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 March 31, 1997
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 0-16552
ENEX OIL & GAS INCOME PROGRAM III - SERIES 4, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0179822
(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
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ENEX OIL & GAS INCOME PROGRAM III - SERIES 4, L.P.
BALANCE SHEET
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MARCH 31,
ASSETS 1997
---------------------
(Unaudited)
CURRENT ASSETS:
Cash $ 24,877
Accounts receivable - oil & gas sales 28,799
Other current assets 6,036
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Total current assets 59,712
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OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 1,700,584
Less accumulated depreciation and depletion 1,353,913
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Property, net 346,671
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TOTAL $ 406,383
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LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 23,947
Payable to general partner 131,431
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Total current liabilities 155,378
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PARTNERS' CAPITAL:
Limited partners 231,792
General partner 19,213
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Total partners' capital 251,005
---------------------
TOTAL $ 406,383
=====================
Number of $500 Limited Partner units outstanding 5,410
See accompanying notes to financial statements.
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I-1
ENEX OIL & GAS INCOME PROGRAM III - SERIES 4, L.P.
STATEMENTS OF OPERATIONS
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(UNAUDITED) THREE MONTHS ENDED
----------------------------------------
MARCH 31, MARCH 31,
1997 1996
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REVENUES:
Oil and gas sales $ 61,651 $ 33,163
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EXPENSES:
Depreciation and depletion 7,532 3,737
Impairment of property - 88,363
Lease operating expenses 23,244 22,454
Production taxes 3,199 2,229
General and administrative 4,737 7,068
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Total expenses 38,712 123,851
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NET INCOME (LOSS) $ 22,939 $ (90,688)
=================== ===================
See accompanying notes to financial statements.
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I-2
ENEX OIL & GAS INCOME PROGRAM III - SERIES 4, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1997
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PER $500
LIMITED
PARTNER
GENERAL LIMITED UNIT OUT-
TOTAL PARTNER PARTNERS STANDING
----------------- ------------------ ------------------ ------------------
BALANCE, JANUARY 1, 1996 $ 287,919 $ 11,336 $ 276,583 $ 51
NET INCOME (59,853) 4,830 (64,683) (12)
----------------- ------------------ ------------------ ------------------
BALANCE, DECEMBER 31, 1996 228,066 16,166 211,900 39
NET INCOME 22,939 3,047 19,892 4
----------------- ------------------ ------------------ ------------------
BALANCE, MARCH 31, 1997 $ 251,005 $ 19,213 $ 231,792 (1)$ 43
================= ================== ================== ==================
(1) Includes 1,003 units purchased by the general partner as a limited partner.
See accompanying notes to financial statements.
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I-3
ENEX OIL AND GAS INCOME PROGRAM III - SERIES 4, L.P.
STATEMENTS OF CASH FLOWS
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(UNAUDITED)
THREE MONTHS ENDED
------------------------------------------
MARCH 31, MARCH 31,
1997 1996
------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 22,939 $ (90,688)
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Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and depletion 7,532 3,737
Impairment of property - 88,363
(Increase) decrease in:
Accounts receivable - oil & gas sales 301 (7,588)
Other current assets (1,692) (4)
Increase (decrease) in:
Accounts payable 4,784 214
Payable to general partner (16,797) 6,301
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Total adjustments (5,872) 91,023
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Net cash provided by operating activities 17,067 335
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CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions - development costs (345) (550)
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NET INCREASE (DECREASE) IN CASH 16,722 (215)
CASH AT BEGINNING OF YEAR 8,155 215
------------------- -------------------
CASH AT END OF PERIOD $ 24,877 $ -
=================== ===================
See accompanying notes to financial statements.
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I-4
ENEX OIL & GAS INCOME PROGRAM III - SERIES 4, 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. The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standard ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which
requires certain to be reviewed for impairment whenever events or
circumstances indicate the carrying amount may not be recoverable. Prior to
this pronouncement, the Company assessed properties on an aggregate basis.
Upon adoption of SFAS 121, the Company began assessing properties on an
individual basis, wherein total capitalized costs may not exceed the
property's fair market value. The fair market value of each property was
determined by H. J. Gruy and Associates, ("Gruy"). To determine the fair
market value, Gruy estimated each property's oil and gas reserves, applied
certain assumptions regarding price and cost escalations, applied a 10%
discount factor for time and certain discount factors for risk, location,
type of ownership interest, category of reserves, operational
characteristics, and other factors. In the first quarter of 1996, the
Company recognized a non-cash impairment provision of $88,363 for certain
oil and gas properties due to changes in the overall market for the sale of
oil and gas and significant decreases in the projected production from
certain of the Company's oil and gas properties.
3. On April 7, 1997, the Company's General Partner mailed proxy material
to the limited partners with respect to a proposed consolidation of the
Company with 33 other managed limited partnerships. The terms and
conditions of the proposed consolidation are set forth in such proxy
material.
I-5
Item 2. Management's Discussion and Analysis or Plan of Operation.
First Quarter 1997 Compared to First Quarter 1996
Oil and gas sales for the first quarter increased from $33,163 in 1996 to
$61,651 in 1997. This represents an increase of $28,488 (86%). Oil sales
increased $16,198 or 69%. A 77% increase in average oil prices increased sales
by $17,325. This increase was partially offset by a 5% decline in oil
production. Gas sales increased by $12,290 or 129%. A 461% increase in gas
production increased sales by $44,114. This increase was partially offset by a
59% decrease in average gas sales prices. The decrease in oil production was
primarily the result of natural production declines. The higher average oil
price was a result of a relatively higher production of oil from wells with a
relatively higher sales price coupled with higher prices in the overall market
for the sale of oil. The higher gas production was primarily the result of the
shut-in of wells in the Pecan Island acquisition in the first quarter of 1996.
The lower average gas price was a result of a relatively higher net profits
payout on the Shana acquisition coupled with higher prices in the overall market
for the sale of gas.
Lease operating expenses increased from $22,454 in 1996 to $23,244 in 1997. The
increase of $790 (4%) is primarily due to the changes in production, noted
above, partially offset by lower operating expenses incurred on the Shana
acquisition in 1997.
Depreciation and depletion expense increased from $3,737 in the first quarter of
1996 to $7,532 in the first quarter of 1997. This represents an increase of
$3,795. The changes in production, noted above, caused depreciation and
depreciation expense to increase by $1,584. A 42% increase in the depletion rate
increased depreciation and depletion expense by an additional $2,211. The
increase in the depletion rate was primarily due to the relatively higher
production from the Pecan Island acquisition which has a relatively higher
depletion rate, partially offset by an upward revision of the oil and gas
reserves during December 1996.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standard ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which requires
certain to be reviewed for impairment whenever events or circumstances indicate
the carrying amount may not be recoverable. Prior to this pronouncement, the
Company assessed properties on an aggregate basis. Upon adoption of SFAS 121,
the Company began assessing properties on an individual basis, wherein total
capitalized costs may not exceed the property's fair market value. The fair
market value of each property was determined by H. J. Gruy and Associates,
("Gruy"). To determine the fair market value, Gruy estimated each property's oil
and gas reserves, applied certain assumptions regarding price and cost
escalations, applied a 10% discount factor for time and certain discount factors
for risk, location, type of ownership interest, category of reserves,
operational characteristics, and other factors. In the first quarter of 1996,
the Company recognized a non-cash impairment provision of $88,363 for certain
oil and gas properties due to changes in the overall market for the sale of oil
and gas and significant decreases in the projected production from certain of
the Company's oil and gas properties.
General and administrative expenses decreased from $7,068 in 1996 to $4,737 in
1997. This decrease of $2,331 (33%) is primarily due to less staff time being
required to manage the Company's operations.
On April 7, 1997, the Company's General Partner mailed proxy material to the
limited partners with respect to a proposed consolidation of the Company with 33
other managed limited partnerships. The terms and conditions of the proposed
consolidation are set forth in such proxy material.
I-6
CAPITAL RESOURCES AND LIQUIDITY
The Company's cash flow from operations is a direct result of the amount of net
proceeds realized from the sale of oil and gas production. Accordingly, the
changes in cash flow from 1996 to 1997 are primarily due to the changes in oil
and gas sales described above. It is the general partner's intention to
distribute substantially all of the Company's available cash flow to the
Company's partners.
The Company discontinued the payment of distributions during 1995. Future
distributions are dependent upon, among other things, an increase in prices
received for oil and gas. The Company will continue to recover its reserves and
distribute to the limited partners the net proceeds realized form the sale of
oil and gas production. Distribution amounts are subject to change if net
revenues are greater or less than expected. 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 Company does not intend to
purchase additional properties or fund extensive development of existing oil and
gas properties, and as such; has no long-term liquidity needs. The Company's
projected cash flows from operations will provide sufficient funding to pay its
operating expenses and debt obligations. The general partner does not intend to
accelerate the repayment of the debt beyond the cash flow provided by operating,
financing and investing activities. Based upon current projected cash flows from
its property, it does not appear that the Company will have sufficient cash to
pay distributions and pay its operating expenses, and meet its debt obligations.
Future periodic distributions will be made once sufficient net revenues are
accumulated.
As of March 31, 1997, the Company had no material commitments for capital
expenditures. The Company does not intend to engage in any significant
developmental drilling activity.
I-7
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 March 31, 1997.
II-1
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 hereunto duly authorized.
ENEX OIL & GAS INCOME
PROGRAM III - 4, L.P.
----------------------
(Registrant)
By:ENEX RESOURCES CORPORATION
--------------------------
General Partner
By: /s/ R. E. Densford
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R. E. Densford
Vice President, Secretary
Treasurer and Chief Financial
Officer
May 11, 1997 By: /s/ James A. Klein
-------------------
James A. Klein
Controller and Chief
Accounting Officer