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 September 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 33-34348-02
ENEX OIL & GAS INCOME PROGRAM V - SERIES 3, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0303876
(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)
Registrant'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 OIL & GAS INCOME PROGRAM V - SERIES 3, L.P.
BALANCE SHEET
- --------------------------------------------------------------------------------
September 30,
ASSETS 1996
---------------------
(Unaudited)
CURRENT ASSETS:
Cash $ 1,990
Accounts receivable - oil & gas sales 18,927
Other current assets 1,679
---------------------
Total current assets 22,596
---------------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 953,091
Less accumulated depreciation and depletion 712,456
---------------------
Property, net 240,635
---------------------
TOTAL $ 263,231
=====================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 3,985
Payable to general partner 20,038
---------------------
Total current liabilities 24,023
---------------------
NONCURRENT PAYABLE TO GENERAL PARTNER 20,039
---------------------
PARTNERS' CAPITAL:
Limited partners 213,226
General partner 5,943
---------------------
Total partners' capital 219,169
---------------------
TOTAL $ 263,231
=====================
Number of $500 Limited Partner units outstanding 2,020
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
I-1
ENEX OIL & GAS INCOME PROGRAM V - SERIES 3, L.P.
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------
(UNAUDITED) QUARTER ENDED NINE MONTHS ENDED
--------------------------------------- ----------------------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------------ ------------------ ----------------- -------------------
REVENUES:
Oil and gas sales $ 38,324 $ 28,094 $ 121,546 $ 98,726
------------------ ------------------ ----------------- -------------------
EXPENSES:
Depreciation, depletion and amortization 12,432 18,116 41,575 57,529
Impairment of property - - 64,028 -
Lease operating expenses 10,324 11,986 44,321 38,655
Production taxes 2,041 1,532 6,662 5,710
General and administrative 5,852 6,161 20,075 21,717
------------------ ------------------ ----------------- -------------------
Total expenses 30,649 37,795 176,661 123,611
------------------ ------------------ ----------------- -------------------
NET (LOSS) $ 7,675 $ (9,701) $ (55,115) $ (24,885)
================== ================== ================= ===================
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
I-2
ENEX OIL AND GAS INCOME PROGRAM V - SERIES 3, L.P.
STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------------------------
(UNAUDITED)
NINE MONTHS ENDED
--------------------------------------------
September 30, September 30,
1996 1995
------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (55,115) $ (24,885)
------------------- -------------------
Adjustments to reconcile net (loss) to net cash
provided by operating activities
Depreciation, depletion and amortization 41,575 57,529
Impairment of property 64,028 -
(Increase) decrease in:
Accounts receivable - oil & gas sales (1,421) 1,445
Other current assets 14 18
(Decrease) in:
Accounts payable (6,301) (2,427)
Payable to general partner (13,993) (15,890)
------------------- -------------------
Total adjustments 83,902 40,675
------------------- -------------------
Net cash provided by operating activities 28,787 15,790
------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions - development costs (9,976) (11,568)
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions (19,789) (13,381)
------------------- -------------------
NET (DECREASE) IN CASH (978) (9,159)
CASH AT BEGINNING OF YEAR 2,968 12,272
------------------- -------------------
CASH AT END OF PERIOD $ 1,990 $ 3,113
=================== ===================
See accompanying notes to financial statements.
- -----------------------------------------------------------------------------
I-3
ENEX OIL & GAS INCOME PROGRAM V - 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. A cash distribution was made to the limited partners of the Company in
the amount of $4,6141 representing net revenues from the sale of oil
and gas produced from properties owned by the Company. This
distribution was made on July 31, 1996.
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. On November 13, 1996, the Company submitted amended
preliminary proxy material to the SEC with respect to this
consolidation. The terms and conditions of the proposed consolidation
are set forth in such preliminary proxy material.
4. 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 of $64,028 for certain oil and gas
properties due to market indications that the carrying amounts were not
fully recoverable.
I-4
Item 2. Management's Discussion and Analysis or Plan of Operation.
Third Quarter 1995 Compared to the Third Quarter of 1996
Oil and gas sales for the third quarter increased to $38,324 in 1996 from
$28,094 in 1995. This represents an increase of $10,230 (36%). Oil sales
increased by $6,149 (32%). A 30% increase in the average oil sales price
increased sales by $5,884. A 2% increase in oil production increased sales by an
additional $305. Gas sales increased by $4,081 (47%). A 37% increase in the
average gas sales price increased sales by $3,147. An 8% increase in gas
production increased sales by an additional $934. The increases in oil and gas
production were a result of higher production from the FEC acquisition, in which
the Company obtained additional interests from farmouts which reached payout
during 1995. The increases in the average oil and gas sales prices correspond
with higher prices in the overall market for the sale of oil and gas.
Lease operating expenses decreased to $10,324 in the third quarter of 1996 from
$11,986 in the third quarter of 1995. This represents a decrease of $1,662
(13%). The decrease is parimrily the result of the changes in production, noted
above.
Depreciation and depletion expense decreased to $12,432 in the third quarter of
1996 from $16,096 in the third quarter of 1995. This represents a decrease of
$3,664 (25%). A 34% decrease in the depletion rate reduced depreciation and
depletion expense by $4,357. This decrease was partially offset by the changes
in productions, noted above. The rate decrease was primarily due to the lower
property basis resulting from the recognition of an impairment of property of
$64,028 in the first quarter of 1996.
General and administrative expenses decreased to $5,852 in the third quarter of
1996 from $6,161 in the third quarter of 1995. This decrease of $309 (5%) is
primarily due to less staff time being required to manage the Company's
operations.
First Nine Months in 1995 Compared to First Nine Months in 1996
Oil and gas sales for the first nine months increased to $121,546 in 1996 from
$98,726 in 1995. This represents an increase of $22,820 (23%). Oil sales
increased by $12,689 (19%). A 16% increase in the average oil sales price
increased sales by $10,784. A 3% increase in oil production increased sales by
an additional $1,905. Gas sales increased by $10,131 (35%). A 41% increase in
the average gas sales price increased sales by $11,987. This increase was
partially offset by a 4% decrease in gas production. The increase in oil
production is a result of higher production from the FEC acquisition, in which
the Company obtained additional interests from farmouts which reached payout
during 1995. The decrease in gas production was primarily due to natural
production declines partially offset by higher production from the FEC
acquisition. The increase in the average oil sales price corresponds with higher
prices in the overall market for the sale of oil. The increase in the average
gas sales price was due to higher expenses incurred on the FEC acquisition on
which the Company pays a net profits royalty, coupled with higher prices in the
overall market for the sale of gas.
Lease operating expenses increased to $44,321 in the first nine months of 1996
from $38,655 in the first nine months of 1995. The increase of $5,666 (15%) is
primarily due to ad valorem taxes
I-5
paid by the operator of the FEC acquisition in the second quarter of 1996 for
the 1995 and 1996 tax years.
Depreciation and depletion expense decreased to $38,881 in the first nine months
of 1996 from $51,469 in the first nine months of 1995. This represents a
decrease of $12,588 (24%). The changes in production, noted above, caused
depreciation and depletion expense to decrease by $732, while a 23% decrease in
the depletion rate reduced depreciation and depletion expense by an additional
$11,856. The rate decrease was primarily due to the lower property basis
resulting from the recognition of an impairment of property of $64,028 in the
first quarter of 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 of $64,028 for certain oil and gas
properties due to market indications that the carrying amounts were not fully
recoverable.
General and administrative expenses decreased to $20,075 in the first nine
months of 1996 from $21,717 in the first nine months of 1995. This decrease of
$1,642 (8%) 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. 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's "available cash flow" is essentially equal to
the net amount of cash provided by operating 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 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
I-6
33 other managed limited partnerships. On November 13, 1996, the Company
submitted amended preliminary proxy material to the SEC with respect to this
consolidation. The terms and conditions of the proposed consolidation are set
forth in such preliminary proxy material.
As of September 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 September 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 V - 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
November 13, 1996 By: /s/ James A. Klein
-------------------
James A. Klein
Controller and Chief
Accounting Officer