agent that (a) the oil and gas leases described in Exhibit A
hereto are valid, subsisting leases, superior and paramount to all other oil and
gas leases respecting the properties to which they pertain, (b) all producing
wells located on the lands described in Exhibit A have been drilled, operated
and produced in substantial compliance with all applicable laws, rules and
regulations of all authorities having jurisdiction and such wells are in fact
bottomed under and are producing from the lands described in Exhibit A or from
units in which such lands are unitized or pooled, (c) the Mortgagor has valid
and indefeasible title to each property right or interest constituting the
Mortgaged Property and has a good and legal right to grant and convey the same
to the Trustees, and (d) the Mortgaged Property is free from all encumbrances or
liens whatsoever, except for Permitted Encumbrances or as permitted by the
provisions of Section 2.5(f) hereof.
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The Mortgagor will warrant and forever defend the Mortgaged Property unto the
Trustees against every person whomsoever lawfully claiming the same or any part
thereof, and the Mortgagor will maintain and preserve the lien and security
interest hereby created so long as any of the Secured Indebtedness remains
unpaid.
2.3 Further Assurances. The Mortgagor will execute and deliver such
other and further instruments and will do such other and further acts as in the
opinion of the Trustees or the Collateral Agent may be necessary or desirable to
carry out more effectually the purposes of this instrument, including, without
limiting the generality of the foregoing, (a) proceeding with reasonable
diligence to promptly correct any Encumbrance which may hereafter be discovered
in the title to the Mortgaged Property other than Permitted Encumbrances, (b)
prompt correction of any defect in the execution and acknowledgment of this
instrument, and (c) prompt execution and delivery of all notices to parties
producing, purchasing or receiving proceeds of production from the Mortgaged
Property, and all division orders or transfer orders, any of which, in the
opinion of the Trustees or the Collateral Agent, is needed to transfer
effectually or to assist in transferring effectually to the Collateral Agent the
assigned proceeds of production from the Mortgaged Property.
2.4 Taxes. Subject to the Mortgagor's right to contest the same, the
Mortgagor will promptly pay all taxes, assessments and governmental charges
legally imposed upon this instrument or upon the Mortgaged Property, or upon the
interest of the Trustees or the Collateral Agent, or upon the income and profits
thereof.
2.5 Recording, etc. The Mortgagor will promptly, and at the Mortgagor's
expense, record, register, deposit and file this and every other instrument in
addition or supplemental hereto in such offices and places and at such times and
as often as may be necessary to preserve, protect and renew the lien and
security interest hereof as a first lien on and prior perfected security
interest in real or personal property, as the case may be, subject to the
Permitted Encumbrances, and the rights and remedies of the Trustees and of the
Collateral Agent, and otherwise will do and observe all things or matters
necessary or expedient to be done or observed by reason of any law or regulation
of any State or of the United States of America or of any other competent
authority, for the purpose of effectively creating, maintaining and preserving
the lien and security interest hereof on and in the Mortgaged Property, subject
to the Permitted Encumbrances.
2.6 Pooling and Unitization of Mortgaged Property. Mortgagor shall have
the right, and is hereby authorized, without notice or consent to pool or
unitize all or any part of any tract of land described in Exhibit A, insofar as
related to the Mortgaged Property, with adjacent lands, leaseholds and other
interests, or enter into joint exploration or development agreements, when, in
the reasonable judgment of the Mortgagor, it is necessary or advisable to do so
in order to form a drilling unit to facilitate the orderly development of that
part of the Mortgaged Property affected thereby, or to comply with the
requirements of any law or governmental order or regulation relating to the
spacing of wells or proration of the production therefrom. Any unit so formed
may relate to one or more zones or horizons, and a unit formed for a particular
zone or horizon need not conform in area to any other unit relating to a
different zone or horizon, and a unit formed for the production of oil need not
conform in area with any unit formed for the production of gas. Upon written
request of the Trustees or the Collateral Agent, Mortgagor shall make available
to the Trustee and the Collateral Agent copies of all such existing pooling
agreements, declarations of pooling or other instruments creating such units.
The interest in any such unit attributable
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to the Mortgaged Property (or any part thereof) included therein shall become a
part of the Mortgaged Property and shall be subject to the lien hereof in the
same manner and with the same effect as though such unit and the interest of the
Mortgagor therein were specifically described in Exhibit A.
2.7 Right of Entry. The Mortgagor will permit the Trustees and the
Collateral Agent, or the agents of any of them, to enter upon the Mortgaged
Property, and all parts thereof, for the purpose of investigating and inspecting
the condition and operation thereof.
ARTICLE III
Assignment of Production
3.1 Assignment. As further security for the payment of the Secured
Indebtedness, the Mortgagor hereby transfers, assigns, warrants and conveys to
the Collateral Agent for the equal and ratable benefit of the holders of Secured
Indebtedness, effective as of the date hereof, at 7:00 A.M., local time, all
Hydrocarbons which are thereafter produced from and which accrue to the
Mortgaged Property, and all proceeds therefrom. All parties producing,
purchasing or receiving any such Hydrocarbons, or having such, or proceeds
therefrom, in their possession for which they or others are accountable to the
Collateral Agent by virtue of the provisions of this Article, are authorized and
directed to treat and regard the Collateral Agent as the assignee and transferee
of the Mortgagor and entitled in the Mortgagor's place and stead to receive such
Hydrocarbons and all proceeds therefrom; and said parties and each of them shall
be fully protected in so treating and regarding the Collateral Agent and shall
be under no obligation to see to the application by the Collateral Agent of any
such proceeds or payments received by it. Notwithstanding the other provisions
of this Article including the foregoing provisions of this Section 3.1, the
Collateral Agent or any receiver appointed in judicial proceedings for the
enforcement of this instrument shall have the right to receive all of the
Hydrocarbons herein assigned and the proceeds therefrom only after any event of
default as described in the provisions of Section 4.1 hereof shall have occurred
and be continuing. Upon any sale of the Mortgaged Property or any part thereof
pursuant to Article V, the Hydrocarbons thereafter produced from the property so
sold, and the proceeds therefrom, shall be included in such sale and shall pass
to the purchaser free and clear of the assignment contained in this Article.
3.2 Application of Proceeds. All payments received by the Collateral
Agent pursuant to Section 3.1 hereof shall be placed in a cash collateral
account at the principal office of the Collateral Agent and on the first
Business Day (as defined in the Credit Agreements) of each calendar month
applied as follows:
First: To the payment and satisfaction of all costs and
expenses incurred in connection with the collection of such proceeds,
and to the payment of all items of the Secured Indebtedness not
evidenced by any Credit Agreement Note or any Indenture Note.
Second: To the payment of those items of the Secured
Indebtedness then due and owing, pro rata according to each Secured
Indebtedness holder's percentage of such items outstanding at the time
of such payment.
Third: The balance, if any, shall be released to the
Mortgagor.
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3.3 No Liability of the Collateral Agent in Collecting. The Collateral
Agent is hereby absolved from all liability for failure to enforce collection of
any proceeds so assigned (and no such failure shall be deemed to be a waiver of
any right of the Collateral Agent or the Trustees) and from all other
responsibility in connection therewith, except the responsibility to account to
the Mortgagor for funds actually received.
3.4 Assignment Not a Restriction on the Collateral Agent's Rights.
Nothing herein contained shall detract from or limit the absolute obligation of
the Mortgagor to make payment of the Secured Indebtedness regardless of whether
the proceeds assigned by this Article are sufficient to pay the same, and the
rights under this Article shall be in addition to all other security now or
hereafter existing to secure the payment of the Secured Indebtedness.
3.5 Indemnity. The Mortgagor agrees to indemnify the Trustees and the
Collateral Agent against all claims, actions, liabilities, judgments, costs,
attorneys' fees or other charges of whatsoever kind or nature (all hereinafter
in this Section 3.6 called "claims") made against or incurred by them or any of
them as a consequence of the assertion, either before or after the payment in
full of the Secured Indebtedness, that they or any of them received Hydrocarbons
herein assigned or the proceeds thereof claimed by third persons, and the
Trustees and the Collateral Agent shall have the right to defend against any
such claims, employing attorneys therefor, and unless furnished with reasonable
indemnity, they or any of them shall have the right to pay or compromise and
adjust all such claims. The Mortgagor will indemnify and pay to the Trustees or
the Collateral Agent, as the case may be, any and all such amounts as may be
paid in respect thereof or as may be successfully adjudged against the Trustees
or the Collateral Agent or any of them. The obligations of the Mortgagor as
hereinabove set forth in this Section 3.5 shall survive the release,
termination, foreclosure or assignment of this instrument or any sale hereunder.
ARTICLE IV
Events of Default
4.1 Events of Default Hereunder. Default in the payment of principal of
any Secured Indebtedness when due or default (and such default shall continue
unremedied for five (5) days or such longer period during which the holders
thereof, or any Indenture Trustee for the holders thereof, do not have the power
to cause such Secured Indebtedness to become immediately payable in full) in the
payment of interest on any Secured Indebtedness when due, so long as such
default shall not have been remedied shall be an "event of default" hereunder.
ARTICLE V
Enforcement of the Security
5.1 Power of Sale of Real Property Constituting a Part of the Mortgaged
Property. Upon the occurrence of an event of default and if such event shall be
continuing, the Trustees shall have the right and power to sell, to the extent
permitted by law, at one or more sales, as an entirety or in parcels, as they
may elect, the real property constituting a part of the Mortgaged Property, at
such place or places and otherwise in such manner and upon such notice as may be
required by law, or, in the absence of any such requirement, as the Trustees may
deem appropriate, and to make conveyance to the purchaser or purchasers; and the
Mortgagor shall warrant title to such real property, subject to Permitted
Encumbrances, to such purchaser or purchasers. Any public sale may be adjourned
without the necessity of announcement
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at the time and place of such sale and without public notice except as may be
required by law. The Trustee may sell, transfer and convey any part of the
Mortgaged Property on such terms of credit or part cash and part credit, secured
by contract or agreement for sale or mortgage, or otherwise as shall appear to
the Trustee to be most advantageous and for such price or prices as can
reasonably be obtained therefor, and in the event of a sale on credit or for
part cash or part credit, whether by way of contract for sale or by conveyance
or transfer and mortgage, neither the Trustee, nor Collateral Agent or holders
of Secured Indebtedness are to be accountable for or charged with any monies
until the same shall actually be received in cash. The right of sale hereunder
shall not be exhausted by one or any sale, and the Trustees may make other and
successive sales until all of the trust estate be legally sold. If the proceeds
of such sale or sales of less than the whole of the Mortgaged Property shall be
less than the aggregate of the indebtedness secured hereby and the expense of
executing this trust as provided herein, this Mortgage and the lien and charge
hereof shall remain in full force and effect as to the unsold portion of the
Mortgaged Property just as though no sale had been made; provided, however, that
the Mortgagor shall never have any right to require the sale of less than the
whole of the Mortgaged Property but the Collateral Agent shall have the right,
at its election, to request the Trustee to sell less than the whole of the
Mortgaged Property. With respect to that portion, if any, of the Mortgaged
Property situated in the State of Wyoming, this instrument may be foreclosed by
advertisement and sale as provided by applicable Wyoming statutes. With respect
to that portion, if any, of the Mortgaged Property situated in the State of
Oklahoma, the Collateral Agent shall have the right and power at its option to
declare the Secured Indebtedness hereby secured due and payable and to sell, or
direct the Trustees to sell, the "real estate," as such term is defined under
the provisions of 46 O.S. Supp. 1986, ss.42, constituting a part of the
Mortgaged Property, all under the terms of 46 O.S. Supp. 1986, ss.40 et seq.,
and shall, to the extent permitted by law, have the other rights conferred on
the Trustees under the provisions of this instrument.
5.2 Rights of the Trustees with Respect to Personal Property
Constituting a Part of the Mortgaged Property. Upon the occurrence of an event
of default and if such event shall be continuing, the Trustees will have all
rights and remedies granted by law, and particularly by the Uniform Commercial
Code, including, but not limited to, the right to take possession of all
personal property constituting a part of the Mortgaged Property, and for this
purpose the Trustees may enter upon any premises on which any or all of such
personal property is situated and take possession of and operate such personal
property (or any portion thereof) or remove it therefrom. The Trustees may
require the Mortgagor to assemble such personal property and make it available
to the Trustees at a place to be designated by the Trustees which is reasonably
convenient to all parties. Unless such personal property is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Trustees will give the Mortgagor reasonable notice of the
time and place of any public sale or of the time after which any private sale or
other disposition of such personal property is to be made. This requirement of
sending reasonable notice will be met if the notice is mailed by first-class
mail, postage prepaid, to the Mortgagor at the address shown below the
signatures at the end of this instrument at least five (5) days before the time
of the sale or disposition.
5.3 Rights of the Trustees with Respect to Fixtures Constituting a Part
of the Mortgaged Property. Upon the occurrence of an event of default and if
such event shall be continuing, the Trustees may elect to treat the fixtures
constituting a part of the Mortgaged Property as either real property collateral
or personal property collateral and then proceed to exercise such rights as
apply to such type of collateral.
Exhibit Q - Page 12
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5.4 Judicial Proceedings. Upon occurrence of an event of default and if
such event shall be continuing, the Trustees, in lieu of or in addition to
exercising any power of sale hereinabove given, may proceed by a suit or suits
in equity or at law, whether for a foreclosure hereunder, or for the sale of the
Mortgaged Property, or for the specific performance of any covenant or agreement
herein contained or in aid of the execution of any power herein granted, or for
the appointment of a receiver pending any foreclosure hereunder or the sale of
the Mortgaged Property, or for the enforcement of any other appropriate legal or
equitable remedy.
5.5 Possession of the Mortgaged Property. It shall not be necessary for
the Trustees to have physically present or constructively in their possession at
any sale held by the Trustees or by any court, receiver or public officer any or
all of the Mortgaged Property; and the Mortgagor shall deliver to the purchasers
at such sale on the date of sale the Mortgaged Property purchased by such
purchasers at such sale, and if it should be impossible or impracticable for any
of such purchasers to take actual delivery of the Mortgaged Property, then the
title and right of possession to the Mortgaged Property shall pass to such
purchaser at such sale as completely as if the same had been actually present
and delivered.
5.6 Certain Aspects of a Sale. Each Lender or Noteholder shall have the
right to become the purchaser at any sale held by the Trustees or by any court,
receiver or public officer, and such Lender shall have the right to credit upon
the amount of the bid made therefor the amount payable out of the net proceeds
of such sale to it. Recitals contained in any conveyance made to any purchaser
at any sale made hereunder shall conclusively establish the truth and accuracy
of the matters therein stated, including, without limiting the generality of the
foregoing, nonpayment of the unpaid principal sum of, and the interest accrued
on, the Secured Indebtedness after the same have become due and payable,
advertisement and conduct of such sale in the manner provided herein or
appointment of any successor Trustee hereunder.
5.7 Receipt to Purchaser. Upon any sale, whether made under the power
of sale herein granted and conferred or by virtue of judicial proceedings, the
receipt of the Trustees, or of the officer making sale under judicial
proceedings, shall be sufficient discharge to the purchaser or purchasers at any
sale for his or their purchase money, and such purchaser or purchasers, or his
or their assigns or personal representatives, shall not, after paying such
purchase money and receiving such receipt of the Trustees or of such officer
therefor, be obliged to see to the application of such purchase money, or be in
anywise answerable for any loss, misapplication or nonapplication thereof.
5.8 Effect of Sale. Any sale or sales of the Mortgaged Property,
whether under the power of sale herein granted and conferred or by virtue of
judicial proceedings, shall operate to divest all right, title, interest, claim
and demand whatsoever either at law or in equity, of the Mortgagor of, in and to
the premises and the property sold, and shall be a perpetual bar, both at law
and in equity, against the Mortgagor, and the Mortgagor's successors or assigns,
and against any and all persons claiming or who shall thereafter claim all or
any of the property sold from, through or under the Mortgagor or the Mortgagor's
successors or assigns. Nevertheless, the Mortgagor, if requested by the Trustees
so to do, shall join in the execution and delivery of all proper conveyances,
assignments and transfers of the properties so sold.
Exhibit Q - Page 13
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5.9 Application of Proceeds. The proceeds of any sale of the Mortgaged
Property, or any part thereof, whether under the power of sale herein granted
and conferred or by virtue of judicial proceedings, shall be applied as follows:
First: To the payment and satisfaction of all reasonable costs
and expenses incurred by the Trustees in the performance of their
duties including, without limiting the generality of the foregoing,
costs and expenses of any entry, or taking of possession, of any sale,
or advertisement thereof, and of conveyances, and as well, court costs,
compensation of agents and employees and reasonable legal fees.
Second: To a payment to the Collateral Agent, equal in amount
to the Secured Indebtedness outstanding at the time of the payment.
Third: Any surplus thereafter remaining shall be paid to the
Mortgagor or the Mortgagor's successors or assigns, as their interests
shall appear.
All payments to the Collateral Agent shall be paid into such account as
the Collateral Agent shall specify from time to time by notice to the Trustees,
in same day or immediately available funds. The Collateral Agent shall promptly
remit in same day funds to each holder of Secured Indebtedness its pro rata
share, based on the amount of outstanding Secured Indebtedness owed to it, of
such payments received by the Collateral Agent.
5.10 The Mortgagor's Waiver of Appraisement, Marshalling and Other
Rights. The Mortgagor agrees, to the full extent that the Mortgagor may lawfully
so agree, that the Mortgagor will not at any time insist upon or plead or in any
manner whatever claim the benefit of any appraisement, valuation, stay,
extension or redemption law now or hereafter in force, in order to prevent or
hinder the enforcement or foreclosure of this instrument or the absolute sale of
the Mortgaged Property or the possession thereof by any purchaser at any sale
made pursuant to any provision hereof, or pursuant to the decree of any court of
competent jurisdiction; but the Mortgagor, for the Mortgagor and all who may
claim through or under the Mortgagor, so far as the Mortgagor or those claiming
through or under the Mortgagor now or hereafter lawfully may, hereby waives the
benefit of all such laws; provided, however, that appraisement of any of the
Mortgaged Property located in the State of Oklahoma is hereby expressly waived
or not, at the option of the Trustees, such option to be exercised prior to or
at the time the judgment is rendered in any foreclosure hereof. The Mortgagor,
for the Mortgagor and all who may claim through or under the Mortgagor, waives,
to the extent that the Mortgagor may lawfully do so, any and all right to have
the Mortgaged Property marshalled upon any foreclosure of the lien hereof, or
sold in inverse order of alienation, and agrees that the Trustees or any court
having jurisdiction to foreclose such lien may sell the Mortgaged Property as an
entirety. The Mortgagor, for the Mortgagor and all who may claim through or
under the Mortgagor, further waives, to the full extent that the Mortgagor may
lawfully do so, any requirement for posting a receiver's bond or replevin bond
or other similar type of bond if the Trustees commence an action for appointment
of a receiver or an action for replevin to recover possession of any of the
Mortgaged Property. If any law in this paragraph referred to and now in force,
of which the Mortgagor or the Mortgagor's successor or successors might take
advantage despite the provisions hereof, shall hereafter be repealed or cease to
be in force, such law shall not thereafter be deemed to constitute any part of
the contract herein contained or to preclude the operation or application of the
provisions of this
Exhibit Q - Page 14
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paragraph. Pursuant to Section 39-5-19, New Mexico Statutes, Annotated, 1978
Comp., as amended, the Mortgagor agrees that as to the Mortgaged Property
situated in the State of New Mexico, the redemption period shall be shortened to
one (1) month. The Mortgagor hereby waives all rights of appraisement, sale,
homestead or redemption allowed under any law or laws of the State of Arkansas,
and especially redemption under the Act of the General Assembly of the State of
Arkansas approved May 8, 1899, and acts amendatory thereto.
5.11 Costs and Expenses. All reasonable costs and expenses (including
reasonable attorneys' fees) incurred by the Trustees and the Collateral Agent in
protecting and enforcing their rights hereunder, shall constitute a demand
obligation owing by the Mortgagor to the party incurring such costs and expenses
and shall draw interest at an annual rate equal to the "Prime Rate" (the "Prime
Rate") as published in the Wall Street Journal from time to time (or if for a
day when such rate is note so published, at the rate for the next preceding day
when so published) from time to time plus two percent (2%) until paid, all of
which shall constitute a portion of the Secured Indebtedness.
5.12 Sale of the Mortgaged Property in Mississippi. After the
occurrence of an event of default, the Trustees, their successors or
substitutes, are authorized and empowered, and it shall be their special duty at
the request of the Collateral Agent (which request is hereby presumed), to
enforce this trust and to sell the Mortgaged Property located in the State of
Mississippi, as an entirety or in parcels, as the Trustees acting may designate,
to satisfy the Secured Indebtedness then unpaid, after having published notice
of the day, time, place and terms of sale in some newspaper published in the
county or counties, as the case may be, in which the Mortgaged Property in the
State of Mississippi is situated for three (3) consecutive weeks preceding date
of sale, and by posting one notice of such sale at the Court House of each
county in which the Mortgaged Property is situated for said period of time. In
the event the Mortgaged Property is located in more than one county or in two
judicial districts of the same county in the State of Mississippi, the Trustees
or their substitutes or successors in trust shall have the power, in case they
are directed to foreclose under this instrument, to select the county or
judicial district in which the sale shall be made and their selection shall be
binding on the Mortgagor and the holders of Secured Indebtedness and all persons
claiming through or under them, whether by contract or law. The Trustees or
their substitutes or any successors in said Trust shall have full power to fix
the day, time, place and terms of sale and may appoint or delegate any one or
more persons as agent to perform any act or acts necessary or incident to any
sale held by the Trustees, including the posting of notices and the conduct of
sale, but in the name and on behalf of the Trustees, their substitutes or
successors. The Mortgagor waives the provisions of Section 89-1-55 of the
Mississippi Code of 1972, Recompiled, and Laws amendatory thereto, if any, as
far as said section restricts the right of the Trustees to offer at sale more
than 160 acres at one time, and the Trustees, their substitutes or successors
may, in their discretion, offer the Mortgaged Property as a whole or in such
part or parts as they may deem desirable, regardless of the manner in which it
may be described. Any sale made by the Trustees hereunder may be adjourned by
announcement at the time and place appointed for such sale without further
notice except as may be required by law.
5.13 Sale of the Mortgaged Property in Texas. If any Credit Agreement
Note or any Indenture Note is not paid when due, whether by acceleration or
otherwise, the Trustees are hereby authorized and empowered to sell any part of
the Mortgaged Property located in the State of Texas at public sale to the
highest bidder for cash in the area at the county courthouse of the county in
Texas in which the Texas portion of the Mortgaged Property or any part thereof
is situated, as herein described, designated by such
Exhibit Q - Page 15
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county's commissioner's court for such proceedings, or if no area is so
designated, at the door of the county courthouse of said county, at a time
between the hours of 10:00 A.M. and 4:00 P.M. which is no later than three (3)
hours after the time stated in the notice described immediately below as the
earliest time at which such sale would occur on the first Tuesday of any month,
after advertising the earliest time at which said sale would occur, the place,
and terms of said sale, and the portion of the Mortgaged Property to be sold, by
(a) posting (or by having some person or persons acting for the Trustees post)
for at least twenty-one (21) days preceding the date of the sale, written or
printed notice of the proposed sale at the courthouse door of said county in
which the sale is to be made; and if such portion of the Mortgaged Property lies
in more than one county, one such notice of sale shall be posted at the
courthouse door of each county in which such part of the Mortgaged Property is
situated and such part of the Mortgaged Property may be sold in the area at the
county courthouse of any one of such counties designated by such county's
commissioner's court for such proceedings, or if no area is designated, at the
courthouse door of such county, and the notice so posted shall designate in
which county such property shall be sold, and (b) filing in the office of the
county clerk of each county in which any part of the Texas portion of the
Mortgaged Property which is to be sold at such sale is situated a copy of the
notice posted in accordance with the preceding clause (a). In addition to such
posting and filing of notice, the Collateral Agent, acting on behalf of the
holders of the Secured Indebtedness shall, at least twenty-one (21) days
preceding the date of sale, serve or cause to be served written notice of the
proposed sale by certified mail on the Mortgagor and on each other debtor, if
any, obligated to pay the Secured Indebtedness according to the records of the
Collateral Agent, the Lenders, the Noteholders or other holders of the Secured
Indebtedness. Service of such notice shall be completed upon deposit of the
notice, enclosed in a postpaid wrapper properly addressed to the Mortgagor and
such other debtors at their most recent address or addresses as shown by the
records of the Collateral Agent in a post office or official depository under
the care and custody of the United States Postal Service. The affidavit of any
person having knowledge of the facts to the effect that such a service was
completed shall be prima facie evidence of the fact of service. The Mortgagor
agrees that no notice of any sale, other than as set out in this paragraph, need
be given by the Trustees, the Collateral Agent or any other person. The
Mortgagor hereby designates as its address for the purpose of such notice the
address set out on the signature page hereof; and agrees that such address shall
be changed only by depositing notice of such change enclosed in a postpaid
wrapper in a post office or official depository under the care and custody of
the United States Postal Service, certified mail, postage prepaid, return
receipt requested, addressed to the Collateral Agent at the address for the
Collateral Agent set out herein (or to such other address as the Collateral
Agent may have designated by notice given as above provided to the Mortgagor and
such other debtors). Any such notice of change of address of the Mortgagor or
other debtors or of the Collateral Agent shall be effective three (3) Business
Days after such deposit if such post office or official depository is located in
the State of Texas, otherwise to be effective upon receipt. The Mortgagor
authorizes and empowers the Trustees to sell the Texas portion of the Mortgaged
Property in lots or parcels or in its entirety as the Trustees shall deem
expedient; and to execute and deliver to the purchaser or purchasers thereof
good and sufficient deeds of conveyance thereto by fee simple title, with
evidence of general warranty by the Mortgagor, and the title of such purchaser
or purchasers when so made by the Trustees, the Mortgagor binds itself to
warrant and forever defend. Where portions of the Mortgaged Property lie in
different counties, sales in such counties may be conducted in any order that
the Trustees may deem expedient; and one or more such sales may be conducted in
the same month, or in successive or different months as the Trustees may deem
expedient. Notwithstanding anything to the contrary contained herein, the
Trustees may postpone the sale provided for in this Section 5.13 at any time
without the necessity of a public announcement. The provisions hereof
Exhibit Q - Page 16
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with respect to the posting and giving of notices of sale are intended to comply
with the provisions of Section 51.002 of the Property Code of the State of
Texas, as in force and effect on January 1, 1992, and in the event the
requirements, or any notice, under such Section 51.002 of the Property Code of
the State of Texas shall be eliminated or the prescribed manner of giving such
notices modified by future amendment to, or adoption of any statute superseding,
Section 51.002 of the Property Code of the State of Texas, the requirement for
such particular notices shall be deemed stricken from or modified in this
instrument in conformity with such amendment or superseding statute, effective
as of the effective date thereof.
5.14 Operation of the Mortgaged Property by the Trustees. Upon the
occurrence of an event of default and so long as such event of default is
continuing and in addition to all other rights herein conferred on the Trustees,
the Trustees (or any person, firm or corporation designated by the Trustees)
shall have the right and power, but shall not be obligated, to enter upon and
take possession of any of the Mortgaged Property, and to exclude the Mortgagor,
and the Mortgagor's agents or servants, wholly therefrom, and to hold, use,
administer, manage and operate the same to the extent that the Mortgagor shall
be at the time entitled and in its place and stead. The Trustees, or any person,
firm or corporation designated by the Trustees, may operate the same without any
liability to the Mortgagor in connection with such operations, except to use
ordinary care in the operation of such properties, and the Trustees or any
person, firm or corporation designated by the Trustees, shall have the right to
collect, receive and receipt for all Hydrocarbons produced and sold from said
properties, to make repairs, purchase machinery and equipment, conduct work-over
operations, drill additional wells and to exercise every power, right and
privilege of the Mortgagor with respect to the Mortgaged Property. When and if
the expenses of such operation and development (including costs of unsuccessful
work-over operations or additional wells) have been paid and the Secured
Indebtedness paid, said properties shall, if there has been no sale or
foreclosure, be returned to the Mortgagor.
ARTICLE VI
Miscellaneous Provisions
6.1 Successor Trustees. Any Trustee may resign in writing addressed to
the Collateral Agent or may be removed at any time with or without cause by an
instrument in writing duly executed by the Collateral Agent. In case of the
death, resignation or removal of a Trustee, one or more successor Trustees may
be appointed by the Collateral Agent by instrument of substitution complying
with any applicable requirements of law, and in the absence of any such
requirement without formality other than appointment and designation in writing.
Such appointment and designation shall be full evidence of the right and
authority to make the same and of all facts therein recited, and upon the making
of any such appointment and designation this conveyance shall vest in the named
successor Trustee or Trustees all the estate and title of the prior Trustee in
all of the Mortgaged Property, and he or they shall thereupon succeed to all the
rights, powers, privileges, immunities and duties hereby conferred upon the
prior Trustee. All references herein to the Trustees shall be deemed to refer to
the Trustees from time to time acting hereunder.
6.2 Actions or Advances by the Collateral Agent or the Trustees. Each
and every covenant herein contained shall be performed and kept by the Mortgagor
solely at the Mortgagor's expense. If the Mortgagor shall fail to perform or
keep any of the covenants of whatsoever kind or nature contained in this
instrument, the Collateral Agent, the Trustees or any receiver appointed
hereunder, may, but shall not be
Exhibit Q - Page 17
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obligated to, take action and/or make advances to perform the same in the
Mortgagor's behalf, and the Mortgagor hereby agrees to repay the expense of such
action and such advances upon demand plus interest at an annual rate equal to
the Prime Rate plus two percent (2%) until paid or, in the event any promissory
note evidences such indebtedness, upon the terms and conditions thereof. No such
advance or action by the Collateral Agent, the Trustees or any receiver
appointed hereunder shall be deemed to relieve the Mortgagor from any default
hereunder.
6.2 Defense of Claims. The Mortgagor will notify the Trustees, in
writing, promptly of the commencement of any legal proceedings affecting the
lien or security interest hereof or the Mortgaged Property, or any part thereof,
and will take such action, employing attorneys agreeable to the Trustees and the
Collateral Agent, as may be necessary or appropriate to preserve the
Mortgagor's, the Trustees' and the Collateral Agent's rights affected thereby
and/or to hold harmless the Trustees or the Collateral Agent in respect of such
proceedings; and should the Mortgagor fail or refuse to take any such action,
the Trustees or the Collateral Agent may, upon giving prior written notice
thereof to the Mortgagor, take such action in behalf and in the name of the
Mortgagor and at the Mortgagor's expense. The obligations of the Mortgagor as
hereinabove set forth in this Section 6.3 shall survive the release,
termination, foreclosure or assignment of this instrument or any sale hereunder.
6.3 The Mortgaged Property to Revert. If the Secured Indebtedness shall
be fully paid and all the commitments and obligations of the Lenders under the
Credit Agreements shall have been terminated in writing and the covenants herein
contained and contained in the Credit Agreements shall be well and truly
performed, then all of the Mortgaged Property shall revert to the Mortgagor and
the entire estate, right, title and interest of the Trustees and the holders of
Secured Indebtedness shall thereupon cease; and the Trustees and the Collateral
Agent in such case shall, upon the request of the Mortgagor and at the
Mortgagor's cost and expense, deliver to the Mortgagor proper instruments
acknowledging satisfaction of this instrument. The foregoing notwithstanding,
this instrument is a Line of Credit Mortgage and until the termination in
writing of the Credit Agreements and the occurrence of the other events
described in the past sentence of this Section, this Mortgage, and the priority
and perfection of the liens created hereunder should continue in full force and
effect even if at any time or from time to time there are no moneys outstanding
under the Credit Agreements.
6.4 Renewals, Amendments and Other Security. Renewals and extensions of
the Secured Indebtedness may be given at any time and amendments may be made to
agreements relating to any part of such Secured Indebtedness or the Mortgaged
Property and the Trustees and the holders of Secured Indebtedness may take or
may now hold other security for the Secured Indebtedness, all without notice to
or consent of the Mortgagor. The Trustees or the holders of Secured Indebtedness
may resort first to such other security or any part thereof or first to the
security herein given or any part thereof, or from time to time to either or
both, even to the partial or complete abandonment of either security, and such
action shall not be a waiver of any rights conferred by this instrument, which
shall continue as a first lien upon and prior perfected security interest in the
Mortgaged Property not expressly released until the Secured Indebtedness is
fully paid.
6.5 Instrument an Assignment, etc. This instrument shall be deemed to
be and may be enforced from time to time as an assignment, chattel mortgage,
contract, deed of trust, financing statement, real estate mortgage, or security
agreement, and from time to time as any one or more thereof.
Exhibit Q - Page 18
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6.6 Limitation on Interest. No provision of this instrument shall
require the payment or permit the collection of interest in excess of the
maximum permitted by applicable law or which is otherwise contrary to law. If
any excess of interest in such respect is herein provided for, or shall be
adjudicated to be so provided for herein, the Mortgagor shall not be obligated
to pay such excess.
6.7 Unenforceable or Inapplicable Provisions. If any provision hereof
is invalid or un enforceable in any jurisdiction, the other provisions hereof
shall remain in full force and effect in such jurisdiction, and the remaining
provisions hereof shall be liberally construed in favor of the Trustees and the
Collateral Agent in order to effectuate the provisions hereof, and the
invalidity of any provision hereof in any jurisdiction shall not affect the
validity or enforceability of any such provision in any other jurisdiction. Any
reference herein contained to a statute or law of a state in which no part of
the Mortgaged Property is situated shall be deemed inapplicable to, and not used
in, the interpretation hereof.
6.8 Rights Cumulative. Each and every right, power and remedy herein
given to the Trustees or the Collateral Agent shall be cumulative and not
exclusive; and each and every right, power and remedy whether specifically
herein given or otherwise existing may be exercised from time to time and so
often and in such order as may be deemed expedient by the Trustees and the
Collateral Agent, as the case may be, and the exercise, or the beginning of the
exercise, of any such right, power or remedy shall not be deemed a waiver of the
right to exercise, at the same time or thereafter, any other right, power or
remedy. No delay or omission by the Trustees or the Collateral Agent or any of
them in the exercise of any right, power or remedy shall impair any such right,
power or remedy or operate as a waiver thereof or of any other right, power or
remedy then or thereafter existing. [In addition to all the rights and remedies
granted hereunder, the Mortgagor agrees to comply with all statutory mortgage
covenants and agree that this Mortgage shall be subject to the statutory
mortgage condition.](1)
6.9 Waiver by the Trustees. Any and all covenants in this instrument
may from time to time by instrument in writing signed by the Trustees be waived
to such extent and in such manner as the Trustees may desire, but no such waiver
shall ever affect or impair either the Trustees' or the Collateral Agent's
rights or liens or security interests hereunder, except to the extent
specifically stated in such written instrument.
6.10 Action by Individual Trustee. Any Trustee from time to time
serving hereunder shall have the absolute right, acting individually, to take
any action and to give any consent and to exercise any right, remedy, power,
privilege or authority conferred upon the Trustees, and any action taken by
either Trustee from time to time serving hereunder shall be binding upon the
other Trustee and no person dealing with either Trustee from time to time
serving hereunder shall be obligated to confirm the power and authority of such
Trustee to act without the concurrence of the other Trustee. In this instrument,
the term "Trustee" shall mean the Trustees hereinabove named, or either of them,
as the context requires, and any successor Trustee.
6.11 Miscellaneous Warranties. The Mortgagor additionally warrants and
represents to the Trustees and the Collateral Agent that (a) the execution and
delivery of this instrument, and the
- ---------------------
(1) To be used in Mortgages to be filed in New Mexico.
Exhibit Q - Page 19
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performance by the Mortgagor of its obligations hereunder, are within the
corporate, partnership or other powers of the Mortgagor and have been duly
authorized by all necessary corporate, partnership or other action on the part
of the Mortgagor, and (b) this instrument has been duly executed and delivered
on behalf of the Mortgagor and is the legal, valid and binding obligation of the
Mortgagor, enforceable in accordance with its terms except as such
enforceability is subject to the effect of (i) any applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting creditors'
rights generally and (ii) general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law, including
without limitation, concepts of materiality, reasonableness, good faith and fair
dealing, and (c) the execution, delivery and performance of this instrument do
not and will not contravene or conflict with the organizational documents of the
Mortgagor or, to the best knowledge of the Mortgagor, violate or constitute a
default under any law, any presently existing requirement or restriction imposed
by judicial, arbitral or any governmental instrumentality.
6.12 Successors and Assigns. This instrument is binding upon the
Mortgagor, the Mortgagor's successors and assigns, and shall inure to the
benefit of the Trustees, their successors, and the Collateral Agent, its
successors and assigns, and the provisions hereof shall likewise be covenants
running with the land.
6.13 Article and Section Headings. The article and section headings in
this instrument are inserted for convenience of reference and shall not be
considered a part of this instrument or used in its interpretation.
6.14 Execution in Counterparts. This instrument may be executed in any
number of counterparts, each of which shall for all purposes be deemed to be an
original and all of which are identical, except that, to facilitate recordation
or filing, in any particular counterpart portions of Exhibit A hereto which
describe properties situated in counties other than the county in which such
counterpart is to be recorded or filed may have been omitted.
6.15 Special Filing as Financing Statement. This Mortgage and Deed of
Trust shall likewise be a Security Agreement and a Financing Statement. This
Mortgage and Deed of Trust shall be filed for record, among other places, in the
real estate records of each county in which any portion of the real property
covered by the oil and gas leases described in Exhibit A hereto is situated,
and, when filed in such counties shall be effective as a financing statement
covering fixtures located on oil and gas properties, which oil and gas
properties (and accounts arising therefrom) are to be financed at the wellheads
of the wells located on the real property described in Exhibit A hereto. At the
option of the Collateral Agent, a carbon, photographic or other reproduction of
this instrument or of any financing statement covering the Mortgaged Property or
any portion thereof shall be sufficient as a financing statement and may be
filed as such.
6.16 Notices. Except as otherwise specifically provided for herein, all
notices, demands, instructions and other communications required or permitted to
be given to or made upon any party hereto shall be in writing and shall be
personally delivered or sent by certified mail, postage prepaid, return receipt
requested, or by telecopier, and shall be deemed to be given for purposes of
this instrument on the day that such writing is delivered or sent to the
intended recipient thereof in accordance with the provisions of this Section
6.16. Unless otherwise specified in a notice sent or delivered in accordance
with the foregoing
Exhibit Q - Page 20
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provisions of this Section 6.16, notices, demands, instructions and other
communications in writing shall be given to or made upon the respective parties
hereto at their respective addresses (or to their respective telecopier numbers)
indicated on the signature page(s) hereof.
6.17 Release Upon Disposition; Termination.
(a) From time to time during the term of this Agreement, unless an
event of default shall have occurred and be continuing, the Trustees and the
Collateral Agent shall execute, acknowledge and deliver to the Mortgagor a
release from this instrument of Mortgaged Properties in connection with the
sale, transfer or other disposition of such Mortgaged Properties by the
Mortgagor, other than a sale, transfer or disposition to Borrower or any
Subsidiary of Borrower and other than the mortgaging, pledging, securing or
granting of a lien, mortgage or security interest in the Mortgaged Properties to
any of them. Upon the receipt by the Collateral Agent of an Officer's
Certificate certifying that no event of default has occurred and is continuing
and that certain Mortgaged Properties described in such Officer's Certificate,
or an attachment thereto, are to be sold, transferred or disposed of by the
Mortgagor pursuant to a bona fide agreement, other than a sale, transfer or
disposition to Borrower or any Subsidiary of Borrower and other than the
mortgaging, pledging, securing or granting of a lien, mortgage or security
interest in the Mortgaged Properties to any of them, the Collateral Agent shall
execute, acknowledge and deliver to the Mortgagor an appropriate instrument
evidencing such release of such Mortgaged Property in such form as may be
reasonably requested by the Mortgagor. The Trustees shall execute, acknowledge
and deliver to the Mortgagor, and the purchaser or other transferee shall be to
rely conclusively on, any such instrument of release of Mortgaged Properties
which bears the signature of the Collateral Agent without any further inquiry.
It is expressly understood that any such release may be delivered to the
Mortgagor prior to the actual sale, transfer or disposition to facilitate such
transaction, provided that such release shall be canceled and redelivered to the
Collateral Agent if such Mortgaged Properties are not so sold, transferred or
disposed of within 20 days after the date such release has been fully executed,
acknowledged and delivered to the Mortgagor. As used herein, the term "Officer's
Certificate" means a certificate signed by the Chairman of the Board, the
President, any Executive Vice President, or the Chief Financial Officer of the
Mortgagor, and the term "Subsidiary" of Borrower means an entity of which more
than 50% of the securities entitled to normal voting power are owned directly,
or indirectly through one or more other Subsidiaries, by Borrower.
(b) The Trustee and the Collateral Agent shall execute, acknowledge and
deliver to the Mortgagor a termination of this instrument and full release of
all the Mortgaged Properties upon receipt of a notice or other writing signed by
the Administrative Agent under the Primary Credit Agreement, stating that this
instrument is no longer required to be maintained pursuant to the terms of the
Primary Credit Agreement. Such termination of this instrument and full release
of all the Mortgaged Properties shall be evidenced by an instrument in such form
as may be reasonably requested by the Mortgagor, which will be executed,
acknowledged and delivered by the Trustees and the Collateral Agent with
reasonable promptness following receipt of such notice or other writing signed
by the Administrative Agent.
[6.18 North Dakota Provisions. THE PARTIES AGREE THAT THIS MORTGAGE
CONSTITUTES A COLLATERAL REAL ESTATE MORTGAGE PURSUANT TO NORTH DAKOTA CENTURY
CODE CHAPTER 35-03.]
Exhibit Q - Page 21
<PAGE> 74
[6.19 New Mexico Mortgage. With respect to the Mortgaged Property
located in the State of New Mexico, this Mortgage shall be construed as a
Mortgage and will be subject to foreclosure by law upon, among others, the
occurrence of any event of default.](1)
- ------------------------
(1) To be used in Mortgages to be filed in New Mexico.
Exhibit Q - Page 22
<PAGE> 75
IN WITNESS WHEREOF, the Mortgagor has executed or caused to be executed
this Mortgage, Deed of Trust, Assignment, Security Agreement and Financing
Statement on the day, month and year first above written.
MORTGAGOR
----------------------------------
By:
-------------------------------
ATTEST: Title:
Printed Name:
- ---------------------
Secretary
Printed Name:
The name and mailing address of the Mortgagor is:
- -------------------
c/o PIONEER NATURAL RESOURCES COMPANY
1400 Williams Square West
5205 North O'Connor Blvd.
Irving, Texas 75039
(Signatures Continued on Next Page)
Exhibit Q - Page 23
<PAGE> 76
SECURED PARTIES
----------------------------------------
, Trustee
------------------
----------------------------------------
, Trustee
------------------
, as Collateral Agent
--------------------
By:
-------------------------------------
ATTEST: Name:
Printed Name:
- ----------------
Title:
Printed Name:
The names and mailing addresses of the Secured Parties are:
, as Collateral Agent
- ----------------------------------------
, Trustee and , Trustee
- ---------------- -----------
- -----------------------------------------
- -----------------------------------------
This Instrument Was Prepared By:
Francis R. Bradley, III, Esq.
Mayer, Brown & Platt
700 Louisiana, Suite 3600
Houston, Texas 77002
[signature]
[SIGNED IN THE PRESENCE OF:
- ----------------
]
- ----------------
Exhibit Q - Page 24
<PAGE> 77
STATE OF TEXAS )
) Section.
COUNTY OF HARRIS )
BE IT REMEMBERED that I,______________ , a Notary Public duly
qualified, commissioned, sworn and acting in and for the County and State
aforesaid, hereby certify that, on this___day of_____, ______, there appeared
before me severally each of the following persons__________________,
the__________, and _____________ __________, the Secretary, of
_______________________, a _____________, whose address is 1400 Williams Square
West, 5205 North O'Connor Blvd., Irving, Texas 75039.
[LANGUAGE TO BE INCLUDED ONLY FOR THE APPLICABLE STATES WHERE
MORTGAGED PROPERTIES ARE LOCATED]
ALABAMA
and
MISSISSIPPI Before me on this day personally appeared the
aforementioned persons, whose names are signed to the
foregoing conveyance in the capacities set forth
opposite the names of such persons above, and who are
known to me, acknowledged before me on this day that,
being informed of the contents of the conveyance,
they, as such officers with full authority, executed
the same voluntarily for and as the act of said
corporation.
ARKANSAS Before me on this day appeared in person the
aforementioned persons, to me personally well known,
who stated that they held the offices in the
corporation set forth opposite their names above and
were duly authorized in their respective capacities
to execute the foregoing instrument for and in the
name and on behalf of said corporation, and further
stated and acknowledged that they had so signed,
executed and delivered said foregoing instrument for
the consideration, uses and purposes therein
mentioned and set forth.
COLORADO The foregoing instrument was acknowledged before me
this day by each such person on behalf of said
corporation.
IDAHO On this day before me personally appeared the
aforementioned persons known or identified to me to
be the officers of the corporation that executed the
above instrument on behalf of said corporation and
acknowledged to me that such corporation executed the
same.
ILLINOIS The foregoing instrument was acknowledged before me
this day by said persons as the designated officers
of the corporation set opposite their names on behalf
of said corporation.
INDIANA Before me this day personally appeared the
aforementioned persons who acknowledged the execution
of the foregoing instrument.
Exhibit Q - Page 25
<PAGE> 78
KANSAS This instrument was acknowledged to me on this day by
each such person as the designated officer of the
corporation set opposite his name, on behalf of said
corporation.
KENTUCKY
and
MICHIGAN The foregoing instrument was acknowledged before me
this day by said persons as the designated officers
of the corporation set opposite their names on behalf
of said corporation.
MONTANA Before me personally appeared each such person, each
of whom is known to me to be the officer of the
corporation described in and that executed the within
instrument, and acknowledged to me that such
corporation executed the same.
NEBRASKA The foregoing instrument was acknowledged before me
this day by each such person as the designated
officers of the corporation set opposite their names
on behalf of said corporation.
NEW MEXICO The foregoing instrument was acknowledged before me
this day by each such person as the designated
officer as stated opposite their names of Pogo
Producing Company, a Delaware corporation, on behalf
of said corporation [in its capacity as general
partner of Pogo Gulf Coast, Ltd., a Texas limited
partnership, on behalf of said partnership].
NORTH
DAKOTA Before me personally appeared each such person, each
of whom is known to me to be the officer of the
corporation described in and that executed the within
instrument, and acknowledged to me that such
corporation executed the same.
OHIO Before me personally appeared such persons known to
me to be the persons who, as the officers of the
corporation set opposite their names which executed
the foregoing instrument, signed the same, and
acknowledged to me that they did so sign said
instrument in the name and upon behalf of said
corporation as such officers, respectively; that the
same is their free act and deed as such officers,
respectively, and the free and corporate act and deed
of the corporation set opposite their names; that
they were duly authorized thereupon by the board of
directors of said corporation; and that (as the case
may be) the seal affixed to said instrument is the
corporate seal of said corporation.
OKLAHOMA Before me on this day personally appeared the
aforementioned persons, to me known to be the
identical persons who subscribed the names of the
respective makers thereof to the foregoing instrument
in the capacities set forth opposite the names of
such persons above, and each such person acknowledged
to me that he executed the same as his free and
voluntary act and deed and as the free and voluntary
act and deed of the corporation set opposite his name
for the uses and purposes therein set forth.
Exhibit Q - Page 26
<PAGE> 79
SOUTH DAKOTA Before me personally appeared each such
person, who acknowledged himself to be the designated
officer of the corporation set opposite his name, as
the case may be, and that as such designated officer
being authorized so to do, he executed the foregoing
instrument for the purposes therein contained, by
signing the name of said corporation by himself as
such designated officer.
TEXAS This instrument was acknowledged before me on this
day by each such person as the designated officer of
the corporation set opposite his name on behalf of
said corporation set opposite his name.
UTAH On this day personally appeared before me such
persons, who, being by me duly sworn, did say, that
they are the designated officers of said corporation,
and that said instrument was signed in behalf of said
corporation by resolution of its Board of Directors,
and said persons acknowledged to me that the said
corporation, executed the same.
WYOMING The foregoing instrument was acknowledged before me
by the above individuals on this day.
GIVEN under my hand and seal this___day of_________________.
---------------------
Notary Public in and for
Harris County, TEXAS
---------------------
Print or Type Name
My commission expires:
Exhibit Q - Page 27
<PAGE> 80
STATE OF____ )
) Sections.
COUNTY OF____ )
BE IT REMEMBERED that I,______________, a Notary Public duly
qualified, commissioned, sworn and acting in and for the County and State
aforesaid, hereby certify that, on this___day of_________,________, there
appeared before me severally each of the following persons, each being either a
Trustee or else the designated officer of the corporation or association set
opposite his name, and each such Trustee, corporation or association being a
party to the foregoing instrument:
_______________,_____________and______,______of____________,
a______________, whose address is_________________________;
__________________and________________whose addresses
are____________, as Trustees.
[LANGUAGE TO BE INCLUDED ONLY FOR THE APPLICABLE STATES WHERE
MORTGAGED PROPERTIES ARE LOCATED]
ALABAMA
and
MISSISSIPPI Before me on this day personally appeared the
aforementioned persons, whose names are signed to the
foregoing conveyance in the capacities set forth
opposite the names of such persons above, and who are
known to me, acknowledged before me on this day that,
being informed of the contents of the conveyance,
they, as such officers or Trustees with full
authority, executed the same voluntarily for and as
the act of said corporation, said association or said
Trustees, as the case may be.
ARKANSAS Before me on this day appeared in person the
aforementioned persons, to me personally well known,
who stated that they held the offices in the
corporation or association set forth opposite their
names above (or, in the case of the Trustees, were
validly appointed Trustees) and were duly authorized
in their respective capacities to execute the
foregoing instrument for and in the name and on
behalf of said corporation or association (or as
Trustees, as the case may be), and further stated and
acknowledged that they had so signed, executed and
delivered said foregoing instrument for the
consideration, uses and purposes therein mentioned
and set forth.
COLORADO The foregoing instrument was acknowledged before me
this day by each such person on behalf of said
corporation or association, or himself, as Trustee,
as the case may be.
IDAHO On this day before me personally appeared the
aforementioned persons known or identified to me to
be the officers (or Trustees, as the case may be) of
the
Exhibit Q - Page 28
<PAGE> 81
corporation or the association that executed the
above instrument on behalf of said corporation or
association (or themselves, as Trustees) and
acknowledged to me that such corporation, association
or Trustees executed the same.
ILLINOIS The foregoing instrument was acknowledged before me
this day by said persons as the designated officers
of the corporation or association set opposite their
names (or as Trustees, as the case may be) on behalf
of said corporation or association (or themselves, as
Trustees).
INDIANA Before me this day personally appeared the
aforementioned persons who acknowledged the execution
of the foregoing instrument.
KANSAS This instrument was acknowledged to me on this day by
each such person as the designated officer of the
corporation or association set opposite his name (or
a Trustee, as the case may be), on behalf of said
corporation or association (or of himself, as a
Trustee, as the case may be).
KENTUCKY
and
MICHIGAN The foregoing instrument was acknowledged before me
this day by said persons as the designated officers
of the corporation or association set opposite their
names (or as Trustees, as the case may be) on behalf
of said corporation or association (or themselves, as
Trustees).
MONTANA Before me personally appeared each such person, each
of whom is known to me to be the officer of the
corporation or association described in and that
executed the within instrument (or a Trustee, as the
case may be), and acknowledged to me that such
corporation or association (or Trustee, as the case
may be) executed the same.
NEBRASKA The foregoing instrument was acknowledged before me
this day by each such person as the designated
officers of the corporation or association set
opposite their names (or as Trustees, as the case may
be) on behalf of said corporation or association, or
himself as a Trustee, as the case may be.
NEW MEXICO The foregoing instrument was acknowledged before me
this day by each such person as the designated
officer as stated opposite their
names,_____________of, a_______________ on behalf of
said___________[(or individually as trustees,
residing at _________________as the case may be, on
behalf of himself, as a Trustee)] [(or as the
designated officer of the Trustee set opposite their
respective names, of ___________, a____________,
and_____________, a___________, respectively on
behalf of said corporation or association, as
trustee)].(1)
- ----------------------------
(1) Modify as necessary for individual or corporate trustees.
Exhibit Q - Page 29
<PAGE> 82
NORTH DAKOTA Before me personally appeared each such
person, each of whom is known to me to be the officer
of the corporation or association described in and
that executed the within instrument (or a Trustee, as
the case may be), and acknowledged to me that such
corporation or association (or Trustee, as the case
may be) executed the same.
OHIO Before me personally appeared such persons known to
me to be the persons who, as the officers of the
corporation or association set opposite their names
which executed the foregoing instrument (or as
Trustees, as the case may be), signed the same, and
acknowledged to me that they did so sign said
instrument in the name and upon behalf of said
corporation or association as such officers,
respectively (or as Trustees, as the case may be);
that the same is their free act and deed as such
officers, respectively (or as Trustees as the case
may be), and (as the case may be) the free and
corporate act and deed of the corporation or
association set opposite their names; that (as the
case may be) they were duly authorized there unto by
the board of directors of said corporation or
association; and that (as the case may be) the seal
affixed to said instrument is the corporate seal of
said corporation or association.
OKLAHOMA Before me on this day personally appeared the
aforementioned persons, to me known to be the
identical persons who subscribed the names of the
respective makers thereof to the foregoing instrument
in the capacities set forth opposite the names of
such persons above, and each such person acknowledged
to me that he executed the same as his free and
voluntary act and deed and as the free and voluntary
act and deed of the corporation or association set
opposite his name (or of himself as Trustee, as the
case may be) for the uses and purposes therein set
forth.
SOUTH DAKOTA Before me personally appeared each such
person, who acknowledged himself to be the designated
officer of the corporation or association set
opposite his name, or a Trustee, as the case may be,
and that (as the case may be, as such designated
officer being authorized so to do) he executed the
foregoing instrument for the purposes therein
contained, by (as the case may be) signing the name
of said corporation or association by himself as such
designated officer.
TEXAS This instrument was acknowledged before me on this
day by each such person as the designated officer of
the corporation or association set opposite his name
(or a Trustee, as the case may be), on behalf of said
corporation or association set opposite his name (or
of himself as Trustee, as the case may be).
UTAH On this day personally appeared before me such
persons, who, being by me duly sworn, did say, that
(as the case may be) they are the designated officers
of said corporation or association or are Trustees
and that said instrument was signed (as the case may
be) in behalf of said corporation or association by
resolution of its Board of Directors (or on behalf of
themselves as Trustees, as the case may be), and said
persons acknowledged to me that said corporation,
association or Trustees executed the same.
Exhibit Q - Page 30
<PAGE> 83
WYOMING The foregoing instrument was acknowledged before me
by the above individuals on this day.
GIVEN under my hand and seal this__day of_____________.
-----------------------
Notary Public in and for
County,
------------ ---------
---------------------
Print or Type Name
My commission expires:
Exhibit Q - Page 31
<PAGE> 84
EXHIBIT A To Mortgage, Deed of Trust, Assignment,
Security Agreement and Financing Statement, dated
______,______, from__________________
to___________ and____________
and________________,
as Collateral Agent
List of Properties
[to be prepared by the Mortgagor]
1. Depth limitations, unit designations, unit tract descriptions and
descriptions of undivided leasehold interests, well names, "Operating
Interests", "Working Interests" and "Net Revenue Interests" contained in this
Exhibit A and the listing of any percentage, decimal or fractional interest in
this Exhibit A shall not be deemed to limit or otherwise diminish the interests
being subjected to the lien, security interest and encumbrance of this
instrument.
2. Some of the land descriptions in this Exhibit A may refer only to a
portion of the land covered by a particular lease. This instrument is not
limited to the land described in Exhibit A but is intended to cover the entire
interest of the Mortgagor in any lease described in Exhibit A even if such
interest relates to land not described in Exhibit A. Reference is made to the
land descriptions contained in the documents of title recorded as described in
this Exhibit A. To the extent that the land descriptions in this Exhibit A are
incomplete, incorrect or not legally sufficient, the land descriptions contained
in the documents so recorded are incorporated herein by this reference.
3. References in Exhibit A to instruments on file in the public records
are made for all purposes. Unless provided otherwise, all recording references
in Exhibit A are to the official real property records of the county or counties
(or parish or parishes) in which the mortgaged property is located and in which
records such documents are or in the past have been customarily recorded,
whether Deed Records, Oil and Gas Records, Oil and Gas Lease Records or other
records.
4. A statement herein that a certain interest described herein is
subject to the terms of certain described or referred to agreements, instruments
or other matters shall not operate to subject such interest to any such
agreement, instrument or other matter except to the extent that such agreement,
instrument or matter is otherwise valid and presently subsisting nor shall such
statement be deemed to constitute a recognition by the parties hereto that any
such agreement, instrument or other matter is valid and presently subsisting.
Exhibit Q - Page 32
<PAGE> 85
Schedule 1
Schedule of Lenders' Commitments and Percentage Share
<TABLE>
<CAPTION>
Lenders Commitment Percentage Share
------- ---------- ----------------
<S> <C> <C>
NationsBank, N.A. $ 178,969,354.90 13.255320%
CIBC Inc. $ 125,077,300.96 9.263819%
Morgan Guaranty Trust Company of New York $ 178,969,354.95 13.255320%
Chase Bank of Texas, National Association $ 120,332,991.31 8.912433%
The Bank of New York $ 58,636,363.64 4.342888%
The Bank of Nova Scotia $ 96,590,840.62 7.153976%
Royal Bank of Canada $ 96,590,840.62 7.153976%
Union Bank of California, N.A. $ 58,636,363.64 4.342888%
Wells Fargo Bank, N.A. $ 58,636,363.64 4.342888%
Bank One, Texas, N.A. $ 22,872,340.43 1.694034%
Den Norske Bank ASA $ 39,090,909.09 2.895258%
Paribas $ 39,090,909.09 2.895258%
First Union National Bank $ 53,323,837.94 3.949417%
Bankers Trust Company $ 19,545,454.55 1.447629%
Credit Agricole Indosuez $ 19,545,454.55 1.447629%
Natexis Banque $ 19,545,454.55 1.447629%
Toronto Dominion (Texas), Inc. $ 52,755,621.88 3.907332%
The Toyo Trust & Banking Co., Ltd. $ 19,545,454.55 1.447629%
Wachovia Bank, N.A. $ 33,778,383.40 2.501788%
The Dai-Ichi Kangyo Bank, Ltd., New York $ 19,545,454.55 1.447629%
Branch
The Sanwa Bank, Limited $ 19,545,454.55 1.447629%
Kredietbank N.V. $ 19,545,454.55 1.447629%
===============================================
Totals: $1,350,169,957.96 100.000000%
</TABLE>
Schedule 1 - Page 1
<PAGE> 86
Schedule 3
Schedule of Restricted Subsidiaries
This Schedule 3 is attached to and made a part of (i) that certain
Primary Credit Facility pursuant to that certain Second Amended and Restated
Credit Facility Agreement dated as of March 19, 1999 by and among Borrower,
NationsBank, N.A., as Administrative Agent, CIBC Inc., as Documentation Agent,
Morgan Guaranty Trust Company of New York, as Documentation Agent, Chase Bank of
Texas, National Association, as successor-in-interest to The Chase Manhattan
Bank, as Syndication Agent, the Co-Agents party thereto, and the Lenders from
time to time parties thereto, and (ii) that certain 364 Day Credit Facility
pursuant to that certain Second Amended and Restated Credit Facility Agreement
dated as of March 19, 1999 by and among Borrower, NationsBank, N.A., as
Administrative Agent, CIBC Inc., as Documentation Agent, Morgan Guaranty Trust
Company of New York, as Documentation Agent, Chase Bank of Texas, National
Association, as successor-in-interest to The Chase Manhattan Bank, as
Syndication Agent, the Co- Agents party thereto, and the Lenders from time to
time parties thereto.
Pioneer Natural Resources USA, Inc., a Delaware corporation
Pioneer International Resources Company, a Delaware corporation
Pioneer Resources Producing L.P., a Delaware limited partnership
Parker & Parsley (Canada) Petroleum Company, a Nova Scotia, Canada limited
liability company
Pioneer Resources, Inc., , a Delaware corporation
P&PCanada LP Co., a Delaware corporation
Pioneer Natural Resources Canada, Inc., an Alberta,
Canada limited liability company Pioneer Natural Resources (Argentina) S.A., an
Argentina limited liability company
Pioneer Natural Resources (Tierra del Fuego)S.A., an Argentina limited
liability company
Westpan NGL Co., a Delaware corporation
Pioneer Natural Resources (Cayman) Ltd., a Cayman exempted company
Parker & Parsley Petroleum Australia Holdings Pty Limited (A.C.N. 064 589 242),
a New South Wales, Australia corporation
Parker & Parsley Petroleum Australia Pty Limited (A.C.N. 064 589 180), a New
South Wales, Australia corporation
Bridge Oil (U.S.A.) Inc., a Delaware corporation
Schedule 3 - Page 1
<PAGE> 87
Schedule 4
Schedule of Insurance
Schedule 4 - Page 1
<PAGE> 88
Schedule 5
Schedule of Security Instruments
Guaranties - Pioneer Natural Resources USA, Inc., a Delaware corporation
Pioneer International Resources Company, a Delaware
corporation
Pioneer Resources Producing L.P., a Delaware limited
partnership
Pioneer Resources, Inc., a Delaware corporation
P&PCanada LP Co., a Delaware corporation
Pioneer Natural Resources Canada Inc., an Alberta, Canada
corporation
Westpan NGL Co., a Delaware corporation
Pioneer Natural Resources (Argentina) S.A., an Argentina
limited liability company
Pioneer Natural Resources (Tierra del Fuego) S.A., an
Argentina limited liability company
Pledge Agreements or Deeds of Mortgage, Blank Stock Powers and Financing
Statements:
Pledge Agreement by Pioneer Resources, Inc., a Delaware corporation,
covering shares of Parker & Parsley (Canada) Petroleum Company, a Nova
Scotia, Canada limited liability company
Pledge Agreement by P&PCanada LP Co., a Delaware corporation, covering
shares of Parker & Parsley (Canada) Petroleum Company, a Nova Scotia,
Canada limited liability company
Deed of Mortgage by Pioneer Natural Resources Company USA, Inc., a
Delaware corporation, covering shares of Parker & Parsley Petroleum
Australia Holdings Pty. Limited (A.C.N. 064 589 242), a New South
Wales, Australia corporation
Pledge Agreement by Pioneer International Resources Company, a Delaware
corporation, covering shares of Pioneer Natural Resources Canada Inc.,
an Alberta, Canada limited liability company
Pledge Agreement by Pioneer Natural Resources USA, Inc., a Delaware
corporation, covering shares of Pioneer Natural Resources (Cayman)
Ltd., a Cayman exempted company
Schedule 5 - Page 1
<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROXY STATEMENT
PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission
only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section.240.14a-11(c) or
Section.240.14a-12
PIONEER NATURAL RESOURCES USA, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which the transaction applies:
Limited partnership interests
(2) Aggregate number of securities to which transaction applies: 100% of the
limited partnership interests
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
The aggregate amount of cash that the registrant is offering to the
holders of the limited partnership interests for 100% of such interests is
$47,500,000.
(4) Proposed maximum aggregate value of transaction: $47,500,000
(5) Total fee paid: $9,500
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PIONEER NATURAL RESOURCES USA, INC.
1400 WILLIAMS SQUARE WEST
5205 NORTH O'CONNOR BLVD.
IRVING, TEXAS 75039
NOTICE OF SPECIAL MEETINGS OF LIMITED PARTNERS
TO BE HELD ON , 1999
To the Limited Partners of 25 Publicly-Held
Parker & Parsley Limited Partnerships:
This is a notice that special meetings of the limited partners of the
following 25 publicly-held limited partnerships will be held on ,
1999, at 2:00 p.m., at the Wyndham Anatole Hotel, Room, 2201 Stemmons
Freeway, Dallas, Texas 75207:
<TABLE>
<S> <C>
Parker & Parsley 82-I, Ltd. Parker & Parsley Producing Properties 87-B,
Ltd.
Parker & Parsley 82-II, Ltd. Parker & Parsley 88-A, L.P.
Parker & Parsley 83-A, Ltd. Parker & Parsley Producing Properties 88-A,
L.P.
Parker & Parsley 83-B, Ltd. Parker & Parsley 88-B, L.P.
Parker & Parsley 84-A, Ltd. Parker & Parsley 89-A, L.P.
Parker & Parsley 85-A, Ltd. Parker & Parsley 90-A, L.P.
Parker & Parsley 85-B, Ltd. Parker & Parsley 90-B Conv., L.P.
Parker & Parsley 86-A, Ltd. Parker & Parsley 90-B, L.P.
Parker & Parsley 86-B, Ltd. Parker & Parsley 90-C Conv., L.P.
Parker & Parsley 86-C, Ltd. Parker & Parsley 90-C, L.P.
Parker & Parsley 87-A, Ltd. Parker & Parsley 91-A, L.P.
Parker & Parsley Producing Parker & Parsley 91-B, L.P.
Properties 87-A, Ltd.
Parker & Parsley 87-B, Ltd.
</TABLE>
Parker & Parsley Petroleum Company and other predecessors of Pioneer
Natural Resources USA, Inc., a Delaware corporation, sponsored the partnerships.
Pioneer USA is a direct 100% owned subsidiary of Pioneer Natural Resources
Company, a Delaware corporation, and is the managing or sole general partner of
the partnerships.
The purpose of these special meetings is for you to consider and vote on
the following matters:
1. A proposal to approve an Agreement and Plan of Merger dated as of
, 1999, among Pioneer, Pioneer USA, and each of the
partnerships. Each partnership that approves this proposal will merge with
and into Pioneer USA, with Pioneer USA surviving the merger. Each
partnership interest of a participating partnership, other than Pioneer
USA's interests, will be converted into the right to receive an amount of
cash. The amount of cash to be paid for all partnership interests of a
participating partnership will be based on the participating partnership's
merger value. The merger value of a participating partnership is equal to
the sum of its reserve value and its net working capital, as reduced by its
pro rata share of the estimated expenses and fees of the mergers of all of
the partnerships, in each case as of September 30, 1999. Each partnership's
pro rata share of the estimated expenses and fees is based on its reserve
value before any reduction for the estimated expenses and fees. WE
CALCULATED THE CASH PAYMENT USING INFORMATION AS OF JUNE 30, 1999 FOR
PURPOSES OF ILLUSTRATION. WE INTEND TO CHANGE EACH REFERENCE TO "JUNE 30,
1999" TO BE "SEPTEMBER 30, 1999" AND TO REVISE JUNE 30, 1999 NUMBERS AS OF
SEPTEMBER 30, 1999 BEFORE MAILING THE DEFINITIVE PROXY STATEMENT TO THE
LIMITED PARTNERS. The cash payment will be allocated among the
<PAGE> 3
partners based on the liquidation provisions of each partnership agreement.
Pioneer USA will not receive any cash payment for its partnership interests
in the participating partnerships. However, as a
<PAGE> 4
result of the mergers, Pioneer USA will acquire 100% of the properties of
the participating partnerships, including properties attributable to its
partnership interests in those partnerships.
2. A proposal to amend the partnership agreement of each partnership
to permit the partnership's merger with Pioneer USA. If the amendment is
not approved, that partnership cannot merge into Pioneer USA even if the
partners of that partnership approve the merger agreement.
3. A proposal to approve the opinion issued to Pioneer USA by
on behalf of the limited partners that neither the grant nor the
exercise of the right to approve the mergers by the limited partners will
result in the loss of any limited partner's limited liability or adversely
affect the tax status of the partnerships and to approve the selection of
as special legal counsel for the limited partners to render such
legal opinion.
4. Other business that properly comes before the special meetings or
any adjournments or postponements of the special meetings. We are not aware
of any other business for the special meetings.
The accompanying proxy statement contains information about the mergers,
including the amount of cash to be paid per $1,000 initial investment in each
partnership, and descriptions of the merger agreement, the merger amendment and
the legal opinion of the special legal counsel for the limited partners. The
proxy statement also contains a copy of the merger agreement, the merger
amendment and the legal opinion.
Pioneer USA's board of directors set the close of business on
, 1999, as the record date to identify the limited partners who
are entitled to notice of, and to vote at, the special meetings or any
adjournments or postponements of the special meetings. During the ten days
before the special meetings, you may examine lists of the limited partners of
your partnership at the offices of Pioneer USA during normal business hours for
any purpose relevant to the special meetings.
ON , 1999, PIONEER USA'S BOARD OF DIRECTORS UNANIMOUSLY
DETERMINED THAT THE MERGERS ARE ADVISABLE, FAIR TO YOU, AND IN YOUR BEST
INTERESTS. THE BOARD RECOMMENDS THAT YOU VOTE FOR THE MERGER AGREEMENT, THE
MERGER AMENDMENT, THE SELECTION OF SPECIAL LEGAL COUNSEL FOR THE LIMITED
PARTNERS AND THAT COUNSEL'S LEGAL OPINION. ALTHOUGH PIONEER USA'S BOARD OF
DIRECTORS HAS ATTEMPTED TO FULFILL ITS FIDUCIARY DUTIES TO YOU, PIONEER USA'S
BOARD OF DIRECTORS HAD CONFLICTING INTERESTS IN EVALUATING THE MERGERS BECAUSE
EACH MEMBER OF ITS BOARD OF DIRECTORS IS ALSO AN OFFICER OF PIONEER. Each
partnership requires the favorable vote of the holders of the majority of its
limited partnership interests to approve the merger agreement, the merger
amendment, the selection of special legal counsel for the limited partners and
that counsel's legal opinion.
IF YOU DO NOT SEND IN YOUR PROXY CARD OR VOTE AT THE SPECIAL MEETINGS, IT
WILL HAVE THE SAME EFFECT AS IF YOU VOTED AGAINST THE MERGERS.
You are requested to sign, vote and date the enclosed proxy card and return
it promptly in the enclosed envelope, even if you expect to be present at the
special meetings. If you give a proxy, you can revoke it at any time before the
special meetings. If you are present at the special meetings, you may withdraw
your proxy and vote in person.
By Order of the Board of Directors,
Mark L. Withrow
Executive Vice President, General
Counsel
and Secretary
, 1999
<PAGE> 5
PRELIMINARY PROXY STATEMENT, SUBJECT TO COMPLETION [LOGO]
PIONEER NATURAL RESOURCES USA, INC.
1400 WILLIAMS SQUARE WEST
5205 NORTH O'CONNOR BLVD.
IRVING, TEXAS 75039
, 1999
Dear Limited Partners:
We invite you to attend the special meetings of limited partners of the
partnerships described below. The special meetings will be held on ,
1999, at 2:00 p.m., at the Wyndham Anatole Hotel, Room, 2201 Stemmons
Freeway, Dallas, Texas 75207. The purpose of the special meetings is for you to
vote on mergers of the partnerships that, if completed, will result in your
receiving cash for your partnership interests.
Pioneer Natural Resources Company, a Delaware corporation, desires to
acquire 25 publicly-held limited partnerships. We are a direct 100% owned
subsidiary of Pioneer and we are the managing or sole general partner of the
partnerships. Our predecessors, including Parker & Parsley Petroleum Company,
originally sponsored the partnerships. The partnerships are Texas and Delaware
limited partnerships. They were formed from 1982 through 1991 to acquire,
develop and produce oil and gas reserves. If you and the other limited partners
approve the mergers, the partnerships will be merged with and into us and we
will survive the mergers.
We have retained Robert A. Stanger & Co., Inc. to issue a fairness opinion
in connection with the mergers. Robert A. Stanger & Co., Inc.'s opinion is dated
as of , 1999 and, subject to the qualifications stated in such
opinion, states that the merger values to be paid in cash for the limited
partner interests are fair from a financial point of view to the limited
partners of the partnerships. The written opinion of Robert A. Stanger & Co.,
Inc. is contained in the accompanying document. You should read all of it
carefully.
We can complete the mergers only if a majority of the limited partners
approve the merger agreement, the amendment to the partnership agreements to
permit the mergers, the selection of special legal counsel for the limited
partners and that counsel's legal opinion for their partnerships. This document
provides information about the proposed mergers. It also includes a copy of the
merger agreement, the merger amendment and the legal opinion of the special
legal counsel for the limited partners. Please give all of this information your
careful attention.
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the special
meetings, please take the time to vote by completing and mailing to us the
enclosed proxy card. This will not prevent you from revoking your proxy at any
time prior to the special meetings or from voting your partnership interests in
person if you later choose to attend the special meetings.
We intend to mail checks to the partners of participating partnerships
promptly after completing the mergers. Certificates representing partnership
interests will be automatically cancelled, and you will not have to surrender
your certificates to receive the cash payment.
Sincerely,
Mark L. Withrow
Executive Vice President, General Counsel
and Secretary
YOU SHOULD CAREFULLY CONSIDER THE RISKS RELATING TO THE MERGERS DESCRIBED
IN "RISK FACTORS." THESE INCLUDE:
- THE MERGER VALUES OF THE PARTNERSHIPS DETERMINE THE AMOUNT OF CASH YOU
WILL RECEIVE IN THE MERGERS. PIONEER AND PIONEER USA DETERMINED THE
MERGER VALUES AND WILL NOT ADJUST THEM FOR CHANGES IN PARTNERSHIP VALUES
BEFORE THE MERGERS ARE COMPLETED.
- YOU WERE NOT INDEPENDENTLY REPRESENTED IN ESTABLISHING THE TERMS OF THE
MERGERS.
- OUR BOARD OF DIRECTORS HAD CONFLICTING INTERESTS IN EVALUATING THE
MERGERS BECAUSE EACH MEMBER OF OUR BOARD OF DIRECTORS IS ALSO AN OFFICER
OF PIONEER.
THE TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
THE TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
This proxy statement is dated , 1999. It is first being
mailed to the limited partners on or about , 1999.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY.................................. 1
RISK FACTORS............................. 8
The Merger Values Involve Estimates
that Will Not Be Adjusted............ 8
You Were Not Independently Represented
in Establishing the Terms of the
Mergers.............................. 9
The Interests of Pioneer, Pioneer USA
and Their Directors and Officers May
Differ From Your Interests........... 10
Pioneer USA Has Not Previously Offered
the Partnerships for Sale to
Others............................... 10
Pioneer USA Did Not Solicit Any Third-
Party Offers......................... 10
Third Parties Might Not Make an Offer
for the Partnerships If They Cannot
Become Operator of the Partnerships'
Properties........................... 10
Potential Litigation Challenging the
Mergers May Delay or Block the
Mergers.............................. 10
Repurchase Rights Terminate On
Completion of the Mergers............ 10
SPECIAL FACTORS.......................... 11
Background of the Mergers.............. 11
Reasons for the Mergers................ 14
Recommendation of Pioneer USA.......... 15
Fairness Opinion....................... 16
Alternative Transactions to the
Mergers.............................. 20
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION............ 22
METHOD OF DETERMINING MERGER VALUES AND
AMOUNT OF CASH OFFERED................. 22
Components of Merger Values............ 22
Allocation of Merger Values Among
Partners............................. 24
Other Methods of Determining Merger
Values............................... 24
Information Sources.................... 25
THE MERGERS.............................. 27
General................................ 27
Legal Opinion for Limited Partners..... 27
Distribution of Cash Payments.......... 27
Material U.S. Federal Income Tax
Consequences......................... 28
Accounting Treatment................... 31
No Appraisal or Dissenter Rights....... 31
Future of Nonparticipating
Partnerships......................... 31
Nonmanaging General Partners of Certain
Partnerships......................... 31
Third-Party Offers..................... 32
Merger Amendment....................... 32
Termination of Registration and
Reporting Requirements............... 33
Source of Funds........................ 33
Payment of Expenses and Fees........... 34
THE MERGER AGREEMENT..................... 35
Structure; Effective Time.............. 35
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Effects of the Mergers................. 35
Conduct of Business Prior to the
Mergers.............................. 35
Other Agreements....................... 35
Representations and Warranties of
Pioneer, Pioneer USA and the
Partnerships......................... 36
Conditions to the Mergers.............. 36
Termination of the Mergers and the
Merger Agreement..................... 37
Amendments; Waivers.................... 38
THE SPECIAL MEETINGS..................... 39
Time and Place; Purpose................ 39
Record Date; Voting Rights and
Proxies.............................. 40
Solicitation of Proxies................ 41
Quorum................................. 41
Required Vote; Broker Non-Votes........ 42
Participation by Assignees............. 42
Special Requirements for Certain
Limited Partners..................... 42
Validity of Proxy Cards................ 43
Local Laws............................. 43
INTERESTS OF PIONEER, PIONEER USA AND
THEIR DIRECTORS AND OFFICERS........... 43
Conflicting Duties of Pioneer USA,
Individually and as a General
Partner.............................. 43
Pioneer USA's Employees Provide
Services to the Partnerships......... 43
Financial Interests of Officers and
Directors in Pioneer................. 43
Financial Interests of Officers and
Directors in Partnerships............ 44
Individual Partnership's Perspective
Not Considered in Mergers............ 44
The Partnerships Pay Operator Fees to
Pioneer USA.......................... 44
OWNERSHIP OF PARTNERSHIP INTERESTS....... 44
TRANSACTIONS AMONG THE PARTNERSHIPS,
PIONEER, PIONEER USA AND THEIR
DIRECTORS AND OFFICERS................. 45
MANAGEMENT............................... 46
Pioneer................................ 46
Pioneer USA............................ 48
THE PARTNERSHIPS......................... 50
General................................ 50
The Drilling Partnerships.............. 50
The Income Partnerships................ 51
LEGAL MATTERS............................ 51
INDEPENDENT AUDITORS AND INDEPENDENT
PETROLEUM CONSULTANTS.................. 51
WHERE YOU CAN FIND MORE INFORMATION...... 52
COMMONLY USED OIL AND GAS TERMS.......... 53
</TABLE>
i
<PAGE> 7
LIST OF APPENDICES
<TABLE>
<CAPTION>
APPENDIX
--------
<S> <C> <C>
General Information Relating to the Partnerships........................ A
Table 1 Jurisdiction of Organization, Initial Investment by Limited
Partners and Number of Limited Partners
Table 2 Aggregate Merger Value
Table 3 Merger Value Attributable to Partnership Interests of
Limited Partners
Table 4 Ownership Percentage and Merger Value Attributable to
Nonmanaging General Partners Other Than Pioneer USA
Table 5 Ownership Percentage and Merger Value Attributable to
Pioneer USA Held in Its Capacities as General Partner,
Nonmanaging General Partner and Limited Partner
Table 6 Voting Percentage in Partnerships Beneficially Owned by
Pioneer USA in Its Capacity as a Limited Partner
Table 7 Historical Partnership Distributions
Table 8 Annual Repurchase Prices and Aggregate Annual Repurchase
Payments
Table 9 Participation in Costs and Revenues of the Partnerships
Table 10 Average Oil, Natural Gas Liquids and Gas Sales Prices and
Production Costs
Table 11 Proved Reserves Attributable to Pioneer USA, Other
Nonmanaging General Partners and Limited Partners
Table 12 Oil, Natural Gas Liquids and Gas Production
Table 13 Productive Wells and Developed Acreage
Table 14 Recent Trades of Partnership Interests
Summary Reserve Report of Williamson Petroleum Consultants, Inc. for the B
Partnerships..........................................................
Form of Fairness Opinion of Robert A. Stanger & Co., Inc................ C
The Merger Proposals.................................................... D
Form of Agreement and Plan of Merger.................................... E
</TABLE>
WE HAVE PREPARED A SEPARATE SUPPLEMENT TO THIS DOCUMENT FOR EACH
PARTNERSHIP. EACH SUPPLEMENT INCLUDES:
- A TABLE CONTAINING:
-- THE AGGREGATE INITIAL INVESTMENT BY THE LIMITED PARTNERS;
-- THE AGGREGATE HISTORICAL LIMITED PARTNER DISTRIBUTIONS THROUGH JUNE 30,
1999;
-- THE MERGER VALUE PER $1,000 LIMITED PARTNER INVESTMENT AS OF JUNE 30,
1999;
-- THE MERGER VALUE PER $1,000 LIMITED PARTNER INVESTMENT AS A MULTIPLE OF
DISTRIBUTIONS FOR THE 12 MONTHS ENDED JUNE 30, 1999;
-- THE BOOK VALUE PER $1,000 LIMITED PARTNER INVESTMENT AS OF JUNE 30,
1999 AND AS OF DECEMBER 31, 1998; AND
-- THE ORDINARY TAX LOSS PER $1,000 LIMITED PARTNER INVESTMENT IN YEAR OF
INITIAL INVESTMENT;
- THE PARTNERSHIP'S QUARTERLY REPORT ON FORM 10-Q FOR THE SIX MONTHS ENDED
JUNE 30, 1999;
- THE PARTNERSHIP'S ANNUAL REPORT ON FORM 10-K THE YEAR ENDED DECEMBER 31,
1998; AND
- DISCLOSURES ABOUT THE PARTNERSHIP'S OIL AND GAS PRODUCING ACTIVITIES.
THE SUPPLEMENT CONSTITUTES AN INTEGRAL PART OF THIS DOCUMENT FOR THAT
PARTNERSHIP. PLEASE CAREFULLY READ ALL OF THE SUPPLEMENTS FOR THE PARTNERSHIPS
IN WHICH YOU ARE A LIMITED PARTNER.
ii
<PAGE> 8
SUMMARY
This summary highlights some information from this document and may not
contain all of the information that is important to you. To understand the
mergers and to obtain a more detailed description of the legal terms of the
mergers, you should carefully read this entire document, the related partnership
supplements, and the documents described in "Where You Can Find More
Information" on page 52. For definitions of oil and gas terms used in this
document, see "Commonly Used Oil and Gas Terms" on page .
When we use the terms "Pioneer USA," "we," "us" or "our," we are referring
to Pioneer Natural Resources USA, Inc. including its consolidated subsidiaries
and predecessors, unless the context otherwise requires. When we use the term
"Pioneer," we are referring to Pioneer Natural Resources Company. When we use
the term "merger proposals," we are referring to the proposals to approve the
merger agreement, the merger amendment, the selection of special legal counsel
for the limited partners and the legal opinion of that counsel.
THE MERGERS
Pioneer proposes to acquire the partnerships by merging them into us. We
will be the survivor of each merger. The partnership interests of each
participating partnership, other than our interests, will be converted into the
right to receive cash.
The amount of cash Pioneer will pay for a partnership interest will be
based on the merger value of the partnership and the liquidation provisions of
the partnership agreement. Pioneer and Pioneer USA determined the merger values
primarily based on the present value of estimated future net revenues from the
partnerships' oil and gas reserves at June 30, 1999. In determining the present
value, Pioneer and Pioneer USA used (1) an arithmetic average of the five-year
New York Mercantile Exchange, or NYMEX, futures price as of June 30, 1999 for
oil, which was approximately $18.00 per barrel, or Bbl, of oil, less standard
industry adjustments, (2) the NYMEX price of $2.40 per thousand cubic feet, or
Mcf, of gas, less standard industry adjustments, and (3) a 12.5% discount rate.
In addition, each participating partnership's merger value includes its net
working capital as of June 30, 1999, as reduced by its pro rata share of the
estimated expenses and fees of the mergers of all of the partnerships. The
partnership's pro rata share of the estimated expenses and fees is based on its
reserve value before any reduction for the estimated expenses and fees.
On page 3 of this document is a table that shows important information
about the partnerships, including the amount of cash that will be paid in the
mergers for each $1,000 of initial investment. For purposes of illustration in
this preliminary document, we calculated the merger values using information as
of June 30, 1999. We intend to revise those numbers as of September 30, 1999
before mailing this document to the limited partners.
Pioneer and Pioneer USA agreed to structure the transaction as mergers
instead of as property sales followed by liquidation of the partnerships because
the mergers will:
- require fewer legal documents;
- reduce filing fees and other costs; and
- result in the same amount of cash to the limited partners as would a
property sale and liquidation using the same commodity prices.
Pioneer and Pioneer USA expect to sign the merger agreement as soon as the
September 30, 1999 merger values are determined. However, if the oil and gas
commodity prices used in calculating the merger values for this preliminary
document materially increase or decrease after the date of determination for
this preliminary document and before mailing this document to the limited
partners, Pioneer or Pioneer USA might abandon the proposed mergers before
submitting the merger proposals to the limited partners for approval.
THE COMPANIES
PIONEER NATURAL RESOURCES COMPANY
1400 Williams Square West
5205 North O'Connor Blvd.
Irving, Texas 75039
(972) 444-9001
Pioneer is an independent exploration and production company. Its common
stock is traded
<PAGE> 9
on the New York Stock Exchange and the Toronto Stock Exchange under the symbol
"PXD."
Pioneer files annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. Those SEC filings
are available to you in the same manner as the partnerships' information. See
"Where You Can Find More Information" on page 52 of this document.
PIONEER NATURAL RESOURCES USA, INC.
1400 Williams Square West
5205 North O'Connor Blvd.
Irving, Texas 75039
(972) 444-9001
We prepared this document to solicit your proxy. We are a 100% owned
subsidiary of Pioneer. We directly own almost all of Pioneer's United States oil
and gas properties.
THE PARTNERSHIPS
c/o Pioneer Natural Resources USA, Inc.
1400 Williams Square West
5205 North O'Connor Blvd.
Irving, Texas 75039
(972) 444-9001
The names of the partnerships are found in the table on the next page. All
of the partnerships produce and sell oil and gas. The partnerships were
generally formed to provide the general and limited partners cash flow from
operations and, in some cases, tax incentives. See the supplement to this
document for each of your partnerships for specific information about your
partnerships, including the merger value as a multiple of distributions for the
12 months ended June 30, 1999. As a result of the partnerships' oil and gas
operations, the partnerships distribute cash to the limited and general partners
from the partnerships' net cash flows. These distributions are made quarterly,
unless sufficient cash is not available.
The partnerships' properties consist of interests in approximately 1,100
oil and gas wells that are located primarily in the Spraberry field of the
Permian Basin of West Texas. We operate most of the partnerships' wells. At
December 31, 1998, the partnerships' combined total proved reserves were 12.2
million barrels of oil equivalent, or MMBOE, consisting of 9.6 million barrels,
or MMBbls, of oil and natural gas liquids and 15.6 billion cubic feet, or Bcf,
of natural gas. Approximately 94% of the reserves are attributable to the
limited partners' partnership interests, excluding partnership interests owned
directly by us. Approximately 79% of the total proved reserves attributable to
the properties are oil and liquids, and 21% are natural gas, based on six Mcf of
gas being equivalent to one Bbl of oil. See "The Partnerships" on page 50 of
this document for more information about the partnerships.
2
<PAGE> 10
SUMMARY TABLE -- MERGER VALUE AND
AMOUNT OF INITIAL LIMITED PARTNER INVESTMENT REPAID
This table contains the following summary information for each partnership:
- the aggregate merger values assigned to:
-- Pioneer USA's partnership interests, whether general or limited;
-- its nonmanaging general partners' partnership interests, excluding
Pioneer USA;
-- its limited partners, excluding Pioneer USA; and
- for each $1,000 initial limited partner investment in that partnership:
-- the merger value;
-- the total historical cash distributions through June 30, 1999; and
-- the total amount of initial investment by the limited partners that has
been repaid, after giving effect to the mergers, stated in dollars and
as a percentage.
This information is based on assumptions. You should read the following
table together with the detailed information in Table 2 and Table 3 of Appendix
A to this document. To provide an example in this preliminary document, we
prepared the following table of merger values using information as of June 30,
1999. We intend to revise those numbers as of September 30, 1999 prior to
mailing the definitive document to the limited partners.
Interests in some partnerships were sold in units at prices other than
$1,000. We have presented this information based on a $1,000 initial investment
for ease of use and comparison among partnerships. You should not assume that
the amount shown per $1,000 investment is the same as any value or amount
attributable to a single unit investment.
<TABLE>
<CAPTION>
PER $1,000 INITIAL LIMITED PARTNER INVESTMENT
AGGREGATE MERGER VALUE ------------------------------------------------
----------------------------------- DISTRIBUTIONS AMOUNT OF
OTHER FROM INITIAL INVESTMENT
NONMANAGING INCEPTION REPAID
PIONEER GENERAL LIMITED MERGER THROUGH ------------------
USA PARTNERS PARTNERS VALUE 6/30/99 $ %
-------- ----------- ---------- -------- -------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Parker & Parsley 82-I,
Ltd........................ $160,707 $ 5,579 $ 370,968 $ 34.99 $ 947.88 $ 982.87 98%
Parker & Parsley 82-II,
Ltd........................ 233,515 7,240 677,990 57.41 1,100.07 1,157.48 116%
Parker & Parsley 83-A,
Ltd........................ 444,921 17,701 1,314,512 69.55 1,264.54 1,334.09 133%
Parker & Parsley 83-B,
Ltd........................ 744,776 29,018 2,170,824 96.42 1,461.35 1,557.77 156%
Parker & Parsley 84-A,
Ltd........................ 637,901 28,200 1,965,607 103.14 1,388.21 1,491.35 149%
Parker & Parsley 85-A,
Ltd........................ 20,949 -- 695,068 73.73 681.05 754.78 75%
Parker & Parsley 85-B,
Ltd........................ 14,351 -- 820,575 103.47 879.49 982.96 98%
Parker & Parsley 86-A,
Ltd........................ 11,133 -- 818,452 81.07 1,282.95 1,364.02 136%
Parker & Parsley 86-B,
Ltd........................ 39,117 -- 2,213,631 129.61 1,476.23 1,605.84 161%
Parker & Parsley 86-C,
Ltd........................ 24,353 -- 1,838,218 95.45 1,405.01 1,500.46 150%
Parker & Parsley 87-A,
Ltd........................ 53,960 -- 3,315,712 115.79 1,232.73 1,348.52 135%
Parker & Parsley Producing
Properties 87-A, Ltd....... 23,968 -- 1,753,345 144.08 892.03 1,036.11 104%
Parker & Parsley 87-B,
Ltd........................ 32,586 -- 2,634,521 131.44 1,158.39 1,289.83 129%
Parker & Parsley Producing
Properties 87-B, Ltd....... 33,115 -- 1,252,499 208.84 961.03 1,169.87 117%
Parker & Parsley 88-A,
L.P........................ 51,739 -- 2,174,467 170.38 997.83 1,168.21 117%
Parker & Parsley Producing
Properties 88-A, L.P....... 32,164 -- 1,873,767 336.28 1,086.22 1,422.50 142%
Parker & Parsley 88-B,
L.P........................ 28,688 -- 1,378,077 155.54 972.69 1,128.23 113%
Parker & Parsley 89-A,
L.P........................ 33,362 -- 1,449,492 176.51 916.62 1,093.13 109%
Parker & Parsley 90-A,
L.P........................ 34,154 -- 1,054,698 158.26 789.75 948.01 95%
Parker & Parsley 90-B Conv.,
L.P........................ 31,749 -- 1,874,279 158.61 604.35 762.96 76%
Parker & Parsley 90-B,
L.P........................ 64,924 -- 5,109,583 158.78 604.43 763.21 76%
Parker & Parsley 90-C Conv.,
L.P........................ 13,545 -- 957,896 127.70 538.46 666.16 67%
Parker & Parsley 90-C,
L.P........................ 18,948 -- 1,533,135 126.92 538.47 665.39 66%
Parker & Parsley 91-A,
L.P........................ 32,032 -- 2,283,469 197.28 673.79 871.07 87%
Parker & Parsley 91-B,
L.P........................ 26,234 -- 2,384,931 212.20 537.98 750.18 75%
</TABLE>
3
<PAGE> 11
BENEFITS TO THE LIMITED PARTNERS
We believe the mergers provide the following benefits to the limited
partners:
Liquidity. The mergers provide liquidity to the limited partners at a price
based on oil and gas reserve values, not on limited market demand for illiquid
partnership interests. All limited partners in participating partnerships will
receive cash payments in exchange for their partnership interests shortly after
completion of the mergers. The cash payments will include both the partnership's
reserve value and its net working capital less the partnership's share of
transaction expenses. None of the partnership interests are traded on a national
stock exchange or in any other significant market. No liquid market exists for
interests in any of the partnerships. See Table 14 of Appendix A for historical
information about recent trades of partnership interests in the partnerships.
Repurchase obligations exist in only a few of the partnerships and are limited
in both amount and price by formula in the partnership agreements. Although some
partnership interests are occasionally sold in private or over-the-counter
transactions, we believe the potential buyers in such transactions are few and
the prices generally reflect a significant discount for illiquidity.
Liquidation Value. The merger values are based on the value of the
underlying properties, which are essentially the same values that could be
achieved by selling the partnerships' property interests and liquidating the
partnerships at this time. In addition, we believe that the lump sum cash
payment to each limited partner in the mergers is higher than what the limited
partners would otherwise receive over the life of the partnership, assuming
constant oil and gas commodity prices and operating costs and giving effect to
the time value of money, for the following reasons:
- The partnership agreements require cash distributions to be reduced by
general and administrative expenses allocable to each partnership. The
merger values reflect liquidation values based on reserve values that
have not been reduced for general and administrative expenses.
- The merger values are based upon current oil and gas prices. It is likely
that oil and gas prices will vary often and possibly widely, as has been
demonstrated historically, from the prices used to prepare these
estimates. In that way, the merger values eliminate the potential loss in
value due to lower oil and gas prices.
Acceleration of Realization of Value. The cash payments to limited partners
of participating partnerships will provide those limited partners with cash
earlier than if the limited partners remain in the partnership and receive the
expected ordinary cash distributions from oil and gas production. Because the
partnerships' properties are mature producing properties, we believe that
production from those properties will continue to decline at the rate predicted
in the partnerships' oil and gas engineering reserve reports. Accordingly, cash
distributions from the partnerships are also expected to decline, subject to
variation for changes in oil and gas prices. We believe the merger value of each
partnership represents an appropriate pricing of estimated future distributions
from the partnership because:
- the merger value of each partnership is based primarily on the
partnership's oil and gas reserves which have been evaluated using (1) an
arithmetic average of the five-year NYMEX futures price as of June 30,
1999 for oil, which was approximately $18.00 per Bbl of oil, less
standard industry adjustments, and (2) the NYMEX price of $2.40 per Mcf
of gas, less standard industry adjustments; and
- the 12.5% discount rate appropriately reflects, among other things, the
potential volatility of future oil and gas commodity prices given
historical trends.
Elimination of Partnership Tax Reports. The mergers will eliminate the
limited partners' Schedule K-1 tax reports in the participating partnerships for
tax years after the mergers occur. This is expected to simplify the limited
partners' individual tax return preparation and reduce preparation costs.
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RECOMMENDATION TO LIMITED PARTNERS
(SEE PAGE 15)
On , 1999, our board of directors unanimously determined that the
mergers are advisable, fair to you, and in your best interests. Our board
recommends that you vote for the merger proposals. Although our board of
directors has attempted to fulfill its fiduciary duties to you, our board of
directors had conflicting interests in evaluating the mergers because each
member of our board of directors is also an officer of Pioneer.
FAIRNESS
In deciding to approve the mergers on , 1999, our board of
directors decided that the mergers are advisable, fair to you, and in your best
interests based on a variety of factors. These factors include:
- the form and amount of consideration offered to the partners;
- the comparison of the cash payments in the mergers to the diminished
future cash distributions otherwise expected as oil and gas production
continues to decline;
- the elimination after the mergers of limited partners' tax preparation
costs relating to partnership tax information;
- that Pioneer is offering a competitive price because of:
-- the commodity pricing used in determining the merger values;
-- Pioneer USA's position as operator of most of the partnerships' wells;
and
-- Pioneer USA's significant ownership of nearby properties; and
- the fairness opinion from Robert A. Stanger & Co., Inc.
FAIRNESS OPINION OF FINANCIAL ADVISOR
(SEE PAGE 16)
Robert A. Stanger & Co., Inc., has issued a fairness opinion dated
, 1999, expressing its opinion that, subject to the
qualifications expressed in the opinion, the merger values to be paid in cash
for the limited partner interests are fair from a financial point of view to the
limited partners of the partnerships. The full text of the form of written
opinion of Robert A. Stanger & Co., Inc. is attached to this document as
Appendix C. You should read all of it carefully. THE OPINION OF ROBERT A.
STANGER & CO., INC. IS DIRECTED TO OUR BOARD OF DIRECTORS. IT IS NOT A
RECOMMENDATION TO YOU ABOUT HOW YOU SHOULD VOTE ON MATTERS RELATING TO THE
PROPOSED MERGERS.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
(SEE PAGE 28)
You will generally recognize gain or loss equal to the difference between
the cash proceeds you receive in the mergers and your adjusted tax basis in your
partnership interests in the participating partnerships for which the cash
proceeds are paid. Your gain or loss will be capital or ordinary depending on
the nature of the assets held by the participating partnerships in which you
hold interests and the amount of depletion and intangible drilling and
development costs that must be recaptured. You must calculate your ordinary and
capital gain or loss separately for each partnership in which you have
interests.
TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGERS TO
YOU WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD SEEK TAX ADVICE
FOR A FULL UNDERSTANDING OF THE PARTICULAR TAX CONSEQUENCES OF THE MERGERS TO
YOU.
RECORD DATE; VOTING POWER
You may vote at the special meetings if you owned partnership interests as
of the close of business on , 1999. We call this date the record
date. For each partnership in which you own a partnership interest, you may cast
one vote representing your percentage of partnership interests in that
partnership. The percentage of partnership interests that you own is determined
by comparing the amount of:
- your, or your predecessor's, initial investment, including any additional
assessments, in the partnership; to
- the total investment of all partners, including any additional
assessments, in the partnership.
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<PAGE> 13
PARTNER VOTE REQUIRED TO APPROVE THE MERGERS
The favorable vote of a majority of the limited partners' partnership
interests in a partnership is required to approve the merger proposals for that
partnership.
We are generally entitled to vote partnership interests we hold as limited
partners at the special meetings. See "The Special Meetings -- Record Date;
Voting Rights and Proxies" on page 40 of this document. We plan to vote all our
partnership interests for the merger proposals. The voting interest that we hold
in each partnership is found in Table 6 of Appendix A.
If limited partners of a partnership approve the merger agreement, but do
not approve the merger amendment, or vice versa, the partnership will not be
able to merge. LIMITED PARTNERS WHO WANT THEIR PARTNERSHIP TO PARTICIPATE IN THE
MERGERS SHOULD VOTE FOR EACH OF THE MERGER PROPOSALS.
CONDITIONS TO THE MERGERS (SEE PAGE 36)
We will complete the mergers only if the conditions of the merger agreement
are satisfied or, if permitted, waived. These conditions include:
- the limited partners' adoption and approval of the merger proposals;
- the absence of any law or court order that prohibits the mergers; and
- the absence of any lawsuit challenging the legality or any aspect of the
mergers.
So long as the law allows us to do so, Pioneer and we may choose to
complete the mergers even though a condition has not been satisfied if the
limited partners have approved the merger proposals. Pioneer and we may complete
the merger of any one or some of the partnerships, even if limited partners in
other partnerships do not approve the mergers.
TERMINATION OF THE MERGERS (SEE PAGE 37)
Pioneer and Pioneer USA may jointly terminate the merger agreement, for any
or all of the partnerships, at any time, even after limited partner approval.
Pioneer USA will not consent to any termination unless it believes such
termination is in the best interests of the partnerships. Either Pioneer or
Pioneer USA may terminate the merger agreement, for any or all of the
partnerships, in certain circumstances, including the following:
- the limited partners of a partnership fail to approve that partnership's
merger; or
- if any of the other parties is in material breach of the merger
agreement.
In addition, Pioneer USA may terminate the merger agreement for any partnership,
if Pioneer USA determines that termination of the merger agreement is required
for its board of directors to comply with its fiduciary duties.
EFFECTS OF MERGERS
ON LIMITED PARTNERS WHO DO NOT VOTE
IN FAVOR OF THE MERGERS
You will be bound by the mergers if the limited partners in your
partnerships vote a majority of their partnership interests in favor of the
mergers, even if you vote against the mergers. If the merger of your partnership
occurs, you will be entitled to receive only an amount of cash based on the
merger value of your partnership interests. You will not have appraisal,
dissenters' or similar rights in connection with the mergers, even if you vote
against the mergers.
FUTURE OF PARTNERSHIPS THAT DO NOT
PARTICIPATE IN THE MERGERS
(SEE PAGE 31)
If your partnership does not participate in the mergers for any reason,
that partnership will remain in existence. Some reasons your partnership might
not participate in the mergers are (1) that the limited partners vote against
the merger, (2) that a condition in the merger agreement is not satisfied, or
(3) that Pioneer or we exercise a termination right with respect to the merger
for that partnership.
At the same time that we mail checks to the partners of participating
partnerships in payment
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<PAGE> 14
of the merger values, we will mail any cash distributions that were delayed for
administrative purposes prior to the completion of the mergers to the partners
of nonparticipating partnerships.
We have not formulated an alternative business plan for nonparticipating
partnerships. The business objectives of each nonparticipating partnership will
continue as they are. We plan to continue to manage each nonparticipating
partnership and operate it in accordance with the terms of its current
partnership agreement. The partnership will continue to operate as a separate
legal entity with its own assets and liabilities. Distributions from these
partnerships are expected to continue to decline since their production revenues
are expected to continue to decline more quickly than their production costs.
Regardless of whether these nonparticipating partnerships distribute cash,
limited partners must continue to include their share of partnership income and
loss in their individual tax returns.
The board of directors of each of Pioneer and Pioneer USA will decide what,
if any, actions Pioneer or Pioneer USA, respectively, will take regarding these
partnerships. Potential activities might include a tender offer for partnership
interests of limited partners or a proposal to acquire the assets of, or merge
with, one or more of the nonparticipating partnerships. The proposal may be on
terms similar to or different from those of the mergers described in this
document.
EXPENSES AND FEES
The expenses and fees that we will incur in connection with the mergers are
expected to be approximately $4.6 million. Each of the partnerships, including
the 21 non-public limited partnerships and 13 privately-held employee
partnerships described in "Similar Transactions" below, which participates in
the mergers, will pay its pro rata share of the estimated expenses and fees of
the mergers allocated to all of the partnerships. The net working capital
component of each partnership's merger value has been reduced by that
partnership's pro rata share of the estimated expenses and fees. The
partnership's pro rata share is based on its reserve value before any reduction
for the estimated expenses and fees.
SIMILAR TRANSACTIONS (SEE PAGE 45)
At the same time as this transaction, Pioneer is also offering to acquire
21 non-public limited partnerships and 13 privately-held employee partnerships
through mergers of those partnerships into Pioneer USA. The terms of the mergers
and the method of establishing merger values for limited partners in those
partnerships are the same as those for the 25 publicly-held partnerships in this
document.
As of the record date for the special meetings, Scott D. Sheffield,
Chairman of the Board, President and Chief Executive Officer of Pioneer and
President of Pioneer USA, owned, on average, approximately 6% of the outstanding
limited partnership interests in each of 11 of the 13 privately-held employee
partnerships. As of the record date for the special meetings, Mark L. Withrow,
Executive Vice President, General Counsel and Secretary of each of Pioneer and
Pioneer USA, owned, on average, approximately 5% of the outstanding limited
partnership interests in each of two of the 13 privately-held employee
partnerships. Mr. Sheffield and Mr. Withrow have advised us that they plan to
vote their partnership interests for the merger proposals.
THIRD-PARTY OFFERS (SEE PAGE 32)
We will consider any offers from third parties to purchase any partnership,
whether one of the publicly-held partnerships discussed in this document or one
of the non-public or employee partnerships, or the assets of any partnership.
Those who wish to make an offer for any partnership or its assets must
demonstrate to our reasonable satisfaction their financial ability and
willingness to complete such a transaction. Before reviewing non-public
information about a partnership, a third party will need to enter into a
customary confidentiality agreement. We will also disclose the price at which
Pioneer will acquire the non-public and employee partnerships. Offers should be
at prices and on terms that are fair to the partners of the partnership and more
favorable to the limited partners than the prices and terms proposed in the
mergers. Pioneer has the right to try to match or top any such offer.
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<PAGE> 15
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN DETERMINING
WHETHER TO VOTE TO APPROVE THE MERGER PROPOSALS.
THE MERGER VALUES INVOLVE ESTIMATES THAT WILL NOT BE ADJUSTED
Estimates of Proved Reserves and Future Net Revenues May Change. The
calculations of the partnerships' proved reserves of crude oil, natural gas
liquids and natural gas and future net revenues from those reserves included in
this document are only estimates. The accuracy of any reserve estimate is a
function of:
- the quality of available data;
- engineering and geological interpretation and judgment;
- the assumptions about quantities of recoverable oil, natural gas liquids
and natural gas reserves;
- the assumptions about prices for crude oil, natural gas liquids and
natural gas; and
- the assumptions about costs to extract, transport and process, if
necessary, crude oil, natural gas liquids and natural gas to their point
of sale.
Actual prices, production, operating expenses and quantities of recoverable oil
and natural gas reserves may vary from those assumed in the estimates. The
variances may be significant. Any significant variance from the assumptions used
could result in the actual quantity of the partnerships' reserves and future net
revenues being materially different from the estimates in the partnerships'
reserve reports and in the calculation of the merger values. In addition,
changes in production levels and changes in crude oil, natural gas liquids and
natural gas prices after the date of the estimate may result in substantial
upward or downward revisions.
Assumptions about Reserves, Pricing and Costs Used in the Merger Values May
Be Wrong. Pioneer and Pioneer USA based the reserve value component of the
merger values on the discounted, or present value of, estimated future net
revenues from the partnerships' properties using estimated reserves at June 30,
1999,
- applying (1) an arithmetic average of the five-year NYMEX futures price
as of June 30, 1999 for oil, which was approximately $18.00 per Bbl of
oil, less standard industry adjustments, and (2) the NYMEX price of $2.40
per Mcf of gas, less standard industry adjustments, and
- using a 12.5% discount rate.
Pioneer and Pioneer USA calculated the volumes of the partnership's proved
reserves as of June 30, 1999, based on a future production curve consistent with
the production curve used in the reserve report of Williamson Petroleum
Consultants, Inc. as of December 31, 1998. Actual production may vary from that
assumed production. Actual prices in the future may be materially higher or
lower than those used in the calculation of the merger values, even though
Pioneer and Pioneer USA adjusted the estimated future net revenues for standard
industry price adjustments, including:
- production costs;
- the effects of oil quality;
- British thermal unit, or BTU, content for gas;
- oil and gas gathering and transportation costs; and
- gas processing costs and shrinkage.
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<PAGE> 16
Therefore, the estimated future net revenues may differ materially from actual
revenues received in the future. In addition, actual future net revenues will be
affected by:
- the timing of production and related expenses;
- changes in consumption; and
- changes in governmental regulations or taxation.
The 12.5% discount rate used in the calculation of the merger values might
not reflect actual interest rates in effect from time to time and risks
associated with the partnerships' properties or the oil and gas industry in
general. The discount rate may disfavor longer-lived properties when compared to
shorter-lived properties, with a resulting effect on the merger values that
disfavors some partnerships as compared to others.
The Merger Values Might Not Reflect the Value of the Partnerships'
Assets. Since the merger value assigned to a partnership is based on assumptions
about reserves, pricing and costs, that merger value could vary materially from
the current market value of, or the price that a third party might offer for,
that partnership's estimated oil and gas reserves and from the value of, or
given to, that partnership's actual future net revenues. The assumptions used to
determine the merger values may ultimately benefit some partners and
partnerships as opposed to others because the merger value of a partnership
might not properly reflect the value of that partnership's assets. In that case,
some partners could receive less than a fair market price for their partnership
interests. For a description of other methods of determining merger values, see
"Method of Determining Merger Values and Amount of Cash Offered -- Other Methods
of Determining Merger Values" on page 24.
The Merger Values Will Not Be Adjusted For Changes Before the Completion of
the Mergers. The merger values determine the amount of cash you will receive in
the mergers. The merger values will be determined when the September 30, 1999
data is available and will not be changed. For example, although oil and gas
prices have fluctuated greatly in the recent past and may continue to do so, the
merger values will not be adjusted as of the closing date of the mergers to
reflect any general changes in oil or gas prices, or any other matter generally
affecting the oil and gas industry, occurring after September 30, 1999 and prior
to the closing date of the mergers.
YOU WERE NOT INDEPENDENTLY REPRESENTED IN ESTABLISHING THE TERMS OF THE MERGERS
Pioneer and Pioneer USA determined the terms of the mergers, including the
method for determining the merger values, and the type and allocation among the
partners of the consideration to be given in exchange for partnership interests.
As noted below, our board of directors had conflicting interests in evaluating
the mergers primarily because each member of that board of directors is also an
officer of Pioneer. We did not seek recommendations about the type of
transaction or the terms or prices from any independent underwriter, financial
advisor or other securities professional prior to accepting the consideration
offered by Pioneer. The only independent representatives in the mergers were
Sayles & Lidji, A Professional Corporation, which represented Pioneer USA's
board of directors, and Robert A. Stanger & Co., Inc., which will render its
fairness opinion to Pioneer USA's board of directors. Moreover, no special
committee or other entity was formed or engaged to negotiate on our behalf or
the partnerships' behalf. No representative group of limited partners and no
outside experts or consultants, such as investment bankers, legal counsel,
accountants or financial experts, were engaged solely to represent the
independent interests of the limited partners in structuring and negotiating the
terms of the mergers. If you had been separately represented, the terms of the
mergers might have been different and possibly more favorable to you. In
addition, if you were separately represented, issues unique to the value of your
partnerships might have received greater attention during the structuring of the
mergers, which might have resulted in an increase in the merger value assigned
to your partnerships and in the amount of cash paid to you in the mergers.
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<PAGE> 17
THE INTERESTS OF PIONEER, PIONEER USA AND THEIR DIRECTORS AND OFFICERS MAY
DIFFER FROM YOUR INTERESTS
The interests of Pioneer, Pioneer USA, and their officers and directors may
differ from your interests as a result of the relationships among them. For
example, Pioneer USA, as general partner of the partnerships, has a duty to
manage the partnerships in the best interests of the limited partners.
Additionally, Pioneer USA has a duty to operate its business for the benefit of
its sole stockholder, Pioneer. Also, the members of Pioneer USA's board of
directors have duties to both the limited partners of the partnerships and to
Pioneer. All of the members of Pioneer USA's board of directors are officers of
Pioneer and have duties to Pioneer's stockholders. Pioneer USA's board of
directors was aware of these interests and considered them in approving the
merger proposals. See "Interests of Pioneer, Pioneer USA and Their Directors and
Officers" beginning on page 43 of this document.
PIONEER USA HAS NOT PREVIOUSLY OFFERED THE PARTNERSHIPS FOR SALE TO OTHERS
Although the partnerships have sold individual properties from time to time
in the ordinary course of their businesses, we have not previously tried to sell
any of the partnerships, as a whole, to third parties. As a result, we cannot be
sure what the market demand is for the partnerships' properties, as a whole, or
what a third party would offer for any partnership.
PIONEER USA DID NOT SOLICIT ANY THIRD-PARTY OFFERS
We have not solicited offers for the partnerships or their assets, and no
assurance may be given that the terms of the mergers are as favorable as could
be obtained from a sale of any such partnerships or assets to an unrelated
party. We will consider offers to purchase any partnership or its assets from
third parties, but there might not be any third-party offers or, to the extent
an offer is made, we might not consider that offer to be a viable alternative to
the mergers.
THIRD PARTIES MIGHT NOT MAKE AN OFFER FOR THE PARTNERSHIPS IF THEY CANNOT BECOME
OPERATOR OF THE PARTNERSHIPS' PROPERTIES
We operate most of the partnerships' wells on behalf of the partnerships
and others who own interests in those wells, including Pioneer. Although we will
consider other offers for the partnerships or their assets, we are not offering
to sell the rights to operate the partnerships' properties. Consequently,
potential buyers may not be interested in making an offer to acquire any of the
partnerships if they cannot also acquire operating rights to the partnerships'
properties.
POTENTIAL LITIGATION CHALLENGING THE MERGERS MAY DELAY OR BLOCK THE MERGERS
One or more of the partners opposed to the mergers may initiate legal
action to stop the mergers or to seek damages for alleged violations of federal
and state laws. Litigation challenging the mergers may delay or block the
closing of the mergers. In addition, if any lawsuits are filed, Pioneer or
Pioneer USA may decide to terminate the mergers.
REPURCHASE RIGHTS TERMINATE ON COMPLETION OF THE MERGERS
The limited partners of each of the partnerships listed below may require
us to repurchase their partnership interests for cash at the times and under the
conditions described in the partnership agreements:
Parker & Parsley 82-I, Ltd.
Parker & Parsley 82-II, Ltd.
Parker & Parsley 83-A, Ltd.
Parker & Parsley 83-B, Ltd.
Parker & Parsley 84-A, Ltd.
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<PAGE> 18
If the limited partners of a partnership with repurchase rights vote a majority
of their partnership interests in favor of the mergers, those repurchase rights
will terminate on completion of the mergers.
The repurchase rights may be exercised only once a year and the amount of
partnership interests required to be purchased in any one year is limited. A
repurchase price is calculated by multiplying:
- the present value of the estimated future net revenues, calculated using
a discount rate equal to prime plus 1% as of December 31 of each year,
from a partnership's proved reserves, as determined by independent
petroleum consultants; by
- 66 2/3%.
Generally, the repurchase prices would be less than the merger values
because of the additional discount factor equal to 33 1/3% for the repurchases.
In calculating the 1999 repurchase prices, Pioneer USA decided not to apply that
additional 33 1/3% discount factor because oil and gas prices had increased
significantly since December 31, 1998. The merger values are higher than the
1999 repurchase prices. The difference between the 1999 repurchase prices and
the merger values is attributable primarily to the use of different oil and gas
prices and discount rates. The repurchase prices were calculated using NYMEX oil
and gas prices as of December 31, 1998, which were $12.00 per Bbl of oil and
$2.00 per Mcf of gas, compared to the merger values which were calculated using
(1) an arithmetic average of the five-year NYMEX futures price as of June 30,
1999 for oil, which was approximately $18.00 per Bbl of oil, less standard
industry adjustments, and (2) the NYMEX price of $2.40 per Mcf of gas, less
standard industry adjustments. The higher oil and gas prices used in the merger
values more than offset the use in the calculation of the repurchase prices of a
discount rate equal to prime plus 1%, or 8.75% for the 1999 repurchases, which
was lower than the 12.5% discount rate used in calculating the merger values.
The 1999 repurchase offers were commenced and completed before the date of
this document. For a list of the repurchase prices in 1999 and the prior two
years, see Table 8 of Appendix A.
SPECIAL FACTORS
BACKGROUND OF THE MERGERS
The partnerships were formed from 1982 through 1991 under the sponsorship
of various affiliated companies collectively known as Parker & Parsley. On
February 19, 1991, Parker & Parsley's principal company converted from limited
partnership form to corporate form and acquired most of the assets of five
publicly-held oil and gas limited partnerships. The new corporation was called
Parker & Parsley Petroleum Company, and it owned the general partners of the
partnerships.
In early 1992, Parker & Parsley Petroleum Company decided that it could not
fully realize the benefits of the properties it had acquired while continuing to
devote substantial resources to the sponsorship of and drilling for the
partnerships. It stopped sponsoring public and private oil and gas development
drilling and income partnerships and focused on its corporate development. In
1997, Parker & Parsley Petroleum Company and MESA Inc. combined their businesses
in a merger that created Pioneer Natural Resources Company. That same year,
Pioneer combined many of its U.S. subsidiaries, including the general partners
of the partnerships, into its main subsidiary, Pioneer USA.
From time to time since 1992, Pioneer and its predecessors have had
general, internal discussions about whether to consolidate the partnerships
pursuant to a transaction such as the mergers. On several occasions, Pioneer or
its predecessors engaged outside legal counsel and had discussions with
investment banks about a possible combination of the partnerships. Some of those
discussions were with Robert A. Stanger & Co., Inc. The contemplated structure
of the combination has varied significantly during these internal discussions
and has included issuances of common stock, combinations of common stock and
cash, and cash-only transactions through asset sales, mergers, tender offers,
and combinations of those types of transactions. In general, the contemplated
transactions would have been taxable to the limited partners because of the
difficulties involved in structuring a tax-free transaction for the
partnerships. Until now,
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<PAGE> 19
every time Pioneer or its predecessors considered such a transaction, it decided
not to propose any transaction to the limited partners. The reasons Pioneer and
its predecessors did not previously propose a transaction to the limited
partners varied. In some early cases, they wanted to collect and fully
distribute proceeds to the limited partners from litigation against an oilfield
services company before trying to value the partnerships. In other cases, they
wanted to avoid periods of volatility in oil and gas prices or in Pioneer's
stock price. On several occasions, Pioneer was involved in other corporate
transactions that could not be completed timely if a transaction with the
partnerships was also pending.
In early 1998, Pioneer was formulating a strategic plan to focus on its 25
core area oil and gas fields and to eliminate ancillary operations. Pioneer
began discussions internally to consider a transaction involving the
partnerships, including the basis for valuing the partnerships and whether the
consideration should be Pioneer common stock, cash, or some combination of both.
During the second quarter of 1998, Pioneer and Pioneer USA began to discuss
the methods for valuing the partnerships. At that time, Pioneer USA engaged
Sayles & Lidji, A Professional Corporation based in Dallas, Texas, as its
independent legal counsel and discussed with them the procedures to be followed
in evaluating various strategic alternatives available to Pioneer USA and
responding to any expressions of interest received by Pioneer USA. Although
Pioneer submitted an offer, the offer was withdrawn and the discussions were
discontinued because of:
- the decline in oil prices, which in turn would result in reducing any
merger value to be paid to the limited partners;
- the decline in Pioneer's stock price; and
- the tight lending environment for many oil and gas companies, including
Pioneer.
As a result, each of Pioneer and Pioneer USA decided to discontinue further
discussions and no transaction was submitted to the limited partners.
As oil and gas prices improved, in June 1999, Pioneer and Pioneer USA again
began discussions internally to consider a transaction involving the
partnerships. At that time, Scott Sheffield, the President and Chief Executive
Officer of Pioneer, contacted members of Pioneer USA's board regarding
consideration of a potential transaction involving the partnerships.
During the second quarter of 1999, Pioneer and Pioneer USA attempted to
formally address the conflicting interests inherent in the relationships among
Pioneer, Pioneer USA, the partnerships and the officers and directors of Pioneer
and Pioneer USA. Pioneer USA caused the members of its board of directors who
were also members of Pioneer's board of directors to resign from Pioneer USA's
board of directors. Because all of the board members of Pioneer USA are also
employees of Pioneer, an inherent conflict exits with respect to their duties to
the limited partners in their capacity as directors of Pioneer USA, on the one
hand, and their duties to Pioneer as employees, on the other hand. This
separation of board processes may lessen, but does not eliminate, the inherent
conflicting interests of the Pioneer USA directors in this transaction. We
believe, however, that this separation enables the directors of Pioneer USA to
more effectively consider and focus on the interests of the partnerships.
Shortly thereafter, Pioneer USA's board again contacted Sayles & Lidji to
advise the board in connection with the procedures to be followed in evaluating
the merger transaction and any others, as well as various strategic alternatives
available to Pioneer USA.
The Pioneer USA board also engaged, on behalf of the partnerships, Robert
A. Stanger & Co., Inc., as its financial advisor to advise the board on the
fairness of the transaction from a financial point of view and to assist in
Pioneer USA's evaluation of the merger transaction and other strategic
alternatives. Robert A. Stanger & Co., Inc. was familiar with the circumstances
from its 1998 engagement. On July 14, 1999, the board met with its counsel and
Robert A. Stanger & Co., Inc. to discuss the proposed merger of the
partnerships. Robert A. Stanger & Co., Inc. presented an overview of the
analysis it planned to perform in evaluating the fairness of the proposed
transaction.
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Members of the Pioneer USA board met on several occasions during July and
early August to discuss among each other the proposed terms of the merger
transaction and other potential alternative transactions.
On , 1999, Pioneer's board of directors met and voted to
approve the mergers and to proceed with the completion of the mergers, subject
to the September 30, 1999 pricing information and other relevant conditions at
the time.
On August 16, 1999, at a special meeting of the Pioneer USA board, the
board met with representatives of Sayles & Lidji and Robert A. Stanger & Co.,
Inc. to discuss the terms of the proposed mergers.
On August 17, 1999, Pioneer delivered a written proposal covering the
merger transaction to the Pioneer USA board which outlined the terms of the
proposed transaction. At a special meeting that day of the Pioneer USA board,
the board, its counsel and Robert A. Stanger & Co., Inc. met to discuss the
specifics of the merger proposal including oil and gas pricing, the present
value discount rate, the right to allow others to bid on the property, and the
costs of the mergers. Following the board meeting, our directors sought and
obtained changes in the proposed terms which were advantageous to the
partnerships.
On August 23, 1999, at a special meeting of the Pioneer USA board, the
board updated its counsel and Robert A. Stanger & Co., Inc. on the status of its
discussions with Pioneer. Representatives of Robert A. Stanger & Co., Inc.
provided the board with its review of the Pioneer proposal. Based partly on the
analysis performed by Robert A. Stanger & Co., Inc., the board advised Pioneer
that in the opinion of the Pioneer USA board, the discount rate used to
determine the present value of future oil production should be reduced from 15%
to 12.5%, thereby increasing the merger consideration to the limited partners.
In response, Pioneer agreed to reduce the discount rate to 12.5%.
On September 2, 1999, at a special meeting of the board, the board and
representatives of Robert A. Stanger & Co., Inc. and Sayles & Lidji reviewed the
terms of a revised merger proposal submitted by Pioneer. The parties discussed
the terms of the merger, the strategic rationale for and benefits of the merger.
At this meeting, Robert A. Stanger & Co., Inc. reviewed with the board its
financial analysis and its evaluation of the merger consideration and the
feasibility of other strategic alternatives. Robert A. Stanger & Co., Inc. also
orally presented to the board the status of its findings and its preliminary
evaluation of the proposed transaction.
After considering Robert A. Stanger & Co., Inc.'s evaluation of the
proposed merger transaction, the board, together with representatives of Robert
A. Stanger & Co., Inc., engaged in a general discussion of other possible
transactions it had considered over the last six to eight months. This
discussion included anticipated ongoing operations of the limited partnerships
under their current structure and the operation of the limited partnerships
through a master limited partnership structure, as well as through a royalty
trust. The board also discussed selling the oil and gas properties of the
limited partnership at auction and potentially soliciting other buyers or merger
partners. The board also considered the fact that other potential buyers of the
limited partnerships would have an opportunity to make an offer for the limited
partnerships before the board submitted the merger transaction to the limited
partners for their consideration and approval.
At a special meeting held on September 8, 1999, the Pioneer USA board
discussed with Sayles & Lidji and Robert A. Stanger & Co., Inc. the complete
terms of the proposed mergers. After considering other alternatives, including
the advantages and disadvantages of each, the board concluded that none of the
alternatives were more advantageous to the limited partners than the terms of
the proposed mergers. The board then unanimously approved proceeding with the
mergers, subject to determination of September 30, 1999, pricing, its receipt of
Robert A. Stanger & Co., Inc.'s fairness opinion, and the board's determination
that the merger consideration is fair to the limited partners based on all
circumstances as of September 30, 1999, including without limitation, the then
current market conditions and the existence, if any, of any other proposal for
the partnerships on terms more favorable to the limited partners.
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<PAGE> 21
The foregoing discussion of these special factors considered by the Pioneer
USA board is not exhaustive, but Pioneer USA believes it includes the material
factors considered by its board. The board did not quantify or otherwise attempt
to assign relative weights to the specific factors the board considered in
reaching its determination to recommend the merger. Rather, the board viewed its
position and recommendation as being based on the total information presented to
and considered by the board.
On September 8, 1999, Pioneer and Pioneer USA publicly announced the
proposed mergers. In that announcement, Pioneer USA also announced that it would
consider proposals from other potential buyers of the partnerships.
In a special meeting of the board of Pioneer USA held on ,
1999, Robert A. Stanger & Co., Inc. presented its opinion dated ,
1999, expressing its opinion that the merger proposals are fair from a financial
point of view to the limited partners of the partnerships. The board of Pioneer
USA then unanimously determined that the merger proposals are advisable, fair to
the limited partners and in the limited partners' best interests. Accordingly,
the board recommended that the limited partners vote for the merger proposals.
References to Pioneer USA's board's recommendation of the mergers and its
finding that the merger consideration is fair from a financial point of view are
stated in this preliminary document conditioned on the board making such
determination after considering September 30, 1999, pricing information and
other relevant conditions at the time.
REASONS FOR THE MERGERS
General. For all of the reasons listed below, Pioneer believes that it is
the party in the position to pay the highest price for the limited partnership
interests of the partnerships. Pioneer USA also believes that Pioneer is the
most likely buyer for the partnerships' properties in light of:
- Pioneer USA's operation of most of the properties;
- Pioneer USA's extensive property holdings in the same fields; and
- Pioneer's ability to achieve efficiencies by consolidating operations
with its existing operations in the same areas.
Pioneer's Reasons. Pioneer believes that completion of the mergers is
advantageous to it for the following reasons:
- Consolidate Core Area of Operations. The Spraberry field of the
Permian Basin is one of Pioneer's 25 fields of focus in its strategic plan.
Acquisition of the partnerships' properties would help consolidate
Pioneer's operations in the Spraberry field and achieve operating
efficiencies. Pioneer USA operates most of the partnerships' wells, and
Pioneer has extensive properties around the partnerships' properties,
including interests in most of the partnerships' wells.
- Achieve Operating Efficiencies. Pioneer expects to improve operating
efficiencies with respect to the properties acquired in the mergers because
it will be able to co-mingle production from participating partnerships'
properties with production from other Pioneer properties for storage,
transportation and sale. Production from the partnerships' properties is
currently kept segregated from Pioneer's production until sale.
- Achieve Administrative Efficiencies. Pioneer will eliminate the
costs, including time spent by Pioneer employees, related to preparing and
filing the partnerships' separate tax returns, financial statements, and
reports with the SEC, as well as dealing with the concerns of approximately
25,000 record limited partners. The mergers will result in administrative
efficiencies and cost reductions in the management and operation of the
properties now owned by the partnerships, particularly in the areas of
audit, accounting and tax services, engineering services, bookkeeping, data
processing, record maintenance and mailing information to the partners.
Although Pioneer will lose the benefit of the partnerships' reimbursement
for general and administrative expenses, it will be able to use the
additional time of its personnel to help achieve its corporate strategic
goals.
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<PAGE> 22
Pioneer USA's Reasons. In considering the mergers, the board of directors
of Pioneer USA also considered the benefits to the limited partners set forth on
page 4 as well as the following factors:
- Maturity of Partnership Properties. Although the partnerships'
properties were long-lived at the formation of the partnerships, Pioneer
and Pioneer USA anticipated that at some point the partnerships would need
to be liquidated. The partnerships' properties have matured, and the
mergers provide (1) liquidity to the limited partners, and (2) a means for
Pioneer, through its subsidiary, Pioneer USA, to liquidate the
partnerships.
- Declining Cash Flows. As the partnerships' properties have matured,
the net cash flows from operations have generally declined. See Table 7 of
Appendix A. The marginal benefit of continuing operations of the
partnerships is offset by the related administrative costs. These
administrative costs consume an increasing amount, and ultimately will
consume the entire amount, of the cash flows as production declines.
- Tax Incentives Have Been Realized. To the extent that the
partnerships were intended to provide tax incentives to the partners, those
incentives have been realized, or the tax purposes for which the
partnerships were originally formed are no longer applicable as a result of
changes in laws.
- Partnership Tax Burdens May Now Exceed Benefits. As net cash flow
available for distribution has declined or, at times, disappeared, some
limited partners may incur greater costs to include their share of the
partnerships' tax information in their returns than they receive in cash
distributions. In any event, all limited partners are expected to benefit
by the elimination of the obligation to include partnership information in
their tax returns for the years after the mergers.
- Partnerships Unable to Access Additional Capital. Pioneer, through
its subsidiary, Pioneer USA, has the ability, financial and otherwise, to
take advantage of corporate opportunities to expand its reserve base
through acquisitions. The partnerships do not have the ability to raise
capital for reserve acquisitions. The partnership agreements of the
partnerships do not authorize the partnerships to raise additional capital,
whether debt or equity. Even if the partnership agreements were amended to
authorize additional capital, Pioneer does not believe that the limited
partners would desire to contribute additional capital or to apply all cash
flow to debt service, while remaining taxable on the related income.
- Fairness of Price. Pioneer USA's board of directors determined,
based in part on the fairness opinion of Robert Stanger & Co., Inc., that
the mergers are advisable, fair to the limited partners and in their best
interests. Pioneer USA's board of directors also considered the following
factors:
-- The form and amount of consideration offered to the partners;
-- The objectives of the mergers, including providing liquidity to the
partners; and
-- Its right to consider third-party offers.
RECOMMENDATION OF PIONEER USA
Pioneer USA's board of directors unanimously determined that the mergers
are advisable, fair to the limited partners of each partnership, and in the
limited partners' best interests. PIONEER USA'S BOARD OF DIRECTORS RECOMMENDS
THAT THE LIMITED PARTNERS VOTE FOR THE MERGER PROPOSALS.
In making this recommendation, Pioneer USA's board of directors considered
a number of factors, including the reasons for the mergers set forth above in
"Special Factors -- Reasons for the Mergers" and the matters, such as its
conflicting interests, described under "Risk Factors" beginning on page 8 of
this document. In view of the numerous factors taken into consideration, Pioneer
USA's board of directors did not consider it practical to, and did not attempt
to, quantify or assign relative weights to the factors considered by it in
reaching its decision. Pioneer USA's board of directors also considered the
likelihood, benefits and costs of other transactions, including third-party
offers. Pioneer USA will consider any offers from third parties to purchase any
partnership or its assets, whether one of the publicly-held partnerships
15
<PAGE> 23
discussed in this document or one of the non-public or employee partnerships.
See "The Mergers -- Third-Party Offers" on page 32 of this document for a
description of the procedures for these offers.
FAIRNESS OPINION
Pioneer USA, on behalf of the partnerships, engaged Robert A. Stanger &
Co., Inc., an independent financial advisory firm to conduct an independent
review and deliver a written opinion of its determination of the fairness, from
a financial point of view to the limited partners of the partnerships, of the
merger values to be paid in cash for limited partner interests in each
partnership in connection with the mergers. The full text of the fairness
opinion, which contains a description of the assumptions, limitations and
qualifications applicable to the review by Stanger is set forth in Appendix C to
this document and should be read in its entirety. The material assumptions and
qualifications to the fairness opinion are summarized below. This summary does
not purport to be a complete description of the various inquiries and analyses
undertaken by Stanger in rendering the fairness opinion. Stanger has advised us
that arriving at a fairness opinion is a complex analytical process not
necessarily susceptible to partial analysis or amenable to summary description.
For a more complete description of the assumptions and qualifications to the
fairness opinion see "Qualifications to Fairness Opinion" and "Assumptions"
below.
Except for certain assumptions which Pioneer USA and the partnerships
advised Stanger would be reasonable and appropriate in their view, Pioneer USA
and the partnerships imposed no conditions or limitations on the scope of the
investigation by Stanger or the methods and procedures to be followed by Stanger
in rendering the fairness opinion. In addition, the partnerships have agreed to
indemnify Stanger against certain liabilities arising out of Stanger's
engagement to prepare and deliver its opinion upon consummation of the mergers,
and such indemnification obligations will become obligations of Pioneer USA.
Experience of Stanger. Since its founding in 1978, Stanger has provided
information, research, investment banking and consulting services to clients
located throughout the United Sates, including major New York Stock Exchange
member firms and insurance companies and over seventy companies engaged in the
management and operation of partnerships. The investment banking activities of
Stanger include financial advisory and fairness opinion services, asset and
securities valuations, industry and company research and analysis, litigation
support and expert witness services, and due diligence investigations in
connection with both publicly registered and privately placed securities
transactions.
Stanger was selected because of its experience in the valuation of
businesses and their securities in connection with mergers, acquisitions,
reorganizations and for estate, tax, corporate and other purposes, including the
valuation of partnerships, partnership securities and the assets typically held
through partnerships including oil and gas assets. Pioneer USA has previously
engaged Stanger to provide financial advisory services in connection with
proposed transactions between the partnerships and Pioneer which were never
consummated.
Qualifications to Fairness Opinion. In the fairness opinion, Stanger
specifically states that Stanger was not requested to, and did not:
- make any recommendations to Pioneer USA, the partnerships or the limited
partners with respect to whether to approve or reject the mergers;
- determine or negotiate the amount or form of the merger values to be paid
for limited partners' interests in the mergers;
- offer the assets of the partnerships for sale to any third party;
- express any opinion as to:
-- the impact of the mergers with respect to Pioneer USA or the limited
partners of any partnerships that do not participate in the mergers;
-- the tax consequences of the mergers for Pioneer USA or the limited
partners of any partnership;
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<PAGE> 24
-- Pioneer's or Pioneer USA's ability to finance their obligations
pursuant to the merger agreement or the impact of a failure to obtain
financing on the financial performance of Pioneer, Pioneer USA or the
partnerships;
-- Pioneer USA's decision to estimate the reserve value of the oil and gas
reserves of each partnership based upon the continued operation of the
properties by Pioneer USA and the payment of general and administrative
and overhead charges in accordance with existing operating agreements
or the impact, if any, on the estimated values of the partnerships' oil
and gas reserves if Pioneer USA and Pioneer determined to offer or
operate the assets subject to revised operating agreements;
-- whether or not alternative methods of determining the merger values
would have also provided fair results or results substantially similar
to the methodology used;
-- alternatives to the mergers, including the offering of such assets for
sale to third-party buyers;
-- the fairness of the amount or allocation of merger costs; or
-- any other terms of the mergers.
Summary of Material Considered and Investigation Undertaken. Stanger's
analysis of the mergers involved a review of the following information:
- a draft of the merger agreement which Pioneer USA intends to execute in
connection with the mergers;
- financial statements of the partnerships for the years ended December 31,
1997 and 1998 and the six months ended June 30, 1999;
- reserve analysis of each partnership prepared by Pioneer USA and Pioneer
as of , 1999;
- consultant's report for each partnership prepared by as of
, 1999;
- calculations prepared by Pioneer USA and Pioneer of the merger values per
unit of limited partner interest in each partnership; and
- estimates prepared by Pioneer USA and Pioneer of the going-concern value
and liquidation value per unit of limited partner interest in each
partnership.
In the course of its analysis, Stanger conducted interviews of senior
management personnel of Pioneer USA in July and August 1999. During such
interviews, Stanger and the senior management personnel reviewed the status of
the mergers, the reserve pricing and related value estimates, the estimated
timing of the mergers and other matters.
Stanger reviewed estimates of merger values, going-concern value, and
liquidation value prepared by Pioneer USA with respect to each partnership. In
addition, Stanger reviewed secondary market prices, as tracked by Stanger, for
limited partner interests in each partnership along with tender offers received
by limited partners as derived from data provided by Pioneer USA. Stanger's
analysis is summarized below.
Review of Merger Value. Stanger reviewed the calculation of merger values
prepared by Pioneer USA. Stanger observed that such calculation includes the
reserve value, as described below, other current assets as of 1999,
reduced by other current liabilities as of 1999 and allocable merger
costs as determined by Pioneer USA. Stanger reviewed the balance sheet of each
partnership as of 1999 as prepared by Pioneer USA, and reconciled the
current assets and current liabilities on such financial statements to the
balances included on the merger value calculation for each partnership. With
respect to merger costs, Stanger observed that Pioneer USA allocated the
estimated aggregate merger cost of approximately $4.6 million among the
partnerships based upon such partnership's relative reserve value.
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<PAGE> 25
Stanger reviewed the summary reserve analysis prepared by Pioneer USA and
Pioneer with respect to each partnership and compared such data to the reserve
analysis prepared as of December 31, 1998. Stanger noted that the reserve
analysis was prepared based upon a pricing case consistent with the average
five-year NYMEX future price for oil and the NYMEX price of $2.40 per Mcf of
gas, as adjusted by Pioneer USA to reflect oil quality, BTU content, oil and gas
gathering and transportation costs, and gas processing costs and shrinkage.
Stanger further observed that the reserve analysis utilized a discount rate
of 12.5% and resulted in a per barrel of oil equivalent, or BOE, value of the
reserves for the partnerships ranging from to . Stanger
observed that such values are low by general industry averages. However, Stanger
observed that such properties are generally low-volume long-lived properties,
not operated by the partnerships, and are subject to overhead charges by the
operator, Pioneer USA. In the course of its engagement, Stanger reviewed
selected comparable transactions in the BOE value range described above for
long-lived, generally low-volume properties.
Stanger reviewed the report prepared by Williamson Petroleum Consultants,
Inc. relating to the reserves of the partnerships. Such report indicated that
such analyses were prepared using industry standards and procedures, based upon
the pricing case provided.
Going Concern Value. Stanger reviewed the going concern value calculation
prepared for each partnership by Pioneer USA. Such going concern value was based
upon the estimated net cash flow from sale of the reserves during a 10-year
operating period less partnership level general and administrative expenses
equal to 3% of revenues except for certain partnerships where 2% was utilized
consistent with 1998 and 1999 expense levels. Such cash flows plus the residual
value from the sale of the remaining reserves at the end of the operating period
were discounted to present value at a discount rate of 12.5%. Stanger observed
that the going concern value of each partnership ranged from % to % less
than the merger values.
Liquidation Value. Stanger reviewed the liquidation value calculation
prepared for each partnership by Pioneer USA. Such liquidation value was based
upon sale of the reserves at the reserve value, less additional merger expenses
estimated at 3% of reserve value. Stanger observed that such merger expenses are
intended to reflect Pioneer USA's estimate of the cost associated with brokers
commissions on asset sales and the additional wind-down costs of the
partnership. Stanger observed that the liquidation value for each partnership
ranged from % to % less than the merger values.
Secondary Market Prices. Stanger reviewed the secondary market prices for
units of limited partner interests in the partnerships during the seven months
ended July 31, 1999, collected from data maintained on partnerships by Stanger.
Stanger observed that secondary market transactions were reported for 24 of the
partnerships during such period and the weighted average price of such units
represents an average discount to the merger values for the partnerships of
%. Stanger advised us that its data indicates that participants in the
secondary market reported only one trade of five units on one partnership
(Parker & Parsley 90-B Conv. L.P.) at a price which exceeds the merger values.
The merger value of such partnership is $158.61 and the reported trade of five
units was at $171.00 per $1,000 investment. Stanger advised Pioneer USA that the
secondary market is illiquid and that trading activity is sporadic and
frequently takes place at substantial discounts to the underlying asset value.
Selected Tender Offers. Stanger observed that Pioneer USA reported
unsolicited tender offers for three of the partnerships during the past two
years. Stanger observed that the tender offers and related merger values per
limited partners interest were as follows:
<TABLE>
<CAPTION>
MERGER VALUE TENDER OFFER
(PER $1,000 (PER $1,000
INVESTMENT) INVESTMENT) DISCOUNT TO MERGER VALUE
------------ ------------ ------------------------
<S> <C> <C> <C>
PARKER & PARSLEY
83-B................................... $ 96.42 $50.00 51.86%
87-B................................... 131.44 60.00 45.65
88-A................................... 170.38 80.00 46.95
</TABLE>
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<PAGE> 26
Stanger observed that the above tender offers represent a discount to the
merger values of 45.65% to 51.86% and average 48.15%. Stanger also observed that
tender offers for limited partnership securities are generally at prices which
represent a substantial discount to the underlying value of the assets held by
such partnerships.
Assumptions. Pioneer USA and Pioneer advised Stanger that the oil and gas
properties owned by the partnerships are subject to operating agreements with
Pioneer USA and that:
- such operating agreements provide for the payment of overhead charges and
that such charges are reasonable compared with amounts charged for
similar services by third-party operators;
- except for cause, such operating agreements do not provide for the
termination of Pioneer USA as operator; and
- such operating agreements do not provide for the revision of the overhead
charges, except as escalated under the terms of such operating
agreements.
Furthermore, Pioneer USA and Pioneer advised Stanger that if each partnership's
reserves were offered for sale to a third party, a condition of such sale would
be that the oil and gas reserves would continue to be subject to the operating
agreements with Pioneer USA which provide for the payment of overhead charges,
and that it would be appropriate to assume, when estimating the value of such
reserves, that such charges would continue.
In addition, Pioneer USA and Pioneer advised Stanger that the reserve value
and working capital balance of each partnership has been properly allocated
between the general partners and the limited partners of each partnership in
accordance with the partnership agreement with respect to a liquidation.
Stanger did not conduct any engineering studies and has relied on estimates
of Pioneer USA and Pioneer with respect to oil and gas reserve volumes, prices,
operating costs, general and administrative expenses and overhead charges with
respect to the reserve value estimates.
Stanger also relied on the assurance of Pioneer USA, Pioneer and the
partnerships that:
- the reserve analysis provided to them was in the judgement of Pioneer USA
and the partnerships reasonably prepared on bases consistent with actual
historical experience and reflect their best currently available
estimates and good faith judgements;
- any estimates of costs to remediate environmental conditions included in
the reserve analysis are based on detailed analyses and reflect the best
currently available estimates and good faith judgements;
- any historical financial data, balance sheet data, merger cost estimates,
merger value analysis, going concern value analyses and liquidation value
analyses are accurate and complete in all material respects;
- all calculations of reserve values, working capital balances, merger
values, going concern values and liquidation values have been made in
accordance with the partnership agreement for each partnership;
- no material changes have occurred in the information reviewed or in the
value of the oil and gas reserves or working capital balances of each
partnership between the date the information was provided to Stanger and
the date of Stanger's opinion; and
- Pioneer USA, Pioneer and the partnerships are not aware of any
information or facts regarding the partnerships, the oil and gas
properties, the reserve analysis or the working capital balances of each
partnership that would cause the information supplied to Stanger to be
incomplete or misleading in any material respect.
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<PAGE> 27
Stanger's opinion is based upon business, economic, oil and gas market and
other conditions as of the date of its analysis and addresses the merger values
in the context of information available as of the date of Stanger's analysis.
Events occurring after the date of Stanger's analysis could affect the value of
the assets of the partnerships or the assumptions used in the preparation of
Stanger's fairness opinion.
Conclusions. Stanger concluded that, based upon and subject to its
analysis, assumptions, limitations and qualifications cited in its opinion, and
as of the date of the fairness opinion, the merger value to be paid in cash for
the limited partner interests in connection with the mergers is fair from a
financial point of view to the limited partner of each respective partnership.
Compensation and Material Relationships. Stanger has been paid a fee of
$200,000 in connection with the rendering of the fairness opinion. Such fee was
not conditioned on Stanger's findings and is payable whether or not the mergers
are consummated. In addition, Stanger will be reimbursed for all reasonable
out-of-pocket expenses, including legal fees, and will be indemnified against
certain liabilities including certain liabilities under the securities laws.
During the past two years, the partnerships had engaged Stanger to render
financial advisory services in connection with proposed transactions which were
withdrawn and never consummated. In connection with such assignments Stanger was
paid fees aggregating $125,000.
ALTERNATIVE TRANSACTIONS TO THE MERGERS
We considered the following alternative types of transactions before
selecting the merger transaction described in this document. As discussed below,
we believe that the mergers are the best available alternative for the
partnerships to maximize the value of the partnerships' property interests.
Comparison of the Mergers to Continuing Operations. Because the
partnerships' properties are mature, producing properties, we believe that
production from those properties will continue to decline at the rate predicted
in the partnerships' oil and gas engineering reserve reports. Accordingly, cash
distributions from the partnerships will also decline, subject to variation for
changes in oil and gas prices. The marginal benefit of continuing operations of
the partnerships is offset by the general and administrative costs related to
continuing operations. See "Special Factors -- Reasons for the Mergers"
beginning on page 14 of this document.
We also believe there is a substantial advantage in receiving the
liquidating distribution in one lump sum currently. We believe that the reserve
values included in the merger values are higher than the net present value of
estimated future cash distributions to the limited partners from continued
operations because the reserve values have not been reduced for the
reimbursement of Pioneer USA's general and administrative expenses allocable to
each partnership. In addition, the estimates of distributions from continued
operations are based upon current oil and gas prices. It is likely that over a
long period of time, oil and gas prices will vary often and possibly widely, as
has been demonstrated historically, from the prices used to prepare these
estimates. Continued operations over a long period of time subject the limited
partners to the risk of receiving lower levels of cash distributions if oil and
gas prices over this period are lower on average than those used in preparing
the estimates of cash distributions from continued operations. Continued
operations also subject the limited partners' potential distributions to the
risk of price volatility and to possible changes in costs or need for workover
or similar significant remedial work on the partnerships' properties. We also
believe that there is an advantage to the limited partners taking cash which can
be redeployed in other investments, rather than continuing to receive decreasing
levels of cash distributions over a long period of time.
We expect that nonparticipating partnerships will continue operations and
will produce their respective reserves until depletion with steadily decreasing
rates of cash flow and, as a result, decreasing cash distributions.
Comparison of the Mergers to Master Limited Partnership. We considered
accomplishing the consolidation of the partnerships through a master limited
partnership, pursuant to which the partnership interests of the limited partners
would be exchanged for interests in the master limited partnership.
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<PAGE> 28
However, the partnerships' oil and gas properties are not of sufficient size in
the aggregate to attract new capital through a master limited partnership. In
addition, the partnership interests in a master limited partnership might not be
traded on a national stock exchange or in any other significant market. Some
master limited partnership interests might be sold from time to time in private
or over-the-counter transactions, but the prices would likely reflect a discount
for illiquidity. As a result, a master limited partnership would not provide the
limited partners with immediate and complete liquidity for their investment in
the partnerships. Finally, a master limited partnership would still be burdened
with general and administrative expenses, which would reduce any cash
distributions paid to the partners of the master limited partnerships. The
merger values reflect liquidation values and have not been reduced for any
reimbursement of Pioneer USA's general and administrative expenses allocable to
the partnerships.
Comparison of the Mergers to Royalty Trust. We also considered a royalty
trust, pursuant to which the partnership interests would be exchanged for
beneficial ownership interests in the trust. Like the master limited partnership
alternative discussed above, the partnerships' oil and gas properties are not of
sufficient size in the aggregate to attract new capital through a royalty trust.
In addition, the beneficial ownership interests in a royalty trust might not be
publicly traded in a significant market. As a result, this alternative was not
selected because it would not result in immediate and complete liquidity for the
partners' investments in the partnerships. Finally, a royalty trust would still
be burdened with general and administrative expenses, which would reduce any
cash distributions paid to the beneficiaries of the royalty trust. The merger
values reflect liquidation values and have not been reduced for any
reimbursement of Pioneer USA's general and administrative expenses allocable to
the partnerships.
Comparison of the Mergers to Auction. Offering oil and gas properties for
sale at auction is often an efficient means of selling smaller interests in
properties in which the seller is not the operator of the property. However,
auctions are generally unsuited to the offer and sale of substantial property
interests such as those owned by the partnerships, which exceed the normal size
of properties offered at auction, and might well be beyond the purchasing
capacity of the parties which typically are bidders at auctions. Attempting to
auction such properties would cause such properties to dominate each auction and
would likely lower the price or the number of interested bidders. In order to
avoid this consequence, the partnerships' interests in properties could be
divided into smaller pieces and offered at auction on multiple occasions over
several years. That extended auction might be counterproductive in terms of
prices received, thus minimizing many of the benefits of selling properties at
auction.
Comparison of the Mergers to Negotiated Sale. We also considered whether
the partnerships would benefit from attempting to sell their property interests
in negotiated transactions. Buyers would be purchasing many partnerships'
property interests which they would neither control nor operate. A portion of
the value of the properties in which the partnerships own interests would
continue to be operated by Pioneer USA because Pioneer USA controls other
interests in fields in which the partnerships' properties are located. Because
of Pioneer USA's control of such properties, Pioneer and Pioneer USA believe
Pioneer is the party in the position to pay the highest price for such interests
and the one most likely to do so. In contrast, Pioneer USA's control of such
properties could negatively affect the amount a third party is willing to pay
and the overall interest of third parties in buying such properties.
In addition, sale of the partnerships' properties on a direct basis often
involves substantial periods of time for due diligence, negotiation and
execution of agreements and closings, often with different purchasers for
different properties. Satisfying due diligence requests requires large amounts
of time to create and supervise data rooms or disseminate data to possible
purchasers, plus the time needed to deal directly with multiple prospective
purchasers. Furthermore, some issues, such as environmental and title matters,
may come to light in the late stages of a negotiated sale, which may delay or
preclude the consummation of the sale.
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<PAGE> 29
The transaction costs for offering properties in a negotiated sale could be
substantial, and often are higher than other means of sale. Those costs include:
- preparing and disseminating information on properties to be offered;
- soliciting attendance by prospective purchasers; and
- screening and qualifying purchasers.
Although we believe the factors described above to be true, we will
consider third party offers to purchase any partnership or its assets. See
"Third-Party Offers" on page 32.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION
Pioneer and Pioneer USA caution you that this document, any supplement and
other statements Pioneer or Pioneer USA make from time to time contain
statements that may constitute "forward-looking statements." Those statements
include statements regarding Pioneer's and Pioneer USA's intent, belief or
current expectations, as well as the assumptions on which those statements are
based. Forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, and actual results may differ materially from
those contemplated by forward-looking statements. Important factors currently
known to Pioneer and Pioneer USA's management that could cause actual results to
differ materially from those in forward-looking statements include, but are not
limited to, those factors set forth from time to time in reports the
partnerships filed with the Securities and Exchange Commission. Some of these
factors are also described in "Risk Factors" beginning on page 8 of this
document. Except as required by law, Pioneer and Pioneer USA undertake no
obligation to update or revise forward-looking statements to reflect changes in
assumptions, the occurrence of unanticipated events or changes to future
operating results over time. You are cautioned not to place too much reliance on
such statements.
METHOD OF DETERMINING MERGER VALUES
AND AMOUNT OF CASH OFFERED
Pioneer and Pioneer USA agreed to merger values for each of the
partnerships for purposes of the mergers. The method of determining merger
values was not determined by arm's-length negotiations. See "Risk Factors -- You
Were Not Independently Represented in Establishing the Terms of the Mergers" on
page 9 and "Interests of Pioneer, Pioneer USA and Their Directors and Officers"
on page 43.
COMPONENTS OF MERGER VALUES
The merger value assigned to each partnership was calculated as follows:
- Pioneer and Pioneer USA calculated the volumes of the partnership's
proved reserves as of June 30, 1999, based on a future production curve
consistent with the production curve used in the reserve report of
Williamson Petroleum Consultants, Inc. as of December 31, 1998. Pioneer
and Pioneer USA ignored any economic limit, or point at which production
would become unprofitable, otherwise assumed in the 1998 Williamson
reserve report because that reserve report used NYMEX oil and gas prices
as of December 31, 1998, which were $12.00 per Bbl of oil and $2.00 per
Mcf of gas. In contrast, Pioneer and Pioneer USA used (1) an arithmetic
average of the five-year NYMEX futures price as of June 30, 1999, which
was approximately $18.00 per Bbl of oil, less standard industry
adjustments, and (2) the NYMEX price of $2.40 per Mcf of gas, less
standard industry adjustments, to calculate the merger values. Based on
this pricing, production could continue profitably for a longer period of
time than assumed in the 1998 Williamson reserve report.
- Pioneer and Pioneer USA calculated estimated future net revenues from the
estimated reserves at June 30, 1999, using (1) an arithmetic average of
the five-year NYMEX futures price for oil, which was approximately $18.00
per Bbl of oil, less standard industry adjustments, and (2) the
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<PAGE> 30
NYMEX price of $2.40 per Mcf of gas, less standard industry adjustments.
Pioneer and Pioneer USA adjusted the estimated future net revenues for
standard industry price adjustments, including:
-- production costs;
-- the effects of oil quality;
-- BTU content for gas;
-- oil and gas gathering and transportation costs; and
-- gas processing costs and shrinkage.
Those adjustments reflect assumptions about the costs to extract, transport and
process, if necessary, crude oil, natural gas liquids and natural gas to their
point of sale.
- Pioneer and Pioneer USA calculated the present value of the estimated
future net revenues using a 12.5% discount rate.
- Pioneer and Pioneer USA added the present value of the partnership's
estimated future net revenues as of June 30, 1999 to the partnership's
net working capital as of June 30, 1999, as reduced by its pro rata
share, based on its reserve value, of the estimated expenses and fees of
the mergers of all of the partnerships, including the 21 non-public
limited partnerships and 13 privately-held employee partnerships
described in "Transactions Among The Partnerships, Pioneer, Pioneer USA
and Their Directors and Officers" on page 45 of this document.
Appendix B to this document contains a summary of the 1998 Williamson
reserve report for the partnerships, including assumptions used in the
preparation of that report.
Pioneer and Pioneer USA will update the information presented in this
document from June 30, 1999 to September 30, 1999 before mailing this document
to the limited partners. Robert A. Stanger & Co., Inc. will review the September
30, 1999 data and determine if it can give its fairness opinion based on that
data. Likewise, Pioneer USA's board of directors will make its determination as
to whether the mergers are advisable, fair to the limited partners, and in their
best interests based on the September 30, 1999 data. From the mailing date of
this document to the closing date of the mergers, neither Pioneer nor Pioneer
USA will adjust any of the components of the merger values.
Estimated Reserve Volumes. Pioneer and Pioneer USA believe it is
appropriate to calculate estimated reserve volumes at June 30, 1999. Pioneer and
Pioneer USA estimate that the mergers will be consummated in the latter half of
December 1999, but before a 1999 year-end reserve report can be prepared in
accordance with the guidelines of the SEC. However, because the properties are
long-lived, mature, producing properties, Pioneer and Pioneer USA believe the
production curve used in preparing the reserve values as of June 30, 1999 is
similar, in all material respects, to the production curve in the 1998
Williamson reserve report.
Estimated Future Net Revenues. Pioneer and Pioneer USA agreed to calculate
estimated future net revenues of the estimated reserves at June 30, 1999, using
(1) an arithmetic average of the five-year NYMEX futures price for oil, which
was approximately $18.00 per Bbl of oil, less standard industry adjustments, and
(2) the NYMEX price of $2.40 per Mcf of gas, less standard industry adjustments.
Pioneer and Pioneer USA used production costs consistent with those assumed in
the 1998 Williamson reserve report. Pioneer and Pioneer USA believe it is
appropriate to use production costs similar to those assumed in the 1998
Williamson reserve report because such costs have been fairly stable and
predictable over the last several years.
Present Value of Estimated Future Net Revenues. Pioneer and Pioneer USA
agreed to use a 12.5% discount rate to determine the present value of estimated
future net revenues from each partnership's reserves. Pioneer and Pioneer USA
believe 12.5% is a rate within the range of discount rates commonly used in the
oil and gas industry in property acquisitions of producing properties, although
it is higher than
23
<PAGE> 31
the 10% rate that the SEC requires for comparative purposes in the year-end
reports of publicly traded oil and gas companies.
None of the partnerships has any material long-term gas contracts. Pioneer
and Pioneer USA estimated future operating costs based on costs in effect at
December 31, 1998. In addition, Pioneer and Pioneer USA do not believe that the
present value of any partnership's proved reserves is significantly affected by
curtailments of gas production. The reserve estimates do not reflect the effect
of any "take-or-pay" clauses in gas contracts, which effect we expect to be
insignificant.
Net Working Capital. No cash distributions will be made by the partnerships
to their partners after September 30, 1999 through the closing date or
termination date of the mergers. The cash payments of the merger values to
limited partners of the participating partnerships already reflect those
distributions. However, any cash distributions by a nonparticipating partnership
which would have been paid during that time period in the ordinary course of
that partnership's business will be distributed to its partners at the same time
that checks are mailed to the partners, other than Pioneer USA, of participating
partnerships. The merger values have been reduced by the estimated expenses and
fees of the mergers of the partnerships, including the 21 non-public limited
partnerships and 13 privately-held employee partnerships described in
"Transactions Among The Partnerships, Pioneer, Pioneer USA and Their Directors
and Officers" on page 45 of this document.
Since the merger values include net working capital, the merger values
assigned to the partnerships include the partnerships' assets and liabilities
other than their oil and gas reserves. The partnerships' other assets and
liabilities consist mainly of cash, accounts receivable from the sale of oil and
gas production and accounts payable.
Pioneer USA will assume all of the liabilities, including contingent
liabilities and obligations, of the participating partnerships as of the closing
date of the mergers. As of the date of this document, Pioneer USA is not aware
of any material contingent liabilities to which any partnership is subject.
ALLOCATION OF MERGER VALUES AMONG PARTNERS
In determining the portion of the merger value attributable to each $1,000
of initial limited partner investment in a partnership, Pioneer determined the
amount payable per $1,000 investment as if the assets of the partnership had
been sold on June 30, 1999 for cash equal to the merger value and the proceeds
distributed in accordance with the liquidation provisions of the partnership's
partnership agreement. If Pioneer USA were to receive any cash payment in the
mergers, this methodology would result in Pioneer USA receiving an equal amount
or a lesser amount than it would have received if the aggregate merger value was
allocated among the partners based on the revenue-sharing provisions of the
partnership agreement.
OTHER METHODS OF DETERMINING MERGER VALUES
Pioneer and Pioneer USA believe that the method used to determine the
merger values is a fair and reasonable method of valuing the partnerships'
properties. Pioneer and Pioneer USA considered a number of alternative methods
of determining the merger values before selecting a method. However, this method
might not accurately reflect the value of the partnerships' assets. See "Risk
Factors -- The Merger Values Involve Estimates that Will Not Be Adjusted" on
page 8. The following alternative methods for determining the merger values
should be taken into account in assessing the adequacy of this method:
Book Value of Assets. Pioneer and Pioneer USA did not base the calculation
of merger values on the net book value of the partnerships' assets. The net book
values of the partnerships' assets are based upon the financial statements
reported in accordance with generally accepted accounting principles. The net
book values are not adjusted for estimates in changes in the fair market value
of the assets. For this reason, Pioneer and Pioneer USA believe that the merger
values are more indicative of the fair market value of the assets of the
partnerships than the assets' net book values.
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<PAGE> 32
Trading Price of Units. None of the partnership interests are traded on a
national stock exchange or in any other significant market. Although some
partnership interests are occasionally sold in private or over-the-counter
transactions, Pioneer and Pioneer USA believe any market for the partnership
interests:
- is highly illiquid;
- reflects an illiquidity discount; and
- as a result, is not reliable as an indicator of value.
As a result, Pioneer and Pioneer USA did not base the calculation of merger
values on recent trading prices of partnership interests in the partnerships.
See Table 14 of Appendix A for historical information about recent trades of
partnership interests in the partnerships.
Repurchase Offers. Pioneer and Pioneer USA did not base the calculation of
merger values on the price of recent repurchase offers in the partnerships. Most
partnerships do not have a repurchase offer obligation, so no repurchase price
information was available for those partnerships. The merger values are higher
than the 1999 repurchase offer prices for the few partnerships that had such
requirements because the repurchase prices were based on NYMEX oil and gas
prices as of December 31, 1998, which were $12.00 per Bbl of oil and $2.00 per
Mcf of gas. In contrast, the merger values are based on (1) an arithmetic
average of the five-year NYMEX futures price for oil, which was approximately
$18.00 per Bbl of oil, less standard industry adjustments, and (2) the NYMEX
price of $2.40 per Mcf of gas, less standard industry adjustments. See "Risk
Factors -- Repurchase Rights Terminate on Completion of the Mergers" on page 10
of this document.
Timing of Pricing. Pioneer and Pioneer USA did not calculate the merger
values using December 31, 1998 oil and gas prices. Oil and gas prices declined
significantly in 1998, which adversely affected the cash distributions that
limited partners had been receiving. However, oil and gas prices have recovered
from NYMEX oil and gas prices of $12.00 per Bbl of oil and $2.00 per Mcf of gas
as of December 31, 1998, to (1) an arithmetic average of the five-year NYMEX
futures price for oil as of June 30, 1999, which was approximately $18.00 per
Bbl of oil, less standard industry adjustments, and (2) the NYMEX price of $2.40
per Mcf of gas, less standard industry adjustments. Pioneer and Pioneer USA used
those recovered oil and gas prices to calculate the merger values. Although
Pioneer and Pioneer USA expect that long-term oil and gas prices will not
increase materially above the prices used in calculating the merger values, no
assurance can be given that prices will not increase significantly in the
future. Significant increases in future prices would increase cash available for
distribution from the partnerships and could, in retrospect, suggest that the
merger values were low by comparison.
INFORMATION SOURCES
Pioneer used the records of Pioneer USA and the partnerships to derive the
information regarding:
- the ownership interests;
- prices being received or contracted for;
- costs;
- production;
- allocation of revenues and costs between classes of partners;
- capital accounts of partners; and
- other factual data used by Pioneer:
-- to prepare its estimates of proved reserves;
-- to compute the merger values; and
-- to determine the allocation among partners of the cash payment to be
received.
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<PAGE> 33
While Pioneer has implemented procedures designed to verify some of this
information, the nature and volume of data preclude verification of all
information. In addition, information relating to prices, costs and production
history frequently is estimated based on incomplete data and is subject to
varying interpretations. Likewise, the provisions of some of the partnership
agreements are subject to different interpretations. In allocating the merger
value assigned to a partnership among its partners, Pioneer and Pioneer USA
attempted to apply a reasonable interpretation of those provisions.
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<PAGE> 34
THE MERGERS
GENERAL
Immediately before the effective time of each merger, the partnership
agreement for each participating partnership will be amended by the merger
amendment to permit the merger of the partnership with and into us. At the
effective time of the mergers, the participating partnerships will be merged
with and into us. We will be the surviving entity. In addition, at the effective
time of the mergers, each of your partnership interests in a participating
partnership will be converted into the right to receive cash. The amount of cash
you receive:
- will be based on the merger values assigned to the partnerships; and
- will equal the amount that you would have received on liquidation of the
partnerships if the partnerships' assets had been sold on June 30, 1999
for cash equal to the merger values.
The merger value of a partnership is equal to the partnership's reserve
value and its net working capital, as reduced by its pro rata share of the
estimated expenses and fees of the mergers, in each case as of June 30, 1999.
The reserve value is based on the present value of estimated future cash flows
from the partnership's reserves at June 30, 1999, using (1) an arithmetic
average of the five-year NYMEX futures price for oil, which was approximately
$18.00 per Bbl of oil, less standard industry adjustments, (2) the NYMEX price
of $2.40 per Mcf of gas, less standard industry adjustments, and (3) a 12.5%
discount rate.
Pioneer and Pioneer USA agreed to use September 30, 1999 to determine the
merger values because that will be the most recent quarter-end preceding the
date on which Pioneer USA mails this document to the limited partners. However,
to provide an example in this preliminary document, Pioneer and Pioneer USA
calculated the merger values as of June 30, 1999. Pioneer and Pioneer USA intend
to revise those numbers as of September 30, 1999 prior to mailing this document
to the limited partners.
LEGAL OPINION FOR LIMITED PARTNERS
All of the partnership agreements require that special legal counsel render
an opinion on behalf of the limited partners to Pioneer USA that neither the
grant nor the exercise of the right to approve the mergers by the limited
partners will adversely affect the tax status of the partnerships. In addition,
some of the partnership agreements require an opinion that such an approval will
not result in the loss of any limited partner's limited liability. For some
partnerships, the counsel designated to render the opinion must be counsel other
than counsel to Pioneer USA or the partnerships. In all cases, the designated
counsel and the legal opinion must be approved by the limited partners. Pioneer
USA has retained of Dallas, Texas for the purpose of rendering this
legal opinion on behalf of all of the limited partners to Pioneer USA. The
merger proposals include an approval of that counsel and the form of its
opinion. See "The Special Meetings -- Time and Place; Purpose" on page 39 of
this document. A copy of the opinion is attached as an exhibit to the merger
proposals.
DISTRIBUTION OF CASH PAYMENTS
Upon completion of the mergers, the partners will have no continuing
interest in, or rights as partners of, any participating partnership. The
transfer books of each participating partnership will be closed on the closing
date of the mergers. All partnership interests in the participating partnerships
will cease to be outstanding, will automatically be cancelled and retired, and
will cease to exist. The certificates previously representing partnership
interests in participating partnerships held by record partners will represent
only the right to receive cash.
We intend to mail checks to the partners of record promptly following the
effectiveness of the mergers in payment of the merger values. Partners will not
be required to surrender partnership interest certificates to receive the cash
payment.
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<PAGE> 35
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
considerations of a conversion of partnership interests into cash pursuant to
the mergers. The federal tax consequences of the mergers will vary for each
limited partner because of the different circumstances of each participating
partnership and the individual federal income tax position of each limited
partner.
The following discussion is based upon current law. Future legislative,
judicial or administrative changes or interpretations could alter or modify the
following statements and conclusions, and any of these changes or
interpretations could be retroactive and could affect the tax consequences to
the limited partners.
The following discussion is not exhaustive of all possible tax
considerations. It does not address any state, local or foreign tax
considerations, nor does it discuss all of the aspects of federal income
taxation that may be relevant to specific partners in light of their particular
circumstances. The discussion below describes general federal income tax
considerations applicable to individuals who are citizens or residents of the
United States, and therefore has limited application to domestic corporations
and persons subject to specialized federal income tax treatment, such as foreign
persons, tax-exempt entities, regulated investment companies and insurance
companies.
YOU ARE ADVISED TO CONSULT YOUR OWN TAX ADVISOR TO DETERMINE ALL OF THE
RELEVANT FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF THE MERGERS TO YOU. THE
FOLLOWING DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING,
AND YOU MUST DEPEND UPON THE ADVICE OF YOUR OWN TAX ADVISOR CONCERNING THE
EFFECTS OF THE MERGERS.
Tax Consequences of a Conversion of Partnership Interests.
- Generally. As more fully described below, if you own partnership
interests in a participating partnership, you will generally recognize an
aggregate amount of net gain or loss equal to the difference between the
amount of cash you receive in the mergers and your adjusted tax basis in
your partnership interests immediately prior to the mergers. That net gain
or loss may be comprised of ordinary income or ordinary loss depending upon
the extent of any recapture of depletion or intangible drilling and
development costs and any appreciation or depreciation in the ordinary
assets of the partnership. The recognition of ordinary income will decrease
the capital gain component or increase the capital loss component of the
net gain or loss otherwise recognizable as a consequence of the mergers.
- Characterization of Mergers. A merger of a participating partnership
into Pioneer USA should be treated for federal income tax purposes as a
sale by such partnership of its assets and a distribution of the proceeds
in liquidation of the limited partnership interests. Under Section 613A of
the Internal Revenue Code, each of the partners must:
- maintain the partner's share of the basis in the partnership's oil
and gas properties at the partner level;
- adjust such basis for depletion deductions; and
- use such basis to calculate gain or loss at the partner level on any
sale by the partnership of its oil and gas properties.
Accordingly, each of the mergers should be generally treated for tax
computation purposes as:
- a taxable sale by you of your interest in a participating
partnership's oil and gas properties for cash and the assumption of
liabilities; and
- a taxable sale of any remaining partnership assets by the
participating partnership followed by a liquidation of the
participating partnership.
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<PAGE> 36
- Gain or Loss on Sale of Partnership Oil and Gas Properties. Upon the
deemed sale of a partnership's oil and gas properties in the mergers, you
will recognize gain or loss equal to the difference between:
- the portion of the partnership's "amount realized" on the sale of its
oil and gas properties allocated to you; and
- your adjusted tax basis in the partnership oil and gas properties
sold, which must be reduced to reflect depletion claimed during the
current year in respect of production prior to the date of the
merger.
The amount realized will include the cash received and the amount of any
liability assumed by Pioneer USA in connection with the mergers which is
attributable to the partnership's oil and gas properties. If gain is
recognized on such sale, the portion of the gain that is treated as
recapture of intangible drilling and development costs or depletion will be
treated as ordinary income. See "Recapture of Intangible Drilling and
Development Costs" and "Recapture of Depletion" below. The remainder of
such gain generally will constitute "Section 1231 gain." If loss is
recognized on such sale, such loss generally will constitute "Section 1231
loss." See "Section 1231 Gains and Losses" below. You must take into
account your share of the portion of the gain that constitutes recapture
income, if any, as ordinary income and must aggregate your share of the
Section 1231 gains and losses along with the Section 1231 gains and losses
you realize from other sources.
- Other Gain or Loss. You will also recognize your allocable share of
the partnership's gain or loss, if any, on the deemed sale of its assets
other than oil and gas properties. Such gain or loss will be equal to the
difference between the amount realized by the partnership on the sale of
such assets and the partnership's adjusted tax basis in such assets. Such
gain or loss will be capital or ordinary depending on the nature of the
assets sold.
Finally, in the event that the cash you receive in the mergers is more
or less than the adjusted tax basis in your partnership interests, as
adjusted to reflect gains and losses described in the two preceding
paragraphs as well as the effects of the partnership's current year
activities, then upon the deemed liquidation of a partnership, you will
recognize capital gain or loss equal to the difference between such
amounts. See "Tax Consequences of Partnership Operations" below.
You will be provided with information necessary to make the
calculations described above for purposes of filing your own federal income
tax return. In order to simplify your federal income tax reporting, this
information will include a calculation of the amount and character of your
gain on the deemed sale of the partnership's oil and gas properties based
upon our estimates. You should verify the accuracy of these calculations
based upon your own records.
- Section 1231 Gains and Losses. Generally, if the total amount of the
Section 1231 gains exceeds the total amount of Section 1231 losses, all
such gains and losses will be treated as capital gains and losses, and if
the total amount of the Section 1231 losses exceeds the total amount of the
gains, all such gains and losses will be treated as ordinary income and
losses. However, your net Section 1231 gains will be treated as ordinary
income to the extent of your net Section 1231 losses during the immediately
preceding five years, reduced by any amount of net Section 1231 losses that
have been previously "recaptured" by you pursuant to this rule.
- Recapture of Intangible Drilling and Development Costs. Generally,
all or a portion of the amounts previously deducted for intangible drilling
and development costs with respect to a property must be recaptured upon
the disposition of such property by treating the gain, if any, realized on
such disposition as ordinary income to the extent of such amounts. With
respect to a property placed in service prior to 1987, the potential
recapture amount is equal to the excess of the aggregate amounts previously
deducted for intangible drilling and development costs with respect to such
property over the amount by which the deduction for depletion with respect
to such property would have been increased had the intangible drilling and
development costs been capitalized and recovered through
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<PAGE> 37
depletion rather than deducted in the year incurred. It should be noted
that, if percentage depletion, rather than cost depletion, has been claimed
with respect to such property, the hypothetical capitalization of
intangible drilling and development costs may result in little or no
increase in depletion deductions and, as a consequence, most or all of the
intangible drilling and development costs with respect to such property may
be subject to recapture. With respect to property placed in service during
1987 or thereafter, the full amount of intangible drilling and development
costs previously deducted, unreduced by depletion, is subject to recapture
to the extent of any gain.
- Recapture of Depletion. Upon the disposition of a property that was
placed in service during 1987 or thereafter, all amounts previously
deducted for depletion, whether cost depletion or percentage depletion, to
the extent such amounts reduced the basis in the property, must be
recaptured by treating the gain, if any, recognized on such disposition as
ordinary income to the extent of such amounts. No such recapture rule is
applicable to a property placed in service before 1987.
- Tax Rates. The capital gains rate for individuals and other
non-corporate taxpayers is 20% if the capital asset has been held for more
than one year at the time of consummation of the mergers. Corporate
taxpayers are taxed at a maximum marginal rate of 35% for both capital
gains and ordinary income. The maximum marginal federal income tax rate for
ordinary income of individuals and other non-corporate taxpayers is 39.6%.
Capital losses are deductible only to the extent of capital gains, except
that, subject to the passive activity loss limitation discussed below,
non-corporate taxpayers may deduct up to $3,000 of capital losses in excess
of the amount of their capital gains against ordinary income. Excess
capital losses generally can be carried forward to succeeding years. A
corporation is permitted to carry back excess capital losses to the three
preceding years, provided the carryback does not increase or produce a net
operating loss for any of those years. A corporation's carryforward period
is five years and a non-corporate taxpayer can carry such losses forward
indefinitely.
- Passive Activity Loss Limitation. Under Section 469 of the Internal
Revenue Code, any losses from the participating partnerships that have been
suspended under the passive loss rules will become fully deductible as a
result of the mergers.
FIRPTA Withholding. Gain recognized by a foreign limited partner on the
sale by a partnership of its assets pursuant to the mergers which is effectively
connected with the conduct of a U.S. trade or business will be subject to
federal income tax. Gain realized on the sale of U.S. real property, including a
participating partnership's oil and gas properties, is treated as effectively
connected with the conduct of a U.S. trade or business for this purpose. Under
Internal Revenue Code Section 1446, a partnership in which an interest is held
by a foreign person generally is required to deduct and withhold a tax equal to
the highest marginal federal income tax rate applicable to the partner
multiplied by such partner's allocable share of effectively connected income. In
order to comply with this requirement, each participating partnership will
withhold the prescribed percentage of the effectively connected income allocated
to you unless you properly complete and sign a "FIRPTA Affidavit" certifying
your taxpayer identification number and address, and that you are not a foreign
person. Amounts withheld will be creditable against a limited partner's federal
income tax liability and, if in excess thereof, a refund may be obtained from
the Internal Revenue Service by filing a U.S. income tax return.
Tax Consequences of Partnership Operations. The federal income tax
consequences of the mergers, described above, are in addition to the tax
consequences of your status as a partner in a participating partnership for the
taxable year ending on the closing date of the mergers. You must include your
allocable share of a participating partnership's items of income, gain, loss,
deduction and credit for that taxable year, including your allocable share
through the closing date of the mergers, on your federal income tax return for
that taxable year. That information will be provided to you on a Schedule K-1 as
required by tax laws. The results of partnership operations for such period will
impact your tax basis in a participating partnership, and your computation of
gain or loss resulting from the mergers.
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<PAGE> 38
ACCOUNTING TREATMENT
The mergers will be accounted for as purchases under generally accepted
accounting principles. Under those rules, Pioneer USA will record the assets and
liabilities of the participating partnerships on its books at their estimated
fair market values.
NO APPRAISAL OR DISSENTER RIGHTS
Under the laws of the State of Delaware and the State of Texas, which are
the states of formation of the partnerships, you are not entitled to appraisal
or dissenter rights with respect to the mergers.
FUTURE OF NONPARTICIPATING PARTNERSHIPS
If the limited partners of a partnership do not approve the merger of that
partnership, it will not participate in the mergers and will remain in
existence. Each nonparticipating partnership will continue to operate as a
separate legal entity with its own assets and liabilities. There will be no
immediate change in its business objectives, and Pioneer USA plans to continue
to manage and operate each nonparticipating partnership in accordance with the
terms of its current partnership agreement. A limited partner in a
nonparticipating partnership will retain the rights, privileges and obligations
that the partner currently has pursuant to the partnership agreement of the
nonparticipating partnership. At the same time that Pioneer USA mails checks to
the partners of participating partnerships in payment of the merger values,
Pioneer USA will mail any cash distributions that were delayed for
administrative purposes prior to the completion of the mergers to the partners
of nonparticipating partnerships.
Pioneer USA's board of directors will determine each nonparticipating
partnership's business plan. In addition, the board of directors of each of
Pioneer and Pioneer USA will decide what, if any, actions they will take with
respect to the nonparticipating partnerships. Potential activities include a
tender offer for partnership interests of limited partners or a proposal to
acquire the assets of, or merge with, one or more of the nonparticipating
partnerships. Such proposals may be on terms similar to or different from those
of the mergers described in this document.
Pioneer USA plans to continue to manage each nonparticipating partnership
until such partnership is dissolved or Pioneer USA is replaced as the general
partner of such partnership. The replacement of Pioneer USA as general partner
would require compliance with the partnership agreement of such nonparticipating
partnership, including the requisite vote of the limited partners thereof. A
nonparticipating partnership may be dissolved in the future in accordance with
its partnership agreement if Pioneer USA or any substituted general partner
withdraws from the nonparticipating partnership, or in some cases, otherwise
elects to dissolve that partnership. Pioneer USA might withdraw from, or
otherwise elect to dissolve, a nonparticipating partnership if Pioneer USA
determines that the nonparticipating partnership's continued operation is
uneconomical or its dissolution and liquidation are in the best interests of the
partners. Upon dissolution, the nonparticipating partnership's assets may be
sold for cash or securities, which may be more or less than the merger value
assigned to that partnership, or distributed in kind to the partners of the
nonparticipating partnership. Any such sale may be to Pioneer or an affiliate of
Pioneer and may involve cash or securities of Pioneer.
NONMANAGING GENERAL PARTNERS OF CERTAIN PARTNERSHIPS
Five of the partnerships described in this document have two general
partners. In those five partnerships, Pioneer USA is the managing general
partner. The second general partner in those partnerships is a parallel
partnership whose limited partners are former affiliates of Pioneer's
predecessors.
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<PAGE> 39
The names of the five partnerships and the names of the nonmanaging general
partner in each of those partnerships are:
<TABLE>
<CAPTION>
PARTNERSHIP NONMANAGING GENERAL PARTNER
----------- ---------------------------
<S> <C>
Parker & Parsley 82-I, Ltd. Parker & Parsley Employees 82-I, Ltd.
Parker & Parsley 82-II, Ltd. Parker & Parsley Employees 82-II,
Ltd.
Parker & Parsley 83-A, Ltd. Parker & Parsley Employees 83-A, Ltd.
Parker & Parsley 83-B, Ltd. Parker & Parsley Employees 83-B, Ltd.
Parker & Parsley 84-A, Ltd. Parker & Parsley Employees 84-A, Ltd.
</TABLE>
Pioneer USA is the sole general partner of each of the nonmanaging general
partners. In that capacity, Pioneer USA has authority:
- to cause the nonmanaging general partner to perform its obligations
relating to the partnership described above; and
- to exercise on behalf of the nonmanaging general partner all of the
rights and elections granted to the nonmanaging general partner by the
partnership described above.
Pioneer USA, as the general partner of the nonmanaging general partners,
has approved the mergers and the distribution of this document to the limited
partners. Pioneer USA will not receive any cash payment in the mergers for its
partnership interests in the nonmanaging general partners.
THIRD-PARTY OFFERS
Pioneer USA will consider offers from third parties to purchase any
partnership or its assets. Those who wish to make an offer for any partnership
or its assets must demonstrate to Pioneer USA's reasonable satisfaction their
financial ability and willingness to complete such a transaction. Before
reviewing non-public information about a partnership, a third party will need to
enter into a customary confidentiality agreement. Pioneer USA will also disclose
the price at which Pioneer plans to acquire the non-public and employee
partnerships. Offers should be at prices and on terms that are fair to the
partners of the partnership and more favorable to the limited partners than the
prices and terms proposed for the mergers in this document. Pioneer reserves the
right to match or top any such offer. Persons desiring to make an offer for any
partnership should contact Timothy L. Dove or Mark L. Withrow, Board of
Directors, Pioneer Natural Resources USA, Inc., 1400 Williams Square West, 5205
North O'Connor Boulevard, Irving, Texas 75039 by November 1, 1999.
At the same time as this transaction, Pioneer is also offering to acquire
21 non-public limited partnerships and 13 privately-held employee limited
partnerships through mergers of those partnerships into Pioneer USA. See
"Transactions Among The Partnerships, Pioneer, Pioneer USA and Their Directors
and Officers" on page 45 of this document. Pioneer USA will also consider offers
from third parties to purchase any of those partnerships as described in the
preceding paragraph.
MERGER AMENDMENT
In order to complete the mergers, the partnership agreements require an
amendment to add a provision permitting the mergers of the partnerships with and
into Pioneer USA. See the merger proposals, which include the merger amendment,
set forth in Appendix D to this document. At the special meetings, the limited
partners will vote upon the merger amendment, which, if approved, will be
effective immediately prior to the effectiveness of the mergers.
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TERMINATION OF REGISTRATION AND REPORTING REQUIREMENTS
As a result of the mergers, the partnership interests in the participating
partnerships, as well as the participating partnerships themselves, will cease
to exist. Consequently, Pioneer USA intends to terminate:
- registration of the partnership interests of the participating
partnerships under the Securities Exchange Act of 1934; and
- the participating partnerships' obligations to file reports and other
information under the Securities Exchange Act of 1934.
Pioneer USA plans to cause any nonparticipating partnerships to continue to
file reports and other information under the Securities Exchange Act of 1934.
However, Pioneer USA's board of directors could determine to cause such
partnerships to terminate their reporting obligations as permitted by federal
securities laws.
SOURCE OF FUNDS
Pioneer USA will need approximately $64.8 million in cash to complete the
mergers for all of the partnerships, including the 21 non-public limited
partnerships and the 13 privately-held employee partnerships. Pioneer USA will
borrow that amount from Pioneer as an intercompany loan. Pioneer USA plans to
repay that intercompany loan with cash flows from operations. Immediately after
completion of the mergers, the cash portion of the working capital in each
partnership that Pioneer acquires will be used to repay a portion of the
intercompany loan.
Pioneer, in turn, will obtain such funds from its amended credit facility
agreement with a syndicate of banks, including Bank of America, N.A., formerly
NationsBank of Texas, N.A. As of June 30, 1999, the outstanding balance due
under Pioneer's credit facility was $1.01 billion, excluding outstanding,
undrawn letters of credit of $19 million, and the borrowing capacity available
under Pioneer's credit facility was $178 million. Under the terms of its credit
facility, Pioneer must reduce its outstanding credit facility borrowings to $941
million prior to December 31, 1999. Such borrowings bear interest, at Pioneer's
option, based on:
- the prime rate of Bank of America, N.A., formerly NationsBank of Texas,
N.A., which was 7.75% at June 30, 1999;
- a eurodollar rate, which is substantially equal to the London Interbank
Offered Rate, or LIBOR, adjusted for the reserve requirement as
determined by the Board of Governors of the Federal Reserve System with
respect to transactions in eurocurrency liabilities; or
- a competitive bid rate as quoted by the lending banks electing to
participate pursuant to Pioneer's request.
LIBOR rate borrowings under Pioneer's credit facility have periodic
maturities, at Pioneer's option, of one, two, three, six, nine or 12 months. Bid
rate borrowings have periodic maturities, at Pioneer's option, of not less than
15 days nor more than 360 days. The annual interest rate on LIBOR rate
borrowings varies with the periodic LIBOR rate and with specified interest rate
margins that are based on Pioneer's senior, unsecured long-term debt ratings and
certain leverage ratios. The maximum interest rate margin on LIBOR rate
borrowings is 300 basis points. Pioneer's obligations under its credit facility
are guaranteed by Pioneer USA and certain other United States subsidiaries of
Pioneer, and are secured by a pledge of a portion of the capital stock of
certain non-United States subsidiaries of Pioneer.
The terms of Pioneer's credit facility also contain various restrictive
covenants and compliance requirements, which include:
- limits on the incurrence of additional indebtedness;
- restrictions as to merger, sale or transfer of assets without the banks'
prior consent;
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<PAGE> 41
- enhancement of the banks' collateral rights under certain circumstances;
and
- the maintenance of certain leverage ratios.
The most restrictive leverage ratio is the maintenance of a ratio of outstanding
Pioneer senior debt to earnings before interest, depletion, amortization, income
taxes, exploration and abandonment and other non-cash expenses not to exceed
5.75 to one through September 30, 1999, 4.25 to one through March 31, 2000, and
3.5 to one after that date.
PAYMENT OF EXPENSES AND FEES
The partnerships, including the 21 non-public limited partnerships and 13
privately-held employee partnerships described in "Transactions Among The
Partnerships, Pioneer, Pioneer USA and Their Directors and Officers" on page 45
of this document, which participate in the mergers, will pay all estimated
expenses and fees of the mergers. The net working capital component of each
partnership's merger value has been reduced by that partnership's pro rata
share, based on its reserve value, of the estimated expenses and fees. If
Pioneer terminates the merger as to any partnership or if any partnership does
not approve its merger, then Pioneer will pay the expenses allocated to that
partnership. Pioneer estimates that the expenses and fees for all of the mergers
will be as follows:
<TABLE>
<S> <C>
Filing fee with SEC......................................... $ 9,500
Legal fees.................................................. 400,000
Accounting fees............................................. 30,000
Financial advisor fees...................................... 200,000
Independent petroleum consultant fees....................... 60,000
Printing and mailing fees................................... 3,770,000
Information agent fees and solicitation and tabulation
expenses.................................................. 130,000
Miscellaneous............................................... 20,000
----------
Total expenses.................................... $4,619,500
==========
</TABLE>
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<PAGE> 42
THE MERGER AGREEMENT
The following describes the material terms of the merger agreement. Pioneer
and Pioneer USA expect to sign the merger agreement after the September 30, 1999
merger values are determined. The full text of the form of the merger agreement
is attached as Appendix E to this document and is incorporated by reference in
this document. We encourage you to read the entire merger agreement.
STRUCTURE; EFFECTIVE TIME
The merger agreement provides for the mergers of the participating
partnerships with and into Pioneer USA, with Pioneer USA surviving the mergers.
The mergers will become effective at the time of the filing of certificates of
merger for each participating partnership with the Secretary of State of the
State of Delaware and, for each participating partnership formed in Texas, with
the Secretary of State of the State of Texas. The certificates of merger are
expected to be filed as soon as practicable after the last condition precedent
to the mergers set forth in the merger agreement has been satisfied or waived.
We estimate that the closing of the mergers will be in the latter half of
December 1999.
EFFECTS OF THE MERGERS
As a result of the mergers, the partners in the participating partnerships
will have no continuing interest in those partnerships. Following the mergers,
there will be no trading market for the partnership interests in, and no further
distributions paid to the former partners of, the participating partnerships. In
addition, following the consummation of the mergers, the registration of any
partnership interests in participating partnerships under the Securities
Exchange Act of 1934 will be terminated.
CONDUCT OF BUSINESS PRIOR TO THE MERGERS
From the date of the merger agreement until the effective time of the
mergers, Pioneer, Pioneer USA and the partnerships are required:
- to conduct their businesses only in the ordinary course consistent with
past practice; and
- to use their reasonable best efforts:
- to preserve intact their business organizations;
- to keep available the services of their officers, employees and
consultants; and
- to preserve their relationships with customers, suppliers and other
persons with which they have significant business dealings.
Pioneer USA has suspended cash distributions to partners until after the
effective time of the mergers. Partners of nonparticipating partnerships will
receive cash distributions that are delayed for administrative purposes at the
same time Pioneer USA mails checks to the partners of participating partnerships
in payment of merger values.
OTHER AGREEMENTS
Special Meetings; Proxies. Pioneer USA has agreed to cause the special
meetings of the limited partners to be duly called and held as soon as
reasonably practicable for the purpose of voting on the approval and adoption of
the merger proposals. Pioneer USA has also agreed to use its reasonable best
efforts to solicit from the limited partners proxies in favor of the merger
proposals and to take all other action necessary or advisable to secure any vote
or consent of the limited partners required by the partnership agreements or the
merger agreement or by law in connection with the mergers.
Reasonable Commercial Efforts. Each party has agreed to use all reasonable
commercial efforts:
- to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings; and
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<PAGE> 43
- to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate as promptly as practicable the transactions
contemplated by the merger agreement.
REPRESENTATIONS AND WARRANTIES OF PIONEER, PIONEER USA AND THE PARTNERSHIPS
The merger agreement contains substantially reciprocal representations and
warranties of Pioneer and Pioneer USA, on the one hand, and each of the
partnerships, on the other hand, including the following matters:
- due organization or formation, standing, corporate or partnership power
and qualification;
- absence of any conflict, breach, notice requirement or default under
organizational documents and material agreements as a result of the
contemplated mergers;
- authority to enter into and the validity and enforceability of the merger
agreement;
- absence of any material adverse change since June 30, 1999; and
- accuracy of information.
In addition, the merger agreement contains representations and warranties
by:
- each of the partnerships as to capitalization; and
- Pioneer USA as to its capacity as general partner of each partnership and
as general partner of each nonmanaging general partner.
CONDITIONS TO THE MERGERS
Conditions to the Obligations of Each Party. The obligations of Pioneer,
Pioneer USA and the partnerships to complete the mergers are dependent on the
satisfaction of the following conditions:
- the merger agreement shall have been approved by the requisite vote of
the limited partners entitled to vote at the special meetings;
- Pioneer USA shall have received the fairness opinion from Robert A.
Stanger & Co., Inc. that, as of the date of that opinion, the amount of
cash to be received by the limited partners of each partnership in the
mergers is fair from a financial point of view to those partners;
- Pioneer USA shall have received the opinion of counsel to the limited
partners that neither the grant nor the exercise of the right to approve
the mergers by the limited partners will result in the loss of any
limited partner's limited liability or adversely affect the tax status of
the partnerships;
- the absence of any statute, regulation, judgment, injunction, order or
decree that would prohibit the consummation of the mergers;
- the absence of any pending suit, action or proceeding challenging the
legality or any aspect of the mergers or the transactions related to the
mergers;
- all material filings and registrations with, and notifications to, third
parties shall have been made and all material approvals and consents of
third parties shall have been received; and
- the absence of any opinion of counsel that the exercise by the limited
partners of the right to approve the mergers is not permitted by state
law.
Conditions to the Obligations of Pioneer and Pioneer USA. The obligations
of Pioneer and Pioneer USA to complete the mergers are further subject to the
satisfaction of the following conditions:
- each of the partnerships having performed in all material respects its
agreements contained in the merger agreement; and
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<PAGE> 44
- the representations and warranties of each of the partnerships being true
and correct in all material respects at the closing date of the mergers
as if made at that time unless they relate to another specified time.
Conditions to the Obligations of the Partnerships. The obligations of the
partnerships to complete the mergers are further subject to the satisfaction of
the following conditions:
- each of Pioneer and Pioneer USA having performed in all material respects
its agreements contained in the merger agreement; and
- the representations and warranties of each of Pioneer and Pioneer USA
being true and correct in all material respects at the closing date of
the mergers as if made at that time unless they relate to another
specified time.
TERMINATION OF THE MERGERS AND THE MERGER AGREEMENT
The merger agreement may be terminated and the mergers abandoned, in whole
or in part, for any or all of the partnerships, at any time prior to the
effective time, whether before or after approval by the limited partners:
- by the mutual written consent of the parties;
- by any party, if:
-- any applicable law, rule or regulation makes consummation of the
mergers illegal or otherwise prohibited or any final and non-appealable
judgment, injunction, order or decree enjoining any party from
consummating the mergers is entered;
-- the requisite limited partner approval for a partnership is not
obtained by a vote at the special meetings or at any adjournment or
postponement thereof; or
-- any suit, action or proceeding is filed against Pioneer, Pioneer USA or
any officer, director or affiliate of Pioneer or Pioneer USA
challenging the legality or any aspect of the mergers or the
transactions related thereto;
- by Pioneer, if Pioneer USA or any partnership is in material breach of
the merger agreement;
- by Pioneer USA or any partnership with respect to that partnership's
merger, if Pioneer is in material breach of the merger agreement;
- by Pioneer USA, if Pioneer USA determines that termination of the merger
agreement is required for its board to comply with its fiduciary duties;
or
- by Pioneer, if there shall have occurred any event, circumstance,
condition, development or occurrence causing, resulting in or having, or
reasonably expected to cause, result in or have, a material adverse
effect (1) on any partnership's business, operations, properties, taken
as a whole, condition, financial or otherwise, results of operations,
assets, taken as a whole, liabilities or cash flows, or (2) on market
prices for oil and gas prevailing generally in the oil and gas industry
since the date of determination of the oil and gas commodity prices used
in the determination of the merger values.
If the merger agreement is validly terminated or the mergers are abandoned,
no party shall have any liabilities or obligations to the other parties except:
- if Pioneer terminates the merger agreement or abandons the mergers,
Pioneer will pay all estimated expenses and fees of the mergers of all of
the partnerships incurred before the termination of the merger agreement
or abandonment of the mergers; and
- a party will be liable if that party is in breach of the merger
agreement.
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<PAGE> 45
AMENDMENTS; WAIVERS
Any provision of the merger agreement may be amended prior to the effective
time if the amendment is in writing and signed by Pioneer and Pioneer USA;
provided, that after the approval of the merger proposals by the limited
partners, no amendment shall, without the further approval of the limited
partners:
- change the type or amount of, or the method of determining, the
consideration to be received in exchange for any partnership interests in
the partnerships; or
- materially and adversely affect the rights of the limited partners of the
partnership, other than a termination of the merger agreement or
abandonment of the mergers.
Prior to the effective time, the parties may:
- extend the time for the performance of any of the obligations of the
parties;
- waive any inaccuracies in the representations and warranties in the
merger agreement or in a document delivered pursuant to the merger
agreement; and
- waive compliance with any agreement or condition in the merger agreement.
Any such extension or waiver will be valid only if it is in writing and signed
by the party against whom the extension or waiver is to be effective.
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<PAGE> 46
THE SPECIAL MEETINGS
TIME AND PLACE; PURPOSE
The special meetings of the limited partners of the partnerships will be
held on , 1999, at 2:00 p.m., at the Wyndham Anatole Hotel,
Room, 2201 Stemmons Freeway, Dallas, Texas 75207. The purpose of the special
meetings, and any adjournment or postponement of the special meetings, is for
the limited partners of each partnership to consider and vote on the following
matters:
- A proposal to approve an Agreement and Plan of Merger dated as of
, 1999, among Pioneer, Pioneer USA and each of the
partnerships. Each partnership that approves this proposal will merge
with and into Pioneer USA, with Pioneer USA surviving the merger. Each
partnership interest of a participating partnership, other than Pioneer
USA's interests, will be converted into the right to receive an amount of
cash. The amount of cash to be paid for all partnership interests of a
participating partnership will be based on the participating
partnership's merger value. The merger value of a participating
partnership is equal to its reserve value and its net working capital, as
reduced by its pro rata share of the estimated expenses and fees of the
mergers of all of the partnerships, in each case as of September 30,
1999. We calculated the cash payment using information as of June 30,
1999 for purposes of illustration. We intend to change each reference to
"June 30, 1999" to be "September 30, 1999" and to revise June 30, 1999
numbers as of September 30, 1999 before mailing the definitive proxy
statement to the limited partners. The cash payment will be allocated
among the partners based on the liquidation provisions of each
partnership agreement. Pioneer USA will not receive any cash payment for
its partnership interests in the participating partnerships. However, as
a result of the mergers, Pioneer USA will acquire 100% of the properties
of the participating partnerships, including properties attributable to
its partnership interests in those partnerships.
- A proposal to amend the partnership agreement of each partnership to
permit the partnership's merger with Pioneer USA. If the amendment is not
approved, that partnership cannot merge into Pioneer USA even if the
partners of that partnership approve the merger agreement.
- A proposal to approve the opinion issued to Pioneer USA by on
behalf of the limited partners that neither the grant nor the exercise of
the right to approve the mergers by the limited partners will result in
the loss of any limited partner's limited liability or adversely affect
the tax status of the partnerships and to approve the selection of
as special legal counsel for the limited partners to render
such legal opinion.
- Other business that properly comes before the special meetings or any
adjournments or postponements of the special meetings. Pioneer USA is not
aware of any other business for the special meetings.
The Delaware Revised Uniform Limited Partnership Act and the Texas Revised
Limited Partnership Act require limited partner approval and adoption of the
merger agreement and the merger amendment. Generally, the partnership agreements
of the partnerships require that special legal counsel for the limited partners
render its legal opinion related to the limited partners' approval of the
mergers. See "The Mergers -- Legal Opinion for Limited Partners" on page 27 of
this document.
PIONEER USA'S BOARD OF DIRECTORS UNANIMOUSLY DETERMINED THAT THE MERGERS
ARE ADVISABLE, FAIR TO THE LIMITED PARTNERS OF EACH PARTNERSHIP, AND IN THE
LIMITED PARTNERS' BEST INTERESTS. THE BOARD RECOMMENDS THAT THE LIMITED PARTNERS
VOTE FOR THE MERGER PROPOSALS. ALTHOUGH PIONEER USA'S BOARD OF DIRECTORS HAS
ATTEMPTED TO FULFILL ITS FIDUCIARY DUTIES TO THE LIMITED PARTNERS, PIONEER USA'S
BOARD OF DIRECTORS HAD CONFLICTING INTERESTS IN EVALUATING THE MERGERS BECAUSE
EACH MEMBER OF ITS BOARD OF DIRECTORS IS ALSO AN OFFICER OF PIONEER.
One or more representatives of Ernst & Young LLP are expected to be present
at the special meetings to answer appropriate questions of limited partners and
to make a statement if so desired.
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<PAGE> 47
RECORD DATE; VOTING RIGHTS AND PROXIES
Only limited partners of record at the close of business on ,
1999 are entitled to notice of and to vote at the special meetings of the
partnerships in which they own partnership interests, or any adjournments or
postponements of such special meetings. Pioneer USA and its affiliates are
entitled to vote partnership interests they hold as limited partners in all of
the partnerships except:
Parker & Parsley 85-A, Ltd.
Parker & Parsley 85-B, Ltd.
Parker & Parsley 91-A, L.P.
Parker & Parsley 91-B, L.P.
Limited partners of record are entitled to vote at their partnership's
special meeting based on their percentage of partnership interests in that
partnership. Each limited partner will receive a proxy card for each partnership
in which that limited partner holds partnership interests. The proxy card will
indicate the amount of the cash payment offered with respect to such partnership
interests in each partnership. The amount of the cash payment offered as shown
on the proxy card will not be adjusted. The percentage of partnership interests
that a limited partner holds in a partnership is determined by comparing the
amount of the limited partner's initial investment, including any additional
assessments, in the partnership to the total investment of all partners,
including any additional assessments, in the partnership. The aggregate initial
investment, including any additional assessments, in each of the partnerships by
the limited partners is set forth in Table 1 of Appendix A.
A limited partner of record may grant a proxy to vote for or against, or
may abstain from voting on, the merger proposals applicable to each of the
partnerships in which he holds partnership interests. To be effective for
purposes of granting a proxy to vote on the merger proposals applicable to each
partnership, a proxy card must be properly completed, executed and delivered to
Pioneer USA before the special meetings. All partnership interests represented
by properly executed proxies will, unless these proxies have been previously
revoked, be voted in accordance with the instructions indicated in these
proxies. If no instructions are indicated, the partnership interests will be
voted for approval and adoption of the merger proposals. A properly executed
proxy card marked abstain is counted as present for purposes of determining the
presence or absence of a quorum at the special meetings, but will not be voted.
Accordingly, abstentions will have the same effect as a vote against the merger
proposals.
Unrevoked proxies granted in the proxy cards will be voted at the special
meetings or at any adjournment or postponement thereof, if received by Pioneer
USA before the special meetings. Proxies granted in the proxy cards will remain
valid until the completion of the special meetings. The partnership agreements
require that a meeting be held within 60 days of the date of mailing of the
notice of meeting. The partnership agreements do not specifically address, and
Pioneer USA has not sought any opinions of counsel as to, whether proxies may be
voted at a meeting originally scheduled to be held within 60 days of the sending
of the notice and adjourned or postponed to a date more than 60 days after the
date of notice. Pioneer USA will not accept a vote of the limited partners in
such circumstances unless it receives an opinion of counsel that such a vote
would be valid.
Votes cast by proxy or in person at the special meetings will be tabulated
by the inspector of election appointed for the meetings.
Pioneer USA does not know of any matters other than the approval of the
merger proposals that are to come before the special meetings. If any other
matter or matters are properly presented for action at the special meetings, the
persons named in the enclosed form of proxy and acting under the proxy will have
the discretion to vote on those matters in accordance with their best judgment.
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<PAGE> 48
You may revoke a proxy you have given at any time before that proxy is
voted at the special meetings by:
- giving written notice of revocation to Pioneer USA;
- signing and returning a later dated proxy; or
- voting in person at the special meetings.
Your notice of revocation will not be effective until Pioneer USA receives it at
or before the special meetings. Your presence at the special meetings will not
automatically revoke your proxy in a proxy card. Revocation during the special
meetings will not affect votes previously taken.
You may deliver your written notice of revocation in person or by mail,
telegraph, telex, or facsimile. Any written notice of revocation must specify
your name and limited partner number as shown on your proxy card and the name of
the partnership to which your revocation relates.
SOLICITATION OF PROXIES
We are soliciting your proxy pursuant to this document. The net working
capital component of the merger value of each partnership, including the 21
non-public limited partnerships and 13 privately-held employee partnerships
described in "Transactions Among The Partnerships, Pioneer, Pioneer USA and
Their Directors and Officers" on page 45 of this document, has been reduced by
the partnership's pro rata share, based on its reserve value, of all estimated
expenses and fees for the mergers of all of the partnerships, including the
expenses and fees described below.
Pioneer USA has retained to assist in the solicitation of proxies
from the limited partners of the partnerships. The total fees and expenses of
are estimated to aggregate $ . In addition to solicitation by
use of the mail, proxies may be solicited by , by other outside
contractors and by directors, officers and employees of Pioneer USA and Pioneer
in person or by telephone, telegram or other means of communication. The total
fees and expenses of any outside contractors which may be retained to solicit
proxies are estimated to aggregate $ . The directors, officers and
employees will not be additionally compensated, but may be reimbursed for
out-of-pocket expenses incurred in connection with the solicitation.
Arrangements may also be made with other brokerage firms, banks,
custodians, nominees and fiduciaries for the forwarding of proxy solicitation
materials to owners of limited partnership interests held of record by those
persons. The partnerships, including the 21 non-public limited partnerships and
13 privately-held employee partnerships described in "Transactions Among The
Partnerships, Pioneer, Pioneer USA and Their Directors and Officers" on page 45
of this document, will pay their pro rata share, based on their reserve values,
of those persons' reasonable expenses incurred in forwarding those materials.
Pioneer USA has also retained to act as information agent to
perform consulting, administration and clerical work with respect to the
mergers. Pioneer USA has agreed to indemnify against certain
liabilities, including liabilities under the federal securities laws.
will also be responsible for receipt and tabulation of the proxy cards. The fees
and expenses of for its services as information agent and tabulator
are included in the aggregate amount set forth above.
We intend to mail checks to the partners of record promptly after
completing the mergers. Certificates representing partnership interests will be
automatically cancelled, and you will not have to surrender your certificates to
receive the cash payment.
QUORUM
The presence in person or by properly executed proxy of a majority of
limited partnership interests entitled to vote in each partnership is necessary
to constitute a quorum at that partnership's special meeting.
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<PAGE> 49
If a quorum is not present at any special meeting, the limited partners
entitled to vote who are present or represented by proxy at that special meeting
may adjourn or postpone that special meeting without notice until a quorum is
present. If a quorum is present at the adjourned or postponed meeting, any
business may be transacted that may have been transacted at the special meeting
had a quorum originally been present. If the adjournment or postponement is for
more than 30 days or if after the adjournment or postponement a new record date
is fixed for the adjourned or postponed meeting, a notice of the adjourned or
postponed meeting shall be given to each limited partner of record entitled to
vote at the adjourned or postponed meeting. The persons named as proxies intend
to vote in favor of any motion to adjourn or postpone the special meetings if,
prior to the special meetings, they have not received sufficient proxies to
approve the mergers described in this document. This process will be repeated at
any adjourned or postponed meeting until sufficient proxies to vote in favor of
the mergers have been received or it appears that sufficient proxies will not be
received.
REQUIRED VOTE; BROKER NON-VOTES
Approval of the merger proposals requires the affirmative vote of the
limited partners holding a majority of limited partnership interests in that
partnership. Pioneer USA and its affiliates are entitled to vote their
partnership interests on the merger proposals for all of the partnerships except
as set forth above under "The Special Meetings -- Record Date; Voting Rights and
Proxies" on page 40.
Brokers, if any, who hold partnership interests in street name for
customers have the authority to vote on certain "routine" proposals when they
have not received instructions from beneficial owners. However, these brokers
are precluded from exercising their voting discretion with respect to the
approval and adoption of non-routine matters such as the merger proposals and,
thus, absent specific instructions from the beneficial owner of the partnership
interests, brokers are not empowered to vote the partnership interests with
respect to the merger proposals. These "broker non-votes" will have the effect
of a vote against the merger proposals.
PARTICIPATION BY ASSIGNEES
Pioneer USA has the discretionary authority granted to it under the
partnership agreements to withhold its consent to the substitution of any
assignees as partners. To facilitate the notification given to limited partners
about the mergers, Pioneer USA intends to exercise that authority and withhold
its consent to the substitution of any assignees as partners from September 8,
1999 until the closing date of the mergers, but in no event later than January
31, 2000.
SPECIAL REQUIREMENTS FOR CERTAIN LIMITED PARTNERS
Pioneer USA may require that any proxy card executed by an entity, such as
a trust, corporation, or partnership, be accompanied by evidence or an opinion
of counsel that such entity:
- has met all requirements of its governing instruments; and
- is authorized to execute and deliver the proxy card under the laws of the
jurisdiction under which the entity was organized.
Pioneer USA will require the named trustee and the beneficial owner of
trusts, including individual retirement accounts, to execute the proxy card. In
some cases, Pioneer USA may provide a limited partner with an envelope,
pre-addressed to his individual retirement account trustee, so that the limited
partner may forward his executed proxy card to the trustee for the trustee's
signature and subsequent delivery to Pioneer USA. Delivery of a proxy card to
the trustee, with or without the use of a pre-addressed envelope, and delivery
of a proxy card from the trustee to Pioneer USA are at the risk of the limited
partner.
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VALIDITY OF PROXY CARDS
A proxy card will not be valid unless it has been properly completed and
executed and timely delivered to Pioneer USA's information agent with all other
required documents. Pioneer USA will determine all questions as to the validity,
form, eligibility, time of receipt and acceptance of a proxy card and its
determination will be final and binding. Pioneer USA's interpretation of the
terms and conditions of the mergers, including the instructions for the proxy
card, will also be final and binding.
A proxy card will not be valid until any irregularities have been cured or
waived. If Pioneer USA does not waive the irregularities, it will return the
defective proxy card to the limited partner as soon as practicable. Pioneer USA
is under no duty to give notification of defects in a proxy card and will incur
no liability if it fails to give such notification.
Delivery of a proxy card is at the risk of the limited partner. A proxy
card will be effective for purposes of voting only when it is actually received
by Pioneer USA's information agent. To ensure receipt of the proxy card and all
other required documents, we suggest that limited partners use overnight courier
delivery or certified or registered mail, return receipt requested.
LOCAL LAWS
Proxy solicitations will not be made to, nor will proxy cards be accepted
from, limited partners in any jurisdiction in which the solicitations would not
be in compliance with federal and state securities or other laws.
INTERESTS OF PIONEER, PIONEER USA
AND THEIR DIRECTORS AND OFFICERS
A number of conflicts of interest are inherent in the relationships among
the partnerships, Pioneer USA, Pioneer and their respective directors and
officers.
CONFLICTING DUTIES OF PIONEER USA, INDIVIDUALLY AND AS GENERAL PARTNER
Pioneer USA, as general partner of the partnerships, has a duty to manage
the partnerships in the best interests of the limited partners. Pioneer USA also
has a duty to operate its business for the benefit of its sole stockholder,
Pioneer. Consequently, Pioneer USA's duties to the limited partners may conflict
with its duties to Pioneer.
The members of the board of directors of Pioneer USA have a duty to cause
Pioneer USA to manage the partnerships in the best interests of the limited
partners. All members of the board of directors of Pioneer USA are officers of
Pioneer and Pioneer USA. Thus, the members of the board of directors of Pioneer
USA have duties to operate Pioneer USA's business for the benefit of its sole
stockholder, Pioneer, and, as officers of Pioneer, to operate Pioneer's business
in its best interests. Consequently, the duties of the members of the board of
directors of Pioneer USA to the limited partners may conflict with the duties of
those members to Pioneer, Pioneer USA and their stockholders.
PIONEER USA'S EMPLOYEES PROVIDE SERVICES TO THE PARTNERSHIPS
The partnerships currently have no employees. Each partnership relies on
Pioneer USA's personnel. Pioneer USA provides all management functions on behalf
of the partnerships. Therefore, each partnership currently competes with Pioneer
USA for the time and resources of Pioneer USA's employees.
FINANCIAL INTERESTS OF OFFICERS AND DIRECTORS IN PIONEER
The officers and directors of Pioneer USA and Pioneer have equity interests
in Pioneer through stock ownership, stock options and other stock-based
compensation, but do not have financial or equity interests in the partnerships.
The boards of directors of Pioneer and Pioneer USA believe that any economic
benefit
43
<PAGE> 51
their directors may obtain from the mergers will be modest and will not result
in a material economic benefit to their directors individually.
FINANCIAL INTERESTS OF OFFICERS AND DIRECTORS IN PARTNERSHIPS
The officers and directors of Pioneer USA and Pioneer have no financial or
equity interests in the partnerships described in this document. See "Ownership
of Partnership Interests" on page 44.
Scott D. Sheffield, Chairman of the Board, President and Chief Executive
Officer of Pioneer and President of Pioneer USA, and Mark L. Withrow, Executive
Vice President, General Counsel and Secretary of each of Pioneer and Pioneer
USA, own partnership interests in some of the 13 privately-held employee
partnerships that Pioneer is offering to acquire at the same time it acquires
the partnerships described in this document.
INDIVIDUAL PARTNERSHIP'S PERSPECTIVE NOT CONSIDERED IN MERGERS
Pioneer USA serves as the managing or sole general partner for all of the
partnerships and did not view the mergers solely from the perspective of a
single partnership. Each partnership is governed by its own partnership
agreement, the terms of which may or may not be similar to the terms of the
partnership agreements of the other partnerships. Consequently, in determining
the terms and conditions of the mergers, Pioneer USA may have advocated
positions which would be in the best interest of one of the partnerships at the
expense of another. If each of the partnerships had separate general partners,
these general partners would have had totally independent perspectives, not
affected by a consideration of the interests of any of the other partnerships,
which may have led them to advocate positions during the structuring of the
mergers different than those taken by Pioneer USA.
THE PARTNERSHIPS PAY OPERATOR FEES TO PIONEER USA
Pioneer USA operates most of the partnerships' wells. Each partnership has
entered into one or more standard industry operating agreements with Pioneer
USA. Those operating agreements establish the base fee paid by the partnership
to Pioneer USA for its lease operating services. That base fee increases
annually based on a rate established by the Counsel of Petroleum Accountants
Society, or COPAS, for the oil and gas industry.
OWNERSHIP OF PARTNERSHIP INTERESTS
Pioneer does not directly own any partnership interests in the
partnerships. Pioneer beneficially owns all of Pioneer USA's partnership
interests in the partnerships. Table 6 of Appendix A to this document contains
the voting percentage as of August 1, 1999, of the outstanding partnership
interests for each partnership that are beneficially owned by Pioneer USA as a
limited partner. As of August 1, 1999, no person or entity known by Pioneer USA
beneficially owns more than 5% of the outstanding partnership interests in any
partnership, except in Parker & Parsley 82-I, Ltd. There, Pioneer USA
repurchased partnership interests equal to $1,188,500, representing a 10.07%
beneficial ownership of the partnership interests in that partnership. Pioneer
USA has sole investment and voting power with respect to partnership interests
it beneficially owns.
Except as set forth above, none of Pioneer, Pioneer USA, or, to the
knowledge of Pioneer USA, any of their directors or executive officers, or any
associate or subsidiary of Pioneer, Pioneer USA or any such director or officer:
- beneficially owns any partnership interests of the partnerships; or
- has effected any transactions in any partnership interests of the
partnerships during the past 60 days.
44
<PAGE> 52
As of the record date for the special meetings, Scott D. Sheffield,
Chairman of the Board, President and Chief Executive Officer of Pioneer and
President of Pioneer USA, owned, on average, approximately 6% of the outstanding
limited partnership interests in each of 11 of the 13 privately-held employee
partnerships that are being acquired by Pioneer at the same time as the
partnerships described in this document. As of the record date for the special
meetings, Mark L. Withrow, Executive Vice President, General Counsel and
Secretary of each of Pioneer and Pioneer USA, owned, on average, approximately
5% of the outstanding limited partnership interests in each of two of those 13
privately-held employee partnerships.
TRANSACTIONS AMONG THE PARTNERSHIPS, PIONEER, PIONEER USA
AND THEIR DIRECTORS AND OFFICERS
Except as described in this document, there have not been any contacts,
transactions or negotiations between Pioneer, Pioneer USA, any of their
respective subsidiaries, or, to the knowledge of Pioneer and Pioneer USA, any
director or executive officer of Pioneer or Pioneer USA, on the one hand, and
the partnerships or any of their general partners, including Pioneer USA,
directors, officers or affiliates, on the other hand, that are required to be
disclosed pursuant to the rules and regulations of the SEC. Except as described
in this document, none of Pioneer, Pioneer USA, or, to the knowledge of Pioneer
and Pioneer USA, any director or executive officer of Pioneer or Pioneer USA,
has any contract, arrangement, understanding or relationship with any person
with respect to any securities of the partnerships.
At the same time as this transaction, Pioneer is also offering to acquire
21 non-public limited partnerships and 13 privately-held employee limited
partnerships through mergers of those partnerships into Pioneer USA. Those
additional limited partnerships are drilling partnerships like the drilling
partnerships described in this document, but the additional limited partnerships
do not have reporting obligations under the Securities Exchange Act of 1934. The
limited partners of the 13 employee limited partnerships are current and former
affiliates of Pioneer and its predecessors. Pioneer USA is the managing or sole
general partner of those additional limited partnerships. The terms of the
mergers, including the method of establishing the merger values and cash payment
amounts for the limited partners in those partnerships, are the same as are set
forth for the reporting partnerships in this document.
If you approve the mergers, there are various ways that Pioneer USA may use
the properties. Pioneer USA may continue to operate the properties, it may sell
the properties to third parties, including a royalty trust, or it may spin-off
the properties to its stockholders. Although Pioneer USA plans to operate the
properties in the immediate future following completion of the mergers, it has
not decided how to use the properties in the long-term.
45
<PAGE> 53
MANAGEMENT
PIONEER
The following information sets forth the age, business experience during
the past five years, positions and offices with Pioneer, and periods of service
of each director and executive officer of Pioneer.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Scott D. Sheffield........................ 47 Chairman of the Board of Directors, President and
Chief Executive Officer
Timothy L. Dove........................... 42 Executive Vice President -- Business Development
Dennis E. Fagerstone...................... 50 Executive Vice President
M. Garrett Smith.......................... 38 Executive Vice President and Chief Financial
Officer
Mark L. Withrow........................... 52 Executive Vice President, General Counsel and
Secretary
James R. Baroffio......................... 67 Director
R. Hartwell Gardner....................... 65 Director
James L. Houghton......................... 68 Director
Jerry P. Jones............................ 68 Director
Richard E. Rainwater...................... 55 Director
Charles E. Ramsey, Jr. ................... 63 Director
Robert L. Stillwell....................... 62 Director
</TABLE>
Scott D. Sheffield. Mr. Sheffield, a graduate of the University of Texas
with a Bachelor of Science degree in Petroleum Engineering, has been the
Chairman of the Board of Directors of Pioneer since August 1999 and the
President and Chief Executive Officer of Pioneer since August 1997. He was the
President and a director of Parker & Parsley Petroleum Company since May 1990
and was the Chairman of the Board and Chief Executive Officer of Parker &
Parsley Petroleum Company since October 1990. Mr. Sheffield was the sole
director of Parker & Parsley Petroleum Company from May 1990 until October 1990.
Mr. Sheffield joined Parker & Parsley Development Company, or PPDC, a
predecessor of Parker & Parsley Petroleum Company, as a petroleum engineer in
1979. Mr. Sheffield served as Vice President -- Engineering of PPDC from
September 1981 until April 1985, when he was elected President and a director.
In March 1989, Mr. Sheffield was elected Chairman of the Board and Chief
Executive Officer of PPDC. Before joining PPDC's predecessor, Mr. Sheffield was
employed as a production and reservoir engineer for Amoco Production Company.
Timothy L. Dove. Mr. Dove, a graduate of Massachusetts Institute of
Technology with a Bachelor of Science degree in Mechanical Engineering and the
University of Chicago with an M.B.A., became Executive Vice
President -- Business Development of Pioneer in August 1997. Mr. Dove joined
Parker & Parsley Petroleum Company in May 1994 as Vice
President -- International and was promoted to Senior Vice President -- Business
Development in October 1996, in which position he served until August 1997.
Before joining Parker & Parsley Petroleum Company, Mr. Dove was employed with
Diamond Shamrock Corp., and its successor, Maxus Energy Corp., in various
capacities in international exploration and production, marketing, refining, and
planning and development.
Dennis E. Fagerstone. Mr. Fagerstone, a graduate of the Colorado School of
Mines with a B.S. in Petroleum Engineering, became an Executive Vice President
of Pioneer in August 1997. Mr. Fagerstone served as Executive Vice President and
Chief Operating Officer of MESA Inc. from March 1997 until August 1997. Mr.
Fagerstone served as Senior Vice President and Chief Operating Officer of MESA
Inc. from October 1996 to February 1997, and served as Vice
President -- Exploration and Production of MESA Inc. from May 1991 to October
1996. Mr. Fagerstone served as Vice President -- Operations of MESA Inc. from
June 1988 until 1991.
M. Garrett Smith. Mr. Smith, a graduate of the University of Texas with a
Bachelor of Science degree in Electrical Engineering and Southern Methodist
University with a M.B.A., became Executive Vice President and Chief Financial
Officer of Pioneer in December 1997. Prior to that, he was Senior Vice
46
<PAGE> 54
President -- Finance of Pioneer since August 1997. Mr. Smith served as Vice
President -- Corporate Acquisitions of MESA Inc. from January 1997 until August
1997. From October 1996 to December 1996, Mr. Smith served as Vice
President -- Finance of MESA Inc. and from 1994 to 1996, he served as Director
of Financial Planning of MESA Inc. Mr. Smith was employed by BTC Partners, Inc.,
a former financial advisor to MESA Inc., from 1989 to 1994.
Mark L. Withrow. Mr. Withrow, a graduate of Abilene Christian University
with a Bachelor of Science degree in Accounting and Texas Tech University with a
J.D. degree, has been the Executive Vice President, General Counsel and
Secretary of Pioneer since August 1997. He served as Vice President -- General
Counsel of Parker & Parsley Petroleum Company from February 1991 until January
1995, and served as Senior Vice President and General Counsel of Parker &
Parsley Petroleum Company from January 1995 until August 1997. He was Parker &
Parsley Petroleum Company's Secretary from August 1992 until August 1997. Mr.
Withrow joined PPDC in January 1991. Before joining PPDC, Mr. Withrow was the
managing partner of the law firm of Turpin, Smith, Dyer, Saxe & MacDonald,
Midland, Texas.
James R. Baroffio. Dr. Baroffio received a B.A. in Geology at the College
of Wooster, Ohio, an M.S. in Geology at Ohio State University, and a Ph.D. in
Geology at the University of Illinois. Before becoming a director of Pioneer in
December 1997, Dr. Baroffio enjoyed a long career with Standard Oil Company of
California, the predecessor of Chevron Corporation, eventually retiring as
President of Chevron Canada Resources in 1994. Dr. Baroffio was President-elect
of the Colorado Petroleum Association, a member of the Board of Directors of the
Rocky Mountain Oil & Gas Association, and Chairman of the U.S. National
Committee of the World Petroleum Congress. His community leadership positions
included membership on the Board of Directors of Glenbow Museum and the Nature
Conservancy of Canada, as well as serving as President of the Alberta Nature
Conservancy.
R. Hartwell Gardner. Mr. Gardner, a graduate of Colgate University with a
Bachelor of Arts degree in Economics and Harvard University with an M.B.A.,
became a director of Pioneer in August 1997. He served as a director of Parker &
Parsley Petroleum Company from November 1995 until August 1997. Until October
1995, Mr. Gardner was the Treasurer of Mobil Oil Corporation and Mobil
Corporation from 1974 and 1976, respectively. Mr. Gardner is a member of the
Financial Executives Institute of which he served as Chairman in 1986/1987 and
is a Director of Oil Investment Corporation Ltd. and Oil Casualty Investment
Corporation Ltd., Pembroke, Bermuda.
James L. Houghton. Mr. Houghton is a certified public accountant and a
graduate of Kansas University with a Bachelor of Science degree in Accounting,
as well as a Bachelor of Laws degree. Mr. Houghton has served as a director of
Pioneer since August 1997, and as a director of Parker & Parsley Petroleum
Company from October 1991 until August 1997. Until October 1, 1991, Mr. Houghton
was the lead oil and gas tax specialist for the accounting firm of Ernst & Young
LLP, was a member of Ernst & Young's National Energy Group, and had served as
its Southwest Regional Director of Tax. Mr. Houghton is a member of the American
Institute of Certified Public Accountants, a member of the Oklahoma Society of
Certified Public Accountants and a former Chairman of its Federal and Oklahoma
Taxation Committee and past President of the Oklahoma Institute of Taxation. He
has also served as a Director for the Independent Petroleum Association of
America and as a member of its Tax Committee.
Jerry P. Jones. Mr. Jones earned a Bachelor of Science degree from West
Texas State College in 1953 and a Bachelor of Law degree from the University of
Texas School of Law in 1959. Mr. Jones has served as a director of Pioneer since
August 1997, and as a director of Parker & Parsley Petroleum Company from May
1991 until August 1997. Mr. Jones has been an attorney with the law firm of
Thompson & Knight, P.C., Dallas, Texas, since September 1959 and was a
shareholder in that firm until January 1998, when he retired and became of
counsel to the firm. Mr. Jones specialized in civil litigation, especially in
the area of energy disputes.
Richard R. Rainwater. Mr. Rainwater, a graduate of the University of Texas
with a B.A. and the Stanford University Graduate School of Business with an
M.B.A., became a director of Pioneer in August 1997. He served as a director of
MESA Inc. from July 1996 until August 1997. Since 1986, Mr. Rainwater has been
an independent investor and the sole shareholder and Chairman of Rainwater,
47
<PAGE> 55
Inc. Mr. Rainwater founded Crescent Real Estate Equities, Inc. in 1994, and
since that time has served as its Chairman of the Board. He was the co-founder
of Mid Ocean Limited in 1991, the founder of Columbia Hospital Corporation,
predecessor to Columbia/HCA Healthcare Corporation, in 1987, and the founder of
ENSCO International, Inc. in 1986. From 1970 until 1986, Mr. Rainwater served as
the Chief Investment Advisor to the Bass Family of Texas.
Charles E. Ramsey, Jr. Mr. Ramsey is a graduate of the Colorado School of
Mines with a Petroleum Engineering degree and a graduate of the Smaller Company
Management program at the Harvard Graduate School of Business Administration.
Mr. Ramsey has served as a director of Pioneer since August 1997. Mr. Ramsey
served as a director of Parker & Parsley Petroleum Company from October 1991
until August 1997. Since October 1991, he has operated an independent management
and financial consulting firm. From June 1958 until June 1986, Mr. Ramsey held
various engineering and management positions in the oil and gas industry and,
for six years before October 1991, was a Senior Vice President in the Corporate
Finance Department of Dean Witter Reynolds Inc. in Dallas, Texas. His industry
experience includes 12 years of senior management experience in the positions of
President, Chief Executive Officer and Executive Officer and Executive Vice
President of May Petroleum Inc. Mr. Ramsey is also a former director of MBank
Dallas, the Dallas Petroleum Club and Lear Petroleum Corporation.
Robert L. Stillwell. Mr. Stillwell, a graduate of the University of Texas
with a B.B.A. and the University of Texas School of Law with a J.D., has served
as a director of Pioneer since August 1997. He served as a director of MESA Inc.
from January 1992 until August 1997, as a member of the Advisory Committee of
Mesa, L.P., a predecessor of MESA Inc., from December 1985 until December 1991,
and as a director of MESA Inc. in its original corporate form from 1968 until
January 1987. Mr. Stillwell has been a partner in the law firm of Baker & Botts,
L.L.P., for more than five years.
PIONEER USA
The following information sets forth the age, business experience during
the past five years, positions and offices with Pioneer USA, and periods of
service of each director and executive officer of Pioneer USA.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Scott D. Sheffield........................ 47 President
Timothy L. Dove........................... 42 Director and Executive Vice President-- Business
Development
Dennis E. Fagerstone...................... 50 Director and Executive Vice President
M. Garrett Smith.......................... 38 Director, Chief Financial Officer and Executive
Vice President
Mark L. Withrow........................... 52 Director, Executive Vice President, General Counsel
and Secretary
</TABLE>
Scott D. Sheffield has been the President of Pioneer USA since August 1997
and served as the Chairman of the Board of Directors of Pioneer USA from August
1997 until June 1999. He served as a Director of Pioneer USA's predecessor,
Parker & Parsley Petroleum USA, Inc., from January 1991 until August 1997. He
was an Executive Vice President of Parker & Parsley Petroleum USA, Inc. from
December 1995 until August 1997. He was the President of Parker & Parsley
Petroleum USA, Inc. from December 1993 until December 1995. Mr. Sheffield was
President and Chief Executive Officer of Parker & Parsley Petroleum USA, Inc.
from January 1991 until December 1993. Mr. Sheffield's other business experience
and biographical information are set forth above under "Management -- Pioneer."
Timothy L. Dove. Mr. Dove has been a Director of Pioneer USA since August
1997 and the Executive Vice President -- Business Development of Pioneer USA
since August 1997. He served as a Director of Parker & Parsley Petroleum USA,
Inc. from June 1997 until August 1997. He was a Senior Vice President of Parker
& Parsley Petroleum USA, Inc. from October 1996 until August 1997. He was a Vice
President of Parker & Parsley Petroleum USA, Inc. from December 1995 until
October 1996.
48
<PAGE> 56
Mr. Dove's other business experience and biographical information are set forth
above under "Management -- Pioneer."
Dennis E. Fagerstone. Mr. Fagerstone has been a Director of Pioneer USA
since August 1997 and an Executive Vice President of Pioneer USA since August
1997. Mr. Fagerstone's other business experience and biographical information
are set forth above under "Management -- Pioneer."
M. Garrett Smith. Mr. Smith has been a Director of Pioneer USA since August
1997 and the Chief Financial Officer and an Executive Vice President of Pioneer
USA since August 1997. Mr. Smith's other business experience and biographical
information are set forth above under "Management -- Pioneer."
Mark L. Withrow. Mr. Withrow has been a Director of Pioneer USA since
August 1997. He became an Executive Vice President, the General Counsel and the
Secretary of Pioneer USA in August 1997. He served as a Director of Parker &
Parsley Petroleum USA, Inc. from January 1996 until August 1997. He was a Senior
Vice President and the Secretary of Parker & Parsley Petroleum USA, Inc. from
January 1995 until August 1997. He was a Vice President and the Secretary of
Parker & Parsley Petroleum USA, Inc. from December 1993 until January 1995. He
was a Vice President of Parker & Parsley Petroleum USA, Inc. from January 1991
until December 1993. Mr. Withrow's other business experience and biographical
information are set forth above under "Management -- Pioneer."
49
<PAGE> 57
THE PARTNERSHIPS
GENERAL
Pioneer USA's predecessor, Parker & Parsley Petroleum Company or its
affiliates, sponsored the partnerships. As a result of the merger of Parker &
Parsley and MESA Inc. to form Pioneer on August 7, 1997, Pioneer USA became the
managing or sole general partner of the partnerships.
Appendix A to this document sets forth information about each partnership,
including proved reserves, oil and gas production, average sales prices and
production costs, productive wells and developed acreage, and historical cash
distributions. In addition, the supplemental information for each partnership
constitutes an integral part of this document. You should read Appendix A and
the supplemental information carefully in their entirety.
THE DRILLING PARTNERSHIPS
The drilling partnerships consist of the following 22 publicly-held limited
partnerships that were formed from 1982 through 1991:
<TABLE>
<CAPTION>
NAME STATE OF FORMATION
- ---- ------------------
<S> <C>
Parker & Parsley 82-I, Ltd. Texas
Parker & Parsley 82-II, Ltd. Texas
Parker & Parsley 83-A, Ltd. Texas
Parker & Parsley 83-B, Ltd. Texas
Parker & Parsley 84-A, Ltd. Texas
Parker & Parsley 85-A, Ltd. Texas
Parker & Parsley 85-B, Ltd. Texas
Parker & Parsley 86-A, Ltd. Texas
Parker & Parsley 86-B, Ltd. Texas
Parker & Parsley 86-C, Ltd. Texas
Parker & Parsley 87-A, Ltd. Texas
Parker & Parsley 87-B, Ltd. Texas
Parker & Parsley 88-A, L.P. Delaware
Parker & Parsley 88-B LP Delaware
Parker & Parsley 89-A, L.P. Delaware
Parker & Parsley 90-A, L.P. Delaware
Parker & Parsley 90-B Conv., L.P. Delaware
Parker & Parsley 90-B, L.P. Delaware
Parker & Parsley 90-C, Conv., L.P. Delaware
Parker & Parsley 90-C, L.P. Delaware
Parker & Parsley 91-A, L.P. Delaware
Parker & Parsley 91-B, L.P. Delaware
</TABLE>
The drilling partnerships were formed to establish long-lived oil and gas
reserves primarily by drilling low risk development wells in the Spraberry field
of the Permian Basin of West Texas. The oil and gas properties of the drilling
partnerships consist primarily of leasehold interests in producing properties
located in Texas. The partners of a drilling partnership received a tax benefit
from drilling activities in the partnership's first year. Subsequently, the
drilling partnerships have regularly distributed their net cash flow. As of the
date of this document, all of the drilling partnerships have expended all of
their initial capital contributions.
For a discussion of certain transactions between the drilling partnerships
and Pioneer USA, see the notes to the financial statements of each drilling
partnership included in the supplemental information.
50
<PAGE> 58
THE INCOME PARTNERSHIPS
The income partnerships consist of the following three publicly-held
limited partnerships that were formed in 1987 and 1988:
<TABLE>
<CAPTION>
NAME STATE OF FORMATION
- ---- ------------------
<S> <C>
Parker & Parsley Producing Properties 87-A, Ltd. Texas
Parker & Parsley Producing Properties 87-B, Ltd. Texas
Parker & Parsley Producing Properties 88-A, L.P. Delaware
</TABLE>
The primary objective of the income partnerships was to acquire long-lived,
producing oil and gas properties in the Permian Basin of West Texas. The income
partnerships had a secondary objective of enhancing acquired oil and gas
reserves and production through initial development drilling and exploitation
activities. Subsequently, the income partnerships have regularly distributed
their net cash flow. As of the date of this document, all of the income
partnerships have expended all of their initial capital contributions.
For a discussion of certain transactions between the income partnerships
and Pioneer USA, see the notes to the financial statements of each income
partnership included in the supplemental information.
LEGAL MATTERS
The limited partners' special legal counsel, , Dallas,
Texas, will deliver the legal opinion referred to in "The Mergers -- Legal
Opinion for Limited Partners" on page 27 of this document. That special counsel
may rely as to matters of law of jurisdictions other than the United States and
the State of Texas on the opinion of counsel in such other jurisdictions.
INDEPENDENT AUDITORS AND INDEPENDENT PETROLEUM CONSULTANTS
Ernst & Young LLP, independent certified public accountants, have audited
the partnerships' financial statements for the year ended December 31, 1998
included in the supplements to this document. A representative of Ernst & Young
LLP will be at the special meetings to answer appropriate questions from limited
partners and will have an opportunity to make a statement if so desired.
KPMG LLP, independent certified public accountants, have audited the
partnerships' financial statements for the years ended December 31, 1997 and
1996 included in the supplements to this document. Pioneer has agreed to
indemnify KPMG LLP against certain liabilities to which KPMG LLP may become
subject because KPMG LLP's reports on the partnerships' financial statements are
included in the supplements to this document.
At a meeting held on December 5, 1997, Pioneer USA's board of directors
approved the engagement of Ernst & Young LLP as the partnerships' independent
auditors for 1998 to replace KPMG LLP, who were dismissed as auditors of the
partnerships after completing the audits of the partnerships for 1997. The audit
committee of Pioneer USA's board of directors approved the change in auditors on
December 5, 1997.
The reports of KPMG LLP on the partnerships' financial statements for 1997
and 1996 did not contain an adverse opinion or a disclaimer of opinion and were
not qualified or modified as to uncertainty, audit scope, or accounting
principles.
In connection with the audits of the partnerships' financial statements for
1997 and 1996, there were no disagreements with KPMG LLP on any matters of
accounting principles or practices, financial statement disclosure, or auditing
scope and procedures which, if not resolved to the satisfaction of KPMG LLP,
would have caused KPMG LLP to make reference to the matter in their report.
51
<PAGE> 59
The summary reserve report for the partnerships set forth as Appendix B to
this document was prepared by Williamson Petroleum Consultants, Inc., an
independent petroleum consultant. The proved reserves and estimated future net
revenues attributable to the partnership interests in the partnerships has been
included in this document in reliance on that firm's authority as experts on the
matters contained in that reserve report.
WHERE YOU CAN FIND MORE INFORMATION
Each of the partnerships is subject to the informational and reporting
requirements of the Securities Exchange Act of 1934. Each of the partnerships
files annual, quarterly and special reports and other information with the SEC.
Those SEC filings are available to the public over the Internet at the SEC's web
site at http://www.sec.gov. You may also read and copy any document the
partnerships file with the SEC at its public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms.
Included in your partnership's information supplement are the following
documents:
1. the partnership's Quarterly Report on Form 10-Q for the six months
ended June 30, 1999; and
2. the partnership's Annual Report on Form 10-K for the year ended
December 31, 1998.
The information supplement constitutes an integral part of this document
for each partnership. Please carefully read all of the supplements for the
partnerships in which you are a limited partner.
You should rely only on the information provided in this document or any
supplement. We have not authorized anyone else to provide you with different
information. We are only offering to purchase partnership interests in states
where the offer is permitted. You should not assume that the information in this
document or any supplement is accurate as of any date other than the date on the
front of those documents.
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<PAGE> 60
COMMONLY USED OIL AND GAS TERMS
The definitions set forth below shall apply to the indicated terms as used
in this document. All volumes of natural gas referred to herein are stated at
the legal pressure base of the state or area where the reserves exist and at 60
degrees Fahrenheit and in most instances are rounded to the nearest major
multiple.
"Bbl" means a standard barrel of 42 U.S. gallons and represents the basic
unit for measuring the production of crude oil, natural gas liquids and
condensate.
"Bcf" means one billion cubic feet under prescribed conditions of pressure
and temperature and represents the basic unit for measuring the production of
natural gas.
"BOE" means a barrel-of-oil-equivalent and is a customary convention used
in the United States to express oil and gas volumes on a comparable basis. It is
determined on the basis of the estimated relative energy content of natural gas
to oil, being approximately six Mcf of natural gas per Bbl of oil.
"Mbbl" means one thousand Bbls.
"MBOE" means one thousand BOEs.
"Mcf" means one thousand cubic feet under prescribed conditions of pressure
and temperature and represents the basic unit for measuring the production of
natural gas.
"MMBbl" means one million Bbls.
"MMcf" means one million cubic feet under prescribed conditions of pressure
and temperature and represents the basic unit for measuring the production of
natural gas.
"NGLs" means natural gas liquids.
"proved reserves" means those estimated quantities of crude oil and natural
gas that geological and engineering data demonstrate with reasonable certainty
to be recoverable in future years from known oil and gas reservoirs under
existing economic and operating conditions. Proved reserves are limited to those
quantities of oil and gas that can be expected to be recoverable commercially at
current prices and costs, under existing regulatory practices and with existing
conventional equipment and operating methods.
53
<PAGE> 61
APPENDIX A
GENERAL INFORMATION RELATING TO THE PARTNERSHIPS
<TABLE>
<S> <C>
Table 1 Jurisdiction of Organization, Initial Investment by Limited
Partners and Number of Limited Partners
Table 2 Aggregate Merger Value
Table 3 Merger Value Attributable to Partnership Interests of
Limited Partners
Table 4 Ownership Percentage and Merger Value Attributable to
Nonmanaging General Partners Other Than Pioneer USA
Table 5 Ownership Percentage and Merger Value Attributable to
Pioneer USA Held in Its Capacities as General Partner,
Nonmanaging General Partner and Limited Partner
Table 6 Voting Percentage in Partnerships Beneficially Owned by
Pioneer USA in Its Capacity as a Limited Partner
Table 7 Historical Partnership Distributions
Table 8 Annual Repurchase Prices and Aggregate Annual Repurchase
Payments
Table 9 Participation in Costs and Revenues of the Partnerships
Table 10 Average Oil, Natural Gas Liquids and Gas Sales Prices and
Production Costs
Table 11 Proved Reserves Attributable to Pioneer USA, Other
Nonmanaging General Partners and Limited Partners
Table 12 Oil, Natural Gas Liquids and Gas Production
Table 13 Productive Wells and Developed Acreage
Table 14 Recent Trades of Partnership Interests
</TABLE>
A-1
<PAGE> 62
TABLE 1
JURISDICTION OF ORGANIZATION, INITIAL INVESTMENT BY LIMITED PARTNERS AND
NUMBER OF LIMITED PARTNERS
AS OF AUGUST 1, 1999
<TABLE>
<CAPTION>
INITIAL
INVESTMENT
JURISDICTION BY LIMITED NUMBER OF
OF PARTNERS LIMITED
ORGANIZATION (IN THOUSANDS) PARTNERS
------------ -------------- ---------
<S> <C> <C> <C>
Parker & Parsley 82-I, Ltd............................... Texas $11,805(a) 619
Parker & Parsley 82-II, Ltd.............................. Texas 12,252 787
Parker & Parsley 83-A, Ltd............................... Texas 19,505 1,315
Parker & Parsley 83-B, Ltd............................... Texas 23,370 1,438
Parker & Parsley 84-A, Ltd............................... Texas 19,435 1,299
Parker & Parsley 85-A, Ltd............................... Texas 9,613 835
Parker & Parsley 85-B, Ltd............................... Texas 7,988 731
Parker & Parsley 86-A, Ltd............................... Texas 10,131 977
Parker & Parsley 86-B, Ltd............................... Texas 17,208 1,441
Parker & Parsley 86-C, Ltd............................... Texas 19,317 1,387
Parker & Parsley 87-A, Ltd............................... Texas 28,811 2,179
Parker & Parsley Producing Properties 87-A, Ltd.......... Texas 12,213 1,126
Parker & Parsley 87-B, Ltd............................... Texas 20,089 1,520
Parker & Parsley Producing Properties 87-B, Ltd.......... Texas 6,096 563
Parker & Parsley 88-A, L.P............................... Delaware 12,935 993
Parker & Parsley Producing Properties 88-A, L.P.......... Delaware 5,611 523
Parker & Parsley 88-B, L.P............................... Delaware 8,954 698
Parker & Parsley 89-A, L.P............................... Delaware 8,317 615
Parker & Parsley 90-A, L.P............................... Delaware 6,811 531
Parker & Parsley 90-B Conv., L.P......................... Delaware 11,897 673
Parker & Parsley 90-B, L.P............................... Delaware 32,264 2,258
Parker & Parsley 90-C Conv., L.P......................... Delaware 7,531 515
Parker & Parsley 90-C, L.P............................... Delaware 12,107 903
Parker & Parsley 91-A, L.P............................... Delaware 11,620 727
Parker & Parsley 91-B, L.P............................... Delaware 11,249 682
------
Total.......................................... 25,335
======
</TABLE>
- ---------------
(a) Includes approximately $2,022,500 of assessment capital.
A-2
<PAGE> 63
TABLE 2
AGGREGATE MERGER VALUE
AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
OTHER
NONMANAGING
GENERAL LIMITED
PIONEER USA(a) PARTNERS(b) PARTNERS(c) TOTAL
-------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Parker & Parsley 82-I, Ltd.................... $160,707 $ 5,579 $ 370,968 $ 537,254
Parker & Parsley 82-II, Ltd................... 233,515 7,240 677,990 918,745
Parker & Parsley 83-A, Ltd.................... 444,921 17,701 1,314,512 1,777,134
Parker & Parsley 83-B, Ltd.................... 744,776 29,018 2,170,824 2,944,618
Parker & Parsley 84-A, Ltd.................... 637,901 28,200 1,965,607 2,631,708
Parker & Parsley 85-A, Ltd.................... 20,949 0 695,068 716,017
Parker & Parsley 85-B, Ltd.................... 14,351 0 820,575 834,926
Parker & Parsley 86-A, Ltd.................... 11,133 0 818,452 829,585
Parker & Parsley 86-B, Ltd.................... 39,117 0 2,213,631 2,252,748
Parker & Parsley 86-C, Ltd.................... 24,353 0 1,838,218 1,862,571
Parker & Parsley 87-A, Ltd.................... 53,960 0 3,315,712 3,369,672
Parker & Parsley Producing Properties 87-A,
Ltd......................................... 23,968 0 1,753,345 1,777,313
Parker & Parsley 87-B, Ltd.................... 32,586 0 2,634,521 2,667,107
Parker & Parsley Producing Properties 87-B,
Ltd......................................... 33,115 0 1,252,499 1,285,614
Parker & Parsley 88-A, L.P.................... 51,739 0 2,174,467 2,226,206
Parker & Parsley Producing Properties 88-A,
L.P......................................... 32,164 0 1,873,767 1,905,931
Parker & Parsley 88-B, L.P.................... 28,688 0 1,378,077 1,406,765
Parker & Parsley 89-A, L.P.................... 33,362 0 1,449,492 1,482,854
Parker & Parsley 90-A, L.P.................... 34,154 0 1,054,698 1,088,852
Parker & Parsley 90-B Conv., L.P.............. 31,749 0 1,874,279 1,906,028
Parker & Parsley 90-B, L.P.................... 64,924 0 5,109,583 5,174,507
Parker & Parsley 90-C Conv., L.P.............. 13,545 0 957,896 971,441
Parker & Parsley 90-C, L.P.................... 18,948 0 1,533,135 1,552,083
Parker & Parsley 91-A, L.P.................... 32,032 0 2,283,469 2,315,501
Parker & Parsley 91-B, L.P.................... 26,234 0 2,384,931 2,411,165
</TABLE>
- ---------------
(a) Represents Pioneer USA's partnership interests in the partnerships as: (1)
the sole or managing general partner of the partnerships; (2) a limited
partner of the partnerships; and (3) the sole general partner of the
nonmanaging general partners. Pioneer USA will not receive any cash payment
for its partnership interests in the participating partnerships. However,
as a result of the mergers, Pioneer USA will acquire 100% of the properties
of the participating partnerships including properties attributable to its
partnership interests in those partnerships.
(b) Represents four unaffiliated individuals' partnership interests as limited
partners of the nonmanaging general partners.
(c) Represents the partnership interests of unaffiliated limited partners of
the partnerships. Excludes Pioneer USA's partnership interests as a limited
partner of the partnerships.
A-3
<PAGE> 64
TABLE 3
MERGER VALUE ATTRIBUTABLE TO PARTNERSHIP INTERESTS
OF LIMITED PARTNERS
PER $1,000 INVESTMENT
AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
LIMITED PARTNERS
PER $1,000 INVESTMENT
-----------------------------------------------------
RESERVE WORKING CAPITAL ESTIMATED MERGER
VALUE VALUE EXPENSES & FEES VALUE
------- --------------- --------------- -------
<S> <C> <C> <C> <C>
Parker & Parsley 82-I, Ltd.................. $ 31.29 $ 6.04 $ (2.34) $ 34.99
Parker & Parsley 82-II, Ltd................. 53.08 8.31 (3.98) 57.41
Parker & Parsley 83-A, Ltd.................. 64.39 9.99 (4.83) 69.55
Parker & Parsley 83-B, Ltd.................. 88.73 14.34 (6.65) 96.42
Parker & Parsley 84-A, Ltd.................. 97.53 12.92 (7.31) 103.14
Parker & Parsley 85-A, Ltd.................. 67.59 11.21 (5.07) 73.73
Parker & Parsley 85-B, Ltd.................. 100.16 10.82 (7.51) 103.47
Parker & Parsley 86-A, Ltd.................. 74.11 12.51 (5.55) 81.07
Parker & Parsley 86-B, Ltd.................. 122.39 16.39 (9.17) 129.61
Parker & Parsley 86-C, Ltd.................. 89.93 12.26 (6.74) 95.45
Parker & Parsley 87-A, Ltd.................. 107.31 16.52 (8.04) 115.79
Parker & Parsley Producing Properties 87-A,
Ltd....................................... 128.29 25.40 (9.61) 144.08
Parker & Parsley 87-B, Ltd.................. 122.26 18.34 (9.16) 131.44
Parker & Parsley Producing Properties 87-B,
Ltd....................................... 201.81 22.15 (15.12) 208.84
Parker & Parsley 88-A, L.P.................. 161.84 20.67 (12.13) 170.38
Parker & Parsley Producing Properties 88-A,
L.P....................................... 299.91 58.85 (22.48) 336.28
Parker & Parsley 88-B, L.P.................. 142.76 23.48 (10.70) 155.54
Parker & Parsley 89-A, L.P.................. 164.80 24.06 (12.35) 176.51
Parker & Parsley 90-A, L.P.................. 146.20 23.02 (10.96) 158.26
Parker & Parsley 90-B Conv., L.P............ 154.61 15.59 (11.59) 158.61
Parker & Parsley 90-B, L.P.................. 154.63 15.74 (11.59) 158.78
Parker & Parsley 90-C Conv., L.P............ 121.40 15.40 (9.10) 127.70
Parker & Parsley 90-C, L.P.................. 121.33 14.68 (9.09) 126.92
Parker & Parsley 91-A, L.P.................. 186.06 25.16 (13.94) 197.28
Parker & Parsley 91-B, L.P.................. 201.06 26.21 (15.07) 212.20
</TABLE>
A-4
<PAGE> 65
TABLE 4
OWNERSHIP PERCENTAGE AND MERGER VALUE ATTRIBUTABLE TO
NONMANAGING GENERAL PARTNERS OTHER THAN PIONEER USA
AS OF AUGUST 1, 1999
<TABLE>
<CAPTION>
OTHER NONMANAGING GENERAL OTHER NONMANAGING
PARTNERS(a) GENERAL PARTNERS' MERGER
-------------------------------- VALUE AS A PERCENTAGE OF
OWNERSHIP AGGREGATE MERGER AGGREGATE MERGER VALUE
PERCENTAGE(b) VALUE(c) FOR THE PARTNERSHIP(d)
------------- ---------------- ------------------------
<S> <C> <C> <C>
Parker & Parsley 82-I, Ltd.................. 1.13% $ 5,579 1.04%
Parker & Parsley 82-II, Ltd................. 0.84% 7,240 0.79%
Parker & Parsley 83-A, Ltd.................. 1.05% 17,701 1.00%
Parker & Parsley 83-B, Ltd.................. 1.05% 29,018 0.99%
Parker & Parsley 84-A, Ltd.................. 1.13% 28,200 1.07%
</TABLE>
- ---------------
(a) Represents four unaffiliated individuals' partnership interests as limited
partners of the nonmanaging general partners. Excludes Pioneer USA's
partnership interests as general partner of the nonmanaging general
partners.
(b) Percentage owned is based upon ownership within the partnership as set
forth in the revenue sharing provisions of the partnership agreement for
that partnership.
(c) See "Method of Determining Merger Values and Amount of Cash Offered."
(d) Represents the dollar amount in the other nonmanaging general partners'
aggregate merger value column divided by the aggregate merger value for the
partnership as set forth in Table 2.
A-5
<PAGE> 66
TABLE 5
OWNERSHIP PERCENTAGE AND MERGER VALUE
ATTRIBUTABLE TO PIONEER USA HELD IN ITS CAPACITIES AS
GENERAL PARTNER, NONMANAGING GENERAL PARTNER AND LIMITED PARTNER
AS OF AUGUST 1, 1999
<TABLE>
<CAPTION>
PIONEER USA'S
PIONEER USA(a) MERGER VALUE AS A
--------------------------------- PERCENTAGE OF
OWNERSHIP AGGREGATE MERGER AGGREGATE MERGER VALUE
PERCENTAGE(b) VALUE(c) FOR THE PARTNERSHIP(d)
-------------- ---------------- ----------------------
<S> <C> <C> <C>
Parker & Parsley 82-I, Ltd. .................. 31.51% 160,707 29.91%
Parker & Parsley 82-II, Ltd. ................. 26.86% 233,515 25.42%
Parker & Parsley 83-A, Ltd. .................. 26.28% 444,921 25.04%
Parker & Parsley 83-B, Ltd. .................. 26.70% 744,776 25.29%
Parker & Parsley 84-A, Ltd. .................. 25.34% 637,901 24.24%
Parker & Parsley 85-A, Ltd. .................. 2.93% 20,949 2.93%
Parker & Parsley 85-B, Ltd. .................. 1.72% 14,351 1.72%
Parker & Parsley 86-A, Ltd. .................. 1.34% 11,133 1.34%
Parker & Parsley 86-B, Ltd. .................. 1.74% 39,117 1.74%
Parker & Parsley 86-C, Ltd. .................. 1.31% 24,353 1.31%
Parker & Parsley 87-A, Ltd. .................. 1.60% 53,960 1.60%
Parker & Parsley Producing Properties 87-A,
Ltd. ....................................... 1.35% 23,968 1.35%
Parker & Parsley 87-B, Ltd. .................. 1.22% 32,586 1.22%
Parker & Parsley Producing Properties 87-B,
Ltd. ....................................... 2.59% 33,115 2.58%
Parker & Parsley 88-A, L.P. .................. 2.32% 51,739 2.32%
Parker & Parsley Producing Properties 88-A,
L.P. ....................................... 1.69% 32,164 1.69%
Parker & Parsley 88-B, L.P. .................. 2.04% 28,688 2.04%
Parker & Parsley 89-A, L.P. .................. 2.25% 33,362 2.25%
Parker & Parsley 90-A, L.P. .................. 3.14% 34,154 3.14%
Parker & Parsley 90-B Conv., L.P. ............ 1.67% 31,749 1.67%
Parker & Parsley 90-B, L.P. .................. 1.25% 64,924 1.25%
Parker & Parsley 90-C Conv., L.P. ............ 1.39% 13,545 1.39%
Parker & Parsley 90-C, L.P. .................. 1.22% 18,948 1.22%
Parker & Parsley 91-A, L.P. .................. 1.38% 32,032 1.38%
Parker & Parsley 91-B, L.P. .................. 1.09% 26,234 1.09%
</TABLE>
- ---------------
(a) Represents Pioneer USA's partnership interests in the partnerships as: (1)
the sole or managing general partner of the partnerships; (2) a limited
partner of the partnerships; and (3) the sole general partner of the
nonmanaging general partners. Pioneer USA will not receive any cash payment
for its partnership interests in the participating partnerships. However,
as a result of the mergers, Pioneer USA will acquire 100% of the properties
of the participating partnerships including properties attributable to its
partnership interests in those partnerships.
(b) Percentage owned is based upon ownership within the partnership as set
forth in the revenue sharing provisions of the partnership agreement for
that partnership.
(c) See "Method of Determining Merger Values and Amount of Cash Offered."
(d) Represents the dollar amount in Pioneer USA's aggregate merger value column
divided by the aggregate merger value for the partnership as set forth in
Table 2.
A-6
<PAGE> 67
TABLE 6
VOTING PERCENTAGE IN PARTNERSHIPS BENEFICIALLY OWNED BY PIONEER USA
IN ITS CAPACITY AS A LIMITED PARTNER
AS OF AUGUST 1, 1999
<TABLE>
<CAPTION>
PIONEER USA(a)
--------------
VOTING
PERCENTAGE(b)
--------------
<S> <C>
Parker & Parsley 82-I, Ltd.................................. 10.17%
Parker & Parsley 82-II, Ltd................................. 3.61%
Parker & Parsley 83-A, Ltd.................................. 3.11%
Parker & Parsley 83-B, Ltd.................................. 3.67%
Parker & Parsley 84-A, Ltd.................................. 1.95%
Parker & Parsley 85-A, Ltd.(c).............................. 0.00%
Parker & Parsley 85-B, Ltd.(c).............................. 0.00%
Parker & Parsley 86-A, Ltd.................................. 0.35%
Parker & Parsley 86-B, Ltd.................................. 0.74%
Parker & Parsley 86-C, Ltd.................................. 0.31%
Parker & Parsley 87-A, Ltd.................................. 0.61%
Parker & Parsley Producing Properties 87-A, Ltd............. 0.35%
Parker & Parsley 87-B, Ltd.................................. 0.22%
Parker & Parsley Producing Properties 87-B, Ltd............. 1.61%
Parker & Parsley 88-A, L.P.................................. 1.34%
Parker & Parsley Producing Properties 88-A, L.P............. 0.70%
Parker & Parsley 88-B, L.P.................................. 1.05%
Parker & Parsley 89-A, L.P.................................. 1.26%
Parker & Parsley 90-A, L.P.................................. 2.16%
Parker & Parsley 90-B Conv., L.P............................ 0.67%
Parker & Parsley 90-B, L.P.................................. 0.26%
Parker & Parsley 90-C Conv., L.P............................ 0.40%
Parker & Parsley 90-C, L.P.................................. 0.22%
Parker & Parsley 91-A, L.P.(c).............................. 0.00%
Parker & Parsley 91-B, L.P.(c).............................. 0.00%
</TABLE>
- ---------------
(a) Represents Pioneer USA's partnership interests in the partnerships as a
limited partner of the partnerships. Pioneer USA will not receive any cash
payment for its partnership interests in the participating partnerships.
However, as a result of the mergers, Pioneer USA will acquire 100% of the
properties of the participating partnerships including properties
attributable to its partnership interests in those partnerships.
(b) Represents percentage of limited partners' vote that Pioneer USA is
entitled to vote. The voting percentage is calculated by multiplying (1)
Pioneer USA's ownership percentage of partnership interests held as a
limited partner, by (2) the percentage of partnership interests held by all
limited partners in the partnership. For example, if the limited partners
of a partnership represent 99% of the partnership and Pioneer USA owns 5%
of the partnership interests as a limited partner in that partnership,
Pioneer USA's voting percentage is 4.95%.
(c) Pioneer USA is not entitled to vote partnership interests it holds as
limited partner in this partnership.
A-7
<PAGE> 68
TABLE 7
HISTORICAL PARTNERSHIP DISTRIBUTIONS
FROM INCEPTION THROUGH JUNE 30, 1999
<TABLE>
<CAPTION>
QUARTERLY DISTRIBUTIONS
TO LIMITED PARTNERS
PER $1,000 INVESTMENT(A)
----------------------------------------------------------------
INCEPTION QUARTER QUARTER QUARTER QUARTER QUARTER
TO ENDED ENDED ENDED ENDED ENDED
12/31/96 3/31/97 6/30/97 9/30/97 12/31/97 3/31/98
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Parker & Parsley 82-I, Ltd...... $ 919.02 $ 6.86 $ 4.82 $ 4.02 $ 3.90 $ 4.07
Parker & Parsley 82-II, Ltd..... 1,054.40 8.00 5.80 4.50 3.20 4.70
Parker & Parsley 83-A, Ltd...... 1,219.31 8.20 6.00 5.00 5.30 5.38
Parker & Parsley 83-B, Ltd...... 1,414.61 10.37 9.00 6.92 6.20 5.60
Parker & Parsley 84-A, Ltd...... 1,339.50 10.20 8.00 7.52 6.60 5.86
Parker & Parsley 85-A, Ltd...... 643.86 8.70 6.20 4.76 5.60 5.29
Parker & Parsley 85-B, Ltd...... 825.31 11.50 8.10 7.60 6.52 9.80
Parker & Parsley 86-A, Ltd...... 1,243.06 11.68 6.42 4.84 4.51 5.78
Parker & Parsley 86-B, Ltd...... 1,404.21 16.82 11.50 9.79 8.66 8.44
Parker & Parsley 86-C, Ltd...... 1,348.77 13.02 9.77 7.03 8.02 8.08
Parker & Parsley 87-A, Ltd...... 1,166.65 15.55 10.17 8.79 8.01 8.86
Parker & Parsley Producing
Properties 87-A, Ltd.......... 822.73 19.50 11.80 8.31 8.68 8.05
Parker & Parsley 87-B, Ltd...... 1,097.20 11.61 8.79 8.30 7.12 7.80
Parker & Parsley Producing
Properties 87-B, Ltd.......... 844.83 25.00 20.50 16.18 16.72 15.51
Parker & Parsley 88-A, L.P...... 913.02 14.69 13.92 10.50 11.58 12.25
Parker & Parsley Producing
Properties 88-A, L.P.......... 924.68 29.50 31.00 20.50 20.03 17.98
Parker & Parsley 88-B, L.P...... 891.68 16.71 13.82 10.56 9.58 7.77
Parker & Parsley 89-A, L.P...... 820.02 19.80 13.40 14.00 15.39 13.94
Parker & Parsley 90-A, L.P...... 703.38 20.41 12.40 9.18 11.07 12.93
Parker & Parsley 90-B Conv.,
L.P........................... 524.41 19.32 14.45 9.38 9.23 9.93
Parker & Parsley 90-B, L.P...... 524.49 19.32 14.45 9.38 9.23 9.93
Parker & Parsley 90-C Conv.,
L.P........................... 472.68 15.85 12.04 10.27 9.37 7.68
Parker & Parsley 90-C, L.P...... 472.69 15.85 12.04 10.27 9.37 7.68
Parker & Parsley 91-A, L.P...... 551.59 23.55 20.62 15.58 15.36 14.69
Parker & Parsley 91-B, L.P...... 414.89 25.80 19.58 16.00 13.94 14.94
<CAPTION>
QUARTERLY DISTRIBUTIONS
TO LIMITED PARTNERS
PER $1,000 INVESTMENT(A)
----------------------------------------------------------------
QUARTER QUARTER QUARTER QUARTER QUARTER INCEPTION
ENDED ENDED ENDED ENDED ENDED TO
6/30/98 9/30/98 12/31/98 3/31/99 6/30/99 6/30/99
-------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Parker & Parsley 82-I, Ltd...... $ 1.40 $ 0.97 $1.67 $0.62 $0.53 $ 947.88
Parker & Parsley 82-II, Ltd..... 1.90 15.24 1.50 0.83 0.00 1,100.07
Parker & Parsley 83-A, Ltd...... 1.10 13.00 1.25 0.00 0.00 1,264.54
Parker & Parsley 83-B, Ltd...... 1.50 2.05 2.35 0.96 1.79 1,461.35
Parker & Parsley 84-A, Ltd...... 2.74 2.19 2.02 0.80 2.78 1,388.21
Parker & Parsley 85-A, Ltd...... 2.21 0.95 1.16 0.83 1.49 681.05
Parker & Parsley 85-B, Ltd...... 5.11 1.59 0.79 0.00 3.17 879.49
Parker & Parsley 86-A, Ltd...... 1.14 1.02 1.48 0.79 2.23 1,282.95
Parker & Parsley 86-B, Ltd...... 3.82 3.28 3.17 1.53 5.01 1,476.23
Parker & Parsley 86-C, Ltd...... 3.46 2.10 1.56 0.82 2.38 1,405.01
Parker & Parsley 87-A, Ltd...... 4.18 3.00 3.49 1.83 2.20 1,232.73
Parker & Parsley Producing
Properties 87-A, Ltd.......... 2.35 4.94 3.29 1.49 0.89 892.03
Parker & Parsley 87-B, Ltd...... 4.64 4.56 4.23 1.85 2.29 1,158.39
Parker & Parsley Producing
Properties 87-B, Ltd.......... 9.00 4.01 4.29 3.97 1.02 961.03
Parker & Parsley 88-A, L.P...... 6.14 4.79 4.72 3.16 3.06 997.83
Parker & Parsley Producing
Properties 88-A, L.P.......... 15.46 9.09 7.45 6.51 4.02 1,086.22
Parker & Parsley 88-B, L.P...... 6.31 5.76 4.18 3.44 2.88 972.69
Parker & Parsley 89-A, L.P...... 6.62 4.44 3.58 2.66 2.77 916.62
Parker & Parsley 90-A, L.P...... 6.05 5.14 4.33 3.18 1.68 789.75
Parker & Parsley 90-B Conv.,
L.P........................... 4.75 4.31 4.67 2.10 1.80 604.35
Parker & Parsley 90-B, L.P...... 4.75 4.31 4.67 2.10 1.80 604.43
Parker & Parsley 90-C Conv.,
L.P........................... 3.59 2.40 3.63 0.95 0.00 538.46
Parker & Parsley 90-C, L.P...... 3.59 2.40 3.63 0.95 0.00 538.47
Parker & Parsley 91-A, L.P...... 10.82 6.14 5.12 3.99 6.33 673.79
Parker & Parsley 91-B, L.P...... 9.84 6.86 5.13 3.95 7.05 537.98
</TABLE>
- ---------------
(a) Past cash distributions to limited partners are not necessarily indicative
of future cash distributions, and limited partners should not assume that
any nonparticipating partnerships will continue to make cash distributions
at levels similar to those shown. See "The Mergers -- Distribution of Cash
Payments."
A-8
<PAGE> 69
TABLE 8
ANNUAL REPURCHASE PRICES AND AGGREGATE ANNUAL REPURCHASE PAYMENTS
<TABLE>
<CAPTION>
1999 1998 1997
----------------------- ----------------------- -----------------------
REPURCHASE AGGREGATE REPURCHASE AGGREGATE REPURCHASE AGGREGATE
PRICE ANNUAL PRICE ANNUAL PRICE ANNUAL
PER $1,000 REPURCHASE PER $1,000 REPURCHASE PER $1,000 REPURCHASE
INVESTMENT PAYMENTS INVESTMENT PAYMENTS INVESTMENT PAYMENTS
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Parker & Parsley 82-I,
Ltd....................... $ 7.52 $ 94 $ 56.12 $ 1,403 $106.62 $ 9,862
Parker & Parsley 82-II,
Ltd....................... 26.17 131 78.17 1,173 136.36 5,727
Parker & Parsley 83-A,
Ltd....................... 27.05 541 90.09 2,703 210.59 13,057
Parker & Parsley 83-B,
Ltd....................... 43.46 0 114.88 9,707 237.60 24,948
Parker & Parsley 84-A,
Ltd....................... 45.72 1,143 114.02 1,140 221.66 16,403
Parker & Parsley 90-A,
L.P....................... (a) (a) (a) (a) 340.73 0
Parker & Parsley 90-B,
L.P....................... (a) (a) (a) (a) 341.42 0
Parker & Parsley 90-C,
L.P....................... (a) (a) (a) (a) 341.13 0
Parker & Parsley 91-A,
L.P....................... (b) (b) 238.87 1,194 389.39 0
Parker & Parsley 91-B,
L.P....................... (b) (b) 208.39 0 446.45 0
------ ------- -------
$1,909 $17,320 $69,997
====== ======= =======
</TABLE>
- ---------------
(a) Repurchase rights expired in 1997.
(b) Repurchase rights expired in 1998.
A-9
<PAGE> 70
TABLE 9
PARTICIPATION IN COSTS AND REVENUES
OF THE PARTNERSHIPS
<TABLE>
<CAPTION>
CAPITAL COSTS REVENUES AND EXPENSES
-------------------------------------- --------------------------------------
NONMANAGING NONMANAGING
GENERAL GENERAL LIMITED GENERAL GENERAL LIMITED
PARTNER(a) PARTNERS(a) PARTNERS(a) PARTNER(a) PARTNERS(a) PARTNERS(a)
---------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Parker & Parsley 82-I, Ltd............ 8% 2% 90% 20% 5% 75%
Parker & Parsley 82-II, Ltd........... 8% 2% 90% 20% 5% 75%
Parker & Parsley 83-A, Ltd.(b)........ 8% 2% 90% 20% 5% 75%
Parker & Parsley 83-B, Ltd.(b)........ 8% 2% 90% 20% 5% 75%
Parker & Parsley 84-A, Ltd.(b)........ 8% 2% 90% 20% 5% 75%
Parker & Parsley 85-A, Ltd............ 1% -- 99% 1% -- 99%
Parker & Parsley 85-B, Ltd............ 1% -- 99% 1% -- 99%
Parker & Parsley 86-A, Ltd............ 1% -- 99% 1% -- 99%
Parker & Parsley 86-B, Ltd............ 1% -- 99% 1% -- 99%
Parker & Parsley 86-C, Ltd............ 1% -- 99% 1% -- 99%
Parker & Parsley 87-A, Ltd............ 1% -- 99% 1% -- 99%
Parker & Parsley Producing Properties
87-A, Ltd........................... 1% -- 99% 1% -- 99%
Parker & Parsley 87-B, Ltd............ 1% -- 99% 1% -- 99%
Parker & Parsley Producing Properties
87-B, Ltd........................... 1% -- 99% 1% -- 99%
Parker & Parsley 88-A, L.P............ 1% -- 99% 1% -- 99%
Parker & Parsley Producing Properties
88-A, L.P........................... 1% -- 99% 1% -- 99%
Parker & Parsley 88-B, L.P............ 1% -- 99% 1% -- 99%
Parker & Parsley 89-A, L.P............ 1% -- 99% 1% -- 99%
Parker & Parsley 90-A, L.P............ 1% -- 99% 1% -- 99%
Parker & Parsley 90-B Conv., L.P...... 1% -- 99% 1% -- 99%
Parker & Parsley 90-B, L.P............ 1% -- 99% 1% -- 99%
Parker & Parsley 90-C Conv., L.P...... 1% -- 99% 1% -- 99%
Parker & Parsley 90-C, L.P............ 1% -- 99% 1% -- 99%
Parker & Parsley 91-A, L.P............ 1% -- 99% 1% -- 99%
Parker & Parsley 91-B, L.P............ 1% -- 99% 1% -- 99%
</TABLE>
- ---------------
(a) These percentages represent the sharing ownerships as set forth in the
prospectus for each partnership. Includes Pioneer USA's partnership
interests in the partnerships as: (1) the sole or managing general partner
of the partnerships; (2) a limited partner of the partnerships; and (3) the
sole general partner of the nonmanaging general partners. Pioneer USA will
not receive any cash payment for its partnership interests in the
participating partnerships.
(b) Incremental direct costs 100% to limited partners.
A-10
<PAGE> 71
TABLE 10
AVERAGE OIL, NATURAL GAS LIQUIDS AND GAS SALES PRICES AND PRODUCTION COSTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
AND THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
AVERAGE SALES PRICE
--------------------------------------------------------------------
OIL (PER BBL) NGL (PER BBL)
--------------------------------- --------------------------------
FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR
MONTHS ENDED MONTHS ENDED
ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31,
--------------- --------------- --------------- --------------
1999 1998 1998 1997 1999 1998 1998 1997
------ ------ ------ ------ ------ ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Parker & Parsley 82-I, Ltd........ $12.91 $14.20 $13.32 $19.68 $6.99 $8.43 $7.20 $12.34
Parker & Parsley 82-II, Ltd....... 13.16 13.87 13.14 19.51 7.36 7.79 6.93 11.02
Parker & Parsley 83-A, Ltd........ 12.91 14.31 13.34 19.45 7.21 7.13 6.49 10.56
Parker & Parsley 83-B, Ltd........ 13.33 14.25 13.30 19.53 7.94 7.46 6.79 10.74
Parker & Parsley 84-A, Ltd........ 13.44 14.22 13.30 19.31 7.07 6.55 6.08 9.23
Parker & Parsley 85-A, Ltd........ 13.15 14.17 13.27 19.48 7.34 7.30 6.51 11.01
Parker & Parsley 85-B, Ltd........ 13.86 14.20 13.30 19.56 7.09 7.57 6.95 11.13
Parker & Parsley 86-A, Ltd........ 13.30 14.26 13.32 19.46 7.35 7.06 6.53 10.23
Parker & Parsley 86-B, Ltd........ 13.27 14.01 13.08 19.38 6.87 7.68 6.80 10.88
Parker & Parsley 86-C, Ltd........ 13.24 14.17 13.26 19.43 6.93 7.05 6.46 10.22
Parker & Parsley 87-A, Ltd........ 13.20 14.18 13.22 19.41 7.26 7.33 6.76 10.75
Parker & Parsley Producing
Properties 87-A, Ltd............ 13.18 14.01 13.04 19.10 5.61 6.00 5.46 8.66
Parker & Parsley 87-B, Ltd........ 13.01 14.09 13.17 19.32 7.29 7.46 6.82 10.48
Parker & Parsley Producing
Properties 87-B, Ltd............ 13.27 13.98 13.05 19.12 7.72 6.83 6.58 10.65
Parker & Parsley 88-A, L.P........ 13.00 14.65 13.59 19.36 6.86 7.39 6.57 10.51
Parker & Parsley Producing
Properties 88-A, L.P............ 12.93 14.08 13.14 19.28 6.84 6.70 6.31 10.05
Parker & Parsley 88-B, L.P........ 13.15 14.32 13.24 19.33 7.55 7.77 6.91 10.81
Parker & Parsley 89-A, L.P........ 13.23 14.26 13.23 19.48 6.75 7.96 6.95 11.08
Parker & Parsley 90-A, L.P........ 13.27 14.16 13.20 19.41 7.10 7.92 7.02 11.16
Parker & Parsley 90-B Conv.,
L.P............................. 13.22 13.99 13.12 19.45 6.81 7.27 6.60 10.38
Parker & Parsley 90-B, L.P........ 13.22 13.98 13.12 19.45 6.81 7.27 6.60 10.38
Parker & Parsley 90-C Conv.,
L.P............................. 13.12 14.14 13.24 19.48 6.63 7.51 6.80 10.58
Parker & Parsley 90-C, L.P........ 13.12 14.13 13.24 19.48 6.63 7.51 6.80 10.58
Parker & Parsley 91-A, L.P........ 13.55 13.90 13.15 19.55 6.98 7.20 6.44 10.04
Parker & Parsley 91-B, L.P........ 13.79 14.26 13.33 19.77 7.60 7.32 6.79 10.54
<CAPTION>
AVERAGE PRODUCTION
AVERAGE SALES PRICE COSTS (LIFTING)
------------------------------- ------------------------------
GAS (PER MCF) COST PER EQUIVALENT BBL (a)
------------------------------- ------------------------------
FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR
MONTHS ENDED MONTHS ENDED
ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31,
--------------- ------------- -------------- -------------
1999 1998 1998 1997 1999 1998 1998 1997
------ ------ ----- ----- ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Parker & Parsley 82-I, Ltd........ $1.66 $1.74 $1.82 $2.46 $8.83 $10.47 $9.88 $9.78
Parker & Parsley 82-II, Ltd....... 1.56 1.68 1.64 2.41 8.34 7.57 7.88 9.35
Parker & Parsley 83-A, Ltd........ 1.52 1.62 1.60 2.32 8.78 9.00 8.76 10.21
Parker & Parsley 83-B, Ltd........ 1.45 1.58 1.54 2.39 7.18 9.12 8.27 8.93
Parker & Parsley 84-A, Ltd........ 1.32 1.33 1.33 2.02 7.05 8.05 7.66 8.21
Parker & Parsley 85-A, Ltd........ 1.52 1.62 1.56 2.37 6.84 8.67 8.70 9.40
Parker & Parsley 85-B, Ltd........ 1.49 1.62 1.58 2.39 7.74 7.72 8.48 7.87
Parker & Parsley 86-A, Ltd........ 1.40 1.48 1.46 2.18 7.09 11.26 9.36 10.86
Parker & Parsley 86-B, Ltd........ 1.50 1.62 1.58 2.39 7.70 7.93 7.64 7.77
Parker & Parsley 86-C, Ltd........ 1.40 1.52 1.49 2.27 8.05 7.83 7.67 8.35
Parker & Parsley 87-A, Ltd........ 1.46 1.57 1.54 2.41 7.08 8.60 7.78 7.64
Parker & Parsley Producing
Properties 87-A, Ltd............ 1.13 1.25 1.23 1.90 8.45 9.81 9.26 11.90
Parker & Parsley 87-B, Ltd........ 1.42 1.51 1.49 2.31 6.96 7.10 6.65 7.54
Parker & Parsley Producing
Properties 87-B, Ltd............ 1.39 1.46 1.46 2.56 7.81 8.43 7.84 8.08
Parker & Parsley 88-A, L.P........ 1.47 1.59 1.56 2.28 6.09 7.30 7.06 7.26
Parker & Parsley Producing
Properties 88-A, L.P............ 1.29 1.45 1.41 2.33 6.44 5.90 5.87 7.66
Parker & Parsley 88-B, L.P........ 1.49 1.59 1.56 2.27 6.75 7.94 7.51 8.50
Parker & Parsley 89-A, L.P........ 1.53 1.74 1.74 2.22 7.57 6.75 6.92 7.88
Parker & Parsley 90-A, L.P........ 1.54 1.67 1.64 2.38 7.24 7.23 6.93 8.00
Parker & Parsley 90-B Conv.,
L.P............................. 1.41 1.51 1.50 2.24 7.21 7.75 7.31 8.11
Parker & Parsley 90-B, L.P........ 1.41 1.51 1.50 2.24 7.21 7.75 7.31 8.11
Parker & Parsley 90-C Conv.,
L.P............................. 1.48 1.56 1.55 2.38 8.63 9.02 8.22 8.75
Parker & Parsley 90-C, L.P........ 1.48 1.56 1.55 2.38 8.64 9.02 8.22 8.75
Parker & Parsley 91-A, L.P........ 1.47 1.63 1.56 2.25 6.15 5.96 6.04 6.83
Parker & Parsley 91-B, L.P........ 1.38 1.51 1.47 2.39 5.83 6.05 5.96 7.27
</TABLE>
- ---------------
(a) Gas production is converted to oil equivalents at the rate of six mcf per
barrel, representing the relative energy content of natural gas and oil.
A-11
<PAGE> 72
TABLE 11
PROVED RESERVES ATTRIBUTABLE TO PIONEER USA,
OTHER NONMANAGING GENERAL PARTNERS AND LIMITED PARTNERS
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
TOTAL PROVED RESERVES
---------------------------------------------------------------------------------------------------
OTHER NONMANAGING
PIONEER USA (a) GENERAL PARTNERS (b) LIMITED PARTNERS (c) TOTAL (d)
---------------------- ---------------------- ----------------------- -----------------------
OIL & OIL & OIL & OIL &
NGL (BBLS) GAS (MCF) NGL (BBLS) GAS (MCF) NGL (BBLS) GAS (MCF) NGL (BBLS) GAS (MCF)
---------- --------- ---------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Parker & Parsley 82-I,
Ltd....................... 20,970 30,236 182 263 43,672 62,968 64,824 93,467
Parker & Parsley 82-II,
Ltd....................... 50,882 84,130 390 646 133,790 221,212 185,062 305,988
Parker & Parsley 83-A,
Ltd....................... 90,980 150,508 882 1,459 244,211 403,998 336,073 555,965
Parker & Parsley 83-B,
Ltd....................... 171,294 304,066 1,636 2,904 450,233 799,215 623,163 1,106,185
Parker & Parsley 84-A,
Ltd....................... 147,587 278,700 1,585 2,994 414,538 782,805 563,710 1,064,499
Parker & Parsley 85-A,
Ltd....................... 3,980 7,179 -- -- 132,040 238,182 136,020 245,361
Parker & Parsley 85-B,
Ltd....................... 2,897 5,345 -- -- 165,634 305,645 168,531 310,990
Parker & Parsley 86-A,
Ltd....................... 2,156 3,635 -- -- 158,463 267,227 160,619 270,862
Parker & Parsley 86-B,
Ltd....................... 8,127 11,871 -- -- 459,926 671,784 468,053 683,655
Parker & Parsley 86-C,
Ltd....................... 4,876 9,719 -- -- 368,059 733,572 372,935 743,291
Parker & Parsley 87-A,
Ltd....................... 10,601 18,792 -- -- 651,405 1,154,734 662,006 1,173,526
Parker & Parsley Producing
Properties 87-A, Ltd...... 4,755 7,480 -- -- 347,826 547,153 352,581 554,633
Parker & Parsley 87-B,
Ltd....................... 6,771 10,996 -- -- 547,437 889,011 554,208 900,007
Parker & Parsley Producing
Properties 87-B, Ltd...... 7,341 13,323 -- -- 275,914 500,752 283,255 514,075
Parker & Parsley 88-A,
L.P....................... 10,962 19,783 -- -- 460,713 831,455 471,675 851,238
Parker & Parsley Producing
Properties 88-A, L.P...... 7,153 12,478 -- -- 416,576 726,686 423,729 739,164
Parker & Parsley 88-B,
L.P....................... 5,505 7,677 -- -- 264,435 368,793 269,940 376,470
Parker & Parsley 89-A,
L.P....................... 6,165 13,057 -- -- 267,858 567,281 274,023 580,338
Parker & Parsley 90-A,
L.P....................... 7,019 12,366 -- -- 216,742 381,866 223,761 394,232
Parker & Parsley 90-B Conv.,
L.P....................... 6,828 10,001 -- -- 403,103 590,414 409,931 600,415
Parker & Parsley 90-B,
L.P....................... 13,950 20,433 -- -- 1,097,904 1,608,072 1,111,854 1,628,505
Parker & Parsley 90-C Conv.,
L.P....................... 2,612 3,138 -- -- 184,678 221,897 187,290 225,035
Parker & Parsley 90-C,
L.P....................... 3,674 4,414 -- -- 297,246 357,152 300,920 361,566
Parker & Parsley 91-A,
L.P....................... 6,995 10,049 -- -- 498,615 716,334 505,610 726,383
Parker & Parsley 91-B,
L.P....................... 5,581 6,608 -- -- 507,398 600,699 512,979 607,307
------- --------- ----- --------- --------- ---------- --------- ----------
Total (d)........... 609,661 1,055,984 4,675 8,266 9,008,416 14,548,907 9,622,752 15,613,157
======= ========= ===== ========= ========= ========== ========= ==========
</TABLE>
- ---------------
(a) Represents Pioneer USA's partnership interests in the partnerships as: (1)
the sole or managing general partner of the partnerships; (2) a limited
partner of the partnerships; and (3) the sole general partner of the
nonmanaging general partners. Pioneer USA will not receive any cash payment
for its partnership interests in the participating partnerships. However,
as a result of the mergers, Pioneer USA will acquire 100% of the properties
of the participating partnerships including properties attributable to its
partnership interests in those partnerships.
(b) Represents four unaffiliated individuals' partnership interests as limited
partners of the nonmanaging general partners. Excludes Pioneer USA's
partnership interests as general partner of the nonmanaging general
partners.
(c) Represents the partnership interests of unaffiliated limited partners of
the partnerships. Excludes Pioneer USA's partnership interests as a limited
partner of the partnerships.
(d) Corresponds to amounts in the reserve report prepared by Williamson
Petroleum Consultants, Inc. as of December 31, 1998.
A-12
<PAGE> 73
TABLE 12
OIL, NATURAL GAS LIQUIDS AND GAS PRODUCTION(a)
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
AND THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
OIL AND NGL (BBLS) GAS (MCF)
------------------------------------------- ---------------------
FOR THE SIX MONTHS FOR THE YEAR ENDED FOR THE SIX MONTHS
ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30,
------------------- --------------------- ---------------------
1999 1998 1998 1997 1999 1998
-------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Parker & Parsley 82-I, Ltd. ............ 12,889 12,741 25,898 23,644 24,947 23,991
Parker & Parsley 82-II, Ltd. ........... 13,094 14,757 27,854 25,018 20,236 22,148
Parker & Parsley 83-A, Ltd. ............ 33,388 34,273 67,612 59,554 52,185 48,253
Parker & Parsley 83-B, Ltd. ............ 44,885 46,072 93,695 79,735 79,292 71,913
Parker & Parsley 84-A, Ltd. ............ 43,450 43,971 88,702 72,806 80,888 67,759
Parker & Parsley 85-A, Ltd. ............ 15,104 13,416 27,808 22,871 26,371 20,967
Parker & Parsley 85-B, Ltd. ............ 10,325 12,676 24,803 21,993 16,651 21,106
Parker & Parsley 86-A, Ltd. ............ 17,457 15,289 31,472 25,717 33,171 23,870
Parker & Parsley 86-B, Ltd. ............ 31,134 34,692 70,399 57,410 42,002 49,055
Parker & Parsley 86-C, Ltd. ............ 33,431 37,981 74,674 61,043 56,238 65,777
Parker & Parsley 87-A, Ltd. ............ 49,279 54,280 107,375 90,576 90,088 90,366
Parker & Parsley Producing Properties
87-A, Ltd. ........................... 27,928 31,859 64,367 59,718 25,190 29,158
Parker & Parsley 87-B, Ltd. ............ 34,931 35,922 73,036 59,291 51,130 51,388
Parker & Parsley Producing Properties
87-B, Ltd. ........................... 17,948 20,793 40,796 35,312 24,988 23,042
Parker & Parsley 88-A, L.P. ............ 29,252 29,693 57,635 48,269 45,216 46,285
Parker & Parsley Producing Properties
88-A, L.P. ........................... 15,213 17,817 34,491 31,920 22,550 25,765
Parker & Parsley 88-B, L.P. ............ 20,317 21,813 43,365 35,648 27,934 26,363
Parker & Parsley 89-A, L.P. ............ 20,251 20,853 41,931 36,061 26,888 35,642
Parker & Parsley 90-A, L.P. ............ 14,779 16,519 32,915 26,735 21,392 24,197
Parker & Parsley 90-B Conv., L.P. ...... 26,777 29,263 58,543 49,199 36,322 36,722
Parker & Parsley 90-B, L.P. ............ 72,613 79,388 158,775 133,407 98,512 99,596
Parker & Parsley 90-C Conv., L.P. ...... 15,634 16,311 33,187 29,478 13,600 14,569
Parker & Parsley 90-C, L.P. ............ 25,133 26,228 53,358 47,389 21,869 23,433
Parker & Parsley 91-A, L.P. ............ 31,609 36,023 70,623 60,858 49,899 56,185
Parker & Parsley 91-B, L.P. ............ 31,853 33,469 66,527 57,021 35,912 34,026
------- ------- --------- --------- --------- ---------
Total........................... 688,674 736,099 1,469,841 1,250,673 1,023,471 1,031,576
======= ======= ========= ========= ========= =========
<CAPTION>
GAS (MCF) TOTAL (BOE)
--------------------- -------------------------------------------
FOR THE YEAR ENDED FOR THE SIX MONTHS FOR THE YEAR ENDED
DECEMBER 31, ENDED JUNE 30, DECEMBER 31,
--------------------- ------------------- ---------------------
1998 1997 1999 1998 1998 1997
--------- --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Parker & Parsley 82-I, Ltd. ............ 48,971 66,728 17,047 16,740 34,060 34,765
Parker & Parsley 82-II, Ltd. ........... 41,862 57,516 16,467 18,448 34,831 34,604
Parker & Parsley 83-A, Ltd. ............ 95,156 141,525 42,086 42,315 83,471 83,142
Parker & Parsley 83-B, Ltd. ............ 147,495 201,100 58,100 58,058 118,278 113,252
Parker & Parsley 84-A, Ltd. ............ 145,870 199,235 56,931 55,264 113,014 106,012
Parker & Parsley 85-A, Ltd. ............ 43,021 57,213 19,499 16,911 34,978 32,407
Parker & Parsley 85-B, Ltd. ............ 41,501 60,076 13,100 16,194 31,720 32,006
Parker & Parsley 86-A, Ltd. ............ 49,805 68,518 22,986 19,267 39,773 37,137
Parker & Parsley 86-B, Ltd. ............ 97,715 141,058 38,134 42,868 86,685 80,920
Parker & Parsley 86-C, Ltd. ............ 129,149 184,965 42,804 48,944 96,199 91,871
Parker & Parsley 87-A, Ltd. ............ 179,494 257,587 64,294 69,341 137,291 133,507
Parker & Parsley Producing Properties
87-A, Ltd. ........................... 56,240 88,478 32,126 36,719 73,740 74,464
Parker & Parsley 87-B, Ltd. ............ 104,072 154,120 43,453 44,487 90,381 84,978
Parker & Parsley Producing Properties
87-B, Ltd. ........................... 50,220 90,629 22,113 24,633 49,166 50,417
Parker & Parsley 88-A, L.P. ............ 86,501 134,311 36,788 37,407 72,052 70,654
Parker & Parsley Producing Properties
88-A, L.P. ........................... 51,099 80,212 18,971 22,111 43,008 45,289
Parker & Parsley 88-B, L.P. ............ 52,254 70,802 24,973 26,207 52,074 47,448
Parker & Parsley 89-A, L.P. ............ 62,751 92,294 24,732 26,793 52,390 51,443
Parker & Parsley 90-A, L.P. ............ 47,086 68,973 18,344 20,552 40,763 38,231
Parker & Parsley 90-B Conv., L.P. ...... 73,460 100,068 32,831 35,383 70,786 65,877
Parker & Parsley 90-B, L.P. ............ 199,215 271,374 89,032 95,987 191,978 178,636
Parker & Parsley 90-C Conv., L.P. ...... 30,348 50,304 17,901 18,739 38,245 37,862
Parker & Parsley 90-C, L.P. ............ 48,787 80,867 28,778 30,134 61,489 60,867
Parker & Parsley 91-A, L.P. ............ 108,617 135,829 39,926 45,387 88,726 83,496
Parker & Parsley 91-B, L.P. ............ 68,244 90,255 37,838 39,140 77,901 72,064
--------- --------- ------- ------- --------- ---------
Total........................... 2,058,933 2,944,037 859,254 908,029 1,812,999 1,741,349
========= ========= ======= ======= ========= =========
</TABLE>
- ---------------
(a) Prior to October 1997, the partnerships accounted for processed natural gas
production as wellhead production on a wet gas basis. In October 1997, the
partnerships began accounting for processed natural gas production as two
components: natural gas liquids and dry residue gas. Consequently, separate
product volumes for NGLs and gas will not be comparable for 1998 and 1997.
A-13
<PAGE> 74
TABLE 13
PRODUCTIVE WELLS AND DEVELOPED ACREAGE
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRODUCTIVE OIL AND
GAS WELLS DEVELOPED ACRES
------------------- -------------------
GROSS (A) NET (B) GROSS (A) NET (B)
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Parker & Parsley 82-I, Ltd.............................. 17 16.19 1,702 1,557
Parker & Parsley 82-II, Ltd............................. 16 15.38 1,882 1,489
Parker & Parsley 83-A, Ltd.............................. 42 36.59 5,154 3,602
Parker & Parsley 83-B, Ltd.............................. 42 41.26 5,227 4,190
Parker & Parsley 84-A, Ltd.............................. 38 37.55 4,929 4,019
Parker & Parsley 85-A, Ltd.............................. 21 17.05 2,083 1,315
Parker & Parsley 85-B, Ltd.............................. 17 13.05 2,536 1,215
Parker & Parsley 86-A, Ltd.............................. 26 21.86 1,689 1,108
Parker & Parsley 86-B, Ltd.............................. 44 36.52 2,709 1,694
Parker & Parsley 86-C, Ltd.............................. 53 44.36 4,432 2,786
Parker & Parsley 87-A, Ltd.............................. 78 55.01 6,498 4,926
Parker & Parsley Producing Properties 87-A, Ltd......... 90 43.55 10,576 3,615
Parker & Parsley 87-B, Ltd.............................. 49 33.94 4,465 3,251
Parker & Parsley Producing Properties 87-B, Ltd......... 33 1.55 4,302 1,609
Parker & Parsley 88-A, L.P.............................. 39 25.98 3,286 1,628
Parker & Parsley Producing Properties 88-A, L.P......... 23 .34 1,689 1,193
Parker & Parsley 88-B, L.P.............................. 42 19.26 2,766 412
Parker & Parsley 89-A, L.P.............................. 32 17.45 2,811 1,645
Parker & Parsley 90-A, L.P.............................. 25 13.17 2,045 1,141
Parker & Parsley 90-B Conv., L.P........................ 103 23.18 9,729 2,086
Parker & Parsley 90-B, L.P.............................. 103 62.92 9,729 5,658
Parker & Parsley 90-C Conv., L.P........................ 42 13.68 1,021 316
Parker & Parsley 90-C, L.P.............................. 42 21.99 1,021 509
Parker & Parsley 91-A, L.P.............................. 47 24.71 4,389 1,891
Parker & Parsley 91-B, L.P.............................. 29 21.97 1,922 1,301
----- ------ ------ ------
Total......................................... 1,093 658.51 98,592 54,156
===== ====== ====== ======
</TABLE>
- ---------------
(a) A "gross well" or "gross acre" is a well or an acre in which a working
interest is owned. The number of gross wells or acres represents the sum of
the wells or acres in which a working interest is owned.
(b) A "net well" or "net acre" is deemed to exist when the sum of the
fractional working interests in gross wells or acres equals one. The number
of net wells or acres is the sum of the fractional working interests in
gross wells or acres.
A-14
<PAGE> 75
TABLE 14
RECENT TRADES OF PARTNERSHIP INTERESTS(a)
PER $1,000 INVESTMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1999
AND THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
PER $1,000 INVESTMENT
-----------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1999 FOR THE YEAR ENDED DECEMBER 31, 1998
---------------------------------------- ----------------------------------------
SALES PRICE SALES PRICE
------------------- NUMBER NUMBER ------------------- NUMBER NUMBER
HIGH LOW OF SALES SOLD HIGH LOW OF SALES SOLD
-------- -------- -------- ------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Parker & Parsley 82-I, Ltd......... $ 4.17 $ 4.17 1 12 $ 60.00 $ 45.00 3 42
Parker & Parsley 82-II, Ltd........ -- -- -- -- 140.00 135.00 2 10
Parker & Parsley 83-A, Ltd......... 54.00 38.00 2 56 97.00 16.00 9 125
Parker & Parsley 83-B, Ltd......... -- -- -- -- 120.00 80.00 6 75
Parker & Parsley 84-A, Ltd......... 72.00 52.78 2 34 175.00 85.00 5 75
Parker & Parsley 85-A, Ltd......... 61.00 10.00 4 30 100.00 55.00 4 35
Parker & Parsley 85-B, Ltd......... 75.00 75.00 2 30 123.00 70.00 3 25
Parker & Parsley 86-A, Ltd......... 55.00 10.00 2 40 82.50 47.00 3 10
Parker & Parsley 86-B, Ltd......... 111.00 82.00 6 43 200.00 105.00 13 89
Parker & Parsley 86-C, Ltd......... 80.00 45.00 4 22 135.00 102.00 4 170
Parker & Parsley 87-A, Ltd......... 112.00 81.00 4 70 151.00 77.00 19 1,025
Parker & Parsley Producing
Properties 87-A, Ltd............. 175.00 120.50 3 74 216.00 112.00 5 46
Parker & Parsley 87-B, Ltd......... 101.67 10.00 8 140 162.00 80.00 10 153
Parker & Parsley Producing
Properties 87-B, Ltd............. 170.00 170.00 1 10 280.00 280.00 1 4
Parker & Parsley 88-A, L.P......... 105.11 57.00 2 15 202.30 115.00 8 123
Parker & Parsley Producing
Properties 88-A, L.P............. -- -- -- -- 370.00 240.00 5 88
Parker & Parsley 88-B, L.P......... 111.00 101.71 3 40 150.10 92.70 4 72
Parker & Parsley 89-A, L.P......... 138.00 123.00 3 40 210.00 160.00 5 65
Parker & Parsley 90-A, L.P......... 92.00 84.33 2 25 161.00 127.00 3 65
Parker & Parsley 90-B, Conv.
L.P.............................. -- -- -- -- -- -- -- --
Parker & Parsley 90-B, L.P......... 175.00 124.00 8 75 255.00 162.00 9 135
Parker & Parsley 90-C Conv.,
L.P.............................. -- -- -- -- -- -- -- --
Parker & Parsley 90-C, L.P......... 136.33 86.00 5 70 230.00 132.00 7 100
Parker & Parsley 91-A, L.P......... -- -- -- -- 249.75 116.43 9 59
Parker & Parsley 91-B, L.P......... 135.00 135.00 1 10 262.50 245.00 4 260
<CAPTION>
PER $1,000 INVESTMENT
-------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1997
-------------------------------------
SALES PRICE
----------------- NUMBER NUMBER
HIGH LOW OF SALES SOLD
------- ------- -------- ------
<S> <C> <C> <C> <C>
Parker & Parsley 82-I, Ltd......... $ -- $ -- -- --
Parker & Parsley 82-II, Ltd........ 171.00 135.00 3 20
Parker & Parsley 83-A, Ltd......... 172.00 80.00 3 40
Parker & Parsley 83-B, Ltd......... 175.00 119.45 2 30
Parker & Parsley 84-A, Ltd......... 222.00 120.00 4 40
Parker & Parsley 85-A, Ltd......... 192.00 147.00 2 85
Parker & Parsley 85-B, Ltd......... 167.00 120.00 3 30
Parker & Parsley 86-A, Ltd......... 171.00 141.00 2 10
Parker & Parsley 86-B, Ltd......... 298.00 175.00 7 100
Parker & Parsley 86-C, Ltd......... 207.00 102.80 8 99
Parker & Parsley 87-A, Ltd......... 205.00 110.00 14 241
Parker & Parsley Producing
Properties 87-A, Ltd............. 368.00 219.90 9 168
Parker & Parsley 87-B, Ltd......... 202.00 151.00 7 278
Parker & Parsley Producing
Properties 87-B, Ltd............. 344.00 340.00 3 9
Parker & Parsley 88-A, L.P......... 213.00 168.00 6 55
Parker & Parsley Producing
Properties 88-A, L.P............. 380.00 350.00 3 12
Parker & Parsley 88-B, L.P......... 261.00 174.00 4 35
Parker & Parsley 89-A, L.P......... 295.00 203.68 3 75
Parker & Parsley 90-A, L.P......... 242.00 165.00 2 15
Parker & Parsley 90-B, Conv.
L.P.............................. -- -- -- --
Parker & Parsley 90-B, L.P......... 290.00 173.00 12 162
Parker & Parsley 90-C Conv.,
L.P.............................. -- -- -- --
Parker & Parsley 90-C, L.P......... 226.00 225.75 2 46
Parker & Parsley 91-A, L.P......... 306.00 288.27 2 50
Parker & Parsley 91-B, L.P......... 380.00 265.00 3 75
</TABLE>
- ---------------
(a) This table contains historical information about recent trades of
partnership interests on a per $1,000 investment as determined from "The
Partnership Spectrum." The price information represents the prices reported
to have been paid to the sellers net of commissions paid by buyers. This
information should not be relied upon as any indication of the price at
which the partnership interests may trade. There may have been other
secondary sale transactions in the partnership interests, although no
information regarding any such transactions is available to Pioneer USA.
Because the information regarding sale transactions in the partnership
interests in this table is provided without verification by Pioneer USA and
because the information provided does not reflect sufficient activity to
cause the prices shown to be representative of the market values of the
partnership interests, the information should not be relied upon as
indicative of the ability of limited partners to sell their partnership
interests in secondary sale transactions or as to the prices at which the
partnership interests may be sold.
A-15
<PAGE> 76
APPENDIX B
SUMMARY RESERVE REPORT OF WILLIAMSON PETROLEUM CONSULTANTS, INC.
FOR THE PARTNERSHIPS
September 3, 1999
Pioneer Natural Resources USA, Inc.
5205 North O'Connor Boulevard, Suite 1400
Irving, Texas 75039
Attention Board of Directors
Gentlemen:
Subject: Letter Report Including 25 Reports Prepared
by Williamson Petroleum Consultants, Inc.
for Pioneer Natural Resources USA, Inc.
to the Interests of Limited Partners
or the Converted Limited Partners
in Various Parker & Parsley Partnerships
Managed by Pioneer Natural Resources USA, Inc.
Effective December 31, 1998
for Disclosure to the
Securities and Exchange Commission
Williamson Project 9.8740
In accordance with your request, Williamson Petroleum Consultants, Inc.
(Williamson) has prepared this summary letter for inclusion in the proxy
statement to be distributed to the limited partners of the referenced
partnerships by Pioneer Natural Resources USA, Inc. (Pioneer USA). This letter
includes 25 Williamson reports prepared for Pioneer USA to the interests of the
limited partners or the converted limited partners in various Parker & Parsley
partnerships managed by Pioneer USA effective December 31, 1998 for disclosure
to the Securities and Exchange Commission (SEC). A listing of the 25 Williamson
reports is included as Exhibit I.
I. ESTIMATED RESERVES AND ESTIMATED FUTURE NET REVENUES
The total Williamson estimated net proved reserves that are attributable to the
evaluated interests of the 25 partnership reports are shown in Exhibit II and
were based on economic parameters and operating condition considered applicable
as of December 31, 1998 and may be used in disclosure to the SEC.
The present values of the estimated future net revenues from proved reserves
were calculated using a discount rate of 10.00 percent per annum and were
computed in accordance with the financial reporting requirements of the SEC and
are presented in Exhibit II.
At the request of Pioneer USA, Williamson used the Landmark graphics and
reserves and economics evaluation software, Aries, to prepare this summary
report. In evaluations of these properties prior to December 31, 1991,
Williamson utilized its proprietary software programs. No comparative tests have
been performed to determine the difference in evaluation results of either
reserves or revenue quantities that may occur solely as a result of the
differences in the programs nor has Williamson performed tests to determine the
accuracy of Aries. However, in accordance with the request made by Pioneer USA
and the general acceptance of Aries by the oil and gas industry, Williamson has
used Aries to prepare this report.
B-1
<PAGE> 77
Pioneer Natural Resources USA, Inc.
Board of Directors
September 3, 1999
Page 2
II. DEFINITIONS OF SEC RESERVES(1)
The estimated reserves presented in this summary letter are net proved reserves,
including proved developed producing, proved developed nonproducing, and proved
undeveloped reserves, and were computed in accordance with the financial
reporting requirements of the SEC. In preparing these evaluations, no attempt
has been made to quantify the element of uncertainty associated with any
category. Reserves were assigned to each category as warranted. The definitions
of oil and gas reserves pursuant to the requirements of the Securities Exchange
Act are:
Proved Reserves(2)
Proved reserves are the estimated quantities of crude oil, natural gas, and
natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under the economic criteria employed and existing operating conditions, i.e.,
prices and costs as of the date the estimate is made. Prices and costs include
consideration of changes provided only by contractual arrangements but not on
escalations based upon an estimate of future conditions.
A. Reservoirs are considered proved if economic producibility is supported by
either actual production or conclusive formation test. The area of a
reservoir considered proved includes:
1. that portion delineated by drilling and defined by gas-oil and/or
oil-water contacts, if any; and
2. the immediately adjoining portions not yet drilled, but which can be
reasonably judged as economically productive on the basis of available
geological and engineering data. In the absence of information on fluid
contacts, the lowest known structural occurrence of hydrocarbons
controls the lower proved limit of the reservoir.
B. Reserves which can be produced economically through application of improved
recovery techniques (such as fluid injection) are included in the "proved'
classification when successful testing by a pilot project, or the operation
of an installed program in the reservoir, provides support for the
engineering analysis on which the project or program was based.
C. Estimates of proved reserves do not include the following:
1. oil that may become available from known reservoirs but is classified
separately as "indicated additional reserves";
2. crude oil, natural gas, and natural gas liquids, the recovery of which
is subject to reasonable doubt because of uncertainty as to geology,
reservoir characteristics, or economic factors;
3. crude oil, natural gas, and natural gas liquids, that may occur in
undrilled prospects; and
4. crude oil, natural gas, and natural gas liquids, that may be recovered
from oil shales, coal(3), gilsonite, and other such sources.
- ---------------
(1 )For evaluations prepared for disclosure to the Securities and Exchange
Commission, see SEC Accounting Rules. Commerce Clearing House, Inc. October
1981, Paragraph 290, Regulation 210.4-10, p. 329.
(2) Any variations to these definitions will be clearly stated in the report.
(3) According to Staff Accounting Bulletin 85, excluding certain coalbed methane
gas.
B-2
<PAGE> 78
Pioneer Natural Resources USA, Inc.
Board of Directors
September 3, 1999
Page 3
Proved Developed Reserves(4)
Proved developed reserves are reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods. Additional
oil and gas expected to be obtained through the application of fluid injection
or other improved recovery techniques for supplementing the natural forces and
mechanisms of primary recovery should be included as "proved developed reserves"
only after testing by a pilot project or after the operation of an installed
program has confirmed through production response that increased recovery will
be achieved.
Proved Undeveloped Reserves
Proved undeveloped reserves are reserves that are expected to be recovered from
new wells on undrilled acreage, or from existing wells where a relatively major
expenditure is required for recompletion. Reserves on undrilled acreage shall be
limited to those drilling units offsetting productive units that are reasonably
certain of production when drilled. Proved reserves for other undrilled units
can be claimed only where it can be demonstrated with certainty that there is
continuity of production from the existing productive formation. Under no
circumstances should estimates for proved undeveloped reserves be attributable
to any acreage for which an application of fluid injection or other improved
recovery technique is contemplated, unless such techniques have been proved
effective by actual tests in the area and in the same reservoir.
III. DISCUSSION OF SEC RESERVES
The properties evaluated in this report are located in the state of Texas with
the majority of the value in the Spraberry (Trend Area) field.
The individual projections of lease reserves and economics prepared to produce
this summary report include data that describe the production forecasts and
associated evaluation parameters such as interests, taxes, product prices,
operating costs, investments, salvage values, abandonment costs, and net profit
interests.
Net income to the evaluated interests is the future net revenue after
consideration of royalty revenue payable to others, taxes, operating expenses,
investments, salvage values, abandonment costs, and net profit interests, as
applicable. The future net revenue is before federal income tax and excludes
consideration of any encumbrances against the properties if such exist.
The future net revenue values presented in this report were based on projections
of oil and gas production. It was assumed there would be no significant delay
between the date of oil and gas production and the receipt of the associated
revenue for this production. No opinion is expressed by Williamson in this
report as to a fair market value of the evaluated properties.
Unless specifically identified and documented by Pioneer USA as having
curtailment problems, gas production trends have been assumed to be a function
of well productivity and not of market conditions. The effect of "take or pay"
clauses in gas contracts was not considered.
- ---------------
(4) Williamson Petroleum Consultants, Inc. separates proved developed reserves
into proved developed producing and proved developed nonproducing reserves.
This is to identify proved developed producing reserves as those to be
recovered from actively producing wells; proved developed nonproducing
reserves as those to be recovered from wells or intervals within wells,
which are completed but shut in waiting on equipment or pipeline
connections, or wells where a relatively minor expenditure is required for
recompletion to another zone.
B-3
<PAGE> 79
Pioneer Natural Resources USA, Inc.
Board of Directors
September 3, 1999
Page 4
Oil and natural gas liquids (NGL) reserves are expressed in thousands of United
States (U.S.) barrels (MBBL) of 42 U.S. gallons. Gas volumes are expressed in
millions of cubic feet (MMCF) at 60 degrees Fahrenheit and at the legal pressure
base that prevails in Texas.
This report includes only those costs and revenues which are considered by
Pioneer USA to be directly attributable to individual leases and areas. There
could exist other revenues, overhead costs, or other costs associated with
Pioneer USA or the Limited Partners/Converted Limited Partners which are not
included in this report. Such additional costs and revenues are outside the
scope of this report. This report is not a financial statement for Pioneer USA
or the Limited Partners/Converted Limited Partners and should not be used as the
sole basis for any transaction concerning Pioneer USA, the Limited
Partners/Converted Limited Partners, or the evaluated properties.
The reserves projections in this report are based on the use of the available
data and accepted industry engineering methods. Future changes in any
operational or economic parameters or production characteristics of the
evaluated properties could increase or decrease their reserves. Unforeseen
changes in market demand or allowables set by various regulatory agencies could
also cause actual production rates to vary from those projected. Williamson
reserves the right to alter any of the reserves projections and the associated
economics included in this evaluation in any future evaluations based on
additional data that may be acquired.
All data utilized in the preparation of this report with respect to interests,
reversionary status, oil and gas prices, gas categories, gas contract terms,
operating expenses, investments, salvage values, abandonment costs, net profit
interests, well information, and current operating conditions, as applicable,
were provided by Pioneer USA. Production data provided by Pioneer USA were
utilized. All data have been reviewed for reasonableness and, unless obvious
errors were detected, have been accepted as correct. It should be emphasized
that revisions to the projections of reserves and economics included in this
report may be required if the provided data are revised for any reason. No
inspection of the properties was made as this was not considered within the
scope of this evaluation. No investigation was made of any environmental
liabilities that might apply to the evaluated properties, and no costs are
included for any possible related expenses.
Since sufficient production history and other data were available, the estimates
of reserves contained in this report were determined by extrapolation of
historical production trends and in accordance with the Definitions of SEC
Reserves included in this summary letter report.
Prices for oil sold as of December 31, 1998 were provided by Pioneer USA to be
used at the effective date. These prices include adjustments for API gravity,
transportation, and any bonus paid. These adjustments were made by Pioneer USA.
After the effective date, prices were held constant for the life of the
properties. No attempt has been made to account for oil price fluctuations which
have occurred in the market subsequent to the effective date of this report.
Prices for gas sold as of December 31, 1998 were provided by Pioneer USA to be
used at the effective date. These prices include adjustments for British thermal
unit content, shrinkage due to NGL removal, transportation and handling charges,
and any other known differences between sales and produced volumes. These
adjustments were made by Pioneer USA. After the effective date, prices were held
constant for the life of the properties unless Pioneer USA indicated that
changes were provided for by contract. All gas prices were applied to projected
wellhead volumes.
Prices for NGL sold as of December 31, 1998 were provided by Pioneer USA to be
used at the effective date. NGL reserves were projected as a separate stream
using a constant ratio (barrels of NGL/thousand cubic feet of gas) based on
historical yields. After the effective date, prices were held constant for the
life
B-4
<PAGE> 80
Pioneer Natural Resources USA, Inc.
Board of Directors
September 3, 1999
Page 5
of the properties. No attempt has been made to account for price fluctuations
which have occurred in the market subsequent to the effective date of this
report.
It should be emphasized that with the current economic uncertainties,
fluctuation in market conditions could significantly change the economics of the
properties included in this report.
Operating expenses were provided by Pioneer USA and represented, when possible,
the latest available 12-month average of all recurring expenses which are
billable to the working interest owners. These expenses included, but were not
limited to, all direct operating expenses, field overhead costs, and any ad
valorem taxes not deducted separately. Expenses for workovers, well
stimulations, and other maintenance were not included in the operating expenses
unless such work was expected on a recurring basis. Judgments for the exclusion
of the nonrecurring expenses were made by Pioneer USA. Any internal indirect
overhead costs (general and administrative) which are billable to the working
interest owners were included, while those not billable were not included.
Operating costs were held constant for the life of the properties.
State production and county ad valorem taxes have been deducted at the published
rates as provided by Pioneer USA. A 7.5 percent severance tax exemption was
applied until September 2001 for qualifying wells.
Based on information supplied by Pioneer USA, neither capital costs nor salvage
values were included in the projections of reserves and economics in this
report.
IV. CONSENT AND DECLARATION OF INDEPENDENT STATUS
We understand that our estimates are to be included in a Schedule 13e-3 under
the Securities Exchange Act of 1934 to be filed by you with the SEC and in the
proxy statement included as an exhibit to such Schedule 13e-3. We understand
further that the estimates may be used by you to establish merger values for the
Partnerships. With this understanding in mind, we have consistently applied the
generally accepted petroleum engineering and evaluation principles in estimating
the proved oil and gas reserves and in computing the future net revenues derived
from such reserves for each property attributable to the interests held by the
Partnerships.
Williamson is an independent consulting firm and does not own any interests in
the oil and gas properties covered by this report. No employee, officer, or
director of Williamson is an employee, officer, or director of Pioneer USA or
any of the subject partnerships. Neither the employment of nor the compensation
received by Williamson is contingent upon the values assigned to the properties
covered by this report.
Yours very truly,
WILLIAMSON PETROLEUM CONSULTANTS, INC.
JDS/chk
Enclosures
B-5
<PAGE> 81
EXHIBIT I
LETTER REPORT INCLUDING 25 REPORTS PREPARED
BY WILLIAMSON PETROLEUM CONSULTANTS, INC.
FOR PIONEER NATURAL RESOURCES USA, INC.
TO THE INTERESTS OF LIMITED PARTNERS
OR THE CONVERTED LIMITED PARTNERS
IN VARIOUS PARKER & PARSLEY PARTNERSHIPS
MANAGED BY PIONEER NATURAL RESOURCES USA, INC.
EFFECTIVE DECEMBER 31, 1998
FOR DISCLOSURE TO THE
SECURITIES AND EXCHANGE COMMISSION
WILLIAMSON PROJECT 9.8740
LIST OF WILLIAMSON PETROLEUM CONSULTANTS, INC. REPORTS
EFFECTIVE DECEMBER 31, 1998
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley 82-I, Ltd. Managed by Pioneer Natural Resources USA, Inc.
Effective December 31, 1998 for Disclosure to the Securities and Exchange
Commission Summary Report Utilizing Aries Software Williamson Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley 82-II, Ltd. Managed by Pioneer Natural Resources USA, Inc.
Effective December 31, 1998 for Disclosure to the Securities and Exchange
Commission Summary Report Utilizing Aries Software Williamson Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley 83-A, Ltd. Managed by Pioneer Natural Resources USA, Inc.
Effective December 31, 1998 for Disclosure to the Securities and Exchange
Commission Summary Report Utilizing Aries Software Williamson Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley 83-B, Ltd. Managed by Pioneer Natural Resources USA, Inc.
Effective December 31, 1998 for Disclosure to the Securities and Exchange
Commission Summary Report Utilizing Aries Software Williamson Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley 84-A, Ltd. Managed by Pioneer Natural Resources USA, Inc.
Effective December 31, 1998 for Disclosure to the Securities and Exchange
Commission Summary Report Utilizing Aries Software Williamson Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley 85-A, Ltd. Managed by Pioneer Natural Resources USA, Inc.
Effective December 31, 1998 for Disclosure to the Securities and Exchange
Commission Summary Report Utilizing Aries Software Williamson Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley 85-B, Ltd. Managed by Pioneer Natural Resources USA, Inc.
Effective December 31, 1998 for Disclosure to the Securities and Exchange
Commission Summary Report Utilizing Aries Software Williamson Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley 86-A, Ltd. Managed by Pioneer Natural Resources USA, Inc.
Effective December 31, 1998 for Disclosure to the Securities and Exchange
Commission Summary Report Utilizing Aries Software Williamson Project 8.8643"
B-6
<PAGE> 82
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley 86-B, Ltd. Managed by Pioneer Natural Resources USA, Inc.
Effective December 31, 1998 for Disclosure to the Securities and Exchange
Commission Summary Report Utilizing Aries Software Williamson Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley 86-C, Ltd. Managed by Pioneer Natural Resources USA, Inc.
Effective December 31, 1998 for Disclosure to the Securities and Exchange
Commission Summary Report Utilizing Aries Software Williamson Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley 87-A, Ltd. Managed by Pioneer Natural Resources USA, Inc.
Effective December 31, 1998 for Disclosure to the Securities and Exchange
Commission Summary Report Utilizing Aries Software Williamson Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley 87-B, Ltd. Managed by Pioneer Natural Resources USA, Inc.
Effective December 31, 1998 for Disclosure to the Securities and Exchange
Commission Summary Report Utilizing Aries Software Williamson Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley Producing Properties 87-A, Ltd. Managed by Pioneer Natural
Resources USA, Inc. Effective December 31, 1998 for Disclosure to the Securities
and Exchange Commission Summary Report Utilizing Aries Software Williamson
Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley Producing Properties 87-B, Ltd. Managed by Pioneer Natural
Resources USA, Inc. Effective December 31, 1998 for Disclosure to the Securities
and Exchange Commission Summary Report Utilizing Aries Software Williamson
Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley 88-A, L.P. Managed by Pioneer Natural Resources USA, Inc.
Effective December 31, 1998 for Disclosure to the Securities and Exchange
Commission Summary Report Utilizing Aries Software Williamson Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley 88-B, L.P. Managed by Pioneer Natural Resources USA, Inc.
Effective December 31, 1998 for Disclosure to the Securities and Exchange
Commission Summary Report Utilizing Aries Software Williamson Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley Producing Properties 88-A, L.P. Managed by Pioneer Natural
Resources USA, Inc. Effective December 31, 1998 for Disclosure to the Securities
and Exchange Commission Summary Report Utilizing Aries Software Williamson
Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley 89-A, L.P. Managed by Pioneer Natural Resources USA, Inc.
Effective December 31, 1998 for Disclosure to the Securities and Exchange
Commission Summary Report Utilizing Aries Software Williamson Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley 90-A, L.P. Managed by Pioneer Natural Resources USA, Inc.
Effective December 31, 1998 for Disclosure to the Securities and Exchange
Commission Summary Report Utilizing Aries Software Williamson Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Converted Limited
Partners in Parker & Parsley 90-B Converted, L.P. Managed by Pioneer Natural
Resources USA, Inc. Effective December 31,
B-7
<PAGE> 83
1998 for Disclosure to the Securities and Exchange Commission Summary Report
Utilizing Aries Software Williamson Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley 90-B, L.P. Managed by Pioneer Natural Resources USA, Inc.
Effective December 31, 1998 for Disclosure to the Securities and Exchange
Commission Summary Report Utilizing Aries Software Williamson Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Converted Limited
Partners in Parker & Parsley 90-C Converted, L.P. Managed by Pioneer Natural
Resources USA, Inc. Effective December 31, 1998 for Disclosure to the Securities
and Exchange Commission Summary Report Utilizing Aries Software Williamson
Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley 90-C, L.P. Managed by Pioneer Natural Resources USA, Inc.
Effective December 31, 1998 for Disclosure to the Securities and Exchange
Commission Summary Report Utilizing Aries Software Williamson Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley 91-A, L.P. Managed by Pioneer Natural Resources USA, Inc.
Effective December 31, 1998 for Disclosure to the Securities and Exchange
Commission Summary Report Utilizing Aries Software Williamson Project 8.8643"
"Evaluation of Oil and Gas Reserves to the Interests of the Limited Partners in
Parker & Parsley 91-B, L.P. Managed by Pioneer Natural Resources USA, Inc.
Effective December 31, 1998 for Disclosure to the Securities and Exchange
Commission Summary Report Utilizing Aries Software Williamson Project 8.8643"
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<PAGE> 84
EXHIBIT II
LETTER REPORT INCLUDING 25 REPORTS PREPARED
BY WILLIAMSON PETROLEUM CONSULTANTS, INC.
FOR PIONEER NATURAL RESOURCES USA, INC.
TO THE INTERESTS OF LIMITED PARTNERS
OR THE CONVERTED LIMITED PARTNERS
IN VARIOUS PARKER & PARSLEY PARTNERSHIPS
MANAGED BY PIONEER NATURAL RESOURCES USA, INC.
EFFECTIVE DECEMBER 31, 1998
FOR DISCLOSURE TO THE
SECURITIES AND EXCHANGE COMMISSION
WILLIAMSON PROJECT 9.8740
NET RESERVES AND FUTURE NET REVENUE FROM
REPORTS PREPARED BY WILLIAMSON PETROLEUM CONSULTANTS, INC.
EFFECTIVE DECEMBER 31, 1998
<TABLE>
<CAPTION>
TOTAL PROVED DEVELOPED PRODUCING
------------------------------------------------------------------
NET RESERVES TO FUTURE NET REVENUE, M$
THE EVALUATED INTERESTS ----------------------------
----------------------------------- DISCOUNTED
OIL/ PER
CONDENSATE LIQUID GAS ANNUM AT
PIONEER FUNDS (MBBL) (MBBL) (MMCF) UNDISCOUNTED 10.00 PERCENT
- ------------------------------------- ---------- --------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Parker & Parsley 82-I, Ltd........... 29.632 18.985 70.101 57.927 49.231
Parker & Parsley 82-II, Ltd.......... 85.450 53.347 229.486 420.160 249.356
Parker & Parsley 83-A, Ltd........... 153.890 98.165 416.976 539.514 383.830
Parker & Parsley 83-B, Ltd........... 279.467 187.895 829.654 1,235.281 827.240
Parker & Parsley 84-A, Ltd........... 238.605 184.163 798.380 1,198.081 749.109
Parker & Parsley 85-A, Ltd........... 79.492 55.166 242.910 329.014 227.255
Parker & Parsley 85-B, Ltd........... 96.024 70.820 307.877 347.783 253.195
Parker & Parsley 86-A, Ltd........... 99.508 59.510 268.157 326.945 238.373
Parker & Parsley 86-B, Ltd........... 294.542 168.826 676.814 1,194.333 810.802
Parker & Parsley 86-C, Ltd........... 197.311 171.892 735.862 762.965 548.472
Parker & Parsley 87-A, Ltd........... 385.925 269.463 1,161.783 1,555.527 1,104.338
Parker & Parsley 87-B, Ltd........... 346.117 202.550 891.008 1,414.932 970.121
Parker & Parsley Producing Properties
87-A, Ltd.......................... 215.420 133.637 549.083 952.233 632.118
Parker & Parsley Producing Properties
87-B, Ltd.......................... 166.388 114.047 508.948 885.094 553.584
Parker & Parsley 88-A, L.P........... 268.159 198.798 842.728 1,431.335 886.681
Parker & Parsley 88-B, L.P........... 183.254 83.979 372.704 661.586 453.182
Parker & Parsley Producing Properties
88-A, L.P.......................... 254.061 165.439 731.772 1,508.503 906.186
Parker & Parsley 89-A, L.P........... 164.838 106.454 574.534 904.472 607.367
Parker & Parsley 90-A, L.P........... 131.527 89.991 390.290 527.962 374.194
Parker & Parsley 90-B Conv., L.P..... 269.992 135.828 594.416 1,098.837 727.865
Parker & Parsley 90-B, L.P........... 732.334 368.395 1,612.230 2,980.361 1,974.162
Parker & Parsley 90-C Conv., L.P..... 134.421 50.998 222.782 412.728 297.694
Parker & Parsley 90-C, L.P........... 215.978 81.928 357.951 663.135 478.313
Parker & Parsley 91-A, L.P........... 344.180 156.373 719.115 1,390.988 939.132
Parker & Parsley 91-B, L.P........... 372.096 135.752 601.234 1,469.109 965.152
--------- --------- ---------- ---------- ----------
Total All Partnerships....... 5,738.611 3,362.401 14,706.795 24,268.805 16,206.952
</TABLE>
B-9
<PAGE> 85
APPENDIX C
FORM OF FAIRNESS OPINION OF ROBERT A. STANGER & CO., INC.
[LETTERHEAD OF ROBERT A. STANGER & CO., INC.]
PRELIMINARY DRAFT
(subject to change)
, 1999
Pioneer Natural Resources USA, Inc.
1400 Williams Square West
5205 North O'Connor Boulevard
Irving, Texas 75039
Attention: Board of Directors
Gentlemen:
Pioneer Natural Resources USA, Inc. ("Pioneer USA"), the sole or managing
general partner of the partnerships identified in Exhibit I attached hereto
("the Partnerships"), has advised us that the Partnerships are contemplating a
transaction (the "Transaction") pursuant to an agreement (the "Merger
Agreement") in which the Partnerships will merge with and into Pioneer USA and
the interests of the limited partners (the "Limited Partners") in each
Partnership will be converted into the right to receive cash equal to the
estimated value of such Partnership's oil and gas reserves (the "Reserve Value")
and net working capital (the "Working Capital Balance") as of , 1999
(collectively, the Reserve Value and the Working Capital Balance are referred to
herein as the "Merger Value"). We have been advised that the Merger Value will
be determined and paid to holders of limited partnership interests (the "Limited
Partner Interests") of each Partnership in accordance with the provisions of the
Partnership agreement of each Partnership relating to a liquidation of the
Partnership.
We have been further advised that the Reserve Value has been established by
Pioneer USA and its parent company, Pioneer Natural Resources Company
("Pioneer"), based upon the present value of estimated future net revenues
(after certain expenses and charges) from each Partnership's proved oil and gas
reserves as of , 1999 utilizing prices of $ per barrel of oil
and $ per thousand cubic feet of gas, and a discount rate of %, (the
"Reserve Analysis"). We have been further advised that , an
independent petroleum engineering firm, has reviewed the Reserve Analysis of
each Partnership and has issued a report thereon confirming the determination of
the Reserve Value (the "Consultant's Report").
We have been advised that the Limited Partners in each Partnership will
have the opportunity to approve or reject the participation by their Partnership
in the Transaction pursuant to a proxy statement and a Limited Partners' meeting
which will be prepared and held, respectively, in connection with the
Transaction, and further that Limited Partners in each Partnership will receive
only cash in exchange for Limited Partner Interests.
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
an opinion as to the fairness, from a financial point of view, of the Merger
Value to be paid in cash for Limited Partner Interests in each Partnership in
connection with the Transaction.
Stanger, founded in 1978, has provided research, investment banking and
consulting services to clients located throughout the United States, including
major New York Stock Exchange member firms and insurance companies and over
seventy companies engaged in the management and operations of partnerships. The
investment banking activities of Stanger include financial advisory services,
asset and securities valuations, industry and company research and analysis,
litigation support and expert witness services, and due diligence investigations
in connection with both publicly registered and privately placed securities
transactions.
C-1
<PAGE> 86
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of securities in connection with mergers, acquisitions, and
reorganizations and for estate, tax, corporate and other purposes. In
particular, Stanger's valuation practice principally involves partnerships,
partnership securities and assets typically owned through partnerships
including, but not limited to, oil and gas reserves, real estate, mortgages
secured by real estate, cable television systems, and equipment leasing assets.
In arriving at the opinion set forth below, we have:
- Reviewed a draft of the Merger Agreement which Pioneer USA has indicated
to be in substantially the form which will be executed in connection with
the Transaction.
- Reviewed the financial statements of the Partnerships for the years ended
December 31, 1997 and 1998 and the six months ended June 30, 1999;
- Reviewed the Reserve Analysis of each Partnership prepared by Pioneer USA
and Pioneer as of , 1999;
- Reviewed the Consultant's Report for each Partnership prepared by
Williamson Petroleum Consultants, Inc. as of , 1999;
- Reviewed the calculations prepared by Pioneer USA and Pioneer of the
Merger Value per unit of Limited Partner Interest in each Partnership;
- Reviewed estimates prepared by Pioneer USA and Pioneer of the
going-concern value and liquidation value per unit of Limited Partner
Interest in each Partnership;
- Interviewed key management personnel of Pioneer USA regarding the oil and
gas reserves, the financial condition of each Partnership and the terms
of the Transaction; and
- Conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.
In rendering this opinion, we have relied, without independent
verification, on the accuracy and completeness in all material respects of all
financial and other information that was furnished or otherwise communicated to
us by Pioneer USA, Pioneer and the Partnerships. We have been advised by Pioneer
USA and Pioneer that the oil and gas properties owned by the Partnerships are
subject to operating agreements (the "Operating Agreements") with Pioneer USA
and that: (i) such Operating Agreements provide for the payment of overhead
charges and that such charges are reasonable compared with amounts charged for
similar services by third-party operators; (ii) except for cause, such Operating
Agreements do not provide for the termination of Pioneer USA as operator; and
(iii) such Operating Agreements do not provide for the revision of the overhead
charges, except as escalated under the terms of such Operating Agreements.
Furthermore, we have been advised by Pioneer USA and Pioneer that if each
Partnership's reserves were offered for sale to a third party, a condition of
such sale would be that the oil and gas reserves would continue to be subject to
the Operating Agreements with Pioneer USA which provide for the payment of
overhead charges, and that it would be appropriate to assume, when estimating
the value of such reserves, that such expenses and charges would continue. We
have also been advised that the Reserve Value and Working Capital Balance of
each Partnership has been properly allocated between Pioneer USA and Limited
Partners of each Partnership in accordance with the Partnership Agreement with
respect to a liquidation of such Partnership.
We have not performed an independent appraisal of the oil and gas reserves
or other assets and liabilities of the Partnerships. We have not conducted any
engineering studies and have relied on estimates of Pioneer USA and Pioneer with
respect to oil and gas reserve volumes, prices, operating costs, general and
administrative expenses and overhead charges.
We have relied on the assurance of Pioneer USA, Pioneer and the
Partnerships that: (i) the Reserve Analysis provided to us was in the judgment
of Pioneer USA and the Partnerships reasonably prepared on bases consistent with
actual historical experience and reflect their best currently available
estimates and
C-2
<PAGE> 87
good faith judgments; (ii) any estimates of costs to remediate environmental
conditions included in the Reserve Analysis are based on detailed analyses and
reflect the best currently available estimates and good faith judgments; (iii)
any historical financial data, balance sheet data, transaction cost estimates,
Merger Value analyses, going-concern value analyses and liquidation value
analyses are accurate and complete in all material respects; (iv) all
calculations of Reserve Values, Working Capital Balances, Merger Values,
going-concern values and liquidation values have been made in accordance with
the Partnership Agreement for each Partnership; (v) no material changes have
occurred in the information reviewed or in the value of the oil and gas reserves
or Working Capital Balances of each Partnership between the date the information
was provided to us and the date of this letter; and (vi) Pioneer USA, Pioneer
and the Partnerships are not aware of any information or facts regarding the
Partnerships, the oil and gas properties, the Reserve Analysis or the Working
Capital Balances of each Partnership that would cause the information supplied
to us to be incomplete or misleading in any material respect.
We have not been requested to, and therefore did not: (i) make any
recommendation to Pioneer USA, the Partnerships or the Limited Partners with
respect to whether to approve or reject the Transaction; (ii) determine or
negotiate the amount or form of the Merger Value to be paid for Limited Partner
Interests in the Transaction; (iii) offer the assets of the Partnerships for
sale to any third party; (iv) express any opinion as to: (a) the impact of the
Transaction with respect to Pioneer USA or the Limited Partners of any
Partnerships that do not participate in the Transaction; (b) the tax
consequences of the Transaction for Pioneer USA or the Limited Partners of any
Partnership; (c) Pioneer's or Pioneer USA's ability to finance their obligations
pursuant to the Merger Agreement or the impact of a failure to obtain financing
on the financial performance of Pioneer, Pioneer USA or the Partnerships; (d)
Pioneer USA's decision to estimate the Reserve Value of the oil and gas reserves
of each Partnership based upon the continued operation of the properties by
Pioneer USA and the payment of overhead charges in accordance with existing
Operating Agreements or the impact, if any, on the estimated values of the
Partnerships' oil and gas reserves if Pioneer USA and Pioneer determined to
offer or operate the assets subject to revised Operating Agreements; (e) whether
or not alternative methods of determining the Merger Value would have also
provided fair results or results substantially similar to the methodology used;
(f) alternatives to the Transaction, including the offering of such assets for
sale to third-party buyers; or (g) the fairness of the amount or allocation of
transaction costs; or (h) any other terms of the Transaction.
This letter does not purport to be a complete description of the analyses
performed or the matters considered in rendering this opinion. The analyses and
the summary set forth herein must be considered as a whole, and selecting
portions of such summary or analyses without considering all factors and
analyses would create an incomplete view of the process underlying this opinion.
In rendering this opinion, judgment was applied to a variety of complex analyses
and assumptions. The assumptions made and the judgments applied in rendering the
opinion are not readily susceptible to partial analysis or summary description.
The fact that any specific analysis is referred to herein is not meant to
indicate that such analysis was given greater weight than any other analyses.
Our opinion is based on business, economic, oil and gas market, and other
conditions as of the date of our analysis and addresses the Merger Value in the
context of information available as of the date of our analysis. Events
occurring after that date could affect the value of the assets of the
Partnerships or the assumptions used in preparing this opinion.
C-3
<PAGE> 88
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter and subject to the assumptions, limitations and
qualifications contained herein, the Merger Value to be paid in cash for the
Limited Partner Interests in connection with the Transaction is fair from a
financial point of view to the Limited Partners of each respective Partnership.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
, 1999
C-4
<PAGE> 89
EXHIBIT 1
PARTNERSHIPS
Parker & Parsley 82-I, Ltd.
Parker & Parsley 82-II, Ltd.
Parker & Parsley 83-A, Ltd.
Parker & Parsley 83-B, Ltd.
Parker & Parsley 84-A, Ltd.
Parker & Parsley 85-A, Ltd.
Parker & Parsley 85-B, Ltd.
Parker & Parsley 86-A, Ltd.
Parker & Parsley 86-B, Ltd.
Parker & Parsley 86-C, Ltd.
Parker & Parsley 87-A, Ltd.
Parker & Parsley Producing Properties 87-A, Ltd.
Parker & Parsley 87-B, Ltd.
Parker & Parsley Producing Properties 87-B, Ltd.
Parker & Parsley 88-A, L.P.
Parker & Parsley Producing Properties 88-A, L.P.
Parker & Parsley 88-B, L.P.
Parker & Parsley 89-A, L.P.
Parker & Parsley 90-A, L.P.
Parker & Parsley 90-B Conv., L.P.
Parker & Parsley 90-B, L.P.
Parker & Parsley 90-C Conv., L.P.
Parker & Parsley 90-C, L.P.
Parker & Parsley 91-A, L.P.
Parker & Parsley 91-B, L.P.
C-5
<PAGE> 90
APPENDIX D
THE MERGER PROPOSALS
The merger proposals for all of the partnerships, except as otherwise
indicated, are set forth below. For each partnership, the merger proposals
include the approval of:
- the merger agreement for that partnership, pursuant to which:
-- the partnership will be merged with and into Pioneer USA, on the terms
and subject to the conditions set forth in the merger agreement as
described in the proxy statement; and
-- each partner, whether limited or general, but other than Pioneer USA,
will receive cash in an amount based on the merger value of that
partnership in exchange for that partner's partnership interests;
- the merger amendment for that partnership authorizing:
-- the merger of the partnership with and into Pioneer USA, with Pioneer
USA being the surviving entity; and
-- the elimination of any restrictions on the mergers otherwise contained
in the partnership's partnership agreement; and
- the opinion of special legal counsel for the limited partners and the
selection of that counsel.
For each partnership, approval of the merger proposals requires the
affirmative vote of limited partners who own or have the power to vote a
majority of the partnership interests in that partnership. The effect of an
abstention or a failure to vote is the same as a vote against the merger
proposals. See "The Special Meetings -- Record Date; Voting Rights and Proxies."
Subject to the terms and conditions of the mergers as described in the proxy
statement under "The Merger Agreement," if the merger proposals are approved by
a partnership, that participating partnership will merge with and into Pioneer
USA, with Pioneer USA being the surviving entity. From and after the closing of
the mergers, the partnership interests of the partners in a participating
partnership will represent the right to receive an amount in cash as described
in the proxy statement.
Generally, the partnership agreements require that, prior to the exercise
of certain rights by the limited partners, special legal counsel for the limited
partners, acceptable to the partnership, deliver a legal opinion, acceptable to
the partnership, that neither the grant nor the exercise of the right to approve
the mergers by the limited partners will result in the loss of any limited
partner's limited liability or adversely affect the tax status of the
partnerships. of Dallas, Texas has delivered that opinion, subject to
the approval of the limited partners of that opinion and the selection of
special legal counsel for the limited partners. See "The Mergers -- Legal
Opinion for Limited Partners."
APPROVAL OF MERGERS (FOR EACH PARTNERSHIP FORMED IN TEXAS):
RESOLVED: That, subject to receipt of a favorable opinion of special legal
counsel for the limited partners as described in the proxy statement,
the partnership be merged with and into Pioneer USA, with Pioneer USA
being the surviving entity, and that an amount in cash be paid to each
partner, other than Pioneer USA, in accordance with the terms set
forth in the merger agreement included as Appendix E to the proxy
statement and subject to the conditions set forth therein.
RESOLVED: That, subject to receipt of a favorable opinion of special legal
counsel for the limited partners as described in the proxy statement,
the following new article shall be added to the partnership agreement
of the partnership:
D-1
<PAGE> 91
ARTICLE
Notwithstanding any provisions of this Agreement to the contrary, it is
hereby agreed as follows:
1. Definitions. For the purposes of this Article, "Proxy Statement" means
the proxy statement dated , 1999 of Pioneer Natural
Resources USA, Inc., a Delaware corporation ("Pioneer USA"), in the form filed
with the Securities and Exchange Commission pursuant to Rule 14A under the
Securities Exchange Act of 1934.
2. Elimination of Restrictions to Transaction. Notwithstanding anything in
this Agreement to the contrary, upon the consent of limited partners holding a
majority of the outstanding partnership interests in the partnership, which
consent may or may not be the same consent to the adoption of an amendment to
this Agreement, no provision of this Agreement shall prohibit, limit or prevent:
(a) the merger or consolidation of the partnership, including the
mergers described in the Proxy Statement, with any other domestic limited
partnership or other entity, as those terms are defined in the Texas
Revised Limited Partnership Act, and
(b) the consummation of the mergers described in the Proxy Statement.
In addition, no consent of the partnership, Pioneer USA or any partner or
other procedure, including the delivery of opinions of counsel, shall be
required in order to enable the partnership, Pioneer USA or any partner to
effect the mergers.
3. Mergers. For purposes of this Agreement, each merger described in the
Proxy Statement shall be treated as if the partnership has:
(a) disposed of all of its assets and liabilities to Pioneer USA in
exchange for an amount in cash representing the merger value of the
partnership, and
(b) liquidated in the manner provided in the liquidation provisions of
this Agreement.
Accordingly, upon the partnership's deemed liquidation resulting from the
mergers, Pioneer USA will pay an amount of cash to the partners, other than
itself, in accordance with the liquidation provisions of this Agreement. For
purposes of Texas law, the merger shall be a merger subject to the provisions of
Section 2.11 of the Texas Revised Limited Partnership Act.
4. Authority of Pioneer USA as General Partner. By obtaining the approval
of the limited partners described in Section 2 of this Article, the partnership
hereby extends the power of attorney granted to Pioneer USA pursuant to this
Agreement to permit Pioneer USA to execute the merger agreement described in the
Proxy Statement and the merger amendment contemplated by this Article on behalf
of the limited partners. Pioneer USA shall be authorized, at such time in its
full discretion as it deems appropriate, to execute, acknowledge, verify,
deliver, file and record, for and in the name and on behalf of the partnership,
Pioneer USA and the limited partners, any and all documents, agreements,
certificates and instruments, and shall do and perform any and all acts required
by applicable law or which Pioneer USA deems necessary or advisable in order to
give effect to this Article and the transactions contemplated herein, including,
but not limited to, the mergers.
5. This Article Controlling. The provisions of this Article shall control
over all other provisions of this Agreement.
Except as herein expressly amended, all other terms and provisions of this
Agreement shall remain in full force and effect.
APPROVAL OF MERGERS (FOR EACH PARTNERSHIP FORMED IN DELAWARE):
RESOLVED: That, subject to receipt of a favorable opinion of special legal
counsel for the limited partners as described in the proxy statement,
the partnership be merged with and into Pioneer USA, with Pioneer USA
being the surviving entity, and that an amount in cash be
D-2
<PAGE> 92
paid to each partner, other than Pioneer USA, in accordance with the
terms set forth in the merger agreement included as Appendix E to the
proxy statement and subject to the conditions set forth therein.
RESOLVED: That, subject to receipt of a favorable opinion of special legal
counsel for the limited partners as described in the proxy statement,
the following new article shall be added to the partnership agreement
of the partnership:
ARTICLE
Notwithstanding any provisions of this Agreement to the contrary, it is
hereby agreed as follows:
1. Definitions. For the purposes of this Article, "Proxy Statement" means
the proxy statement dated , 1999 of Pioneer Natural Resources USA,
Inc., a Delaware corporation ("Pioneer USA"), in the form filed with the
Securities and Exchange Commission pursuant to Rule 14A under the Securities
Exchange Act of 1934.
2. Elimination of Restrictions to Transaction. Notwithstanding anything in
this Agreement to the contrary, upon the consent of limited partners holding a
majority of the outstanding partnership interests in the partnership, which
consent may or may not be the same consent to the adoption of an amendment to
this Agreement, no provision of this Agreement shall prohibit, limit or prevent:
(a) the merger or consolidation of the partnership, including the
mergers described in the Proxy Statement, with any other domestic limited
partnership or other business entity, as those terms are defined in the
Delaware Revised Uniform Limited Partnership Act, and
(b) the consummation of the mergers described in the Proxy Statement.
In addition, no consent of the partnership, Pioneer USA or any partner or other
procedure, including the delivery of opinions of counsel, shall be required in
order to enable the partnership, Pioneer USA or any partner to effect the
mergers.
3. Mergers. For purposes of this Agreement, each merger described in the
Proxy Statement shall be treated as if the partnership has:
(a) disposed of all of its assets and liabilities to Pioneer USA in
exchange for an amount in cash representing the merger value of the
partnership, and
(b) liquidated in the manner provided in the liquidation provisions of
this Agreement.
Accordingly, upon the partnership's deemed liquidation resulting from the
mergers, Pioneer USA will pay an amount of cash to the partners, other than
itself, in accordance with the liquidation provisions of this Agreement. For
purposes of Delaware law, the merger shall be a merger subject to the provisions
of Section 17-211 of the Delaware Revised Uniform Limited Partnership Act.
4. Authority of Pioneer USA as General Partner. By obtaining the approval
of the limited partners described in Section 2 of this Article, the partnership
hereby extends the power of attorney granted to Pioneer USA pursuant to this
Agreement to permit Pioneer USA to execute the merger agreement described in the
Proxy Statement and the merger amendment contemplated by this Article on behalf
of the limited partners. Pioneer USA shall be authorized, at such time in its
full discretion as it deems appropriate, to execute, acknowledge, verify,
deliver, file and record, for and in the name and on behalf of the partnership,
Pioneer USA and the limited partners, any and all documents, agreements,
certificates and instruments, and shall do and perform any and all acts required
by applicable law or which Pioneer USA deems necessary or advisable in order to
give effect to this Article and the transactions contemplated herein, including,
but not limited to, the mergers.
5. This Article Controlling. The provisions of this Article shall control
over all other provisions of this Agreement.
D-3
<PAGE> 93
Except as herein expressly amended, all other terms and provisions of this
Agreement shall remain in full force and effect.
APPROVAL OF COUNSEL TO LIMITED PARTNERS (FOR EACH PARTNERSHIP):
RESOLVED: That the selection of of Dallas, Texas as special legal
counsel for the limited partners of the partnership for the purpose of
rendering the legal opinion described in the proxy statement under
"The Mergers -- Legal Opinion for Limited Partners" be and hereby is
approved by Pioneer USA, on behalf of the partnership, and the limited
partners of such partnership.
RESOLVED: That the legal opinion delivered pursuant to the partnership agreement
of the partnership as described in the proxy statement under "The
Mergers -- Legal Opinion for Limited Partners," in form and substance
as set forth in Exhibit A to these merger proposals, be and hereby is
approved as in form and substance satisfactory to the limited partners
of such partnership in their reasonable judgment.
D-4
<PAGE> 94
EXHIBIT A
TO APPENDIX D
OPINION OF
[OPINION SHOULD BE SUBSTANTIALLY TO THE FOLLOWING EFFECT]
Pioneer Natural Resources USA, Inc.,
As Sole or Managing General Partner of
25 Publicly-Held Limited Partnerships
Named in the Proxy Statement dated , 1999
1400 Williams Square West
5205 North O'Connor Blvd.
Irving, Texas 75039
We are of the opinion that neither the grant nor the exercise of the right
to amend each of the partnership agreements allowing each partnership to merge
with and into Pioneer Natural Resources USA, Inc. will result in the loss of
limited liability of any limited partner or result in any of the partnerships
being treated as an association taxable as a corporation for federal income tax
purposes.
D-5
<PAGE> 95
APPENDIX E
FORM OF
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated , 1999, to be
effective as of the Closing Date (as defined below) (the "MERGER AGREEMENT"), is
entered into by and among Pioneer Natural Resources Company, a Delaware
corporation ("PIONEER"), Pioneer Natural Resources USA, Inc., a Delaware
corporation and wholly-owned subsidiary of Pioneer ("PIONEER USA"), and each of
the limited partnerships referred to below (the "PARTNERSHIPS").
RECITALS:
A. Pioneer USA is the sole or managing general partner of each of the
following Partnerships:
<TABLE>
<CAPTION>
NAME STATE OF FORMATION
- ---- ------------------
<S> <C>
Parker & Parsley 82-I, Ltd. Texas
Parker & Parsley 82-II, Ltd. Texas
Parker & Parsley 83-A, Ltd. Texas
Parker & Parsley 83-B, Ltd. Texas
Parker & Parsley 84-A, Ltd. Texas
Parker & Parsley 85-A, Ltd. Texas
Parker & Parsley 85-B, Ltd. Texas
Parker & Parsley 86-A, Ltd. Texas
Parker & Parsley 86-B, Ltd. Texas
Parker & Parsley 86-C, Ltd. Texas
Parker & Parsley 87-A, Ltd. Texas
Parker & Parsley Producing Properties 87-A, Ltd. Texas
Parker & Parsley 87-B, Ltd. Texas
Parker & Parsley Producing Properties 87-B, Ltd. Texas
Parker & Parsley 88-A, L.P. Delaware
Parker & Parsley Producing Properties 88-A, L.P. Delaware
Parker & Parsley 88-B LP Delaware
Parker & Parsley 89-A, L.P. Delaware
Parker & Parsley 90-A, L.P. Delaware
Parker & Parsley 90-B Conv., L.P. Delaware
Parker & Parsley 90-B, L.P. Delaware
Parker & Parsley 90-C, Conv., L.P. Delaware
Parker & Parsley 90-C, L.P. Delaware
Parker & Parsley 91-A, L.P. Delaware
Parker & Parsley 91-B, L.P. Delaware
</TABLE>
B. Each of Parker & Parsley Employees 82-I, Ltd., a Texas limited
partnership, Parker & Parsley Employees 82-II, Ltd., a Texas limited
partnership, Parker & Parsley Employees 83-A, Ltd., a Texas limited partnership,
Parker & Parsley Employees 83-B, Ltd., a Texas limited partnership, and Parker &
Parsley Employees 84-A, Ltd., a Texas limited partnership (individually, the
"NONMANAGING GENERAL PARTNER" and collectively, the "NONMANAGING GENERAL
PARTNERS"), is the nonmanaging general partner of Parker & Parsley 82-I, Ltd., a
Texas limited partnership, Parker & Parsley 82-II, Ltd., a Texas limited
partnership, Parker & Parsley 83-A, Ltd., a Texas limited partnership, Parker &
Parsley 83-B, Ltd., a Texas limited partnership, and Parker & Parsley 84-A,
Ltd., a Texas limited partnership, respectively.
C. Pioneer USA is the sole general partner of each of the Nonmanaging
General Partners and in such capacity has authority (a) to cause the Nonmanaging
General Partner to perform its obligations under the partnership agreement of
the respective Partnership; and (b) to exercise on behalf of the
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Nonmanaging General Partner all of the rights and elections granted to such
Nonmanaging General Partner by the respective Partnership.
D. The board of directors of each of Pioneer and Pioneer USA has determined
that it is in the best interests of Pioneer and Pioneer USA (in its individual
capacity, as general partner of the Partnerships and as general partner of the
Nonmanaging General Partners) to merge each of the Partnerships with and into
Pioneer USA and such boards of directors have approved the mergers, upon the
terms and subject to the conditions contained herein.
E. Pioneer USA intends to solicit the vote of the limited partners of each
Partnership holding at least a majority of the outstanding partnership interests
of such Partnership to approve the merger for such Partnership. Subject to
certain limitations, upon consummation of the mergers, the partners, other than
Pioneer USA, will have the right to an amount in cash subject to the terms and
conditions described herein.
F. Concurrently with the mergers described in this Merger Agreement,
Pioneer is also offering to acquire 21 non-public limited partnerships and 13
privately-held employee partnerships through mergers of those partnerships into
Pioneer USA. The terms of the mergers and the method of establishing merger
values for limited partners in those partnerships are substantially the same as
those for the Partnerships.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereto agree as follows:
ARTICLE 1
THE MERGERS
1.1 Mergers. At the Effective Time (as defined in Section 1.4), each
Partnership shall be merged with and into Pioneer USA, the separate existence of
such Partnership shall cease, and Pioneer USA, as the surviving corporation,
shall continue to exist by virtue of and shall be governed by the laws of the
State of Delaware.
1.2 Merger Values.
(a) At the Effective Time, by virtue of the mergers and without any action
on the part of Pioneer USA or the other partners, each partnership interest
outstanding immediately prior thereto shall be converted, except as otherwise
set forth in this Section, into the right to receive an amount in cash allocated
to the respective Partnership in accordance with the merger value assigned
thereto pursuant to the procedures set forth in the Proxy Statement (as defined
in Section 4.3) and the procedures set forth in such Partnership's partnership
agreement for allocating liquidation distributions. The merger value assigned to
each Partnership and the amount of cash offered with respect to each $1,000
investment by the limited partners in such Partnership pursuant to the mergers
are set forth on Exhibit A hereto opposite the name of such Partnership. The
merger values will not be adjusted as of the Closing Date.
(b) All partnership interests, when converted into the right to receive
cash, shall no longer be outstanding and shall automatically be cancelled and
retired and shall cease to exist, and each holder of a certificate representing
any such partnership interests shall cease to have any rights with respect
thereto, except the right to receive the amount of cash to be delivered in
consideration therefor.
(c) The partnership interests, whether general or limited, in the
participating partnerships held directly or indirectly by Pioneer USA shall be
cancelled without any consideration being received therefor; provided, however,
that as a result of the mergers, Pioneer USA will acquire 100% of the properties
of the participating partnerships, including properties attributable to its
partnership interests in those partnerships.
1.3 Closing. The closing of the mergers (the "CLOSING") shall take place
at the offices of Vinson & Elkins L.L.P., 2001 Ross Avenue, Dallas, Texas 75201,
as soon as practicable after the fulfillment of the conditions referred to in
Article 4, or at such other time and place as the parties shall agree (the date
of such Closing being the "CLOSING DATE").
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1.4 Effective Time of Mergers. Upon satisfaction of the conditions set
forth in Article 4 hereof and as soon as practicable after the Closing, this
Merger Agreement, or a certificate of merger setting forth the information
required by, and otherwise in compliance with, Section 263 of the General
Corporation Law of the State of Delaware (the "DGCL") and, if applicable,
Section 17-211 of the Revised Uniform Limited Partnership Act of the State of
Delaware (the "DRULPA") with respect to the mergers, shall be delivered for
filing with the Secretary of State of the State of Delaware. At such time, a
certificate of merger with respect to the mergers setting forth the information
required by, and otherwise in compliance with, Section 2.11 the Revised Limited
Partnership Act of the State of Texas (the "TRLPA") shall be delivered for
filing with the Secretary of State of the State of Texas. The mergers shall
become effective upon the later of (a) the day and at the time the Secretary of
State of the State of Delaware files this Merger Agreement or certificate of
merger in compliance with Section 263 of the DGCL and, if applicable, Section
17-211 of the DRULPA, and (b) the day and at the time the Secretary of State of
the State of Texas files such certificate of merger in compliance with Section
2.11 of the TRLPA (the time of such effectiveness is herein called the
"EFFECTIVE TIME").
1.5 Effects of Mergers. At the Effective Time, Pioneer USA, without
further action, as provided by the laws of the State of Delaware and the State
of Texas, shall succeed to and possess all the rights, privileges, powers, and
franchises, of a public as well as of a private nature, of the Partnerships; and
all property, real, personal and mixed, and all debts due on whatsoever account,
including subscriptions to shares, and all other choses in action, and all and
every other interest, of or belonging to or due to the Partnerships shall be
deemed to be vested in Pioneer USA without further act or deed; and the title to
any real estate, or any interest therein, vested in Pioneer USA or the
Partnerships shall not revert or be in any way impaired by reason of the
mergers. Such transfer to and vesting in Pioneer USA shall be deemed to occur by
operation of law, and no consent or approval of any other person shall be
required in connection with any such transfer or vesting unless such consent or
approval is specifically required in the event of merger or consolidation by law
or express provision in any contract, agreement, decree, order, or other
instrument to which Pioneer USA or the Partnerships is a party or by which
either of them is bound. At and after the Effective Time, Pioneer USA shall be
responsible and liable for all debts, liabilities, and duties of the
Partnerships, including franchise taxes, if any, which may be enforced against
Pioneer USA to the same extent as if said debts, liabilities, and duties had
been incurred or contracted by it. Neither the rights of creditors nor any liens
upon the property of the Partnerships or Pioneer USA shall be impaired by the
mergers.
1.6 Certificate of Incorporation and Bylaws. The certificate of
incorporation of Pioneer USA, attached hereto as Exhibit B, before the mergers
shall be and remain the certificate of incorporation of Pioneer USA after the
Effective Time, until the same shall thereafter be altered, amended, or repealed
in accordance with law and Pioneer USA's certificate of incorporation. The
bylaws of Pioneer USA as in effect at the Effective Time shall be and remain the
bylaws of Pioneer USA, as the surviving corporation, until the same shall
thereafter be altered, amended, or repealed in accordance with law, Pioneer
USA's certificate of incorporation, or such bylaws.
1.7 Pioneer USA Common Stock. At the Effective Time, each outstanding
share of common stock of Pioneer USA shall remain outstanding and shall continue
to represent one share of common stock of Pioneer USA.
1.8 Officers and Directors. At the Effective Time, each of the persons who
was serving as an officer of Pioneer USA immediately prior to the Effective Time
shall continue to be an officer of Pioneer USA and shall continue to serve in
such capacity at the pleasure of the board of directors of Pioneer USA or, if
earlier, until their respective death or resignation. At the Effective Time,
each of the persons who was serving as a director of Pioneer USA immediately
prior to the Effective Time shall continue to be a director of Pioneer USA, and
each shall serve in such capacity until the next annual meeting of stockholders
of Pioneer USA and until his or her successor is elected and qualified or, if
earlier, until his death, resignation, or removal from office.
1.9 Exchange of Partnership Interests for Cash. (a) Pioneer USA shall mail
checks to the partners of record, other than Pioneer USA, promptly following the
Closing Date in payment of the merger
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consideration. Limited partners and Nonmanaging General Partners of
participating partnerships will not be required to surrender partnership
interest certificates to receive the cash payment.
(b) After the Closing Date, there shall not be any further registration of
transfers on the transfer books of the Partnerships of the partnership interests
that were issued and outstanding immediately before the Closing Date and were
converted into the right to receive cash. If, after the Closing Date,
certificates representing partnership interests of participating partnerships
are presented, they shall be exchanged for cash, all as provided in this
Article.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Partnerships. Each of the
Partnerships hereby represents and warrants to Pioneer and Pioneer USA as
follows:
(a) Formation; Qualification. Such Partnership is a limited partnership
duly formed under the DRULPA or TRLPA, as applicable, and is validly existing
and in good standing under the laws of the State of Delaware or the State of
Texas, as applicable. Such Partnership has all requisite partnership power and
authority to own, operate or lease its properties and to carry on its business
as now being conducted. Such Partnership is duly qualified to do business as a
foreign limited partnership and is in good standing in each jurisdiction where
the character of its properties owned, operated or leased, or the nature of its
activities, makes such qualifications necessary.
(b) Capitalization. The aggregate initial investments by limited partners
of such Partnership as of August 1, 1999 are set forth in Table 1 of Appendix A
to the Proxy Statement. All of the outstanding partnership interests of such
Partnership are duly authorized, validly issued, free of preemptive rights and,
subject to the qualifications set forth in the Proxy Statement, nonassessable.
Except as described in the Proxy Statement, there are no outstanding
subscriptions, options or other arrangements or commitments obligating such
Partnership to issue any additional partnership interests.
(c) No Conflicts. Assuming this Merger Agreement is approved by the
requisite vote of the limited partners (with respect to Parker & Parsley 85-A,
Ltd., Parker & Parsley 85-B, Ltd., Parker & Parsley 91-A, L.P. and Parker &
Parsley 91-B, L.P. (the "SPECIAL VOTE PARTNERSHIPS"), excluding Pioneer USA and
its affiliates), consummation of the transactions contemplated hereby and
compliance with the terms and provisions of this Merger Agreement will not
conflict with, result in a breach of, require notice under or constitute a
default under any material judgment, order, injunction, decree or ruling of any
court or governmental authority or under any material agreement, indenture or
instrument to which such Partnership is a party.
(d) Authority, Authorization and Enforceability. Such Partnership has all
requisite power and authority to enter into and perform the provisions of this
Merger Agreement. The execution and delivery of this Merger Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary partnership action on the part of such Partnership other than
the approval of the limited partners (with respect to the Special Vote
Partnerships, excluding Pioneer USA and its affiliates). Subject to such
approval, this Merger Agreement has been duly executed and delivered by such
Partnership and constitutes a valid and binding obligation of such Partnership
enforceable in accordance with its terms.
(e) SEC Reports; Financial Statements.
(i) Each Partnership's (A) Annual Report on Form 10-K for the fiscal
year ended December 31, 1998, (B) Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999 and for the quarter ended June 30, 1999, and
(C) all other reports or registration statements filed with the Securities
and Exchange Commission (the "SEC") since December 31, 1998 (collectively,
the "PARTNERSHIP'S SEC REPORTS") (1) were prepared in accordance with the
applicable requirements of the Securities Act of 1933 (the "SECURITIES
ACT") and the Securities Exchange Act of 1934 (the
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"EXCHANGE ACT"), and (2) as of their respective dates, did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading.
(ii) Each of the financial statements of such Partnership for the
fiscal year ended December 31, 1998 and for the quarters ended March 31,
1999 and June 30, 1999 contained in such Partnership's SEC Reports has been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes thereto) and each fairly presents the
financial position of such Partnership as of the respective dates thereof
and the results of operations and cash flows of such Partnership for the
periods indicated, except that the unaudited interim financial statements
are subject to normal and recurring year-end adjustments that are not
expected to be material in amount.
(f) No Material Adverse Change. Since June 30, 1999, such Partnership has
conducted its operations in the ordinary and usual course of business and has
paid all of its obligations as they have become due; and the business of such
Partnership has not undergone any material adverse change since such date.
(g) Accuracy of Information. None of the information supplied or to be
supplied by such Partnership for inclusion in the Proxy Statement, as amended or
supplemented, will, at the time of the mailing of the Proxy Statement, the time
of the special meetings of the limited partners of the Partnerships (the
"SPECIAL MEETINGS") or the Closing Date, be false or misleading with respect to
any material fact, contain any untrue statement of material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
2.2 Representations and Warranties of Pioneer and Pioneer USA. Pioneer and
Pioneer USA hereby represent and warrant to the Partnerships as follows:
(a) Organization; Qualification. Each of Pioneer and Pioneer USA is a
corporation duly formed under the DGCL and is validly existing and in good
standing under the laws of the State of Delaware. Each of Pioneer and Pioneer
USA has all requisite corporate power and authority to own, operate or lease its
properties and to carry on its business as now being conducted. Each of Pioneer
and Pioneer USA is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction where the character of its properties
owned, operated or leased, or the nature of its activities, makes such
qualifications necessary.
(b) No Conflicts. Consummation of the transactions contemplated hereby and
compliance with the terms and provisions of this Merger Agreement will not
conflict with, result in a breach of, require notice under or constitute a
default under any material judgment, order, injunction, decree or ruling of any
court or governmental authority or under any material agreement, indenture or
instrument to which Pioneer or Pioneer USA is a party.
(c) Authority, Authorization and Enforceability. Each of Pioneer and
Pioneer USA has all requisite corporate power and authority to execute and
deliver this Merger Agreement and to perform the provisions of this Merger
Agreement. The execution and delivery of this Merger Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of each of Pioneer and Pioneer
USA. This Merger Agreement has been duly executed and delivered by each of
Pioneer and Pioneer USA and constitutes a valid and binding obligation of each
of Pioneer and Pioneer USA enforceable in accordance with its terms.
(d) No Material Adverse Change. Since June 30, 1999, each of Pioneer and
Pioneer USA has conducted its operations in the ordinary and usual course of
business and has paid all of its obligations as they have become due; and the
business of each of Pioneer and Pioneer USA has not undergone any material
adverse change since such date.
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(e) Accuracy of Information. None of the information supplied or to be
supplied by each of Pioneer and Pioneer USA for inclusion in the Proxy
Statement, as amended or supplemented, will, at the time of the mailing of the
Proxy Statement, the time of the Special Meetings or the Closing Date, be false
or misleading with respect to any material fact, contain any untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(f) Capacity as General Partner. Pioneer USA is the sole or managing
general partner of each of the Partnerships and is the sole general partner of
any Nonmanaging General Partner thereof.
ARTICLE 3
CONDITIONS PRECEDENT TO MERGERS
3.1 Conditions to Each Party's Obligations to Effect the Mergers. The
respective obligations of each party to effect the mergers shall be subject to
the fulfillment (or waiver in whole or in part by the intended beneficiary
thereof in its sole discretion) at or prior to the Closing Date of the following
conditions:
(a) This Merger Agreement, an amendment to the partnership agreements to
permit the mergers (the "MERGER AMENDMENT"), the selection of special legal
counsel for the limited partners and that counsel's legal opinion referred to in
Section 3.1(c) shall have been approved by the limited partners (with respect to
the Special Vote Partnerships, excluding Pioneer USA and its affiliates) holding
at least a majority of the outstanding limited partnership interests voting in
person or by proxy at the Special Meetings at which a quorum is present, with
respect to each merger.
(b) Pioneer USA shall have received from Robert A. Stanger & Co., Inc. a
written opinion for inclusion in the Proxy Statement satisfactory in form and
substance to Pioneer USA and substantially to the effect that, as of the date of
that opinion, the amount of cash to be received by the limited partners of each
partnership in the mergers is fair from a financial point of view to those
partners. Such opinion shall not have been withdrawn prior to the Closing Date,
unless a replacement opinion or opinions of an investment banking firm or firms
satisfactory to Pioneer USA to a similar effect has been received by Pioneer USA
and has not been withdrawn.
(c) The receipt, on or prior to the Closing Date, by Pioneer USA of the
opinion of special legal counsel for the limited partners pursuant to the
partnership agreements of the Partnerships.
(d) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the mergers and
the transactions related thereto.
(e) No suit, action or proceeding shall have been filed or otherwise be
pending against Pioneer, Pioneer USA or any officer, director or affiliate of
Pioneer or Pioneer USA challenging the legality or any aspect of the mergers or
the transactions related thereto.
(f) The parties to the mergers having made all filings and registrations
with, and notifications to, all third parties, including, without limitation,
lenders and all appropriate regulatory authorities, required for consummation of
the transactions contemplated by this Merger Agreement (other than the filing
and recordation of appropriate merger documents required by the DGCL, DRULPA or
TRLPA, as applicable), and all approvals and authorizations and consents of all
third parties, including, without limitation, lenders and all regulatory
authorities, required for consummation of the transactions contemplated by this
Merger Agreement shall have been received and shall be in full force and effect,
except for such filings, registrations, notifications, approvals, authorizations
and consents, the failure of which to make or obtain would not have a material
adverse effect on the business or financial condition of Pioneer, Pioneer USA or
the Partnerships.
(g) The absence of any opinion of counsel that the exercise by the limited
partners of the right to approve the mergers is not permitted under applicable
state law.
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3.2 Conditions to Obligations of Pioneer and Pioneer USA to Effect the
Mergers. The obligations of Pioneer and Pioneer USA to effect the mergers shall
be subject to the fulfillment (or waiver in whole or in part by the intended
beneficiary thereof in its sole discretion), at or prior to the Closing Date, of
the following additional conditions:
(a) Each of the Partnerships shall have performed in all material respects
its agreements contained in this Merger Agreement required to be performed at or
prior to the Closing Date.
(b) The representations and warranties of each of the Partnerships
contained in this Merger Agreement shall be true and correct in all material
respects at and as of the Closing Date as if made at and as of such time unless
they relate to another specified time.
3.3 Conditions to Obligations of the Partnerships to Effect the
Mergers. The obligations of each of the Partnerships to effect its respective
merger shall be subject to the fulfillment (or waiver in whole or in part by the
intended beneficiary thereof in its sole discretion) at or prior to the Closing
Date of the following additional conditions:
(a) Each of Pioneer and Pioneer USA shall have performed in all material
respects its agreements contained in this Merger Agreement required to be
performed at or prior to the Closing Date.
(b) The representations and warranties of each of Pioneer and Pioneer USA
contained in this Merger Agreement shall be true and correct in all material
respects at and as of the Closing Date as if made at and as of such time unless
they relate to another specific time.
ARTICLE 4
ADDITIONAL AGREEMENTS
4.1 Conduct of Business Pending the Mergers. Each of Pioneer, Pioneer USA
and the Partnerships covenants and agrees that, between the date of this Merger
Agreement and the Closing Date, unless the other parties shall otherwise agree
in writing or as otherwise contemplated in this Merger Agreement, they shall
conduct their respective businesses only in the ordinary course of business and
in a manner consistent with past practice, and they shall not take any action
except for actions consistent with such practice. Each of Pioneer, Pioneer USA
and the Partnerships shall use their respective reasonable best efforts to
preserve intact the business organization of Pioneer, Pioneer USA and the
Partnerships, to keep available the services of the present officers, employees
and consultants of Pioneer, Pioneer USA and the Partnerships, and to preserve
their relationships with customers, suppliers and other persons with which they
have significant business dealings.
4.2 Special Meetings; Proxies. As soon as reasonably practicable after the
execution of this Merger Agreement, Pioneer USA will take all action necessary
to duly call, give notice of, convene and hold the Special Meetings to consider
and vote upon approval of this Merger Agreement, the Merger Amendment, the
selection of special legal counsel for the limited partners, that counsel's
legal opinion referred to in Section 3.1(c) and the transactions contemplated
hereby and thereby. Pioneer USA will use its reasonable best efforts to solicit
from the limited partners proxies in favor of this Merger Agreement, the Merger
Amendment, the selection of special legal counsel for the limited partners, that
counsel's legal opinion referred to in Section 3.1(c) and the transactions
contemplated hereby and thereby, and to take all other action necessary or
advisable to secure any vote or consent of the limited partners required by the
partnership agreements of the Partnerships or this Merger Agreement or
applicable law to effect the mergers.
4.3 Proxy Statement. Pioneer USA has filed with the SEC under the Exchange
Act a preliminary proxy statement for the Special Meetings (the definitive form
of such proxy statement is referred to as the "Proxy Statement"). Pioneer and
Pioneer USA shall use all reasonable commercial efforts to have the Proxy
Statement cleared with the SEC as promptly as practicable. Pioneer and Pioneer
USA shall cause the Proxy Statement to be mailed to the limited partners as soon
as practicable in accordance with applicable federal and state law.
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4.4 Additional Agreements. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable commercial
efforts to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and to use all
reasonable commercial efforts to take, or cause to be taken, all other actions
and to do, or cause to be done, all other things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective as
promptly as practicable the transactions contemplated by this Merger Agreement.
ARTICLE 5
TERMINATION
5.1 Termination. This Merger Agreement may be terminated and the mergers
contemplated hereby may be abandoned, in whole or in part, with respect to any
or all of the partnerships, at any time prior to the Effective Time, whether
before or after approval of the mergers by the limited partners (with respect to
the Special Vote Partnerships, excluding Pioneer USA and its affiliates):
(a) By mutual written consent of the parties;
(b) By any party, if:
(i) there shall be any applicable law, rule or regulation that makes
consummation of the mergers illegal or otherwise prohibited or if any
judgment, injunction, order or decree enjoining any party from consummating
the mergers is entered and such judgment, injunction, order or decree shall
have become final and non-appealable;
(ii) at the Special Meetings or at any adjournment or postponement
thereof, the limited partners' approval referred to in Section 3.1(a) shall
not have been obtained by reason of the failure to obtain the requisite
vote; or
(iii) there shall be any pending suit, action or proceeding filed
against Pioneer, Pioneer USA or any officer, director or affiliate of
Pioneer or Pioneer USA challenging the legality or any aspect of the
mergers or the transactions related thereto;
(c) By Pioneer, if Pioneer USA or any Partnership shall have failed to
perform its agreements and covenants contained herein, which failure has a
material adverse effect on Pioneer USA or such Partnership, as the case may be,
or materially and adversely affects the transactions contemplated by this Merger
Agreement;
(d) By Pioneer USA or any of the Partnerships with respect to that
Partnership's merger, if Pioneer shall have failed to perform its agreements and
covenants contained herein, which failure has a material adverse effect on
Pioneer USA or that Partnership, as the case may be, or materially and adversely
affects the transactions contemplated by this Merger Agreement;
(e) By Pioneer USA, if Pioneer USA, after considering the written advice of
outside legal counsel, determines in good faith that termination of the Merger
Agreement is required for Pioneer USA's board of directors to comply with its
fiduciary duties to its sole stockholder or to the Partnerships imposed by
applicable law; or
(f) By Pioneer, if there shall have occurred any event, circumstance,
condition, development or occurrence causing, resulting in or having a material
adverse effect (i) on any partnership's business, operations, properties (taken
as a whole), condition (financial or otherwise), results of operations, assets
(taken as a whole), liabilities, cash flows or prospects, or (ii) on market
prices for oil and gas prevailing generally in the oil and gas industry since
the date of determination of the oil and gas commodity prices used in the
determination of the merger values.
5.2 Effect of Termination. In the event of termination of this Merger
Agreement by a party as provided in Section 5.1, written notice thereof shall
promptly be given to the other party and this Merger Agreement shall forthwith
terminate without further action by either of the parties hereto. If this Merger
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Agreement is terminated as provided, however, there shall be no liabilities or
obligations hereunder on the part of any party hereto except as provided in
Section 6.13 and except that nothing herein shall relieve any party hereto from
liability for any breach of this Merger Agreement.
ARTICLE 6
MISCELLANEOUS
6.1 Headings. The headings contained in this Merger Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Merger Agreement.
6.2 Amendment. This Merger Agreement may be supplemented, amended or
modified by an instrument in writing signed by Pioneer and Pioneer USA (on
behalf of itself and as (a) general partner, (b) general partner of the
Nonmanaging General Partners, and (c) attorney-in-fact for the limited partners)
at any time prior to the Closing Date; provided, however, that after approval by
the limited partners (with respect to the Special Vote Partnerships, excluding
Pioneer USA and its affiliates) of this Merger Agreement, the Merger Amendment,
the selection of special legal counsel for the limited partners and that
counsel's legal opinion referred to in Section 3.1(c), no amendment may be made
which would change the type or amount of, or the method for determining, the
consideration into which each Partnership interest will be converted upon
consummation of the mergers or which would in any other way materially and
adversely affect the rights of such limited partners (other than a termination
of this Merger Agreement or abandonment of the mergers).
6.3 Waiver. At any time prior to the Closing Date, the parties hereto may
(a) extend the time for the performance of any of the obligations or other acts
of the other parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant hereto,
and (c) waive compliance with any of the agreements or conditions contained
herein. Any such extension or waiver shall not operate as an extension or waiver
of, or estoppel with respect to, any subsequent failure of compliance or other
failure. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid against such party if set forth in an instrument in
writing signed by such party.
6.4 Expiration of Representations and Warranties. All representations and
warranties made pursuant to this Merger Agreement shall expire with, and be
terminated and extinguished by, the mergers at the Closing Date.
6.5 Notices. All notices and other communications to be given or made
hereunder by any party shall be delivered by first class mail, or by personal
delivery, postage or fees prepaid, to (a) Pioneer at 1400 Williams Square West,
5205 North O'Connor Boulevard, Irving, Texas 75039, with a copy to Michael D.
Wortley, Vinson & Elkins L.L.P., 3700 Trammell Crow Center, Dallas, Texas 75201,
and (b) to the other parties at Pioneer Natural Resources USA, Inc., 1400
Williams Square West, 5205 North O'Connor Boulevard, Irving, Texas 75039 with a
copy to Brian M. Lidji, Sayles & Lidji, A Professional Corporation, 4400
Renaissance Tower, 1201 Elm Street, Dallas, Texas 75270.
6.6 Counterparts. This Merger Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
6.7 Severability. If any term or other provision of this Merger Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Merger Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.
6.8 Entire Agreement. This Merger Agreement, including the documents and
instruments referred to herein, constitutes the entire agreement and supersedes
all other prior agreements and undertakings, both written and oral, between the
parties, or any of them, with respect to the subject matter hereof.
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6.9 Remedies. Except as otherwise expressly provided herein, this Merger
Agreement is not intended to confer upon any other person any rights or remedies
hereunder.
6.10 Assignment. This Merger Agreement shall not be assigned by operation
of law or otherwise without the consent of all parties hereto.
6.11 No Implied Waiver. Except as expressly provided in this Merger
Agreement, no course of dealing among the parties hereto and no delay by any of
them in exercising any right, power or remedy conferred herein or now or
hereafter existing at law or in equity, by statute or otherwise, shall operate
as a waiver of, or otherwise prejudice, any such right, power or remedy.
6.12 Governing Law. Except to the extent that TRLPA is mandatorily
applicable, this Merger Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware (regardless of the laws that
might otherwise govern under applicable principles of conflicts of law) as to
all matters.
6.13 Expenses. Except as otherwise provided herein, the Partnerships,
including the 21 non-public limited partnerships and 13 privately-held employee
partnerships described in the recitals, will pay, pro rata based on their merger
values, all estimated expenses and fees incurred in connection with the mergers
of the Partnerships and the other partnerships with and into Pioneer USA, to the
extent the mergers of those Partnerships or partnerships are completed. If
Pioneer terminates this Merger Agreement or abandons the mergers pursuant to
Section 5.1, Pioneer will pay all estimated expenses and fees of the
Partnerships and the other partnerships incurred in connection with the mergers
before such termination or abandonment.
6.14 Liquidation. The Partnerships, Pioneer and Pioneer USA intend and
agree that the mergers shall be treated as a liquidation of the Partnerships
into Pioneer USA pursuant to Section 332 of the Internal Revenue Code of 1986,
as amended, and shall make all declarations and filings necessary to accomplish
such intent and liquidation.
E-10
<PAGE> 105
IN WITNESS WHEREOF, each of the parties hereto has executed this Merger
Agreement as of the date first written above.
PIONEER NATURAL RESOURCES COMPANY
By:
----------------------------------
Name:
---------------------------------
Title:
---------------------------------
PIONEER NATURAL RESOURCES USA, INC.
By:
----------------------------------
Name:
---------------------------------
Title:
---------------------------------
PARTNERSHIPS:
Parker & Parsley 82-I, Ltd.
Parker & Parsley 82-II, Ltd.
Parker & Parsley 83-A, Ltd.
Parker & Parsley 83-B, Ltd.
Parker & Parsley 84-A, Ltd.
Parker & Parsley 85-A, Ltd.
Parker & Parsley 85-B, Ltd.
Parker & Parsley 86-A, Ltd.
Parker & Parsley 86-B, Ltd.
Parker & Parsley 86-C, Ltd.
Parker & Parsley 87-A, Ltd.
Parker & Parsley 87-B, Ltd.
Parker & Parsley Producing
Properties 87-A, Ltd.
Parker & Parsley Producing
Properties 87-B, Ltd.
Parker & Parsley 88-A, L.P.
Parker & Parsley 88-B, L.P.
Parker & Parsley Producing
Properties 88-A, L.P.
Parker & Parsley 89-A, L.P.
Parker & Parsley 90-A, L.P.
Parker & Parsley 90-B Conv., L.P.
Parker & Parsley 90-B, L.P.
Parker & Parsley 90-C Conv., L.P.
Parker & Parsley 90-C, L.P.
Parker & Parsley 91-A, L.P.
Parker & Parsley 91-B, L.P.
E-11
<PAGE> 106
By: Pioneer Natural Resources USA,
Inc., as general partner of each
Partnership
By:
----------------------------------
Name:
---------------------------------
Title:
---------------------------------
By: Pioneer Natural Resources USA,
Inc., as general partner of the
Nonmanaging General Partner of
each of Parker & Parsley 82-I,
Ltd., Parker & Parsley 82-II,
Ltd., Parker & Parsley 83-A,
Ltd., Parker & Parsley 83-B,
Ltd., and Parker & Parsley 84-A,
Ltd., respectively
By:
----------------------------------
Name:
---------------------------------
Title:
---------------------------------
By: Pioneer Natural Resources USA,
Inc., as attorney-in-fact for
the limited partners of each
Partnership
By:
----------------------------------
Name:
---------------------------------
Title:
---------------------------------
E-12
<PAGE> 107
EXHIBIT A
TO APPENDIX E
MERGER VALUE AND AMOUNT OF INITIAL LIMITED PARTNER INVESTMENT REPAID
This table contains the following summary information for each partnership:
- the aggregate merger values assigned to:
-- Pioneer USA's partnership interests, whether general or limited;
-- its nonmanaging general partners' partnership interests, excluding
Pioneer USA;
-- its limited partners, excluding Pioneer USA; and
- for each $1,000 initial limited partner investment in that partnership:
-- the merger value;
-- the total historical cash distributions through June 30, 1999; and
-- the total amount of initial investment by the limited partners that has
been repaid, after giving effect to the mergers, stated in dollars and
as a percentage.
<TABLE>
<CAPTION>
PER $1,000 INITIAL LIMITED PARTNER INVESTMENT
AGGREGATE MERGER VALUE -----------------------------------------------
-------------------------------------- DISTRIBUTIONS AMOUNT OF
OTHER FROM INITIAL INVESTMENT
NONMANAGING INCEPTION REPAID
GENERAL LIMITED MERGER THROUGH -------------------
PIONEER USA PARTNERS PARTNERS VALUE 6/30/99 $ %
----------- ----------- ---------- -------- -------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Parker & Parsley 82-I, Ltd........ $160,707 $ 5,579 $ 370,968 $ 34.99 $ 947.88 $ 982.87 98%
Parker & Parsley 82-II, Ltd....... 233,515 7,240 677,990 57.41 1,100.07 1,157.48 116%
Parker & Parsley 83-A, Ltd........ 444,921 17,701 1,314,512 69.55 1,264.54 1,334.09 133%
Parker & Parsley 83-B, Ltd........ 744,776 29,018 2,170,824 96.42 1,461.35 1,557.77 156%
Parker & Parsley 84-A, Ltd........ 637,901 28,200 1,965,607 103.14 1,388.21 1,491.35 149%
Parker & Parsley 85-A, Ltd........ 20,949 -- 695,068 73.73 681.05 754.78 75%
Parker & Parsley 85-B, Ltd........ 14,351 -- 820,575 103.47 879.49 982.96 98%
Parker & Parsley 86-A, Ltd........ 11,133 -- 818,452 81.07 1,282.95 1,364.02 136%
Parker & Parsley 86-B, Ltd........ 39,117 -- 2,213,631 129.61 1,476.23 1,605.84 161%
Parker & Parsley 86-C, Ltd........ 24,353 -- 1,838,218 95.45 1,405.01 1,500.46 150%
Parker & Parsley 87-A, Ltd........ 53,960 -- 3,315,712 115.79 1,232.73 1,348.52 135%
Parker & Parsley Producing
Properties 87-A, Ltd............ 23,968 -- 1,753,345 144.08 892.03 1,036.11 104%
Parker & Parsley 87-B, Ltd........ 32,586 -- 2,634,521 131.44 1,158.39 1,289.83 129%
Parker & Parsley Producing
Properties 87-B, Ltd............ 33,115 -- 1,252,499 208.84 961.03 1,169.87 117%
Parker & Parsley 88-A, L.P........ 51,739 -- 2,174,467 170.38 997.83 1,168.21 117%
Parker & Parsley Producing
Properties 88-A, L.P............ 32,164 -- 1,873,767 336.28 1,086.22 1,422.50 142%
Parker & Parsley 88-B, L.P........ 28,688 -- 1,378,077 155.54 972.69 1,128.23 113%
Parker & Parsley 89-A, L.P........ 33,362 -- 1,449,492 176.51 916.62 1,093.13 109%
Parker & Parsley 90-A, L.P........ 34,154 -- 1,054,698 158.26 789.75 948.01 95%
Parker & Parsley 90-B Conv.,
L.P............................. 31,749 -- 1,874,279 158.61 604.35 762.96 76%
Parker & Parsley 90-B, L.P........ 64,924 -- 5,109,583 158.78 604.43 763.21 76%
Parker & Parsley 90-C Conv.,
L.P............................. 13,545 -- 957,896 127.70 538.46 666.16 67%
Parker & Parsley 90-C, L.P........ 18,948 -- 1,533,135 126.92 538.47 665.39 66%
Parker & Parsley 91-A, L.P........ 32,032 -- 2,283,469 197.28 673.79 871.07 87%
Parker & Parsley 91-B, L.P........ 26,234 -- 2,384,931 212.20 537.98 750.18 75%
</TABLE>
E-13
<PAGE> 108
EXHIBIT B
TO APPENDIX E
CERTIFICATE OF INCORPORATION
OF
PIONEER NEWSUB2, INC.
FIRST: The name of the corporation is Pioneer NewSub2, Inc. (the
"Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, Wilmington, county of New Castle,
Delaware 19801. The name of the registered agent of the Corporation at such
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "General Corporation Law").
FOURTH: The total number of shares of stock which the Corporation shall
have the authority to issue is 1,000 shares of common stock, par value $.01 per
share ("Common Stock").
In the event of a voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation and upon any distribution of the
assets of the Corporation in connection therewith, the holders of Common Stock
shall be entitled to receive all the assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to stockholders, ratably
in proportion to the number of shares of Common Stock held by them.
Each holder of Common Stock shall have one vote in respect of each share of
Common Stock held by such holder on any matter submitted to the stockholders.
Cumulative voting of shares of Common Stock is prohibited.
FIFTH: The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. In furtherance and not in
limitation of the powers conferred by statute, the Board of Directors is
expressly authorized to adopt, amend or repeal the Bylaws of the Corporation;
provided, however, that the grant of such authority shall not divest the
stockholders of the power, nor limit their power to adopt, amend or repeal the
Bylaws. The number of directors that shall constitute the whole Board of
Directors of the Corporation shall be as from time to time fixed by, or in the
manner provided in, the Bylaws of the Corporation. The election of directors
need not be by written ballot, unless the Bylaws so provide. In addition to the
authority and powers hereinabove or by statute conferred upon the directors, the
directors are hereby authorized and empowered to exercise all such powers and do
all such acts and things as may be exercised or done by the Corporation, subject
to the provisions of the General Corporation Law, this Certificate of
Incorporation and any Bylaws adopted by the stockholders of the Corporation;
provided, however, that no Bylaws hereafter adopted by the stockholders of the
Corporation shall invalidate any prior act of the directors that would have been
valid if such Bylaws had not been adopted.
SIXTH: No director of the Corporation shall be personally liable to the
Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director involving any act or omission of any such director;
provided, however, that the foregoing provision shall not eliminate or limit the
liability of a director (a) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (b) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (c) under
Section 174 of the General Corporation Law, as the same exists or hereafter may
be amended, or (d) for any transaction from which the director derived an
improper personal benefit. If the General Corporation Law is amended after the
date of filing of this Certificate of Incorporation to authorize corporate
action further limiting or eliminating the personal liability of directors, then
the liability of a director of the Corporation, in addition to the limitation on
personal liability
E-14
<PAGE> 109
provided for herein, shall be limited to the fullest extent permitted by the
General Corporation Law as so amended. Any repeal or modification of this
Article Sixth by the stockholders of the Corporation shall be prospective only,
and shall not adversely affect any limitation on the personal liability of a
director of the Corporation existing at the time of such repeal or modification.
SEVENTH: The Corporation expressly elects not to be governed by Section 203
of the General Corporation Law, as the same exists or hereafter may be amended.
EIGHTH: The name and mailing address of the sole incorporator are as
follows: Patricia F. Reilly, c/o Vinson & Elkins L.L.P., 3700 Trammell Crow
Center, 2001 Ross Avenue, Dallas, Texas 75201.
NINTH: The powers of the sole incorporator shall terminate upon the filing
of this Certificate of Incorporation. The names and mailing addresses of the
persons who are to serve as directors of the Corporation until the first annual
meeting of stockholders or until their successors are elected and qualify are as
follows:
<TABLE>
<CAPTION>
NAME OF DIRECTOR MAILING ADDRESS
- ---------------- ---------------
<S> <C>
Scott D. Sheffield........................... c/o Pioneer Natural Resources Company
1400 Williams Square West
5205 North O'Connor Boulevard
Irving, Texas 75039
Timothy L. Dove.............................. c/o Pioneer Natural Resources Company
1400 Williams Square West
5205 North O'Connor Boulevard
Irving, Texas 75039
Mark L. Withrow.............................. c/o Pioneer Natural Resources Company
1400 Williams Square West
5205 North O'Connor Boulevard
Irving, Texas 75039
M. Garrett Smith............................. c/o Pioneer Natural Resources Company
1400 Williams Square West
5205 North O'Connor Boulevard
Irving, Texas 75039
Dennis E. Fagerstone......................... c/o Pioneer Natural Resources Company
1400 Williams Square West
5205 North O'Connor Boulevard
Irving, Texas 75039
</TABLE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Incorporation this 30th day of December, 1997.
By: /s/ PATRICIA F. REILLY
----------------------------------
Patricia F. Reilly
Incorporator
E-15
<PAGE> 110
ARTICLES OF MERGER
WITH RESPECT TO THE MERGER OF
PIONEER ASSETCO, INC.
A TEXAS CORPORATION
WITH AND INTO
PIONEER NEWSUB2, INC.
A DELAWARE CORPORATION
December 30, 1997
Pursuant to the provisions of Article 5.16 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Merger for the purpose of effecting a merger of Pioneer AssetCo, Inc., a Texas
corporation ("AssetCo"), with and into Pioneer NewSub2, Inc., a Delaware
corporation (the "Subsidiary"), with the Subsidiary to continue in existence
following the merger as the surviving corporation.
1. The name, type of entity and respective jurisdiction of organization of
the parties to the merger are as follows:
<TABLE>
<CAPTION>
NAME OF PARENT ENTITY ENTITY STATE
- --------------------- ----------- -----
<S> <C> <C>
Pioneer AssetCo, Inc. ...................................... Corporation Texas
</TABLE>
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY ENTITY ENTITY STATE
- ------------------------- ----------- --------
<S> <C> <C>
Pioneer NewSub2, Inc. ...................................... Corporation Delaware
</TABLE>
2. The name of the entity that shall survive the merger is Pioneer NewSub2,
Inc., which, at the effective time of the merger, shall be changed to Pioneer
Natural Resources USA, Inc.
3. As to the Subsidiary, the total number or percentage of outstanding
shares, identified by class or series of stock of such corporation, and the
number or percentage of shares in each class or series owned by AssetCo are as
follows:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE
SHARES DESIGNATION OF OWNED BY
NAME OF CORPORATION OUTSTANDING CLASS OR SERIES ASSETCO
- ------------------- ----------- --------------- ----------
<S> <C> <C> <C>
Pioneer NewSub2, Inc. ......................... 1,000 Common Stock 100%
</TABLE>
4. Attached hereto as Exhibit A is a true and correct copy of the
resolution of merger (the "Plan of Merger") adopted on December 30, 1997, by the
Board of Directors of AssetCo, approving the merger of AssetCo with and into the
Subsidiary, with the Subsidiary being the surviving corporation. The Plan of
Merger and the performance of its terms were duly authorized by all action
required by the laws of the State of Delaware and the State of Texas and the
organizational or other constituent documents of the parties to the merger.
5. The address of the registered office of the Subsidiary in the State of
Delaware is 1209 Orange Street, Wilmington, County of New Castle, Delaware
19801.
6. As to the corporation set forth below, the approval of whose
shareholders is required, the number of outstanding shares of each class or
series of stock of such corporation entitled to vote, with other shares or as a
class, on the plan of merger are as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES ENTITLED TO
VOTE AS CLASS OR SERIES:
NUMBER OF ----------------------------
SHARES DESIGNATION OF NUMBER OF
NAME OF CORPORATION OUTSTANDING CLASS OR SERIES SHARES
- ------------------- ----------- ---------------- ----------
<S> <C> <C> <C>
Pioneer AssetCo, Inc. ............................ 1,000 Common 1,000
</TABLE>
E-16
<PAGE> 111
7. As to the corporation set forth below, the approval of whose
shareholders is required, the number of shares voted for and against the plan of
merger, respectively, and, if the shares of any class or series are entitled to
vote as a class, the number of shares of each such class or series voted for and
against the plan of merger are as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
ENTITLED TO VOTE AS
CLASS OR SERIES:
-------------------
TOTAL VOTED TOTAL VOTED CLASS OR VOTED
NAME OF CORPORATION FOR AGAINST SERIES VOTED FOR AGAINST
- ------------------- ----------- ----------- -------- --------- -------
<S> <C> <C> <C> <C> <C>
Pioneer AssetCo, Inc. ........... 1,000 0 Common 1,000 0
</TABLE>
8. The Subsidiary will be responsible for the payment of any fees and
franchise taxes required by law and will be obligated to pay such fees and
franchise taxes if the same are not timely paid.
9. The merger will become effective on the later of (a) the day and at the
time the Secretary of State of the State of Delaware files the Certificate of
Ownership and Merger, or (b) the day and at the time the Secretary of State of
the State of Texas files the Articles of Merger.
DATED the date first above written.
PIONEER ASSETCO, INC.
By: /s/ M. GARRETT SMITH
----------------------------------
M. Garrett Smith
President
E-17
<PAGE> 112
EXHIBIT A
RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS
OF
PIONEER ASSETCO, INC.
December 30, 1997
WHEREAS, Pioneer AssetCo, Inc., a Texas corporation ("AssetCo") desires to
merge with and into Pioneer NewSub2, Inc., a Delaware corporation (the
"Subsidiary"), pursuant to the terms of that certain Agreement and Plan of
Merger (the "Merger Agreement") to be entered into by AssetCo and the
Subsidiary, a draft of which has been presented to and reviewed by the Board of
Directors of AssetCo and is attached hereto as Schedule I, and pursuant to which
Merger Agreement the Subsidiary will be possessed of all the estate, property,
rights, privileges and franchises of AssetCo; and
WHEREAS, the Board of Directors of AssetCo believes it is in the best
interests of AssetCo to enter into the Merger Agreement (as it may be changed in
accordance with these resolutions) and to merge with and into the Subsidiary;
NOW, THEREFORE, IT IS RESOLVED, that, subject to prior approval and
adoption by the sole stockholder of AssetCo, AssetCo merge with and into the
Subsidiary pursuant to the provisions of the Merger Agreement (as it may be
changed in accordance with these resolutions), the terms and provisions of which
are hereby authorized, adopted and approved in all respects; that the separate
existence of AssetCo cease at the effective time set forth in the Merger
Agreement; and that the Subsidiary, as the surviving corporation of the merger
pursuant to Section 253 of the General Corporation Law of the State of Delaware
and Article 5.16 of the Texas Business Corporation Act, continue to exist by
virtue of and be governed by the laws of the State of Delaware (such actions,
collectively, being called the "Merger").
RESOLVED FURTHER, that (a) the Merger Agreement be submitted to the sole
stockholder of AssetCo for its approval and adoption thereof, (b) that the Board
of Directors of AssetCo hereby recommends that the sole stockholder approve and
adopt the Merger Agreement (as it may be changed in accordance with these
resolutions), and (c) that, prior to such approval and adoption, a copy of the
Merger Agreement, as approved by the Board of Directors, be made available for
inspection by the sole stockholder.
RESOLVED FURTHER, that the officers of AssetCo be, and each is hereby,
authorized, empowered, and directed, for and on behalf and in the name of
AssetCo, to execute and deliver the Merger Agreement in substantially the form
reviewed by the Board of Directors of AssetCo, but with such changes therein as
the officer or officers executing the same may deem necessary, appropriate, or
advisable, and in the best interest of AssetCo, the execution of the Merger
Agreement in its final form to be conclusive evidence that such officers did
deem any such changes to be so necessary, appropriate, or desirable, and in the
best interest of AssetCo.
RESOLVED FURTHER, that, upon the required approval and adoption of the
Merger Agreement by the sole stockholder of AssetCo, the proper officers of
AssetCo are hereby authorized and directed, in the name and on behalf of
AssetCo, to execute and deliver a Certificate of Ownership and Merger for filing
with the Secretary of State of the State of Delaware and Articles of Merger for
filing with the Secretary of State of the State of Texas.
E-18
<PAGE> 113
SCHEDULE I
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 30, 1997 (this
"Merger Agreement"), is entered into by and among Pioneer AssetCo, Inc., a Texas
corporation ("AssetCo"), and Pioneer NewSub2, Inc., a Delaware corporation
("NewSub2").
RECITALS:
A. AssetCo is a wholly-owned subsidiary of Pioneer Natural Resources
Company, a Delaware corporation ("Pioneer"), and NewSub2 is a wholly-owned
subsidiary of AssetCo.
B. The Board of Directors of each of AssetCo and NewSub2 has determined
that it is in the best interests of AssetCo and NewSub2, respectively, to merge
AssetCo with and into NewSub2 upon the terms and subject to the conditions
contained herein.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 Merger. At the Effective Time (as defined in Section 1.2), AssetCo
shall be merged with and into NewSub2, the separate existence of AssetCo shall
cease, and NewSub2, as the surviving corporation, shall continue to exist by
virtue of and shall be governed by the laws of the State of Delaware (such
actions, collectively, being called the "Merger").
1.2 Effective Time of Merger. This Merger Agreement, or a Certificate of
Ownership and Merger setting forth the information required by, and otherwise in
compliance with, Section 253 of the General Corporation Law of the State of
Delaware with respect to the Merger, shall be delivered for filing with the
Secretary of State of the State of Delaware. This Merger Agreement, or Articles
of Merger setting forth the information required by, and otherwise in compliance
with, Article 5.16 of the Texas Business Corporation Act with respect to the
Merger, shall be delivered for filing with the Secretary of State of the State
of Texas. The Merger shall become effective upon the later of (i) the day and at
the time the Secretary of State of the State of Delaware files such Certificate
of Ownership and Merger, and (ii) the day and at the time the Secretary of State
of the State of Texas files such Articles of Merger (the time of such
effectiveness is herein called the "Effective Time"). Notwithstanding the
foregoing, by action of its Board of Directors, either of NewSub2 or AssetCo may
terminate this Merger Agreement at any time prior to the filing of the
Certificate of Ownership and Merger with respect to the Merger with Secretary of
State of the State of Delaware and the Articles of Merger with respect to the
Merger with Secretary of State of the State of Texas.
1.3 Effects of Merger. At the Effective Time, NewSub2, without further
action, as provided by the laws of the State of Delaware and the State of Texas,
shall succeed to and possess all the rights, privileges, powers, and franchises,
of a public as well as of a private nature, of AssetCo; and all property, real,
personal and mixed, and all debts due on whatsoever account, including
subscriptions to shares, and all other choses in action, and all and every other
interest, of or belonging to or due to AssetCo shall be deemed to be vested in
NewSub2 without further act or deed; and the title to any real estate, or any
interest therein, vested in NewSub2 or AssetCo shall not revert or be in any way
impaired by reason of the Merger. Such transfer to and vesting in NewSub2 shall
be deemed to occur by operation of law, and no consent or approval of any other
person shall be required in connection with any such transfer or vesting unless
such consent or approval is specifically required in the event of merger or
consolidation by law or express provision in any contract, agreement, decree,
order, or other instrument to which NewSub2 or AssetCo is a party or by which
either of them is bound. At and after the Effective Time, NewSub2
E-19
<PAGE> 114
shall be responsible and liable for all debts, liabilities, and duties of
AssetCo, including franchise taxes, if any, which may be enforced against
NewSub2 to the same extent as if said debts, liabilities, and duties had been
incurred or contracted by it. Neither the rights of creditors nor any liens upon
the property of AssetCo or NewSub2 shall be impaired by the Merger.
1.4 Certificate of Incorporation. The Certificate of Incorporation of
NewSub2 before the merger, as amended by the Certificate of Ownership and
Merger, attached hereto as Exhibit A-1 and Exhibit A-2, respectively, shall be
and remain the Certificate of Incorporation of NewSub2 after the Effective Time,
until the same shall thereafter be altered, amended, or repealed in accordance
with law and the Certificate of Incorporation of NewSub2. The Certificate of
Incorporation of NewSub2, as amended as aforesaid, changes the name of NewSub2
to Pioneer Natural Resources USA, Inc.
1.5 Bylaws. The Bylaws of NewSub2 as in effect at the Effective Time shall
be and remain the Bylaws of NewSub2 as the surviving corporation, until the same
shall thereafter be altered, amended, or repealed in accordance with law, the
Certificate of Incorporation of NewSub2 or such Bylaws.
ARTICLE 2
EFFECT ON OUTSTANDING COMMON STOCK
2.1 AssetCo Common Stock. At the Effective Time, all of the outstanding
shares of common stock of AssetCo shall, without any action on the part of the
holder thereof, be cancelled.
2.2 NewSub2 Common Stock. At the Effective Time, each outstanding share of
common stock of NewSub2 shall remain outstanding and shall continue to represent
one share of common stock of NewSub2.
2.3 Cancellation of Certificates of AssetCo Common Stock. At or after the
Effective Time, Pioneer, as the sole holder of the shares of common stock of
AssetCo that were outstanding immediately prior to the Effective Time, shall
surrender to NewSub2 the certificate(s) that represented such holder's shares
immediately prior to the Effective Time, and NewSub2 shall, upon receipt of such
certificate(s), immediately cancel such certificate(s). Whether or not so
surrendered, at and after the Effective Time, such certificate(s) shall be
deemed for all purposes to have been cancelled and shall not evidence any right
or interest in or claim against AssetCo or NewSub2.
ARTICLE 3
OFFICERS AND DIRECTORS
3.1 Directors. At the Effective Time, each of the persons who was serving
as a director of NewSub2 immediately prior to the Effective Time shall continue
to be a director of NewSub2 and each shall serve in such capacity until the next
annual meeting of stockholders of NewSub2 and until his or her successor is
elected and qualified or, if earlier, until his death, resignation, or removal
from office.
3.2 Officers. At the Effective Time, each of the persons who was serving
as an officer of NewSub2 immediately prior to the Effective Time shall continue
to be an officer of NewSub2 and shall continue to serve in such capacity at the
pleasure of the Board of Directors of NewSub2 or, if earlier, until their
respective death or resignation.
ARTICLE 4
MISCELLANEOUS
4.1 Headings. The headings contained in this Merger Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Merger Agreement.
E-20
<PAGE> 115
4.2 Amendment. To the extent permitted by law, this Merger Agreement may
be amended or supplemented at any time and in any respect, to the extent such
amendment or supplement relates to the Merger, by action taken by the Boards of
Directors of NewSub2 and AssetCo, if prior to the Effective Time, or by the
Board of Directors of NewSub2, if on or after the Effective Time.
4.3 Governing Law. This Merger Agreement shall be governed by and
construed in accordance with the laws of the State of Texas with respect to all
matters except to the extent the laws of the State of Delaware apply to matters
of corporate governance relating to NewSub2.
4.4 Counterparts. This Merger Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
4.5 Liquidation. AssetCo and NewSub2 intend and agree that the Merger
shall be treated as a liquidation of AssetCo into NewSub2 pursuant to Section
332 of the Internal Revenue Code of 1986, as amended, and shall make all
declarations and filings necessary to accomplish such intent and liquidation.
IN WITNESS WHEREOF, each of the parties hereto has executed this Merger
Agreement as of the date first written above.
PIONEER ASSETCO, INC.
By: /s/ M. GARRETT SMITH
----------------------------------
M. Garrett Smith
President
PIONEER NEWSUB2, INC.
By: /s/ M. GARRETT SMITH
----------------------------------
M. Garrett Smith
Senior Vice President -- Finance
Exhibit A-1: Certificate of Incorporation of NewSub2
Exhibit A-2: Certificate of Ownership and Merger
E-21
<PAGE> 116
EXHIBIT A-1
TO
SCHEDULE I
CERTIFICATE OF INCORPORATION
OF
PIONEER NEWSUB2, INC.
FIRST: The name of the corporation is Pioneer NewSub2, Inc. (the
"Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, Wilmington, county of New Castle,
Delaware 19801. The name of the registered agent of the Corporation at such
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "General Corporation Law").
FOURTH: The total number of shares of stock which the Corporation shall
have the authority to issue is 1,000 shares of common stock, par value $.01 per
share ("Common Stock").
In the event of a voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation and upon any distribution of the
assets of the Corporation in connection therewith, the holders of Common Stock
shall be entitled to receive all the assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to stockholders, ratably
in proportion to the number of shares of Common Stock held by them.
Each holder of Common Stock shall have one vote in respect of each share of
Common Stock held by such holder on any matter submitted to the stockholders.
Cumulative voting of shares of Common Stock is prohibited.
FIFTH: The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. In furtherance and not in
limitation of the powers conferred by statute, the Board of Directors is
expressly authorized to adopt, amend or repeal the Bylaws of the Corporation;
provided, however, that the grant of such authority shall not divest the
stockholders of the power, nor limit their power to adopt, amend or repeal the
Bylaws. The number of directors that shall constitute the whole Board of
Directors of the Corporation shall be as from time to time fixed by, or in the
manner provided in, the Bylaws of the Corporation. The election of directors
need not be by written ballot, unless the Bylaws so provide. In addition to the
authority and powers hereinabove or by statute conferred upon the directors, the
directors are hereby authorized and empowered to exercise all such powers and do
all such acts and things as may be exercised or done by the Corporation, subject
to the provisions of the General Corporation Law, this Certificate of
Incorporation and any Bylaws adopted by the stockholders of the Corporation;
provided, however, that no Bylaws hereafter adopted by the stockholders of the
Corporation shall invalidate any prior act of the directors that would have been
valid if such Bylaws had not been adopted.
SIXTH: No director of the Corporation shall be personally liable to the
Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director involving any act or omission of any such director;
provided, however, that the foregoing provision shall not eliminate or limit the
liability of a director (a) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (b) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (c) under
Section 174 of the General Corporation Law, as the same exists or hereafter may
be amended, or (d) for any transaction from which the director derived an
improper personal benefit. If the General Corporation Law is amended after the
date of filing of this Certificate of Incorporation to authorize corporate
action further limiting or eliminating the personal liability of directors, then
the liability of a director of the Corporation, in addition to the limitation on
personal liability
E-22
<PAGE> 117
provided for herein, shall be limited to the fullest extent permitted by the
General Corporation Law as so amended. Any repeal or modification of this
Article Sixth by the stockholders of the Corporation shall be prospective only,
and shall not adversely affect any limitation on the personal liability of a
director of the Corporation existing at the time of such repeal or modification.
SEVENTH: The Corporation expressly elects not to be governed by Section 203
of the General Corporation Law, as the same exists or hereafter may be amended.
EIGHTH: The name and mailing address of the sole incorporator are as
follows: Patricia F. Reilly, c/o Vinson & Elkins L.L.P., 3700 Trammell Crow
Center, 2001 Ross Avenue, Dallas, Texas 75201.
NINTH: The powers of the sole incorporator shall terminate upon the filing
of this Certificate of Incorporation. The names and mailing addresses of the
persons who are to serve as directors of the Corporation until the first annual
meeting of stockholders or until their successors are elected and qualify are as
follows:
<TABLE>
<CAPTION>
NAME OF DIRECTOR MAILING ADDRESS
- ---------------- ---------------
<S> <C>
Scott D. Sheffield........................... c/o Pioneer Natural Resources Company 1400
Williams Square West 5205 North O'Connor
Boulevard Irving, Texas 75039
Timothy L. Dove.............................. c/o Pioneer Natural Resources Company 1400
Williams Square West 5205 North O'Connor
Boulevard Irving, Texas 75039
Mark L. Withrow.............................. c/o Pioneer Natural Resources Company 1400
Williams Square West 5205 North O'Connor
Boulevard Irving, Texas 75039
M. Garrett Smith............................. c/o Pioneer Natural Resources Company 1400
Williams Square West 5205 North O'Connor
Boulevard Irving, Texas 75039
Dennis E. Fagerstone......................... c/o Pioneer Natural Resources Company 1400
Williams Square West 5205 North O'Connor
Boulevard Irving, Texas 75039
</TABLE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Incorporation this 30th day of December, 1997.
By: /s/ PATRICIA F. REILLY
----------------------------------
Patricia F. Reilly
Incorporator
E-23
<PAGE> 118
EXHIBIT A-2
TO
SCHEDULE I
CERTIFICATE OF OWNERSHIP AND MERGER
WITH RESPECT TO THE MERGER OF
PIONEER ASSETCO, INC.
A TEXAS CORPORATION
WITH AND INTO
PIONEER NEWSUB2, INC.
A DELAWARE CORPORATION
(Pursuant to Section 253 of the
General Corporation Law of the State of Delaware)
December 30, 1997
Pioneer AssetCo, Inc., a Texas corporation ("AssetCo"), for the purpose of
merging AssetCo with and into Pioneer NewSub2, Inc., a Delaware corporation (the
"Subsidiary"), hereby certifies as follows:
FIRST: The name of AssetCo is Pioneer AssetCo, Inc., and AssetCo is
incorporated under the laws of the State of Texas. The name of the
Subsidiary is Pioneer NewSub2, Inc., and the Subsidiary is incorporated
under the laws of the State of Delaware.
SECOND: AssetCo owns all of the issued and outstanding capital stock
of the Subsidiary.
THIRD: Attached hereto as Exhibit A is a true and correct copy of the
resolution adopted on December 30, 1997, by the Board of Directors of
AssetCo approving the merger of AssetCo with and into the Subsidiary.
FOURTH: The merger has been approved by Pioneer Natural Resources
Company, a Delaware corporation and sole stockholder of AssetCo, by written
consent thereof dated December 30, 1997, in accordance with the provisions
of Sections 228(a) and 253(a) of the General Corporation Law of the State
of Delaware.
FIFTH: The name of the surviving corporation is Pioneer NewSub2, Inc.,
which, at the effective time of the merger, shall hereby be changed to
Pioneer Natural Resources USA, Inc.
SIXTH: The certificate of incorporation of the Subsidiary, as amended
hereby, shall be the certificate of incorporation of the surviving
corporation.
IN WITNESS WHEREOF, AssetCo has caused this Certificate to be signed by its
duly authorized officer on the date first above written.
PIONEER ASSETCO, INC.
By: /s/ M. GARRETT SMITH
----------------------------------
M. Garrett Smith
President
E-24
<PAGE> 119
CERTIFICATION OF NON-FOREIGN STATUS
FOR INDIVIDUAL PARTNERS
Section 1446 of the Internal Revenue Code provides that a partnership must
pay a withholding tax to the Internal Revenue Service with respect to a
partner's allocable share of the partnership's effectively connected taxable
income, if the partner is a foreign person. To inform (insert
name of partnership) that the provisions of section 1446 do not apply I,
, hereby certify the following:
1. I am not a nonresident alien for purposes of U.S. income taxation;
2. My U.S. taxpayer identification number (social security number) is
; and
3. My home address is
-----------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------ .
I hereby agree that if I become a nonresident alien, I will notify the
partnership within sixty (60) days of doing so, I understand that this
certification may be disclosed to the Internal Revenue Service by the
partnership and that any false statement I have made here could be punished by
fine, imprisonment, or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct,
and complete.
Executed this day of , 1999.
------------------------------------
Printed Name:
------------------------------------
<PAGE> 120
CERTIFICATION OF NON-FOREIGN STATUS
FOR PARTNERS THAT ARE ENTITIES
Section 1446 of the Internal Revenue Code provides that a partnership must
pay a withholding tax to the Internal Revenue Service with respect to a
partner's allocable share of the partnership's effectively connected taxable
income, if the partner is a foreign person. To inform (name of
partnership) that the provisions of section 1446 do not apply the undersigned
hereby certifies on behalf of (name of entity) ("Partner") the
following:
1. Partner is not a foreign corporation, foreign partnership, foreign
trust, or foreign estate (as those terms are defined in the Internal
Revenue Code and Income Tax Regulations);
2. Partner's U.S. employer identification number is ; and
3. Partner's office address is
-----------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
---------------------------------------------------------------- .
Partner hereby agrees to notify the partnership within sixty (60) days of
the date Partner becomes a foreign person. Partner understands that this
certification may be disclosed to the Internal Revenue Service by the
partnership and that any false statement contained herein could be punished by
fine, imprisonment, or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct,
and complete, and I further declare that I have authority to sign this document
on behalf of Partner.
Executed this day of , 1999.
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
<PAGE> 121
PIONEER NATURAL RESOURCES USA, INC.
1400 WILLIAMS SQUARE WEST
5205 NORTH O'CONNOR BLVD.
IRVING, TEXAS 75039
SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 90-A, L.P., A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT DATED , 1999
----------------------
THE DATE OF THIS SUPPLEMENT IS , 1999
----------------------
This document contains important information specific to Parker & Parsley
90-A, L.P. and supplements the proxy statement dated , 1999, of
Pioneer Natural Resources USA, Inc., by which Pioneer USA is soliciting proxies
to be voted at a special meeting of limited partners of the partnerships
described in the proxy statement. The purpose of the special meeting is for you
to vote upon the merger of Parker & Parsley 90-A, L.P. with and into Pioneer USA
that, if completed, will result in your receiving cash for your partnership
interests.
This supplement contains the following information concerning Parker &
Parsley 90-A, L.P.:
- A table containing:
-- the aggregate initial investment by the limited partners
-- the aggregate historical limited partner distributions through June
30, 1999
-- the merger value per $1,000 limited partner investment as of June 30,
1999
-- the merger value per $1,000 limited partner investment as a multiple
of distributions for the 12 months ended June 30, 1999
-- the book value per $1,000 limited partner investment as of June 30,
1999 and as of December 31, 1998 and
-- the ordinary tax loss per $1,000 limited partner investment in year
of initial investment
- Quarterly Report on Form 10-Q for the six months ended June 30, 1999
- Annual Report on Form 10-K for the year ended December 31, 1998
- Disclosures about the partnership's oil and gas producing activities
<PAGE> 122
PARKER & PARSLEY 90-A, L.P.
SUPPLEMENTAL INFORMATION TABLE
<TABLE>
<S> <C>
Aggregate Initial Investment by the Limited Partners(a)..... $ 6,811
Aggregate Historical Limited Partner Distributions through
June 30, 1999(a).......................................... $ 5,379
Merger Value per $1,000 Limited Partner Investment as of
June 30, 1999(b).......................................... $158.27
Merger Value per $1,000 Limited Partner Investment as a
Multiple of Distributions for the 12 Months ended June 30,
1999(b)................................................... 10.81times
Book Value per $1,000 Limited Partner Investment:
-- as of June 30, 1999(b)................................. $193.39
-- as of December 31, 1998(b)............................. $199.51
Ordinary Tax Loss per $1,000 Limited Partner Investment in
Year of Initial Investment(b), (c)........................ $ 377
</TABLE>
- ---------------
(a) Stated in thousands.
(b) Interests in some partnerships were sold in units at prices other than
$1,000. We have presented this information based on a $1,000 initial
investment for ease of use and comparison among partnerships. You should
not assume that the amount shown per $1,000 investment is the same as any
value or amount attributable to a single unit investment.
(c) Your ability to use your distributive share of the partnership's loss to
offset your other income may have been subject to certain limitations at
your level as a partner, and you may therefore wish to consult your tax
advisor to determine the additional value, if any, actually realized by you
in your particular circumstances.
<PAGE> 123
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
COMMISSION FILE NO. 33-26097-05
PARKER & PARSLEY 90-A, L.P.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 75-2329245
(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)
</TABLE>
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> 124
PARKER & PARSLEY 90-A, L.P.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets as of June 30, 1999 and December 31,
1998.................................................. 3
Statements of Operations for the three and six months
ended June 30, 1999 and 1998.......................... 4
Statement of Partners' Capital for the six months ended
June 30, 1999......................................... 5
Statements of Cash Flows for the six months ended June
30, 1999 and 1998..................................... 6
Notes to Financial Statements.......................... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................. 8
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................... 11
27.1 Financial Reporting Schedule
Signatures............................................. 12
</TABLE>
2
<PAGE> 125
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PARKER & PARSLEY 90-A, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash...................................................... $ 108,664 $ 92,210
Accounts receivable -- oil and gas sales.................. 67,453 50,121
----------- -----------
Total current assets.............................. 176,117 142,331
----------- -----------
Oil and gas properties -- at cost, based on the successful
efforts accounting method................................. 5,070,780 5,076,345
Accumulated depletion....................................... (3,898,611) (3,832,899)
----------- -----------
Net oil and gas properties........................ 1,172,169 1,243,446
----------- -----------
$ 1,348,286 $ 1,385,777
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable -- affiliate............................. $ 17,726 $ 13,101
Partners' capital:
Managing general partner.................................. 13,387 13,808
Limited partners (6,811 interests)........................ 1,317,173 1,358,868
----------- -----------
1,330,560 1,372,676
----------- -----------
$ 1,348,286 $ 1,385,777
=========== ===========
</TABLE>
The financial information included as of June 30, 1999 has been prepared by
management
without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 126
PARKER & PARSLEY 90-A, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas...................................... $111,127 $113,383 $195,089 $240,589
Interest......................................... 1,063 1,500 1,956 3,199
-------- -------- -------- --------
112,190 114,883 197,045 243,788
-------- -------- -------- --------
Costs and expenses:
Oil and gas production........................... 71,921 75,490 132,744 148,593
General and administrative....................... 3,806 7,201 7,264 11,447
Depletion........................................ 21,066 34,815 65,712 67,710
-------- -------- -------- --------
96,793 117,506 205,720 227,750
-------- -------- -------- --------
Net income (loss).................................. $ 15,397 $ (2,623) $ (8,675) $ 16,038
======== ======== ======== ========
Allocation of net income (loss):
Managing general partner......................... $ 154 $ (26) $ (87) $ 160
======== ======== ======== ========
Limited partners................................. $ 15,243 $ (2,597) $ (8,588) $ 15,878
======== ======== ======== ========
Net income (loss) per limited partnership
interest......................................... $ 2.24 $ (.38) $ (1.26) $ 2.33
======== ======== ======== ========
Distributions per limited partnership interest..... $ 1.68 $ 6.05 $ 4.86 $ 18.98
======== ======== ======== ========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 127
PARKER & PARSLEY 90-A, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENT OF PARTNERS' CAPITAL
(UNAUDITED)
<TABLE>
<CAPTION>
MANAGING
GENERAL LIMITED
PARTNER PARTNERS TOTAL
-------- ---------- ----------
<S> <C> <C> <C>
Balance at January 1, 1999................................. $13,808 $1,358,868 $1,372,676
Distributions............................................ (334) (33,107) (33,441)
Net loss................................................. (87) (8,588) (8,675)
------- ---------- ----------
Balance at June 30, 1999................................... $13,387 $1,317,173 $1,330,560
======= ========== ==========
</TABLE>
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> 128
PARKER & PARSLEY 90-A, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1999 1998
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ (8,675) $ 16,038
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depletion.............................................. 65,712 67,710
Changes in assets and liabilities:
Accounts receivable.................................... (17,332) 30,977
Accounts payable....................................... 4,625 8,171
-------- ---------
Net cash provided by operating activities......... 44,330 122,896
-------- ---------
Cash flows used in investing activities:
Additions to oil and gas properties....................... (1,655) (6,679)
Proceeds from asset dispositions.......................... 7,220 --
-------- ---------
Net cash provided by (used in) investing
activities...................................... 5,565 (6,679)
-------- ---------
Cash flows used in financing activities:
Cash distributions to partners............................ (33,441) (130,571)
-------- ---------
Net increase (decrease) in cash............................. 16,454 (14,354)
Cash at beginning of period................................. 92,210 116,510
-------- ---------
Cash at end of period....................................... $108,664 $ 102,156
======== =========
</TABLE>
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> 129
PARKER & PARSLEY 90-A, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(UNAUDITED)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 90-A, L.P. (the "Partnership") is a limited partnership
organized in 1990 under the laws of the State of Delaware.
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 June 30, 1999 and for the three and six months ended June 30,
1999 and 1998 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, 1998, 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.
7
<PAGE> 130
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS(1)
RESULTS OF OPERATIONS
Six months ended June 30, 1999 compared with six months ended June 30, 1998
Revenues:
The Partnership's oil and gas revenues decreased 19% to $195,089 from
$240,589 for the six months ended June 30, 1999 and 1998, respectively. The
decrease in revenues resulted from lower average prices received and a decrease
in production. For the six months ended June 30, 1999, 9,267 barrels of oil,
5,512 barrels of natural gas liquids ("NGLs") and 21,392 mcf of gas were sold,
or 18,344 barrel of oil equivalents ("BOEs"). For the six months ended June 30,
1998, 11,127 barrels of oil, 5,392 barrels of NGLs and 24,197 mcf of gas were
sold, or 20,552 BOEs.
The average price received per barrel of oil decreased 6% from $14.16 for
the six months ended June 30, 1998 to $13.27 for the same period ended June 30,
1999. The average price received per barrel of NGLs decreased 10% from $7.92
during the six months ended June 30, 1998 to $7.10 for the same period in 1999.
The average price received per mcf of gas decreased 8% from $1.67 during the six
months ended June 30, 1998 to $1.54 for the same period in 1999. 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, 1999.
The volatility of commodity prices has had, and continues to have, a
significant impact on the Partnership's revenues and operating cash flow and
could result in additional decreases to the carrying value of the Partnership's
oil and gas properties.
Costs and Expenses:
Total costs and expenses decreased to $205,720 for the six months ended
June 30, 1999 as compared to $227,750 for the same period in 1998, a decrease of
$22,030, or 10%. This decrease was due to declines in production costs, general
and administrative expenses ("G&A") and depletion.
Production costs were $132,744 for the six months ended June 30, 1999 and
$148,593 for the same period in 1998 resulting in a $15,849 decrease, or 11%.
The decrease was primarily due to less well maintenance costs and declines in
production taxes and ad valorem taxes.
G&A's components are independent accounting and engineering fees and
managing general partner personnel and operating costs. During this period, G&A
decreased, in aggregate, 37%, from $11,447 for the six months ended June 30,
1998 to $7,264 for the same period in 1999.
Depletion was $65,712 for the six months ended June 30, 1999 compared to
$67,710 for the same period in 1998, a decrease of $1,998, or 3%. This decrease
was primarily the result of a reduction in oil production of 1,860 barrels for
the six months ended June 30, 1999 compared to the same period in 1998, an
increase in proved reserves during the period ended June 30, 1999 due to higher
commodity prices and 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 1998.
Three months ended June 30, 1999 compared with three months ended June 30,
1998
Revenues:
The Partnership's oil and gas revenues decreased slightly to $111,127 from
$113,383 for the three months ended June 30, 1999 and 1998, respectively. The
decrease in revenues resulted from decreases in production and lower average
prices received from barrels of NGLs and mcf of gas, offset by a higher average
price received per barrel of oil. For the three months ended June 30, 1999,
4,486 barrels of oil, 3,061 barrels of NGLs and 10,259 mcf of gas were sold, or
9,257 BOEs. For the three months ended June 30, 1998, 5,358 barrels of oil,
2,355 barrels of NGLs and 9,423 mcf of gas were sold, or 9,284 BOEs.
8
<PAGE> 131
The average price received per barrel of oil increased $1.54, or 11%, from
$13.45 for the three months ended June 30, 1998 to $14.99 for the same period in
1999. The average price received per barrel of NGLs decreased 10% from $9.60
during the three months ended June 30, 1998 to $8.62 for the same period in
1999. The average price received per mcf of gas decreased 14% from $1.98 during
the three months ended June 30, 1998 to $1.71 for the same period in 1999.
Costs and Expenses:
Total costs and expenses decreased to $96,793 for the three months ended
June 30, 1999 as compared to $117,506 for the same period in 1998, a decrease of
$20,713, or 18%. This decrease was due to declines in depletion, production
costs and G&A.
Production costs were $71,921 for the three months ended June 30, 1999 and
$75,490 for the same period in 1998 resulting in a $3,569 decrease, or 5%. The
decrease was due to less well maintenance costs and declines in production taxes
and ad valorem taxes.
During this period, G&A decreased, in aggregate, 47%, from $7,201 for the
three months ended June 30, 1998 to $3,806 for the same period in 1999.
Depletion was $21,066 for the three months ended June 30, 1999 compared to
$34,815 for the same period in 1998, a decrease of $13,749, or 39%. This
decrease was primarily attributable to an increase in proved reserves during the
period ended June 30, 1999 as a result of higher commodity prices, a decrease in
oil production of 872 barrels for the three months ended June 30, 1999 as
compared to the same period in 1998 and a reduction in the Partnership's net
depletable basis from charges taken in accordance with SFAS 121 during the
fourth quarter of 1998.
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased $78,566 during the six
months ended June 30, 1999 from the same period ended June 30, 1998. This
decrease was primarily due to a decline in oil and gas sales receipts, offset by
declines in production costs and G&A expenses paid.
Net Cash Provided by (Used in) Investing Activities
The Partnership's principal investing activities during the six months
ended June 30, 1999 and 1998 were for expenditures related to oil and gas
equipment replacement on various oil and gas properties.
Proceeds of $7,220 were recognized during the six months ended June 30,
1999 from equipment credits on active properties.
Net Cash Used in Financing Activities
Cash was sufficient for the six months ended June 30, 1999 to cover
distributions to the partners of $33,441 of which $334 was distributed to the
managing general partner and $33,107 to the limited partners. For the same
period ended June 30, 1998, cash was sufficient for distributions to the
partners of $130,571 of which $1,306 was distributed to the managing general
partner and $129,265 to the limited partners.
From the third quarter of 1997 through the first quarter of 1999, there was
a declining trend in oil and gas levels. During the first quarter of 1999, the
Organization of Petroleum Exporting Countries and certain other crude oil
exporting nations announced reductions in their planned export volumes. These
announcements, together with early indications that the nations have initiated
their planned reductions, have had some stabilizing effect on commodity prices
during the latter part of the first quarter of 1999 and into August 1999.
However, no assurances can be given that the stabilizing effect of these
actions, or the planned reductions in export volumes, will be sustained for an
extended period of time.
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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 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.
As of June 30, 1999, the managing general partner estimates that the
assessment phase is approximately 99% complete and has included, but is not
limited to, the following procedures:
- the identification of necessary remediation, upgrade and/or replacement
of existing information technology applications and systems;
- the assessment of non-information technology exposures, such as
telecommunications systems, security systems, elevators and process
control equipment;
- 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;
- 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,
- the formulation of contingency plans for mission-critical information
technology systems.
Through June 30, 1999, the managing general partner had distributed Year
2000 problem inquiries to over 500 entities and has received responses to
approximately 52% of the inquiries.
The remedial phase of the managing general partner's Year 2000 project is
in varying stages of completion as it pertains to the remediation of information
technology and non-information technology applications and systems in the United
States, Canada and Argentina. As of June 30, 1999, the managing general partner
estimates that the remedial phase is approximately 83% complete, on a worldwide
basis, subject to continuing evaluations of the responses to third party
inquiries and to the testing phase results. 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 has completed the testing of the system for
Year 2000 compliance. The remediation of non-information technology is expected
to be completed by October 1999. The managing general partner's Year 2000
remedial actions have not delayed other information technology projects or
upgrades.
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
information technology systems by October 1999. The testing of the
non-information technology remediation is scheduled to be completed by the end
of November 1999.
The managing general partner expects that its total costs related to the
Year 2000 problem will approximate $3.6 million, of which approximately $500
thousand will have been incurred to replace non-compliant information technology
systems. As of June 30, 1999, the managing general partner's total costs
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<PAGE> 133
incurred on the Year 2000 problem were $2.3 million, of which approximately $200
thousand were incurred to replace non-compliant systems.
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 most likely
worst case scenario 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 business continuity and contingency planning phase of the managing
general partner's Year 2000 project, contingency plans were designed to mitigate
the exposures to mission critical information technology systems, such as oil
and gas sales receipts, vendor and royalty cash distributions, debt compliance,
accounting, and employee compensation. Such contingency plans anticipate the
extensive utilization of third-party data processing services, personal computer
applications and the substitution of courier and mail services in place of
electronic data interchange. 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) Form 8-K -- none
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SIGNATURES
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 90-A, L.P.
By: Pioneer Natural Resources USA,
Inc., Managing General Partner
By: /s/ RICH DEALY
----------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
Dated: August 6, 1999
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<PAGE> 135
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
COMMISSION FILE NO. 33-26097-05
PARKER & PARSLEY 90-A, L.P.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 75-2329245
(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)
</TABLE>
Registrant's Telephone Number, including area code: (915) 683-4768
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP INTERESTS ($1,000 PER UNIT)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
No market currently exists for the limited partnership interests of the
Registrant. Based on original purchase price the aggregate market value of
limited partnership interests owned by non-affiliates of the Registrant is
$6,664,000.
As of March 8, 1999, the number of outstanding limited partnership
interests was 6,811.
The following documents are incorporated by reference into the indicated
parts of this Annual Report on Form 10-K: NONE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 136
Parts I and II of this Report contain 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. See "Item 1.
Business" for a description of various factors that could materially affect the
ability of the Partnership to achieve the anticipated results described in the
forward looking statements.
PART I
ITEM 1. BUSINESS
Parker & Parsley 90-A, L.P. (the "Partnership") is a limited partnership
organized in 1990 under the laws of the State of Delaware. As of August 8, 1997,
Pioneer Natural Resources USA, Inc. ("Pioneer USA") became the managing general
partner of the Partnership. Prior to August 8, 1997, the Partnership's managing
general partner was Parker & Parsley Development L.P. ("PPDLP"), a wholly-owned
subsidiary of Parker & Parsley Petroleum Company ("Parker & Parsley"). On August
7, 1997, Parker & Parsley and Mesa Inc. ("Mesa") received shareholder approval
to merge and create Pioneer Natural Resources Company ("Pioneer"). On August 8,
1997, PPDLP was merged with and into Pioneer USA, a wholly-owned subsidiary of
Pioneer, resulting in Pioneer USA becoming the managing general partner of the
Partnership as PPDLP's successor by merger. For a more complete description of
the Parker & Parsley and Mesa merger, see Pioneer's Registration Statement on
Form S-4 as filed with the Securities & Exchange Commission.
A Registration Statement, as amended, filed pursuant to the Securities Act
of 1933, registering limited partnership interests aggregating $70,000,000 in a
series of Delaware limited partnerships formed under the Parker & Parsley 89-90
Development Drilling Program, was declared effective by the Securities and
Exchange Commission on August 1, 1989. On April 30, 1990, the offering of
limited partnership interests in the Partnership, the third partnership formed
under such registration statement, was closed, with interests aggregating
$6,811,000 being sold to 525 subscribers.
The Partnership engages primarily in oil and gas development and production
and is not involved in any industry segment other than oil and gas. See "Item 6.
Selected Financial Data" and "Item 8. Financial Statements and Supplementary
Data" of this report for a summary of the Partnership's revenue, income and
identifiable assets.
The principal markets during 1998 for the oil produced by the Partnership
were refineries and oil transmission companies that have facilities near the
Partnership's oil producing properties. The principal markets for the
Partnership's gas were companies that have pipelines located near the
Partnership's gas producing properties. Of the Partnership's total oil and gas
revenues for 1998, approximately 57% and 22% were attributable to sales made to
Genesis Crude Oil, L.P. and Western Gas Resources, Inc., respectively.
The Partnership's revenues, profitability, cash flow and future rate of
growth are highly dependent on the prevailing prices of oil and gas, which are
affected by numerous factors beyond the Partnership's control. Oil and gas
prices historically have been very volatile. A substantial or extended decline
in the prices of oil or gas could have a material adverse effect on the
Partnership's revenues, profitability and cash flow and could, under certain
circumstances, result in a reduction in the carrying value of the Partnership's
oil and gas properties.
Because of the demand for oil and gas, the Partnership does not believe
that the termination of the sales of its products to any one customer would have
a material adverse impact on its operations. The loss of a particular customer
for gas may have an effect if that particular customer has the only gas pipeline
located in the areas of the Partnership's gas producing properties. The
Partnership believes, however, that the effect would be temporary, until
alternative arrangements could be made.
Federal and state regulation of oil and gas operations generally includes
the fixing of maximum prices for regulated categories of natural gas, the
imposition of maximum allowable production rates, the taxation
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<PAGE> 137
of income and other items, and the protection of the environment. Although the
Partnership believes that its business operations do not impair environmental
quality and that its costs of complying with any applicable environmental
regulations are not currently significant, the Partnership cannot predict what,
if any, effect these environmental regulations may have on its current or future
operations.
The Partnership does not have any employees of its own. Pioneer USA employs
818 persons, many of whom dedicated a part of their time to the conduct of the
Partnership's business during the period for which this report is filed. Pioneer
USA is responsible for all management functions.
Numerous uncertainties exist in estimating quantities of proved reserves
and future net revenues therefrom. The estimates of proved reserves and related
future net revenues set forth in this report are based on various assumptions,
which may ultimately prove to be inaccurate. Therefore, such estimates should
not be construed as estimates of the current market value of the Partnership's
proved reserves.
No material part of the Partnership's business is seasonal and the
Partnership conducts no foreign operations.
ITEM 2. PROPERTIES
The Partnership's properties consist primarily of leasehold interests in
properties on which oil and gas wells are located. Such property interests are
often subject to landowner royalties, overriding royalties and other oil and gas
leasehold interests.
Fractional working interests in developmental oil and gas prospects located
primarily in the Spraberry Trend Area of West Texas were acquired by the
Partnership, resulting in the Partnership's participation in the drilling of 27
oil and gas wells. Two wells have been sold. At December 31, 1998, 25 wells were
producing.
For information relating to the Partnership's estimated proved oil and gas
reserves at December 31, 1998, 1997 and 1996 and changes in such quantities for
the years then ended, see Note 7 of Notes to Financial Statements included in
"Item 8. Financial Statements and Supplementary Data" below. Such reserves have
been estimated by the engineering staff of Pioneer USA with a review by
Williamson Petroleum Consultants, Inc., an independent petroleum consultant.
ITEM 3. LEGAL PROCEEDINGS
The Partnership from time to time is a party to various legal proceedings
incidental to its business involving claims in oil and gas leases or interests,
other claims for damages in amounts not in excess of 10% of its current assets
and other matters, none of which Pioneer believes to be material to the
Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 1998.
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<PAGE> 138
PART II
ITEM 5. MARKET FOR PARTNERSHIP'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
At March 8, 1999, the Partnership had 6,811 outstanding limited partnership
interests held of record by 525 subscribers. There is no established public
trading market for the limited partnership interests. Under the limited
partnership agreement, Pioneer USA has made certain commitments to purchase
partnership interests at a computed value.
Revenues which, in the sole judgement of the managing general partner, are
not required to meet the Partnership's obligations are distributed to the
partners at least quarterly in accordance with the limited partnership
agreement. During the years ended December 31, 1998 and 1997, $193,717 and
$361,394, respectively, of such revenue-related distributions were made to the
limited partners.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the years ended
December 31:
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Operating results:
Oil and gas sales.............. $ 441,480 $ 643,882 $ 777,677 $ 661,198 $ 733,354
========== ========== ========== ========== ==========
Impairment of oil and gas
properties.................. $ 34,145 $ 321,019 $ -- $ 583,706 $ --
========== ========== ========== ========== ==========
Net income (loss).............. $ (44,421) $ (149,948) $ 261,210 $ (696,986) $ 2,920
========== ========== ========== ========== ==========
Allocation of net income
(loss):
Managing general partner.... $ (444) $ (1,499) $ 2,612 $ (6,960) $ 58
========== ========== ========== ========== ==========
Limited partners............ $ (43,977) $ (148,449) $ 258,598 $ (690,026) $ 2,862
========== ========== ========== ========== ==========
Limited partners' net income
(loss) per limited
partnership interest........ $ (6.46) $ (21.80) $ 37.97 $ (101.31) $ .42
========== ========== ========== ========== ==========
Limited partners' cash
distributions per limited
partnership interest........ $ 28.44 $ 53.06 $ 53.75 $ 48.45 $ 57.38
========== ========== ========== ========== ==========
At year end:
Total assets................... $1,385,777 $1,634,061 $2,146,498 $2,277,937 $3,289,433
========== ========== ========== ========== ==========
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
1998 compared to 1997
The Partnership's 1998 oil and gas revenues decreased 31% to $441,480 from
$643,882 in 1997. The decrease in revenues resulted from lower average prices
received. In 1998, 21,587 barrels of oil, 11,328 barrels of natural gas liquids
("NGLs") and 47,086 mcf of gas were sold, or 40,763 barrel of oil equivalents
("BOEs"). In 1997, 21,972 barrels of oil, 4,763 barrels of NGLs and 68,973 mcf
of gas were sold, or 38,231 BOEs. Due to the decline characteristics of the
Partnership's oil and gas properties, management expects a certain amount of
decline in production in the future until the Partnership's economically
recoverable reserves are fully depleted.
Consistent with the managing general partner, the Partnership has
historically accounted for processed natural gas production as wellhead
production on a wet gas basis. Effective September 30, 1997, as a result of the
merger with Mesa, the managing general partner accounts for processed natural
gas production in two components: natural gas liquids and dry residue gas. As a
result of the change in the managing general partner's policy, the Partnership
now accounts for processed natural gas production as processed natural
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<PAGE> 139
gas liquids and dry residue gas. Consequently, separate product volumes will not
be comparable for 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
year ended December 31, 1998 is the price received for dry residue gas and the
price per mcf for natural gas produced prior to October 1997 was presented as a
price for wet gas (i.e., natural gas liquids combined with dry residue gas).
The average price received per barrel of oil decreased $6.21, or 32% from
$19.41 in 1997 to $13.20 in 1998. The average price received per barrel of NGLs
decreased $4.14, or 37% from $11.16 in 1997 to $7.02 in 1998. The average price
received per mcf of gas decreased 31% in 1998 to $1.64 compared to $2.38 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 in 1998.
Total costs and expenses decreased in 1998 to $492,078 as compared to
$801,240 in 1997, a decrease of $309,162, or 39%. This decrease was primarily
due to declines in the impairment of oil and gas properties, production costs
and general and administrative expenses ("G&A"), offset by a slight increase in
depletion.
Production costs were $282,430 in 1998 and $305,774 in 1997, resulting in a
$23,344 decline, or 8%. The decline includes a reduction in production taxes due
to the decline in oil and gas revenues and less 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, 41% from $23,842 in 1997 to $14,124 in 1998. The
Partnership paid the managing general partner $11,560 in 1998 and $20,526 in
1997 for G&A incurred on behalf of the Partnership. G&A is allocated, in part,
to the Partnership by the managing general partner. Such allocated expenses are
determined by the managing general partner based upon its judgement of the level
of activity of the Partnership relative to the managing general partner's
activities and other entities it manages. The method of allocation has been
consistent over the past several years with certain modifications incorporated
to reflect changes in Pioneer USA's overall business activities.
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"), the managing general partner reviews the
Partnership's oil and gas properties for impairment whenever events or
circumstances indicate a decline in the recoverability of the carrying value of
the Partnership's assets may have occurred. Declining commodity prices prompted
impairment reviews in 1998 and 1997. As a result of the review and evaluation of
its long-lived assets for impairment, the Partnership recognized non-cash
charges of $34,145 and $321,019 related to its oil and gas properties during
1998 and 1997, respectively.
Depletion was $161,379 in 1998 compared to $150,605 in 1997. This
represented an increase of $10,774, or 7%. This increase was primarily the
result of a decline in proved reserves during 1998 due to the lower commodity
prices, offset by 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 reduction in oil production of 385 barrels for the period ended December 31,
1998 compared to the same period in 1997.
1997 compared to 1996
The Partnership's 1997 oil and gas revenues decreased 17% to $643,882 from
$777,677 in 1996. The decrease in revenues resulted from declines in production
and lower average prices received. In 1997, 21,972 barrels of oil, 4,763 barrels
of NGLs and 68,973 mcf of gas were sold, or 38,231 BOEs. In 1996, 25,428 barrels
of oil and 88,919 mcf of gas were sold, or 40,248 BOEs.
Consistent with the managing general partner, the Partnership has
historically accounted for processed natural gas production as wellhead
production on a wet gas basis. As is described above in "Results of
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<PAGE> 140
Operations -- 1998 compared to 1997", the Partnership changed its method of
accounting for processed natural gas to a dry gas basis in the fourth quarter of
1997. As a result of this change, the Partnership now accounts for processed
natural gas production as processed natural gas liquids and dry residue gas.
Consequently, 1997 and 1996 separate product volumes are not comparable.
The declines in production volumes were primarily attributable to the
decline characteristics of the Partnership's oil and gas properties.
The average price received per barrel of oil decreased 10% from $21.62 in
1996 to $19.41 in 1997. The average price received per barrel of NGLs during
1997 was $11.16. The average price received per mcf of gas decreased 7% in 1997
to $2.38 compared to $2.56 in 1996.
Total costs and expenses increased in 1997 to $801,240 as compared to
$523,562 in 1996, an increase of $277,678, or 53%. This increase was primarily
due to the impairment of oil and gas properties and an increase in production
costs, offset by declines in loss on disposition of assets, depletion and G&A.
Production costs were $305,774 in 1997 and $298,749 in 1996, resulting in a
$7,025 increase. The increase was due to additional well maintenance costs,
offset by a decrease in production taxes.
During this period, G&A decreased, in aggregate, 9% from $26,252 in 1996 to
$23,842 in 1997. The Partnership paid the managing general partner $20,526 in
1997 and $22,989 in 1996 for G&A incurred on behalf of the Partnership.
The Partnership recognized a non-cash SFAS 121 impairment provision of
$321,019 related to its oil and gas properties during the fourth quarter of
1997.
Depletion was $150,605 in 1997 compared to $169,844 in 1996. This
represented a decrease of $19,239, or 11%. This decrease was primarily
attributable to a decline in oil production of 3,456 barrels from 1996.
A loss on disposition of assets of $28,717 was recognized during 1996
resulting from the sale of one gas well and the write-off of remaining
capitalized well costs of $35,532 less proceeds received of $6,815.
IMPACT OF INFLATION AND CHANGING PRICES ON SALES AND NET INCOME
Inflation impacts the fixed overhead rate charges of the lease operating
expenses for the Partnership. During 1998, the annual change in the index of
average weekly earnings of crude petroleum and gas production workers issued by
the U.S. Department of Labor, Bureau of Labor Statistics increased (effective
April 1, 1998) 10.3%. The 1997 annual change in average weekly earnings
increased by 2%. The 1996 index increased 4.1%. The impact of inflation for
other lease operating expenses is small due to the current economic condition of
the oil industry.
The oil and gas industry experienced volatility during the past decade
because of the fluctuation of the supply of most fossil fuels relative to the
demand for such products and other uncertainties in the world energy markets
causing significant fluctuations in oil and gas prices. During 1998, the price
per barrel for oil production similar to the Partnership's ranged from
approximately $9.50 to $15.50. During most of 1997 and 1996, the Partnership
benefitted from higher oil prices as compared to previous years. However, during
the fourth quarter of 1997, oil prices began a downward trend that has continued
into March 1999. On March 8, 1999, the market price for West Texas intermediate
crude was $11.00 per barrel. A continuation of the current commodity price
environment experienced will continue to have an adverse effect on the
Partnership's revenues, operating cash flow and distributions and could result
in additional decreases in the carrying value of the Partnership's oil and gas
properties.
Prices for natural gas are subject to ordinary seasonal fluctuations, and
this volatility of natural gas prices may result in production being curtailed
and, in some cases, wells being completely shut-in.
5
<PAGE> 141
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased $187,810 during the
year ended December 31, 1998 from the year ended December 31, 1997, attributable
to a decrease in oil and gas sales receipts, offset by declines in production
costs and G&A expenses paid.
Net Cash Provided by (Used in) Investing Activities
The Partnership's investing activities during 1998 and 1997 were for
expenditures related to oil and gas equipment replacement on active properties.
Net Cash Used in Financing Activities
Cash was sufficient in 1998 for distributions to the partners of $195,674
of which $1,957 was distributed to the managing general partner and $193,717 to
the limited partners. In 1997, cash was sufficient for distributions to the
partners of $365,044 of which $3,650 was distributed to the managing general
partner and $361,394 to the limited partners.
The current commodity price environment will continue to impact the
distributions and could result in limited or no distributions to the partners.
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 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
at varying stages of completion as it pertains to information technology and
non-information technology applications and systems in the United States, Canada
and Argentina. As of December 31, 1998, the managing general partner estimates
that the assessment phase is approximately 86% complete, on a worldwide basis,
and has included, but is not limited to, the following procedures:
- the identification of necessary remediation, upgrade and/or replacement
of existing information technology applications and systems;
- the assessment of non-information technology exposures, such as
telecommunications systems, security systems, elevators and process
control equipment;
- 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;
- 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,
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<PAGE> 142
- 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 to
approximately 37% of those inquiries.
The remedial phase of the managing general partner's Year 2000 project is
also at varying stages of completion as it pertains to the remediation of
information technology and non-information technology applications and systems
in the United States, Canada and Argentina. As of December 31, 1998, the
managing general partner estimates that the remedial phase is approximately 54%
complete, on a worldwide basis, subject to the continuing 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 during July 1999. The managing general partner's Year 2000 remedial
actions have not significantly delayed other information technology projects or
upgrades.
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 and non-information technology remediation by the end of the third
quarter of 1999.
The managing general partner expects that its total costs related to the
Year 2000 problem will approximate $3.6 million, of which approximately $500
thousand will have been incurred to replace non-compliant information technology
systems. The managing general partner intends to use its working capital to pay
for the costs of the Year 2000 projects. As of December 31, 1998, the managing
general partner's total costs incurred on the Year 2000 problem were $1.8
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 in accordance with the general and
administration allocation. (See Note 2 of Notes to Financial Statements included
in "Item 8. Financial Statements and Supplementary Data".)
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 most likely
worst case scenario 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 to
mission-critical information technology systems, such as oil and gas sales
receipts, vendor and royalty cash distributions, debt compliance, accounting,
and employee compensation. Such contingency plans anticipate the extensive
utilization of third-party data processing services, personal computer
applications and the substitution of courier and mail services in place of
electronic data interchange. 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.
7
<PAGE> 143
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Statements of Parker & Parsley 90-A, L.P.:
Independent Auditors' Report -- Ernst & Young LLP......... 9
Independent Auditors' Report -- KPMG LLP.................. 10
Balance Sheets as of December 31, 1998 and 1997........... 11
Statements of Operations for the Years Ended December 31,
1998, 1997 and 1996.................................... 12
Statements of Partners' Capital for the Years Ended
December 31, 1998, 1997 and 1996....................... 13
Statements of Cash Flows for the Years Ended December 31,
1998, 1997 and 1996.................................... 14
Notes to Financial Statements............................. 15
</TABLE>
8
<PAGE> 144
INDEPENDENT AUDITORS' REPORT
The Partners
Parker & Parsley 90-A, L.P.
(A Delaware Limited Partnership):
We have audited the balance sheet of Parker & Parsley 90-A, L.P. as of
December 31, 1998, and the related statements of operations, partners' capital
and cash flows for the year then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Parker & Parsley 90-A, L.P.
as of December 31, 1998, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Dallas, Texas
March 15, 1999
9
<PAGE> 145
INDEPENDENT AUDITORS' REPORT
The Partners
Parker & Parsley 90-A, L.P.
(A Delaware Limited Partnership):
We have audited the financial statements of Parker & Parsley 90-A, L.P. as
of December 31, 1997, and the related statements of operations, partners'
capital and cash flows for the years ended December 31, 1997 and 1996. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Parker & Parsley 90-A, L.P.
as of December 31, 1997, and the results of its operations and its cash flows
for the years ended December 31, 1997 and 1996, in conformity with generally
accepted accounting principles.
KPMG LLP
Midland, Texas
March 20, 1998
10
<PAGE> 146
PARKER & PARSLEY 90-A, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31
ASSETS
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Current assets:
Cash...................................................... $ 92,210 $ 116,510
Accounts receivable -- oil and gas sales.................. 50,121 87,628
----------- -----------
Total current assets.............................. 142,331 204,138
----------- -----------
Oil and gas properties -- at cost, based on the successful
efforts accounting method................................. 5,076,345 5,067,298
Accumulated depletion....................................... (3,832,899) (3,637,375)
----------- -----------
Net oil and gas properties........................ 1,243,446 1,429,923
----------- -----------
$ 1,385,777 $ 1,634,061
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable -- affiliate............................. $ 13,101 $ 21,290
Partners' capital:
Managing general partner.................................. 13,808 16,209
Limited partners (6,811 interests)........................ 1,358,868 1,596,562
----------- -----------
1,372,676 1,612,771
----------- -----------
$ 1,385,777 $ 1,634,061
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE> 147
PARKER & PARSLEY 90-A, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1998 1997 1996
-------- --------- --------
<S> <C> <C> <C>
Revenues:
Oil and gas............................................... $441,480 $ 643,882 $777,677
Interest.................................................. 6,177 7,410 7,095
-------- --------- --------
447,657 651,292 784,772
-------- --------- --------
Costs and expenses:
Oil and gas production.................................... 282,430 305,774 298,749
General and administrative................................ 14,124 23,842 26,252
Impairment of oil and gas properties...................... 34,145 321,019 --
Depletion................................................. 161,379 150,605 169,844
Loss on disposition of assets............................. -- -- 28,717
-------- --------- --------
492,078 801,240 523,562
-------- --------- --------
Net income (loss)........................................... $(44,421) $(149,948) $261,210
======== ========= ========
Allocation of net income (loss):
Managing general partner.................................. $ (444) $ (1,499) $ 2,612
======== ========= ========
Limited partners.......................................... $(43,977) $(148,449) $258,598
======== ========= ========
Net income (loss) per limited partnership interest.......... $ (6.46) $ (21.80) $ 37.97
======== ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE> 148
PARKER & PARSLEY 90-A, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
MANAGING
GENERAL LIMITED
PARTNER PARTNERS TOTAL
-------- ---------- ----------
<S> <C> <C> <C>
Partners' capital at January 1, 1996....................... $22,444 $2,213,917 $2,236,361
Distributions............................................ (3,698) (366,110) (369,808)
Net income............................................... 2,612 258,598 261,210
------- ---------- ----------
Partners' capital at December 31, 1996..................... 21,358 2,106,405 2,127,763
Distributions............................................ (3,650) (361,394) (365,044)
Net loss................................................. (1,499) (148,449) (149,948)
------- ---------- ----------
Partners' capital at December 31, 1997..................... 16,209 1,596,562 1,612,771
Distributions............................................ (1,957) (193,717) (195,674)
Net loss................................................. (444) (43,977) (44,421)
------- ---------- ----------
Partners' capital at December 31, 1998..................... $13,808 $1,358,868 $1,372,676
======= ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE> 149
PARKER & PARSLEY 90-A, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)....................................... $ (44,421) $(149,948) $ 261,210
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Impairment of oil and gas properties................. 34,145 321,019 --
Depletion............................................ 161,379 150,605 169,844
Loss on disposition of assets........................ -- -- 28,717
Changes in assets and liabilities:
Accounts receivable.................................. 37,507 44,000 (63,996)
Accounts payable..................................... (8,189) 2,555 (22,583)
--------- --------- ---------
Net cash provided by operating activities....... 180,421 368,231 373,192
--------- --------- ---------
Cash flows from investing activities:
Additions to oil and gas properties..................... (9,047) (14,202) (1,425)
Proceeds from asset dispositions........................ -- -- 6,815
--------- --------- ---------
Net cash provided by (used in) investing
activities.................................... (9,047) (14,202) 5,390
--------- --------- ---------
Cash flows from financing activities:
Cash distributions to partners.......................... (195,674) (365,044) (369,808)
--------- --------- ---------
Net increase (decrease) in cash........................... (24,300) (11,015) 8,774
Cash at beginning of year................................. 116,510 127,525 118,751
--------- --------- ---------
Cash at end of year....................................... $ 92,210 $ 116,510 $ 127,525
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE> 150
PARKER & PARSLEY 90-A, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 90-A, L.P. (the "Partnership") is a limited partnership
organized in 1990 under the laws of the State of Delaware. As of August 8, 1997,
Pioneer Natural Resources USA, Inc. ("Pioneer USA") became the managing general
partner of the Partnership. Prior to August 8, 1997, the Partnership's managing
general partner was Parker & Parsley Development L.P. ("PPDLP"), a wholly-owned
subsidiary of Parker & Parsley Petroleum Company ("Parker & Parsley"). On August
7, 1997, Parker & Parsley and Mesa Inc. received shareholder approval to merge
and create Pioneer Natural Resources Company ("Pioneer"). On August 8, 1997,
PPDLP was merged with and into Pioneer USA, a wholly-owned subsidiary of
Pioneer, resulting in Pioneer USA becoming the managing general partner of the
Partnership as PPDLP's successor by merger.
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. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:
Oil and gas properties -- The Partnership utilizes the successful efforts
method of accounting for its oil and gas properties and equipment. Under this
method, all costs associated with productive wells and nonproductive development
wells are capitalized while nonproductive exploration costs are expensed.
Capitalized costs relating to proved properties are depleted using the
unit-of-production method on a property-by-property basis based on proved oil
(dominant mineral) reserves as determined by the engineering staff of Pioneer
USA, the Partnership's managing general partner, and reviewed by independent
petroleum consultants. The carrying amounts of properties sold or otherwise
disposed of and the related allowances for depletion are eliminated from the
accounts and any gain or loss is included in operations.
Impairment of long-lived assets -- 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"), the
Partnership reviews its long-lived assets to be held and used on an individual
property basis, including oil and gas properties accounted for under the
successful efforts method of accounting, whenever events or circumstances
indicate that the carrying value of those assets may not be recoverable. An
impairment loss is indicated if the sum of the expected future cash flows is
less than the carrying amount of the assets. In this circumstance, the
Partnership recognizes an impairment loss for the amount by which the carrying
amount of the asset exceeds the estimated fair value of the asset.
Use of estimates in the preparation of financial statements -- Preparation
of the accompanying financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reporting amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Net income (loss) per limited partnership interest -- The net income (loss)
per limited partnership interest is calculated by using the number of
outstanding limited partnership interests.
Income taxes -- A Federal income tax provision has not been included in the
financial statements as the income of the Partnership is included in the
individual Federal income tax returns of the respective partners.
15
<PAGE> 151
PARKER & PARSLEY 90-A, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Statements of cash flows -- For purposes of reporting cash flows, cash
includes depository accounts held by banks.
General and administrative expenses -- General and administrative expenses
are allocated in part to the Partnership by the managing general partner or its
affiliates. Such allocated expenses are determined by the managing general
partner based upon its judgement of the level of activity of the Partnership
relative to the managing general partner's activities and other entities it
manages. The method of allocation has been consistent over the past several
years with certain modifications incorporated to reflect changes in Pioneer
USA's overall business activities.
Reclassifications -- Certain reclassifications may have been made to the
1997 and 1996 financial statements to conform to the 1998 financial statement
presentations.
Environmental -- The Partnership is subject to extensive federal, state and
local environmental laws and regulations. These laws, which are constantly
changing, regulate the discharge of materials into the environment and may
require the Partnership to remove or mitigate the environmental effects of the
disposal or release of petroleum or chemical substances at various sites.
Environmental expenditures are expensed or capitalized depending on their future
economic benefit. Expenditures that relate to an existing condition caused by
past operations and that have no future economic benefits are expensed.
Liabilities for expenditures of a noncapital nature are recorded when
environmental assessment and/or remediation is probable, and the costs can be
reasonably estimated. Such liabilities are generally undiscounted unless the
timing of cash payments for the liability or component are fixed or reliably
determinable. No such liabilities have been accrued as of December 31, 1998.
Revenue recognition -- The Partnership uses the entitlements method of
accounting for crude oil and natural gas revenues.
Reporting comprehensive income -- Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130") establishes
standards for the reporting and display of comprehensive income (loss) and its
components in a full set of general purpose financial statements. Comprehensive
income (loss) includes net income (loss) and other comprehensive income (loss).
The Partnership has no items of other comprehensive income (loss), as defined by
SFAS No. 130. Consequently, the provisions of SFAS No. 130 do not apply to the
Partnership.
NOTE 3. IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with SFAS 121, the Partnership reviews its proved oil and gas
properties for impairment whenever events and circumstances indicate a decline
in the recoverability of the carrying value of the Partnership's oil and gas
properties. Based upon a decline in the Partnership's outlook for future
commodity prices, the Partnership has estimated the expected future cash flows
of its oil and gas properties as of December 31, 1998, 1997 and 1996, and
compared such estimated future cash flows to the respective carrying amount of
the oil and gas properties to determine if the carrying amounts were likely to
be recoverable. For those proved oil and gas properties for which the carrying
amount exceeded the estimated future cash flows, an impairment was determined to
exist; therefore, the Partnership adjusted the carrying amount of those oil and
gas properties to their fair value as determined by discounting their expected
future cash flows at a discount rate commensurate with the risks involved in the
industry. As a result, the Partnership recognized non-cash impairment provisions
of $34,145 and $321,019 related to its proved oil and gas properties during 1998
and 1997, respectively.
16
<PAGE> 152
PARKER & PARSLEY 90-A, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4. INCOME TAXES
The financial statement basis of the Partnership's net assets and
liabilities was $482,501 greater than the tax basis at December 31, 1998.
The following is a reconciliation of net income (loss) per statements of
operations with the net income per Federal income tax returns for the years
ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------- --------- --------
<S> <C> <C> <C>
Net income (loss) per statements of operations...... $(44,421) $(149,948) $261,210
Depletion and depreciation provisions for tax
reporting purposes (greater than) less than
amounts for financial reporting purposes.......... 149,296 16,293 (25,153)
Impairment of oil and gas properties for financial
reporting purposes................................ 34,145 321,019 --
Loss on sale of an asset for financial reporting
purposes greater than amounts for tax reporting
purposes.......................................... -- -- 26,940
Other............................................... 3,688 (2,745) 2,545
-------- --------- --------
Net income per Federal income tax
returns................................. $142,708 $ 184,619 $265,542
======== ========= ========
</TABLE>
NOTE 5. OIL AND GAS PRODUCING ACTIVITIES
The following is a summary of the costs incurred, whether capitalized or
expensed, related to the Partnership's oil and gas producing activities for the
years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------- ------
<S> <C> <C> <C>
Development costs......................................... $9,047 $14,202 $1,168
====== ======= ======
</TABLE>
Capitalized oil and gas properties consist of the following:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Proved properties:
Property acquisition costs............................... $ 200,177 $ 200,177
Completed wells and equipment............................ 4,876,168 4,867,121
----------- -----------
5,076,345 5,067,298
Accumulated depletion...................................... (3,832,899) (3,637,375)
----------- -----------
Net capitalized costs............................ $ 1,243,446 $ 1,429,923
=========== ===========
</TABLE>
NOTE 6. RELATED PARTY TRANSACTIONS
Pursuant to the limited partnership agreement, the Partnership had the
following related party transactions with the managing general partner or its
affiliates during the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Payment of lease operating and supervision charges in
accordance with standard industry operating
agreements......................................... $119,432 $139,545 $121,284
Reimbursement of general and administrative
expenses........................................... $ 11,560 $ 20,526 $ 22,989
</TABLE>
17
<PAGE> 153
PARKER & PARSLEY 90-A, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Partnership participates in oil and gas activities through an income
tax partnership (the "Program") pursuant to the Program agreement. Pioneer USA
and P&P Employees 90-A, L.P., ("EMPL") (the "Entities"), Parker & Parsley 90-A
Conv., L.P. and the Partnership (the "Partnerships") are parties to the Program
agreement. EMPL is a limited partnership organized for the benefit of certain
employees of Pioneer USA.
The costs and revenues of the Program are allocated to the Entities and the
Partnerships as follows:
<TABLE>
<CAPTION>
ENTITIES(1) PARTNERSHIPS(2)
----------- ---------------
<S> <C> <C>
Revenues:
Proceeds from disposition of depreciable and
depletable properties --
First three years.................................. 14.141414% 85.858586%
After first three years............................ 19.191919% 80.808081%
All other revenues --
First three years.................................. 14.141414% 85.858586%
After first three years............................ 19.191919% 80.808081%
Costs and expenses:
Lease acquisition costs, drilling and completion costs
and all other costs................................ 9.090909% 90.909091%
Operating costs, reporting and legal expenses and
general and administrative expenses --
First three years.................................. 14.141414% 85.858586%
After first three years............................ 19.191919% 80.808081%
</TABLE>
- ---------------
(1) Excludes Pioneer USA's 1% general partner ownership which is allocated at
the Partnership level and 147 limited partner interests owned by Pioneer
USA.
(2) The allocation between the Partnership and Parker & Parsley 90-A Conv., L.P.
is 74.274809% and 25.725191%, respectively.
18
<PAGE> 154
PARKER & PARSLEY 90-A, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. OIL AND GAS INFORMATION (UNAUDITED)
The following table presents information relating to the Partnership's
estimated proved oil and gas reserves at December 31, 1998, 1997 and 1996 and
changes in such quantities during the years then ended. Due to a change in the
accounting policy of the managing general partner in 1997, the Partnership began
accounting for processed natural gas production in two components: processed
natural gas liquids ("NGLs") and dry residue gas. NGLs are reflected in "Oil and
NGLs" in the table below. All of the Partnership's reserves are proved developed
and located within the United States. The Partnership's reserves are based on an
evaluation prepared by the engineering staff of Pioneer USA and reviewed by
Williamson Petroleum Consultants, Inc., an independent petroleum consultant,
using criteria established by the Securities and Exchange Commission. Reserve
value information is available to limited partners pursuant to the Partnership
agreement and therefore, is not presented.
<TABLE>
<CAPTION>
OIL AND NGLS GAS
(BBLS) (MCF)
------------ ---------
<S> <C> <C>
Net proved reserves at January 1, 1996...................... 308,386 1,305,645
Revisions................................................... 60,341 363,559
Sale of reserves............................................ (141) (51,479)
Production.................................................. (25,428) (88,919)
-------- ---------
Net proved reserves at December 31, 1996.................... 343,158 1,528,806
Revisions................................................... 81,982 (865,758)
Production.................................................. (26,735) (68,973)
-------- ---------
Net proved reserves at December 31, 1997.................... 398,405 594,075
Revisions................................................... (141,729) (152,757)
Production.................................................. (32,915) (47,086)
-------- ---------
Net proved reserves at December 31, 1998.................... 223,761 394,232
======== =========
</TABLE>
As of December 31, 1998, the estimated present value of future net revenues
of proved reserves, calculated using December 31, 1998 prices of $10.61 per
barrel of oil, $5.53 per barrel of NGLs and $1.40 per mcf of gas, discounted at
10% was approximately $378,000 and undiscounted was $533,000.
Numerous uncertainties exist in estimating quantities of proved reserves
and future net revenues therefrom. The estimates of proved reserves and related
future net revenues set forth in this report are based on various assumptions,
which may ultimately prove to be inaccurate. Therefore, such estimates should
not be construed as estimates of the current market value of the Partnership's
proved reserves. The Partnership emphasizes that reserve estimates are
inherently imprecise and, accordingly, the estimates are expected to change as
future information becomes available.
NOTE 8. MAJOR CUSTOMERS
The following table reflects the major customers of the Partnership's oil
and gas sales (a major customer is defined as a customer whose sales exceed 10%
of total sales) during the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Genesis Crude Oil, L.P...................................... 57% 58% 61%
Western Gas Resources, Inc. ................................ 22% 19% 14%
</TABLE>
19
<PAGE> 155
PARKER & PARSLEY 90-A, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1998, the amounts receivable from Genesis Crude Oil, L.P.
and Western Gas Resources, Inc. were $17,024 and $14,116, respectively, which
are included in the caption "Accounts receivable -- oil and gas sales" in the
accompanying Balance Sheet.
The Partnership's share of oil and gas production is sold to various
purchasers. Pioneer USA is of the opinion that the loss of any one purchaser
would not have an adverse effect on the ability of the Partnership to sell its
oil and gas production.
NOTE 9. ORGANIZATION AND OPERATIONS
The Partnership was organized April 30, 1990 as a limited partnership under
the Delaware Act for the purpose of acquiring and developing oil and gas
properties. The following is a brief summary of the more significant provisions
of the limited partnership agreement:
Managing general partner -- The managing general partner of the
Partnership is Pioneer USA. Pioneer USA has the power and authority to
manage, control and administer all Program and Partnership affairs. As
managing general partner and operator of the Partnership's properties, all
production expenses are incurred by Pioneer USA and billed to the
Partnership and a portion of revenue is initially received by Pioneer USA
prior to being paid to the Partnership. Under the limited partnership
agreement, the managing general partner pays 1% of the Partnership's
acquisition, drilling and completion costs and 1% of its operating and
general and administrative expenses. In return, it is allocated 1% of the
Partnership's revenues.
Limited partner liability -- The maximum amount of liability of any
limited partner is the total contributions of such partner plus his share
of any undistributed profits.
Initial capital contributions -- The limited partners entered into
subscription agreements for aggregate capital contributions of $6,811,000.
Pioneer USA is required to contribute amounts equal to 1% of initial
Partnership capital less commission and organization and offering costs
allocated to the limited partners and to contribute amounts necessary to
pay costs and expenses allocated to it under the Partnership agreement to
the extent its share of revenues does not cover such costs.
NOTE 10. DISPOSITION OF ASSETS
Loss on disposition of assets was due to a loss of $28,717 on sale of
assets during 1996. This loss was the result of the write-off of remaining
capitalized well costs for one gas well of $35,532, less proceeds received of
$6,815.
20
<PAGE> 156
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Partnership does not have any officers or directors. Under the limited
partnership agreement, the Partnership's managing general partner, Pioneer USA,
is granted the exclusive right and full authority to manage, control and
administer the Partnership's business.
Set forth below are the names, ages and positions of the directors and
executive officers of Pioneer USA. Directors of Pioneer USA are elected to serve
until the next annual meeting of stockholders or until their successors are
elected and qualified.
<TABLE>
<CAPTION>
AGE AT
DECEMBER 31,
NAME 1998 POSITION
- ---- ------------ --------
<S> <C> <C>
Scott D. Sheffield..... 46 President and Director
Timothy L. Dove........ 42 Executive Vice President and Director
Dennis E. Fagerstone... 49 Executive Vice President and Director
Mark L. Withrow........ 51 Executive Vice President, General Counsel and Director
M. Garrett Smith....... 37 Executive Vice President, Chief Financial Officer and
Director
Mel Fischer (a)........ 64 Executive Vice President
Lon C. Kile............ 43 Executive Vice President
Rich Dealy............. 32 Vice President and Chief Accounting Officer
</TABLE>
- ---------------
(a) Mr. Fischer was a director and officer until his retirement from Pioneer
and Pioneer USA on February 19, 1999.
Scott D. Sheffield. Mr. Sheffield is a distinguished graduate of The
University of Texas with a B.S. in Petroleum Engineering. Since August 1997, he
has served as President, Chief Executive Officer and a director of Pioneer and
President and a director of Pioneer USA. Mr. Sheffield was the President and a
director of Parker & Parsley from May 1990 until August 1997 and was the
Chairman of the Board and Chief Executive Officer of Parker & Parsley from
October 1990 until August 1997. He was the sole director of Parker & Parsley
from May 1990 until October 1990. Mr. Sheffield joined Parker & Parsley
Development Company ("PPDC"), a predecessor of Parker & Parsley, as a petroleum
engineer in 1979. He served as Vice President -- Engineering of PPDC from
September 1981 until April 1985 when he was elected President and a director. In
March 1989, Mr. Sheffield was elected Chairman of the Board and Chief Executive
Officer of PPDC. Before joining PPDC, Mr. Sheffield was employed as a production
and reservoir engineer for Amoco Production Company.
Timothy L. Dove. Mr. Dove became Executive Vice President -- Business
Development of Pioneer and Pioneer USA in August 1997. He was also appointed a
director of Pioneer USA in August 1997. Mr. Dove joined Parker & Parsley in May
1994 as Vice President -- International and was promoted to Senior Vice
President -- Business Development in October 1996, in which position he served
until August 1997. Prior to joining Parker & Parsley, Mr. Dove was employed with
Diamond Shamrock Corp., and its successor, Maxus Energy Corp, in various
capacities in international exploration and production, marketing, refining and
marketing and planning and development. Mr. Dove earned a B.S. in Mechanical
Engineering from Massachusetts Institute of Technology in 1979 and received his
M.B.A. in 1981 from the University of Chicago.
21
<PAGE> 157
Dennis E. Fagerstone. Mr. Fagerstone, a graduate of the Colorado School of
Mines with a B.S. in Petroleum Engineering, became an Executive Vice President
of Pioneer and Pioneer USA in August 1997. He was also appointed a director of
Pioneer USA in August 1997. He served as Executive Vice President and Chief
Operating Officer of Mesa from March 1, 1997 until August 1997. From October
1996 to February 1997, Mr. Fagerstone served as Senior Vice President and Chief
Operating Officer of Mesa and from May 1991 to October 1996, he served as Vice
President -- Exploration and Production of Mesa. From June 1988 to May 1991, Mr.
Fagerstone served as Vice President -- Operations of Mesa.
Mark L. Withrow. Mr. Withrow, a graduate of Abilene Christian University
with a B. S. in Accounting and Texas Tech University with a Juris Doctorate
degree, became Executive Vice President, General Counsel and Secretary of
Pioneer and Pioneer USA in August 1997. He was also appointed a director of
Pioneer USA in August 1997. Mr. Withrow was Vice President -- General Counsel of
Parker & Parsley from January 1991, when he joined Parker & Parsley, to January
1995, when he was appointed Senior Vice President -- General Counsel. He was
Parker & Parsley's Secretary from August 1992 until August 1997. Prior to
joining Parker & Parsley, Mr. Withrow was the managing partner of the law firm
of Turpin, Smith, Dyer, Saxe & MacDonald, Midland, Texas.
M. Garrett Smith. Mr. Smith, a graduate of The University of Texas with a
B.S. in Electrical Engineering and Southern Methodist University with an M.B.A.,
was appointed Executive Vice President and Chief Financial Officer of Pioneer in
December 1997. He served as Senior Vice President -- Finance of Pioneer from
August 1997 until December 1997. Mr. Smith was elected Senior Vice President --
Finance and a director of Pioneer USA in August 1997. He served as Vice
President -- Corporate Acquisitions of Mesa from January 1997 until August 1997.
From October 1996 to December 1996, Mr. Smith served as Vice
President -- Finance of Mesa and from 1994 to 1996 he served as Director of
Financial Planning of Mesa. Mr. Smith was employed by BTC Partners, Inc. (a
former financial advisor to Mesa) from 1989 to 1994.
Mel Fischer. Mr. Fischer, a graduate of the University of California at
Berkeley with a Masters degree in Geology, became Executive Vice
President -- Worldwide Exploration of Pioneer and Pioneer USA in August 1997. He
served as a director of Parker & Parsley from November 1995 until August 1997
and was Executive Vice President -- Worldwide Exploration for Parker & Parsley
from February 1997 to August 1997. Mr. Fischer retired from Pioneer and Pioneer
USA effective February 15, 1999. He worked in the petroleum industry for 32
years, starting as a Petroleum Geologist with Texaco in 1962, and retiring as
President, Occidental International Exploration and Production Company in March
1994. For the 10 years prior to becoming President of Occidental International,
he served as Executive Vice President, World Wide Exploration with Occidental
Oil and Gas Corporation. He is a registered geologist in the State of
California, a member of the American Association of Petroleum Geologists and an
emeritus member of the Board of Advisors for the Earth Sciences Research
Institute at the University of Utah.
Lon C. Kile. Mr. Kile, a graduate of Oklahoma State University with a
B.B.A. in Accounting, became Executive Vice President of Pioneer and Pioneer USA
in August 1997. Mr. Kile was Senior Vice President -- Investor Relations from
October 1996 to August 1997. Previously, he served as Vice President and Manager
of the Mid-Continent Division, Vice President -- Equity Finance & Analysis and
Vice President -- Marketing & Program Administration. Prior to joining Parker &
Parsley in 1985, he was employed as Supervisor -- Senior, Audit, in charge of
Parker & Parsley's audit, with Arthur Young.
Rich Dealy. Mr. Dealy is a graduate of Eastern New Mexico University with a
B.B.A. in Accounting and Finance and is a Certified Public Accountant. He became
Vice President and Chief Accounting Officer of Pioneer and Pioneer USA in
February 1998. Mr. Dealy served as Controller of Pioneer USA from August 1997 to
February 1998. He served as Controller of Parker & Parsley from August 1995 to
August 1997. Mr. Dealy joined Parker & Parsley as an Accounting Manager in July,
1992. He was previously employed with KPMG Peat Marwick as an Audit Senior, in
charge of Parker & Parsley's audit.
22
<PAGE> 158
ITEM 11. EXECUTIVE COMPENSATION
The Partnership does not have any directors or officers. Management of the
Partnership is vested in Pioneer USA, the managing general partner. The
Partnership participates in oil and gas activities through an income tax
partnership (the "Program") pursuant to the Program agreement. Under the Program
agreement, Pioneer USA and P&P Employees 90-A, L.P., ("EMPL") pay approximately
10% of the Partnership's acquisition, drilling and completion costs and
approximately 15% during the first three years and approximately 20% after three
years of its operating and general and administrative expenses. In return, they
are allocated approximately 15% during the first three years and approximately
20% after three years of the Partnership's revenues. See Notes 6 and 9 of Notes
to Financial Statements included in "Item 8. Financial Statements and
Supplementary Data" for information regarding fees and reimbursements paid to
the managing general partner or its affiliates by the Partnership.
Pioneer USA's current executive officers and other employees are general
partners of EMPL which serves as a co-general partner of the Program. Under this
arrangement, EMPL pays approximately 2 1/2% of the Partnership's acquisition,
drilling and completion costs and approximately 3.75% during the first three
years and approximately 5% after three years of its operating and general and
administrative expenses. In return, EMPL is allocated approximately 3.75% during
the first three years and approximately 5% after three years of the
Partnership's revenues. EMPL does not receive any fees or reimbursements from
the Partnership.
The Partnership does not directly pay any salaries of the executive
officers of Pioneer USA, but does pay a portion of Pioneer USA's general and
administrative expenses of which these salaries are a part. See Note 6 of Notes
to Financial Statements included in "Item 8. Financial Statements and
Supplementary Data".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Beneficial owners of more than five percent
The Partnership is not aware of any person who beneficially owns 5% or more
of the outstanding limited partnership interests of the Partnership. Pioneer USA
owned 147 limited partner interests at January 1, 1999.
(b) Security ownership of management
The Partnership does not have any officers or directors. The managing
general partner of the Partnership, Pioneer USA, has the exclusive right and
full authority to manage, control and administer the Partnership's business.
Under the limited partnership agreement, limited partners holding a majority of
the outstanding limited partnership interests have the right to take certain
actions, including the removal of the managing general partner or any other
general partner. The Partnership is not aware of any current arrangement or
activity which may lead to such removal. The Partnership is not aware of any
officer or director of Pioneer USA who beneficially owns limited partnership
interests in the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with the managing general partner or its affiliates
Pursuant to the limited partnership agreement, the Partnership had the
following related party transactions with the managing general partner or its
affiliates during the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Payment of lease operating and supervision charges in
accordance with standard industry operating
agreements......................................... $119,432 $139,545 $121,284
Reimbursement of general and administrative
expenses........................................... $ 11,560 $ 20,526 $ 22,989
</TABLE>
23
<PAGE> 159
Under the limited partnership agreement, the managing general partner pays
1% of the Partnership's acquisition, drilling and completion costs and 1% of its
operating and general and administrative expenses. In return, it is allocated 1%
of the Partnership's revenues. Also, see Notes 6 and 9 of Notes to Financial
Statements included in "Item 8. Financial Statements and Supplementary Data",
regarding the Partnership's participation with the managing general partner in
oil and gas activities of the Program.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial statements
The following are filed as part of this annual report:
Independent Auditors' Report -- Ernst & Young LLP
Independent Auditors' Report -- KPMG LLP
Balance sheets as of December 31, 1998 and 1997
Statements of operations for the years ended December 31, 1998, 1997
and 1996
Statements of partners' capital for the years ended December 31, 1998,
1997 and 1996
Statements of cash flows for the years ended December 31, 1998, 1997
and 1996
Notes to financial statements
2. Financial statement schedules
All financial statement schedules have been omitted since the required
information is in the financial statements or notes thereto, or is not
applicable nor required.
(b) Reports on Form 8-K
None.
(c) Exhibits
The exhibits listed on the accompanying index to exhibits are filed or
incorporated by reference as part of this annual report.
24
<PAGE> 160
SIGNATURES
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 90-A, L.P.
By: Pioneer Natural Resources USA,
Inc. Managing General Partner
By: /s/ SCOTT D. SHEFFIELD
----------------------------------
Scott D. Sheffield,
President
Dated: March 25, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<C> <S> <C>
/s/ SCOTT D. SHEFFIELD President and Director of March 25, 1999
- ----------------------------------------------------- Pioneer USA
Scott D. Sheffield
/s/ TIMOTHY L. DOVE Executive Vice President and March 25, 1999
- ----------------------------------------------------- Director of Pioneer USA
Timothy L. Dove
/s/ DENNIS E. FAGERSTONE Executive Vice President and March 25, 1999
- ----------------------------------------------------- Director of Pioneer USA
Dennis E. Fagerstone
/s/ MARK L. WITHROW Executive Vice President, March 25, 1999
- ----------------------------------------------------- General Counsel and Director
Mark L. Withrow of Pioneer USA
/s/ M. GARRETT SMITH Executive Vice President, Chief March 25, 1999
- ----------------------------------------------------- Financial Officer and
M. Garrett Smith Director of Pioneer USA
/s/ LON C. KILE Executive Vice President of March 25, 1999
- ----------------------------------------------------- Pioneer USA
Lon C. Kile
/s/ RICH DEALY Vice President and Chief March 25, 1999
- ----------------------------------------------------- Accounting Officer of Pioneer
Rich Dealy USA
</TABLE>
25
<PAGE> 161
PARKER & PARSLEY 90-A, L.P.
INDEX TO EXHIBITS
The following documents are incorporated by reference in response to Item
14(c):
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
3(a) -- Form of Agreement of Limited Partnership of Parker &
Parsley 90-A, L.P. incorporated by reference to Exhibit A
of the Post-Effective Amendment No. 1 of the
Partnership's Registration Statement on Form S-1
(Registration No. 33-26097)
4(b) -- Form of Limited Partner Subscription Agreement
incorporated by reference to Exhibit C of the
Post-Effective Amendment No. 1 of the Partnership's
Registration Statement on Form S-1 (Registration No.
33-26097)
4(b) -- Form of General Partner Subscription Agreement
incorporated by reference to Exhibit D of the
Post-Effective Amendment No. 1 of the Partnership's
Registration Statement on Form S-1 (Registration No.
33-26097)
4(b) -- Power of Attorney incorporated by reference to Exhibit B
of Amendment No. 1 of the Partnership's Registration
Statement on Form S-1 (Registration No. 33-26097)
4(c) -- Specimen Certificate of Limited Partnership Interest
incorporated by reference to Exhibit 4c of the
Partnership's Registration Statement on Form S-1
(Registration No. 33-26097)
10(b) -- Form of Development Drilling Program Agreement
incorporated by reference to Exhibit B of the
Post-Effective Amendment No. 1 of the Partnership's
Registration Statement on Form S-1 (Registration No.
33-26097)
27.1* -- Financial Data Schedule
</TABLE>
- ---------------
* Filed herewith
<PAGE> 162
PARKER & PARSLEY 90-A, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
DECEMBER 31, 1998, 1997 AND 1996
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
The standardized measure of discounted future net cash flows is computed by
applying year-end prices of oil and gas (with consideration of price changes
only to the extent provided by contractual arrangements) to the estimated future
production of proved oil and gas reserves less estimated future expenditures
(based on year-end costs) to be incurred in developing and producing the proved
reserves, discounted using a rate of 10% per year to reflect the estimated
timing of the future cash flows. Future income taxes are calculated by comparing
discounted future cash flows to the tax basis of oil and gas properties plus
available carryforwards and credits and applying the current tax rates to the
difference.
Discounted future cash flow estimates like those shown below are not
intended to represent estimates of the fair value of oil and gas properties.
Estimates of fair value should also consider probable reserves, anticipated
future oil and gas prices, interest rates, changes in development and production
costs and risks associated with future production. Because of these and other
considerations, any estimate of fair value is necessarily subjective and
imprecise.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Oil and gas producing activities:
Future cash inflows....................................... $ 2,464 $ 7,483 $14,291
Future production costs................................... (1,931) (4,629) (7,636)
Future development costs.................................. -- -- 100
------- ------- -------
533 2,854 6,755
10% annual discount factor................................ (155) (1,237) (3,392)
------- ------- -------
Standardized measure of discounted future net cash
flows.................................................. $ 378 $ 1,617 $ 3,363
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1998 1997 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Oil and Gas Producing Activities:
Oil and gas sales, net of production costs................ $ (159) $ (338) $ (479)
Net changes in prices and production costs................ (1,027) (1,539) 1,365
Extensions and discoveries................................ -- -- --
Sales of minerals-in-place................................ -- -- (31)
Purchases of minerals-in-place............................ -- -- --
Revisions of estimated future development costs........... -- (57) (51)
Revisions of previous quantity estimates and reserves
added by development drilling.......................... (174) (178) 724
Accretion of discount..................................... 162 336 191
Changes in production rates, timing and other............. (41) 30 (266)
------- ------- -------
Change in present value of future net revenues............ (1,239) (1,746) 1,453
------- ------- -------
Balance, beginning of year................................ 1,617 3,363 1,910
------- ------- -------
Balance, end of year...................................... $ 378 $ 1,617 $ 3,363
======= ======= =======
</TABLE>
<PAGE> 163
PIONEER NATURAL RESOURCES USA, INC.
1400 WILLIAMS SQUARE WEST
5205 NORTH O'CONNOR BLVD.
IRVING, TEXAS 75039
PROXY FOR 1999 SPECIAL MEETINGS OF LIMITED PARTNERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PIONEER NATURAL
RESOURCES USA, INC., AS MANAGING GENERAL PARTNER TO THE 25 PUBLICLY-HELD PARKER
& PARSLEY LIMITED PARTNERSHIPS LISTED IN THE PROXY STATEMENT DATED ,
1999. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
The undersigned hereby appoints Mark L. Withrow and Timothy L. Dove, and
either of them, proxies or proxy with full power of substitution and revocation
as to each of them, to represent the undersigned and to act and vote, with all
powers which the undersigned would possess if personally present, at the special
meetings of limited partners to be held on , 1999 at 2:00 p.m. at the
Wyndham Anatole Hotel, Room, 2201 Stemmons Freeway, Dallas, Texas 75207,
on the following matters and in their discretion on any other matters which may
come before the meeting or any adjournments thereof. Receipt of the proxy
statement dated , 1999 is acknowledged.
ITEM 1. Proposal to approve the Agreement and Plan of Merger dated as of
, 1999, among Pioneer Natural Resources Company, Pioneer Natural
Resources USA, Inc. and each of the partnerships.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
ITEM 2. Proposal to amend the partnership agreement of to permit the
partnership's merger with and into Pioneer Natural Resources USA, Inc.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
ITEM 3. Proposal to approve the opinion issued to Pioneer USA by on
behalf of the limited partners that neither the grant nor the exercise of the
right to approve the mergers by the limited partners will result in the loss of
any limited partner's limited liability or adversely affect the tax status of
the partnerships and to approve the selection of as special legal counsel
for the limited partners to render such legal opinion.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
ITEM 4. In the discretion of the proxies, upon such other business incident to
the conduct of the meeting as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned. IN THE ABSENCE OF SUCH DIRECTION, THE PROXY WILL BE VOTED FOR
THE PROPOSALS SET FORTH IN ITEMS 1, 2 AND 3.
Signature
-------------------------------
Signature
-------------------------------
Date
-------------------------------
NOTE: PLEASE SIGN AS NAME
APPEARS HEREON. JOINT OWNERS
SHOULD EACH SIGN. WHEN SIGNING
AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL
TITLE AS SUCH.
