UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D. C. 20549

                                     FORM 10-K

       / x /       Annual Report Pursuant to Section 13 or 15(d)
               of the Securities Exchange Act of 1934 (Fee Required)
                    For the fiscal year ended December 31, 1995
                                         or
       /   /     Transition Report Pursuant to Section 13 or 15(d)
              of the Securities Exchange Act of 1934 (No Fee Required)

                           Commission File No. 33-3353-A

                            PARKER & PARSLEY 86-A, LTD.
               (Exact name of Registrant as specified in its charter)
                   Texas                                      75-2124884
        (State or other jurisdiction of                    (I.R.S. Employer
        incorporation or organization)                  Identification Number)

     303 West Wall, Suite 101, Midland, Texas                     79701
     (Address of principal executive offices)                  (Zip code)
        Registrant's Telephone Number, including area code : (915) 683-4768

       Securities  registered  pursuant  to  Section  12(b) of the Act:  None
          Securities registered pursuant to Section 12(g) of the Act:
                 Limited partnership interests ($1,000 per unit)

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 / /

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / x /

No  market  currently  exists  for  the  limited  partnership  interests  of the
Registrant.  Based on original  purchase  price the  aggregate  market  value of
limited  partnership  interests  owned by  non-affiliates  of the  Registrant is
$10,096,000.

As of March 8, 1996, the number of outstanding limited partnership interests was
10,131.   The  following  documents  are  incorporated  by  reference  into  the
indicated parts of this Annual Report on Form 10-K: None

                                 Page 1 of 30 pages.
                             -Exhibit index on page 30-

<PAGE>




                                     PART I

ITEM 1.     Business

Parker & Parsley  86-A,   Ltd.  (the   "Registrant")  is  a limited  partnership
organized  in 1986 under the laws of the State of Texas.  The  managing  general
partner is Parker & Parsley Development L.P. ("PPDLP").  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  $50,000,000 in a
series  of Texas  limited  partnerships  formed  under the  Parker & Parsley  86
Development  Drilling  Program,  was declared  effective by the  Securities  and
Exchange  Commission on April 7, 1986. On July 23, 1986, the offering of limited
partnership interests in the Registrant, the first partnership formed under such
statement,  was closed, with interests aggregating $10,131,000 being sold to 952
subscribers.

The Registrant  engages  primarily in oil and gas 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 52%, 16%, 15% and 11% were attributable to sales made to
Phibro   Energy,   Inc.,   Western  Gas  Resources,   Inc.,   Texaco  Trading  &
Transportation and GPM Gas Corporation, respectively.

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.

                                        2

<PAGE>



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.     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  oil and gas prospects  located
primarily  in the  Spraberry  Trend  area of West  Texas  were  acquired  by the
Registrant,  resulting in the  Registrant's  participation in the drilling of 32
oil and gas wells.  One well was  abandoned in 1992 and one well was sold during
1990. At December 31, 1995, 30 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 Item 8, Note 7. Such reserves have been  estimated by
the  engineering  staff  of  PPUSA  with a review  by an  independent  petroleum
consultant.

ITEM 3.     Legal Proceedings

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

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.









                                        3

<PAGE>



                                     PART II

ITEM 5.    Market for Registrant's Common Equity and Related Stockholder Matters

At March 8, 1996,  the  Registrant had 10,131  outstanding  limited  partnership
interests held of record by 1,002  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 $254,727 and $288,376,
respectively, were made to the limited partners.

ITEM 6.     Selected Financial Data

The  following  table sets forth  selected  financial  data for the years  ended
December 31:
                       1995        1994        1993         1992        1991
                    ----------  ----------  ----------   ----------  ----------
Operating results:
 Oil and gas sales  $  791,896  $  793,615  $1,006,672   $1,211,930  $1,370,502
                     =========   =========   =========    =========   =========
 Litigation settle-
  ment, net         $       -   $       -   $3,130,054   $       -   $       -
                     =========   =========   =========    =========   =========
 Impairment of oil
  and gas properties$  548,293  $       -   $       -    $       -   $       -
                     =========   =========   =========    =========   =========
 Net income (loss)  $ (532,368) $  (16,117) $3,107,510   $  (84,937) $   58,546
                     =========   =========   =========    =========   =========
 Allocation of net
  income (loss):
   Managing general
     partner        $   (5,323) $     (161) $   31,057   $     (849) $      787
                     =========   =========   =========    =========   =========
   Limited partners $ (527,045) $  (15,956) $3,076,453   $  (84,088) $   57,759
                     =========   =========   =========    =========   =========
 Limited partners' net
  income (loss) per
  limited partnership
  interest          $   (52.02) $    (1.57) $   303.67   $    (8.30) $     5.70
                     =========   =========   =========    =========   =========
 Limited partners' cash
  distributions per
  limited partnership
  interest          $    25.14  $    28.46  $  327.45(a) $    53.99  $    74.28
                      ========   =========   ========     =========   =========
At year end:
  Total assets      $2,016,485  $2,791,726  $3,118,375   $3,588,033  $4,212,891
---------------       =========  =========   =========    =========   =========
(a) Including litigation settlement per limited partnership interest of $284.51
    in 1993.                           4

<PAGE>




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 $791,896 from $793,615
in 1994.  The  decrease in revenues  resulted  from a 2% decrease in the average
price  received  per mcf of gas and a 9% decrease in barrels of oil produced and
sold, offset by a 6% increase in mcf of gas produced and sold and an 8% increase
in the average price received per barrel of oil. In 1995,  32,534 barrels of oil
were sold  compared  to 35,844 in 1994,  a decrease of 3,310  barrels.  In 1995,
148,708 mcf of gas were sold  compared to 139,653 in 1994,  an increase of 9,055
mcf.   The  decrease  in  oil   production   volumes  was  due  to  the  decline
characteristics of the Registrant's oil and gas properties.  The increase in gas
production  volumes was  attributable  to operational  changes on several wells.
Management expects a certain amount of decline in production in the future until
the Registrant's economically recoverable reserves are fully depleted.(1)

The average price received per barrel of oil increased $1.25 from $15.89 in 1994
to $17.14 in 1995.  The average  price  received per mcf of gas  decreased  from
$1.60  in 1994 to  $1.57  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)

Salvage income of $11,463 from equipment  disposals during 1995 was derived from
equipment  credits  received  on two  fully  depleted  wells,  compared  to $223
received during 1994 from the equipment credits received on one well plugged and
abandoned in a prior year.

Total costs and expenses increased in 1995 to $1,339,926 as compared to $812,340
in 1994,  an increase of $527,586 or 65%.  The  increase was due to increases in
production  costs  and the  impairment  of oil and gas  properties,  offset by a
decline in general and administrative expense ("G&A") and depletion.

Production costs were $472,456 in 1995 and $471,702 in 1994, resulting in a $754
increase.  The increase was due to additional well repair and maintenance  costs
incurred in an effort to stimulate well production.

                                        5

<PAGE>



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,  from $23,809 in 1994 to $23,757 in 1995.
The Registrant paid the managing  general partner $19,583 in 1995 and $17,754 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. The Partnership agreement limits
allocated G&A to 3% of gross oil and gas revenues.  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 $295,420 in 1995 compared to $316,829 in 1994. This  represented a
decrease  of  $21,409,  or  7%.  Depletion  was  computed   property-by-property
utilizing  the  unit-of-production   method  based  upon  the  dominant  mineral
produced,  generally  oil. Oil production  decreased  3,310 barrels in 1995 from
1994,  while oil reserves of barrels were revised upward by 17,716  barrels,  or
5%. The decline in depletion expense for 1995 was partially due to the declining
barrels of oil produced and sold.

Effective for the fourth  quarter of 1995 the  Registrant  adopted  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") 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 $548,293 associated with
the adoption of SFAS 121.

1994 compared to 1993

The Registrant's 1994 oil and gas revenues decreased to $793,615 from $1,006,672
in 1993,  a decrease  of 21%.  The  decrease  in  revenues  resulted  from an 8%
decrease in the average price  received per barrel of oil, a 15% decrease in the
average price received per mcf of gas, a 13% decrease in barrels of oil produced
and sold and an 11% decrease in mcf of gas produced  and sold.  In 1994,  35,844
barrels  of oil were  sold  compared  to  41,347 in 1993,  a  decrease  of 5,503
barrels.  In 1994,  139,653 mcf of gas were sold  compared to 157,200 in 1993, a
decrease  of  17,547  mcf.  The  decreases  were  primarily  due to the  decline
characteristics of the Registrant's oil and gas properties.


                                        6

<PAGE>



The average price received per barrel of oil decreased $1.29 from $17.18 in 1993
to $15.89 in 1994.  The average  price  received per mcf of gas  decreased  from
$1.89 in 1993 to $1.60 in 1994.

Interest income decreased to $2,385 in 1994 as compared to $8,710 for 1993. This
decrease was due to interest earned on the litigation  proceeds received in 1993
until it was disbursed to the limited partners.

Salvage  income from  equipment  disposals  during 1993  consisted  of equipment
credits  received of $25,267 on one well  abandoned  in a prior  year.  Expenses
incurred  during 1993 to plug and abandon  this well  totaled  $15,197.  Salvage
income received during 1994 was $223, with no expense incurred.

Total costs and expenses decreased in 1994 to $812,340 as compared to $1,063,193
in 1993,  a decrease  of $250,853 or 24%.  The decline was due to  decreases  in
production costs, G&A, depletion, interest expense and abandoned property costs.

Production  costs were  $471,702 in 1994 and  $560,401 in 1993,  resulting in an
$88,699  decrease,  or 16%.  The  decrease  was due to declines in well  repair,
maintenance costs, workover expense and production and ad valorem taxes.

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,  21% from $30,200 in 1993 to $23,809 in
1994.  The  Registrant  paid the managing  general  partner  $17,754 in 1994 and
$25,126 in 1993 for G&A incurred on behalf of the Registrant.

Depletion was $316,829 in 1994 compared to $452,863 in 1993. This  represented a
decrease of $136,034,  or 30%. Oil  production  decreased  5,503 barrels in 1994
from 1993, while oil reserves of barrels were revised downward by 9,722 barrels,
or 3%. The  decline  in  depletion  expense  for 1994 was  partially  due to the
declining barrels of oil produced and sold.

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

                                        7

<PAGE>



working interest owners, including the Registrant, on July 30, 1993. The limited
partners  received their  distribution  of  $2,882,376,  or  $284.51 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  agreement.  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.  Interest charged on legal expenses paid on behalf
of the Registrant by the managing general partner was $4,532 in 1993 and $11,302
in 1992.

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%  and was
implemented  April 1, 1994. 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, 1994, 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

                                        8

<PAGE>



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 $305,079 during the year
ended  December 31, 1995, a $31,912  increase  from the year ended  December 31,
1994. The increase was due to declines in production costs primarily due to less
well repair and maintenance costs in 1995 compared to 1994.

Net Cash Used in Investing Activities

The  Registrant's   principal   investing   activities  during  1995  and  1994,
respectively, included $17,619 and $2,310 for expenditures related to repair and
maintenance activity on various oil and gas properties.

The Registrant received proceeds of $11,463 in 1995 from the disposal of oil and
gas  equipment on two active  properties.  Proceeds of $223 was received  during
1994 from the  disposal of oil and gas  equipment  on a property  abandoned in a
prior year.

Net Cash Used in Financing Activities

Cash  available  was  sufficient  in 1995 for  distributions  to the partners of
$257,303 of which $254,727 was distributed to the limited partners and $2,576 to
the managing general partner.  In 1994, cash was sufficient for distributions to
the  partners of  $291,289  of which  $288,376  was  distributed  to the limited
partners and $2,913 to the managing general partner.

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.


                                        9

<PAGE>




ITEM 8.    Financial Statements and Supplementary Data

The Registrant's audited financial statements are included elsewhere herein.

ITEM 9.    Changes in and Disagreements with Accountants on Accounting
             and Financial Disclosure

None.











                                       10

<PAGE>


                                    PART III


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.

                                       11

<PAGE>




     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.     Executive Compensation

The  Registrant  does not have any  directors  or  officers.  Management  of the
Registrant is vested in PPDLP,  the managing  general  partner.  The  Registrant

                                       12

<PAGE>


participates in oil and gas activities  through an income tax  partnership  (the
"Program") pursuant to the Program agreement. Under the Program agreement, PPDLP
pays approximately 10% of the Registrant's acquisition,  drilling and completion
costs and  approximately  25% of its  operating  and general and  administrative
expenses.  In return,  PPDLP is allocated  approximately 25% 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.

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.     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 owned 35
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 86-A,  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.





                                       13

<PAGE>




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      $ 194,298      $ 195,989      $ 202,264

   Reimbursement of general and
     administrative expenses            $  19,583      $  17,754      $  25,126

   Purchase of oil and gas properties
     and related equipment, at
     predecessor cost                   $   3,309      $   4,664      $      -

   Receipt of proceeds for the
     salvage value of retired oil
     and gas equipment                  $      -       $      -       $  23,401

   Interest expense charged
     on legal expenses paid on
     behalf of the Registrant by
     the managing general partner       $      -       $      -       $   4,532

Under the limited partnership agreement, the managing general partner pays 1% of
the  Registrant's  acquisition,  drilling  and  completion  costs  and 1% of its
operating and general and administrative expenses. In return, it is allocated 1%
of the  Registrant's  revenues.  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 Program.








                                       14

<PAGE>


                                     PART IV


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.











                                        15

<PAGE>


                               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 86-A, 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




                                        16

<PAGE>




                           INDEPENDENT AUDITORS' REPORT




The Partners
Parker & Parsley 86-A, Ltd.
  (A Texas Limited Partnership):

We  have  audited  the  financial  statements  of Parker & Parsley 86-A, 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 86-A, 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







                                        17

<PAGE>




                           PARKER & PARSLEY 86-A, LTD.
                          (A Texas Limited Partnership)

                                  BALANCE SHEETS
                                   December 31


                                                     1995              1994
                                                  -----------       -----------
           ASSETS

Current assets:
  Cash and cash equivalents, including interest
   bearing deposits of $66,392 in 1995 and
   $24,892 in 1994                                $    66,625       $    25,005
  Accounts receivable - oil and gas sales             106,785            95,300
                                                   ----------        ----------

      Total current assets                            173,410           120,305

Oil and gas properties - at cost, based on the
  successful efforts accounting method              8,008,245         7,992,878
   Accumulated depletion                           (6,165,170)       (5,321,457)
                                                   ----------        ----------

      Net oil and gas properties                    1,843,075         2,671,421
                                                   ----------        ----------

                                                  $ 2,016,485       $ 2,791,726
                                                   ==========        ==========
LIABILITIES AND PARTNERS' CAPITAL

Current liabilities:
  Accounts payable - affiliate                    $    62,993       $    48,563

Partners' capital:
  Limited partners (10,131 interests)               1,935,262         2,717,034
  Managing general partner                             18,230            26,129
                                                   ----------        ----------

                                                    1,953,492         2,743,163
                                                   ----------        ----------

                                                  $ 2,016,485       $ 2,791,726
                                                   ==========        ==========



         The accompanying notes are an integral part of these statements.


                                        18

<PAGE>




                           PARKER & PARSLEY 86-A, LTD.
                          (A Texas Limited Partnership)

                             STATEMENTS OF OPERATIONS
                         For the years ended December 31



                                           1995           1994          1993
                                        ----------     ---------     ---------- 
Revenues:
  Oil and gas sales                     $  791,896     $ 793,615     $1,006,672
  Interest income                            4,199         2,385          8,710
  Salvage income from equipment
   disposals                                11,463           223         25,267
  Litigation settlement, net                    -             -       3,130,054
                                         ---------      --------      ---------

       Total revenues                      807,558       796,223      4,170,703

Costs and expenses:
  Production costs                         472,456       471,702        560,401
  General and administrative expenses       23,757        23,809         30,200
  Depletion                                295,420       316,829        452,863
  Impairment of oil and gas properties     548,293            -              -
  Interest expense                              -             -           4,532
  Abandoned property costs                      -             -          15,197
                                         ---------      --------      ---------

       Total costs and expenses          1,339,926       812,340      1,063,193
                                         ---------      --------      ---------

Net income (loss)                       $ (532,368)    $ (16,117)    $3,107,510
                                         =========      ========      =========

Allocation of net income (loss):
  Managing general partner              $   (5,323)    $    (161)    $   31,057
                                         =========      ========      =========

  Limited partners                      $ (527,045)    $ (15,956)    $3,076,453
                                         =========      ========      =========

Net income (loss) per limited
  partnership interest                  $   (52.02)    $   (1.57)    $   303.67
                                         =========      ========      =========


        The accompanying notes are an integral part of these statements.


                                        19

<PAGE>




                            PARKER & PARSLEY 86-A, LTD.
                          (A Texas Limited Partnership)

                         STATEMENTS OF PARTNERS' CAPITAL




                                           Managing
                                           general      Limited
                                           partner      partners       Total
                                          ---------   -----------   -----------

Partners' capital at January 1, 1993      $  31,636   $ 3,262,313   $ 3,293,949

  Distributions                             (33,490)   (3,317,400)   (3,350,890)

  Net income                                 31,057     3,076,453     3,107,510
                                           --------    ----------    ----------

Partners' capital at December 31, 1993       29,203     3,021,366     3,050,569

  Distributions                              (2,913)     (288,376)     (291,289)

  Net loss                                     (161)      (15,956)      (16,117)
                                           --------    ----------    ----------

Partners' capital at December 31, 1994       26,129     2,717,034     2,743,163

  Distributions                              (2,576)     (254,727)     (257,303)

  Net loss                                   (5,323)     (527,045)     (532,368)
                                           --------    ----------    ----------

Partners' capital at December 31, 1995    $  18,230   $ 1,935,262   $ 1,953,492
                                           ========    ==========    ==========










         The accompanying notes are an integral part of these statements.


                                        20

<PAGE>




                           PARKER & PARSLEY 86-A, 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 (loss)                     $ (532,368)   $  (16,117)   $ 3,107,510
  Adjustments to reconcile net income
   (loss) to net cash provided by
   operating activities:
     Depletion                             295,420       316,829        452,863
     Impairment of oil and gas
      properties                           548,293            -              -
     Salvage income from equipment
      disposals                            (11,463)         (223)       (25,267)
  Changes in assets and liabilities:
     (Increase) decrease in accounts
      receivable                           (11,485)       (5,502)        19,331
     Increase (decrease) in accounts
      payable                               16,682       (21,820)      (219,963)
                                         ---------     ---------     ----------
       Net cash provided by operating
        activities                         305,079       273,167      3,334,474

Cash flows from investing activities:
  Additions to oil and gas properties      (17,619)       (2,310)       (22,144)
  Proceeds from salvage income on
   equipment disposals                      11,463           223         25,267
                                         ---------     ---------     ----------

       Net cash provided by (used in)
        investing activities                (6,156)       (2,087)         3,123

Cash flows from financing activities:
  Cash distributions to partners          (257,303)     (291,289)    (3,350,890)
                                         ---------     ---------     ----------

Net increase (decrease) in cash and
  cash equivalents                          41,620       (20,209)       (13,293)
Cash and cash equivalents at
  beginning of year                         25,005        45,214         58,507
                                         ---------     ---------     ----------

Cash and cash equivalents at end
  of year                               $   66,625    $   25,005    $    45,214
                                         =========     =========     ==========

         The accompanying notes are an integral part of these statements.

                                        21

<PAGE>



                           PARKER & PARSLEY 86-A, LTD.
                          (A Texas Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                         December 31, 1995, 1994 and 1993

Note 1.     Organization and nature of operations

     Parker & Parsley 86-A, Ltd. (the  "Partnership")  is a limited  partnership
organized in 1986 under the laws of the State of Texas.

     The Partnership engages primarily in oil and gas development and production
in Texas 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.
                                        22

<PAGE>




     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 (loss) 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 121 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.

                                        23

<PAGE>




    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 $548,293 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 $796,782 greater than the tax basis at December 31, 1995.

    The following is a  reconciliation  of net income  (loss) per  statements of
operations  with the net income per  Federal  income tax  returns  for the years
ended December 31:
                                           1995          1994          1993
                                        ----------    ----------    ----------
  Net income (loss) per statements
   of operations                        $ (532,368)   $  (16,117)   $3,107,510
  Intangible development costs
   capitalized for financial reporting
   purposes and expensed for tax
   reporting purposes                           -             -           (196)
  Depletion and depreciation
   provisions for tax reporting
   purposes under amounts for
   financial reporting purposes            281,353       280,776       399,188
  Impairment of oil and gas properties
   for financial reporting purposes        548,293            -             -
  Other, net                                   202         1,708         1,025
                                         ---------     ---------     ---------
       Net income per Federal
         income tax returns             $  297,480    $  266,367    $3,507,527
                                         =========     =========     =========

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
                                    ----------     ----------     ----------
   Development costs                $    3,904     $    4,887     $   31,026
                                     =========      =========      =========

                                        24

<PAGE>




     Capitalized oil and gas properties consist of the following:

                                         1995           1994           1993
                                     -----------    -----------    -----------
   Proved properties:
     Property acquisition costs      $   334,265    $   334,265    $   334,265
     Completed wells and equipment     7,673,980      7,658,613      7,653,726
                                      ----------     ----------     ----------

                                       8,008,245      7,992,878      7,987,991
   Accumulated depletion              (6,165,170)    (5,321,457)    (5,004,628)
                                      ----------     ----------     ----------

        Net capitalized costs        $ 1,843,075    $ 2,671,421    $ 2,983,363
                                      ==========     ==========     ==========

During 1995, the Partnership recognized a non-cash charge of $548,293 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                            $ 194,298   $ 195,989   $ 202,264

   Reimbursement of general and
     administrative expenses               $  19,583   $  17,754   $  25,126

   Purchase of oil and gas properties
     and related equipment, at
     predecessor cost                      $   3,309   $   4,664   $      -

   Receipt of proceeds for the salvage
     value of retired oil and gas
     equipment                             $      -    $      -    $  23,401

   Interest expense charged on legal
     expenses paid on behalf of the
     Partnership by the managing
     general partner                       $      -    $      -    $   4,532

   The Partnership  participates in oil and gas activities through an income tax
partnership  (the "Program")  pursuant to the Program  agreement.  PPDLP and the
Partnership are parties to the Program agreement.


                                        25

<PAGE>




   The  costs  and  revenues  of the  Program  are  allocated  to PPDLP  and the
Partnership as follows:
                                                PPDLP (1)        Partnership
                                               ----------        -----------
Revenues:
  Proceeds from disposition of depreciable
   properties                                    9.09091%         90.90909%
     All other revenues                        24.242425%         75.757575%
Costs and expenses:
  Lease acquisition costs, drilling and
   completion costs and all other costs          9.09091%         90.90909%
  Operating costs, direct costs and general
   and administrative expenses                 24.242425%         75.757575%

   (1) Excludes  PPDLP's 1% general partner  ownership which is allocated at the
       Partnership level and 35 limited partner interests owned by PPDLP.

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           405,062        1,852,167
  Revisions of estimates of January 1, 1993         18,642          105,842
  Production                                       (41,347)        (157,200)
                                                ----------      -----------

  Net proved reserves at December 31, 1993         382,357        1,800,809
  Revisions of estimates of December 31, 1993       (9,722)        (185,475)
  Production                                       (35,844)        (139,653)
                                                ----------      -----------

  Net proved reserves at December 31, 1994         336,791         1,475,681
  Revisions of estimates of December 31, 1994       17,716           128,050
  Production                                       (32,534)         (148,708)
                                                ----------      ------------
  Net proved reserves at December 31, 1995         321,973         1,455,023
                                                ==========      ============

     The  estimated  present  value of future net  revenues of proved  reserves,
calculated  using December 31, 1995 prices of $19.36 per barrel of oil and $1.76
per mcf of gas, discounted at 10% was approximately  $1,818,000 and undiscounted
was $2,998,000 at December 31, 1995.

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     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.                   52%        54%        64%
         GPM Gas Corporation                   11%        23%        23%
         Texaco Trading & Transportation       15%        15%         -
         Western Gas Resources, Inc.           16%         -          -

     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 $38,376 due  from
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.
                                        27

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     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 $2,882,376,  or $284.51 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  ("Produc
tion"),  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.

                                        28

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Note 10. Organization and operations

     The Partnership was organized July 23, 1986 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:

     Managing  general  partner - On  January 1, 1995,  PPDLP,  a Texas  limited
     partnership, became the sole managing general partner of the Partnership as
     a result of the  merger  into it of PPDC,  a Delaware  corporation,  and an
     affiliate  of PPDLP and the  Company,  and which  previously  served as the
     managing  general  partner  of  the  Partnership.   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  Partnership,  including
     the development  drilling  program in which the  Partnership  participates.
     PPDLP has the power and  authority to manage,  control and  administer  all
     Program and Partnership affairs.  Under the limited partnership  agreement,
     the  managing  general  partner pays 1% of the  Partnership's  acquisition,
     drilling  and  completion  costs and 1% of its  operating  and  general and
     administrative expenses. In return, it is allocated 1% of the Partnership's
     revenues.

     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 $10,131,000.
     PPDLP is required to contribute amounts equal to 1% of initial  Partnership
     capital  less  commission  and offering  expenses  allocated to the limited
     partners  and to  contribute  amounts  necessary  to pay costs and expenses
     allocated to it under the Partnership agreement to the extent its
     share of revenues does not cover such costs.
















                                        29

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                           PARKER & PARSLEY 86-A, LTD.

                                INDEX TO EXHIBITS




     The following  documents are  incorporated by reference in response to Item
14(c):

Exhibit No.                      Description                        Page

    3(a)                Amended and Restated Certificate of           -
                        Limited Partnership of Parker & Parsley
                        86-A, Ltd.

    4(a)                Agreement of Limited Partnership of           -
                        Parker & Parsley 86-A, Ltd.

    4(b)                Form of Subscription Agreement and            -
                        Power of Attorney

    4(c)                Specimen Certificate of Limited               -
                        Partnership Interest

   10(a)                Operating Agreement                           -

   10(b)                Exploration and Development Program           -
                        Agreement

     99.1               Mutual Release and Indemnity Agreement
                        dated May 25, 1993                            -



                                        30

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