Filed Pursuant to Rule 424(b)(3)
Registration No. 333-59094
[PIONEER LOGO]
PIONEER NATURAL RESOURCES COMPANY
COMMON STOCK
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
--------------------------------
THE DATE OF THIS SUPPLEMENT IS NOVEMBER 15, 2001.
--------------------------------
Dear Limited Partners:
The following information supplements the proxy statement/prospectus dated
October 12, 2001, of Pioneer Natural Resources Company, a Delaware corporation
that we call Pioneer Parent, and Pioneer Natural Resources USA, Inc., a Delaware
corporation that we call Pioneer USA, by which Pioneer USA is soliciting proxies
to be voted at a special meeting of the limited partners of each of the
following partnerships. The purpose of the special meeting is for the limited
partners of each partnership to vote upon the merger of the partnership with and
into Pioneer USA that, if completed, will result in the limited partners'
receiving common stock of Pioneer Parent for their partnership interests.
Parker & Parsley 81-I, Ltd. Parker & Parsley 88-A Conv., L.P.
Parker & Parsley 81-II, Ltd. Parker & Parsley 88-A, L.P.
Parker & Parsley 82-I, Ltd. Parker & Parsley 88-B Conv., L.P.
Parker & Parsley 82-II, Ltd. Parker & Parsley 88-B, L.P.
Parker & Parsley 82-III, Ltd. Parker & Parsley 88-C Conv., L.P.
Parker & Parsley 83-A, Ltd. Parker & Parsley 88-C, L.P.
Parker & Parsley 83-B, Ltd. Parker & Parsley Producing Properties 88-A, L.P.
Parker & Parsley 84-A, Ltd. Parker & Parsley Private Investment 88, L.P.
Parker & Parsley 85-A, Ltd. Parker & Parsley 89-A Conv., L.P.
Parker & Parsley 85-B, Ltd. Parker & Parsley 89-A, L.P.
Parker & Parsley Private Investment 85-A, Ltd. Parker & Parsley 89-B Conv., L.P.
Parker & Parsley Selected 85 Private Investment, Ltd. Parker & Parsley 89-B, L.P.
Parker & Parsley 86-A, Ltd. Parker & Parsley Private Investment 89, L.P.
Parker & Parsley 86-B, Ltd. Parker & Parsley 90-A Conv., L.P.
Parker & Parsley 86-C, Ltd. Parker & Parsley 90-A, L.P.
Parker & Parsley Private Investment 86, Ltd. Parker & Parsley 90-B Conv., L.P.
Parker & Parsley 87-A Conv., Ltd. Parker & Parsley 90-B, L.P.
Parker & Parsley 87-A , Ltd. Parker & Parsley 90-C Conv., L.P.
Parker & Parsley 87-B Conv., Ltd. Parker & Parsley 90-C, L.P.
Parker & Parsley 87-B, Ltd. Parker & Parsley Private Investment 90, L.P.
Parker & Parsley Producing Properties 87-A, Ltd. Parker & Parsley 90 Spraberry Private Development, L.P.
Parker & Parsley Producing Properties 87-B, Ltd. Parker & Parsley 91-A, L.P.
Parker & Parsley Private Investment 87, Ltd. Parker & Parsley 91-B, L.P.
As discussed in the proxy statement/prospectus, we are the managing or sole
general partner of each partnership. Our board of directors recommends the
approval of the merger proposals for each of the partnerships. We urge you to
vote FOR the merger proposals for each partnership in which you own an interest
and return your proxy card promptly so that your vote may be counted at the
special meeting for each partnership scheduled for December 20, 2001.
Sincerely,
Pioneer Natural Resources USA, Inc.
NYMEX FUTURES PRICES
The following table shows the NYMEX futures price for oil and gas as of
March 30, 2001, the date that Pioneer Parent and Pioneer USA used in the
calculation of the reserve value portion of the merger value for each
partnership, and as of November 15, 2001, the date of this supplement. Oil and
gas prices are subject to rapid change. See "Risk Factors -- Risk Factors
Relating to the Merger of Each Partnership -- The Merger Value for a Partnership
Will Not be Adjusted For Changes in Oil and Gas Prices Before the Completion of
Its Merger" on page 20 of the proxy statement/prospectus.
MARCH 30, 2001 NOVEMBER 15, 2001 (1)
------------------------------------- ---------------------------------
DATE OIL ($/BBL) GAS ($/MCF)(2) OIL ($/BBL) GAS ($/MCF)(2)
-------------------------------------- ---------------- ------------------- ------------- ----------------
April - December 2001............... 26.17 5.18 -- --
December 2001....................... -- -- 17.46 2.55
2002................................ 24.36 4.61 18.90 2.98
2003................................ 22.83 4.16 19.74 3.46
2004................................ 22.31 4.09 20.15 3.66
2005................................ 21.97 4.12 20.31 3.78
Thereafter.......................... 21.97 4.12 20.31 3.78
----------
(1) NYMEX prices for some periods can be found without charge on the web site
maintained by the NYMEX at www.nymex.com. Many institutional brokerage
houses can also provide this information. Limited partners seeking
information about NYMEX prices are encouraged to contact their own brokers.
(2) The NYMEX price for gas is quoted in dollars per million British thermal
units, or MMBTU. We converted those prices to dollars per thousand cubic
feet, or Mcf.
RECENT DEVELOPMENTS FOR PIONEER PARENT
On October 31, 2001, Pioneer Parent announced an oil discovery on the Ozona
Deep prospect in the deepwater Gulf of Mexico and the results from an appraisal
well on the Stirrup discovery on the Gulf of Mexico shelf. The Ozona Deep
discovery well was logged, fluid samples were taken for analysis, and the well
will be temporarily suspended without further testing. Appraisal plans for 2002
will be finalized following the analysis of the data gathered in the discovery
well. Pioneer Parent has a 32% working interest in the well and Marathon Oil
Company has a 68% working interest and is operator.
The Stirrup #2 appraisal well (Mustang Island block 861), the initial test
of a second large fault block on the Stirrup structure, found three productive
sequences in the middle Frio formation. The discovery well was temporarily
suspended pending fabrication of facilities which is underway. First production
is expected in April 2002. Pioneer Parent has a 25% working interest in the
5,600-acre unit that includes the Stirrup field.
Pioneer Parent also announced that the well drilled on the Malta prospect
on the Gulf of Mexico shelf encountered wet sands and will be plugged and
abandoned.
CAPITAL BUDGET AND FUTURE PRODUCTION OUTLOOK
Pioneer Parent has adopted a $425 million capital expenditure budget for
2002, based upon current commodity prices. The 2002 capital expenditures budget
includes $200 million of capital earmarked for development of Pioneer Parent's
deepwater Gulf of Mexico Canyon Express, Devils Tower and Falcon projects and
Pioneer Parent's Sable oil discovery offshore South Africa. Net to Pioneer
Parent's interest, the aggregate production contributed by these projects is
expected to increase Pioneer Parent's worldwide annual production by 12% during
2002, to a range of 46 to 48 million barrels of oil equivalent, or MMBOE, and by
31% in 2003, to a range of 60 to 63 MMBOE.
THIRD QUARTER RESULTS FOR PIONEER PARENT
Revenues from oil and gas operations were $198.1 million and $674.7 million
for the three and nine months ended September 30, 2001, respectively, compared
to $228.6 million and $600.9 million for the three and nine months ended
September 30, 2000. The decrease in revenues during the three months ended
September 30, 2001, as compared to the three months ended September 30, 2000, is
due to commodity price decreases and a five percent decrease in production
volumes. The increase in revenues for the nine months ended September 30, 2001,
as compared to the nine months ended September 30, 2000, reflects commodity
price increases which more than offset a four percent decrease in production
volumes.
-2-
Average realized prices were $25.06 per barrel for oil, $15.01 per barrel
for natural gas liquids and $2.66 per thousand cubic feet, or Mcf, for natural
gas for the three months ended September 30, 2001, compared to average realized
prices of $25.48, $20.73 and $2.87, respectively, for the three months ended
September 30, 2000. Average realized prices were $24.95 per barrel for oil,
$18.87 per barrel for natural gas liquids and $3.40 per Mcf for natural gas for
the nine months ended September 30, 2001, compared to average realized prices of
$23.52, $19.37 and $2.49, respectively, for the nine months ended September 30,
2000.
Net income was $24.6 million, or $0.25 per share on a diluted basis, and
$120.9 million, or $1.21 per share on a diluted basis, respectively, for the
three and nine months ended September 30, 2001, compared to net income of $69.3
million, or $0.69 per share on a diluted basis, and $68.0 million, or $0.68 per
share on a diluted basis, respectively, for the three and nine months ended
September 30, 2000. Earnings for the three months ended September 30, 2001, as
compared to the same period in 2000, decreased primarily as result of commodity
price decreases. Earnings for the nine months ended September 30, 2001, as
compared to the same period in 2000, increased primarily as a result of
commodity price increases and an $8.7 million gain on the disposition of assets.
During the nine months ended September 30, 2001, Pioneer Parent spent
$364.4 million on capital expenditures including $170.2 million for development
activities, $147.9 million for exploration activities and $46.3 million on
acquisitions. While development activities include the costs of related
facilities, exploration activities include geological and geophysical data
purchases and acquisitions include the costs of leasing unproved properties, the
majority of Pioneer Parent's capital expenditures is spent on drilling wells.
Pioneer Parent has increased its 2001 capital expenditures budget by
approximately 25% to $540 million from the $430 million budget originally
established. This includes the recently announced acquisition of an incremental
interest in the Aconcagua field and the Canyon Express gathering system and
capital invested to appraise 2001 exploration discoveries.
Pioneer Parent's total book capitalization at September 30, 2001 was $2.7
billion, consisting of total debt of $1.5 billion and stockholders' equity of
$1.2 billion. Pioneer Parent reduced its total outstanding indebtedness by $17.7
million during the three months ended September 30, 2001 and by $24.2 million
during the nine months ended September 30, 2001.
THIRD QUARTER RESULTS FOR EACH PARTNERSHIP
We have prepared a separate supplement to the supplemental information to
this document for each partnership. The supplement contains:
o for each reporting partnership, the partnership's quarterly report
on Form 10-Q, including management's discussion and analysis of
financial condition and results of operations, for the nine months
ended September 30, 2001; and
o for each nonreporting partnership, the partnership's financial
statements, including management's discussion and analysis of
financial condition and results of operations, for the nine months
ended September 30, 2001.
The supplement to the supplemental information for each partnership
constitutes an integral part of this document. Please carefully read all of the
supplements for each partnership in which you are a limited partner.
ADDITIONAL INFORMATION
This supplement summarizes Pioneer Parent's Quarterly Report on Form 10-Q
for the nine months ended September 30, 2001, that Pioneer Parent has previously
filed with the SEC and that contains important information about Pioneer Parent
and its finances. See "Where You Can Find More Information" beginning on the
inside front cover page of the proxy statement/prospectus for more information
on documents incorporated by reference and how to obtain them.
YOU ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS FILED WITH THE SEC
BECAUSE IT CONTAINS IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER, INCLUDING
INFORMATION ABOUT (1) THE DIRECT AND INDIRECT INTERESTS OF US AND OUR PARENT
COMPANY AS PARTICIPANTS IN THE MERGER, (2) OUR OWNERSHIP OF INTERESTS IN THE
LIMITED PARTNERSHIPS AND (3) OUR CONFLICTING INTERESTS IN RECOMMENDING THE
MERGER. 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, TELEPHONE: (972) 969-3584, ATTENTION: INVESTOR
RELATIONS. YOU MAY ALSO OBTAIN THE PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT
DOCUMENTS RELATING TO THE PROPOSED MERGERS FREE THROUGH THE INTERNET WEB SITE
THAT THE SEC MAINTAINS AT WWW.SEC.GOV.
-3-
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 81-I, LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
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THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 81-I, Ltd. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY 81-I, LTD.
(A Texas Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY 81-I, LTD.
(A Texas Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 86,210 $ 38,546
Accounts receivable - oil and gas sales 26,535 63,269
----------- -----------
Total current assets 112,745 101,815
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 5,245,930 5,245,144
Accumulated depletion (5,148,464) (5,142,190)
----------- -----------
Net oil and gas properties 97,466 102,954
----------- -----------
$ 210,211 $ 204,769
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 12,955 $ 8,817
Partners' capital:
General partners 44,080 45,564
Limited partners (1,482 interests) 153,176 150,388
----------- -----------
197,256 195,952
----------- -----------
$ 210,211 $ 204,769
=========== ===========
The financial information included as of September 30, 2001 has been prepared
by management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY 81-I, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------------ ------------------------
2001 2000 2001 2000
-------- -------- -------- --------
Revenues:
Oil and gas $ 62,284 $118,165 $274,037 $309,364
Interest 518 834 1,956 2,192
Gain on disposition of assets 15,880 -- 15,880 --
-------- -------- -------- --------
78,682 118,999 291,873 311,556
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 46,704 47,350 132,665 132,506
General and administrative 1,868 4,557 9,834 11,209
Depletion 2,298 3,287 6,274 6,972
-------- -------- -------- --------
50,870 55,194 148,773 150,687
-------- -------- -------- --------
Net income $ 27,812 $ 63,805 $143,100 $160,869
======== ======== ======== ========
Allocation of net income:
General partners $ 4,916 $ 16,444 $ 34,079 $ 41,263
======== ======== ======== ========
Limited partners $ 22,896 $ 47,361 $109,021 $119,606
======== ======== ======== ========
Net income per limited
partnership interest $ 15.45 $ 31.96 $ 73.56 $ 80.71
======== ======== ======== ========
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.
3
PARKER & PARSLEY 81-I, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
General Limited
partners partners Total
---------- ---------- ----------
Balance at January 1, 2001 $ 45,564 $ 150,388 $ 195,952
Distributions (35,563) (106,233) (141,796)
Net income 34,079 109,021 143,100
---------- ---------- ----------
Balance at September 30, 2001 $ 44,080 $ 153,176 $ 197,256
========== ========== ==========
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 81-I, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
-------------------------------
2001 2000
---------- ----------
Cash flows from operating activities:
Net income $ 143,100 $ 160,869
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 6,274 6,972
Gain on disposition of assets (15,880) --
Changes in assets and liabilities:
Accounts receivable 36,734 (33,837)
Accounts payable 4,138 1,362
---------- ----------
Net cash provided by operating activities 174,366 135,366
---------- ----------
Cash flows from investing activities:
Additions to oil and gas properties (786) (4,019)
Proceeds from asset dispositions 15,880 --
---------- ----------
Net cash provided by (used in) investing activities 15,094 (4,019)
---------- ----------
Cash flows used in financing activities:
Cash distributions to partners (141,796) (141,621)
---------- ----------
Net increase (decrease) in cash 47,664 (10,274)
Cash at beginning of period 38,546 38,716
---------- ----------
Cash at end of period $ 86,210 $ 28,442
========== ==========
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 81-I, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 81-I, Ltd. (the "Partnership") is a limited partnership
organized in 1981 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 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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $905,863 of which $670,578 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
6
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 11% to $274,037 for the nine
months ended September 30, 2001 as compared to $309,364 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 decrease in production, offset by
higher average prices received for gas. For the nine months ended September 30,
2001, 6,195 barrels of oil, 2,706 barrels of NGLs and 15,850 mcf of gas were
sold, or 11,543 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 6,885 barrels of oil, 3,941 barrels of NGLs and 19,682 mcf
of gas were sold, or 14,106 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 $1.05, or 4%, from $28.45
for the nine months ended September 30, 2000 to $27.40 for the same period in
2001. The average price received per barrel of NGLs decreased $.33, or 2%, from
$14.24 during the nine months ended September 30, 2000 to $13.91 for the same
period in 2001. The average price received per mcf of gas increased 44% from
$2.92 during the nine months ended September 30, 2000 to $4.21 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.
A gain on disposition of assets of $15,880 was recognized during the nine months
ended September 30, 2001 from salvage income received on one well plugged and
abandoned in a prior year.
Costs and Expenses:
Total costs and expenses decreased to $148,773 for the nine months ended
September 30, 2001 as compared to $150,687 for the same period in 2000, a
decrease of $1,914, or 1%. This decrease was due to decreases in general and
administrative expenses ("G&A") and depletion, offset by an increase in
production costs.
Production costs were $132,665 for the nine months ended September 30, 2001 and
$132,506 for the same period in 2000 resulting in a $159 increase. The increase
was primarily due to higher ad valorem taxes, offset by lower well maintenance
costs.
7
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
12% from $11,209 for the nine months ended September 30, 2000 to $9,834 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.
Depletion was $6,274 for the nine months ended September 30, 2001 as compared to
$6,972 for the same period in 2000, a decrease of $698, or 10%. This decrease
was the result of a decline in oil production of 690 barrels for the nine months
ended September 30, 2001 as compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended
September 30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 47% to $62,284 for the three
months ended September 30, 2001 as compared to $118,165 for the same period in
2000. The decrease in revenues resulted from lower average prices received and a
decrease in production. For the three months ended September 30, 2001, 1,992
barrels of oil, 541 barrels of NGLs and 3,125 mcf of gas were sold, or 3,054
BOEs. For the three months ended September 30, 2000, 2,361 barrels of oil, 1,429
barrels of NGLs and 7,349 mcf of gas were sold, or 5,015 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 $3.92, or 13%, from
$30.28 for the three months ended September 30, 2000 to $26.36 for the same
period in 2001. The average price received per barrel of NGLs decreased $6.46,
or 43%, from $14.97 during the three months ended September 30, 2000 to $8.51
for the same period in 2001. The average price received per mcf of gas decreased
52% to $1.65 during the three months ended September 30, 2001 from $3.44 during
the same period in 2000.
A gain on disposition of assets was recognized during the three month period
ended September 30, 2001 of $15,880 from salvage income received on one well
plugged and abandoned in a prior year.
Costs and Expenses:
Total costs and expenses decreased to $50,870 for the three months ended
September 30, 2001 as compared to $55,194 for the same period in 2000, a
decrease of $4,324, or 8%. This decrease was due to declines in G&A, depletion
and production costs.
Production costs were $46,704 for the three months ended September 30, 2001 and
$47,350 for the same period in 2000 resulting in a $646 decrease, or 1%. The
decrease was primarily due to lower well maintenance costs, offset by higher ad
valorem taxes.
8
During this period, G&A decreased 59%, from $4,557 for the three months ended
September 30, 2000 to $1,868 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.
Depletion was $2,298 for the three months ended September 30, 2001 as compared
to $3,287 for the same period in 2000, a decrease of $989, or 30%. This decrease
was the result of a decline in oil production of 369 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 $39,000 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to reductions in working capital of $73,347 and G&A
expenses of $1,375, offset by an increase in production costs of $159 and a
decline in oil and gas sales receipts of $35,563. The increase in production
costs was primarily due to higher ad valorem taxes, offset by lower well
maintenance costs. 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. The decrease in oil
and gas receipts resulted from a $52,200 decline in production during 2001 as
compared to the same period in 2000 and a decline of $8,783 in oil and NGL
commodity prices, offset by an increase in gas commodity prices during 2001
which contributed an additional $25,420 to oil and gas receipts.
Net Cash Provided by (Used in) Investing Activities
The Partnership's investing activities for the nine months ended September 30,
2001 and 2000 were for expenditures related to equipment upgrades on various oil
and gas properties.
Proceeds from disposition of assets of $15,880 recognized during the nine months
ended September 30, 2001 were from salvage income received on one well plugged
and abandoned in a prior year.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $141,796, of which $35,563 was distributed to the general partners and
$106,233 to the limited partners. For the same period ended September 30, 2000,
cash distributions to the partners were $141,621, of which $35,737 was
distributed to the general partners and $105,884 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
the proposed merger of the Partnership into Pioneer Natural Resources USA, Inc.
("Pioneer USA"). For further information, see "Proposal to acquire partnerships"
below.
9
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.
10
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 81-II, LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 81-II, Ltd. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY 81-II, LTD.
(A Texas Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY 81-II, LTD.
(A Texas Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 53,938 $ 29,376
Accounts receivable - oil and gas sales 32,440 64,821
------------ ------------
Total current assets 86,378 94,197
------------ ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 5,349,639 5,345,296
Accumulated depletion (4,854,110) (4,821,914)
------------ ------------
Net oil and gas properties 495,529 523,382
------------ ------------
$ 581,907 $ 617,579
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 12,945 $ 9,253
Partners' capital:
General partners 55,799 61,405
Limited partners (1,153 interests) 513,163 546,921
------------ ------------
568,962 608,326
------------ ------------
$ 581,907 $ 617,579
============ ============
The financial information included as of September 30, 2001 has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY 81-II, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------------- -------------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Revenues:
Oil and gas $ 74,617 $ 109,345 $ 273,617 $ 283,393
Interest 479 867 1,824 1,760
---------- ---------- ---------- ----------
75,096 110,212 275,441 285,153
---------- ---------- ---------- ----------
Costs and expenses:
Oil and gas production 58,522 43,674 159,421 143,090
General and administrative 2,195 4,058 9,372 9,668
Depletion 11,470 9,464 32,196 36,281
---------- ---------- ---------- ----------
72,187 57,196 200,989 189,039
---------- ---------- ---------- ----------
Net income $ 2,909 $ 53,016 $ 74,452 $ 96,114
========== ========== ========== ==========
Allocation of net income:
General partners $ 2,447 $ 14,674 $ 23,187 $ 29,471
========== ========== ========== ==========
Limited partners $ 462 $ 38,342 $ 51,265 $ 66,643
========== ========== ========== ==========
Net income per limited
partnership interest $ .40 $ 33.25 $ 44.46 $ 57.80
========== ========== ========== ==========
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.
3
PARKER & PARSLEY 81-II, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
General Limited
partners partners Total
------------ ------------ ------------
Balance at January 1, 2001 $ 61,405 $ 546,921 $ 608,326
Distributions (28,793) (85,023) (113,816)
Net income 23,187 51,265 74,452
------------ ------------ ------------
Balance at September 30, 2001 $ 55,799 $ 513,163 $ 568,962
============ ============ ============
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 81-II, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
--------------------------
2001 2000
---------- ----------
Cash flows from operating activities:
Net income $ 74,452 $ 96,114
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 32,196 36,281
Changes in assets and liabilities:
Accounts receivable 32,381 (19,113)
Accounts payable 3,692 2,085
---------- ----------
Net cash provided by operating activities 142,721 115,367
---------- ----------
Cash flows used in investing activities:
Additions to oil and gas properties (4,343) (5,705)
Cash flows used in financing activities:
Cash distributions to partners (113,816) (89,035)
---------- ----------
Net increase in cash 24,562 20,627
Cash at beginning of period 29,376 30,160
---------- ----------
Cash at end of period $ 53,938 $ 50,787
========== ==========
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 81-II, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 81-II (the "Partnership") is a limited partnership organized in
1981 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 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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $693,862 of which $533,071 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
6
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 4% to $273,617 for the nine
months ended September 30, 2001 as compared to $283,393 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, 6,157 barrels of oil, 2,539 barrels of NGLs and 16,344 mcf of gas were
sold, or 11,420 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 6,691 barrels of oil, 4,010 barrels of NGLs and 12,982 mcf
of gas were sold, or 12,865 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 $1.17, or 4%, from $28.21
for the nine months ended September 30, 2000 to $27.04 for the same period in
2001. The average price received per barrel of NGLs decreased slightly from
$14.70 during the nine months ended September 30, 2000 to $14.62 for the same
period in 2001. The average price received per mcf of gas increased 56% from
$2.75 during the nine months ended September 30, 2000 to $4.28 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.
Costs and Expenses:
Total costs and expenses increased to $200,989 for the nine months ended
September 30, 2001 as compared to $189,039 for the same period in 2000, an
increase of $11,950, or 6%. This increase was due to an increase in production
costs, offset by declines in depletion and general and administrative expenses
("G&A").
Production costs were $159,421 for the nine months ended September 30, 2001 and
$143,090 for the same period in 2000 resulting in a $16,331 increase, or 11%.
The increase was primarily due to additional well maintenance costs incurred to
stimulate well production and higher ad valorem taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
3% from $9,668 for the nine months ended September 30, 2000 to $9,372 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.
7
Depletion was $32,196 for the nine months ended September 30, 2001 as compared
to $36,281 for the same period in 2000, a decrease of $4,085, or 11%. This
decrease was the result of a decline in oil production of 534 barrels for the
nine months ended September 30, 2001 as compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 32% to $74,617 for the three
months ended September 30, 2001 as compared to $109,345 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, 2,021
barrels of oil, 1,139 barrels of NGLs and 4,369 mcf of gas were sold, or 3,888
BOEs. For the three months ended September 30, 2000, 2,144 barrels of oil, 1,604
barrels of NGLs and 6,120 mcf of gas were sold, or 4,768 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 $3.96, or 13%, from
$30.25 for the three months ended September 30, 2000 to $26.29 for the same
period in 2001. The average price received per barrel of NGLs decreased $3.98,
or 26%, from $15.14 during the three months ended September 30, 2000 to $11.16
for the same period in 2001. The average price received per mcf of gas decreased
39% to $2.01 during the three months ended September 30, 2001 from $3.30 during
the same period in 2000.
Costs and Expenses:
Total costs and expenses increased to $72,187 for the three months ended
September 30, 2001 as compared to $57,196 for the same period in 2000, an
increase of $14,991, or 26%. This increase was due to increases in production
costs and depletion, offset by a decline in G&A.
Production costs were $58,522 for the three months ended September 30, 2001 and
$43,674 for the same period in 2000 resulting in a $14,848 increase, or 34%. The
increase was primarily due to additional well maintenance costs incurred to
stimulate production and higher ad valorem taxes.
During this period, G&A decreased 46%, from $4,058 for the three months ended
September 30, 2000 to $2,195 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.
Depletion was $11,470 for the three months ended September 30, 2001 as compared
to $9,464 for the same period in 2000, an increase of $2,006, or 21%. This
increase was the result of a decline in proved reserves during the period ended
September 30, 2001 as a result of lower commodity prices, offset by a decline in
oil production of 123 barrels for the three months ended September 30, 2001 as
compared to the same period in 2000.
8
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $27,354 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to reductions in working capital of $53,101 and G&A
expenses of $296, offset by an increase in production costs of $16,331 and a
decline in oil and gas receipts of $9,712. The decrease in oil and gas receipts
resulted from the declines in oil and NGL commodity prices during 2001 of $8,138
and a decline in production of $21,537 during 2001 as compared to the same
period in 2000, offset by an increase in gas commodity prices of $19,963. The
increase in production costs was primarily due to additional well maintenance
costs incurred to stimulate well production and higher ad valorem taxes. 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 Used in Investing Activities
For the nine months ended September 30, 2001 and 2000, the Partnership's
investing activities included expenditures related to equipment upgrades on
various oil and gas properties.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $113,816, of which $28,793 was distributed to the general partners and
$85,023 to the limited partners. For the same period ended September 30, 2000,
cash distributions to the partners were $89,035, of which $24,648 was
distributed to the general partners and $64,387 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
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.
9
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.
10
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 82-I, LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker & Parsley
82-I, Ltd. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 2-75530A
PARKER & PARSLEY 82-I, LTD.
(Exact name of Registrant as specified in its charter)
TEXAS 75-1825545
------------------------------- ----------------------
(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 82-I, LTD.
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..................................................... 11
Signatures........................................................................... 12
2
PARKER & PARSLEY 82-I, LTD.
(A Texas Limited Partnership)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 143,941 $ 57,728
Accounts receivable - oil and gas sales 60,695 109,719
----------- -----------
Total current assets 204,636 167,447
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 9,901,101 9,901,101
Accumulated depletion (9,633,702) (9,613,644)
----------- -----------
Net oil and gas properties 267,399 287,457
----------- -----------
$ 472,035 $ 454,904
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 28,340 $ 13,712
Partners' capital:
General partners 164,970 161,365
Limited partners (4,891 interests) 278,725 279,827
----------- -----------
443,695 441,192
----------- -----------
$ 472,035 $ 454,904
=========== ===========
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 82-I, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
---------------------- ----------------------
2001 2000 2001 2000
-------- -------- -------- --------
Revenues:
Oil and gas $151,803 $191,130 $573,649 $540,662
Interest 954 1,707 3,361 4,030
-------- -------- -------- --------
152,757 192,837 577,010 544,692
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 94,767 93,508 292,217 276,533
General and administrative 4,670 6,974 19,118 18,306
Depletion 7,341 4,107 20,058 20,219
-------- -------- -------- --------
106,778 104,589 331,393 315,058
-------- -------- -------- --------
Net income $ 45,979 $ 88,248 $245,617 $229,634
======== ======== ======== ========
Allocation of net income:
General partners $ 12,596 $ 22,678 $ 64,158 $ 60,441
======== ======== ======== ========
Limited partners $ 33,383 $ 65,570 $181,459 $169,193
======== ======== ======== ========
Net income per limited
partnership interest $ 6.82 $ 13.40 $ 37.10 $ 34.59
======== ======== ======== ========
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 82-I, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
General Limited
partners partners Total
--------- --------- ---------
Balance at January 1, 2001 $ 161,365 $ 279,827 $ 441,192
Distributions (60,553) (182,561) (243,114)
Net income 64,158 181,459 245,617
--------- --------- ---------
Balance at September 30, 2001 $ 164,970 $ 278,725 $ 443,695
========= ========= =========
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 82-I, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
-------------------------
2001 2000
--------- ---------
Cash flows from operating activities:
Net income $ 245,617 $ 229,634
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 20,058 20,219
Changes in assets and liabilities:
Accounts receivable 49,024 (30,085)
Accounts payable 14,628 7,967
--------- ---------
Net cash provided by operating activities 329,327 227,735
--------- ---------
Cash flows used in investing activities:
Additions to oil and gas properties -- (5,746)
Cash flows used in financing activities:
Cash distributions to partners (243,114) (243,035)
--------- ---------
Net increase (decrease) in cash 86,213 (21,046)
Cash at beginning of period 57,728 61,558
--------- ---------
Cash at end of period $ 143,941 $ 40,512
========= =========
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 82-I, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 82-I, Ltd. (the "Partnership") is a limited partnership
organized in 1982 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 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 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.
NOTE 3. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $1,292,805 of which $882,252 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
7
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 increased 6% to $573,649 for the nine
months ended September 30, 2001 as compared to $540,662 for the same period in
2000. The increase in revenues resulted from higher average prices received for
gas and natural gas liquids ("NGLs"), offset by lower average prices received
for oil and a decrease in production. For the nine months ended September 30,
2001, 13,049 barrels of oil, 3,835 barrels of NGLs and 39,037 mcf of gas were
sold, or 23,390 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 12,935 barrels of oil, 5,029 barrels of NGLs and 35,584 mcf
of gas were sold, or 23,895 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 $1.03, or 4%, from $28.34
for the nine months ended September 30, 2000 to $27.31 for the same period in
2001. The average price received per barrel of NGLs increased $.92, or 7%, from
$13.72 during the nine months ended September 30, 2000 to $14.64 for the same
period in 2001. The average price received per mcf of gas increased 40% from
$2.95 during the nine months ended September 30, 2000 to $4.13 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.
Costs and Expenses:
Total costs and expenses increased to $331,393 for the nine months ended
September 30, 2001 as compared to $315,058 for the same period in 2000, an
increase of $16,335, or 5%. This increase was due to increases in production
costs and general and administrative expenses ("G&A"), offset by a decline in
depletion.
Production costs were $292,217 for the nine months ended September 30, 2001 and
$276,533 for the same period in 2000 resulting in a $15,684 increase, or 6%.
This increase was primarily due to higher ad valorem taxes, additional well
maintenance costs incurred to stimulate well production and higher production
taxes associated with higher revenue prices.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A increased
4% from $18,306 for the nine months ended September 30, 2000 to $19,118 for the
same period in 2001 primarily due to a higher percentage of the managing general
partner's G&A being allocated (limited to 3% of oil and gas revenues) as a
result of increased oil and gas revenues.
8
Depletion was $20,058 for the nine months ended September 30, 2001 as compared
to $20,219 for the same period in 2000, a decrease of $161, or 1%.
Three months ended September 30, 2001 compared with three months ended
September 30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 21% to $151,803 for the three
months ended September 30, 2001 as compared to $191,130 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, 4,005
barrels of oil, 1,491 barrels of NGLs and 11,206 mcf of gas were sold, or 7,364
BOEs. For the three months ended September 30, 2000, 4,072 barrels of oil, 1,737
barrels of NGLs and 12,327 mcf of gas were sold, or 7,864 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 $3.77, or 12%, from
$30.26 for the three months ended September 30, 2000 to $26.49 for the same
period in 2001. The average price received per barrel of NGLs decreased $3.20,
or 22%, from $14.80 during the three months ended September 30, 2000 to $11.60
for the same period in 2001. The average price received per mcf of gas decreased
26% from $3.42 during the three months ended September 30, 2000 to $2.54 for the
same period in 2001.
Costs and Expenses:
Total costs and expenses increased to $106,778 for the three months ended
September 30, 2001 as compared to $104,589 for the same period in 2000, an
increase of $2,189, or 2%. This increase was due to increases in depletion and
production costs, offset by a decrease in G&A.
Production costs were $94,767 for the three months ended September 30, 2001 and
$93,508 for the same period in 2000 resulting in a $1,259 increase, or 1%. The
increase was primarily due to a higher ad valorem taxes, offset by a decline in
well maintenance costs and lower production taxes associated with lower oil and
gas prices.
During this period, G&A decreased 33% from $6,974 for the three months ended
September 30, 2000 to $4,670 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.
Depletion was $7,341 for the three months ended September 30, 2001 as compared
to $4,107 for the same period in 2000, representing an increase of $3,234, or
79%. This increase was attributable to a decrease in proved reserves as a result
of lower commodity prices for the three months ended September 30, 2001 as
compared to the same period in 2000.
9
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $101,592 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to an increase in oil and gas sales receipts of $32,318
and a reduction of $85,770 in working capital, offset by increases in production
costs of $15,684 and G&A expenses of $812. The increase in oil and gas receipts
resulted from increases in gas and NGL prices during 2001 which contributed an
additional $46,447 to oil and gas receipts, offset by a decrease of $14,017 in
oil prices and a decline in production of $112 during 2001 as compared to the
same period in 2000. The increase in production costs was primarily due to
higher ad valorem taxes, additional well maintenance costs incurred to stimulate
well production and increased production taxes associated with higher revenue
prices. The increase in G&A was primarily due to a higher percentage of the
managing general partner's G&A being allocated (limited to 3% of oil and gas
revenues) as a result of increased oil and gas revenues.
Net Cash Used in Investing Activities
The Partnership's principal investing activities during the nine months ended
September 30, 2000 were related to upgrades of oil and gas equipment on active
properties.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $243,114, of which $60,553 was distributed to the general partners and
$182,561 to the limited partners. For the same period ended September 30, 2000,
cash distributions to the partners were $243,035, of which $61,165 was
distributed to the general partners and $181,870 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
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.
10
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 - none
(b) Reports on Form 8-K - none
11
PARKER & PARSLEY 82-I, LTD.
(A Texas Limited Partnership)
SIGNATURES
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 82-I, LTD.
By: Pioneer Natural Resources USA, Inc.,
Managing General Partner
Dated: November 8, 2001 By: /s/ Rich Dealy
-------------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
12
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 82-II, LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 82-II, Ltd. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 2-75530B
PARKER & PARSLEY 82-II, LTD.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
TEXAS 75-1867115
------------------------------- ----------------------
(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 82-II, LTD.
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........................ 11
Signatures.............................................. 12
2
PARKER & PARSLEY 82-II, LTD.
(A Texas Limited Partnership)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
September 30, December 31,
2001 2000
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash $ 169,759 $ 77,911
Accounts receivable - oil and gas sales 65,458 107,778
----------- -----------
Total current assets 235,217 185,689
----------- -----------
Oil and gas properties - at cost, based on the successful
efforts accounting method 8,307,568 8,305,901
Accumulated depletion (7,566,667) (7,531,290)
----------- -----------
Net oil and gas properties 740,901 774,611
----------- -----------
$ 976,118 $ 960,300
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 26,061 $ 12,662
Partners' capital:
General partners 127,374 121,968
Limited partners (6,126 interests) 822,683 825,670
----------- -----------
950,057 947,638
----------- -----------
$ 976,118 $ 960,300
=========== ===========
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 82-II, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------- -------------------
2001 2000 2001 2000
-------- -------- -------- --------
Revenues:
Oil and gas $155,860 $186,321 $540,003 $520,927
Interest 1,039 1,871 3,597 4,810
-------- -------- -------- --------
156,899 188,192 543,600 525,737
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 90,122 80,741 274,287 227,999
General and administrative 4,780 6,711 17,991 17,538
Depletion 13,080 11,881 35,377 33,084
-------- -------- -------- --------
107,982 99,333 327,655 278,621
-------- -------- -------- --------
Net income $ 48,917 $ 88,859 $215,945 $247,116
======== ======== ======== ========
Allocation of net income:
General partners $ 14,192 $ 23,997 $ 59,038 $ 66,742
======== ======== ======== ========
Limited partners $ 34,725 $ 64,862 $156,907 $180,374
======== ======== ======== ========
Net income per limited
partnership interest $ 5.67 $ 10.58 $ 25.61 $ 29.44
======== ======== ======== ========
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.
4
PARKER & PARSLEY 82-II, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
General Limited
partners partners Total
--------- --------- ---------
Balance at January 1, 2001 $ 121,968 $ 825,670 $ 947,638
Distributions (53,632) (159,894) (213,526)
Net income 59,038 156,907 215,945
--------- --------- ---------
Balance at September 30, 2001 $ 127,374 $ 822,683 $ 950,057
========= ========= =========
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.
5
PARKER & PARSLEY 82-II, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
----------------------
2001 2000
--------- ---------
Cash flows from operating activities:
Net income $ 215,945 $ 247,116
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 35,377 33,084
Changes in assets and liabilities:
Accounts receivable 42,320 (12,897)
Accounts payable 13,399 7,890
--------- ---------
Net cash provided by operating activities 307,041 275,193
--------- ---------
Cash flows used in investing activities:
Additions to oil and gas properties (1,667) (5,226)
Cash flows used in financing activities:
Cash distributions to partners (213,526) (256,036)
--------- ---------
Net increase in cash 91,848 13,931
Cash at beginning of period 77,911 91,672
--------- ---------
Cash at end of period $ 169,759 $ 105,603
========= =========
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.
6
PARKER & PARSLEY 82-II, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 82-II, Ltd. (the "Partnership") is a limited partnership
organized in 1982 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 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 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.
NOTE 3. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $1,657,138 of which $1,223,284 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
7
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 increased 4% to $540,003 for the nine
months ended September 30, 2001 as compared to $520,927 for the same period in
2000. The increase in revenues resulted from higher average prices received for
gas and natural gas liquids ("NGLs"), offset by lower average prices received
for oil and a decrease in production. For the nine months ended September 30,
2001, 12,144 barrels of oil, 4,826 barrels of NGLs and 31,066 mcf of gas were
sold, or 22,148 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 12,890 barrels of oil, 5,841 barrels of NGLs and 27,416 mcf
of gas were sold, or 23,300 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 $1.10, or 4%, from $28.46
for the nine months ended September 30, 2000 to $27.36 for the same period in
2001. The average price received per barrel of NGLs increased $.85, or 6%, from
$14.28 during the nine months ended September 30, 2000 to $15.13 for the same
period in 2001. The average price received per mcf of gas increased 68% from
$2.58 for the nine months ended September 30, 2000 to $4.34 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.
Costs and Expenses:
Total costs and expenses increased to $327,655 for the nine months ended
September 30, 2001 as compared to $278,621 for the same period in 2000, an
increase of $49,034, or 18%. This increase was due to increases in production
costs, depletion and general and administrative expenses ("G&A").
Production costs were $274,287 for the nine months ended September 30, 2001 and
$227,999 for the same period in 2000 resulting in a $46,288 increase, or 20%.
This increase was primarily due to additional well maintenance costs incurred to
stimulate well production, higher ad valorem taxes and higher production taxes
associated with higher revenue prices.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A increased
3% from $17,538 for the nine months ended September 30, 2000 to $17,991 for the
same period in 2001 primarily due to a higher percentage of the managing general
partner's G&A being allocated (limited to 3% of oil and gas revenues) as a
result of increased oil and gas revenues.
8
Depletion was $35,377 for the nine months ended September 30, 2001 as compared
to $33,084 for the same period in 2000, an increase of $2,293, or 7%. This
increase was attributable to a reduction in proved reserves during the period
ended September 30, 2001 as a result of lower commodity prices, offset by a
decline in oil production of 746 barrels for the nine months ended September 30,
2001 as compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 16% to $155,860 for the three
months ended September 30, 2001 as compared to $186,321 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, 4,160
barrels of oil, 1,877 barrels of NGLs and 9,035 mcf of gas were sold, or 7,543
BOEs. For the three months ended September 30, 2000, 4,262 barrels of oil, 1,865
barrels of NGLs and 8,918 mcf of gas were sold, or 7,613 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 $3.83, or 13%, from
$30.37 for the three months ended September 30, 2000 to $26.54 for the same
period in 2001. The average price received per barrel of NGLs decreased $3.71,
or 24%, from $15.65 during the three months ended September 30, 2000 to $11.94
for the same period in 2001. The average price received per mcf of gas decreased
18% to $2.55 during the three months ended September 30, 2001 from $3.10 for the
same period in 2000.
Costs and Expenses:
Total costs and expenses increased to $107,982 for the three months ended
September 30, 2001 as compared to $99,333 for the same period in 2000, an
increase of $8,649, or 9%. This increase was due to increases in production
costs and depletion, offset by a decline in G&A.
Production costs were $90,122 for the three months ended September 30, 2001 and
$80,741 for the same period in 2000 resulting in a $9,381 increase, or 12%. The
increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production, offset by a decline in
production taxes associated with lower oil and gas prices.
During this period, G&A decreased 29% from $6,711 for the three months ended
September 30, 2000 to $4,780 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.
Depletion was $13,080 for the three months ended September 30, 2001 as compared
to $11,881 for the same period in 2000, representing an increase of $1,199, or
10%. This increase was attributable to a decrease in proved reserves during the
period ended September 30, 2001 as a result of lower
9
commodity prices, offset by a decline in oil production of 102 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 $31,848 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to an increase in oil and gas sales receipts of $17,863
and a reduction of $60,726 in working capital, offset by increases in production
costs of $46,288 and G&A expenses of $453. The increase in oil and gas receipts
resulted from higher average prices received for gas and NGLs of $53,094, offset
by a decrease in oil prices of $15,293 and a decline in production of $19,938
during 2001 as compared to the same period in 2000. The increase in production
costs was primarily due to additional well maintenance costs incurred to
stimulate well production, higher ad valorem taxes and increased production
taxes associated with higher revenue prices. The increase in G&A was primarily
due to a higher percentage of the managing general partner's G&A being allocated
(limited to 3% of oil and gas revenues) as a result of increased oil and gas
revenues.
Net Cash Used in Investing Activities
The Partnership's investing activities during the nine months ended September
30, 2001 and 2000 were related to upgrades of oil and gas equipment on various
oil and gas properties.
Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $213,526, of which $53,632 was distributed to the general partners and
$159,894 to the limited partners. For the same period ended September 30, 2000,
cash distributions to the partners were $256,036, of which $64,534 was
distributed to the general partners and $191,502 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
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.
10
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 - none
(b) Reports on Form 8-K - none
11
PARKER & PARSLEY 82-II, LTD.
(A Texas Limited Partnership)
SIGNATURES
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 82-II, LTD.
By: Pioneer Natural Resources USA, Inc.,
Managing General Partner
Dated: November 8, 2001 By: /s/ Rich Dealy
------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
12
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 82-III, LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 82-III, Ltd. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY 82-III, LTD.
(A Texas Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY 82-III, LTD.
(A Texas Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 97,178 $ 46,188
Accounts receivable - oil and gas sales 43,977 69,903
----------- -----------
Total current assets 141,155 116,091
----------- -----------
Oil and gas properties - at cost, based on
the successful efforts accounting method 5,970,397 5,970,397
Accumulated depletion (5,651,487) (5,634,468)
----------- -----------
Net oil and gas properties 318,910 335,929
----------- -----------
$ 460,065 $ 452,020
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 20,013 $ 9,780
Partners' capital:
General partners 59,706 57,956
Limited partners (3,441 interests) 380,346 384,284
----------- -----------
440,052 442,240
----------- -----------
$ 460,065 $ 452,020
=========== ===========
The financial information included as of September 30, 2001 has been prepared
by management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY 82-III, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------------ ------------------------
2001 2000 2001 2000
-------- -------- -------- --------
Revenues:
Oil and gas $ 99,921 $151,444 $371,917 $414,741
Interest 653 1,275 2,312 3,171
-------- -------- -------- --------
100,574 152,719 374,229 417,912
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 59,803 61,896 181,874 170,758
General and administrative 2,997 5,379 12,430 13,687
Depletion 5,852 5,667 17,019 17,658
-------- -------- -------- --------
68,652 72,942 211,323 202,103
-------- -------- -------- --------
Net income $ 31,922 $ 79,777 $162,906 $215,809
======== ======== ======== ========
Allocation of net income:
General partners $ 8,858 $ 20,794 $ 43,024 $ 56,601
======== ======== ======== ========
Limited partners $ 23,064 $ 58,983 $119,882 $159,208
======== ======== ======== ========
Net income per limited
partnership interest $ 6.70 $ 17.14 $ 34.84 $ 46.27
======== ======== ======== ========
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.
3
PARKER & PARSLEY 82-III, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
General Limited
partners partners Total
---------- ---------- ----------
Balance at January 1, 2001 $ 57,956 $ 384,284 $ 442,240
Distributions (41,274) (123,820) (165,094)
Net income 43,024 119,882 162,906
---------- ---------- ----------
Balance at September 30, 2001 $ 59,706 $ 380,346 $ 440,052
========== ========== ==========
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 82-III, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
---------------------------------
2001 2000
----------- -----------
Cash flows from operating activities:
Net income $ 162,906 $ 215,809
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 17,019 17,658
Changes in assets and liabilities:
Accounts receivable 25,926 (18,428)
Accounts payable 10,233 7,008
----------- -----------
Net cash provided by operating activities 216,084 222,047
----------- -----------
Cash flows used in investing activities:
Additions to oil and gas properties -- (2,484)
Cash flows used in financing activities:
Cash distributions to partners (165,094) (224,758)
----------- -----------
Net increase (decrease) in cash 50,990 (5,195)
Cash at beginning of period 46,188 53,335
----------- -----------
Cash at end of period $ 97,178 $ 48,140
=========== ===========
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 82-III, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 82-III, Ltd. (the "Partnership") is a limited partnership
organized in 1982 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 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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $1,103,465 of which $797,555 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
6
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 10% to $371,917 for the nine
months ended September 30, 2001 as compared to $414,741 for the same period in
2000. The decrease in revenues resulted from lower average prices received for
oil and a decline in production, offset by higher average prices received for
gas and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 9,885 barrels of oil, 2,898 barrels of NGLs and 16,610 mcf of gas were
sold, or 15,551 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 10,653 barrels of oil, 5,165 barrels of NGLs and 17,317 mcf
of gas were sold, or 18,704 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 $1.33, or 5%, from $28.84
for the nine months ended September 30, 2000 to $27.51 for the same period in
2001. The average price received per barrel of NGLs increased $.20, or 2%, from
$13.06 during the nine months ended September 30, 2000 to $13.26 for the same
period in 2001. The average price received per mcf of gas increased 61% from
$2.31 during the nine months ended September 30, 2000 to $3.71 in 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.
Costs and Expenses:
Total costs and expenses increased to $211,323 for the nine months ended
September 30, 2001 as compared to $202,103 for the same period in 2000, an
increase of $9,220, or 5%. 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 $181,874 for the nine months ended September 30, 2001 and
$170,758 for the same period in 2000, resulting in an $11,116 increase, or 7%.
The increase was primarily due to additional well maintenance costs incurred to
stimulate well production and higher ad valorem taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
9% from $13,687 for the nine months ended September 30, 2000 to $12,430 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.
7
Depletion was $17,019 for the nine months ended September 30, 2001 as compared
to $17,658 for the same period in 2000, a decrease of $639, or 4%. This decrease
was due to a decline in oil production of 768 barrels for the nine months ended
September 30, 2001 as compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended
September 30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 34% to $99,921 for the three
months ended September 30, 2001 as compared to $151,444 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, 3,001
barrels of oil, 1,175 barrels of NGLs and 4,208 mcf of gas were sold, or 4,877
BOEs. For the three months ended September 30, 2000, 3,519 barrels of oil, 1,755
barrels of NGLs and 5,908 mcf of gas were sold, or 6,259 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 $4.21, or 14%, from
$30.74 for the three months ended September 30, 2000 to $26.53 for the same
period in 2001. The average price received per barrel of NGLs decreased $3.85,
or 26%, from $14.54 during the three months ended September 30, 2000 to $10.69
for the same period in 2001. The average price received per mcf of gas decreased
39% to $1.84 during the three months ended September 30, 2001 from $3.01 during
the same period in 2000.
Costs and Expenses:
Total costs and expenses decreased to $68,652 for the three months ended
September 30, 2001 as compared to $72,942 for the same period in 2000, a
decrease of $4,290, or 6%. This decrease was due to declines in G&A and
production costs, offset by an increase in depletion.
Production costs were $59,803 for the three months ended September 30, 2001 and
$61,896 for the same period in 2000 resulting in a $2,093 decrease, or 3%. The
decrease was primarily due to lower well maintenance costs, offset by higher ad
valorem taxes.
During this period, G&A decreased 44% from $5,379 for the three months ended
September 30, 2000 to $2,997 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.
Depletion was $5,852 for the three months ended September 30, 2001 as compared
to $5,667 for the same period in 2000, an increase of $185, or 3%.
8
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased $5,963 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This decrease was due to a decline in oil and gas sales receipts of $43,683 and
an increase in production costs of $11,116, offset by a decline in G&A expenses
of $1,257 and a reduction in working capital of $47,579. The decrease in oil and
gas receipts of $53,817 resulted from the decline in production during 2001 as
compared to the same period in 2000 and a decline of $15,059 in oil commodity
prices during 2001, offset by an increase in gas and NGL commodity prices of
$25,193. The increase in production costs was primarily due to additional well
maintenance costs incurred to stimulate well production and higher ad valorem
taxes. 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 Used in Investing Activities
The Partnership's principal investing activities during the nine months ended
September 30, 2000 were related to upgrades of oil and gas equipment on active
properties.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $165,094, of which $41,274 was distributed to the general partners and
$123,820 to the limited partners. For the same period ended September 30, 2000,
cash distributions to the partners were $224,758, of which $54,987 was
distributed to the general partners and $169,771 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
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.
9
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.
10
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 83-A, LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 83-A, Ltd. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 2-81398A
PARKER & PARSLEY 83-A, LTD.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
TEXAS 75-1891384
-------------------------------- ----------------------
(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 83-A, LTD.
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..................................................... 11
Signatures........................................................................... 12
2
PARKER & PARSLEY 83-A, LTD.
(A Texas Limited Partnership)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- -------------
(Unaudited)
ASSETS
Current assets:
Cash $ 357,718 $ 169,055
Accounts receivable - oil and gas sales 155,762 279,239
------------ ------------
Total current assets 513,480 448,294
------------ ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 16,907,175 16,901,194
Accumulated depletion (15,688,107) (15,622,262)
------------ ------------
Net oil and gas properties 1,219,068 1,278,932
------------ ------------
$ 1,732,548 $ 1,727,226
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 67,956 $ 33,783
Partners' capital:
General partners 201,848 200,131
Limited partners (19,505 interests) 1,462,744 1,493,312
------------ ------------
1,664,592 1,693,443
------------ ------------
$ 1,732,548 $ 1,727,226
============ ============
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 83-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
---------------------------- ----------------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Revenues:
Oil and gas $ 354,249 $ 500,331 $1,333,347 $1,365,167
Interest 2,499 3,991 8,755 9,415
---------- ---------- ---------- ----------
356,748 504,322 1,342,102 1,374,582
---------- ---------- ---------- ----------
Costs and expenses:
Oil and gas production 251,477 210,730 723,118 654,006
General and administrative 10,944 17,886 44,059 45,675
Depletion 22,665 20,114 65,845 60,352
---------- ---------- ---------- ----------
285,086 248,730 833,022 760,033
---------- ---------- ---------- ----------
Net income $ 71,662 $ 255,592 $ 509,080 $ 614,549
========== ========== ========== ==========
Allocation of net income:
General partners $ 21,385 $ 67,634 $ 137,821 $ 163,870
========== ========== ========== ==========
Limited partners $ 50,277 $ 187,958 $ 371,259 $ 450,679
========== ========== ========== ==========
Net income per limited
partnership interest $ 2.57 $ 9.64 $ 19.03 $ 23.11
========== ========== ========== ==========
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 83-A, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
General Limited
partners partners Total
----------- ----------- -----------
Balance at January 1, 2001 $ 200,131 $ 1,493,312 $ 1,693,443
Distributions (136,104) (401,827) (537,931)
Net income 137,821 371,259 509,080
----------- ----------- -----------
Balance at September 30, 2001 $ 201,848 $ 1,462,744 $ 1,664,592
=========== =========== ===========
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 83-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
-----------------------------
2001 2000
--------- ---------
Cash flows from operating activities:
Net income $ 509,080 $ 614,549
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 65,845 60,352
Changes in assets and liabilities:
Accounts receivable 123,477 (35,612)
Accounts payable 34,173 26,005
--------- ---------
Net cash provided by operating activities 732,575 665,294
--------- ---------
Cash flows used in investing activities:
Additions to oil and gas properties (5,981) (5,992)
Cash flows used in financing activities:
Cash distributions to partners (537,931) (616,726)
--------- ---------
Net increase in cash 188,663 42,576
Cash at beginning of period 169,055 143,823
--------- ---------
Cash at end of period $ 357,718 $ 186,399
========= =========
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 83-A, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 83-A, Ltd. (the "Partnership") is a limited partnership
organized in 1983 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 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 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.
NOTE 3. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $3,660,109 of which $2,697,724 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
7
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 2% to $1,333,347 for the nine
months ended September 30, 2001 as compared to $1,365,167 for the same period in
2000. The decrease in revenues resulted from lower average prices received for
oil and a decline in production, offset by higher average prices received for
gas and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 30,872 barrels of oil, 13,264 barrels of NGLs and 72,161 mcf of gas were
sold, or 56,163 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 31,864 barrels of oil, 17,938 barrels of NGLs and 73,083 mcf
of gas were sold, or 61,983 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 $1.36, or 5%, from $28.54
for the nine months ended September 30, 2000 to $27.18 for the same period in
2001. The average price received per barrel of NGLs increased slightly from
$14.67 during the nine months ended September 30, 2000 to $14.72 for the same
period in 2001. The average price received per mcf of gas increased 57% from
$2.64 for the nine months ended September 30, 2000 to $4.15 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.
Costs and Expenses:
Total costs and expenses increased to $833,022 for the nine months ended
September 30, 2001 as compared to $760,033 for the same period in 2000, an
increase of $72,989, or 10%. This increase was due to increases in production
costs and depletion, offset by a decline in general and administrative expenses
("G&A").
Production costs were $723,118 for the nine months ended September 30, 2001 and
$654,006 for the same period in 2000 resulting in a $69,112 increase, or 11%.
The increase was primarily due to additional well maintenance costs incurred to
stimulate well production and higher ad valorem taxes, offset by less 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
4% from $45,675 for the nine months ended September 30, 2000 to $44,059 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.
8
Depletion was $65,845 for the nine months ended September 30, 2001 as compared
to $60,352 for the same period in 2000, an increase of $5,493, or 9%. This
increase was attributable to a decrease in proved reserves during the period
ended September 30, 2001 due to lower commodity prices, offset by a decline in
oil production of 992 barrels for the nine months ended September 30, 2001 as
compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended
September 30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 29% to $354,249 for the three
months ended September 30, 2001 as compared to $500,331 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, 10,009
barrels of oil, 4,586 barrels of NGLs and 19,666 mcf of gas were sold, or 17,873
BOEs. For the three months ended September 30, 2000, 10,409 barrels of oil,
6,242 barrels of NGLs and 26,245 mcf of gas were sold, or 21,025 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 $4.19, or 14%, from
$30.57 for the three months ended September 30, 2000 to $26.38 for the same
period in 2001. The average price received per barrel of NGLs decreased $4.32,
or 28%, from $15.38 during the three months ended September 30, 2000 to $11.06
for the same period in 2001. The average price received per mcf of gas decreased
39% from $3.28 for the three months ended September 30, 2000 to $2.01 for the
same period in 2001.
Costs and Expenses:
Total costs and expenses increased to $285,086 for the three months ended
September 30, 2001 as compared to $248,730 for the same period in 2000, an
increase of $36,356, or 15%. This increase was due to increases in production
costs and depletion, offset by a decrease in G&A.
Production costs were $251,477 for the three months ended September 30, 2001 and
$210,730 for the same period in 2000 resulting in a $40,747 increase, or 19%.
This increase was primarily due to additional well maintenance costs incurred to
stimulate well production and higher ad valorem taxes, offset by a decline in
production taxes and workover costs.
During this period, G&A decreased 39% from $17,886 for the three months ended
September 30, 2000 to $10,944 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.
Depletion was $22,665 for the three months ended September 30, 2001 as compared
to $20,114 for the same period in 2000, representing an increase of $2,551, or
13%. This increase was attributable to a decline in proved reserves during the
period ended September 30, 2001 as a result of lower
9
commodity prices, offset by a decrease in oil production of 400 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 $67,281 during the nine
months ended September 30, 2001 compared to the same period in 2000. This
increase was due to a decline of $167,257 in working capital and $1,616 in G&A
expenses, offset by an increase in production costs of $69,112 and a reduction
in oil and gas receipts of $32,480. The decrease in oil and gas receipts
resulted from the decline in oil commodity prices of $43,357 and the decline in
production of $99,584 during 2001 as compared to the same period in 2000, offset
by higher gas and NGL commodity prices of $110,461. The increase in production
costs was primarily due to additional well maintenance costs incurred to
stimulate well production and increased ad valorem taxes, offset by less
workover expenses. 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 Used in Investing Activities
The Partnership's investment activities during the nine months ended September
30, 2001 and 2000 included expenditures related to equipment upgrades on various
oil and gas properties.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $537,931, of which $136,104 was distributed to the general partners and
$401,827 to the limited partners. For the same period ended September 30, 2000,
cash distributions to the partners were $616,726, of which $157,253 was
distributed to the general partners and $459,473 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
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.
10
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
11
PARKER & PARSLEY 83-A, LTD.
(A Texas Limited Partnership)
SIGNATURES
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 83-A, LTD.
By: Pioneer Natural Resources USA, Inc.,
Managing General Partner
Dated: November 8, 2001 By: /s/ Rich Dealy
--------------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
12
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 83-B, LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 83-B, Ltd. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 2-81398B
PARKER & PARSLEY 83-B, LTD.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
TEXAS 75-1907245
------------------------------- ----------------------
(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 83-B, LTD.
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 83-B, LTD.
(A Texas Limited Partnership)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 397,455 $ 224,865
Accounts receivable - oil and gas sales 205,714 369,349
------------ ------------
Total current assets 603,169 594,214
------------ ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 18,508,128 18,957,070
Accumulated depletion (16,943,709) (17,248,214)
------------ ------------
Net oil and gas properties 1,564,419 1,708,856
------------ ------------
$ 2,167,588 $ 2,303,070
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 73,898 $ 39,862
Partners' capital:
General partners 296,159 316,574
Limited partners (23,370 interests) 1,797,531 1,946,634
------------ ------------
2,093,690 2,263,208
------------ ------------
$ 2,167,588 $ 2,303,070
============ ============
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 83-B, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------------------ -----------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Revenues:
Oil and gas $ 445,417 $ 620,233 $ 1,531,987 $ 1,716,120
Interest 3,049 6,307 10,989 15,396
Gain on disposition of assets 28,178 -- 39,101 5,351
------------ ------------ ------------ ------------
476,644 626,540 1,582,077 1,736,867
------------ ------------ ------------ ------------
Costs and expenses:
Oil and gas production 323,489 221,858 908,472 701,985
General and administrative 13,667 21,699 50,094 56,487
Impairment of oil and gas properties 74,068 -- 74,068 --
Depletion 33,320 26,120 85,287 78,451
Abandoned property 30,388 -- 30,388 --
------------ ------------ ------------ ------------
474,932 269,677 1,148,309 836,923
------------ ------------ ------------ ------------
Net income $ 1,712 $ 356,863 $ 433,768 $ 899,944
============ ============ ============ ============
Allocation of net income (loss):
General partners $ 16,944 $ 93,908 $ 131,732 $ 237,202
============ ============ ============ ============
Limited partners $ (15,232) $ 262,955 $ 302,036 $ 662,742
============ ============ ============ ============
Net income (loss) per limited
partnership interest $ (.66) $ 11.25 $ 12.92 $ 28.36
============ ============ ============ ============
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 83-B, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
General Limited
partners partners Total
------------ ------------ ------------
Balance at January 1, 2001 $ 316,574 $ 1,946,634 $ 2,263,208
Distributions (152,147) (451,139) (603,286)
Net income 131,732 302,036 433,768
------------ ------------ ------------
Balance at September 30, 2001 $ 296,159 $ 1,797,531 $ 2,093,690
============ ============ ============
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 83-B, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
------------------------------
2001 2000
------------ ------------
Cash flows from operating activities:
Net income $ 433,768 $ 899,944
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 74,068 --
Depletion 85,287 78,451
Gain on disposition of assets (39,101) (5,351)
Changes in assets and liabilities:
Accounts receivable 163,635 (49,392)
Accounts payable 51,536 22,414
------------ ------------
Net cash provided by operating activities 769,193 946,066
------------ ------------
Cash flows from investing activities:
Additions to oil and gas properties (14,918) (7,644)
Proceeds from asset dispositions 21,601 5,358
------------ ------------
Net cash provided by (used in) investing activities 6,683 (2,286)
------------ ------------
Cash flows used in financing activities:
Cash distributions to partners (603,286) (926,425)
------------ ------------
Net increase in cash 172,590 17,355
Cash at beginning of period 224,865 244,091
------------ ------------
Cash at end of period $ 397,455 $ 261,446
============ ============
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 83-B, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF ORGANIZATION
Parker & Parsley 83-B, Ltd. (the "Partnership") is a limited partnership
organized in 1983 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 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 adjustment 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 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.
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
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 $74,068 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
7
NOTE 4. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $4,925,037 of which $3,614,524 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the 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 11% to $1,531,987 for the nine
months ended September 30, 2001 as compared to $1,716,120 for the same period in
2000. The decrease in revenues resulted from lower average prices received for
oil and a decline in production, offset by higher average prices received for
gas and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 35,211 barrels of oil, 16,529 barrels of NGLs and 82,726 mcf of gas were
sold, or 65,528 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 38,681 barrels of oil, 23,453 barrels of NGLs and 103,116
mcf of gas were sold, or 79,320 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 $1.59, or 6%, from $28.77
for the nine months ended September 30, 2000 to $27.18 for the same period in
2001. The average price received per barrel of NGLs increased $.10, or 1%, from
$14.82 during the nine months ended September 30, 2000 to $14.92 for the same
period in 2001. The average price received per mcf of gas increased 60% from
$2.48 for the nine months ended September 30, 2000 to $3.97 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 $39,101 and $5,351 were recognized during the
nine months ended September 30, 2001 and 2000, respectively. During the period
ended 2001, salvage income of $10,923 was received from a well that was plugged
and abandoned in the prior year and $28,178 was recognized from salvage income
on one plugged and abandoned well in the current period. A gain of $5,351
recognized during the period ended 2000 was from equipment credits on a fully
depleted well. Abandoned property costs of $30,388 were incurred to plug and
abandon one well during the nine months ended September 30, 2001.
8
Costs and Expenses:
Total costs and expenses increased to $1,148,309 for the nine months ended
September 30, 2001 as compared to $836,923 for the same period in 2000, an
increase of $311,386, or 37%. This increase was due to increases in production
costs, the impairment of oil and gas properties, abandoned property costs and
depletion, offset by a decline in general and administrative expenses ("G&A").
Production costs were $908,472 for the nine months ended September 30, 2001 and
$701,985 for the same period in 2000 resulting in a $206,487 increase, or 29%.
This increase was primarily due to additional well maintenance and workover
costs incurred to stimulate well production and higher ad valorem taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
11% from $56,487 for the nine months ended September 30, 2000 to $50,094 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 $74,068 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $85,287 for the nine months ended September 30, 2001 as compared
to $78,451 for the same period in 2000, representing an increase of $6,836, or
9%. This increase was attributable to a decrease 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 decline in oil production of 3,470 barrels for
the nine months ended September 30, 2001 as compared to the same period in 2000
and a decline in the Partnership's net depletable basis from charges taken in
accordance with SFAS 121 during the fourth quarter of 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 28% to $445,417 for the three
months ended September 30, 2001 as compared to $620,233 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, 12,133
barrels of oil, 5,770 barrels of NGLs and 26,522 mcf of gas were sold, or 22,323
BOEs. For the three months ended September 30, 2000, 12,754 barrels of oil,
7,440 barrels of NGLs and 32,864 mcf of gas were sold, or 25,671 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 $4.45, or 14%, from
$30.78 for the three months ended September 30, 2000 to $26.33 for the same
period in 2001. The average price received per barrel of NGLs decreased $4.66,
or 28%, from $16.38 during the three months ended September 30, 2000 to $11.72
for the same period in 2001. The average price received per mcf of gas decreased
32% from $3.22 for the three months ended September 30, 2000 to $2.20 for the
same period in 2001.
Gain on disposition of assets of $28,178 was recognized during the three months
ended September 30, 2001 from salvage income received on one well plugged and
abandoned during the current period. Abandoned property costs of $30,388 were
incurred during the three months ended September 30, 2001 to plug and abandon
this well.
Costs and Expenses:
Total costs and expenses increased to $474,932 for the three months ended
September 30, 2001 as compared to $269,677 for the same period in 2000, an
increase of $205,255, or 76%. This increase was due to increases in production
costs, the impairment of oil and gas properties, abandoned property costs and
depletion, offset by a decline in G&A.
Production costs were $323,489 for the three months ended September 30, 2001 and
$221,858 for the same period in 2000 resulting in a $101,631 increase, or 46%.
The increase was primarily due to additional well maintenance costs incurred to
stimulate well production and higher ad valorem taxes.
During this period, G&A decreased 37% from $21,699 for the three months ended
September 30, 2000 to $13,667 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 $74,068 related to
its proved oil and gas properties during the three months ended September 30,
2001.
Depletion was $33,320 for the three months ended September 30, 2001 as compared
to $26,120 for the same period in 2000, representing an increase of $7,200, or
28%. This increase was attributable
10
to a decrease 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 decline in oil production of 621 barrels for the three months ended
September 30, 2001 as compared to the same period in 2000 and a reduction in the
Partnership's net depletable basis from charges taken in accordance with SFAS
121 during the fourth quarter of 2000.
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased $176,873 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This decrease was due to an increase in production costs of $206,487, a
reduction in oil and gas receipts of $188,540 and an increase in abandoned
property costs of $30,388, offset by reductions in working capital of $242,149
and G&A expenses of $6,393. The decrease in oil and gas receipts resulted from a
decline in oil commodity prices of $61,185 during 2001 and a decline in
production of $278,525 during 2001 as compared to the same period in 2000,
offset by an increase in gas and NGL commodity prices of $151,170. The increase
in production costs was primarily due to additional well maintenance and
workover costs incurred to stimulate well production and higher ad valorem
taxes. 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 for the nine months ended
September 30, 2001 and 2000 included expenditures related to equipment upgrades
on active properties.
Proceeds from asset dispositions of $21,601 and $5,358 were recognized during
the nine months ended September 30, 2001 and 2000, respectively. The proceeds
recognized during the period in 2001 was due to $10,923 from salvage income on a
well plugged and abandoned in the prior year and $10,678 from salvage income on
a well abandoned in the current year. The proceeds recognized during the period
in 2000 was due to equipment credits on a fully depleted well.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $603,286, of which $152,147 was distributed to the general partners and
$451,139 to the limited partners. For the same period ended September 30, 2000,
cash distributions to the partners were $926,425, of which $232,937 was
distributed to the general partners and $693,488 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
the proposed merger of the Partnership into Pioneer Natural Resources USA, Inc.
("Pioneer USA"). For further information, see "Proposal to acquire partnerships"
below.
11
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 83-B, LTD.
(A Texas Limited Partnership)
SIGNATURES
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 83-B, LTD.
By: Pioneer Natural Resources USA, Inc.,
Managing General Partner
Dated: November 8, 2001 By: /s/ Rich Dealy
------------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
13
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 84-A, LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 84-A, Ltd. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 2-90417
PARKER & PARSLEY 84-A, LTD.
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
TEXAS 75-1974814
------------------------------- ----------------------
(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 84-A, LTD.
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..................................................... 11
Signatures........................................................................... 12
2
PARKER & PARSLEY 84-A, LTD.
(A Texas Limited Partnership)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 360,095 $ 179,539
Accounts receivable - oil and gas sales 204,546 360,844
------------ ------------
Total current assets 564,641 540,383
------------ ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 18,268,569 18,260,776
Accumulated depletion (16,490,135) (16,391,831)
------------ ------------
Net oil and gas properties 1,778,434 1,868,945
------------ ------------
$ 2,343,075 $ 2,409,328
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 85,408 $ 36,496
Partners' capital:
General partners 278,461 293,504
Limited partners (19,435 interests) 1,979,206 2,079,328
------------ ------------
2,257,667 2,372,832
------------ ------------
$ 2,343,075 $ 2,409,328
============ ============
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 84-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
----------------------------- -----------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Revenues:
Oil and gas $ 427,567 $ 615,825 $ 1,538,389 $ 1,698,194
Interest 2,725 5,118 10,085 12,110
------------ ------------ ------------ ------------
430,292 620,943 1,548,474 1,710,304
------------ ------------ ------------ ------------
Costs and expenses:
Oil and gas production 306,915 226,699 816,895 691,478
General and administrative 12,938 21,036 49,698 55,175
Depletion 41,094 24,033 98,304 82,846
------------ ------------ ------------ ------------
360,947 271,768 964,897 829,499
------------ ------------ ------------ ------------
Net income $ 69,345 $ 349,175 $ 583,577 $ 880,805
============ ============ ============ ============
Allocation of net income:
General partners $ 23,562 $ 91,539 $ 161,220 $ 233,685
============ ============ ============ ============
Limited partners $ 45,783 $ 257,636 $ 422,357 $ 647,120
============ ============ ============ ============
Net income per limited
partnership interest $ 2.35 $ 13.26 $ 21.73 $ 33.30
============ ============ ============ ============
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 84-A, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
General Limited
partners partners Total
------------ ------------ ------------
Balance at January 1, 2001 $ 293,504 $ 2,079,328 $ 2,372,832
Distributions (176,263) (522,479) (698,742)
Net income 161,220 422,357 583,577
------------ ------------ ------------
Balance at September 30, 2001 $ 278,461 $ 1,979,206 $ 2,257,667
============ ============ ============
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 84-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
--------------------------
2001 2000
---------- ----------
Cash flows from operating activities:
Net income $ 583,577 $ 880,805
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 98,304 82,846
Changes in assets and liabilities:
Accounts receivable 156,298 (76,469)
Accounts payable 48,912 32,531
---------- ----------
Net cash provided by operating activities 887,091 919,713
---------- ----------
Cash flows used in investing activities:
Additions to oil and gas properties (7,793) (12,681)
Cash flows used in financing activities:
Cash distributions to partners (698,742) (830,001)
---------- ----------
Net increase in cash 180,556 77,031
Cash at beginning of period 179,539 117,140
---------- ----------
Cash at end of period $ 360,095 $ 194,171
========== ==========
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 84-A, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 84-A, Ltd. (the "Partnership") is a limited partnership
organized in 1984 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 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 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.
NOTE 3. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $5,111,410 of which $3,797,678 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
7
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 9% to $1,538,389 for the nine
months ended September 30, 2001 as compared to $1,698,194 for the same period in
2000. The decrease in revenues resulted from a decline in production and lower
average prices received for oil and natural gas liquids ("NGLs"), offset by
higher average prices received for gas. For the nine months ended September 30,
2001, 38,418 barrels of oil, 18,041 barrels of NGLs and 81,437 mcf of gas were
sold, or 70,032 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 39,130 barrels of oil, 25,473 barrels of NGLs and 104,455
mcf of gas were sold, or 82,012 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 $1.83, or 6%, from $28.61
for the nine months ended September 30, 2000 to $26.78 for the same period in
2001. The average price received per barrel of NGLs decreased $.80, or 6%, from
$13.67 during the nine months ended September 30, 2000 to $12.87 for the same
period in 2001. The average price received per mcf of gas increased 54% from
$2.21 during the nine months ended September 30, 2000 to $3.41 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.
Costs and Expenses:
Total costs and expenses increased to $964,897 for the nine months ended
September 30, 2001 as compared to $829,499 for the same period in 2000, an
increase of $135,398, or 16%. This increase was due to increases in production
costs and depletion, offset by a decline in general and administrative expenses
("G&A").
Production costs were $816,895 for the nine months ended September 30, 2001 and
$691,478 for the same period in 2000 resulting in a $125,417 increase, or 18%.
This increase was primarily due to additional well maintenance costs incurred to
stimulate well production and higher ad valorem taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
10% from $55,175 for the nine months ended September 30, 2000 to $49,678 for the
same period in 2001, primarily due to a lower
8
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.
Depletion was $98,304 for the nine months ended September 30, 2001 as compared
to $82,846 for the same period in 2000, representing an increase of $15,458, or
19%. This increase was attributable 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 decrease in oil production of 712 barrels for
the nine months ended September 30, 2001 as compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 31% to $427,567 for the three
months ended September 30, 2001 as compared to $615,825 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, 12,383
barrels of oil, 5,775 barrels of NGLs and 23,873 mcf of gas were sold, or 22,137
BOEs. For the three months ended September 30, 2000, 12,371 barrels of oil,
9,166 barrels of NGLs and 36,292 mcf of gas were sold, or 27,586 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 $4.49, or 15%, from
$30.74 for the three months ended September 30, 2000 compared to $26.25 for the
same period in 2001. The average price received per barrel of NGLs decreased
$4.41, or 31%, from $14.39 during the three months ended September 30, 2000 to
$9.98 for the same period in 2001. The average price received per mcf of gas
decreased 34% from $2.86 during the three months ended September 30, 2000 to
$1.88 for the same period in 2001.
Costs and Expenses:
Total costs and expenses increased to $360,947 for the three months ended
September 30, 2001 as compared to $271,768 for the same period in 2000, an
increase of $89,179, or 33%. This increase was due to increases in production
costs and depletion, offset by a decline in G&A.
Production costs were $306,915 for the three months ended September 30, 2001 and
$226,699 for the same period in 2000, resulting in an $80,216 increase, or 35%.
The increase was primarily due to additional well maintenance costs incurred to
stimulate well production and higher ad valorem taxes.
During this period, G&A decreased 38% from $21,036 for the three months ended
September 30, 2000 to $12,938 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.
9
Depletion was $41,094 for the three months ended September 30, 2001 as compared
to $24,033 for the same period in 2000, an increase of $17,061, or 71%. 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.
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased $32,622 during the nine
months ended September 30, 2001 from the same period ended in 2000. This
decrease was due to a decrease in oil and gas sales receipts of $161,830 and an
increase in production costs of $125,417, offset by reductions in working
capital of $249,148 and G&A expenses of $5,477. The decrease in oil and gas
receipts resulted from $193,137 from the decline in production during 2001 as
compared to the same period in 2000 and a decline in the average prices received
for oil and NGLs of $94,366, offset by an increase in average prices received
for gas of $125,673. The increase in production costs was primarily due to
additional well maintenance costs incurred to stimulate well production and
higher ad valorem taxes. 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 Used in Investing Activities
The Partnership's principal investing activities during the nine months ended
September 30, 2001 and 2000 included equipment upgrades on various oil and gas
properties.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $698,742, of which $176,263 was distributed to the general partners and
$522,479 to the limited partners. For the same period ended September 30, 2000,
cash distributions to the partners were $830,001, of which $210,687 was
distributed to the general partners and $619,314 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
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
10
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
11
PARKER & PARSLEY 84-A, LTD.
(A Texas Limited Partnership)
SIGNATURES
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 84-A, LTD.
By: Pioneer Natural Resources USA, Inc.,
Managing General Partner
Dated: November 8, 2001 By: /s/ Rich Dealy
------------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
12
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 85-A, LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 85-A, Ltd. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 2-99079A
PARKER & PARSLEY 85-A, LTD.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
TEXAS 75-2064518
------------------------------- ----------------------
(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 85-A, LTD.
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..................................................... 11
Signatures........................................................................... 12
2
PARKER & PARSLEY 85-A, LTD.
(A Texas Limited Partnership)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 119,998 $ 72,868
Accounts receivable - oil and gas sales 55,565 103,810
------------ ------------
Total current assets 175,563 176,678
------------ ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 7,404,354 7,398,954
Accumulated depletion (6,899,304) (6,871,985)
------------ ------------
Net oil and gas properties 505,050 526,969
------------ ------------
$ 680,613 $ 703,647
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 26,733 $ 11,211
Partners' capital:
Managing general partner 6,550 6,936
Limited partners (9,613 interests) 647,330 685,500
------------ ------------
653,880 692,436
------------ ------------
$ 680,613 $ 703,647
============ ============
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 85-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------------- -------------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Revenues:
Oil and gas $ 129,723 $ 213,419 $ 512,479 $ 566,748
Interest 939 1,672 3,456 4,220
Gain on disposition of assets -- 2,205 -- 2,205
---------- ---------- ---------- ----------
130,662 217,296 515,935 573,173
---------- ---------- ---------- ----------
Costs and expenses:
Oil and gas production 103,249 87,628 288,198 256,507
General and administrative 3,891 6,402 15,374 17,002
Depletion 9,765 8,122 27,319 23,829
---------- ---------- ---------- ----------
116,905 102,152 330,891 297,338
---------- ---------- ---------- ----------
Net income $ 13,757 $ 115,144 $ 185,044 $ 275,835
========== ========== ========== ==========
Allocation of net income:
Managing general partner $ 137 $ 1,151 $ 1,850 $ 2,758
========== ========== ========== ==========
Limited partners $ 13,620 $ 113,993 $ 183,194 $ 273,077
========== ========== ========== ==========
Net income per limited
partnership interest $ 1.42 $ 11.86 $ 19.06 $ 28.41
========== ========== ========== ==========
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-A, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
------------ ------------ ------------
Balance at January 1, 2001 $ 6,936 $ 685,500 $ 692,436
Distributions (2,236) (221,364) (223,600)
Net income 1,850 183,194 185,044
------------ ------------ ------------
Balance at September 30, 2001 $ 6,550 $ 647,330 $ 653,880
============ ============ ============
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-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
------------------------------
2001 2000
------------ ------------
Cash flows from operating activities:
Net income $ 185,044 $ 275,835
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 27,319 23,829
Gain on disposition of assets -- (2,205)
Changes in assets and liabilities:
Accounts receivable 48,245 (35,162)
Accounts payable 15,522 8,775
------------ ------------
Net cash provided by operating activities 276,130 271,072
------------ ------------
Cash flows from investing activities:
Additions to oil and gas properties (5,400) (3,092)
Proceeds from asset dispositions -- 2,454
------------ ------------
Net cash used in investing activities (5,400) (638)
------------ ------------
Cash flows used in financing activities:
Cash distributions to partners (223,600) (274,786)
------------ ------------
Net increase (decrease) in cash 47,130 (4,352)
Cash at beginning of period 72,868 73,810
------------ ------------
Cash at end of period $ 119,998 $ 69,458
============ ============
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-A, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 85-A, 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 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 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.
NOTE 3. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $1,339,065 of which $1,299,886 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
7
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 10% to $512,479 for the nine
months ended September 30, 2001 as compared to $566,748 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, 11,694 barrels of oil, 5,623 barrels of NGLs and 30,325 mcf of gas were
sold, or 22,371 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 13,003 barrels of oil, 8,318 barrels of NGLs and 32,775 mcf
of gas were sold, or 26,784 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 $1.33, or 5%, from $28.67
for the nine months ended September 30, 2000 to $27.34 for the same period in
2001. The average price received per barrel of NGLs decreased slightly from
$13.89 during the nine months ended September 30, 2000 to $13.84 for the same
period in 2001. The average price received per mcf of gas increased 59% from
$2.39 during the nine months ended September 30, 2000 to $3.79 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.
Gain on disposition of assets of $2,205 was recognized during the nine months
ended September 30, 2000. The gain resulted from equipment credits received on
one well.
Costs and Expenses:
Total costs and expenses increased to $330,891 for the nine months ended
September 30, 2001 as compared to $297,338 for the same period in 2000, an
increase of $33,553, or 11%. This increase was due to increases in production
costs and depletion, offset by a decline in general and administrative expenses
("G&A").
Production costs were $288,198 for the nine months ended September 30, 2001 and
$256,507 for the same period in 2000 resulting in a $31,691 increase, or 12%.
The increase was primarily due to additional workover and well maintenance costs
incurred to stimulate well production and higher ad valorem taxes.
8
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
10% from $17,002 for the nine months ended September 30, 2000 to $15,374 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.
Depletion was $27,319 for the nine months ended September 30, 2001 as compared
to $23,829 for the same period in 2000, representing an increase of $3,490, or
15%. This increase was the result of a decline in proved reserves due to lower
commodity prices, offset by a decline in oil production of 1,309 barrels for the
nine months ended September 30, 2001 as compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 39% to $129,723 for the three
months ended September 30, 2001 as compared to $213,419 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, 3,560
barrels of oil, 2,035 barrels of NGLs and 9,273 mcf of gas were sold, or 7,141
BOEs. For the three months ended September 30, 2000, 4,468 barrels of oil, 2,816
barrels of NGLs and 11,161 mcf of gas were sold, or 9,144 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 $3.89, or 13%, from
$30.38 for the three months ended September 30, 2000 to $26.49 for the same
period in 2001. The average price received per barrel of NGLs decreased $5.38,
or 35%, from $15.41 during the three months ended September 30, 2000 to $10.03
for the same period in 2001. The average price received per mcf of gas decreased
47% from $3.07 for the three months ended September 30, 2000 to $1.62 for the
same period in 2001.
Gain on disposition of assets of $2,205 was recognized during the three months
ended September 30, 2000. The gain resulted from equipment credits received on
one well.
Costs and Expenses:
Total costs and expenses increased to $116,905 for the three months ended
September 30, 2001 as compared to $102,152 for the same period in 2000, an
increase of $14,753, or 14%. This increase was due to increases in production
costs and depletion, offset by a decline in G&A.
Production costs were $103,249 for the three months ended September 30, 2001 and
$87,628 for the same period in 2000 resulting in a $15,621 increase, or 18%. The
increase was primarily due to additional well maintenance costs incurred to
stimulate well production and higher ad valorem taxes.
9
During this period, G&A decreased 39% from $6,402 for the three months ended
September 30, 2000 to $3,891 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.
Depletion was $9,765 for the three months ended September 30, 2001 as compared
to $8,122 for the same period in 2000, an increase of $1,643, or 20%. This
increase was attributable to a decrease in proved reserves as a result of lower
commodity prices for the three months ended September 30, 2001 as compared to
the same period in 2000, offset by a decline in oil production of 908 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 $5,058 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to a decrease in G&A expenses of $1,628 and a reduction in
working capital of $90,154, offset by an increase in production costs of $31,691
and a decrease in oil and gas sales receipts of $55,033. The decrease in oil and
gas receipts resulted in $82,378 from the decline in production and a $17,760
decline resulting from lower oil and NGL prices during 2001 as compared to the
same period in 2000, offset by a $45,105 increase from higher gas prices. The
increase in production costs was primarily due to additional workover and well
maintenance costs incurred to stimulate well production and higher ad valorem
taxes. 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 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 $2,454 were received from equipment credits
during the nine months ended September 30, 2000.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $223,600, of which $2,236 was distributed to the managing general partner
and $221,364 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $274,786, of which $2,748 was
distributed to the managing general partner and $272,038 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
the proposed merger of the Partnership into Pioneer Natural Resources USA, Inc.
("Pioneer USA"). For further information, see "Proposal to acquire partnerships"
below.
10
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
11
PARKER & PARSLEY 85-A, LTD.
(A Texas Limited Partnership)
SIGNATURES
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-A, LTD.
By: Pioneer Natural Resources USA, Inc.
Managing General Partner
Dated: November 8, 2001 By: /s/ Rich Dealy
------------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
12
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 85-B, LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 85-B, Ltd. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 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)
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 85-B, LTD.
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 85-B, LTD.
(A Texas Limited Partnership)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 124,378 $ 80,718
Accounts receivable - oil and gas sales 60,654 84,740
------------ ------------
Total current assets 185,032 165,458
------------ ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 5,323,995 5,317,256
Accumulated depletion (4,654,806) (4,526,767)
------------ ------------
Net oil and gas properties 669,189 790,489
------------ ------------
$ 854,221 $ 955,947
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 25,268 $ 10,515
Partners' capital:
Managing general partner 8,640 9,805
Limited partners (7,988 interests) 820,313 935,627
------------ ------------
828,953 945,432
------------ ------------
$ 854,221 $ 955,947
============ ============
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 85-B, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
-------------------------- -------------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Revenues:
Oil and gas $ 122,938 $ 168,472 $ 446,471 $ 444,585
Interest 958 1,614 3,365 3,936
---------- ---------- ---------- ----------
123,896 170,086 449,836 448,521
---------- ---------- ---------- ----------
Costs and expenses:
Oil and gas production 88,122 70,821 220,865 207,231
General and administrative 3,611 5,054 13,317 13,337
Impairment of oil and gas properties 69,944 -- 69,944 --
Depletion 26,136 11,849 58,095 39,767
---------- ---------- ---------- ----------
187,813 87,724 362,221 260,335
---------- ---------- ---------- ----------
Net income (loss) $ (63,917) $ 82,362 $ 87,615 $ 188,186
========== ========== ========== ==========
Allocation of net income (loss):
Managing general partner $ (639) $ 824 $ 876 $ 1,882
========== ========== ========== ==========
Limited partners $ (63,278) $ 81,538 $ 86,739 $ 186,304
========== ========== ========== ==========
Net income (loss) per limited
partnership interest $ (7.92) $ 10.20 $ 10.86 $ 23.32
========== ========== ========== ==========
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 (2,041) (202,053) (204,094)
Net income 876 86,739 87,615
------------ ------------ ------------
Balance at September 30, 2001 $ 8,640 $ 820,313 $ 828,953
============ ============ ============
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)
Nine months ended
September 30,
------------------------------
2001 2000
------------ ------------
Cash flows from operating activities:
Net income $ 87,615 $ 188,186
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 69,944 --
Depletion 58,095 39,767
Changes in assets and liabilities:
Accounts receivable 24,086 (30,909)
Accounts payable 14,753 9,072
------------ ------------
Net cash provided by operating activities 254,493 206,116
------------ ------------
Cash flows from investing activities:
Additions to oil and gas properties (6,739) (3,647)
Proceeds from asset dispositions -- 6,412
------------ ------------
Net cash provided by (used in) investing activities (6,739) 2,765
------------ ------------
Cash flows used in financing activities:
Cash distributions to partners (204,094) (211,749)
------------ ------------
Net increase (decrease) in cash 43,660 (2,868)
Cash at beginning of period 80,718 74,959
------------ ------------
Cash at end of period $ 124,378 $ 72,091
============ ============
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
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 85-B, L.P. (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 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 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.
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
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
7
provision of $69,944 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
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $1,175,680 of which $1,155,472 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the 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 increased slightly to $446,471 for the
nine months ended September 30, 2001 as compared to $444,585 for the same period
in 2000. The increase in revenues resulted from higher average prices received
for gas, offset by a decline in production and lower average prices received for
oil and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 10,016 barrels of oil, 4,872 barrels of NGLs and 24,275 mcf of gas were
sold, or 18,934 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 10,425 barrels of oil, 5,029 barrels of NGLs and 23,230 mcf
of gas were sold, or 19,326 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 $2.07, or 7%, from $29.52
for the nine months ended September 30, 2000 to $27.45 for the same period in
2001. The average price received per barrel of NGLs decreased $.29, or 2%, from
$15.25 during the nine months ended September 30, 2000 to $14.96 for the same
period in 2001. The average price received per mcf of gas increased 57% from
$2.59 during the nine months ended September 30, 2000 to $4.06 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 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.
8
Costs and Expenses:
Total costs and expenses increased to $362,221 for the nine months ended
September 30, 2001 as compared to $260,335 for the same period in 2000, an
increase of $101,886, or 39%. This increase was due to increases in the
impairment of oil and gas properties, depletion and production costs, offset by
a decline in general and administrative expenses ("G&A").
Production costs were $220,865 for the nine months ended September 30, 2001 and
$207,231 for the same period in 2000 resulting in a $13,634 increase, or 7%. The
increase was primarily due to higher ad valorem taxes and additional 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
slightly from $13,337 for the nine months ended September 30, 2000 to $13,317
for the same period in 2001.
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 $69,944 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $58,095 for the nine months ended September 30, 2001 as compared
to $39,767 for the same period in 2000, representing an increase of $18,328, or
46%. This increase was the result of 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 decline in oil production of 409 barrels for the nine months ended
September 30, 2001 as compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 27% to $122,938 for the three
months ended September 30, 2001 as compared to $168,472 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, 3,120
barrels of oil, 1,912 barrels of NGLs and 8,243 mcf of gas were sold, or
9
6,406 BOEs. For the three months ended September 30, 2000, 3,483 barrels of oil,
1,906 barrels of NGLs and 8,398 mcf of gas were sold, or 6,789 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 $5.03, or 16%, from
$31.37 for the three months ended September 30, 2000 to $26.34 for the same
period in 2001. The average price received per barrel of NGLs decreased $4.77,
or 28%, from $16.82 during the three months ended September 30, 2000 to $12.05
for the same period in 2001. The average price received per mcf of gas decreased
33% from $3.23 for the three months ended September 30, 2000 to $2.15 for the
same period in 2001.
Costs and Expenses:
Total costs and expenses increased to $187,813 for the three months ended
September 30, 2001 as compared to $87,724 for the same period in 2000, an
increase of $100,089, or 114%. This increase was due to increases in the
impairment of oil and gas properties, production costs and depletion, offset by
a decline in G&A.
Production costs were $88,122 for the three months ended September 30, 2001 and
$70,821 for the same period in 2000, resulting in a $17,301 increase, or 24%.
The increase was primarily due to additional well maintenance costs incurred to
stimulate well production and higher ad valorem taxes, offset by lower
production taxes.
During this period, G&A decreased 29% from $5,054 for the three months ended
September 30, 2000 to $3,611 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 $69,944 related to
its proved oil and gas properties during the three months ended September 30,
2001.
Depletion was $26,136 for the three months ended September 30, 2001 as compared
to $11,849 for the same period in 2000, an increase of $14,287, or 121%. This
increase was attributable to a reduction in proved reserves during the period
ended September 30, 2001 resulting from 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 decline in oil production of 363 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 $48,377 during the nine
months ended September 30, 2001 from the same period in 2000. This increase was
due to an increase in oil and gas sales receipts of $1,315, a decline in G&A
expenses of $20 and a reduction in working capital of $60,676,
10
offset by an increase in production costs of $13,634. The increase in oil and
gas receipts resulted from the increase in gas prices during 2001 which
contributed an additional $34,153, offset by $9,333 resulting from the decline
in production and a $23,505 decline from lower oil and NGL prices received
during 2001 as compared to the same period in 2000. The increase in production
costs was primarily due to higher ad valorem taxes and additional workover costs
incurred to stimulate well production.
Net Cash Provided by (Used in) Investing Activities
The Partnership's investing activities for the nine months ended September 30,
2001 and 2000 included expenditures related to equipment upgrades on several oil
and gas properties.
Proceeds from asset dispositions of $6,412 were recognized during the nine
months ended September 30, 2000 from equipment credits received on active
properties.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $204,094, of which $2,041 was distributed to the managing general partner
and $202,053 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $211,749, of which $2,117 was
distributed to the managing general partner and $209,632 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
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.
11
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 85-B, LTD.
(A Texas Limited Partnership)
SIGNATURES
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: November 8, 2001 By: /s/ Rich Dealy
------------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
13
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY
PRIVATE INVESTMENT 85-A, LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker & Parsley
Private Investment 85-A, Ltd. and supplements the supplemental information to
the proxy statement/prospectus dated October 12, 2001, of Pioneer Natural
Resources Company, a Delaware corporation that we call Pioneer Parent, and
Pioneer Natural Resources USA, Inc., a Delaware corporation that we call Pioneer
USA, by which Pioneer USA is soliciting proxies to be voted at a special meeting
of the limited partners of the partnership. The purpose of the special meeting
is for you to vote upon the merger of the partnership with and into Pioneer USA
that, if completed, will result in your receiving common stock of Pioneer Parent
for your partnership interests.
This document contains the partnership's financial statements, including
management's discussion and analysis of financial condition and results of
operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY PRIVATE INVESTMENT 85-A, LTD.
(A Texas Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY PRIVATE INVESTMENT 85-A, LTD.
(A Texas Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 125,329 $ 74,084
Accounts receivable - oil and gas sales 46,959 68,251
----------- -----------
Total current assets 172,288 142,335
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 3,111,569 3,399,009
Accumulated depletion (2,518,408) (2,780,814)
----------- -----------
Net oil and gas properties 593,161 618,195
----------- -----------
$ 765,449 $ 760,530
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 19,959 $ 5,818
Partners' capital:
Managing general partner 9,865 9,957
Limited partners (125 interests) 735,625 744,755
----------- -----------
745,490 754,712
----------- -----------
$ 765,449 $ 760,530
=========== ===========
The financial information included as of September 30, 2001 has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY PRIVATE INVESTMENT 85-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
---------------------- -----------------------
2001 2000 2001 2000
-------- -------- --------- ---------
Revenues:
Oil and gas $ 99,606 $135,211 $ 324,211 $ 372,217
Interest 877 1,714 3,109 4,367
Gain on disposition of assets 26,885 -- 26,885 33,459
-------- -------- --------- ---------
127,368 136,925 354,205 410,043
-------- -------- --------- ---------
Costs and expenses:
Oil and gas production 59,160 38,822 136,145 122,215
General and administrative 1,992 2,704 6,484 7,444
Depletion 10,314 8,735 26,719 28,693
Abandoned property 15,586 -- 15,586 7,039
-------- -------- --------- ---------
87,052 50,261 184,934 165,391
-------- -------- --------- ---------
Net income $ 40,316 $ 86,664 $ 169,271 $ 244,652
======== ======== ========= =========
Allocation of net income:
Managing general partner $ 403 $ 867 $ 1,693 $ 2,447
======== ======== ========= =========
Limited partners $ 39,913 $ 85,797 $ 167,578 $ 242,205
======== ======== ========= =========
Net income per limited
partnership interest $ 319.30 $ 686.38 $1,340.62 $1,937.64
======== ======== ========= =========
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.
3
PARKER & PARSLEY PRIVATE INVESTMENT 85-A, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
--------- --------- ---------
Balance at January 1, 2001 $ 9,957 $ 744,755 $ 754,712
Distributions (1,785) (176,708) (178,493)
Net income 1,693 167,578 169,271
--------- --------- ---------
Balance at September 30, 2001 $ 9,865 $ 735,625 $ 745,490
========= ========= =========
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 PRIVATE INVESTMENT 85-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
-------------------------
2001 2000
--------- ---------
Cash flows from operating activities:
Net income $ 169,271 $ 244,652
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 26,719 28,693
Gain on disposition of assets (26,885) (33,459)
Changes in assets and liabilities:
Accounts receivable 21,292 (18,440)
Accounts payable 16,096 6,491
--------- ---------
Net cash provided by operating activities 206,493 227,937
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (1,685) (1,948)
Proceeds from disposition of assets 24,930 41,970
--------- ---------
Net cash provided by investing activities 23,245 40,022
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (178,493) (265,604)
--------- ---------
Net increase in cash 51,245 2,355
Cash at beginning of period 74,084 79,497
--------- ---------
Cash at end of period $ 125,329 $ 81,852
========= =========
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 PRIVATE INVESTMENT 85-A, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley Private Investment 85-A, 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 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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $1,418,023 of which $1,370,151 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
6
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 13% to $324,211 for the nine
months ended September 30, 2001 as compared to $372,217 for the same period in
2000. The decrease in revenues resulted from a decline in production and lower
average prices received for oil and natural gas liquids ("NGLs"), offset by
higher average prices received for gas. For the nine months ended September 30,
2001, 8,969 barrels of oil, 2,696 barrels of NGLs and 10,709 mcf of gas were
sold, or 13,450 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 9,523 barrels of oil, 4,177 barrels of NGLs and 15,122 mcf
of gas were sold, or 16,220 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 $1.60, or 6%, from $29.05
for the nine months ended September 30, 2000 to $27.45 for the same period in
2001. The average price received per barrel of NGLs decreased $.58, or 4%, from
$14.64 during the nine months ended September 30, 2000 to $14.06 for the same
period in 2001. The average price received per mcf of gas increased 64% from
$2.28 during the nine months ended September 30, 2000 to $3.75 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 $26,885 and $33,459 were recognized during the
nine months ended September 30, 2001 and 2000, respectively, from salvage income
on one well plugged and abandoned during each period. Expenses incurred to plug
and abandon these wells were $15,586 and $7,039 for the nine months ended
September 30, 2001 and 2000, respectively.
Costs and Expenses:
Total costs and expenses increased to $184,934 for the nine months ended
September 30, 2001 as compared to $165,391 for the same period in 2000, an
increase of $19,543, or 12%. This increase was due to increases in production
costs and abandoned property costs, offset by declines in depletion and general
and administrative expenses ("G&A").
7
Production costs were $136,145 for the nine months ended September 30, 2001 and
$122,215 for the same period in 2000, resulting in a $13,930, or 11%, increase.
The increase was primarily the result of additional well maintenance costs
incurred to stimulate well production and higher ad valorem taxes.
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 $7,444 for the nine months ended September 30, 2000 to $6,484 for the
same period in 2001, primarily due to a lower percentage of the managing general
partner's G&A being allocated (limited to 2% of oil and gas revenues) as a
result of decreased oil and gas revenues.
Depletion was $26,719 for the nine months ended September 30, 2001 as compared
to $28,693 for the same period in 2000, a decrease of $1,974, or 7%. This
decrease was the result of a decline in oil production of 554 barrels for the
nine months ended September 30, 2001 as compared to the same period in 2000.
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 $99,606 for the three
months ended September 30, 2001 as compared to $135,211 for the same period in
2000. The decrease in revenues resulted from a decline in production and lower
average prices received. For the three months ended September 30, 2001, 3,182
barrels of oil, 832 barrels of NGLs and 3,248 mcf of gas were sold, or 4,555
BOEs. For the three months ended September 30, 2000, 3,191 barrels of oil, 1,455
barrels of NGLs and 5,043 mcf of gas were sold, or 5,487 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 $3.82, or 13%, from
$30.39 for the three months ended September 30, 2000 to $26.57 for the same
period in 2001. The average price received per barrel of NGLs decreased $5.15,
or 32%, from $15.86 during the three months ended September 30, 2000 to $10.71
for the same period in 2001. The average price received per mcf of gas decreased
37% to $1.89 during the three months ended September 30, 2001 from $3.00 during
the same period in 2000.
Gain on disposition of assets of $26,885 was recognized during the three months
ended September 30, 2001 from salvage income on one well plugged and abandoned
during the current period.
Costs and Expenses:
Total costs and expenses increased to $87,052 for the three months ended
September 30, 2001 as compared to $50,261 for the same period in 2000, an
increase of $36,791, or 73%. This increase was due to increases in production
cost, abandoned property costs and depletion, offset by a decline in G&A.
8
Production costs were $59,160 for the three months ended September 30, 2001 and
$38,822 for the same period in 2000 resulting in a $20,338 increase, or 52%. The
increase was primarily due to additional well maintenance and workover costs
incurred to stimulate well production and higher ad valorem taxes.
During this period, G&A decreased 26%, from $2,704 for the three months ended
September 30, 2000 to $1,992 for the same period in 2001, primarily due to a
lower percentage of the managing general partner's G&A being allocated (limited
to 2% of oil and gas revenues) as a result of decreased oil and gas revenues.
Depletion was $10,314 for the three months ended September 30, 2001 as compared
to $8,735 for the same period in 2000, an increase of $1,579, or 18%. This
increase was primarily due to a decline in proved reserves due to lower
commodity prices for the period 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 decreased $21,444 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This decrease was due to increases in production costs of $13,930 and abandoned
property costs of $8,547 and a reduction in oil and gas receipts of $49,264,
offset by reductions in working capital of $49,337 and G&A expenses of $960. The
decline in oil and gas receipts resulted from a decline in production of $52,564
during 2001 as compared to the same period in 2000 and $17,615 due to lower
average prices received for oil and NGLs, offset by an increase in gas prices
during 2001 which contributed an additional $20,915 to oil and gas receipts. The
increase in production costs was primarily due to additional well maintenance
costs incurred to stimulate well production and higher ad valorem taxes. The
decrease in G&A was primarily due to a lower percentage of the managing general
partner's G&A being allocated (limited to 2% of oil and gas revenues) as a
result of decreased oil and gas revenues.
Net Cash Provided by Investing Activities
The Partnership's principal investing activities during the nine months ended
September 30, 2001 and 2000 were related to expenditures for equipment upgrades
on various oil and gas properties.
Proceeds from disposition of assets of $24,930 and $41,970 were recognized
during the nine months ended September 30, 2001 and 2000, respectively. The
proceeds were primarily from salvage income on one well plugged and abandoned
during each period.
9
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $178,493, of which $1,785 was distributed to the managing general partner
and $176,708 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $265,604, of which $2,656 was
distributed to the managing general partner and $262,948 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
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.
10
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY
SELECTED 85 PRIVATE INVESTMENT, LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley Selected 85 Private Investment, Ltd. and supplements the supplemental
information to the proxy statement/prospectus dated October 12, 2001, of Pioneer
Natural Resources Company, a Delaware corporation that we call Pioneer Parent,
and Pioneer Natural Resources USA, Inc., a Delaware corporation that we call
Pioneer USA, by which Pioneer USA is soliciting proxies to be voted at a special
meeting of the limited partners of the partnership. The purpose of the special
meeting is for you to vote upon the merger of the partnership with and into
Pioneer USA that, if completed, will result in your receiving common stock of
Pioneer Parent for your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY SELECTED 85 PRIVATE INVESTMENT, LTD.
(A Texas Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY SELECTED 85 PRIVATE INVESTMENT, LTD.
(A Texas Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 76,516 $ 32,773
Accounts receivable - oil and gas sales 42,922 78,218
----------- -----------
Total current assets 119,438 110,991
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 3,866,940 3,864,140
Accumulated depletion (3,462,174) (3,441,568)
----------- -----------
Net oil and gas properties 404,766 422,572
----------- -----------
$ 524,204 $ 533,563
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 19,120 $ 6,722
Partners' capital:
Managing general partner 7,674 7,892
Limited partners (117 interests) 497,410 518,949
----------- -----------
505,084 526,841
----------- -----------
$ 524,204 $ 533,563
=========== ===========
The financial information included as of September 30, 2001
has been prepared by management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY SELECTED 85 PRIVATE INVESTMENT, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
--------------------- ----------------------
2001 2000 2001 2000
-------- -------- --------- ---------
Revenues:
Oil and gas $ 85,502 $110,199 $ 334,888 $ 306,667
Interest 616 1,093 2,164 2,566
Gain on disposition of assets -- -- 2,574 --
-------- -------- --------- ---------
86,118 111,292 339,626 309,233
-------- -------- --------- ---------
Costs and expenses:
Oil and gas production 64,804 39,934 165,977 122,353
General and administrative 1,710 2,204 6,698 6,133
Depletion 5,946 8,104 20,606 24,882
-------- -------- --------- ---------
72,460 50,242 193,281 153,368
-------- -------- --------- ---------
Net income $ 13,658 $ 61,050 $146,345 $ 155,865
======== ======== ========= =========
Allocation of net income:
Managing general partner $ 136 $ 611 $ 1,463 $ 1,559
======== ======== ========= =========
Limited partners $ 13,522 $ 60,439 $ 144,882 $ 154,306
======== ======== ========= =========
Net income per limited
partnership interest $ 115.57 $ 516.57 $1,238.31 $1,318.85
======== ======== ========= =========
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.
3
PARKER & PARSLEY SELECTED 85 PRIVATE INVESTMENT, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
--------- --------- ---------
Balance at January 1, 2001 $ 7,892 $ 518,949 $ 526,841
Distributions (1,681) (166,421) (168,102)
Net income 1,463 144,882 146,345
--------- --------- ---------
Balance at September 30, 2001 $ 7,674 $ 497,410 $ 505,084
========= ========= =========
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 SELECTED 85 PRIVATE INVESTMENT, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
------------------------
2001 2000
--------- ---------
Cash flows from operating activities:
Net income $ 146,345 $ 155,865
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 20,606 24,882
Gain on disposition of assets (2,574) --
Changes in assets and liabilities:
Accounts receivable 35,296 (18,834)
Accounts payable 12,398 3,918
--------- ---------
Net cash provided by operating activities 212,071 165,831
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (2,800) (3,186)
Proceeds from disposition of assets 2,574 --
--------- ---------
Net cash used in investing activities (226) (3,186)
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (168,102) (159,996)
--------- ---------
Net increase in cash 43,743 2,649
Cash at beginning of period 32,773 39,610
--------- ---------
Cash at end of period $ 76,516 $ 42,259
========= =========
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 SELECTED 85 PRIVATE INVESTMENT, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley Selected 85 Private Investment, 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 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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $1,053,729 of which $1,025,397 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
6
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 increased 9% to $334,888 for the nine
months ended September 30, 2001 as compared to $306,667 for the same period in
2000. The increase in revenues resulted from higher average prices received for
gas and an increase in production, offset by a decline in average prices
received for oil and natural gas liquids ("NGLs"). For the nine months ended
September 30, 2001, 7,481 barrels of oil, 4,108 barrels of NGLs and 18,604 mcf
of gas were sold, or 14,690 barrel of oil equivalents ("BOEs"). For the nine
months ended September 30, 2000, 6,907 barrels of oil, 4,535 barrels of NGLs and
16,793 mcf of gas were sold, or 14,241 BOEs.
The average price received per barrel of oil decreased $1.11, or 4%, from $28.52
for the nine months ended September 30, 2000 to $27.41 for the same period in
2001. The average price received per barrel of NGLs decreased $.44, or 3%, from
$15.00 during the nine months ended September 30, 2000 to $14.56 for the same
period in 2001. The average price received per mcf of gas increased 52% from
$2.48 during the nine months ended September 30, 2000 to $3.76 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 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.
Gain on disposition of assets of $2,574 recognized during the nine months ended
September 30, 2001 was due to equipment credits received on one fully depleted
well.
Costs and Expenses:
Total costs and expenses increased to $193,281 for the nine months ended
September 30, 2001 as compared to $153,368 for the same period in 2000, an
increase of $39,913 or 26%. This increase was due to higher production costs and
general and administrative expenses ("G&A"), offset by a decline in depletion.
Production costs were $165,977 for the nine months ended September 30, 2001 and
$122,353 for the same period in 2000 resulting in a $43,624 increase, or 36%.
This increase was primarily the result of additional well maintenance and
workover costs incurred to stimulate well production and higher ad valorem
taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A increased
9%, from $6,133 for the nine months ended September 30, 2000 to $6,698 for the
same period in 2001, primarily due to a higher percentage of the managing
general partner's G&A being allocated (limited to 2% of oil and gas revenues) as
a result of increased oil and gas revenues.
7
Depletion was $20,606 for the nine months ended September 30, 2001 as compared
to $24,882 for the same period in 2000, a decrease of $4,276, or 17%. This
decrease was the result of a positive revision to proved reserves on significant
wells during the period ended September 30, 2001, offset by an increase in oil
production of 574 barrels for the nine months ended September 30, 2001 as
compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended
September 30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 22% to $85,502 for the three
months ended September 30, 2001 as compared to $110,199 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, 2,111
barrels of oil, 1,528 barrels of NGLs and 6,002 mcf of gas were sold, or 4,639
BOEs. For the three months ended September 30, 2000, 2,116 barrels of oil, 1,652
barrels of NGLs and 5,735 mcf of gas were sold, or 4,724 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 $4.50, or 15%, from
$30.59 for the three months ended September 30, 2000 to $26.09 for the same
period in 2001. The average price received per barrel of NGLs decreased $4.80,
or 29%, from $16.53 during the three months ended September 30, 2000 to $11.73
for the same period in 2001. The average price received per mcf of gas decreased
34% to $2.08 during the three months ended September 30, 2001 from $3.17 during
the same period in 2000.
Costs and Expenses:
Total costs and expenses increased to $72,460 for the three months ended
September 30, 2001 as compared to $50,242 for the same period in 2000, an
increase of $22,218, or 44%. This increase was due to higher production costs,
offset by declines in G&A and depletion.
Production costs were $64,804 for the three months ended September 30, 2001 and
$39,934 for the same period in 2000 resulting in a $24,870, or 62%, increase.
The increase was primarily due to additional well maintenance and workover costs
incurred to stimulate well production and higher ad valorem taxes.
8
During this period, G&A decreased 22%, from $2,204 for the three months ended
September 30, 2000 to $1,710 for the same period in 2001, primarily due to a
lower percentage of the managing general partner's G&A being allocated (limited
to 2% of oil and gas revenues) as a result of a decline in oil and gas revenues.
Depletion was $5,946 for the three months ended September 30, 2001 as compared
to $8,104 for the same period in 2000, a decrease of $2,158, or 27%. This
decrease was the result of a positive revision to proved reserves on significant
wells during the period 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 $46,240 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to an increase in oil and gas sales receipts of $27,819
and a reduction in working capital of $62,610, offset by increases in production
costs of $43,624 and G&A expenses of $565. The increase in oil and gas receipts
resulted from the increase in gas commodity prices during 2001 which contributed
an additional $21,601 to oil and gas receipts and $16,332 resulting from an
increase in production during 2001 as compared to the same period in 2000,
offset by declines in oil and NGL commodity prices of $10,114. The increase in
production costs was primarily due to additional well maintenance and workover
costs incurred to stimulate well production and higher ad valorem taxes. The
increase in G&A was primarily due to a higher percentage of the managing general
partner's G&A being allocated (limited to 2% of oil and gas revenues) as a
result of increased oil and gas revenues.
Net Cash Used in Investing Activities
The Partnership's principal investing activities during the nine months ended
September 30, 2001 and 2000 were for expenditures related to equipment upgrades
on various oil and gas properties.
Proceeds from disposition of assets of $2,574 recognized during the nine months
ended September 30, 2001 were due to equipment credits received 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 $168,102, of which $1,681 was distributed to the managing general partner
and $166,421 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $159,996, of which $1,600 was
distributed to the managing general partner and $158,396 to the limited
partners.
9
During 2001, the Partnership made distributions in March and July but no
distributions were made by the Partnership during September pending the vote of
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.
10
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 86-A, LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 86-A, Ltd. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 33-3353A
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 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 86-A, LTD.
(A Texas Limited Partnership)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 51,388 $ 46,169
Accounts receivable - oil and gas sales 86,684 150,881
------------ ------------
Total current assets 138,072 197,050
------------ ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 7,136,319 7,132,242
Accumulated depletion (6,744,562) (6,721,529)
------------ ------------
Net oil and gas properties 391,757 410,713
------------ ------------
$ 529,829 $ 607,763
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 71,721 $ 12,398
Partners' capital:
Managing general partner 3,275 4,647
Limited partners (10,131 interests) 454,833 590,718
------------ ------------
458,108 595,365
------------ ------------
$ 529,829 $ 607,763
============ ============
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 86-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
-------------------------- -------------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Revenues:
Oil and gas $ 163,429 $ 280,167 $ 573,508 $ 673,913
Interest 550 1,965 3,148 4,786
Gain on disposition of assets 4,709 1,856 4,709 30,827
---------- ---------- ---------- ----------
168,688 283,988 581,365 709,526
---------- ---------- ---------- ----------
Costs and expenses:
Oil and gas production 155,802 89,063 390,610 265,976
General and administrative 4,903 8,405 14,869 20,217
Depletion 9,676 5,634 23,033 19,528
---------- ---------- ---------- ----------
170,381 103,102 428,512 305,721
---------- ---------- ---------- ----------
Net income (loss) $ (1,693) $ 180,886 $ 152,853 $ 403,805
========== ========== ========== ==========
Allocation of net income (loss):
Managing general partner $ (16) $ 1,809 $ 1,529 $ 4,038
========== ========== ========== ==========
Limited partners $ (1,677) $ 179,077 $ 151,324 $ 399,767
========== ========== ========== ==========
Net income (loss) per limited
partnership interest $ (.16) $ 17.68 $ 14.94 $ 39.46
========== ========== ========== ==========
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 86-A, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
------------ ------------ ------------
Balance at January 1, 2001 $ 4,647 $ 590,718 $ 595,365
Distributions (2,901) (287,209) (290,110)
Net income 1,529 151,324 152,853
------------ ------------ ------------
Balance at September 30, 2001 $ 3,275 $ 454,833 $ 458,108
============ ============ ============
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 86-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
------------------------------
2001 2000
------------ ------------
Cash flows from operating activities:
Net income $ 152,853 $ 403,805
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 23,033 19,528
Gain on disposition of assets (4,709) (30,827)
Changes in assets and liabilities:
Accounts receivable 64,197 (93,990)
Accounts payable 59,323 8,977
------------ ------------
Net cash provided by operating activities 294,697 307,493
------------ ------------
Cash flows from investing activities:
Additions to oil and gas properties (4,077) (3,916)
Proceeds from asset dispositions 4,709 30,827
------------ ------------
Net cash provided by investing activities 632 26,911
------------ ------------
Cash flows used in financing activities:
Cash distributions to partners (290,110) (333,415)
------------ ------------
Net increase in cash 5,219 989
Cash at beginning of period 46,169 76,838
------------ ------------
Cash at end of period $ 51,388 $ 77,827
============ ============
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
September 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 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 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.
NOTE 3. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $1,740,131 of which $1,716,778 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
7
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 15% to $573,508 for the nine
months ended September 30, 2001 as compared to $673,913 for the same period in
2000. The decrease in revenues resulted from lower average prices received for
oil and a decline in production, offset by higher average prices received for
gas and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 12,954 barrels of oil, 6,988 barrels of NGLs and 29,064 mcf of gas were
sold, or 24,786 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 12,982 barrels of oil, 11,853 barrels of NGLs and 48,604 mcf
of gas were sold, or 32,936 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 $1.32, or 5%, from $28.63
for the nine months ended September 30, 2000 to $27.31 for the same period in
2001. The average price received per barrel of NGLs increased slightly from
$15.23 during the nine months ended September 30, 2000 to $15.27 for the same
period in 2001. The average price received per mcf of gas increased 55% from
$2.51 for the nine months ended September 30, 2000 to $3.89 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 $4,709 and $30,827 were recognized during the
nine months ended September 30, 2001 and 2000, respectively. The gain recognized
during the period ended September 30, 2001 resulted from equipment credits on
one fully depleted well. The gain recognized during the same period in 2000
resulted from equipment credits on two fully depleted wells.
Costs and Expenses:
Total costs and expenses increased to $428,512 for the nine months ended
September 30, 2001 as compared to $305,721 for the same period in 2000, an
increase of $122,791, or 40%. This increase was due to increases in production
costs and depletion, offset by a decline in general and administrative expenses
("G&A").
Production costs were $390,610 for the nine months ended September 30, 2001 and
$265,976 for the same period in 2000 resulting in a $124,634 increase, or 47%.
This increase was primarily due to additional well maintenance and workover
costs incurred to stimulate well production and higher ad valorem taxes, offset
by lower production taxes.
8
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
26% from $20,217 for the nine months ended September 30, 2000 to $14,869 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.
Depletion was $23,033 for the nine months ended September 30, 2001 as compared
to $19,528 for the same period in 2000, representing an increase of $3,505, or
18%. This increase was the result of a decrease 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 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
2000.
Three months ended September 30, 2001 compared with three months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 42% to $163,429 for the three
months ended September 30, 2001 as compared to $280,167 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, 4,595
barrels of oil, 2,048 barrels of NGLs and 8,898 mcf of gas were sold, or 8,126
BOEs. For the three months ended September 30, 2000, 3,814 barrels of oil, 5,599
barrels of NGLs and 22,585 mcf of gas were sold, or 13,177 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 $4.27, or 14%, from
$30.82 for the three months ended September 30, 2000 to $26.55 for the same
period in 2001. The average price received per barrel of NGLs decreased $4.69,
or 29%, from $16.39 during the three months ended September 30, 2000 to $11.70
for the same period in 2001. The average price received per mcf of gas decreased
38% from $3.14 for the three months ended September 30, 2000 to $1.96 for the
same period in 2001.
Gains on disposition of assets of $4,709 and $1,856 were recognized during the
three months ended September 30, 2001 and 2000, respectively, resulting from
equipment credits on one fully depleted well each year.
Costs and Expenses:
Total costs and expenses increased to $170,381 for the three months ended
September 30, 2001 as compared to $103,102 for the same period in 2000, an
increase of $67,279, or 65%. This increase was due to increases in production
costs and depletion, offset by a decline in G&A.
9
Production costs were $155,802 for the three months ended September 30, 2001 and
$89,063 for the same period in 2000 resulting in a $66,739 increase, or 75%.
This increase was primarily due to additional well maintenance and workover
costs incurred to stimulate well production and higher ad valorem taxes, offset
by a decline in production taxes associated with lower average prices.
During this period, G&A decreased 42% from $8,405 for the three months ended
September 30, 2000 to $4,903 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.
Depletion was $9,676 for the three months ended September 30, 2001 as compared
to $5,634 for the same period in 2000, representing an increase of $4,042, or
72%. This increase was attributable to a decrease in proved reserves during the
period ended September 30, 2001 as a result of lower commodity prices and an
increase in oil production of 781 barrels for the three months ended September
30, 2001 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.
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased $12,796 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This decrease was due to a decline in oil and gas sales receipts of $102,043 and
an increase in production costs of $124,634, offset by decreases of $208,533 in
working capital and $5,348 in G&A expenses. The decrease in oil and gas receipts
resulted from the decrease of $18,741 in oil prices and a decline in production
of $151,052, offset by an increase of $67,750 in gas and NGL prices 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 and a higher ad valorem taxes, offset by lower
production taxes. 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 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 $4,709 and $30,827 received during the nine
months ended September 30, 2001 and 2000, respectively, were due to equipment
credits received on fully depleted wells.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $290,110, of which $2,901 was distributed to the managing general partner
and $287,209 to the limited
10
partners. For the same period ended September 30, 2000, cash distributions to
the partners were $333,415, of which $3,334 was distributed to the managing
general partner and $330,081 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
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.
11
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 86-A, LTD.
(A Texas Limited Partnership)
SIGNATURES
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: November 9, 2001 By: /s/ Rich Dealy
-------------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
13
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 86-B, LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 86-B, Ltd. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 33-3353B
PARKER & PARSLEY 86-B, LTD.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
TEXAS 75-2140235
------------------------------- ----------------------
(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-B, LTD.
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 86-B, LTD.
(A Texas Limited Partnership)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 421,969 $ 220,466
Accounts receivable - oil and gas sales 158,545 260,049
------------ ------------
Total current assets 580,514 480,515
------------ ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 11,816,863 11,805,173
Accumulated depletion (10,123,344) (10,032,733)
------------ ------------
Net oil and gas properties 1,693,519 1,772,440
------------ ------------
$ 2,274,033 $ 2,252,955
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 55,225 $ 15,305
Partners' capital:
Managing general partner 20,912 21,100
Limited partners (17,208 interests) 2,197,896 2,216,550
------------ ------------
2,218,808 2,237,650
------------ ------------
$ 2,274,033 $ 2,252,955
============ ============
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 86-B, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
----------------------------- -----------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Revenues:
Oil and gas $ 336,535 $ 470,780 $ 1,184,086 $ 1,265,828
Interest 2,793 5,054 9,699 12,449
Gain on disposition of assets 8,222 1,255 8,222 3,505
------------ ------------ ------------ ------------
347,550 477,089 1,202,007 1,281,782
------------ ------------ ------------ ------------
Costs and expenses:
Oil and gas production 191,511 169,022 545,838 508,686
General and administrative 10,173 14,124 35,600 37,975
Depletion 32,039 26,659 90,611 84,153
------------ ------------ ------------ ------------
233,723 209,805 672,049 630,814
------------ ------------ ------------ ------------
Net income $ 113,827 $ 267,284 $ 529,958 $ 650,968
============ ============ ============ ============
Allocation of net income:
Managing general partner $ 1,139 $ 2,673 $ 5,300 $ 6,510
============ ============ ============ ============
Limited partners $ 112,688 $ 264,611 $ 524,658 $ 644,458
============ ============ ============ ============
Net income per limited
partnership interest $ 6.55 $ 15.38 $ 30.49 $ 37.45
============ ============ ============ ============
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 86-B, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
------------ ------------ ------------
Balance at January 1, 2001 $ 21,100 $ 2,216,550 $ 2,237,650
Distributions (5,488) (543,312) (548,800)
Net income 5,300 524,658 529,958
------------ ------------ ------------
Balance at September 30, 2001 $ 20,912 $ 2,197,896 $ 2,218,808
============ ============ ============
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 86-B, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
------------------------------
2001 2000
------------ ------------
Cash flows from operating activities:
Net income $ 529,958 $ 650,968
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 90,611 84,153
Gain on disposition of assets (8,222) (3,505)
Changes in assets and liabilities:
Accounts receivable 101,504 (53,484)
Accounts payable 39,920 22,007
------------ ------------
Net cash provided by operating activities 753,771 700,139
------------ ------------
Cash flows from investing activities:
Additions to oil and gas properties (11,690) (19,146)
Proceeds from asset dispositions 8,222 6,101
------------ ------------
Net cash used in investing activities (3,468) (13,045)
------------ ------------
Cash flows used in financing activities:
Cash distributions to partners (548,800) (655,618)
------------ ------------
Net increase in cash 201,503 31,476
Cash at beginning of period 220,466 206,408
------------ ------------
Cash at end of period $ 421,969 $ 237,884
============ ============
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-B, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 86-B, 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 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 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.
NOTE 3. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $4,004,447 of which $3,934,914 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
7
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 6% to $1,184,086 for the nine
months ended September 30, 2001 as compared to $1,265,828 for the same period in
2000. The decrease in revenues resulted from lower average prices received for
oil and a decline in production, offset by higher average prices received for
gas and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 27,584 barrels of oil, 12,159 barrels of NGLs and 63,389 mcf of gas were
sold, or 50,308 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 31,100 barrels of oil, 15,890 barrels of NGLs and 61,540 mcf
of gas were sold, or 57,247 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 $1.30, or 5%, from $28.59
for the nine months ended September 30, 2000 to $27.29 for the same period in
2001. The average price received per barrel of NGLs increased $.21, or 1%, from
$14.13 during the nine months ended September 30, 2000 to $14.34 for the same
period in 2001. The average price received per mcf of gas increased 64% from
$2.47 for the nine months ended September 30, 2000 to $4.05 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 $8,222 and $3,505 were recognized during the
nine months ended September 30, 2001 and 2000, respectively, due to equipment
credits received on one well each year.
Costs and Expenses:
Total costs and expenses increased to $672,049 for the nine months ended
September 30, 2001 as compared to $630,814 for the same period in 2000, an
increase of $41,235, or 7%. This increase was due to increases in production
costs and depletion, offset by a decline in general and administrative expenses
("G&A").
Production costs were $545,838 for the nine months ended September 30, 2001 and
$508,686 for the same period in 2000, resulting in a $37,152 increase, or 7%.
The increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production.
8
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
6% from $37,975 for the nine months ended September 30, 2000 to $35,600 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.
Depletion was $90,611 for the nine months ended September 30, 2001 as compared
to $84,153 for the same period in 2000, representing an increase of $6,458, or
8%. 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 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 2000 and a decline in oil production of 3,516
barrels for the nine months ended September 30, 2001 as compared to the same
period in 2000.
Three months ended September 30, 2001 compared with three months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 29% to $336,535 for the three
months ended September 30, 2001 as compared to $470,780 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, 9,183
barrels of oil, 5,009 barrels of NGLs and 20,146 mcf of gas were sold, or 17,550
BOEs. For the three months ended September 30, 2000, 10,509 barrels of oil,
5,484 barrels of NGLs and 20,505 mcf of gas were sold, or 19,411 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 $4.47, or 15%, from
$30.58 for the three months ended September 30, 2000 to $26.11 for the same
period in 2001. The average price received per barrel of NGLs decreased $4.17,
or 27%, from $15.47 during the three months ended September 30, 2000 to $11.30
for the same period in 2001. The average price received per mcf of gas decreased
37% from $3.15 during the three months ended September 30, 2000 to $1.99 for the
same period in 2001.
Gains on disposition of assets of $8,222 and $1,255 were recognized during the
three months ended September 30, 2001 and 2000, respectively, due to equipment
credits received on one well each year.
Costs and Expenses:
Total costs and expenses increased to $233,723 for the three months ended
September 30, 2001 as compared to $209,805 for the same period in 2000, an
increase of $23,918, or 11%. This increase was due to increases in production
costs and depletion, offset by a decline in G&A.
9
Production costs were $191,511 for the three months ended September 30, 2001 and
$169,022 for the same period in 2000, resulting in a $22,489 increase, or 13%.
The increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production, offset by lower
production taxes.
During this period, G&A decreased 28% from $14,124 for the three months ended
September 30, 2000 to $10,173 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.
Depletion was $32,039 for the three months ended September 30, 2001 as compared
to $26,659 for the same period in 2000, representing an increase of $5,380, or
20%. 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 decline in oil production of 1,326 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 $53,632 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to a reduction of $172,901 in working capital and a
decrease in G&A expenses of $2,375, offset by a decrease in oil and gas sales
receipts of $84,492 and an increase in production costs of $37,152. The decrease
in oil and gas receipts resulted from the decrease of $43,056 in oil prices
during 2001 and a decline of $141,990 in production during 2001 as compared to
the same period in 2000, offset by an increase in gas and NGL prices which
contributed an additional $100,554. The increase in production costs was
primarily due to higher ad valorem taxes and additional well maintenance costs
incurred to stimulate well production, offset by lower production taxes. 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 Used in Investing Activities
The Partnership's investing activities during the nine months ended September
30, 2001 and 2000 were related to upgrades of oil and gas equipment on various
oil and gas properties.
Proceeds from disposition of assets of $8,222 and $6,101 recognized during the
nine months ended September 30, 2001 and 2000, respectively, consisted of
equipment credits received on one well for the current period in 2001 and for
equipment credits received on two wells for the same period in 2000.
10
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $548,800, of which $5,488 was distributed to the managing general partner
and $543,312 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $655,618, of which $6,556 was
distributed to the managing general partner and $649,062 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
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.
11
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 86-B, LTD.
(A Texas Limited Partnership)
SIGNATURES
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-B, LTD.
By: Pioneer Natural Resources USA, Inc.,
Managing General Partner
Dated: November 9, 2001 By: /s/ Rich Dealy
------------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
13
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 86-C, LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 86-C, Ltd. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 33-3353C
PARKER & PARSLEY 86-C, LTD.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
TEXAS 75-2142283
------------------------------- ----------------------
(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-C, LTD.
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..................................................... 11
Signatures........................................................................... 12
2
PARKER & PARSLEY 86-C, LTD.
(A Texas Limited Partnership)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 327,034 $ 161,347
Accounts receivable - oil and gas sales 168,704 296,462
------------ ------------
Total current assets 495,738 457,809
------------ ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 14,605,375 14,598,140
Accumulated depletion (13,203,284) (13,107,930)
------------ ------------
Net oil and gas properties 1,402,091 1,490,210
------------ ------------
$ 1,897,829 $ 1,948,019
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 69,772 $ 30,112
Partners' capital:
Managing general partner 16,972 17,871
Limited partners (19,317 interests) 1,811,085 1,900,036
------------ ------------
1,828,057 1,917,907
------------ ------------
$ 1,897,829 $ 1,948,019
============ ============
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 86-C, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
----------------------------- -----------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Revenues:
Oil and gas $ 343,050 $ 498,725 $ 1,298,151 $ 1,354,998
Interest 2,413 4,134 8,865 9,834
------------ ------------ ------------ ------------
345,463 502,859 1,307,016 1,364,832
------------ ------------ ------------ ------------
Costs and expenses:
Oil and gas production 237,527 191,243 670,680 639,715
General and administrative 10,291 14,962 38,944 40,650
Depletion 34,563 36,399 95,354 116,305
------------ ------------ ------------ ------------
282,381 242,604 804,978 796,670
------------ ------------ ------------ ------------
Net income $ 63,082 $ 260,255 $ 502,038 $ 568,162
============ ============ ============ ============
Allocation of net income:
Managing general partner $ 630 $ 2,603 $ 5,020 $ 5,682
============ ============ ============ ============
Limited partners $ 62,452 $ 257,652 $ 497,018 $ 562,480
============ ============ ============ ============
Net income per limited
partnership interest $ 3.23 $ 13.34 $ 25.73 $ 29.12
============ ============ ============ ============
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 86-C, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
------------ ------------ ------------
Balance at January 1, 2001 $ 17,871 $ 1,900,036 $ 1,917,907
Distributions (5,919) (585,969) (591,888)
Net income 5,020 497,018 502,038
------------ ------------ ------------
Balance at September 30, 2001 $ 16,972 $ 1,811,085 $ 1,828,057
============ ============ ============
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 86-C, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
--------------------------
2001 2000
---------- ----------
Cash flows from operating activities:
Net income $ 502,038 $ 568,162
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 95,354 116,305
Changes in assets and liabilities:
Accounts receivable 127,758 (68,520)
Accounts payable 39,660 17,830
---------- ----------
Net cash provided by operating activities 764,810 633,777
---------- ----------
Cash flows from investing activities:
Additions to oil and gas properties (7,546) (15,594)
Proceeds from asset dispositions 311 --
---------- ----------
Net cash used in investing activities (7,235) (15,594)
---------- ----------
Cash flows used in financing activities:
Cash distributions to partners (591,888) (586,630)
---------- ----------
Net increase in cash 165,687 31,553
Cash at beginning of period 161,347 142,687
---------- ----------
Cash at end of period $ 327,034 $ 174,240
========== ==========
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-C, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 86-C, 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 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 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.
NOTE 3. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $3,226,799 of which $3,184,609 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
7
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 4% to $1,298,151 for the nine
months ended September 30, 2001 as compared to $1,354,998 for the same period in
2000. The decrease in revenues resulted from lower average oil prices received
and a decline in production, offset by higher average prices received for gas
and natural gas liquids ("NGLs"). For the nine months ended September 30, 2001,
28,869 barrels of oil, 15,766 barrels of NGLs and 74,022 mcf of gas were sold,
or 56,972 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 32,036 barrels of oil, 18,405 barrels of NGLs and 72,406 mcf
of gas were sold, or 62,509 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 $1.62, or 6%, from $28.64
for the nine months ended September 30, 2000 to $27.02 for the same period in
2001. The average price received per barrel of NGLs increased $.15, or 1%, from
$14.26 during the nine months ended September 30, 2000 to $14.41 during the same
period in 2001. The average price received per mcf of gas increased 62% from
$2.42 during the nine months ended September 30, 2000 to $3.93 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.
Costs and Expenses:
Total costs and expenses increased to $804,978 for the nine months ended
September 30, 2001 as compared to $796,670 for the same period in 2000, an
increase of $8,308, or 1%. This increase was due to an increase in production
costs, offset by declines in depletion and general and administrative expenses
("G&A").
Production costs were $670,680 for the nine months ended September 30, 2001 and
$639,715 for the same period in 2000, resulting in a $30,965, or 5%, increase.
This increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production, offset by a decline in
workover costs.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
4% from $40,650 for the nine months ended September 30, 2000 to $38,944 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.
8
Depletion was $95,354 for the nine months ended September 30, 2001 as compared
to $116,305 for the same period in 2000, representing a decrease of $20,951, or
18%. This decrease was primarily due to a decline in oil production of 3,167
barrels for the nine months ended September 30, 2001 as compared to the same
period in 2000.
Three months ended September 30, 2001 compared with three months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 31% to $343,050 for the three
months ended September 30, 2001 as compared to $498,725 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, 9,466
barrels of oil, 5,097 barrels of NGLs and 19,629 mcf of gas were sold, or 17,835
BOEs. For the three months ended September 30, 2000, 10,398 barrels of oil,
6,403 barrels of NGLs and 26,667 mcf of gas were sold, or 21,246 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 $4.52, or 15%, from
$30.72 for the three months ended September 30, 2000 to $26.20 for the same
period in 2001. The average price received per barrel of NGLs decreased $4.14,
or 27%, from $15.27 during the three months ended September 30, 2000 to $11.13
for the same period in 2001. The average price received per mcf of gas decreased
36% from $3.05 during the three months ended September 30, 2000 to $1.95 for the
same period in 2001.
Costs and Expenses:
Total costs and expenses increased to $282,381 for the three months ended
September 30, 2001 as compared to $242,604 for the same period in 2000, an
increase of $39,777, or 16%. This increase was due to an increase in production
costs, offset by declines in G&A and depletion.
Production costs were $237,527 for the three months ended September 30, 2001 and
$191,243 for the same period in 2000, resulting in a $46,284 increase, or 24%.
This increase was primarily due to additional well maintenance costs incurred to
stimulate well production and higher ad valorem taxes.
During this period, G&A decreased 31% from $14,962 for the three months ended
September 30, 2000 to $10,291 for the same period in 2001, primarily due to a
lower percentage of the managing general partner's G&A being allocated as a
result of decreased oil and gas revenues.
Depletion was $34,563 for the three months ended September 30, 2001 as compared
to $36,399 for the same period in 2000, representing a decrease of $1,836, or
5%. This decrease was primarily attributable to a decline in oil production of
932 barrels for the three months ended September 30, 2001 as compared to the
same period in 2000.
9
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $131,033 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to a reduction of $218,108 in working capital and a
decline in G&A expenses of $1,706, offset by a decrease in oil and gas sales
receipts of $57,816 and an increase in production costs of $30,965. 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. The decrease in oil and gas receipts resulted
from the decrease in oil prices of $51,763 during 2001 and $117,265 resulting
from the decline in production during 2001 as compared to the same period in
2000, offset by an increase in gas and NGL prices of $111,212 during 2001. The
increase in production costs was primarily due to increased ad valorem taxes and
additional well maintenance costs incurred to stimulate well production, offset
by a decline in workover costs.
Net Cash Used in Investing Activities
The Partnership's investment activities during the nine months ended September
30, 2001 and 2000 were related to upgrades of equipment on various oil and gas
properties.
Proceeds from asset dispositions of $311 recognized during the nine months ended
September 30, 2001 were from the sale of equipment on one active well.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $591,888, of which $5,919 was distributed to the managing general partner
and $585,969 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $586,630, of which $5,866 was
distributed to the managing general partner and $580,764 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
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
10
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
11
PARKER & PARSLEY 86-C, LTD.
(A Texas Limited Partnership)
SIGNATURES
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-C, LTD.
By: Pioneer Natural Resources USA, Inc.,
Managing General Partner
Dated: November 9, 2001 By: /s/ Rich Dealy
------------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
12
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY
PRIVATE INVESTMENT 86, LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley Private Investment 86, Ltd. and supplements the supplemental information
to the proxy statement/prospectus dated October 12, 2001, of Pioneer Natural
Resources Company, a Delaware corporation that we call Pioneer Parent, and
Pioneer Natural Resources USA, Inc., a Delaware corporation that we call Pioneer
USA, by which Pioneer USA is soliciting proxies to be voted at a special meeting
of the limited partners of the partnership. The purpose of the special meeting
is for you to vote upon the merger of the partnership with and into Pioneer USA
that, if completed, will result in your receiving common stock of Pioneer Parent
for your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY PRIVATE INVESTMENT 86, LTD.
(A Texas Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY PRIVATE INVESTMENT 86, LTD.
(A Texas Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 112,810 $ 57,176
Accounts receivable - oil and gas sales 62,603 90,053
------------ ------------
Total current assets 175,413 147,229
------------ ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 4,035,386 4,032,771
Accumulated depletion (3,304,576) (3,261,600)
------------ ------------
Net oil and gas properties 730,810 771,171
------------ ------------
$ 906,223 $ 918,400
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 23,669 $ 5,165
Partners' capital:
Managing general partner 9,794 10,101
Limited partners (123 interests) 872,760 903,134
------------ ------------
882,554 913,235
------------ ------------
$ 906,223 $ 918,400
============ ============
The financial information included as of September 30, 2001 has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY PRIVATE INVESTMENT 86, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------------- -------------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Revenues:
Oil and gas $ 126,373 $ 156,441 $ 432,666 $ 442,527
Interest 768 1,549 2,881 3,472
---------- ---------- ---------- ----------
127,141 157,990 435,547 445,999
---------- ---------- ---------- ----------
Costs and expenses:
Oil and gas production 75,898 60,401 218,176 214,275
General and administrative 2,677 7,554 8,803 13,276
Depletion 14,843 10,787 42,976 37,778
---------- ---------- ---------- ----------
93,418 78,742 269,955 265,329
---------- ---------- ---------- ----------
Net income $ 33,723 $ 79,248 $ 165,592 $ 180,670
========== ========== ========== ==========
Allocation of net income:
Managing general partner $ 337 $ 793 $ 1,656 $ 1,807
========== ========== ========== ==========
Limited partners $ 33,386 $ 78,455 $ 163,936 $ 178,863
========== ========== ========== ==========
Net income per limited
partnership interest $ 271.43 $ 637.84 $ 1,332.81 $ 1,454.17
========== ========== ========== ==========
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.
3
PARKER & PARSLEY PRIVATE INVESTMENT 86, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
------------ ------------ ------------
Balance at January 1, 2001 $ 10,101 $ 903,134 $ 913,235
Distributions (1,963) (194,310) (196,273)
Net income 1,656 163,936 165,592
------------ ------------ ------------
Balance at September 30, 2001 $ 9,794 $ 872,760 $ 882,554
============ ============ ============
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 PRIVATE INVESTMENT 86, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
--------------------------
2001 2000
---------- ----------
Cash flows from operating activities:
Net income $ 165,592 $ 180,670
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 42,976 37,778
Changes in assets and liabilities:
Accounts receivable 27,450 (23,879)
Accounts payable 18,504 10,777
---------- ----------
Net cash provided by operating activities 254,522 205,346
---------- ----------
Cash flows used in investing activities:
Additions to oil and gas properties (2,615) (8,921)
Cash flows used in financing activities:
Cash distributions to partners (196,273) (201,071)
---------- ----------
Net increase (decrease) in cash 55,634 (4,646)
Cash at beginning of period 57,176 72,318
---------- ----------
Cash at end of period $ 112,810 $ 67,672
========== ==========
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 PRIVATE INVESTMENT 86, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley Private Investment 86, 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 September 30, 2000 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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $1,341,550 of which $1,328,134 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
6
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 2% to $432,666 for the nine
months ended September 30, 2001 as compared to $442,527 for the same period in
2000. The decrease in revenues resulted from a decline in production and lower
average prices received for oil, offset by higher average prices received for
gas and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 9,546 barrels of oil, 4,199 barrels of NGLs and 26,470 mcf of gas were
sold, or 18,157 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 10,487 barrels of oil, 5,360 barrels of NGLs and 25,561 mcf
of gas were sold, or 20,107 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 $1.40, or 5%, from $28.66
for the nine months ended September 30, 2000 to $27.26 for the same period in
2001. The average price received per barrel of NGLs increased slightly from
$14.20 during the nine months ended September 30, 2000 to $14.30 for the same
period in 2001. The average price received per mcf of gas increased 65% from
$2.58 during the nine months ended September 30, 2000 to $4.25 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.
Costs and Expenses:
Total costs and expenses increased to $269,955 for the nine months ended
September 30, 2001 as compared to $265,329 for the same period in 2000, an
increase of $4,626, or 2%. This increase was due to higher production costs and
depletion, offset by a decline in general and administrative expenses ("G&A").
Production costs were $218,176 for the nine months ended September 30, 2001 and
$214,275 for the same period in 2000, resulting in a $3,901, or 2%, increase.
The increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production, offset by lower
workover costs.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
34%, from $13,276 for the nine months ended September 30, 2000 to $8,803 for the
same period in 2001, primarily due to a lower percentage of the managing general
partners' G&A being allocated (limited to 2% of oil and gas revenues) as a
result of decreased oil and gas revenues.
7
Depletion was $42,976 for the nine months ended September 30, 2001 as compared
to $37,778 for the same period in 2000, an increase of $5,198, or 14%. This
increase was the result of a decline in proved reserves during the period ended
September 30, 2001 due to lower commodity prices, offset by a decline in oil
production of 941 barrels for the nine months ended September 30, 2001 as
compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 19% to $126,373 for the three
months ended September 30, 2001 as compared to $156,441 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, 3,218
barrels of oil, 1,745 barrels of NGLs and 8,648 mcf of gas were sold, or 6,404
BOEs. For the three months ended September 30, 2000, 3,262 barrels of oil, 1,792
barrels of NGLs and 8,955 mcf of gas were sold, or 6,547 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 $4.20, or 14%, from
$30.45 for the three months ended September 30, 2000 to $26.25 for the same
period in 2001. The average price received per barrel of NGLs decreased $4.38,
or 28%, from $15.90 during the three months ended September 30, 2000 to $11.52
for the same period in 2001. The average price received per mcf of gas decreased
12% to $2.81 during the three months ended September 30, 2001 from $3.20 during
the same period in 2000.
Costs and Expenses:
Total costs and expenses increased to $93,418 for the three months ended
September 30, 2001 as compared to $78,742 for the same period in 2000, an
increase of $14,676, or 19%. This increase was due to higher production costs
and depletion, offset by a decline in G&A.
Production costs were $75,898 for the three months ended September 30, 2001 and
$60,401 for the same period in 2000, resulting in a $15,497 increase, or 26%.
The increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production.
During this period, G&A decreased 65% from $7,554 for the three months ended
September 30, 2000 to $2,677 for the same period in 2001, primarily due to a
lower percentage of the managing general partner's G&A being allocated (limited
to 2% of oil and gas revenues) as a result of decreased oil and gas revenues.
Depletion was $14,843 for the three months ended September 30, 2001 as compared
to $10,787 for the same period in 2000, an increase of $4,056, or 38%. This
increase was attributable to a decline in proved reserves during the period
ended September 30, 2001 as a result of lower commodity prices.
8
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $49,176 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to a decline in G&A expenses of $4,473 and a reduction in
working capital of $59,056, offset by an increase in production costs of $3,901
and a decline in oil and gas receipts of $10,452. The decrease in oil and gas
receipts resulted from declines in oil prices of $15,273 and in production of
$38,389 during 2001 as compared to the same period in 2000, offset by an
increase of $43,210 in gas and NGL prices. The increase in production costs was
primarily due to higher ad valorem taxes and additional well maintenance costs
incurred to stimulate well production, offset by lower workover costs. The
decrease in G&A was due to a lower percentage of the managing general partner's
G&A being allocated (limited to 2% of oil and gas revenues) as a result of
decreased oil and gas revenues.
Net Cash Used in Investing Activities
The Partnership's principal investing activities during the nine months ended
September 30, 2001 and 2000 were related to expenditures for equipment upgrades
on various oil and gas properties.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $196,273, of which $1,963 was distributed to the managing general partner
and $194,310 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $201,071, of which $2,011 was
distributed to the managing general partner and $199,060 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
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.
9
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.
10
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 87-A CONV., LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 87-A Conv., Ltd. and supplements the supplemental information to the
proxy statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY 87-A CONV., LTD.
(A Texas Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY 87-A CONV., LTD.
(A Texas Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
--------------- ---------------
(Unaudited)
ASSETS
Current assets:
Cash $ 79,082 $ 42,044
Accounts receivable - oil and gas sales 36,248 58,386
--------------- ---------------
Total current assets 115,330 100,430
--------------- ---------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 2,575,818 2,703,338
Accumulated depletion (2,262,546) (2,357,166)
--------------- ---------------
Net oil and gas properties 313,272 346,172
--------------- ---------------
$ 428,602 $ 446,602
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 8,250 $ 5,133
Partners' capital:
Managing general partner 4,206 4,417
Limited partners (3,856 interests) 416,146 437,052
--------------- ---------------
420,352 441,469
--------------- ---------------
$ 428,602 $ 446,602
=============== ===============
The financial information included as of September 30, 2001 has been prepared
by management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY 87-A CONV., LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------------- -------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
Revenues:
Oil and gas $ 70,881 $ 97,967 $ 258,166 $ 279,279
Interest 576 1,064 2,034 2,709
Gain on disposition of assets 2,475 73 8,384 857
----------- ----------- ----------- -----------
73,932 99,104 268,584 282,845
----------- ----------- ----------- -----------
Costs and expenses:
Oil and gas production 43,917 37,072 118,732 107,608
General and administrative 2,126 2,939 7,745 8,378
Impairment of oil and gas properties 859 -- 859 --
Depletion 17,030 6,412 32,748 19,311
Abandoned property 2,267 -- 5,401 --
----------- ----------- ----------- -----------
66,199 46,423 165,485 135,297
----------- ----------- ----------- -----------
Net income $ 7,733 $ 52,681 $ 103,099 $ 147,548
=========== =========== =========== ===========
Allocation of net income:
Managing general partner $ 77 $ 526 $ 1,031 $ 1,475
=========== =========== =========== ===========
Limited partners $ 7,656 $ 52,155 $ 102,068 $ 146,073
=========== =========== =========== ===========
Net income per limited
partnership interest $ 1.99 $ 13.52 $ 26.47 $ 37.88
=========== =========== =========== ===========
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.
3
PARKER & PARSLEY 87-A CONV., LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 2001 $ 4,417 $ 437,052 $ 441,469
Distributions (1,242) (122,974) (124,216)
Net income 1,031 102,068 103,099
----------- ----------- -----------
Balance at September 30, 2001 $ 4,206 $ 416,146 $ 420,352
=========== =========== ===========
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 87-A CONV., LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
----------------------
2001 2000
--------- ---------
Cash flows from operating activities:
Net income $ 103,099 $ 147,548
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 859 --
Depletion 32,748 19,311
Gain on disposition of assets (8,384) (857)
Changes in assets and liabilities:
Accounts receivable 22,138 (18,551)
Accounts payable 7,546 4,487
--------- ---------
Net cash provided by operating activities 158,006 151,938
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (1,023) (1,884)
Proceeds from asset dispositions 4,271 1,029
--------- ---------
Net cash provided by (used in) investing activities 3,248 (855)
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (124,216) (158,601)
--------- ---------
Net increase (decrease) in cash 37,038 (7,518)
Cash at beginning of period 42,044 53,265
--------- ---------
Cash at end of period $ 79,082 $ 45,747
========= =========
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 87-A CONV., LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 87-A Conv., Ltd. (the "Partnership") was organized in 1987 as a
general partnership under the laws of the State of Texas and was converted to a
Texas limited partnership in 1989.
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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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
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 $859 related to its proved oil and gas properties during the nine
months ended September 30, 2001.
6
NOTE 4. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $779,803 of which $764,998 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
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 8% to $258,166 for the nine
months ended September 30, 2001 as compared to $279,279 for the same period in
2000. The decrease in revenues resulted from a decrease in production and lower
average prices received for oil and natural gas liquids ("NGLs"), offset by
higher average prices received for gas. For the nine months ended September 30,
2001, 5,727 barrels of oil, 2,969 barrels of NGLs and 14,647 mcf of gas were
sold, or 11,137 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 6,428 barrels of oil, 3,690 barrels of NGLs and 16,201 mcf
of gas were sold, or 12,818 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 $1.33, or 5%, from $28.38
for the nine months ended September 30, 2000 to $27.05 for the same period in
2001. The average price received per barrel of NGLs decreased $.12, or 1%, from
$15.34 during the nine months ended September 30, 2000 to $15.22 for the same
period in 2001. The average price received per mcf of gas increased 59% from
$2.49 during 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.
Gain on disposition of assets of $8,384 was received during the nine months
ended September 30, 2001 from disposal of equipment on three wells plugged and
abandoned during the current period. Expenses to plug and abandon these wells
were $5,401. For the nine months ended September 30, 2000, a gain of $857 was
recognized due to equipment credits received on one fully depleted well.
7
Costs and Expenses:
Total costs and expenses increased to $165,485 for the nine months ended
September 30, 2001 as compared to $135,297 for the same period in 2000, an
increase of $30,188, or 22%. This increase was due to increases in depletion,
production costs, abandoned property costs and the impairment of oil and gas
properties, offset by a decrease in general and administrative expenses ("G&A").
Production costs were $118,732 for the nine months ended September 30, 2001 and
$107,608 for the same period in 2000, resulting in an $11,124 increase, or 10%.
The increase was due to additional well maintenance and workover costs incurred
to stimulate well production and higher ad valorem taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
8% from $8,378 for the nine months ended September 30, 2000 to $7,745 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 $859 related to its proved oil and gas properties during the nine
months ended September 30, 2001.
Depletion was $32,748 for the nine months ended September 30, 2001 as compared
to $19,311 for the same period in 2000, an increase of $13,437 or 70%. This
increase was due to a decrease in proved reserves during the period ended
September 30, 2001 due to lower commodity prices, offset by a decrease in oil
production of 701 barrels for the nine months ended September 30, 2001 as
compared to the same period in 2000.
8
Three months ended September 30, 2001 compared with three months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 28% to $70,881 for the three
months ended September 30, 2001 as compared to $97,967 for the same period in
2000. The decrease in revenues resulted from a decrease in production and lower
average prices received. For the three months ended September 30, 2001, 1,899
barrels of oil, 954 barrels of NGLs and 4,302 mcf of gas were sold, or 3,570
BOEs. For the three months ended September 30, 2000, 2,079 barrels of oil, 1,127
barrels of NGLs and 4,826 mcf of gas were sold, or 4,010 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 $4.17, or 14%, from
$30.43 for the three months ended September 30, 2000 to $26.26 for the same
period in 2001. The average price received per barrel of NGLs decreased $4.92,
or 29%, from $16.96 during the three months ended September 30, 2000 to $12.04
for the same period in 2001. The average price received per mcf of gas decreased
32% to $2.21 during the three months ended September 30, 2001 from $3.25 during
the same period in 2000.
Gain on disposition of assets of $2,475 was received during the three months
ended September 30, 2001 from disposal of equipment on three wells plugged and
abandoned during the current period. Expenses to plug and abandon these wells
were $2,267. For the same period ended September 30, 2000, a gain of $73 was
recognized on one fully depleted well.
Costs and Expenses:
Total costs and expenses increased to $66,199 for the three months ended
September 30, 2001 as compared to $46,423 for the same period in 2000, an
increase of $19,776, or 43%. This increase was due to higher depletion,
production costs, abandoned property costs and the impairment of oil and gas
properties, offset by a decline in G&A.
Production costs were $43,917 for the three months ended September 30, 2001 and
$37,072 for the same period in 2000, resulting in a $6,845 increase, or 18%. The
increase was primarily due to additional workover costs incurred to stimulate
well production and higher ad valorem taxes.
During this period, G&A decreased 28%, from $2,939 for the three months ended
September 30, 2000 to $2,126 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 $859 related to
its proved oil and gas properties for the three months ended September 30, 2001.
9
Depletion was $17,030 for the three months ended September 30, 2001 as compared
to $6,412 for the same period in 2000, an increase of $10,618, or 166%. This
increase was due to a decrease in proved reserves during the period ended
September 30, 2001 due to lower commodity prices, offset by a decline in oil
production of 180 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 $6,068 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to a reduction in working capital of $43,748 and a
decrease in G&A expenses of $633, offset by a decline in oil and gas sales
receipts of $21,788 and increases in production costs of $11,124 and abandoned
property costs of $5,401. The decrease in oil and gas receipts resulted from a
decline of $36,096 in production during 2001 as compared to the same period in
2000 and a decline in oil and NGL prices of $9,552, offset by an increase in gas
prices of $23,860 during 2001. The increase in production costs was primarily
due to additional well maintenance and workover costs incurred to stimulate well
production and higher ad valorem taxes. 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 for the nine months ended September 30,
2001 and 2000 included expenditures related to equipment upgrades on various oil
and gas properties.
Proceeds from disposition of assets of $4,271 and $1,029 were recognized during
the nine months ended September 30, 2001 and 2000, respectively. Proceeds
recognized during the period in 2001 were due to salvage income received on
three wells plugged and abandoned during the current period. Proceeds recognized
during the period in 2000 were from equipment credits received 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 $124,216, of which $1,242 was distributed to the managing general partner
and $122,974 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $158,601, of which $1,586 was
distributed to the managing general partner and $157,015 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
the proposed merger of the Partnership into Pioneer Natural Resources USA, Inc.
("Pioneer USA"). For further information, see "Proposal to acquire partnerships"
below.
10
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.
11
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 87-A, LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 87-A, Ltd. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 33-12244-01
PARKER & PARSLEY 87-A, LTD.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
TEXAS 75-2185148
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
in corporation 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 87-A, LTD.
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 87-A, LTD.
(A Texas Limited Partnership)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 597,301 $ 321,340
Accounts receivable - oil and gas sales 269,813 435,508
------------ ------------
Total current assets 867,114 756,848
------------ ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 19,245,849 20,198,629
Accumulated depletion (16,905,327) (17,611,694)
------------ ------------
Net oil and gas properties 2,340,522 2,586,935
------------ ------------
$ 3,207,636 $ 3,343,783
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 60,317 $ 37,865
Partners' capital:
Managing general partner 31,446 33,032
Limited partners (28,811 interests) 3,115,873 3,272,886
------------ ------------
3,147,319 3,305,918
------------ ------------
$ 3,207,636 $ 3,343,783
============ ============
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 87-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------------- -------------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Revenues:
Oil and gas $ 529,630 $ 732,635 $1,928,698 $2,089,710
Interest 4,333 8,101 15,347 20,403
Gain on disposition of assets 18,489 546 62,642 6,407
---------- ---------- ---------- ----------
552,452 741,282 2,006,687 2,116,520
---------- ---------- ---------- ----------
Costs and expenses:
Oil and gas production 328,174 277,007 887,189 804,325
General and administrative 15,889 22,375 57,861 62,691
Impairment of oil and gas properties 6,487 -- 6,487 --
Depletion 127,394 48,184 245,209 144,393
Abandoned property 16,941 -- 40,357 --
---------- ---------- ---------- ----------
494,885 347,566 1,237,103 1,011,409
---------- ---------- ---------- ----------
Net income $ 57,567 $ 393,716 $ 769,584 $1,105,111
========== ========== ========== ==========
Allocation of net income:
Managing general partner $ 576 $ 3,937 $ 7,696 $ 11,051
========== ========== ========== ==========
Limited partners $ 56,991 $ 389,779 $ 761,888 $1,094,060
========== ========== ========== ==========
Net income per limited
partnership interest $ 1.97 $ 13.53 $ 26.44 $ 37.97
========== ========== ========== ==========
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-A, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 2001 $ 33,032 $ 3,272,886 $ 3,305,918
Distributions (9,282) (918,901) (928,183)
Net income 7,696 761,888 769,584
----------- ----------- -----------
Balance at September 30, 2001 $ 31,446 $ 3,115,873 $ 3,147,319
=========== =========== ===========
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-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
----------------------------
2001 2000
----------- -----------
Cash flows from operating activities:
Net income $ 769,584 $ 1,105,111
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 6,487 --
Depletion 245,209 144,393
Gain on disposition of assets (62,642) (6,407)
Changes in assets and liabilities:
Accounts receivable 165,695 (71,516)
Accounts payable 55,540 32,543
----------- -----------
Net cash provided by operating activities 1,179,873 1,204,124
----------- -----------
Cash flows from investing activities:
Additions to oil and gas properties (7,641) (14,078)
Proceeds from asset dispositions 31,912 7,695
----------- -----------
Net cash provided by (used in) investing activities 24,271 (6,383)
----------- -----------
Cash flows used in financing activities:
Cash distributions to partners (928,183) (1,185,023)
----------- -----------
Net increase in cash 275,961 12,718
Cash at beginning of period 321,340 339,531
----------- -----------
Cash at end of period $ 597,301 $ 352,249
=========== ===========
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 statements.
6
PARKER & PARSLEY 87-A, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 87-A, 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 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 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.
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
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
7
risks involved in the industry. As a result, the Partnership recognized a
non-cash impairment provision of $6,487 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
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $5,806,714 of which $5,713,729 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the 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 8% to $1,928,698 for the nine
months ended September 30, 2001 as compared to $2,089,710 for the same period in
2000. The decrease in revenues resulted from a decrease in production and
declines in average prices received for oil and natural gas liquids ("NGLs"),
offset by an increase in average prices received for gas. For the nine months
ended September 30, 2001, 42,783 barrels of oil, 22,185 barrels of NGLs and
109,451 mcf of gas were sold, or 83,210 barrel of oil equivalents ("BOEs"). For
the nine months ended September 30, 2000, 48,110 barrels of oil, 27,559 barrels
of NGLs and 121,076 mcf of gas were sold, or 95,848 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 $1.33, or 5%, from $28.38
for the nine months ended September 30, 2000 to $27.05 for the same period in
2001. The average price received per barrel of NGLs decreased $.12, or 1%, from
$15.34 during the nine months ended September 30, 2000 to $15.22 for the same
period in 2001. The average price received per mcf of gas increased 59% from
$2.49 during 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.
Gain on disposition of assets of $62,642 was realized during the nine months
ended September 30, 2001 from disposal of equipment on three wells plugged and
abandoned during the current period.
8
Expenses to plug and abandon these wells were $40,357. For the nine months ended
September 30, 2000, a gain of $6,407 was recognized due to equipment credits
received on a fully depleted well.
Costs and Expenses:
Total costs and expenses increased to $1,237,103 for the nine months ended
September 30, 2001 as compared to $1,011,409 for the same period in 2000, an
increase of $225,694, or 22%. This increase was due to increases in depletion,
production costs, abandoned property costs and the impairment of oil and gas
properties, offset by a decline in general and administrative expenses ("G&A").
Production costs were $887,189 for the nine months ended September 30, 2001 and
$804,325 for the same period in 2000, resulting in a $82,864 increase, or 10%.
The increase was primarily due to additional workover and well maintenance costs
incurred to stimulate well production and higher ad valorem taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
8%, from $62,691 for the nine months ended September 30, 2000 to $57,861 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 $6,487 related to its proved oil and gas properties during the nine
months ended September 30, 2001.
Depletion was $245,209 for the nine months ended September 30, 2001 as compared
to $144,393 for the same period in 2000, representing an increase of $100,816,
or 70%. This increase was due to a decrease in proved reserves during the period
ended September 30, 2001 due to lower commodity prices, offset by a decline in
oil production of 5,327 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 28% to $529,630 for the three
months ended September 30, 2001 as compared to $732,635 for the same period in
2000. The decrease in revenues resulted from a decline in production and lower
average prices received. For the three months ended September 30, 2001, 14,188
barrels of oil, 7,133 barrels of NGLs and 32,136 mcf of gas were sold, or 26,677
BOEs. For the three months ended September 30, 2000, 15,537 barrels of oil,
8,410 barrels of NGLs and 36,098 mcf of gas were sold, or 29,963 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 $4.17, or 14%, from
$30.43 for the three months ended September 30, 2000 to $26.26 for the same
period in 2001. The average price received per barrel of NGLs decreased $4.92,
or 29%, from $16.96 during the three months ended September 30, 2000 to $12.04
for the same period in 2001. The average price received per mcf of gas decreased
32% from $3.25 during the three months ended September 30, 2000 to $2.21 for the
same period in 2001.
Gain on disposition of assets of $18,489 was received during the three months
ended September 30, 2001 from disposal of equipment on three wells plugged and
abandoned during the current period. Expenses to plug and abandon these wells
were $16,941. For the three months ended September 30, 2000, a gain of $546 was
recognized due to equipment credits received on a fully depleted well.
Costs and Expenses:
Total costs and expenses increased to $494,885 for the three months ended
September 30, 2001 as compared to $347,566 for the same period in 2000, an
increase of $147,319, or 42%. This increase was due to increases in depletion,
production costs, abandoned property costs and the impairment of oil and gas
properties, offset by a decline in G&A.
Production costs were $328,174 for the three months ended September 30, 2001 and
$277,007 for the same period in 2000, resulting in a $51,167 increase, or 18%.
The increase was primarily due to additional workover costs incurred to
stimulate well production and higher ad valorem taxes.
During this period, G&A decreased 29% from $22,375 for the three months ended
September 30, 2000 to $15,889 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 $6,487 related to
its proved oil and gas properties during the three months ended September 30,
2001.
10
Depletion was $127,394 for the three months ended September 30, 2001 as compared
to $48,184 for the same period in 2000, representing an increase of $79,210, or
164%. This increase was due to a decrease in proved reserves during the period
ended September 30, 2001 due to lower commodity prices, offset by a decline in
oil production of 1,349 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 decreased $24,251 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This decrease was due to a decline in oil and gas sales receipts of $166,068 and
increases in production costs of $82,864 and abandoned property costs of
$40,357, offset by a decline in G&A expenses of $4,830 and a reduction in
working capital of $260,208. The decrease in oil and gas receipts resulted from
a decline of $271,960 in production during 2001 as compared to the same period
in 2000 and a decline in oil and NGL prices of $72,334, offset by an increase in
gas prices of $178,226 during 2001. The increase in production costs was
primarily due to increased workover and well maintenance costs incurred to
stimulate well production and higher ad valorem taxes. 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
During the nine months ended September 30, 2001 and 2000, the Partnership's
principal investing activities were for expenditures related to equipment
upgrades on various oil and gas properties.
Proceeds from dispositions of assets of $31,912 and $7,695 were recognized
during the nine months ended September 30, 2001 and 2000, respectively. Proceeds
recognized during the period in 2001 were due to salvage income received on
three wells plugged and abandoned during the current period. Proceeds recognized
during the period in 2000 were from equipment credits received 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 $928,183, of which $9,282 was distributed to the managing general partner
and $918,901 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $1,185,023, of which $11,850 was
distributed to the managing general partner and $1,173,173 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
the proposed merger of the Partnership into Pioneer Natural Resources USA, Inc.
("Pioneer USA"). For further information, see "Proposal to acquire partnerships"
below.
11
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 87-A, LTD.
(A Texas Limited Partnership)
SIGNATURES
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-A, LTD.
By: Pioneer Natural Resources USA, Inc.
Managing General Partner
Dated: November 9, 2001 By: /s/ Rich Dealy
-------------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
13
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 87-B CONV., LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 87-B Conv., Ltd. and supplements the supplemental information to the
proxy statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY 87-B CONV., LTD.
(A Texas Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY 87-B CONV., LTD.
(A Texas Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 104,560 $ 62,552
Accounts receivable - oil and gas sales 36,130 87,620
------------ ------------
Total current assets 140,690 150,172
------------ ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 3,153,597 3,280,150
Accumulated depletion (2,640,864) (2,733,516)
------------ ------------
Net oil and gas properties 512,733 546,634
------------ ------------
$ 653,423 $ 696,806
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 13,884 $ 6,423
Partners' capital:
Managing general partner 6,380 6,889
Limited partners (4,919 interests) 633,159 683,494
------------ ------------
639,539 690,383
------------ ------------
$ 653,423 $ 696,806
============ ============
The financial information included as of September 30, 2001 has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY 87-B CONV., LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
--------------------------- ---------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Revenues:
Oil and gas $ 79,536 $ 115,607 $ 282,318 $ 328,175
Interest 737 1,530 2,850 3,689
Gain on disposition of assets -- 85 5,439 1,004
------------ ------------ ------------ ------------
80,273 117,222 290,607 332,868
------------ ------------ ------------ ------------
Costs and expenses:
Oil and gas production 51,842 41,434 143,178 125,900
General and administrative 2,069 3,538 7,341 9,845
Depletion 9,811 9,104 37,707 27,340
Abandoned property -- -- 4,243 --
------------ ------------ ------------ ------------
63,722 54,076 192,469 163,085
------------ ------------ ------------ ------------
Net income $ 16,551 $ 63,146 $ 98,138 $ 169,783
============ ============ ============ ============
Allocation of net income:
Managing general partner $ 165 $ 632 $ 981 $ 1,698
============ ============ ============ ============
Limited partners $ 16,386 $ 62,514 $ 97,157 $ 168,085
============ ============ ============ ============
Net income per limited
partnership interest $ 3.33 $ 12.71 $ 19.75 $ 34.17
============ ============ ============ ============
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.
3
PARKER & PARSLEY 87-B CONV., LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
------------ ------------ ------------
Balance at January 1, 2001 $ 6,889 $ 683,494 $ 690,383
Distributions (1,490) (147,492) (148,982)
Net income 981 97,157 98,138
------------ ------------ ------------
Balance at September 30, 2001 $ 6,380 $ 633,159 $ 639,539
============ ============ ============
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 87-B CONV., LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
----------------------------
2001 2000
------------ ------------
Cash flows from operating activities:
Net income $ 98,138 $ 169,783
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 37,707 27,340
Gain on disposition of assets (5,439) (1,004)
Changes in assets and liabilities:
Accounts receivable 51,490 (23,187)
Accounts payable 10,331 5,023
------------ ------------
Net cash provided by operating activities 192,227 177,955
------------ ------------
Cash flows from investing activities:
Additions to oil and gas properties (3,806) (2,585)
Proceeds from asset dispositions 2,569 1,004
------------ ------------
Net cash used in investing activities (1,237) (1,581)
------------ ------------
Cash flows used in financing activities:
Cash distributions to partners (148,982) (179,766)
------------ ------------
Net increase (decrease) in cash 42,008 (3,392)
Cash at beginning of period 62,552 71,344
------------ ------------
Cash at end of period $ 104,560 $ 67,952
============ ============
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 87-B CONV., LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 87-B Conv., Ltd. (the "Partnership") was organized in 1987 as a
general partnership under the laws of the State of Texas and was converted to a
Texas limited partnership in 1989.
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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $1,032,141 of which $1,019,742 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS(1)
Nine months ended September 30, 2001 compared with nine months ended
September 30, 2000
RESULTS OF OPERATIONS
Revenues:
The Partnership's oil and gas revenues decreased 14% to $282,318 for the nine
months ended September 30, 2001 as compared to $328,175 for the same period in
2000. The decrease in revenues resulted from a decrease in production and a
lower average prices received for oil and natural gas liquids ("NGLs"), offset
by higher average prices received for gas. For the nine months ended September
30, 2001, 7,020 barrels of oil, 2,587 barrels of NGLs and 13,006 mcf of gas were
sold, or 11,775 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 7,785 barrels of oil, 4,113 barrels of NGLs and 17,194 mcf
of gas were sold, or 14,764 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 $1.47, or 5%, from $28.26
for the nine months ended September 30, 2000 to $26.79 for the same period in
2001. The average price received per barrel of NGLs decreased $.43, or 3%, from
$15.88 during the nine months ended September 30, 2000 to $15.45 for the same
period in 2001. The average price received per mcf of gas increased 67% from
$2.50 during the nine months ended September 30, 2000 to $4.17 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.
Gain on disposition of assets of $5,439 was received during the nine months
ended September 30, 2001 from disposal of equipment on two wells plugged and
abandoned during the current period. Expenses to plug and abandon these wells
were $4,243. For the nine months ended September 30, 2000, a gain on disposition
of assets of $1,004 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 $192,469 for the nine months ended
September 30, 2001 as compared to $163,085 for the same period in 2000, an
increase of $29,384, or 18%. This increase was due to increases in production
costs, depletion and abandoned property costs, offset by a decrease in general
and administrative expenses ("G&A").
7
Production costs were $143,178 for the nine months ended September 30, 2001 and
$125,900 for the same period in 2000, resulting in a $17,278 increase, or 14%.
The increase was due to additional well maintenance and workover costs incurred
to stimulate well production and higher ad valorem taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
25% from $9,845 for the nine months ended September 30, 2000 to $7,341 for the
same period in 2001, due to a lower percentage of the managing general partner's
G&A being allocated (limited to 3% of oil and gas revenues) due to decreased oil
and gas revenues.
Depletion was $37,707 for the nine months ended September 30, 2001 as compared
to $27,340 for the same period in 2000, an increase of $10,367, or 38%. This
increase was due to a downward revision to proved reserves during the period
ended September 30, 2001 as a result of lower commodity prices, offset by a
decline in oil production of 765 barrels for the nine months ended September 30,
2001 as compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended
September 30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 31% to $79,536 for the three
months ended September 30, 2001 as compared to $115,607 for the same period in
2000. The decrease in revenues resulted from lower average prices received and a
decrease in production. For the three months ended September 30, 2001, 2,192
barrels of oil, 1,025 barrels of NGLs and 4,278 mcf of gas were sold, or 3,930
BOEs. For the three months ended September 30, 2000, 2,477 barrels of oil, 1,275
barrels of NGLs and 5,493 mcf of gas were sold, or 4,668 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 $4.29, or 14%, from
$30.32 for the three months ended September 30, 2000 to $26.03 for the same
period in 2001. The average price received per barrel of NGLs decreased $5.02,
or 28%, from $17.66 during the three months ended September 30, 2000 to $12.64
for the same period in 2001. The average price received per mcf of gas decreased
32% to $2.22 during the three months ended September 30, 2001 from $3.28 during
the same period in 2000.
A gain on disposition of assets of $85 recognized during the three months ended
September 30, 2000 was attributable to credits received from the disposal of oil
and gas equipment on one well.
Costs and Expenses:
Total costs and expenses increased to $63,722 for the three months ended
September 30, 2001 as compared to $54,076 for the same period in 2000, an
increase of $9,646, or 18%. This increase was due to increases in production
costs and depletion, offset by a decrease in G&A.
8
Production costs were $51,842 for the three months ended September 30, 2001 and
$41,434 for the same period in 2000, resulting in an increase of $10,408, or
25%. The increase was due to higher ad valorem taxes and additional well
maintenance and workover costs incurred to stimulate well production.
During this period, G&A decreased 42%, from $3,538 for the three months ended
September 30, 2000 to $2,069 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.
Depletion was $9,811 for the three months ended September 30, 2001 as compared
to $9,104 for the same period in 2000, an increase of $707, or 8%. This increase
was primarily due to a downward revision to proved reserves during the period
ended September 30, 2001 as a result of lower commodity prices, offset by a
decline in oil production of 285 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 $14,272 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to reductions of $79,985 in working capital and $2,504 in
G&A expenses, offset by a decline in oil and gas sales receipts of $46,696 and
increases in production costs of $17,278 and abandoned property costs of $4,243.
The decline 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)
due to decreased oil and gas revenues. The decrease in oil and gas receipts
resulted from a decline of $61,546 in production during 2001 as compared to the
same period in 2000 and a decline in oil and NGL prices of $13,928, offset by an
increase in gas prices of $28,778 during 2001. The increase in production costs
was primarily due to additional well maintenance and workover costs incurred to
stimulate well production and higher ad valorem taxes.
Net Cash Used in Investing Activities
The Partnership's investing activities during the nine months ended September
30, 2001 and 2000 were related to equipment upgrades on various oil and gas
properties.
Proceeds from disposition of assets of $2,569 and $1,004 were recognized during
the nine months ended September 30, 2001 and 2000, respectively. Proceeds
recognized during the period in 2001 were due to salvage income received on two
wells plugged and abandoned during the current period. Proceeds recognized
during the period in 2000 were from equipment credits received 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 $148,982, of which $1,490 was distributed to the managing general partner
and $147,492 to the limited
9
partners. For the same period ended September 30, 2000, cash distributions to
the partners were $179,766, of which $1,798 was distributed to the managing
general partner and $177,968 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
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.
10
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 87-B, LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 87-B, Ltd. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 33-12244-02
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)
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 87-B, LTD.
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 87-B, LTD.
(A Texas Limited Partnership)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 428,731 $ 257,845
Accounts receivable - oil and gas sales 147,544 357,836
------------ ------------
Total current assets 576,275 615,681
------------ ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 12,879,164 13,396,004
Accumulated depletion (10,784,559) (11,162,910)
------------ ------------
Net oil and gas properties 2,094,605 2,233,094
------------ ------------
$ 2,670,880 $ 2,848,775
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 55,769 $ 25,998
Partners' capital:
Managing general partner 26,080 28,156
Limited partners (20,089 interests) 2,589,031 2,794,621
------------ ------------
2,615,111 2,822,777
------------ ------------
$ 2,670,880 $ 2,848,775
============ ============
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 87-B, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------------- -------------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Revenues:
Oil and gas $ 324,818 $ 472,512 $1,152,993 $1,340,625
Interest 3,028 6,245 11,667 15,156
Gain on disposition of assets -- 349 22,214 4,102
---------- ---------- ---------- ----------
327,846 479,106 1,186,874 1,359,883
---------- ---------- ---------- ----------
Costs and expenses:
Oil and gas production 211,736 169,247 584,756 514,171
General and administrative 8,445 14,176 29,978 40,219
Depletion 40,142 37,143 154,030 111,659
Abandoned property -- -- 17,332 --
---------- ---------- ---------- ----------
260,323 220,566 786,096 666,049
---------- ---------- ---------- ----------
Net income $ 67,523 $ 258,540 $ 400,778 $ 693,834
========== ========== ========== ==========
Allocation of net income:
Managing general partner $ 676 $ 2,585 $ 4,008 $ 6,938
========== ========== ========== ==========
Limited partners $ 66,847 $ 255,955 $ 396,770 $ 686,896
========== ========== ========== ==========
Net income per limited
partnership interest $ 3.33 $ 12.74 $ 19.75 $ 34.19
========== ========== ========== ==========
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 (6,084) (602,360) (608,444)
Net income 4,008 396,770 400,778
----------- ----------- -----------
Balance at September 30, 2001 $ 26,080 $ 2,589,031 $ 2,615,111
=========== =========== ===========
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)
Nine months ended
September 30,
------------------------
2001 2000
--------- ---------
Cash flows from operating activities:
Net income $ 400,778 $ 693,834
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 154,030 111,659
Gain on disposition of assets (22,214) (4,102)
Changes in assets and liabilities:
Accounts receivable 210,292 (63,056)
Accounts payable 41,493 19,767
--------- ---------
Net cash provided by operating activities 784,379 758,102
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (15,541) (10,558)
Proceeds from asset dispositions 10,492 4,102
--------- ---------
Net cash used in investing activities (5,049) (6,456)
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (608,444) (734,154)
--------- ---------
Net increase in cash 170,886 17,492
Cash at beginning of period 257,845 262,756
--------- ---------
Cash at end of period $ 428,731 $ 280,248
========= =========
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
September 30, 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 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 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.
NOTE 3. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $4,217,818 of which $4,166,286 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
7
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 14% to $1,152,993 for the nine
months ended September 30, 2001 as compared to $1,340,625 for the same period in
2000. The decrease in revenues resulted from a decline in production and
decreases in the average prices received for oil and natural gas liquids
("NGLs"), offset by a higher average price received for gas. For the nine months
ended September 30, 2001, 28,670 barrels of oil, 10,570 barrels of NGLs and
53,125 mcf of gas were sold, or 48,094 barrel of oil equivalents ("BOEs"). For
the nine months ended September 30, 2000, 31,795 barrels of oil, 16,800 barrels
of NGLs and 70,245 mcf of gas were sold, or 60,303 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 $1.47, or 5%, from $28.26
for the nine months ended September 30, 2000 to $26.79 for the same period in
2001. The average price received per barrel of NGLs decreased $.43, or 3%, from
$15.88 during the nine months ended September 30, 2000 to $15.45 for the same
period in 2001. The average price received per mcf of gas increased 67% from
$2.50 during the nine months ended September 30, 2000 to $4.17 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.
Gain on disposition of assets of $22,214 was received during the nine months
ended September 30, 2001 from disposal of equipment on two wells plugged and
abandoned during the current period. Expenses to plug and abandon these wells
were $17,332. For the nine months ended September 30, 2000, a gain on
disposition of assets of $4,102 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 $786,096 for the nine months ended
September 30, 2001 as compared to $666,049 for the same period in 2000, an
increase of $120,047, or 18%. This increase was due to increases in production
costs, depletion and abandoned property costs, offset by a decrease in general
and administrative expenses ("G&A").
8
Production costs were $584,756 for the nine months ended September 30, 2001 and
$514,171 for the same period in 2000 resulting in a $70,585 increase, or 14%.
The increase was primarily due to additional well maintenance and workover costs
incurred to stimulate well production and higher ad valorem taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
25% from $40,219 for the nine months ended September 30, 2000 to $29,978 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) due to
decreased oil and gas revenues.
Depletion was $154,030 for the nine months ended September 30, 2001 as compared
to $111,659 for the same period in 2000, representing an increase of $42,371, or
38%. This increase was due to a downward revision to proved reserves during the
period ended September 30, 2001 as a result of lower commodity prices, offset by
a decline in oil production of 3,125 barrels for the nine months ended September
30, 2001 as compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended
September 30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 31% to $324,818 for the three
months ended September 30, 2001 as compared to $472,512 for the same period in
2000. The decrease in revenues resulted from a decline in production and lower
average prices received. For the three months ended September 30, 2001, 8,956
barrels of oil, 4,185 barrels of NGLs and 17,485 mcf of gas were sold, or 16,055
BOEs. For the three months ended September 30, 2000, 10,119 barrels of oil,
5,215 barrels of NGLs and 22,437 mcf of gas were sold, or 19,074 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 $4.29, or 14%, from
$30.32 for the three months ended September 30, 2000 to $26.03 for the same
period in 2001. The average price received per barrel of NGLs decreased $5.02,
or 28%, from $17.66 during the three months ended September 30, 2000 to $12.64
for the same period in 2001. The average price received per mcf of gas decreased
32% from $3.28 during the three months ended September 30, 2000 to $2.22 for the
same period in 2001.
A gain on disposition of assets of $349, recognized during the three months
ended September 30, 2000, was attributable to credits received from the disposal
of oil and gas equipment on one well.
Costs and Expenses:
Total costs and expenses increased to $260,323 for the three months ended
September 30, 2001 as compared to $220,566 for the same period in 2000, an
increase of $39,757, or 18%. This increase was due to increases in production
costs and depletion, offset by a decline in G&A.
9
Production costs were $211,736 for the three months ended September 30, 2001 and
$169,247 for the same period in 2000 resulting in a $42,489 increase, or 25%.
The increase was primarily due to higher ad valorem taxes and additional well
maintenance and workover costs incurred to stimulate production.
During this period, G&A decreased 40% from $14,176 for the three months ended
September 30, 2000 to $8,445 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) due to decreased oil and gas revenues.
Depletion was $40,142 for the three months ended September 30, 2001 as compared
to $37,143 for the same period in 2000, representing an increase of $2,999, or
8%. This increase was primarily due to a downward revision to proved reserves
during the period ended September 30, 2001 as a result of lower commodity
prices, offset by a decline in production of 1,163 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 $26,277 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to reductions of $295,074 in working capital and $10,241
in G&A expenses, offset by a decline in oil and gas sales receipts of $191,121
and increases in production costs of $70,585 and abandoned property costs of
$17,332. 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) due to decreased oil and gas revenues. The decrease in oil and gas
receipts resulted from a decline of $251,354 in production during 2001 as
compared to the same period in 2000 and a decline in oil and NGL prices of
$57,380, offset by an increase in gas prices of $117,613 during 2001. The
increase in production costs was primarily due to additional well maintenance
and workover costs incurred to stimulate well production and higher ad valorem
taxes.
Net Cash Used in Investing Activities
The Partnership's investing activities during the nine months ended September
30, 2001 and 2000 were related to upgrades of oil and gas equipment on active
properties.
Proceeds from disposition of assets of $10,492 and $4,102 were recognized during
the nine months ended September 30, 2001 and 2000, respectively. Proceeds
recognized during the period in 2001 were due to salvage income received on two
wells plugged and abandoned during the current period. Proceeds recognized
during the period in 2000 were from equipment credits received 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 $608,444, of which $6,084 was distributed to the managing general partner
and $602,360 to the limited
10
partners. For the same period ended September 30, 2000, cash distributions to
the partners were $734,154, of which $7,342 was distributed to the managing
general partner and $726,812 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
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.
11
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 87-B, LTD.
(A Texas Limited Partnership)
SIGNATURES
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: November 9, 2001 By: /s/ Rich Dealy
-------------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
13
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY
PRODUCING PROPERTIES 87-A, LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley Producing Properties 87-A, Ltd. and supplements the supplemental
information to the proxy statement/prospectus dated October 12, 2001, of Pioneer
Natural Resources Company, a Delaware corporation that we call Pioneer Parent,
and Pioneer Natural Resources USA, Inc., a Delaware corporation that we call
Pioneer USA, by which Pioneer USA is soliciting proxies to be voted at a special
meeting of the limited partners of the partnership. The purpose of the special
meeting is for you to vote upon the merger of the partnership with and into
Pioneer USA that, if completed, will result in your receiving common stock of
Pioneer Parent for your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 33-11193-1
PARKER & PARSLEY PRODUCING PROPERTIES 87-A, LTD.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
TEXAS 75-2195512
------------------------------- ----------------------
(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 PRODUCING PROPERTIES 87-A, LTD.
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..................................................... 13
Signatures........................................................................... 14
2
PARKER & PARSLEY PRODUCING PROPERTIES 87-A, LTD.
(A Texas Limited Partnership)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 282,471 $ 182,206
Accounts receivable - oil and gas sales 152,062 296,053
----------- -----------
Total current assets 434,533 478,259
----------- -----------
Oil and gas properties - at cost, based on
the successful efforts accounting method 5,421,875 5,701,037
Accumulated depletion (4,812,976) (5,019,550)
----------- -----------
Net oil and gas properties 608,899 681,487
----------- -----------
$ 1,043,432 $ 1,159,746
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 50,506 $ 37,242
Partners' capital:
Managing general partner 11,171 12,466
Limited partners (24,426 interests) 981,755 1,110,038
----------- -----------
992,926 1,122,504
----------- -----------
$ 1,043,432 $ 1,159,746
=========== ===========
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 PRODUCING PROPERTIES 87-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------------------ ------------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
Revenues:
Oil and gas $ 245,446 $ 425,268 $ 953,451 $ 1,121,194
Interest 2,025 4,409 8,672 11,558
Gain (loss) on disposition of assets 15,138 (1,034) 54,375 23,311
----------- ----------- ----------- -----------
262,609 428,643 1,016,498 1,156,063
----------- ----------- ----------- -----------
Costs and expenses:
Oil and gas production 163,515 232,421 497,344 592,352
General and administrative 4,632 12,758 28,607 33,636
Impairment of oil and gas properties 28,862 -- 28,862 --
Depletion 13,851 19,469 43,732 52,686
Abandoned property 15,229 4,038 32,692 17,107
----------- ----------- ----------- -----------
226,089 268,686 631,237 695,781
----------- ----------- ----------- -----------
Net income $ 36,520 $ 159,957 $ 385,261 $ 460,282
=========== =========== =========== ===========
Allocation of net income:
Managing general partner $ 366 $ 1,600 $ 3,853 $ 4,603
=========== =========== =========== ===========
Limited partners $ 36,154 $ 158,357 $ 381,408 $ 455,679
=========== =========== =========== ===========
Net income per limited
partnership interest $ 1.48 $ 6.49 $ 15.61 $ 18.66
=========== =========== =========== ===========
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 PRODUCING PROPERTIES 87-A, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 2001 $ 12,466 $ 1,110,038 $ 1,122,504
Distributions (5,148) (509,691) (514,839)
Net income 3,853 381,408 385,261
----------- ----------- -----------
Balance at September 30, 2001 $ 11,171 $ 981,755 $ 992,926
=========== =========== ===========
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 PRODUCING PROPERTIES 87-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
-----------------------------
2001 2000
--------- ---------
Cash flows from operating activities:
Net income $ 385,261 $ 460,282
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 28,862 --
Depletion 43,732 52,686
Gain on disposition of assets (54,375) (23,311)
Changes in assets and liabilities:
Accounts receivable 143,991 (92,942)
Accounts payable 13,264 7,159
--------- ---------
Net cash provided by operating activities 560,735 403,874
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (3,537) (829)
Proceeds from asset dispositions 57,906 43,366
--------- ---------
Net cash provided by investing activities 54,369 42,537
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (514,839) (450,855)
--------- ---------
Net increase (decrease) in cash 100,265 (4,444)
Cash at beginning of period 182,206 170,538
--------- ---------
Cash at end of period $ 282,471 $ 166,094
========= =========
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.
6
PARKER & PARSLEY PRODUCING PROPERTIES 87-A, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley Producing Properties 87-A, 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 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 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.
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
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
7
provision of $28,862 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
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $2,624,622 of which $2,589,227 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the 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 15% to $953,451 for the nine
months ended September 30, 2001 as compared to $1,121,194 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, 28,916 barrels of oil, 5,946 barrels of NGLs and 32,901 mcf of gas were
sold, or 40,346 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 33,684 barrels of oil, 7,631 barrels of NGLs and 34,418 mcf
of gas were sold, or 47,051 BOEs. Of the decrease, 2,155 BOEs are attributable
to the fact that on July 1, 2001, the Partnership's revenue and operating
expense allocation reverted to 80.808081% from 95.959595% pursuant to the
Program agreement governing the Partnership which provides for a reversionary
interest of 80.808081% once cumulative distributions equal initial partners'
capital ("Reversionary Interest"). 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 $1.48, or 5%, from $28.33
for the nine months ended September 30, 2000 to $26.85 for the same period in
2001. The average price received per barrel of NGLs decreased $.90, or 8%, from
$11.64 during the nine months ended September 30, 2000 to $10.74 for the same
period in 2001. The average price received per mcf of gas increased 52% from
$2.27 during the nine months ended September 30, 2000 to $3.44 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.
8
Gains on disposition of assets of $54,375 and $23,311 were recognized during the
nine months ended September 30, 2001 and 2000, respectively. The gain recognized
during the period ended September 30, 2001 was due to $45,790 from salvage
income on two wells plugged and abandoned in the current period and $8,585 was
primarily due to equipment credits received on fully depleted wells. The gain
recognized during the period ended September 30, 2000 was comprised of $10,858
from equipment credits on one well plugged and abandoned in the current period
and $17,081 salvage income primarily from wells plugged and abandoned during
1999, offset by a $4,628 loss on the abandonment of two additional wells plugged
in the current period. Expenses incurred during the nine months ended September
30, 2001 and 2000 to plug and abandon these wells were $32,692 and $17,107,
respectively.
Costs and Expenses:
Total costs and expenses decreased to $631,237 for the nine months ended
September 30, 2001 as compared to $695,781 for the same period in 2000, a
decrease of $64,544, or 9%. This decrease was the result of lower production
costs, depletion and general and administrative expenses ("G&A"), offset by
increases in the impairment of oil and gas properties and abandoned property
costs.
Production costs were $497,344 for the nine months ended September 30, 2001 and
$592,352 for the same period in 2000, resulting in a $95,008 decrease, or 16%.
The decrease was primarily due to lower workover expenses and well maintenance
costs and a 5% decline in lease operating costs and production taxes
attributable to the Revisionary Interest change, offset by higher ad valorem
taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
15%, from $33,636 for the nine months ended September 30, 2000 to $28,607 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 and the Revisionary Interest change
as noted above.
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 $28,862 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
9
Depletion was $43,732 for the nine months ended September 30, 2001 as compared
to $52,686 for the same period in 2000, representing a decrease of $8,954, or
17%. This decrease was the result of 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 decline in oil production of 4,768 barrels for the
nine months ended September 30, 2001 as compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended
September 30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 42% to $245,446 for the three
months ended September 30, 2001 as compared to $425,268 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, 8,076
barrels of oil, 2,201 barrels of NGLs and 8,443 mcf of gas were sold, or 11,684
BOEs. For the three months ended September 30, 2000, 11,999 barrels of oil,
2,647 barrels of NGLs and 11,524 mcf of gas were sold, or 16,567 BOEs. Of the
decrease, 2,154 BOEs were attributable to the Reversionary Interest change
occurring. 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 $4.01, or 13%, from
$30.14 for the three months ended September 30, 2000 to $26.13 for the same
period in 2001. The average price received per barrel of NGLs decreased $3.17,
or 26%, from $12.05 during the three months ended September 30, 2000 to $8.88
for the same period in 2001. The average price received per mcf of gas decreased
36% from $2.75 during the three months ended September 30, 2000 to $1.77 for the
same period in 2001.
Gain on disposition of assets of $15,138 recognized during the three months
ended September 30, 2001 consisted of $11,280 from salvage income received on
two wells plugged and abandoned during the current period and $3,858 from
equipment credits on fully depleted wells. Loss on disposition of assets of
$1,034 recognized during the three months ended September 30, 2000 resulted
primarily from the loss on the abandonment of two wells plugged during the
current period. Expenses incurred during the three months ended September 30,
2001 and 2000 to plug and abandon these wells were $15,229 and $4,038,
respectively.
Costs and Expenses:
Total costs and expenses decreased to $226,089 for the three months ended
September 30, 2001 as compared to $268,686 for the same period in 2000, a
decrease of $42,597, or 16%. This decrease was the result of lower production
costs, G&A and depletion, offset by increases in the impairment of oil and gas
properties and abandoned property costs.
Production costs were $163,515 for the three months ended September 30, 2001 and
$232,421 for the same period in 2000, resulting in a $68,906 decrease, or 30%.
The decrease was primarily due
10
to lower workover expenses and well maintenance costs and a 14% decline in lease
operating costs and production taxes attributable to the Reversionary Interest
change, offset by higher ad valorem taxes.
During this period, G&A decreased 64% from $12,758 for the three months ended
September 30, 2000 to $4,632 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 $28,862 related to
its proved oil and gas properties during the three months ended September 30,
2001.
Depletion was $13,851 for the three months ended September 30, 2001 as compared
to $19,469 for the same period in 2000, representing a decrease of $5,618, or
29%. This decrease was attributable to a decline in oil production of 3,923
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 $156,861 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
The increase was attributable to decreases in production costs of $95,008, G&A
expenses of $5,029 and working capital of $243,038, offset by a decrease in oil
and gas sales receipts of $170,629 and an increase in abandoned property costs
of $15,585. The decrease in oil and gas receipts resulted from lower oil and NGL
prices during 2001 of $56,571 and a $151,359 decline in production and
Reversionary Interest change during 2001 as compared to the same period in 2000,
offset by an increase of $37,301 resulting from higher gas prices received. The
decrease in production costs was primarily due to lower workover expenses and
well maintenance costs and the Reversionary Interest change, offset by higher ad
valorem taxes. 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 and the Reversionary
Interest change.
Net Cash Provided by Investing Activities
The Partnership's investing activities during the nine months ended September
30, 2001 and 2000 were related to upgrades of oil and gas equipment on active
properties.
Proceeds from disposition of assets of $57,906 and $43,366 were received during
the nine months ended September 30, 2001 and 2000, respectively. The proceeds
recognized during the period in 2001 were comprised of $45,790 from salvage
income on two wells plugged and abandoned in the current period and $12,116 from
equipment credits received on active wells. The proceeds recognized during the
period in 2000 were primarily from equipment credits on wells plugged and
abandoned during 2000 and 1999.
11
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $514,839, of which $5,148 was distributed to the managing general partner
and $509,691 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $450,855, of which $4,509 was
distributed to the managing general partner and $446,346 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
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.
12
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(b) Reports on Form 8-K - none
13
PARKER & PARSLEY PRODUCING PROPERTIES 87-A, LTD.
(A Texas Limited Partnership)
SIGNATURES
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 PRODUCING
PROPERTIES 87-A, LTD.
By: Pioneer Natural Resources USA, Inc.,
Managing General Partner
Dated: November 9, 2001 By: /s/ Rich Dealy
--------------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
14
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY
PRODUCING PROPERTIES 87-B, LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley Producing Properties 87-B, Ltd. and supplements the supplemental
information to the proxy statement/prospectus dated October 12, 2001, of Pioneer
Natural Resources Company, a Delaware corporation that we call Pioneer Parent,
and Pioneer Natural Resources USA, Inc., a Delaware corporation that we call
Pioneer USA, by which Pioneer USA is soliciting proxies to be voted at a special
meeting of the limited partners of the partnership. The purpose of the special
meeting is for you to vote upon the merger of the partnership with and into
Pioneer USA that, if completed, will result in your receiving common stock of
Pioneer Parent for your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 33-11193-2
PARKER & PARSLEY PRODUCING PROPERTIES 87-B, LTD.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
TEXAS 75-2205943
------------------------------- ----------------------
(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 PRODUCING PROPERTIES 87-B, LTD.
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................................. 11
Signatures........................................................ 12
2
PARKER & PARSLEY PRODUCING PROPERTIES 87-B, LTD.
(A Texas Limited Partnership)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 102,879 $ 19,277
Accounts receivable - oil and gas sales 125,462 194,002
------------ ------------
Total current assets 228,341 213,279
------------ ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 4,830,091 4,829,203
Accumulated depletion (4,208,000) (4,181,937)
------------ ------------
Net oil and gas properties 622,091 647,266
------------ ------------
$ 850,432 $ 860,545
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 33,621 $ 20,375
Partners' capital:
Managing general partner 8,427 8,661
Limited partners (12,191 interests) 808,384 831,509
------------ ------------
816,811 840,170
------------ ------------
$ 850,432 $ 860,545
============ ============
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 PRODUCING PROPERTIES 87-B, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
--------------------------- ---------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Revenues:
Oil and gas $ 194,104 $ 252,587 $ 629,266 $ 722,124
Interest 743 2,184 2,996 4,720
Gain on disposition of assets -- -- -- 8,294
------------ ------------ ------------ ------------
194,847 254,771 632,262 735,138
------------ ------------ ------------ ------------
Costs and expenses:
Oil and gas production 111,923 71,685 321,809 263,814
General and administrative 5,823 7,578 18,878 21,664
Depletion 8,877 10,453 26,063 29,282
------------ ------------ ------------ ------------
126,623 89,716 366,750 314,760
------------ ------------ ------------ ------------
Net income $ 68,224 $ 165,055 $ 265,512 $ 420,378
============ ============ ============ ============
Allocation of net income:
Managing general partner $ 682 $ 1,651 $ 2,655 $ 4,204
============ ============ ============ ============
Limited partners $ 67,542 $ 163,404 $ 262,857 $ 416,174
============ ============ ============ ============
Net income per limited
partnership interest $ 5.54 $ 13.41 $ 21.56 $ 34.14
============ ============ ============ ============
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 PRODUCING PROPERTIES 87-B, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
------------ ------------ ------------
Balance at January 1, 2001 $ 8,661 $ 831,509 $ 840,170
Distributions (2,889) (285,982) (288,871)
Net income 2,655 262,857 265,512
------------ ------------ ------------
Balance at September 30, 2001 $ 8,427 $ 808,384 $ 816,811
============ ============ ============
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 PRODUCING PROPERTIES 87-B, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
----------------------------
2001 2000
------------ ------------
Cash flows from operating activities:
Net income $ 265,512 $ 420,378
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 26,063 29,282
Gain on disposition of assets -- (8,294)
Changes in assets and liabilities:
Accounts receivable 68,540 (37,000)
Accounts payable 13,246 10,308
------------ ------------
Net cash provided by operating activities 373,361 414,674
------------ ------------
Cash flows from investing activities:
Additions to oil and gas equipment (2,821) --
Proceeds from asset dispositions 1,933 13,943
------------ ------------
Net cash provided by (used in) investing activities (888) 13,943
------------ ------------
Cash flows used in financing activities:
Cash distributions to partners (288,871) (430,530)
------------ ------------
Net increase (decrease) in cash 83,602 (1,913)
Cash at beginning of period 19,277 21,724
------------ ------------
Cash at end of period $ 102,879 $ 19,811
============ ============
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 PRODUCING PROPERTIES 87-B, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley Producing Properties 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 for 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 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.
NOTE 3. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $2,357,795 of which $2,296,689 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
7
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 13% to $629,266 for the nine
months ended September 30, 2001 as compared to $722,124 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 decrease in production, offset by
higher average prices received for gas. For the nine months ended September 30,
2001, 15,371 barrels of oil, 6,486 barrels of NGLs and 31,041 mcf of gas were
sold, or 27,031 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 17,798 barrels of oil, 7,883 barrels of NGLs and 37,119 mcf
of gas were sold, or 31,868 BOEs. Of the decrease, 1,797 BOEs are attributable
to the fact that on April 1, 2000 the Partnership's revenue and operating
expense percentage reverted to 80.808081% from 95.959595% pursuant to the
Program agreement governing the Partnership which provides for a reversionary
interest of 80.808081% once cumulative distributions equal initial partners'
capital ("Reversionary Interest"). 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 $1.93, or 7%, from $28.49
for the nine months ended September 30, 2000 to $26.56 for the same period in
2001. The average price received per barrel of NGLs decreased $.47, or 3%, from
$15.80 during the nine months ended September 30, 2000 to $15.33 for the same
period in 2001. The average price received per mcf of gas increased 61% from
$2.44 during the nine months ended September 30, 2000 to $3.92 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.
A gain on disposition of assets of $8,294 was recognized during the nine months
ended September 30, 2000. The gain was due to equipment credits received on one
well.
Costs and Expenses:
Total costs and expenses increased to $366,750 for the nine months ended
September 30, 2001 as compared to $314,760 for the same period in 2000, an
increase of $51,990, or 17%. This increase was due to an increase in production
costs, offset by declines in depletion and general and administrative expenses
("G&A").
Production costs were $321,809 for the nine months ended September 30, 2001 and
$263,814 for the same period in 2000, resulting in $57,995 increase, or 22%. The
increase in production costs resulted from additional well maintenance costs
incurred to stimulate well production and higher ad
8
valorem taxes, offset by an 8% decline in lease operating costs and production
taxes attributable to the Reversionary Interest occurring.
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 $21,664 for the nine months ended September 30, 2000 to $18,878 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.
Depletion was $26,063 for the nine months ended September 30, 2001 as compared
to $29,282 for the same period in 2000, representing a decrease in depletion of
$3,219, or 11%. This decrease was the result of a decline in oil production of
2,427 barrels for the nine months ended September 30, 2001 as compared to the
same period in 2000.
Three months ended September 30, 2001 compared with three months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 23% to $194,104 for the three
months ended September 30, 2001 as compared to $252,587 for the same period in
2000. The decrease in revenues resulted from lower average prices received and a
decrease in production. For the three months ended September 30, 2001, 5,107
barrels of oil, 2,698 barrels of NGLs and 11,560 mcf of gas were sold, or 9,732
BOEs. For the three months ended September 30, 2000, 5,836 barrels of oil, 2,454
barrels of NGLs and 10,989 mcf of gas were sold, or 10,122 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 $3.69, or 12% from $29.58
for the three months ended September 30, 2000 to $25.89 for the same period in
2001. The average price received per barrel of NGLs decreased $5.05, or 28%,
from $17.98 during the three months ended September 30, 2000 to $12.93 for the
same period in 2001. The average price received per mcf of gas decreased 29%
from $3.26 during the three months ended September 30, 2000 to $2.33 for the
same period in 2001.
Costs and Expenses:
Total costs and expenses increased to $126,623 for the three months ended
September 30, 2001 as compared to $89,716 for the same period in 2000, an
increase of $36,907, or 41%. This increase was due to an increase in production
costs, offset by declines in G&A and depletion.
Production costs were $111,923 for the three months ended September 30, 2001 and
$71,685 for the same period in 2000, resulting in a $40,238 increase, or 56%.
The increase was the result of additional well maintenance costs incurred to
stimulate well production and higher ad valorem taxes.
9
During this period, G&A decreased 23% from $7,578 for the three months ended
September 30, 2000 to $5,823 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.
Depletion was $8,877 for the three months ended September 30, 2001 as compared
to $10,453 for the same period in 2000, representing a decrease in depletion of
$1,576, or 15%. This decrease was attributable to a decrease in oil production
of 729 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 decreased $41,313 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This decrease was due to a reduction of $94,582 in oil and gas sales receipts
and an increase of $57,995 in production costs, offset by a $2,786 decline in
G&A expenses and a reduction of $108,478 in working capital. The decrease in oil
and gas receipts resulted from a decline of $109,686 in production during 2001
as compared to the same period in 2000 and a decline in oil and NGL prices of
$38,135, offset by an increase in gas prices of $53,239 during 2001. The
increase in production costs was primarily due to additional well maintenance
costs incurred to stimulate well production and higher ad valorem taxes, offset
by the Reversionary Interest charge. 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 were related to upgrades of equipment on various active oil and gas
properties.
Proceeds from disposition of assets of $1,933 and $13,943 were recognized for
the nine months ended September 30, 2001 and 2000, respectively. The proceeds
were primarily from equipment credits on fully depleted wells.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $288,871, of which $2,889 was distributed to the managing general partner
and $285,982 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $430,530 of which $4,305 was
distributed to the managing general partner and $426,225 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
the proposed merger of the Partnership into
10
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
11
PARKER & PARSLEY PRODUCING PROPERTIES 87-B, LTD.
(A Texas Limited Partnership)
SIGNATURES
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 PRODUCING
PROPERTIES 87-B, LTD.
By: Pioneer Natural Resources USA, Inc.,
Managing General Partner
Dated: November 9, 2001 By: /s/ Rich Dealy
------------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
12
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY
PRIVATE INVESTMENT 87, LTD.,
A TEXAS LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley Private Investment 87, Ltd. and supplements the supplemental information
to the proxy statement/prospectus dated October 12, 2001, of Pioneer Natural
Resources Company, a Delaware corporation that we call Pioneer Parent, and
Pioneer Natural Resources USA, Inc., a Delaware corporation that we call Pioneer
USA, by which Pioneer USA is soliciting proxies to be voted at a special meeting
of the limited partners of the partnership. The purpose of the special meeting
is for you to vote upon the merger of the partnership with and into Pioneer USA
that, if completed, will result in your receiving common stock of Pioneer Parent
for your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY PRIVATE INVESTMENT 87, LTD.
(A Texas Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY PRIVATE INVESTMENT 87, LTD.
(A Texas Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 248,152 $ 94,943
Accounts receivable - oil and gas sales 75,206 169,256
----------- -----------
Total current assets 323,358 264,199
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 7,226,978 7,234,802
Accumulated depletion (6,056,827) (5,959,961)
----------- -----------
Net oil and gas properties 1,170,151 1,274,841
----------- -----------
$ 1,493,509 $ 1,539,040
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 42,619 $ 14,344
Partners' capital:
Managing general partner 14,264 15,002
Limited partners (262 interests) 1,436,626 1,509,694
----------- -----------
1,450,890 1,524,696
----------- -----------
$ 1,493,509 $ 1,539,040
=========== ===========
The financial information included as of September 30, 2001
has been prepared by management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY PRIVATE INVESTMENT 87, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
--------------------- ----------------------
2001 2000 2001 2000
-------- -------- --------- ---------
Revenues:
Oil and gas $232,379 $285,189 $ 794,655 $ 735,244
Interest 1,705 3,372 5,794 7,991
Gain on disposition of assets 208 -- 208 15,200
-------- -------- --------- ---------
234,292 288,561 800,657 758,435
-------- -------- --------- ---------
Costs and expenses:
Oil and gas production 131,299 94,808 353,572 296,303
General and administrative 6,042 8,555 20,661 22,057
Impairment of oil and gas properties 22,836 -- 22,836 --
Depletion 28,521 21,207 74,030 60,458
-------- -------- --------- ---------
188,698 124,570 471,099 378,818
-------- -------- --------- ---------
Net income $ 45,594 $163,991 $ 329,558 $ 379,617
======== ======== ========= =========
Allocation of net income:
Managing general partner $ 456 $ 1,640 $ 3,296 $ 3,796
======== ======== ========= =========
Limited partners $ 45,138 $162,351 $ 326,262 $ 375,821
======== ======== ========= =========
Net income per limited
partnership interest $ 172.28 $ 619.66 $1,245.27 $1,434.43
======== ======== ========= =========
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.
3
PARKER & PARSLEY PRIVATE INVESTMENT 87, LTD.
(A Texas Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 2001 $ 15,002 $ 1,509,694 $ 1,524,696
Distributions (4,034) (399,330) (403,364)
Net income 3,296 326,262 329,558
----------- ----------- -----------
Balance at September 30, 2001 $ 14,264 $ 1,436,626 $ 1,450,890
=========== =========== ===========
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 PRIVATE INVESTMENT 87, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
------------------------
2001 2000
--------- ---------
Cash flows from operating activities:
Net income $ 329,558 $ 379,617
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 22,836 --
Depletion 74,030 60,458
Gain on disposition of assets (208) (15,200)
Changes in assets and liabilities:
Accounts receivable 94,050 (46,960)
Accounts payable 28,275 15,697
--------- ---------
Net cash provided by operating activities 548,541 393,612
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (5,884) (8,504)
Proceeds from asset dispositions 13,916 25,096
--------- ---------
Net cash provided by investing activities 8,032 16,592
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (403,364) (422,116)
--------- ---------
Net increase (decrease) in cash 153,209 (11,912)
Cash at beginning of period 94,943 134,914
--------- ---------
Cash at end of period $ 248,152 $ 123,002
========= =========
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 PRIVATE INVESTMENT 87, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley Private Investment 87, Ltd. (the "Partnership") was organized
in 1987 as a general partnership under the laws of the State of Texas and was
converted to a Texas limited partnership in 1989.
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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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
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
6
provision of $22,836 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
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $2,626,123 of which $2,599,862 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
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 increased 8% to $794,655 for the nine
months ended September 30, 2001 as compared to $735,244 for the same period in
2000. The increase in revenues resulted from higher average prices received for
gas and natural gas liquids ("NGLs") and an increase in production, offset by a
decline in average prices received for oil. For the nine months ended September
30, 2001, 19,215 barrels of oil, 8,374 barrels of NGLs and 39,952 mcf of gas
were sold, or 34,248 barrel of oil equivalents ("BOEs"). For the nine months
ended September 30, 2000, 17,753 barrels of oil, 8,434 barrels of NGLs and
35,841 mcf of gas were sold, or 32,161 BOEs.
The average price received per barrel of oil decreased $2.42, or 8%, from $29.00
for the nine months ended September 30, 2000 to $26.58 for the same period in
2001. The average price received per barrel of NGLs increased slightly from
$15.17 during the nine months ended September 30, 2000 to $15.22 for the same
period in 2001. The average price received per mcf of gas increased 52% from
$2.58 during the nine months ended September 30, 2000 to $3.92 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 $208 and $15,200 were recognized during the
nine months ended September 30, 2001 and 2000, respectively, resulting from
salvage income received on two wells plugged and abandoned in a prior year.
7
Costs and Expenses:
Total costs and expenses increased to $471,099 for the nine months ended
September 30, 2001 as compared to $378,818 for the same period in 2000, an
increase of $92,281, or 24%. This increase was due to increases in production
costs, the impairment of oil and gas properties and depletion, offset by a
decline in general and administrative expenses ("G&A").
Production costs were $353,572 for the nine months ended September 30, 2001 and
$296,303 for the same period in 2000, resulting in a $57,269 increase, or 19%.
The increase was primarily due to additional well maintenance and workover costs
incurred to stimulate well production and higher ad valorem taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
6%, from $22,057 for the nine months ended September 30, 2000 to $20,661 for the
same period in 2001.
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 $22,836 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $74,030 for the nine months ended September 30, 2001 as compared
to $60,458 for the same period in 2000, an increase of $13,572, or 22%. This
increase was due to an increase in oil production of 1,462 barrels for the nine
months ended September 30, 2001 as compared to the same period in 2000.
8
Three months ended September 30, 2001 compared with three months ended
September 30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 19% to $232,379 for the three
months ended September 30, 2001 as compared to $285,189 for the same period in
2000. The decrease in revenues resulted from lower average prices received,
offset by an increase in production. For the three months ended September 30,
2001, 6,115 barrels of oil, 3,333 barrels of NGLs and 14,196 mcf of gas were
sold, or 11,814 BOEs. For the three months ended September 30, 2000, 6,605
barrels of oil, 2,676 barrels of NGLs and 11,945 mcf of gas were sold, or 11,272
BOEs.
The average price received per barrel of oil decreased $4.75, or 16%, from
$30.40 for the three months ended September 30, 2000 to $25.65 for the same
period in 2001. The average price received per barrel of NGLs decreased $4.30,
or 25%, from $16.96 during the three months ended September 30, 2000 to $12.66
for the same period in 2001. The average price received per mcf of gas decreased
28% to $2.35 during the three months ended September 30, 2001 from $3.26 during
the same period in 2000.
Gain on disposition of assets of $208 was recognized during the three months
ended September 30, 2001 resulting from salvage income received on one well
plugged and abandoned in a prior year.
Costs and Expenses:
Total costs and expenses increased to $188,698 for the three months ended
September 30, 2001 as compared to $124,570 for the same period in 2000, an
increase of $64,128, or 51%. This increase was due to increases in production
costs, the impairment of oil and gas properties and depletion, offset by a
decline in G&A.
Production costs were $131,299 for the three months ended September 30, 2001 and
$94,808 for the same period in 2000, resulting in a $36,491 increase, or 38%.
This increase was due to additional well maintenance costs incurred to stimulate
well production and higher ad valorem taxes.
During this period, G&A decreased 29%, from $8,555 for the three months ended
September 30, 2000 to $6,042 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 $22,836 related to
its proved oil and gas properties during the three months ended September 30,
2001.
Depletion was $28,521 for the three months ended September 30, 2001 as compared
to $21,207 for the same period in 2000, an increase of $7,314, or 34%. This
increase was attributable to a decrease in proved reserves during the period
ended September 30, 2001 due to lower commodity prices,
9
offset by a decline in oil production of 490 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 $154,929 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to an increase in oil and gas sales receipts of $57,214
and reductions in working capital of $153,588 and G&A expenses of $1,396, offset
by increases in production costs of $57,269. The increase in oil and gas
receipts resulted from an increase in gas and NGL prices during 2001 which
contributed an additional $48,265 to oil and gas receipts and $54,048 resulting
from the increase in production during 2001 as compared to the same period in
2000, offset by a decline of $45,099 due to decreased oil prices 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 and increased ad valorem taxes.
Net Cash Provided by Investing Activities
The Partnership's investing activities during the nine months ended September
30, 2001 and 2000 were for expenditures related to oil and gas equipment
upgrades on various oil and gas properties.
Proceeds from asset dispositions of $13,916 and $25,096 were recognized during
the nine months ended September 30, 2001 and 2000, respectively. The proceeds
recognized during the period in 2001 consisted of $13,708 in equipment credits
on one fully depleted well and $208 in salvage income on one well plugged and
abandoned in a prior year. The proceeds recognized during the period in 2000
were from salvage income received on two wells plugged and abandoned in a prior
year.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $403,364, of which $4,034 was distributed to the managing general partner
and $399,330 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $422,116, of which $4,221 was
distributed to the managing general partner and $417,895 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
the proposed merger of the Partnership into Pioneer Natural Resources USA, Inc.
("Pioneer USA"). For further information, see "Proposal to acquire partnerships"
below.
10
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.
11
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 88-A CONV., L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
-------------------------------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
--------------------------------
This document contains important information specific to Parker &
Parsley 88-A Conv., L.P. and supplements the supplemental information to the
proxy statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY 88-A CONV., L.P.
(A Delaware Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY 88-A CONV., L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- -----------
(Unaudited)
ASSETS
Current assets:
Cash $ 105,513 $ 54,706
Accounts receivable - oil and gas sales 37,665 65,812
----------- -----------
Total current assets 143,178 120,518
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 2,966,854 2,964,986
Accumulated depletion (2,547,573) (2,502,477)
----------- -----------
Net oil and gas properties 419,281 462,509
----------- -----------
$ 562,459 $ 583,027
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable-affiliate $ 15,550 $ 5,544
Partners' capital:
Managing general partner 5,541 5,847
Limited partners (3,793 interests) 541,368 571,636
----------- -----------
546,909 577,483
----------- -----------
$ 562,459 $ 583,027
=========== ===========
The financial information included as of September 30, 2001 has been
prepared by management without audit by independent public accountants.
The accompanying notes are an integral part of these
financial statements.
2
PARKER & PARSLEY 88-A 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 $ 81,958 $118,404 $308,009 $305,534
Interest 707 1,336 2,642 3,334
Gain on disposition of assets -- -- -- 76
-------- -------- -------- --------
82,665 119,740 310,651 308,944
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 42,940 38,155 129,012 121,722
General and administrative 2,458 3,552 9,240 9,166
Impairment of oil and gas properties 15,533 -- 15,533 --
Depletion 10,463 9,046 29,563 23,373
-------- -------- -------- --------
71,394 50,753 183,348 154,261
-------- -------- -------- --------
Net income $ 11,271 $ 68,987 $127,303 $154,683
======== ======== ======== ========
Allocation of net income:
Managing general partner $ 113 $ 690 $ 1,273 $ 1,547
======== ======== ======== ========
Limited partners $ 11,158 $ 68,297 $126,030 $153,136
======== ======== ======== ========
Net income per limited
partnership interest $ 2.94 $ 18.00 $ 33.23 $ 40.37
======== ======== ======== ========
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.
3
PARKER & PARSLEY 88-A CONV., L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
--------- --------- ---------
Balance at January 1, 2001 $ 5,847 $ 571,636 $ 577,483
Distributions (1,579) (156,298) (157,877)
Net income 1,273 126,030 127,303
--------- --------- ---------
Balance at September 30, 2001 $ 5,541 $ 541,368 $ 546,909
========= ========= =========
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 88-A 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 $ 127,303 $ 154,683
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 15,533 --
Depletion 29,563 23,373
Gain on disposition of assets -- (76)
Changes in assets and liabilities:
Accounts receivable 28,147 (10,858)
Accounts payable 10,006 6,579
--------- ---------
Net cash provided by operating activities 210,552 173,701
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (1,868) (2,809)
Proceeds from asset dispositions -- 76
--------- ---------
Net cash used in investing activities (1,868) (2,733)
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (157,877) (174,206)
--------- ---------
Net increase (decrease) in cash 50,807 (3,238)
Cash at beginning of period 54,706 66,104
--------- ---------
Cash at end of period $ 105,513 $ 62,866
========= =========
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 88-A CONV., L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 88-A Conv., L.P. (the "Partnership") was organized in 1988 as a
general partnership under the laws of the State of Texas and was converted to a
Delaware limited partnership in 1989.
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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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
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 $15,533 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
6
NOTE 4. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $944,717 of which $922,941 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
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 increased 1% to $308,009 for the nine
months ended September 30, 2001 as compared to $305,534 for the same period in
2000. The increase in revenues resulted from higher average prices received for
gas, offset by lower average prices received for oil and natural gas liquids
("NGLs") and a decline in production. For the nine months ended September 30,
2001, 7,396 barrels of oil, 3,051 barrels of NGLs and 19,219 mcf of gas were
sold, or 13,650 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 7,212 barrels of oil, 4,010 barrels of NGLs and 16,705 mcf
of gas were sold, or 14,006 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 $1.98, or 7%, from $28.30
for the nine months ended September 30, 2000 to $26.32 for the same period in
2001. The average price received per barrel of NGLs decreased $.25, or 2%, from
$14.48 during the nine months ended September 30, 2000 to $14.23 for the same
period in 2001. The average price received per mcf of gas increased 39% from
$2.62 for the nine months ended September 30, 2000 to $3.64 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.
Gain on disposition of assets of $76 was recognized during the nine months ended
September 30, 2000 resulting from equipment credits received on one fully
depleted well.
7
Costs and Expenses:
Total costs and expenses increased to $183,348 for the nine months ended
September 30, 2001 as compared to $154,261 for the same period in 2000, an
increase of $29,087, or 19%. This increase was due to increases in the
impairment of oil and gas properties, production costs, depletion and general
and administrative expenses ("G&A").
Production costs were $129,012 for the nine months ended September 30, 2001 and
$121,722 for the same period in 2000, resulting in a $7,290 increase, or 6%.
This increase was due to higher ad valorem taxes and additional well maintenance
costs incurred to stimulate well production, offset by lower workover costs.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A increased
1% from $9,166 for the nine months ended September 30, 2000 to $9,240 for the
same period in 2001, primarily due to a higher percentage of the managing
general partner's G&A being allocated (limited to 3% of oil and gas revenues) as
a result of increased 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 $15,533 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $29,563 for the nine months ended September 30, 2001 as compared
to $23,373 for the same period in 2000, an increase of $6,190, or 26%. This
increase was due to a decrease in proved reserves during the period ended
September 30, 2001 due to lower commodity prices for the nine months ended
September 30, 2001 as compared to the same period in 2000 and an increase in oil
production of 184 barrels for the nine months ended September 30, 2001 as
compared to the same period in 2000.
8
Three months ended September 30, 2001 compared with three months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 31% to $81,958 for the three
months ended September 30, 2001 as compared to $118,404 for the same period in
2000. The decrease in revenues resulted from lower average prices received and a
decrease in production. For the three months ended September 30, 2001, 2,251
barrels of oil, 1,170 barrels of NGLs and 5,156 mcf of gas were sold, or 4,280
BOEs. For the three months ended September 30, 2000, 2,799 barrels of oil, 1,265
barrels of NGLs and 6,005 mcf of gas were sold, or 5,065 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 $1.83, or 7%, from $27.98
for the three months ended September 30, 2000 to $26.15 for the same period in
2001. The average price received per barrel of NGLs decreased $4.85, or 30%,
from $15.92 during the three months ended September 30, 2000 to $11.07 for the
same period in 2001. The average price received per mcf of gas decreased 41% to
$1.98 during the three months ended September 30, 2001 from $3.38 during the
same period in 2000.
Costs and Expenses:
Total costs and expenses increased to $71,394 for the three months ended
September 30, 2001 as compared to $50,753 for the same period in 2000, an
increase of $20,641, or 41%. This increase was due to increases in the
impairment of oil and gas properties, production costs and depletion, offset by
a decline in G&A.
Production costs were $42,940 for the three months ended September 30, 2001 and
$38,155 for the same period in 2000 resulting in a $4,785 increase, or 13%. The
increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production, offset by lower
production taxes.
During this period, G&A decreased 31% from $3,552 for the three months ended
September 30, 2000 to $2,458 for the same period in 2001, primarily due to a
lower percentage of the managing general partner's G&A 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 $15,533 related to
its proved oil and gas properties during the three months ended September 30,
2001.
Depletion was $10,463 for the three months ended September 30, 2001 as compared
to $9,046 for the same period in 2000, an increase in depletion of $1,417, or
16%. This increase was attributable to a decrease in proved reserves during the
period ended September 30, 2001 as a result of lower commodity prices, offset by
a decrease in oil production of 548 barrels for the three months ended September
30, 2001 as compared to the same period in 2000.
9
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $36,851 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to an increase in sales receipts of $1,783 and a reduction
in working capital of $42,432, offset by increases in production costs of $7,290
and G&A expenses of $74. The increase in oil and gas receipts resulted from an
increase of $17,129 in average prices received for gas and $358 resulted from
the increase in production during 2001 as compared to the same period in 2000,
offset by a decrease of $15,704 in average prices received for oil and NGLs
during 2001. The increase in production costs was primarily due to higher ad
valorem taxes and additional well maintenance costs incurred to stimulate well
production, offset by lower workover costs. The increase in G&A was primarily
due to a higher percentage of the managing general partner's G&A being allocated
(limited to 3% of oil and gas revenues) as a result of increased oil and gas
revenues.
Net Cash Used in Investing Activities
The Partnership's principal investing activities during the nine months ended
September 30, 2001 and 2000 were related to expenditures for equipment upgrades
on various oil and gas properties.
Proceeds of $76 recognized during the nine months ended September 30, 2000 were
from equipment credits 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 $157,877, of which $1,579 was distributed to the managing general partner
and $156,298 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $174,206, of which $1,742 was
distributed to the managing general partner and $172,464 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
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
10
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.
11
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 88-A, L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
-------------------------------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
--------------------------------
This document contains important information specific to Parker &
Parsley 88-A, L.P. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 33-19659-01
PARKER & PARSLEY 88-A, L.P.
---------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 75-2225738
------------------------------- ----------------------
(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 88-A, 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 88-A, 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 $ 367,261 $ 193,491
Accounts receivable - oil and gas sales 128,453 224,465
------------- ------------
Total current assets 495,714 417,956
------------- ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 10,117,650 10,111,281
Accumulated depletion (8,688,082) (8,534,409)
------------- ------------
Net oil and gas properties 1,429,568 1,576,872
------------- ------------
$ 1,925,282 $ 1,994,828
============= ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 53,099 $ 18,724
Partners' capital:
Managing general partner 18,964 20,003
Limited partners (12,935 interests) 1,853,219 1,956,101
------------- ------------
1,872,183 1,976,104
------------- ------------
$ 1,925,282 $ 1,994,828
============= ============
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 88-A, 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 $ 279,405 $ 404,891 $ 1,050,356 $ 1,043,026
Interest 2,482 4,613 9,266 11,691
Gain on disposition of assets -- -- -- 259
------------ ------------ ------------ ------------
281,887 409,504 1,059,622 1,054,976
------------ ------------ ------------ ------------
Costs and expenses:
Oil and gas production 146,434 130,098 439,961 415,111
General and administrative 8,383 12,147 31,511 31,291
Impairment of oil and gas properties 52,901 -- 52,901 --
Depletion 35,751 30,877 100,772 79,675
------------ ------------ ------------ ------------
243,469 173,122 625,145 526,077
------------ ------------ ------------ ------------
Net income $ 38,418 $ 236,382 $ 434,477 $ 528,899
============ ============ ============ ============
Allocation of net income:
Managing general partner $ 384 $ 2,364 $ 4,345 $ 5,289
============ ============ ============ ============
Limited partners $ 38,034 $ 234,018 $ 430,132 $ 523,610
============ ============ ============ ============
Net income per limited
partnership interest $ 2.94 $ 18.09 $ 33.25 $ 40.48
============ ============ ============ ============
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 88-A, L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
---------- ----------- -----------
Balance at January 1, 2001 $ 20,003 $ 1,956,101 $ 1,976,104
Distributions (5,384) (533,014) (538,398)
Net income 4,345 430,132 434,477
---------- ----------- -----------
Balance at September 30, 2001 $ 18,964 $ 1,853,219 $ 1,872,183
========== =========== ===========
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 88-A, 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 $ 434,477 $ 528,899
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 52,901 --
Depletion 100,772 79,675
Gain on disposition of assets -- (259)
Changes in assets and liabilities:
Accounts receivable 96,012 (21,329)
Accounts payable 34,375 22,103
---------- ----------
Net cash provided by operating activities 718,537 609,089
---------- ----------
Cash flows from investing activities:
Additions to oil and gas properties (6,369) (9,580)
Proceeds from asset dispositions -- 259
---------- ----------
Net cash used in investing activities (6,369) (9,321)
---------- ----------
Cash flows used in financing activities:
Cash distributions to partners (538,398) (594,086)
---------- ----------
Net increase in cash 173,770 5,682
Cash at beginning of period 193,491 215,801
---------- ----------
Cash at end of period $ 367,261 $ 221,483
========== ==========
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 88-A, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 88-A, L.P. (the "Partnership") is a limited partnership
organized in 1988 under the laws of the State of Delaware.
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 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.
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
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
7
provision of $52,901 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
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $3,228,907 of which $3,153,865 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the 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 increased 1% to $1,050,356 for the nine
months ended September 30, 2001 as compared to $1,043,026 for the same period in
2000. The increase in revenues resulted from higher average prices received for
gas, offset by lower average prices received for oil and natural gas liquids
("NGLs") and a decline in production. For the nine months ended September 30,
2001, 25,222 barrels of oil, 10,396 barrels of NGLs and 65,563 mcf of gas were
sold, or 46,545 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 24,596 barrels of oil, 13,677 barrels of NGLs and 56,955 mcf
of gas were sold, or 47,766 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 $1.98, or 7%, from $28.30
for the nine months ended September 30, 2000 to $26.32 for the same period in
2001. The average price received per barrel of NGLs decreased $.25, or 2%, from
$14.48 during the nine months ended September 30, 2000 to $14.23 for the same
period in 2001. The average price received per mcf of gas increased 39% from
$2.62 during the nine months ended September 30, 2000 to $3.64 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.
Gain on disposition of assets of $259 was recognized during the nine months
ended September 30, 2000 resulting from equipment credits received on one well.
8
Costs and Expenses:
Total costs and expenses increased to $625,145 for the nine months ended
September 30, 2001 as compared to $526,077 for the same period in 2000, an
increase of $99,068, or 19%. This increase was due to increases in the
impairment of oil and gas properties, production costs, depletion and general
and administrative expenses ("G&A").
Production costs were $439,961 for the nine months ended September 30, 2001 and
$415,111 for the same period in 2000 resulting in an increase of $24,850, or 6%.
The increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production, offset by a decrease in
workover costs.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A increased
1%, from $31,291 for the nine months ended September 30, 2000 to $31,511 for the
same period in 2001, primarily due to a higher percentage of the managing
general partner's G&A being allocated (limited to 3% of oil and gas revenues) as
a result of increased 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 $52,901 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $100,772 for the nine months ended September 30, 2001 as compared
to $79,675 for the same period in 2000, representing an increase of $21,097, or
26%. This increase was the result of a decrease in proved reserves during the
period ended September 30, 2001 due to lower commodity prices and an increase in
oil production of 626 barrels for the nine months ended September 30, 2001 as
compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 31% to $279,405 for the three
months ended September 30, 2001 as compared to $404,891 for the same period in
2000. The decrease in revenues resulted from lower average prices received and a
decrease in production. For the three months
9
ended September 30, 2001, 7,667 barrels of oil, 3,981 barrels of NGLs and 17,597
mcf of gas were sold, or 14,581 BOEs. For the three months ended September 30,
2000, 9,541 barrels of oil, 4,325 barrels of NGLs and 20,466 mcf of gas were
sold, or 17,277 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 $1.83, or 7%, from $27.98
for the three months ended September 30, 2000 to $26.15 for the same period in
2001. The average price received per barrel of NGLs decreased $4.85, or 30%,
from $15.92 during the three months ended September 30, 2000 to $11.07 for the
same period in 2001. The average price received per mcf of gas decreased 41%
from $3.38 during the three months ended September 30, 2000 to $1.98 for the
same period in 2001.
Costs and Expenses:
Total costs and expenses increased to $243,469 for the three months ended
September 30, 2001 as compared to $173,122 for the same period in 2000, an
increase of $70,347, or 41%. This increase was due to increases in the
impairment of oil and gas properties, production costs and depletion, offset by
a decrease in G&A.
Production costs were $146,434 for the three months ended September 30, 2001 and
$130,098 for the same period in 2000, resulting in a $16,336 increase, or 13%.
The increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production, offset by a decline in
production taxes.
During this period, G&A decreased 31% from $12,147 for the three months ended
September 30, 2000 to $8,383 for the same period in 2001, 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 $52,901 related to
its proved oil and gas properties during the period ended September 30, 2001.
Depletion was $35,751 for the three months ended September 30, 2001 as compared
to $30,877 for the same period in 2000, representing an increase of $4,874, or
16%. This increase was due to a decrease in proved reserves during the period
ended September 30, 2001 compared to the same period in 2000 as a result of
lower commodity prices, offset by a decrease in oil production of 1,874 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 $109,448 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to an increase in oil and gas sales receipts of $4,905 and
a reduction of $129,613 in working capital, offset
10
by increases in production costs of $24,850 and G&A expenses of $220. The
increase in revenue receipts resulted from increases in gas prices of $58,271
and $47,798 resulting from an increase in oil and gas production during 2001 as
compared to the same period in 2000, offset by decreases of $54,476 in oil and
NGL prices and $46,688 in NGL production. The increase in production costs was
primarily due to higher ad valorem taxes and additional well maintenance costs
incurred to stimulate well production, offset by a decrease in workover costs.
The increase in G&A was primarily due to a higher percentage of the managing
general partner's G&A being allocated (limited to 3% of oil and gas revenues) as
a result of increased oil and gas revenues.
Net Cash Used in Investing Activities
The Partnership's principal 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 $259 received during the nine months ended
September 30, 2000 were due to equipment credits received on one well.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $538,398, of which $5,384 was distributed to the managing general partner
and $533,014 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $594,086, of which $5,941 was
distributed to the managing general partner and $588,145 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
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.
11
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 88-A, L.P.
(A Delaware Limited Partnership)
SIGNATURES
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 88-A, L.P.
By: Pioneer Natural Resources USA, Inc.,
Managing General Partner
Dated: November 9, 2001 By: /s/ Rich Dealy
-------------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
13
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 88-B CONV., L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
-------------------------------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
--------------------------------
This document contains important information specific to Parker &
Parsley 88-B Conv., L.P. and supplements the supplemental information to the
proxy statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY 88-B CONV., L.P.
(A Delaware Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY 88-B CONV., L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 129,543 $ 58,050
Accounts receivable - oil and gas sales 43,474 80,619
------------ ------------
Total current assets 173,017 138,669
------------ ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 2,751,252 2,824,029
Accumulated depletion (2,391,169) (2,424,313)
------------ ------------
Net oil and gas properties 360,083 399,716
------------ ------------
$ 533,100 $ 538,385
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 19,250 $ 6,684
Partners' capital:
Managing general partner 5,129 5,308
Limited partners (3,636 interests) 508,721 526,393
------------ ------------
513,850 531,701
------------ ------------
$ 533,100 $ 538,385
============ ============
The financial information included as of September 30, 2001 has been
prepared by management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY 88-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 $105,325 $143,104 $354,526 $383,160
Interest 775 1,466 2,757 3,544
Gain on disposition of assets -- 2,886 3,190 6,478
-------- -------- -------- --------
106,100 147,456 360,473 393,182
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 54,225 46,350 148,819 129,611
General and administrative 2,679 4,293 8,909 11,495
Impairment of oil and gas properties 14,234 -- 14,234 --
Depletion 12,704 6,631 27,619 21,046
Abandoned property 6 3,340 4,165 3,340
-------- -------- -------- --------
83,848 60,614 203,746 165,492
-------- -------- -------- --------
Net income $ 22,252 $ 86,842 $156,727 $227,690
======== ======== ======== ========
Allocation of net income:
Managing general partner $ 222 $ 869 $ 1,567 $ 2,277
======== ======== ======== ========
Limited partners $ 22,030 $ 85,973 $155,160 $225,413
======== ======== ======== ========
Net income per limited
partnership interest $ 6.06 $ 23.64 $ 42.67 $ 61.99
======== ======== ======== ========
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.
3
PARKER & PARSLEY 88-B CONV., L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
------------ ------------ ------------
Balance at January 1, 2001 $ 5,308 $ 526,393 $ 531,701
Distributions (1,746) (172,832) (174,578)
Net income 1,567 155,160 156,727
------------ ------------ ------------
Balance at September 30, 2001 $ 5,129 $ 508,721 $ 513,850
============ ============ ============
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 88-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 $ 156,727 $ 227,690
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 14,234 --
Depletion 27,619 21,046
Gain on disposition of assets (3,190) (6,478)
Changes in assets and liabilities:
Accounts receivable 37,145 (20,356)
Accounts payable 13,356 9,333
------------ ------------
Net cash provided by operating activities 245,891 231,235
------------ ------------
Cash flows from investing activities:
Additions to oil and gas properties (2,448) (2,350)
Proceeds from asset dispositions 2,628 5,320
------------ ------------
Net cash provided by investing activities 180 2,970
------------ ------------
Cash flows used in financing activities:
Cash distributions to partners (174,578) (225,984)
------------ ------------
Net increase in cash 71,493 8,221
Cash at beginning of period 58,050 59,846
------------ ------------
Cash at end of period $ 129,543 $ 68,067
============ ============
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 88-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 88-B Conv., L.P. (the "Partnership") was organized in 1988 as a
general partnership under the laws of the State of Texas and was converted to a
Delaware limited partnership in 1989.
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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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
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 $14,234 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
6
NOTE 4. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $1,252,584 of which $1,233,237 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (1)
RESULTS OF OPERATIONS
Revenues:
Nine months ended September 30, 2001 compared with nine months ended September
30, 2000
The Partnership's oil and gas revenues decreased 7% to $354,526 for the nine
months ended September 30, 2001 as compared to $383,160 for the same period in
2000. The decrease in revenues resulted from lower average prices received for
oil and a decline in production, offset by higher average prices received for
gas and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 9,074 barrels of oil, 2,963 barrels of NGLs and 13,253 mcf of gas were
sold, or 14,246 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 9,855 barrels of oil, 4,114 barrels of NGLs and 16,862 mcf
of gas were sold, or 16,779 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 $.82, or 3%, from $28.32
for the nine months ended September 30, 2000 to $27.50 for the same period in
2001. The average price received per barrel of NGLs increased $.13, or 1%, from
$15.11 during the nine months ended September 30, 2000 to $15.24 for the same
period in 2001. The average price received per mcf of gas increased 81% from
$2.49 during the nine months ended September 30, 2000 to $4.51 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.
Gain on disposition of assets of $3,190 was recognized during the nine months
ended September 30, 2001 due to the sale of equipment on one well plugged and
abandoned during the current period. A gain of $6,478 was recognized during the
same period in 2000 resulting from a $4,726 salvage income from one well plugged
and abandoned during the current period and $1,752 from equipment credits
received on one fully depleted well. Abandoned property costs of $4,165 and
$3,340 were
7
incurred during the nine months ended September 30, 2001 and 2000, respectively,
to abandon these wells.
Costs and Expenses:
Total costs and expenses increased to $203,746 for the nine months ended
September 30, 2001 as compared to $165,492 for the same period in 2000, an
increase of $38,254, or 23%. 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 general and administrative expenses
("G&A").
Production costs were $148,819 for the nine months ended September 30, 2001 and
$129,611 for the same period in 2000, resulting in a $19,208 increase, or 15%.
The increase was due to higher ad valorem taxes and 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
22% from $11,495 for the nine months ended September 30, 2000 to $8,909 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 $14,234 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $27,619 for the nine months ended September 30, 2001 as compared
to $21,046 for the same period in 2000, an increase of $6,573, or 31%. This
increase was due to a decrease 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 decrease in oil production of 781 barrels for the nine
months ended September 30, 2001 as compared to the same period in 2000.
8
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 $105,325 for the three
months ended September 30, 2001 as compared to $143,104 for the same period in
2000. The decrease in revenues resulted from lower average prices received and a
decrease in production. For the three months ended September 30, 2001, 3,234
barrels of oil, 1,060 barrels of NGLs and 4,816 mcf of gas were sold, or 5,097
BOEs. For the three months ended September 30, 2000, 3,152 barrels of oil, 1,508
barrels of NGLs and 6,019 mcf of gas were sold, or 5,663 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 $5.15, or 16%, from
$31.31 for the three months ended September 30, 2000 to $26.16 for the same
period in 2001. The average price received per barrel of NGLs decreased $5.65,
or 33%, from $16.90 during the three months ended September 30, 2000 to $11.25
for the same period in 2001. The average price received per mcf of gas decreased
42% to $1.84 during the three months ended September 30, 2001 from $3.16 during
the same period in 2000.
Gain on disposition of assets of $2,886 was recognized during the three months
ended September 30, 2000. The gain was comprised of $1,752 from equipment
credits received on one fully depleted well and $1,134 received from salvage
income on one well plugged and abandoned during the current period. Abandoned
property costs of $6 and $3,340 were incurred during the three months ended
September 30, 2001 and 2000, respectively, resulting from one well plugged and
abandoned during the current periods.
Costs and Expenses:
Total costs and expenses increased to $83,848 for the three months ended
September 30, 2001 as compared to $60,614 for the same period in 2000, an
increase of $23,234, or 38%. This increase was due to increases in the
impairment of oil and gas properties, production costs and depletion, offset by
declines in abandoned property costs and G&A.
Production costs were $54,225 for the three months ended September 30, 2001 and
$46,350 for the same period in 2000, resulting in a $7,875 increase, or 17%. The
increase was due to higher ad valorem taxes and additional well maintenance
costs incurred to stimulate well production.
During this period, G&A decreased 38% from $4,293 for the three months ended
September 30, 2000 to $2,679 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 $14,234 related to
its proved oil and gas properties during the three months ended September 30,
2001.
9
Depletion was $12,704 for the three months ended September 30, 2001 as compared
to $6,631 for the same period in 2000, an increase of $6,073, or 92%. This
increase was attributable to a decrease 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.
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $14,656 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to reductions of $61,524 in working capital and $2,586 in
G&A expenses, offset by increases in production costs of $19,208 and abandoned
property costs of $825 and a reduction in oil and gas sales receipts of $29,421.
The decrease in oil and gas receipts resulted from the decrease of $8,833 in oil
prices and $55,318 resulting from the decline in production during 2001 as
compared to the same period in 2000, offset by an increase of $34,730 in gas and
NGL prices. The increase in production costs was primarily due to higher ad
valorem taxes and additional well maintenance and workover costs incurred to
stimulate well production. The decrease in G&A was 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 Investing Activities
The Partnership's principal investing activities during the nine months ended
September 30, 2001 and 2000 were related to expenditures for equipment upgrades
on various oil and gas properties.
Proceeds from disposition of assets of $2,628 was recognized during the nine
months ended September 30, 2001. The gain was comprised of $2,424 received from
the sale of equipment on one well plugged and abandoned during the current
period and $204 from equipment credits received on one active well. Proceeds of
$5,320 received during the same period in 2000 were due to $3,591 on one well
plugged and abandoned during the current period and $1,729 from equipment
credits 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 $174,578, of which $1,746 was distributed to the managing general partner
and $172,832 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $225,984, of which $2,260 was
distributed to the managing general partner and $223,724 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
the proposed merger of the Partnership into Pioneer Natural Resources USA, Inc.
("Pioneer USA"). For further information, see "Proposal to acquire partnerships"
below.
10
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.
11
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 88-B, L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
-------------------------------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
--------------------------------
This document contains important information specific to Parker &
Parsley 88-B, L.P. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 33-19659-02
PARKER & PARSLEY 88-B, L.P.
---------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 75-2240121
------------------------------- ----------------------
(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 88-B, 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 88-B, 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 $ 320,866 $ 144,763
Accounts receivable - oil and gas sales 107,113 198,467
------------- ------------
Total current assets 427,979 343,230
------------- ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 6,775,326 6,954,545
Accumulated depletion (5,888,350) (5,969,972)
------------- ------------
Net oil and gas properties 886,976 984,573
------------- ------------
$ 1,314,955 $ 1,327,803
============= ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 47,325 $ 16,350
Partners' capital:
Managing general partner 12,645 13,083
Limited partners (8,954 interests) 1,254,985 1,298,370
------------- ------------
1,267,630 1,311,453
------------- ------------
$ 1,314,955 $ 1,327,803
============= ============
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 88-B, 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 $ 259,220 $ 352,159 $ 873,186 $ 943,505
Interest 1,927 3,636 6,841 8,813
Gain on disposition of assets -- 7,108 7,855 15,953
---------- ---------- ---------- ----------
261,147 362,903 887,882 968,271
---------- ---------- ---------- ----------
Costs and expenses:
Oil and gas production 133,495 114,143 366,524 319,196
General and administrative 6,594 10,565 21,943 28,305
Impairment of oil and gas properties 34,975 -- 34,975 --
Depletion 31,335 16,274 68,090 51,791
Abandoned property 17 8,226 10,258 8,226
---------- ---------- ---------- ----------
206,416 149,208 501,790 407,518
---------- ---------- ---------- ----------
Net income $ 54,731 $ 213,695 $ 386,092 $ 560,753
========== ========== ========== ==========
Allocation of net income:
Managing general partner $ 547 $ 2,137 $ 3,861 $ 5,608
========== ========== ========== ==========
Limited partners $ 54,184 $ 211,558 $ 382,231 $ 555,145
========== ========== ========== ==========
Net income per limited
partnership interest $ 6.05 $ 23.63 $ 42.69 $ 62.00
========== ========== ========== ==========
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 88-B, L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 2001 $ 13,083 $ 1,298,370 $ 1,311,453
Distributions (4,299) (425,616) (429,915)
Net income 3,861 382,231 386,092
----------- ----------- -----------
Balance at September 30, 2001 $ 12,645 $ 1,254,985 $ 1,267,630
=========== =========== ===========
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 88-B, 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 $ 386,092 $ 560,753
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 34,975 --
Depletion 68,090 51,791
Gain on disposition of assets (7,855) (15,953)
Changes in assets and liabilities:
Accounts receivable 91,354 (29,725)
Accounts payable 32,919 22,569
---------- ----------
Net cash provided by operating activities 605,575 589,435
---------- ----------
Cash flows from investing activities:
Additions to oil and gas properties (6,028) (5,788)
Proceeds from asset dispositions 6,471 13,102
---------- ----------
Net cash provided by investing activities 443 7,314
---------- ----------
Cash flows used in financing activities:
Cash distributions to partners (429,915) (556,511)
---------- ----------
Net increase in cash 176,103 40,238
Cash at beginning of period 144,763 129,430
---------- ----------
Cash at end of period $ 320,866 $ 169,668
========== ==========
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 88-B, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 88-B, L.P. (the "Partnership") is a limited partnership
organized in 1988 under the laws of the State of Delaware.
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 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.
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
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
7
provision of $34,975 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
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $3,086,337 of which $3,023,397 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the 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 7% to $873,186 for the nine
months ended September 30, 2001 as compared to $943,505 for the same period in
2000. The decrease in revenues resulted from lower average prices received for
oil and a decline in production, offset by higher average prices received for
gas and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 22,346 barrels of oil, 7,311 barrels of NGLs and 32,649 mcf of gas were
sold, or 35,099 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 24,263 barrels of oil, 10,130 barrels of NGLs and 41,502 mcf
of gas were sold, or 41,310 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 $.82, or 3%, from $28.32
for the nine months ended September 30, 2000 to $27.50 for the same period in
2001. The average price received per barrel of NGLs increased $.13, or 1%, from
$15.11 during the nine months ended September 30, 2000 to $15.24 for the same
period in 2001. The average price received per mcf of gas increased 81% from
$2.49 during the nine months ended September 30, 2000 to $4.51 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.
Gain on disposition of assets of $7,855 was recognized during the nine months
ended September 30, 2001 due to the sale of equipment on one well plugged and
abandoned during the current period. A gain of $15,953 was recognized during the
same period in 2000 resulting from an $11,638 salvage
8
income from one well plugged and abandoned during the current period and $4,315
from equipment credits received on one fully depleted well. Abandoned property
costs of $10,528 and $8,226 were incurred during the nine months ended September
30, 2001 and 2000, respectively, to abandon these wells.
Costs and Expenses:
Total costs and expenses increased to $501,790 for the nine months ended
September 30, 2001 as compared to $407,518 for the same period in 2000, an
increase of $94,272, or 23%. This increase was due to increases in production
costs, depletion, the impairment of oil and gas properties and abandoned
property costs, offset by a decline in general and administrative expenses
("G&A").
Production costs were $366,524 for the nine months ended September 30, 2001 and
$319,196 for the same period in 2000, resulting in an increase of $47,328, or
15%. The increase was primarily due to higher ad valorem taxes and additional
well maintenance costs and workover expenses 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
22% from $28,305 for the nine months ended September 30, 2000 to $21,943 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 $34,975 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $68,090 for the nine months ended September 30, 2001 as compared
to $51,791 for the same period in 2000, representing an increase of $16,299, or
31%. This increase was the result of 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 decline in oil production of
1,917 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 $259,220 for the three
months ended September 30, 2001 as compared to $352,159 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, 7,949
barrels of oil, 2,619 barrels of NGLs and 11,857 mcf of gas were sold, or 12,544
BOEs. For the three months ended September 30, 2000, 7,752 barrels of oil, 3,707
barrels of NGLs and 14,807 mcf of gas were sold, or 13,927 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 $5.15, or 16%, from
$31.31 for the three months ended September 30, 2000 to $26.16 for the same
period in 2001. The average price received per barrel of NGLs decreased $5.65,
or 33%, from $16.90 during the three months ended September 30, 2000 to $11.25
for the same period in 2001. The average price received per mcf of gas decreased
42% from $3.16 during the three months ended September 30, 2000 to $1.84 for the
same period in 2001.
Gain on disposition of assets of $7,108 was recognized during the three months
ended September 30, 2000. The gain was comprised of $4,315 from equipment
credits received on one fully depleted well and $2,793 received from salvage
income on one well plugged and abandoned during the current period. Abandoned
property costs of $17 and $8,226 were incurred during the three months ended
September 30, 2001 and 2000, respectively, resulting from one well plugged and
abandoned during the current periods.
Costs and Expenses:
Total costs and expenses increased to $206,416 for the three months ended
September 30, 2001 as compared to $149,208 for the same period in 2000, an
increase of $57,208, or 38%. This increase was due to increases in the
impairment of oil and gas properties, production costs and depletion, offset by
decreases in abandoned property costs and G&A.
Production costs were $133,495 for the three months ended September 30, 2001 and
$114,143 for the same period in 2000 resulting in a $19,352 increase, or 17%.
The increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production, offset by lower
production and ad valorem taxes.
During this period, G&A decreased 38% from $10,565 for the three months ended
September 30, 2000 to $6,594 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.
10
The Partnership recognized a non-cash impairment provision of $34,975 related to
its proved oil and gas properties during the three months ended September 30,
2001.
Depletion was $31,335 for the three months ended September 30, 2001 as compared
to $16,274 for the same period in 2000, representing an increase of $15,061, or
93%. This increase was due to a decrease 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.
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $16,140 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to reductions of $131,429 in working capital and G&A
expenses of $6,362, offset by increases in production costs of $47,328,
abandoned property costs of $2,032 and a reduction in oil and gas sales receipts
of $72,291. The decrease in oil and gas receipts resulted from the decline of
$21,833 in oil prices during 2001 and $135,612 resulting from the decline in
production during 2001 as compared to the same period in 2000, offset by
increases in gas and NGL prices of $85,154. The increase in production costs was
primarily due to higher ad valorem taxes and additional well maintenance and
workover 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 Investing Activities
The Partnership's investing activities during the nine months ended September
30, 2001 and 2000 were related to upgrades of oil and gas equipment on various
oil and gas properties.
Proceeds from dispositions of assets of $6,471 was recognized during the nine
months ended September 30, 2001. The proceeds were comprised of $5,968 received
from the sale of equipment on one well plugged and abandoned during the current
period and $503 from equipment credits received on one active well. Proceeds of
$13,102 received during the same period in 2000 were due to $8,845 on one well
plugged and abandoned during the current period and $4,257 from equipment
credits on one fully depleted well.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2000, cash distributions to the partners
were $429,915, of which $4,299 was distributed to the managing general partner
and $425,616 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $556,511, of which $5,565 was
distributed to the managing general partner and $550,946 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
the proposed merger of the Partnership into
11
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 88-B, L.P.
(A Delaware Limited Partnership)
SIGNATURES
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 88-B, L.P.
By: Pioneer Natural Resources USA, Inc.,
Managing General Partner
Dated: November 9, 2001 By: /s/ Rich Dealy
--------------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
13
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 88-C CONV., L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
-------------------------------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
--------------------------------
This document contains important information specific to Parker &
Parsley 88-C Conv., L.P. and supplements the supplemental information to the
proxy statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY 88-C CONV., L.P.
(A Delaware Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY 88-C CONV., L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 108,920 $ 51,156
Accounts receivable - oil and gas sales 38,388 66,963
----------- -----------
Total current assets 147,308 118,119
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 2,400,899 2,458,118
Accumulated depletion (2,055,170) (2,078,258)
----------- -----------
Net oil and gas properties 345,729 379,860
----------- -----------
$ 493,037 $ 497,979
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 17,008 $ 5,927
Partners' capital:
Managing general partner 4,745 4,905
Limited partners (3,411 interests) 471,284 487,147
----------- -----------
476,029 492,052
----------- -----------
$ 493,037 $ 497,979
=========== ===========
The financial information included herein as of September 30, 2001 has been
prepared by management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY 88-C 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 $ 87,732 $119,902 $302,836 $318,657
Interest 679 1,227 2,413 3,010
Gain on disposition of assets -- 2,269 2,508 5,093
-------- -------- -------- --------
88,411 123,398 307,757 326,760
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 47,414 39,073 130,202 112,471
General and administrative 2,451 3,597 9,129 9,560
Impairment of oil and gas properties 11,171 -- 11,171 --
Depletion 11,047 6,317 24,706 19,292
Abandoned property 49 2,626 3,279 2,626
-------- -------- -------- --------
72,132 51,613 178,487 143,949
-------- -------- -------- --------
Net income $ 16,279 $ 71,785 $129,270 $182,811
======== ======== ======== ========
Allocation of net income:
Managing general partner $ 163 $ 718 $ 1,293 $ 1,828
======== ======== ======== ========
Limited partners $ 16,116 $ 71,067 $127,977 $180,983
======== ======== ======== ========
Net income per limited
partnership interest $ 4.73 $ 20.84 $ 37.52 $ 53.06
======== ======== ======== ========
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.
3
PARKER & PARSLEY 88-C CONV., L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
--------- --------- ---------
Balance at January 1, 2001 $ 4,905 $ 487,147 $ 492,052
Distributions (1,453) (143,840) (145,293)
Net income 1,293 127,977 129,270
--------- --------- ---------
Balance at September 30, 2001 $ 4,745 $ 471,284 $ 476,029
========= ========= =========
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 88-C 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 $ 129,270 $ 182,811
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 11,171 --
Depletion 24,706 19,292
Gain on disposition of assets (2,508) (5,093)
Changes in assets and liabilities:
Accounts receivable 28,575 (16,829)
Accounts payable 11,702 6,893
--------- ---------
Net cash provided by operating activities 202,916 187,074
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (1,925) (1,862)
Proceeds from asset dispositions 2,066 4,183
--------- ---------
Net cash provided by investing activities 141 2,321
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (145,293) (187,973)
--------- ---------
Net increase in cash 57,764 1,422
Cash at beginning of period 51,156 56,353
--------- ---------
Cash at end of period $ 108,920 $ 57,775
========= =========
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 88-C CONV., L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 88-C Conv., L.P. (the "Partnership") was organized in 1988 as a
general partnership under the laws of the State of Texas and was converted to a
Delaware limited partnership in 1989.
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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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
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 $11,171 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
6
NOTE 4. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $1,009,229 of which $996,208 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
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 5% to $302,836 for the nine
months ended September 30, 2001 as compared to $318,657 for the same period in
2000. The decrease in revenues resulted from lower average prices received from
oil and a decline in production, offset by higher average prices received for
gas and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 7,375 barrels of oil, 2,938 barrels of NGLs and 12,521 mcf of gas were
sold, or 12,400 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 7,994 barrels of oil, 3,665 barrels of NGLs and 14,995 mcf
of gas were sold, or 14,158 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 $.73, or 3%, from $28.38
for the nine months ended September 30, 2000 to $27.65 for the same period in
2001. The average price received per barrel of NGLs increased $.19, or 1%, from
$15.03 during the nine months ended September 30, 2000 to $15.22 for the same
period in 2001. The average price received per mcf of gas increased 77% from
$2.44 during the nine months ended September 30, 2000 to $4.31 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 $2,508 and $5,093 were recognized during the
nine months ended September 30, 2001 and 2000, respectively. The gain recognized
during the period ended September 30, 2001 was due to salvage income received on
one well plugged and abandoned during the current period. The gain recognized
during the period ended September 30, 2000 was primarily due to salvage income
received on one well plugged and abandoned during the period ended 2000.
7
Costs and Expenses:
Total costs and expenses increased to $178,487 for the nine months ended
September 30, 2001 as compared to $143,949 for the same period in 2000, an
increase of $34,538, or 24%. 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 $130,202 for the nine months ended September 30, 2001 and
$112,471 for the same period in 2000 resulting in a $17,731 increase, or 16%.
The increase was primarily due to additional well maintenance and workover costs
incurred to stimulate well production and higher ad valorem taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel costs. During this period, G&A decreased 5%, from
$9,560 for the nine months ended September 30, 2000 to $9,129 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 $11,171 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $24,706 for the nine months ended September 30, 2001 as compared
to $19,292 for the same period in 2000, an increase of $5,414, or 28%. This
increase was due to a reduction in proved reserves during the period ended
September 30, 2001 due to lower commodity prices, offset by a decline in oil
production of 619 barrels for the nine months ended September 30, 2001 as
compared to the same period in 2000.
Abandoned property costs of $3,279 and $2,626 were incurred for the nine months
ended September 30, 2001 and 2000, respectively, to plug and abandon one well
during the current periods.
8
Three months ended September 30, 2001 compared with three months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 27% to $87,732 for the three
months ended September 30, 2001 as compared to $119,902 for the same period in
2000. The decrease in revenues resulted from a decline in production and lower
average prices received. For the three months ended September 30, 2001, 2,598
barrels of oil, 980 barrels of NGLs and 4,361 mcf of gas were sold, or 4,305
BOEs. For the three months ended September 30, 2000, 2,639 barrels of oil, 1,267
barrels of NGLs and 5,043 mcf of gas were sold, or 4,747 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 $4.98, or 16%, from
$31.26 for 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 $5.53,
or 32%, from $17.08 during the three months ended September 30, 2000 to $11.55
for the same period in 2001. The average price received per mcf of gas decreased
40% to $1.88 during the three months ended September 30, 2001 from $3.11 during
the same period in 2000.
A gain on disposition of assets of $2,269 recognized during the three months
ended September 30, 2000 was due to salvage income received on one well plugged
and abandoned during the period ended 2000.
Costs and Expenses:
Total costs and expenses increased to $72,132 for the three months ended
September 30, 2001 as compared to $51,613 for the same period in 2000, an
increase of $20,519, or 40%. This increase was due to increases in the
impairment of oil and gas properties, production costs and depletion, offset by
declines in G&A and abandoned property costs.
Production costs were $47,414 for the three months ended September 30, 2001 and
$39,073 for the same period in 2000, resulting in an $8,341 increase, or 21%.
The increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production.
During this period, G&A decreased 32%, from $3,597 for the three months ended
September 30, 2000 to $2,451 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 $11,171 related to
its proved oil and gas properties during the three months ended September 30,
2001.
Depletion was $11,047 for the three months ended September 30, 2001 as compared
to $6,317 for the same period in 2000, an increase of $4,730, or 75%. This
increase was attributable to a reduction in proved reserves during the period
ended September 30, 2001 due to lower commodity prices.
9
Abandoned property costs of $49 and $2,626 were incurred for the three months
ended September 30, 2001 and 2000, respectively, to plug and abandon one well
during the current periods.
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $15,842 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to reductions in working capital of $50,213 and G&A
expenses of $431, offset by increases in production costs of $17,731 and
abandoned property costs of $653 and a reduction in oil and gas receipts of
$16,418. The decrease in oil and gas receipts resulted from the decrease in oil
commodity prices during 2001 of $5,974 and a decline in production of $38,893
during 2001 as compared to the same period in 2000, offset by increased gas and
NGL commodity prices of $28,449. The increase in production costs was primarily
due to additional well maintenance and workover costs incurred to stimulate well
production and higher ad valorem taxes. 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 Investing Activities
The Partnership's principal 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 $2,066 and $4,183 were recognized during the
nine months ended September 30, 2001 and 2000, respectively. The proceeds
recognized during 2001 were primarily due to salvage income received on a well
plugged and abandoned during the current year. The proceeds recognized during
2000 were due to salvage income received on one well plugged and abandoned
during the period ended 2000.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $145,293, of which $1,453 was distributed to the managing general partner
and $143,840 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $187,973, of which $1,880 was
distributed to the managing general partner and $186,093 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
the proposed merger of the Partnership into Pioneer Natural Resources USA, Inc.
("Pioneer USA"). For further information, see "Proposal to acquire partnerships"
below.
10
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.
11
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 88-C, L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
-------------------------------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
--------------------------------
This document contains important information specific to Parker &
Parsley 88-C, L.P. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY 88-C , L.P.
(A Delaware Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY 88-C, L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 72,627 $ 31,689
Accounts receivable - oil and gas sales 27,453 47,902
------------- ------------
Total current assets 100,080 79,591
------------- ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 1,711,107 1,751,887
Accumulated depletion (1,465,093) (1,481,594)
------------- ------------
Net oil and gas properties 246,014 270,293
------------- ------------
$ 346,094 $ 349,884
============= ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 12,249 $ 4,246
Partners' capital:
Managing general partner 3,326 3,443
Limited partners (2,431 interests) 330,519 342,195
------------- ------------
333,845 345,638
------------- ------------
$ 346,094 $ 349,884
============= ============
The financial information included as of September 30, 2001 has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY 88-C, 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 $ 62,636 $ 85,503 $ 215,744 $ 227,002
Interest 547 803 1,580 1,977
Gain on disposition of assets -- 1,617 1,788 3,630
---------- ---------- ---------- ----------
63,183 87,923 219,112 232,609
---------- ---------- ---------- ----------
Costs and expenses:
Oil and gas production 33,832 27,815 92,793 80,121
General and administrative 1,950 2,565 6,703 6,810
Impairment of oil and gas properties 7,965 -- 7,965 --
Depletion 7,876 4,492 17,558 13,743
Abandoned property 7 1,872 2,337 1,872
---------- ---------- ---------- ----------
51,630 36,744 127,356 102,546
---------- ---------- ---------- ----------
Net income $ 11,553 $ 51,179 $ 91,756 $ 130,063
========== ========== ========== ==========
Allocation of net income:
Managing general partner $ 116 $ 512 $ 918 $ 1,301
========== ========== ========== ==========
Limited partners $ 11,437 $ 50,667 $ 90,838 $ 128,762
========== ========== ========== ==========
Net income per limited
partnership interest $ 4.71 $ 20.85 $ 37.37 $ 52.97
========== ========== ========== ==========
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.
3
PARKER & PARSLEY 88-C, L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 2001 $ 3,443 $ 342,195 $ 345,638
Distributions (1,035) (102,514) (103,549)
Net income 918 90,838 91,756
----------- ----------- -----------
Balance at September 30, 2001 $ 3,326 $ 330,519 $ 333,845
=========== =========== ===========
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 88-C, 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 $ 91,756 $ 130,063
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 7,965 --
Depletion 17,558 13,743
Gain on disposition of assets (1,788) (3,630)
Changes in assets and liabilities:
Accounts receivable 20,449 (11,926)
Accounts payable 8,445 4,863
---------- ----------
Net cash provided by operating activities 144,385 133,113
---------- ----------
Cash flows from investing activities:
Additions to oil and gas properties (1,370) (1,327)
Proceeds from asset dispositions 1,472 2,981
---------- ----------
Net cash provided by investing activities 102 1,654
---------- ----------
Cash flows used in financing activities:
Cash distributions to partners (103,549) (133,968)
---------- ----------
Net increase in cash 40,938 799
Cash at beginning of period 31,689 35,943
---------- ----------
Cash at end of period $ 72,627 $ 36,742
========== ==========
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 88-C, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 88-C, L.P. (the "Partnership") is a limited partnership
organized in 1988 under the laws of the State of Delaware.
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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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
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
6
provision of $7,965 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
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $714,658 of which $706,056 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
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 5% to $215,744 for the nine
months ended September 30, 2001 as compared to $227,002 for the same period in
2000. The decrease in revenues resulted from lower average prices received for
oil and a decline in production, offset by higher average prices received for
gas and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 5,252 barrels of oil, 2,090 barrels of NGLs and 8,970 mcf of gas were
sold, or 8,837 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 5,698 barrels of oil, 2,609 barrels of NGLs and 10,687 mcf
of gas were sold, or 10,088 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 $.73, or 3%, from $28.38
for the nine months ended September 30, 2000 to $27.65 for the same period in
2001. The average price received per barrel of NGLs increased $.19, or 1%, from
$15.03 during the nine months ended September 30, 2000 to $15.22 for the same
period in 2001. The average price received per mcf of gas increased 77% from
$2.44 during the nine months ended September 30, 2000 to $4.31 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 $1,788 and $3,630 were recognized during the
nine months ended September 30, 2001 and 2000, respectively. The gain recognized
during the period ended September
7
30, 2001 was due to salvage income received on one well plugged and abandoned
during the current period. The gain recognized during the period ended September
30, 2000 was primarily due to salvage income received on one well plugged and
abandoned during the period ended 2000.
Costs and Expenses:
Total costs and expenses increased to $127,356 for the nine months ended
September 30, 2001 as compared to $102,546 for the same period in 2000, an
increase of $24,810, or 24%. 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 general and administrative expenses
("G&A").
Production costs were $92,793 for the nine months ended September 30, 2001 and
$80,121 for the same period in 2000 resulting in a $12,672 increase, or 16%. The
increase was primarily due to additional well maintenance and workover costs
incurred to stimulate well production and higher ad valorem taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
2%, from $6,810 for the nine months ended September 30, 2000 to $6,703 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 $7,965 related to its proved oil and gas properties during the nine
months ended September 30, 2001.
Depletion was $17,558 for the nine months ended September 30, 2001 as compared
to $13,743 for the same period in 2000, an increase of $3,815, or 28%. This
increase was due to a reduction in proved reserves during the period ended
September 30, 2001 due to lower commodity prices, offset by a decline in oil
production of 446 barrels for the nine months ended September 30, 2001 as
compared to the same period in 2000.
Abandoned property costs of $2,337 and $1,872 were incurred for the nine months
ended September 30, 2001 and 2000, respectively, to plug and abandon one well
during the current periods.
8
Three months ended September 30, 2001 compared with three months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 27% to $62,636 for the three
months ended September 30, 2001 as compared to $85,503 for the same period in
2000. The decrease in revenues resulted from a decline in production and lower
average prices received. For the three months ended September 30, 2001, 1,849
barrels of oil, 701 barrels of NGLs and 3,159 mcf of gas were sold, or 3,077
BOEs. For the three months ended September 30, 2000, 1,884 barrels of oil, 903
barrels of NGLs and 3,601 mcf of gas were sold, or 3,387 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 $4.98, or 16%, from
$31.26 for 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 $5.53,
or 32%, from $17.08 during the three months ended September 30, 2000 to $11.55
for the same period in 2001. The average price received per mcf of gas decreased
40% to $1.88 during the three months ended September 30, 2001 from $3.11 during
the same period in 2000.
A gain on disposition of assets of $1,617 recognized during the three months
ended September 30, 2000 was due to salvage income received on one well plugged
and abandoned during the period ended 2000.
Costs and Expenses:
Total costs and expenses increased to $51,630 for the three months ended
September 30, 2001 as compared to $36,744 for the same period in 2000, an
increase of $14,886, or 41%. This increase was due to increases in the
impairment of oil and gas properties, production costs and depletion, offset by
declines in G&A and abandoned property costs.
Production costs were $33,832 for the three months ended September 30, 2001 and
$27,815 for the same period in 2000, resulting in a $6,017 increase, or 22%. The
increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production.
During this period, G&A decreased 24%, from $2,565 for the three months ended
September 30, 2000 to $1,950 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 $7,965 related to
its proved oil and gas properties during the three months ended September 30,
2001.
9
Depletion was $7,876 for the three months ended September 30, 2001 as compared
to $4,492 for the same period in 2000, an increase of $3,384, or 75%. This
increase was attributable to a reduction in proved reserves during the period
ended September 30, 2001 due to lower commodity prices.
Abandoned property costs of $7 and $1,872 were incurred for the three months
ended September 30, 2001 and 2000, respectively, to plug and abandon one well
during the current periods.
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $11,272 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to reductions in working capital of $35,957 and G&A
expenses of $107, offset by increases in production costs of $12,672 and
abandoned property costs of $465 and a decline in oil and gas receipts of
$11,655. The decrease in oil and gas receipts resulted from a decline in oil
commodity prices of $4,158 during 2001 and a decline in production during 2001
of $27,641, offset by an increase in gas and NGL commodity prices of $20,144.
The increase in production costs was primarily due to additional well
maintenance and workover costs incurred to stimulate well production and higher
ad valorem taxes. 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 Investing Activities
The Partnership's principal 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 $1,472 and $2,981 were recognized during the
nine months ended September 30, 2001 and 2000, respectively. The proceeds
recognized during 2001 were primarily due to salvage income received on a well
plugged and abandoned during the current year. The proceeds recognized during
2000 were due to salvage income received on one well plugged and abandoned
during the period ended 2000.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $103,549, of which $1,035 was distributed to the managing general partner
and $102,514 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $133,968, of which $1,340 was
distributed to the managing general partner and $132,628 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
the proposed merger of the Partnership into Pioneer Natural Resources USA, Inc.
("Pioneer USA"). For further information, see "Proposal to acquire partnerships"
below.
10
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.
11
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY
PRODUCING PROPERTIES 88-A, L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
THIS DOCUMENT CONTAINS IMPORTANT INFORMATION SPECIFIC TO PARKER &
PARSLEY PRODUCING PROPERTIES 88-A, L.P. AND SUPPLEMENTS THE SUPPLEMENTAL
INFORMATION TO THE PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001, OF PIONEER
NATURAL RESOURCES COMPANY, A DELAWARE CORPORATION THAT WE CALL PIONEER PARENT,
AND PIONEER NATURAL RESOURCES USA, INC., A DELAWARE CORPORATION THAT WE CALL
PIONEER USA, BY WHICH PIONEER USA IS SOLICITING PROXIES TO BE VOTED AT A SPECIAL
MEETING OF THE LIMITED PARTNERS OF THE PARTNERSHIP. THE PURPOSE OF THE SPECIAL
MEETING IS FOR YOU TO VOTE UPON THE MERGER OF THE PARTNERSHIP WITH AND INTO
PIONEER USA THAT, IF COMPLETED, WILL RESULT IN YOUR RECEIVING COMMON STOCK OF
PIONEER PARENT FOR YOUR PARTNERSHIP INTERESTS.
THIS DOCUMENT CONTAINS THE PARTNERSHIP'S QUARTERLY REPORT ON FORM 10-Q,
INCLUDING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001.
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. 33-19133-A
PARKER & PARSLEY PRODUCING PROPERTIES 88-A, L.P.
-------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 75-2225758
----------------------------------------- -------------------------
(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 PRODUCING PROPERTIES 88-A, 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 PRODUCING PROPERTIES 88-A, 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 $ 343,338 $ 253,499
Accounts receivable - oil and gas sales 72,540 115,810
-------------- --------------
Total current assets 415,878 369,309
-------------- --------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 4,855,712 4,855,712
Accumulated depletion (3,793,693) (3,719,241)
-------------- --------------
Net oil and gas properties 1,062,019 1,136,471
-------------- --------------
$ 1,477,897 $ 1,505,780
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 29,420 $ 11,054
Partners' capital:
Managing general partner 14,416 14,879
Limited partners (11,222 interests) 1,434,061 1,479,847
-------------- --------------
1,448,477 1,494,726
-------------- --------------
$ 1,477,897 $ 1,505,780
============== ==============
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 PRODUCING PROPERTIES 88-A, 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 $ 160,309 $ 182,810 $ 510,321 $ 529,705
Interest 2,283 4,475 8,508 12,279
Gain on disposition of assets -- -- 6,447 9,859
---------- ---------- ---------- ----------
162,592 187,285 525,276 551,843
---------- ---------- ---------- ----------
Costs and expenses:
Oil and gas production 72,619 64,917 199,948 264,170
General and administrative 3,974 5,484 14,480 15,891
Impairment of oil and gas properties 18,255 -- 18,255 --
Depletion 19,670 19,737 56,197 49,684
Abandoned property -- -- 10,766 --
---------- ---------- ---------- ----------
114,518 90,138 299,646 329,745
---------- ---------- ---------- ----------
Net income $ 48,074 $ 97,147 $ 225,630 $ 222,098
========== ========== ========== ==========
Allocation of net income:
Managing general partner $ 480 $ 971 $ 2,256 $ 2,221
========== ========== ========== ==========
Limited partners $ 47,594 $ 96,176 $ 223,374 $ 219,877
========== ========== ========== ==========
Net income per limited
partnership interest $ 4.25 $ 8.57 $ 19.91 $ 19.59
========== ========== ========== ==========
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 PRODUCING PROPERTIES 88-A, L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
------------ ------------ ------------
Balance at January 1, 2001 $ 14,879 $ 1,479,847 $ 1,494,726
Distributions (2,719) (269,160) (271,879)
Net income 2,256 223,374 225,630
------------ ------------ ------------
Balance at September 30, 2001 $ 14,416 $ 1,434,061 $ 1,448,477
============ ============ ============
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 PRODUCING PROPERTIES 88-A, 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 $ 225,630 $ 222,098
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 18,255 --
Depletion 56,197 49,684
Gain on disposition of assets (6,447) (9,859)
Changes in assets and liabilities:
Accounts receivable 43,270 (1,287)
Accounts payable 18,366 16,675
------------ ------------
Net cash provided by operating activities 355,271 277,311
------------ ------------
Cash flows from investing activities:
Additions to oil and gas properties -- (782)
Proceeds from asset dispositions 6,447 9,859
------------ ------------
Net cash provided by investing activities 6,447 9,077
------------ ------------
Cash flows used in financing activities:
Cash distributions to partners (271,879) (339,285)
------------ ------------
Net increase (decrease) in cash 89,839 (52,897)
Cash at beginning of period 253,499 323,271
------------ ------------
Cash at end of period $ 343,338 $ 270,374
============ ============
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 PRODUCING PROPERTIES 88-A, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley Producing Properties 88-A, L.P. (the "Partnership") is a
limited partnership organized in 1988 under the laws of the State of Delaware.
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 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.
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
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
7
provision of $18,255 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
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $2,088,664 of which $2,053,405 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the 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 4% to $510,321 for the nine
months ended September 30, 2001 as compared to $529,705 for the same period in
2000. The decrease in revenues resulted from lower average prices received for
oil and a decline in production, offset by higher average prices received for
gas and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 12,433 barrels of oil, 6,103 barrels of NGLs and 26,047 mcf of gas were
sold, or 22,877 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 12,685 barrels of oil, 7,553 barrels of NGLs and 29,106 mcf
of gas were sold, or 25,089 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 $1.70, or 6%, from $28.54
for the nine months ended September 30, 2000 to $26.84 for the same period in
2001. The average price received per barrel of NGLs increased $.12, or 1%, from
$13.80 during the nine months ended September 30, 2000 to $13.92 for the same
period in 2001. The average price received per mcf of gas increased 61% from
$2.18 during the nine months ended September 30, 2000 to $3.52 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.
8
Gains on disposition of assets of $6,447 and $9,859 were recognized during the
nine months ended September 30, 2001 and 2000, respectively. The gain recognized
during the nine months ended September 30, 2001 resulted from equipment credits
received on one well that was plugged and abandoned during the current period.
Expenses incurred during the nine months ended September 30, 2001 to plug this
well were $10,766. The gain recognized during the period ended September 30,
2000 resulted from equipment credits received on one fully depleted well.
Costs and Expenses:
Total costs and expenses decreased to $299,646 for the nine months ended
September 30, 2001 as compared to $329,745 for the same period in 2000, a
decrease of $30,099, or 9%. This decrease resulted from decreases in production
costs and general and administrative expenses ("G&A"), offset by increases in
the impairment of oil and gas properties, abandoned property costs and
depletion.
Production costs were $199,948 for the nine months ended September 30, 2001 and
$264,170 for the same period in 2000 resulting in a $64,222 decrease, or 24%.
The decrease was primarily due to lower workover expenses and well maintenance
costs, offset by higher ad valorem taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
9% from $15,891 for the nine months ended September 30, 2000 to $14,480 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 lower 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 $18,255 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $56,197 for the nine months ended September 30, 2001 as compared
to $49,684 for the same period in 2000, representing an increase of $6,513, or
13%. This increase was primarily the result of a downward revision in proved
reserves during the period ended September 30, 2001 due to lower commodity
prices 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 12% to $160,309 for the three
months ended September 30, 2001 as compared to $182,810 for the same period in
2000. The decrease in revenues resulted from lower average prices received,
offset by a slight increase in production. For the three months ended September
30, 2001, 4,175 barrels of oil, 2,263 barrels of NGLs and 9,878 mcf of gas were
sold, or 8,084 BOEs. For the three months ended September 30, 2000, 4,197
barrels of oil, 2,315 barrels of NGLs and 8,704 mcf of gas were sold, or 7,963
BOEs.
The average price received per barrel of oil decreased $4.06, or 13%, from
$30.23 for the three months ended September 30, 2000 to $26.17 for the same
period in 2001. The average price received per barrel of NGLs decreased $.38, or
3%, from $13.50 during the three months ended September 30, 2000 to $13.12 for
the same period in 2001. The average price received per mcf of gas decreased 24%
from $2.84 during the three months ended September 30, 2000 to $2.16 for the
same period in 2001.
Costs and Expenses:
Total costs and expenses increased to $114,518 for the three months ended
September 30, 2001 as compared to $90,138 for the same period in 2000, an
increase of $24,380, or 27%. This increase was due to increases in the
impairment of oil and gas properties and production costs, offset by declines in
G&A and depletion.
Production costs were $72,619 for the three months ended September 30, 2001 and
$64,917 for the same period in 2000, resulting in a $7,702 increase, or 12%. The
increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production, offset by a decline in
workover expenses.
During this period, G&A decreased 28% from $5,484 for the three months ended
September 30, 2000 to $3,974 for the same period in 2001, primarily due to a
lower percentage of the managing general partner's G&A being allocated as a
result of lower oil and gas revenues.
The Partnership recognized a non-cash impairment provision of $18,255 related to
its proved oil and gas properties during the three months ended September 30,
2001.
Depletion was $19,670 for the three months ended September 30, 2001 as compared
to $19,737 for the same period in 2000, representing a decrease in depletion of
$67.
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $77,960 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to decreases in
10
production costs of $64,222 and G&A expenses of $1,411 and a reduction of
$46,248 in working capital, offset by a decrease in oil and gas sales receipts
of $23,155 and an increase in abandoned property costs of $10,766. The decrease
in production costs was primarily due to lower workover expenses and well
maintenance costs, offset by higher ad valorem taxes. 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 lower oil and
gas revenues. The decrease in oil and gas receipts resulted from the decline in
oil prices of $21,616 during 2001 and $37,714 resulting from the decline in
production during 2001 as compared to the same period in 2000, offset by an
increase in gas and NGL prices of $36,175.
Net Cash Provided by Investing Activities
The Partnership's principal investing activities during the nine months ended
September 30, 2000 were related to equipment upgrades on various oil and gas
properties.
Proceeds from disposition of assets of $6,447 and $9,859 were recognized during
the nine months ended September 30, 2001 and 2000, respectively. The proceeds
recognized during the nine months ended September 30, 2001 resulted from
equipment credits received on one well that was plugged and abandoned during the
current period. The proceeds recognized during the period ended September 30,
2000 resulted from equipment credits received 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 $271,879, of which $2,719 was distributed to the managing general partner
and $269,160 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $339,285, of which $3,393 was
distributed to the managing general partner and $335,892 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
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.
11
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 PRODUCING PROPERTIES 88-A, L.P.
(A Delaware Limited Partnership)
SIGNATURES
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 PRODUCING
PROPERTIES 88-A, L.P.
By: Pioneer Natural Resources USA, Inc.,
Managing General Partner
Dated: November 9, 2001 By: /s/ Rich Dealy
-------------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
13
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY PRIVATE INVESTMENT 88, L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker & Parsley
Private Investment 88, L.P. and supplements the supplemental information to the
proxy statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's financial statements, including
management's discussion and analysis of financial condition and results of
operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY PRIVATE INVESTMENT 88, L.P.
(A Delaware Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY PRIVATE INVESTMENT 88, L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 336,512 $ 174,638
Accounts receivable - oil and gas sales 117,161 190,189
----------- -----------
Total current assets 453,673 364,827
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 7,351,528 7,348,142
Accumulated depletion (6,235,778) (6,092,889)
----------- -----------
Net oil and gas properties 1,115,750 1,255,253
----------- -----------
$ 1,569,423 $ 1,620,080
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 48,291 $ 9,440
Partners' capital:
Managing general partner 15,376 16,271
Limited partners (249 interests) 1,505,756 1,594,369
----------- -----------
1,521,132 1,610,640
----------- -----------
$ 1,569,423 $ 1,620,080
=========== ===========
The financial information included as of September 30, 2001 has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY PRIVATE INVESTMENT 88, 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 $252,520 $345,951 $878,326 $944,374
Interest 2,196 4,322 7,789 10,324
-------- -------- -------- --------
254,716 350,273 886,115 954,698
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 133,296 103,736 368,354 315,742
General and administrative 6,313 10,378 21,958 28,331
Impairment of oil and gas properties 82,411 -- 82,411 --
Depletion 21,045 17,596 60,478 57,857
-------- -------- -------- --------
243,065 131,710 533,201 401,930
-------- -------- -------- --------
Net income $ 11,651 $218,563 $352,914 $552,768
======== ======== ======== ========
Allocation of net income:
Managing general partner $ 116 $ 2,186 $ 3,529 $ 5,528
======== ======== ======== ========
Limited partners $ 11,535 $216,377 $349,385 $547,240
======== ======== ======== ========
Net income per limited
partnership interest $ 46.32 $ 868.98 $1,403.15 $2,197.75
======== ======== ======== ========
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.
3
PARKER & PARSLEY PRIVATE INVESTMENT 88, L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 2001 $ 16,271 $ 1,594,369 $ 1,610,640
Distributions (4,424) (437,998) (442,422)
Net income 3,529 349,385 352,914
----------- ----------- -----------
Balance at September 30, 2001 $ 15,376 $ 1,505,756 $ 1,521,132
=========== =========== ===========
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 PRIVATE INVESTMENT 88, 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 $ 352,914 $ 552,768
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 82,411 --
Depletion 60,478 57,857
Changes in assets and liabilities:
Accounts receivable 73,028 (43,764)
Accounts payable 38,851 22,947
--------- ---------
Net cash provided by operating activities 607,682 589,808
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (3,386) (4,269)
Proceeds from asset dispositions -- 467
--------- ---------
Net cash used in investing activities (3,386) (3,802)
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (442,422) (586,599)
--------- ---------
Net increase (decrease) in cash 161,874 (593)
Cash at beginning of period 174,638 200,529
--------- ---------
Cash at end of period $ 336,512 $ 199,936
========= =========
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 PRIVATE INVESTMENT 88, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley Private Investment 88, L.P. (the "Partnership") was organized
in 1988 as a general partnership under the laws of the State of Texas and was
converted to a Delaware limited partnership in 1989.
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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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
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
6
provision of $82,411 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
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $3,538,899 of which $3,503,510 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
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 7% to $878,326 for the nine
months ended September 30, 2001 as compared to $944,374 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 decrease in production, offset by a
higher average price received for gas. For the nine months ended September 30,
2001, 21,853 barrels of oil, 8,166 barrels of NGLs and 43,510 mcf of gas were
sold, or 37,271 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 22,815 barrels of oil, 12,104 barrels of NGLs and 46,784 mcf
of gas were sold, or 42,716 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 $1.38, or 5%, from $28.53
for the nine months ended September 30, 2000 to $27.15 for the same period in
2001. The average price received per barrel of NGLs decreased $.51, or 3%, from
$14.65 during the nine months ended September 30, 2000 to $14.14 for the same
period in 2001. The average price received per mcf of gas increased 57% from
$2.48 during the nine months ended September 30, 2000 to $3.89 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 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.
7
Costs and Expenses:
Total costs and expenses increased to $533,201 for the nine months ended
September 30, 2001 as compared to $401,930 for the same period in 2000, an
increase of $131,271, or 33%. This increase was due to increases in the
impairment of oil and gas properties, production costs and depletion, offset by
a decline in general and administrative expenses ("G&A").
Production costs were $368,354 for the nine months ended September 30, 2001 and
$315,742 for the same period in 2000, resulting in a $52,612 increase, or 17%.
The increase was primarily the result of additional well maintenance costs
incurred to stimulate well production and higher ad valorem taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
22%, from $28,331 for the nine months ended September 30, 2000 to $21,958 for
the same period in 2001 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 $82,411 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $60,478 for the nine months ended September 30, 2001 as compared
to $57,857 for the same period in 2000, an increase of $2,621, or 5%. This
increase was due to a decline in proved reserves during the period ended
September 30, 2001 as a result of lower commodity prices, offset by a decline in
oil production of 962 barrels for the nine months ended September 30, 2001 as
compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended
September 30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 27% to $252,520 for the three
months ended September 30, 2001 as compared to $345,951 for the same period in
2000. The decrease in revenues resulted from a decline in production and lower
average prices received. For the three months ended September 30, 2001, 6,763
barrels of oil, 3,682 barrels of NGLs and 15,409 mcf of gas were sold, or 13,013
BOEs. For the three months ended
8
September 30, 2000, 7,544 barrels of oil, 4,062 barrels of NGLs and 15,885 mcf
of gas were sold, or 14,254 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
$30.52 for the three months ended September 30, 2000 to $26.26 for the same
period in 2001. The average price received per barrel of NGLs decreased $4.36,
or 27%, from $15.91 during the three months ended September 30, 2000 to $11.55
for the same period in 2001. The average price received per mcf of gas decreased
35% to $2.10 during the three months ended September 30, 2001 from $3.22 during
the same period in 2000.
Costs and Expenses:
Total costs and expenses increased to $243,065 for the three months ended
September 30, 2001 as compared to $131,710 for the same period in 2000, an
increase of $111,355, or 85%. This increase was due to increases in the
impairment of oil and gas properties, production costs and depletion, offset by
a decrease in G&A.
Production costs were $133,296 for the three months ended September 30, 2001 and
$103,736 for the same period in 2000, resulting in a $29,560 increase, or 28%.
The increase was primarily due to additional well maintenance costs incurred to
stimulate well production and higher ad valorem taxes.
During this period, G&A decreased 39%, from $10,378 for the three months ended
September 30, 2000 to $6,313 for the same period in 2001 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 $82,411 related to
its proved oil and gas properties during the three months ended September 30,
2001.
Depletion was $21,045 for the three months ended September 30, 2001 as compared
to $17,596 for the same period in 2000, an increase of $3,449, or 20%. This
increase was attributable to a decline in proved reserves during the period
ended September 30, 2001 as a result of lower commodity prices, offset by a
decline in oil production of 781 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 $17,874 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to reductions in working capital of $132,696 and G&A
expenses of $6,373, offset by an increase in production costs of $52,612 and a
decline in oil and gas receipts of $68,583. The decrease in oil and gas receipts
resulted from the decline in production of $94,567 and lower oil and NGL
commodity prices of $37,468, offset by an increase in gas commodity prices of
$63,452 during 2001 as compared to the
9
same period in 2000. The increase in production costs was primarily due to
additional well maintenance costs incurred to stimulate well production and
higher ad valorem taxes. 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 Used in Investing Activities
The Partnership's investing activities for the nine months ended September 30,
2001 and 2000 included expenditures related to equipment upgrades on several oil
and gas properties.
Proceeds from asset dispositions of $467 recognized during the nine months ended
September 30, 2000 were due to equipment credits on active properties.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $442,422, of which $4,424 was distributed to the managing general partner
and $437,998 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $586,599, of which $5,866 was
distributed to the managing general partner and $580,733 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
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.
10
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.
11
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 89-A CONV., L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 89-A Conv., L.P. and supplements the supplemental information to the
proxy statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY 89-A CONV., L.P.
(A Delaware Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY 89-A CONV., L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 87,818 $ 49,781
Accounts receivable - oil and gas sales 31,082 57,620
----------- -----------
Total current assets 118,900 107,401
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 2,091,224 2,205,981
Accumulated depletion (1,775,946) (1,860,437)
----------- -----------
Net oil and gas properties 315,278 345,544
----------- -----------
$ 434,178 $ 452,945
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 11,241 $ 4,194
Partners' capital:
Managing general partner 4,297 4,556
Limited partners (2,797 interests) 418,640 444,195
----------- -----------
422,937 448,751
----------- -----------
$ 434,178 $ 452,945
=========== ===========
The financial information included as of September 30, 2001
has been prepared by management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY 89-A 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 $ 71,559 $102,671 $264,279 272,560
Interest 585 1,149 2,234 2,874
Gain on disposition of assets 6,005 -- 9,718 2,083
-------- -------- -------- --------
78,149 103,820 276,231 277,517
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 40,238 34,716 114,282 106,525
General and administrative 2,147 3,552 8,535 8,809
Depletion 19,163 5,052 30,913 15,903
Abandoned property 3,597 -- 5,860 --
-------- -------- -------- --------
65,145 43,320 159,590 131,237
-------- -------- -------- --------
Net income $ 13,004 $ 60,500 $116,641 $146,280
======== ======== ======== ========
Allocation of net income:
Managing general partner $ 130 $ 605 $ 1,166 $ 1,463
======== ======== ======== ========
Limited partners $ 12,874 $ 59,895 $115,475 $144,817
======== ======== ======== ========
Net income per limited
partnership interest $ 4.61 $ 21.42 $ 41.29 $ 51.78
======== ======== ======== ========
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.
3
PARKER & PARSLEY 89-A CONV., L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
--------- --------- ---------
Balance at January 1, 2001 $ 4,556 $ 444,195 $ 448,751
Distributions (1,425) (141,030) (142,455)
Net income 1,166 115,475 116,641
--------- --------- ---------
Balance at September 30, 2001 $ 4,297 $ 418,640 $ 422,937
========= ========= =========
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 89-A 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 $ 116,641 $ 146,280
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 30,913 15,903
Gain on disposition of assets (9,718) (2,083)
Changes in assets and liabilities:
Accounts receivable 26,538 (10,511)
Accounts payable 11,277 6,541
--------- ---------
Net cash provided by operating activities 175,651 156,130
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (647) (2,306)
Proceeds from asset dispositions 5,488 2,083
--------- ---------
Net cash provided by (used in) investing activities 4,841 (223)
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (142,455) (160,327)
--------- ---------
Net increase (decrease) in cash 38,037 (4,420)
Cash at beginning of period 49,781 58,311
--------- ---------
Cash at end of period $ 87,818 $ 53,891
========= =========
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 89-A CONV., L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 89-A Conv., L.P. (the "Partnership") was organized in 1989 as a
general partnership under the laws of the State of Texas and was converted to a
Delaware limited partnership in 1990.
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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $938,221 of which $928,839 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
6
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 $264,279 for the nine
months ended September 30, 2001 as compared to $272,560 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 an
increase in the average price received for gas. For the nine months ended
September 30, 2001, 5,952 barrels of oil, 2,849 barrels of NGLs and 15,338 mcf
of gas were sold, or 11,357 barrel of oil equivalents ("BOEs"). For the nine
months ended September 30, 2000, 6,258 barrels of oil, 3,477 barrels of NGLs and
15,638 mcf of gas were sold, or 12,341 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 $1.21, or 4%, from $28.59
for the nine months ended September 30, 2000 to $27.38 for the same period in
2001. The average price received per barrel of NGLs decreased $1.83, or 12%,
from $14.67 during the nine months ended September 30, 2000 to $12.84 for the
same period in 2001. The average price received per mcf of gas increased 55%
from $2.73 during the nine months ended September 30, 2000 to $4.22 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 $9,718 and $2,083 were recognized during the
nine months ended September 30, 2001 and 2000, respectively. The gain recognized
during the period ended September 30, 2001 was due to $9,089 salvage income
received on two wells plugged and abandoned during the current period and $629
from equipment credits received on a fully depleted well. Abandoned property
costs of $5,860 were incurred during 2001 to plug and abandon these wells. The
gain recognized during the period ended September 30, 2000 was from equipment
credits received on one fully depleted well.
Costs and Expenses:
Total costs and expenses increased to $159,590 for the nine months ended
September 30, 2001 as compared to $131,237 for the same period in 2000, an
increase of $28,353, or 22%. 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").
7
Production costs were $114,282 for the nine months ended September 30, 2001 as
compared to $106,525 for the same period in 2000, resulting in a $7,757
increase, or 7%. This increase was primarily due to higher workover and well
maintenance costs incurred to stimulate well production and an increase in ad
valorem taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
3% from $8,809 for the nine months ended September 30, 2000 to $8,535 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.
Depletion was $30,913 for the nine months ended September 30, 2001 as compared
to $15,903 for the same period in 2000, an increase of $15,010, or 94%. This
increase was the result of a decrease in proved reserves during the period ended
September 30, 2001 due to lower commodity prices, offset by a decline in oil
production of 306 barrels for the nine months ended September 30, 2001 as
compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended
September 30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 30% to $71,559 for the three
months ended September 30, 2001 as compared to $102,671 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, 1,980
barrels of oil, 1,045 barrels of NGLs and 4,166 mcf of gas were sold, or 3,719
BOEs. For the three months ended September 30, 2000, 2,086 barrels of oil, 1,226
barrels of NGLs and 5,475 mcf of gas were sold, or 4,225 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 $4.05, or 13%, from
$30.64 for the three months ended September 30, 2000 to $26.59 for the same
period in 2001. The average price received per barrel of NGLs decreased $6.39,
or 39%, from $16.35 during the three months ended September 30, 2000 to $9.96
for the same period in 2001. The average price received per mcf of gas decreased
40% to $2.05 during the three months ended September 30, 2001 from $3.42 during
the same period in 2000.
Gain on disposition of assets of $6,005 recognized for the three months ended
September 30, 2001 was due to $5,376 in salvage income received on two wells
plugged and abandoned during the current period and $629 from equipment credits
on a fully depleted well. Abandoned property costs of $3,597 were recognized for
the three months ended September 30, 2001 to plug and abandon these wells.
8
Costs and Expenses:
Total costs and expenses increased to $65,145 for the three months ended
September 30, 2001 as compared to $43,320 for the same period in 2000, an
increase of $21,825, or 50%. This increase was due to increases in depletion,
production costs and abandoned property costs, offset by a decline in G&A.
Production costs were $40,238 for the three months ended September 30, 2001 and
$34,716 for the same period in 2000 resulting in a $5,522 increase, or 16%. This
increase was the result of additional well maintenance and workover costs
incurred to stimulate well production and an increase in ad valorem taxes.
During this period, G&A decreased 40% from $3,552 for the three months ended
September 30, 2000 to $2,147 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.
Depletion was $19,163 for the three months ended September 30, 2001 as compared
to $5,052 for the same period in 2000, an increase of $14,111, or 279%. This
increase was the result of a decrease in proved reserves during the period ended
September 30, 2001 due to lower commodity prices, offset by a decline in oil
production of 106 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 $19,521 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to decreases in G&A expenses of $274 and working capital
of $41,785, offset by a decrease in oil and gas sales receipts of $8,921 and
increases in production costs of $7,757 and abandoned property costs of $5,860.
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. The decrease in oil and gas receipts
resulted from lower average prices received for oil and NGLs during 2001 which
resulted in a $14,601 decrease and a decline in production of $17,704, offset by
a $23,384 increase resulting from higher average prices received for gas. The
increase in production costs was primarily due to additional well maintenance
and workover costs incurred to stimulate well production and higher ad valorem
taxes.
Net Cash Provided by (Used in) Investing Activities
The Partnership's principal 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 disposition of assets of $5,488 and $2,083 were recognized during
the nine months ended September 30, 2001 and 2000, respectively. The proceeds
recognized during the period in 2001 were primarily from salvage income on two
wells plugged and abandoned during the current
9
period. The proceeds recognized during the period in 2000 were due to equipment
credits received 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 $142,455, of which $1,425 was distributed to the managing general partner
and $141,030 was distributed to the limited partners. For the same period ended
September 30, 2000, cash distributions to the partners were $160,327, of which
$1,603 was distributed to the managing general partner and $158,724 was
distributed 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
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.
10
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 89-A, L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker & Parsley
89-A, L.P. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 33-26097-01
PARKER & PARSLEY 89-A, L.P.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 75-2297058
---------------------------------------- ----------------------
(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 89-A, 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 89-A, 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 $ 268,224 $ 154,704
Accounts receivable - oil and gas sales 92,470 171,226
----------- -----------
Total current assets 360,694 325,930
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 6,218,341 6,559,576
Accumulated depletion (5,280,605) (5,531,818)
----------- -----------
Net oil and gas properties 937,736 1,027,758
----------- -----------
$ 1,298,430 $ 1,353,688
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 36,074 $ 12,645
Partners' capital:
Managing general partner 12,815 13,602
Limited partners (8,317 interests) 1,249,541 1,327,441
----------- -----------
1,262,356 1,341,043
----------- -----------
$ 1,298,430 $ 1,353,688
=========== ===========
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 89-A, 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 $212,821 $305,191 $786,034 $810,322
Interest 1,791 3,498 6,817 8,795
Gain on disposition of assets 17,858 -- 28,898 6,194
-------- -------- -------- --------
232,470 308,689 821,749 825,311
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 119,647 103,256 339,498 316,752
General and administrative 6,592 10,777 25,876 27,049
Depletion 56,995 14,978 91,945 47,267
Abandoned property 10,695 -- 19,519 --
-------- -------- -------- --------
193,929 129,011 476,838 391,068
-------- -------- -------- --------
Net income $ 38,541 $179,678 $344,911 $434,243
======== ======== ======== ========
Allocation of net income:
Managing general partner $ 385 $ 1,796 $ 3,449 $ 4,342
======== ======== ======== ========
Limited partners $ 38,156 $177,882 $341,462 $429,901
======== ======== ======== ========
Net income per limited
partnership interest $ 4.59 $ 21.39 $ 41.06 $ 51.69
======== ======== ======== ========
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 89-A, L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 2001 $ 13,602 $ 1,327,441 $ 1,341,043
Distributions (4,236) (419,362) (423,598)
Net income 3,449 341,462 344,911
----------- ----------- -----------
Balance at September 30, 2001 $ 12,815 $ 1,249,541 $ 1,262,356
=========== =========== ===========
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 89-A, 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 $ 344,911 $ 434,243
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 91,945 47,267
Gain on disposition of assets (28,898) (6,194)
Changes in assets and liabilities:
Accounts receivable 78,756 (31,115)
Accounts payable 36,008 20,312
--------- ---------
Net cash provided by operating activities 522,722 464,513
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (1,923) (6,857)
Proceeds from asset dispositions 16,319 6,194
--------- ---------
Net cash provided by (used in) investing activities 14,396 (663)
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (423,598) (476,738)
--------- ---------
Net increase (decrease) in cash 113,520 (12,888)
Cash at beginning of period 154,704 180,301
--------- ---------
Cash at end of period $ 268,224 $ 167,413
========= =========
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 89-A, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 89-A, L.P. (the "Partnership") is a limited partnership
organized in 1989 under the laws of the State of Delaware.
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 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.
NOTE 3. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $2,794,725 of which $2,731,848 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
7
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 $786,034 for the nine
months ended September 30, 2001 as compared to $810,322 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, 17,700 barrels of oil, 8,481 barrels of NGLs and 45,607 mcf of gas were
sold, or 33,782 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 18,609 barrels of oil, 10,334 barrels of NGLs and 46,510 mcf
of gas were sold, or 36,695 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 $1.21, or 4%, from $28.59
for the nine months ended September 30, 2000 to $27.38 for the same period in
2001. The average price received per barrel of NGLs decreased $1.83, or 12%,
from $14.67 during the nine months ended September 30, 2000 to $12.84 for the
same period in 2001. The average price received per mcf of gas increased 55%
from $2.73 during the nine months ended September 30, 2000 to $4.22 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 $28,898 and $6,194 were recognized for the
nine months ended September 30, 2001 and 2000, respectively. The gain recognized
during the period in 2001 was due to $27,026 in salvage income from two wells
plugged and abandoned during the current period and $1,872 from equipment
credits received on a fully depleted well. The gain recognized during the period
in 2000 was from equipment credits received on one fully depleted well.
Abandoned property costs of $19,519 were incurred during the nine months ended
September 30, 2001 to plug and abandon these wells.
Costs and Expenses:
Total costs and expenses increased to $476,838 for the nine months ended
September 30, 2001 as compared to $391,068 for the same period in 2000, an
increase of $85,770, or 22%. 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").
8
Production costs were $339,498 for the nine months ended September 30, 2001 and
$316,752 for the same period in 2000 resulting in a $22,746 increase, or 7%. The
increase was due to additional well maintenance and workover costs incurred to
stimulate well production and higher ad valorem taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
4% from $27,049 for the nine months ended September 30, 2000 to $25,876 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.
Depletion was $91,945 for the nine months ended September 30, 2001 as compared
to $47,267 for the same period in 2000, representing an increase of $44,678, or
95%. This increase was the result of a reduction in proved reserves during the
period ended September 30, 2001 due to lower commodity prices, offset by a
decline in oil production of 909 barrels for the nine months ended September 30,
2001 as compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended
September 30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 30% to $212,821 for the three
months ended September 30, 2001 as compared to $305,191 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, 5,889
barrels of oil, 3,103 barrels of NGLs and 12,375 mcf of gas were sold, or 11,055
BOEs. For the three months ended September 30, 2000, 6,197 barrels of oil, 3,652
barrels of NGLs and 16,282 mcf of gas were sold, or 12,563 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 $4.05, or 13%, from
$30.64 for the three months ended September 30, 2000 to $26.59 for the same
period in 2001. The average price received per barrel of NGLs decreased $6.39,
or 39%, from $16.35 during the three months ended September 30, 2000 to $9.96
for the same period in 2001. The average price received per mcf of gas decreased
40% from $3.42 during the three months ended September 30, 2000 to $2.05 for the
same period in 2001.
Gain on disposition of assets of $17,858 recognized for the three months ended
September 30, 2001 was due to $15,986 in salvage income received on two wells
plugged and abandoned during the current period and $1,872 from equipment
credits on a fully depleted well. Abandoned property costs of $10,695 were
incurred during the three months ended September 30, 2001 to plug and abandon
these wells.
9
Costs and Expenses:
Total costs and expenses increased to $193,929 for the three months ended
September 30, 2001 as compared to $129,011 for the same period in 2000, an
increase of $64,918, or 50%. This increase was due to increases in depletion,
production costs and abandoned property costs, offset by a decline in G&A.
Production costs were $119,647 for the three months ended September 30, 2001 and
$103,256 for the same period in 2000, resulting in a $16,391 increase, or 16%.
The increase was primarily due to additional well maintenance costs incurred to
stimulate well production and higher ad valorem taxes.
During this period, G&A decreased 39% from $10,777 for the three months ended
September 30, 2000 to $6,592 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.
Depletion was $56,995 for the three months ended September 30, 2001 as compared
to $14,978 for the same period in 2000, representing an increase of $42,017, or
281%. This increase was due to a reduction in proved reserves during the period
ended September 30, 2001 as a result of lower commodity prices, offset by a
decline in oil production of 308 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 $58,209 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to decreases in G&A expenses of $1,173 and a reduction in
working capital of $125,567, offset by a decrease in oil and gas sales receipts
of $26,266 and increases in production costs of $22,746 and abandoned property
costs of $19,519. 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. The decrease in oil and
gas receipts resulted from lower average prices received for oil and NGLs during
2001 which resulted in a $41,370 decrease and a decline in production of
$52,491, offset by a $67,595 increase resulting from higher average prices
received for gas. The increase in production costs was primarily due to
additional well maintenance and workover costs incurred to stimulate well
production and higher ad valorem taxes.
Net Cash Provided by (Used in) Investing Activities
The Partnership's investing activities during the nine months ended September
30, 2001 and 2000 were related to equipment upgrades on active oil and gas
properties.
Proceeds from disposition of assets of $16,319 and $6,194 were recognized during
the nine months ended September 30, 2001 and 2000, respectively. The proceeds
recognized during the period in 2001 were primarily from salvage income on two
wells plugged and abandoned during the current
10
period. The proceeds recognized during the period in 2000 were due to equipment
credits received 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 $423,598, of which $4,236 was distributed to the managing general partner
and $419,362 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $476,738, of which $4,767 was
distributed to the managing general partner and $471,971 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
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.
11
----------
(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 89-A, L.P.
(A Delaware Limited Partnership)
SIGNATURES
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 89-A, L.P.
By: Pioneer Natural Resources USA, Inc.,
Managing General Partner
Dated: November 9, 2001 By: /s/ Rich Dealy
------------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
13
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 89-B CONV., L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 89-B Conv., L.P. and supplements the supplemental information to the
proxy statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY 89-B CONV., L.P.
(A Delaware Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY 89-B CONV., L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 191,288 $ 94,922
Accounts receivable - oil and gas sales 80,909 134,431
------------ ------------
Total current assets 272,197 229,353
------------ ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 5,318,425 5,314,971
Accumulated depletion (4,549,707) (4,443,011)
------------ ------------
Net oil and gas properties 768,718 871,960
------------ ------------
$ 1,040,915 $ 1,101,313
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 28,825 $ 11,787
Partners' capital:
Managing general partner 10,267 11,042
Limited partners (6,307 interests) 1,001,823 1,078,484
------------ ------------
1,012,090 1,089,526
------------ ------------
$ 1,040,915 $ 1,101,313
============ ============
The financial information included as of September 30, 2001 has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY 89-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 $ 168,045 $ 213,150 $ 600,262 $ 622,684
Interest 1,291 2,583 4,663 6,238
------------ ------------ ------------ ------------
169,336 215,733 604,925 628,922
------------ ------------ ------------ ------------
Costs and expenses:
Oil and gas production 92,147 82,348 266,185 246,547
General and administrative 5,041 7,314 19,118 19,912
Impairment of oil and gas properties 48,672 -- 48,672 --
Depletion 21,876 16,488 58,024 48,328
------------ ------------ ------------ ------------
167,736 106,150 391,999 314,787
------------ ------------ ------------ ------------
Net income $ 1,600 $ 109,583 $ 212,926 $ 314,135
============ ============ ============ ============
Allocation of net income:
Managing general partner $ 16 $ 1,095 $ 2,129 $ 3,141
============ ============ ============ ============
Limited partners $ 1,584 $ 108,488 $ 210,797 $ 310,994
============ ============ ============ ============
Net income per limited
partnership interest $ .25 $ 17.20 $ 33.42 $ 49.31
============ ============ ============ ============
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.
3
PARKER & PARSLEY 89-B CONV., L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
------------ ------------ ------------
Balance at January 1, 2001 $ 11,042 $ 1,078,484 $ 1,089,526
Distributions (2,904) (287,458) (290,362)
Net income 2,129 210,797 212,926
------------ ------------ ------------
Balance at September 30, 2001 $ 10,267 $ 1,001,823 $ 1,012,090
============ ============ ============
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 89-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 $ 212,926 $ 314,135
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 48,672 --
Depletion 58,024 48,328
Changes in assets and liabilities:
Accounts receivable 53,522 (23,744)
Accounts payable 17,038 13,285
------------ ------------
Net cash provided by operating activities 390,182 352,004
------------ ------------
Cash flows from investing activities:
Additions to oil and gas properties (4,622) (22,885)
Proceeds from asset dispositions 1,168 --
------------ ------------
Net cash used in investing activities (3,454) (22,885)
------------ ------------
Cash flows used in financing activities:
Cash distributions to partners (290,362) (340,500)
------------ ------------
Net increase (decrease) in cash 96,366 (11,381)
Cash at beginning of period 94,922 116,810
------------ ------------
Cash at end of period $ 191,288 $ 105,429
============ ============
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 89-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 89-B Conv., L.P. (the "Partnership") was organized as a general
partnership in 1989 under the laws of the State of Texas and was converted to a
Delaware limited partnership on May 30, 1990.
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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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
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
6
provision of $48,672 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
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $1,784,756 of which $1,761,305 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
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 4% to $600,262 for the nine
months ended September 30, 2001 as compared to $622,684 for the same period in
2000. The decrease in revenues resulted from lower average prices received for
oil and a decrease in production, offset by higher average prices received for
gas and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 13,568 barrels of oil, 6,212 barrels of NGLs and 33,698 mcf of gas were
sold, or 25,396 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 14,984 barrels of oil, 8,270 barrels of NGLs and 31,453 mcf
of gas were sold, or 28,496 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 $1.10, or 4%, from $28.36
for the nine months ended September 30, 2000 to $27.26 for the same period in
2001. The average price received per barrel of NGLs increased $.59, or 4%, from
$14.42 during the nine months ended September 30, 2000 to $15.01 for the same
period in 2001. The average price received per mcf of gas increased 63% from
$2.49 during the nine months ended September 30, 2000 to $4.07 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.
7
Costs and Expenses:
Total costs and expenses increased to $391,999 for the nine months ended
September 30, 2001 as compared to $314,787 for the same period in 2000, an
increase of $77,212, or 25%. This increase was due to increases in the
impairment of oil and gas properties, production costs and depletion, offset by
a decline in general and administrative expenses ("G&A").
Production costs were $266,185 for the nine months ended September 30, 2001 and
$246,547 for the same period in 2000, resulting in a $19,638 increase, or 8%.
This increase was due to additional well maintenance and workover costs incurred
to stimulate well production and higher ad valorem taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
4%, from $19,912 for the nine months ended September 30, 2000 to $19,118 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 $48,672 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $58,024 for the nine months ended September 30, 2001 as compared
to $48,328 for the same period in 2000, an increase of $9,696, or 20%. This
increase was due to a reduction in proved reserves during the period ended
September 30, 2001 as a result of lower commodity prices, offset by a decline in
oil production of 1,416 barrels for the nine months ended September 30, 2001 as
compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended
September 30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 21% to $168,045 for the three
months ended September 30, 2001 as compared to $213,150 for the same period in
2000. The decrease in revenues resulted from lower average prices received and a
decrease in production. For the three months
8
ended September 30, 2001, 4,396 barrels of oil, 2,459 barrels of NGLs and 10,415
mcf of gas were sold, or 8,591 BOEs. For the three months ended September 30,
2000, 4,816 barrels of oil, 2,334 barrels of NGLs and 9,552 mcf of gas were
sold, or 8,742 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 $3.95, or 13%, from
$30.31 for the three months ended September 30, 2000 to $26.36 for the same
period in 2001. The average price received per barrel of NGLs decreased $3.73,
or 24%, from $15.68 during the three months ended September 30, 2000 to $11.95
for the same period in 2001. The average price received per mcf of gas decreased
32% to $2.18 during the three months ended September 30, 2001 from $3.21 during
the same period in 2000.
Costs and Expenses:
Total costs and expenses increased to $167,736 for the three months ended
September 30, 2001 as compared to $106,150 for the same period in 2000, an
increase of $61,586, or 58%. This increase was due to increases in the
impairment of oil and gas properties, production costs and depletion, offset by
a decrease in G&A.
Production costs were $92,147 for the three months ended September 30, 2001 and
$82,348 for the same period in 2000, resulting in a $9,799 increase, or 12%. The
increase was due to higher ad valorem taxes and an increase in well maintenance
costs incurred to stimulate well production, offset by a decrease in production
taxes.
During this period, G&A decreased 31%, from $7,314 for the three months ended
September 30, 2000 to $5,041 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 $48,672 related to
its proved oil and gas properties during the three months ended September 30,
2001.
Depletion was $21,876 for the three months ended September 30, 2001 as compared
to $16,488 for the same period in 2000, an increase of $5,388, or 33%. This
increase was attributable to a decrease in proved reserves during the period
ended September 30, 2001 as a result of lower commodity prices, offset by a
decline in oil production of 420 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 $38,178 during the nine
months ended September 30, 2001 from the same period in 2000. This increase was
due to decreases of $794 in G&A expenses and $81,019 in working capital, offset
by an increase in production costs of $19,638 and a decline in oil and gas sales
receipts of $23,997. The decrease in oil and gas receipts resulted from
9
the decline in the average prices received for oil of $18,083 and $60,377
resulting from the decline in production during 2001 as compared to the same
period in 2000, offset by an increase in the average prices received for gas and
NGLs of $54,463. The increase in production costs was due to additional well
maintenance and workover costs incurred to stimulate well production and higher
ad valorem taxes. The decrease in G&A was 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 Used in Investing Activities
The Partnership's principal 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 disposition of assets of $1,168 were received during the nine
months ended September 30, 2001. The proceeds were from equipment credits
received on one active well.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $290,362, of which $2,904 was distributed to the managing general partner
and $287,458 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $340,500, of which $3,405 was
distributed to the managing general partner and $337,095 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
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.
10
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.
11
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 89-B, L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 89-B, L.P. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY 89-B, L.P.
(A Delaware Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY 89-B, L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 211,438 $ 105,641
Accounts receivable - oil and gas sales 89,053 148,020
----------- -----------
Total current assets 300,491 253,661
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 5,859,608 5,855,803
Accumulated depletion (5,012,483) (4,894,889)
----------- -----------
Net oil and gas properties 847,125 960,914
----------- -----------
$ 1,147,616 $ 1,214,575
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 31,763 $ 12,985
Partners' capital:
Managing general partner 11,399 12,256
Limited partners (6,949 interests) 1,104,454 1,189,334
----------- -----------
1,115,853 1,201,590
----------- -----------
$ 1,147,616 $ 1,214,575
=========== ===========
The financial information included as of September 30, 2001
has been prepared by management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY 89-B, 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 $185,004 $234,681 $660,944 $685,480
Interest 1,405 2,867 5,128 6,909
-------- -------- -------- --------
186,409 237,548 666,072 692,389
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 101,518 90,734 293,252 271,638
General and administrative 5,550 8,053 21,045 21,921
Impairment of oil and gas properties 53,666 -- 53,666 --
Depletion 24,105 18,158 63,928 53,235
-------- -------- -------- --------
184,839 116,945 431,891 346,794
-------- -------- -------- --------
Net income $ 1,570 $120,603 $234,181 $345,595
======== ======== ======== ========
Allocation of net income:
Managing general partner $ 16 $ 1,206 $ 2,342 $ 3,456
======== ======== ======== ========
Limited partners $ 1,554 $119,397 $231,839 $342,139
======== ======== ======== ========
Net income per limited
partnership interest $ .22 $ 17.19 $ 33.36 $ 49.24
======== ======== ======== ========
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.
3
PARKER & PARSLEY 89-B, L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 2001 $ 12,256 $ 1,189,334 $ 1,201,590
Distributions (3,199) (316,719) (319,918)
Net income 2,342 231,839 234,181
----------- ----------- -----------
Balance at September 30, 2001 $ 11,399 $ 1,104,454 $ 1,115,853
=========== =========== ===========
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 89-B, 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 $ 234,181 $ 345,595
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 53,666 --
Depletion 63,928 53,235
Changes in assets and liabilities:
Accounts receivable 58,967 (26,048)
Accounts payable 18,778 14,929
--------- ---------
Net cash provided by operating activities 429,520 387,711
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (5,092) (25,215)
Proceeds from asset dispositions 1,287 --
--------- ---------
Net cash used in investing activities (3,805) (25,215)
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (319,918) (375,160)
--------- ---------
Net increase (decrease) in cash 105,797 (12,664)
Cash at beginning of period 105,641 130,083
--------- ---------
Cash at end of period $ 211,438 $ 117,419
========= =========
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 89-B, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 89-B, L.P. (the "Partnership") is a limited partnership
organized in 1989 under the laws of the State of Delaware.
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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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
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 $53,666 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
6
NOTE 4. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $1,963,928 of which $1,924,144 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
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 4% to $660,944 for the nine
months ended September 30, 2001 as compared to $685,480 for the same period in
2000. The decrease in revenues resulted from lower average prices received for
oil and a decrease in production, offset by higher average prices received for
gas and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 14,935 barrels of oil, 6,849 barrels of NGLs and 37,107 mcf of gas were
sold, or 27,969 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 16,497 barrels of oil, 9,105 barrels of NGLs and 34,637 mcf
of gas were sold, or 31,375 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 $1.10, or 4%, from $28.36
for the nine months ended September 30, 2000 to $27.26 for the same period in
2001. The average price received per barrel of NGLs increased $.59, or 4%, from
$14.42 during the nine months ended September 30, 2000 to $15.01 for the same
period in 2001. The average price received per mcf of gas increased 63% from
$2.49 during the nine months ended September 30, 2000 to $4.07 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 those
received during the nine months ended September 30, 2001.
7
Costs and Expenses:
Total costs and expenses increased to $431,891 for the nine months ended
September 30, 2001 as compared to $346,794 for the same period in 2000, an
increase of $85,097, or 25%. This increase was due to an increase in production
costs, the impairment of oil and gas properties and depletion, offset by a
decline in general and administrative expenses ("G&A").
Production costs were $293,252 for the nine months ended September 30, 2001 and
$271,638 for the same period in 2000, resulting in a $21,614, or 8%, increase.
This increase was the result of additional well maintenance and workover costs
incurred to stimulate well production and higher ad valorem taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
4%, from $21,921 for the nine months ended September 30, 2000 to $21,045 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 $53,666 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $63,928 for the nine months ended September 30, 2001 as compared
to $53,235 for the same period in 2000, an increase of $10,693, or 20%. This
increase was due to a decrease in proved reserves during the period ended
September 30, 2001 as a result of lower commodity prices, offset by a decline in
oil production of 1,562 barrels for the nine months ended September 30, 2001 as
compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended
September 30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 21% to $185,004 for the three
months ended September 30, 2001 as compared to $234,681 for the same period in
2000. The decrease in revenues
8
resulted from a decrease in production and lower average prices received. For
the three months ended September 30, 2001, 4,840 barrels of oil, 2,708 barrels
of NGLs and 11,469 mcf of gas were sold, or 9,460 BOEs. For the three months
ended September 30, 2000, 5,299 barrels of oil, 2,567 barrels of NGLs and 10,523
mcf of gas were sold, or 9,620 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 $3.95, or 13%, from
$30.31 for the three months ended September 30, 2000 to $26.36 for the same
period in 2001. The average price received per barrel of NGLs decreased $3.73,
or 24%, from $15.68 during the three months ended September 30, 2000 to $11.95
for the same period in 2001. The average price received per mcf of gas decreased
32% to $2.18 during the three months ended September 30, 2001 from $3.21 during
the same period in 2000.
Costs and Expenses:
Total costs and expenses increased to $184,839 for the three months ended
September 30, 2001 as compared to $116,945 for the same period in 2000, an
increase of $67,894, or 58%. This increase was due to increases in production
costs, the impairment of oil and gas properties and depletion, offset by a
decrease in G&A.
Production costs were $101,518 for the three months ended September 30, 2001 and
$90,734 for the same period in 2000, resulting in a $10,784 increase, or 12%.
The increase was due to higher ad valorem taxes and an increase in well
maintenance costs incurred to stimulate well production, offset by a decrease in
production taxes.
During this period, G&A decreased 31%, from $8,053 for the three months ended
September 30, 2000 to $5,550 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 $53,666 related to
its proved oil and gas properties during the three months ended September 30,
2001.
Depletion was $24,105 for the three months ended September 30, 2001 as compared
to $18,158 for the same period in 2000, an increase of $5,947, or 33%. This
increase was attributable to a decrease in proved reserves during the period
ended September 30, 2001 as a result of lower commodity prices, offset by a
decrease in oil production of 459 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 $41,809 during the nine
months ended September 30, 2001 from the same period in 2000. This increase was
due to a decrease in G&A expenses of $876 and reductions in working capital of
$88,864, offset by a decrease in oil and gas sales receipts
9
of $26,317 and an increase in production costs of $21,614. The decrease in oil
and gas receipts resulted from the decrease in the average price received for
oil of $19,876 and $66,407 resulting from the decline in production during 2001
as compared to the same period in 2000, offset by an increase in the average
price received for gas and NGLs of $59,966. The increase in production costs was
primarily due to additional well maintenance and workover costs incurred to
stimulate well production and higher ad valorem taxes. 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 Used in Investing Activities
The Partnership's principal 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 $1,287 were received during the nine months
ended September 30, 2001 from equipment credits on one active well.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $319,918, of which $3,199 was distributed to the managing general partner
and $316,719 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $375,160, of which $3,752 was
distributed to the managing general partner and $371,408 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
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.
10
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.
11
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY
PRIVATE INVESTMENT 89, L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley Private Investment 89, L.P. and supplements the supplemental information
to the proxy statement/prospectus dated October 12, 2001, of Pioneer Natural
Resources Company, a Delaware corporation that we call Pioneer Parent, and
Pioneer Natural Resources USA, Inc., a Delaware corporation that we call Pioneer
USA, by which Pioneer USA is soliciting proxies to be voted at a special meeting
of the limited partners of the partnership. The purpose of the special meeting
is for you to vote upon the merger of the partnership with and into Pioneer USA
that, if completed, will result in your receiving common stock of Pioneer Parent
for your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY PRIVATE INVESTMENT 89, L.P.
(A Delaware Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY PRIVATE INVESTMENT 89, L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- -------------
(Unaudited)
ASSETS
Current assets:
Cash $ 176,905 $ 101,600
Accounts receivable - oil and gas sales 109,460 118,399
------------- -------------
Total current assets 286,365 219,999
------------- -------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 5,237,687 5,223,723
Accumulated depletion (4,403,143) (4,351,220)
------------- -------------
Net oil and gas properties 834,544 872,503
------------- -------------
$ 1,120,909 $ 1,092,502
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 30,277 $ 15,443
Partners' capital:
Managing general partner 12,903 12,767
Limited partners (176.5 interests) 1,077,729 1,064,292
------------- -------------
1,090,632 1,077,059
------------- -------------
$ 1,120,909 $ 1,092,502
============= =============
The financial information included as of September 30, 2001 has been prepared
by management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY PRIVATE INVESTMENT 89, 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 $ 179,915 $ 224,506 $ 632,145 $ 613,023
Interest 1,288 2,430 4,349 5,906
------------ ------------ ------------ ------------
181,203 226,936 636,494 618,929
------------ ------------ ------------ ------------
Costs and expenses:
Oil and gas production 92,862 88,476 326,233 246,879
General and administrative 5,397 8,226 20,435 19,881
Depletion 16,569 15,922 51,923 44,883
------------ ------------ ------------ ------------
114,828 112,624 398,591 311,643
------------ ------------ ------------ ------------
Net income $ 66,375 $ 114,312 $ 237,903 $ 307,286
============ ============ ============ ============
Allocation of net income:
Managing general partner $ 664 $ 1,143 $ 2,379 $ 3,073
============ ============ ============ ============
Limited partners $ 65,711 $ 113,169 $ 235,524 $ 304,213
============ ============ ============ ============
Net income per limited
partnership interest $ 372.30 $ 641.19 $ 1,334.41 $ 1,723.59
============ ============ ============ ============
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.
3
PARKER & PARSLEY PRIVATE INVESTMENT 89, L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
------------- ------------- -------------
Balance at January 1, 2001 $ 12,767 $ 1,064,292 $ 1,077,059
Distributions (2,243) (222,087) (224,330)
Net income 2,379 235,524 237,903
------------- ------------- -------------
Balance at September 30, 2001 $ 12,903 $ 1,077,729 $ 1,090,632
============= ============= =============
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 PRIVATE INVESTMENT 89, 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 $ 237,903 $ 307,286
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 51,923 44,883
Changes in assets and liabilities:
Accounts receivable 8,939 (29,988)
Accounts payable 14,834 12,939
------------- -------------
Net cash provided by operating activities 313,599 335,120
------------- -------------
Cash flows from investing activities:
Additions to oil and gas properties (14,685) (10,741)
Proceeds from asset dispositions 721 158
------------- -------------
Net cash used in investing activities (13,964) (10,583)
------------- -------------
Cash flows used in financing activities:
Cash distributions to partners (224,330) (320,734)
------------- -------------
Net increase in cash 75,305 3,803
Cash at beginning of period 101,600 105,420
------------- -------------
Cash at end of period $ 176,905 $ 109,223
============= =============
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 PRIVATE INVESTMENT 89, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley Private Investment 89, L.P. (the "Partnership") was organized
in 1989 as a general partnership under the laws of the State of Texas and was
converted to a Delaware limited partnership in 1990.
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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $2,030,049 of which $1,998,362 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
6
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 increased 3% to $632,145 for the nine
months ended September 30, 2001 as compared to $613,023 for the same period in
2000. The increase in revenues resulted from higher average prices received for
gas and an increase in production, offset by lower average prices received for
oil and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 16,643 barrels of oil, 5,776 barrels of NGLs and 29,644 mcf of gas were
sold, or 27,360 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 17,053 barrels of oil, 5,923 barrels of NGLs and 22,377 mcf
of gas were sold, or 26,706 BOEs.
The average price received per barrel of oil decreased $1.23, or 4%, from $28.02
for the nine months ended September 30, 2000 to $26.79 for the same period in
2001. The average price received per barrel of NGLs decreased $.97, or 7%, from
$13.92 during the nine months ended September 30, 2000 to $12.95 for the same
period in 2001. The average price received per mcf of gas increased 59% from
$2.36 during the nine months ended September 30, 2000 to $3.76 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.
Costs and Expenses:
Total costs and expenses increased to $398,591 for the nine months ended
September 30, 2001 as compared to $311,643 for the same period in 2000, an
increase of $86,948, or 28%. This increase was due to increases in production
costs, general and administrative expenses ("G&A") and depletion.
Production costs were $326,233 for the nine months ended September 30, 2001 and
$246,879 for the same period in 2000, resulting in a $79,354 increase, or 32%.
The increase was attributable to additional workover and well maintenance costs
incurred to stimulate well production and higher ad valorem taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A increased
3%, from $19,881 for the nine months ended September 30, 2000 to $20,435 for the
same period in 2001, primarily due to a higher percentage of the managing
general partner's G&A being allocated (limited to 3% of oil and gas revenues) as
a result of increased oil and gas revenues.
7
Depletion was $51,923 for the nine months ended September 30, 2001 as compared
to $44,883 for the same period in 2000, an increase of $7,040, or 16%. This
increase was primarily due to a reduction in proved reserves due to lower
commodity prices during the period ended September 30, 2001 as compared to the
same period in 2000.
Three months ended September 30, 2001 compared with three months ended
September 30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 20% to $179,915 for the three
months ended September 30, 2001 as compared to $224,506 for the same period in
2000. The decrease in revenues resulted from lower average prices received and a
decrease in production. For the three months ended September 30, 2001, 5,416
barrels of oil, 2,309 barrels of NGLs and 8,456 mcf of gas were sold, or 9,134
BOEs. For the three months ended September 30, 2000, 5,454 barrels of oil, 2,303
barrels of NGLs and 9,053 mcf of gas were sold, or 9,266 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 $3.98, or 13%, from
$30.05 for the three months ended September 30, 2000 to $26.07 for the same
period in 2001. The average price received per barrel of NGLs decreased $4.76,
or 32%, from $14.78 during the three months ended September 30, 2000 to $10.02
for the same period in 2001. The average price received per mcf of gas decreased
37% to $1.84 during the three months ended September 30, 2001 from $2.94 during
the same period in 2000.
Costs and Expenses:
Total costs and expenses increased to $114,828 for the three months ended
September 30, 2001 as compared to $112,624 for the same period in 2000, an
increase of $2,204, or 2%. This increase was due to increases in production
costs and depletion, offset by a decline in G&A.
Production costs were $92,862 for the three months ended September 30, 2001 and
$88,476 for the same period in 2000, resulting in a $4,386 increase, or 5%. The
increase was primarily due to higher ad valorem taxes.
During this period, G&A decreased 34%, from $8,226 for the three months ended
September 30, 2000 to $5,397 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.
Depletion was $16,569 for the three months ended September 30, 2001 as compared
to $15,922 for the same period in 2000, an increase of $647, or 4%. This
increase was primarily attributable to a reduction in proved reserves due to
lower commodity prices during the period ended September 30, 2001 as compared to
the same period in 2000.
8
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased $21,521 during the nine
months ended September 30, 2001 from the same period in 2000. This decrease was
due to increases in production costs of $79,354 and G&A expenses of $554, offset
by an increase in oil and gas receipts of $17,565 and a reduction in working
capital of $40,822. The increase in oil and gas receipts resulted from the
increase in gas commodity prices during 2001 which contributed an additional
$31,437 to oil and gas receipts and $14,439 resulting from an increase in
production during 2001 as compared to the same period in 2000, offset by a
decline in oil and NGL commodity prices of $28,311. The increase in production
costs was primarily due to additional workover and well maintenance costs
incurred to stimulate well production and higher ad valorem taxes. The increase
in G&A was primarily due to a higher percentage of the managing general
partner's G&A being allocated (limited to 3% of oil and gas revenues) as a
result of increased oil and gas revenues.
Net Cash Used in Investing Activities
The Partnership's investing activities included expenditures related to
equipment upgrades on various oil and gas properties for the nine months ended
September 30, 2001 and 2000.
Proceeds from asset dispositions of $721 and $158 for the nine months ended
September 30, 2001 and 2000, respectively, were due to equipment credits
received on active wells.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $224,330, of which $2,243 was distributed to the managing general partner
and $222,087 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $320,734, of which $3,207 was
distributed to the managing general partner and $317,527 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
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
9
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.
10
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 90-A CONV., L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 90-A Conv., L.P. and supplements the supplemental information to the
proxy statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY 90-A CONV., L.P.
(A Delaware Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY 90-A CONV., L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- -------------
(Unaudited)
ASSETS
Current assets:
Cash $ 68,855 $ 30,771
Accounts receivable - oil and gas sales 26,523 42,233
------------- -------------
Total current assets 95,378 73,004
------------- -------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 1,762,513 1,761,261
Accumulated depletion (1,410,862) (1,390,348)
------------- -------------
Net oil and gas properties 351,651 370,913
------------- -------------
$ 447,029 $ 443,917
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 9,934 $ 5,524
Partners' capital:
Managing general partner 4,399 4,412
Limited partners (2,359 interests) 432,696 433,981
------------- -------------
437,095 438,393
------------- -------------
$ 447,029 $ 443,917
============= =============
The financial information included as of September 30, 2001 has been prepared
by management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY 90-A 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 $ 53,709 $ 76,703 $ 200,918 $ 202,184
Interest 468 883 1,623 2,157
Gain on disposition of assets -- -- -- 3,262
------------ ------------ ------------ ------------
54,177 77,586 202,541 207,603
------------ ------------ ------------ ------------
Costs and expenses:
Oil and gas production 27,493 26,269 84,692 81,684
General and administrative 1,753 2,678 6,669 6,570
Depletion 7,269 7,796 20,514 20,225
------------ ------------ ------------ ------------
36,515 36,743 111,875 108,479
------------ ------------ ------------ ------------
Net income $ 17,662 $ 40,843 $ 90,666 $ 99,124
============ ============ ============ ============
Allocation of net income:
Managing general partner $ 177 $ 408 $ 907 $ 991
============ ============ ============ ============
Limited partners $ 17,485 $ 40,435 $ 89,759 $ 98,133
============ ============ ============ ============
Net income per limited
partnership interest $ 7.41 $ 17.14 $ 38.05 $ 41.60
============ ============ ============ ============
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.
3
PARKER & PARSLEY 90-A CONV., L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
------------ ------------ ------------
Balance at January 1, 2001 $ 4,412 $ 433,981 $ 438,393
Distributions (920) (91,044) (91,964)
Net income 907 89,759 90,666
------------ ------------ ------------
Balance at September 30, 2001 $ 4,399 $ 432,696 $ 437,095
============ ============ ============
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-A 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 $ 90,666 $ 99,124
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 20,514 20,225
Gain on disposition of assets -- (3,262)
Changes in assets and liabilities:
Accounts receivable 15,710 (13,147)
Accounts payable 4,410 3,057
------------ ------------
Net cash provided by operating activities 131,300 105,997
------------ ------------
Cash flows from investing activities:
Additions to oil and gas properties (1,252) (2,283)
Proceeds from asset dispositions -- 3,262
------------ ------------
Net cash provided by (used in) investing activities (1,252) 979
------------ ------------
Cash flows used in financing activities:
Cash distributions to partners (91,964) (106,403)
------------ ------------
Net increase in cash 38,084 573
Cash at beginning of period 30,771 41,094
------------ ------------
Cash at end of period $ 68,855 $ 41,667
============ ============
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-A 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-A Conv., L.P. (the "Partnership") was organized in 1990 as a
general partnership under the laws of the State of Texas and was converted to a
Delaware limited partnership in 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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $592,956 of which $583,543 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
6
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 1% to $200,918 for the nine
months ended September 30, 2001 as compared to $202,184 for the same period in
2000. The decrease in revenues resulted from lower average prices received for
oil and a decline in production, offset by higher average prices received for
gas and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 4,444 barrels of oil, 2,149 barrels of NGLs and 11,496 mcf of gas were
sold, or 8,509 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 4,750 barrels of oil, 2,753 barrels of NGLs and 10,491 mcf
of gas were sold, or 9,252 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 $.96, or 3%, from $28.43
for the nine months ended September 30, 2000 to $27.47 for the same period in
2001. The average price received per barrel of NGLs increased slightly from
$14.53 during the nine months ended September 30, 2000 to $14.58 for the same
period in 2001. The average price received per mcf of gas increased 59% from
$2.59 during the nine months ended September 30, 2000 to $4.13 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.
Gain on disposition of assets of $3,262 was recognized during the nine months
ended September 30, 2000 resulting from equipment credits received on one fully
depleted well.
Costs and Expenses:
Total costs and expenses increased to $111,875 for the nine months ended
September 30, 2001 as compared to $108,479 for the same period in 2000, an
increase of $3,396, or 3%. This increase was due to increases in production
costs, depletion and general and administrative expenses ("G&A").
Production costs were $84,692 for the nine months ended September 30, 2001 and
$81,684 for the same period in 2000 resulting in a $3,008 increase, or 4%. The
increase was due to higher ad valorem taxes, offset by a decrease in workover
costs.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A increased
2% from $6,570 for the nine months ended September 30, 2000 to $6,669 for the
same period in 2001.
7
Depletion was $20,514 for the nine months ended September 30, 2001 as compared
to $20,225 for the same period in 2000, an increase of $289, or 1%. This
increase was primarily due to a decrease in proved reserves during the period
ended September 30, 2001 due to lower commodity prices, offset by a decline in
oil production of 306 barrels for the nine months ended September 30, 2001 as
compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 30% to $53,709 for the three
months ended September 30, 2001 as compared to $76,703 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, 1,395
barrels of oil, 867 barrels of NGLs and 3,341 mcf of gas were sold, or 2,819
BOEs. For the three months ended September 30, 2000, 1,645 barrels of oil, 900
barrels of NGLs and 3,589 mcf of gas were sold, or 3,143 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 $3.68, or 12%, from
$30.25 for the three months ended September 30, 2000 to $26.57 for the same
period in 2001. The average price received per barrel of NGLs decreased $5.29,
or 32%, from $16.51 during the three months ended September 30, 2000 to $11.22
for the same period in 2001. The average price received per mcf of gas decreased
38% to $2.06 during the three months ended September 30, 2001 from $3.34 during
the same period in 2000.
Costs and Expenses:
Total costs and expenses decreased to $36,515 for the three months ended
September 30, 2001 as compared to $36,743 for the same period in 2000, a
decrease of $228, or 1%. This decrease was due to declines in G&A and depletion,
offset by an increase in production costs.
Production costs were $27,493 for the three months ended September 30, 2001 and
$26,269 for the same period in 2000, resulting in a $1,224 increase, or 5%. The
increase was due to higher ad valorem taxes, offset by decreases in production
taxes and well maintenance costs.
During this period, G&A decreased 35%, from $2,678 for the three months ended
September 30, 2000 to $1,753 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.
Depletion was $7,269 for the three months ended September 30, 2001 as compared
to $7,796 for the same period in 2000, a decrease of $527, or 7%. This decrease
was attributable to a decline in oil production of 250 barrels for the three
months ended September 30, 2001 as compared to the same period in 2000.
8
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $25,303 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to a reduction of $30,210 in working capital, offset by
increases in production costs of $3,008 and G&A expenses of $99 and a reduction
in oil and gas sales receipts of $1,800. The decrease in oil and gas receipts
resulted from declines of $5,093 in oil prices and $13,066 in production, offset
by an increase of $16,359 in gas and NGL prices during 2001 as compared to the
same period in 2000. The increase in production costs was primarily due to
increased ad valorem, offset by a decrease in workover costs.
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 of $3,262 recognized during the nine months ended September 30, 2000
were from equipment credits 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 $91,964, of which $920 was distributed to the managing general partner and
$91,044 to the limited partners. For the same period ended September 30, 2000,
cash distributions to the partners were $106,403, of which $1,064 was
distributed to the managing general partner and $105,339 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
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.
9
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.
10
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 90-A, L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 90-A, L.P. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 33-26097-05
PARKER & PARSLEY 90-A, L.P.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 75-2329245
------------------------------- ----------------------
(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-A, 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..................................................... 11
Signatures........................................................................... 12
2
PARKER & PARSLEY 90-A, 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 $ 203,050 $ 92,685
Accounts receivable - oil and gas sales 76,688 122,067
------------- -------------
Total current assets 279,738 214,752
------------- -------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 5,088,799 5,085,185
Accumulated depletion (4,073,625) (4,014,368)
------------- -------------
Net oil and gas properties 1,015,174 1,070,817
------------- -------------
$ 1,294,912 $ 1,285,569
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 28,897 $ 15,770
Partners' capital:
Managing general partner 12,741 12,779
Limited partners (6,811 interests) 1,253,274 1,257,020
------------- -------------
1,266,015 1,269,799
------------- -------------
$ 1,294,912 $ 1,285,569
============= =============
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-A, 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 $ 155,153 $ 221,255 $ 580,050 $ 583,512
Interest 1,380 2,604 4,789 6,362
Gain on disposition of assets -- -- -- 9,419
------------ ------------ ------------ ------------
156,533 223,859 584,839 599,293
------------ ------------ ------------ ------------
Costs and expenses:
Oil and gas production 79,369 75,837 244,499 235,807
General and administrative 4,959 7,896 19,344 19,634
Depletion 21,000 22,443 59,257 58,406
------------ ------------ ------------ ------------
105,328 106,176 323,100 313,847
------------ ------------ ------------ ------------
Net income $ 51,205 $ 117,683 $ 261,739 $ 285,446
============ ============ ============ ============
Allocation of net income:
Managing general partner $ 512 $ 1,176 $ 2,617 $ 2,854
============ ============ ============ ============
Limited partners $ 50,693 $ 116,507 $ 259,122 $ 282,592
============ ============ ============ ============
Net income per limited
partnership interest $ 7.44 $ 17.11 $ 38.04 $ 41.49
============ ============ ============ ============
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-A, L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
------------ ------------ ------------
Balance at January 1, 2001 $ 12,779 $ 1,257,020 $ 1,269,799
Distributions (2,655) (262,868) (265,523)
Net income 2,617 259,122 261,739
------------ ------------ ------------
Balance at September 30, 2001 $ 12,741 $ 1,253,274 $ 1,266,015
============ ============ ============
The financial information included herein has been prepared by managing general
partner without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
5
PARKER & PARSLEY 90-A, 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 $ 261,739 $ 285,446
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 59,257 58,406
Gain on disposition of assets -- (9,419)
Changes in assets and liabilities:
Accounts receivable 45,379 (37,754)
Accounts payable 13,127 9,629
------------ ------------
Net cash provided by operating activities 379,502 306,308
------------ ------------
Cash flows from investing activities:
Additions to oil and gas properties (3,614) (6,591)
Proceeds from asset dispositions -- 9,419
------------ ------------
Net cash provided by (used in) investing activities (3,614) 2,828
------------ ------------
Cash flows used in financing activities:
Cash distributions to partners (265,523) (307,211)
------------ ------------
Net increase in cash 110,365 1,925
Cash at beginning of period 92,685 122,649
------------ ------------
Cash at end of period $ 203,050 $ 124,574
============ ============
The financial information included herein has been prepared by managing general
partner without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
6
PARKER & PARSLEY 90-A, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 90-A, L.P. (the "Partnership") is a limited partnership
organized in 1990 under the laws of the State of Delaware.
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 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.
NOTE 3. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $1,716,195 of which $1,662,363 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
7
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 1% to $580,050 for the nine
months ended September 30, 2001 as compared to $583,512 for the same period in
2000. The decrease in revenues resulted from lower average prices received for
oil and a decline in production, offset by higher average prices received for
gas and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 12,827 barrels of oil, 6,212 barrels of NGLs and 33,199 mcf of gas were
sold, or 24,572 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 13,714 barrels of oil, 7,938 barrels of NGLs and 30,270 mcf
of gas were sold, or 26,697 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 $.96, or 3%, from $28.43
for the nine months ended September 30, 2000 to $27.47 for the same period in
2001. The average price received per barrel of NGLs increased slightly from
$14.53 during the nine months ended September 30, 2000 to $14.58 for the same
period in 2001. The average price received per mcf of gas increased 59% from
$2.59 during the nine months ended September 30, 2000 to $4.13 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.
Gain on disposition of assets of $9,419 was recognized during the nine months
ended September 30, 2000 resulting from equipment credits received on one well.
Costs and Expenses:
Total costs and expenses increased to $323,100 for the nine months ended
September 30, 2001 as compared to $313,847 for the same period in 2000, an
increase of $9,253, or 3%. This increase was due to increases in production
costs and depletion, offset by a decline in general and administrative expenses
("G&A").
Production costs were $244,499 for the nine months ended September 30, 2001 and
$235,807 for the same period in 2000, resulting in an $8,692 increase, or 4%.
The increase was primarily due to higher ad valorem taxes, offset by a decline
in workover costs.
8
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
1% from $19,634 for the nine months ended September 30, 2000 to $19,344 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.
Depletion was $59,257 for the nine months ended September 30, 2001 as compared
to $58,406 for the same period in 2000, an increase of $851, or 1%. This
increase was the result of a reduction in proved reserves during the period
ended September 30, 2001 due to lower commodity prices, offset by a decline in
oil production of 887 barrels for the nine months ended September 30, 2001 as
compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 30% to $155,153 for the three
months ended September 30, 2001 as compared to $221,255 for the same period in
2000. The decrease in revenues resulted from lower average prices received and a
decrease in production. For the three months ended September 30, 2001, 4,024
barrels of oil, 2,522 barrels of NGLs and 9,660 mcf of gas were sold, or 8,156
BOEs. For the three months ended September 30, 2000, 4,749 barrels of oil, 2,600
barrels of NGLs and 10,373 mcf of gas were sold, or 9,078 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 $3.68, or 12%, from
$30.25 for the three months ended September 30, 2000 to $26.57 for the same
period in 2001. The average price received per barrel of NGLs decreased $5.29,
or 32%, from $16.51 during the three months ended September 30, 2000 to $11.22
for the same period in 2001. The average price received per mcf of gas decreased
38% from $3.34 during the three months ended September 30, 2000 to $2.06 for the
same period in 2001.
Costs and Expenses:
Total costs and expenses decreased to $105,328 for the three months ended
September 30, 2001 as compared to $106,176 for the same period in 2000, a
decrease of $848, or 1%. This decrease was due to declines in G&A and depletion,
offset by an increase in production costs.
Production costs were $79,369 for the three months ended September 30, 2001 and
$75,837 for the same period in 2000 resulting in a $3,532 increase, or 5%. The
increase was primarily due to higher ad valorem taxes, offset by a decrease in
production taxes and well maintenance costs.
During this period, G&A decreased 37% from $7,896 for the three months ended
September 30, 2000 to $4,959 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.
9
Depletion was $21,000 for the three months ended September 30, 2001 as compared
to $22,443 for the same period in 2000, representing a decrease of $1,443, or
6%. This decrease was attributable to a decline in oil production of 725 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 $73,194 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to reductions of $86,631 in working capital and $290 in
G&A expense, offset by an increase in production costs of $8,692 and a reduction
in oil and gas sales receipts of $5,035. The decrease in oil and gas receipts
resulted from the decrease of $14,617 in oil prices and a decline in production
of $37,433, offset by an increase of $47,015 in gas and NGL prices during 2001
as compared to the same period in 2000. The increase in production costs was
primarily due to higher ad valorem taxes, offset by a decline in workover costs.
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 were for expenditures related to equipment upgrades on various
oil and gas properties.
Proceeds of $9,419 were recognized during the nine months ended September 30,
2000 from equipment credits on one well.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $265,523, of which $2,655 was distributed to the managing general partner
and $262,868 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $307,211, of which $3,072 was
distributed to the managing general partner and $304,139 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
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
10
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
11
PARKER & PARSLEY 90-A, L.P.
(A Delaware Limited Partnership)
SIGNATURES
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-A, L.P.
By: Pioneer Natural Resources USA, Inc.,
Managing General Partner
Dated: November 9, 2001 By: /s/ Rich Dealy
--------------------------------------
Rich Dealy, Vice President and
Chief Accounting Officer
12
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 90-B CONV., L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 90-B Conv., L.P. and supplements the supplemental information to the
proxy statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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
exist; therefore, the Partnership adjusted the carrying amount of those oil and
gas properties to their fair value as
7
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
from one well plugged and abandoned in the current
8
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
the proposed merger of the Partnership into
11
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)
SIGNATURES
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
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 90-B, L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 90-B, L.P. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 33-26097-07
PARKER & PARSLEY 90-B, L.P.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 75-2329287
------------------------------- ---------------------
(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, 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, 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 $ 798,150 $ 364,895
Accounts receivable - oil and gas sales 393,565 568,283
------------- -------------
Total current assets 1,191,715 933,178
------------- -------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 25,946,724 26,110,930
Accumulated depletion (21,988,768) (21,899,717)
------------- -------------
Net oil and gas properties 3,957,956 4,211,213
------------- -------------
$ 5,149,671 $ 5,144,391
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 137,433 $ 42,091
Partners' capital:
Managing general partner 50,126 51,027
Limited partners (32,264 interests) 4,962,112 5,051,273
------------- -------------
5,012,238 5,102,300
------------- -------------
$ 5,149,671 $ 5,144,391
============= =============
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, 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 $ 814,193 $ 1,098,786 $ 2,883,717 $ 2,962,304
Interest 5,341 9,281 19,499 22,423
Gain on disposition of assets 11,959 -- 20,242 5,487
------------ ------------ ------------ ------------
831,493 1,108,067 2,923,458 2,990,214
------------ ------------ ------------ ------------
Costs and expenses:
Oil and gas production 456,072 368,259 1,221,395 1,120,284
General and administrative 22,471 37,886 84,405 96,797
Impairment of oil and gas properties 30,575 -- 30,575 --
Depletion 85,177 67,785 232,270 210,132
Abandoned property 213 -- 8,509 --
------------ ------------ ------------ ------------
594,508 473,930 1,577,154 1,427,213
------------ ------------ ------------ ------------
Net income $ 236,985 $ 634,137 $ 1,346,304 $ 1,563,001
============ ============ ============ ============
Allocation of net income:
Managing general partner $ 2,370 $ 6,341 $ 13,463 $ 15,630
============ ============ ============ ============
Limited partners $ 234,615 $ 627,796 $ 1,332,841 $ 1,547,371
============ ============ ============ ============
Net income per limited
partnership interest $ 7.27 $ 19.46 $ 41.31 $ 47.96
============ ============ ============ ============
The financial information included herein has been prepared by 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, L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 2001 $ 51,027 $ 5,051,273 $ 5,102,300
Distributions (14,364) (1,422,002) (1,436,366)
Net income 13,463 1,332,841 1,346,304
----------- ----------- -----------
Balance at September 30, 2001 $ 50,126 $ 4,962,112 $ 5,012,238
=========== =========== ===========
The financial information included herein has been prepared by 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, 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 $ 1,346,304 $ 1,563,001
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 30,575 --
Depletion 232,270 210,132
Gain on disposition of assets (20,242) (5,487)
Changes in assets and liabilities:
Accounts receivable 174,718 (98,986)
Accounts payable 95,342 54,488
------------ ------------
Net cash provided by operating activities 1,858,967 1,723,148
------------ ------------
Cash flows from investing activities:
Additions to oil and gas properties (9,898) (38,547)
Proceeds from asset dispositions 20,552 5,487
------------ ------------
Net cash provided by (used in) investing activities 10,654 (33,060)
------------ ------------
Cash flows used in financing activities:
Cash distributions to partners (1,436,366) (1,619,198)
------------ ------------
Net increase in cash 433,255 70,890
Cash at beginning of period 364,895 311,017
------------ ------------
Cash at end of period $ 798,150 $ 381,907
============ ============
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, 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, L.P. (the "Partnership") is a limited partnership
organized in 1990 under the laws of the State of Delaware.
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 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.
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
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
7
risks involved in the industry. As a result, the Partnership recognized a
non-cash impairment provision of $30,575 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 $8,900,613 of which $8,788,939 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 $2,883,717 for the nine
months ended September 30, 2001 as compared to $2,962,304 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, 69,840 barrels of oil, 27,890 barrels of NGLs and 140,294 mcf of gas were
sold, or 121,112 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 73,699 barrels of oil, 35,181 barrels of NGLs and 135,699
mcf of gas were sold, or 131,497 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 $20,242 and $5,487 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 $19,074 salvage income
from one well plugged and abandoned in the current period and $1,168 from
equipment credits received on one fully depleted well. The gain recognized
8
during the period ended September 30, 2000 was derived from the sale of
equipment on one fully depleted well. Abandoned property costs of $8,509 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 $1,577,154 for the nine months ended
September 30, 2001 as compared to $1,427,213 for the same period in 2000, an
increase of $149,941, 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 $1,221,395 for the nine months ended September 30, 2001
and $1,120,284 for the same period in 2000, resulting in an increase of
$101,111, 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 $96,797 for the nine months ended September 30, 2000 to $84,405 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 $30,575 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $232,270 for the nine months ended September 30, 2001 as compared
to $210,132 for the same period in 2000, representing an increase of $22,138, or
11%. This increase was primarily due to a decline 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 by a decrease in oil production of 3,859 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 $814,193 for the three
months ended September 30, 2001 as compared to $1,098,786 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, 22,788
barrels of oil, 10,478 barrels of NGLs and 44,376 mcf of gas were sold, or
40,662 BOEs. For the three months ended September 30, 2000, 25,000 barrels of
oil, 11,842 barrels of NGLs and 46,163 mcf of gas were sold, or 44,536 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 for 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 $11,959 recognized during the three months
ended September 30, 2001 was due to $10,791 salvage income from one well plugged
and abandoned in the current period and $1,168 from equipment credits received
on one fully depleted well. Abandoned property costs of $213 were incurred
during the three months ended September 30, 2001 to plug this well.
Costs and Expenses:
Total costs and expenses increased to $594,508 for the three months ended
September 30, 2001 as compared to $473,930 for the same period in 2000, an
increase of $120,578, 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 $456,072 for the three months ended September 30, 2001 and
$368,259 for the same period in 2000 resulting in an $87,813 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 $37,886 for the three months ended
September 30, 2000 to $22,471 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 $30,575 related to
its proved oil and gas properties for the three months ended September 30, 2001.
10
Depletion was $85,177 for the three months ended September 30, 2001 as compared
to $67,785 for the same period in 2000, representing an increase of $17,392, 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 by a decrease in oil production of 2,212 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 $135,819 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to reductions of $314,558 in working capital and $12,392
in G&A expenses, offset by increases in production costs of $101,111 and
abandoned property costs of $8,509 and a decline in oil and gas sales receipts
of $81,511. The decrease in oil and gas receipts resulted from the decline in
oil and NGL prices during 2001 which resulted in a $90,026 decline to oil and
gas receipts and $192,845 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 $201,360 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 $20,552 and $5,487 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 $1,436,366, of which $14,364 was distributed to the managing general
partner and $1,422,002 to the limited partners. For the same period ended
September 30, 2000, cash distributions to the partners were $1,619,198, of which
$16,192 was distributed to the managing general partner and $1,603,006 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
the proposed merger of the Partnership into
11
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, L.P.
(A Delaware Limited Partnership)
SIGNATURES
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, 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
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 90-C CONV., L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 90-C Conv., L.P. and supplements the supplemental information to the
proxy statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 33-26097-10
PARKER & PARSLEY 90-C CONV., L.P.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 75-2347264
------------------------------- ----------------------
(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-C 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-C 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 $ 219,883 $ 106,593
Accounts receivable - oil and gas sales 66,471 119,396
------------- -------------
Total current assets 286,354 225,989
------------- -------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 5,801,749 5,798,493
Accumulated depletion (5,051,593) (5,000,618)
------------- -------------
Net oil and gas properties 750,156 797,875
------------- -------------
$ 1,036,510 $ 1,023,864
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 34,540 $ 14,074
Partners' capital:
Managing general partner 9,989 10,067
Limited partners (7,531 interests) 991,981 999,723
------------- -------------
1,001,970 1,009,790
------------- -------------
$ 1,036,510 $ 1,023,864
============= =============
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-C 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 $ 175,857 $ 256,283 $ 619,975 $ 671,181
Interest 1,352 2,546 4,764 5,989
------------ ------------ ------------ ------------
177,209 258,829 624,739 677,170
------------ ------------ ------------ ------------
Costs and expenses:
Oil and gas production 91,284 84,096 284,567 245,244
General and administrative 5,380 8,742 20,059 21,832
Impairment of oil and gas properties 8,163 -- 8,163 --
Depletion 14,944 12,341 42,812 38,657
------------ ------------ ------------ ------------
119,771 105,179 355,601 305,733
------------ ------------ ------------ ------------
Net income $ 57,438 $ 153,650 $ 269,138 $ 371,437
============ ============ ============ ============
Allocation of net income:
Managing general partner $ 575 $ 1,536 $ 2,692 $ 3,714
============ ============ ============ ============
Limited partners $ 56,863 $ 152,114 $ 266,446 $ 367,723
============ ============ ============ ============
Net income per limited
partnership interest $ 7.55 $ 20.20 $ 35.38 $ 48.83
============ ============ ============ ============
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-C CONV., L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
------------ ------------ ------------
Balance at January 1, 2001 $ 10,067 $ 999,723 $ 1,009,790
Distributions (2,770) (274,188) (276,958)
Net income 2,692 266,446 269,138
------------ ------------ ------------
Balance at September 30, 2001 $ 9,989 $ 991,981 $ 1,001,970
============ ============ ============
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-C 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 $ 269,138 $ 371,437
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 8,163 --
Depletion 42,812 38,657
Changes in assets and liabilities:
Accounts receivable 52,925 (31,185)
Accounts payable 20,466 13,580
------------ ------------
Net cash provided by operating activities 393,504 392,489
------------ ------------
Cash flows used in investing activities:
Additions to oil and gas properties (3,256) (15,801)
Cash flows used in financing activities:
Cash distributions to partners (276,958) (361,535)
------------ ------------
Net increase in cash 113,290 15,153
Cash at beginning of period 106,593 107,295
------------ ------------
Cash at end of period $ 219,883 $ 122,448
============ ============
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-C 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-C 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 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.
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
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
7
provision of $8,163 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
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $1,884,667 of which $1,858,388 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the 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 8% to $619,975 for the nine
months ended September 30, 2001 as compared to $671,181 for the same period in
2000. The decrease in revenues resulted from a decrease in production and lower
average prices received for oil and natural gas liquids ("NGLs"), offset by
higher average prices received for gas. For the nine months ended September 30,
2001, 16,610 barrels of oil, 4,687 barrels of NGLs and 25,888 mcf of gas were
sold, or 25,612 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 17,723 barrels of oil, 7,280 barrels of NGLs and 25,305 mcf
of gas were sold, or 29,221 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 $1.23, or 4%, from $28.39
for the nine months ended September 30, 2000 to $27.16 for the same period in
2001. The average price received per barrel of NGLs decreased $.31, or 2%, from
$14.08 during the nine months ended September 30, 2000 to $13.77 for the same
period in 2001. The average price received per mcf of gas increased 55% from
$2.59 during the nine months ended September 30, 2000 to $4.02 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.
8
Costs and Expenses:
Total costs and expenses increased to $355,601 for the nine months ended
September 30, 2001 as compared to $305,733 for the same period in 2000, an
increase of $49,868, or 16%. This increase was due to increases in production
costs, the impairment of oil and gas properties and depletion, offset by a
decline in general and administrative expenses ("G&A").
Production costs were $284,567 for the nine months ended September 30, 2001 and
$245,244 for the same period in 2000, resulting in an increase of $39,323, or
16%. The increase was primarily due to additional well maintenance and workover
costs incurred to stimulate production and higher ad valorem taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
8% from $21,832 for the nine months ended September 30, 2000 to $20,059 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 $8,163 related to its proved oil and gas properties during the nine
months ended September 30, 2001.
Depletion was $42,812 for the nine months ended September 30, 2001 as compared
to $38,657 for the same period in 2000, representing an increase of $4,155, or
11%. This increase was the result of a reduction in proved reserves during the
period ended September 30, 2001 due to lower commodity prices, offset by a
decrease in oil production of 1,113 barrels for the nine months ended September
30, 2001 as compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 31% to $175,857 for the three
months ended September 30, 2001 as compared to $256,283 for the same period in
2000. The decrease in revenues resulted from a decline in production and lower
average prices received. For the three months ended
9
September 30, 2001, 5,105 barrels of oil, 2,210 barrels of NGLs and 8,083 mcf of
gas were sold, or 8,662 BOEs. For the three months ended September 30, 2000,
5,764 barrels of oil, 2,853 barrels of NGLs and 11,213 mcf of gas were sold, or
10,486 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 $4.00, or 13%, from
$30.30 for the three months ended September 30, 2000 to $26.30 for the same
period in 2001. The average price received per barrel of NGLs decreased $4.84,
or 30%, from $16.07 during the three months ended September 30, 2000 to $11.23
for the same period in 2001. The average price received per mcf of gas decreased
35% from $3.19 during the three months ended September 30, 2000 to $2.07 for the
same period in 2001.
Costs and Expenses:
Total costs and expenses increased to $119,771 for the three months ended
September 30, 2001 as compared to $105,179 for the same period in 2000, an
increase of $14,592, or 14%. This increase was due to increases in the
impairment of oil and gas properties, production costs and depletion, offset by
a decline in G&A.
Production costs were $91,284 for the three months ended September 30, 2001 and
$84,096 for the same period in 2000, resulting in a $7,188 increase, or 9%. The
increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production, offset by lower
production taxes.
During this period, G&A decreased 38% from $8,742 for the three months ended
September 30, 2000 to $5,380 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 $8,163 related to
its proved oil and gas properties during the three months ended September 30,
2001.
Depletion was $14,944 for the three months ended September 30, 2001 as compared
to $12,341 for the same period in 2000, representing an increase of $2,603, or
21%. This increase was the result of a reduction in proved reserves during the
period ended September 30, 2001 as a result of lower commodity prices, offset by
a decline in oil production of 659 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 $1,015 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to a reduction in working capital of $90,996 and a
decrease of $1,773 in G&A expenses, offset by an increase in production costs of
$39,323 and a decrease in oil and gas sales receipts of $52,431. The decrease in
oil and gas receipts resulted from the decline in production of $63,623 during
2001 as compared
10
to the same period in 2000 and a decrease in the average prices received for oil
and NGLs of $25,167, offset by an increase in average prices received for gas of
$36,359. The increase in production costs was primarily due to additional well
maintenance and workover costs incurred to stimulate well production and higher
ad valorem taxes. 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 Used in Investing Activities
The Partnership's investing activities during the nine months ended September
30, 2001 and 2000 were for expenditures related to equipment upgrades on various
oil and gas properties.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $276,958, of which $2,770 was distributed to the managing general partner
and $274,188 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $361,535, of which $3,615 was
distributed to the managing general partner and $357,920 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
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
11
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-C CONV., L.P.
(A Delaware Limited Partnership)
SIGNATURES
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-C 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
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 90-C, L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 90-C, L.P. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 33-26097-09
PARKER & PARSLEY 90-C, L.P.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 75-2347262
------------------------------- ----------------------
(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-C, 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-C, 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 $ 344,784 $ 162,620
Accounts receivable - oil and gas sales 106,872 191,950
------------ ------------
Total current assets 451,656 354,570
------------ ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 9,327,018 9,321,783
Accumulated depletion (8,121,923) (8,040,111)
------------ ------------
Net oil and gas properties 1,205,095 1,281,672
------------ ------------
$ 1,656,751 $ 1,636,242
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 55,627 $ 22,567
Partners' capital:
Managing general partner 15,961 16,087
Limited partners (12,107 interests) 1,585,163 1,597,588
------------ ------------
1,601,124 1,613,675
------------ ------------
$ 1,656,751 $ 1,636,242
============ ============
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-C, 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 $ 282,703 $ 412,219 $ 996,680 $ 1,079,018
Interest 2,114 4,001 7,427 9,336
------------ ------------ ------------ ------------
284,817 416,220 1,004,107 1,088,354
------------ ------------ ------------ ------------
Costs and expenses:
Oil and gas production 146,737 135,213 457,467 394,273
General and administrative 8,648 14,060 32,201 35,098
Impairment of oil and gas properties 13,105 -- 13,105 --
Depletion 23,952 19,837 68,707 62,164
------------ ------------ ------------ ------------
192,442 169,110 571,480 491,535
------------ ------------ ------------ ------------
Net income $ 92,375 $ 247,110 $ 432,627 $ 596,819
============ ============ ============ ============
Allocation of net income:
Managing general partner $ 923 $ 2,471 $ 4,326 $ 5,968
============ ============ ============ ============
Limited partners $ 91,452 $ 244,639 $ 428,301 $ 590,851
============ ============ ============ ============
Net income per limited
partnership interest $ 7.56 $ 20.20 $ 35.38 $ 48.80
============ ============ ============ ============
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-C, L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
------------ ------------ ------------
Balance at January 1, 2001 $ 16,087 $ 1,597,588 $ 1,613,675
Distributions (4,452) (440,726) (445,178)
Net income 4,326 428,301 432,627
------------ ------------ ------------
Balance at September 30, 2001 $ 15,961 $ 1,585,163 $ 1,601,124
============ ============ ============
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-C, 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 $ 432,627 $ 596,819
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 13,105 --
Depletion 68,707 62,164
Changes in assets and liabilities:
Accounts receivable 85,078 (50,135)
Accounts payable 33,060 22,240
------------ ------------
Net cash provided by operating activities 632,577 631,088
------------ ------------
Cash flows used in investing activities:
Additions to oil and gas properties (5,235) (25,402)
Cash flows used in financing activities:
Cash distributions to partners (445,178) (581,211)
------------ ------------
Net increase in cash 182,164 24,475
Cash at beginning of period 162,620 164,100
------------ ------------
Cash at end of period $ 344,784 $ 188,575
============ ============
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-C, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 90-C, L.P. (the "Partnership") is a limited partnership
organized in 1990 under the laws of the State of Delaware.
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 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.
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
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
7
provision of $13,105 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
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $3,021,205 of which $2,984,323 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the 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 8% to $996,680 for the nine
months ended September 30, 2001 as compared to $1,079,018 for the same period in
2000. The decrease in revenues resulted from a decline in production and lower
average prices received for oil and natural gas liquids ("NGLs"), offset by an
increase in average prices received for gas. For the nine months ended September
30, 2001, 26,703 barrels of oil, 7,541 barrels of NGLs and 41,620 mcf of gas
were sold, or 41,181 barrel of oil equivalents ("BOEs"). For the nine months
ended September 30, 2000, 28,494 barrels of oil, 11,707 barrels of NGLs and
40,683 mcf of gas were sold, or 46,982 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 $1.23, or 4%, from $28.39
for the nine months ended September 30, 2000 to $27.16 for the same period in
2001. The average price received per barrel of NGLs decreased $.31, or 2%, from
$14.08 during the nine months ended September 30, 2000 to $13.77 for the same
period in 2001. The average price received per mcf of gas increased 55% from
$2.59 during the nine months ended September 30, 2000 to $4.02 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.
8
Costs and Expenses:
Total costs and expenses increased to $571,480 for the nine months ended
September 30, 2001 as compared to $491,535 for the same period in 2000, an
increase of $79,945, or 16%. This increase was due to increases in production
costs, the impairment of oil and gas properties and depletion, offset by a
decline in general and administrative expenses ("G&A").
Production costs were $457,467 for the nine months ended September 30, 2001 and
$394,273 for the same period in 2000, resulting in an increase of $63,194, or
16%. The increase was primarily due to additional well maintenance and workover
costs incurred to stimulate well production and higher ad valorem taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
8% from $35,098 for the nine months ended September 30, 2000 to $32,201 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 $13,105 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $68,707 for the nine months ended September 30, 2001 as compared
to $62,164 for the same period in 2000, representing an increase of $6,543, or
11%. This increase was the result of a reduction in proved reserves during the
period ended September 30, 2001 due to lower commodity prices, offset by a
decline in oil production of 1,791 barrels for the nine months ended September
30, 2001 as compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended
September 30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 31% to $282,703 for the three
months ended September 30, 2001 as compared to $412,219 for the same period in
2000. The decrease in revenues
9
resulted from a decline in production and lower average prices received. For the
three months ended September 30, 2001, 8,206 barrels of oil, 3,559 barrels of
NGLs and 12,995 mcf of gas were sold, or 13,931 BOEs. For the three months ended
September 30, 2000, 9,267 barrels of oil, 4,602 barrels of NGLs and 18,019 mcf
of gas were sold, or 16,872 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 $4.00, or 13%, from
$30.30 for the three months ended September 30, 2000 to $26.30 for the same
period in 2001. The average price received per barrel of NGLs decreased $4.84,
or 30%, from $16.07 during the three months ended September 30, 2000 to $11.23
for the same period in 2001. The average price received per mcf of gas decreased
35% from $3.19 during the three months ended September 30, 2000 to $2.07 for the
same period in 2001.
Costs and Expenses:
Total costs and expenses increased to $192,442 for the three months ended
September 30, 2001 as compared to $169,110 for the same period in 2000, an
increase of $23,332, or 14%. This increase was due to increases in the
impairment of oil and gas properties, production costs and depletion, offset by
a decline in G&A.
Production costs were $146,737 for the three months ended September 30, 2001 and
$135,213 for the same period in 2000 resulting in an $11,524 increase, or 9%.
The increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production, offset by a decrease in
production taxes.
During this period, G&A decreased 38% from $14,060 for the three months ended
September 30, 2000 to $8,648 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 $13,105 related to
its proved oil and gas properties during the three months ended September 30,
2001.
Depletion was $23,952 for the three months ended September 30, 2001 as compared
to $19,837 for the same period in 2000, representing an increase of $4,115, or
21%. This increase was the result of a reduction in proved reserves during the
period ended September 30, 2001 due to lower commodity prices, offset by a
decline in oil production of 1,061 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 $1,489 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to a reduction in working capital of $146,033 and a
decrease of $2,897 in G&A expenses, offset by an increase in
10
production costs of $63,194 and a decrease in oil and gas sales receipts of
$84,247. The decrease in oil and gas receipts of $102,246 resulted from the
decline in production during 2001 as compared to the same period in 2000 and a
decrease in the average prices received for oil and NGLs of $40,439, offset by
an increase in average prices received for gas of $58,438. The increase in
production costs was primarily due to additional well maintenance and workover
costs incurred to stimulate well production and higher ad valorem taxes. 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 Used in Investing Activities
The Partnership's investing activities during the nine months ended September
30, 2001 and 2000 were for expenditures related to equipment upgrades on various
oil and gas properties.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $445,178, of which $4,452 was distributed to the managing general partner
and $440,726 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $581,211, of which $5,812 was
distributed to the managing general partner and $575,399 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
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.
11
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-C, L.P.
(A Delaware Limited Partnership)
SIGNATURES
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-C, 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
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY PRIVATE INVESTMENT 90, L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley Private Investment 90, L.P. and supplements the supplemental information
to the proxy statement/prospectus dated October 12, 2001, of Pioneer Natural
Resources Company, a Delaware corporation that we call Pioneer Parent, and
Pioneer Natural Resources USA, Inc., a Delaware corporation that we call Pioneer
USA, by which Pioneer USA is soliciting proxies to be voted at a special meeting
of the limited partners of the partnership. The purpose of the special meeting
is for you to vote upon the merger of the partnership with and into Pioneer USA
that, if completed, will result in your receiving common stock of Pioneer Parent
for your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY PRIVATE INVESTMENT 90, L.P.
(A Delaware Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY PRIVATE INVESTMENT 90, L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 310,372 $ 168,054
Accounts receivable - oil and gas sales 116,148 197,750
----------- -----------
Total current assets 426,520 365,804
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 8,477,949 8,464,366
Accumulated depletion (7,191,666) (7,073,249)
----------- -----------
Net oil and gas properties 1,286,283 1,391,117
----------- -----------
$ 1,712,803 $ 1,756,921
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 50,543 $ 13,453
Partners' capital:
Managing general partner 20,837 21,649
Limited partners (274.25 interests) 1,641,423 1,721,819
----------- -----------
1,662,260 1,743,468
----------- -----------
$ 1,712,803 $ 1,756,921
=========== ===========
The financial information included as of September 30, 2001
has been prepared by management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY PRIVATE INVESTMENT 90, 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 $ 294,111 $ 391,875 $1,016,117 $1,083,888
Interest 2,091 4,134 7,684 10,086
Gain on disposition of assets -- 2,385 -- 2,385
---------- ---------- ---------- ----------
296,202 398,394 1,023,801 1,096,359
---------- ---------- ---------- ----------
Costs and expenses:
Oil and gas production 166,592 141,307 428,240 379,640
General and administrative 7,353 13,338 27,259 34,635
Depletion 50,496 24,505 118,417 83,418
---------- ---------- ---------- ----------
224,441 179,150 573,916 497,693
---------- ---------- ---------- ----------
Net income $ 71,761 $ 219,244 $ 449,885 $ 598,666
========== ========== ========== ==========
Allocation of net income:
Managing general partner $ 718 $ 2,193 $ 4,499 $ 5,987
========== ========== ========== ==========
Limited partners $ 71,043 $ 217,051 $ 445,386 $ 592,679
========== ========== ========== ==========
Net income per limited
partnership interest $ 259.04 $ 791.43 $ 1,624.01 $ 2,161.09
========== ========== ========== ==========
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.
3
PARKER & PARSLEY PRIVATE INVESTMENT 90, L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 2001 $ 21,649 $ 1,721,819 $ 1,743,468
Distributions (5,311) (525,782) (531,093)
Net income 4,499 445,386 449,885
----------- ----------- -----------
Balance at September 30, 2001 $ 20,837 $ 1,641,423 $ 1,662,260
=========== =========== ===========
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 PRIVATE INVESTMENT 90, 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 $ 449,885 $ 598,666
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 118,417 83,418
Gain on disposition of assets -- (2,385)
Changes in assets and liabilities:
Accounts receivable 81,602 (57,043)
Accounts payable 37,090 20,944
--------- ---------
Net cash provided by operating activities 686,994 643,600
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (13,656) (24,839)
Proceeds from asset dispositions 73 2,385
--------- ---------
Net cash used in investing activities (13,583) (22,454)
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (531,093) (592,158)
--------- ---------
Net increase in cash 142,318 28,988
Cash at beginning of period 168,054 174,341
--------- ---------
Cash at end of period $ 310,372 $ 203,329
========= =========
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 PRIVATE INVESTMENT 90, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley Private Investment 90, L.P. (the "Partnership") was organized
in 1990 as a general partnership under the laws of the State of Texas and was
converted to a Delaware limited partnership in 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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $3,412,684 of which $3,360,078 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
6
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 6% to $1,016,117 for the nine
months ended September 30, 2001 as compared to $1,083,888 for the same period in
2000. The decrease in revenues resulted from a decline in production and lower
average prices received for oil and natural gas liquids ("NGLs"), offset by an
increase in average prices received for gas. For the nine months ended September
30, 2001, 26,054 barrels of oil, 8,822 barrels of NGLs and 43,600 mcf of gas
were sold, or 42,143 barrel of oil equivalents ("BOEs"). For the nine months
ended September 30, 2000, 29,405 barrels of oil, 10,456 barrels of NGLs and
38,261 mcf of gas were sold, or 46,238 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 $.99, or 3%, from $28.34
for the nine months ended September 30, 2000 to $27.35 for the same period in
2001. The average price received per barrel of NGLs decreased $.16, or 1%, from
$14.77 during the nine months ended September 30, 2000 to $14.61 for the same
period in 2001. The average price received per mcf of gas increased 59% from
$2.51 during the nine months ended September 30, 2000 to $4.00 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.
Gain on disposition of assets was recognized during the nine months ended
September 30, 2000 of $2,385 from equipment credits received on one fully
depleted well.
Costs and Expenses:
Total costs and expenses increased to $573,916 for the nine months ended
September 30, 2001 as compared to $497,693 for the same period in 2000, an
increase of $76,223, or 15%. This increase was due to increases in production
costs and depletion, offset by a decrease in general and administrative expenses
("G&A").
Production costs were $428,240 for the nine months ended September 30, 2001 and
$379,640 for the same period in 2000, resulting in a $48,600 increase, or 13%.
The increase was the result of additional well maintenance and workover costs
incurred to stimulate well production and higher ad valorem taxes.
7
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
21%, from $34,635 for the nine months ended September 30, 2000 to $27,259 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.
Depletion was $118,417 for the nine months ended September 30, 2001 as compared
to $83,418 for the same period in 2000, an increase of $34,999, or 42%. The
increase was the result of a decrease in proved reserves during the period ended
September 30, 2001 due to lower commodity prices, offset by a decrease in oil
production of 3,351 barrels for the nine months ended September 30, 2001 as
compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended
September 30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 25% to $294,111 for the three
months ended September 30, 2001 as compared to $391,875 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, 8,239
barrels of oil, 4,050 barrels of NGLs and 14,301 mcf of gas were sold, or 14,673
BOEs. For the three months ended September 30, 2000, 9,671 barrels of oil, 3,510
barrels of NGLs and 13,272 mcf of gas were sold, or 15,393 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 $3.80, or 13%, from
$30.22 for the three months ended September 30, 2000 to $26.42 for the same
period in 2001. The average price received per barrel of NGLs decreased $4.48,
or 28%, from $16.17 during the three months ended September 30, 2000 to $11.69
for the same period in 2001. The average price received per mcf of gas decreased
37% to $2.03 during the three months ended September 30, 2001 from $3.23 during
the same period in 2000.
Gain on disposition of assets of $2,385 was recognized during the three month
period ended September 30, 2000 from equipment credits received on one fully
depleted well.
Costs and Expenses:
Total costs and expenses increased to $224,441 for the three months ended
September 30, 2001 as compared to $179,150 for the same period in 2000, an
increase of $45,291, or 25%. This increase was due to increases in depletion and
production costs, offset by a decrease in G&A.
Production costs were $166,592 for the three months ended September 30, 2001 and
$141,307 for the same period in 2000 resulting in a $25,285 increase, or 18%.
This increase was due to additional well maintenance and workover costs incurred
to stimulate well production and an increase in ad valorem taxes.
8
During this period, G&A decreased 45%, from $13,338 for the three months ended
September 30, 2000 to $7,353 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.
Depletion was $50,496 for the three months ended September 30, 2001 as compared
to $24,505 for the same period in 2000, an increase of $25,991, or 106%. This
increase was attributable to a decrease in proved reserves during the period
ended September 30, 2001 due to lower commodity prices, offset by a decrease in
oil production of 1,432 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 $43,394 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000
This increase was due to reductions in working capital of $154,791 and G&A
expenses of $7,376, offset by a decrease in oil and gas sales of $70,173 and an
increase in production costs of $48,600. The decrease in oil and gas receipts
resulted from a decline in production of $94,157 during 2001 as compared to the
same period in 2000 and a decrease in average prices received for oil and NGLs
of $32,986, offset by an increase in average prices received for gas of $56,970.
The increase in production costs was primarily due to additional well
maintenance and workover costs incurred to stimulate well production and higher
ad valorem taxes. The decrease in G&A was 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 Used in Investing Activities
The Partnership's principal 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 disposition of assets of $73 and $2,385 recognized during the nine
months ended September 30, 2001 and 2000, respectively, were due to equipment
credits received on active properties.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $531,093, of which $5,311 was distributed to the managing general partner
and $525,782 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $592,158, of which $5,922 was
distributed to the managing general partner and $586,236 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
the proposed merger of the Partnership into
9
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.
10
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 90 SPRABERRY
PRIVATE DEVELOPMENT, L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker &
Parsley 90 Spraberry Private Development, L.P. and supplements the supplemental
information to the proxy statement/prospectus dated October 12, 2001, of Pioneer
Natural Resources Company, a Delaware corporation that we call Pioneer Parent,
and Pioneer Natural Resources USA, Inc., a Delaware corporation that we call
Pioneer USA, by which Pioneer USA is soliciting proxies to be voted at a special
meeting of the limited partners of the partnership. The purpose of the special
meeting is for you to vote upon the merger of the partnership with and into
Pioneer USA that, if completed, will result in your receiving common stock of
Pioneer Parent for your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY 90 SPRABERRY PRIVATE DEVELOPMENT, L.P.
(A Delaware Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY 90 SPRABERRY PRIVATE DEVELOPMENT, L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 150,132 $ 47,337
Accounts receivable - oil and gas sales 53,324 91,915
----------- -----------
Total current assets 203,456 139,252
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 3,666,171 3,666,171
Accumulated depletion (3,071,589) (3,046,352)
----------- -----------
Net oil and gas properties 594,582 619,819
----------- -----------
$ 798,038 $ 759,071
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 25,337 $ 12,584
Partners' capital:
Managing general partner 8,999 8,737
Limited partners (130 interests) 763,702 737,750
----------- -----------
772,701 746,487
----------- -----------
$ 798,038 $ 759,071
=========== ===========
The financial information included as of September 30, 2001
has been prepared by management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY 90 SPRABERRY PRIVATE DEVELOPMENT, 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 $121,881 $171,691 $ 456,163 $ 445,577
Interest 1,005 973 3,346 3,469
-------- -------- --------- ---------
122,886 172,664 459,509 449,046
-------- -------- --------- ---------
Costs and expenses:
Oil and gas production 62,899 65,983 168,515 179,437
General and administrative 3,656 5,588 14,551 14,309
Depletion 8,783 9,652 25,237 32,048
-------- -------- --------- ---------
75,338 81,223 208,303 225,794
-------- -------- --------- ---------
Net income $ 47,548 $ 91,441 $ 251,206 $ 223,252
======== ======== ========= =========
Allocation of net income:
Managing general partner $ 475 $ 915 $ 2,512 $ 2,233
======== ======== ========= =========
Limited partners $ 47,073 $ 90,526 $ 248,694 $ 221,019
======== ======== ========= =========
Net income per limited
partnership interest $ 362.10 $ 696.36 $1,913.03 $1,700.15
======== ======== ========= =========
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.
3
PARKER & PARSLEY 90 SPRABERRY PRIVATE DEVELOPMENT, L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
--------- --------- ---------
Balance at January 1, 2001 $ 8,737 $ 737,750 $ 746,487
Distributions (2,250) (222,742) (224,992)
Net income 2,512 248,694 251,206
--------- --------- ---------
Balance at September 30, 2001 $ 8,999 $ 763,702 $ 772,701
========= ========= =========
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 SPRABERRY PRIVATE DEVELOPMENT, 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 $ 251,206 $ 223,252
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 25,237 32,048
Changes in assets and liabilities:
Accounts receivable 38,591 (19,194)
Accounts payable 12,753 9,016
--------- ---------
Net cash provided by operating activities 327,787 245,122
--------- ---------
Cash flows used in investing activities:
Additions to oil and gas properties -- (5,738)
Cash flows used in financing activities:
Cash distributions to partners (224,992) (234,563)
--------- ---------
Net increase in cash 102,795 4,821
Cash at beginning of period 47,337 84,843
--------- ---------
Cash at end of period $ 150,132 $ 89,664
========= =========
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 SPRABERRY PRIVATE DEVELOPMENT, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 90 Spraberry Private Development, L.P. (the "Partnership") was
organized in 1990 as a general partnership under the laws of the State of Texas
and was converted to a Delaware limited partnership in 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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $1,633,026 of which $1,616,696 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If a majority of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
6
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 increased 2% to $456,163 for the nine
months ended September 30, 2001 as compared to $445,577 for the same period in
2000. The increase in revenues resulted from higher average prices received for
gas, offset by a decline in production and lower average prices received for oil
and natural gas liquids ("NGLs"). For the nine months ended September 30, 2001,
11,767 barrels of oil, 3,817 barrels of NGLs and 20,556 mcf of gas were sold, or
19,010 barrel of oil equivalents ("BOEs"). For the nine months ended September
30, 2000, 11,950 barrels of oil, 4,565 barrels of NGLs and 16,276 mcf of gas
were sold, or 19,228 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 $1.50, or 5%, from $28.28
for the nine months ended September 30, 2000 to $26.78 for the same period in
2001. The average price received per barrel of NGLs decreased slightly from
$14.60 during the nine months ended September 30, 2000 to $14.58 for the same
period in 2001. The average price received per mcf of gas increased 65% from
$2.52 during the nine months ended September 30, 2000 to $4.16 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.
Costs and Expenses:
Total costs and expenses decreased to $208,303 for the nine months ended
September 30, 2001 as compared to $225,794 for the same period in 2000, a
decrease of $17,491, or 8%. This decrease was attributable to declines in
production costs and depletion, offset by an increase in general and
administrative expenses ("G&A").
Production costs were $168,515 for the nine months ended September 30, 2001 and
$179,437 for the same period in 2000, a $10,922 decrease, or 6%. This decrease
was primarily due to lower well maintenance costs, offset by an increase in ad
valorem taxes.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A increased
2% from $14,309 for the nine months ended September 30, 2000 to $14,551 for the
same period in 2001, primarily due to a higher percentage of the managing
general partner's G&A being allocated (limited to 3% of oil and gas revenues) as
a result of increased oil and gas revenues.
7
Depletion was $25,237 for the nine months ended September 30, 2001 as compared
to $32,048 for the same period in 2000, a decrease of $6,811, or 21%. This
decrease was primarily the result of an increase in proved reserves on a
significant well during the period ended September 30, 2001.
Three months ended September 30, 2001 compared with three months ended
September 30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 29% to $121,881 for the three
months ended September 30, 2001 as compared to $171,691 for the same period in
2000. The decrease in revenues resulted from a decline in production and lower
average prices received. For the three months ended September 30, 2001, 3,629
barrels of oil, 1,446 barrels of NGLs and 5,635 mcf of gas were sold, or 6,014
BOEs. For the three months ended September 30, 2000, 4,001 barrels of oil, 1,798
barrels of NGLs and 6,292 mcf of gas were sold, or 6,848 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 $4.45, or 15%, from
$30.44 for the three months ended September 30, 2000 to $25.99 for the same
period in 2001. The average price received per barrel of NGLs decreased $5.69,
or 34%, from $16.73 during the three months ended September 30, 2000 to $11.04
for the same period in 2001. The average price received per mcf of gas decreased
35% to $2.06 during the three months ended September 30, 2001 from $3.15 during
the same period in 2000.
Costs and Expenses:
Total costs and expenses decreased to $75,338 for the three months ended
September 30, 2001 as compared to $81,223 for the same period in 2000, a
decrease of $5,885, or 7%. This decrease was due to lower production costs, G&A
and depletion.
Production costs were $62,899 for the three months ended September 30, 2001 and
$65,983 for the same period in 2000 resulting in a $3,084 decrease, or 5%. The
decrease was primarily due to lower well maintenance costs, offset by higher ad
valorem taxes.
During this period, G&A decreased 35% from $5,588 for the three months ended
September 30, 2000 to $3,656 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.
Depletion was $8,783 for the three months ended September 30, 2001 as compared
to $9,652 for the same period in 2000, a decrease of $869, or 9%. This decrease
was primarily the result of an increase in proved reserves on a significant well
during the period ended September 30, 2001.
8
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $82,665 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to an increase in oil and gas sales receipts of $10,463
and reductions in working capital of $61,522 and production costs of $10,922,
offset by an increase in G&A expenses of $242. The increase in oil and gas
receipts resulted from the increase in gas prices of $26,631 during 2001 and an
increase in production of $1,980, offset by a $18,148 decline in oil and NGL
prices as compared to the same period in 2000. The decrease in production costs
was primarily due to lower well maintenance costs, offset by an increase in ad
valorem taxes. The increase in G&A was primarily due to a higher percentage of
the managing general partner's G&A being allocated (limited to 3% of oil and gas
revenues) as a result of increased oil and gas revenues.
Net Cash Used in Investing Activities
The Partnership's principal investing activities during the nine months ended
September 30, 2000 included expenditures related to equipment upgrades on
various oil and gas properties.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $224,992, of which $2,250 was distributed to the managing general partner
and $222,742 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $234,563, of which $2,346 was
distributed to the managing general partner and $232,217 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
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.
9
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.
10
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 91-A, L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker & Parsley
91-A, L.P. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 33-38582-01
PARKER & PARSLEY 91-A, L.P.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 75-2387572
------------------------------- ----------------------
(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 91-A, 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..................................................... 11
Signatures........................................................................... 12
2
PARKER & PARSLEY 91-A, L.P.
(A Delaware Limited Partnership)
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 485,377 $ 219,827
Accounts receivable - oil and gas sales 159,572 255,270
----------- -----------
Total current assets 644,949 475,097
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 9,717,616 9,710,132
Accumulated depletion (7,827,996) (7,727,573)
----------- -----------
Net oil and gas properties 1,889,620 1,982,559
----------- -----------
$ 2,534,569 $ 2,457,656
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 82,277 $ 32,513
Partners' capital:
Managing general partner 24,567 24,295
Limited partners (11,620 interests) 2,427,725 2,400,848
----------- -----------
2,452,292 2,425,143
----------- -----------
$ 2,534,569 $ 2,457,656
=========== ===========
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 91-A, 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 $ 365,972 $ 511,495 $1,250,138 $1,389,696
Interest 2,856 5,114 9,910 12,766
---------- ---------- ---------- ----------
368,828 516,609 1,260,048 1,402,462
---------- ---------- ---------- ----------
Costs and expenses:
Oil and gas production 143,757 145,610 457,405 454,327
General and administrative 12,580 21,669 44,745 53,767
Depletion 37,575 31,705 100,423 110,745
---------- ---------- ---------- ----------
193,912 198,984 602,573 618,839
---------- ---------- ---------- ----------
Net income $ 174,916 $ 317,625 $ 657,475 $ 783,623
========== ========== ========== ==========
Allocation of net income:
Managing general partner $ 1,749 $ 3,176 $ 6,575 $ 7,836
========== ========== ========== ==========
Limited partners $ 173,167 $ 314,449 $ 650,900 $ 775,787
========== ========== ========== ==========
Net income per limited
partnership interest $ 14.91 $ 27.06 $ 56.02 $ 66.76
========== ========== ========== ==========
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 91-A, L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 2001 $ 24,295 $ 2,400,848 $ 2,425,143
Distributions (6,303) (624,023) (630,326)
Net income 6,575 650,900 657,475
----------- ----------- -----------
Balance at September 30, 2001 $ 24,567 $ 2,427,725 $ 2,452,292
=========== =========== ===========
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 91-A, 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 $ 657,475 $ 783,623
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 100,423 110,745
Changes in assets and liabilities:
Accounts receivable 95,698 (81,168)
Accounts payable 49,764 16,414
--------- ---------
Net cash provided by operating activities 903,360 829,614
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (7,484) (22,353)
Proceeds from asset dispositions -- 8,812
--------- ---------
Net cash used in investing activities (7,484) (13,541)
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (630,326) (821,399)
--------- ---------
Net increase (decrease) in cash 265,550 (5,326)
Cash at beginning of period 219,827 226,846
--------- ---------
Cash at end of period $ 485,377 $ 221,520
========= =========
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 91-A, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF ORGANIZATION
Parker & Parsley 91-A, L.P. (the "Partnership") is a limited partnership
organized in 1991 under the laws of the State of Delaware.
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 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.
NOTE 3. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $4,730,736 of which $4,665,291 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If two-thirds of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
7
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 10% to $1,250,138 for the nine
months ended September 30, 2001 as compared to $1,389,696 for the same period in
2000. The decrease in revenues resulted from a decline in production and lower
average prices received for oil and natural gas liquids ("NGLs"), offset by
higher average prices received for gas. For the nine months ended September 30,
2001, 30,122 barrels of oil, 8,255 barrels of NGLs and 78,636 mcf of gas were
sold, or 51,483 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 33,643 barrels of oil, 15,741 barrels of NGLs and 72,334 mcf
of gas were sold, or 61,440 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 $1.95, or 7%, from $28.90
for the nine months ended September 30, 2000 to $26.95 for the same period in
2001. The average price received per barrel of NGLs decreased $3.57, or 25%,
from $14.33 during the nine months ended September 30, 2000 to $10.76 for the
same period in 2001. The average price received per mcf of gas increased 68%
from $2.65 during the nine months ended September 30, 2000 to $4.45 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.
Costs and Expenses:
Total costs and expenses decreased to $602,573 for the nine months ended
September 30, 2001 as compared to $618,839 for the same period in 2000, a
decrease of $16,266, or 3%. This decrease was due to declines in depletion and
general and administrative expenses ("G&A"), offset by an increase in production
costs.
Production costs were $457,405 for the nine months ended September 30, 2001 and
$454,327 for the same period in 2000, resulting in a $3,078 increase, or 1%.
This increase was primarily due to higher ad valorem taxes, offset by a decline
in production taxes.
G&A components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
17% from $53,767 for the nine months ended September 30, 2000 to $44,745 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.
8
Depletion was $100,423 for the nine months ended September 30, 2001 as compared
to $110,745 for the same period in 2000, representing a decrease of $10,322, or
9%. This decrease was primarily due to 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 2000 and a decline in oil production of 3,521 barrels for the
nine months ended September 30, 2001 as compared to the same period in 2000.
Three months ended September 30, 2001 compared with three months ended
September 30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 28% to $365,972 for the three
months ended September 30, 2001 as compared to $511,495 for the same period in
2000. The decrease in revenues resulted from a decline in production and lower
average prices received. For the three months ended September 30, 2001, 10,359
barrels of oil, 3,069 barrels of NGLs and 26,409 mcf of gas were sold, or 17,830
BOEs. For the three months ended September 30, 2000, 11,160 barrels of oil,
5,343 barrels of NGLs and 25,051 mcf of gas were sold, or 20,678 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 $4.95, or 16%, from
$31.00 for the three months ended September 30, 2000 to $26.05 for the same
period in 2001. The average price received per barrel of NGLs decreased $6.59,
or 44%, from $15.09 during the three months ended September 30, 2000 to $8.50 in
2001. The average price received per mcf of gas decreased 22% from $3.39 during
the three months ended September 30, 2000 to $2.65 for the same period in 2001.
Costs and Expenses:
Total costs and expenses decreased to $193,912 for the three months ended
September 30, 2001 as compared to $198,984 for the same period in 2000, a
decrease of $5,072, or 3%. This decrease was due to declines in G&A and
production costs, offset by an increase in depletion.
Production costs were $143,757 for the three months ended September 30, 2001 and
$145,610 for the same period in 2000, resulting in a $1,853 decrease, or 1%.
This decrease was primarily due to lower well maintenance costs and production
taxes, offset by higher ad valorem taxes.
During this period, G&A decreased 42% from $21,669 for the three months ended
September 30, 2000 to $12,580 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.
Depletion was $37,575 for the three months ended September 30, 2001 as compared
to $31,705 for the same period in 2000, representing an increase of $5,870, or
19%. This increase was attributable to a decrease in proved reserves during the
period ended September 30, 2001 as a result of lower
9
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
801 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 $73,746 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was the result of a reduction in working capital of $210,216 and a
decrease of $9,022 in G&A costs, offset by a decrease in oil and gas sales
receipts of $142,414 and an increase in production costs of $3,078. The decrease
in oil and gas receipts resulted from the decrease in production of $147,382
during 2001 as compared to the same period in 2000 and a decrease in oil and NGL
prices of $124,676, offset by an increase in gas prices of $129,644. The
increase in production costs was primarily due to increased ad valorem taxes,
offset by lower production taxes. 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 revenue.
Net Cash 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 $8,812 were from the disposition of oil and
gas equipment during the nine months ended September 30, 2000.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $630,326, of which $6,303 was distributed to the managing general partner
and $624,023 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $821,399, of which $8,214 was
distributed to the managing general partner and $813,185 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
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
10
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 two-thirds 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
11
PARKER & PARSLEY 91-A, L.P.
(A Delaware Limited Partnership)
SIGNATURES
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 91-A, 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
12
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 91-B, L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
This document contains important information specific to Parker & Parsley
91-B, L.P. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 33-38582-02
PARKER & PARSLEY 91-B, L.P.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 75-2397335
------------------------------- ----------------------
(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 91-B, 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..................................................... 11
Signatures........................................................................... 12
2
PARKER & PARSLEY 91-B, L.P.
(A Delaware Limited Partnership)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
ASSETS (Unaudited)
Current assets:
Cash $ 365,152 $ 185,644
Accounts receivable - oil and gas sales 204,644 281,416
----------- -----------
Total current assets 569,796 467,060
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 9,754,730 9,761,207
Accumulated depletion (8,465,484) (8,398,807)
----------- -----------
Net oil and gas properties 1,289,246 1,362,400
----------- -----------
$ 1,859,042 $ 1,829,460
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 82,396 $ 6,714
Partners' capital:
Managing general partner 14,734 15,195
Limited partners (11,249 interests) 1,761,912 1,807,551
----------- -----------
1,776,646 1,822,746
----------- -----------
$ 1,859,042 $ 1,829,460
=========== ===========
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 91-B, 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 $ 323,917 $ 560,600 $1,056,644 $1,514,941
Interest 2,577 5,907 9,419 13,377
Gain on disposition of assets -- -- -- 2,273
---------- ---------- ---------- ----------
326,494 566,507 1,066,063 1,530,591
---------- ---------- ---------- ----------
Costs and expenses:
Oil and gas production 160,626 144,855 437,953 424,874
General and administrative 11,411 17,415 38,359 54,878
Depletion 26,159 18,260 66,677 60,270
---------- ---------- ---------- ----------
198,196 180,530 542,989 540,022
---------- ---------- ---------- ----------
Net income $ 128,298 $ 385,977 $ 523,074 $ 990,569
========== ========== ========== ==========
Allocation of net income:
Managing general partner $ 1,283 $ 3,860 $ 5,231 $ 9,906
========== ========== ========== ==========
Limited partners $ 127,015 $ 382,117 $ 517,843 $ 980,663
========== ========== ========== ==========
Net income per limited partnership
interest $ 11.29 $ 33.97 $ 46.03 $ 87.18
========== ========== ========== ==========
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 91-B, L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 2001 $ 15,195 $ 1,807,551 $ 1,822,746
Distributions (5,692) (563,482) (569,174)
Net income 5,231 517,843 523,074
----------- ----------- -----------
Balance at September 30, 2001 $ 14,734 $ 1,761,912 $ 1,776,646
=========== =========== ===========
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 91-B, 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 $ 523,074 $ 990,569
Adjustments to reconcile net income to
net cash provided by operating activities:
Depletion 66,677 60,270
Gain on disposition of assets -- (2,273)
Changes in assets and liabilities:
Accounts receivable 76,772 (85,801)
Accounts payable 75,682 21,431
--------- ---------
Net cash provided by operating activities 742,205 984,196
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (8,694) (8,113)
Proceeds from asset dispositions 15,171 2,372
--------- ---------
Net cash provided by (used in) investing activities 6,477 (5,741)
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (569,174) (939,493)
--------- ---------
Net increase in cash 179,508 38,962
Cash at beginning of period 185,644 213,165
--------- ---------
Cash at end of period $ 365,152 $ 252,127
========= =========
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 91-B, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 91-B, L.P. (the "Partnership") is a limited partnership
organized in 1991 under the laws of the State of Delaware.
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 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 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.
NOTE 3. PROPOSAL TO ACQUIRE PARTNERSHIP
On October 22, 2001, Pioneer Natural Resources Company ("Pioneer") mailed
materials to the limited partners of the Partnership soliciting their approval
of an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and the Partnership.
Pioneer has valued the Partnership interest at $5,057,542 of which $5,002,516 is
attributable to the limited partners, excluding Pioneer USA in its capacity as a
general partner or a limited partner. If two-thirds of the limited partners
approve the transaction, each limited partner will receive their proportionate
share of the value in the form of Pioneer common stock.
7
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 30% to $1,056,644 for the nine
months ended September 30, 2001 as compared to $1,514,941 for the same period in
2000. The decrease in revenues resulted from a decline in production and lower
average prices received for oil and natural gas liquids ("NGLs"), offset by a
higher average price received for gas. For the nine months ended September 30,
2001, 27,163 barrels of oil, 10,118 barrels of NGLs and 43,800 mcf of gas were
sold, or 44,581 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 36,648 barrels of oil, 16,876 barrels of NGLs and 66,057 mcf
of gas were sold, or 64,534 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 $2.14, or 7%, from $29.55
for the nine months ended September 30, 2000 to $27.41 for the same period in
2001. The average price received per barrel of NGLs decreased $1.17 or 7%, from
$15.68 during the nine months ended September 30, 2000 to $14.51 for the same
period in 2001. The average price received per mcf of gas increased 48% from
$2.54 during the nine months ended September 30, 2000 to $3.77 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 nine months ended September 30, 2001.
Gain on disposition of assets of $2,273 was recognized during the nine months
ended September 30, 2000 from equipment credits received on one well.
Costs and Expenses:
Total costs and expenses increased to $542,989 for the nine months ended
September 30, 2001 as compared to $540,022 for the same period in 2000, an
increase of $2,967. This increase was due to increases in production costs and
depletion, offset by a decline in general and administrative expenses ("G&A").
Production costs were $437,953 for the nine months ended September 30, 2001 and
$424,874 for the same period in 2000, resulting in a $13,079 increase, or 3%.
The increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production, offset by lower
production taxes.
8
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A decreased
30% from $54,878 for the nine months ended September 30, 2000 to $38,359 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.
Depletion was $66,677 for the nine months ended September 30, 2001 as compared
to $60,270 for the same period in 2000, representing an increase of $6,407, or
11%. This increase was primarily due to a reduction in proved reserves for the
period ended September 30, 2001 due to lower commodity prices as compared to the
same period ended 2000, offset by a decline in oil production of 9,485 barrels
for the nine months ended September 30, 2001 as compared to the same period in
2000.
Three months ended September 30, 2001 compared with three months ended
September 30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 42% to $323,917 for the three
months ended September 30, 2001 as compared to $560,600 for the same period in
2000. The decrease in revenues resulted from a decline in production and lower
average prices received. For the three months ended September 30, 2001, 9,262
barrels of oil, 3,867 barrels of NGLs and 15,656 mcf of gas were sold, or 15,738
BOEs. For the three months ended September 30, 2000, 12,181 barrels of oil,
5,860 barrels of NGLs and 23,229 mcf of gas were sold, or 21,913 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 $5.08, or 16%, from
$31.49 for the three months ended September 30, 2000 to $26.41 for the same
period in 2001. The average price received per barrel of NGLs decreased $5.25,
or 30%, from $17.25 during the three months ended September 30, 2000 to $12.00
for the same period in 2001. The average price received per mcf of gas decreased
36% from $3.27 during the three months ended September 30, 2000 to $2.10 for the
same period in 2001.
Costs and Expenses:
Total costs and expenses increased to $198,196 for the three months ended
September 30, 2001 as compared to $180,530 for the same period in 2000, an
increase of $17,666, or 10%. This increase was due to increases in production
costs and depletion, offset by a decrease in G&A.
Production costs were $160,626 for the three months ended September 30, 2001 and
$144,855 for the same period in 2000, resulting in a $15,771 increase, or 11%.
This increase was primarily due to higher ad valorem taxes, offset by lower
production taxes.
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During this period, G&A decreased 34% from $17,415 for the three months ended
September 30, 2000 to $11,411 for the same period in 2001. The decline was due
to a lower percentage of the managing general partner's G&A being allocated
(limited to 3% of oil and gas revenues) due to decreased oil and gas revenues.
Depletion was $26,159 for the three months ended September 30, 2001 as compared
to $18,260 for the same period in 2000, representing an increase of $7,899, or
43%. This increase was primarily due to a reduction in proved reserves for the
period ended September 30, 2001 due to lower commodity prices as compared to the
same period ended 2000, offset by a decline in oil production of 2,919 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 decreased $241,991 during the nine
months ended September 30, 2001 from the same period ended September 30 2000.
The decrease was due to a decline in oil and gas sales receipts of $462,255 and
an increase in production costs of $13,079, offset by decreases in G&A expenses
of $16,519 and working capital of $216,824. The decrease in oil and gas receipts
resulted from a decline of $442,030 in production during 2001 as compared to the
same period in 2000 and a decline in oil and NGL prices of $101,813, offset by
an increase in gas prices of $81,588 during 2001. The increase in production
costs was primarily due to higher ad valorem taxes and an increase in well
maintenance costs incurred to stimulate well production, offset by lower
production taxes. 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) due to decreased oil and gas revenues.
Net Cash Provided by (Used in) Investing Activities
The Partnership's principal investing activities during the nine months ended
September 30, 2001 and 2000 were related to the upgrades of oil and gas
equipment on active properties.
Proceeds from asset dispositions of $15,171 and $2,372 recognized during the
nine months ended September 30, 2001 and 2000, respectively, were related to
equipment credits on active wells.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $569,174 of which $5,692 was distributed to the managing general partner
and $563,482 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $939,493, of which $9,395 was
distributed to the managing general partner and $930,098 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
the proposed merger of the Partnership into Pioneer Natural Resources USA, Inc.
("Pioneer USA"). For further information, see "Proposal to acquire partnerships"
below.
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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 two-thirds 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.
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(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
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PARKER & PARSLEY 91-B, L.P.
(A Delaware Limited Partnership)
SIGNATURES
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 91-B, 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
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