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, 1997

                                       or
         /   /   Transition Report Pursuant to Section 13 or 15(d)
             of the Securities Exchange Act of 1934 (No Fee Required)
                          Commission File No. 33-3353C

                           PARKER & PARSLEY 86-C, LTD.
             (Exact name of Registrant as specified in its charter)
               Texas                                          75-2142283
   -------------------------------                     ----------------------
   (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
$19,257,000.

             As of March 9, 1998, the number of outstanding limited
            partnership interests was 19,317. The following documents
             are incorporated by reference into the indicated parts
                    of this Annual Report on Form 10-K: None





<PAGE>



Parts I and II of this Report contain  forward  looking  statements that involve
risks and uncertainties. Accordingly, no assurances can be given that the actual
events and results will not be materially different than the anticipated results
described  in the  forward  looking  statements.  See "Item 1.  Business"  for a
description of various factors that could  materially  affect the ability of the
Partnership to achieve the anticipated  results described in the forward looking
statements.


                                     PART I

ITEM 1.   Business

Parker &  Parsley  86-C,  Ltd.  (the  "Partnership")  is a  limited  partnership
organized  in 1986  under the laws of the State of Texas.  As of August 8, 1997,
Pioneer Natural Resources USA, Inc.  ("Pioneer USA") became the managing general
partner of the Partnership.  Prior to August 8, 1997, the Partnership's managing
general partner was Parker & Parsley Development L.P. ("PPDLP"),  a wholly-owned
subsidiary of Parker & Parsley Petroleum Company ("Parker & Parsley"). On August
7, 1997, Parker & Parsley and Mesa Inc. ("Mesa") received  shareholder  approval
to merge and create Pioneer Natural Resources Company ("Pioneer").  On August 8,
1997,  PPDLP was merged with and into Pioneer USA, a wholly-owned  subsidiary of
Pioneer,  resulting in Pioneer USA becoming the managing  general partner of the
Partnership as PPDLP's successor by merger.  For a more complete  description of
the Parker & Parsley and Mesa merger,  see Pioneer's  Registration  Statement on
Form S-4 as filed with the Securities & Exchange Commission.

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 December 30,  1986,  the offering of
limited partnership  interests in the Partnership,  the third partnership formed
under such statement,  was closed, with interests aggregating  $19,317,000 being
sold to 1,466 subscribers.

The Partnership  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  Partnership's  revenue,  income and
identifiable assets.

The principal  markets during 1997 for the oil produced by the Partnership  were
refineries  and  oil  transmission  companies  that  have  facilities  near  the
Partnership's   oil  producing   properties.   The  principal  markets  for  the
Partnership's   gas  were  companies  that  have  pipelines   located  near  the
Partnership's gas producing  properties.  Of the Partnership's total oil and gas
revenues for 1997,  approximately 52% and 25% were attributable to sales made to
Genesis Crude Oil, L.P. and Western Gas Resources, Inc., respectively.

The Partnership's revenues,  profitability,  cash flow and future rate of growth
are highly dependent on the prevailing prices of oil and gas, which are affected
by  numerous  factors  beyond  the  Partnership's  control.  Oil and gas  prices
historically  have been very volatile.  A substantial or extended decline in the
prices of oil or gas could have a material  adverse effect on the  Partnership's
revenues,  profitability and cash flow and could,  under certain  circumstances,
result in a reduction in the  carrying  value of the  Partnership's  oil and gas
properties.

                                        2

<PAGE>



Because of the demand for oil and gas, the Partnership 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  Partnership's  gas  producing  properties.  The
Partnership  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 Partnership  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  Partnership  cannot  predict  what,  if  any,  effect  these
environmental regulations may have on its current or future operations.

The  Partnership  does not have any  employees  of its own.  Pioneer USA employs
1,133 persons, many of whom dedicated a part of their time to the conduct of the
Partnership's business during the period for which this report is filed. Pioneer
USA is responsible for all management functions.

Numerous  uncertainties  exist in estimating  quantities of proved  reserves and
future net revenues  therefrom.  The  estimates  of proved  reserves and related
future net revenues  set forth in this report are based on various  assumptions,
which may ultimately  prove to be inaccurate.  Therefore,  such estimates should
not be construed as estimates of the current  market value of the  Partnership's
proved reserves.

No material part of the  Partnership's  business is seasonal and the Partnership
conducts no foreign operations.

ITEM 2.   Properties

The  Partnership'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
Partnership,  resulting in the Partnership's participation in the drilling of 60
productive oil and gas wells.  Four wells were sold in 1996 and three wells were
abandoned due to  uneconomical  operations;  one in 1997, one in 1995 and one in
1992. At December 31, 1997, 53 wells were producing.

For  information  relating  to the  Partnership's  estimated  proved oil and gas
reserves at December 31, 1997, 1996 and 1995, 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  Pioneer  USA with a review by an
independent petroleum consultant.



                                        3

<PAGE>



ITEM 3.   Legal Proceedings

The  Partnership  is a party to  various  legal  proceedings  incidental  to its
business  involving claims in oil and gas leases or interests,  other claims for
damages in amounts not in excess of 10% of its current assets and other matters,
none of which Pioneer believes to be material.

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 1997.



                                        4

<PAGE>



                                     PART II


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

At March 9, 1998, the Partnership  had 19,317  outstanding  limited  partnership
interests held of record by 1,420  subscribers.  There is no established  public
trading  market  for  the  limited  partnership  interests.  Under  the  limited
partnership  agreement,  Pioneer USA 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  Partnership's  obligations are distributed to the partners
at least quarterly in accordance with the limited partnership agreement.  During
the years ended  December  31,  1997 and 1996,  distributions  of  $730,927  and
$1,340,522, 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:
<TABLE>
                             1997         1996           1995          1994         1993
                          ----------   ----------     -----------   ----------   ----------
<S>                       <C>          <C>            <C>           <C>          <C>
Operating results:
  Oil and gas sales       $1,484,170   $1,750,717     $ 1,423,091   $1,525,637   $1,972,283
                           =========    =========      ==========    =========    =========
  Litigation
   settlement, net        $      -     $  704,864     $       -     $      -     $7,605,715
                           =========    =========      ==========    =========    =========
  Impairment of oil and
   gas properties         $  895,701   $  132,778     $   877,603   $      -     $      -
                           =========    =========      ==========    =========    =========
  Net income
   (loss)                 $ (577,071)  $1,142,509     $(1,054,048)  $   (8,694)  $7,667,154
                           =========    =========      ==========    =========    =========
  Allocation of net
   income (loss):
     Managing general
     partner              $   (5,770)  $   11,425     $   (10,540)  $      (87)  $   76,627
                           =========    =========      ==========    =========   =========
     Limited partners     $ (571,301)  $1,131,084     $(1,043,508)  $   (8,607)  $7,590,527
                           =========    =========      ==========    =========    =========
  Limited partners'
    net income loss
    per limited
    partnership
    interest              $   (29.58)  $    58.55     $    (54.02)  $     (.45)  $   392.95
                           =========    =========      ==========    =========    =========
  Limited partners'
    cash distributions
    per limited
    partnership
    interest              $    37.84   $    69.40(a)  $     30.80   $    35.84   $   410.60(a)
                           =========    =========      ==========    =========    =========
At year end:
  Total assets            $2,820,637   $4,193,447     $ 4,413,551   $6,049,557   $6,768,125
                           =========    =========      ==========    =========    =========
</TABLE>
---------------
(a)   Including litigation settlement per limited partnership interest of $36.12
      in 1996 and $360.95 in 1993.

                                        5

<PAGE>



ITEM 7.   Management's Discussion and Analysis of Financial Condition and
            Results of Operations

Results of operations

1997 compared to 1996

The  Partnership's  1997 oil and gas revenues  decreased 15% to $1,484,170  from
$1,750,717  in  1996.  The  decrease  in  revenues  resulted  from  declines  in
production and lower average prices  received.  In 1997,  47,796 barrels of oil,
13,247 barrels of natural gas liquids ("NGLs") and 184,965 mcf of gas were sold,
or 91,871 barrel of oil equivalents ("BOEs"). In 1996, 52,839 barrels of oil and
246,386 mcf of gas were sold, or 93,903 BOEs.

Consistent with the managing general  partner,  the Partnership has historically
accounted for processed  natural gas production as wellhead  production on a wet
gas basis. As a result of the merger with Mesa, the managing general partner has
adopted  Mesa's  accounting  policy and now accounts for  processed  natural gas
production  in two  components:  natural gas  liquids and dry residue  gas. As a
result of the change in the managing general partner's  policy,  the Partnership
now accounts  for  processed  natural gas  production  as processed  natural gas
liquids and dry residue gas. Consequently,  separate product volumes will not be
comparable for periods prior to September 30, 1997.

The declines in production  volumes were primarily  attributable  to the decline
characteristics  of the Partnership'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 Partnership's economically recoverable reserves
are fully depleted.

The average price received per barrel of oil decreased $2.33, or 11% from $21.76
in 1996 to $19.43 in 1997. The average price per barrel of NGL's during 1997 was
$10.22.  The average  price  received per mcf of gas  decreased 7% from $2.44 in
1996 to $2.27 in  1997.  The  market  price  for oil and gas has been  extremely
volatile  in the past  decade,  and  management  expects  a  certain  amount  of
volatility to continue in the foreseeable  future. The Partnership may therefore
sell its future oil and gas  production  at average  prices lower or higher than
that received in 1997.

Gains on  disposition  of assets of $20,511 and $58,479 were  recognized  during
1997 and 1996,  respectively.  The gains were  comprised  of $20,511 and $28,740
received from the disposal of equipment on two fully  depleted wells during 1997
and 1996, respectively. The additional gain in 1996 of $29,739 resulted from the
sale of four oil and gas wells and four saltwater  disposal wells,  attributable
to proceeds of $31,623  received from the sale,  less the write-off of remaining
capitalized well costs of $1,884 during 1996.

On April  29,  1996,  Southmark  Corporation,  Pioneer  USA and the  Partnership
entered  into a final  $7.4  million  settlement  agreement  with Jack N.  Price
resolving all outstanding  litigation  between the parties.  As a result, all of
the pending  lawsuits and judgments have been dismissed,  the  supersedeas  bond
released,  and the Reserve  released as  collateral.  On June 28,  1996, a final
distribution  was made to the  working  interest  owners  of  $704,864  of which
included  $697,816,   or  $36.12  per  limited  partnership   interest,  to  the
Partnership and its partners.

                                        6

<PAGE>



Total  costs  and  expenses  increased  in 1997 to  $2,094,098  as  compared  to
$1,380,816 in 1996, an increase of $713,282, or 52%. The increase was due to the
impairment of oil and gas  properties  and an increase in  depletion,  offset by
decreases  in  production  costs,  abandoned  property  costs  and  general  and
administrative ("G&A") expenses.

Production  costs were  $767,140 in 1997 and  $815,378 in 1996,  resulting  in a
$48,238 decrease,  or 6%. The decrease was due to a reduction in workover costs,
production taxes and well maintenance costs.

G&A's  components are independent  accounting and engineering  fees and managing
general  partner  personnel  and  operating  costs.   During  this  period,  G&A
decreased,  in  aggregate,  11% from  $52,521 in 1996 to  $46,992  in 1997.  The
Partnership  paid the managing  general  partner  $38,761 in 1997 and $45,387 in
1996 for G&A incurred on behalf of the  Partnership.  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  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.

The Partnership  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")  effective as of October 1, 1995 (see Notes 2 and 3
of Notes to Financial  Statements included in "Item 8. Financial  Statements and
Supplementary Data"). As a result of the review and evaluation of its long-lived
assets for impairment,  the Partnership  recognized non-cash charges of $895,701
and $132,778 related to its oil and gas properties during the fourth quarters of
1997 and 1996, respectively.

Depletion was $371,531 in 1997 compared to $352,216 in 1996. This represented an
increase of $19,315,  or 5%.  This  increase  was  primarily  attributable  to a
decrease  in oil  reserves  during 1997 as a result of lower  commodity  prices,
offset by a decline in oil production of 5,043 barrels in 1997 compared to 1996.

Abandoned  property  costs of $12,734 and $27,923 were incurred  during 1997 and
1996,   respectively.   These  costs  were  attributable  to  the  plugging  and
abandonment of one uneconomical well in 1997 and two wells in 1996.

1996 compared to 1995

The  Partnership's  1996 oil and gas revenues  increased 23% to $1,750,717  from
$1,423,091 in 1995. The increase in revenues resulted from a 27% increase in the
average price received per barrel of oil and a 46% increase in the average price
received  per mcf of gas,  offset by  declines  in barrels of oil and mcf of gas
produced and sold. In 1996,  52,839  barrels of oil were sold compared to 57,498
in 1995, a decrease of 4,659  barrels,  or 8%. In 1996,  246,386 mcf of gas were
sold  compared to 261,087 in 1995,  a decrease of 14,701 mcf, or 6%. The sale of
four oil and gas wells  during 1996 had no material  effect on the  decreases in
oil  and  gas  production.  The  decreases  were  primarily  due to the  decline
characteristics of the Partnership's oil and gas properties.

The average price received per barrel of oil increased $4.57 from $17.19 in 1995
to $21.76 in 1996.  The average  price  received per mcf of gas  increased  from
$1.67 in 1995 to $2.44 in 1996.

                                        7

<PAGE>



Gain on  disposition  of assets of $58,479 was  recognized  during 1996 of which
$28,740 was received from the disposal of equipment on one fully  depleted well,
along  with a gain of  $29,739  from the sale of four oil and gas wells and four
saltwater disposal wells,  attributable to proceeds of $31,623 received from the
sale, less the write-off of remaining  capitalized  well costs of $1,884. A loss
on  disposition  of assets of $108,356 was  recognized  during  1995.  This loss
resulted  from the  write-off of remaining  capitalized  well costs of $144,704,
less proceeds received of $32,091 from equipment salvage on abandoned  property,
offset by salvage income of $4,257.

On April  29,  1996,  Southmark  Corporation,  Pioneer  USA and the  Partnership
entered  into a final  $7.4  million  settlement  agreement  with Jack N.  Price
resolving all outstanding  litigation  between the parties.  As a result, all of
the pending  lawsuits and judgments have been dismissed,  the  supersedeas  bond
released,  and the Reserve  released as  collateral.  On June 28,  1996, a final
distribution  was made to the working interest owners of $704,864 which included
$697,816, or $36.12 per limited partnership interest, to the Partnership and its
partners.

Total  costs  and  expenses  decreased  in 1996 to  $1,380,816  as  compared  to
$2,377,042 in 1995, a decrease of $996,226,  or 42%. The decrease was due to the
reduction in impairment of oil and gas  properties,  in addition to decreases in
production  costs  and  depletion,  offset  by  increases  in G&A and  abandoned
property costs.

Production  costs were  $815,378 in 1996 and  $848,246 in 1995,  resulting  in a
$32,868  decrease,  or 4%. The decrease was due to a decline in well maintenance
costs.

During this period,  G&A  increased,  in aggregate,  23% from $42,693 in 1995 to
$52,521 in 1996. The  Partnership  paid the managing  general partner $45,387 in
1996 and $34,427 in 1995 for G&A incurred on behalf of the Partnership.

The  Partnership  adopted SFAS 121  effective as of October 1, 1995 (see Notes 2
and 3 of Notes to Financial Statements included in "Item 8. Financial Statements
and  Supplementary  Data").  As a result of the  review  and  evaluation  of its
long-lived assets for impairment, the Partnership recognized non-cash charges of
$132,778 and $877,603  related to its oil and gas  properties  during the fourth
quarters of 1996 and 1995, respectively.

Depletion was $352,216 in 1996 compared to $594,478 in 1995. This  represented a
decrease of $242,262,  or 41%. This decrease was primarily  attributable  to the
following  factors:  (i) a reduction in the  Partnership's  net depletable basis
from  charges  taken  in  accordance  with  SFAS121,  (ii)  a  reduction  in oil
production of 4,659 barrels in 1996 from 1995,  and (iii) an increase in oil and
gas reserves during 1996 as a result of higher commodity prices.

Incurred  expenses  of $27,923 for  abandoned  property  costs  during 1996 were
related to two of the four oil and gas wells sold and are  reflected  in the net
post-closing  adjustment  to  proceeds  from  the sale of  properties.  Expenses
incurred in 1995 to plug and abandon one well totaled $14,022.



                                        8

<PAGE>



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  Partnership.  During 1995,  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  increased by 4.4%. The
1996 annual change in average weekly earnings  increased by 4.1%. The 1997 index
(effective  April 1, 1997) increased 2%. 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.  During  1997,  the price per
barrel for oil production similar to the Partnership's ranged from approximately
$16.00 to $23.00. During most of 1997 and 1996, the Partnership  benefitted from
higher oil prices as  compared  to previous  years.  However,  during the fourth
quarter of 1997, oil prices began a downward trend that has continued into March
1998. On March 19, 1998, the market price for West Texas  intermediate crude was
$12.00 per  barrel.  A  continuation  of the oil price  environment  experienced
during  the  first  quarter  of  1998  will  have  an  adverse   effect  on  the
Partnership's  revenues and  operating  cash flow and could result in additional
decreases in the carrying value of the Partnership's oil and gas properties.

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.

Liquidity and capital resources

Net Cash Provided by Operating Activities

Net cash provided by operating  activities  decreased  $769,164  during the year
ended  December 31, 1997 from the year ended December 31, 1996. The decrease was
primarily  attributable  to the receipt of proceeds in 1996 from the  litigation
settlement as discussed above and a decline in oil and gas sales receipts.

Net Cash Provided by Investing Activities

The Partnership's  investing activities during 1997 and 1996 were related to the
addition or disposal of oil and gas equipment on active properties.

Proceeds from asset  dispositions  included  $20,511 and $60,363 during 1997 and
1996,  respectively.  Proceeds  from salvage  income on  equipment  disposals of
$20,511 and $28,740  resulted from the sale of two fully  depleted  wells during
1997 and 1996, respectively.  Proceeds of $31,623 were received during 1996 from
the sale of four oil and gas wells and four saltwater disposal wells.

Net Cash Used in Financing Activities

Cash was  sufficient  in 1997 for  distributions  to the partners of $738,310 of
which $7,383 was distributed to the managing general partner and $730,927 to the


                                        9

<PAGE>



limited partners. In 1996, cash was sufficient for distributions to the partners
of $1,354,063 of which $13,541 was  distributed to the managing  general partner
and $1,340,522 to the limited partners.

It is expected that future net cash  provided by  operations  will be sufficient
for any capital  expenditures and any distributions.  As the production from the
properties declines, distributions are also expected to decrease.

Information systems for the year 2000

The general partner will be required to modify its information  systems in order
to accurately process Partnership data referencing the year 2000. Because of the
importance of occurrence dates in the oil and gas industry,  the consequences of
not pursuing these  modifications could be very significant to the Partnership's
ability  to manage and  report  operating  activities.  Currently,  the  general
partner plans to contract with third parties to perform the software programming
changes necessary to correct any existing deficiencies. Such programming changes
are  anticipated  to be  completed  and  tested by March 1, 1999.  The  managing
general  partner  will  allocate  a  portion  of  the  costs  of the  year  2000
programming  charges  to the  Partnership  when they are  incurred,  along  with
recurring  general  and  administrative  expenses  as  defined  pursuant  to the
partnership  agreement.  Although the costs are not estimable at this time, they
should not be significant to the Partnership.



                                       10

<PAGE>



ITEM 8.         Financial Statements and Supplementary Data

                          Index to Financial Statements

                                                                         Page
                                                                         ----

Financial Statements of Parker & Parsley 86-C, Ltd:
  Independent Auditors' Report.......................................     12
  Balance Sheets as of December 31, 1997 and 1996....................     13
  Statements of Operations for the Years Ended December 31,
    1997, 1996 and 1995..............................................     14
  Statements of Partners' Capital for the Years Ended
    December 31, 1997, 1996 and 1995.................................     15
  Statements of Cash Flows for the Years Ended December 31,
    1997, 1996 and 1995..............................................     16
  Notes to Financial Statements......................................     17




                                       11

<PAGE>



                          INDEPENDENT AUDITORS' REPORT




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

We have  audited the  financial  statements  of Parker & Parsley  86-C,  Ltd. as
listed  in  the  accompanying   index.   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-C, Ltd. as
of December 31, 1997 and 1996,  and the results of its  operations  and its cash
flows for each of the years in the three-year period ended December 31, 1997, in
conformity with generally accepted accounting principles.

As  discussed  in Notes 2 and 3 to the  financial  statements,  the  Partnership
adopted 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" in 1995.



                                                 KPMG Peat Marwick LLP


Midland, Texas
March 20, 1998



                                       12

<PAGE>



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

                                 BALANCE SHEETS
                                   December 31



                                                        1997           1996
                                                    ------------   ------------
                  ASSETS

Current assets:
  Cash and cash equivalents, including interest
    bearing deposits of $163,340 in 1997 and
    $193,384 in 1996                                $    163,568   $    205,207
  Accounts receivable - oil and gas sales                203,783        265,255
                                                     -----------    -----------

          Total current assets                           367,351        470,462
                                                     -----------    -----------

Oil and gas properties - at cost, based on
  the successful efforts accounting method            14,548,946     14,551,413
Accumulated depletion                                (12,095,660)   (10,828,428)
                                                     -----------    -----------

          Net oil and gas properties                   2,453,286      3,722,985
                                                     -----------    -----------

                                                    $  2,820,637   $  4,193,447
                                                     ===========    ===========

LIABILITIES AND PARTNERS' CAPITAL

Current liabilities:
  Accounts payable - affiliate                      $     47,106   $    104,535

Partners' capital:
  Managing general partner                                26,428         39,581
  Limited partners (19,317 interests)                  2,747,103      4,049,331
                                                     -----------    -----------

                                                       2,773,531      4,088,912
                                                     -----------    -----------

                                                    $  2,820,637   $  4,193,447
                                                     ============   ===========






   The accompanying notes are an integral part of these financial statements.

                                       13

<PAGE>



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

                            STATEMENTS OF OPERATIONS
                         For the years ended December 31




                                           1997          1996           1995
                                       -----------   -----------   -----------

Revenues:
  Oil and gas                          $ 1,484,170   $ 1,750,717   $ 1,423,091
  Interest                                  12,346         9,265         8,259
  Gain (loss) on disposition of assets      20,511        58,479      (108,356)
  Litigation settlement                        -         704,864           -
                                        ----------    ----------    ----------

                                         1,517,027     2,523,325     1,322,994
                                         ---------    ----------    ----------

Costs and expenses:
  Oil and gas production                   767,140       815,378       848,246
  General and administrative                46,992        52,521        42,693
  Impairment of oil and gas properties     895,701       132,778       877,603
  Depletion                                371,531       352,216       594,478
  Abandoned property                        12,734        27,923        14,022
                                        ----------    ----------    ----------

                                         2,094,098     1,380,816     2,377,042
                                        ----------    ----------    ----------

Net income (loss)                      $  (577,071)  $ 1,142,509   $(1,054,048)
                                        ==========    ==========    ==========

Allocation of net income (loss):
  Managing general partner             $    (5,770)  $    11,425   $   (10,540)
                                        ==========    ==========    ==========

  Limited partners                     $  (571,301)  $ 1,131,084   $(1,043,508)
                                        ==========    ==========    ==========

Net income (loss) per limited
  partnership interest                 $    (29.58)  $     58.55   $    (54.02)
                                        ==========    ==========    ==========






   The accompanying notes are an integral part of these financial statements.

                                       14

<PAGE>



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

                         STATEMENTS OF PARTNERS' CAPITAL




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


Partners' capital at January 1, 1995     $   58,247   $ 5,897,267  $ 5,955,514

   Distributions                             (6,010)     (594,990)    (601,000)

   Net loss                                 (10,540)   (1,043,508)  (1,054,048)
                                          ---------    ----------   ----------

Partners' capital at December 31, 1995       41,697     4,258,769    4,300,466

   Distributions                            (13,541)   (1,340,522)  (1,354,063)

   Net income                                11,425     1,131,084    1,142,509
                                          ---------    ----------   ----------

Partners' capital at December 31, 1996       39,581     4,049,331    4,088,912

   Distributions                             (7,383)     (730,927)    (738,310)

   Net loss                                  (5,770)     (571,301)    (577,071)
                                          ---------    ----------   ----------

Partners' capital at December 31, 1997   $   26,428   $ 2,747,103  $ 2,773,531
                                          =========    ==========   ==========






   The accompanying notes are an integral part of these financial statements.

                                       15

<PAGE>



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

                            STATEMENTS OF CASH FLOWS
                         For the years ended December 31




                                              1997         1996        1995
                                           ----------  -----------  -----------

Cash flows from operating activities:

  Net income (loss)                        $ (577,071) $ 1,142,509  $(1,054,048)
  Adjustments to reconcile net income
   (loss) to net cash provided by
   operating activities:
     Impairment of oil and gas properties     895,701      132,778      877,603
     Depletion                                371,531      352,216      594,478
     (Gain) loss on disposition of assets     (20,511)     (58,479)     108,356
  Changes in assets and liabilities:
     Accounts receivable                       61,472     (114,204)      13,081
     Accounts payable                         (56,014)     (10,548)      22,423
                                            ---------   ----------   ----------

        Net cash provided by operating
          activities                          675,108    1,444,272      561,893
                                            ---------   ----------   ----------

Cash flows from investing activities:

  (Additions to) deletions of oil and
     gas properties                             1,052      (19,161)       9,250
  Proceeds from asset dispositions             20,511       60,363       36,348
                                            ---------   ----------   ----------

        Net cash provided by investing
          activities                           21,563       41,202       45,598
                                            ---------   ----------   ----------

Cash flows from financing activities:

  Cash distributions to partners             (738,310)  (1,354,063)    (601,000)
                                            ----------  ----------   ----------

Net increase (decrease) in cash and
     cash equivalents                         (41,639)     131,411        6,491
Cash and cash equivalents at beginning
     of year                                  205,207       73,796       67,305
                                            ---------   ----------   ----------

Cash and cash equivalents at end of year   $  163,568  $   205,207  $    73,796
                                            =========   ==========   ==========



   The accompanying notes are an integral part of these financial statements.

                                       16

<PAGE>



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

                          NOTES TO FINANCIAL STATEMENTS
                        December 31, 1997, 1996 and 1995

Note 1.          Organization and nature of operations

     Parker & Parsley 86-C, Ltd. (the  "Partnership")  is a limited  partnership
organized  in 1986  under the laws of the State of Texas.  As of August 8, 1997,
Pioneer Natural Resources USA, Inc.  ("Pioneer USA") became the managing general
partner of the Partnership.  Prior to August 8, 1997, the Partnership's managing
general partner was Parker & Parsley Development L.P. ("PPDLP"),  a wholly-owned
subsidiary of Parker & Parsley Petroleum Company ("Parker & Parsley"). On August
7, 1997, Parker & Parsley and Mesa Inc. received  shareholder  approval to merge
and create Pioneer Natural  Resources  Company  ("Pioneer").  On August 8, 1997,
PPDLP was  merged  with and into  Pioneer  USA,  a  wholly-owned  subsidiary  of
Pioneer,  resulting in Pioneer USA becoming the managing  general partner of the
Partnership as PPDLP's successor by merger.

     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:

     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 Pioneer
Natural Resources USA, Inc. ("Pioneer USA"), 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.

     Impairment of long-lived assets - In accordance with Statement of Financial
Accounting  Standards  No. 121,  "Accounting  for the  Impairment  of Long-Lived
Assets  and  for  Long-Lived  Assets  to  be  Disposed  Of"  ("SFAS  121"),  the
Partnership  reviews its long-lived  assets to be held and used on an individual
property  basis,  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


                                       17

<PAGE>



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
amount of the asset exceeds the fair value of the asset.

     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  judgment 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.

     Reclassifications  - Certain  reclassifications  have been made to the 1996
and  1995  financial  statements  to  conform  to the 1997  financial  statement
presentation.

     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.  Such liabilities are generally  undiscounted  unless the
timing of cash  payments for the  liability  or component  are fixed or reliably
determinable.

Note 3.   Impairment of long-lived assets

     The  Partnership  adopted SFAS 121  effective  October 1, 1995. In order to
determine  whether  an  impairment has occurred,  the Partnership  estimates the


                                       18

<PAGE>



expected  future  cash flows of its oil and gas  properties  and  compares  such
future  cash  flows to the  carrying  amount  of the oil and gas  properties  to
determine  if the  carrying  amount  is  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 of the review
and  evaluation  of  its  long-lived  assets  for  impairment,  the  Partnership
recognized  non-cash  charges of $895,701,  $132,778 and $877,603 related to its
oil and gas  properties  during  the  fourth  quarters  of 1997,  1996 and 1995,
respectively.

Note 4.   Income taxes

     The  financial   statement  basis  of  the  Partnership's  net  assets  and
liabilities was $432,783 greater than the tax basis at December 31, 1997.

     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:

                                             1997         1996         1995
                                           ---------   ----------   -----------

  Net income (loss) per statements
     of operations                         $(577,071)  $1,142,509   $(1,054,048)
  Depletion and depreciation provisions
     for tax reporting purposes under
     amounts for financial reporting
     purposes                                359,055      343,527       567,874
  Impairment of oil and gas properties for
     financial reporting purposes            895,701      132,778       877,603
  Salvage income                              46,884          -             -
  Other                                      (24,448)        (833)      160,182
                                            --------    ---------    ----------

         Net income per Federal
           income tax returns              $ 700,121   $1,617,981   $   551,611
                                            ========    =========    ==========

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:

                                            1997          1996          1995
                                         ----------    ----------    ----------

     Development costs                   $  (10,244)   $   20,343    $  (34,957)
                                          =========     =========     =========



                                       19

<PAGE>



     Capitalized oil and gas properties consist of the following:

                                                      1997             1996
                                                  ------------     ------------

     Proved properties:
         Property acquisition costs               $    645,990     $    645,990
         Completed wells and equipment              13,902,956       13,905,423
                                                   -----------      -----------

                                                    14,548,946       14,551,413
     Accumulated depletion                         (12,095,660)     (10,828,428)
                                                   -----------      -----------

                 Net capitalized costs            $  2,453,286     $  3,722,985
                                                   ===========      ===========

     During  1997 and 1996,  the  Partnership  recognized  non-cash  charges  of
$895,701 and $132,778 in accordance with 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:

                                                1997        1996        1995
                                              ---------   ---------   ---------

  Payment of lease operating and supervision
    charges in accordance with standard
    industry operating agreements             $ 331,252   $ 332,708   $ 351,625

  Reimbursement of general and
    administrative expenses                   $  38,761   $  45,387   $  34,427

  Receipt of proceeds for the salvage value
    of retired oil and gas equipment          $  33,726   $  12,336   $  58,340

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

     The costs and revenues of the Program are  allocated to Pioneer USA and the
Partnership as follows:

                                                  Pioneer USA (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  Pioneer USA's 1% general partner  ownership which is allocated
        at  the  Partnership level  and 60  limited partner  interests owned  by
        Pioneer USA.

                                       20

<PAGE>




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, 1997,  1996 and 1995 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 Pioneer
USA  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 and NGLs        Gas
                                                       (bbls)          (mcf)
                                                    ------------    ----------

   Net proved reserves at January 1, 1995                738,251     3,523,622
   Revisions                                             (34,442)     (108,877)
   Production                                            (57,498)     (261,087)
                                                    ------------    ----------

   Net proved reserves at December 31, 1995              646,311     3,153,658
   Revisions                                             124,741       728,870
   Sale of reserves                                       (3,398)      (21,832)
   Production                                            (52,839)     (246,386)
                                                    ------------    ----------

   Net proved reserves at December 31, 1996              714,815     3,614,310
   Revisions                                             177,753    (2,054,703)
   Production                                            (61,043)     (184,965)
                                                    ------------    ----------

   Net proved reserves at December 31, 1997              831,525     1,374,642
                                                    ============    ==========

     The  estimated  present  value of future net  revenues of proved  reserves,
calculated  using  December 31, 1997 prices of $17.21 per barrel of oil,  $12.44
per barrel of NGLs and $2.20 per mcf of gas, discounted at 10% was approximately
$3,231,000 and undiscounted  was $5,511,000 at December 31, 1997.  Subsequent to
December 31, 1997, the prices of oil and gas have been  declining,  and on March
19,  1998,  the  average  prices  for  the   Partnership's   oil  and  gas  were
approximately $12.00 and $2.05, respectively.

     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 (a major  customer is defined as a customer whose sales exceed 10%
of total sales) during the years ended December 31:

                                                      1997      1996      1995
                                                    --------  --------  --------

             Genesis Crude Oil, L.P.                  52%        54%      56%
             Western Gas Resources Inc.               25%        15%      14%
             GPM Gas Corporation                       -         15%      13%

     The above customers  represent 60% of total accounts receivable at December
31, 1997.

                                       21

<PAGE>




     Pioneer USA is party to a long-term agreement pursuant to which Pioneer USA
and affiliates are to sell to Basis  Petroleum,  Inc.  (formerly  Phibro Energy,
Inc.)  substantially  all crude  oil  (including  condensate)  which any of such
entities  have the right to market  from time to time.  On  November  25,  1996,
Pioneer USA  consented to the  assignment of the agreement to Genesis Crude Oil,
L.P.  ("Genesis"),  a limited  partnership  formed by Basis Petroleum,  Inc. and
Howell Corporation.  The price to be paid by Genesis for oil purchased under the
agreement  ("Genesis  Agreement") is to be competitive with prices paid by other
substantial  purchasers  in the same areas who are  significant  competitors  of
Genesis.  The price to be paid for oil  purchased  under the  Genesis  Agreement
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  Genesis
Agreement is through June 30, 1998,  and it may continue  thereafter  subject to
termination  rights  afforded each party.  Salomon,  Inc., the parent company of
Basis Petroleum, Inc. and a subordinated limited partner in Genesis, secures the
payment  obligations  under the Genesis  Agreement  with a $25  million  payment
guarantee.  Accounts  receivable-oil  and gas sales  included  $58,669  due from
Genesis at December 31, 1997.

Note 9.   Organization and operations

     The  Partnership was organized  December 30, 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 - The general  partner of the  Partnership  is
       Pioneer USA. Pioneer USA, the managing general partner, has the power and
       authority to manage,  control and  administer  all  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
       $19,317,000. Pioneer USA 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.

Note 10.  Disposition of Assets

     Gain on disposition of assets resulted from gains of $20,511 and $58,479 in
1997 and 1996, respectively.  Salvage income of $20,511 and $28,740 was received
from the disposal of equipment on two fully depleted wells during 1997 and 1996,
respectively. A gain of $29,739 from the sale of four oil and gas wells and four
saltwater disposal wells was recognized during 1996, attributable to proceeds of


                                       22

<PAGE>



$31,623 received from the sale, less the write-off of remaining capitalized well
costs of $1,884.  A loss on  disposition  of assets  recognized  during 1995 was
primarily due to the loss on one plugged and abandoned well.

                                       23

<PAGE>



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

None.



                                       24

<PAGE>



                                    PART III


ITEM 10.  Directors and Executive Officers of the Partnership

The  Partnership  does not have any  officers  or  directors.  Under the limited
partnership agreement,  the Partnership's managing general partner, Pioneer USA,
is  granted  the  exclusive  right and full  authority  to manage,  control  and
administer the Partnership's business.  Pioneer USA is a wholly-owned subsidiary
of Pioneer, 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 Pioneer USA. Directors of Pioneer USA are elected to serve until the
next annual meeting of  stockholders  or until their  successors are elected and
qualified.

                          Age at
                        December 31,
        Name               1997                        Position
        ----               ----                        --------

Scott D. Sheffield          45             President and Director

Timothy L. Dove             41             Executive Vice President and Director

Dennis E. Fagerstone        48             Executive Vice President and Director

Mark L. Withrow             50             Executive Vice President, General
                                             Counsel and Director

M. Garrett Smith            36             Executive Vice President, Chief
                                             Financial Officer and Director

Mel Fischer                 63             Executive Vice President

Lon C. Kile                 42             Executive Vice President

Rich Dealy                  31             Vice President and Chief Accounting
                                             Officer

     Scott D.  Sheffield.  Mr.  Sheffield  is a  distinguished  graduate  of The
University of Texas with a B.S. in Petroleum Engineering.  Since August 1997, he
has served as President,  Chief Executive  Officer and a director of Pioneer and
President  and a director of Pioneer USA. Mr.  Sheffield was the President and a
director  of  Parker  &  Parsley  from May 1990  until  August  1997 and was the
Chairman  of the Board  and Chief  Executive  Officer  of Parker & Parsley  from
October  1990 until August  1997.  He was the sole  director of Parker & Parsley
from  May 1990  until  October  1990.  Mr.  Sheffield  joined  Parker &  Parsley
Development Company ("PPDC"),  a predecessor of Parker & Parsley, as a petroleum
engineer  in 1979.  He  served  as Vice  President  -  Engineering  of PPDC from
September 1981 until April 1985 when he was elected President and a director. In



                                       25

<PAGE>



March 1989, Mr.  Sheffield was elected Chairman of the Board and Chief Executive
Officer of PPDC. Before joining PPDC, Mr. Sheffield was employed as a production
and reservoir engineer for Amoco Production Company.

     Timothy L. Dove.  Mr.  Dove  became  Executive  Vice  President  - Business
Development  of Pioneer and Pioneer USA in August 1997. He was also  appointed a
director of Pioneer USA in August 1997.  Mr. Dove joined Parker & Parsley in May
1994 as Vice President - International and was promoted to Senior Vice President
- Business Development in October 1996, in which position he served until August
1997.  Prior to joining  Parker & Parsley,  Mr. Dove was  employed  with Diamond
Shamrock Corp., and its successor,  Maxus Energy Corp, in various  capacities in
international exploration and production,  marketing, refining and marketing and
planning and development.  Mr. Dove earned a B.S. in Mechanical Engineering from
Massachusetts  Institute of Technology  in 1979 and received his M.B.A.  in 1981
from the University of Chicago.

     Dennis E. Fagerstone.  Mr. Fagerstone, a graduate of the Colorado School of
Mines with a B.S. in Petroleum  Engineering,  became an Executive Vice President
of Pioneer and Pioneer USA in August 1997.  He was also  appointed a director of
Pioneer USA in August 1997.  He served as  Executive  Vice  President  and Chief
Operating  Officer of Mesa from March 1, 1997 until  August  1997.  From October
1996 to February 1997, Mr.  Fagerstone served as Senior Vice President and Chief
Operating  Officer of Mesa and from May 1991 to October  1996, he served as Vice
President - Exploration  and Production of Mesa. From June 1988 to May 1991, Mr.
Fagerstone served as Vice President - Operations of Mesa.

     Mark L. Withrow.  Mr. Withrow,  a graduate of Abilene Christian  University
with a B. S. in  Accounting  and Texas Tech  University  with a Juris  Doctorate
degree,  became  Executive  Vice  President,  General  Counsel and  Secretary of
Pioneer  and  Pioneer USA in August  1997.  He was also  appointed a director of
Pioneer USA in August 1997. Mr. Withrow was Vice President - General  Counsel of
Parker & Parsley from January 1991, when he joined Parker & Parsley,  to January
1995,  when he was appointed  Senior Vice  President - General  Counsel.  He was
Parker &  Parsley's  Secretary  from  August 1992 until  August  1997.  Prior to
joining Parker & Parsley,  Mr. Withrow was the managing  partner of the law firm
of Turpin, Smith, Dyer, Saxe & MacDonald, Midland, Texas.

     M. Garrett  Smith.  Mr. Smith, a graduate of The University of Texas with a
B.S. in Electrical Engineering and Southern Methodist University with an M.B.A.,
was appointed Executive Vice President and Chief Financial Officer of Pioneer in
December  1997.  He served as Senior Vice  President  - Finance of Pioneer  from
August 1997 until  December  1997. Mr. Smith was elected Senior Vice President -
Finance  and a  director  of  Pioneer  USA in  August  1997.  He  served as Vice
President - Corporate  Acquisitions of Mesa from January 1997 until August 1997.
From October 1996 to December 1996, Mr. Smith served as Vice President - Finance
of Mesa and from 1994 to 1996 he served as  Director  of  Financial  Planning of
Mesa. Mr. Smith was employed by BTC Partners,  Inc. (a former financial  advisor
to Mesa) from 1989 to 1994.

     Mel Fischer.  Mr.  Fischer,  a graduate of the  University of California at
Berkeley with a Masters  degree in Geology,  became  Executive  Vice President -
Worldwide  Exploration of Pioneer and Pioneer USA in August 1997. He served as a
director  of Parker & Parsley  from  November  1995  until  August  1997 and was
Executive  Vice  President -  Worldwide  Exploration  for Parker & Parsley  from
February 1997 to August 1997. Mr.  Fischer worked in the petroleum  industry for
32 years, starting as a Petroleum Geologist with Texaco in 1962, and retiring as


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President,  Occidental International Exploration and Production Company in March
1994. For the 10 years prior to becoming President of Occidental  International,
he served as Executive Vice President,  World Wide  Exploration  with Occidental
Oil  and  Gas  Corporation.  He  is a  registered  geologist  in  the  State  of
California,  a member of the American Association of Petroleum Geologists and an
emeritus  member  of the  Board of  Advisors  for the  Earth  Sciences  Research
Institute at the University of Utah.

     Lon C. Kile.  Mr.  Kile,  a graduate of Oklahoma  State  University  with a
B.B.A. in Accounting, became Executive Vice President of Pioneer and Pioneer USA
in August 1997.  Mr. Kile was Senior Vice  President - Investor  Relations  from
October 1996 to August 1997. Previously, he served as Vice President and Manager
of the  Mid-Continent  Division,  Vice President - Equity Finance & Analysis and
Vice President - Marketing & Program  Administration.  Prior to joining Parker &
Parsley in 1985,  he was employed as  Supervisor - Senior,  Audit,  in charge of
Parker & Parsley's audit, with Ernst & Young.

     Rich Dealy. Mr. Dealy is a graduate of Eastern New Mexico University with a
B.B.A. in Accounting and Finance and is a Certified Public Accountant. He became
Vice  President  and Chief  Accounting  Officer of Pioneer  and  Pioneer  USA in
February 1998. Mr. Dealy served as Controller of Pioneer USA from August 1997 to
February  1998.  He served as Controller of Parker & Parsley from August 1995 to
August 1997. Mr. Dealy joined Parker & Parsley as an Accounting Manager in July,
1992. He was previously  employed with KPMG Peat Marwick as an Audit Senior,  in
charge of Parker & Parsley's audit.

ITEM 11.  Executive Compensation

The  Partnership  does not have any  directors  or officers.  Management  of the
Partnership  is vested  in  Pioneer  USA,  the  managing  general  partner.  The
Partnership  participates  in oil and  gas  activities  through  an  income  tax
partnership (the "Program") pursuant to the Program agreement. Under the Program
agreement,  Pioneer USA pays approximately 10% of the Partnership's acquisition,
drilling and completion costs and approximately 25% of its operating and general
and administrative  expenses. In return, Pioneer USA is allocated  approximately
25% of the  Partnership's  revenues.  See  Notes 6 and 9 of Notes  to  Financial
Statements included in "Item 8. Financial Statements and Supplementary Data" for
information  regarding  fees and  reimbursements  paid to the  managing  general
partner or its affiliates by the Partnership.

The Partnership does not directly pay any salaries of the executive  officers of
Pioneer USA, but does pay a portion of Pioneer USA'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".

ITEM 12.  Security Ownership of Certain Beneficial Owners and Management

(a)      Beneficial owners of more than five percent

The Partnership is not aware of any person who  beneficially  owns 5% or more of
the outstanding  limited partnership  interests of the Partnership.  Pioneer USA
owned 60 limited partner interests at January 1, 1998.


                                       27

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(b)      Security ownership of management

The Partnership  does not have any officers or directors.  The managing  general
partner  of the  Partnership,  Pioneer  USA,  has the  exclusive  right and full
authority to manage,  control and administer the Partnership'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  Partnership  is not aware of any current  arrangement or
activity  which may lead to such removal.  The  Partnership  is not aware of any
officer or director of Pioneer USA who  beneficially  owns  limited  partnership
interests in the Partnership.

ITEM 13.  Certain Relationships and Related Transactions

Transactions with the managing general partner or its affiliates

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:

                                                1997        1996       1995
                                              ---------   ---------  ---------

Payment of lease operating and supervision
   charges in accordance with standard
   industry operating agreements              $ 331,252  $ 332,708   $ 351,625

Reimbursement of general and
   administrative expenses                    $  38,761  $  45,387   $  34,427

Receipt of proceeds for the salvage
   value of retired oil and gas equipment     $  33,726  $  12,336   $  58,340


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.  Also,  see Notes 6 and 9 of Notes to Financial
Statements  included in "Item 8. Financial  Statements and  Supplementary  Data"
regarding the Partnership's  participation  with the managing general partner in
oil and gas activities of the Program.



                                       28

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                                     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, 1997 and 1996

                Statements of operations for the years ended December 31, 1997,
                  1996 and 1995

                Statements of partners' capital for the years ended December 31,
                 1997, 1996 and 1995

                Statements of cash flows for the years ended December 31,1997,
                  1996 and 1995

                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.



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                               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-C, LTD.

Dated: March 25, 1998              By:     Pioneer Natural Resources USA, Inc.
                                             Managing 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 and Director of              March 25, 1998
------------------------
Scott D. Sheffield         Pioneer USA


/s/ Timothy L. Dove        Executive Vice President and           March 25, 1998
------------------------
Timothy L. Dove            Director of Pioneer USA


/s/ Dennis E. Fagerstone   Executive Vice President and           March 25, 1998
------------------------
Dennis E. Fagerstone       Director of Pioneer USA


/s/ Mark L. Withrow        Executive Vice President, General      March 25, 1998
------------------------
Mark L. Withrow            Counsel and Director of Pioneer USA


/s/ M. Garrett Smith       Executive Vice President, Chief        March 25, 1998
------------------------
M. Garrett Smith           Financial Officer and Director
                           of Pioneer USA


/s/ Mel Fischer            Executive Vice President               March 25, 1998
------------------------
Mel Fischer                of Pioneer USA


/s/ Lon C. Kile            Executive Vice President of            March 25, 1998
------------------------
Lon C. Kile                Pioneer USA


/s/ Rich Dealy             Vice President and Chief Accounting    March 25, 1998
------------------------
Rich Dealy                 Officer of Pioneer USA

                                       30

<PAGE>


                           PARKER & PARSLEY 86-C, 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-C, Ltd. incorporated by reference to
               Exhibit 3a of the Partnership's Registration
               Statement on Form S-1 (Registration No.
               33-3353) (hereinafter called the Partnership's
               Registration Statement)

      4(a)     Form of Agreement of Limited Partnership of              -
               Parker & Parsley 86-C, Ltd. incorporated by
               reference to Exhibit A of Amendment No. 1 of
               the Partnership's Registration Statement

      4(b)     Form of Subscription Agreement incorporated by
               reference to Exhibit C of Amendment No. 1 of
               the Partnership's Registration Statement                 -

      4(b)     Power of Attorney incorporated by reference to an        -
               Exhibit of the Partnership's Registration
               Statement

      4(c)     Specimen Certificate of Limited Partnership              -
               Interest incorporated by reference to Exhibit
               4c of the Partnership's Registration Statement

     10(b)     Development Program Agreement incorporated               -
               by reference to Exhibit B of Amendment No. 1
               of the Partnership's Registration Statement

     27.1*     Financial Data Schedule

     99.1      Mutual Release and Indemnity Agreement                   -
               dated May 25, 1993 incorporated by reference
               to Exhibit 99.1 of the Partnership's Annual
               Report on Form 10-K for the year ended
               December 31, 1993

*   Filed herewith

                                       31

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