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 0-16549
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) 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 INCOME AND RETIREMENT FUND - SERIES 1, L.P.
BALANCE SHEET
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MARCH 31,
ASSETS 1997
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(Unaudited)
CURRENT ASSETS:
Cash $ 14,277
Receivable from affiliated limited partnership 136
Accounts receivable - oil & gas sales 21,781
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Total current assets 36,194
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OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests 1,148,114
Less depletion 851,336
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Property, net 296,778
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TOTAL $ 332,972
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LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 1,254
Payable to general partner 116,300
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Total current liabilities 117,554
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PARTNERS' CAPITAL:
Limited partners 201,481
General partner 13,937
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Total partners' capital 215,418
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TOTAL $ 332,972
=====================
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) THREE MONTHS ENDED
------------------------------------------
MARCH 31, MARCH 31,
1997 1996
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REVENUES:
Oil and gas sales $ 26,662 $ 16,054
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EXPENSES:
Depletion 10,177 9,093
Impairment of property - 50,639
Production taxes 1,163 670
General and administrative 5,716 7,526
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Total expenses 17,056 67,928
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NET INCOME (LOSS) $ 9,606 $ (51,874)
=================== ===================
See accompanying notes to financial statements.
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ENEX INCOME AND RETIREMENT FUND - SERIES 1, 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 $ 266,202 $ 9,364 $ 256,838 $ 94
CASH DISTRIBUTIONS (9,196) (920) (8,276) (3)
NET INCOME (42,243) 4,412 (46,655) (17)
------------------ ------------------ ------------------ ------------------
BALANCE, DECEMBER 31, 1996 214,763 12,856 201,907 74
CASH DISTRIBUTIONS (8,951) (896) (8,055) (3)
NET INCOME 9,606 1,977 7,629 3
------------------ ------------------ ------------------ ------------------
BALANCE, MARCH 31, 1997 $ 215,418 $ 13,937 $ 201,481 (1)$ 74
================== ================== ================== ==================
(1) Includes 358 units purchased by the general partner as a limited partner.
See accompanying notes to financial statements.
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I-3
ENEX INCOME AND RETIREMENT FUND - SERIES 1, 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) $ 9,606 $ (51,874)
------------------- -------------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depletion 10,177 9,093
Impairment of property - 50,639
(Increase) decrease in:
Accounts receivable - oil & gas sales 1,007 (3,757)
(Decrease) in:
Accounts payable (1,384) (3,342)
Payable to general partner (3,297) (731)
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Total adjustments 6,503 51,902
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Net cash provided by operating activities 16,109 28
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CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions (8,951) -
------------------- -------------------
NET INCREASE IN CASH 7,158 28
CASH AT BEGINNING OF YEAR 7,119 633
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CASH AT END OF PERIOD $ 14,277 $ 661
=================== ===================
See accompanying notes to financial statements.
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I-4
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. 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.
3. A cash distribution was made to the limited partners of the Company in
the amount of $8,055 representing net revenues from the sale of oil and
gas produced from properties owned by the Company. This distribution
was made on January 31, 1997.
4. 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.
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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 $16,054 in 1996 to
$26,662 in 1997. This represents an increase of $10,608 (66%). Oil sales
increased by $1,019 or 22%. A 49% increase in oil production increased sales by
$2,268. This increase was partially offset by an 18% decrease in average net oil
sales prices. Gas sales increased by $9,589 or 84%. A 22% increase in gas
production increased sales by $2,465. A 51% increase in average net gas sales
prices increased sales by . The increase in oil production was primarily a
result of a successful workover performed in the Shana acquisition. The increase
in gas production was primarily the result of additional wells drilled on the
Pecan Island acquisition in 1996. The decrease in average net oil sales price
was a result of higher operating costs incurred on the Company's net profits
royalty properties, especially the Shana acquisition which incurred higher
operating costs in the first quarter of 1997, partially offset by higher prices
in the overall market for the sale of oil. The increase in average net gas sales
price corresponds with higher prices in the overall market for the sale of gas.
Depletion expense increased from $9,093 in the first quarter of 1996 to $10,177
in the first quarter of 1997. This represents an increase of $1,084 (12%). The
changes in production, noted above, caused depletion expense to increase by
$2,822. This increase was partially offset by a 15% decrease in the depletion
rate. The rate decrease was primarily due to relatively higher production from
properties with a lower depletion rate, partially offset by downward revisions
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 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 from $7,526 in the first quarter
of 1996 to $5,716 in the first quarter of 1997. This decrease of $1,810 (24%) is
primarily due to less staff time being required to manage the Company's
operations in 1997.
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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'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 1996. 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 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 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-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 INCOME AND RETIREMENT
FUND - SERIES 1, 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