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 June 30, 1998
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 / /
PARKER & PARSLEY 86-C, LTD.
TABLE OF CONTENTS
Page
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets as of June 30, 1998 and
December 31, 1997....................................... 3
Statements of Operations for the three and six
months ended June 30, 1998 and 1997...................... 4
Statement of Partners' Capital for the six months
ended June 30, 1998...................................... 5
Statements of Cash Flows for the six months
ended June 30, 1998 and 1997............................. 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
27.1 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
June 30, December 31,
1998 1997
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents, including interest
bearing deposits of $127,218 at June 30
and $163,340 at December 31 $ 127,447 $ 163,568
Accounts receivable - oil and gas sales 136,668 203,783
----------- -----------
Total current assets 264,115 367,351
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 14,556,444 14,548,946
Accumulated depletion (12,224,288) (12,095,660)
----------- -----------
Net oil and gas properties 2,332,156 2,453,286
----------- -----------
$ 2,596,271 $ 2,820,637
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 38,890 $ 47,106
Partners' capital:
Managing general partner 24,266 26,428
Limited partners (19,317 interests) 2,533,115 2,747,103
----------- -----------
2,557,381 2,773,531
----------- -----------
$ 2,596,271 $ 2,820,637
=========== ===========
The financial information included as of June 30, 1998 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 Six months ended
June 30, June 30,
--------------------- ---------------------
1998 1997 1998 1997
--------- --------- --------- ---------
Revenues:
Oil and gas $ 262,816 $ 340,203 $ 532,019 $ 763,278
Interest 2,249 3,537 5,044 6,576
Gain on disposition of assets 285 - 356 14,656
-------- -------- -------- --------
265,350 343,740 537,419 784,510
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 195,142 202,138 383,272 390,336
General and administrative 7,885 10,206 15,961 22,898
Depletion 66,558 85,514 128,628 178,746
Abandoned property 115 - 650 -
-------- -------- -------- ------
269,700 297,858 528,511 591,980
-------- -------- -------- --------
Net income (loss) $ (4,350) $ 45,882 $ 8,908 $ 192,530
======== ======== ======== ========
Allocation of net income (loss):
Managing general partner $ (44) $ 459 $ 89 $ 1,925
======== ======== ======== ========
Limited partners $ (4,306) $ 45,423 $ 8,819 $ 190,605
======== ======== ======== ========
Net income (loss) per limited
partnership interest $ (.22) $ 2.35 $ .46 $ 9.87
======== ======== ======== ========
Distributions per limited
partnership interest $ 3.45 $ 9.78 $ 11.53 $ 22.80
======== ======== ======== ========
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, 1998 $ 26,428 $2,747,103 $2,773,531
Distributions (2,251) (222,807) (225,058)
Net income 89 8,819 8,908
-------- --------- ---------
Balance at June 30, 1998 $ 24,266 $2,533,115 $2,557,381
======== ========= =========
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)
Six months ended
June 30,
------------------------
1998 1997
---------- ----------
Cash flows from operating activities:
Net income $ 8,908 $ 192,530
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 128,628 178,746
Gain on disposition of assets (356) (14,656)
Changes in assets and liabilities:
Accounts receivable 67,115 103,854
Accounts payable (8,216) (61,480)
--------- ---------
Net cash provided by operating
activities 196,079 398,994
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (7,498) (2,662)
Proceeds from asset dispositions 356 14,656
--------- ---------
Net cash provided by (used in)
investing activities (7,142) 11,994
--------- ---------
Cash flows from financing activities:
Cash distributions to partners (225,058) (444,837)
--------- ---------
Net decrease in cash and cash equivalents (36,121) (33,849)
Cash and cash equivalents at beginning of period 163,568 205,207
--------- ---------
Cash and cash equivalents at end of period $ 127,447 $ 171,358
========= =========
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
June 30, 1998
(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 primarily 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, 1998 and for the three and six months ended June 30,
1998 and 1997 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 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, 1997, 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, 1400 Williams Square
West, 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, 1998 compared with six months ended
June 30, 1997
Revenues:
The Partnership's oil and gas revenues decreased 30% to $532,019 from $763,278
for the six months ended June 30, 1998 and 1997, respectively. The decrease in
revenues resulted from lower average prices received, offset by an increase in
production. For the six months ended June 30, 1998, 23,063 barrels of oil,
14,918 barrels of natural gas liquids ("NGLs") and 65,777 mcf of gas were sold,
7
or 48,944 barrel of oil equivalents ("BOEs"). For the six months ended June 30,
1997, 24,318 barrels of oil and 108,939 mcf of gas were sold, or 42,475 BOEs.
As of September 30, 1997, the Partnership began accounting for processed natural
gas production as processed natural gas liquids and dry residue gas.
Consequently, separate product volumes will not be comparable to periods prior
to September 30, 1997. Also, prices for gas products will not be comparable as
the price per mcf for natural gas for the three and six months ended June 30,
1998 is the price received for dry residue gas and the price per mcf for natural
gas for the three and six months ended June 30, 1997 is a price for wet gas
(i.e., natural gas liquids combined with dry residue gas).
The average price received per barrel of oil decreased $6.23, or 31%, from
$20.40 for the six months ended June 30, 1997 to $14.17 for the same period in
1998. The average price received per barrel of NGLs during the six months ended
June 30, 1998 was $7.05. The average price received per mcf of gas decreased 38%
from $2.45 during the six months ended June 30, 1997 to $1.52 in 1998. 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, 1998.
During most of 1997, the Partnership benefitted from higher oil prices as
compared to previous years. However, during the fourth quarter of 1997, oil
prices began a downward trend that has continued into 1998. On July 29, 1998,
the market price for West Texas intermediate crude was $11.58 per barrel. A
continuation of the oil price environment experienced during the first half of
1998 will have an adverse effect on the Partnership's revenues and operating
cash flow and could result in additional decreases in the carrying value of the
Partnership's oil and gas properties.
Gain on disposition of assets of $356 and $14,656 was received during the six
months ended June 30, 1998 and 1997, respectively, from the disposal of oil and
gas equipment on fully depleted wells.
Costs and Expenses:
Total costs and expenses decreased to $528,511 for the six months ended June 30,
1998 as compared to $591,980 for the same period in 1997, a decrease of $63,469,
or 11%. This decrease was due to declines in depletion, production costs and
general and administrative expenses ("G&A"), offset by an increase in abandoned
property costs.
Production costs were $383,272 for the six months ended June 30, 1998 and
$390,336 for the same period in 1997 resulting in a $7,064 decrease. This
decrease was primarily due to a decline in production taxes.
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, 30% from $22,898 for the six months ended June 30, 1997
to $15,961 for the same period in 1998.
8
Depletion was $128,628 for the six months ended June 30, 1998 compared to
$178,746 for the same period in 1997. This represented a decline in depletion of
$50,118, or 28%. This decrease was primarily attributable to a reduction in the
Partnership's net depletable basis from charges taken in accordance with
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("SFAS 121") during the fourth quarter of 1997 and a reduction in oil production
of 1,255 barrels for the period ended June 30, 1998 compared to the same period
in 1997, offset by a decrease in oil reserves during the six months ended June
30, 1998 as a result of lower commodity prices.
Abandoned property costs incurred during the six months ended June 30, 1998
totaled $650. These costs were in association with the plugging and abandonment
of one uneconomical well.
Three months ended June 30, 1998 compared with three months ended
June 30, 1997
Revenues:
The Partnership's oil and gas revenues decreased 23% to $262,816 from $340,203
for the three months ended June 30, 1998 and 1997, respectively. The decrease in
revenues resulted from lower average prices received, offset by an increase in
production. For the three months ended June 30, 1998, 11,711 barrels of oil,
7,790 barrels of NGLs and 32,461 mcf of gas were sold, or 24,911 BOEs. For the
three months ended June 30, 1997, 11,927 barrels of oil and 55,842 mcf of gas
were sold, or 21,234 BOEs.
The average price received per barrel of oil decreased $5.35, or 28%, from
$18.82 for the three months ended June 30, 1997 to $13.47 for the same period in
1998. The average price received per barrel of NGLs during the three months
ended June 30, 1998 was $7.24. The average price received per mcf of gas
decreased 28% from $2.07 during the three months ended June 30, 1997 to $1.50 in
1998.
Gain on disposition of assets of $285 was received during the three months ended
June 30, 1998 from the disposal of oil and gas equipment on fully depleted
wells.
Costs and Expenses:
Total costs and expenses decreased to $269,700 for the three months ended June
30, 1998 as compared to $297,858 for the same period in 1997, a decrease of
$28,158, or 9%. This decrease was due to declines in depletion, production costs
and G&A, offset by an increase in abandoned property costs.
Production costs were $195,142 for the three months ended June 30, 1998 and
$202,138 for the same period in 1997 resulting in a $6,996 decrease, or 3%. This
decrease was due to declines in ad valorem taxes and production taxes, offset by
an increase in well maintenance costs incurred in an effort to stimulate well
production.
9
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, 23% from $10,206 for the three months ended June 30,
1997 to $7,885 for the same period in 1998.
Depletion was $66,558 for the three months ended June 30, 1998 compared to
$85,514 for the same period in 1997. This represented a decrease in depletion of
$18,956, or 22%. This decrease was primarily attributable to a reduction in the
Partnership's net depletable basis from charges taken in accordance with SFAS
121 during the fourth quarter of 1997 and a reduction in oil production of 216
barrels for the three months ended June 30, 1998 compared to the same period in
1997, offset by a decrease in oil reserves during the three months ended June
30, 1998 as a result of lower commodity prices.
Abandoned property costs during the three months ended June 30, 1998 totaled
$115. These costs were incurred in association with the plugging and abandonment
of one uneconomical well.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased $202,915 during the six
months ended June 30, 1998 from the same period ended June 30, 1997. This
decrease was primarily due to a decline in oil and gas receipts, offset by a
decrease in production costs paid.
Net Cash Provided by (Used in) Investing Activities
The Partnership's investing activities during the six months ended June 30, 1998
and 1997 were related to expenditures for equipment replacement on various oil
and gas properties.
Proceeds from asset dispositions of $356 and $14,656 were received during the
six months ended June 30, 1998 and 1997, respectively, from the sale of oil and
gas equipment on fully depleted wells.
Net Cash Used in Financing Activities
Cash was sufficient for the six months ended June 30, 1998 to cover
distributions to the partners of $225,058 of which $2,251 was distributed to the
managing general partner and $222,807 to the limited partner. For the same
period ended June 30, 1997, cash was sufficient for distributions to the
partners of $444,837 of which $4,448 was distributed to the managing general
partner and $440,389 to the limited partners.
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.
10
Information systems for the year 2000
The managing general partner will be required to modify its information systems
in order to accurately process Partnership data referencing the year 2000.
Because of the importance of occurrence dates in the oil and gas industry, the
consequences of not pursuing these modifications could be very significant to
the Partnership's ability to manage and report operating activities. Currently,
the managing general partner plans to contract with third parties to perform the
software programming changes necessary to correct any existing deficiencies.
Such programming changes are anticipated to be completed and tested by June
1999. The managing general partner will allocate a portion of the costs of the
year 2000 programming charges to the Partnership when they are incurred, along
with recurring general and administrative expenses. Although the costs are not
estimable at this time, they should not be significant to the Partnership.
- ---------------
(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
27.1 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: August 3, 1998 By: /s/ Rich Dealy
-----------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
12