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 June 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 0-16550
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) 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 2, L.P.
BALANCE SHEET
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JUNE 30,
ASSETS 1996
---------------------
(Unaudited)
CURRENT ASSETS:
Cash $ 5,840
Accounts receivable - oil & gas sales 36,775
---------------------
Total current assets 42,615
---------------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests 1,209,403
Less accumulated depletion 896,619
---------------------
Property, net 312,784
---------------------
TOTAL $ 355,399
=====================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 325
Payable to general partner 8,712
---------------------
Total current liabilities 9,037
---------------------
NONCURRENT PAYABLE TO GENERAL PARTNER 8,712
---------------------
PARTNERS' CAPITAL:
Limited partners 326,728
General partner 10,922
---------------------
Total partners' capital 337,650
---------------------
TOTAL $ 355,399
=====================
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) QUARTER ENDED SIX MONTHS ENDED
------------------------------------- --------------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995
---------------- ----------------- ----------------- -----------------
REVENUES:
Oil and gas sales $ 30,091 $ 13,740 $ 51,274 $ 40,504
---------------- ----------------- ----------------- -----------------
EXPENSES:
Depletion 7,912 4,201 16,143 14,846
Impairment of property - - 49,409 -
Production taxes 1,830 172 3,042 1,132
General and administrative 6,955 6,172 15,121 16,187
---------------- ----------------- ----------------- -----------------
Total expenses 16,697 10,545 83,715 32,165
---------------- ----------------- ----------------- -----------------
NET INCOME (LOSS) $ 13,394 $ 3,195 $ (32,441) $ 8,339
================ ================= ================= =================
See accompanying notes to financial statements.
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ENEX INCOME AND RETIREMENT FUND - SERIES 2, L.P.
STATEMENTS OF CASH FLOWS
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(UNAUDITED)
SIX MONTHS ENDED
--------------------------------------------
JUNE 30, JUNE 30,
1996 1995
------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (32,441) $ 8,339
------------------- -------------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depletion 16,143 14,846
Impairment of property 49,409 -
(Increase) decrease in:
Accounts receivable - oil & gas sales (20,400) 6,211
Accounts receivable - affiliated partnerships - (340)
(Decrease) in:
Accounts payable (4,336) (3,039)
Payable to general partner (3,424) (3,246)
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Total adjustments 37,392 14,432
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Net cash provided by operating activities 4,951 22,771
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CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions - (24,708)
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NET INCREASE (DECREASE) IN CASH 4,951 (1,937)
CASH AT BEGINNING OF YEAR 889 7,677
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CASH AT END OF PERIOD $ 5,840 $ 5,740
=================== ===================
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. 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. 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.
Second Quarter 1995 Compared to Second Quarter 1996
Oil and gas sales for the second quarter increased to $30,091 in 1996 from
$13,740 in 1995. This represents a decrease of $16,351 (119%). Oil sales
decreased by $5,121 (65%). A 58% decrease in oil production reduced oil sales by
$4,578. A 17% decrease in the average net oil sales price reduced sales by an
additional $543. Gas sales increased by $21,472 (366%). A 108% increase in gas
production increased sales by $6,365. A 123% increase in the average net gas
sales price increased sales by an additional $15,107. 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
increase in gas production was primarily due to higher production from the
Corinne acquisition which had been shut-in for over-production in the second
quarter of 1995, and due to higher production from the East Cameron acquisition,
which was shut-in for workovers in the second quarter of 1995. The decrease in
average net oil sales price was primarily the result of relatively lower
production from properties with a higher oil sales price, partially offset by
higher prices in the overall market for the sale of oil. The decrease in the
average net gas sales price was primarily due to relatively higher production
from the Corinne and East Cameron properties which have a higher gas sales price
coupled with higher prices in the overall market for the sale gas.
Depletion expense increased to $7,912 in the second quarter of 1996 from $4,201
in the second quarter of 1995. This represents an increase of $3,711 (88%). The
changes in production, noted above, caused depletion expense to increase by
$800, while a 58% increase in the depletion rate increased depletion expense by
an additional $2,911. The rate increase was primarily due to a higher production
from properties with a higher depletion rate coupled with a downward revision of
the gas reserves during December 1995, partially offset by an upward revision of
the oil reserves during December 1995 and the lower property basis resulting
from the recognition of a $49,409 property impairment in the first quarter of
1996.
General and administrative expenses increased to $6,955 in 1996 from $6,172 in
1995. This increase of $783 (13%) is primarily due to more staff time being
required to manage the Company's operations.
First Six Months in 1995 Compared to First Six Months in 1996
Oil and gas sales for the first six months increased to $51,274 in 1996 from
$40,504 in 1995. This represents an increase of $10,770 (27%). Oil sales
decreased by $6,082 (50%). A 54% decrease in oil production reduced oil sales by
$6,630. This decrease was partially offset by a 10% increase in the average net
oil sales price. Gas sales increased by $16,852 (60%). A 34% increase in gas
production increased sales by $9,682. A 19% increase in average net gas sales
price increased sales by an additional $7,170. The decrease in oil production
was primarily a
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result of the sale of the Garcia wells in the Shana acquisition, effective July
1995, coupled with natural production declines. The increase in gas production
was primarily due to higher production from the Corinne acquisition which had
been shut-in for over-production in the second quarter of 1995, and due to
higher production from the East Cameron acquisition, which was shut-in for
workovers in the second quarter of 1995. The increases in average net oil and
gas sales prices correspond with higher prices in the overall market for the
sale of oil and gas.
Depletion expense increased to $16,143 in the first six months of 1996 from
$14,846 in the first six months of 1995. This represents an increase of $1,297
(9%). The changes in production, noted above, caused depletion expense to
increase by $253, while a 7% increase in the depletion rate increased depletion
expense by an additional $1,044. The rate increase was primarily due to a higher
production from properties with a higher depletion rate coupled with a downward
revision of the gas reserves during December 1995, partially offset by an upward
revision of the oil reserves during December 1995 and the lower property basis
resulting from the recognition of a $49,409 property impairment in the first
quarter of 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. 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 to $15,121 in 1996 from $16,187 in
1995. This decrease of $1,066 (7%) 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 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. 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. The
terms and conditions of the proposed consolidation are set forth in such
preliminary proxy material.
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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 June 30, 1996.
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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 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
August 13, 1996 By: /s/ James A. Klein
-------------------
James A. Klein
Controller and Chief
Accounting Officer