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 September 30, 1997
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 11 pages.
Exhibit index on page 10.
PARKER & PARSLEY 86-A, LTD.
TABLE OF CONTENTS
Page
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets as of September 30, 1997 and
December 31, 1996 ..................................... 3
Statements of Operations for the three and nine
months ended September 30, 1997 and 1996.................. 4
Statement of Partners' Capital for the nine months
ended September 30, 1997.................................. 5
Statements of Cash Flows for the nine months ended
September 30, 1997 and 1996............................... 6
Notes to Financial Statements............................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K............................ 10
27. Financial Data Schedule
Signatures.................................................. 11
2
PARKER & PARSLEY 86-A, LTD.
(A Texas Limited Partnership)
Part I. Financial Information
Item 1. Financial Statements
BALANCE SHEETS
September 30, December 31,
1997 1996
------------ -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents, including interest
bearing deposits of $105,173 at September 30
and $231,863 at December 31 $ 105,290 $ 232,139
Accounts receivable - oil and gas sales 66,012 121,894
----------- ----------
Total current assets 171,302 354,033
----------- ----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 7,095,265 7,084,599
Accumulated depletion (5,758,409) (5,634,266)
----------- ----------
Net oil and gas properties 1,336,856 1,450,333
----------- ----------
$ 1,508,158 $ 1,804,366
=========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 21,293 $ 76,557
Partners' capital:
Managing general partner 13,563 15,972
Limited partners (10,131 interests) 1,473,302 1,711,837
----------- ----------
1,486,865 1,727,809
----------- ----------
$ 1,508,158 $ 1,804,366
=========== ==========
The financial information included as of September 30, 1997 has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
3
PARKER & PARSLEY 86-A, LTD.
(A Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
--------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- ----------
Revenues:
Oil and gas $ 135,437 $ 179,352 $ 439,462 $ 590,230
Interest 1,839 6,032 6,590 8,670
Litigation settlement - - - 290,690
Gain (loss) on disposition
of assets - (4,729) - 172,972
-------- -------- -------- ---------
137,276 180,655 446,052 1,062,562
-------- -------- -------- ---------
Costs and expenses:
Oil and gas production 105,015 83,832 314,983 319,793
General and administrative 4,063 5,380 13,184 17,706
Depletion 41,170 30,405 124,143 110,678
-------- -------- -------- ---------
150,248 119,617 452,310 448,177
-------- -------- -------- ---------
Net income (loss) $ (12,972) $ 61,038 $ (6,258) $ 614,385
======== ======== ======== =========
Allocation of net income (loss):
Managing general partner $ (130) $ 610 $ (63) $ 6,143
======== ======== ======== =========
Limited partners $ (12,842) $ 60,428 $ (6,195) $ 608,242
======== ======== ======== =========
Net income (loss) per limited
partnership interest $ (1.27) $ 5.97 $ (.61) $ 60.04
======== ======== ======== =========
Distributions per limited
partnership interest $ 4.83 $ 7.46 $ 22.93 $ 52.67
======== ======== ======== =========
The financial information included herein has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
4
PARKER & PARSLEY 86-A, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
--------- ---------- ----------
Balance at January 1, 1997 $ 15,972 $1,711,837 $1,727,809
Distributions (2,346) (232,340) (234,686)
Net loss (63) (6,195) (6,258)
-------- --------- ---------
Balance at September 30, 1997 $ 13,563 $1,473,302 $1,486,865
======== ========= =========
The financial information included herein has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
5
PARKER & PARSLEY 86-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
----------------------
1997 1996
---------- ---------
Cash flows from operating activities:
Net income (loss) $ (6,258) $ 614,385
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depletion 124,143 110,678
Gain on disposition of assets - (172,972)
Changes in assets and liabilities:
Decrease in accounts receivable 55,882 40,368
Increase (decrease) in accounts payable (56,079) 29,829
-------- --------
Net cash provided by operating activities 117,688 622,288
-------- --------
Cash flows from investing activities:
Additions to oil and gas properties (9,851) (2,679)
Proceeds from disposition of assets - 411,753
-------- --------
Net cash provided by (used in) investing
activities (9,851) 409,074
-------- --------
Cash flows from financing activities:
Cash distributions to partners (234,686) (539,008)
-------- --------
Net increase (decrease) in cash and cash equivalents (126,849) 492,354
Cash and cash equivalents at beginning of period 232,139 66,625
-------- --------
Cash and cash equivalents at end of period $ 105,290 $ 558,979
======== ========
The financial information included herein has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
6
PARKER & PARSLEY 86-A, LTD.
(Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
Note 1. Basis of presentation
In the opinion of management, the unaudited financial statements of Parker &
Parsley 86-A, Ltd. (the "Partnership") as of September 30, 1997 and for the
three and nine months ended September 30, 1997 and 1996 include all adjustments
and accruals consisting only of normal recurring accrual adjustments which are
necessary for a fair presentation of the results for the interim period. These
interim results are not necessarily indicative of results for a full year.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in this Form 10-Q pursuant to the rules and
regulations of the Securities and Exchange Commission. The financial statements
should be read in conjunction with the financial statements and the notes
thereto contained in the Partnership's Report on Form 10-K for the year ended
December 31, 1996, as filed with the Securities and Exchange Commission, a copy
of which is available upon request by writing to Rich Dealy, Vice President and
Controller, 303 West Wall, Suite 101, Midland, Texas 79701.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (1)
As of August 8, 1997, Pioneer Natural Resources USA, Inc. ("Pioneer USA") became
the general partner of the Partnership. Prior to August 8, 1997, the
Partnership's general partner was Parker & Parsley Development L.P. ("PPDLP"), a
wholly-owned subsidiary of Parker & Parsley Petroleum Company ("Parker &
Parsley"). On August 7, 1997, Parker & Parsley and Mesa Inc. received
shareholder approval to merge and create Pioneer Natural Resources Company
("Pioneer"). On August 8, 1997, PPDLP was merged with and into Pioneer USA, a
wholly-owned subsidiary of Pioneer, resulting in Pioneer USA becoming the
general partner of the Partnership as PPDLP's successor by merger. For a more
complete description of the Parker & Parsley and Mesa Inc. merger, see Pioneer's
Registration Statement on Form S-4 as filed with the Securities and Exchange
Commission.
Results of Operations
Nine months ended September 30, 1997 compared with nine months ended
September 30, 1996
Revenues:
The Partnership's oil and gas revenues decreased 26% to $439,462 from $590,230
for the nine months ended September 30, 1997 as compared to the nine months
ended September 30, 1996. The decrease in revenues resulted from declines in
barrels of oil and mcf of gas produced and sold and a lower average price
7
received per barrel of oil, offset by an increase in the average price received
per mcf of gas. For the nine months ended September 30, 1997, 15,268 barrels of
oil were sold compared to 19,905 for the same period in 1996, a decrease of
4,637 barrels, or 23%. Of the decrease, 2,407 barrels, or 12%, was attributable
to the sale of four oil and gas wells during 1996. The additional decrease of
11%, or 2,230 barrels, was due to the decline characteristics of the
Partnership's oil and gas properties. For the nine months ended September 30,
1997, 61,398 mcf of gas were sold compared to 85,111 for the same period in
1996, a decrease of 23,713 mcf, or 28%. Of the decrease, 10,573 mcf, or 12%, was
attributable to the sale of four oil and gas wells during 1996. The additional
decrease of 13,140 mcf, or 16%, was due to the decline characteristics of the
Partnership's oil and gas properties. 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 decreased $1.01, or 5%, from $20.79
for the nine months ended September 30, 1996 to $19.78 for the same period in
1997, while the average price received per mcf of gas increased 8% from $2.07
for the nine months ended September 30, 1996 to $2.24 in 1997. The market price
for oil and gas has been extremely volatile in the past decade, and management
expects a certain amount of volatility to continue in the foreseeable future.
The Partnership may therefore sell its future oil and gas production at average
prices lower or higher than that received during the nine months ended September
30, 1997.
On April 29, 1996, Southmark Corporation, the managing general partner and the
Partnership entered into a final $7.4 million settlement agreement with Jack N.
Price resolving all outstanding litigation between the parties. As a result, all
of the pending lawsuits and judgments have been dismissed, the supersedeas bond
released, and the Reserve released as collateral. On June 28, 1996, a final
distribution was made to the working interest owners of $290,690, which included
$287,784, or $28.41 per limited partnership interest, to the Partnership and its
partners.
The gain on disposition of assets was comprised of salvage income of $14,605
that was received during the nine months ended September 30, 1996 from the
disposal of equipment on one fully depleted well. A gain of $158,367 from the
sale of four oil and gas wells and four saltwater disposal wells to Costilla
Energy, L.L.C. was recognized during the nine months ended September 30, 1996.
Costs and Expenses:
Total costs and expenses increased to $452,310 for the nine months ended
September 30, 1997 as compared to $448,177 for the same period in 1996, an
increase of $4,133. This increase was due to an increase in depletion, offset by
decreases in production costs and general and administrative expenses ("G&A").
Production costs were $314,983 for the nine months ended September 30, 1997 and
$319,793 for the same period in 1996 resulting in a $4,810 decrease. This
decrease was primarily the result of a reduction in well repair and maintenance
costs and lower production taxes paid due to the decline in oil and gas sales,
offset by an increase in workover expenses incurred in an effort to stimulate
well production.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A
decreased, in aggregate, 26% from $17,706 for the nine months ended September
8
30, 1996 to $13,184 for the same period in 1997. The Partnership agreement
limits G&A to 3% of gross oil and gas revenues.
Depletion was $124,143 for the nine months ended September 30, 1997 compared to
$110,678 for the same period in 1996, representing an increase of $13,465, or
12%. This increase was primarily attributable to a decrease in oil reserves
during 1997 as a result of lower commodity prices, offset by a decline in oil
production.
Three months ended September 30, 1997 compared with three months ended September
30, 1996
Revenues:
The Partnership's oil and gas revenues decreased 24% to $135,437 from $179,352
for the three months ended September 30, 1997 as compared to the three months
ended September 30, 1996. The decrease in revenues resulted from declines in
barrels of oil and mcf of gas produced and sold and a decrease in the average
price received per barrel of oil, offset by an increase in the average price
received per mcf of gas. For the three months ended September 30, 1997, 5,045
barrels of oil were sold compared to 5,898 for the same period in 1996, a
decrease of 853 barrels, or 14%. For the three months ended September 30, 1997,
20,931 mcf of gas were sold compared to 25,689 for the same period in 1996, a
decrease of 4,758 mcf, or 19%. The decreases in production were due to the
decline characteristics of the Partnership's oil and gas properties.
The average price received per barrel of oil decreased $3.49, or 16%, from
$21.84 for the three months ended September 30, 1996 to $18.35 for the same
period in 1997, while the average price received per mcf of gas increased 4%
from $1.97 for the three months ended September 30, 1996 to $2.05 in 1997.
Costs and Expenses:
Total costs and expenses increased to $150,248 for the three months ended
September 30, 1997 as compared to $119,617 for the same period in 1996, an
increase of $30,631, or 26%. This increase was due to increases in production
costs and depletion, offset by a decrease in G&A.
Production costs were $105,015 for the three months ended September 30, 1997 and
$83,832 for the same period in 1996 resulting in a $21,183 increase, or 25%.
This increase was primarily due to higher well repair and maintenance costs.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A
decreased, in aggregate, 24% from $5,380 for the three months ended September
30, 1996 to $4,063 for the same period in 1997.
Depletion was $41,170 for the three months ended September 30, 1997 compared to
$30,405 for the same period in 1996, representing an increase of $10,765, or
35%, primarily attributable to a decrease in oil reserves during 1997 as a
result of lower commodity prices, offset by a decline in oil production of 853
barrels during the three months ended September 30, 1997 as compared to the same
period in 1996.
9
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased $504,600 during the nine
months ended September 30, 1997 from the same period ended September 30, 1996.
This decrease was primarily due to the receipt of proceeds from the litigation
settlement received in 1996 as discussed in Item 2, a decrease in oil and gas
sales receipts and an increase in production and G&A costs paid.
Net Cash Provided by (Used in) Investing Activities
The Partnership's investing activities during the nine months ended September
30, 1997 and 1996 included expenditures related to equipment replacement on
various oil and gas properties.
Proceeds from disposition of assets of $411,753, received during the nine months
ended September 30, 1996, consisted of $14,605 from the disposal of oil and gas
equipment on fully depleted wells and $397,148 from the sale of four oil and gas
wells and four saltwater disposal wells.
Net Cash Used in Financing Activities
Cash was sufficient for the nine months ended September 30, 1997 to cover
distributions to the partners of $234,686 of which $2,346 was distributed to the
managing general partner and $232,340 to the limited partners. For the same
period ended September 30, 1996, cash was sufficient for distributions to the
partners of $539,008 of which $5,390 was distributed to the managing general
partner and $533,618 to the limited partners. Cash distributions to the partners
of $539,008 for the nine months ended September 30, 1996 included $2,906 to the
managing general partner and $287,784 to the limited partners, resulting from
proceeds received in the litigation settlement as discussed in Item 2.
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.
- ---------------
(1) "Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations" contains forward looking statements that involve
risks and uncertainties. Accordingly, no assurances can be given that the
actual events and results will not be materially different than the
anticipated results described in the forward looking statements.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K - none
10
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: Pioneer Natural Resources USA, Inc.,
Managing General Partner
Dated: November 7, 1997 By: /s/ Rich Dealy
----------------------------------------
Rich Dealy, Vice President and
Controller
11