ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS.
Since the beginning of the calendar year, Rollins, Inc. and its subsidiaries have continued to operate and grow in the same principal services for homes and businesses.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
The response to Item 1.(b) is incorporated by reference from the table under the caption "Business Segment Information," on page 22 of the 1995 Annual Report to Stockholders.
(c) NARRATIVE DESCRIPTION OF BUSINESS.
(1)(i) The Registrant is a national company with headquarters located in Atlanta, Georgia, providing services to both residential and commercial customers. The four primary services provided are termite and pest control, protective services, lawn care and plantscaping. Additionally, the revenues by business segment are incorporated by reference to the table under the caption "Business Segment Information" on page 22 of the 1995 Annual Report to Stockholders.
Orkin Exterminating Company, Inc., a wholly owned subsidiary (Orkin), founded in 1901, is one of the world's largest termite and pest control companies. It provides customized services to approximately 1.6 million customers through a network of 386 branches serving customers in 49 states, the District of Columbia, the Bahamas, Canada, Mexico, and Puerto Rico. It provides customized pest control services to homes and businesses, including hotels, food service establishments, dairy farms and transportation companies. Orkin's continuous regular service provides protection against household pests, rodents and termites. Orkin's Lawn Care Division provides fertilization, weed and insect control, seeding, aeration of lawns, and tree and shrub care from 23 branches serving customers in nine states. Orkin's Plantscaping Division designs, installs and maintains green and flowering plants from ten branches and services customers in 21 states and the District of Columbia. It provides services to hotels, shopping malls, restaurants, and office buildings.
Rollins Protective Services, a division of the Registrant, was established in 1969. Services are provided from 51 branches serving customers in 41 states and the District of Columbia. A pioneer in developing customized wired and wireless electronic security systems, it provides full-service capabilities from system design and installation to maintenance and monitoring services. Full-service includes guaranteed maintenance programs, 24-hour emergency repairs, and 24-hour alarm monitoring services.
(ii) The Registrant has made no announcement of, nor did any information become public about, a new line of business or product requiring the investment of a material amount of the Registrant's total assets.
(iii) Sources and availability of raw materials present no particular problem to the Registrant, since its businesses are primarily in service-related industries.
(iv) Governmental licenses, patents, trademarks and franchises are of minor importance to the Registrant's service operations. Local licenses and permits are required in order for the Registrant to conduct its termite and pest control, protective services, lawn care and plantscaping operations in certain localities. In view of the widespread operations of the Registrant's service operations, the failure of a few local governments to license a facility would not have a material adverse effect on the results of operations of the Registrant.
(v) The business of the Registrant is affected by the seasonal nature of the Registrant's termite and pest control, lawn care and plantscaping service operations (Orkin Exterminating Company, Inc.). The metamorphosis of termites in the spring and summer (the occurrence of which is determined by the timing of the change in seasons) has historically resulted in an increase in the revenue and income of the Registrant's termite and pest control operations during such period. Lawn care services are seasonal and coincide with
the growing seasons of lawns. Plantscaping operations experience seasonal increases in revenues and operating income generated by the division's Exterior Color and Holiday programs offered during the spring and late fall.
(vi) Inapplicable.
(vii) The Registrant and its subsidiaries do not have a material part of their business that is dependent upon a single customer or a few customers, the loss of which would have a material effect on the business of the Registrant.
(viii) The dollar amount of service contracts and backlog orders as of the end of the Registrant's 1995 and 1994 calendar years was approximately $15,508,000 and $16,063,000, respectively. Backlog services and orders are usually provided within the month following the month of receipt, except in the area of prepaid pest control and alarm monitoring where services are usually provided within twelve months of receipt.
(ix) Inapplicable.
(x) The Registrant believes that each of its businesses competes favorably with competitors within its respective area. Orkin Exterminating Company, Inc. is one of the world's largest termite and pest control companies. Rollins Protective Services is a pioneer and one of the leaders in residential and commercial security. Orkin Lawn Care is one of the largest lawn care companies. Orkin Plantscaping is the industry's second largest company with operations in ten major markets.
The principal methods of competition in the Registrant's termite and pest control business are service and guarantees, including the money-back guarantee on termite and pest control, and the termite retreatment and damage repair guarantee to qualified homeowners. Competition in the plantscaping and lawn care businesses is based on providing customized services together with guarantees, with the Registrant offering the same money-back guarantee for the services. The principal method of competition in the residential protection business of the Registrant is the provision of customized emergency protection services to meet the particular needs of each customer.
(xi) Expenditures by the Registrant on research activities relating to the development of new products or services are not significant. Some of the new and improved service methods and products are researched, developed and produced by unaffiliated universities and companies. Also a portion of these methods and products are produced to the specifications provided by the Registrant.
(xii) The capital expenditures, earnings and competitive position of the Registrant and its subsidiaries are not materially affected by compliance with Federal, state and local provisions which have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment.
(xiii) The number of persons employed by the Registrant and its subsidiaries as of the end of 1995 was 8,956.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES.
Inapplicable.
ITEM 2.

ITEM 2. PROPERTIES.
The Registrant's administrative headquarters and central warehouse, both of which are owned by the Registrant, are located at 2170 Piedmont Road, N.E., Atlanta, Georgia 30324. The Registrant owns or leases several hundred branch offices and operating facilities used in its businesses. None of the branch offices, individually considered, represents a materially important physical property of the Registrant. The facilities are suitable and adequate to meet the current and reasonably anticipated future needs of the Registrant.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS.
During November 1995, Orkin and the Attorney General of Missouri and private plaintiffs reached an agreement in settlement of a class action regarding treatments for termites for residential customers with basement homes contracted for between January 1, 1987 and May 15, 1993. The Attorney General and the
private plaintiffs raised concerns that Orkin's initial termite protection treatment for these customers was incomplete. Orkin maintains that its customers have received treatment consistent with industry practices. In order to best serve its customers and to avoid the continued expense of litigation, Orkin has agreed to reinspect the basement homes of all applicable customers and apply additional termiticide, if needed. In the event a customer covered by this agreement has suffered termite damage as a result of insufficient termiticide, Orkin has agreed to repair the customer's basement home. The presiding judge of the Circuit Court of the City of St. Louis approved the settlement on December 13, 1995. The resolution does not constitute an admission of wrongdoing by the Company and did not have a material adverse effect on the Company's financial position, results of operations, or liquidity.
In the normal course of business, the Company is a defendant in a number of lawsuits which allege that plaintiffs have been damaged as a result of the rendering of services by Company personnel and equipment. The Company is actively contesting these actions. It is the opinion of Management that the outcome of these actions will not have a material adverse effect on the Company's financial position, results of operations, or liquidity.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Inapplicable.
ITEM 4.A. EXECUTIVE OFFICERS OF THE REGISTRANT.
Each of the executive officers of the Registrant was elected by the Board of Directors to serve until the Board of Directors' meeting immediately following the next annual meeting of stockholders or until his earlier removal by the Board of Directors or his resignation. The following table lists the executive officers of the Registrant and their ages, offices with the Registrant, and the dates from which they have continually served in their present offices with the Registrant.
- ------------------------ (1) R. Randall Rollins and Gary W. Rollins are brothers.
(2) Gene L. Smith served as the Registrant's Vice President of Finance for the period 12/30/85 to 1/21/91.
PART II
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Information containing dividends and stock prices on page 12 and the principal markets on which common shares are traded on page 25 of the 1995 Annual Report to Stockholders are incorporated herein by reference. The number of stockholders of record on December 31, 1995 was 3,764.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA.
Selected Financial Data on pages 10 and 11 of the 1995 Annual Report to Stockholders is incorporated herein by reference.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Management's Discussion and Analysis of Financial Condition and Results of Operations included on pages 13 through 15 of the 1995 Annual Report to Stockholders is incorporated herein by reference. The effects of inflation on operations were not material for the periods being reported.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following consolidated financial statements and supplementary data of the Registrant and its consolidated subsidiaries, included in the 1995 Annual Report to Stockholders, are incorporated herein by reference.
Financial Statements:
Statements of Income for each of the three years in the period ended December 31, 1995, page 17.
Statements of Earnings Retained for each of the three years in the period ended December 31, 1995, page 17.
Statements of Financial Position as of December 31, 1995 and 1994, page 16.
Statements of Cash Flows for each of the three years in the period ended December 31, 1995, page 18.
Notes to Financial Statements, pages 19 through 23.
Report of Independent Auditors, page 24.
Supplementary Data:
Quarterly Information, page 12.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Inapplicable.
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The response to Item 10, applicable to the Directors of the Registrant, is incorporated herein by reference to the information set forth under the caption "Election of Directors" in the Proxy Statement for the Annual Meeting of Stockholders to be held April 23, 1996. Additional information concerning executive officers is included in Part I, Item 4.A. of this Form 10-K.
Based solely on its review of copies of forms received by it pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended, or written representations from certain reporting persons, Registrant believes that during the fiscal year ended December 31, 1995 all filing requirements applicable to its officers, directors, and greater than 10% stockholders were complied with.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION.
The response to Item 11 is incorporated herein by reference to the information set forth under the caption "Executive Compensation" in the Proxy Statement for the Annual Meeting of Stockholders to be held April 23, 1996.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The response to Item 12 is incorporated herein by reference to the information set forth under the captions "Capital Stock" and "Election of Directors" in the Proxy Statement for the Annual Meeting of Stockholders to be held April 23, 1996.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The section entitled "Compensation Committee Interlocks and Insider Participation" and "Executive Compensation" in the Proxy Statement for the Annual Meeting of Stockholders to be held April 23, 1996, and related footnotes and information are incorporated herein by reference.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
The following are filed as part of this report:
(a) 1. Financial Statements
The following financial statements are incorporated herein by reference to portions of the 1995 Annual Report to Stockholders included with this Form 10-K:
Statements of Income for each of the three years in the period ended December 31, 1995, page 17.
Statements of Earnings Retained for each of the three years in the period ended December 31, 1995, page 17.
Statements of Financial Position as of December 31, 1995 and 1994, page 16.
Statement of Cash Flows for each of the three years in the period ended December 31, 1995, page 18.
Notes to Financial Statements, pages 19 through 23.
Report of Independent Auditors, page 24.
(a) 2. Financial Statement Schedule
II Valuation and Qualifying Accounts
Schedules not listed above have been omitted as either not applicable, immaterial or disclosed in the financial statements or notes thereto.
(a) 3. Exhibits (3)(i) The Company's Certificate of Incorporation is incorporated herein by reference to Exhibit (3)(a) as filed with its Form 10-K for the year ended December 31, 1992.
(ii) By-laws of Rollins, Inc. are incorporated herein by reference to Exhibit 3(b) as filed with its Form 10-K for the year ended December 31, 1993.
(10) Rollins, Inc. 1984 Employee Incentive Stock Option Plan is incorporated herein by reference to Exhibit (10) filed with the Company's Form 10-K for the year ended December 31, 1991.
Rollins, Inc. 1994 Employee Stock Incentive Plan is incorporated herein by reference to Exhibit A of the March 18, 1994 Proxy Statement for the Annual Meeting of Stockholders held on April 26, 1994.
(13) Portions of the Annual Report to Stockholders for the year ended December 31, 1995 which are specifically incorporated herein by reference.
(21) Subsidiaries of Registrant.
(23) Consent of Independent Public Accountants.
(24) Powers of Attorney for Directors.
(27) Financial Data Schedule.
(b) No reports on Form 8-K were required to be filed by the Company for the quarter ended December 31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 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.
ROLLINS, INC.
By: /s/ R. RANDALL ROLLINS
----------------------------------- R. Randall Rollins Chairman of the Board of Directors (Principal Executive Officer) March 27, 1996
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
The Directors of Rollins, Inc. (listed below) executed a power of attorney appointing Gary W. Rollins their attorney-in-fact, empowering him to sign this report on their behalf.
Wilton Looney, Director John W. Rollins, Director Henry B. Tippie, Director James B. Williams, Director Bill J. Dismuke, Director
/s/ GARY W. ROLLINS - ---------------------------------- Gary W. Rollins, As Attorney-in-Fact & Director, President and Chief Operating Officer March 27, 1996
ROLLINS, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
CONSOLIDATED FINANCIAL STATEMENTS OF ROLLINS, INC. AND SUBSIDIARIES:
The Registrant's 1995 Annual Report to Stockholders, portions of which are filed with this Form 10-K, contains on pages 16 through 24 the consolidated financial statements for the years ended December 31, 1995, 1994 and 1993 and the report of Arthur Andersen LLP on the financial statements for the years then ended. These financial statements and the report of Arthur Andersen LLP are incorporated herein by reference. The financial statements include the following:
Statements of Income for each of the three years in the period ended December 31, 1995.
Statements of Earnings Retained for each of the three years in the period ended December 31, 1995.
Statements of Financial Position as of December 31, 1995 and 1994.
Statements of Cash Flows for each of the three years in the period ended December 31, 1995.
Notes to Financial Statements.
REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE, Page 9. SCHEDULE
Schedules not listed above have been omitted as either not applicable, immaterial or disclosed in the financial statements or notes thereto.
REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE
To the Directors and the Stockholders of Rollins Inc.:
We have audited, in accordance with generally accepted auditing standards, the financial statements included in Rollins, Inc.'s annual report to stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 12, 1996. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in Item 14 of this Form 10-K is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia February 12, 1996
ROLLINS, INC. AND SUBSIDIARIES SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (IN THOUSANDS OF DOLLARS)
- ------------------------ NOTE: (1) Deductions represent the write-off of uncollectible receivables, net of recoveries.
(2) Includes a Special Charge of $12,000,000 ($7,440,000 after tax benefit or $.21 per share) relating to the write off of doubtful accounts at September 30, 1995, in the consumer finance operation, Rollins Acceptance Company.
EXHIBITS
EXHIBIT INDEX


ITEM 1. Business
Parker & Parsley 82-I, Ltd. (the "Registrant") is a limited partnership organized in 1982 under the laws of the State of Texas. The managing general partner is Parker & Parsley Development L.P. ("PPDLP") and its co-general partner is P&P Employees 82-I, Ltd., a Texas limited partnership ("EMPL"). PPDLP's general partner is Parker & Parsley Petroleum USA, Inc. ("PPUSA"). The managing general partner during the year ended December 31, 1994 was Parker & Parsley Development Company ("PPDC"). PPDC was merged into PPDLP on January 1, 1995. See Item 12 (c).
A Registration Statement, as amended, filed pursuant to the Securities Act of 1933, registering limited partnership interests aggregating $33,000,000 in a series of Texas limited partnerships formed under the Parker & Parsley 82 Drilling Program, was declared effective by the Securities and Exchange Commission on February 4, 1982. On June 1, 1982, the offering of limited partnership interests in the Registrant, the first partnership formed under such registration statement, was closed, with interests aggregating $9,782,000 being sold to 624 subscribers.
The Registrant engages primarily in oil and gas exploration, development and production and is not involved in any industry segment other than oil and gas. See "Item 6. Selected Financial Data" and "Item 8. Financial Statements and Supplementary Data" of this report for a summary of the Registrant's revenue, income and identifiable assets.
The principal markets during 1995 for the oil produced by the Registrant were refineries and oil transmission companies that have facilities near the Registrant's oil producing properties. The principal markets for the Registrant's gas were companies that have pipelines located near the Registrant's gas producing properties. Of the Registrant's oil and gas revenues for 1995, approximately 69% was attributable to sales made to Phibro Energy, Inc.
Because of the demand for oil and gas, the Registrant does not believe that the termination of the sales of its products to any one customer would have a material adverse impact on its operations. The loss of a particular customer for gas may have an effect if that particular customer has the only gas pipeline located in the areas of the Registrant's gas producing properties. The Registrant believes, however, that the effect would be temporary, until alternative arrangements could be made.
Federal and state regulation of oil and gas operations generally includes the fixing of maximum prices for regulated categories of natural gas, the imposition of maximum allowable production rates, the taxation of income and other items, and the protection of the environment. Although the Registrant believes that its business operations do not impair environmental quality and that its costs of complying with any applicable environmental regulations are not currently significant, the Registrant cannot predict what, if any, effect these environmental regulations may have on its current or future operations.
The Registrant does not have any employees of its own. PPUSA employs 623 persons, many of whom dedicated a part of their time to the conduct of the Registrant's business during the period for which this report is filed. The Registrant's managing general partner, PPDLP through PPUSA, supplies all management functions.
No material part of the Registrant's business is seasonal and the Registrant conducts no foreign operations.
ITEM 2.

ITEM 2. Properties
The Registrant's properties consist primarily of leasehold interests in properties on which oil and gas wells are located. Such property interests are often subject to landowner royalties, overriding royalties and other oil and gas leasehold interests.
Fractional working interests in developmental and exploratory oil and gas prospects located in Texas and New Mexico were acquired by the Registrant, resulting in the Registrant's participation in the drilling of 34 oil and gas wells. Six were completed as dry holes from previous periods, one well was plugged and abandoned in 1993 due to unprofitable operations and one well was sold in 1995. At December 31, 1995, 26 wells were producing,
For information relating to the Registrant's estimated proved oil and gas reserves at December 31, 1995, 1994 and 1993 and changes in such quantities for the years then ended, see Note 7 of Notes to Financial Statements included in "Item 8. Financial Statements and Supplementary Data" below. Such reserves have been estimated by the engineering staff of PPUSA with a review by an independent petroleum consultant.
ITEM 3.

ITEM 3. Legal Proceedings
The Registrant is a party to material litigation which is described in Note 9 of Notes to Financial Statements included in "Item 8. Financial Statements and Supplementary Data" below.
ITEM 4.

ITEM 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the fourth quarter of 1995.
PART II
ITEM 5.

ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters
At March 8, 1996, the Registrant had 4,891 outstanding limited partnership interests held of record by 670 subscribers. There is no established public trading market for the limited partnership interests. Under the limited partnership agreement, PPDLP has made certain commitments to purchase partnership interests at a computed value.
Revenues which, in the sole judgement of the managing general partner, are not required to meet the Registrant's obligations are distributed to the partners at least quarterly in accordance with the limited partnership agreement. During the years ended December 31, 1995 and 1994, distributions of $200,344 and $156,143, respectively, were made to the limited partners.
ITEM 6.

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of operations
1995 compared to 1994
The Registrant's 1995 oil and gas revenues decreased to $613,929 from $636,470 in 1994, a decrease of 4%. The decrease in revenues resulted from a 2% decline in the average price received per mcf of gas, offset by an 8% increase in the price received per barrel of oil, an 8% decrease in barrels of oil produced and sold and a 7% decrease in mcf of gas produced and sold. In 1995, 25,404 barrels of oil were sold compared to 27,699 in 1994, a decrease of 2,295 barrels. In 1995, 103,030 mcf of gas were sold compared to 110,979 in 1994, a decrease of 7,949 mcf. The decreases in production volumes were primarily due to the decline characteristics of the Registrant's oil and gas properties. Because of these characteristics, management expects a certain amount of decline in production to continue in the future until the Registrant's economically recoverable reserves are fully depleted.(1)
The average price received per barrel of oil increased $1.26 from $16.01 in 1994 to $17.27 in 1995. The average price received per mcf of gas decreased from $1.74 in 1994 to $1.70 in 1995. 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.(1) The Registrant may therefore sell its future oil and gas production at average prices lower or higher than that received in 1995.(1)
A gain of $1,170 from the sale of one fully depleted property was recognized during 1995, resulting from proceeds received from post closing adjustments made after the effective date of sale.
Total costs and expenses increased in 1995 to $587,197 as compared to $538,471 in 1994, an increase of $48,726, or 9%. The increase was primarily due to the impairment of oil and gas properties during 1995, in addition to increases in production costs and depletion, offset by a decline in general and administrative expenses ("G&A").
Production costs were $387,418 in 1995 and $380,001 in 1994, resulting in a $7,417 increase, or 2%. The increase was due to additional well repair and maintenance costs incurred in an effort to stimulate production.
G&A's components are independent accounting and engineering fees, computer services, postage and managing general partner personnel costs. During this period, G&A decreased, in aggregate, 15% from $25,164 in 1994 to $21,267 in 1995. The Registrant paid the managing general partner $18,418 in 1995 and $19,094 in 1994 for G&A incurred on behalf of the Registrant. G&A is allocated, in part, to the Registrant by the managing general partner. Such allocated expenses are determined by the managing general partner based upon its judgement of the level of activity of the Registrant relative to the managing general
partner's activities and other entities it manages. The method of allocation has varied in certain years and may do so again depending on the activities of the managed entities.(1)
Depletion was $157,793 in 1995 compared to $133,306 in 1994. This represented an increase of $24,487, or 18%. Depletion was computed property-by-property utilizing the unit-of-production method based upon the dominant mineral produced, generally oil. Oil production decreased 2,295 barrels in 1995 from 1994, while oil reserves of barrels were revised upward by 61,976 barrels, or 21%.
Effective for the fourth quarter of 1995 the Registrant adopted Statement of Financial Accounting Standards No. 121 - Accounting for Impairment of Long-Lived Assets ("SFAS 121") which requires that long-lived assets held and used by an entity, including oil and gas properties accounted for under the successful efforts method of accounting, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review of recoverability, the entity should estimate the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows is less than the carrying amount of the assets, an impairment is recognized based on the asset's fair value as determined for oil and gas properties by discounting their expected future cash flows at a discount rate commensurate with the risks involved in the industry. As a result of the natural gas price environment and the Registrant's expectation of future cash flows from its oil and gas properties at the time of review, the Registrant recognized a non-cash charge of $20,719 associated with the adoption of SFAS 121.
1994 compared to 1993
The Registrant's 1994 oil and gas revenues decreased to $636,470 from $778,497 in 1993, a decrease of 18%. The decrease in revenues resulted from a decrease of 7% in the average price received per barrel of oil, a 12% decline in the average price received per mcf of gas, combined with a 13% decrease in barrels of oil produced and sold and a 6% decrease in mcf of gas produced and sold. In 1994, 27,699 barrels of oil were sold compared to 31,709 in 1993, a decrease of 4,010 barrels. In 1994, 110,979 mcf of gas were sold compared to 117,576 in 1993, a decrease of 6,597 mcf. The decreases in production volumes were primarily due to the decline characteris tics of the Registrant's oil and gas properties.
The average price received per barrel of oil decreased $1.22 from $17.23 in 1993 to $16.01 in 1994. The average price received per mcf of gas decreased from $1.98 in 1993 to $1.74 in 1994.
Total costs and expenses decreased in 1994 to $538,471 as compared to $651,830 in 1993, a decrease of $113,359, or 17%. The decrease was due to a decline in production costs, abandoned property costs, G&A and depletion.
Production costs were $380,001 in 1994 and $413,665 in 1993, resulting in a $33,664 decrease, or 8%. The decrease was due to declines in well repair and maintenance costs, ad valorem taxes and production taxes due to the decline in oil and gas sales.
Abandoned property costs were $50,806 in 1993 compared to no related costs in 1994. This decrease was due to the plugging of one well in 1993 and no abandonment activity in 1994.
G&A's components are independent accounting and engineering fees, computer services, postage and managing general partner personnel costs. During this period, G&A decreased, in aggregate, 6% from $26,800 in 1993 to $25,164 in 1994. The Registrant paid the managing general partner $19,094 in 1994 and $23,355 in 1993 for G&A incurred on behalf of the Registrant.
Depletion was $133,306 in 1994 compared to $160,559 in 1993. This represented a decrease of $27,253, or 17%. Oil production decreased 4,010 barrels in 1994 from 1993, while oil reserves of barrels were revised downward by 46,824 barrels, or 13%.
On May 25, 1993, a final settlement agreement was negotiated, drafted and finally executed, ending litigation which had begun on September 5, 1989, when the Registrant filed suit along with other parties against Dresser Industries, Inc.; Titan Services, Inc.; BJ-Titan Services Company; BJ-Hughes Holding Company; Hughes Tool Company; Baker Hughes Production Tools, Inc.; and Baker Hughes Incorporated alleging that the defendants had intentionally failed to provide the materials and services ordered and paid for by the Registrant and other parties in connection with the fracturing and acidizing of 523 wells, and then fraudulently concealed the shorting practice from PPDLP. The May 25, 1993 settlement agreement called for a payment of $115 million in cash by the defendants, and Southmark, the Registrant, and the other plaintiffs indemnified the defendants against the claims of Jack N. Price. The managing general partner received the funds, deducted incurred legal expenses, accrued interest, determined the general partner's portion of the funds and calculated any inter-partnership allocations. A distribution of $91,000,000 was made to the working interest owners, including the Registrant, on July 30, 1993. The limited partners received their distribution of $359,173, or $73.44 per limited partnership interest, in September 1993.
On May 3, 1993, Jack N. Price, the attorney who represented Gary G. "Zeke" Lancaster in the Federal Court lawsuit, filed suit in State Court in Beaumont against all of the plaintiff partnerships, including the Registrant and others, alleging his entitlement to 12% of the settlement proceeds. Price's lawsuit claim for approximately $13.8 million is predicated on a purported contract entered into with Southmark Corporation in August 1988 in which he allegedly binds the Registrant and the other defendants, as well as Southmark. Although PPDLP believes the lawsuit is without merit and intends to vigorously defend it, PPDLP is holding in reserve approximately 12.5% of the total settlement (the "Reserve") pending final resolution of the litigation by the court.
On September 20, 1995, the Beaumont trial judge entered a summary judgment against Southmark for the $13,790,000 contingent fee sought by Price, together with prejudgment interest, and also awarded Price an additional $5,498,525 in attorneys' fees. On January 22, 1996, the trial judge entered an interlocutory summary judgment against Dresser Industries and Baker Hughes for an amount yet to be determined. Pursuant to their indemnity obligations, the Registrant, Southmark, PPDLP and other original plaintiffs will vigorously pursue appeal when the final judgment is entered. Southmark is vigorously pursuing its appeal
of the judgment, and has posted a supersedeas bond using the Reserve as collateral. Trial against the Registrant is currently scheduled for April 29, 1996.
Legal expenses were incurred during 1989, 1990, 1991, 1992 and 1993 by the Registrant and other joint property owners for participating in the lawsuit pursuant to the joint operating agree ment. Litigation settlement proceeds received by the Registrant, less legal expenses incurred in 1993, are recorded as litigation settlement, net in the accompanying statement of operations for the year ended December 31, 1993.
Impact of inflation and changing prices on sales and net income
Inflation impacts the fixed overhead rate charges of the lease operating expenses for the Registrant. During 1993, the annual change in the index of average weekly earnings of crude petroleum and gas production workers issued by the U.S. Department of Labor, Bureau of Labor Statistics, decreased by 1.1%. The 1994 annual change in average weekly earnings increased by 4.8%. The 1995 index (effective April 1, 1995) increased 4.4%. The impact of inflation for other lease operating expenses is small due to the current economic condition of the oil industry.
The oil and gas industry experienced volatility during the past decade because of the fluctuation of the supply of most fossil fuels relative to the demand for such products and other uncertainties in the world energy markets causing significant fluctuations in oil and gas prices. Since December 31, 1993, prices for oil production have fluctuated throughout the year. The price per barrel for oil production similar to the Registrant's ranged from approximately $16.00 to $19.00. For February 1996, the average price for the Registrant's oil was approximately $18.00.
Prices for natural gas are subject to ordinary seasonal fluctuations, and this volatility of natural gas prices may result in production being curtailed and, in some cases, wells being completely shut-in.(1)
Liquidity and capital resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased to $245,319 during the year ended December 31, 1995, a 3% increase from the year ended December 31, 1994. This increase was due to reduced production costs, offset by a decrease in oil and gas sales and G&A. Production costs decreased due to less well repair and maintenance costs. Oil and gas sales declined due to a decrease in oil and gas production and a decrease in the average price received per mcf of gas, offset by an increase in the average price received per barrel of oil. G&A decreased due to less allocated expenses by the managing general partner in 1995 compared to 1994.
Net Cash Provided by Investing Activities
The Registrant's investing activities during 1995 was for expenditures related to repair and maintenance activity on various oil and gas properties.
Proceeds of $1,170 were received from the sale of one oil and gas property during 1995.
Net Cash Used in Financing Activities
Cash was sufficient in 1995 for distributions to the partners of $263,066 of which $200,344 was distributed to the limited partners and $62,722 to the general partners. In 1994, cash was sufficient for distributions to the partners of $212,085 of which $156,143 was distributed to the limited partners and $55,942 to the general partners.
It is expected that future net cash provided by operations will be sufficient for any capital expenditures and any distributions.(1) As the production from the properties declines, distributions are also expected to decrease.(1)
- - ---------------
(1) This statement is a forward looking statement that involves 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 statement.
ITEM 8.

ITEM 8. Financial Statements and Supplementary Data
The Registrant's audited financial statements are included elsewhere herein.
ITEM 9.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
PART III
ITEM 10.

ITEM 10. Directors and Executive Officers of the Registrant
The Registrant does not have any officers or directors. Under the limited partnership agreement, the Registrant's managing general partner, PPDLP, is granted the exclusive right and full authority to manage, control and administer the Registrant's business. PPUSA, the sole general partner of PPDLP, is a wholly-owned subsidiary of Parker & Parsley Petroleum Company (the "Company"), a publicly-traded corporation on the New York Stock Exchange.
Set forth below are the names, ages and positions of the directors and executive officers of PPUSA. Directors of PPUSA are elected to serve until the next annual meeting of stockholders or until their successors are elected and qualified.
Age at December 31, Name 1995 Position
Scott D. Sheffield 43 Chairman of the Board and Director
James D. Moring (a) 59 President, Chief Executive Officer and Director
Timothy A. Leach 36 Executive Vice President and Director
Steven L. Beal 36 Senior Vice President, Treasurer and Chief Financial Officer
Mark L. Withrow 48 Senior Vice President and Secretary
- - --------------- (a) Mr. Moring retired from the Company and subsidiaries effective January 1, 1996. Mr. Sheffield assumed the positions of President and Chief Executive Officer of PPUSA effective January 1, 1996.
Scott D. Sheffield. Mr. Sheffield, a graduate of The University of Texas with a Bachelor of Science degree in Petroleum Engineering, has been the President and a Director of the Company since May 1990 and has been the Chairman of the Board and Chief Executive Officer since October 1990. Mr. Sheffield joined PPDC, the principal operating subsidiary of the Company, as a petroleum engineer in 1979. Mr. Sheffield served as Vice President - Engineering of PPDC from September 1981 until April 1985 when he was elected President and a Director of PPDC. In March 1989, Mr. Sheffield was elected Chairman of the Board and Chief Executive Officer of PPDC. On January 1, 1995, Mr. Sheffield resigned as President and Chief Executive Officer of PPUSA, but remained Chairman of the Board and a Director of PPUSA. On January 1, 1996, Mr. Sheffield reassumed the positions of President and Chief Executive Officer of PPUSA. Before joining PPDC, Mr. Sheffield was principally occupied for more than three years as a production and reservoir engineer for Amoco Production Company.
James D. Moring. Mr. Moring, a graduate of Texas Tech University with a Bachelor of Science degree in Petroleum Engineering has been a Director of the Company since October 1990 and was Senior Vice President - Operations of the Company from October 1990 until May 1993, when he was appointed Executive Vice President - Operations. Mr. Moring has been principally occupied since July 1982 as the supervisor of the drilling, completion, and production operations of PPDC and its affiliates and has served as an officer of PPDC since January 1983. Mr. Moring has been Senior Vice President - Operations and a Director of PPDC since June 1989 and in May 1993, Mr. Moring was appointed Executive Vice President - Operations. Mr. Moring was elected President and Director and appointed Chief Executive Officer of PPUSA on January 1, 1995. Effective January 1, 1996, Mr. Moring retired from the Company and subsidiaries. In the five years before joining PPDC, Mr. Moring was employed as a Division Operations Manager with Moran Exploration, Inc. and its predecessor.
Timothy A. Leach. Mr. Leach, a graduate of Texas A&M University with a Bachelor of Science degree in Petroleum Engineering and the University of Texas of the Permian Basin with a Master of Business Administration degree, was elected Executive Vice President - Engineering of the Company on March 21, 1995. Mr. Leach had been serving as Senior Vice President Engineering since March 1993 and served as Vice President - Engineering of the Company from October 1990 to March 1993. Mr. Leach was elected Executive Vice President of PPUSA on December 1, 1995. He had joined PPDC as Vice President - Engineering in September 1989. Prior to joining PPDC, Mr. Leach was employed as Senior Vice President and Director of First City Texas - Midland, N.A.
Steven L. Beal. Mr. Beal, a graduate of the University of Texas with a Bachelor of Business Administration degree in Accounting and a certified public accountant, was elected Senior Vice President - Finance of the Company in January 1995 and Chief Financial Officer of the Company on March 21, 1995. On January 1, 1995, Mr. Beal was elected Senior Vice President, Treasurer and Chief Financial Officer of PPUSA. Mr. Beal has been the Company's Chief Accounting officer since November 1992 and been the Company's Treasurer since October 1990. Mr. Beal joined PPDC as Treasurer in March 1988 and was elected Vice President - Finance in October 1991. Prior to joining PPDC, Mr. Beal was employed as an audit manager of Price Waterhouse.
Mark L. Withrow. Mr. Withrow, a graduate of Abilene Christian University with Bachelor of Science degree in Accounting and Texas Tech University with a Juris Doctorate degree, was Vice President - General Counsel of the Company from February 1991 to January 1995, when he was appointed Senior Vice President - General Counsel, and has been the Company's Secretary since August 1992. On January 1, 1995, Mr. Withrow was elected Senior Vice President and Secretary of PPUSA. Mr. Withrow joined PPDC in January 1991. Prior to joining PPDC , Mr. Withrow was the managing partner of the law firm of Turpin, Smith, Dyer, Saxe & MacDonald, Midland, Texas.
ITEM 11.

ITEM 11. Executive Compensation
The Registrant does not have any directors or officers. Management of the Registrant is vested in PPDLP, the managing general partner. Under the
Partnership agreement, PPDLP pays 8% of the Registrant's acquisition, drilling and completion costs and 20% of its operating and general and administrative expenses. In return, PPDLP is allocated 20% of the Registrant's revenues. See Notes 6 and 10 of Notes to Financial Statements included in "Item 8. Financial Statements and Supplementary Data" below for information regarding fees and reimbursements paid to the managing general partner or its affiliates by the Registrant.
EMPL is a co-general partner of the Registrant. Under this arrangement, EMPL pays 2% of the Registrant's acquisition, drilling and completion costs and 5% of its operating and general and administrative expenses. In return, EMPL is allocated 5% of the Registrant's revenues. EMPL does not receive any fees or reimbursements from the Registrant.
The Registrant does not directly pay any salaries of the executive officers of PPUSA, but does pay a portion of PPUSA's general and administrative expenses of which these salaries are a part. See Note 6 of Notes to Financial Statements included in "Item 8. Financial Statements and Supplementary Data" below.
ITEM 12.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management
(a) Beneficial owners of more than five percent
The Registrant is not aware of any person who beneficially owns 5% or more of the outstanding limited partnership interests of the Registrant. PPDLP and EMPL respectively own 80% and 20% of the general partners' interests in the Registrant. PPDLP owned 497 limited partner interests at January 1, 1996.
(b) Security ownership of management
The Registrant does not have any officers or directors. The managing general partner of the Registrant, PPDLP, has the exclusive right and full authority to manage, control and administer the Registrant's business. Under the limited partnership agreement, limited partners holding a majority of the outstanding limited partnership interests have the right to take certain actions, including the removal of the managing general partner or any other general partner. The Registrant is not aware of any current arrangement or activity which may lead to such removal. The Registrant is not aware of any officer or director of PPUSA who beneficially owns limited partnership interests in the Registrant.
(c) Changes in control
On January 1, 1995, PPDLP, a Texas limited partnership, became the sole managing general partner of Parker & Parsley 82-I, Ltd., as a result of the merger into it of PPDC, a Delaware corporation, and an affiliate of PPDLP and the Company, which previously served as the managing general partner of the Registrant. PPDLP has, therefore, succeeded to all of the rights and obligations of PPDC and will manage and conduct the property, business and affairs of the Registrant, including the development drilling program in which the Registrant participates.
ITEM 13.

ITEM 13. Certain Relationships and Related Transactions
Transactions with the managing general partner or its affiliates
Pursuant to the limited partnership agreement, the Registrant had the following related party transactions with the managing general partner or its affiliates during the years ended December 31:
1995 1994 1993 -------- -------- --------- Payment of lease operating and supervision charges in accordance with standard industry operating agreements $144,583 $146,503 $ 146,956
Reimbursement of general and administrative expenses $ 18,418 $ 19,094 $ 23,355
Purchase of oil and gas properties and related equipment, at predecessor cost $ 249 $ - $ -
Receipt of proceeds for the salvage value of retired oil and gas equipment $ - $ - $ 37,363
Under the limited partnership agreement, the general partners, PPDLP and EMPL, together pay 10% of Registrant's acquisition, drilling and completion costs and 25% of its operating and general and administrative expenses. In return, they are allocated 25% of the Registrant's revenues. Twenty percent of the general partners' share of costs and revenues is allocated to EMPL and the remainder is allocated to PPDLP. Certain former affiliates of PPUSA are limited partners of EMPL. Also, see Notes 6 and 10 of Notes to Financial Statements included in "Item 8. Financial Statements and Supplementary Data" below, regarding the Registrant's participation with the managing general partner in oil and gas activities of the Registrant.
PART IV
ITEM 14.

ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Financial statements
The following are filed as part of this annual report:
Independent Auditors' Report
Balance sheets as of December 31, 1995 and 1994
Statements of operations for the years ended December 31, 1995, 1994 and 1993
Statements of partners' capital for the years ended December 31, 1995, 1994 and 1993
Statements of cash flows for the years ended December 31, 1995, 1994 and 1993
Notes to financial statements
2. Financial statement schedules
All financial statement schedules have been omitted since the required information is in the financial statements or notes thereto, or is not applicable nor required.
(b) Reports on Form 8-K
None.
(c) Exhibits
The exhibits listed on the accompanying index to exhibits are filed or incorporated by reference as part of this annual report.
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PARKER & PARSLEY 82-I, LTD.
Dated: March 27, 1996 By: Parker & Parsley Development L.P., Managing General Partner
By: Parker & Parsley Petroleum USA, Inc. ("PPUSA"), General Partner
By: /s/ Scott D. Sheffield -------------------------------- Scott D. Sheffield, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
/s/ Scott D. Sheffield President, Chairman of the Board, March 27, 1996 ------------------------ Chief Executive Officer and Scott D. Sheffield Director of PPUSA
/s/ Timothy A. Leach Executive Vice President March 27, 1996 ------------------------ and Director of PPUSA Timothy A. Leach
/s/ Steven L. Beal Senior Vice President, March 27, 1996 ------------------------ Treasurer and Chief Steven L. Beal Financial Officer of PPUSA
/s/ Mark L. Withrow Senior Vice President and March 27, 1996 ------------------------ Secretary of PPUSA Mark L. Withrow
INDEPENDENT AUDITORS' REPORT
The Partners Parker & Parsley 82-I, Ltd. (A Texas Limited Partnership):
We have audited the financial statements of Parker & Parsley 82-I, Ltd. as listed in the accompanying index under Item 14(a). These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Parker & Parsley 82-I, Ltd. as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles.
As discussed in Notes 2 and 3 to the financial statements, the Partnership changed its method of accounting for the impairment of long-lived assets and for long-lived assets to be disposed of in 1995 to adopt the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to Be Disposed Of."
KPMG Peat Marwick LLP
Midland, Texas March 8, 1996
PARKER & PARSLEY 82-I, LTD. (A Texas Limited Partnership)
BALANCE SHEETS December 31
1995 1994 ----------- ----------- ASSETS
Current assets: Cash and cash equivalents, including interes bearing deposits of $82,469 in 1995 and $101,323 in 1994 $ 83,890 $ 101,573 Accounts receivable - oil and gas sales 62,586 67,204 ---------- ----------
Total current assets 146,476 168,777
Oil and gas properties - at cost, based on the successful efforts accounting method 10,409,464 10,496,709 Accumulated depletion (8,970,229) (8,879,212) ---------- ----------
Net oil and gas properties 1,439,235 1,617,497 ---------- ----------
$ 1,585,711 $ 1,786,274 ========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities: Accounts payable - affiliate $ 50,057 $ 21,635
Partners' capital: Limited partners (4,891 interests) 1,277,125 1,478,510 General partners 258,529 286,129 ---------- ----------
1,535,654 1,764,639 ---------- ----------
$ 1,585,711 $ 1,786,274 ========== ==========
The accompanying notes are an integral part of these statements.
PARKER & PARSLEY 82-I, LTD. (A Texas Limited Partnership)
STATEMENTS OF OPERATIONS For the years ended December 31
1995 1994 1993 --------- --------- ---------- Revenues: Oil and gas sales $ 613,929 $ 636,470 $ 778,497 Interest income 6,179 3,752 4,550 Salvage income from equipment disposals - 282 156 Gain on sale of oil and gas properties 1,170 - - Litigation settlement, net - - 458,778 -------- -------- ---------
Total revenues 621,278 640,504 1,241,981
Costs and expenses: Production costs 387,418 380,001 413,665 Abandoned property costs - - 50,806 General and administrative expenses 21,267 25,164 26,800 Depletion 157,793 133,306 160,559 Impairment of oil and gas propertie 20,719 - - -------- -------- ---------
Total costs and expenses 587,197 538,471 651,830 -------- -------- ---------
Net income $ 34,081 $ 102,033 $ 590,151 ======== ======== =========
Allocation of net income (loss): General partners $ 35,122 $ 45,462 $ 166,204 ======== ======== =========
Limited partners $ (1,041) $ 56,571 $ 423,947 ======== ======== =========
Net income (loss) per limited partnership interest $ (.21) $ 11.57 $ 86.68 ======== ======== =========
The accompanying notes are an integral part of these statements.
PARKER & PARSLEY 82-I, LTD. (A Texas Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
General Limited partners partners Total ---------- ---------- ----------
Partners' capital at January 1, 1993 $ 313,317 $1,773,283 $2,086,600
Distributions (182,912) (619,148) (802,060)
Net income 166,204 423,947 590,151 --------- --------- ---------
Partners' capital at December 31, 1993 296,609 1,578,082 1,874,691
Distributions (55,942) (156,143) (212,085)
Net income 45,462 56,571 102,033 --------- --------- ---------
Partners' capital at December 31, 1994 286,129 1,478,510 1,764,639
Distributions (62,722) (200,344) (263,066)
Net income (loss) 35,122 (1,041) 34,081 --------- --------- ---------
Partners' capital at December 31, 1995 $ 258,529 $1,277,125 $1,535,654 ========= ========= =========
The accompanying notes are an integral part of these statements.
PARKER & PARSLEY 82-I, LTD. (A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS For the years ended December 31
1995 1994 1993 --------- --------- --------- Cash flows from operating activities: Net income $ 34,081 $ 102,033 $ 590,151 Adjustments to reconcile net income to net cash provided by operating activities: Depletion 157,793 133,306 160,559 Impairment of oil and gas properties 20,719 - - Salvage income from equipment disposals - (282) (156) Gain on sale of oil and gas properties (1,170) - - Changes in assets and liabilities: (Increase) decrease in accounts receivable 4,618 (5,345) 9,819 Increase (decrease) in accounts payable 29,278 8,049 (4,464) -------- -------- -------- Net cash provided by operating activities 245,319 237,761 755,909
Cash flows from investing activities: Additions to oil and gas properties (1,106) - (799) Proceeds from equipment salvage on abandoned property - - 35,645 Proceeds from sale of oil and gas properties 1,170 - - -------- -------- -------- Net cash provided by investing activities 64 - 34,846
Cash flows from financing activities: Cash distributions to partners (263,066) (212,085) (802,060) -------- -------- -------- Net increase (decrease) in cash and cash equivalents (17,683) 25,676 (11,305) Cash and cash equivalents at beginning of year 101,573 75,897 87,202 -------- -------- -------- Cash and cash equivalents at end of year $ 83,890 $ 101,573 $ 75,897 ======== ======== ========
The accompanying notes are an integral part of these statements.
PARKER & PARSLEY 82-I, LTD. (A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS December 31, 1995, 1994 and 1993
Note 1. Organization and nature of operations
Parker & Parsley 82-I, Ltd. (the "Partnership") is a limited partnership organized in 1982 under the laws of the State of Texas.
The Partnership engages primarily in oil and gas exploration, development and production in Texas and New Mexico and is not involved in any industry segment other than oil and gas.
Note 2. Summary of significant accounting policies
A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements follows:
Impairment of long-lived assets - Effective for the fourth quarter of 1995 the Partnership adopted the provisions of 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"). Consequently, the Partnership reviews its long-lived assets to be held and used, including oil and gas properties accounted for under the successful efforts method of accounting, whenever events or circumstances indicate that the carrying value of those assets may not be recoverable. An impairment loss is indicated if the sum of the expected future cash flows is less than the carrying amount of the assets. In this circumstance, the Partnership recognizes an impairment loss for the amount by which the carrying value of the asset exceeds the fair value of the asset.
The Partnership accounts for long-lived assets to be disposed of at the lower of their carrying amount or fair value less costs to sell once management has committed to a plan to dispose of the assets.
Oil and gas properties - The Partnership utilizes the successful efforts method of accounting for its oil and gas properties and equipment. Under this method, all costs associated with productive wells and nonproductive development wells are capitalized while nonproductive exploration costs are expensed. Capitalized costs relating to proved properties are depleted using the unit-of-production method on a property-by-property basis based on proved oil (dominant mineral) reserves as determined by the engineering staff of Parker & Parsley Petroleum USA, Inc. ("PPUSA"), the sole general partner of Parker & Parsley Development L.P. ("PPDLP"), the Partnership's managing general partner, and reviewed by independent petroleum consultants. The carrying amounts of properties sold or otherwise disposed of and the related allowances for depletion are eliminated from the accounts and any gain or loss is included in operations.
Prior to the adoption of SFAS 121 in the fourth quarter, the Partnership's aggregate oil and gas properties were stated at cost not in excess of total estimated future net revenues and the estimated fair value of oil and gas assets not being depleted.
Use of estimates in the preparation of financial statements - Preparation of the accompanying financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reporting amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Net income (loss) per limited partnership interest - The net income (loss) per limited partnership interest is calculated by using the number of outstanding limited partnership interests.
Income taxes - A Federal income tax provision has not been included in the financial statements as the income of the Partnership is included in the individual Federal income tax returns of the respective partners.
Statements of cash flows - For purposes of reporting cash flows, cash and cash equivalents include depository accounts held by banks.
General and administrative expenses - General and administrative expenses are allocated in part to the Partnership by the managing general partner or its affiliates. Such allocated expenses are determined by the managing general partner based upon its judgement of the level of activity of the Partnership relative to the managing general partner's activities and other entities it manages. The method of allocation has varied in certain years and may do so again depending on the activities of the managed entities.
Environmental - The Partnership is subject to extensive federal, state and local environmental laws and regulations. These laws, which are constantly changing, regulate the discharge of materials into the environment and may require the Partnership to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites. Environmental expenditures are expensed or capitalized depending on their future economic benefit. Expenditures that relate to an existing condition caused by past operations and that have no future economic benefits are expensed. Liabilities for expenditures of a noncapital nature are recorded when environmental assessment and/or remediation is probable, and the costs can be reasonably estimated.
Note 3. Impairment of long-lived assets
The Partnership adopted SFAS 21 effective for the fourth quarter of 1995. SFAS 121 requires that long-lived assets held and used by an entity, including oil and gas properties accounted for under the successful efforts method of accounting, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets to be disposed of are to be accounted for at the lower of carrying amount or fair value less cost to sell when management has
committed to a plan to dispose of the assets. All companies, including successful efforts oil and gas companies, are required to adopt SFAS 121 for fiscal years beginning after December 15, 1995.
In order to determine whether an impairment had occurred, the Partnership estimated the expected future cash flows of its oil and gas properties and compared such future cash flows to the carrying amount of the oil and gas properties to determine if the carrying amount was recoverable. For those 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 charge of $20,719 related to its oil and gas properties during the fourth quarter of 1995.
As of December 31, 1995, management had not committed to sell any Partnership assets.
Note 4. Income taxes
The financial statement basis of the Partnership's net assets and liabilities was $492,560 greater than the tax basis at December 31, 1995.
The following is a reconciliation of net income per statements of operations with the net income per Federal income tax returns for the years ended December 31: 1995 1994 1993 --------- --------- ---------
Net income per statements of operations $ 34,081 $ 102,033 $ 590,151 Depletion and depreciation provisions for tax reporting purposes under amounts for financial reporting purposes 151,722 123,767 146,057 Impairment of oil and gas properties for financial reporting purposes 20,719 - - Abandonment costs for tax reporting purposes under amounts for financial reporting purposes - - 35,363 Other, net (86) (814) 2,272 -------- --------- -------- Net income per Federal income tax returns $ 206,436 $ 224,986 $ 773,843 ======== ========= ========
Note 5. Oil and gas producing activities
The following is a summary of the costs incurred, whether capitalized or expensed, related to the Partnership's oil and gas producing activities for the years ended December 31: 1995 1994 1993 --------- --------- --------- Property acquisition costs $ - $ - $ 2,934 ======== ======== ======== Development costs $ 250 $ - $ 48,671 ======== ======== ========
Capitalized oil and gas properties consist of the following:
1995 1994 1993 ----------- ----------- ----------- Proved properties: Property acquisition costs $ 448,668 $ 456,246 $ 456,246 Completed wells and equipment 9,960,796 10,040,463 10,040,463 ---------- ---------- ---------- 10,409,464 10,496,709 10,496,709 Accumulated depletion (8,970,229) (8,879,212) (8,746,188) ---------- ---------- ----------
Net capitalized costs $ 1,439,235 $ 1,617,497 $ 1,750,521 ========== ========== ==========
During 1995, the Partnership recognized a non-cash charge of $20,719 associated with the adoption of SFAS 121. See Note 3.
Note 6. Related party transactions
Pursuant to the limited partnership agreement, the Partnership had the following related party transactions with the managing general partner or its affiliates during the years ended December 31:
1995 1994 1993 --------- --------- --------- Payment of lease operating and supervision charges in accordance with standard industry operating agreements $ 144,583 $ 146,503 $ 146,956
Reimbursement of general and administrative expenses $ 18,418 $ 19,094 $ 23,355
Purchase of oil and gas properties and related equipment, at predecessor cost $ 249 $ - $ -
Receipt of proceeds for the salvage value of retired oil and gas equipment $ - $ - $ 37,363
PPDLP, P&P Employees 82-I, Ltd. ("EMPL") and the Partnership are parties to the Partnership agreement. EMPL is a limited partnership in which PPDLP owns 77.5% and the remaining portion is owned by former affiliates. PPDLP owned 497 limited partner interests at January 1, 1995.
The costs and revenues of the Partnership are allocated as follows:
General Limited partners partners -------- -------- Revenues: Proceeds from property dispositions prior to cost recovery 10% 90% All other Partnership revenues 25% 75%
Costs and expenses: Lease acquisition costs, drilling and completion costs 10% 90% Operating costs, direct costs and general and administrative expenses 25% 75%
Note 7. Oil and gas information (unaudited)
The following table presents information relating to the Partnership's estimated proved oil and gas reserves at December 31, 1995, 1994 and 1993 and changes in such quantities during the years then ended. All of the Partnership's reserves are proved and located within the United States. The Partnership's reserves are based on an evaluation prepared by the engineering staff of PPUSA and reviewed by an independent petroleum consultant, using criteria established by the Securities and Exchange Commission. Reserve value information is available to limited partners pursuant to the Partnership agreement and, therefore, is not presented.
Oil (bbls) Gas (mcf) ---------- ---------- Net proved reserves at January 1, 1993 399,375 1,600,653 Revisions of estimates of January 1, 1993 5,586 (42,877) Production (31,709) (117,576) ---------- ---------- Net proved reserves at December 31, 1993 373,252 1,440,200 Revisions of estimates of December 31, 1993 (46,824) (154,774) Production (27,699) (110,979) ---------- ---------- Net proved reserves at December 31, 1994 298,729 1,174,447 Revisions of estimates of December 31, 1994 61,976 222,702 Production (25,404) (103,030) ---------- ---------- Net proved reserves at December 31, 1995 335,301 1,294,119 ========== ==========
The estimated present value of future net revenues of proved reserves, calculated using December 31, 1995 prices of $19.16 per barrel of oil and $1.97 per mcf of gas, discounted at 10% was approximately $1,861,000 and undiscounted was $3,344,000 at December 31, 1995.
The Partnership emphasizes that reserve estimates are inherently imprecise and, accordingly, the estimates are expected to change as future information becomes available.
Note 8. Major customers
The following table reflects the major customers of the Partnership's oil and gas sales during the years ended December 31:
1995 1994 1993 ---- ---- ----
Phibro Energy, Inc. 69% 67% 67% GPM Gas Corporation - 16% 17%
PPDLP is party to a long-term agreement pursuant to which PPDLP and affiliates are to sell to Phibro Energy, Inc. ("Phibro") substantially all crude oil (including condensate) which any of such entities has the right to market from time to time. On December 29, 1995, PPDLP and Phibro entered into a Memorandum of Agreement ("Phibro MOA") that cancels the prior crude oil purchase agreement between the parties and provides for adjusted terms effective December 1, 1995. The price to be paid for oil purchased under the Phibro MOA is to be competitive with prices paid by other substantial purchasers in the same area who are significant competitors of Phibro. The price to be paid for oil purchased under the Phibro MOA also includes a market-related bonus that may vary from month to month based upon spot oil prices at various commodity trade points. The term of the Phibro MOA is through June 30, 1998, and it may continue thereafter subject to termination rights afforded each party. Although Phibro was required to post a $16 million letter of credit in connection with purchases under the prior agreement, it is anticipated that this security requirement will be replaced by a $25 million payment guarantee by Phibro's parent company, Salomon Inc. Accounts receivable-oil and gas sales included $36,802 due from Phibro at December 31, 1995.
Note 9. Contingencies
On May 25, 1993, a final settlement agreement was negotiated, drafted and finally executed, ending litigation which had begun on September 5, 1989, when the Partnership filed suit along with other parties against Dresser Industries, Inc.; Titan Services, Inc.; BJ-Titan Services Company; BJ-Hughes Holding Company; Hughes Tool Company; Baker Hughes Production Tools, Inc.; and Baker Hughes Incorporated alleging that the defendants had intentionally failed to provide the materials and services ordered and paid for by the Partnership and other parties in connection with the fracturing and acidizing of 523 wells, and then fraudulently concealed the shorting practice from PPDLP. The May 25, 1993 settlement agreement called for a payment of $115 million in cash by the defendants, and Southmark, the Partnership, and the other plaintiffs indemnified the defendants against the claims of Jack N. Price. The managing general partner received the funds, deducted incurred legal expenses, accrued interest, determined the general partner's portion of the funds and calculated any inter-partnership allocations.
On May 3, 1993, Jack N. Price, the attorney who represented Gary G. "Zeke" Lancaster in the Federal Court lawsuit, filed suit in State Court in Beaumont against all of the plaintiff partnerships, including the Partnership and others, alleging his entitlement to 12% of the settlement proceeds. Price's lawsuit claim for approximately $13.8 million is predicated on a purported contract entered into with Southmark Corporation in August 1988 in which he allegedly binds the Partnership and the other defendants, as well as Southmark. Although PPDLP believes the lawsuit is without merit and intends to vigorously defend it, PPDLP is holding in reserve approximately 12.5% of the total settlement (the "Reserve") pending final resolution of the litigation by the court.
On September 20, 1995, the Beaumont trial judge entered a summary judgment against Southmark for the $13,790,000 contingent fee sought by Price, together with prejudgment interest, and also awarded Price an additional $5,498,525 in attorneys' fees. On January 22, 1996, the trial judge entered an interlocutory summary judgment against Dresser Industries and Baker Hughes for an amount yet to be determined. Pursuant to their indemnity obligations, the Partnership, Southmark, PPDLP and other original plaintiffs will vigorously pursue appeal when the final judgment is entered. Southmark is vigorously pursuing its appeal of the judgment, and has posted a supersedeas bond using the Reserve as collateral. Trial against the Partnership is currently scheduled for April 29, 1996.
Legal expenses were incurred during 1989, 1990, 1991, 1992 and 1993 by the Partnership and other joint property owners for participating in the lawsuit pursuant to the joint operating agreement. Litigation settlement proceeds received by the Partnership, less legal expenses incurred in 1993, are recorded as litigation settlement, net in the accompanying statement of operations for the year ended December 31, 1993.
A distribution of $91,000,000 was made to the working interest owners, including the Partnership, on July 30, 1993. The limited partners received their distribution of $359,173, or $73.44 per limited partnership interest, in September 1993. The allocation of the lawsuit settlement amount was based on the original verdict entered on October 26, 1990. The allocation to the working interest owners in each well (including the Partnership) was based on a ratio of the relative amount of damages due to overcharges for services and materials ("Materials") and damages for loss of past and future production ("Production"), each as determined in that initial judgment. Within the Partnership, damages for Materials were allocated between the partners based on their original sharing percentages for costs of acquiring and/or drilling of wells. Similarly, damages related to Production were allocated to the partners in the Partnership based on their respective share of revenues from the subject wells (see Note 6).
As a condition of the purchase by Parker & Parsley Petroleum Company of Parker & Parsley Development Company ("PPDC"), which was merged into PPDLP on January 1, 1995 (see Note 10), from its former parent in May 1989, PPDC's interest in the lawsuit and subsequent settlement was retained by the former parent. Consequently, all of PPDC's share of the settlement related to its separately held interests in the wells and its partnership interests in the sponsored partnerships (except that portion allocable to interests acquired by PPDC after May 1989) was paid to the former parent.
Note 10. Organization and operations
The Partnership was organized June 1, 1982 as a limited partnership under the Texas Uniform Limited Partnership Act for the purpose of acquiring and developing oil and gas properties. The following is a brief summary of the more significant provisions of the limited partnership agreement:
General partners - The general partners of the Partnership at December 31, 1994 were PPDC and EMPL. On January 1, 1995, PPDLP, a Texas limited partnership, became the managing general partner of the Partnership, by acquiring the rights and assuming the obligations of PPDC as the managing general partner of the Partnership. PPDC was merged into PPDLP on January 1, 1995. PPDLP's co-general partner is EMPL. PPDLP acquired PPDC's rights and obligations as managing general partner of the Partnership in connection with the merger of PPDC, P&P Producing, Inc. and Spraberry Development Corporation into MidPar L.P., which survived the merger with a change of name to PPDLP. PPDLP has the power and authority to manage, control and administer all Partnership affairs.
Limited partner liability - The maximum amount of liability of any limited partner is the total contributions of such partner plus his share of any undistributed profits.
Initial capital contributions - The limited partners entered into subscription agreements for aggregate capital contributions of $9,782,000. During 1985, the Partnership received a total of $1,372,500 from its limited partners in response to an assessment called by the general partner. Additionally, $650,000 was contributed by the managing general partner for limited partnership interests on unpaid assessments of which $500,000 was paid in 1985 and $150,000 in 1986. The general partners are required to contribute amounts equal to 10% of Partnership expenditures for lease acquisition, drilling and completion and 25% of direct, general and administrative and operating expenses, and by agreement must maintain a calculated minimum capital balance.
PARKER & PARSLEY 82-I, LTD.
INDEX TO EXHIBITS
The following documents are incorporated by reference in response to Item 14(c):
Exhibit No. Description Page
3.1 Agreement of Limited Partnership of Parker - & Parsley 82-I, Ltd. incorporated by reference to Exhibit 4(e) of Registrant's Registration Statement on Form S-1 (Registration No. 2-75503A), as amended on February 4, 1982, the effective date thereof (hereinafter called, the Registration Statement)
3.2 Amended and Restated Certificate of Limited - Partnership of Parker & Parsley 82-I, Ltd. incorporated by reference to Exhibit 3.2 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1983
4.1 Form of Subscription Agreement and Power - of Attorney incorporated by reference to Exhibit 4(b) of the Registrant's Registration Statement
4.2 Specimen Certificate of Limited Partnership - Interest incorporated by reference to Exhibit 4(d) of the Registrant's Registration Statement
99.1 * Mutual Release and Indemnity Agreement dated May 25, 1993 -