UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2001
Commission File No. 33-3353C
PARKER & PARSLEY 86-C, LTD.
(Exact name of Registrant as specified in its charter)
Texas 75-2142283
-------------------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5205 N. O'Connor Blvd., Suite 1400, Irving, Texas 75039
------------------------------------------------- ------------
(Address of principal executive offices) (Zip code)
Registrant's Telephone Number, including area code : (972) 444-9001
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 / /
PARKER & PARSLEY 86-C, LTD.
TABLE OF CONTENTS
Page
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets as of June 30, 2001 and
December 31, 2000..................................... 3
Statements of Operations for the three and six
months ended June 30, 2001 and 2000.................... 4
Statement of Partners' Capital for the six months
ended June 30, 2001.................................... 5
Statements of Cash Flows for the six months
ended June 30, 2001 and 2000........................... 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......................... 11
Signatures............................................... 12
2
PARKER & PARSLEY 86-C, LTD.
(A Texas Limited Partnership)
Part I. Financial Information
Item 1. Financial Statements
BALANCE SHEETS
June 30, December 31,
2001 2000
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 441,080 $ 161,347
Accounts receivable - oil and gas sales 213,975 296,462
----------- -----------
Total current assets 655,055 457,809
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 14,602,482 14,598,140
Accumulated depletion (13,168,721) (13,107,930)
----------- -----------
Net oil and gas properties 1,433,761 1,490,210
----------- -----------
$ 2,088,816 $ 1,948,019
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 43,231 $ 30,112
Partners' capital:
Managing general partner 19,148 17,871
Limited partners (19,317 interests) 2,026,437 1,900,036
----------- -----------
2,045,585 1,917,907
----------- -----------
$ 2,088,816 $ 1,948,019
=========== ===========
The financial information included as of June 30, 2001 been prepared by
the managing general partner without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
3
PARKER & PARSLEY 86-C, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Six months ended
June 30, June 30,
---------------------- ----------------------
2001 2000 2001 2000
--------- --------- --------- ---------
Revenues:
Oil and gas $ 422,897 $ 439,126 $ 955,101 $ 856,273
Interest 3,190 3,246 6,452 5,700
-------- -------- -------- --------
426,087 442,372 961,553 861,973
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 215,988 231,517 433,153 448,472
General and administrative 12,687 13,174 28,653 25,688
Depletion 29,568 36,749 60,791 79,906
-------- -------- -------- --------
258,243 281,440 522,597 554,066
-------- -------- -------- --------
Net income $ 167,844 $ 160,932 $ 438,956 $ 307,907
======== ======== ======== ========
Allocation of net income:
Managing general partner $ 1,679 $ 1,609 $ 4,390 $ 3,079
======== ======== ======== ========
Limited partners $ 166,165 $ 159,323 $ 434,566 $ 304,828
======== ======== ======== ========
Net income per limited partnership
interest $ 8.61 $ 8.25 $ 22.50 $ 15.78
======== ======== ======== ========
The financial information included herein has been prepared by
the managing general partner without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
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PARKER & PARSLEY 86-C, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
---------- ---------- ----------
Balance at January 1, 2001 $ 17,871 $1,900,036 $1,917,907
Distributions (3,113) (308,165) (311,278)
Net income 4,390 434,566 438,956
--------- --------- ---------
Balance at June 30, 2001 $ 19,148 $2,026,437 $2,045,585
========= ========= =========
The financial information included herein has been prepared by
the managing general partner without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
5
PARKER & PARSLEY 86-C, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
June 30,
-------------------------
2001 2000
---------- ----------
Cash flows from operating activities:
Net income $ 438,956 $ 307,907
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 60,791 79,906
Changes in assets and liabilities:
Accounts receivable 82,487 (29,385)
Accounts payable 13,119 14,845
--------- ---------
Net cash provided by operating activities 595,353 373,273
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (4,653) (11,614)
Proceeds from asset dispositions 311 -
--------- ---------
Net cash used in investing activities (4,342) (11,614)
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (311,278) (351,708)
--------- ---------
Net increase in cash 279,733 9,951
Cash at beginning of period 161,347 142,687
--------- ---------
Cash at end of period $ 441,080 $ 152,638
========= =========
The financial information included herein has been prepared by
the managing general partner without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
6
PARKER & PARSLEY 86-C, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 2001
(Unaudited)
Note 1. Organization and nature of operations
Parker & Parsley 86-C, Ltd. (the "Partnership") is a limited partnership
organized in 1986 under the laws of the State of Texas.
The Partnership engages in oil and gas development and production in Texas and
is not involved in any industry segment other than oil and gas.
Note 2. Basis of presentation
In the opinion of management, the unaudited financial statements of the
Partnership as of June 30, 2001 and for the three and six months ended June 30,
2001 and 2000 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 of operations are not
necessarily indicative of results for a full year. Certain reclassifications may
have been made to the June 30, 2000 financial statements to conform to the June
30, 2001 financial statement presentations.
Certain information and footnote disclosures 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, 2000, as filed with the Securities and Exchange Commission, a copy
of which is available upon request by writing to Rich Dealy, Vice President and
Chief Accounting Officer, 5205 North O'Connor Boulevard, Suite 1400, Irving,
Texas 75039-3746.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (1)
Results of Operations
Six months ended June 30, 2001 compared with six months ended
June 30, 2000
Revenues:
The Partnership's oil and gas revenues increased 12% to $955,101 for the six
months ended June 30, 2001 as compared to $856,273 for the same period in 2000.
The increase in revenues resulted from higher average prices received for gas
and NGLs, offset by a decrease in production and lower average prices received
for oil. For the six months ended June 30, 2001, 19,403 barrels of oil, 10,669
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barrels of natural gas liquids ("NGLs") and 54,393 mcf of gas were sold, or
39,138 barrel of oil equivalents ("BOEs"). For the six months ended June 30,
2000, 21,638 barrels of oil, 12,002 barrels of NGLs and 45,739 mcf of gas were
sold, or 41,263 BOEs.
The average price received per barrel of oil decreased $.22, or 1%, from $27.64
for the six months ended June 30, 2000 to $27.42 for the same period in 2001.
The average price received per barrel of NGLs increased $2.26, or 16%, from
$13.72 during the six months ended June 30, 2000 to $15.98 for the same period
in 2001. The average price received per mcf of gas increased 126% from $2.05
during the six months ended June 30, 2000 to $4.64 for the same period in 2001.
The market price for oil and gas has been extremely volatile in the past decade
and management expects a certain amount of volatility to continue in the
foreseeable future. The Partnership may therefore sell its future oil and gas
production at average prices lower or higher than that received during the six
months ended June 30, 2001.
Costs and Expenses:
Total costs and expenses decreased to $522,597 for the six months ended June 30,
2001 as compared to $554,066 for the same period in 2000, a decrease of $31,469,
or 6%. This decrease was due to declines in depletion and production costs,
offset by an increase in general and administrative expenses ("G&A").
Production costs were $433,153 for the six months ended June 30, 2001 and
$448,472 for the same period in 2000 resulting in a $15,319 decrease, or 3%.
This decrease was due to lower well maintenance and workover costs.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A increased
12% from $25,688 for the six months ended June 30, 2000 to $28,653 for the same
period in 2001, primarily due to a higher percentage of the managing general
partner's G&A being allocated (limited to 3% of oil and gas revenues) as a
result of increased oil and gas revenues and an increase in audit and tax fees.
Depletion was $60,791 for the six months ended June 30, 2001 as compared to
$79,906 for the same period in 2000, a decline of $19,115, or 24%. This decrease
was due to upward revisions in proved reserves on three significant wells during
the period ended June 30, 2001 and a decrease in oil production of 2,235 barrels
for the six months ended June 30, 2001 as compared to the same period in 2000.
Three months ended June 30, 2001 compared with three months ended June 30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 4% to $422,897 for the three
months ended June 30, 2001 as compared to $439,126 for the same period in 2000.
The decrease in revenues resulted from a decrease in production and lower
average prices received for oil, offset by higher average prices received for
gas and NGLs. For the three months ended June 30, 2001, 9,459 barrels of oil,
5,538 barrels of NGLs and 25,535 mcf of gas were sold, or 19,253 BOEs. For the
8
three months ended June 30, 2000, 10,480 barrels of oil, 6,550 barrels of NGLs
and 23,989 mcf of gas were sold, or 21,028 BOEs.
The average price received per barrel of oil decreased $.86, or 3%, from $27.72
for the three months ended June 30, 2000 to $26.86 for the same period in 2001.
The average price received per barrel of NGLs increased $.24, or 2%, from $13.79
during the three months ended June 30, 2000 to $14.03 for the same period in
2001. The average price received per mcf of gas increased 47% from $2.43 during
the three months ended June 30, 2000 to $3.57 for the same period in 2001.
Costs and Expenses:
Total costs and expenses decreased to $258,243 for the three months ended June
30, 2001 as compared to $281,440 for the same period in 2000, a decrease of
$23,197, or 8%. This decrease was due to declines in production costs, depletion
and G&A.
Production costs were $215,988 for the three months ended June 30, 2001 and
$231,517 for the same period in 2000 resulting in a $15,529 decrease, or 7%.
This decrease was primarily due to lower workover and well maintenance costs.
During this period, G&A decreased 4% from $13,174 for the three months ended
June 30, 2000 to $12,687 for the same period in 2001, primarily due to a
decrease in audit and tax fees
Depletion was $29,568 for the three months ended June 30, 2001 as compared to
$36,749 for the same period in 2000, a decrease of $7,181, or 20%. This decrease
was primarily due to upward revisions to proved reserves on three significant
wells during the period ended June 30, 2001 and a decrease in oil production of
1,021 barrels for the three months ended June 30, 2001 as compared to the same
period in 2000.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $222,080 during the six
months ended June 30, 2001 from the same period ended June 30, 2000. This
increase was due to an increase of $99,580 in oil and gas receipts and
reductions of $110,146 in working capital and $15,319 in production costs,
offset by an increase in G&A expenses of $2,965. The increase in oil and gas
receipts resulted from the increase in gas and NGL prices of $145,824 during
2001, offset by a decline of $42,415 in production and a $3,829 decline
resulting from lower oil prices as compared to the same period in 2000. The
decrease in production costs was primarily due to lower well maintenance and
workover costs. The increase in G&A was primarily due to a higher percentage of
the managing general partner's G&A being allocated (limited to 3% of oil and gas
revenues) as a result of increased oil and gas revenues and an increase in audit
and tax fees.
Net Cash Used in Investing Activities
The Partnership's investing activities during the six months ended June 30, 2001
and 2000 were related to expenditures for equipment upgrades on active
properties.
9
Proceeds from disposition of assets of $311 recognized during the six months
ended June 30, 2001 were due to equipment credits received on an active
property.
Net Cash Used in Financing Activities
For the six months ended June 30, 2001, cash distributions to the partners were
$311,278, of which $3,113 was distributed to the managing general partner and
$308,165 to the limited partners. For the same period ended June 30, 2000, cash
distributions to the partners were $351,708, of which $3,517 was distributed to
the managing general partner and $348,191 to the limited partners.
For the three months ended June 30, 2001, no distributions were made by the
partnership to its partners. Subsequent to June 30, 2001 the cash distribution
that otherwise would have been mailed to partners in late June was made to
holders of record as of July 9, 2001 and was mailed on July 13, 2001. For
further information, see "Proposal to acquire partnerships" below.
Proposal to acquire partnerships
On June 29, 2001, Pioneer Natural Resources Company ("Pioneer") filed with the
Securities and Exchange Commission Amendment No. 1 to the Form S-4 Registration
Statement (File No. 333-59094) (the "preliminary proxy statement/prospectus"),
which proposes an agreement and plan of merger among Pioneer, Pioneer Natural
Resources USA, Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and
46 Parker & Parsley limited partnerships. Each partnership that approves the
agreement and plan of merger and the other related merger proposals will merge
with and into Pioneer USA upon the closing of the transactions described in the
preliminary proxy statement/prospectus, and the partnership interests of each
such partnership will be converted into the right to receive Pioneer common
stock. The Partnership is one of the 46 Parker & Parsley limited partnerships
that will be asked to approve the agreement and plan of merger. The preliminary
proxy statement/prospectus is non-binding and is subject to, among other things,
consideration of offers from third parties to purchase any partnership or its
assets and the majority approval of the limited partnership interests in each
partnership.
Pioneer USA will solicit proxies from limited partners to approve the mergers
only when the proxy statement/prospectus is final and declared effective. No
solicitation will be made using preliminary materials. Nonetheless, copies of
the preliminary proxy statement/prospectus may be obtained without charge upon
request from Pioneer Natural Resources Company, 5205 North O'Connor Blvd., Suite
1400, Irving, Texas 75039, Attention: Investor Relations.
The limited partners are urged to read the proxy statement/prospectus of Pioneer
filed with the Securities and Exchange Commission, when it is finalized, because
it contains important information about the proposed mergers, including
information about the direct and indirect interests of Pioneer USA and Pioneer
in the mergers. The limited partners may also obtain the preliminary and (when
filed) final proxy statement/prospectus and other relevant documents relating to
the proposed mergers free through the internet web site that the Securities and
Exchange Commission maintains at www.sec.gov.
10
- ---------------
(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 - none
(b) Reports on Form 8-K - none
11
PARKER & PARSLEY 86-C, 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-C, LTD.
By: Pioneer Natural Resources USA, Inc.
Managing General Partner
Dated: August 8, 2001 By: /s/ Rich Dealy
-------------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
12