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 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 0-16574
ENEX OIL & GAS INCOME PROGRAM III - SERIES 6, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0214443
(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
Transitional Small Business Disclosure Format (Check one):
Yes No X
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ENEX OIL & GAS INCOME PROGRAM III - SERIES 6, L.P.
BALANCE SHEET
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JUNE 30,
ASSETS 1996
---------------
(Unaudited)
CURRENT ASSETS:
Cash $ 5,015
Accounts receivable - oil & gas sales 39,404
Other current assets 44,961
---------------
Total current assets 89,380
---------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 2,754,315
Less accumulated depreciation and depletion 2,516,260
---------------
Property, net 238,055
---------------
TOTAL $ 327,435
===============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 36,184
Payable to general partner 27,520
---------------
Total current liabilities 63,704
---------------
NONCURRENT PAYABLE TO GENERAL PARTNER 55,041
---------------
PARTNERS' CAPITAL:
Limited partners 144,106
General partner 64,584
---------------
Total partners'capital 208,690
---------------
TOTAL $ 327,435
===============
Number of $500 Limited Partner units outstanding 6,340
See accompanying notes to financial statements.
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I-1
ENEX OIL & GAS INCOME PROGRAM III - SERIES 6, 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. Effective February 1, 1996, the Company sold its interest in the Credo
acquisition for $10,500. The Company recognized a $656 gain from the
sale. Effective April 1, 1996, the Company sold its interest in the
Kidd well in the Enexco acquisition for $22,400. The Company recognized
a $21,253 gain from the sale. Effective 6/1/96, the Company sold its
interest in the Harper well in the RIC acquisition for $19,466. The
Company recognized a gain of $15,469 from the sale.
3. 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.
4. 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 $194,403 for certain oil and gas properties
due to market indications that the carrying amounts were not fully
recoverable.
I-4
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 remained relatively unchanged at
$87,465 in 1996 as compared to $87,473 in 1995. Oil sales increased by $2,502
(4%). A 6% increase in the average oil sales price increased sales by $3,921.
This increase was partially offset by a 2% decrease in oil production. Gas sales
decreased by $2,510 (11%). A 37% decrease in gas production reduced sales by
$8,676. This decrease was partially offset by a 42% increase in the average gas
sales price. The changes in the average sales prices correspond with changes in
the overall market for the sale of oil and gas. The decrease in oil production
was primarily a result of natural production declines, partially offset by
production from the Corkscrew acquisition which had been shut-in during the
second quarter of 1995 for rod repairs. The decrease in gas production was
primarily the result of the sale of the Credo acquisition in the first quarter
of 1996 and the sale of the Kidd well in the Enex acquisition in the fourth
quarter of 1995, coupled with natural production declines.
Lease operating expenses decreased to $41,065 in the second quarter of 1996 from
$49,708 in the second quarter of 1995. The decrease of $8,643 (21%) is primarily
due to workover expenses incurred on the Corkscrew acquisition in 1995.
Depreciation and depletion expense decreased to $19,394 in the second quarter of
1996 from $34,050 in the second quarter of 1995. This represents a decrease of
$14,656 (43%). The changes in production, noted above, caused depreciation and
depletion expense to decrease by $5,460, while a 32% decrease in the depletion
rate reduced depreciation and depletion expense by an additional $9,196. The
rate decrease was primarily due to the lower property basis resulting from the
recognition of an impairment of property for $194,403 in the first quarter of
1996.
Effective April 1, 1996, the Company sold its interest in the Kidd well in the
Enexco acquisition for $22,400. The Company recognized a $21,253 gain from the
sale. Effective 6/1/96, the Company sold its interest in the Harper well in the
RIC acquisition for $19,466. The Company recognized a gain of $15,469 from the
sale.
On April 2, 1996, the Company settled a property interest dispute on the Barnes
Estate acquisition. In the settlement, the Company agreed to pay $2,500 to the
plaintiff and convey 0.1% overriding royalty interest in the Barnes Estate #1
and #2 wells. Such conveyance should not have a material impact on the current
or future revenues of the Company.
General and administrative expenses decreased to $10,937 in the second quarter
of 1996 from $15,536 in the second quarter of 1995. This decrease of $4,599
(30%) is primarily due to less staff time being required to manage the Company's
operations.
I-5
First Six Months in 1995 Compared to First Six Months in 1996
Oil and gas sales for the first six months decreased to $186,762 in 1996 from
$189,491 in 1995. This represents a decrease of $2,729 (1%). Oil sales decreased
by $8,246 (6%). A 12% decrease in oil production reduced sales by $16,553. This
decrease was partially offset by a 7% increase in the average oil sales price.
Gas sales increased by $5,517 (11%). A 32% increase in the average gas sales
price increased sales by $13,077. This increase was partially offset by a 16%
decrease in gas production. The changes in the average sales prices correspond
with changes in the overall market for the sale of oil and gas. The decrease in
oil production was primarily a result of natural production declines, partially
offset by production from the Corkscrew acquisition which had been shut-in
during the second quarter of 1995 for rod repairs. The decrease in gas
production was primarily the result of the sale of the Credo acquisition in the
first quarter of 1996 and the sale of the Kidd well in the Enex acquisition in
the fourth quarter of 1995 coupled with natural production declines.
Lease operating expenses decreased to $93,152 in the first six months of 1996 to
$96,024 in the first six months of 1995. The decrease of $2,872 (3%) is
primarily due to workover expenses incurred on the Corkscrew acquisition in
1995.
Depreciation and depletion expense decreased to $38,858 in the first six months
of 1996 from $74,897 in the first six months of 1995. This represents a decrease
of $36,039 (48%). The changes in production, noted above, caused depreciation
and depletion expense to decrease by $9,779, while a 40% decrease in the
depletion rate reduced depreciation and depletion expense by an additional
$26,260. The rate decrease was primarily due to the lower property basis
resulting from the recognition of an impairment of property for $194,403 in the
first quarter of 1996.
Effective February 1, 1996, the Company sold its interest in the Credo
acquisition for $10,500. The Company recognized a $656 gain from the sale.
Effective April 1, 1996, the Company sold its interest in the Kidd well in the
Enexco acquisition for $22,400. The Company recognized a $21,253 gain from the
sale. Effective 6/1/96, the Company sold its interest in the Harper well in the
RIC acquisition for $19,466. The Company recognized a gain of $15,469 from the
sale.
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
I-6
other factors. In the first quarter of 1996, the Company recognized a non-cash
impairment provision of $194,403 for certain oil and gas properties due to
market indications that the carrying amounts were not fully recoverable.
On April 2, 1996, the Company settled a property interest dispute on the Barnes
Estate acquisition. In the settlement, the Company agreed to pay $2,500 to the
plaintiff and convey 0.1% overriding royalty interest in the Barnes Estate #1
and #2 wells. Such conveyance should not have a material impact on the current
or future revenues of the Company.
General and administrative expenses decreased to $23,816 in the first six months
of 1996 from $30,313 in the first six months of 1995. This decrease of $6,497
(21%) is primarily due to less staff time being required to manage the Company's
operations.
I-7
CAPITAL RESOURCES AND LIQUIDITY
The Company's cash flow is a direct result of the amount of net proceeds
realized from the sale of oil and gas production after the payment of its debt
obligations. 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
remaining 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 activities.
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
the payment of its debt obligations. Distribution amounts are subject to change
if net revenues are greater or less than expected. Nonetheless, the general
partner believes the Company will continue to have sufficient cash flow to fund
operations and to maintain a regular pattern of distributions.
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.
As of June 30, 1996, the Company had no material commitments for capital
expenditures. The Company does not intend to engage in any significant
developmental drilling activity.
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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 OIL & GAS INCOME
PROGRAM III - SERIES 6, 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
November 7, 1996 By: /s/ James A. Klein
-------------------
James A. Klein
Controller and Chief
Accounting Officer