SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURTIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1994 Commission File No. 1-8876
ENSERCH EXPLORATION PARTNERS, LTD.
Incorporated - State of Texas I.R.S. Identification No. 75-2017566
1817 Wood Street, Dallas, Texas 75201
Registrant's telephone number, including Area Code: 214-748-1110
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 twelve 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
_____ _____
Number of Depositary Units evidenced by Depositary Receipts of the
Registrant outstanding as of May 11, 1994: 805,914
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ENSERCH EXPLORATION PARTNERS, LTD.
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
March 31
---------------------
1994 1993
---------------------
(In thousands except
per unit amounts)
Revenues:
Natural gas $ 42,098 $ 28,982
Oil and condensate. . . . . . . . . . . . . . . . . 7,055 9,132
Natural gas liquids . . . . . . . . . . . . . . . . 405 1,097
Other . . . . . . . . . . . . . . . . . . . . . . . 151 544
-------- --------
Total. . . . . . . . . . . . . . . . . . . . . . 49,709 39,755
-------- --------
Costs and Expenses:
Operating expenses. . . . . . . . . . . . . . . . . 10,103 8,824
Revenue related taxes . . . . . . . . . . . . . . . 2,281 2,069
Depreciation and amortization . . . . . . . . . . . 20,438 16,877
General, administrative and other . . . . . . . . . 5,765 6,867
-------- --------
Total. . . . . . . . . . . . . . . . . . . . . . 38,587 34,637
-------- --------
Operating Income . . . . . . . . . . . . . . . . . . 11,122 5,118
Other Income - Net . . . . . . . . . . . . . . . . . 2
Interest Expense . . . . . . . . . . . . . . . . . . (6,205) (5,760)
-------- --------
Net Income (Loss). . . . . . . . . . . . . . . . . . 4,917 (640)
Less 1% General Partners' Interest . . . . . . . . . 49 (6)
-------- --------
Income (Loss) Applicable to Limited Partners'
Interest. . . . . . . . . . . . . . . . . . . . . $ 4,868 $ (634)
======== ========
Net Income (Loss) Per Unit . . . . . . . . . . . . . $ 0.05 $ (.01)
======== ========
Weighted Average Units Outstanding . . . . . . . . . 102,500 102,500
======== ========
Distributions Declared Per Unit. . . . . . . . . . . $ $ .075
======== ========
<FN>
See accompanying notes.
1
ENSERCH EXPLORATION PARTNERS, LTD.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
March 31
----------------------
1994 1993
------- --------
(In thousands)
OPERATING ACTIVITIES
Net income (loss) . . . . . . . . . . . . . . . . . $ 4,917 $ (640)
Adjustments to reconcile net income (loss) to
net cash flows from operating activities -
Depreciation and amortization . . . . . . . . . . 20,438 16,877
Cash effect of changes in current operating
assets and liabilities. . . . . . . . . . . . . . 9,125 5,026
-------- --------
Net cash flows from operating activities. . . . 34,480 21,263
-------- --------
INVESTING ACTIVITIES
Property, plant and equipment additions . . . . . . (26,651) (25,100)
Other . . . . . . . . . . . . . . . . . . . . . . . (3,296) (4,180)
-------- --------
Net cash flows used for investing activities. . (29,947) (29,280)
-------- --------
Net cash flows from (used for) operating
and investing activities . . . . . . . . . . 4,533 (8,017)
-------- --------
FINANCING ACTIVITIES
Change in temporary advances with
affiliated companies. . . . . . . . . . . . . . . 15,717 1,681
Proceeds from long-term note payable to
an affiliated company . . . . . . . . . . . . . . 8,000 8,000
Advances under leasing arrangements . . . . . . . . (20,496) 5,876
Cash distributions paid . . . . . . . . . . . . . . (7,765) (7,765)
-------- --------
Net cash flows (used for) from financing
activities . . . . . . . . . . . . . . . . . (4,544) 7,792
-------- --------
Net Decrease in Cash . . . . . . . . . . . . . . . . (11) (225)
Cash at Beginning of Period. . . . . . . . . . . . . 309 937
-------- --------
Cash at End of Period. . . . . . . . . . . . . . . . $ 298 $ 712
======== ========
<FN>
See accompanying notes.
2
ENSERCH EXPLORATION PARTNERS, LTD.
CONDENSED BALANCE SHEETS
(March 31, 1994 Unaudited)
March 31 December 31
1994 1993
--------- -----------
(In thousands)
ASSETS
Current Assets:
Cash. . . . . . . . . . . . . . . . . . . . . . . . $ 298 $ 309
Accounts receivable - trade . . . . . . . . . . . . 15,635 17,120
Accounts receivable - affiliated companies. . . . . 13,997 13,952
Materials and supplies, at average cost . . . . . . 2,002 1,749
Other . . . . . . . . . . . . . . . . . . . . . . . 1,641 272
---------- ----------
Total current assets . . . . . . . . . . . . . . 33,573 33,402
---------- ----------
Property, Plant and Equipment (at cost):
Gas and oil properties (full-cost method) . . . . . 1,826,597 1,803,581
Other . . . . . . . . . . . . . . . . . . . . . . . 5,972 5,947
---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . 1,832,569 1,809,528
Less accumulated depreciation and amortization. . . 796,418 779,217
---------- ----------
Net property, plant and equipment. . . . . . . . 1,036,151 1,030,311
---------- ----------
Other Assets . . . . . . . . . . . . . . . . . . . . 13,263 22,590
---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . $1,082,987 $1,086,303
========== ==========
LIABILITIES
Current Liabilities:
Accounts payable - trade. . . . . . . . . . . . . . $ 49,129 $ 67,693
Accounts payable - affiliated companies . . . . . . 20,682 3,531
Temporary advances - affiliated companies . . . . . 42,933 27,216
Advances under leasing arrangements . . . . . . . . 10,432 30,928
Distributions payable to unitholders. . . . . . . . 7,765
Other . . . . . . . . . . . . . . . . . . . . . . . 2,958 2,690
---------- ----------
Total current liabilities. . . . . . . . . . . . 126,134 139,823
---------- ----------
Long-term Debt - Affiliated Company. . . . . . . . . 306,000 298,000
Deferred Royalties . . . . . . . . . . . . . . . . . 27,712 28,554
Other Liabilities. . . . . . . . . . . . . . . . . . 7,987 9,689
Partners' Capital. . . . . . . . . . . . . . . . . . 615,154 610,237
---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . $1,082,987 $1,086,303
========== ==========
<FN>
See accompanying notes.
3
ENSERCH EXPLORATION PARTNERS, LTD.
Notes to Condensed Financial Statements
1. Enserch Exploration Partners, Ltd. issued a 5-year promissory note for $8
million payable to an affiliate of ENSERCH Corporation on January 3, 1994.
Proceeds from the note were used to fund the January 3, 1994 cash
distribution.
2. In the opinion of management, all adjustments (consisting only of normal
recurring accruals) necessary for a fair statement of the results of
operations for the interim periods included herein have been made.
4
INDEPENDENT ACCOUNTANTS' REPORT
Enserch Exploration Partners, Ltd.:
We have reviewed the accompanying condensed balance sheet of Enserch
Exploration Partners, Ltd., as of March 31, 1994, and the related condensed
statements of income and of cash flows for the three months ended March 31,
1994 and 1993. These financial statements are the responsibility of the
Partnership's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data, and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such condensed financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of Enserch Exploration Partners, Ltd., as of
December 31, 1993, and the related statements of income, cash flows and changes
in partners' capital for the year then ended (not presented herein); and in our
report dated February 7, 1994, we expressed an unqualified opinion on those
financial statements. In our opinion, the information set forth in the
accompanying condensed balance sheet as of December 31, 1993, is fairly stated
in all material respects, in relation to the balance sheet from which it has
been derived.
DELOITTE & TOUCHE
Dallas, Texas
April 25, 1994
5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
EP had first-quarter 1994 net income of $4.9 million, compared with a net
loss of $.6 million for the first quarter of 1993, reflecting significantly
improved prices and sales volumes for natural gas but lower oil prices. First-
quarter 1994 revenues of $50 million were 25% higher than the year-ago period.
Operating income for the first three months of 1994 of $11 million was more than
double the year-earlier period.
Natural-gas revenues of $42 million were 45% higher than the first quarter
of 1993. The average natural-gas sales price of $2.32 per thousand cubic feet
(Mcf) rose 19% from $1.95 per Mcf a year ago. Natural-gas sales volumes were
18 billion cubic feet, a 22% increase from the year-earlier quarter, primarily
due to production from Mississippi Canyon Block 441, which went on stream after
the first quarter of 1993. Improved production from several East Texas gas
fields, the result of production optimization and successful in-fill drilling
and completion work in late 1993 and early 1994, also contributed to the higher
sales volumes.
Oil revenues of $7.1 million were 23% below the first quarter of 1993,
with the average price per barrel declining 20% to $14.85 from $18.56. Oil
sales volumes of 475 thousand barrels were slightly lower than the year-earlier
period.
Costs and expenses for the first quarter of 1994 of $39 million were
$4 million higher than the year-earlier period, principally due to higher
amortization expense as a result of both increased production and a higher-per-
unit of amortization of capitalized costs and production expenses for
Mississippi Canyon Block 441. The overall rate of amortization increased to
$.92 per million British thermal units (MMBtu) produced from $.89 in 1993,
principally due to costs of additional offshore projects and increased develop-
ment costs associated with older East Texas fields. Average production cost per
MMBtu decreased to $.52 in 1994 from $.59 in 1993, as fixed costs per unit of
production declined due to a higher level of gas production. Interest expense
for the first quarter of 1994 was $6.2 million, compared with $5.8 million for
the same period a year ago.
At March 31, 1994, the value of EP's gas and oil properties, as determined
by the method prescribed by the Securities and Exchange Commission, exceeded the
net capitalized cost of such properties by approximately $110 million. Product
prices are subject to seasonal and other fluctuations.
CAPITAL RESOURCES AND LIQUIDITY
Net cash flows from operating activities for the first quarter of 1994
were $34 million, a $13 million improvement from the year-earlier period.
Investing activities required net cash flows of $30 million, virtually the same
6
as the first quarter of 1993. Net cash flows from operating and investing
activities for the first quarter of 1994 were $4.5 million, a $13 million
improvement from the 1993 period.
Planned property, plant and equipment additions for 1994 total
$114 million. In addition, construction of the offshore platform and related
facilities associated with EP's interest in the Garden Banks Block 388
development project in the Gulf of Mexico is being financed through an operating
lease arrangement.
On January 3, 1994, EP paid a quarterly distribution of $.075 per unit.
In February 1994, EP announced that the quarterly distributions to unitholders
had been indefinitely suspended.
DRILLING PROGRAM
The Garden Banks Block 388 project remains on schedule, with initial
production anticipated by mid-1995. The final major contract for the conversion
of the semisubmersible drilling rig to a floating drilling/production facility
was awarded in January. Installation of the offshore facilities, consisting of
the subsea template, gathering and sales pipelines and shallow-water facilities,
will begin in the second quarter.
During the first quarter, a confirmation well on Green Canyon Block 254
was spudded, which is an offset to a discovery well drilled in late 1991 that
encountered 11 sands with a combined thickness of more than 360 feet of oil
pay. The well will test the downdip extent of the pay sands. EP holds a 25%
working interest in this block and a similar working interest in three adjacent
blocks.
EP continued developing gas reserves in East Texas. In the Freestone
field, three new wells yielded initial deliveries of slightly over 2.0 million
cubic feet (MMcf) of gas per day each. A fourth well is being drilled.
In north central Texas, four wells have been completed this year in the
Boonsville field, with daily production ranging from 0.4 MMcf to 1.0 MMcf of
gas. Additional wells in the field are in various stages of drilling or com-
pletion. A well completed in the Fashing field in South Texas flowed at a daily
rate of 2.7 MMcf of gas.
7
ENSERCH EXPLORATION PARTNERS, LTD.
SUMMARY OF OPERATING DATA (UNAUDITED)
Three Months Ended
March 31
---------------------
1994 1993
------- -------
Operating Income (in millions) $ 11.1 $ 5.1
======= =======
Revenues (in millions)
Natural gas . . . . . . . . . . . . . . . . . . . . $ 42.1 $ 29.0
Oil and condensate . . . . . . . . . . . . . . . . 7.1 9.1
Natural gas liquids . . . . . . . . . . . . . . . . .4 1.1
Other revenues - net. . . . . . . . . . . . . . . . .1 .6
------- -------
Total. . . . . . . . . . . . . . . . . . . . . . $ 49.7 $ 39.8
======= =======
Sales Volumes
Natural gas (MMcf) . . . . . . . . . . . . . . . . 18,183 14,899
Oil and condensate (MBbl) . . . . . . . . . . . . . 475 492
Natural gas liquids (MBbl). . . . . . . . . . . . . 41 82
Average Sales Price
Natural gas (per Mcf) . . . . . . . . . . . . . . . $ 2.32 $ 1.95
Oil and condensate (per Bbl). . . . . . . . . . . . 14.85 18.56
Natural gas liquids (per Bbl) . . . . . . . . . . . 9.88 13.38
Net Wells
Drilled . . . . . . . . . . . . . . . . . . . . . . 16 16
Productive. . . . . . . . . . . . . . . . . . . . . 8 14
Data in Equivalent Energy Content (MMBtu)(1)
Average sales price . . . . . . . . . . . . . . . . $ 2.26 $ 2.09
Average production costs (2). . . . . . . . . . . . .52 .59
Amortization costs . . . . . . . . . . . . . . . . .92 .89
<FN>
(1) For purposes of providing a common unit of measure, natural gas, oil and
natural gas liquids are converted to an approximate equivalent unit on the
basis of relative energy content: one Mcf of natural gas equals 1.05
million British thermal units (MMBtu), one barrel of oil equals 5.6 MMBtu
and one barrel of natural gas liquids equals 4.2 MMBtu.
(2) Average production costs declined due to the impact of a higher level of gas
production on fixed costs.
8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) No reports were filed on Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENSERCH EXPLORATION PARTNERS, LTD.
(Registrant)
By Enserch Exploration, Inc.
Managing General Partner
Dated May 13, 1994 By /s/Gary J. Junco
----------------------------------------
Gary J. Junco
President and Chief Operating Officer
Dated May 13, 1994 By /s/J. W. Pinkerton
----------------------------------------
J. W. Pinkerton
Vice President and Controller
9