10-Q 1 s89a01.txt P&P 89-A 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. 33-26097-01 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 10 wells plugged and abandoned during the current 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) 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 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