United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
[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 0-16549
ENEX INCOME AND RETIREMENT FUND - SERIES 1, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0222813
(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) has 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 INCOME AND RETIREMENT FUND - SERIES 1, L.P.
BALANCE SHEET
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September 30,
ASSETS 1996
---------------------
(Unaudited)
CURRENT ASSETS:
Cash $ 6,500
Receivable from affiliated limited partnership 136
Accounts receivable - oil & gas sales 15,294
---------------------
Total current assets 21,930
---------------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests 1,148,114
Less depletion 829,570
---------------------
Property, net 318,544
---------------------
TOTAL $ 340,474
=====================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 13
Payable to general partner 125,631
---------------------
Total current liabilities 125,644
---------------------
PARTNERS' CAPITAL:
Limited partners 203,126
General partner 11,704
---------------------
Total partners' capital 214,830
---------------------
TOTAL $ 340,474
=====================
Number of $500 Limited Partner units outstanding 2,736
See accompanying notes to financial statements.
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ENEX INCOME AND RETIREMENT FUND - 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 $ 17,709 $ 15,422 $ 44,579 $ 58,276
--------------- ----------------- ----------------- -------------------
EXPENSES:
Depletion 7,185 9,932 24,126 27,525
Impairment of property - - 50,639 -
Production taxes 823 894 2,226 1,799
General and administrative 5,236 6,284 18,960 20,908
--------------- ----------------- ----------------- -------------------
Total expenses 13,244 17,110 95,951 50,232
--------------- ----------------- ----------------- -------------------
INCOME (LOSS) FROM OPERATIONS 4,465 (1,688) (51,372) 8,044
--------------- ----------------- ----------------- -------------------
OTHER INCOME:
Interest income 0 15 0 15
Gain on sale of property 0 37,624 0 37,624
--------------- ----------------- ----------------- -------------------
Total other income 0 37,639 0 37,639
--------------- ----------------- ----------------- -------------------
NET INCOME (LOSS) $ 4,465 $ 35,951 $ (51,372) $ 45,683
=============== ================= ================= ===================
See accompanying notes to financial statements.
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ENEX INCOME AND RETIREMENT FUND - SERIES 1, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE TWO YEARS ENDED DECEMBER 31, 1995
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
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PER $500
LIMITED
PARTNER
GENERAL LIMITED UNIT OUT-
TOTAL PARTNER PARTNERS STANDING
------------------- -------------------- -------------------- -------------------
BALANCE, JANUARY 1, 1994 $ 312,869 $ 4,967 $ 307,902 $ 113
CASH DISTRIBUTIONS (74,475) (7,447) (67,028) (25)
NET INCOME (LOSS) (669) 5,049 (5,718) (2)
------------------- -------------------- -------------------- -------------------
BALANCE, DECEMBER 31, 1994 237,725 2,569 235,156 86
CASH DISTRIBUTIONS (10,133) (1,015) (9,118) (3)
NET INCOME 38,610 7,810 30,800 11
------------------- -------------------- -------------------- -------------------
BALANCE, DECEMBER 31, 1995 266,202 9,364 256,838 94
NET INCOME (LOSS) (51,372) 2,340 (53,712) (20)
------------------- -------------------- -------------------- -------------------
BALANCE, SEPTEMBER 30, 1996 $ 214,830 $ 11,704 $ 203,126 (1) $ 74
=================== ==================== ==================== ===================
(1) Includes 349 units purchased by the general partner as a limited partner.
See accompanying notes to financial statements.
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ENEX INCOME AND RETIREMENT FUND - SERIES 1, L.P.
STATEMENTS OF CASH FLOWS
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(UNAUDITED)
NINE MONTHS ENDED
--------------------------------------------
September 30, September 30,
1996 1995
------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ (51,372) $ 45,683
------------------- -------------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion 24,126 27,525
(Gain) on sale of property - (37,624)
Impairment of property 50,639 -
(Increase) in:
Accounts receivable - oil & gas sales (805) (3,579)
-
Other current assets - (42,338)
(Decrease) in:
Accounts payable (3,758) (3,012)
Payable to general partner (12,963) (30,042)
------------------- -------------------
Total adjustments 57,239 (89,070)
------------------- -------------------
Net cash provided (used) by operating activities 5,867 (43,387)
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of property - 42,338
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions - (10,133)
------------------- -------------------
NET INCREASE (DECREASE) IN CASH 5,867 (11,182)
CASH AT BEGINNING OF YEAR 633 11,971
------------------- -------------------
CASH AT END OF PERIOD $ 6,500 $ 789
=================== ===================
See accompanying notes to financial statements.
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ENEX INCOME AND RETIREMENT FUND - 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.
3. 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 assets 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 $50,639 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.
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Item 2. Management's Discussion and Analysis or Plan of Operation.
Third Quarter 1995 Compared to Third Quarter 1996
Oil and gas sales for the third quarter increased to $17,709 in 1996 from
$15,442 in 1995. This represents a decrease of $2,287 (15%). Oil sales increased
by $656 (12%). A 29% increase in oil production increased sales by $1,629. This
increase was partially offset by a 13% decrease in the average oil sales price.
Gas sale increased by $1,631 or 17%. A 67% increase in the average gas sales
price increased sales by $4,565. This increase was partially offset by a 29%
decrease in gas production. The increase in oil production was primarily due to
higher production from the Pecan Island acquisition which had additional wells
drilled on it in 1996. The decrease in gas production was primarily a result of
the sale of the Garcia wells in the Shana acquisition, effective July 1995,
coupled with natural production declines. The decrease in average net oil prices
were a result of higher operating costs incurred on the Company's net profits
royalty properties, especially the Larto acquisition which incurred higher
operating costs in the third quarter of 1996, partially offset by higher prices
in the overall market for the sale of oil and gas. The increase in average net
gas prices corresponding with higher prices in the overall market for the sale
of gas.
Depletion expense decreased to $7,185 in the third quarter of 1996 from $9,932
in the third quarter of 1995. This represents a decrease of $2,747 (28%). An 18%
decrease in the production rate reduced depleted expense by $1,543, while the
production decreases, noted above, reduced depletion by an additional $1,204.
This rate decrease is primarily the result of a downward revision of the gas
reserves during December 1995, and the lower property basis resulting from the
recognition of a $50,639 property impairment in the first quarter of 1996.
General and administrative expenses decreased to $5,236 in 1996 from $6,284 in
1995. This decrease of $1,048 (17%) is primarily due to less staff time being
required to manage the Company's operations.
First Nine Months in 1995 Compared to First Nine Months in 1996
Oil and gas sales for the first nine months decreased to $44,579 in 1996 from
$58,276 in 1995. This represents a decrease of $13,697 (24%). Oil sales
decreased by $13,568 (45%). A 17% decrease in oil production reduced sales by
$5,062. A 34% decrease in the average net oil sales price reduced sales by an
additional $8,506. Gas sales decreased by $129. A 6% decrease in the gas
production reduced sales by $1,767. This decrease was partially offset by a 6%
increase in the average gas sales price received. The decreases in oil and gas
production were primarily a result of the sale of the Garcia wells in the Shana
acquisition, effective July 1995, coupled with natural production declines. The
decrease in average net oil price was a result of higher operating costs
incurred on the Company's net profits royalty properties, especially the Larto
acquisition which incurred higher operating costs in 1996, partially offset by
higher prices in the overall market for the sale of oil. The increase in average
net gas price corresponds with higher prices in the overall market for the sale
of gas.
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Depletion expense decreased to $24,126 in the first nine months of 1996 from
$27,525 in the first nine months of 1995. This represents a decrease of $3,399
(12%). A 1% decrease in the depletion rate reduced depletion expense by $268,
while the decreases in production, noted above, reduced depletion expense by an
additional $3,131. The decrease in the depletion rate is primarily the result of
an upward revision of the oil reserves during December 1995 and the lower
property basis resulting from the recognition of a $50,639 property impairment
in the first quarter of 1996, partially offset by a downward revision of the gas
reserves during December 1995.
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 assets 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 $50,639 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 to $18,960 in 1996 from $20,908 in
1995. This decrease of $1,948 (9%) is primarily due to less staff time being
required to manage the Company's operations.
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 1995 to 1996 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's "available cash flow" is essentially equal to
the net amount of cash provided by operating, financing and investing
activities.
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. 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
I-7
liquidity needs. The Company's projected cash flows from operations will provide
sufficient funding to pay its operating expenses and debt obligations. 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, financing and investing activities.
Future periodic distributions will be made once sufficient net revenues are
accumulated.
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.
I-8
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 INCOME AND RETIREMENT
FUND - 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
December 23, 1996 By: /s/ James A. Klein
-------------------
James A. Klein
Controller and Chief
Accounting Officer