United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from...............to...............
Commission file number 0-15433
ENEX OIL & GAS INCOME PROGRAM III - SERIES 1, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0179821
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 200, Three Kingwood Place
Kingwood, Texas 77339
(Address of principal executive offices)
Issuer's telephone number:
(713) 358-8401
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
Transitional Small Business Disclosure Format (Check one):
Yes No x
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ENEX OIL & GAS INCOME PROGRAM III - SERIES 1, L.P.
BALANCE SHEET
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September 30,
ASSETS 1996
-----------------
(Unaudited)
CURRENT ASSETS:
Cash $ 5,729
Accounts receivable - oil & gas sales 15,780
Other current assets 772
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Total current assets 22,281
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OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 1,145,700
Less accumulated depreciation and depletion 920,315
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Property, net 225,385
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TOTAL $ 247,666
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LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 2,194
Payable to general partner 22,404
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Total current liabilities 24,598
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NONCURRENT PAYABLE TO GENERAL PARTNER 179,240
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PARTNERS' CAPITAL (DEFICIT):
Limited partners (6,993)
General partner 50,821
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Total partners' capital 43,828
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TOTAL $ 247,666
=============
Number of $500 Limited Partner units outstanding 2,978
See accompanying notes to financial statements.
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I-1
ENEX OIL & GAS INCOME PROGRAM III - SERIES 1, L.P.
STATEMENTS OF OPERATIONS
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(UNAUDITED) QUARTER ENDED NINE MONTHS ENDED
------------------------------------- ----------------------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
---------------- ----------------- ----------------- -------------------
REVENUES:
Oil and gas sales $ 37,042 $ 28,282 $ 109,200 $ $ 93,817
---------------- ----------------- ----------------- -------------------
EXPENSES:
Depreciation and depletion 7,923 15,504 29,892 45,161
Lease operating expenses 4,999 8,035 17,003 23,399
Production taxes 1,787 1,380 5,225 4,224
General and administrative 4,936 5,324 18,992 13,277
---------------- ----------------- ----------------- -------------------
Total expenses 19,645 28,550 71,112 86,061
---------------- ----------------- ----------------- -------------------
INCOME (LOSS) FROM OPERATIONS 17,397 (268) 38,088 7,756
---------------- ----------------- ----------------- -------------------
OTHER EXPENSE:
Interest expense - - - (761)
---------------- ----------------- ----------------- -------------------
NET INCOME (LOSS) $ 17,397 $ (268) $ 38,088 $ $ 6,995
================ ================= ================= ===================
See accompanying notes to financial statements.
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I-2
ENEX OIL AND GAS INCOME PROGRAM III - SERIES 1, L.P.
STATEMENTS OF CASH FLOWS
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(UNAUDITED)
NINE MONTHS ENDED
-----------------------------
September 30, September 30,
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 38,088 $ 6,995
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Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and depletion 29,892 45,161
(Increase) decrease in:
Accounts receivable - oil & gas sales (6,288) (822)
Other current assets 1,982 2,135
(Decrease) in:
Accounts payable (8,602) (4,710)
Payable to general partner (52,508) (22,768)
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Total adjustments (35,524) 18,996
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Net cash provided by operating activities 2,564 25,991
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CASH FLOWS FROM INVESTING ACTIVITIES:
Property (additions) credits - development costs 1,087 (13,761)
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CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) in note payable to general partner - (10,204)
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NET INCREASE IN CASH 3,651 2,026
CASH AT BEGINNING OF YEAR 2,078 734
----------- ------------
CASH AT END OF PERIOD $ 5,729 $ 2,760
=========== ============
Cash paid for interest during the period $ - $ 761
=========== ============
See accompanying notes to financial statements.
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ENEX OIL & GAS INCOME PROGRAM III - SERIES 1, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. The interim financial information included herein is unaudited;
however, such information reflects all adjustments (consisting solely
of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of results for the
interim periods.
2. On August 9, 1996, the Company's General Partner submitted preliminary
proxy material to the Securities Exchange Commission with respect to a
proposed consolidation of the Company with 33 other managed limited
partnerships. On November 13, 1996, the Company submitted amended
preliminary proxy material to the SEC with respect to this consolidation
The terms and conditions of the proposed consolidation are set forth in
such preliminary proxy material.
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Item 2. Management's Discussion and Analysis or Plan of Operation.
Third Quarter 1996 Compared to Third Quarter 1995
Oil and gas sales for the third quarter increased to $37,042 in 1996 from
$28,282 in 1995. This represents an increase of $5,760 (18%). Oil sales
increased by $5,304 (20%). A 33% increase in the average oil sales price
increased oil sales by $7,814. This increase was partially offset by a 10%
decrease in oil production. Gas sales increased by $456 (11%). A 56% increase in
the average gas sales price increased sales by $1,556. This increase was
partially offset by a 30% decrease in gas production. The increases in the
average sales prices correspond with changes in the overall market for the sale
of oil and gas. The decrease in oil and gas production was primarily due to
natural production declines.
Lease operating expenses for the third quarter decreased to $4,999 in 1996 from
$8,035 in 1995. The decrease of $3,036 is primarily due to the changes in
production, noted above.
Depreciation and depletion expense decreased to $7,923 in the third quarter of
1996 from $15,504 in the third quarter of 1995. This represents a decrease of
$7,581 (49%). A 41% decrease in the depletion rate reduced depreciation and
depletion expense by $5,562. The changes in production, noted above, reduced
depreciation and depletion expense by an additional $2,019. The decrease in the
depletion rate is primarily the result of an upward revision of the oil and gas
reserves during December 1995.
General and administrative expenses incurred during the third quarter decreased
to $4,936 in 1996 from $5,324 in 1995. This decrease of $388 (7%) is primarily
due to less staff time being required to manage the Company's operations.
First Nine Months in 1996 Compared to First Nine Months in 1995
Oil and gas sales for the first nine months increased to $109,200 in 1996 from
$93,817 in 1995. This represents an increase of $15,383 (16%). Oil sales
increased by $9,893 (12%). A 26% increase in average oil sales price increased
sales by $19,427. This increase was partially offset by a 12% decrease in oil
production. Gas sales increased by $5,703 (51%). A 43% increase in average gas
sales prices increased sales by $5,006. A 5% increase in gas production
increased sales by an additional $484. The increases in the average sales prices
correspond with changes in the overall market for the sale of oil and gas. The
decrease in oil production was primarily due to natural production declines. The
increase in gas production was primarily the result of the enhanced production
improvements on the Concord acquisition.
Lease operating expenses incurred during the first nine months decreased to
$17,003 in 1996 from $23,399 in 1995. The decrease of $6,396 (27%) is primarily
due from the settlement of the Company's equity investment in an electric
cooperative which resulted from the purchase of electricity used on the Florida
acquisition while it was owned by the Company.
I-5
Depreciation and depletion expense decreased to $29,892 in the first nine months
of 1996 from $45,161 in the first nine months of 1995. This represents a
decrease of $15,269 (34%). A 28% decrease in the depletion rate reduced
depreciation and depletion expense by $11,438. The changes in production, noted
above, reduced depreciation and depletion by an additional $3,831. The decrease
in the depletion rate is primarily the result of an upward revision of the oil
and gas reserves during December 1995.
General and administrative expenses increased to $18,992 in the first nine
months of 1996 from $13,277 in the first nine months of 1995. This increase of
$5,715 is primarily due to more staff time being required to manage the
Company's operations.
CAPITAL RESOURCES AND LIQUIDITY
The Company's cash flow is a direct result of the amount of net proceeds
realized from the sale of oil and gas production and the issuance of additional
debt. Accordingly, the changes in cash flow from 1995 to 1996 are primarily due
to the changes in oil and gas sales described above and the repayment of $10,204
on a note to the general partner in 1995. It is the general partner's intention
to distribute substantially all of the Company's remaining available cash flow
to the Company's partners. The Company's "available cash flow" is essentially
equal to the net amount of cash provided by operating activities.
On August 9, 1996, the Company's General Partner submitted preliminary proxy
material to the Securities Exchange Commission with respect to a proposed
consolidation of the Company with 33 other managed limited partnerships. On
November 13, 1996, the Company submitted amended preliminary proxy material to
the SEC with respect to this consolidation The terms and conditions of the
proposed consolidation are set forth in such preliminary proxy material.
The Company discontinued the payment of distributions in January 1994. Future
distributions are dependent upon, among other things, an increase in the prices
received for oil and gas. The Company will continue to recover its reserves and
reduce its obligations in 1996. Based on the December 31, 1995 reserve report
prepared by Gruy, there appears to be sufficient future net revenues to pay all
obligations and expenses. The General Partner does not intend to accelerate the
repayment of the debt beyond the Company's cash flow provided by operating
activities. Based upon current projected cash flows from its property, it does
not appear that the Company will have sufficient cash to pay its operating
expenses, repay its debt obligations and pay distributions in the near future.
As of September 30, 1996, the Company had no material commitments for capital
expenditures. The Company does not intend to engage in any significant
developmental drilling activity.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable
Item 5. Other Information.
Not Applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) There are no exhibits to this report.
(b) The Company filed no reports on Form 8-K during the
quarter ended September 30, 1996.
II-1
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
ENEX OIL & GAS INCOME
PROGRAM III - SERIES 1, L.P.
(Registrant)
By:ENEX RESOURCES CORPORATION
General Partner
By: /s/ R. E. Densford
R. E. Densford
Vice President, Secretary
Treasurer and Chief Financial
Officer
November 13, 1996 By: /s/ James A. Klein
-------------------
James A. Klein
Controller and Chief
Accounting Officer