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

                                    FORM 10-K

                  Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                   For the fiscal year ended December 31, 2000


                          Commission File No. 33-3353B


                           PARKER & PARSLEY 86-B, LTD.
             (Exact name of Registrant as specified in its charter)

                           Texas                              75-2140235
          ---------------------------------------       ---------------------
             (State or other jurisdiction of               (I.R.S. Employer
              incorporation or organization)            Identification Number)


1400 Williams Square West, 5205 N. O'Connor Blvd., Irving, Texas      75039
----------------------------------------------------------------    ----------
            (Address of principal executive offices)                (Zip code)

       Registrant's Telephone Number, including area code : (972) 444-9001


        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 the original purchase price, the aggregate market value of
limited  partnership  interests  owned by  non-affiliates  of the  Registrant is
$17,080,000.

             As of March 8, 2001, the number of outstanding limited
                       partnership interests was 17,208.

 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 annual report on Form 10-K (the "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-B,  Ltd.  (the  "Partnership")  is a  limited  partnership
organized  in 1986  under  the laws of the  State of  Texas.  The  Partnership's
managing general partner is Pioneer Natural Resources USA, Inc. ("Pioneer USA").
Pioneer USA is a wholly-owned  subsidiary of Pioneer Natural  Resources  Company
("Pioneer"). As of March 8, 2001, the Partnership had 17,208 limited partnership
interests outstanding.

The Partnership  does not have any employees of its own. Pioneer USA employs 701
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 supplies all management functions.

The  Partnership  engages in oil and gas  development  and production and is not
involved  in any  industry  segment  other than oil and gas.  The  Partnership's
production is geographically concentrated in West Texas.

The principal  markets during 2000 for the oil produced by the Partnership  were
refineries  and  oil  transmission  companies  that  have  facilities  near  the
Partnership's oil producing  properties.  During 2000,  Pioneer USA marketed the
Partnership's gas to a variety of purchasers, none of which accounted for 10% or
more of the Partnership's oil and gas revenues.  Of the Partnership's  total oil
and gas revenues for 2000,  approximately 36% and 16% were attributable to sales
made to Plains Marketing, L.P. and Mobil Oil Corporation,  respectively. Pioneer
USA is of the  opinion  that the  loss of any one  purchaser  would  not have an
adverse effect on its ability to sell its oil,  natural gas liquids ("NGLs") and
gas production.

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.

Oil and gas production operations are subject to various types of regulations by
local, state and federal agencies. The Partnership's operations are also subject
to state  conservation  laws and  regulations,  including the  establishment  of
maximum rates of production  from wells and the regulation of spacing,  plugging
and abandonment of wells. Each state generally imposes a production or severance
tax with respect to production  and sale of oil and gas within their  respective
jurisdictions.  Noncompliance  with the laws and  regulations  may  subject  the
Partnership  to  penalties,  damages or other  liabilities  and  compliance  may
increase the cost of the Partnership's operations.

                                        2

<PAGE>




The oil and gas  business is also subject to  environmental  hazards such as oil
spills,  gas leaks and ruptures and discharges of toxic substances or gases that
could expose the Partnership to substantial liability due to pollution and other
environmental  damages.  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.

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 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 56
oil and gas wells. At December 31, 2000, 43 wells were producing. Nine wells and
interests  in two  abandoned  wells  were sold and two wells  were  plugged  and
abandoned.

For  information  relating  to the  Partnership's  estimated  proved oil and gas
reserves at December 31, 2000, 1999 and 1998, 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  evaluated  by  Williamson  Petroleum  Consultants,  Inc.,  an  independent
petroleum consultant.

ITEM 3.     Legal Proceedings

The  Partnership  from  time to time 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  USA  believes to be material to the
Partnership.

ITEM 4.     Submission of Matters to a Vote of Security Holders

There  were no matters  submitted  to a vote of the  partners  during the fourth
quarter of 2000.


                                        3

<PAGE>



                                     PART II


ITEM 5.     Market for Limited Partnership Interests and Limited Partnership
              Distributions

At March 8, 2001, the Partnership  had 17,208  outstanding  limited  partnership
interests held of record by 1,409  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,  2000 and 1999,  distributions  of  $923,558  and
$357,887, 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>
                                       2000          1999          1998          1997          1996
                                    ----------    ----------    ----------    ----------    ----------
<S>                                 <C>           <C>           <C>           <C>           <C>
Operating results:

  Oil and gas sales                 $1,756,242    $1,056,533    $  928,899    $1,369,807    $1,700,251
                                     =========     =========     =========     =========     =========
  Gain on litigation
     settlement, net                $      -      $      -      $      -      $      -      $  565,756
                                     =========     =========     =========     =========     =========
  Impairment of oil and gas
     properties                     $   13,279    $     -       $  509,585    $  561,432    $    4,960
                                     =========     =========     =========     =========     =========
  Net income (loss)                 $  933,292    $  246,008    $ (807,041)   $ (158,796)   $1,229,639
                                     =========     =========     =========     =========     =========
  Allocation of net income
    (loss):
     Managing general partner       $    9,333    $    2,460    $   (8,070)   $   (1,587)   $   12,296
                                     =========     =========     =========     =========     =========
      Limited partners              $  923,959    $  243,548    $ (798,971)   $ (157,209)   $1,217,343
                                     =========     =========     =========     =========     =========
  Limited partners' net
     income (loss) per limited
     partnership interest           $    53.69    $    14.15    $   (46.43)   $    (9.14)   $    70.74
                                     =========     =========     =========     =========     =========
  Limited partners' cash
     distributions per limited
     partnership interest           $    53.67    $    20.80    $    18.70    $    46.77    $    86.49 (a)
                                     =========     =========     =========     =========     =========
At year end:

  Identifiable assets               $2,252,955    $2,266,438    $2,363,955    $3,520,172    $4,548,338
                                     =========     =========     =========     =========     =========
---------------

(a)   Including litigation settlement per limited partnership interest of $32.55
      in 1996.
</TABLE>
                                        4

<PAGE>




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

Results of operations

2000 compared to 1999

The Partnership's  oil and gas revenues  increased 66% to $1,756,242 for 2000 as
compared to  $1,056,533 in 1999.  The increase in revenues  resulted from higher
average  prices  received,  offset by a decline in production.  In 2000,  41,276
barrels of oil, 21,061 barrels of natural gas liquids ("NGLs") and 79,859 mcf of
gas were sold, or 75,647 barrel of oil  equivalents  ("BOEs").  In 1999,  40,490
barrels of oil,  22,642  barrels  of NGLs and  86,726  mcf of gas were sold,  or
77,586 BOEs. Due to the decline characteristics of the Partnership's oil and gas
properties,  management expects a certain amount of decline in production in the
future  until the  Partnership's  economically  recoverable  reserves  are fully
depleted.

The average  price  received per barrel of oil  increased  $12.27,  or 71%, from
$17.18 in 1999 to $29.45 in 2000.  The average price received per barrel of NGLs
increased $5.61, or 60%, from $9.39 in 1999 to $15.00 in 2000. The average price
received per mcf of gas increased  65% from $1.71 in 1999 to $2.82 in 2000.  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 2000.

A gain on disposition  of assets of $21,074 was received  during 2000 due to the
sale of equipment on one plugged and abandoned well. Abandoned property costs of
$12,161 were also incurred during 2000 to plug and abandon this well.

Total costs and  expenses  increased in 2000 to $861,600 as compared to $821,102
in 1999,  an increase of $40,498,  or 5%. The  increase  was due to increases in
production costs, general and administrative expenses ("G&A"), the impairment of
oil and gas  properties  and abandoned  property  costs,  offset by a decline in
depletion.

Production  costs were  $670,780 in 2000 and  $611,991 in 1999,  resulting in an
increase  of  $58,789,  or  10%.  This  increase  was  primarily  due to  higher
production  taxes  associated with higher oil and gas prices and additional well
maintenance costs incurred to stimulate well production.

G&A's  components are independent  accounting and engineering  fees and managing
general partner personnel and operating costs. During this period, G&A increased
66% from $31,696 in 1999 to $52,687 in 2000 primarily due to a higher percentage
of the managing general partner's G&A being allocated  (limited to 3% of oil and
gas  revenues) as a result of increased oil and gas  revenues.  The  Partnership
paid the managing  general  partner  $44,975 in 2000 and $19,909 in 1999 for G&A
incurred on behalf of the  Partnership.  The  remaining G&A was paid directly by
the Partnership.  The managing general partner determines the allocated expenses
based  upon  the  level  of  activity  of  the   Partnership   relative  to  the
non-partnership  activities  of  the  managing  general  partner.  The method of

                                        5

<PAGE>



allocation  has been  consistent  over  the  past  several  years  with  certain
modifications  incorporated to reflect changes in Pioneer USA's overall business
activities.

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  managing  general  partner  reviews  the
Partnership's  oil  and  gas  properties  for  impairment   whenever  events  or
circumstances  indicate a decline in the recoverability of the carrying value of
the  Partnership's  assets  may have  occurred.  As a result of the  review  and
evaluation of its long-lived assets for impairment, the Partnership recognized a
non-cash charge of $13,279 related to its oil and gas properties during 2000.

Depletion was $112,693 in 2000 as compared to $177,415 in 1999,  representing  a
decrease of $64,722, or 36%. This decrease was primarily due to a 65,045 barrels
of oil increase in proved reserves  during 2000 as a result of higher  commodity
prices.

1999 compared to 1998

The  Partnership's  1999 oil and gas revenues  increased 14% to $1,056,533  from
$928,899 in 1998.  The increase in revenues  resulted from higher average prices
received,  offset by a decline in  production.  In 1999,  40,490 barrels of oil,
22,642 barrels of NGLs and 86,726 mcf of gas were sold, or 77,586 BOEs. In 1998,
47,107  barrels of oil,  23,292 barrels of NGLs and 97,715 mcf of gas were sold,
or 86,685 BOEs.

The average  price  received per barrel of oil  increased  $4.10,  or 31%,  from
$13.08 in 1998 to $17.18 in 1999.  The average price received per barrel of NGLs
increased  $2.59, or 38%, from $6.80 in 1998 to $9.39 in 1999. The average price
received per mcf of gas increased 8% from $1.58 in 1998 to $1.71 in 1999.

A gain on disposition  of assets of $6,371 was  recognized  during 1998 from the
sale of  equipment  on one well plugged and  abandoned  during  1998.  Abandoned
property  costs of $20,389  were also  incurred  during 1998 to plug and abandon
this well.

Total costs and expenses decreased in 1999 to $821,102 as compared to $1,755,278
in 1998, a decrease of $934,176, or 53%. The decrease was due to declines in the
impairment of oil and gas properties,  depletion, production costs and abandoned
property costs, offset by an increase in G&A.

Production  costs were  $611,991 in 1999 and  $662,691 in 1998,  resulting  in a
$50,700  decrease,  or 8%. This decrease was due to lower well maintenance costs
and ad valorem  taxes,  offset by an  increase  in  workover  costs  incurred to
stimulate well production.

During this period,  G&A  increased  14% from $27,867 in 1998 to $31,696 in 1999
primarily due to a higher percentage of the managing general partner's G&A being
allocated  (limited to 3% of oil and gas  revenues) as a result of increased oil
and gas revenues.  The Partnership  paid the managing general partner $19,909 in
1999 and $21,984 in 1998 for G&A incurred on behalf of the Partnership.


                                        6

<PAGE>



The Partnership recognized a non-cash SFAS 121 charge of $509,585 related to its
oil and gas properties during 1998.

Depletion was $177,415 in 1999 compared to $534,746 in 1998. This  represented a
decrease of $357,331,  or 67%. This decrease was the result of a combination  of
factors that included an increase in proved  reserves of 343,529  barrels of oil
during  1999  as a  result  of  higher  commodity  prices,  a  reduction  in the
Partnership's  net depletable  basis from charges taken in accordance  with SFAS
121 during the fourth  quarter of 1998 and a decline in oil  production of 6,617
barrels for the period ended  December  31, 1999  compared to the same period in
1998.

Petroleum industry

The petroleum  industry has been  characterized by volatile oil, NGL and natural
gas commodity prices and relatively stable supplier costs during the three years
ended  December  31, 2000.  During 1998,  weather  patterns,  regional  economic
recessions  and political  matters  combined to cause  worldwide oil supplies to
exceed  demand  resulting in a  substantial  decline in oil prices.  Also during
1998,  but to a lesser  extent,  market prices for natural gas declined.  During
1999 and 2000, the Organization of Petroleum  Exporting  Countries  ("OPEC") and
certain other crude oil exporting nations announced  reductions in their planned
export  volumes.  Those  announcements,  together  with  the  enactment  of  the
announced  reductions  in export  volumes,  had a  positive  impact on world oil
prices,  as have  overall  natural gas supply and demand  fundamentals  on North
American natural gas prices.  Although the favorable commodity price environment
and stable field service cost  environment is expected to continue  during 2001,
there is no assurance that commodity  prices will not return to a less favorable
level or that field service costs will not escalate in the future, both of which
could negatively impact the Partnership's  future results of operations and cash
distributions.

Liquidity and capital resources

Net Cash Provided by Operating Activities

Net cash provided by operating  activities  increased  $561,909  during the year
ended  December 31, 2000 from 1999.  This increase was due to an increase in oil
and gas sales receipts of $706,708, offset by increases in production costs paid
of $58,789,  G&A expenses paid of $20,991,  abandoned  costs paid of $12,161 and
working capital of $52,858.  The increase in oil and gas receipts  resulted from
the increase in commodity  prices  during 2000 which  contributed  an additional
$726,611 to oil and gas receipts,  offset by $19,903  resulting from the decline
in production during 2000. The increase in production costs was primarily due to
increased  production  taxes  associated with higher oil and gas prices and well
maintenance costs incurred to stimulate well production. The increase in G&A was
primarily due to higher  percentage of the managing general  partner's G&A being
allocated  (limited to 3% of oil and gas  revenues) as a result of increased oil
and gas revenues.

Net Cash Provided by (Used in) Investing Activities

The  Partnership's  investing  activities  during 2000 and 1999 were  related to
expenditures for oil and gas equipment upgrades on active properties.


                                        7

<PAGE>



Proceeds from  disposition of assets of $23,670 was recognized  during 2000. The
gain was  comprised of $21,074  received  from the sale of equipment on one well
plugged  and  abandoned  during the  current  period and $2,596  from  equipment
credits  received  on one  active  well.  Proceeds  of  $8,980 in 1999 were from
equipment credits received on active properties.

Net Cash Used in Financing Activities

In 2000, cash  distributions to the partners were $932,887,  of which $9,329 was
distributed  to the  managing  general  partner  and  $923,558  to  the  limited
partners.  In 1999, cash  distributions to the partners were $361,502,  of which
$3,615 was  distributed  to the  managing  general  partner and  $357,887 to the
limited partners.



                                        8

<PAGE>



ITEM 8.     Financial Statements and Supplementary Data


                          Index to Financial Statements

                                                                        Page

Financial Statements of Parker & Parsley 86-B, Ltd:
  Independent Auditors' Report.....................................      10
  Balance Sheets as of December 31, 2000 and 1999..................      11
  Statements of Operations for the Years Ended December 31,
    2000, 1999 and 1998............................................      12
  Statements of Partners' Capital for the Years Ended
    December 31, 2000, 1999 and 1998...............................      13
  Statements of Cash Flows for the Years Ended December 31,
    2000, 1999 and 1998............................................      14
  Notes to Financial Statements....................................      15



                                        9

<PAGE>




                          INDEPENDENT AUDITORS' REPORT



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

We have audited the balance sheets of Parker & Parsley 86-B, Ltd. as of December
31, 2000 and 1999, and the related  statements of operations,  partners' capital
and cash flows for each of the three  years in the  period  ended  December  31,
2000. 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 auditing standards generally accepted
in the United States. 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-B, Ltd. as
of December 31, 2000 and 1999,  and the results of its  operations  and its cash
flows for each of the three years in the period  ended  December  31,  2000,  in
conformity with accounting principles generally accepted in the United States.



                                          Ernst & Young LLP


Dallas, Texas
March 9, 2001






                                       10

<PAGE>



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

                                 BALANCE SHEETS
                                   December 31


<TABLE>
                                                         2000           1999
                                                     ------------    ------------
                 ASSETS

<S>                                                  <C>             <C>
Current assets:
  Cash                                               $    220,466    $    206,408
  Accounts receivable - oil and gas sales                 260,049         179,740
                                                      -----------     -----------
          Total current assets                            480,515         386,148
                                                      -----------     -----------
Oil and gas properties - at cost, based on the
  successful efforts accounting method                 11,805,173      12,044,833
Accumulated depletion                                 (10,032,733)    (10,164,543)
                                                      -----------     -----------
          Net oil and gas properties                    1,772,440       1,880,290
                                                      -----------     -----------
                                                     $  2,252,955    $  2,266,438
                                                      ===========     ===========

LIABILITIES AND PARTNERS' CAPITAL

Current liabilities:
  Accounts payable - affiliate                       $     15,305    $     29,193

Partners' capital:
  Managing general partner                                 21,100          21,096
  Limited partners (17,208 interests)                   2,216,550       2,216,149
                                                      -----------     -----------
                                                        2,237,650       2,237,245
                                                      -----------     -----------
                                                     $  2,252,955    $  2,266,438
                                                      ===========     ===========




   The accompanying notes are an integral part of these financial statements.
</TABLE>

                                       11

<PAGE>



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

                            STATEMENTS OF OPERATIONS
                         For the years ended December 31



<TABLE>
                                                        2000           1999           1998
                                                     ----------     ----------     ----------

<S>                                                  <C>            <C>            <C>
Revenues:
  Oil and gas                                        $1,756,242     $1,056,533     $  928,899
  Interest                                               17,576         10,577         12,967
  Gain on disposition of assets                          21,074            -            6,371
                                                      ---------      ---------      ---------
                                                      1,794,892      1,067,110        948,237
                                                      ---------      ---------      ---------
Costs and expenses:
  Oil and gas production                                670,780        611,991        662,691
  General and administrative                             52,687         31,696         27,867
  Impairment of oil and gas properties                   13,279            -          509,585
  Depletion                                             112,693        177,415        534,746
  Abandoned property                                     12,161            -           20,389
                                                      ---------      ---------      ---------
                                                        861,600        821,102      1,755,278
                                                      ---------      ---------      ---------
Net income (loss)                                    $  933,292     $  246,008     $ (807,041)
                                                      =========      =========      =========
Allocation of net income (loss):
  Managing general partner                           $    9,333     $    2,460     $   (8,070)
                                                      =========      =========      =========
  Limited partners                                   $  923,959     $  243,548     $ (798,971)
                                                      =========      =========      =========
Net income (loss) per limited partnership interest   $    53.69     $    14.15     $   (46.43)
                                                      =========      =========      =========




   The accompanying notes are an integral part of these financial statements.
</TABLE>

                                       12

<PAGE>



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

                         STATEMENTS OF PARTNERS' CAPITAL



<TABLE>
                                               Managing
                                               general        Limited
                                               partner        partners        Total
                                              ----------     ----------     ----------

<S>                                           <C>            <C>            <C>
Partners' capital at January 1, 1998          $   33,572     $3,451,264     $3,484,836

   Distributions                                  (3,251)      (321,805)      (325,056)

   Net loss                                       (8,070)      (798,971)      (807,041)
                                               ---------      ---------      ---------
Partners' capital at December 31, 1998            22,251      2,330,488      2,352,739

   Distributions                                  (3,615)      (357,887)      (361,502)

   Net income                                      2,460        243,548        246,008
                                               ---------      ---------      ---------
Partners' capital at December 31, 1999            21,096      2,216,149      2,237,245

   Distributions                                  (9,329)      (923,558)      (932,887)

   Net income                                      9,333        923,959        933,292
                                               ---------      ---------      ---------
Partners' capital at December 31, 2000        $   21,100     $2,216,550     $2,237,650
                                               =========      =========      =========








   The accompanying notes are an integral part of these financial statements.
</TABLE>

                                       13

<PAGE>



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

                            STATEMENTS OF CASH FLOWS
                         For the years ended December 31


<TABLE>
                                                          2000          1999         1998
                                                       ----------    ----------    ----------

<S>                                                    <C>           <C>           <C>
Cash flows from operating activities:
  Net income (loss)                                    $  933,292    $  246,008    $ (807,041)
  Adjustments to reconcile net income (loss) to
     net cash provided by operating activities:
       Impairment of oil and gas properties                13,279           -         509,585
       Depletion                                          112,693       177,415       534,746
       Gain on disposition of assets                      (21,074)          -          (6,371)
     Changes in assets and liabilities:
       Accounts receivable                                (80,309)      (59,316)       47,751
       Accounts payable                                   (13,888)       17,977       (24,120)
                                                        ---------     ---------     ---------
          Net cash provided by operating activities       943,993       382,084       254,550
                                                        ---------     ---------     ---------
Cash flows from investing activities:
  Additions to oil and gas properties                     (20,718)       (8,474)      (19,495)
  Proceeds from disposition of assets                      23,670         8,980        15,526
                                                        ---------     ---------     ---------
          Net cash provided by (used in)
            investing activities                            2,952           506        (3,969)
                                                        ---------     ---------     ---------
Cash flows used in financing activities:
  Cash distributions to partners                         (932,887)     (361,502)     (325,056)
                                                        ---------     ---------     ---------
Net  increase (decrease) in cash                           14,058        21,088       (74,475)
Cash at beginning of year                                 206,408       185,320       259,795
                                                        ---------     ---------     ---------
Cash at end of year                                    $  220,466    $  206,408    $  185,320
                                                        =========     =========     =========




   The accompanying notes are an integral part of these financial statements.
</TABLE>

                                       14

<PAGE>



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

                          NOTES TO FINANCIAL STATEMENTS
                        December 31, 2000, 1999 and 1998


Note 1.     Organization and nature of operations

       Parker & Parsley 86-B,  Ltd. (the "Partnership") is a limited partnership
organized  in 1986  under  the laws of the  State of  Texas.  The  Partnership's
managing general partner is Pioneer Natural Resources USA, Inc. ("Pioneer USA").

       The  Partnership  engages in oil and gas  development  and  production in
Texas and is not involved in any industry segment other than oil and gas.

Note 2.     Summary of significant accounting policies

       A summary of the significant  accounting policies consistently applied in
the preparation of the accompanying financial statements follows:

       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  evaluated  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 results of 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
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 estimated 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  reported  amounts of revenues and expenses  during the  reporting  periods.
Actual results could differ from those estimates.

                                       15

<PAGE>



       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
includes 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.
Allocated expenses are determined by the managing general partner based upon the
level of activity of the Partnership relative to the non- partnership activities
of the managing  general  partner.  The method of allocation has been consistent
over the past several years with certain  modifications  incorporated to reflect
changes in Pioneer USA's overall business activities.

       Reclassifications - Certain  reclassifications  may have been made to the
1999 and 1998 financial  statements to conform to the 2000  financial  statement
presentations.

       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. No such liabilities have been accrued as of December 31, 2000.

       Revenue  recognition - The Partnership  uses the  entitlements  method of
accounting for oil, natural gas liquids ("NGLs") and natural gas revenues.

Note 3.     Impairment of long-lived assets

      In accordance  with SFAS 121, the  Partnership  reviews its proved oil and
gas properties  for  impairment  whenever  events and  circumstances  indicate a
decline in the recoverability of the carrying value of the Partnership's oil and
gas properties.  The Partnership has estimated the expected future cash flows of
its oil and gas  properties  as of December  31, 2000,  1999 and 1998,  based on
proved reserves, and compared such estimated future cash flows to the respective
carrying  amount of the oil and gas  properties  to  determine  if the  carrying
amounts were likely to be  recoverable.  For those proved oil and gas properties
for which the carrying  amount  exceeded  the  estimated  future cash flows,  an
impairment  was determined to exist;  therefore,  the  Partnership  adjusted the
carrying  amount  of  those  oil and gas  properties  to  their  fair  value  as


                                       16

<PAGE>



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 non-cash  impairment  provisions of $13,279 and $509,585
related to its proved oil and gas properties during 2000 and 1998, respectively.

Note 4.     Income taxes

      The  financial  statement  basis  of  the  Partnership's  net  assets  and
liabilities was $38,785 greater than the tax basis at December 31, 2000.

      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:
<TABLE>
                                                          2000          1999          1998
                                                       ----------    ----------    ----------

<S>                                                    <C>           <C>           <C>
  Net income (loss) per statements of operations       $  933,292    $  246,008    $ (807,041)
  Depletion and depreciation provisions for tax
    reporting purposes less than amounts for
    financial reporting purposes                          104,139       168,298       525,430
  Impairment of oil and gas properties for financial
    reporting purposes                                     13,279           -         509,585
  Intangible development costs capitalized for
    financial reporting purposes and expensed
    for tax reporting purposes                            (13,305)          -             -
  Other, net                                                 (142)       11,789         6,831
                                                        ---------     ---------     ---------
         Net income per Federal income tax
           returns                                     $1,037,263    $  426,095    $  234,805
                                                        =========     =========     =========
</TABLE>

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:
<TABLE>
                                                          2000          1999           1998
                                                       ----------    ----------    -----------

<S>                                                    <C>           <C>           <C>
       Development costs                               $   20,718    $    8,474    $    19,495
                                                        =========     =========     ==========
</TABLE>

       Capitalized oil and gas properties consist of the following:
<TABLE>
                                                           2000             1999
                                                       ------------     ------------
<S>                                                    <C>              <C>
     Proved properties:
       Property acquisition costs                      $    439,613     $    444,922
       Completed wells and equipment                     11,365,560       11,599,911
                                                        -----------      -----------
                                                         11,805,173       12,044,833
     Accumulated depletion                              (10,032,733)     (10,164,543)
                                                        -----------      -----------
             Net oil and gas properties                $  1,772,440     $  1,880,290
                                                        ===========      ===========
</TABLE>

                                       17

<PAGE>



Note 6.     Related party transactions

       Pursuant to the limited  partnership  agreement,  the Partnership had the
following  related party  transactions  with the managing general partner during
the years ended December 31:
<TABLE>
                                                                2000          1999          1998
                                                             ----------    ----------    ----------
<S>                                                          <C>           <C>           <C>
     Payment of lease operating and supervision
       charges in accordance with standard
       industry operating agreements                         $  298,127    $  298,479    $  296,383

     Reimbursement of general and administrative
       expenses                                              $   44,975    $   19,909    $   21,984
</TABLE>

       The Partnership  participates in oil and gas activities through an income
tax partnership (the "Program") pursuant to the Program agreement.  In addition,
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:
<TABLE>
                                                                Pioneer
                                                                USA (1)      Partnership
                                                               ----------    -----------

<S>                                                            <C>           <C>
   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 128 limited  partner  interests owned by
         Pioneer USA.
</TABLE>

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, 2000,  1999 and 1998 and
changes in such quantities during the years then ended. All of the Partnership's
reserves  are  proved  developed  and  located  within the  United  States.  The
Partnership's  reserves  are  based  on an  evaluation  prepared  by  Williamson
Petroleum Consultants, Inc., an independent petroleum consultant, using criteria
established by the Securities and Exchange Commission.



                                       18

<PAGE>


<TABLE>
                                                       Oil and NGLs        Gas
                                                          (bbls)          (mcf)
                                                       ------------     ----------

<S>                                                    <C>              <C>
     Net proved reserves at January 1, 1998                940,047       1,239,206
     Revisions                                            (401,595)       (457,837)
     Production                                            (70,399)        (97,715)
                                                        ----------      ----------
     Net proved reserves at December 31, 1998              468,053         683,654
     Revisions                                             550,528         841,323
     Production                                            (63,132)        (86,726)
                                                        ----------      ----------
     Net proved reserves at December 31, 1999              955,449       1,438,251
     Revisions                                              42,519        (145,295)
     Production                                            (62,337)        (79,859)
                                                        ----------      ----------
     Net proved reserves at December 31, 2000              935,631       1,213,097
                                                        ==========      ==========
</TABLE>

       As of  December  31,  2000,  the  estimated  present  value of future net
revenues of proved reserves, calculated using December 31, 2000 prices of $26.64
per  barrel  of oil,  $13.61  per  barrel  of  NGLs  and  $7.82  per mcf of gas,
discounted at 10% was approximately $7,100,000 and undiscounted was $14,263,000.

       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.   The  Partnership   emphasizes  that  reserve  estimates  are
inherently imprecise and,  accordingly,  the estimates are expected to change as
future information becomes available.

Disclosures about Oil & Gas Producing Activities

Standardized Measure of Discounted Future Net Cash Flows

      The standardized  measure of discounted  future net cash flows is computed
by applying year-end prices of oil and gas (with  consideration of price changes
only to the extent provided by contractual arrangements) to the estimated future
production of proved oil and gas reserves  less  estimated  future  expenditures
(based on year-end  costs) to be incurred in developing and producing the proved
reserves,  discounted  using a rate of 10% per  year to  reflect  the  estimated
timing of the future cash flows.  A Federal  income tax  provision  has not been
calculated  as the  income of the  Partnership  is  included  in the  individual
Federal income tax returns of the respective partners.

      Discounted  future  cash flow  estimates  like those  shown  below are not
intended to  represent  estimates  of the fair value of oil and gas  properties.
Estimates  of fair value  should also  consider  anticipated  future oil and gas
prices,  interest rates,  changes in development and production  costs and risks
associated with future  production.  Because of these and other  considerations,
any estimate of fair value is necessarily subjective and imprecise.

                                       19

<PAGE>


<TABLE>
                                                         For the years ended December 31,
                                                       -----------------------------------
                                                          2000         1999         1998
                                                       ---------    ---------    ---------
                                                                  (in thousands)
<S>                                                    <C>          <C>          <C>
Oil and gas producing activities:
   Future cash inflows                                 $  30,354    $  23,606    $   5,045
   Future production costs                               (16,091)     (13,697)      (3,839)
                                                        --------     --------     --------
                                                          14,263        9,909        1,206
   10% annual discount factor                             (7,163)      (4,671)        (387)
                                                        --------     --------     --------
   Standardized measure of discounted future
     net cash flows                                    $   7,100    $   5,238    $     819
                                                        ========     ========     ========
</TABLE>
<TABLE>
                                                         For the years ended December 31,
                                                       -----------------------------------
                                                          2000         1999         1998
                                                       ---------    ---------    ---------
                                                                  (in thousands)
<S>                                                    <C>          <C>          <C>
   Oil and Gas Producing Activities:
     Oil and gas sales, net of production costs        $  (1,085)   $    (445)   $    (266)
     Net changes in prices and production costs            2,757        2,398       (2,377)
     Revisions of previous quantity estimates                121        3,891         (547)
     Accretion of discount                                   524           82          377
     Changes in production rates, timing and other          (455)      (1,507)        (140)
                                                        --------     --------     --------
     Change in present value of future net revenues        1,862        4,419       (2,953)
                                                        --------     --------     --------
     Balance, beginning of year                            5,238          819        3,772
                                                        --------     --------     --------
     Balance, end of year                              $   7,100    $   5,238    $     819
                                                        ========     ========     ========
</TABLE>

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:
<TABLE>
                                                        2000       1999       1998
                                                       ------     ------     ------

<S>                                                    <C>        <C>        <C>
             Plains Marketing, L.P.                      36%        35%         -
             Genesis Crude Oil, L.P.                      -          -         41%
             Western Gas Resources, Inc.                  2%         4%        17%
             Mobil Oil Corporation                       16%        15%        15%
             Texaco Trading & Transportation              4%         8%        10%
</TABLE>

       At December 31, 2000, the amounts receivable from Plains Marketing,  L.P.
and Mobil Oil  Corporation  were  $54,631 and $21,954,  respectively,  which are
included  in the  caption  "Accounts  receivable  - oil  and gas  sales"  in the
accompanying Balance Sheet.

       Pioneer USA is of the opinion  that the loss of any one  purchaser  would
not have an adverse  effect on the ability of the  Partnership  to sell its oil,
NGLs and gas production.

Note 9.     Partnership agreement

        The following is a brief summary of the more  significant  provisions of
the limited partnership agreement:

                                       20

<PAGE>



       Managing   general  partner  -  The  managing   general  partner  of  the
       Partnership  is Pioneer USA.  Pioneer USA has the power and  authority to
       manage,  control and administer all Program and Partnership  affairs.  As
       managing  general partner and operator of the  Partnership's  properties,
       all  production  expenses  are  incurred by Pioneer USA and billed to the
       Partnership.  The majority of the  Partnership's oil and gas revenues are
       received directly by the Partnership,  however,  a portion of the oil and
       gas revenue is  initially  received by Pioneer USA prior to being paid to
       the Partnership.  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
       $17,208,000. 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.

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

None.




                                       21

<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.

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                 2000                     Position
--------------------      ------------                --------

Scott D. Sheffield            48           President

Timothy L. Dove               44           Executive Vice President, Chief
                                             Financial Officer and Director

Dennis E. Fagerstone          51           Executive Vice President and Director

Mark L. Withrow               53           Executive Vice President, General
                                             Counsel and Director

Danny Kellum                  46           Executive Vice President - Domestic
                                             Operations and Director

Rich Dealy                    34           Vice President and Chief Accounting
                                             Officer

         Scott D. Sheffield.   Mr. Sheffield is a 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 of
Pioneer  USA.  Mr.  Sheffield  assumed the  position of Chairman of the Board of
Pioneer in August 1999.  He served as a director of Pioneer USA from August 1997
until  his  resignation  from the  board in June  1999.  Mr.  Sheffield  was the
President  and a  director  of Parker & Parsley  Petroleum  Company  ("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 March 1989,  Mr.  Sheffield  was
elected  Chairman  of the Board  and Chief  Executive  Officer  of PPDC.  Before
joining  PPDC's  predecessor,  Mr.  Sheffield  was employed as a production  and
reservoir engineer for Amoco Production Company.

                                       22

<PAGE>



       Timothy L. Dove.   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.  He became  Executive Vice President - Business
Development  of Pioneer and Pioneer USA in August 1997 and was also  appointed a
director of Pioneer USA in August  1997.  Mr. Dove assumed the position of Chief
Financial  Officer of Pioneer and Pioneer USA  effective  February 1, 2000.  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.

       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 Inc.  ("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.

       Danny Kellum.  Mr.  Kellum,  who received a Bachelor of Science degree in
Petroleum  Engineering from Texas Tech University in 1979, was elected Executive
Vice President - Domestic  Operations of Pioneer and Pioneer USA on May 18, 2000
and  Director of Pioneer USA on February 1, 2000.  From  January  2000 until May
2000, Mr. Kellum served as Vice  President - Domestic  Operations of Pioneer and
Pioneer USA. Mr. Kellum served as Vice President Permian Division of Pioneer and
Pioneer USA from April 1998 until December 1999.  From 1989 until 1994 he served
as Spraberry District Manager and as Vice President of the Spraberry and Permian
Division for Parker & Parsley  until August of 1997.  Mr. Kellum joined Parker &
Parsley as an  operations  engineer in 1981 after a brief  career with Mobil Oil
Corporation.

       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.

                                       23

<PAGE>



ITEM 11.     Executive Compensation

The  Partnership  does not have any  directors  or officers.  Management  of the
Partnership  is performed by 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  Program'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 Program's revenues.

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 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 by the Partnership.

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 128 limited partner interests at January 1, 2001.

(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

Pursuant to the limited partnership agreement, the Partnership had the following
related party  transactions  with the managing  general partner during the years
ended December 31:


                                       24

<PAGE>


<TABLE>
                                                      2000          1999          1998
                                                   ----------    ----------    ----------
<S>                                                <C>           <C>           <C>
  Payment of lease operating and supervision
     charges in accordance with standard
     industry operating agreements                 $  298,127    $  298,479    $  296,383

  Reimbursement of general and administrative
     expenses                                      $   44,975    $   19,909    $   21,984
</TABLE>

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.


                                       25

<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 Report:

                Independent Auditors' Report

                Balance sheets as of December 31, 2000 and 1999

                Statements of operations for the years ended December 31, 2000,
                  1999 and 1998

                Statements of partners' capital for the years ended December 31,
                  2000, 1999 and 1998

                Statements of cash flows for the years ended December 31, 2000,
                  1999 and 1998

                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 Report.


                                       26

<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-B, LTD.

Dated: March 29, 2001            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 of Pioneer USA               March 29, 2001
------------------------
Scott D. Sheffield


/s/ Timothy L. Dove        Executive Vice President, Chief        March 29, 2001
------------------------   Financial Officer and Director of
Timothy L. Dove            Pioneer USA


/s/ Dennis E. Fagerstone   Executive Vice President and           March 29, 2001
------------------------   Director of Pioneer USA
Dennis E. Fagerstone


/s/ Mark L. Withrow        Executive Vice President, General      March 29, 2001
------------------------   Counsel and Director of Pioneer USA
Mark L. Withrow


/s/ Danny Kellum           Executive Vice President - Domestic    March 29, 2001
------------------------   Operations and Director of Pioneer
Danny Kellum               USA


/s/ Rich Dealy             Vice President and Chief Accounting    March 29, 2001
------------------------   Officer of Pioneer USA
Rich Dealy


                                       27

<PAGE>


                           PARKER & PARSLEY 86-B, 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-B, 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-B, 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




                                       28

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