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 September 30, 2001
Commission File No. 33-19659-02
PARKER & PARSLEY 88-B, L.P.
-----------------------------
(Exact name of Registrant as specified in its charter)
Delaware 75-2240121
---------------------------------------- ---------------------
(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 88-B, L.P.
TABLE OF CONTENTS
Page
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets as of September 30, 2001 and
December 31, 2000...................................... 3
Statements of Operations for the three and nine
months ended September 30, 2001 and 2000................ 4
Statement of Partners' Capital for the nine months
ended September 30, 2001................................ 5
Statements of Cash Flows for the nine months ended
September 30, 2001 and 2000............................. 6
Notes to Financial Statements............................. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.......................... 12
Signatures................................................ 13
2
PARKER & PARSLEY 88-B, L.P.
(A Delaware Limited Partnership)
Part I. Financial Information
Item 1. Financial Statements
BALANCE SHEETS
September 30, December 31,
2001 2000
------------ -----------
(Unaudited)
ASSETS
Current assets:
Cash $ 320,866 $ 144,763
Accounts receivable - oil and gas sales 107,113 198,467
---------- ----------
Total current assets 427,979 343,230
---------- ----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 6,775,326 6,954,545
Accumulated depletion (5,888,350) (5,969,972)
---------- ----------
Net oil and gas properties 886,976 984,573
---------- ----------
$ 1,314,955 $ 1,327,803
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 47,325 $ 16,350
Partners' capital:
Managing general partner 12,645 13,083
Limited partners (8,954 interests) 1,254,985 1,298,370
---------- ----------
1,267,630 1,311,453
---------- ----------
$ 1,314,955 $ 1,327,803
========== ==========
The financial information included as of September 30, 2001 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.
3
PARKER & PARSLEY 88-B, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
---------------------- ----------------------
2001 2000 2001 2000
--------- --------- --------- ---------
Revenues:
Oil and gas $ 259,220 $ 352,159 $ 873,186 $ 943,505
Interest 1,927 3,636 6,841 8,813
Gain on disposition of assets - 7,108 7,855 15,953
-------- -------- -------- --------
261,147 362,903 887,882 968,271
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 133,495 114,143 366,524 319,196
General and administrative 6,594 10,565 21,943 28,305
Impairment of oil and gas properties 34,975 - 34,975 -
Depletion 31,335 16,274 68,090 51,791
Abandoned property 17 8,226 10,258 8,226
-------- -------- -------- --------
206,416 149,208 501,790 407,518
-------- -------- -------- --------
Net income $ 54,731 $ 213,695 $ 386,092 $ 560,753
======== ======== ======== ========
Allocation of net income:
Managing general partner $ 547 $ 2,137 $ 3,861 $ 5,608
======== ======== ======== ========
Limited partners $ 54,184 $ 211,558 $ 382,231 $ 555,145
======== ======== ======== ========
Net income per limited
partnership interest $ 6.05 $ 23.63 $ 42.69 $ 62.00
======== ======== ======== ========
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.
4
PARKER & PARSLEY 88-B, L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
---------- ---------- ----------
Balance at January 1, 2001 $ 13,083 $1,298,370 $1,311,453
Distributions (4,299) (425,616) (429,915)
Net income 3,861 382,231 386,092
--------- --------- ---------
Balance at September 30, 2001 $ 12,645 $1,254,985 $1,267,630
========= ========= =========
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 88-B, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
------------------------
2001 2000
---------- ----------
Cash flows from operating activities:
Net income $ 386,092 $ 560,753
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 34,975 -
Depletion 68,090 51,791
Gain on disposition of assets (7,855) (15,953)
Changes in assets and liabilities:
Accounts receivable 91,354 (29,725)
Accounts payable 32,919 22,569
--------- ---------
Net cash provided by operating activities 605,575 589,435
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (6,028) (5,788)
Proceeds from asset dispositions 6,471 13,102
--------- ---------
Net cash provided by investing activities 443 7,314
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (429,915) (556,511)
--------- ---------
Net increase in cash 176,103 40,238
Cash at beginning of period 144,763 129,430
--------- ---------
Cash at end of period $ 320,866 $ 169,668
========= =========
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 88-B, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
Note 1. Organization and nature of operations
Parker & Parsley 88-B, L.P. (the "Partnership") is a limited partnership
organized in 1988 under the laws of the State of Delaware.
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 September 30, 2001 and for the three and nine months ended
September 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 are
not necessarily indicative of results for a full year. Certain reclassifications
may have been made to the September 30, 2000 financial statements to conform to
the September 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.
Note 3. Impairment of long-lived assets
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"), the Partnership reviews its proved oil and gas
properties for impairment whenever events and circumstances indicate a decline
in the recoverability of the carrying value of the Partnership's oil and gas
properties. The Partnership has estimated the expected future cash flows of its
oil and gas properties as of September 30, 2001, based on proved reserves, and
compared such estimated future cash flows to the respective carrying amount of
the oil and gas properties to determine if the carrying amounts were likely to
be recoverable. For those proved oil and gas properties for which the carrying
amount exceeded the estimated future cash flows, an impairment was determined to
exist; therefore, the Partnership adjusted the carrying amount of those oil and
gas properties to their fair value as determined by discounting their expected
future cash flows at a discount rate commensurate with the risks involved in the
7
industry. As a result, the Partnership recognized a non-cash impairment
provision of $34,975 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Note 4. Proposal to acquire Partnership
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $3,086,337 of which $3,023,397 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (1)
Results of Operations
Nine months ended September 30, 2001 compared with nine months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 7% to $873,186 for the nine
months ended September 30, 2001 as compared to $943,505 for the same period in
2000. The decrease in revenues resulted from lower average prices received for
oil and a decline in production, offset by higher average prices received for
gas and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 22,346 barrels of oil, 7,311 barrels of NGLs and 32,649 mcf of gas were
sold, or 35,099 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 24,263 barrels of oil, 10,130 barrels of NGLs and 41,502 mcf
of gas were sold, or 41,310 BOEs. Due to the decline characteristics of the
Partnership's oil and gas properties, management expects a certain amount of
decline in production in the future until the Partnership's economically
recoverable reserves are fully depleted.
The average price received per barrel of oil decreased $.82, or 3%, from $28.32
for the nine months ended September 30, 2000 to $27.50 for the same period in
2001. The average price received per barrel of NGLs increased $.13, or 1%, from
$15.11 during the nine months ended September 30, 2000 to $15.24 for the same
period in 2001. The average price received per mcf of gas increased 81% from
$2.49 during the nine months ended September 30, 2000 to $4.51 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 nine months ended September 30, 2001.
Gain on disposition of assets of $7,855 was recognized during the nine months
ended September 30, 2001 due to the sale of equipment on one well plugged and
abandoned during the current period.
8
A gain of $15,953 was recognized during the same period in 2000 resulting from
an $11,638 salvage income from one well plugged and abandoned during the current
period and $4,315 from equipment credits received on one fully depleted well.
Abandoned property costs of $10,528 and $8,226 were incurred during the nine
months ended September 30, 2001 and 2000, respectively, to abandon these wells.
Costs and Expenses:
Total costs and expenses increased to $501,790 for the nine months ended
September 30, 2001 as compared to $407,518 for the same period in 2000, an
increase of $94,272, or 23%. This increase was due to increases in production
costs, depletion, the impairment of oil and gas properties and abandoned
property costs, offset by a decline in general and administrative expenses
("G&A").
Production costs were $366,524 for the nine months ended September 30, 2001 and
$319,196 for the same period in 2000, resulting in an increase of $47,328, or
15%. The increase was primarily due to higher ad valorem taxes and additional
well maintenance costs and workover expenses incurred 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
22% from $28,305 for the nine months ended September 30, 2000 to $21,943 for the
same period in 2001, primarily due to a lower percentage of the managing general
partner's G&A being allocated (limited to 3% of oil and gas revenues) as a
result of decreased oil and gas revenues.
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"), the Partnership reviews its proved oil and gas
properties for impairment whenever events and circumstances indicate a decline
in the recoverability of the carrying value of the Partnership's oil and gas
properties. The Partnership has estimated the expected future cash flows of its
oil and gas properties as of September 30, 2001, based on proved reserves, and
compared such estimated future cash flows to the respective carrying amount of
the oil and gas properties to determine if the carrying amounts were likely to
be recoverable. For those proved oil and gas properties for which the carrying
amount exceeded the estimated future cash flows, an impairment was determined to
exist; therefore, the Partnership adjusted the carrying amount of those oil and
gas properties to their fair value as determined by discounting their expected
future cash flows at a discount rate commensurate with the risks involved in the
industry. As a result, the Partnership recognized a non-cash impairment
provision of $34,975 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $68,090 for the nine months ended September 30, 2001 as compared
to $51,791 for the same period in 2000, representing an increase of $16,299, or
31%. This increase was the result of a reduction in proved reserves during the
period ended September 30, 2001 as a result of lower commodity prices as
compared to the same period in 2000, offset by a decline in oil production of
1,917 barrels for the nine months ended September 30, 2001 as compared to the
same period in 2000.
9
Three months ended September 30, 2001 compared with three months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 26% to $259,220 for the three
months ended September 30, 2001 as compared to $352,159 for the same period in
2000. The decrease in revenues resulted from lower average prices received and a
decline in production. For the three months ended September 30, 2001, 7,949
barrels of oil, 2,619 barrels of NGLs and 11,857 mcf of gas were sold, or 12,544
BOEs. For the three months ended September 30, 2000, 7,752 barrels of oil, 3,707
barrels of NGLs and 14,807 mcf of gas were sold, or 13,927 BOEs. Due to the
decline characteristics of the Partnership's oil and gas properties, management
expects a certain amount of decline in production in the future until the
Partnership's economically recoverable reserves are fully depleted.
The average price received per barrel of oil decreased $5.15, or 16%, from
$31.31 for the three months ended September 30, 2000 to $26.16 for the same
period in 2001. The average price received per barrel of NGLs decreased $5.65,
or 33%, from $16.90 during the three months ended September 30, 2000 to $11.25
for the same period in 2001. The average price received per mcf of gas decreased
42% from $3.16 during the three months ended September 30, 2000 to $1.84 for the
same period in 2001.
Gain on disposition of assets of $7,108 was recognized during the three months
ended September 30, 2000. The gain was comprised of $4,315 from equipment
credits received on one fully depleted well and $2,793 received from salvage
income on one well plugged and abandoned during the current period. Abandoned
property costs of $17 and $8,226 were incurred during the three months ended
September 30, 2001 and 2000, respectively, resulting from one well plugged and
abandoned during the current periods.
Costs and Expenses:
Total costs and expenses increased to $206,416 for the three months ended
September 30, 2001 as compared to $149,208 for the same period in 2000, an
increase of $57,208, or 38%. This increase was due to increases in the
impairment of oil and gas properties, production costs and depletion, offset by
decreases in abandoned property costs and G&A.
Production costs were $133,495 for the three months ended September 30, 2001 and
$114,143 for the same period in 2000 resulting in a $19,352 increase, or 17%.
The increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production, offset by lower
production and ad valorem taxes.
During this period, G&A decreased 38% from $10,565 for the three months ended
September 30, 2000 to $6,594 for the same period in 2001, primarily due to a
lower percentage of the managing general partner's G&A being allocated (limited
to 3% of oil and gas revenues) as a result of decreased oil and gas revenues.
The Partnership recognized a non-cash impairment provision of $34,975 related to
its proved oil and gas properties during the three months ended September 30,
2001.
10
Depletion was $31,335 for the three months ended September 30, 2001 as compared
to $16,274 for the same period in 2000, representing an increase of $15,061, or
93%. This increase was due to a decrease in proved reserves during the period
ended September 30, 2001 as a result of lower commodity prices 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 $16,140 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to reductions of $131,429 in working capital and G&A
expenses of $6,362, offset by increases in production costs of $47,328,
abandoned property costs of $2,032 and a reduction in oil and gas sales receipts
of $72,291. The decrease in oil and gas receipts resulted from the decline of
$21,833 in oil prices during 2001 and $135,612 resulting from the decline in
production during 2001 as compared to the same period in 2000, offset by
increases in gas and NGL prices of $85,154. The increase in production costs was
primarily due to higher ad valorem taxes and additional well maintenance and
workover costs incurred to stimulate well production. The decrease in G&A was
primarily due to a lower percentage of the managing general partner's G&A being
allocated (limited to 3% of oil and gas revenues) as a result of decreased oil
and gas revenues.
Net Cash Provided by Investing Activities
The Partnership's investing activities during the nine months ended September
30, 2001 and 2000 were related to upgrades of oil and gas equipment on various
oil and gas properties.
Proceeds from dispositions of assets of $6,471 was recognized during the nine
months ended September 30, 2001. The proceeds were comprised of $5,968 received
from the sale of equipment on one well plugged and abandoned during the current
period and $503 from equipment credits received on one active well. Proceeds of
$13,102 received during the same period in 2000 were due to $8,845 on one well
plugged and abandoned during the current period and $4,257 from equipment
credits on one fully depleted well.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2000, cash distributions to the partners
were $429,915, of which $4,299 was distributed to the managing general partner
and $425,616 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $556,511, of which $5,565 was
distributed to the managing general partner and $550,946 to the limited
partners.
During 2001, the Partnership made distributions in March and July but no
distributions were made by the Partnership during September pending the vote of
the proposed merger of the Partnership into Pioneer Natural Resources USA, Inc.
("Pioneer USA"). For further information, see "Proposal to acquire partnerships"
below.
11
Proposal to acquire partnerships
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
definitive materials (the "proxy statement/prospectus") to solicit the approval
of limited partners of 46 Parker & Parsley limited partnerships, including the
Partnership, of an agreement and plan of merger among Pioneer, Pioneer USA, a
wholly-owned subsidiary of Pioneer, and those limited partnerships. The special
meetings of the limited partners to consider and vote on the merger proposal are
scheduled for December 20, 2001. The record date to identify the limited
partners who are entitled to notice of and to vote at the special meetings was
September 21, 2001. Each partnership that approves the agreement and plan of
merger and the other related merger proposals will merge with and into Pioneer
USA. As a result, the partnership interests of those partnerships will be
converted into the right to receive Pioneer common stock.
The 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.
A copy of the 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 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 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.
- ---------------
(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
(b) Reports on Form 8-K - none
12
PARKER & PARSLEY 88-B, L.P.
(A Delaware 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 88-B, L.P.
By: Pioneer Natural Resources USA, Inc.,
Managing General Partner
Dated: November 9, 2001 By: /s/ Rich Dealy
----------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
13