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 June 30, 1999
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)
303 West Wall, Suite 101, Midland, Texas 79701
(Address of principal executive offices) (Zip code)
Registrant's Telephone Number, including area code : (915) 683-4768
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes / x / No / /
PARKER & PARSLEY 90-B CONV., L.P.
TABLE OF CONTENTS
Page
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets as of June 30, 1999 and
December 31, 1998....................................... 3
Statements of Operations for the three and six
months ended June 30, 1999 and 1998...................... 4
Statement of Partners' Capital for the six months
ended June 30, 1999...................................... 5
Statements of Cash Flows for the six months ended
June 30, 1999 and 1998................................... 6
Notes to Financial Statements.............................. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K........................... 12
27.1 Financial Data Schedule
Signatures................................................. 13
2
PARKER & PARSLEY 90-B CONV., L.P.
(A Delaware Limited Partnership)
Part I. Financial Information
Item 1. Financial Statements
BALANCE SHEETS
June 30, December 31,
1999 1998
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash $ 96,775 $ 76,330
Accounts receivable - oil and gas sales 125,793 83,807
---------- ----------
Total current assets 222,568 160,137
---------- ----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 9,606,297 9,600,469
Accumulated depletion (7,794,127) (7,703,198)
---------- ----------
Net oil and gas properties 1,812,170 1,897,271
---------- ----------
$ 2,034,738 $ 2,057,408
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 35,235 $ 22,740
Partners' capital:
Managing general partner 19,995 20,346
Limited partners (11,897 interests) 1,979,508 2,014,322
---------- ----------
1,999,503 2,034,668
---------- ----------
$ 2,034,738 $ 2,057,408
========== ==========
The financial information included as of June 30, 1999 has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
3
PARKER & PARSLEY 90-B CONV., L.P.
(A Delaware Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Six months ended
June 30, June 30,
--------------------- ---------------------
1999 1998 1999 1998
--------- --------- --------- ---------
Revenues:
Oil and gas $ 196,244 $ 203,398 $ 349,651 $ 410,441
Interest 960 1,558 1,899 3,475
Gain on disposition of assets - - - 123
-------- -------- -------- --------
197,204 204,956 351,550 414,039
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 115,052 134,541 236,655 274,144
General and administrative 6,427 6,706 12,245 13,701
Depletion 29,386 61,424 90,929 114,204
-------- -------- -------- --------
150,865 202,671 339,829 402,049
-------- -------- -------- --------
Net income $ 46,339 $ 2,285 $ 11,721 $ 11,990
======== ======== ======== ========
Allocation of net income:
Managing general partner $ 463 $ 23 $ 117 $ 120
======== ======== ======== ========
Limited partners $ 45,876 $ 2,262 $ 11,604 $ 11,870
======== ======== ======== ========
Net income per limited
partnership interest $ 3.86 $ .19 $ .98 $ 1.00
======== ======== ======== ========
Distributions per limited
partnership interest $ 1.80 $ 4.76 $ 3.90 $ 14.69
======== ======== ======== ========
The financial information included herein has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
4
PARKER & PARSLEY 90-B CONV., L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
---------- ---------- ----------
Balance at January 1, 1999 $ 20,346 $2,014,322 $2,034,668
Distributions (468) (46,418) (46,886)
Net income 117 11,604 11,721
--------- --------- ---------
Balance at June 30, 1999 $ 19,995 $1,979,508 $1,999,503
========= ========= =========
The financial information included herein has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
5
PARKER & PARSLEY 90-B CONV., L.P.
(A Delaware Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
June 30,
------------------------
1999 1998
---------- ----------
Cash flows from operating activities:
Net income $ 11,721 $ 11,990
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 90,929 114,204
Gain on disposition of assets - (123)
Changes in assets and liabilities:
Accounts receivable (41,986) 31,700
Accounts payable 12,495 6,802
--------- ---------
Net cash provided by operating activities 73,159 164,573
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (5,828) (7,888)
Proceeds from asset dispositions - 123
--------- ---------
Net cash used in investing activities (5,828) (7,765)
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (46,886) (176,476)
--------- ---------
Net increase (decrease) in cash equivalents 20,445 (19,668)
Cash at beginning of period 76,330 118,712
--------- ---------
Cash at end of period $ 96,775 $ 99,044
========= =========
The financial information included herein has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
6
PARKER & PARSLEY 90-B CONV., L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(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 primarily in oil and gas development and production in
Texas and is not involved in any industry segment other than oil and gas.
Note 2. Basis of presentation
In the opinion of management, the unaudited financial statements of the
Partnership as of June 30, 1999 and for the three and six months ended June 30,
1999 and 1998 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 information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in this Form 10-Q pursuant to the rules and
regulations of the Securities and Exchange Commission. The financial statements
should be read in conjunction with the financial statements and the notes
thereto contained in the Partnership's Report on Form 10-K for the year ended
December 31, 1998, as filed with the Securities and Exchange Commission, a copy
of which is available upon request by writing to Rich Dealy, Vice President and
Chief Accounting Officer, 5205 North O'Connor Boulevard, 1400 Williams Square
West, Irving, Texas 75039-3746.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (1)
Results of Operations
Six months ended June 30, 1999 compared with six months ended
June 30, 1998
Revenues:
The Partnership's oil and gas revenues decreased 15% to $349,651 from $410,441
for the six months ended June 30, 1999 and 1998, respectively. The decrease in
revenues resulted from lower average prices received and a decrease in
production. For the six months ended June 30, 1999, 18,107 barrels of oil, 8,670
barrels of natural gas liquids ("NGLs") and 36,322 mcf of gas were sold, or
7
32,831 barrel of oil equivalents ("BOEs"). For the six months ended June 30,
1998, 21,153 barrels of oil, 8,110 barrel of NGLs and 36,722 mcf of gas were
sold, or 35,383 BOEs.
The average price received per barrel of oil decreased 6%, from $13.99 for the
six months ended June 30, 1998 to $13.22 for the same period in 1999. The
average price received per barrel of NGLs decreased 6%, from $7.27 during the
six months ended June 30, 1998 to $6.81 for the same period in 1999. The average
price received per mcf of gas decreased 7% from $1.51 for the six months ended
June 30, 1998 to $1.41 for the same period in 1999. The market price for oil and
gas has been extremely volatile in the past decade, and management expects a
certain amount of volatility to continue in the foreseeable future. The
Partnership may therefore sell its future oil and gas production at average
prices lower or higher than that received during the six months ended June 30,
1999.
The volatility of commodity prices has had, and continues to have, a significant
impact on the Partnership's revenues and operating cash flow and could result in
additional decreases to the carrying value of the Partnership's oil and gas
properties.
A gain on disposition of assets of $123 was received during the six months ended
June 30, 1998 from the sale of equipment on one saltwater disposal well plugged
and abandoned in a prior year.
Costs and Expenses:
Total costs and expenses decreased to $339,829 for the six months ended June 30,
1998 as compared to $402,049 for the same period in 1998, a decrease of $62,220,
or 15%. This decrease was due to declines in production costs, depletion and
general and administrative expenses ("G&A").
Production costs were $236,655 for the six months ended June 30, 1999 and
$274,144 for the same period in 1998, resulting in a $37,489 decrease, or 14%.
This decrease was due to declines in well maintenance costs, production taxes
and workover expenses.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A
decreased, in aggregate, 11% from $13,701 for the six months ended June 30, 1998
to $12,245 for the same period in 1999.
Depletion was $90,929 for the six months ended June 30, 1999 compared to
$114,204 for the same period in 1998, a decrease in depletion of $23,275, or
20%. This decrease was primarily due to a reduction in oil production of 3,046
barrels for the six months ended June 30, 1999 compared to the same period in
1998, an increase in proved reserves during the period ended June 30, 1999 due
to higher commodity prices and a reduction in the Partnership's net depletable
basis from charges taken in accordance with Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" ("SFAS 121") during the fourth quarter of
1998.
8
Three months ended June 30, 1999 compared with three months ended
June 30, 1998
Revenues:
The Partnership's oil and gas revenues decreased 4% to $196,244 from $203,398
for the three months ended June 30, 1999 and 1998, respectively. The decrease in
revenues resulted from a decrease in production, offset by higher average prices
received. For the three months ended June 30, 1999, 8,675 barrels of oil, 4,896
barrels of NGLs and 18,753 mcf of gas were sold, or 16,697 BOEs. For the three
months ended June 30, 1998, 10,684 barrels of oil, 4,429 barrels of NGLs and
18,359 mcf of gas were sold, or 18,173 BOEs.
The average price received per barrel of oil increased $1.56, or 12%, from
$13.25 for the three months ended June 30, 1998 to $14.81 for the same period in
1999. The average price received per barrel of NGLs increased 4% from $7.62
during the three months ended June 30, 1998 to $7.90 for the same period in
1999. The average price received per mcf of gas increased slightly from $1.53
during the three months ended June 30, 1998 to $1.55 for the same period in
1999.
Costs and Expenses:
Total costs and expenses decreased to $150,865 for the three months ended June
30, 1999 as compared to $202,671 for the same period in 1998, a decrease of
$51,806, or 26%. This decrease was due to declines in depletion, production
costs and G&A.
Production costs were $115,052 for the three months ended June 30, 1999 and
$134,541 for the same period in 1998, resulting in a $19,489 decrease, or 14%.
The decrease was due to lower well maintenance costs, production taxes and ad
valorem taxes.
During this period, G&A decreased, in aggregate, 4% from $6,706 for the three
months ended June 30, 1998 to $6,427 for the same period in 1999.
Depletion was $29,386 for the three months ended June 30, 1999 compared to
$61,424 for the same period in 1997, a decrease of $32,038, or 52%. This
decrease was primarily attributable to an increase in proved reserves during the
period ended June 30, 1999 as a result of higher commodity prices, a decrease in
oil production of 2,009 barrels for the three months ended June 30, 1999
compared to the same period in 1998 and a reduction in the Partnership's net
depletable basis from charges taken in accordance with SFAS 121 during the
fourth quarter of 1998.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased $91,414 during the six
months ended June 30, 1999 from the same period ended June 30, 1998. This
decrease was primarily due to a decline in oil and gas sales receipts, offset by
a decrease in production costs paid.
9
Net Cash Used in Investing Activities
The Partnership's principal investing activities for the six months ended June
30, 1999 and 1998 included expenditures related to equipment replacement on
various oil and gas properties.
Proceeds from asset dispositions of $123 were received during the six months
ended June 30, 1998 from the sale of equipment on one saltwater disposal well
abandoned in a prior year.
Net Cash Used in Financing Activities
Cash was sufficient for the six months ended June 30, 1999 to cover
distributions to the partners of $46,886 of which $468 was distributed to the
managing general partner and $46,418 to the limited partners. For the same
period ended June 30, 1998, cash was sufficient for distributions to the
partners of $176,476 of which $1,765 was distributed to the managing general
partner and $174,711 to the limited partners.
From the third quarter of 1997 through the first quarter of 1999, there was a
declining trend in oil and gas levels. During the first quarter of 1999, the
Organization of Petroleum Exporting Countries and certain other crude oil
exporting nations announced reductions in their planned export volumes. These
announcements, together with early indications that the nations have initiated
their planned reductions, have had some stabilizing effect on commodity prices
during the latter part of the first quarter of 1999 and into August 1999.
However, no assurances can be given that the stabilizing effect of these
actions, or the planned reductions in export volumes, will be sustained for an
extended period of time.
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.
As of June 30, 1999, the managing general partner estimates that the assessment
phase is approximately 99% complete and has included, but is not limited to, the
following procedures:
10
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.
Through June 30, 1999, the managing general partner had distributed Year 2000
problem inquiries to over 500 entities and has received responses to
approximately 52% of the inquiries.
The remedial phase of the managing general partner's Year 2000 project is in
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 June 30, 1999, the managing general partner
estimates that the remedial phase is approximately 83% complete, on a worldwide
basis, subject to continuing evaluations of the responses to third party
inquiries and to the testing phase results. 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 has completed the testing of the system for
Year 2000 compliance. The remediation of non-information technology is expected
to be completed by October 1999. The managing general partner's Year 2000
remedial actions have not 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
information technology systems by October 1999. The testing of the
non-information technology remediation is scheduled to be completed by the end
of November 1999.
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.
As of June 30, 1999, the managing general partner's total costs incurred on the
Year 2000 problem were $2.3 million, of which approximately $200 thousand were
incurred to replace non-compliant systems.
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.
11
In the business continuity and contingency planning phase of the managing
general partner's Year 2000 project, contingency plans were 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.
- ---------------
(1) "Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations" contains forward looking statements that involve
risks and uncertainties. Accordingly, no assurances can be given that the
actual events and results will not be materially different than the
anticipated results described in the forward looking statements.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) 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: August 9, 1999 By: /s/ Rich Dealy
---------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
13