10-Q 1 s87b01.txt P&P 87-B 9/30/01 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. 33-12244-02 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. 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 partners. For the same period ended September 30, 10 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) 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: November 9, 2001 By: /s/ Rich Dealy ------------------------------- Rich Dealy, Vice President and Chief Accounting Officer 13

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