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 March 31, 1997
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 0-18322
ENEX OIL & GAS INCOME PROGRAM IV - SERIES 3, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0251421
(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 IV - SERIES 3, L.P.
BALANCE SHEET
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MARCH 31,
ASSETS 1997
---------------------
(Unaudited)
CURRENT ASSETS:
Cash $ 9,596
Accounts receivable - oil & gas sales 24,305
Other current assets 981
---------------------
Total current assets 34,882
---------------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 2,880,339
Less accumulated depreciation and depletion 2,822,342
---------------------
Property, net 57,997
---------------------
TOTAL $ 92,879
=====================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 29,337
Payable to general partner 47,334
---------------------
Total current liabilities 76,671
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PARTNERS' CAPITAL:
Limited partners (10,202)
General partner 26,410
---------------------
Total partners' capital 16,208
---------------------
TOTAL $ 92,879
=====================
Number of $500 Limited Partner units outstanding 6,079
See accompanying notes to financial statements.
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ENEX OIL & GAS INCOME PROGRAM IV - SERIES 3, L.P.
STATEMENTS OF OPERATIONS
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(UNAUDITED) THREE MONTHS ENDED
----------------------------------------
MARCH 31, MARCH 31,
1997 1996
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REVENUES:
Oil and gas sales $ 30,489 $ 38,629
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EXPENSES:
Depreciation and depletion 4,161 2,845
Impairment of property - 538,207
Lease operating expenses 15,651 14,219
Production taxes 2,753 4,106
General and administrative 3,854 4,826
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Total expenses 26,419 564,203
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NET INCOME (LOSS) $ 4,070 $ (525,574)
=================== ===================
See accompanying notes to financial statements.
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ENEX OIL & GAS INCOME PROGRAM IV - SERIES 3, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1997
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PER $500
LIMITED
PARTNER
GENERAL LIMITED UNIT OUT-
TOTAL PARTNER PARTNERS STANDING
----------------- ------------------ ------------------ ------------------
BALANCE, JANUARY 1, 1996 $ 526,561 $ 20,593 $ 505,968 $ 83
NET INCOME (LOSS) (514,423) 4,992 (519,415) (85)
----------------- ------------------ ------------------ ------------------
BALANCE, DECEMBER 31, 1996 12,138 25,585 (13,447) (2)
NET INCOME 4,070 825 3,245 -
----------------- ------------------ ------------------ ------------------
BALANCE, MARCH 31, 1997 $ 16,208 $ 26,410 $ (10,202)(1)$ (2)
================= ================== ================== ==================
(1) Includes 1,156 units purchased by the general partner as a limited partner.
See accompanying notes to financial statements.
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ENEX OIL AND GAS INCOME PROGRAM IV - SERIES 3, L.P.
STATEMENTS OF CASH FLOWS
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(UNAUDITED)
THREE MONTHS ENDED
------------------------------------------
MARCH 31, MARCH 31,
1997 1996
------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 4,070 $ (525,574)
------------------- -------------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and depletion 4,161 2,845
Impairment of property - 538,207
(Increase) decrease in:
Accounts receivable - oil & gas sales 5,301 (14,159)
Increase (decrease) in:
Accounts payable (2,676) 2,788
Payable to general partner (7,846) 2,229
------------------- -------------------
Total adjustments (1,060) 531,910
------------------- -------------------
Net cash provided by operating activities 3,010 6,336
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CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions - development costs (49) (514)
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NET INCREASE IN CASH 2,961 5,822
CASH AT BEGINNING OF YEAR 6,635 44
------------------- -------------------
CASH AT END OF PERIOD $ 9,596 $ 5,866
=================== ===================
See accompanying notes to financial statements.
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ENEX OIL & GAS INCOME PROGRAM IV - 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. 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 $142,465 for certain
oil and gas properties due primarily to downward reserve revisions on the
Lake Decade acquisition and lower prices in the market for the sale of oil
and gas. The Lake Decade acquisition included significant reserves that
were considered "proved" but not yet developed. Due to depressed gas prices
and the unsuccessful efforts of wells drilled near the acquisition, it was
determined by the operator of the acquisition that future drillings could
not be justified. The well which was holding the lease, which had
undeveloped reserves assigned to it, was recompleted by the operator in
1996 to a zone in which the Company did not own an interest. As a result,
the lease expired and the undeveloped reserves associated with the lease
had to be written off. This was the cause of both the downward reserve
revisions in 1996 and the reserve valuation writedowns taken by the Company
in the first quarter of 1996.
3. On April 24, 1997, the Company's General Partner submitted preliminary
proxy material to the Securities Exchange Commission with respect to a
proposed liquidation of the Company.
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Item 2. Management's Discussion and Analysis or Plan of Operation.
First Quarter 1997 Compared to First Quarter 1995
Oil and gas sales for the first quarter decreased from $38,629 in 1996 to
$30,489 in 1997. This represents a decrease of $8,140 (21%). Oil sales decreased
by $6,815 or 35%. A 48% decrease in oil production reduced sales by $9,316. This
decrease was partially offset by a 24% increase in the average oil sales price.
Gas sales decreased by $1,325 or 7%. A 24% decrease in gas production reduced
sales by $4,648. This decrease was partially offset by a 23% increase in the
average gas sales price. The decreases in oil and gas production were primarily
the result of a shut in of production from the Bagley acquisition to perform a
workover, coupled with natural production declines. The increases in average oil
and gas sales prices correspond with higher prices in the overall market for the
sale of oil and gas.
Lease operating expenses increased from $14,219 in the first quarter of 1996 to
$15,651 in the first quarter of 1997. The increase of $1,432, or 10%, is
primarily due to workover expenses incurred on the Bagley acquisition in the
first quarter of 1997.
Depreciation and depletion expense increased from $2,845 in the first quarter of
1996 to $4,161 in the first quarter of 1997. This represents an increase of
$1,316 (46%). A 142% increase in the depletion rate increased depreciation and
depletion expense by $2,444. This increase was partially offset by the changes
in production, noted above. The rate increase was primarily due to a downward
revision of the oil and gas reserves during December 1996.
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 $142,465 for certain
oil and gas properties due primarily to downward reserve revisions on the Lake
Decade acquisition and lower prices in the market for the sale of oil and gas.
The Lake Decade acquisition included significant reserves that were considered
"proved" but not yet developed. Due to depressed gas prices and the unsuccessful
efforts of wells drilled near the acquisition, it was determined by the operator
of the acquisition that future drillings could not be justified. The well which
was holding the lease, which had undeveloped reserves assigned to it, was
recompleted by the operator in 1996 to a zone in which the Company did not own
an interest. As a result, the lease expired and the undeveloped reserves
associated with the lease had to be written off. This was the cause of both the
downward reserve revisions in 1996 and the reserve valuation writedowns taken by
the Company in the first quarter of 1996.
General and administrative expenses decreased from $4,826 in the first quarter
of 1996 to $3,854 in the first quarter of 1997. This decrease of $972 (20%) 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 after the payment of
its debt obligations. Accordingly, the changes in cash flow from 1996 to 1997
are primarily due to the changes in oil and gas sales
I-6
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 in the third quarter of
1995. Future distributions are dependent upon among other things, the prices
received for oil and gas. The Company will continue to recover its reserves and
reduce its obligations in 1997. The general partner does not intend to
accelerate the repayment of the debt beyond the cash flow provided by operating
activities. Based upon current projected cash flows from its property, it does
not appear that the Company will have sufficient cash to pay its operating
expenses, repay its debt obligations and pay distributions in the near future.
On April 24, 1997, the Company's General Partner submitted preliminary proxy
material to the Securities Exchange Commission with respect to a proposed
liquidation of the Company.
As of March 31, 1997, 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, 1997.
II-1
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 IV - 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
June 10, 1997 By: /s/ James A. Klein
-------------------
James A. Klein
Controller and Chief
Accounting Officer