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, 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 0-16550
ENEX INCOME AND RETIREMENT FUND - SERIES 2, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0222815
(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 2, L.P.
BALANCE SHEET
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MARCH 31,
ASSETS 1996
---------------
(Unaudited)
CURRENT ASSETS:
Cash $ 726
Accounts receivable - oil & gas sales 23,735
---------------
Total current assets 24,461
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OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests 1,209,403
Less accumulated depletion 888,707
---------------
Property, net 320,696
---------------
TOTAL $ 345,157
===============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 458
Payable to general partner 10,221
---------------
Total current liabilities 10,679
---------------
NONCURRENT PAYABLE TO GENERAL PARTNER 10,222
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PARTNERS' CAPITAL:
Limited partners 315,464
General partner 8,792
---------------
Total partners' capital 324,256
---------------
TOTAL $ 345,157
===============
See accompanying notes to financial statements.
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ENEX INCOME AND RETIREMENT FUND - SERIES 2, L.P.
STATEMENTS OF OPERATIONS
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(UNAUDITED) THREE MONTHS ENDED
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MARCH 31, MARCH 31,
1996 1995
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REVENUES:
Oil and gas sales $ 21,183 $ 26,764
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EXPENSES:
Depletion 8,231 10,645
Impairment of property 49,409 -
Production taxes 1,212 960
General and administrative 8,166 10,015
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Total expenses 67,018 21,620
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NET INCOME (LOSS) $ (45,835) $ 5,144
=================== ===================
See accompanying notes to financial statements.
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ENEX INCOME AND RETIREMENT FUND - SERIES 2, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31, MARCH 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (45,835) $ 5,144
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depletion 8,231 10,645
Impairment of property 49,409 -
(Increase) decrease in:
Accounts receivable - oil & gas sales (7,360) 369
(Decrease) in:
Accounts payable (4,203) (757)
Payable to general partner (405) (411)
Total adjustments 45,672 9,846
Net cash provided by operating activities (163) 14,990
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions - (14,513)
NET INCREASE (DECREASE) IN CASH (163) 477
CASH AT BEGINNING OF YEAR 889 7,677
CASH AT END OF PERIOD $ 726 $ 8,154
See accompanying notes to financial statements.
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ENEX INCOME AND RETIREMENT FUND - SERIES 2, 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. In the
first quarter of 1996, the Company recognized a non-cash impairment
provision of $49,409 for certain oil and gas properties due to market
indications that the carrying amounts were not fully recoverable.
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Item 2Management's Discussion and Analysis or Plan of Operation.
First Quarter 1996 Compared to First Quarter 1995
Oil and gas sales for the first quarter decreased from $26,764 in 1995 to
$21,183 in 1996. This represents a decrease of $5,581 or 21%. Oil sales
decreased by $961 or 22%. A 47% decrease in oil production reduced sales by
$2,069. This decrease was partially offset by a 47% increase in the average net
oil price. Gas sales decreased by $4,620 or 21%. A 1% decrease in gas production
reduced sales by $47, while a 21% decrease in average net gas price reduced
sales by an additional $4,573. The decrease in oil 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 gas production
was primarily due to natural production declines. The increase in average net
oil price was primarily due to lower operating expenses incurred on the Shana
acquisition, from which the Company receives a net profits royalty, coupled with
higher prices in the overall market for the sale of oil. The decrease in average
net gas price was primarily a result of higher operating expenses incurred on
the Barnes Estate acquisition, from which the Company receives a net profits
royalty, partially offset by higher gas prices in the overall market for the
sale of gas.
Depletion expense decreased from $10,645 in the first quarter of 1995 to $8,231
in the first quarter of 1996. This represents a decrease of $2,414 (23%). The
changes in production, noted above, caused depletion to decrease by $1,224,
while a 13% decrease in the depletion rate reduced depletion expense by an
additional $1,190. The rate decrease was primarily due to the lower property
basis resulting from the recognition of a $49,409 property impairment.
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. In the first quarter of
1996, the Company recognized a non-cash impairment provision of $49,409 for
certain oil and gas properties due to market indications that the carrying
amounts were not fully recoverable.
General and administrative expenses decreased from $10,015 in the first quarter
of 1995 to $8,166 in the first quarter of 1996. This decrease of $1,849 (18%) is
primarily due to less staff time being required to manage the Company's
operations, partially offset by a $1,186 increase in direct expenses incurred by
the Company in 1996.
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
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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 will continue to recover its reserves and distribute to the limited
partners the net proceeds realized from the sale of oil and gas production after
payment of its debt obligations. Distribution amounts are subject to change if
net revenues are greater or less than expected. The general partner does not
intend to accelerate the repayment of the debt beyond the 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.
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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 March 31, 1996.
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 2, 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
May 11, 1996 By: /s/ James A. Klein
-------------------
James A. Klein
Controller and Chief
Accounting Officer