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, 1995, 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. 33-26097-02
PARKER & PARSLEY 89-B, L.P.
(Exact name of Registrant as specified in its charter)
Delaware 75-2301810
(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.
There are no exhibits.
PARKER & PARSLEY 89-B, L.P.
(A Delaware Limited Partnership)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
September 30, December 31,
1995 1994
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents, including
interest bearing deposits of $76,637
at September 30 and $68,049 at
December 31 $ 76,670 $ 68,082
Accounts receivable - oil and gas sales 67,798 76,868
----------- -----------
Total current assets 144,468 144,950
Oil and gas properties - at cost, based on
the successful efforts accounting method 5,812,535 5,809,482
Accumulated depletion (2,756,022) (2,544,071)
----------- -----------
Net oil and gas properties 3,056,513 3,265,411
----------- -----------
$ 3,200,981 $ 3,410,361
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 37,546 $ 20,039
Partners' capital:
Limited partners (6,949 interests) 3,131,559 3,356,176
Managing general partner 31,876 34,146
----------- -----------
3,163,435 3,390,322
----------- -----------
$ 3,200,981 $ 3,410,361
=========== ===========
The financial information included as of September 30, 1995 has been
prepared by management without audit by independent public accountants.
The accompanying notes are an integral part of these statements.
2
PARKER & PARSLEY 89-B, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
---------- ---------- ---------- ----------
Revenues:
Oil and gas sales $ 180,781 $ 209,627 $ 570,144 $ 601,667
Interest income 1,502 1,084 4,033 2,219
--------- --------- --------- ---------
Total revenues 182,283 210,711 574,177 603,886
Costs and expenses:
Production costs 91,183 84,810 288,404 280,706
General and adminis-
trative expenses 4,694 5,615 17,104 19,244
Depletion 68,654 58,339 211,951 196,464
Amortization of
organization costs - 1,930 - 5,788
--------- --------- --------- ---------
Total costs and
expenses 164,531 150,694 517,459 502,202
--------- --------- --------- ---------
Net income $ 17,752 $ 60,017 $ 56,718 $ 101,684
========= ========= ========= =========
Allocation of net income:
Managing general
partner $ 177 $ 620 $ 567 $ 1,075
========= ========= ========= =========
Limited partners $ 17,575 $ 59,397 $ 56,151 $ 100,609
========= ========= ========= =========
Net income per limited
partnership interest $ 2.53 $ 8.55 $ 8.08 $ 14.48
========= ========= ========= =========
Distributions per
limited partnership
interest $ 12.09 $ 15.76 $ 40.40 $ 41.46
========= ========= ========= =========
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 statements.
3
PARKER & PARSLEY 89-B, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 1994 $ 36,747 $ 3,621,386 $ 3,658,133
Distributions (2,910) (288,072) (290,982)
Net income 1,075 100,609 101,684
---------- ---------- ----------
Balance at September 30, 1994 $ 34,912 $ 3,433,923 $ 3,468,835
========== ========== ==========
Balance at January 1, 1995 $ 34,146 $ 3,356,176 $ 3,390,322
Distributions (2,837) (280,768) (283,605)
Net income 567 56,151 56,718
---------- ---------- ----------
Balance at September 30, 1995 $ 31,876 $ 3,131,559 $ 3,163,435
========== ========== ==========
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 statements.
4
PARKER & PARSLEY 89-B, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
1995 1994
---------- ----------
Cash flows from operating activities:
Net income $ 56,718 $ 101,684
Adjustments to reconcile net income to
net cash provided by operating activities:
Depletion and amortization 211,951 202,252
Changes in assets and liabilities:
Decrease in accounts receivable 9,070 943
Increase in accounts payable 17,507 15,466
--------- ---------
Net cash provided by operating activities 295,246 320,345
Cash flows from investing activities:
Additions to oil and gas properties (3,053) (1,180)
Cash flows from financing activities:
Cash distributions to partners (283,605) (290,982)
--------- ---------
Net increase in cash and cash
equivalents 8,588 28,183
Cash and cash equivalents at beginning
of period 68,082 57,749
--------- ---------
Cash and cash equivalents at end of period $ 76,670 $ 85,932
========= =========
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 statements.
5
PARKER & PARSLEY 89-B, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1995
(Unaudited)
NOTE 1.
In the opinion of management, the unaudited financial statements as of September
30, 1995 of Parker & Parsley 89-B, L.P. (the "Registrant") 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. However, the results of operations for the nine months ended September
30, 1995 are not necessarily indicative of the results for the full year ending
December 31, 1995.
The financial statements should be read in conjunction with the financial
statements and the notes thereto contained in the Registrant's Report on Form
10-K for the year ended December 31, 1994, as filed with the Securities and
Exchange Commission, a copy of which is available upon request by writing to
Steven L. Beal, Senior Vice President, 303 West Wall, Suite 101, Midland, Texas
79701.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Registrant was formed December 30, 1989. The managing general partner of the
Registrant at December 31, 1994 was Parker & Parsley Development Company
("PPDC") which was merged into Parker & Parsley Development L.P. ("PPDLP") on
January 1, 1995. On January 1, 1995, PPDLP, a Texas limited partnership, became
the sole managing general partner of the Registrant, by acquiring the rights and
assuming the obligations of PPDC. PPDLP acquired PPDC's rights and obligations
as managing general partner of the Registrant in connection with the merger of
PPDC, P&P Producing, Inc. and Spraberry Development Corporation into MidPar LP.,
which survived the merger with a change of name to PPDLP. The sole general
partner of PPDLP is Parker & Parsley Petroleum USA, Inc. PPDLP has the power and
authority to manage, control and administer all Registrant affairs. The limited
partners contributed $6,949,000 representing 6,949 interests ($1,000 per
interest) sold to a total of 463 limited partners.
Since its formation, the Registrant invested $5,812,535 in various prospects
drilled in Texas. At September 30, 1995, the Registrant had 33 producing oil and
gas wells.
6
RESULTS OF OPERATIONS
Nine months ended September 30, 1995 compared with nine months ended
September 30, 1994
REVENUES:
The Registrant's oil and gas revenues decreased to $570,144 from $601,667 for
the nine months ended September 30, 1995 and 1994, respectively, a decrease of
5%. The decrease in revenues resulted from a 13% decline in barrels of oil
produced and sold, a 5% decline in mcf of gas produced and sold and a decrease
in the average price received per mcf of gas, offset by an increase in the
average price received per barrel of oil. For the nine months ended September
30, 1995, 24,523 barrels of oil were sold compared to 28,031 for the same period
in 1994, a decrease of 3,508 barrels. For the nine months ended September 30,
1995, 86,897 mcf of gas were sold compared to 91,606 for the same period in
1994, a decrease of 4,709 mcf. These production decreases were due to the
decline characteristics of the Registrant's oil and gas properties. Management
expects a certain amount of decline in production to continue in the future
until the Registrant's economically recoverable reserves are fully depleted.
The average price received per barrel of oil increased 9% from $15.79 for the
nine months ended September 30, 1994 to $17.28 for the same period in 1995 while
the average price received per mcf of gas decreased 3% from $1.74 for the nine
months ended September 30, 1994 to $1.69 for the same period in 1995. 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 Registrant 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, 1995.
COSTS AND EXPENSES:
Total costs and expenses increased to $517,459 for the nine months ended
September 30, 1995 as compared to $502,202 for the same period in 1994, an
increase of $15,257, or 3%. This increase was due to increases in production
costs and depletion, offset by declines in general and administrative expenses
("G&A") and amortization of organization costs.
Production costs were $288,404 for the nine months ended September 30, 1995 and
$280,706 for the same period in 1994 resulting in a $7,698 increase, or 3%. The
increase was primarily due to increases in well
7
repair, maintenance and workover costs incurred in an effort to stimulate well
production, offset by a decline in ad valorem taxes.
G&A's components are independent accounting and engineering fees, computer
services, postage and managing general partner personnel costs. During this
period, G&A decreased 11% from $19,244 for the nine months ended September 30,
1994 to $17,104 for the same period in 1995. The Partnership agreement limits
G&A to 3% of gross oil and gas revenues.
Depletion was $211,951 for the nine months ended September 30, 1995 compared to
$196,464 for the same period in 1994. This represented an increase in depletion
of $15,487, or 8%. Depletion was computed quarterly on a property-by-property
basis utilizing the unit-of-production method based upon the dominant mineral
produced, generally oil. Oil production decreased 3,508 barrels for the nine
months ended September 30, 1995 from the same period in 1994. Depletion expense
for the nine months ended September 30, 1995 was calculated based on reserves
computed utilizing an oil price of $16.35 per barrel. Comparatively, depletion
expense for the three months ended September 30, 1994 and June 30, 1994 was
calculated based on reserves computed utilizing an oil price of $18.26 per
barrel while depletion expense for the three months ended March 31, 1994 was
calculated based on reserves computed utilizing an oil price of $12.76 per
barrel.
Three months ended September 30, 1995 compared with three months ended
September 30, 1994
REVENUES:
The Registrant's oil and gas revenues decreased to $180,781 from $209,627 for
the three months ended September 30, 1995 and 1994, respectively, a decrease of
14%. The decrease in revenues resulted from a 10% decline in barrels of oil
produced and sold, a 6% decline in mcf of gas produced and sold and decreases in
the average prices received per barrel of oil and mcf of gas. For the three
months ended September 30, 1995, 7,934 barrels of oil were sold compared to
8,850 for the same period in 1994, a decrease of 916 barrels. For the three
months ended September 30, 1995, 31,116 mcf of gas were sold compared to 33,087
mcf for the same period in 1994, a decrease of 1,971 mcf. These decreases were
due to the decline characteristics of the Registrant's oil and gas properties.
The average price received per barrel of oil decreased 5% from $17.34 for the
three months ended September 30, 1994 to $16.53 for the same period in 1995
while the average price received per mcf of gas decreased
8
6% from $1.70 for the three months ended September 30, 1994 to $1.60 for the
same period in 1995.
COSTS AND EXPENSES:
Total costs and expenses increased to $164,531 for the three months ended
September 30, 1995 as compared to $150,694 for the same period in 1994, an
increase of $13,837, or 9%. This increase was due to increases in production
costs and depletion, offset by declines in G&A and amortization of organization
costs.
Production costs were $91,183 for the three months ended September 30, 1995 and
$84,810 for the same period in 1994 resulting in a $6,373 increase, or 8%. The
increase was attributable to additional well repair and maintenance costs and
higher ad valorem taxes, offset by a decline in production taxes.
G&A's components are independent accounting and engineering fees, computer
services, postage and managing general partner personnel costs. During this
period, G&A decreased 16% from $5,615 for the three months ended September 30,
1994 to $4,694 for the same period in 1995.
Depletion was $68,654 for the three months ended September 30, 1995 compared to
$58,339 for the same period in 1994. This represented an increase in depletion
of $10,315, or 18%. Oil production decreased 916 barrels for the three months
ended September 30, 1995 from the same period in 1994. Depletion expense for the
three months ended September 30, 1995 was calculated based on reserves computed
utilizing an oil price of $16.35 per barrel while depletion expense for the
three months ended September 30, 1994 was calculated based on reserves computed
utilizing an oil price of $18.26 per barrel.
LIQUIDITY AND CAPITAL RESOURCES
NET CASH PROVIDED BY OPERATING ACTIVITIES
Net cash provided by operating activities decreased to $295,246 during the nine
months ended September 30, 1995, an 8% decrease from the same period ended
September 30, 1994. This decrease was due to a decline in oil and gas sales and
an increase in production costs, offset by a decline in G&A. The decline in oil
and gas sales was primarily due to decreases in barrels of oil and mcf of gas
produced and sold, offset by an increase in the average price received for oil.
Production costs increased due to additional well repair, maintenance and
workover costs
9
incurred in an effort to stimulate well production. The decline in G&A was the
result of less allocated expenses by the managing general partner.
NET CASH USED IN INVESTING ACTIVITIES
The Registrant's principal investing activities during the nine months ended
September 30, 1995 was for repair and maintenance activity on various oil and
gas properties.
NET CASH USED IN FINANCING ACTIVITIES
Cash was sufficient for the nine months ended September 30, 1995 to cover
distributions to the partners of $283,605 of which $280,768 was distributed to
the limited partners and $2,837 to the managing general partner. For the same
period ended September 30, 1994, cash was sufficient for distributions to the
partners of $290,982 of which $288,072 was distributed to the limited partners
and $2,910 to the managing general partner.
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.
ACCOUNTING STANDARD ON IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 - Accounting for Impairment of Long-lived
Assets and for Long-lived Assets to Be Disposed Of ("FAS 121") regarding the
impairment of long-lived assets, identifiable intangibles and goodwill related
to those assets. FAS 121 is effective for financial statements for fiscal years
beginning after December 15, 1995, although earlier adoption is encouraged. The
application of FAS 121 to oil and gas companies utilizing the successful efforts
method (such as the Registrant) will require periodic determination of whether
the book value of long-lived assets exceeds the future cash flows expected to
result from the use of such assets and, if so, will require reduction of the
carrying amount of the "impaired" assets to their estimated fair values. There
is currently a great deal of uncertainty as to how FAS 121 will apply to oil and
gas companies using the successful efforts method, including uncertainty
regarding the determination of expected future cash flows from the relevant
assets and, if an impairment is determined to exist, their estimated fair value.
There is also uncertainty regarding the level at which the test
10
might be applied. Given this uncertainty, the Registrant is currently unable to
estimate the effect that FAS 121 will have on the Registrant's results of
operations for the period in which it is adopted.
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 89-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 89-B, L.P.
By: Parker & Parsley Development L.P.,
Managing General Partner
By: Parker & Parsley Petroleum USA, Inc.
("PPUSA"), General Partner
Dated: November 9, 1995 By: /s/ Steven L. Beal
---------------------------------------
Steven L. Beal, Senior Vice President
and Chief Financial Officer of PPUSA
12