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 0-17562
ENEX OIL & GAS INCOME PROGRAM III - SERIES 8, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0214442
(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 8, L.P.
BALANCE SHEET
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JUNE 30,
ASSETS 1996
----------------
(Unaudited)
CURRENT ASSETS:
Cash $ 9,765
Accounts receivable - oil & gas sales 41,646
Other current assets 17,329
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Total current assets 68,740
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OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 2,543,620
Less accumulated depreciation and depletion 2,356,829
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Property, net 186,791
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TOTAL $ 255,531
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LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 27,388
Payable to general partner 34,699
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Total current liabilities 62,087
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NONCURRENT PAYABLE TO GENERAL PARTNER 69,399
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PARTNERS' CAPITAL:
Limited partners 74,338
General partner 49,707
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Total partners' capital 124,045
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TOTAL $ 255,531
=============
See accompanying notes to financial statements.
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I-1
ENEX OIL & GAS INCOME PROGRAM III - SERIES 8, 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 $ 54,972 $ 74,719 $ 150,737 $ 160,527
-------------- ------------- ------------ ------------
EXPENSES:
Depreciation and depletion 12,308 41,499 31,614 86,219
Impairment of property - - 291,307 -
Lease operating expenses 33,475 47,860 78,075 88,406
Production taxes 3,828 4,595 10,298 10,147
General and administrative 8,851 27,813 19,011 39,158
-------------- ------------- ------------ ------------
Total expenses 58,462 121,767 430,305 223,930
-------------- ------------- ------------ ------------
LOSS FROM OPERATIONS (3,490) (47,048) (279,568) (63,403)
-------------- ------------- ------------ ------------
OTHER INCOME:
Gain from sale of property 12,223 - 13,632 -
-------------- ------------- ------------ ------------
NET INCOME (LOSS) $ 8,733 $ (47,048) $ (265,936) $ (63,403)
============== ============= ============ ============
See accompanying notes to financial statements.
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I-2
ENEX OIL AND GAS INCOME PROGRAM III - SERIES 8, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (265,936) $ (63,403)
Adjustments to reconcile net(loss)
to net cash provided by operating
activities:
Depreciation and depletion 31,614 86,219
Impairment of property 291,307 -
Gain on sale of property (13,632) -
(Increase) in:
Accounts receivable - oil & gas sales (11,911) (2,865)
Other current assets (14,455) (1,623)
Increase (decrease) in:
Accounts payable 10,352 2,989
Payable to affiliated limited partner - 923
Payable to general partner (46,071) (12,704)
Total adjustments 247,204 72,939
Net cash provided (used) by operating
activities (18,732) 9,536
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 36,929 -
Property additions - development costs (11,021) (4,383)
Net cash provided (used) by investing
activities 25,908 (4,383)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions - (18,201)
NET INCREASE (DECREASE) IN CASH 7,176 (13,048)
CASH AT BEGINNING OF YEAR 2,589 16,214
CASH AT END OF PERIOD $ 9,765 $ 3,166
See accompanying notes to financial statements.
I-3
ENEX OIL & GAS INCOME PROGRAM III - SERIES 8, 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 $22,575. The Company recognized a gain of
$1,409 on the sale. Effective April 1, 1996, the Company sold its
interest in the Kidd well in the Enexco acquisition for $7,680. The
Company recognized a $7,100 gain from the sale. Effective June 1, 1996,
the Company sold its interest in the Harper well in the RIC acquisition
for $6,674. The Company recognized a gain of $5,123 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.
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 decreased to $54,972 in 1996 from
$74,719 in 1995. This represents a decrease of $19,747 (26%). Oil sales
decreased by $3,270 (7%). A 4% decrease in production caused sales to decrease
by $1,830. A 3% decrease in the average oil sales price reduced sales by an
additional $1,440. Gas sales decreased by $7,317 (48%). A 62% decrease in gas
production reduced sales by $9,507. This decrease was partially offset by a 38%
increase in the average gas sales price. The decrease in oil production was
primarily a result of the sale of the Credo acquisition in the first quarter of
1996 and the sale of the Kidd well in the Enexco acquisition in the second
quarter of 1996, 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
Enexco acquisition in the second quarter of 1996 coupled with natural production
declines. The lower average oil sales price was primarily the result of
relatively higher production from the Corkscrew acquisition which has a
relatively lower oil sales price, partially offset by higher prices in the
overall market for the sale of oil. The higher average gas sales price was
primarily the result of relatively higher production from properties with a
higher gas sales price, coupled with higher prices in the overall market for the
sale of gas.
Lease operating expenses decreased to $33,475 in the second quarter of 1996 from
$47,860 in the second quarter of 1995. The decrease of $14,385 (30%) is
primarily due to the changes in production, noted above.
Depreciation and depletion expense decreased to $12,308 in the second quarter of
1996 from $41,499 in the second quarter of 1995. This represents a decrease of
$29,191 (70%). The changes in production, noted above, reduced depreciation and
depletion expense by $9,550. A 61% decrease in the depletion rate reduced
depreciation and depletion expense by an additional $19,641. The rate decrease
is primarily due to the lower property basis resulting from the recognition of
an impairment of property for $291,307 in the first quarter of 1996.
Effective April 1, 1996, the Company sold its interest in the Kidd well in the
Enexco acquisition for $7,680. The Company recognized a $7,100 gain from the
sale. Effective June 1, 1996, the Company sold its interest in the Harper well
in the RIC acquisition for $6,674. The Company recognized a gain of $5,123 from
the sale.
General and administrative expenses decreased to $8,851 in the second quarter of
1996 from $27,813 in the second quarter of 1995. This decrease of $18,962 is
primarily due to $11,938 of legal costs incurred in the second quarter of 1995
for a property interest dispute on the Barnes Estate acquisition, coupled with
less staff time being required to manage the Company's operations in 1996.
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First Six Months in 1995 Compared to First Six Months in 1996
Oil and gas sales for the first six months decreased to $150,737 in 1996 from
$160,527 in 1995. This represents a decrease of $9,790 (6%). Oil sales decreased
by $1,585 (2%). A 5% decrease in oil production reduced sales by $5,513. This
decrease was partially offset by a 4% increase in the average oil sales price.
Gas sales decreased by $8,204 (14%). A 19% decrease in gas production reduced
sales by $11,218. This decrease was partially offset by a 6% increase in the
average gas sales price. The decrease in oil production was primarily a result
of the sale of the Credo acquisition in the first quarter of 1996 and the sale
of the Kidd well in the Enexco acquisition in the second quarter of 1996,
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 Enexco acquisition in
the second quarter of 1996 coupled with natural production declines. The changes
in the average sales prices correspond with changes in the overall market for
the sale of oil and gas.
Lease operating expenses decreased to $78,075 in the first six months of 1996
from $88,406 in the first six months of 1995. The decrease of $10,331 (12%) is
primarily due to the changes in production, noted above.
Depreciation and depletion expense decreased to $31,614 in the first six months
of 1996 from $86,219 in the first six months of 1995. This represents a decrease
of $54,605 (63%). A 59% decrease in the depletion rate reduced depreciation and
depletion expense by $45,179. The changes in production, noted above, reduced
depreciation and depletion expense by an additional $9,426. The rate decrease is
primarily due to the lower property basis resulting from the recognition of an
impairment of property for $291,307 in the first quarter of 1996.
Effective February 1, 1996, the Company sold its interest in the Credo
acquisition for $22,575. The Company recognized a gain of $1,409 on the sale.
Effective April 1, 1996, the Company sold its interest in the Kidd well in the
Enexco acquisition for $7,680. The Company recognized a $7,100 gain from the
sale. Effective June 1, 1996, the Company sold its interest in the Harper well
in the RIC acquisition for $6,674. The Company recognized a gain of $5,123 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 circumstances indicate the
carrying amount may not be recoverable. In the first quarter of 1996, the
Company recognized a non-cash impairment provision of $291,307 for certain oil
and gas properties due to market indications that the carrying amounts were not
fully recoverable.
General and administrative expenses decreased to $19,011 in 1996 to $39,158 in
1995. This decrease of $20,147 (51%) is primarily due to $11,938 of legal costs
incurred in the second quarter of 1995 for a property interest dispute on the
Barnes Estate acquisition coupled with less staff time being required to manage
the Company's operations in 1996.
I-6
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 repayment 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 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.
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.
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 June 30, 1996.
II-1
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 8, 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