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 March 31, 2001 Commission File No. 2-99079B PARKER & PARSLEY 85-B, LTD. (Exact name of Registrant as specified in its charter) Texas 75-2075492 --------------------------------- --------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1400 Williams Square West, 5205 N. O'Connor Blvd., 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 85-B, LTD. TABLE OF CONTENTS Page Part I. Financial Information Item 1. Financial Statements Balance Sheets as of March 31, 2001 and December 31, 2000...................................... 3 Statements of Operations for the three months ended March 31, 2001 and 2000........................... 4 Statement of Partners' Capital for the three months ended March 31, 2001.................................... 5 Statements of Cash Flows for the three months ended March 31, 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.......................... 9 Signatures................................................ 10 2 PARKER & PARSLEY 85-B, LTD. (A Texas Limited Partnership) Part I. Financial Information Item 1. Financial Statements BALANCE SHEETS March 31, December 31, 2001 2000 ----------- ----------- (Unaudited) ASSETS Current assets: Cash $ 60,380 $ 80,718 Accounts receivable - oil and gas sales 95,223 84,740 ---------- ---------- Total current assets 155,603 165,458 ---------- ---------- Oil and gas properties - at cost, based on the on the successful efforts accounting method 5,317,256 5,317,256 Accumulated depletion (4,541,387) (4,526,767) ---------- ---------- Net oil and gas properties 775,869 790,489 ---------- ---------- $ 931,472 $ 955,947 ========== ========== LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Accounts payable - affiliate $ 12,172 $ 10,515 Partners' capital: Managing general partner 9,544 9,805 Limited partners (7,988 interests) 909,756 935,627 ---------- ---------- 919,300 945,432 ---------- ---------- $ 931,472 $ 955,947 ========== ========== The financial information included as of March 31, 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 85-B, LTD. (A Texas Limited Partnership) STATEMENTS OF OPERATIONS (Unaudited) Three months ended March 31, ------------------------- 2001 2000 ---------- ---------- Revenues: Oil and gas $ 179,094 $ 135,322 Interest 1,282 987 --------- --------- 180,376 136,309 --------- --------- Costs and expenses: Oil and gas production 61,176 57,367 General and administrative 5,373 4,060 Depletion 14,620 13,863 --------- --------- 81,169 75,290 --------- --------- Net income $ 99,207 $ 61,019 ========= ========= Allocation of net income: Managing general partner $ 992 $ 610 ========= ========= Limited partners $ 98,215 $ 60,409 ========= ========= Net income per limited partnership interest $ 12.30 $ 7.56 ========= ========= 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 85-B, LTD. (A Texas Limited Partnership) STATEMENT OF PARTNERS' CAPITAL (Unaudited) Managing general Limited partner partners Total --------- ---------- ---------- Balance at January 1, 2001 $ 9,805 $ 935,627 $ 945,432 Distributions (1,253) (124,086) (125,339) Net income 992 98,215 99,207 -------- --------- --------- Balance at March 31, 2001 $ 9,544 $ 909,756 $ 919,300 ======== ========= ========= 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 85-B, LTD. (A Texas Limited Partnership) STATEMENTS OF CASH FLOWS (Unaudited) Three months ended March 31, ------------------------- 2001 2000 ---------- ---------- Cash flows from operating activities: Net income $ 99,207 $ 61,019 Adjustments to reconcile net income to net cash provided by operating activities: Depletion 14,620 13,863 Changes in assets and liabilities: Accounts receivable (10,483) (3,406) Accounts payable 1,657 1,184 --------- --------- Net cash provided by operating activities 105,001 72,660 --------- --------- Cash flows used in investing activities: Additions to oil and gas properties - (1,898) Cash flows used in financing activities: Cash distributions to partners (125,339) (64,107) --------- --------- Net increase (decrease) in cash (20,338) 6,655 Cash at beginning of period 80,718 74,959 --------- --------- Cash at end of period $ 60,380 $ 81,614 ========= ========= 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 85-B, LTD. (A Texas Limited Partnership) NOTES TO FINANCIAL STATEMENTS March 31, 2001 (Unaudited) Note 1. Organization and nature of operations Parker & Parsley 85-B, Ltd. (the "Partnership") is a limited partnership organized in 1985 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 March 31, 2001 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 March 31, 2000 financial statements to conform to the March 31, 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, 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 Revenues: The Partnership's oil and gas revenues increased 32% to $179,094 for the three months ended March 31, 2001 as compared to $135,322 for the same period in 2000. The increase in revenues resulted from higher average prices received and an increase in production. For the three months ended March 31, 2001, 3,660 barrels of oil, 1,334 barrels of natural gas liquids ("NGLs") and 8,365 mcf of gas were sold, or 6,388 barrel of oil equivalents ("BOEs"). For the three months ended March 31, 2000, 3,488 barrels of oil, 1,505 barrels of NGLs and 7,429 mcf of gas were sold, or 6,231 BOEs. 7 The average price received per barrel of oil increased slightly from $28.65 for the three months ended March 31, 2000 to $28.85 for the same period in 2001. The average price received per barrel of NGLs increased $4.53, or 31%, from $14.41 for the three months ended March 31, 2000 to $18.94 for the same period in 2001. The average price received per mcf of gas increased 214% from $1.84 during the three months ended March 31, 2000 to $5.77 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 three months ended March 31, 2001. Costs and Expenses: Total costs and expenses increased to $81,169 for the three months ended March 31, 2001 as compared to $75,290 for the same period in 2000, an increase of $5,879, or 8%. This increase was primarily due to increases in production costs, general and administrative expenses ("G&A") and depletion. Production costs were $61,176 for the three months ended March 31, 2001 and $57,367 for the same period in 2000, an increase of $3,809, or 7%. The increase was primarily due to higher production taxes associated with higher oil and gas prices. G&A's components are independent accounting and engineering fees and managing general partner personnel and administrative costs. During this period, G&A increased 32% from $4,060 for the three months ended March 31, 2000 to $5,373 for the same period in 2001, primarily due to an increase in the accrual for tax preparation fees. Depletion was $14,620 for the three months ended March 31, 2001 as compared to $13,863 for the same period in 2000, an increase of $757, or 5%. The increase was primarily due to an increase in oil production of 172 barrels for the period ended March 31, 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 $32,341 during the three months ended March 31, 2001 from the same period in 2000. The increase was due to an increase of $44,067 in oil and gas sales receipts, offset by increases in production costs of $3,809, G&A expenses of $1,313 and working capital of $6,604. The increase in oil and gas receipts resulted from the increase in commodity prices during 2001 which contributed an additional $36,947 to oil and gas receipts and $7,120 resulting from the increase in production during 2001. The increase in production costs was primarily due to increased production taxes associated with higher oil and gas prices. The increase in G&A was primarily due to an increase in the accrual for tax preparation fees. 8 Net Cash Used in Investing Activities The Partnership's investing activities for the three months ended March 31, 2000 were related to equipment upgrades on active properties. Net Cash Used in Financing Activities For the three months ended March 31, 2001, cash distributions to the partners were $125,339, of which $1,253 was distributed to the managing general partner and $124,086 to the limited partners. For the same period ended March 31, 2000, cash distributions to the partners were $64,107, of which $641 was distributed to the managing general partner and $63,466 to the limited partners. Proposal to acquire partnerships On April 17, 2001, Pioneer Natural Resources Company ("Pioneer") filed a preliminary proxy statement/prospectus with the Securities and Exchange Commission proposing an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA, Inc. ("Pioneer USA"), a wholly- owned subsidiary of Pioneer, and the limited partners of 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, and the partnership interests of each such partnership will be converted into the right to receive cash and Pioneer common stock. Pioneer USA is the sole or managing general partner of the partnerships. The Partnership is one of the 46 Parker & Parsley limited partnerships being requested 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, the majority approval of the limited partnership interests in each partnership and the resolution of Securities and Exchange Commission review comments. No solicitation will be made using preliminary materials. --------------- (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. 9 PARKER & PARSLEY 85-B, 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 85-B, LTD. By: Pioneer Natural Resources USA, Inc. Managing General Partner Dated: May 10, 2001 By: /s/ Rich Dealy ---------------------------------- Rich Dealy, Vice President and Chief Accounting Officer 10

September 30, December 31, 2000 1999 ------------ ------------ (Unaudited) ASSETS Current assets: Cash $ 72,091 $ 74,959 Accounts receivable - oil and gas sales 90,659 59,750 ----------- ----------- Total current assets 162,750 134,709 ----------- ----------- Oil and gas properties - at cost, based on the successful efforts accounting method 5,317,256 5,320,021 Accumulated depletion (4,501,976) (4,462,209) ----------- ----------- Net oil and gas properties 815,280 857,812 ----------- ----------- $ 978,030 $ 992,521 =========== =========== LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Accounts payable - affiliate $ 21,081 $ 12,009 Partners' capital: Managing general partner 9,921 10,156 Limited partners (7,988 interests) 947,028 970,356 ----------- ----------- 956,949 980,512 ----------- ----------- $ 978,030 $ 992,521 =========== ===========

Three months ended Nine months ended September 30, September 30, ---------------------- ---------------------- 2000 1999 2000 1999 --------- --------- --------- --------- Revenues: Oil and gas $ 168,472 $ 110,165 $ 444,585 $ 255,042 Interest 1,614 833 3,936 2,063 -------- -------- -------- -------- 170,086 110,998 448,521 257,105 -------- -------- -------- -------- Costs and expenses: Oil and gas production 70,821 47,290 207,231 148,640 General and administrative 5,054 3,304 13,337 7,651 Depletion 11,849 14,535 39,767 72,042 -------- -------- -------- -------- 87,724 65,129 260,335 228,333 -------- -------- -------- -------- Net income $ 82,362 $ 45,869 $ 188,186 $ 28,772 ======== ======== ======== ======== Allocation of net income: Managing general partner $ 824 $ 459 $ 1,882 $ 288 ======== ======== ======== ======== Limited partners $ 81,538 $ 45,410 $ 186,304 $ 28,484 ======== ======== ======== ======== Net income per limited partnership interest $ 10.20 $ 5.69 $ 23.32 $ 3.57 ======== ======== ======== ========

Managing general Limited partner partners Total ---------- ---------- ---------- Balance at January 1, 2000 $ 10,156 $ 970,356 $ 980,512 Distributions (2,117) (209,632) (211,749) Net income 1,882 186,304 188,186 --------- --------- --------- Balance at September 30, 2000 $ 9,921 $ 947,028 $ 956,949 ========= ========= =========

Nine months ended September 30, ------------------------ 2000 1999 ---------- ---------- Cash flows from operating activities: Net income $ 188,186 $ 28,772 Adjustments to reconcile net income to net cash provided by operating activities: Depletion 39,767 72,042 Changes in assets and liabilities: Accounts receivable (30,909) (14,575) Accounts payable 9,072 3,906 --------- --------- Net cash provided by operating activities 206,116 90,145 --------- --------- Cash flows from investing activities: Additions to oil and gas properties (3,647) (6,399) Proceeds from asset dispositions 6,412 134 --------- --------- Net cash provided by (used in) investing activities 2,765 (6,265) --------- --------- Cash flows used in financing activities: Cash distributions to partners (211,749) (58,792) --------- --------- Net increase (decrease) in cash (2,868) 25,088 Cash at beginning of period 74,959 47,370 --------- --------- Cash at end of period $ 72,091 $ 72,458 ========= =========

Filing Compare · PARKER & PARSLEY 85-B LTD