10-Q 1 s90bc01.txt P&P 90-BC 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. 33-26097-08 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. 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 7 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. 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 8 from one well plugged and abandoned in the current 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 11 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. 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) 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 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

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