10-Q 1 s87bp01.txt P&P 87-BP 9/30/2001 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended 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. 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 8 incurred to stimulate well production and higher ad 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 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 PRODUCING PROPERTIES 87-B, LTD. (A Texas Limited Partnership) S I G N A T U R E S Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PARKER & PARSLEY 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

PARKER & PARSLEY PRODUCING PROPERTIES 87-B LTD 10-Q