UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1998
Commission File No. 33-26097-10
PARKER & PARSLEY 90-C CONV., L.P.
(Exact name of Registrant as specified in its charter)
Delaware 75-2347264
(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
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Limited partnership interests ($1,000 per unit)
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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / x /
No market currently exists for the limited partnership interests of the
Registrant. Based on original purchase price the aggregate market value of
limited partnership interests owned by non-affiliates of the Registrant is
$7,501,000.
As of March 8, 1999, the number of outstanding limited partnership interests was
7,531. The following documents are incorporated by reference into the indicated
parts of this Annual Report on Form 10-K: None
Parts I and II of this Report contain 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. See "Item 1. Business" for a
description of various factors that could materially affect the ability of the
Partnership to achieve the anticipated results described in the forward looking
statements.
PART I
ITEM 1. Business
Parker & Parsley 90-C Conv., L.P. (the "Partnership") is a general partnership
organized in 1990 under the laws of the State of Texas. The Partnership
converted to a Delaware limited partnership on August 1, 1991. As of August 8,
1997, Pioneer Natural Resources USA, Inc. ("Pioneer USA") became the managing
general partner of the Partnership. Prior to August 8, 1997, the Partnership's
managing 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. ("Mesa") 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
managing general partner of the Partnership as PPDLP's successor by merger. For
a more complete description of the Parker & Parsley and Mesa merger, see
Pioneer's Registration Statement on Form S-4 as filed with the Securities &
Exchange Commission.
A Registration Statement, as amended, filed pursuant to the Securities Act of
1933, registering general partnership interests aggregating $30,000,000 in a
series of Texas general partnerships formed under the Parker & Parsley 89-90
Development Drilling Program, was declared effective by the Securities and
Exchange Commission on August 1, 1989. On December 28, 1990, the offering of
general partnership interests in the Partnership, the fifth partnership formed
under such registration statement, was closed, with interests aggregating
$7,531,000 being sold to 517 subscribers.
The Partnership engages primarily in oil and gas development and production and
is not involved in any industry segment other than oil and gas. See "Item 6.
Selected Financial Data" and "Item 8. Financial Statements and Supplementary
Data" of this report for a summary of the Partnership's operating information
and identifiable assets.
The principal markets during 1998 for the oil produced by the Partnership were
refineries and oil transmission companies that have facilities near the
Partnership's oil producing properties. The principal markets for the
Partnership's gas were companies that have pipelines located near the
Partnership's gas producing properties. Of the Partnership's total oil and gas
revenues for 1998, approximately 69% and 13% were attributable to sales made to
Genesis Crude Oil, L.P. and Western Gas Resources, Inc., respectively.
The Partnership's revenues, profitability, cash flow and future rate of growth
are highly dependent on the prevailing prices of oil and gas, which are affected
2
by numerous factors beyond the Partnership's control. Oil and gas prices
historically have been very volatile. A substantial or extended decline in the
prices of oil or gas could have a material adverse effect on the Partnership's
revenues, profitability and cash flow and could, under certain circumstances,
result in a reduction in the carrying value of the Partnership's oil and gas
properties.
Because of the demand for oil and gas, the Partnership does not believe that the
termination of the sales of its products to any one customer would have a
material adverse impact on its operations. The loss of a particular customer for
gas may have an effect if that particular customer has the only gas pipeline
located in the areas of the Partnership's gas producing properties. The
Partnership believes, however, that the effect would be temporary, until
alternative arrangements could be made.
Federal and state regulation of oil and gas operations generally includes the
fixing of maximum prices for regulated categories of natural gas, the imposition
of maximum allowable production rates, the taxation of income and other items,
and the protection of the environment. Although the Partnership believes that
its business operations do not impair environmental quality and that its costs
of complying with any applicable environmental regulations are not currently
significant, the Partnership cannot predict what, if any, effect these
environmental regulations may have on its current or future operations.
The Partnership does not have any employees of its own. Pioneer USA employs 818
persons, many of whom dedicated a part of their time to the conduct of the
Partnership's business during the period for which this report is filed. Pioneer
USA is responsible for all management functions.
Numerous uncertainties exist in estimating quantities of proved reserves and
future net revenues therefrom. The estimates of proved reserves and related
future net revenues set forth in this report are based on various assumptions,
which may ultimately prove to be inaccurate. Therefore, such estimates should
not be construed as estimates of the current market value of the Partnership's
proved reserves.
No material part of the Partnership's business is seasonal and the Partnership
conducts no foreign operations.
ITEM 2. Properties
The Partnership's properties consist primarily of leasehold interests in
properties on which oil and gas wells are located. Such property interests are
often subject to landowner royalties, overriding royalties and other oil and gas
leasehold interests.
Fractional working interests in developmental oil and gas prospects located
primarily in the Spraberry Trend Area of West Texas were acquired by the
Partnership, resulting in the Partnership's participation in the drilling of 44
oil and gas wells. One well was sold and one well was plugged and abandoned due
to uneconomical operations. At December 31, 1998, the Partnership had 42
producing oil and gas wells.
3
For information relating to the Partnership's estimated proved oil and gas
reserves at December 31, 1998, 1997 and 1996 and changes in such quantities for
the years then ended, see Note 7 of Notes to Financial Statements included in
"Item 8. Financial Statements and Supplementary Data" below. Such reserves have
been estimated by the engineering staff of Pioneer USA with a review by
Williamson Petroleum Consultants, Inc., an independent petroleum consultant.
ITEM 3. Legal Proceedings
The Partnership from time to time is a party to various legal proceedings
incidental to its business involving claims in oil and gas leases or interests,
other claims for damages in amounts not in excess of 10% of its current assets
and other matters, none of which Pioneer believes to be material to the
Partnership.
ITEM 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the fourth
quarter of 1998.
4
PART II
ITEM 5. Market for Partnership's Common Equity and Related Stockholder
Matters
At March 8, 1999, the Partnership had 7,531 outstanding limited partnership
interests held of record by 509 subscribers. There is no established public
trading market for the limited partnership interests. Under the limited
partnership agreement, Pioneer USA has made certain commitments to purchase
partnership interests at a computed value.
Revenues which, in the sole judgement of the managing general partner, are not
required to meet the Partnership's obligations are distributed to the partners
at least quarterly in accordance with the limited partnership agreement. During
the years ended December 31, 1998 and 1997, $130,281 and $357,952, respectively,
of such revenue-related distributions were made to the limited partners.
ITEM 6. Selected Financial Data
The following table sets forth selected financial data for the years ended
December 31:
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- -----------
Operating results:
Oil and gas sales $ 430,499 $ 661,475 $ 837,849 $ 722,324 $ 804,039
========= ========= ========= ========= ==========
Impairment of oil and
gas properties $ 185,784 $ 79,288 $ - $ 48,088 $ -
========= ========= ========= ========= ==========
Net income (loss) $ (258,625) $ 105,740 $ 359,349 $ 163,626 $ 152,612
========= ========= ========= ========= ==========
Allocation of net income
(loss):
Managing general
partner $ (2,586) $ 1,057 $ 3,593 $ 1,668 $ 1,558
========= ========= ========= ========= ==========
Limited partners $ (256,039) $ 104,683 $ 355,756 $ 161,958 $ 151,054
========= ========= ========= ========= ==========
Limited partners' net
income (loss) per
limited partnership
interest $ (34.00) $ 13.90 $ 47.24 $ 21.51 $ 20.06
========= ========= ========= ========= ==========
Limited partners' cash
distributions per
limited partnership
interest $ 17.30 $ 47.53 $ 51.98 $ 45.34 $ 51.71
========= ========= ========= ========= ==========
At year end:
Total assets $1,011,034 $1,411,804 $1,661,127 $1,728,891 $ 1,886,057
========= ========= ========= ========= ==========
5
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
1998 compared to 1997
The Partnership's 1998 oil and gas revenues decreased 35% to $430,499 from
$661,475 in 1997. The decrease in revenues resulted from lower average prices
received. In 1998, 24,493 barrels of oil, 8,694 barrels of natural gas liquids
("NGLs") and 30,348 mcf of gas were sold, or 38,245 barrel of oil equivalents
("BOEs"). In 1997, 25,817 barrels of oil, 3,661 barrels of NGLs and 50,304 mcf
of gas were sold, or 37,862 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.
Consistent with the managing general partner, the Partnership has historically
accounted for processed natural gas production as wellhead production on a wet
gas basis. Effective September 30, 1997, as a result of the merger with Mesa,
the managing general partner accounts for processed natural gas production in
two components: natural gas liquids and dry residue gas. As a result of the
change in the managing general partner's policy, the Partnership now accounts
for processed natural gas production as processed natural gas liquids and dry
residue gas. Consequently, separate product volumes will not be comparable for
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 year ended December 31,
1998 is the price received for dry residue gas and the price per mcf for natural
gas produced prior to October 1997 was presented as a price for wet gas (i.e.,
natural gas liquids combined with dry residue gas).
The average price received per barrel of oil decreased $6.24, or 32%, from
$19.48 in 1997 to $13.24 in 1998. The average price received per barrel of NGLs
decreased $3.78, or 36%, from $10.58 in 1997 to $6.80 in 1998. The average price
received per mcf of gas decreased 35% from $2.38 in 1997 to $1.55 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 received in 1998.
Total costs and expenses increased in 1998 to $693,871 compared to $562,477 in
1997, an increase of $131,394, or 23%. This increase was due to increases in
impairment of oil and gas properties and depletion, offset by decreases in
production costs and general and administrative expenses ("G&A").
Production costs were $314,363 in 1998 and $331,332 in 1997, resulting in a
decrease of $16,969, or 5%. The decrease was due to declines in production and
ad valorem taxes and workover expense, offset by an increase in well 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,
6
in aggregate, 30% from $21,436 in 1997 to $15,084 in 1998. The Partnership paid
the managing general partner $12,838 in 1998 and $17,703 in 1997 for G&A
incurred on behalf of the Partnership. G&A is allocated, in part, to the
Partnership by the managing general partner. Such allocated expenses are
determined by the managing general partner based upon its judgement of the level
of activity of the Partnership relative to the managing general partner's
activities and other entities it manages. The method of allocation has been
consistent over the past several years with certain modifications incorporated
to reflect changes in Pioneer USA's overall business activities.
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 managing general partner reviews the
Partnership's oil and gas properties for impairment whenever events or
circumstances indicate a decline in the recoverability of the carrying value of
the Partnership's assets may have occurred. Declining commodity prices prompted
impairment reviews in 1998 and 1997. As a result of the review and evaluation of
its long-lived assets for impairment, the Partnership recognized non-cash
charges of $185,784 and $79,288 related to its oil and gas properties during
1998 and 1997, respectively.
Depletion was $178,640 in 1998 compared to $130,421 in 1997. This represented an
increase of $48,219, or 37%. This increase was primarily the result of a
combination of factors that included a decline in proved reserves during 1998
due to the lower commodity prices, offset by 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 1,324 barrels for
the period ended December 31, 1998 compared to the same period in 1997.
1997 compared to 1996
The Partnership's 1997 oil and gas revenues decreased 21% to $661,475 from
$837,849 in 1996. The decrease in revenues resulted from declines in production
and lower average prices received. In 1997, 25,817 barrels of oil, 3,661 barrels
of NGLs and 50,304 mcf of gas were sold, or 37,862 BOEs. In 1996, 30,485 barrels
of oil and 64,557 mcf of gas were sold, or 41,245 BOEs.
Consistent with the managing general partner, the Partnership has historically
accounted for processed natural gas production as wellhead production on a wet
gas basis. As is described above in "Results of Operations - 1998 compared to
1997", the Partnership changed its method of accounting for processed natural
gas to a dry gas basis in the fourth quarter of 1997. As a result of this
change, the Partnership now accounts for processed natural gas production as
processed natural gas liquids and dry residue gas. Consequently, 1997 and 1996
separate product volumes are not comparable.
The declines in production volumes were primarily attributable to the decline
characteristics of the Partnership's oil and gas properties.
The average price received per barrel of oil decreased $2.40, or 11%, from
$21.88 in 1996 to $19.48 in 1997. The average price received per barrel of NGLs
during 1997 was $10.58. The average price received per mcf of gas decreased 10%
from $2.65 in 1996 to $2.38 in 1997.
7
A gain on disposition of assets of $800 was recognized during 1997 from credits
received from the disposal of oil and gas equipment on one fully depleted well.
Loss on disposition of assets of $6,508 was recognized during 1996 of which
$6,674 was attributable to the sale of one gas well, offset by salvage income of
$166 received from the disposal of oil and gas equipment on one well that was
plugged and abandoned in a prior year and to credits received from the disposal
of oil and gas equipment on fully depleted wells.
Total costs and expenses increased in 1997 to $562,477 compared to $477,266 in
1996, an increase of $85,211, or 18%. This increase was due to the impairment of
oil and gas properties and depletion, offset by decreases in production costs
and G&A.
Production costs were $331,332 in 1997 and $337,193 in 1996, resulting in a
$5,861 decrease. The decrease was due to a decline in production taxes and
workover expense, offset by a slight increase in ad valorem taxes.
During this period G&A decreased, in aggregate, 21% from $27,292 in 1996 to
$21,436 in 1997. The Partnership paid the managing general partner $17,703 in
1997 and $24,441 in 1996 for G&A incurred on behalf of the Partnership.
The Partnership recognized a non-cash SFAS 121 impairment provision of $79,288
related to its oil and gas properties during the fourth quarter of 1997.
Depletion was $130,421 in 1997 compared to $112,781 in 1996. This represented an
increase of $17,640 or 16%. This increase was primarily attributable to a
decline in oil reserves during 1997 as a result of lower commodity prices,
offset by a decline in oil production of 4,668 barrels for 1997 as compared to
1996.
Impact of inflation and changing prices on sales and net income
Inflation impacts the fixed overhead rate charges of the lease operating
expenses for the Partnership. During 1998, the annual change in the index of
average weekly earnings of crude petroleum and gas production workers issued by
the U.S. Department of Labor, Bureau of Labor Statistics increased (effective
April 1, 1998) 10.3%. The 1997 annual change in average weekly earnings
increased by 2%. The 1996 index increased 4.1%. The impact of inflation for
other lease operating expenses is small due to the current economic condition of
the oil industry.
The oil and gas industry experienced volatility during the past decade because
of the fluctuation of the supply of most fossil fuels relative to the demand for
such products and other uncertainties in the world energy markets causing
significant fluctuations in oil and gas prices. During 1998, the price per
barrel for oil production similar to the Partnership's ranged from approximately
$9.50 to $15.50. During most of 1997 and 1996, 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 March
1999. On March 8, 1999, the market price for West Texas intermediate crude was
$11.00 per barrel. A continuation of the current commodity price environment
will continue to have an adverse effect on the Partnership's revenues, operating
cash flow and distributions and could result in additional decreases in the
carrying value of the Partnership's oil and gas properties.
8
Prices for natural gas are subject to ordinary seasonal fluctuations, and this
volatility of natural gas prices may result in production being curtailed and,
in some cases, wells being completely shut-in.
Liquidity and capital resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased $251,807 during the year
ended December 31, 1998 from the year ended December 31, 1997, primarily
attributable to declines in oil and gas sales receipts, offset by decreases in
production costs and G&A expenses paid.
Net Cash Provided by (Used in) Investing Activities
The Partnership's investing activities during 1998 and 1997 included
expenditures related to equipment replacement on various oil and gas properties.
Proceeds from disposition of assets of $800 from the salvage of equipment on one
fully depleted well were received during 1997.
Net Cash Used in Financing Activities
Cash was sufficient in 1998 for distributions to the partners of $131,597 of
which $1,316 was distributed to the managing general partner and $130,281 to the
limited partners. In 1997, cash was sufficient for distributions to the partners
of $361,567 of which $3,615 was distributed to the managing general partner and
$357,952 to the limited partners.
The current commodity price environment will continue to impact the
distributions and could result in limited or no distributions to the partners.
Year 2000 Project Readiness
Historically, many computer programs have been developed that use only the last
two digits in a date to refer to a year. As the year 2000 nears, the inability
of such computer programs and embedded technologies to distinguish between
"1900" and "2000" has given rise to the "Year 2000" problem. Theoretically, such
computer programs and related technology could fail outright or communicate
inaccurate data, if not remediated or replaced. With the proliferation of
electronic data interchange, the Year 2000 problem represents a significant
exposure to the entire global community, the full extent of which cannot be
accurately assessed.
In proactive response to the Year 2000 problem, the managing general partner
established a "Year 2000" project to assess, to the extent possible, the
Partnership's and the managing general partner's internal Year 2000 problem; to
take remedial actions necessary to minimize the Year 2000 risk exposure to the
managing general partner and significant third parties with whom it has data
interchange; and, to test its systems and processes once remedial actions have
been taken. The managing general partner has contracted with IBM Global Services
to perform the assessment and remedial phases of its Year 2000 project.
9
The assessment phase of the managing general partner's Year 2000 project is at
varying stages of completion as it pertains to information technology and
non-information technology applications and systems in the United States, Canada
and Argentina. As of December 31, 1998, the managing general partner estimates
that the assessment phase is approximately 86% complete, on a worldwide basis,
and has included, but is not limited to, the following procedures:
o the identification of necessary remediation, upgrade and/or replacement
of existing information technology applications and systems;
o the assessment of non-information technology exposures, such as
telecommunications systems, security systems, elevators and process
control equipment;
o the initiation of inquiry and dialogue with significant third party
business partners, customers and suppliers in an effort to understand and
assess their Year 2000 problems, readiness and potential impact on the
managing general partner and its Year 2000 problem;
o the implementation of processes designed to reduce the risk of
reintroduction of Year 2000 problems into the managing general partner's
systems and business processes; and,
o the formulation of contingency plans for mission-critical information
technology systems.
The managing general partner expects to complete the assessment phase of its
Year 2000 project by the end of the first quarter of 1999 but is being delayed
by limited responses received on inquiries made of third party businesses. To
date, the managing general partner has distributed Year 2000 problem inquiries
to over 500 entities and has received responses to approximately 37% of those
inquiries.
The remedial phase of the managing general partner's Year 2000 project is also
at varying stages of completion as it pertains to the remediation of information
technology and non-information technology applications and systems in the United
States, Canada and Argentina. As of December 31, 1998, the managing general
partner estimates that the remedial phase is approximately 54% complete, on a
worldwide basis, subject to the continuing results of the third party inquiry
assessments and the testing phase. The remedial phase has included the upgrade
and/or replacement of certain application and hardware systems. The managing
general partner has upgraded its Artesia general ledger accounting systems
through remedial coding and is currently testing this system for Year 2000
compliance. The remediation of non-information technology is expected to be
completed during July 1999. The managing general partner's Year 2000 remedial
actions have not significantly delayed other information technology projects or
upgrades.
The testing phase of the managing general partner's Year 2000 project is on
schedule. The managing general partner expects to complete the testing of the
Artesia system upgrades by March 1999 and all other information technology
systems and non-information technology remediation by the end of the third
quarter of 1999.
10
The managing general partner expects that its total costs related to the Year
2000 problem will approximate $3.6 million, of which approximately $500 thousand
will have been incurred to replace non-compliant information technology systems.
The managing general partner intends to use its working capital to pay for the
costs of the Year 2000 projects. As of December 31, 1998, the managing general
partner's total costs incurred on the Year 2000 problem were $1.8 million, of
which $200 thousand were incurred to replace non-compliant systems. The managing
general partner will allocate a portion of the costs of the Year 2000
programming charges to the Partnership in accordance with the general and
administration allocation. (See Note 2 of Notes to Financial Statements included
in "Item 8. Financial Statements and Supplementary Data".)
The risks associated with the Year 2000 problem are significant. A failure to
remedy a critical Year 2000 problem could have a materially adverse affect on
the Partnership's results of operations and financial condition. The most likely
worst case scenario which may be encountered as a result of a Year 2000 problem
could include information and non-information system failures, the receipt or
transmission of erroneous data, lost data or a combination of similar problems
of a magnitude that cannot be accurately assessed at this time.
In the assessment phase of the managing general partner's Year 2000 project,
contingency plans are being designed to mitigate the exposures to
mission-critical information technology systems, such as oil and gas sales
receipts, vendor and royalty cash distributions, debt compliance, accounting,
and employee compensation. Such contingency plans anticipate the extensive
utilization of third-party data processing services, personal computer
applications and the substitution of courier and mail services in place of
electronic data interchange. Given the uncertainties regarding the scope of the
Year 2000 problem and the compliance of significant third parties, there can be
no assurance that contingency plans will have anticipated all Year 2000
scenarios.
ITEM 8. Financial Statements and Supplementary Data
Index to Financial Statements
Page
----
Financial Statements of Parker & Parsley 90-C Conv., L.P:
Independent Auditors' Report - Ernst & Young LLP.................... 12
Independent Auditors' Report - KPMG LLP............................. 13
Balance Sheets as of December 31, 1998 and 1997..................... 14
Statements of Operations for the Years Ended December 31,
1998, 1997 and 1996............................................... 15
Statements of Partners' Capital for the Years Ended
December 31, 1998, 1997 and 1996.................................. 16
Statements of Cash Flows for the Years Ended December 31,
1998, 1997 and 1996............................................... 17
Notes to Financial Statements....................................... 18
11
INDEPENDENT AUDITORS' REPORT
The Partners
Parker & Parsley 90-C Conv., L.P.
(A Delaware Limited Partnership):
We have audited the balance sheet of Parker & Parsley 90-C Conv., L.P. as of
December 31, 1998, and the related statements of operations, partners' capital
and cash flows for the year then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Parker & Parsley 90-C Conv.,
L.P. as of December 31, 1998, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Dallas, Texas
March 15, 1999
12
INDEPENDENT AUDITORS' REPORT
The Partners
Parker & Parsley 90-C Conv., L.P.
(A Delaware Limited Partnership):
We have audited the financial statements of Parker & Parsley 90-C Conv., L.P. as
of December 31, 1997, and the related statements of operations, partners'
capital and cash flows for the years ended December 31, 1997 and 1996. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Parker & Parsley 90-C Conv.,
L.P. as of December 31, 1997, and the results of its operations and its cash
flows for the years ended December 31, 1997 and 1996, in conformity with
generally accepted accounting principles.
KPMG LLP
Midland, Texas
March 20, 1998
13
PARKER & PARSLEY 90-C CONV., L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
December 31
1998 1997
----------- ----------
ASSETS
Current assets:
Cash $ 66,221 $ 87,423
Accounts receivable - oil and gas sales 41,400 69,891
---------- ----------
Total current assets 107,621 157,314
---------- ----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 5,765,217 5,751,870
Accumulated depletion (4,861,804) (4,497,380)
---------- ----------
Net oil and gas properties 903,413 1,254,490
---------- ----------
$ 1,011,034 $ 1,411,804
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 13,398 $ 23,946
Partners' capital:
Managing general partner 9,946 13,848
Limited partners (7,531 interests) 987,690 1,374,010
---------- ----------
997,636 1,387,858
---------- ----------
$ 1,011,034 $ 1,411,804
========== ==========
The accompanying notes are an integral part of these
financial statements.
14
PARKER & PARSLEY 90-C CONV., L.P.
(A Delaware Limited Partnership)
STATEMENTS OF OPERATIONS
For the years ended December 31
1998 1997 1996
--------- --------- ---------
Revenues:
Oil and gas $ 430,499 $ 661,475 $ 837,849
Interest 4,747 5,942 5,274
Gain (loss) on disposition of assets - 800 (6,508)
-------- -------- --------
435,246 668,217 836,615
-------- -------- --------
Costs and expenses:
Oil and gas production 314,363 331,332 337,193
General and administrative 15,084 21,436 27,292
Impairment of oil and gas properties 185,784 79,288 -
Depletion 178,640 130,421 112,781
-------- -------- --------
693,871 562,477 477,266
-------- -------- --------
Net income (loss) $(258,625) $ 105,740 $ 359,349
======== ======== ========
Allocation of net income (loss):
Managing general partner $ (2,586) $ 1,057 $ 3,593
======== ======== ========
Limited partners $(256,039) $ 104,683 $ 355,756
======== ======== ========
Net income (loss) per limited
partnership interest $ (34.00) $ 13.90 $ 47.24
======== ======== ========
The accompanying notes are an integral part of these
financial statements.
15
PARKER & PARSLEY 90-C CONV., L.P.
(A Delaware Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Managing
general Limited
partner partners Total
--------- ---------- ----------
Partners' capital at January 1, 1996 $ 16,767 $1,662,989 $1,679,756
Distributions (3,954) (391,466) (395,420)
Net income 3,593 355,756 359,349
-------- --------- ---------
Partners' capital at December 31, 1996 16,406 1,627,279 1,643,685
Distributions (3,615) (357,952) (361,567)
Net income 1,057 104,683 105,740
-------- --------- ---------
Partners' capital at December 31, 1997 13,848 1,374,010 1,387,858
Distributions (1,316) (130,281) (131,597)
Net loss (2,586) (256,039) (258,625)
-------- --------- ---------
Partners' capital at December 31, 1998 $ 9,946 $ 987,690 $ 997,636
======== ========= =========
The accompanying notes are an integral part of these
financial statements.
16
PARKER & PARSLEY 90-C CONV., L.P.
(A Delaware Limited Partnership)
STATEMENTS OF CASH FLOWS
For the years ended December 31
1998 1997 1996
--------- --------- ---------
Cash flows from operating activities:
Net income (loss) $(258,625) $ 105,740 $ 359,349
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Impairment of oil and gas properties 185,784 79,288 -
Depletion 178,640 130,421 112,781
(Gain) loss on disposition of assets - (800) 6,508
Changes in assets and liabilities:
Accounts receivable 28,491 54,396 (54,851)
Accounts payable (10,548) 6,504 (31,693)
-------- -------- --------
Net cash provided by operating
activities 123,742 375,549 392,094
-------- -------- --------
Cash flows from investing activities:
Additions to oil and gas properties (13,347) (6,923) (3,869)
Proceeds from disposition of assets - 800 4,608
-------- -------- --------
Net cash provided by (used in)
investing activities (13,347) (6,123) 739
-------- -------- --------
Cash flows from financing activities:
Cash distributions to partners (131,597) (361,567) (395,420)
-------- -------- --------
Net increase (decrease) in cash (21,202) 7,859 (2,587)
Cash at beginning of year 87,423 79,564 82,151
-------- -------- --------
Cash at end of year $ 66,221 $ 87,423 $ 79,564
======== ======== ========
The accompanying notes are an integral part of these
financial statements.
17
PARKER & PARSLEY 90-C CONV., L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
Note 1. Organization and nature of operations
Parker & Parsley 90-C Conv., L.P. (the "Partnership") is a general
partnership organized in 1990 under the laws of the State of Texas. The
Partnership converted to a Delaware limited partnership on August 1, 1991. As of
August 8, 1997, Pioneer Natural Resources USA, Inc. ("Pioneer USA") became the
managing general partner of the Partnership. Prior to August 8, 1997, the
Partnership's managing 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
managing general partner of the Partnership as PPDLP's successor by merger.
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. Summary of significant accounting policies
A summary of the significant accounting policies consistently applied
in the preparation of the accompanying financial statements follows:
Oil and gas properties - The Partnership utilizes the successful
efforts method of accounting for its oil and gas properties and equipment. Under
this method, all costs associated with productive wells and nonproductive
development wells are capitalized while nonproductive exploration costs are
expensed. Capitalized costs relating to proved properties are depleted using the
unit-of-production method on a property-by-property basis based on proved oil
(dominant mineral) reserves as determined by the engineering staff of Pioneer
USA, the Partnership's managing general partner, and reviewed by independent
petroleum consultants. The carrying amounts of properties sold or otherwise
disposed of and the related allowances for depletion are eliminated from the
accounts and any gain or loss is included in operations.
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 long-lived assets to be held and used on an individual
property basis, including oil and gas properties accounted for under the
successful efforts method of accounting, whenever events or circumstances
indicate that the carrying value of those assets may not be recoverable. An
impairment loss is indicated if the sum of the expected future cash flows is
less than the carrying amount of the assets. In this circumstance, the
Partnership recognizes an impairment loss for the amount by which the carrying
amount of the asset exceeds the estimated fair value of the asset.
18
Use of estimates in the preparation of financial statements -
Preparation of the accompanying financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reporting amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Net income (loss) per limited partnership interest - The net income
(loss) per limited partnership interest is calculated by using the number of
outstanding limited partnership interests.
Income taxes - A Federal income tax provision has not been included in
the financial statements as the income of the Partnership is included in the
individual Federal income tax returns of the respective partners.
Statements of cash flows - For purposes of reporting cash flows, cash
includes depository accounts held by banks.
General and administrative expenses - General and administrative
expenses are allocated in part to the Partnership by the managing general
partner or its affiliates. Such allocated expenses are determined by the
managing general partner based upon its judgement of the level of activity of
the Partnership relative to the managing general partner's activities and other
entities it manages. The method of allocation has been consistent over the past
several years with certain modifications incorporated to reflect changes in
Pioneer USA's overall business activities.
Reclassifications - Certain reclassifications may have been made to the
1997 and 1996 financial statements to conform to the 1998 financial statement
presentations.
Environmental - The Partnership is subject to extensive federal, state
and local environmental laws and regulations. These laws, which are constantly
changing, regulate the discharge of materials into the environment and may
require the Partnership to remove or mitigate the environmental effects of the
disposal or release of petroleum or chemical substances at various sites.
Environmental expenditures are expensed or capitalized depending on their future
economic benefit. Expenditures that relate to an existing condition caused by
past operations and that have no future economic benefits are expensed.
Liabilities for expenditures of a noncapital nature are recorded when
environmental assessment and/or remediation is probable, and the costs can be
reasonably estimated. Such liabilities are generally undiscounted unless the
timing of cash payments for the liability or component are fixed or reliably
determinable. No such liabilities have been accrued as of December 31, 1998.
Revenue recognition - The Partnership uses the entitlements method of
accounting for crude oil and natural gas revenues.
Reporting comprehensive income - Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130") establishes
standards for the reporting and display of comprehensive income (loss) and its
components in a full set of general purpose financial statements. Comprehensive
income (loss) includes net income (loss) and other comprehensive income (loss).
19
The Partnership has no items of other comprehensive income (loss), as defined by
SFAS No. 130. Consequently, the provisions of SFAS No. 130 do not apply to the
Partnership.
Note 3. Impairment of long-lived assets
In accordance with 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. Based upon a decline in the Partnership's outlook for future
commodity prices, the Partnership has estimated the expected future cash flows
of its oil and gas properties as of December 31, 1998, 1997 and 1996, 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 non-cash impairment provisions
of $185,784 and $79,288 related to its proved oil and gas properties during 1998
and 1997, respectively.
Note 4. Income taxes
The financial statement basis of the Partnership's net assets and
liabilities was $64,114 greater than the tax basis at December 31, 1998.
The following is a reconciliation of net income (loss) per statements of
operations with the net income (loss) per Federal income tax returns for the
years ended December 31:
1998 1997 1996
--------- --------- ---------
Net income (loss) per statements of
operations $(258,625) $ 105,740 $ 359,349
Depletion and depreciation provisions for
tax reporting purposes (greater than)
less than amounts for financial
reporting purposes 50,997 (98,399) (121,400)
Impairment of oil and gas properties
for financial reporting purposes 185,784 79,288 -
Other 1,870 (2,081) 6,706
-------- -------- --------
Net income (loss) per Federal
income tax returns $ (19,974) $ 84,548 $ 244,655
======== ======== ========
Note 5. Oil and gas producing activities
The following is a summary of the costs incurred, whether capitalized or
expensed, related to the Partnership's oil and gas producing activities for the
years ended December 31:
1998 1997 1996
--------- --------- ---------
Development costs $ 13,347 $ 6,123 $ 3,704
======== ======== ========
20
Capitalized oil and gas properties consist of the following:
1998 1997
----------- -----------
Proved properties:
Property acquisition costs $ 226,701 $ 226,701
Completed wells and equipment 5,538,516 5,525,169
---------- ----------
5,765,217 5,751,870
Accumulated depletion (4,861,804) (4,497,380)
---------- ----------
Net capitalized costs $ 903,413 $ 1,254,490
========== ==========
Note 6. Related party transactions
Pursuant to the limited partnership agreement, the Partnership had the
following related party transactions with the managing general partner or its
affiliates during the years ended December 31:
1998 1997 1996
-------- ------- --------
Payment of lease operating and supervision
charges in accordance with standard
industry operating agreements $124,074 $128,942 $120,014
Reimbursement of general and
administrative expenses $ 12,838 $ 17,703 $ 24,441
The Partnership participates in oil and gas activities through an income
tax partnership (the "Program") pursuant to the Program agreement. Pioneer USA,
P&P Employees 90-C Conv., L.P. ("EMPL") (the "Entities"), Parker & Parsley 90-C,
L.P. and the Partnership (the "Partnerships") are parties to the Program
agreement. EMPL is a limited partnership organized for the benefit of certain
employees of Pioneer USA.
The costs and revenues of the Program are allocated to the Entities and
the Partnerships as follows:
Entities (1) Partnerships (2)
------------ ----------------
Revenues:
Proceeds from disposition of depreciable
and depletable properties -
First three years 14.141414% 85.858586%
After first three years 19.191919% 80.808081%
All other revenues -
First three years 14.141414% 85.858586%
After first three years 19.191919% 80.808081%
Costs and expenses:
Lease acquisition costs, drilling and
completion costs and all other costs 9.090909% 90.909091%
Operating costs, reporting and legal expenses
and general and administrative expenses-
First three years 14.141414% 85.858586%
After first three years 19.191919% 80.808081%
21
(1) Excludes Pioneer USA's 1% general partner ownership which is allocated
at the Partnership level and 30 limited partner interests owned by
Pioneer USA.
(2) The allocation between the Partnership and Parker & Parsley 90-C, L.P.
is 38.349119% and 61.650881%, respectively.
Note 7. Oil and gas information (unaudited)
The following table represents information relating to the Partnership's
estimated proved oil and gas reserves at December 31, 1998, 1997 and 1996 and
changes in such quantities during the years then ended. Due to a change in the
accounting policy of the managing general partner in 1997, the Partnership began
accounting for processed natural gas production in two components: processed
natural gas liquids ("NGLs") and dry residue gas. NGLs are reflected in "Oil and
NGLs" in the table below. All of the Partnership's reserves are proved developed
and located within the United States. The Partnership's reserves are based on an
evaluation prepared by the engineering staff of Pioneer USA and reviewed by
Williamson Petroleum Consultants, Inc., an independent petroleum consultant,
using criteria established by the Securities and Exchange Commission. Reserve
value information is available to limited partners pursuant to the Partnership
agreement and, therefore, is not presented.
Oil and NGLs Gas
(bbls) (mcf)
----------- ----------
Net proved reserves at January 1, 1996 386,827 964,462
Revisions 95,644 258,581
Sale of reserves (126) (18,702)
Production (30,485) (64,557)
----------- ----------
Net proved reserves at December 31, 1996 451,860 1,139,784
Revisions 2,219 (662,760)
Production (29,478) (50,304)
----------- ----------
Net proved reserves at December 31, 1997 424,601 426,720
Revisions (204,124) (171,338)
Production (33,187) (30,348)
----------- ----------
Net proved reserves at December 31, 1998 187,290 225,034
=========== ==========
As of December 31, 1998, the estimated present value of future net
revenues of proved reserves, calculated using December 31, 1998 prices of $10.61
per barrel of oil, $5.48 per barrel of NGLs and $1.41 per mcf of gas, discounted
at 10% was approximately $301,000 and undiscounted was $417,000.
Numerous uncertainties exist in estimating quantities of proved reserves
and future net revenues therefrom. The estimates of proved reserves and related
future net revenues set forth in this report are based on various assumptions,
which may ultimately prove to be inaccurate. Therefore, such estimates should
not be construed as estimates of the current market value of the Partnership's
proved reserves. The Partnership emphasizes that reserve estimates are
inherently imprecise and, accordingly, the estimates are expected to change as
future information becomes available.
22
Note 8. Major customers
The following table reflects the major customers of the Partnership's oil
and gas sales (a major customer is defined as a customer whose sales exceed 10%
of total sales) during the years ended December 31:
1998 1997 1996
-------- -------- --------
Genesis Crude Oil, L.P. 69% 69% 73%
Western Gas Resources, Inc. 13% 12% 8%
At December 31, 1998, the amounts receivable from Genesis Crude Oil, L.P.
and Western Gas Resources, Inc. were $18,361 and $8,629, respectively, which are
included in the caption "Accounts receivable - oil and gas sales" in the
accompanying Balance Sheet.
The Partnership's share of oil and gas production is sold to various
purchasers. Pioneer USA is of the opinion that the loss of any one purchaser
would not have an adverse effect on the ability of the Partnership to sell its
oil and gas production.
Note 9. Organization and operations
The Partnership was organized December 28, 1990 as a general partnership
under the Texas Uniform General Partnership Act for the purpose of acquiring and
developing oil and gas properties. The Partnership converted to a Delaware
limited partnership on August 1, 1991. The managing general partner received an
opinion of legal counsel to the effect that such conversion will not result in
material adverse tax consequences to the Partnership. The following is a brief
summary of the more significant provisions of the limited partnership agreement:
Managing general partner - The managing general partner of the
Partnership is Pioneer USA. Pioneer USA has the power and authority to
manage, control and administer all Program and Partnership affairs. As
managing general partner and operator of the Partnership's properties,
all production expenses are incurred by Pioneer USA and billed to the
Partnership and a portion of revenue is initially received by Pioneer USA
prior to being paid to the Partnership. Under the Partnership agreement,
the managing general partner pays 1% of the Partnership's acquisition,
drilling and completion costs and 1% of its operating and general and
administrative expenses. In return, it is allocated 1% of the
Partnership's revenues.
Limited partner liability - The maximum amount of liability of any
limited partner is the total contributions of such partner plus his share
of any undistributed profits.
Initial capital contributions - The partners entered into subscription
agreements for aggregate capital contributions of $7,531,000. Pioneer USA
is required to contribute amounts equal to 1% of initial Partnership
capital less commission and organization and offering costs allocated to
the limited partners and to contribute amounts necessary to pay costs and
expenses allocated to it under the Partnership agreement to the extent
its share of revenues does not cover such costs.
23
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
24
PART III
ITEM 10. Directors and Executive Officers of the Partnership
The Partnership does not have any officers or directors. Under the limited
partnership agreement, the Partnership's managing general partner, Pioneer USA,
is granted the exclusive right and full authority to manage, control and
administer the Partnership's business.
Set forth below are the names, ages and positions of the directors and executive
officers of Pioneer USA. Directors of Pioneer USA are elected to serve until the
next annual meeting of stockholders or until their successors are elected and
qualified.
Age at
December 31,
Name 1998 Position
---- ------------ --------
Scott D. Sheffield 46 President and Director
Timothy L. Dove 42 Executive Vice President and Director
Dennis E. Fagerstone 49 Executive Vice President and Director
Mark L. Withrow 51 Executive Vice President, General
Counsel and Director
M. Garrett Smith 37 Executive Vice President, Chief
Financial Officer and Director
Mel Fischer (a) 64 Executive Vice President
Lon C. Kile 43 Executive Vice President
Rich Dealy 32 Vice President and Chief Accounting
Officer
(a) Mr. Fischer was a director and officer until his retirement from Pioneer and
Pioneer USA on February 19, 1999.
Scott D. Sheffield. Mr. Sheffield is a distinguished graduate of The
University of Texas with a B.S. in Petroleum Engineering. Since August 1997, he
has served as President, Chief Executive Officer and a director of Pioneer and
President and a director of Pioneer USA. Mr. Sheffield was the President and a
director of Parker & Parsley from May 1990 until August 1997 and was the
Chairman of the Board and Chief Executive Officer of Parker & Parsley from
October 1990 until August 1997. He was the sole director of Parker & Parsley
from May 1990 until October 1990. Mr. Sheffield joined Parker & Parsley
Development Company ("PPDC"), a predecessor of Parker & Parsley, as a petroleum
engineer in 1979. He served as Vice President - Engineering of PPDC from
September 1981 until April 1985 when he was elected President and a director. In
March 1989, Mr. Sheffield was elected Chairman of the Board and Chief Executive
Officer of PPDC. Before joining PPDC, Mr. Sheffield was employed as a production
and reservoir engineer for Amoco Production Company.
25
Timothy L. Dove. Mr. Dove became Executive Vice President - Business
Development of Pioneer and Pioneer USA in August 1997. He was also appointed a
director of Pioneer USA in August 1997. Mr. Dove joined Parker & Parsley in May
1994 as Vice President - International and was promoted to Senior Vice President
- - Business Development in October 1996, in which position he served until August
1997. Prior to joining Parker & Parsley, Mr. Dove was employed with Diamond
Shamrock Corp., and its successor, Maxus Energy Corp, in various capacities in
international exploration and production, marketing, refining and marketing and
planning and development. Mr. Dove earned a B.S. in Mechanical Engineering from
Massachusetts Institute of Technology in 1979 and received his M.B.A. in 1981
from the University of Chicago.
Dennis E. Fagerstone. Mr. Fagerstone, a graduate of the Colorado School
of Mines with a B.S. in Petroleum Engineering, became an Executive Vice
President of Pioneer and Pioneer USA in August 1997. He was also appointed a
director of Pioneer USA in August 1997. He served as Executive Vice President
and Chief Operating Officer of Mesa from March 1, 1997 until August 1997. From
October 1996 to February 1997, Mr. Fagerstone served as Senior Vice President
and Chief Operating Officer of Mesa and from May 1991 to October 1996, he served
as Vice President - Exploration and Production of Mesa. From June 1988 to May
1991, Mr. Fagerstone served as Vice President - Operations of Mesa.
Mark L. Withrow. Mr. Withrow, a graduate of Abilene Christian
University with a B. S. in Accounting and Texas Tech University with a Juris
Doctorate degree, became Executive Vice President, General Counsel and Secretary
of Pioneer and Pioneer USA in August 1997. He was also appointed a director of
Pioneer USA in August 1997. Mr. Withrow was Vice President - General Counsel of
Parker & Parsley from January 1991, when he joined Parker & Parsley, to January
1995, when he was appointed Senior Vice President - General Counsel. He was
Parker & Parsley's Secretary from August 1992 until August 1997. Prior to
joining Parker & Parsley, Mr. Withrow was the managing partner of the law firm
of Turpin, Smith, Dyer, Saxe & MacDonald, Midland, Texas.
M. Garrett Smith. Mr. Smith, a graduate of The University of Texas with
a B.S. in Electrical Engineering and Southern Methodist University with an
M.B.A., was appointed Executive Vice President and Chief Financial Officer of
Pioneer in December 1997. He served as Senior Vice President - Finance of
Pioneer from August 1997 until December 1997. Mr. Smith was elected Senior Vice
President - Finance and a director of Pioneer USA in August 1997. He served as
Vice President - Corporate Acquisitions of Mesa from January 1997 until August
1997. From October 1996 to December 1996, Mr. Smith served as Vice President -
Finance of Mesa and from 1994 to 1996 he served as Director of Financial
Planning of Mesa. Mr. Smith was employed by BTC Partners, Inc. (a former
financial advisor to Mesa) from 1989 to 1994.
Mel Fischer. Mr. Fischer, a graduate of the University of California at
Berkeley with a Masters degree in Geology, became Executive Vice President -
Worldwide Exploration of Pioneer and Pioneer USA in August 1997. He served as a
director of Parker & Parsley from November 1995 until August 1997 and was
Executive Vice President - Worldwide Exploration for Parker & Parsley from
February 1997 to August 1997. Mr. Fischer retired from Pioneer and Pioneer USA
effective February 15, 1999. He worked in the petroleum industry for 32 years,
starting as a Petroleum Geologist with Texaco in 1962, and retiring as
26
President, Occidental International Exploration and Production Company in March
1994. For the 10 years prior to becoming President of Occidental International,
he served as Executive Vice President, World Wide Exploration with Occidental
Oil and Gas Corporation. He is a registered geologist in the State of
California, a member of the American Association of Petroleum Geologists and an
emeritus member of the Board of Advisors for the Earth Sciences Research
Institute at the University of Utah.
Lon C. Kile. Mr. Kile, a graduate of Oklahoma State University with a
B.B.A. in Accounting, became Executive Vice President of Pioneer and Pioneer USA
in August 1997. Mr. Kile was Senior Vice President - Investor Relations from
October 1996 to August 1997. Previously, he served as Vice President and Manager
of the Mid-Continent Division, Vice President - Equity Finance & Analysis and
Vice President - Marketing & Program Administration. Prior to joining Parker &
Parsley in 1985, he was employed as Supervisor - Senior, Audit, in charge of
Parker & Parsley's audit, with Arthur Young.
Rich Dealy. Mr. Dealy is a graduate of Eastern New Mexico University
with a B.B.A. in Accounting and Finance and is a Certified Public Accountant. He
became Vice President and Chief Accounting Officer of Pioneer and Pioneer USA in
February 1998. Mr. Dealy served as Controller of Pioneer USA from August 1997 to
February 1998. He served as Controller of Parker & Parsley from August 1995 to
August 1997. Mr. Dealy joined Parker & Parsley as an Accounting Manager in July,
1992. He was previously employed with KPMG Peat Marwick as an Audit Senior, in
charge of Parker & Parsley's audit.
ITEM 11. Executive Compensation
The Partnership does not have any directors or officers. Management of the
Partnership is vested in Pioneer USA, the managing general partner. The
Partnership participates in oil and gas activities through an income tax
partnership (the "Program") pursuant to the Program agreement. Under the Program
agreement, Pioneer USA and P&P Employees 90-C Conv., L.P. ("EMPL") pay
approximately 10% of the Partnership's acquisition, drilling and completion
costs and approximately 15% during the first three years and approximately 20%
after three years of its operating and general and administrative expenses. In
return, they are allocated approximately 15% during the first three years and
approximately 20% after three years of the Partnership's revenues. See Notes 6
and 9 of Notes to Financial Statements included in "Item 8. Financial Statements
and Supplementary Data" for information regarding fees and reimbursements paid
to the managing general partner or its affiliates by the Partnership.
Pioneer USA's current executive officers and other employees are general
partners of EMPL which serves as a co-general partner of the Program. Under this
arrangement, EMPL pays approximately 2.5% of the Partnership's acquisition,
drilling and completion costs and approximately 3.75% during the first three
years and approximately 5% after three years of its operating and general and
administrative expenses. In return, EMPL is allocated approximately 3.75% during
the first three years and approximately 5% after three years of the
Partnership's revenues. EMPL does not receive any fees or reimbursements from
the Partnership.
27
The Partnership does not directly pay any salaries of the executive officers of
Pioneer USA, but does pay a portion of Pioneer USA's general and administrative
expenses of which these salaries are a part. See Note 6 of Notes to Financial
Statements included in "Item 8. Financial Statements and Supplementary Data".
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
(a) Beneficial owners of more than five percent
The Partnership is not aware of any person who beneficially owns 5% or more of
the outstanding limited partnership interests of the Partnership. Pioneer USA
owned 30 limited partner interests at January 1, 1999.
(b) Security ownership of management
The Partnership does not have any officers or directors. The managing general
partner of the Partnership, Pioneer USA, has the exclusive right and full
authority to manage, control and administer the Partnership's business. Under
the limited partnership agreement, limited partners holding a majority of the
outstanding limited partnership interests have the right to take certain
actions, including the removal of the managing general partner or any other
general partner. The Partnership is not aware of any current arrangement or
activity which may lead to such removal. The Partnership is not aware of any
officer or director of Pioneer USA who beneficially owns limited partnership
interests in the Partnership.
ITEM 13. Certain Relationships and Related Transactions
Transactions with the managing general partner or its affiliates
Pursuant to the limited partnership agreement, the Partnership had the following
related party transactions with the managing general partner or its affiliates
during the years ended December 31:
1998 1997 1996
-------- -------- --------
Payment of lease operating and
supervision charges in accordance
with standard industry operating
agreements $124,074 $128,942 $120,014
Reimbursement of general and
administrative expenses $ 12,838 $ 17,703 $ 24,441
Under the limited partnership agreement, the managing general partner pays 1% of
the Partnership's acquisition, drilling and completion costs and 1% of its
operating and general and administrative expenses. In return, it is allocated 1%
of the Partnership's revenues. Also, see Notes 6 and 9 of Notes to Financial
Statements included in "Item 8. Financial Statements and Supplementary Data",
regarding the Partnership's participation with the managing general partner in
oil and gas activities of the Program.
28
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Financial statements
The following are filed as part of this annual report:
Independent Auditors' Report - Ernst & Young LLP
Independent Auditors' Report - KPMG LLP
Balance sheets as of December 31, 1998 and 1997
Statements of operations for the years ended December 31, 1998,
1997 and 1996
Statements of partners' capital for the years ended December 31,
1998, 1997 and 1996
Statements of cash flows for the years ended December 31, 1998,
1997 and 1996
Notes to financial statements
2. Financial statement schedules
All financial statement schedules have been omitted since the
required information is in the financial statements or notes
thereto, or is not applicable nor required.
(b) Reports on Form 8-K
None.
(c) Exhibits
The exhibits listed on the accompanying index to exhibits are filed or
incorporated by reference as part of this annual report.
29
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 90-C CONV., L.P.
Dated: March 26, 1999 By: Pioneer Natural Resources USA, Inc.
Managing General Partner
By: /s/ Scott D. Sheffield
--------------------------------
Scott D. Sheffield, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
/s/ Scott D. Sheffield President and Director of March 26, 1999
- ------------------------ Pioneer USA
Scott D. Sheffield
/s/ Timothy L. Dove Executive Vice President and March 26, 1999
- ------------------------ Director of Pioneer USA
Timothy L. Dove
/s/ Dennis E. Fagerstone Executive Vice President and March 26, 1999
- ------------------------ Director of Pioneer USA
Dennis E. Fagerstone
/s/ Mark L. Withrow Executive Vice President, General March 26, 1999
- ------------------------ Counsel and Director of Pioneer USA
Mark L. Withrow
/s/ M. Garrett Smith Executive Vice President, Chief March 26, 1999
- ------------------------ Financial Officer and Director
M. Garrett Smith of Pioneer USA
/s/ Lon C. Kile Executive Vice President of March 26, 1999
- ------------------------ Pioneer USA
Lon C. Kile
/s/ Rich Dealy Vice President and Chief Accounting March 26, 1999
- ------------------------ Officer of Pioneer USA
Rich Dealy
30
PARKER & PARSLEY 90-C CONV., L.P.
INDEX TO EXHIBITS
The following documents are incorporated by reference in response to Item
14(c):
Exhibit No. Description Page
- ----------- ----------- ----
3(a) Form of Agreement of Limited Partnership -
of Parker & Parsley 90-C Conv., L.P.
incorporated by reference to Exhibit A of
the Post-Effective Amendment No. 1 of
the Partnership's Registration Statement
on Form S-1 (Registration No. 33-26097)
4(b) Form of Limited Partner Subscription Agree- -
ment incorporated by reference to Exhibit C
of the Post-Effective Amendment No. 1 of
the Partnership's Registration Statement on
Form S-1 (Registration No. 33-26097)
4(b) Form of General Partner Subscription Agreement -
incorporated by reference to Exhibit D of the
Post-Effective Amendment No. 1 of the Part-
nership's Registration Statement on Form S-1
(Registration No. 33-26097)
4(b) Power of Attorney incorporated by reference to -
Exhibit B of Amendment No. 1 of the Partner-
ship's Registration Statement on Form S-1
(Registration No. 33-26097)
4(c) Specimen Certificate of Limited Partnership -
Interest incorporated by reference to Exhibit 4c
of the Partnership's Registration Statement on
Form S-1 (Registration No. 33-26097)
10(b) Form of Development Drilling Program -
Agreement incorporated by reference to Exhibit
B of the Post-Effective Amendment No. 1 of
the Partnership's Registration Statement on
Form S-1 (Registration No. 33-26097)
27.1* Financial Data Schedule
*Filed herewith
31