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 33-45253
ENEX OIL & GAS INCOME PROGRAM VI - SERIES 1, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0303885
(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 VI- SERIES 1, L.P.
BALANCE SHEET
- -----------------------------------------------------------------------------
MARCH 31,
ASSETS 1997
-----------------
(Unaudited)
CURRENT ASSETS:
Cash $ 28,753
Accounts receivable - oil & gas sales 32,638
-----------------
Total current assets 61,391
-----------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 1,138,087
Less accumulated depreciation and depletion 607,502
-----------------
Property, net 530,585
-----------------
ORGANIZATION COSTS
(Net of accumulated amortization of $23,575) 16,840
-----------------
TOTAL $ 608,816
=================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 16,253
Payable to general partner 26,580
-----------------
Total current liabilities 42,833
-----------------
PARTNERS' CAPITAL:
Limited partners 540,390
General partner 25,593
-----------------
Total partners' capital 565,983
-----------------
TOTAL $ 608,816
=================
Number of $500 Limited Partner units outstanding 2,021
See accompanying notes to financial statements.
- -----------------------------------------------------------------------------
I-1
OIL & GAS INCOME PROGRAM VI - SERIES 1, L.P.
STATEMENT OF OPERATIONS
- ----------------------------------------------------------------------
THREE MONTHS ENDED
---------------------------------------------
MARCH 31, MARCH 31,
1997 1996
------------------- -------------------
REVENUES:
Oil and gas sales $ 98,896 $ 93,242
------------------- -------------------
EXPENSES:
Depreciation, depletion and amortization 33,711 30,681
Impairment of property - 201,736
Lease operating expenses 26,029 46,857
Production taxes 4,656 4,345
General and administrative 6,146 8,512
------------------- -------------------
Total expenses 70,542 292,131
------------------- -------------------
INCOME (LOSS) FROM OPERATIONS 28,354 (198,889)
------------------- -------------------
OTHER EXPENSE:
Interest expense - (338)
------------------- -------------------
NET INCOME (LOSS) $ 28,354 $ (199,227)
=================== ===================
See accompanying notes to financial statements.
- ----------------------------------------------------------------------------
I-2
OIL & GAS INCOME PROGRAM VI - SERIES 1, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1997
- ------------------------------------------------------------------------------
PER $500
LIMITED
PARTNER
GENERAL LIMITED UNIT OUT-
TOTAL PARTNER PARTNERS STANDING
----------------- ------------------ ------------------ ------------------
BALANCE, JANUARY 1, 1996 $ 780,391 $ 10,750 $ 769,641 $ 381
CASH DISTRIBUTIONS (21,042) (2,864) (18,178) (9)
NET INCOME (LOSS) (207,298) 12,943 (220,241) (110)
----------------- ------------------ ------------------ ------------------
BALANCE, DECEMBER 31, 1996 552,051 20,829 531,222 262
CASH DISTRIBUTIONS (14,422) (1,443) (12,979) (6)
NET INCOME 28,354 6,207 22,147 11
----------------- ------------------ ------------------ ------------------
BALANCE, MARCH 31, 1997 $ 565,983 $ 25,593 $ 540,390 (1)$ 267
================= ================== ================== ==================
(1) Includes 484 units purchased by the general partner as a limited partner.
See accompanying notes to financial statements.
- -------------------------------------------------------------------------------
I-3
OIL & GAS INCOME PROGRAM VI - SERIES 1, L.P.
STATEMENT OF CASH FLOWS
- -----------------------------------------------------------------------------
(UNAUDITED)
THREE MONTHS ENDED
----------------------------------------------
MARCH 31, MARCH 31,
1997 1996
-------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 28,354 $ (199,227)
-------------------- -------------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation, depletion and amortization 33,711 30,681
Impairment of property - 201,736
(Increase) decrease in:
Accounts receivable - oil sales 5,641 (8,598)
Other current assets - 1,981
Increase (decrease) in:
Accounts payable (8,747) (122)
Payable to general partner (20,177) 11,778
-------------------- -------------------
Total adjustments 10,428 237,456
-------------------- -------------------
Net cash provided by operating activities 38,782 38,229
-------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions - development costs (1,668) (16,116)
-------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of note payable to general partner - (8,525)
Cash distributions (14,422) (2,975)
-------------------- -------------------
Net cash used by financing activities (14,422) (11,500)
-------------------- -------------------
NET INCREASE IN CASH 22,692 10,613
CASH AT BEGINNING OF YEAR 6,061 2,810
-------------------- -------------------
CASH AT END OF PERIOD $ 28,753 $ 13,423
==================== ===================
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
I-4
ENEX OIL & GAS INCOME PROGRAM VI - SERIES 1, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. The 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 period.
2. A cash distribution was made to the limited partners of the Company in
the amount of $12,979 representing net revenues from the temporary
investment of proceeds from subscriptions by the Company. This
distribution was made on January 31, 1997.
3. On December 29, 1994, in order to partially finance the purchase of
producing oil and gas properties, the Company borrowed $87,000 from the
general partner. The resulting note payable to the general partner bore
interest at the general partner's borrowing rate of prime plus
three-fourths of one-percent. Principal repayments of $8,525 were made
on the note during the first quarter of 1996. The weighted average
principal outstanding during the first three months of 1996 was $36,577
and bore interest at an average rate of 9.25% in the first quarter of
1996. The note was completely repaid in the fourth quarter of 1996.
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 provision of $201,736 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.
5. 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-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 increased from $93,242 in 1996 to
$98,896 in 1997. This represents a decrease of $5,654 (6%). Oil sales increased
by $6,657 or 8%. A 15% increase in the average oil sales price increased sales
by $12,172. This increase was partially offset by a 6% decrease in oil
production. Gas sales decreased by $1,003 or 12%. A 28% decrease in gas
production reduced sales by $2,298. This decrease was partially offset by a 22%
increase in the average gas sales price. The decrease in oil production was
primarily the result of natural production declines. The decrease in gas
production was primarily the result of the shut-in of production from the
Concord acquisition to perform workovers in the first quarter of 1997. 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 decreased from $46,857 in the first quarter of 1996 to
$26,029 in the first quarter of 1997. The decrease of $20,828 (44%) is primarily
due to lower operating costs incurred on the McBride acquisition in 1996, as a
result of new techniques utilized to control paraffin build-up and due to the
plugging of non-economic wells in the McBride acquisition.
Depreciation and depletion expense increased from $28,661 in the first quarter
of 1996 to $31,691 in the first quarter of 1997. This represents an increase of
$3,030 (11%). A 23% increase in the depletion rate increased depreciation and
depletion expense by $5,923. 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 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 $201,736 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 decreased from $8,512 in the first quarter
of 1996 to $6,146 in the first quarter of 1997. This decrease of $2,366 (28%) is
primarily due to less staff time being required to manage the Company's
operations in 1997.
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 after
payment of its debt obligations. 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.
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.
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
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 VI - 1, 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