SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
February 3, 1997 (January 2, 1996)
PARKER & PARSLEY PETROLEUM COMPANY
(Exact name of Registrant as specified in its charter)
Delaware 1-10695 75-2570602
(State or other jurisdiction of Commission (I.R.S. Employer
incorporation or organization) File Number Identification Number)
303 West Wall, Suite 101, Midland, Texas 79701
(Address of principal executive offices) (Zip code)
Registrant's Telephone Number, including area code : (915) 683-4768
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Page 1 of 11 pages.
ITEM 5. Other Events
Divestiture of Australasian Assets
On March 28, 1996, the Company completed the sale of certain wholly-owned
Australian subsidiaries to Santos Ltd., and on June 20, 1996, the Company
completed the sale of another wholly-owned subsidiary, Bridge Oil Timor Sea,
Inc., to Phillips Petroleum International Investment Company. During the nine
months ended September 30, 1996, the Company received aggregate consideration of
$237.5 million for these combined sales which consisted of $186.6 million of
proceeds for the equity of such entities, $21.8 million for reimbursement of
certain intercompany cash advances, and the assumption of such subsidiaries' net
liabilities, exclusive of oil and gas properties, of $29.1 million. The
proceeds, after payment of certain costs and expenses, were utilized to reduce
the Company's outstanding bank indebtedness and for general working capital
purposes.
The assets sold to Santos Ltd. consisted primarily of properties located in
the Cooper Basin in Central Australia, the Surat Basin in Northeast Australia,
the Carnarvon Basin on the Northwest Shelf off the coast of Western Australia,
the Otway Basin off the coast of Southeast Australia and the Central Sumatra
Basin in Indonesia. At December 31, 1995, the Company's interests in these
properties contained 32.1 million BOE of proved reserves (consisting of 12.4
million Bbls of oil and 118.3 Bcf of gas), representing $133.8 million of SEC 10
value.
The wholly-owned subsidiary sold to Phillips Petroleum International
Investment Company, Bridge Oil Timor Sea, Inc. has a wholly owned subsidiary,
Bridge Oil Timor Sea Pty Ltd., which owns a 22.5% interest in the ZOCA 91-13
permit in the offshore Bonaparte Basin in the Zone of Cooperation between
Australia and Indonesia.
Divestiture of Domestic Assets
The Company regularly reviews its property base for the purpose of
identifying nonstrategic assets, the disposition of which would create
organizational and operational efficiencies. While the Company generally would
not dispose of assets solely for the purpose of reducing debt, such dispositions
can have the result of furthering the Company's objective of financial
flexibility through decreased debt levels. During the nine months ended
September 30, 1996, the Company received proceeds of $51.2 million from the sale
of such properties and related assets. At December 31, 1995, the domestic
properties which the Company has sold contained proved reserves of 5.1 million
barrels of oil and 44.7 Bcf of gas and had an aggregate SEC 10 value of $55.2
million. The proceeds from such divestitures were initially used to reduce
outstanding indebtedness and subsequently to provide funding for a portion of
the Company's 1996 capital expenditures including purchases of oil and gas
properties in the Company's core areas.
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ITEM 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information:
The following pro forma financial information for the Company, taking
into account the disposition of the Company's Australasian assets and
certain domestic assets, are included in this Report on the pages
indicated below.
Page
Preliminary Statement 4
Unaudited Pro Forma Combined Statement of Operations
for the nine months ended September 30, 1996 5
Unaudited Pro Forma Combined Statement of Operations
for the year ended December 31, 1995 6
Notes to Unaudited Pro Forma Combined Financial Statements 7
3
Unaudited Pro Forma Combined Financial Statements of the Company
The Unaudited Pro Forma Combined Financial Statements of the Company have
been prepared to give effect to (i) the sale of certain wholly-owned Australian
subsidiaries to Santos Ltd. in March 1996, (ii) the sale of Bridge Oil Timor
Sea, Inc. to Phillips Petroleum International Investment Company in June 1996
(items (i) and (ii) collectively the "Australasian Assets"), (iii) the aggregate
effect of certain nonstrategic domestic oil and gas properties, gas plants, and
related assets sold during the period from January 2, 1996 to September 30, 1996
(collectively the "1996 Assets Sold"), (iv) the aggregate effect of certain
nonstrategic domestic oil and gas properties, gas plants, and related assets
sold during the year ended December 31, 1995 (collectively the "1995 Assets
Sold"), (v) the issuance in April 1995 of $150 million 8-7/8% Senior Notes, and
(vi) the issuance in August 1995 of $150 million 8-1/4% Senior Notes. The
Unaudited Pro Forma Combined Financial Statements of the Company are not
necessarily indicative of the financial results for the periods presented had
the sale of the Australasian Assets, the 1996 Assets Sold, and the 1995 Assets
Sold taken place on January 1, 1995. In addition, future results may vary
significantly from the results reflected in the accompanying Unaudited Pro Forma
Combined Financial Statements because of normal production declines, changes in
product prices and future acquisitions and divestitures, among other factors.
This information should be read in conjunction with the Consolidated Financial
Statements of the Company (and the related notes) included in the Annual Report
on Form 10-K for the year ended December 31, 1995 and in the Quarterly Report on
Form 10-Q for the nine months ended September 30, 1996.
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PARKER & PARSLEY PETROLEUM COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Nine months ended September 30, 1996
(in thousands, except share and per share data)
1996
The Australasian Assets Pro Forma Pro Forma
Company Assets Sold Entries Combined
Revenues:
Oil and gas $283,327 $(10,591) $ (8,933) $263,803
Natural gas processing 16,810 - (630) 16,180
Interest and other 14,996 (130) - 961 (b) 15,827
Gain on disposition of
assets 96,887 (83,181) (13,706) -
------- ------- ------- -------
412,020 (93,902) (23,269) 295,810
------- ------- ------- -------
Cost and expenses:
Oil and gas production 82,233 (3,300) (4,686) 74,247
Natural gas processing 9,123 - (579) 8,544
Depletion, depreciation
and amortization 86,228 (4,217) (2,674) 79,337
Exploration and
abandonments 14,171 (1,435) (1,408) 11,328
General and
administrative 19,420 (1,732) - 17,688
Interest 36,105 (1,100) - (4,335)(a) 30,670
Other 1,709 - - 1,709
------- ------- ------- -------
248,989 (11,784) (9,347) 223,523
------- ------- ------- -------
Income from continuing
operations before
income taxes 163,031 (82,118) (13,922) 72,287
Income tax provision (47,200) - - 21,900 (d) (25,300)
------- ------- ------- -------
Income from continuing
operations $115,831 $(82,118) $(13,922) $ 46,987
======= ======= ======= =======
Income from continuing
operations per share:
Primary $ 3.24 $ 1.31
======= =======
Fully diluted $ 2.86 $ 1.24
======= =======
Weighted average shares
outstanding 35,762,877 35,762,877
========== ==========
See accompanying notes to unaudited pro forma combined financial statements.
5
PARKER & PARSLEY PETROLEUM COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Year ended December 31, 1995
(in thousands, except share and per share data)
1996 1995
The Australasian Assets Assets Pro Forma Pro Forma
Company Assets Sold Sold Entries Combined
Revenues:
Oil and gas $ 375,720 $(45,805) $(23,988) $(29,524) $ 276,403
Natural gas processing 33,258 - (1,362) (15,799) 16,097
Gas marketing 76,784 - - - 76,784
Interest and other 11,364 (3,850) - - 4,040 (b) 11,554
Gain on disposition of
assets 16,620 888 - (17,508) -
-------- ------- ------- ------- --------
513,746 (48,767) (25,350) (62,831) 380,838
-------- ------- ------- ------- --------
Cost and expenses:
Oil and gas production 130,905 (12,418) (13,304) (17,494) 87,689
Natural gas processing 25,865 - (1,033) (14,799) 10,033
Gas marketing 75,664 - - - 75,664
Depletion, depreciation
and amortization 159,058 (22,256) (10,230) (10,611) 115,961
Impairment of oil and
gas properties and
natural gas processing
facilities 130,494 - (20,910) (2,801) 106,783
Exploration and
abandonments 27,552 (13,563) (462) (168) 13,359
General and administrative 37,409 (6,443) - - 30,966
Interest 65,449 (5,077) - - 11,606 (c) 42,339
(29,639)(a)
Other 11,357 - - - 11,357
-------- ------- ------- ------- --------
663,753 (59,757) (45,939) (45,873) 494,151
-------- ------- ------- ------- --------
Loss from continuing
operations before
income taxes (150,007) 10,990 20,589 (16,958) (113,313)
Income tax benefit 45,900 - - - (6,200)(d 39,700
-------- ------- ------- ------- --------
Loss from continuing
operations $(104,107) $ 10,990 $ 20,589 $(16,958) $ (73,613)
======== ======= ======= ======= ========
Loss from continuing
operations per share:
Primary $ (2.95) $ (2.09)
======== ========
Fully diluted $ (2.95) $ (2.09)
======== ========
Weighted average shares
outstanding 35,274,214 35,274,214
========== ==========
See accompanying notes to unaudited pro forma combined financial statements.
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PARKER & PARSLEY PETROLEUM COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
December 31, 1995 and September 30, 1996
Note 1. Basis of Presentation
The accompanying unaudited pro forma combined financial information of
Parker & Parsley Petroleum Company ("the Company") is presented to reflect (i)
the sale of certain wholly-owned Australian subsidiaries to Santos Ltd. in
March 1996, (ii) the sale of Bridge Oil Timor Sea, Inc. to Phillips Petroleum
International Investment Company in June 1996 (items (i) and (ii) collectively
the "Australasian Assets"), (iii) the aggregate effect of certain nonstrategic
domestic oil and gas properties, gas plants, and related assets sold during
the nine months ended September 30, 1996 (collectively the "1996 Assets
Sold"), (iv) the aggregate effect of certain nonstrategic domestic oil and gas
properties, gas plants, and related assets sold during the year ended December
31, 1995 (collectively the "1995 Assets Sold"), (v) the issuance in April 1995
of $150 million 8-7/8% Senior Notes, and (vi) the issuance in August 1995 of
$150 million 8- 1/4% Senior Notes. The unaudited pro forma combined statements
of operations are presented as if the sale of the Australasian Assets, the
1996 Assets Sold, the 1995 Assets Sold and the two senior note issuances
occurred on January 1, 1995.
The Company - Represents the consolidated statements of operations of
Parker & Parsley Petroleum Company for the nine months ended September 30,
1996 and the year ended December 31, 1995.
Australasian Assets - Reflects the results of operations (before
income taxes) for the nine months ended September 30, 1996 and the year
ended December 31, 1995 from the oil and gas properties and related assets
prior to their sale in 1996.
1996 Assets Sold - Reflects the results of operations (before income
taxes) for the nine months ended September 30, 1996 and the year ended
December 31, 1995 from the oil and gas properties, gas plants, related
assets and contract rights prior to their sale in 1996.
1995 Assets Sold - Reflects the results of operations (before income
taxes) for the year ended December 31, 1995 from the oil and gas
properties, gas plants, related assets and contract rights prior to their
sale in 1995.
Note 2. Pro Forma Entries
(a) To adjust interest expense resulting from the application of that
portion of the sales proceeds necessary to retire the Company's
outstanding bank indebtedness. The proceeds applied in 1996 of $225
million from the sale of the Australasian Assets and the 1996 Assets
Sold resulted in a reduction in interest expense of $4.3 million. The
proceeds applied in 1995 of $328.3 million from the sale of the
Australasian Assets, the 1996 Assets Sold and the 1995 Assets Sold
resulted in a reduction of interest expense of $29.6 million. The
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PARKER & PARSLEY PETROLEUM COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
December 31, 1995 and September 30, 1996
reductions in interest expense were calculated utilizing the Company's
weighted average rate on its bank indebtedness of 6.61% for the nine
months ended September 30, 1996 and 7.18% for the year ended December
31, 1995, respectively.
(b) To adjust interest income as a result of investing the sales proceeds
received in excess of the amounts used to retire the Company's
outstanding bank indebtedness. Such excess cash proceeds exceeded
outstanding bank indebtedness by an average amount of $28.8 million
during the nine months ended September 30, 1996 and $81 million during
the year ended December 31, 1995. The Company typically invests excess
cash in a Treasury Securities money fund which had an average yield of
4.45% during the nine months ended September 30, 1996 and 4.99% during
the year ended December 31, 1995.
(c) To adjust interest expense and amortization of debt issuance costs
associated with (i) the issuance in April 1995 of $150 million 8-7/8%
Senior Notes due April 15, 2005 (an additional $3.4 million in
interest expense) and (ii) the issuance in August 1995 of $150 million
8-1/4% Senior Notes due August 15, 2007 (an additional $8.2 million in
interest expense).
(d) To adjust income tax expense for each tax jurisdiction.
Note 3. Income Taxes
The Company accounts for income taxes pursuant to the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("Statement 109"). In accordance with Statement 109, the Company
prepares separate tax calculations for each tax jurisdiction in which the
Company is subject to income taxes.
The Company's tax provision for the nine months ended September 30, 1996
of $47.2 million included a provision of $16.2 million associated with the
disposition of the Australasian Assets. The income tax provision includes $6.4
million related to the write-off of certain net operating loss carryforwards
which, with the sale of the income producing assets in the Australian tax
jurisdiction, will not be utilized in the future.
Note 4. Income (Loss) from Continuing Operations per Share
Primary income (loss) from continuing operations per share is computed
based on the weighted average number of shares of common stock and common
stock equivalents outstanding during the period. The computation of fully
diluted income from continuing operations per share for the nine months ended
September 30, 1996 assumes conversion of the Company's 6-1/4% Cumulative
Guaranteed Monthly Income Convertible Preferred Shares which increased the
8
PARKER & PARSLEY PETROLEUM COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
December 31, 1995 and September 30, 1996
weighted average number of shares outstanding to 42.5 million. For 1995, the
computation of fully diluted income (loss) from continuing operations per
share was antidilutive; therefore, the amounts reported for primary and fully
diluted income (loss) from continuing operations per share were the same.
Note 5. Oil and Gas Reserve Data
The following unaudited pro forma supplemental information regarding the
oil and gas activities of the Company is presented pursuant to the disclosure
requirements promulgated by the Securities and Exchange Commission and
Statement of Financial Accounting Standards No. 69, "Disclosures About Oil and
Gas Producing Activities". The pro forma combined reserve information is
presented as if the sale of the Australasian Assets, 1996 Assets Sold, and
1995 Assets Sold had occurred on January 1, 1995. Information for oil is
presented in barrels (Bbls) and for gas in thousands of cubic feet (Mcf).
The Company emphasizes that reserve estimates are inherently imprecise and
subject to revision and that estimates of new discoveries are more imprecise
than those of producing oil and gas properties. Accordingly, the estimates are
expected to change as future information becomes available; such changes could
be significant.
Quantities of oil and gas reserves
Set forth below is a pro forma summary of the changes in the net
quantities of oil and natural gas reserves for the year ended December 31,
1995.
Oil Gas
(Bbls) (Mcf)
------- -------
(in thousands)
Balance, January 1, 1995 106,745 574,603
Revisions of previous estimates 27,399 134,717
Purchase of minerals-in-place 4,309 82,713
New discoveries and extensions 761 6,015
Production (9,389) (64,159)
Sales of minerals-in-place ------- -------
Balance, December 31, 1995 129,825 733,889
======= =======
Standardized measure of discounted future net cash flows
The pro forma combined standardized measure of discounted future net cash
flow 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 oil and gas reserves less
estimated future expenditures (based on year-end costs) to be incurred in
9
PARKER & PARSLEY PETROLEUM COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
December 31, 1995 and September 30, 1996
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 rate to the difference.
December 31, 1995
-----------------
(in thousands)
Oil and Gas Producing Activities:
Future cash inflows $ 3,950,996
Future production costs (1,532,737)
Future development costs (157,875)
----------
Future net cash flows before taxes 2,260,384
10% annual discount factor (1,083,814)
----------
Discounted future cash flows before taxes 1,176,570
Discounted future income taxes (125,510)
----------
Standardized measure of discounted future
net cash flows $ 1,051,060
==========
Changes relating to the standardized measure of discounted future net
cash flows
The principal sources of the change in the pro forma combined standardized
measure of discounted future net cash flows for the year ended December 31,
1995 are as follows (in thousands):
Oil and gas sales, net of production costs $ (188,714)
Net changes in prices and production costs 195,164
Extensions and discoveries 12,321
Sales of minerals-in-place -
Purchases of minerals-in-place 53,628
Revisions of estimated future development costs (44,005)
Revisions of previous quantity estimates 259,506
Accretion of discount 79,665
Changes in production rates, timing and other 12,358
----------
Change in present value of future net revenues 379,923
Net change in present value of future income taxes (116,343)
----------
263,580
Balance, beginning of year 787,480
----------
Balance, end of year $ 1,051,060
==========
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PARKER & PARSLEY PETROLEUM COMPANY
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 hereunto duly authorized.
PARKER & PARSLEY PETROLEUM COMPANY
Date: February 5, 1997 By: /s/ Steven L. Beal
-----------------------------------
Steven L. Beal, Senior Vice President
and Chief Financial Officer
11