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, 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 01-19033
ENEX 90-91 INCOME AND RETIREMENT FUND - SERIES 2 L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0299898
(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 90-91 INCOME AND RETIREMENT FUND - SERIES 2, L.P.
BALANCE SHEET
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MARCH 31,
ASSETS 1997
---------------------
(Unaudited)
CURRENT ASSETS:
Cash $ 8,515
Accounts receivable - oil & gas sales 30,395
---------------------
Total current assets 38,910
---------------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests 894,954
Less accumulated depletion 668,605
---------------------
Property, net 226,349
---------------------
TOTAL $ 265,259
=====================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 1,352
Payable to general partner 33,053
---------------------
Total current liabilities 34,405
---------------------
PARTNERS' CAPITAL:
Limited partners 223,894
General partner 6,960
---------------------
Total partners' capital 230,854
---------------------
TOTAL $ 265,259
=====================
Number of $500 Limited Partner units outstanding 2,020
See accompanying notes to financial statements.
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I-1
ENEX 90-91 INCOME AND RETIREMENT FUND - SERIES 2, L.P.
STATEMENT OF OPERATIONS
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(UNAUDITED) THREE MONTHS ENDED
------------------------------------------
MARCH 31, MARCH 31,
1997 1996
------------------- -------------------
REVENUES:
Oil and gas sales $ 16,676 $ 21,723
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EXPENSES:
Depletion and amortization 5,994 13,183
Impairment of property - 50,669
General and administrative 5,972 5,743
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Total expenses 11,966 69,595
------------------- -------------------
NET INCOME (LOSS) $ 4,710 $ (47,872)
=================== ===================
See accompanying notes to financial statements.
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I-2
ENEX 90-91 INCOME AND RETIREMENT FUND - SERIES 2, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
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 $ 267,115 $ 1,834 $ 265,281 $ 131
CASH DISTRIBUTIONS (19,991) (2,532) (17,459) (9)
NET INCOME (LOSS) (18,006) 6,885 (24,891) (12)
-------------- ----------------- ----------------- -----------------
BALANCE, DECEMBER 31, 1996 229,118 6,187 222,931 110
CASH DISTRIBUTIONS (2,974) (298) (2,676) (1)
NET INCOME 4,710 1,071 3,639 2
-------------- ----------------- ----------------- -----------------
BALANCE, MARCH 31, 1997 $ 230,854 $ 6,960 $ 223,894 (1) $ 111
============== ================= ================= =================
(1) Includes 304 units purchased by the general partner as a limited partner.
See accompanying notes to financial statements.
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I-3
ENEX 90-91 INCOME AND RETIREMENT FUND - SERIES 2, 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) $ 4,710 $ (47,872)
------------------- -------------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depletion and amortization 5,994 13,183
Impairment of property - 50,669
(Increase) decrease in:
Accounts receivable - oil & gas sales (1,208) 1,952
(Decrease) in:
Accounts payable (1,003) (3,715)
Payable to general partner (8,469) (10,210)
------------------- -------------------
Total adjustments (4,686) 51,879
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Net cash provided by operating activities 24 4,007
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions (2,974) (7,478)
------------------- -------------------
NET (DECREASE) IN CASH (2,950) (3,471)
CASH AT BEGINNING OF YEAR 11,465 4,666
------------------- -------------------
CASH AT END OF PERIOD $ 8,515 $ 1,195
=================== ===================
See accompanying notes to financial statements.
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I-4
ENEX 90-91 INCOME AND RETIREMENT FUND - SERIES 2, 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. A cash distribution was made to the limited partners of the Company in
the amount of $2,676, representing net revenues from the sale of oil
and gas produced from properties owned by the Company. This
distribution was made on January 31, 1997.
3. 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 $50,669 for certain
oil and gas properties due to changes in the overall market for the sale of
oil and gas and significant decreases in the projected production from
certain of the Company's oil and gas properties.
I-5
Item 2. Management's Discussion and Analysis or Plan of Operation.
First Quarter 1997 Compared to First Quarter 1996
Oil and gas sales for the first quarter decreased from $21,723 in 1996 to
$16,676 in 1997. This represents a decrease of $5,047 (23%). Oil sales decreased
by $4,406 or 23%. A 33% decrease in oil production reduced sales by $6,278. This
decrease was partially offset by a 15% increase in average net oil prices. Gas
sales decreased by $641 or 23%. A 35% decrease in gas production reduced sales
by $964. This decrease was partially offset by an 18% increase in average net
gas sales prices. The decreases in oil and gas production were primarily a
result of the shut in of production from the FEC acquisition to perform a
workover in the first quarter of 1997, coupled with natural production declines.
The increases in average net oil and gas sales prices correspond with higher
prices in the overall market for the sale of oil and gas.
Depletion expense decreased from $12,594 in the first quarter of 1996 to $5,994
in the first quarter of 1997. This represents a decrease of $6,600 (52%). The
changes in production, noted above, caused depletion expense to decrease by
$4,268. A 28% decrease in the depletion rate reduced depletion expense by an
additional $2,332. The rate decrease is primarily the result of upward revisions
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 $50,669 for certain
oil and gas properties due to changes in the overall market for the sale of oil
and gas and significant decreases in the projected production from certain of
the Company's oil and gas properties.
General and administrative expenses increased from $5,743 in the first quarter
of 1996 to $5,972 in the first quarter of 1997. This increase of $229 or 4% is
primarily due to more staff time being required to manage the Company's
operations.
I-6
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 1996 to 1997 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's "available cash flow" is essentially equal to
the net amount of cash provided by operating, financing and investing
activities.
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.
Distribution amounts are subject to change if net revenues are greater or less
than expected. Nonetheless, the general partner believes the Company will
continue to have sufficient cash flow to fund operations and to maintain a
regular pattern of distributions.
On April 7, 1997, the Company's General Partner mailed proxy material to the
limited partners 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 proxy material.
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 March 31, 1997.
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 90-91 INCOME AND RETIREMENT
FUND - SERIES 2, 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
May 11, 1997 By: /s/ James A. Klein
--------------
James A. Klein
Controller and Chief
Accounting Officer