UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
/ x / Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 (Fee Required)
For the fiscal year ended December 31, 1996
or
/ / Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 (No Fee Required)
Commission File No. 33-38582-01
PARKER & PARSLEY 91-A, L.P.
(Exact name of Registrant as specified in its charter)
Delaware 75-2387572
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
303 West Wall, Suite 101, Midland, Texas 79701
(Address of principal executive offices) (Zip code)
Registrant's Telephone Number, including area code : (915) 683-4768
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
$11,580,000
As of March 8, 1997, the number of outstanding limited partnership interests was
11,620. The following documents are incorporated by reference into the indicated
parts of this Annual Report on Form 10-K: None
Page 1 of 27 pages.
-Exhibit index on page 27-
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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 91-A, L.P. (the "Partnership") is a limited partnership
organized in 1991 under the laws of the State of Delaware. The managing general
partner is Parker & Parsley Petroleum USA, Inc. ("PPUSA").
A Registration Statement, as amended, filed pursuant to the Securities Act of
1933, registering limited partnership interests aggregating $105,000,000 and
$45,000,000 in general partnership interests in a series of Delaware limited
partnerships formed under the Parker & Parsley 91-92 Development Drilling
Program, was declared effective by the Securities and Exchange Commission on
June 25, 1991. On September 30, 1991, the offering of limited and general
partnership interests in the Partnership, the first partnership formed under
such statement, was closed, with interests aggregating $11,620,000 being sold to
705 subscribers of which $3,512,000 were sold to 199 subscribers as general
partner interests and $8,108,000 were sold to 506 subscribers as limited partner
interests. The general partners were converted to limited partners on November
30, 1992.
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 1996 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 1996, approximately 58% were attributable to sales made to Genesis
Crude Oil, L.P.
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
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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 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. PPUSA employs 659
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. The
Partnership's managing general partner, PPUSA, 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 48
oil and gas wells. One well was plugged and abandoned during 1993. At December
31, 1996, the Partnership had 47 wells producing.
For information relating to the Partnership's estimated proved oil and gas
reserves at December 31, 1996, 1995 and 1994, 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 PPUSA with
a review by an independent petroleum consultant.
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ITEM 3. Legal Proceedings
The Partnership is not aware of any material legal proceedings (other than
routine litigation in the ordinary course of the Partnership's business) to
which it is a party or to which its properties are subject.
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 1996.
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PART II
ITEM 5. Market for Partnership's Common Equity and Related Stockholder
Matters
At March 8, 1997, the Partnership had 11,620 outstanding limited partnership
interests held of record by 716 subscribers. There is no established public
trading market for the limited partnership interests. Under the limited
partnership agreement, PPUSA 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, 1996 and 1995, distributions of $824,664 and
$751,842, respectively, 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>
1996 1995 1994 1993 1992
---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Operating results:
Oil and gas sales $1,629,975 $1,387,494 $ 1,568,783 $2,374,818 $3,228,587
========= ========= ========== ========= =========
Impairment of oil and gas
properties $ - $1,008,771 $ 1,055,409 $ 197,347 $ -
========= ========= ========== ========= =========
Net income (loss) $ 654,054 $ (755,419) $(1,032,621) $ 418,007 $1,335,411
========= ========= ========== ========= =========
Allocation of net income
(loss):
Managing general partner $ 6,540 $ (7,554) $ (10,326) $ 4,180 $ 13,354
========= ========= ========== ========= =========
Limited partners $ 647,514 $ (747,865) $(1,022,295) $ 413,827 $1,322,057
========= ========= ========== ========= =========
Net income (loss) per
limited partners' interest $ 55.72 $ (64.36) $ (87.98) $ 35.61 $ 113.77
========= ========= ========== ========= =========
Limited partners' cash
distributions per limited
partners' interest $ 70.97 $ 64.70 $ 77.81 $ 163.94 $ 174.17
========= ========= ========== ========= =========
At year end:
Total assets $4,289,878 $4,511,078 $ 5,976,067 $7,930,286 $9,438,301
========= ========= ========== ========= =========
</TABLE>
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ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
1996 compared to 1995
The Partnership's 1996 oil and gas revenues increased to $1,629,975 from
$1,387,494 in 1995, an increase of 17%. The increase in revenues resulted from a
27% increase in the average price received per barrel of oil and a 48% increase
in the average price received per mcf of gas, offset by an 8% decline in barrels
of oil produced and sold and an 18% decline in mcf of gas produced and sold. In
1996, 57,484 barrels of oil were sold compared to 62,648 in 1995, a decrease of
5,164 barrels. In 1996, 150,454 mcf of gas were sold compared to 183,929 in
1995, a decrease of 33,475 mcf. The decreases in production volumes were
primarily due to the decline characteristics of the Partnership's oil and gas
properties. Because of these characteristics, management expects a certain
amount of decline in production to continue in the future until the
Partnership's economically recoverable reserves are fully depleted.
The average price received per barrel of oil increased $4.59 from $17.17 in 1995
to $21.76 in 1996. The average price received per mcf of gas increased from
$1.70 in 1995 to $2.52 in 1996. The market price for oil and gas has been
extremely volatile in the past decade, and management expects a certain amount
of volatility to continue in the foreseeable future. The Partnership may
therefore sell its future oil and gas production at average prices lower or
higher than that received in 1996.
Salvage income of $150 was received in 1996 from equipment disposals on two
fully depleted wells.
Total costs and expenses decreased in 1996 to $987,243 as compared to $2,153,502
in 1995, a decrease of $1,166,259, or 54%. The decrease was due to declines in
the impairment of oil and gas properties and depletion, offset by an increase in
production costs and general and administrative expenses ("G&A").
Production costs were $577,650 in 1996 and $569,299 in 1995, resulting in an
increase of $8,351. This increase resulted from higher production taxes, offset
by a decline in ad valorem taxes.
G&A's components are independent accounting and engineering fees, computer
services, postage and managing general partner personnel costs. During this
period, G&A increased, in aggregate, 16% from $48,236 in 1995 to $56,036 in
1996. The Partnership paid the managing general partner $35,518 in 1996 and
$38,439 in 1995 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
varied in certain years and may do so again depending on the activities of the
managed entities.
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The Partnership adopted 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") effective as of October 1, 1995 (see Notes 2 and 3
of Notes to Financial Statements included in "Item 8. Financial Statements and
Supplementary Data"). As a result of the review and evaluation of its long-lived
assets for impairment, the Partnership recognized a non-cash charge of
$1,008,771 to its oil and gas properties during the fourth quarter of 1995.
Depletion decreased in 1996 to $353,557 as compared to $527,196 in 1995. This
represented a decrease of $173,639, or 33%. This decrease was primarily
attributable to the following factors: (i) a reduction in the Partnership's net
depletable basis from charges taken in accordance with SFAS 121, (ii) a
reduction in oil production of 5,164 barrels in 1996 from 1995, and (iii) an
increase in oil and gas reserves during 1996 as a result of higher commodity
prices.
1995 compared to 1994
The Partnership's 1995 oil and gas revenues decreased to $1,387,494 from
$1,568,783 in 1994, a decrease of 12%. The decrease in revenues resulted from a
16% decrease in barrels of oil produced and sold, a 17% decrease in mcf of gas
produced and sold and a 2% decrease in the average price received per mcf of
gas, offset by an 8% increase in the average price received per barrel of oil.
In 1995, 62,648 barrels of oil were sold compared to 74,392 in 1994, a decrease
of 11,744 barrels. In 1995, 183,929 mcf of gas were sold compared to 221,159 in
1994, a decrease of 37,230 mcf. The decreases in production volumes were
primarily due to the decline characteristics of the Partnership's oil and gas
properties.
The average price received per barrel of oil increased $1.26 from $15.91 in 1994
to $17.17 in 1995. The average price received per mcf of gas decreased from
$1.74 in 1994 to $1.70 in 1995.
Salvage income of $3,877 was received in 1994 from equipment disposals on a well
plugged and abandoned in 1993 with additional costs to plug and abandon this
well of $2,461 incurred in 1994. There was no abandonment activity in 1995.
Total costs and expenses decreased in 1995 to $2,153,502 as compared to
$2,613,247 in 1994, a decrease of $459,745, or 18%. The decrease was due to
declines in impairment of oil and gas properties, depletion, production costs
and abandoned property costs, offset by an increase in G&A.
Production costs were $569,299 in 1995 and $672,473 in 1994, resulting in a
decrease of $103,174, or 15%. This decrease resulted from a decline in well
repair and maintenance costs and ad valorem taxes.
G&A's components are independent accounting and engineering fees, computer
services, postage and managing general partner personnel costs. During this
period, G&A increased, in aggregate, 29% from $37,356 in 1994 to $48,236 in
1995. The Partnership paid the managing general partner $38,439 in 1995 and
$26,270 in 1994 for G&A incurred on behalf of the Partnership.
The Partnership adopted SFAS 121 effective as of October 1, 1995 (see Notes 2
and 3 of Notes to Financial Statements included in "Item 8. Financial Statements
and Supplementary Data").
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As a result of the review and evaluation of its long-lived assets for
impairment, the Partnership recognized a non-cash charge of $1,008,771 related
to its oil and gas properties during the fourth quarter of 1995.
The Partnership charged $1,055,409 of its investment in oil and gas properties
to operations in 1994 through an additional provision for depletion. The
provision resulted from the write-down of net capitalized costs which exceeded
future net revenues from proved oil and gas reserves based on prices and costs
in effect at December 31, 1994.
Depletion decreased in 1995 to $527,196 as compared to $845,548 in 1994. This
represented a decrease of $318,352, or 38%. Oil production decreased 11,744
barrels in 1995 from 1994, while oil reserves of barrels were revised downward
by 86,521 barrels, or 10%.
Impact of inflation and changing prices on sales and net loss
Inflation impacts the fixed overhead rate charges of the lease operating
expenses for the Partnership. During 1994, 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 by 4.8%. The
1995 annual change in average weekly earnings increased by 4.4%. The 1996 index
(effective April 1, 1996) 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 1996, the price per
barrel for oil production similar to the Partnership's ranged from approximately
$18.00 to $25.00. For February 1997, the average price for the Partnership's oil
was approximately $22.00.
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.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $25,727 during 1996 from
1995. The increase was due to an increase in oil and gas sales, offset by an
increase in production costs paid.
Net Cash Used in Investing Activities
The Partnership's investing activities during 1996 and 1995 included
expenditures related to equipment replacement on various oil and gas properties.
Proceeds of $150 were received during 1996 from the salvage of equipment on two
fully depleted wells.
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Net Cash Used in Financing Activities
Cash was sufficient in 1996 for distributions to the partners of $832,994, of
which $824,664 was distributed to the limited partners and $8,330 to the
managing general partner. In 1995, cash was sufficient for distributions to the
partners of $759,490, of which $751,842 was distributed to the limited partners
and $7,648 to the managing general partner.
It is expected that future net cash provided by operations will be sufficient
for any capital expenditures and any distributions. As the production from the
properties declines, distributions are also expected to decrease.
ITEM 8. Financial Statements and Supplementary Data
The Partnership's audited financial statements are included elsewhere herein.
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
9
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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, PPUSA, is
granted the exclusive right and full authority to manage, control and administer
the Partnership's business. PPUSA is a wholly-owned subsidiary of Parker &
Parsley Petroleum Company (the "Company"), a publicly-traded corporation on the
New York Stock Exchange.
Set forth below are the names, ages and positions of the directors and executive
officers of PPUSA. Directors of PPUSA are elected to serve until the next annual
meeting of stockholders or until their successors are elected and qualified.
Age at
December 31,
Name 1996 Position
---- ------------ --------
Scott D. Sheffield 44 President, Chairman of the Board,
Chief Executive Officer and
Director
Timothy A. Leach 37 Executive Vice President and Director
Steven L. Beal 37 Senior Vice President, Chief Financial
Officer and Director
Mark L. Withrow 49 Senior Vice President, Secretary and
Director
David A. Chroback 41 Senior Vice President and Director
Scott D. Sheffield. Mr. Sheffield, a graduate of The University of
Texas with a Bachelor of Science degree in Petroleum Engineering, has been the
President and a Director of the Company since May 1990 and has been the Chairman
of the Board and Chief Executive Officer since October 1990. Mr. Sheffield
joined the Company as a petroleum engineer in 1979. Mr. Sheffield served as Vice
President - Engineering of the Company from September 1981 until April 1985 when
he was elected President and a Director of the Company. In March 1989, Mr.
Sheffield was elected Chairman of the Board and Chief Executive Officer of the
Company. On January 1, 1995, Mr. Sheffield resigned as President and Chief
Executive Officer of PPUSA, but remained Chairman of the Board and a Director of
PPUSA. On January 1, 1996, Mr. Sheffield reassumed the positions of President
and Chief Executive Officer of PPUSA. Before joining the Company, Mr. Sheffield
was principally occupied for more than three years as a production and reservoir
engineer for Amoco Production Company.
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Timothy A. Leach. Mr. Leach, a graduate of Texas A&M University with a
Bachelor of Science degree in Petroleum Engineering and the University of Texas
of the Permian Basin with a Master of Business Administration degree, was
elected Executive Vice President - Engineering of the Company on March 21, 1995.
Mr. Leach had been serving as Senior Vice President - Engineering since March
1993 and served as Vice President - Engineering of the Company from October 1990
to March 1993. Mr. Leach was elected Executive Vice President and Director of
PPUSA on December 1, 1995. He had joined the Company as Vice President -
Engineering in September 1989. Prior to joining the Company, Mr. Leach was
employed as Senior Vice President and Director of First City Texas - Midland,
N.A.
Steven L. Beal. Mr. Beal, a graduate of the University of Texas with a
Bachelor of Business Administration degree in Accounting and a certified public
accountant, was elected Senior Vice President - Finance of the Company in
January 1995 and Chief Financial Officer of the Company on March 21, 1995. Mr.
Beal was elected Senior Vice President and Chief Financial Officer of PPUSA on
January 1, 1995 and was elected a Director of PPUSA on January 2, 1996. He
served as Treasurer of PPUSA from January 1, 1995 to June 12, 1996. Mr. Beal
joined the Company as Treasurer in March 1988 and was elected Vice President -
Finance in October 1991. Prior to joining the Company, Mr. Beal was employed as
an audit manager for Price Waterhouse.
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 Juris Doctorate degree, was Vice President - General Counsel
of the Company from February 1991 to January 1995, when he was appointed Senior
Vice President - General Counsel, and has been the Company's Secretary since
August 1992. On January 1, 1995, Mr. Withrow was elected Senior Vice President
and Secretary of PPUSA and was elected a Director of PPUSA on January 2, 1996.
Mr. Withrow joined the Company in January 1991. Prior to joining the Company,
Mr. Withrow was the managing partner of the law firm of Turpin, Smith, Dyer,
Saxe & MacDonald, Midland, Texas.
David A. Chroback. Mr. Chroback, a graduate of Hanover College with a
Bachelor of Science degree in Geology, and a graduate of Southern Illinois
University at Carbondale with a Master of Science degree in Geology, was elected
Senior Vice President of the Company and PPUSA on October 7, 1996. On January 2,
1996, Mr. Chroback was elected Director of PPUSA. He had served as Vice
President - Geology of the Company since February 1993. Mr. Chroback has been
the Geological Manager since June 1992, and prior to that has been a Senior
Geologist with the Company since January 1988. Before joining the Company, he
was a project geologist with Indian Wells Oil Company. Mr. Chroback was
previously employed by Amoco Production Company as a petroleum geologist from
1980 through 1984.
ITEM 11. Executive Compensation
The Partnership does not have any directors or officers. Management of the
Partnership is vested in 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,
Parker & Parsley Development L.P. ("PPDLP") and P&P Employees 91-A GP ("EMPL")
11
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pay approximately 25% of the Partnership's acquisition, drilling and completion
costs and approximately 35% of its operating and general and administrative
expenses. In return, they are allocated approximately 35% of the Partnership's
revenues. See Notes 6 and 9 of Notes to Financial Statements included in "Item
8. Financial Statements and Supplementary Data" below for information regarding
fees and reimbursements paid to the managing general partner or its affiliates
by the Partnership.
PPUSA's current executive officers and other employees are general partners of
EMPL. EMPL serves as a co-general partner of the Program. Under this
arrangement, EMPL pays approximately 2.5% of the Partnership's acquisition,
drilling and completion costs and approximately 3.5% of its operating and
general and administrative expenses. In return, EMPL is allocated approximately
3.5% 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 or
employees of PPUSA, but does pay a portion of PPUSA'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"
below.
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.
(b) Security ownership of management
The Partnership does not have any officers or directors. The managing general
partner of the Partnership, PPUSA, 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
PPUSA 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:
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1996 1995 1994
-------- -------- --------
Payment of lease operating and supervision
charges in accordance with standard
industry operating agreements $218,737 $203,349 $211,698
Reimbursement of general and administrative
expenses $ 35,518 $ 38,439 $ 26,270
Purchase of oil and gas properties and
related equipment, at predecessor cost $ 6,064 $ 15,047 $ 5,041
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"
below, regarding the Partnership's participation in oil and gas activities of
the Program.
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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
Balance sheets as of December 31, 1996 and 1995
Statements of operations for the years ended December 31, 1996,
1995 and 1994
Statements of partners' capital for the years ended December 31,
1996, 1995 and 1994
Statements of cash flows for the years ended December 31, 1996,
1995 and 1994
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.
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S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PARKER & PARSLEY 91-A, L.P.
Dated: March 25, 1997 By: Parker & Parsley Petroleum USA, Inc.
("PPUSA"), General Partner
By: /s/ Scott D. Sheffield
------------------------------
Scott D. Sheffield, President
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.
/s/ Scott D. Sheffield President, Chairman of the Board, March 25, 1997
- ----------------------- Chief Executive Officer and
Scott D. Sheffield Director of PPUSA
/s/ Timothy A. Leach Executive Vice President and March 25, 1997
- ----------------------- Director of PPUSA
Timothy A. Leach
/s/ Steven L. Beal Senior Vice President, Chief March 25, 1997
- ----------------------- Financial Officer and Director
Steven L. Beal of PPUSA
/s/ Mark L. Withrow Senior Vice President, Secretary March 25, 1997
- ----------------------- and Director of PPUSA
Mark L. Withrow
/s/ David A. Chroback Senior Vice President and March 25, 1997
- ----------------------- Director of PPUSA
David A. Chroback
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INDEPENDENT AUDITORS' REPORT
The Partners
Parker & Parsley 91-A, L.P.
(A Delaware Limited Partnership):
We have audited the financial statements of Parker & Parsley 91-A, L.P. as
listed in the accompanying index under Item 14(a). 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 91-A, L.P. as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1996, in
conformity with generally accepted accounting principles.
As discussed in Notes 2 and 3 to the financial statements, the Partnership
adopted the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" in 1995.
KPMG Peat Marwick LLP
Midland, Texas
March 21, 1997
16
<PAGE>
PARKER & PARSLEY 91-A, L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
December 31
1996 1995
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents, including interest
bearing deposits of $200,661 in 1996 and
$173,066 in 1995 $ 202,546 $ 174,500
Accounts receivable - oil and gas sales 234,215 138,831
---------- ----------
Total current assets 436,761 313,331
---------- ----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 9,653,538 9,644,611
Accumulated depletion (5,800,421) (5,446,864)
---------- ----------
Net oil and gas properties 3,853,117 4,197,747
---------- ----------
$ 4,289,878 $ 4,511,078
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 35,361 $ 77,621
Partners' capital:
Limited partners (11,620 interests) 4,211,929 4,389,079
Managing general partner 42,588 44,378
---------- ----------
4,254,517 4,433,457
---------- ----------
$ 4,289,878 $ 4,511,078
========== ==========
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
PARKER & PARSLEY 91-A, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF OPERATIONS
For the years ended December 31
1996 1995 1994
---------- ---------- -----------
Revenues:
Oil and gas $1,629,975 $1,387,494 $ 1,568,783
Interest 11,172 10,589 7,966
Salvage income from equipment
disposals 150 - 3,877
--------- --------- ----------
1,641,297 1,398,083 1,580,626
--------- --------- ----------
Costs and expenses:
Oil and gas production 577,650 569,299 672,473
General and administrative 56,036 48,236 37,356
Impairment of oil and gas
properties - 1,008,771 1,055,409
Depletion 353,557 527,196 845,548
Abandoned property - - 2,461
--------- --------- ----------
987,243 2,153,502 2,613,247
--------- --------- ----------
Net income (loss) $ 654,054 $ (755,419) $(1,032,621)
========= ========= ==========
Allocation of net income (loss):
Managing general partner $ 6,540 $ (7,554) $ (10,326)
========= ========= ==========
Limited partners $ 647,514 $ (747,865) $(1,022,295)
========= ========= ==========
Net income (loss) per limited
partners' interest $ 55.72 $ (64.36) $ (87.98)
========= ========= ==========
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
PARKER & PARSLEY 91-A, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Managing
general Limited
partner partners Total
--------- ----------- -----------
Partners' capital at January 1, 1994 $ 79,067 $ 7,815,178 $ 7,894,245
Distributions (9,161) (904,097) (913,258)
Net loss (10,326) (1,022,295) (1,032,621)
-------- ---------- ----------
Partners' capital at December 31, 1994 59,580 5,888,786 5,948,366
Distributions (7,648) (751,842) (759,490)
Net loss (7,554) (747,865) (755,419)
-------- ---------- ----------
Partners' capital at December 31, 1995 44,378 4,389,079 4,433,457
Distributions (8,330) (824,664) (832,994)
Net income 6,540 647,514 654,054
-------- ---------- ----------
Partners' capital at December 31, 1996 $ 42,588 $ 4,211,929 $ 4,254,517
======== ========== ==========
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
PARKER & PARSLEY 91-A, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF CASH FLOWS
For the years ended December 31
1996 1995 1994
---------- ---------- -----------
Cash flows from operations:
Net income (loss) $ 654,054 $ (755,419) $(1,032,621)
Adjustment to reconcile net income
(loss) to net cash provided by
operating activities:
Impairment of oil and gas
properties - 1,008,771 1,055,409
Depletion 353,557 527,196 845,548
Salvage income from equipment
disposals (150) - (3,877)
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable (95,384) 15,874 43,700
Increase (decrease) in accounts
payable (41,134) 48,794 (8,340)
--------- --------- ----------
Net cash provided by operating
activities 870,943 845,216 899,819
--------- --------- ----------
Cash flows from investing activities:
Additions to oil and gas properties (10,053) (21,357) (11,137)
Proceeds from salvage income on
equipment disposals 150 - 3,877
--------- --------- ----------
Net cash used in investing
activities (9,903) (21,357) (7,260)
--------- --------- ----------
Cash flows from financing activities:
Cash distributions to partners (832,994) (759,490) (913,258)
--------- --------- ----------
Net increase (decrease) in cash and cash
equivalents 28,046 64,369 (20,699)
Cash and cash equivalents at beginning
of year 174,500 110,131 130,830
--------- --------- ----------
Cash and cash equivalents at end of year $ 202,546 $ 174,500 $ 110,131
========= ========= ==========
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
PARKER & PARSLEY 91-A, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
Note 1. Organization and nature of operations
Parker & Parsley 91-A, L.P. (the "Partnership") is a limited partnership
organized in 1991 under the laws of the State of Delaware.
The Partnership engages primarily in oil and gas development and
production in 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:
Impairment of long-lived assets - Commencing in 1995, 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 fair value of the asset.
The Partnership accounts for long-lived assets to be disposed of at the
lower of their carrying amount or fair value less costs to sell once management
has committed to a plan to dispose of the assets.
Prior to the adoption of SFAS 121 in the fourth quarter of 1995, the
Partnership's aggregate oil and gas properties were stated at cost not in excess
of total estimated future net revenues and the estimated fair value of oil and
gas assets not being depleted.
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 Parker &
Parsley Petroleum USA, Inc. ("PPUSA"), the Partnership's managing general
21
<PAGE>
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.
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.
Statements of cash flows - For purposes of reporting cash flows, cash and
cash equivalents include 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 varied in certain years and may do so
again depending on the activities of the managed entities.
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 environ mental 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.
Note 3. Impairment of long-lived assets
The Partnership adopted SFAS 121 effective October 1, 1995. In order to
determine whether an impairment had occurred, the Partnership estimated the
expected future cash flows of its oil and gas properties and compared such
future cash flows to the carrying amount of the oil and gas properties to
determine if the carrying amount was recoverable. For those 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
22
<PAGE>
commensurate with the risks involved in the industry. As a result of the review
and evaluation of its long-lived assets for impairment, the Partnership
recognized a non-cash charge of $1,008,771 to its oil and gas properties during
the fourth quarter of 1995.
Note 4. Income taxes
The financial statement basis of the Partnership's net assets and
liabilities was $1,986,186 greater than the tax basis at December 31, 1996.
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:
1996 1995 1994
-------- ---------- -----------
Net income (loss) per statements of
operations $654,054 $ (755,419) $(1,032,621)
Intangible development costs capitalized
for financial reporting purposes and
expensed for tax reporting purposes - - (2,219)
Depletion and depreciation provisions
for tax reporting purposes under
(over) amounts for financial reporting
purposes (44,893) 27,271 159,629
Impairment of oil and gas properties for
financial reporting purposes - 1,008,771 1,055,049
Other 11,084 - 2,397
------ --------- ----------
Net income per Federal
income tax returns $620,245 $ 280,623 $ 182,235
======= ========= ==========
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:
1996 1995 1994
--------- --------- ---------
Development costs $ 8,927 $ 22,483 $ 11,137
======== ======== ========
Capitalized oil and gas properties consist of the following:
1996 1995 1994
----------- ----------- -----------
Property acquisition costs $ 343,666 $ 343,666 $ 343,666
Completed wells and equipment 9,309,872 9,300,945 9,278,462
---------- ---------- ----------
9,653,538 9,644,611 9,622,128
Accumulated depletion (5,800,421) (5,446,864) (3,910,897)
---------- ---------- ----------
Net capitalized costs $ 3,853,117 $ 4,197,747 $ 5,711,231
========== ========== ==========
23
<PAGE>
The Partnership charged $1,055,409 of its investment in oil and gas
properties to operations in 1994 through an additional provision for depletion.
The provision resulted from the write-down of net capitalized costs which
exceeded future net revenues from proved oil and gas reserves based on prices
and costs in effect at December 31, 1994. During 1995, the Partnership
recognized a non-cash charge against oil and gas properties of $1,008,771
associated with the adoption of SFAS 121. See Note 3.
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:
1996 1995 1994
-------- -------- --------
Payment of lease operating and supervision
charges in accordance with standard industry
operating agreements $218,737 $203,349 $211,698
Reimbursement of general and administrative
expenses $ 35,518 $ 38,439 $ 26,270
Purchase of oil and gas properties and related
equipment, at predecessor cost $ 6,064 $ 15,047 $ 5,041
The Partnership participates in oil and gas activities through an income
tax partnership (the "Program") pursuant to the Program agreement. Parker &
Parsley Development L.P. ("PPDLP"), P&P Employees 91-A GP ("EMPL") (the
"Entities") and the Partnership are parties to the Program agreement. EMPL is a
general partnership organized for the benefit of certain employees of PPUSA.
The costs and revenues of the Program are allocated to the Entities and
the Partnership as follows:
Entities Partnership (1)
---------- ---------------
Revenues:
Proceeds from disposition of depreciable
and depletable properties 34.3434343% 65.6565657%
All other revenues 34.3434343% 65.6565657%
Costs and expenses:
Lease acquisition costs, drilling and
completion costs and all other costs 24.2424242% 75.7575758%
Operating costs, reporting and legal
expenses and general and administrative
expenses 34.3434343% 65.6565657%
(1) Includes PPUSA's 1% general partner ownership which is allocated at th
Partnership level.
24
<PAGE>
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, 1996, 1995 and 1994 and
changes in such quantities during the years then ended. All of the Partnership's
reserves are proved and located within the United States. The Partnership's
reserves are based on an evaluation prepared by PPUSA internal engineers and
reviewed by 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.
Oil (bbls) Gas (mcf)
---------- ---------
Net proved reserves at January 1, 1994 1,073,868 3,150,134
Revisions (132,941) (639,483)
Production (74,392) (221,159)
--------- ---------
Net proved reserves at December 31, 1994 866,535 2,289,492
Revisions (86,521) (267,269)
Production (62,648) (183,929)
--------- ---------
Net proved reserves at December 31, 1995 717,366 1,838,294
Revisions 110,536 570,978
Production (57,484) (150,454)
--------- ---------
Net proved reserves at December 31, 1996 770,418 2,258,818
========= =========
The estimated present value of future net revenues of proved reserves,
calculated using December 31, 1996 prices of $24.72 per barrel of oil and $3.65
per mcf of gas, discounted at 10% was approximately $6,765,000 and undiscounted
was $13,717,000 at December 31, 1996.
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:
1996 1995 1994
------ ------ ------
Genesis Crude Oil, L.P. 58% 57% 56%
GPM Gas Corporation - - 13%
The above customers represent 47% of total accounts receivable at
December 31, 1996.
PPDLP is party to a long-term agreement pursuant to which PPDLP and
affiliates are to sell to Basis Petroleum, Inc. (formerly Phibro Energy, Inc.)
substantially all crude oil (including condensate) which any of such entities
have the right to market from time to time. On September 23, 1996, PPDLP and
Basis Petroleum, Inc. entered into an agreement that supersedes the prior crude
oil purchase agreement between the parties and provides for adjusted terms
25
<PAGE>
effective December 1, 1995. On November 25, 1996, the Company consented to the
assignment of the agreement to Genesis Crude Oil, L.P. ("Genesis"), a limited
partnership formed by Basis Petroleum, Inc. and Howell Corporation. The price to
be paid by Genesis for oil purchased under the agreement ("Genesis Agreement")
is to be competitive with prices paid by other substantial purchasers in the
same areas who are significant competitors of Genesis. The price to be paid for
oil purchased under the Genesis Agreement includes a market-related bonus that
may vary from month to month based upon spot oil prices at various commodity
trade points. The term of the Genesis Agreement is through June 30, 1998, and it
may continue thereafter subject to termination rights afforded each party.
Salomon, Inc., the parent company of Basis Petroleum, Inc. and a subordinated
limited partner in Genesis, secures the payment obligations under the Genesis
Agreement with a $25 million payment guarantee. Accounts receivable-oil and gas
sales included $111,202 due from Genesis at December 31, 1996.
Note 9. Organization and operations
The Partnership was organized September 30, 1991 as a limited partnership
under the Delaware Act for the purpose of acquiring and developing oil and gas
properties. The general partners were converted to limited partners on November
30, 1992. The managing general partner received an opinion of legal counsel to
the effect that such conversion will not result in material adverse tax
consequences. 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 PPUSA. PPUSA has the power and authority to manage,
control and administer all Partnership affairs. 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
$11,620,000. The managing general partner is required to contribute
amounts equal to 1% of initial Partnership capital less sales commission
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.
26
<PAGE>
PARKER & PARSLEY 91-A, L.P.
INDEX TO EXHIBITS
The following documents are incorporated by reference in response to Item
14(c):
Exhibit No. Description Page
----------- ----------- ----
3(a) Amended and Restated Certificate -
and Agreement of Limited Partnership
of Parker & Parsley 91-A, L.P.
4(b) Form of Subscription Agreement and -
Power of Attorney
4(c) Specimen Certificate of Limited -
Partnership Interest
10(a) Operating Agreement -
10(b) Exploration and Development Program -
Agreement
27
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000871364
<NAME> 91A.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 202,546
<SECURITIES> 0
<RECEIVABLES> 234,215
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 436,761
<PP&E> 9,653,538
<DEPRECIATION> 5,800,421
<TOTAL-ASSETS> 4,289,878
<CURRENT-LIABILITIES> 35,361
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,254,517
<TOTAL-LIABILITY-AND-EQUITY> 4,289,878
<SALES> 1,629,975
<TOTAL-REVENUES> 1,641,297
<CGS> 0
<TOTAL-COSTS> 987,243
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 654,054
<INCOME-TAX> 0
<INCOME-CONTINUING> 654,054
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 654,054
<EPS-PRIMARY> 55.72
<EPS-DILUTED> 0
</TABLE>
