10-Q 1 m0187b.txt P&P 87-B MARCH 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 March 31, 2001 Commission File No. 33-12244-02 PARKER & PARSLEY 87-B, LTD. (Exact name of Registrant as specified in its charter) Texas 75-2185706 ---------------------------------- --------------------- (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 87-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.......................... 10 Signatures................................................ 11 2 PARKER & PARSLEY 87-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 $ 238,842 $ 257,845 Accounts receivable - oil and gas sales 275,384 357,836 ----------- ----------- Total current assets 514,226 615,681 ----------- ----------- Oil and gas properties - at cost, based on the successful efforts accounting method 13,156,014 13,396,004 Accumulated depletion (10,992,258) (11,162,910) ----------- ------------ Net oil and gas properties 2,163,756 2,233,094 ----------- ----------- $ 2,677,982 $ 2,848,775 =========== =========== LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Accounts payable: Affiliate $ 22,825 $ 25,998 Other 3,332 - ----------- ----------- 26,157 25,998 ----------- ----------- Partners' capital: Managing general partner 26,446 28,156 Limited partners (20,089 interests) 2,625,379 2,794,621 ----------- ----------- 2,651,825 2,822,777 ----------- ----------- $ 2,677,982 $ 2,848,775 =========== =========== 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 87-B, LTD. (A Texas Limited Partnership) STATEMENTS OF OPERATIONS (Unaudited) Three months ended March 31, ------------------------- 2001 2000 ---------- ---------- Revenues: Oil and gas $ 446,606 $ 453,944 Interest 4,670 3,686 Gain on disposition of assets 16,389 3,753 --------- --------- 467,665 461,383 --------- --------- Costs and expenses: Oil and gas production 191,209 162,841 General and administrative 11,612 13,618 Depletion 74,190 38,551 Abandoned property 13,935 - --------- --------- 290,946 215,010 --------- --------- Net income $ 176,719 $ 246,373 ========= ========= Allocation of net income: Managing general partner $ 1,767 $ 2,464 ========= ========= Limited partners $ 174,952 $ 243,909 ========= ========= Net income per limited partnership interest $ 8.71 $ 12.14 ========= ========= 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 87-B, LTD. (A Texas Limited Partnership) STATEMENT OF PARTNERS' CAPITAL (Unaudited) Managing general Limited partner partners Total ---------- ---------- ---------- Balance at January 1, 2001 $ 28,156 $2,794,621 $2,822,777 Distributions (3,477) (344,194) (347,671) Net income 1,767 174,952 176,719 --------- --------- --------- Balance at March 31, 2001 $ 26,446 $2,625,379 $2,651,825 ========= ========= ========= 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 87-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 $ 176,719 $ 246,373 Adjustments to reconcile net income to net cash provided by operating activities: Depletion 74,190 38,551 Gain on disposition of assets (16,389) (3,753) Changes in assets and liabilities: Accounts receivable 82,452 (71,505) Accounts payable 15,012 9,079 --------- --------- Net cash provided by operating activities 331,984 218,745 --------- --------- Cash flows from investing activities: Additions to oil and gas properties (4,852) (2,443) Proceeds from disposition of assets 1,536 3,753 --------- --------- Net cash provided by (used in) investing activities (3,316) 1,310 --------- --------- Cash flows used in financing activities: Cash distributions to partners (347,671) (204,239) --------- --------- Net increase (decrease) in cash (19,003) 15,816 Cash at beginning of period 257,845 262,756 --------- --------- Cash at end of period $ 238,842 $ 278,572 ========= ========= 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 87-B, LTD. (A Texas Limited Partnership) NOTES TO FINANCIAL STATEMENTS March 31, 2001 (Unaudited) Note 1. Organization and nature of operations Parker & Parsley 87-B, Ltd. (the "Partnership") is a limited partnership organized in 1987 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 decreased 2% to $446,606 for the three months ended March 31, 2001 as compared to $453,944 for the same period in 2000. The decrease in revenues resulted from declines in production, offset by higher average prices received. For the three months ended March 31, 2001, 9,952 barrels of oil, 2,989 barrels of natural gas liquids ("NGLs") and 18,570 mcf of gas were sold, or 16,036 barrel of oil equivalents ("BOEs"). For the three months ended March 31, 2000, 11,392 barrels of oil, 6,086 barrels of NGLs and 26,331 mcf of gas were sold, or 21,867 BOEs. 7 The average price received per barrel of oil decreased slightly from $27.69 for the three months ended March 31, 2000 to $27.55 for the same period in 2001. The average price received per barrel of NGLs increased $3.74, or 25%, from $15.18 for the three months ended March 31, 2000 to $18.92 for the same period in 2001. The average price received per mcf of gas increased 257% from $1.75 during the three months ended March 31, 2000 to $6.24 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. Gain on disposition of assets of $16,389 was received during the three months ended March 31, 2001 of which $14,853 was from disposal of equipment on one well plugged and abandoned during the current period and $1,536 was from equipment credits received on one fully depleted well. Expenses to plug and abandon this well were $13,935. For the three months ended March 31, 2000, a gain on disposition of assets of $3,753 was recognized due to credits received from the disposal of oil and gas equipment on one fully depleted well. Costs and Expenses: Total costs and expenses increased to $290,946 for the three months ended March 31, 2001 as compared to $215,010 for the same period in 2000, an increase of $75,936, or 35%. This increase was due to increases in depletion, production costs and abandoned property costs, offset by a decline in general and administrative expenses ("G&A"). Production costs were $191,209 for the three months ended March 31, 2001 and $162,841 for the same period in 2000, resulting in a $28,368 increase, or 17%. The increase was primarily due to additional well maintenance costs incurred to stimulate well production. G&A's components are independent accounting and engineering fees and managing general partner personnel and administrative costs. During this period, G&A decreased 15% from $13,618 for the three months ended March 31, 2000 to $11,612 for the same period in 2001. The decline was due to less G&A being allocated (limited to 3% of oil and gas revenues) due to lower oil and gas revenues for the three months ended March 31, 2001 as compared to the same period in 2000, offset by an increase in the accrual of tax preparation fees. Depletion was $74,190 for the three months ended March 31, 2001 as compared to $38,551 for the same period in 2000, an increase of $35,639, or 92%. This increase was primarily due to a downward revision to proved reserves on one well, offset by a decline in oil production of 1,440 barrels during the three months 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 $113,239 during the three months ended March 31, 2001 from the same period in 2000. The increase was due to reductions of $159,890 in working capital and $2,006 in G&A expenses, offset 8 by a decline in oil and gas sales receipts of $6,354 and increases in production costs of $28,368 and abandoned property costs of $13,935. The G&A decline was primarily due to less G&A being allocated (limited to 3% of oil and gas revenues) due to lower oil and gas revenues during the three months ended March 31, 2001 as compared to the same period in 2000, offset by an increase in the accrual of tax preparation fees. The increase in production costs was primarily due to additional well maintenance costs incurred to stimulate well production. The decline in oil and gas receipts resulted from declines in production of $146,692, offset by $140,338 resulting from higher average prices received. The increase in abandoned property costs was due to the plugging and abandonment of one well during the three months ended March 31, 2001. Net Cash Provided by (Used in) Investing Activities The Partnership's principle investing activities for the three months ended March 31, 2001 and 2000 were related to expenditures for oil and gas equipment upgrades on active properties. Proceeds from disposition of assets of $1,536 and $3,753 were recognized during the three months ended March 31, 2001 and 2000, respectively, from equipment credits received on fully depleted wells. Net Cash Used in Financing Activities For the three months ended March 31, 2001, cash distributions to the partners were $347,671, of which $3,477 was distributed to the managing general partner and $344,194 to the limited partners. For the same period ended March 31, 2000, cash distributions to the partners were $204,239, of which $2,042 was distributed to the managing general partner and $202,197 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. 9 --------------- (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. 10 PARKER & PARSLEY 87-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 87-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 11

PARKER & PARSLEY 87-B LTD 10-Q