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 0-16575
ENEX INCOME AND RETIREMENT FUND - SERIES 3, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0222818
(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 3, L.P.
BALANCE SHEET
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JUNE 30,
ASSETS 1996
---------------------
(Unaudited)
CURRENT ASSETS:
Cash $ 2,565
Accounts receivable - oil & gas sales 40,015
---------------------
Total current assets 42,580
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OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests 1,325,118
Less accumulated depletion 1,156,526
---------------------
Property, net 168,592
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TOTAL $ 211,172
=====================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 292
Payable to general partner 22,778
---------------------
Total current liabilities 23,070
---------------------
NONCURRENT PAYABLE TO GENERAL PARTNER 45,557
---------------------
PARTNERS' CAPITAL:
Limited partners 134,866
General partner 7,679
---------------------
Total partners' capital 142,545
---------------------
TOTAL $ 211,172
=====================
See accompanying notes to financial statements.
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ENEX INCOME AND RETIREMENT FUND - SERIES 3, 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 $ 35,884 $ 5,179 $ 64,282 $ 33,756
-------------- ----------------- ----------------- -----------------
EXPENSES:
Depletion 8,770 4,499 20,147 20,307
Impairment of property - - 52,602 -
Production taxes 1,827 205 3,087 1,162
General and administrative 7,138 6,363 15,633 16,732
-------------- ----------------- ----------------- -----------------
Total expenses 17,735 11,067 91,469 38,201
-------------- ----------------- ----------------- -----------------
NET INCOME (LOSS) $ 18,149 $ (5,888) $ (27,187) $ (4,445)
============== ================= ================= =================
See accompanying notes to financial statements.
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ENEX INCOME AND RETIREMENT FUND - SERIES 3, 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 (loss) $ (27,187) $ (4,445)
------------------- -------------------
Adjustments to reconcile net (loss) to net cash
provided by operating activities
Depletion 20,147 20,307
Impairment of property 52,602 -
(Increase) decrease in:
Accounts receivable - oil & gas sales (26,854) 13,939
Increase (decrease) in:
Accounts payable (4,000) (2,909)
Payable to general partner (14,168) 211
------------------- -------------------
Total adjustments 27,727 31,548
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Net cash provided by operating activities 540 27,103
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CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions - (30,254)
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NET INCREASE (DECREASE) IN CASH 540 (3,151)
CASH AT BEGINNING OF YEAR 2,025 7,518
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CASH AT END OF PERIOD $ 2,565 $ 4,367
=================== ===================
See accompanying notes to financial statements.
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ENEX INCOME AND RETIREMENT FUND - SERIES 3, 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 $35,884 in 1996 from
$5,179 in 1995. This represents an increase of $30,705 (593%). Oil sales
increased by $969 or 54%. An 83% increase in the average net oil sales price
increased sales by $1,246. This increase was partially offset by a 16% decrease
in oil production. Gas sales increased by $29,736 or 888%. A 65% increase in gas
production increased sales by $2,188, while a 497% increase in the average net
gas sales price increased sales by an additional $27,548. The decrease in oil
production was primarily the result of 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 the
average net oil and gas sales prices were due to relatively higher net profits
royalty payments received from the Barnes Estate acquisition, which had lower
operating costs in 1996, coupled with higher prices in the overall market for
the sale of oil and gas.
Depletion expense increased to $8,770 in the second quarter of 1996 from $4,499
in the second quarter of 1995. This represents an increase of $4,271 (95%). The
changes in production, noted above, increased depletion expense by $2,446. A 26%
increase in the depletion rate increased depletion expense by an additional
$1,825. 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 $52,602 property impairment in the first quarter of 1996.
General and administrative expenses increased to $7,138 in 1996 from $6,363 in
1995. This increase of $775 (12%) 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 $64,282 in 1996 from
$33,756 in 1995. This represents an increase of $30,526 (90%). Oil sales
increased by $2,272 or 36%. A 3% increase in oil production caused sales to
increase by $160. A 33% increase in the average net oil sales price increased
sales by an additional $2,112. Gas sales increased by $28,254 or 103%. A 26%
increase in gas production increased sales by $7,080, while a 61% increase in
the average net gas sales price increased sales by an additional $21,174. The
increases in oil and gas production were 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 1995. The increases in the
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average net oil and gas sales prices were due to relatively higher net profits
royalty payments received from the Barnes Estate acquisition, which had lower
operating costs in 1996, coupled with higher prices in the overall market for
the sale of oil and gas.
Depletion expense decreased to $20,147 in the first six months of 1996 from
$20,307 in the first six months of 1995. This represents a decrease of $160
(1%). A 19% decrease in the depletion rate reduced depletion expense by $4,793.
This decrease was partially offset by the changes in production, noted above.
The rate decrease was primarily due to an upward revision of the oil reserves
during December 1995 and the lower property basis resulting from the recognition
of a $52,602 property impairment in the first quarter of 1996, partially offset
by a downward revision of the oil 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. In the first quarter of
1996, the Company recognized a non-cash impairment of $52,602 for certain oil
and gas properties due to market indications that the carrying amounts were not
fully recoverable.
General and administrative expenses decreased to $15,633 in 1996 from $16,732 in
1995. This decrease of $1,099 (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 3, 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