10-Q 1 j87b.txt P&P 87-B 6/30/2001 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2001 Commission File No. 33-12244-02 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 June 30, 2001 and December 31, 2000................................... 3 Statements of Operations for the three and six months ended June 30, 2001 and 2000.................. 4 Statement of Partners' Capital for the six months ended June 30, 2001.................................. 5 Statements of Cash Flows for the six months ended June 30, 2001 and 2000............................... 6 Notes to Financial Statements.......................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 7 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K....................... 11 Signatures............................................. 12 2 PARKER & PARSLEY 87-B, LTD. (A Texas Limited Partnership) Part I. Financial Information Item 1. Financial Statements BALANCE SHEETS June 30, December 31, 2001 2000 ------------ ------------ (Unaudited) ASSETS Current assets: Cash $ 511,824 $ 257,845 Accounts receivable - oil and gas sales 201,924 357,836 ----------- ----------- Total current assets 713,748 615,681 ----------- ----------- Oil and gas properties - at cost, based on the successful efforts accounting method 12,870,546 13,396,004 Accumulated depletion (10,744,417) (11,162,910) ----------- ----------- Net oil and gas properties 2,126,129 2,233,094 ----------- ----------- $ 2,839,877 $ 2,848,775 =========== =========== LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Accounts payable - affiliate $ 31,516 $ 25,998 Partners' capital: Managing general partner 28,011 28,156 Limited partners (20,089 interests) 2,780,350 2,794,621 ----------- ----------- 2,808,361 2,822,777 ----------- ----------- $ 2,839,877 $ 2,848,775 =========== ===========

The financial information included as of June 30, 2001 has been prepared by the managing general partner without audit by independent public accountants. The accompanying notes are an integral part of these financial statements. 3 PARKER & PARSLEY 87-B, LTD. (A Texas Limited Partnership) STATEMENTS OF OPERATIONS (Unaudited) Three months ended Six months ended June 30, June 30, ---------------------- ---------------------- 2001 2000 2001 2000 --------- --------- --------- --------- Revenues: Oil and gas $ 381,569 $ 414,169 $ 828,175 $ 868,113 Interest 3,969 5,225 8,639 8,911 Gain on disposition of assets 5,825 - 22,214 3,753 -------- -------- -------- -------- 391,363 419,394 859,028 880,777 -------- -------- -------- -------- Costs and expenses: Oil and gas production 181,811 182,083 373,020 344,924 General and administrative 9,921 12,425 21,533 26,043 Depletion 39,698 35,965 113,888 74,516 Abandoned property 3,397 - 17,332 - -------- -------- -------- -------- 234,827 230,473 525,773 445,483 -------- -------- -------- -------- Net income $ 156,536 $ 188,921 $ 333,255 $ 435,294 ======== ======== ======== ======== Allocation of net income: Managing general partner $ 1,565 $ 1,889 $ 3,332 $ 4,353 ======== ======== ======== ======== Limited partners $ 154,971 $ 187,032 $ 329,923 $ 430,941 ======== ======== ======== ======== Net income per limited partnership interest $ 7.71 $ 9.31 $ 16.42 $ 21.45 ======== ======== ======== ========

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. 6 PARKER & PARSLEY 87-B, LTD. (A Texas Limited Partnership) NOTES TO FINANCIAL STATEMENTS June 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 June 30, 2001 and for the three and six months ended June 30, 2001 and 2000 include all adjustments and accruals consisting only of normal recurring accrual adjustments which are necessary for a fair presentation of the results for the interim period. These interim results are not necessarily indicative of results for a full year. Certain reclassifications may have been made to the June 30, 2000 financial statements to conform to the June 30, 2001 financial statement presentations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in this Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission. The financial statements should be read in conjunction with the financial statements and the notes thereto contained in the Partnership's Report on Form 10-K for the year ended December 31, 2000, as filed with the Securities and Exchange Commission, a copy of which is available upon request by writing to Rich Dealy, Vice President and Chief Accounting Officer, 5205 North O'Connor Boulevard, Suite 1400, Texas 75039-3746. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (1) Results of Operations Six months ended June 30, 2001 compared with six months ended June 30, 2000 Revenues: The Partnership's oil and gas revenues decreased 5% to $828,175 for the six months ended June 30, 2001 as compared to $868,113 for the same period in 2000. The decrease in revenues resulted from a decline in production and a decrease in the average price received for oil, offset by higher average prices received for 7 gas and NGLs. For the six months ended June 30, 2001, 19,714 barrels of oil, 6,385 barrels of natural gas liquids ("NGLs") and 35,640 mcf of gas were sold, or 32,039 barrel of oil equivalents ("BOEs"). For the six months ended June 30, 2000, 21,676 barrels of oil, 11,585 barrels of NGLs and 47,808 mcf of gas were sold, or 41,229 BOEs. The average price received per barrel of oil decreased $.16, or 1%, from $27.30 for the six months ended June 30, 2000 to $27.14 for the same period in 2001. The average price received per barrel of NGLs increased $2.21, or 15%, from $15.08 during the six months ended June 30, 2000 to $17.29 for the same period in 2001. The average price received per mcf of gas increased 141% from $2.13 during the six months ended June 30, 2000 to $5.13 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 six months ended June 30, 2001. Gain on disposition of assets of $22,214 was received during the six months ended June 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 six months ended June 30, 2000 a gain on disposition of assets of $3,753 was recognized due to credits received from the disposal of oil and gas equipment on one fully depleted well. Costs and Expenses: Total costs and expenses increased to $525,773 for the six months ended June 30, 2001 as compared to $445,483 for the same period in 2000, an increase of $80,290, or 18%. This increase was due to increases in depletion, production costs and abandoned property costs, offset by a decline in general and administrative expenses ("G&A"). Production costs were $373,020 for the six months ended June 30, 2001 and $344,924 for the same period in 2000 resulting in a $28,096 increase, or 8%. This increase was primarily due to additional well maintenance and workover costs incurred to stimulate well production. G&A's components are independent accounting and engineering fees and managing general partner personnel and operating costs. During this period, G&A decreased 17% from $26,043 for the six months ended June 30, 2000 to $21,533 from the same period in 2001, primarily due to less G&A being allocated (limited to 3% of oil and gas revenues) due to lower oil and gas revenues for the six months ended June 30, 2001 as compared to the same period in 2000. Depletion was $113,888 for the six months ended June 30, 2001 as compared to $74,516 for the same period in 2000, an increase of $39,372, or 53%. This increase was due to a downward revision to proved reserves on one significant well, offset by a decline in oil production of 1,962 barrels for the six months ended June 30, 2001 as compared to the same period in 2000. 8 Three months ended June 30, 2001 compared with three months ended June 30, 2000 Revenues: The Partnership's oil and gas revenues decreased 8% to $381,569 for the three months ended June 30, 2001 as compared to $414,169 for the same period in 2000. The decrease in revenues resulted from a decrease in production and a decline in the average price received for oil, offset by an increase in the average prices received for gas and NGLs. For the three months ended June 30, 2001, 9,762 barrels of oil, 3,497 barrels of NGLs and 17,474 mcf of gas were sold, or 16,171 BOEs. For the three months ended June 30, 2000, 10,284 barrels of oil, 5,499 barrels of NGLs and 21,477 mcf of gas were sold, or 19,363 BOEs. The average price received per barrel of oil decreased slightly from $26.86 during the three months ended June 30, 2000 to $26.73 for the same period in 2001. The average price received per barrel of NGLs increased $.42, or 3%, from $14.98 during the three months ended June 30, 2000 to $15.40 for the same period in 2001. The average price received per mcf of gas increased 47% from $2.59 during the three months ended June 30, 2000 to $3.82 for the same period in 2001. Gain on disposition of assets of $5,825 was received during the three months ended June 30, 2001 from disposal of equipment on two wells plugged and abandoned during the current period. Expenses to plug and abandon these wells were $3,397. Costs and Expenses: Total costs and expenses increased to $234,827 for the three months ended June 30, 2001 as compared to $230,473 for the same period in 2000, an increase of $4,354, or 2%. This increase was due to increases in depletion and abandoned property costs, offset by decreases in G&A and production costs. Production costs were $181,811 for the three months ended June 30, 2001 and $182,083 for the same period in 2000 resulting in a $272 decrease. This decrease was primarily due to lower well maintenance costs, offset by an increase in workover costs incurred to stimulate well production. During this period, G&A decreased 20%, from $12,425 for the three months ended June 30, 2000 to $9,921 for the same period in 2001, primarily due to less G&A being allocated (limited to 3% of oil and gas revenues) due to lower oil and gas revenues for the three months ended June 30, 2001 as compared to the same period in 2000 and a decrease in audit and tax fees. Depletion was $39,698 for the three months ended June 30, 2001 as compared to $35,965 for the same period in 2000, an increase of $3,733, or 10%. This increase was primarily due to a downward revision to proved reserves on one significant well, offset by a decline in oil production of 522 barrels for the three months ended June 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 $120,786 during the six months ended June 30, 2001 from the same period ended June 30, 2000. This increase was due to reductions of $201,914 in working capital and $4,510 in G&A expenses, offset by a decline in oil and gas sales receipts of $40,210 and increases in production costs of $28,096 and abandoned property costs of $17,332. The decrease in G&A was primarily due to less G&A being allocated (limited to 3% of oil and gas revenues) due to lower oil and gas revenues for the six months ended June 30, 2001 as compared to the same period in 2000. The decrease in oil and gas receipts resulted from a decline of $205,527 in production during 2001 as compared to the same period in 2000 and a decline in oil prices of $3,615, offset by an increase in gas and NGL prices of $168,932 during 2001. The increase in production costs was primarily due to additional well maintenance and workover costs incurred to stimulate well production. Net Cash Provided by Investing Activities The Partnership's investing activities during the six months ended June 30, 2001 and 2000 were related to expenditures for oil and gas equipment upgrades on active properties. Proceeds from disposition of assets of $10,056 and $3,753 were recognized during the six months ended June 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 six months ended June 30, 2001, cash distributions to the partners were $347,671, of which $3,477 was distributed to the managing general partner and $344,194 to the limited partners. For the same period ended June 30, 2000, cash distributions to the partners were $459,528, of which $4,595 was distributed to the managing general partner and $454,933 to the limited partners. For the three months ended June 30, 2001, no distributions were made by the partnership to its partners. Subsequent to June 30, 2001 the cash distribution that otherwise would have been mailed to partners in late June was made to holders of record as of July 9, 2001 and was mailed on July 13, 2001. For further information, see "Proposal to acquire partnerships" below. Proposal to acquire partnerships On June 29, 2001, Pioneer Natural Resources Company ("Pioneer") filed with the Securities and Exchange Commission Amendment No. 1 to the Form S-4 Registration Statement (File No. 333- 59094) (the "preliminary proxy statement/prospectus"), which proposes an agreement and plan of merger among Pioneer, Pioneer Natural Resources USA, Inc. ("Pioneer USA"), a wholly-owned subsidiary of Pioneer, and 46 Parker & Parsley limited partnerships. Each partnership that approves the agreement and plan of merger and the other related merger proposals will merge 10 with and into Pioneer USA upon the closing of the transactions described in the preliminary proxy statement/prospectus, and the partnership interests of each such partnership will be converted into the right to receive Pioneer common stock. The Partnership is one of the 46 Parker & Parsley limited partnerships that will be asked to approve the agreement and plan of merger. The preliminary proxy statement/prospectus is non-binding and is subject to, among other things, consideration of offers from third parties to purchase any partnership or its assets and the majority approval of the limited partnership interests in each partnership. Pioneer USA will solicit proxies from limited partners to approve the mergers only when the proxy statement/prospectus is final and declared effective. No solicitation will be made using preliminary materials. Nonetheless, copies of the preliminary proxy statement/prospectus may be obtained without charge upon request from Pioneer Natural Resources Company, 5205 North O'Connor Blvd., Suite 1400, Irving, Texas 75039, Attention: Investor Relations. The limited partners are urged to read the proxy statement/prospectus of Pioneer filed with the Securities and Exchange Commission, when it is finalized, because it contains important information about the proposed mergers, including information about the direct and indirect interests of Pioneer USA and Pioneer in the mergers. The limited partners may also obtain the preliminary and (when filed) final proxy statement/prospectus and other relevant documents relating to 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 87-B, LTD. (A Texas Limited Partnership) S I G N A T U R E S Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PARKER & PARSLEY 87-B, LTD. By: Pioneer Natural Resources USA, Inc., Managing General Partner Dated: August 8, 2001 By: /s/ Rich Dealy ------------------------------------- Rich Dealy, Vice President and Chief Accounting Officer 12

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