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. 33-26097-08
PARKER & PARSLEY 90-B CONV., L.P.
-----------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 75-2329284
---------------------------------------- ---------------------
(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 90-B CONV., 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 90-B CONV., 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 $ 292,511 $ 132,300
Accounts receivable - oil and gas sales 144,371 209,552
---------- ----------
Total current assets 436,882 341,852
---------- ----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 9,567,572 9,628,120
Accumulated depletion (8,108,789) (8,075,752)
---------- ----------
Net oil and gas properties 1,458,783 1,552,368
---------- ----------
$ 1,895,665 $ 1,894,220
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 50,571 $ 15,580
Partners' capital:
Managing general partner 18,450 18,785
Limited partners (11,897 interests) 1,826,644 1,859,855
---------- ----------
1,845,094 1,878,640
---------- ----------
$ 1,895,665 $ 1,894,220
========== ==========
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 90-B CONV., 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 $ 300,263 $ 405,161 $1,063,346 $1,092,350
Interest 1,957 3,426 7,043 8,203
Gain on disposition of assets 4,410 - 7,464 2,023
--------- --------- --------- ---------
306,630 408,587 1,077,853 1,102,576
--------- --------- --------- ---------
Costs and expenses:
Oil and gas production 168,131 135,775 450,324 413,083
General and administrative 8,287 13,970 31,171 35,694
Impairment of oil and gas properties 11,272 - 11,272 -
Depletion 31,450 24,992 85,849 77,504
Abandoned property 79 - 3,138 -
--------- --------- --------- ---------
219,219 174,737 581,754 526,281
--------- --------- --------- ---------
Net income $ 87,411 $ 233,850 $ 496,099 $ 576,295
========= ========= ========= =========
Allocation of net income:
Managing general partner $ 874 $ 2,339 $ 4,961 $ 5,763
========= ========= ========= =========
Limited partners $ 86,537 $ 231,511 $ 491,138 $ 570,532
========= ========= ========= =========
Net income per limited
partnership interest $ 7.27 $ 19.46 $ 41.28 $ 47.96
========= ========= ========= =========
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 90-B CONV., L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
---------- ---------- ----------
Balance at January 1, 2001 $ 18,785 $1,859,855 $1,878,640
Distributions (5,296) (524,349) (529,645)
Net income 4,961 491,138 496,099
--------- --------- ---------
Balance at September 30, 2001 $ 18,450 $1,826,644 $1,845,094
========= ========= =========
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 90-B CONV., 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 $ 496,099 $ 576,295
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 11,272 -
Depletion 85,849 77,504
Gain on disposition of assets (7,464) (2,023)
Changes in assets and liabilities:
Accounts receivable 65,181 (47,783)
Accounts payable 34,991 19,871
--------- ---------
Net cash provided by operating activities 685,928 623,864
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (3,650) (14,214)
Proceeds from asset dispositions 7,578 2,023
--------- ---------
Net cash provided by (used in) investing
activities 3,928 (12,191)
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (529,645) (597,062)
--------- ---------
Net increase in cash 160,211 14,611
Cash at beginning of period 132,300 132,031
--------- ---------
Cash at end of period $ 292,511 $ 146,642
========= =========
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 90-B CONV., L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
Note 1. Organization and nature of operations
Parker & Parsley 90-B Conv., L.P. (the "Partnership") was organized as a general
partnership in 1990 under the laws of the State of Texas and was converted to a
Delaware limited partnership on August 1, 1991.
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 results 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
7
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 $11,272 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
definitive materials (the "proxy statement/prospectus") to solicit the approval
of the limited partners of the Partnership. Pioneer has valued the Partnership
interest at $3,275,273 of which $3,220,716 is allocated to the non-affiliated
limited partners. If a majority of the limited partners approve the transaction,
the limited partners will receive their 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 3% to $1,063,346 for the nine
months ended September 30, 2001 as compared to $1,092,350 for the same period in
2000. The decrease in revenues resulted from lower average prices received for
oil and natural gas liquids ("NGLs") and a decline in production, offset by
higher average prices received for gas. For the nine months ended September 30,
2001, 25,759 barrels of oil, 10,283 barrels of NGLs and 51,734 mcf of gas were
sold, or 44,664 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 27,178 barrels of oil, 12,971 barrels of NGLs and 50,036 mcf
of gas were sold, or 48,488 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 $1.07, or 4%, from $28.68
for the nine months ended September 30, 2000 to $27.61 for the same period in
2001. The average price received per barrel of NGLs decreased $.33, or 2%, from
$14.66 during the nine months ended September 30, 2000 to $14.33 for the same
period in 2001. The average price received per mcf of gas increased 62% from
$2.45 for the nine months ended September 30, 2000 to $3.96 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.
Gains on disposition of assets of $7,464 and $2,023 were recognized during the
nine months ended September 30, 2001 and 2000, respectively. The gain recognized
during the period ended September 30, 2001 consisted of $7,033 salvage income
8
from one well plugged and abandoned in the current period and $431 from
equipment credits received on one fully depleted well. The gain recognized
during the period ended September 30, 2000 was due to the sale of equipment on
one fully depleted well. Abandoned property costs of $3,138 were incurred during
the nine months ended September 30, 2001 to plug one well in the current period.
Costs and Expenses:
Total costs and expenses increased to $581,754 for the nine months ended
September 30, 2001 as compared to $526,281 for the same period in 2000, an
increase of $55,473, or 11%. The increase was due to increases in production
costs, the impairment of oil and gas properties, depletion and abandoned
property costs, offset by a decline in general and administrative expenses
("G&A").
Production costs were $450,324 for the nine months ended September 30, 2001 and
$413,083 for the same period in 2000, resulting in a $37,241 increase, or 9%.
The increase was primarily due to higher ad valorem taxes and additional
workover and well maintenance costs 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
13% from $35,694 for the nine months ended September 30, 2000 to $31,171 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 $11,272 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $85,849 for the nine months ended September 30, 2001 as compared
to $77,504 for the same period in 2000, representing an increase of $8,345, or
11%. This increase was primarily due to a reduction in proved reserves during
the period ended September 30, 2001 due to lower commodity prices as compared to
the same period in 2000, offset by a reduction in the Partnership's net
depletable basis from charges taken in accordance with SFAS 121 during the
fourth quarter of 2000 and a decrease in oil production of 1,419 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 $300,263 for the three
months ended September 30, 2001 as compared to $405,161 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, 8,406
barrels of oil, 3,873 barrels of NGLs and 16,365 mcf of gas were sold, or 15,007
BOEs. For the three months ended September 30, 2000, 9,220 barrels of oil, 4,367
barrels of NGLs and 17,020 mcf of gas were sold, or 16,424 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 $4.26, or 14%, from
$30.54 during the three months ended September 30, 2000 to $26.28 for the same
period in 2001. The average price received per barrel of NGLs decreased $4.53,
or 28%, from $15.94 during the three months ended September 30, 2000 to $11.41
for the same period in 2001. The average price received per mcf of gas decreased
32% from $3.17 during the three months ended September 30, 2000 to $2.16 for the
same period in 2001.
A gain on disposition of assets of $4,410 recognized during the three months
ended September 30, 2001 was due to $3,979 salvage income from one well plugged
and abandoned in the current period and $431 from equipment credits received on
one fully depleted well. Abandoned property costs of $79 were incurred during
the three months ended September 30, 2001 to plug this well.
Costs and Expenses:
Total costs and expenses increased to $219,219 for the three months ended
September 30, 2001 as compared to $174,737 for the same period in 2000, an
increase of $44,482, or 25%. This increase was due to increases in production
costs, the impairment of oil and gas properties, depletion and abandoned
property costs, offset by a decline in G&A.
Production costs were $168,131 for the three months ended September 30, 2001 and
$135,775 for the same period in 2000, resulting in a $32,356 increase, or 24%.
The increase was primarily due to higher ad valorem taxes and additional
workover and well maintenance costs incurred to stimulate well production,
offset by a decrease in production taxes.
During this period, G&A decreased 41% from $13,970 for the three months ended
September 30, 2000 to $8,287 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 $11,272 related to
its proved oil and gas properties during the three months ended September 30,
2001.
10
Depletion was $31,450 for the three months ended September 30, 2001 as compared
to $24,992 for the same period in 2000, representing an increase of $6,458, or
26%. This increase was attributable to 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 reduction in the Partnership's
net depletable basis from charges taken in accordance with SFAS 121 during the
fourth quarter of 2000 and a decrease in oil production of 814 barrels for the
three months ended September 30, 2001 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 $62,064 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to reductions of $128,084 in working capital and $4,523 in
G&A expenses, offset by increases of $37,241 in production costs and $3,138 in
abandoned property costs and a decline in oil and gas sales receipts of $30,164.
The decrease in oil and gas receipts resulted from the decline in oil and NGL
prices during 2001 which resulted in a $33,470 decline to oil and gas receipts
and $70,974 resulting from the decline in production during 2001 as compared to
the same period in 2000, offset by an increase in gas prices which contributed
an additional $74,280 to oil and gas receipts. The increase in production costs
was primarily due to higher ad valorem taxes and additional workover and well
maintenance 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 (Used in) Investing Activities
The Partnership's investing activities during the nine months ended September
30, 2001 and 2000 included expenditures related to equipment upgrades on various
oil and gas properties.
Proceeds from asset dispositions of $7,578 and $2,023 were recognized during the
nine months ended September 30, 2001 and 2000, respectively. The proceeds
recognized during the period ended September 30, 2001 were primarily due to
salvage income from one well plugged and abandoned during the current period.
The proceeds recognized during the period ended September 30, 2000 were derived
from the sale of equipment on one fully depleted well.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $529,645, of which $5,296 was distributed to the managing general partner
and $524,349 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $597,062, of which $5,971 was
distributed to the managing general partner and $591,091 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
11
the proposed merger of the Partnership into Pioneer Natural Resources USA, Inc.
("Pioneer USA"). For further information, see "Proposal to acquire partnerships"
below.
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 90-B CONV., 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 90-B CONV., L.P.
By: Pioneer Natural Resources USA, Inc.,
Managing General Partner
Dated: November 7, 2001 By: /s/ Rich Dealy
----------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
13