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. 33-3353C
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)
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 12 pages.
Exhibit index on page 11.
PARKER & PARSLEY 86-C, 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........................... 11
27. Financial Data Schedule
Signatures................................................. 12
2
PARKER & PARSLEY 86-C, 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 $156,365 at September 30
and $193,384 at December 31 $ 156,593 $ 205,207
Accounts receivable - oil and gas sales 164,093 265,255
------------ -----------
Total current assets 320,686 470,462
------------ -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 14,546,262 14,551,413
Accumulated depletion (11,089,086) (10,828,428)
------------ -----------
Net oil and gas properties 3,457,176 3,722,985
------------ -----------
$ 3,777,862 $ 4,193,447
============ ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 51,496 $ 104,535
Partners' capital:
Managing general partner 35,956 39,581
Limited partners (19,317 interests) 3,690,410 4,049,331
------------ -----------
3,726,366 4,088,912
------------ -----------
$ 3,777,862 $ 4,193,447
============ ===========
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-C, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
--------------------- -----------------------
1997 1996 1997 1996
--------- ---------- ---------- ----------
Revenues:
Oil and gas $ 321,035 $ 400,781 $1,084,313 $1,207,241
Interest 2,729 2,670 9,305 5,821
Gain (loss) on
disposition of assets - (1,638) 14,656 66,136
Litigation settlement - - - 704,864
-------- -------- --------- ---------
323,764 401,813 1,108,274 1,984,062
-------- -------- --------- ---------
Costs and expenses:
Oil and gas production 196,365 180,835 586,701 614,436
General and administrative 9,632 12,024 32,530 36,218
Depletion 81,912 85,319 260,658 268,472
Abandoned property 9,016 - 9,016 27,923
-------- -------- --------- ---------
296,925 278,178 888,905 947,049
-------- -------- --------- ---------
Net income $ 26,839 $ 123,635 $ 219,369 $1,037,013
======== ======== ========= =========
Allocation of net income:
Managing general partner $ 269 $ 1,236 $ 2,194 $ 10,370
======== ======== ========= =========
Limited partners $ 26,570 $ 122,399 $ 217,175 $1,026,643
======== ======== ========= =========
Net income per limited
partnership interest $ 1.37 $ 6.34 $ 11.24 $ 53.15
======== ======== ========= =========
Distributions per limited
partnership interest $ 7.02 $ 7.77 $ 29.82 $ 57.87
======== ======== ========= =========
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-C, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
------------- -------------- -------------
Balance at January 1, 1997 $ 39,581 $ 4,049,331 $ 4,088,912
Distributions (5,819) (576,096) (581,915)
Net income 2,194 217,175 219,369
---------- ----------- ----------
Balance at September 30, 1997 $ 35,956 $ 3,690,410 $ 3,726,366
=========== ============ ===========
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-C, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
1997 1996
----------- ----------
Cash flows from operating activities:
Net income $ 219,369 $ 1,037,013
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 260,658 268,472
Gain on disposition of assets (14,656) (66,136)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 101,162 (17,531)
Decrease in accounts payable (51,625) (7,722)
--------- ----------
Net cash provided by operating activities 514,908 1,214,096
--------- ----------
Cash flows from investing activities:
Additions to oil and gas properties - (17,896)
Proceeds from disposition of assets 18,393 68,020
--------- ----------
Net cash provided by investing activities 18,393 50,124
--------- ----------
Cash flows from financing activities:
Cash distributions to partners (581,915) (1,129,214)
--------- ----------
Net increase (decrease) in cash and cash equivalents (48,614) 135,006
Cash and cash equivalents at beginning of period 205,207 73,796
--------- ----------
Cash and cash equivalents at end of period $ 156,593 $ 208,802
========= ==========
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-C, LTD.
(A 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-C, 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 10% to $1,084,313 from
$1,207,241 for the ninemonths ended September 30, 1997 as compared to the nine
7
months ended September 30, 1996. The decrease in revenues resulted from
decreases 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 nine months ended September 30,
1997, 35,219 barrels of oil were sold compared to 38,211 for the same period in
1996, a decrease of 2,992 barrels, or 8%. For the nine months ended September
30, 1997, 165,236 mcf of gas were sold compared to 191,063 for the same period
in 1996, a decrease of 25,827 mcf, or 14%. The decreases in oil and gas
production were 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 decreased $1.05, or 5%, from $20.82
for the nine months ended September 30, 1996 to $19.77 for the same period in
1997, while the average price received per mcf of gas increased 9% from $2.16
during the nine months ended September 30, 1996 to $2.35 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.
Gain on disposition of assets was comprised of salvage income of $14,656 and
$28,740 received during the nine months ended September 30, 1997 and 1996,
respectively, from the disposal of oil and gas equipment on one fully depleted
well during each period, and a gain of $37,396 from the sale of four oil and gas
wells and four saltwater disposal wells to Costilla Energy, L.L.C., during the
nine months ended September 30, 1996.
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 $704,864, which included
$697,816, or $36.12 per limited partnership interest, to the Partnership and its
partners.
Costs and Expenses:
Total costs and expenses decreased to $888,905 for the nine months ended
September 30, 1997 as compared to $947,049 for the same period in 1996, a
decrease of $58,144, or 6%. This decrease was due to declines in production
costs, abandoned property cost, depletion and general and administrative
expenses ("G&A").
Production costs were $586,701 for the nine months ended September 30, 1997 and
$614,436 for the same period in 1996, resulting in a $27,735, or 5%, decrease.
This decrease was the result of lower workover costs and declines in 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, 10% from $36,218 for the nine months ended September
30, 1996 to $32,530 for the same period in 1997. The Partnership agreement
limits G&A to 3% of gross oil and gas revenues.
8
Depletion was $260,658 for the nine months ended September 30, 1997 compared to
$268,472 for the same period in 1996, representing a decrease of $7,814, or 3%.
The decrease was due to the decline in oil production of 2,992 barrels from the
nine months ended September 30, 1997 as compared to the same period in 1996,
offset by a decline in oil reserves in 1997 due to lower commodity prices.
Abandoned property costs during the nine months ended September 30, 1996 and
1997 totaled $27,923 and $9,016, respectively. These costs were attributable to
plugging and abandonment of two uneconomical wells in 1996 and one in 1997.
Three months ended September 30, 1997 compared with three months ended September
30, 1996
Revenues:
The Partnership's oil and gas revenues decreased 20% to $321,035 from $400,781
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 lower average price
received per barrel of oil. For the three months ended September 30, 1997,
10,901 barrels of oil were sold compared to 12,064 for the same period in 1996,
a decrease of 1,163 barrels, or 10%. For the three months ended September 30,
1997, 56,297 mcf of gas were sold compared to 65,370 for the same period in
1996, a decrease of 9,073 mcf, or 14%. The decreases in oil and gas production
were due to the decline characteristics of the Partnership's oil and gas
properties.
The average price received per barrel of oil decreased $3.20, or 15%, from
$21.55 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 remained constant
at $2.15 for the three months ended September 30, 1996 and 1997.
Costs and Expenses:
Total costs and expenses increased to $296,925 for the three months ended
September 30, 1997 as compared to $278,178 for the same period in 1996, an
increase of $18,747, or 7%. This increase consisted of higher production costs
and abandoned property costs, offset by declines in depletion and G&A.
Production costs were $196,365 for the three months ended September 30, 1997 and
$180,835 for the same period in 1996, resulting in a $15,530 increase, or 9%.
This increase was the result of additional well repair and maintenance cost
incurred in an effort to stimulate well production, offset by a decrease in
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
decreased, in aggregate, 20% from $12,024 for the three months ended September
30, 1996 to $9,632 for the same period in 1997.
Depletion was $81,912 for the three months ended September 30, 1997 compared to
$85,319 for the same period in 1996, representing a decrease of $3,407, or 4%.
9
The decrease was due to the decline in oil production of 1,163 barrels for the
three months ended September 30, 1997 as compared to the same period in 1996,
offset by a decline in oil reserves during the third quarter of 1997 due to
lower commodity prices.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased $699,188 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 litigation proceeds during
1996 as discussed in Item 2 and an increase in production costs paid, offset by
an increase in oil and gas sales receipts.
Net Cash Provided by Investing Activities
The Partnership's investment activities during the nine months ended September
30, 1997 and 1996 were related to disposal or replacement of oil and gas
equipment on various oil and gas properties.
Proceeds from salvage income of $14,656 and $28,740 were received during the
nine months ended September 30, 1997 and 1996, respectively, and are primarily
from the sale of oil and gas equipment on one fully depleted well during each
period. Proceeds of $39,280 were received during the nine months ended September
30, 1996 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 $581,915 of which $5,819 was distributed to the
managing general partner and $576,096 to the limited partners. For the same
period ended September 30, 1996, cash was sufficient for distributions to the
partners of $1,129,214 of which $11,292 was distributed to the managing general
partner and $1,117,922 to the limited partners. Cash distributions to the
partners of $1,129,214 for the nine months ended September 30, 1996 included
$7,048 to the managing general partner and $697,816 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.
10
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
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: November 6, 1997 By: /s/ Rich Dealy
------------------------------
Rich Dealy, Vice President and
Controller
12