Filed Pursuant to Rule 424(b)(3)
Registration No. 333-59094
[PIONEER LOGO]
PIONEER NATURAL RESOURCES COMPANY
COMMON STOCK
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
--------------------------------
THE DATE OF THIS SUPPLEMENT IS NOVEMBER 15, 2001.
--------------------------------
Dear Limited Partners:
The following information supplements the proxy statement/prospectus dated
October 12, 2001, of Pioneer Natural Resources Company, a Delaware corporation
that we call Pioneer Parent, and Pioneer Natural Resources USA, Inc., a Delaware
corporation that we call Pioneer USA, by which Pioneer USA is soliciting proxies
to be voted at a special meeting of the limited partners of each of the
following partnerships. The purpose of the special meeting is for the limited
partners of each partnership to vote upon the merger of the partnership with and
into Pioneer USA that, if completed, will result in the limited partners'
receiving common stock of Pioneer Parent for their partnership interests.
Parker & Parsley 81-I, Ltd. Parker & Parsley 88-A Conv., L.P.
Parker & Parsley 81-II, Ltd. Parker & Parsley 88-A, L.P.
Parker & Parsley 82-I, Ltd. Parker & Parsley 88-B Conv., L.P.
Parker & Parsley 82-II, Ltd. Parker & Parsley 88-B, L.P.
Parker & Parsley 82-III, Ltd. Parker & Parsley 88-C Conv., L.P.
Parker & Parsley 83-A, Ltd. Parker & Parsley 88-C, L.P.
Parker & Parsley 83-B, Ltd. Parker & Parsley Producing Properties 88-A, L.P.
Parker & Parsley 84-A, Ltd. Parker & Parsley Private Investment 88, L.P.
Parker & Parsley 85-A, Ltd. Parker & Parsley 89-A Conv., L.P.
Parker & Parsley 85-B, Ltd. Parker & Parsley 89-A, L.P.
Parker & Parsley Private Investment 85-A, Ltd. Parker & Parsley 89-B Conv., L.P.
Parker & Parsley Selected 85 Private Investment, Ltd. Parker & Parsley 89-B, L.P.
Parker & Parsley 86-A, Ltd. Parker & Parsley Private Investment 89, L.P.
Parker & Parsley 86-B, Ltd. Parker & Parsley 90-A Conv., L.P.
Parker & Parsley 86-C, Ltd. Parker & Parsley 90-A, L.P.
Parker & Parsley Private Investment 86, Ltd. Parker & Parsley 90-B Conv., L.P.
Parker & Parsley 87-A Conv., Ltd. Parker & Parsley 90-B, L.P.
Parker & Parsley 87-A , Ltd. Parker & Parsley 90-C Conv., L.P.
Parker & Parsley 87-B Conv., Ltd. Parker & Parsley 90-C, L.P.
Parker & Parsley 87-B, Ltd. Parker & Parsley Private Investment 90, L.P.
Parker & Parsley Producing Properties 87-A, Ltd. Parker & Parsley 90 Spraberry Private Development, L.P.
Parker & Parsley Producing Properties 87-B, Ltd. Parker & Parsley 91-A, L.P.
Parker & Parsley Private Investment 87, Ltd. Parker & Parsley 91-B, L.P.
As discussed in the proxy statement/prospectus, we are the managing or sole
general partner of each partnership. Our board of directors recommends the
approval of the merger proposals for each of the partnerships. We urge you to
vote FOR the merger proposals for each partnership in which you own an interest
and return your proxy card promptly so that your vote may be counted at the
special meeting for each partnership scheduled for December 20, 2001.
Sincerely,
Pioneer Natural Resources USA, Inc.
NYMEX FUTURES PRICES
The following table shows the NYMEX futures price for oil and gas as of
March 30, 2001, the date that Pioneer and Pioneer USA used in the calculation of
the reserve value portion of the merger value for each partnership, and as of
November 15, 2001, the date of this supplement. Oil and gas prices are subject
to rapid change. See "Risk Factors -- Risk Factors Relating to the Merger of
Each Partnership -- The Merger Value for a Partnership Will Not be Adjusted For
Changes in Oil and Gas Prices Before the Completion of Its Merger" on page 20 of
the proxy statement/prospectus.
MARCH 30, 2001 NOVEMBER 15, 2001 (1)
------------------------------------- ---------------------------------
DATE OIL ($/BBL) GAS ($/MCF)(2) OIL ($/BBL) GAS ($/MCF)(2)
-------------------------------------- ---------------- ------------------- ------------- ----------------
April - December 2001............... 26.17 5.18 -- --
December 2001....................... -- -- 17.46 2.55
2002................................ 24.36 4.61 18.90 2.98
2003................................ 22.83 4.16 19.74 3.46
2004................................ 22.31 4.09 20.15 3.66
2005................................ 21.97 4.12 20.31 3.78
Thereafter.......................... 21.97 4.12 20.31 3.78
----------
(1) NYMEX prices for some periods can be found without charge on the web site
maintained by the NYMEX at www.nymex.com. Many institutional brokerage
houses can also provide this information. Limited partners seeking
information about NYMEX prices are encouraged to contact their own brokers.
(2) The NYMEX price for gas is quoted in dollars per million British thermal
units, or MMBTU. We converted those prices to dollars per thousand cubic
feet, or Mcf.
RECENT DEVELOPMENTS FOR PIONEER PARENT
On October 31, 2001, Pioneer Parent announced an oil discovery on the Ozona
Deep prospect in the deepwater Gulf of Mexico and the results from an appraisal
well on the Stirrup discovery on the Gulf of Mexico shelf. The Ozona Deep
discovery well was logged, fluid samples were taken for analysis, and the well
will be temporarily suspended without further testing. Appraisal plans for 2002
will be finalized following the analysis of the data gathered in the discovery
well. Pioneer Parent has a 32% working interest in the well and Marathon Oil
Company has a 68% working interest and is operator.
The Stirrup #2 appraisal well (Mustang Island block 861), the initial test
of a second large fault block on the Stirrup structure, found three productive
sequences in the middle Frio formation. The discovery well was temporarily
suspended pending fabrication of facilities which is underway. First production
is expected in April 2002. Pioneer Parent has a 25% working interest in the
5,600-acre unit that includes the Stirrup field.
Pioneer Parent also announced that the well drilled on the Malta prospect
on the Gulf of Mexico shelf encountered wet sands and will be plugged and
abandoned.
CAPITAL BUDGET AND FUTURE PRODUCTION OUTLOOK
Pioneer Parent has adopted a $425 million capital expenditure budget for
2002, based upon current commodity prices. The 2002 capital expenditures budget
includes $200 million of capital earmarked for development of Pioneer Parent's
deepwater Gulf of Mexico Canyon Express, Devils Tower and Falcon projects and
Pioneer Parent's Sable oil discovery offshore South Africa. Net to Pioneer
Parent's interest, the aggregate production contributed by these projects is
expected to increase Pioneer Parent's worldwide annual production by 12% during
2002, to a range of 46 to 48 million barrels of oil equivalent, or MMBOE, and by
31% in 2003, to a range of 60 to 63 MMBOE.
THIRD QUARTER RESULTS FOR PIONEER PARENT
Revenues from oil and gas operations were $198.1 million and $674.7 million
for the three and nine months ended September 30, 2001, respectively, compared
to $228.6 million and $600.9 million for the three and nine months ended
September 30, 2000. The decrease in revenues during the three months ended
September 30, 2001, as compared to the three months ended September 30, 2000, is
due to commodity price decreases and a five percent decrease in production
volumes. The increase in revenues for the nine months ended September 30, 2001,
as compared to the nine months ended September 30, 2000, reflects commodity
price increases which more than offset a four percent decrease in production
volumes.
-2-
Average realized prices were $25.06 per barrel for oil, $15.01 per barrel
for natural gas liquids and $2.66 per thousand cubic feet, or Mcf, for natural
gas for the three months ended September 30, 2001, compared to average realized
prices of $25.48, $20.73 and $2.87, respectively, for the three months ended
September 30, 2000. Average realized prices were $24.95 per barrel for oil,
$18.87 per barrel for natural gas liquids and $3.40 per Mcf for natural gas for
the nine months ended September 30, 2001, compared to average realized prices of
$23.52, $19.37 and $2.49, respectively, for the nine months ended September 30,
2000.
Net income was $24.6 million, or $0.25 per share on a diluted basis, and
$120.9 million, or $1.21 per share on a diluted basis, respectively, for the
three and nine months ended September 30, 2001, compared to net income of $69.3
million, or $0.69 per share on a diluted basis, and $68.0 million, or $0.68 per
share on a diluted basis, respectively, for the three and nine months ended
September 30, 2000. Earnings for the three months ended September 30, 2001, as
compared to the same period in 2000, decreased primarily as result of commodity
price decreases. Earnings for the nine months ended September 30, 2001, as
compared to the same period in 2000, increased primarily as a result of
commodity price increases and an $8.7 million gain on the disposition of assets.
During the nine months ended September 30, 2001, Pioneer Parent spent
$364.4 million on capital expenditures including $170.2 million for development
activities, $147.9 million for exploration activities and $46.3 million on
acquisitions. While development activities include the costs of related
facilities, exploration activities include geological and geophysical data
purchases and acquisitions include the costs of leasing unproved properties, the
majority of Pioneer Parent's capital expenditures is spent on drilling wells.
Pioneer Parent has increased its 2001 capital expenditures budget by
approximately 25% to $540 million from the $430 million budget originally
established. This includes the recently announced acquisition of an incremental
interest in the Aconcagua field and the Canyon Express gathering system and
capital invested to appraise 2001 exploration discoveries.
Pioneer Parent's total book capitalization at September 30, 2001 was $2.7
billion, consisting of total debt of $1.5 billion and stockholders' equity of
$1.2 billion. Pioneer Parent reduced its total outstanding indebtedness by $17.7
million during the three months ended September 30, 2001 and by $24.2 million
during the nine months ended September 30, 2001.
THIRD QUARTER RESULTS FOR EACH PARTNERSHIP
We have prepared a separate supplement to the supplemental information to
this document for each partnership. The supplement contains:
o for each reporting partnership, the partnership's quarterly report
on Form 10-Q, including management's discussion and analysis of
financial condition and results of operations, for the nine months
ended September 30, 2001; and
o for each nonreporting partnership, the partnership's financial
statements, including management's discussion and analysis of
financial condition and results of operations, for the nine months
ended September 30, 2001.
The supplement to the supplemental information for each partnership
constitutes an integral part of this document. Please carefully read all of the
supplements for each partnership in which you are a limited partner.
ADDITIONAL INFORMATION
This supplement summarizes Pioneer Parent's Quarterly Report on Form 10-Q
for the nine months ended September 30, 2001, that Pioneer Parent has previously
filed with the SEC and that contains important information about Pioneer Parent
and its finances. See "Where You Can Find More Information" beginning on the
inside front cover page of the proxy statement/prospectus for more information
on documents incorporated by reference and how to obtain them.
YOU ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS FILED WITH THE SEC
BECAUSE IT CONTAINS IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER, INCLUDING
INFORMATION ABOUT (1) THE DIRECT AND INDIRECT INTERESTS OF US AND OUR PARENT
COMPANY AS PARTICIPANTS IN THE MERGER, (2) OUR OWNERSHIP OF INTERESTS IN THE
LIMITED PARTNERSHIPS AND (3) OUR CONFLICTING INTERESTS IN RECOMMENDING THE
MERGER. 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, TELEPHONE: (972) 969-3584, ATTENTION: INVESTOR
RELATIONS. YOU MAY ALSO OBTAIN THE PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT
DOCUMENTS RELATING TO THE PROPOSED MERGERS FREE THROUGH THE INTERNET WEB SITE
THAT THE SEC MAINTAINS AT WWW.SEC.GOV.
-3-
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 88-A, L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
-------------------------------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
--------------------------------
This document contains important information specific to Parker &
Parsley 88-A, L.P. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 33-19659-01
PARKER & PARSLEY 88-A, L.P.
---------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 75-2225738
------------------------------- ----------------------
(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 88-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 88-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 $ 367,261 $ 193,491
Accounts receivable - oil and gas sales 128,453 224,465
------------- ------------
Total current assets 495,714 417,956
------------- ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 10,117,650 10,111,281
Accumulated depletion (8,688,082) (8,534,409)
------------- ------------
Net oil and gas properties 1,429,568 1,576,872
------------- ------------
$ 1,925,282 $ 1,994,828
============= ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 53,099 $ 18,724
Partners' capital:
Managing general partner 18,964 20,003
Limited partners (12,935 interests) 1,853,219 1,956,101
------------- ------------
1,872,183 1,976,104
------------- ------------
$ 1,925,282 $ 1,994,828
============= ============
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 88-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 $ 279,405 $ 404,891 $ 1,050,356 $ 1,043,026
Interest 2,482 4,613 9,266 11,691
Gain on disposition of assets -- -- -- 259
------------ ------------ ------------ ------------
281,887 409,504 1,059,622 1,054,976
------------ ------------ ------------ ------------
Costs and expenses:
Oil and gas production 146,434 130,098 439,961 415,111
General and administrative 8,383 12,147 31,511 31,291
Impairment of oil and gas properties 52,901 -- 52,901 --
Depletion 35,751 30,877 100,772 79,675
------------ ------------ ------------ ------------
243,469 173,122 625,145 526,077
------------ ------------ ------------ ------------
Net income $ 38,418 $ 236,382 $ 434,477 $ 528,899
============ ============ ============ ============
Allocation of net income:
Managing general partner $ 384 $ 2,364 $ 4,345 $ 5,289
============ ============ ============ ============
Limited partners $ 38,034 $ 234,018 $ 430,132 $ 523,610
============ ============ ============ ============
Net income per limited
partnership interest $ 2.94 $ 18.09 $ 33.25 $ 40.48
============ ============ ============ ============
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 88-A, L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
---------- ----------- -----------
Balance at January 1, 2001 $ 20,003 $ 1,956,101 $ 1,976,104
Distributions (5,384) (533,014) (538,398)
Net income 4,345 430,132 434,477
---------- ----------- -----------
Balance at September 30, 2001 $ 18,964 $ 1,853,219 $ 1,872,183
========== =========== ===========
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 88-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 $ 434,477 $ 528,899
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 52,901 --
Depletion 100,772 79,675
Gain on disposition of assets -- (259)
Changes in assets and liabilities:
Accounts receivable 96,012 (21,329)
Accounts payable 34,375 22,103
---------- ----------
Net cash provided by operating activities 718,537 609,089
---------- ----------
Cash flows from investing activities:
Additions to oil and gas properties (6,369) (9,580)
Proceeds from asset dispositions -- 259
---------- ----------
Net cash used in investing activities (6,369) (9,321)
---------- ----------
Cash flows used in financing activities:
Cash distributions to partners (538,398) (594,086)
---------- ----------
Net increase in cash 173,770 5,682
Cash at beginning of period 193,491 215,801
---------- ----------
Cash at end of period $ 367,261 $ 221,483
========== ==========
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 88-A, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 88-A, L.P. (the "Partnership") is a limited partnership
organized in 1988 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. 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
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
7
provision of $52,901 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
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 $3,228,907 of which $3,153,865 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.
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 increased 1% to $1,050,356 for the nine
months ended September 30, 2001 as compared to $1,043,026 for the same period in
2000. The increase in revenues resulted from higher average prices received for
gas, offset by lower average prices received for oil and natural gas liquids
("NGLs") and a decline in production. For the nine months ended September 30,
2001, 25,222 barrels of oil, 10,396 barrels of NGLs and 65,563 mcf of gas were
sold, or 46,545 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 24,596 barrels of oil, 13,677 barrels of NGLs and 56,955 mcf
of gas were sold, or 47,766 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 $1.98, or 7%, from $28.30
for the nine months ended September 30, 2000 to $26.32 for the same period in
2001. The average price received per barrel of NGLs decreased $.25, or 2%, from
$14.48 during the nine months ended September 30, 2000 to $14.23 for the same
period in 2001. The average price received per mcf of gas increased 39% from
$2.62 during the nine months ended September 30, 2000 to $3.64 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 $259 was recognized during the nine months
ended September 30, 2000 resulting from equipment credits received on one well.
8
Costs and Expenses:
Total costs and expenses increased to $625,145 for the nine months ended
September 30, 2001 as compared to $526,077 for the same period in 2000, an
increase of $99,068, or 19%. This increase was due to increases in the
impairment of oil and gas properties, production costs, depletion and general
and administrative expenses ("G&A").
Production costs were $439,961 for the nine months ended September 30, 2001 and
$415,111 for the same period in 2000 resulting in an increase of $24,850, or 6%.
The increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production, offset by a decrease in
workover costs.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A increased
1%, from $31,291 for the nine months ended September 30, 2000 to $31,511 for the
same period in 2001, primarily due to a higher percentage of the managing
general partner's G&A being allocated (limited to 3% of oil and gas revenues) as
a result of increased 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 $52,901 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $100,772 for the nine months ended September 30, 2001 as compared
to $79,675 for the same period in 2000, representing an increase of $21,097, or
26%. This increase was the result of a decrease in proved reserves during the
period ended September 30, 2001 due to lower commodity prices and an increase in
oil production of 626 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 $279,405 for the three
months ended September 30, 2001 as compared to $404,891 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
9
ended September 30, 2001, 7,667 barrels of oil, 3,981 barrels of NGLs and 17,597
mcf of gas were sold, or 14,581 BOEs. For the three months ended September 30,
2000, 9,541 barrels of oil, 4,325 barrels of NGLs and 20,466 mcf of gas were
sold, or 17,277 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 $1.83, or 7%, from $27.98
for the three months ended September 30, 2000 to $26.15 for the same period in
2001. The average price received per barrel of NGLs decreased $4.85, or 30%,
from $15.92 during the three months ended September 30, 2000 to $11.07 for the
same period in 2001. The average price received per mcf of gas decreased 41%
from $3.38 during the three months ended September 30, 2000 to $1.98 for the
same period in 2001.
Costs and Expenses:
Total costs and expenses increased to $243,469 for the three months ended
September 30, 2001 as compared to $173,122 for the same period in 2000, an
increase of $70,347, or 41%. This increase was due to increases in the
impairment of oil and gas properties, production costs and depletion, offset by
a decrease in G&A.
Production costs were $146,434 for the three months ended September 30, 2001 and
$130,098 for the same period in 2000, resulting in a $16,336 increase, or 13%.
The increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production, offset by a decline in
production taxes.
During this period, G&A decreased 31% from $12,147 for the three months ended
September 30, 2000 to $8,383 for the same period in 2001, 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 $52,901 related to
its proved oil and gas properties during the period ended September 30, 2001.
Depletion was $35,751 for the three months ended September 30, 2001 as compared
to $30,877 for the same period in 2000, representing an increase of $4,874, or
16%. This increase was due to a decrease in proved reserves during the period
ended September 30, 2001 compared to the same period in 2000 as a result of
lower commodity prices, offset by a decrease in oil production of 1,874 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 $109,448 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to an increase in oil and gas sales receipts of $4,905 and
a reduction of $129,613 in working capital, offset
10
by increases in production costs of $24,850 and G&A expenses of $220. The
increase in revenue receipts resulted from increases in gas prices of $58,271
and $47,798 resulting from an increase in oil and gas production during 2001 as
compared to the same period in 2000, offset by decreases of $54,476 in oil and
NGL prices and $46,688 in NGL production. The increase in production costs was
primarily due to higher ad valorem taxes and additional well maintenance costs
incurred to stimulate well production, offset by a decrease in workover costs.
The increase in G&A was primarily due to a higher percentage of the managing
general partner's G&A being allocated (limited to 3% of oil and gas revenues) as
a result of increased oil and gas revenues.
Net Cash Used in Investing Activities
The Partnership's principal 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 $259 received during the nine months ended
September 30, 2000 were due to equipment credits received on one well.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $538,398, of which $5,384 was distributed to the managing general partner
and $533,014 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $594,086, of which $5,941 was
distributed to the managing general partner and $588,145 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.
11
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 88-A, L.P.
(A Delaware Limited Partnership)
SIGNATURES
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 88-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
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 88-A CONV., L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
-------------------------------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
--------------------------------
This document contains important information specific to Parker &
Parsley 88-A Conv., L.P. and supplements the supplemental information to the
proxy statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY 88-A CONV., L.P.
(A Delaware Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY 88-A CONV., L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- -----------
(Unaudited)
ASSETS
Current assets:
Cash $ 105,513 $ 54,706
Accounts receivable - oil and gas sales 37,665 65,812
----------- -----------
Total current assets 143,178 120,518
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 2,966,854 2,964,986
Accumulated depletion (2,547,573) (2,502,477)
----------- -----------
Net oil and gas properties 419,281 462,509
----------- -----------
$ 562,459 $ 583,027
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable-affiliate $ 15,550 $ 5,544
Partners' capital:
Managing general partner 5,541 5,847
Limited partners (3,793 interests) 541,368 571,636
----------- -----------
546,909 577,483
----------- -----------
$ 562,459 $ 583,027
=========== ===========
The financial information included as of September 30, 2001 has been
prepared by management without audit by independent public accountants.
The accompanying notes are an integral part of these
financial statements.
2
PARKER & PARSLEY 88-A 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 $ 81,958 $118,404 $308,009 $305,534
Interest 707 1,336 2,642 3,334
Gain on disposition of assets -- -- -- 76
-------- -------- -------- --------
82,665 119,740 310,651 308,944
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 42,940 38,155 129,012 121,722
General and administrative 2,458 3,552 9,240 9,166
Impairment of oil and gas properties 15,533 -- 15,533 --
Depletion 10,463 9,046 29,563 23,373
-------- -------- -------- --------
71,394 50,753 183,348 154,261
-------- -------- -------- --------
Net income $ 11,271 $ 68,987 $127,303 $154,683
======== ======== ======== ========
Allocation of net income:
Managing general partner $ 113 $ 690 $ 1,273 $ 1,547
======== ======== ======== ========
Limited partners $ 11,158 $ 68,297 $126,030 $153,136
======== ======== ======== ========
Net income per limited
partnership interest $ 2.94 $ 18.00 $ 33.23 $ 40.37
======== ======== ======== ========
The financial information included herein has been prepared by management
without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
3
PARKER & PARSLEY 88-A CONV., L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
--------- --------- ---------
Balance at January 1, 2001 $ 5,847 $ 571,636 $ 577,483
Distributions (1,579) (156,298) (157,877)
Net income 1,273 126,030 127,303
--------- --------- ---------
Balance at September 30, 2001 $ 5,541 $ 541,368 $ 546,909
========= ========= =========
The financial information included herein has been prepared by management
without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
4
PARKER & PARSLEY 88-A CONV., 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 $ 127,303 $ 154,683
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 15,533 --
Depletion 29,563 23,373
Gain on disposition of assets -- (76)
Changes in assets and liabilities:
Accounts receivable 28,147 (10,858)
Accounts payable 10,006 6,579
--------- ---------
Net cash provided by operating activities 210,552 173,701
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (1,868) (2,809)
Proceeds from asset dispositions -- 76
--------- ---------
Net cash used in investing activities (1,868) (2,733)
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (157,877) (174,206)
--------- ---------
Net increase (decrease) in cash 50,807 (3,238)
Cash at beginning of period 54,706 66,104
--------- ---------
Cash at end of period $ 105,513 $ 62,866
========= =========
The financial information included herein has been prepared by management
without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
5
PARKER & PARSLEY 88-A CONV., L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 88-A Conv., L.P. (the "Partnership") was organized in 1988 as a
general partnership under the laws of the State of Texas and was converted to a
Delaware limited partnership in 1989.
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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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
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 $15,533 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
6
NOTE 4. 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 $944,717 of which $922,941 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.
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 increased 1% to $308,009 for the nine
months ended September 30, 2001 as compared to $305,534 for the same period in
2000. The increase in revenues resulted from higher average prices received for
gas, offset by lower average prices received for oil and natural gas liquids
("NGLs") and a decline in production. For the nine months ended September 30,
2001, 7,396 barrels of oil, 3,051 barrels of NGLs and 19,219 mcf of gas were
sold, or 13,650 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 7,212 barrels of oil, 4,010 barrels of NGLs and 16,705 mcf
of gas were sold, or 14,006 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 $1.98, or 7%, from $28.30
for the nine months ended September 30, 2000 to $26.32 for the same period in
2001. The average price received per barrel of NGLs decreased $.25, or 2%, from
$14.48 during the nine months ended September 30, 2000 to $14.23 for the same
period in 2001. The average price received per mcf of gas increased 39% from
$2.62 for the nine months ended September 30, 2000 to $3.64 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 $76 was recognized during the nine months ended
September 30, 2000 resulting from equipment credits received on one fully
depleted well.
7
Costs and Expenses:
Total costs and expenses increased to $183,348 for the nine months ended
September 30, 2001 as compared to $154,261 for the same period in 2000, an
increase of $29,087, or 19%. This increase was due to increases in the
impairment of oil and gas properties, production costs, depletion and general
and administrative expenses ("G&A").
Production costs were $129,012 for the nine months ended September 30, 2001 and
$121,722 for the same period in 2000, resulting in a $7,290 increase, or 6%.
This increase was due to higher ad valorem taxes and additional well maintenance
costs incurred to stimulate well production, offset by lower workover costs.
G&A's components are independent accounting and engineering fees and managing
general partner personnel and operating costs. During this period, G&A increased
1% from $9,166 for the nine months ended September 30, 2000 to $9,240 for the
same period in 2001, primarily due to a higher percentage of the managing
general partner's G&A being allocated (limited to 3% of oil and gas revenues) as
a result of increased 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 $15,533 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $29,563 for the nine months ended September 30, 2001 as compared
to $23,373 for the same period in 2000, an increase of $6,190, or 26%. This
increase was due to a decrease in proved reserves during the period ended
September 30, 2001 due to lower commodity prices for the nine months ended
September 30, 2001 as compared to the same period in 2000 and an increase in oil
production of 184 barrels for the nine months ended September 30, 2001 as
compared to the same period in 2000.
8
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 $81,958 for the three
months ended September 30, 2001 as compared to $118,404 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, 2,251
barrels of oil, 1,170 barrels of NGLs and 5,156 mcf of gas were sold, or 4,280
BOEs. For the three months ended September 30, 2000, 2,799 barrels of oil, 1,265
barrels of NGLs and 6,005 mcf of gas were sold, or 5,065 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 $1.83, or 7%, from $27.98
for the three months ended September 30, 2000 to $26.15 for the same period in
2001. The average price received per barrel of NGLs decreased $4.85, or 30%,
from $15.92 during the three months ended September 30, 2000 to $11.07 for the
same period in 2001. The average price received per mcf of gas decreased 41% to
$1.98 during the three months ended September 30, 2001 from $3.38 during the
same period in 2000.
Costs and Expenses:
Total costs and expenses increased to $71,394 for the three months ended
September 30, 2001 as compared to $50,753 for the same period in 2000, an
increase of $20,641, or 41%. This increase was due to increases in the
impairment of oil and gas properties, production costs and depletion, offset by
a decline in G&A.
Production costs were $42,940 for the three months ended September 30, 2001 and
$38,155 for the same period in 2000 resulting in a $4,785 increase, or 13%. The
increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production, offset by lower
production taxes.
During this period, G&A decreased 31% from $3,552 for the three months ended
September 30, 2000 to $2,458 for the same period in 2001, primarily due to a
lower percentage of the managing general partner's G&A 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 $15,533 related to
its proved oil and gas properties during the three months ended September 30,
2001.
Depletion was $10,463 for the three months ended September 30, 2001 as compared
to $9,046 for the same period in 2000, an increase in depletion of $1,417, or
16%. This increase was attributable to a decrease in proved reserves during the
period ended September 30, 2001 as a result of lower commodity prices, offset by
a decrease in oil production of 548 barrels for the three months ended September
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 $36,851 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to an increase in sales receipts of $1,783 and a reduction
in working capital of $42,432, offset by increases in production costs of $7,290
and G&A expenses of $74. The increase in oil and gas receipts resulted from an
increase of $17,129 in average prices received for gas and $358 resulted from
the increase in production during 2001 as compared to the same period in 2000,
offset by a decrease of $15,704 in average prices received for oil and NGLs
during 2001. The increase in production costs was primarily due to higher ad
valorem taxes and additional well maintenance costs incurred to stimulate well
production, offset by lower workover costs. The increase in G&A was primarily
due to a higher percentage of the managing general partner's G&A being allocated
(limited to 3% of oil and gas revenues) as a result of increased oil and gas
revenues.
Net Cash Used in Investing Activities
The Partnership's principal investing activities during the nine months ended
September 30, 2001 and 2000 were related to expenditures for equipment upgrades
on various oil and gas properties.
Proceeds of $76 recognized during the nine months ended September 30, 2000 were
from equipment credits 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 $157,877, of which $1,579 was distributed to the managing general partner
and $156,298 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $174,206, of which $1,742 was
distributed to the managing general partner and $172,464 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
10
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
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY
PRODUCING PROPERTIES 88-A, L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
----------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
----------
THIS DOCUMENT CONTAINS IMPORTANT INFORMATION SPECIFIC TO PARKER &
PARSLEY PRODUCING PROPERTIES 88-A, L.P. AND SUPPLEMENTS THE SUPPLEMENTAL
INFORMATION TO THE PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001, OF PIONEER
NATURAL RESOURCES COMPANY, A DELAWARE CORPORATION THAT WE CALL PIONEER PARENT,
AND PIONEER NATURAL RESOURCES USA, INC., A DELAWARE CORPORATION THAT WE CALL
PIONEER USA, BY WHICH PIONEER USA IS SOLICITING PROXIES TO BE VOTED AT A SPECIAL
MEETING OF THE LIMITED PARTNERS OF THE PARTNERSHIP. THE PURPOSE OF THE SPECIAL
MEETING IS FOR YOU TO VOTE UPON THE MERGER OF THE PARTNERSHIP WITH AND INTO
PIONEER USA THAT, IF COMPLETED, WILL RESULT IN YOUR RECEIVING COMMON STOCK OF
PIONEER PARENT FOR YOUR PARTNERSHIP INTERESTS.
THIS DOCUMENT CONTAINS THE PARTNERSHIP'S QUARTERLY REPORT ON FORM 10-Q,
INCLUDING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001.
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. 33-19133-A
PARKER & PARSLEY PRODUCING PROPERTIES 88-A, L.P.
-------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 75-2225758
----------------------------------------- -------------------------
(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 88-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 PRODUCING PROPERTIES 88-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 $ 343,338 $ 253,499
Accounts receivable - oil and gas sales 72,540 115,810
-------------- --------------
Total current assets 415,878 369,309
-------------- --------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 4,855,712 4,855,712
Accumulated depletion (3,793,693) (3,719,241)
-------------- --------------
Net oil and gas properties 1,062,019 1,136,471
-------------- --------------
$ 1,477,897 $ 1,505,780
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 29,420 $ 11,054
Partners' capital:
Managing general partner 14,416 14,879
Limited partners (11,222 interests) 1,434,061 1,479,847
-------------- --------------
1,448,477 1,494,726
-------------- --------------
$ 1,477,897 $ 1,505,780
============== ==============
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 88-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 $ 160,309 $ 182,810 $ 510,321 $ 529,705
Interest 2,283 4,475 8,508 12,279
Gain on disposition of assets -- -- 6,447 9,859
---------- ---------- ---------- ----------
162,592 187,285 525,276 551,843
---------- ---------- ---------- ----------
Costs and expenses:
Oil and gas production 72,619 64,917 199,948 264,170
General and administrative 3,974 5,484 14,480 15,891
Impairment of oil and gas properties 18,255 -- 18,255 --
Depletion 19,670 19,737 56,197 49,684
Abandoned property -- -- 10,766 --
---------- ---------- ---------- ----------
114,518 90,138 299,646 329,745
---------- ---------- ---------- ----------
Net income $ 48,074 $ 97,147 $ 225,630 $ 222,098
========== ========== ========== ==========
Allocation of net income:
Managing general partner $ 480 $ 971 $ 2,256 $ 2,221
========== ========== ========== ==========
Limited partners $ 47,594 $ 96,176 $ 223,374 $ 219,877
========== ========== ========== ==========
Net income per limited
partnership interest $ 4.25 $ 8.57 $ 19.91 $ 19.59
========== ========== ========== ==========
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 PRODUCING PROPERTIES 88-A, L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
------------ ------------ ------------
Balance at January 1, 2001 $ 14,879 $ 1,479,847 $ 1,494,726
Distributions (2,719) (269,160) (271,879)
Net income 2,256 223,374 225,630
------------ ------------ ------------
Balance at September 30, 2001 $ 14,416 $ 1,434,061 $ 1,448,477
============ ============ ============
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 PRODUCING PROPERTIES 88-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 $ 225,630 $ 222,098
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 18,255 --
Depletion 56,197 49,684
Gain on disposition of assets (6,447) (9,859)
Changes in assets and liabilities:
Accounts receivable 43,270 (1,287)
Accounts payable 18,366 16,675
------------ ------------
Net cash provided by operating activities 355,271 277,311
------------ ------------
Cash flows from investing activities:
Additions to oil and gas properties -- (782)
Proceeds from asset dispositions 6,447 9,859
------------ ------------
Net cash provided by investing activities 6,447 9,077
------------ ------------
Cash flows used in financing activities:
Cash distributions to partners (271,879) (339,285)
------------ ------------
Net increase (decrease) in cash 89,839 (52,897)
Cash at beginning of period 253,499 323,271
------------ ------------
Cash at end of period $ 343,338 $ 270,374
============ ============
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 88-A, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley Producing Properties 88-A, L.P. (the "Partnership") is a
limited partnership organized in 1988 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. 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
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
7
provision of $18,255 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
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 $2,088,664 of which $2,053,405 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.
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 4% to $510,321 for the nine
months ended September 30, 2001 as compared to $529,705 for the same period in
2000. The decrease in revenues resulted from lower average prices received for
oil and a decline in production, offset by higher average prices received for
gas and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 12,433 barrels of oil, 6,103 barrels of NGLs and 26,047 mcf of gas were
sold, or 22,877 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 12,685 barrels of oil, 7,553 barrels of NGLs and 29,106 mcf
of gas were sold, or 25,089 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 $1.70, or 6%, from $28.54
for the nine months ended September 30, 2000 to $26.84 for the same period in
2001. The average price received per barrel of NGLs increased $.12, or 1%, from
$13.80 during the nine months ended September 30, 2000 to $13.92 for the same
period in 2001. The average price received per mcf of gas increased 61% from
$2.18 during the nine months ended September 30, 2000 to $3.52 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.
8
Gains on disposition of assets of $6,447 and $9,859 were recognized during the
nine months ended September 30, 2001 and 2000, respectively. The gain recognized
during the nine months ended September 30, 2001 resulted from equipment credits
received on one well that was plugged and abandoned during the current period.
Expenses incurred during the nine months ended September 30, 2001 to plug this
well were $10,766. The gain recognized during the period ended September 30,
2000 resulted from equipment credits received on one fully depleted well.
Costs and Expenses:
Total costs and expenses decreased to $299,646 for the nine months ended
September 30, 2001 as compared to $329,745 for the same period in 2000, a
decrease of $30,099, or 9%. This decrease resulted from decreases in production
costs and general and administrative expenses ("G&A"), offset by increases in
the impairment of oil and gas properties, abandoned property costs and
depletion.
Production costs were $199,948 for the nine months ended September 30, 2001 and
$264,170 for the same period in 2000 resulting in a $64,222 decrease, or 24%.
The decrease was primarily due to lower workover expenses and well maintenance
costs, offset by 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
9% from $15,891 for the nine months ended September 30, 2000 to $14,480 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 lower 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 $18,255 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $56,197 for the nine months ended September 30, 2001 as compared
to $49,684 for the same period in 2000, representing an increase of $6,513, or
13%. This increase was primarily the result of a downward revision in proved
reserves during the period ended September 30, 2001 due to lower commodity
prices 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 12% to $160,309 for the three
months ended September 30, 2001 as compared to $182,810 for the same period in
2000. The decrease in revenues resulted from lower average prices received,
offset by a slight increase in production. For the three months ended September
30, 2001, 4,175 barrels of oil, 2,263 barrels of NGLs and 9,878 mcf of gas were
sold, or 8,084 BOEs. For the three months ended September 30, 2000, 4,197
barrels of oil, 2,315 barrels of NGLs and 8,704 mcf of gas were sold, or 7,963
BOEs.
The average price received per barrel of oil decreased $4.06, or 13%, from
$30.23 for the three months ended September 30, 2000 to $26.17 for the same
period in 2001. The average price received per barrel of NGLs decreased $.38, or
3%, from $13.50 during the three months ended September 30, 2000 to $13.12 for
the same period in 2001. The average price received per mcf of gas decreased 24%
from $2.84 during the three months ended September 30, 2000 to $2.16 for the
same period in 2001.
Costs and Expenses:
Total costs and expenses increased to $114,518 for the three months ended
September 30, 2001 as compared to $90,138 for the same period in 2000, an
increase of $24,380, or 27%. This increase was due to increases in the
impairment of oil and gas properties and production costs, offset by declines in
G&A and depletion.
Production costs were $72,619 for the three months ended September 30, 2001 and
$64,917 for the same period in 2000, resulting in a $7,702 increase, or 12%. The
increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production, offset by a decline in
workover expenses.
During this period, G&A decreased 28% from $5,484 for the three months ended
September 30, 2000 to $3,974 for the same period in 2001, primarily due to a
lower percentage of the managing general partner's G&A being allocated as a
result of lower oil and gas revenues.
The Partnership recognized a non-cash impairment provision of $18,255 related to
its proved oil and gas properties during the three months ended September 30,
2001.
Depletion was $19,670 for the three months ended September 30, 2001 as compared
to $19,737 for the same period in 2000, representing a decrease in depletion of
$67.
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $77,960 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to decreases in
10
production costs of $64,222 and G&A expenses of $1,411 and a reduction of
$46,248 in working capital, offset by a decrease in oil and gas sales receipts
of $23,155 and an increase in abandoned property costs of $10,766. The decrease
in production costs was primarily due to lower workover expenses and well
maintenance costs, offset by higher ad valorem taxes. 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 lower oil and
gas revenues. The decrease in oil and gas receipts resulted from the decline in
oil prices of $21,616 during 2001 and $37,714 resulting from the decline in
production during 2001 as compared to the same period in 2000, offset by an
increase in gas and NGL prices of $36,175.
Net Cash Provided by Investing Activities
The Partnership's principal investing activities during the nine months ended
September 30, 2000 were related to equipment upgrades on various oil and gas
properties.
Proceeds from disposition of assets of $6,447 and $9,859 were recognized during
the nine months ended September 30, 2001 and 2000, respectively. The proceeds
recognized during the nine months ended September 30, 2001 resulted from
equipment credits received on one well that was plugged and abandoned during the
current period. The proceeds recognized during the period ended September 30,
2000 resulted 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 $271,879, of which $2,719 was distributed to the managing general partner
and $269,160 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $339,285, of which $3,393 was
distributed to the managing general partner and $335,892 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.
11
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 PRODUCING PROPERTIES 88-A, L.P.
(A Delaware Limited Partnership)
SIGNATURES
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 88-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
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 88-B, L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
-------------------------------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
--------------------------------
This document contains important information specific to Parker &
Parsley 88-B, L.P. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's quarterly report on Form 10-Q,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
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. 33-19659-02
PARKER & PARSLEY 88-B, L.P.
---------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 75-2240121
------------------------------- ----------------------
(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 88-B, 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 88-B, 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 $ 320,866 $ 144,763
Accounts receivable - oil and gas sales 107,113 198,467
------------- ------------
Total current assets 427,979 343,230
------------- ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 6,775,326 6,954,545
Accumulated depletion (5,888,350) (5,969,972)
------------- ------------
Net oil and gas properties 886,976 984,573
------------- ------------
$ 1,314,955 $ 1,327,803
============= ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 47,325 $ 16,350
Partners' capital:
Managing general partner 12,645 13,083
Limited partners (8,954 interests) 1,254,985 1,298,370
------------- ------------
1,267,630 1,311,453
------------- ------------
$ 1,314,955 $ 1,327,803
============= ============
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 88-B, 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 $ 259,220 $ 352,159 $ 873,186 $ 943,505
Interest 1,927 3,636 6,841 8,813
Gain on disposition of assets -- 7,108 7,855 15,953
---------- ---------- ---------- ----------
261,147 362,903 887,882 968,271
---------- ---------- ---------- ----------
Costs and expenses:
Oil and gas production 133,495 114,143 366,524 319,196
General and administrative 6,594 10,565 21,943 28,305
Impairment of oil and gas properties 34,975 -- 34,975 --
Depletion 31,335 16,274 68,090 51,791
Abandoned property 17 8,226 10,258 8,226
---------- ---------- ---------- ----------
206,416 149,208 501,790 407,518
---------- ---------- ---------- ----------
Net income $ 54,731 $ 213,695 $ 386,092 $ 560,753
========== ========== ========== ==========
Allocation of net income:
Managing general partner $ 547 $ 2,137 $ 3,861 $ 5,608
========== ========== ========== ==========
Limited partners $ 54,184 $ 211,558 $ 382,231 $ 555,145
========== ========== ========== ==========
Net income per limited
partnership interest $ 6.05 $ 23.63 $ 42.69 $ 62.00
========== ========== ========== ==========
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 88-B, L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 2001 $ 13,083 $ 1,298,370 $ 1,311,453
Distributions (4,299) (425,616) (429,915)
Net income 3,861 382,231 386,092
----------- ----------- -----------
Balance at September 30, 2001 $ 12,645 $ 1,254,985 $ 1,267,630
=========== =========== ===========
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 88-B, 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 $ 386,092 $ 560,753
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 34,975 --
Depletion 68,090 51,791
Gain on disposition of assets (7,855) (15,953)
Changes in assets and liabilities:
Accounts receivable 91,354 (29,725)
Accounts payable 32,919 22,569
---------- ----------
Net cash provided by operating activities 605,575 589,435
---------- ----------
Cash flows from investing activities:
Additions to oil and gas properties (6,028) (5,788)
Proceeds from asset dispositions 6,471 13,102
---------- ----------
Net cash provided by investing activities 443 7,314
---------- ----------
Cash flows used in financing activities:
Cash distributions to partners (429,915) (556,511)
---------- ----------
Net increase in cash 176,103 40,238
Cash at beginning of period 144,763 129,430
---------- ----------
Cash at end of period $ 320,866 $ 169,668
========== ==========
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 88-B, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 88-B, L.P. (the "Partnership") is a limited partnership
organized in 1988 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. 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
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
7
provision of $34,975 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
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 $3,086,337 of which $3,023,397 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.
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 7% to $873,186 for the nine
months ended September 30, 2001 as compared to $943,505 for the same period in
2000. The decrease in revenues resulted from lower average prices received for
oil and a decline in production, offset by higher average prices received for
gas and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 22,346 barrels of oil, 7,311 barrels of NGLs and 32,649 mcf of gas were
sold, or 35,099 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 24,263 barrels of oil, 10,130 barrels of NGLs and 41,502 mcf
of gas were sold, or 41,310 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 $.82, or 3%, from $28.32
for the nine months ended September 30, 2000 to $27.50 for the same period in
2001. The average price received per barrel of NGLs increased $.13, or 1%, from
$15.11 during the nine months ended September 30, 2000 to $15.24 for the same
period in 2001. The average price received per mcf of gas increased 81% from
$2.49 during the nine months ended September 30, 2000 to $4.51 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 $7,855 was recognized during the nine months
ended September 30, 2001 due to the sale of equipment on one well plugged and
abandoned during the current period. A gain of $15,953 was recognized during the
same period in 2000 resulting from an $11,638 salvage
8
income from one well plugged and abandoned during the current period and $4,315
from equipment credits received on one fully depleted well. Abandoned property
costs of $10,528 and $8,226 were incurred during the nine months ended September
30, 2001 and 2000, respectively, to abandon these wells.
Costs and Expenses:
Total costs and expenses increased to $501,790 for the nine months ended
September 30, 2001 as compared to $407,518 for the same period in 2000, an
increase of $94,272, or 23%. This increase was due to increases in production
costs, depletion, the impairment of oil and gas properties and abandoned
property costs, offset by a decline in general and administrative expenses
("G&A").
Production costs were $366,524 for the nine months ended September 30, 2001 and
$319,196 for the same period in 2000, resulting in an increase of $47,328, or
15%. The increase was primarily due to higher ad valorem taxes and additional
well maintenance costs and workover expenses 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
22% from $28,305 for the nine months ended September 30, 2000 to $21,943 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 $34,975 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $68,090 for the nine months ended September 30, 2001 as compared
to $51,791 for the same period in 2000, representing an increase of $16,299, or
31%. This increase was the result of 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 decline in oil production of
1,917 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 $259,220 for the three
months ended September 30, 2001 as compared to $352,159 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, 7,949
barrels of oil, 2,619 barrels of NGLs and 11,857 mcf of gas were sold, or 12,544
BOEs. For the three months ended September 30, 2000, 7,752 barrels of oil, 3,707
barrels of NGLs and 14,807 mcf of gas were sold, or 13,927 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 $5.15, or 16%, from
$31.31 for the three months ended September 30, 2000 to $26.16 for the same
period in 2001. The average price received per barrel of NGLs decreased $5.65,
or 33%, from $16.90 during the three months ended September 30, 2000 to $11.25
for the same period in 2001. The average price received per mcf of gas decreased
42% from $3.16 during the three months ended September 30, 2000 to $1.84 for the
same period in 2001.
Gain on disposition of assets of $7,108 was recognized during the three months
ended September 30, 2000. The gain was comprised of $4,315 from equipment
credits received on one fully depleted well and $2,793 received from salvage
income on one well plugged and abandoned during the current period. Abandoned
property costs of $17 and $8,226 were incurred during the three months ended
September 30, 2001 and 2000, respectively, resulting from one well plugged and
abandoned during the current periods.
Costs and Expenses:
Total costs and expenses increased to $206,416 for the three months ended
September 30, 2001 as compared to $149,208 for the same period in 2000, an
increase of $57,208, or 38%. This increase was due to increases in the
impairment of oil and gas properties, production costs and depletion, offset by
decreases in abandoned property costs and G&A.
Production costs were $133,495 for the three months ended September 30, 2001 and
$114,143 for the same period in 2000 resulting in a $19,352 increase, or 17%.
The increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production, offset by lower
production and ad valorem taxes.
During this period, G&A decreased 38% from $10,565 for the three months ended
September 30, 2000 to $6,594 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.
10
The Partnership recognized a non-cash impairment provision of $34,975 related to
its proved oil and gas properties during the three months ended September 30,
2001.
Depletion was $31,335 for the three months ended September 30, 2001 as compared
to $16,274 for the same period in 2000, representing an increase of $15,061, or
93%. This increase was due to a decrease 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.
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $16,140 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to reductions of $131,429 in working capital and G&A
expenses of $6,362, offset by increases in production costs of $47,328,
abandoned property costs of $2,032 and a reduction in oil and gas sales receipts
of $72,291. The decrease in oil and gas receipts resulted from the decline of
$21,833 in oil prices during 2001 and $135,612 resulting from the decline in
production during 2001 as compared to the same period in 2000, offset by
increases in gas and NGL prices of $85,154. The increase in production costs was
primarily due to higher ad valorem taxes and additional well maintenance and
workover 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 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 various
oil and gas properties.
Proceeds from dispositions of assets of $6,471 was recognized during the nine
months ended September 30, 2001. The proceeds were comprised of $5,968 received
from the sale of equipment on one well plugged and abandoned during the current
period and $503 from equipment credits received on one active well. Proceeds of
$13,102 received during the same period in 2000 were due to $8,845 on one well
plugged and abandoned during the current period and $4,257 from equipment
credits on one fully depleted well.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2000, cash distributions to the partners
were $429,915, of which $4,299 was distributed to the managing general partner
and $425,616 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $556,511, of which $5,565 was
distributed to the managing general partner and $550,946 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
11
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 88-B, L.P.
(A Delaware Limited Partnership)
SIGNATURES
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 88-B, 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
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 88-B CONV., L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
-------------------------------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
--------------------------------
This document contains important information specific to Parker &
Parsley 88-B Conv., L.P. and supplements the supplemental information to the
proxy statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY 88-B CONV., L.P.
(A Delaware Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY 88-B CONV., L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 129,543 $ 58,050
Accounts receivable - oil and gas sales 43,474 80,619
------------ ------------
Total current assets 173,017 138,669
------------ ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 2,751,252 2,824,029
Accumulated depletion (2,391,169) (2,424,313)
------------ ------------
Net oil and gas properties 360,083 399,716
------------ ------------
$ 533,100 $ 538,385
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 19,250 $ 6,684
Partners' capital:
Managing general partner 5,129 5,308
Limited partners (3,636 interests) 508,721 526,393
------------ ------------
513,850 531,701
------------ ------------
$ 533,100 $ 538,385
============ ============
The financial information included as of September 30, 2001 has been
prepared by management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY 88-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 $105,325 $143,104 $354,526 $383,160
Interest 775 1,466 2,757 3,544
Gain on disposition of assets -- 2,886 3,190 6,478
-------- -------- -------- --------
106,100 147,456 360,473 393,182
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 54,225 46,350 148,819 129,611
General and administrative 2,679 4,293 8,909 11,495
Impairment of oil and gas properties 14,234 -- 14,234 --
Depletion 12,704 6,631 27,619 21,046
Abandoned property 6 3,340 4,165 3,340
-------- -------- -------- --------
83,848 60,614 203,746 165,492
-------- -------- -------- --------
Net income $ 22,252 $ 86,842 $156,727 $227,690
======== ======== ======== ========
Allocation of net income:
Managing general partner $ 222 $ 869 $ 1,567 $ 2,277
======== ======== ======== ========
Limited partners $ 22,030 $ 85,973 $155,160 $225,413
======== ======== ======== ========
Net income per limited
partnership interest $ 6.06 $ 23.64 $ 42.67 $ 61.99
======== ======== ======== ========
The financial information included herein has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
3
PARKER & PARSLEY 88-B CONV., L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
------------ ------------ ------------
Balance at January 1, 2001 $ 5,308 $ 526,393 $ 531,701
Distributions (1,746) (172,832) (174,578)
Net income 1,567 155,160 156,727
------------ ------------ ------------
Balance at September 30, 2001 $ 5,129 $ 508,721 $ 513,850
============ ============ ============
The financial information included herein has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
4
PARKER & PARSLEY 88-B CONV., 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 $ 156,727 $ 227,690
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 14,234 --
Depletion 27,619 21,046
Gain on disposition of assets (3,190) (6,478)
Changes in assets and liabilities:
Accounts receivable 37,145 (20,356)
Accounts payable 13,356 9,333
------------ ------------
Net cash provided by operating activities 245,891 231,235
------------ ------------
Cash flows from investing activities:
Additions to oil and gas properties (2,448) (2,350)
Proceeds from asset dispositions 2,628 5,320
------------ ------------
Net cash provided by investing activities 180 2,970
------------ ------------
Cash flows used in financing activities:
Cash distributions to partners (174,578) (225,984)
------------ ------------
Net increase in cash 71,493 8,221
Cash at beginning of period 58,050 59,846
------------ ------------
Cash at end of period $ 129,543 $ 68,067
============ ============
The financial information included herein has been prepared by management
without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
5
PARKER & PARSLEY 88-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 88-B Conv., L.P. (the "Partnership") was organized in 1988 as a
general partnership under the laws of the State of Texas and was converted to a
Delaware limited partnership in 1989.
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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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
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 $14,234 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
6
NOTE 4. 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 $1,252,584 of which $1,233,237 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (1)
RESULTS OF OPERATIONS
Revenues:
Nine months ended September 30, 2001 compared with nine months ended September
30, 2000
The Partnership's oil and gas revenues decreased 7% to $354,526 for the nine
months ended September 30, 2001 as compared to $383,160 for the same period in
2000. The decrease in revenues resulted from lower average prices received for
oil and a decline in production, offset by higher average prices received for
gas and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 9,074 barrels of oil, 2,963 barrels of NGLs and 13,253 mcf of gas were
sold, or 14,246 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 9,855 barrels of oil, 4,114 barrels of NGLs and 16,862 mcf
of gas were sold, or 16,779 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 $.82, or 3%, from $28.32
for the nine months ended September 30, 2000 to $27.50 for the same period in
2001. The average price received per barrel of NGLs increased $.13, or 1%, from
$15.11 during the nine months ended September 30, 2000 to $15.24 for the same
period in 2001. The average price received per mcf of gas increased 81% from
$2.49 during the nine months ended September 30, 2000 to $4.51 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 $3,190 was recognized during the nine months
ended September 30, 2001 due to the sale of equipment on one well plugged and
abandoned during the current period. A gain of $6,478 was recognized during the
same period in 2000 resulting from a $4,726 salvage income from one well plugged
and abandoned during the current period and $1,752 from equipment credits
received on one fully depleted well. Abandoned property costs of $4,165 and
$3,340 were
7
incurred during the nine months ended September 30, 2001 and 2000, respectively,
to abandon these wells.
Costs and Expenses:
Total costs and expenses increased to $203,746 for the nine months ended
September 30, 2001 as compared to $165,492 for the same period in 2000, an
increase of $38,254, or 23%. 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 general and administrative expenses
("G&A").
Production costs were $148,819 for the nine months ended September 30, 2001 and
$129,611 for the same period in 2000, resulting in a $19,208 increase, or 15%.
The increase was due to higher ad valorem taxes and 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
22% from $11,495 for the nine months ended September 30, 2000 to $8,909 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 $14,234 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $27,619 for the nine months ended September 30, 2001 as compared
to $21,046 for the same period in 2000, an increase of $6,573, or 31%. This
increase was due to a decrease 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 decrease in oil production of 781 barrels for the nine
months ended September 30, 2001 as compared to the same period in 2000.
8
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 $105,325 for the three
months ended September 30, 2001 as compared to $143,104 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, 3,234
barrels of oil, 1,060 barrels of NGLs and 4,816 mcf of gas were sold, or 5,097
BOEs. For the three months ended September 30, 2000, 3,152 barrels of oil, 1,508
barrels of NGLs and 6,019 mcf of gas were sold, or 5,663 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 $5.15, or 16%, from
$31.31 for the three months ended September 30, 2000 to $26.16 for the same
period in 2001. The average price received per barrel of NGLs decreased $5.65,
or 33%, from $16.90 during the three months ended September 30, 2000 to $11.25
for the same period in 2001. The average price received per mcf of gas decreased
42% to $1.84 during the three months ended September 30, 2001 from $3.16 during
the same period in 2000.
Gain on disposition of assets of $2,886 was recognized during the three months
ended September 30, 2000. The gain was comprised of $1,752 from equipment
credits received on one fully depleted well and $1,134 received from salvage
income on one well plugged and abandoned during the current period. Abandoned
property costs of $6 and $3,340 were incurred during the three months ended
September 30, 2001 and 2000, respectively, resulting from one well plugged and
abandoned during the current periods.
Costs and Expenses:
Total costs and expenses increased to $83,848 for the three months ended
September 30, 2001 as compared to $60,614 for the same period in 2000, an
increase of $23,234, or 38%. This increase was due to increases in the
impairment of oil and gas properties, production costs and depletion, offset by
declines in abandoned property costs and G&A.
Production costs were $54,225 for the three months ended September 30, 2001 and
$46,350 for the same period in 2000, resulting in a $7,875 increase, or 17%. The
increase was due to higher ad valorem taxes and additional well maintenance
costs incurred to stimulate well production.
During this period, G&A decreased 38% from $4,293 for the three months ended
September 30, 2000 to $2,679 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 $14,234 related to
its proved oil and gas properties during the three months ended September 30,
2001.
9
Depletion was $12,704 for the three months ended September 30, 2001 as compared
to $6,631 for the same period in 2000, an increase of $6,073, or 92%. This
increase was attributable to a decrease 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.
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $14,656 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to reductions of $61,524 in working capital and $2,586 in
G&A expenses, offset by increases in production costs of $19,208 and abandoned
property costs of $825 and a reduction in oil and gas sales receipts of $29,421.
The decrease in oil and gas receipts resulted from the decrease of $8,833 in oil
prices and $55,318 resulting from the decline in production during 2001 as
compared to the same period in 2000, offset by an increase of $34,730 in gas and
NGL prices. The increase in production costs was primarily due to higher ad
valorem taxes and additional well maintenance and workover costs incurred to
stimulate well production. The decrease in G&A was 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 Investing Activities
The Partnership's principal investing activities during the nine months ended
September 30, 2001 and 2000 were related to expenditures for equipment upgrades
on various oil and gas properties.
Proceeds from disposition of assets of $2,628 was recognized during the nine
months ended September 30, 2001. The gain was comprised of $2,424 received from
the sale of equipment on one well plugged and abandoned during the current
period and $204 from equipment credits received on one active well. Proceeds of
$5,320 received during the same period in 2000 were due to $3,591 on one well
plugged and abandoned during the current period and $1,729 from equipment
credits 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 $174,578, of which $1,746 was distributed to the managing general partner
and $172,832 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $225,984, of which $2,260 was
distributed to the managing general partner and $223,724 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.
11
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 88-C, L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
-------------------------------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
--------------------------------
This document contains important information specific to Parker &
Parsley 88-C, L.P. and supplements the supplemental information to the proxy
statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY 88-C , L.P.
(A Delaware Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY 88-C, L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 72,627 $ 31,689
Accounts receivable - oil and gas sales 27,453 47,902
------------- ------------
Total current assets 100,080 79,591
------------- ------------
Oil and gas properties - at cost, based on the
successful efforts accounting method 1,711,107 1,751,887
Accumulated depletion (1,465,093) (1,481,594)
------------- ------------
Net oil and gas properties 246,014 270,293
------------- ------------
$ 346,094 $ 349,884
============= ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 12,249 $ 4,246
Partners' capital:
Managing general partner 3,326 3,443
Limited partners (2,431 interests) 330,519 342,195
------------- ------------
333,845 345,638
------------- ------------
$ 346,094 $ 349,884
============= ============
The financial information included as of September 30, 2001 has been prepared by
management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY 88-C, 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 $ 62,636 $ 85,503 $ 215,744 $ 227,002
Interest 547 803 1,580 1,977
Gain on disposition of assets -- 1,617 1,788 3,630
---------- ---------- ---------- ----------
63,183 87,923 219,112 232,609
---------- ---------- ---------- ----------
Costs and expenses:
Oil and gas production 33,832 27,815 92,793 80,121
General and administrative 1,950 2,565 6,703 6,810
Impairment of oil and gas properties 7,965 -- 7,965 --
Depletion 7,876 4,492 17,558 13,743
Abandoned property 7 1,872 2,337 1,872
---------- ---------- ---------- ----------
51,630 36,744 127,356 102,546
---------- ---------- ---------- ----------
Net income $ 11,553 $ 51,179 $ 91,756 $ 130,063
========== ========== ========== ==========
Allocation of net income:
Managing general partner $ 116 $ 512 $ 918 $ 1,301
========== ========== ========== ==========
Limited partners $ 11,437 $ 50,667 $ 90,838 $ 128,762
========== ========== ========== ==========
Net income per limited
partnership interest $ 4.71 $ 20.85 $ 37.37 $ 52.97
========== ========== ========== ==========
The financial information included herein has been prepared by management
without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
3
PARKER & PARSLEY 88-C, L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
----------- ----------- -----------
Balance at January 1, 2001 $ 3,443 $ 342,195 $ 345,638
Distributions (1,035) (102,514) (103,549)
Net income 918 90,838 91,756
----------- ----------- -----------
Balance at September 30, 2001 $ 3,326 $ 330,519 $ 333,845
=========== =========== ===========
The financial information included herein has been prepared by management
without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
4
PARKER & PARSLEY 88-C, 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 $ 91,756 $ 130,063
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 7,965 --
Depletion 17,558 13,743
Gain on disposition of assets (1,788) (3,630)
Changes in assets and liabilities:
Accounts receivable 20,449 (11,926)
Accounts payable 8,445 4,863
---------- ----------
Net cash provided by operating activities 144,385 133,113
---------- ----------
Cash flows from investing activities:
Additions to oil and gas properties (1,370) (1,327)
Proceeds from asset dispositions 1,472 2,981
---------- ----------
Net cash provided by investing activities 102 1,654
---------- ----------
Cash flows used in financing activities:
Cash distributions to partners (103,549) (133,968)
---------- ----------
Net increase in cash 40,938 799
Cash at beginning of period 31,689 35,943
---------- ----------
Cash at end of period $ 72,627 $ 36,742
========== ==========
The financial information included herein has been prepared by management
without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
5
PARKER & PARSLEY 88-C, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 88-C, L.P. (the "Partnership") is a limited partnership
organized in 1988 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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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
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
6
provision of $7,965 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
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 $714,658 of which $706,056 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.
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 5% to $215,744 for the nine
months ended September 30, 2001 as compared to $227,002 for the same period in
2000. The decrease in revenues resulted from lower average prices received for
oil and a decline in production, offset by higher average prices received for
gas and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 5,252 barrels of oil, 2,090 barrels of NGLs and 8,970 mcf of gas were
sold, or 8,837 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 5,698 barrels of oil, 2,609 barrels of NGLs and 10,687 mcf
of gas were sold, or 10,088 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 $.73, or 3%, from $28.38
for the nine months ended September 30, 2000 to $27.65 for the same period in
2001. The average price received per barrel of NGLs increased $.19, or 1%, from
$15.03 during the nine months ended September 30, 2000 to $15.22 for the same
period in 2001. The average price received per mcf of gas increased 77% from
$2.44 during the nine months ended September 30, 2000 to $4.31 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 $1,788 and $3,630 were recognized during the
nine months ended September 30, 2001 and 2000, respectively. The gain recognized
during the period ended September
7
30, 2001 was due to salvage income received on one well plugged and abandoned
during the current period. The gain recognized during the period ended September
30, 2000 was primarily due to salvage income received on one well plugged and
abandoned during the period ended 2000.
Costs and Expenses:
Total costs and expenses increased to $127,356 for the nine months ended
September 30, 2001 as compared to $102,546 for the same period in 2000, an
increase of $24,810, or 24%. 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 general and administrative expenses
("G&A").
Production costs were $92,793 for the nine months ended September 30, 2001 and
$80,121 for the same period in 2000 resulting in a $12,672 increase, or 16%. 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
2%, from $6,810 for the nine months ended September 30, 2000 to $6,703 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 $7,965 related to its proved oil and gas properties during the nine
months ended September 30, 2001.
Depletion was $17,558 for the nine months ended September 30, 2001 as compared
to $13,743 for the same period in 2000, an increase of $3,815, or 28%. This
increase was due to 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 446 barrels for the nine months ended September 30, 2001 as
compared to the same period in 2000.
Abandoned property costs of $2,337 and $1,872 were incurred for the nine months
ended September 30, 2001 and 2000, respectively, to plug and abandon one well
during the current periods.
8
Three months ended September 30, 2001 compared with three months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 27% to $62,636 for the three
months ended September 30, 2001 as compared to $85,503 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, 1,849
barrels of oil, 701 barrels of NGLs and 3,159 mcf of gas were sold, or 3,077
BOEs. For the three months ended September 30, 2000, 1,884 barrels of oil, 903
barrels of NGLs and 3,601 mcf of gas were sold, or 3,387 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 $4.98, or 16%, from
$31.26 for 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 $5.53,
or 32%, from $17.08 during the three months ended September 30, 2000 to $11.55
for the same period in 2001. The average price received per mcf of gas decreased
40% to $1.88 during the three months ended September 30, 2001 from $3.11 during
the same period in 2000.
A gain on disposition of assets of $1,617 recognized during the three months
ended September 30, 2000 was due to salvage income received on one well plugged
and abandoned during the period ended 2000.
Costs and Expenses:
Total costs and expenses increased to $51,630 for the three months ended
September 30, 2001 as compared to $36,744 for the same period in 2000, an
increase of $14,886, or 41%. This increase was due to increases in the
impairment of oil and gas properties, production costs and depletion, offset by
declines in G&A and abandoned property costs.
Production costs were $33,832 for the three months ended September 30, 2001 and
$27,815 for the same period in 2000, resulting in a $6,017 increase, or 22%. The
increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production.
During this period, G&A decreased 24%, from $2,565 for the three months ended
September 30, 2000 to $1,950 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 $7,965 related to
its proved oil and gas properties during the three months ended September 30,
2001.
9
Depletion was $7,876 for the three months ended September 30, 2001 as compared
to $4,492 for the same period in 2000, an increase of $3,384, or 75%. This
increase was attributable to a reduction in proved reserves during the period
ended September 30, 2001 due to lower commodity prices.
Abandoned property costs of $7 and $1,872 were incurred for the three months
ended September 30, 2001 and 2000, respectively, to plug and abandon one well
during the current periods.
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $11,272 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to reductions in working capital of $35,957 and G&A
expenses of $107, offset by increases in production costs of $12,672 and
abandoned property costs of $465 and a decline in oil and gas receipts of
$11,655. The decrease in oil and gas receipts resulted from a decline in oil
commodity prices of $4,158 during 2001 and a decline in production during 2001
of $27,641, offset by an increase in gas and NGL commodity prices of $20,144.
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. 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 Investing Activities
The Partnership's principal 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 $1,472 and $2,981 were recognized during the
nine months ended September 30, 2001 and 2000, respectively. The proceeds
recognized during 2001 were primarily due to salvage income received on a well
plugged and abandoned during the current year. The proceeds recognized during
2000 were due to salvage income received on one well plugged and abandoned
during the period ended 2000.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $103,549, of which $1,035 was distributed to the managing general partner
and $102,514 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $133,968, of which $1,340 was
distributed to the managing general partner and $132,628 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.
11
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC.
5205 NORTH O'CONNOR BLVD., SUITE 1400
IRVING, TEXAS 75039
SUPPLEMENT TO SUPPLEMENTAL INFORMATION
OF
PARKER & PARSLEY 88-C CONV., L.P.,
A DELAWARE LIMITED PARTNERSHIP
TO
PROXY STATEMENT/PROSPECTUS DATED OCTOBER 12, 2001
-------------------------------
THE DATE OF THIS SUPPLEMENT TO SUPPLEMENTAL INFORMATION IS NOVEMBER 15, 2001
--------------------------------
This document contains important information specific to Parker &
Parsley 88-C Conv., L.P. and supplements the supplemental information to the
proxy statement/prospectus dated October 12, 2001, of Pioneer Natural Resources
Company, a Delaware corporation that we call Pioneer Parent, and Pioneer Natural
Resources USA, Inc., a Delaware corporation that we call Pioneer USA, by which
Pioneer USA is soliciting proxies to be voted at a special meeting of the
limited partners of the partnership. The purpose of the special meeting is for
you to vote upon the merger of the partnership with and into Pioneer USA that,
if completed, will result in your receiving common stock of Pioneer Parent for
your partnership interests.
This document contains the partnership's financial statements,
including management's discussion and analysis of financial condition and
results of operations, for the nine months ended September 30, 2001.
PARKER & PARSLEY 88-C CONV., L.P.
(A Delaware Limited Partnership)
FINANCIAL STATEMENTS
September 30, 2001 and December 31, 2000
(Unaudited)
PARKER & PARSLEY 88-C CONV., L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
September 30, December 31,
2001 2000
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 108,920 $ 51,156
Accounts receivable - oil and gas sales 38,388 66,963
----------- -----------
Total current assets 147,308 118,119
----------- -----------
Oil and gas properties - at cost, based on the
successful efforts accounting method 2,400,899 2,458,118
Accumulated depletion (2,055,170) (2,078,258)
----------- -----------
Net oil and gas properties 345,729 379,860
----------- -----------
$ 493,037 $ 497,979
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable - affiliate $ 17,008 $ 5,927
Partners' capital:
Managing general partner 4,745 4,905
Limited partners (3,411 interests) 471,284 487,147
----------- -----------
476,029 492,052
----------- -----------
$ 493,037 $ 497,979
=========== ===========
The financial information included herein as of September 30, 2001 has been
prepared by management without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
2
PARKER & PARSLEY 88-C 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 $ 87,732 $119,902 $302,836 $318,657
Interest 679 1,227 2,413 3,010
Gain on disposition of assets -- 2,269 2,508 5,093
-------- -------- -------- --------
88,411 123,398 307,757 326,760
-------- -------- -------- --------
Costs and expenses:
Oil and gas production 47,414 39,073 130,202 112,471
General and administrative 2,451 3,597 9,129 9,560
Impairment of oil and gas properties 11,171 -- 11,171 --
Depletion 11,047 6,317 24,706 19,292
Abandoned property 49 2,626 3,279 2,626
-------- -------- -------- --------
72,132 51,613 178,487 143,949
-------- -------- -------- --------
Net income $ 16,279 $ 71,785 $129,270 $182,811
======== ======== ======== ========
Allocation of net income:
Managing general partner $ 163 $ 718 $ 1,293 $ 1,828
======== ======== ======== ========
Limited partners $ 16,116 $ 71,067 $127,977 $180,983
======== ======== ======== ========
Net income per limited
partnership interest $ 4.73 $ 20.84 $ 37.52 $ 53.06
======== ======== ======== ========
The financial information included herein has been prepared by management
without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
3
PARKER & PARSLEY 88-C CONV., L.P.
(A Delaware Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
(Unaudited)
Managing
general Limited
partner partners Total
--------- --------- ---------
Balance at January 1, 2001 $ 4,905 $ 487,147 $ 492,052
Distributions (1,453) (143,840) (145,293)
Net income 1,293 127,977 129,270
--------- --------- ---------
Balance at September 30, 2001 $ 4,745 $ 471,284 $ 476,029
========= ========= =========
The financial information included herein has been prepared by management
without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
4
PARKER & PARSLEY 88-C CONV., 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 $ 129,270 $ 182,811
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment of oil and gas properties 11,171 --
Depletion 24,706 19,292
Gain on disposition of assets (2,508) (5,093)
Changes in assets and liabilities:
Accounts receivable 28,575 (16,829)
Accounts payable 11,702 6,893
--------- ---------
Net cash provided by operating activities 202,916 187,074
--------- ---------
Cash flows from investing activities:
Additions to oil and gas properties (1,925) (1,862)
Proceeds from asset dispositions 2,066 4,183
--------- ---------
Net cash provided by investing activities 141 2,321
--------- ---------
Cash flows used in financing activities:
Cash distributions to partners (145,293) (187,973)
--------- ---------
Net increase in cash 57,764 1,422
Cash at beginning of period 51,156 56,353
--------- ---------
Cash at end of period $ 108,920 $ 57,775
========= =========
The financial information included herein has been prepared by management
without audit by independent public accountants.
The accompanying notes are an integral part of these financial statements.
5
PARKER & PARSLEY 88-C CONV., L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Parker & Parsley 88-C Conv., L.P. (the "Partnership") was organized in 1988 as a
general partnership under the laws of the State of Texas and was converted to a
Delaware limited partnership in 1989.
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 disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in these interim financial statements. The
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in the Partnership's report for the year ended
December 31, 2000, 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
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 $11,171 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
6
NOTE 4. 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 $1,009,229 of which $996,208 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.
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 5% to $302,836 for the nine
months ended September 30, 2001 as compared to $318,657 for the same period in
2000. The decrease in revenues resulted from lower average prices received from
oil and a decline in production, offset by higher average prices received for
gas and natural gas liquids ("NGLs"). For the nine months ended September 30,
2001, 7,375 barrels of oil, 2,938 barrels of NGLs and 12,521 mcf of gas were
sold, or 12,400 barrel of oil equivalents ("BOEs"). For the nine months ended
September 30, 2000, 7,994 barrels of oil, 3,665 barrels of NGLs and 14,995 mcf
of gas were sold, or 14,158 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 $.73, or 3%, from $28.38
for the nine months ended September 30, 2000 to $27.65 for the same period in
2001. The average price received per barrel of NGLs increased $.19, or 1%, from
$15.03 during the nine months ended September 30, 2000 to $15.22 for the same
period in 2001. The average price received per mcf of gas increased 77% from
$2.44 during the nine months ended September 30, 2000 to $4.31 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 $2,508 and $5,093 were recognized during the
nine months ended September 30, 2001 and 2000, respectively. The gain recognized
during the period ended September 30, 2001 was due to salvage income received on
one well plugged and abandoned during the current period. The gain recognized
during the period ended September 30, 2000 was primarily due to salvage income
received on one well plugged and abandoned during the period ended 2000.
7
Costs and Expenses:
Total costs and expenses increased to $178,487 for the nine months ended
September 30, 2001 as compared to $143,949 for the same period in 2000, an
increase of $34,538, or 24%. 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 $130,202 for the nine months ended September 30, 2001 and
$112,471 for the same period in 2000 resulting in a $17,731 increase, or 16%.
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 costs. During this period, G&A decreased 5%, from
$9,560 for the nine months ended September 30, 2000 to $9,129 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 $11,171 related to its proved oil and gas properties during the
nine months ended September 30, 2001.
Depletion was $24,706 for the nine months ended September 30, 2001 as compared
to $19,292 for the same period in 2000, an increase of $5,414, or 28%. This
increase was due to 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 619 barrels for the nine months ended September 30, 2001 as
compared to the same period in 2000.
Abandoned property costs of $3,279 and $2,626 were incurred for the nine months
ended September 30, 2001 and 2000, respectively, to plug and abandon one well
during the current periods.
8
Three months ended September 30, 2001 compared with three months ended September
30, 2000
Revenues:
The Partnership's oil and gas revenues decreased 27% to $87,732 for the three
months ended September 30, 2001 as compared to $119,902 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, 2,598
barrels of oil, 980 barrels of NGLs and 4,361 mcf of gas were sold, or 4,305
BOEs. For the three months ended September 30, 2000, 2,639 barrels of oil, 1,267
barrels of NGLs and 5,043 mcf of gas were sold, or 4,747 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 $4.98, or 16%, from
$31.26 for 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 $5.53,
or 32%, from $17.08 during the three months ended September 30, 2000 to $11.55
for the same period in 2001. The average price received per mcf of gas decreased
40% to $1.88 during the three months ended September 30, 2001 from $3.11 during
the same period in 2000.
A gain on disposition of assets of $2,269 recognized during the three months
ended September 30, 2000 was due to salvage income received on one well plugged
and abandoned during the period ended 2000.
Costs and Expenses:
Total costs and expenses increased to $72,132 for the three months ended
September 30, 2001 as compared to $51,613 for the same period in 2000, an
increase of $20,519, or 40%. This increase was due to increases in the
impairment of oil and gas properties, production costs and depletion, offset by
declines in G&A and abandoned property costs.
Production costs were $47,414 for the three months ended September 30, 2001 and
$39,073 for the same period in 2000, resulting in an $8,341 increase, or 21%.
The increase was primarily due to higher ad valorem taxes and additional well
maintenance costs incurred to stimulate well production.
During this period, G&A decreased 32%, from $3,597 for the three months ended
September 30, 2000 to $2,451 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 $11,171 related to
its proved oil and gas properties during the three months ended September 30,
2001.
Depletion was $11,047 for the three months ended September 30, 2001 as compared
to $6,317 for the same period in 2000, an increase of $4,730, or 75%. This
increase was attributable to a reduction in proved reserves during the period
ended September 30, 2001 due to lower commodity prices.
9
Abandoned property costs of $49 and $2,626 were incurred for the three months
ended September 30, 2001 and 2000, respectively, to plug and abandon one well
during the current periods.
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $15,842 during the nine
months ended September 30, 2001 from the same period ended September 30, 2000.
This increase was due to reductions in working capital of $50,213 and G&A
expenses of $431, offset by increases in production costs of $17,731 and
abandoned property costs of $653 and a reduction in oil and gas receipts of
$16,418. The decrease in oil and gas receipts resulted from the decrease in oil
commodity prices during 2001 of $5,974 and a decline in production of $38,893
during 2001 as compared to the same period in 2000, offset by increased gas and
NGL commodity prices of $28,449. 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. 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 Investing Activities
The Partnership's principal 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 $2,066 and $4,183 were recognized during the
nine months ended September 30, 2001 and 2000, respectively. The proceeds
recognized during 2001 were primarily due to salvage income received on a well
plugged and abandoned during the current year. The proceeds recognized during
2000 were due to salvage income received on one well plugged and abandoned
during the period ended 2000.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2001, cash distributions to the partners
were $145,293, of which $1,453 was distributed to the managing general partner
and $143,840 to the limited partners. For the same period ended September 30,
2000, cash distributions to the partners were $187,973, of which $1,880 was
distributed to the managing general partner and $186,093 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.
11