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 0-17595
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 3, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0251417
(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 88-89 INCOME AND RETIREMENT FUND - SERIES 3, L.P.
BALANCE SHEET
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JUNE 30,
ASSETS 1996
---------------
(Unaudited)
CURRENT ASSETS:
Cash ........................................................ $ 6,495
Accounts receivable - oil & gas sales ..................... 6,491
-----------
Total current assets ........................................ 12,986
-----------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests ........................................ 1,510,573
Less accumulated depletion ............................... 1,469,252
-----------
Property, net ............................................... 41,321
-----------
TOTAL ....................................................... $ 54,307
===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable ......................................... $ 77
Payable to general partner ............................... 14,857
-----------
Total current liabilities ................................... 14,934
-----------
NONCURRENT PAYABLE TO GENERAL PARTNER ....................... 89,146
-----------
PARTNERS' CAPITAL:
Limited partners ......................................... (53,927)
General partner .......................................... 4,154
-----------
Total partners' capital ..................................... (49,773)
-----------
TOTAL ....................................................... $ 54,307
===========
See accompanying notes to financial statements.
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I-1
ENEX 88-89 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 .......... $ 8,767 $ 7,982 $ 19,887 $ 17,332
--------- --------- --------- ---------
EXPENSES:
Depletion ................ 7,990 9,835 9,362 18,306
Impairment of property ... -- -- 258,758 --
Production taxes ......... 112 119 215 253
General and administrative 2,814 2,578 6,451 5,086
--------- --------- --------- ---------
Total expenses ............. 10,916 12,532 274,786 23,645
--------- --------- --------- ---------
NET (LOSS) ................. $ (2,149) $ (4,550) $(254,899) $ (6,313)
========= ========= ========= =========
See accompanying notes to financial statements.
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I-2
ENEX 88-89 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) ....................................... $(254,899) $(6,313)
--------- ---------
Adjustments to reconcile net (loss) to net cash provided by operating
activities:
Depletion ...................................... 9,362 18,306
Impairment of property ......................... 258,758 --
Decrease in:
Accounts receivable - oil & gas sales .......... 1,267 4,308
(Decrease) in:
Accounts payable .............................. (1,518) (2,862)
Payable to general partner .................... (7,251) (15,157)
-------- ---------
Total adjustments ................................ 260,618 4,595
-------- ---------
Net cash provided (used) by operating activities . 5,719 (1,718)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ........................... -- (5,029)
------- ---------
NET INCREASE (DECREASE) IN CASH .................. 5,719 (6,747)
CASH AT BEGINNING OF YEAR ........................ 776 7,540
-------- ---------
CASH AT END OF PERIOD ............................ $ 6,495 $ 793
======== =========
See accompanying notes to financial statements.
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ENEX 88-89 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.
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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 $8,767 in 1996 from $7,982
in 1995. This represents an increase of $785 (10%). Oil sales increased by $414
or 7%. A 17% increase in the average net oil sales price increased sales by
$955. This increase was partially offset by a 9% decrease in oil production. Gas
sales increased by $371 or 20%. A 31% increase in the average net gas sales
price increased sales by $516. This increase was partially offset by an 8%
decrease in gas production. The decreases in oil and gas production were
primarily due to natural production declines. The increases in average net sales
prices correspond with higher prices in the overall market for the sale of oil
and gas.
Depletion expense decreased to $7,990 in the second quarter of 1996 from $9,835
in the second quarter of 1995. This represents a decrease of $1,845 (19%). The
changes in production, noted above, reduced depletion expense by $822. An 11%
decrease in the depletion rate reduced depletion expense by an additional
$1,023. The decrease in the depletion rate was primarily due to the lower
property basis resulting from the recognition of a $258,758 property impairment
in the first quarter of 1996.
General and administrative expenses increased to $2,814 in 1996 from $2,578 in
1995. This increase of $236 (9%) 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 $19,887 in 1996 from
$17,332 in 1995. This represents an increase of $2,555 (15%). Oil sales
increased by $1,159 or 9%. A 16% increase in the average net oil sales price
increased sales by $1,982. This increase was partially offset by a 6% decrease
in oil production. Gas sales increased by $1,396 or 33%. A 57% increase in the
average net gas sales price increased sales by $2,023. This increase was
partially offset by a 15% decrease in gas production. The decreases in oil and
gas production were primarily due to natural production declines. The increases
in average net sales prices correspond with higher prices in the overall market
for the sale of oil and gas.
Depletion expense decreased to $9,362 in the first six months of 1996 from
$18,306 in the first six months of 1995. This represents a decrease of $8,944
(49%). The changes in production, noted above, reduced depletion expense by
$1,925. A 43% decrease in the depletion rate reduced depletion expense by an
additional $7,019. The decrease in the depletion rate was primarily due to the
lower property basis resulting from the recognition of a $258,758 property
impairment in the first quarter of 1996.
I-5
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 $258,758 for
certain oil and gas properties due to market conditions and reserve revisions on
the Lake Decade acquisition, which indicated that the carrying amounts were not
fully recoverable.
General and administrative expenses increased to $6,451 in 1996 from $5,086 in
1995. This increase of $1,365 (27%) is primarily due to more 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. 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 payment of
its debt obligations. Distribution amounts are subject to change if net revenues
are greater or less than expected. Based upon current projected cash flows from
the properties, it does not appear that the Company will have sufficient cash to
pay its operating expenses, repay its debt obligations and pay distributions.
II-1
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 88-89 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