10-Q 1 j86a.txt P&P 86-A 6/30/2001 10-Q 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, 2001 Commission File No. 33-3353A PARKER & PARSLEY 86-A, LTD. (Exact name of Registrant as specified in its charter) Texas 75-2124884 -------------------------------------------- --------------------- (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 86-A, LTD. TABLE OF CONTENTS Page Part I. Financial Information Item 1. Financial Statements Balance Sheets as of June 30, 2001 and December 31, 2000........................................ 3 Statements of Operations for the three and six months ended June 30, 2001 and 2000....................... 4 Statement of Partners' Capital for the six months ended June 30, 2001....................................... 5 Statements of Cash Flows for the six months ended June 30, 2001 and 2000.............................. 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............................ 11 Signatures.................................................. 12 2 PARKER & PARSLEY 86-A, LTD. (A Texas Limited Partnership) Part I. Financial Information Item 1. Financial Statements BALANCE SHEETS June 30, December 31, 2001 2000 ----------- ----------- (Unaudited) ASSETS Current assets: Cash $ 72,545 $ 46,169 Accounts receivable - oil and gas sales 108,397 150,881 ---------- ---------- Total current assets 180,942 197,050 ---------- ---------- Oil and gas properties - at cost, based on the successful efforts accounting method 7,132,242 7,132,242 Accumulated depletion (6,734,886) (6,721,529) ---------- ---------- Net oil and gas properties 397,356 410,713 ---------- ---------- $ 578,298 $ 607,763 ========== ========== LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Accounts payable - affiliate $ 20,057 $ 12,398 Partners' capital: Managing general partner 4,275 4,647 Limited partners (10,131 interests) 553,966 590,718 ---------- ---------- 558,241 595,365 ---------- ---------- $ 578,298 $ 607,763 ========== ==========

The financial information included as of June 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 86-A, LTD. (A Texas Limited Partnership) STATEMENTS OF OPERATIONS (Unaudited) Three months ended Six months ended June 30, June 30, ---------------------- ---------------------- 2001 2000 2001 2000 --------- --------- --------- --------- Revenues: Oil and gas $ 190,561 $ 196,767 $ 410,079 $ 393,746 Interest 782 1,681 2,598 2,821 Gain on disposition of assets - 18,734 - 28,971 -------- -------- -------- -------- 191,343 217,182 412,677 425,538 -------- -------- -------- -------- Costs and expenses: Oil and gas production 133,669 86,961 234,808 176,913 General and administrative 5,717 5,903 9,966 11,812 Depletion 6,758 6,831 13,357 13,894 -------- -------- -------- -------- 146,144 99,695 258,131 202,619 -------- -------- -------- -------- Net income $ 45,199 $ 117,487 $ 154,546 $ 222,919 ======== ======== ======== ======== Allocation of net income: Managing general partner $ 452 $ 1,175 $ 1,545 $ 2,229 ======== ======== ======== ======== Limited partners $ 44,747 $ 116,312 $ 153,001 $ 220,690 ======== ======== ======== ======== Net income per limited partnership interest $ 4.41 $ 11.48 $ 15.10 $ 21.78 ======== ======== ======== ========

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 86-A, LTD. (A Texas Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 30, 2001 (Unaudited) Note 1. Organization and nature of operations Parker & Parsley 86-A, Ltd. (the "Partnership") is a limited partnership organized in 1986 under the laws of the State of Texas. 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 June 30, 2001 and for the three and six months ended June 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 June 30, 2000 financial statements to conform to the June 30, 2001 financial statement presentations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in this Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission. The financial statements should be read in conjunction with the financial statements and the notes thereto contained in the Partnership's Report on Form 10-K for the year ended December 31, 2000, as filed with the Securities and Exchange Commission, a copy of which is available upon request by writing to Rich Dealy, Vice President and Chief Accounting Officer, 5205 North O'Connor Boulevard, Suite 1400, Irving, Texas 75039-3746. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (1) Results of Operations Six months ended June 30, 2001 compared with six months ended June 30, 2000 Revenues: The Partnership's oil and gas revenues increased 4% to $410,079 for the six months ended June 30, 2001 as compared to $393,746 for the same period in 2000. The increase in revenues resulted from higher average prices received, offset by a decrease in production. For the six months ended June 30, 2001, 8,359 barrels of oil, 4,940 barrels of natural gas liquids ("NGLs") and 20,166 mcf of gas were 7 sold, or 16,660 barrel of oil equivalents ("BOEs"). For the six months ended June 30, 2000, 9,168 barrels of oil, 6,254 barrels of NGLs and 26,019 mcf of gas were sold, or 19,759 BOEs. The average price received per barrel of oil increased slightly from $27.71 for the six months ended June 30, 2000 to $27.73 for the same period in 2001. The average price received per barrel of NGLs increased $2.56, or 18%, from $14.19 during the six months ended June 30, 2000 to $16.75 for the same period in 2001. The average price received per mcf of gas increased 142% from $1.96 during the six months ended June 30, 2000 to $4.74 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 six months ended June 30, 2001. A gain on disposition of assets of $28,971 was recognized during the six months ended June 30, 2000 resulting from equipment credits received on two fully depleted wells. Costs and Expenses: Total costs and expenses increased to $258,131 for the six months ended June 30, 2001 as compared to $202,619 for the same period in 2000, an increase of $55,512, or 27%. This increase was due to an increase in production costs, offset by declines in general and administrative expenses ("G&A") and depletion. Production costs were $234,808 for the six months ended June 30, 2001 and $176,913 for the same period in 2000 resulting in a $57,895 increase, or 33%. This increase was primarily due to additional well maintenance and workover 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 16% from $11,812 for the six months ended June 30, 2000 to $9,966 for the same period in 2001. The decrease is primarily attributable to a decline in audit and tax fees. Depletion was $13,357 for the six months ended June 30, 2001 as compared to $13,894 for the same period in 2000, a decrease of $537, or 4%. This decrease was primarily due to a decline in oil production of 809 barrels for the six months ended June 30, 2001 as compared to the same period in 2000. Three months ended June 30, 2001 compared with three months ended June 30, 2000 Revenues: The Partnership's oil and gas revenues decreased 3% to $190,561 for the three months ended June 30, 2001 as compared to $196,767 for the same period in 2000. The decrease in revenues resulted from a decrease in production and lower average prices received for oil, offset by higher average prices received for gas and NGLs. For the three months ended June 30, 2001, 4,389 barrels of oil, 2,558 barrels of NGLs and 9,290 mcf of gas were sold, or 8,495 BOEs. For the 8 three months ended June 30, 2000, 4,548 barrels of oil, 2,908 barrels of NGLs and 11,558 mcf of gas were sold, or 9,382 BOEs. The average price received per barrel of oil decreased $.67, or 2%, from $27.97 for the three months ended June 30, 2000 to $27.30 for the same period in 2001. The average price received per barrel of NGLs increased $.27, or 2%, from $14.53 during the three months ended June 30, 2000 to $14.80 for the same period in 2001. The average price received per mcf of gas increased 50% from $2.36 during the three months ended June 30, 2000 to $3.54 for the same period in 2001. Gain on disposition of assets of $18,734 was recognized during the three months ended June 30, 2000 resulting from equipment credits received on two fully depleted wells. Costs and Expenses: Total costs and expenses increased to $146,144 for the three months ended June 30, 2001 as compared to $99,695 for the same period in 2000, an increase of $46,449, or 47%. This increase was due to an increase in production costs, offset by declines in G&A and depletion. Production costs were $133,669 for the three months ended June 30, 2001 and $86,961 for the same period in 2000 resulting in a $46,708 increase, or 54%. This increase was primarily due to additional well maintenance and workover costs incurred to stimulate well production. During this period, G&A decreased 3% from $5,903 for the three months ended June 30, 2000 to $5,717 for the same period in 2001. The decrease is primarily attributable to a decline in audit and tax fees. Depletion was $6,758 for the three months ended June 30, 2001 as compared to $6,831 for the same period in 2000, a decrease of $73, or 1%. This decrease was primarily due to a decline in oil production of 159 barrels for the three months ended June 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 $45,251 during the six months ended June 30, 2001 from the same period ended June 30, 2000. This increase was due to an increase of $16,110 in oil and gas sales receipts and reductions of $85,190 in working capital and $1,846 in G&A expenses, offset by an increase of $57,895 in production costs. The increase in oil and gas receipts resulted from the increase in commodity prices during 2001 which contributed an additional $88,287 to oil and gas receipts, offset by $72,177 resulting from the decline in production during 2001 as compared to the same period in 2000. The increase in production costs was primarily due to additional well maintenance and workover costs incurred to stimulate well production. The decrease in G&A was primarily due to a decline in audit and tax fees. 9 Net Cash Provided by Investing Activities The Partnership's principal investing activities for the six months ended June 30, 2000 included expenditures related to equipment upgrades on active properties. Proceeds from asset dispositions of $28,971 received during the six months ended June 30, 2000 were due to equipment credits received on two fully depleted wells. Net Cash Used in Financing Activities For the six months ended June 30, 2001, cash distributions to the partners were $191,670, of which $1,917 was distributed to the managing general partner and $189,753 to the limited partners. For the same period ended June 30, 2000, cash distributions to the partners were $205,060, of which $2,051 was distributed to the managing general partner and $203,009 to the limited partners. For the three months ended June 30, 2001, no distributions were made by the partnership to its partners. Subsequent to June 30, 2001 the cash distribution that otherwise would have been mailed to partners in late June was made to holders of record as of July 9, 2001 and was mailed on July 13, 2001. For further information, see "Proposal to acquire partnerships" below. Proposal to acquire partnerships On June 29, 2001, Pioneer Natural Resources Company ("Pioneer") filed with the Securities and Exchange Commission Amendment No. 1 to the Form S-4 Registration Statement (File No. 333-59094) (the "preliminary proxy statement/prospectus"), which proposes an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA, Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and 46 Parker & Parsley limited partnerships. Each partnership that approves the agreement and plan of merger and the other related merger proposals will merge with and into Pioneer USA upon the closing of the transactions described in the preliminary proxy statement/prospectus, and the partnership interests of each such partnership will be converted into the right to receive Pioneer common stock. The Partnership is one of the 46 Parker & Parsley limited partnerships that will be asked to approve the agreement and plan of merger. The preliminary 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. Pioneer USA will solicit proxies from limited partners to approve the mergers only when the proxy statement/prospectus is final and declared effective. No solicitation will be made using preliminary materials. Nonetheless, copies of the preliminary 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, when it is finalized, 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 preliminary and (when filed) final proxy statement/prospectus and other relevant documents relating to 10 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 - none (b) Reports on Form 8-K - none 11 PARKER & PARSLEY 86-A, LTD. (A Texas 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 86-A, LTD. By: Pioneer Natural Resources USA, Inc. Managing General Partner Dated: August 6, 2001 By: /s/ Rich Dealy ---------------------------------- Rich Dealy, Vice President and Chief Accounting Officer 12

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