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 0-17559
ENEX OIL & GAS INCOME PROGRAM III - SERIES 7, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0214444
(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 OIL & GAS INCOME PROGRAM III - SERIES 7, L.P.
BALANCE SHEET
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MARCH 31,
ASSETS 1996
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(Unaudited)
CURRENT ASSETS:
Cash $ 1,727
Accounts receivable - oil & gas sales 30,492
Other current assets 2,202
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Total current assets 34,421
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OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 2,060,183
Less accumulated depreciation and depletion 1,896,586
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Property, net 163,597
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TOTAL $ 198,018
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LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 9,723
Payable to general partner 28,892
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Total current liabilities 38,615
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NONCURRENT PAYABLE TO GENERAL PARTNER 105,578
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PARTNERS' CAPITAL:
Limited partners 20,942
General partner 32,883
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Total partners' capital 53,825
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TOTAL $ 198,018
==============
See accompanying notes to financial statements.
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ENEX OIL & GAS INCOME PROGRAM III - SERIES 7, 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 $ 69,273 72,767
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EXPENSES:
Depreciation and depletion 13,726 27,946
Impairment of property 128,116 -
Lease operating expenses 36,869 32,557
Production taxes 4,326 4,096
General and administrative 10,760 12,378
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Total expenses 193,797 76,977
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LOSS FROM OPERATIONS (124,524) (4,210)
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OTHER INCOME:
Gain on sale of property 393 -
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NET LOSS $ (124,131) (4,210)
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See accompanying notes to financial statements.
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ENEX OIL AND GAS INCOME PROGRAM III - SERIES 7, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31, MARCH 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (124,131) $ (4,210)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and depletion 13,726 27,946
Impairment of property 128,116 -
Gain on sale of property (393) -
(Increase) decrease in:
Accounts receivable - oil & gas sales (9,924) (5,658)
Other current assets 129 (609)
Increase (decrease) in:
Accounts payable (14,042) (3,993)
Payable to general partner (6,786) 4,368
Total adjustments 110,826 22,054
Net cash provided (used) by operating activities (13,305) 17,844
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 6,300 -
Property (additions) credits - development costs 306 (352)
Net cash provided (used) by investing activities 6,606 (352)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions - (10,879)
NET INCREASE (DECREASE) IN CASH (6,699) 6,613
CASH AT BEGINNING OF YEAR 8,426 1,384
CASH AT END OF PERIOD $ 1,727 $ 7,997
See accompanying notes to financial statements.
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ENEX OIL & GAS INCOME PROGRAM III - SERIES 7, 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 $128,116 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 $72,767 in 1995 to
$69,273 in 1996. This represents a decrease of $3,494 (5%). Oil sales decreased
by $8,320 or 15%. A 19% decrease in oil production reduced sales by $10,651.
This decrease was partially offset by a 5% increase in the average oil sales
price. Gas sales increased by $4,826 or 28%. A 6% increase in gas production
increased sales by $1,016. A 21% increase in average gas prices increased sales
by an additional $3,810. 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 RIC acquisition resulting from a higher level of
available compression. The changes in average prices correspond with changes in
the overall market for the sale of oil and gas.
Lease operating expenses increased from $32,557 in the first quarter of 1995 to
$36,869 in the first quarter of 1996. The increase of $4,312 (13%) is primarily
due to road repair expenses incurred on the Corkscrew acquisition in 1996.
Depreciation and depletion expense decreased from $27,946 in the first quarter
of 1995 to $13,726 in the first quarter of 1996. This represents a decrease of
$14,220 (51%). The changes in production, noted above, reduced depreciation and
depletion expense by $3,368. A 44% decrease in the depletion rate reduced
depreciation and depletion expense by an additional $10,852. The rate decrease
is primarily due to the lower property basis resulting from the recognition of
an impairment of property for $128,116 in the first quarter of 1996.
Effective February 1, 1996, the Company sold its interest in the Credo
acquisition for $6,300. The Company recognized a gain of $393 on 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. In the first quarter of
1996, the Company recognized a non-cash impairment provision of $128,116 for
certain oil and gas properties due to market indications that the carrying
amounts were not fully recoverable.
General and administrative expenses decreased from $12,378 in the first quarter
of 1995 to $10,760 in the first quarter of 1996. This decrease of $1,618 (13%)
is primarily due to less staff time being required to manage the Company's
operations, partially offset by $3,191 higher direct expenses incurred by the
Company in 1996.
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.
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The Company will continue to recover its reserves and distribute to the partners
the net proceeds realized from the sale of oil and gas production after payment
of debt obligations. The Company suspended the payment of distributions in the
fourth quarter of 1995. The payment of future distributions will depend on the
Company's earnings, financial condition, working capital requirements and other
factors. It is anticipated that periodic distributions will be made by the
Company as cash becomes available.
As of March 31, 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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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 OIL & GAS INCOME
PROGRAM III - 7, L.P.
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(Registrant)
By:ENEX RESOURCES CORPORATION
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General Partner
By: /s/ R. E. Densford
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R. E. Densford
Vice President, Secretary
Treasurer and Chief Financial
Officer
May 11, 1996 By: /s/ James A. Klein
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James A. Klein
Controller and Chief
Accounting Officer