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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/x/ Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1995, or
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _________ to _________
Commission File No. 33-3353A
PARKER & PARSLEY 86-A, LTD.
(Exact name of Registrant as specified in its charter)
Texas 75-2124884
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
303 West Wall, Suite 101
Midland, Texas 79701
(Address of principal executive offices) (Zip code)
Registrant's Telephone Number, including area code: (915)683-4768
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /x/ No / /
Page 1 of 13 pages.
There are no exhibits.
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PARKER & PARSLEY 86-A, LTD.
(A Texas Limited Partnership)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
March 31, December 31,
1995 1994
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents, including
interest bearing deposits of
$17,717 at March 31 and $24,892 at
December 31 $ 18,495 $ 25,005
Accounts receivable - oil and gas sales 98,568 95,300
---------- ----------
Total current assets 117,063 120,305
Oil and gas properties - at cost, based
on the successful efforts accounting
method 8,006,979 7,992,878
Accumulated depletion (5,408,792) (5,321,457)
---------- ----------
Net oil and gas properties 2,598,187 2,671,421
---------- ----------
$ 2,715,250 $ 2,791,726
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 64,564 $ 48,563
Partners' capital:
Limited partners (10,131 interests) 2,625,485 2,717,034
Managing general partner 25,201 26,129
---------- ----------
2,650,686 2,743,163
---------- ----------
$ 2,715,250 $ 2,791,726
========== ==========
The financial information included herein has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these statements.
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PARKER & PARSLEY 86-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
1995 1994
---------- ----------
Revenues:
Oil and gas sales $ 208,220 $ 185,220
Interest income 779 197
Salvage income from abandoned property - 223
--------- ---------
Total revenues 208,999 185,640
Costs and expenses:
Production costs 131,054 108,731
General and administrative expenses 6,247 5,557
Depletion 87,335 102,485
--------- ---------
Total costs and expenses 224,636 216,773
--------- ---------
Net loss $ (15,637) $ (31,133)
========= =========
Allocation of net loss:
Managing general partner $ (157) $ (311)
========= =========
Limited partners $ (15,480) $ (30,822)
========= =========
Net loss per limited partnership
interest $ (1.53) $ (3.04)
========= =========
Distributions per limited partnership
interest $ 7.51 $ 6.07
========= =========
The financial information included herein has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these statements.
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PARKER & PARSLEY 86-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 1994 $ 29,203 $ 3,021,366 $ 3,050,569
Distributions (621) (61,479) (62,100)
Net loss (311) (30,822) (31,133)
---------- ---------- ----------
Balance at March 31, 1994 $ 28,271 $ 2,929,065 $ 2,957,336
========== ========== ==========
Balance at January 1, 1995 $ 26,129 $ 2,717,034 $ 2,743,163
Distributions (771) (76,069) (76,840)
Net loss (157) (15,480) (15,637)
---------- ---------- ----------
Balance at March 31, 1995 $ 25,201 $ 2,625,485 $ 2,650,686
========== ========== ==========
The financial information included herein has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these statements.
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PARKER & PARSLEY 86-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
March 31,
1995 1994
---------- ----------
Cash flows from operating activities:
Net loss $ (15,637) $ (31,133)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depletion 87,335 102,485
Salvage income from abandoned property - (223)
Changes in assets and liabilities:
Increase in accounts receivable (3,268) (4,934)
Increase (decrease) in accounts payable 16,536 (7,377)
--------- ---------
Net cash provided by operating
activities 84,966 58,818
Cash flows from investing activities:
(Additions) disposals to oil and gas
properties (14,636) 868
Proceeds from equipment salvage on
abandoned property - 223
--------- ---------
Net cash provided by (used in)
investing activities (14,636) 1,091
Cash flows from financing activities:
Cash distributions to partners (76,840) (62,100)
--------- ---------
Net decrease in cash and cash equivalents (6,510) (2,191)
Cash and cash equivalents at beginning
of period 25,005 45,214
--------- ---------
Cash and cash equivalents at end of period $ 18,495 $ 43,023
========= =========
The financial information included herein has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these statements.
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PARKER & PARSLEY 86-A, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1995
(Unaudited)
NOTE 1.
In the opinion of management, the unaudited financial statements as of
March 31, 1995 of Parker & Parsley 86-A, Ltd. (the "Registrant") include
all adjustments and accruals consisting only of normal recurring accrual
adjustments which are necessary for a fair presentation of the results
for the interim period. However, the results of operations for the
three months ended March 31, 1995 are not necessarily indicative of the
results for the full year ending December 31, 1995.
The financial statements should be read in conjunction with the
financial statements and the notes thereto contained in the Registrant's
Report on Form 10-K for the year ended December 31, 1994, as filed with
the Securities and Exchange Commission, a copy of which is available
upon request by writing to Steven L. Beal, Senior Vice President, 303
West Wall, Suite 101, Midland, Texas 79701.
NOTE 2.
On May 25, 1993, a final settlement agreement was negotiated, drafted
and finally executed, ending litigation which had begun on September 5,
1989, when the Registrant filed suit along with other parties against
Dresser Industries, Inc.; Titan Services, Inc.; BJ-Titan Services
Company; BJ-Hughes Holding Company; Hughes Tool Company; Baker Hughes
Production Tools, Inc.; and Baker Hughes Incorporated alleging that the
defendants had intentionally failed to provide the materials and
services ordered and paid for by the Registrant and other parties in
connection with the fracturing and acidizing of 523 wells, and then
fraudulently concealed the shorting practice from the managing general
partner, Parker & Parsley Development L.P. ("PPDLP") (see Item 2). The
May 25, 1993 settlement agreement called for a payment of $115 million
in cash by the defendants. The managing general partner received the
funds, deducted incurred legal expenses, accrued interest, determined
the general partner's portion of the funds and calculated any inter-
partnership allocations. A distribution of $91,000,000 was made to the
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working interest owners, including the Registrant, on July 30, 1993.
The limited partners received their distribution of $2,882,376, or
$284.51 per limited partnership interest, in September 1993.
On May 3, 1993, Jack N. Price, the attorney who represented Gary G.
"Zeke" Lancaster in the Federal Court lawsuit, filed suit in State Court
in Beaumont against all of the plaintiff partnerships, including the
Registrant and others, alleging his entitlement to 12% of the settlement
proceeds. Price's lawsuit claim for approximately $13.8 million is
predicated on a purported contract entered into with Southmark
Corporation in August 1988, in which he allegedly binds the Registrant
and the other defendants, as well as Southmark. Although PPDLP believes
the lawsuit is without merit and intends to vigorously defend it, PPDLP
is holding in reserve approximately 12.5% of the total settlement
pending final resolution of the litigation by the court. Upon payment
of the costs associated with the Price litigation, and assuming a
successful defense, a second distribution will be made consisting of the
balance of the settlement funds, including any accrued interest.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Registrant was formed July 23, 1986. The managing general partner
of the Registrant at December 31, 1994 was Parker & Parsley Development
Company ("PPDC"). On January 1, 1995, PPDLP, a Texas limited
partnership, became the sole managing general partner of the Registrant,
by acquiring the rights and assuming the obligations of PPDC. PPDC was
merged into PPDLP on January 1, 1995. PPDLP acquired PPDC's rights and
obligations as managing general partner of the Registrant in connection
with the merger of PPDC, P&P Producing, Inc. and Spraberry Development
Corporation into MidPar L.P., which survived the merger with a change
of name to PPDLP. The sole general partner of PPDLP is Parker & Parsley
Petroleum USA, Inc. PPDLP has the power and authority to manage,
control and administer all Program and Registrant affairs. The limited
partners contributed $10,131,000 representing 10,131 interests ($1,000
per interest) sold to a total of 952 limited partners.
Since its formation, the Registrant invested $8,418,523 in various
prospects that were drilled in Texas. At March 31, 1995, the Registrant
had 30 producing oil and gas wells, one well was abandoned in 1992 and
one well was sold during 1990.
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Results of Operations
Revenues:
The Registrant's oil and gas revenues increased to $208,220 from
$185,220 for the three months ended March 31, 1995 and 1994,
respectively, an increase of 12%. The increase in revenues resulted
from a 28% increase in the average price received per barrel of oil and
a 2% increase in mcf of gas produced and sold, offset by a 7% decrease
in barrels of oil produced and sold and a 3% decrease in the average
price received per mcf of gas. For the three months ended March 31,
1995, 8,736 barrels of oil were sold compared to 9,404 for the same
period in 1994, a decrease of 668 barrels. For the three months ended
March 31, 1995, 34,229 mcf of gas were sold compared to 33,436 for the
same period in 1994, an increase of 793 mcf. The decrease in oil
production volumes were primarily due to the decline characteristics of
the Registrant's oil and gas properties. The increase in gas production
volumes was attributable to operational changes on several wells.
Management expects a certain amount of decline in production in the
future until the Registrant's economically recoverable reserves are
fully depleted.
The average price received per barrel of oil increased $3.75 from $13.40
for the three months ended March 31, 1994 to $17.15 for the same period
in 1995 while the average price received per mcf of gas decreased from
$1.77 during the three months ended March 31, 1994 to $1.71 in 1995.
The market price for oil and gas has been extremely volatile in the past
decade, and management expects a certain amount of volatility to
continue in the foreseeable future. The Registrant may therefore sell
its future oil and gas production at average prices lower or higher than
that received during the three months ended March 31, 1995.
Costs and Expenses:
Total costs and expenses increased to $224,636 for the three months
ended March 31, 1995 as compared to $216,773 for the same period in
1994, an increase of $7,863, or 4%. This increase was due to an
increase in production costs and general and administrative expenses
("G&A"), offset by a decrease in depletion.
Production costs were $131,054 for the three months ended March 31, 1995
and $108,731 for the same period in 1994 resulting in a $22,323
increase, or 21%. This increase was primarily the result of an increase
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in well repair and maintenance costs incurred in an effort to stimulate
well production.
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, 12% from $5,557 for the
three months ended March 31, 1994 to $6,247 for the same period in 1995.
The Partnership agreement limits G&A to 3% of gross oil and gas
revenues.
Depletion was $87,335 for the three months ended March 31, 1995 compared
to $102,485 for the same period in 1994. This represented a decrease in
depletion of $15,150, or 15%. Depletion was computed property-by-property
utilizing the unit-of-production method based upon the dominant
mineral produced, generally oil. Oil production decreased 668 barrels
for the three months ended March 31, 1995 from the same period in 1994,
while oil reserves of barrels were revised downward by 9,722 barrels, or
3%.
On May 25, 1993, a final settlement agreement was negotiated, drafted
and finally executed, ending litigation which had begun on September 5,
1989, when the Registrant filed suit along with other parties against
Dresser Industries, Inc.; Titan Services, Inc.; BJ-Titan Services
Company; BJ-Hughes Holding Company; Hughes Tool Company; Baker Hughes
Production Tools, Inc.; and Baker Hughes Incorporated alleging that the
defendants had intentionally failed to provide the materials and
services ordered and paid for by the Registrant and other parties in
connection with the fracturing and acidizing of 523 wells, and then
fraudulently concealed the shorting practice from the managing general
partner. The May 25, 1993 settlement agreement called for a payment of
$115 million in cash by the defendants. The managing general partner
received the funds, deducted incurred legal expenses, accrued interest,
determined the general partner's portion of the funds and calculated any
inter-partnership allocations. A distribution of $91,000,000 was made
to the working interest owners, including the Registrant, on July 30,
1993. The limited partners received their distribution of $2,882,376,
or $284.51 per limited partnership interest, in September 1993.
On May 3, 1993, Jack N. Price, the attorney who represented Gary G.
"Zeke" Lancaster in the Federal Court lawsuit, filed suit in State Court
in Beaumont against all of the plaintiff partnerships, including the
Registrant and others, alleging his entitlement to 12% of the settlement
proceeds. Price's lawsuit claim for approximately $13.8 million is
predicated on a purported contract entered into with Southmark
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Corporation in August 1988, in which he allegedly binds the Registrant
and the other defendants, as well as Southmark. Although PPDLP
believes the lawsuit is without merit and intends to vigorously defend
it, PPDLP is holding in reserve approximately 12.5% of the total
settlement pending final resolution of the litigation by the court.
Upon payment of the costs associated with the Price litigation, and
assuming a successful defense, a second distribution will be made
consisting of the balance of the settlement funds, including any accrued
interest.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased to $84,966 for the
three months ended March 31, 1995, a $26,148 increase from the same
period ended March 31, 1994. This increase was due to an increase in
oil and gas sales and a decline in G&A, offset by an increase in
production costs. The increase in oil and gas sales was due to an
increase in the average price received per barrel of oil. G&A decreased
due to less expense allocated by the managing general partner. The
increase in production costs was due to more well repair and maintenance
costs incurred in an effort to stimulate well production.
Net Cash Provided by (Used in) Investing Activities
The Registrant's principal investing activities during the three months
ended March 31, 1995 were for repair and maintenance activity on various
oil and gas properties.
Proceeds of $223 were received during the three months ended March 31,
1994 from the salvage of equipment from one abandoned property from a
prior year.
Net Cash Used in Financing Activities
Cash was sufficient for the three months ended March 31, 1995 to cover
distributions to the partners of $76,840 of which $76,069 was
distributed to the limited partners and $771 to the managing general
partner. For the same period ended March 31, 1994, cash was sufficient
for distributions to the partners of $62,100 of which $61,479 was
distributed to the limited partners and $621 to the managing general
partner.
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It is expected that future net cash provided by operating activities
will be sufficient for any capital expenditures and any distributions.
As the production from the properties declines, distributions are also
expected to decrease.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 25, 1993, a final settlement agreement was negotiated, drafted
and finally executed, ending litigation which had begun on September 5,
1989, when the Registrant filed suit along with other parties against
Dresser Industries, Inc.; Titan Services, Inc.; BJ-Titan Services
Company; BJ-Hughes Holding Company; Hughes Tool Company; Baker Hughes
Production Tools, Inc.; and Baker Hughes Incorporated alleging that the
defendants had intentionally failed to provide the materials and
services ordered and paid for by the Registrant and other parties in
connection with the fracturing and acidizing of 523 wells, and then
fraudulently concealed the shorting practice from the managing general
partner. The May 25, 1993 settlement agreement called for a payment of
$115 million in cash by the defendants. The managing general partner
received the funds, deducted incurred legal expenses, accrued interest,
determined the general partner's portion of the funds and calculated any
inter-partnership allocations. A distribution of $91,000,000 was made
to the working interest owners, including the Registrant, on July 30,
1993. The limited partners received their distribution of $2,882,376,
or $284.51 per limited partnership interest, in September 1993.
On May 3, 1993, Jack N. Price, the attorney who represented Gary G.
"Zeke" Lancaster in the Federal Court lawsuit, filed suit in State Court
in Beaumont against all of the plaintiff partnerships, including the
Registrant and others, alleging his entitlement to 12% of the settlement
proceeds. Price's lawsuit claim for approximately $13.8 million is
predicated on a purported contract entered into with Southmark
Corporation in August 1988, in which he allegedly binds the Registrant
and the other defendants, as well as Southmark. Although PPDLP believes
the lawsuit is without merit and intends to vigorously defend it, PPDLP
is holding in reserve approximately 12.5% of the total settlement
pending final resolution of the litigation by the court. Upon payment
of the costs associated with the Price litigation, and assuming a
successful defense, a second distribution will be made consisting of the
balance of the settlement funds, including any accrued interest.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - none
(b) Reports on Form 8-K - none
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PARKER & PARSLEY 86-A, LTD.
(A Texas Limited Partnership)
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PARKER & PARSLEY 86-A, LTD.
By: Parker & Parsley Development L.P.,
Managing General Partner
By: Parker & Parsley Petroleum USA, Inc.
("PPUSA"), General Partner
Dated: May 12, 1995 By: /s/ Steven L. Beal
------------------------------------
Steven L. Beal, Senior Vice
President - Finance and
Chief Financial Officer
of PPUSA
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