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 June 30, 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 CONSOLIDATED PARTNERS, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0508488
(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:
(281) 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 No x
Transitional Small Business Disclosure Format (Check one):
Yes No x
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ENEX CONSOLIDATED PARTNERS, L.P.
BALANCE SHEET
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June 30,
ASSETS 1997
------------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 953,087
Accounts receivable - oil & gas sales 1,281,421
Receivable from litigation settlement 280,050
Other current assets 33,502
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Total current assets 2,548,060
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OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 11,375,964
Less accumulated depreciation and depletion -
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Property, net 11,375,964
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TOTAL $ 13,924,024
==============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 498,817
Payable to general partner 549,158
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Total current liabilities 1,047,975
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LIMITED PARTNERS' CAPITAL SUBJECT
TO REDEMPTION 12,876,049
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TOTAL $ 13,924,024
==============
See accompanying notes to financial statements.
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I-1
ENEX CONSOLIDATED PARTNERS, L.P.
COMBINED HISTORICAL STATEMENTS OF OPERATIONS
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(UNAUDITED) QUARTER ENDED SIX MONTHS ENDED
---------------------------- ----------------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
REVENUES:
Oil and gas sales $ 2,326,210 $ 2,577,530 $ 5,200,270 $ 5,261,288
Gas plant sales 210,708 259,154 619,555 503,793
------------ ----------- ------------ ------------
Total revenues 2,536,918 2,836,684 5,819,825 5,765,081
------------ ------------ ------------ ------------
EXPENSES:
Depreciation and depletion 523,900 723,275 1,048,413 1,388,450
Impairment of property - - - 2,315,081
Lease operating expenses 910,704 868,412 1,743,841 1,803,219
Gas plant purchases 146,493 189,918 439,370 350,975
Production taxes 128,169 143,998 288,581 297,163
General and administrative:
Allocated from general partner 360,214 411,872 758,298 892,061
Direct expenses 35,784 33,062 58,349 83,347
------------ ---------- ------------ ------------
Total expenses 2,105,264 2,370,537 4,336,852 7,130,296
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS 431,654 466,147 1,482,973 (1,365,215)
------------ ------------ ------------ ------------
OTHER INCOME:
Gain on sale of property 5,940 128,555 5,940 137,710
Interest income - 256 1,265 5,613
Other income - - 21,000 -
---------- ------------ ------------ -----------
Total other income 5,940 128,811 28,205 143,323
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 437,594 $ 594,958 $ 1,511,178 $(1,221,892)
============ ============ ============ ============
See accompanying notes to financial statements.
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I-2
ENEX CONSOLIDATED PARTNERS, L.P.
COMBINED HISTORICAL STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1997
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LIMITED
PARTNERS'
GENERAL CAPITAL
PARTNER'S SUBJECT TO
TOTAL CAPITAL REDEMPTION
------------------- ------------- ---------------
Balance, January 1, 1996 $ 15,984,697 $ 1,664,903 $ 14,319,794
Cash Distributions (2,744,270) (279,323) (2,464,947)
Net Income 1,009,912 342,661 667,251
------------------- ------------- ---------------
Balance, December 31, 1996 14,250,339 1,728,241 12,522,098
Cash Distributions (2,841,710) (512,192) (2,329,518)
Net Income 1,511,179 156,491 1,354,688
------------------- ------------- ---------------
Combined Historical Balance, June 30, 1997 12,919,808 1,372,540 11,547,268
Purchase Accounting Adjustments:
Adjustment to Record Property at
Fair Market Value (1,350,959) - (1,350,959)
Recognize Conversion of Payable to
General Partner to Limited Partner Capital 1,856,358 - 1,856,358
Recognize Conversion of General Partner
Capital to Limited Partner Capital - (1,372,540) 1,372,540
Expenses of Consolidation (549,158) - (549,158)
------------------- ------------- ---------------
Consolidated Balance, June 30, 1997 $ 12,876,049 $ - $ 12,876,049
=================== ============= ===============
See accompanying notes to financial statements.
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I-3
ENEX CONSOLIDATED PARTNERS, L.P.
COMBINED HISTORICAL STATEMENTS OF CASH FLOWS
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(UNAUDITED)
SIX MONTHS ENDED
--------------------------------
June 30, June 30,
1997 1996
--------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,511,178 $ (1,221,892)
--------------- --------------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and depletion 1,048,413 1,388,450
Impairment of property - 2,315,081
Gain on sale of property (5,940) (137,710)
(Increase) decrease in:
Accounts receivable - oil & gas sales 599,008 (289,011)
Other current assets 172,568 (93,514)
Increase (decrease) in:
Accounts payable (401,102) (185,023)
Payable to general partner 47,924 (686,178)
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Total adjustments 1,460,871 2,312,095
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Net cash provided by operating activities 2,972,049 1,090,203
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 5,940 282,316
Property additions - development costs (106,788) (491,640)
--------------- --------------
Net cash used by investing activities (100,848) (209,324)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions (2,841,710) (1,023,798)
--------------- --------------
NET INCREASE (DECREASE) IN CASH 29,491 (142,919)
--------------- --------------
CASH AT BEGINNING OF YEAR 923,596 703,721
--------------- --------------
CASH AT END OF PERIOD $ 953,087 $ 560,802
=============== ==============
See accompanying notes to financial statements.
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I-4
ENEX CONSOLIDATED PARTNERS, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. Effective June 30, 1997, Enex Consolidated Partners, L.P. (the "Company")
was formed from the consolidation of thirty-four (34) partnerships
consisting of Enex Program I Partners, L.P., four partnerships in Enex Oil
& Gas Income Program II, the eight partnerships in Enex Oil & Gas Income
Program III, six partnerships in Enex Oil & Gas Income Program IV, the five
partnerships in Enex Oil & Gas Income Program V, Enex Oil & Gas Income
Program VI - Series 1, L.P., the three partnerships in Enex Income and
Retirement Fund, three partnerships in Enex 88-89 Income and Retirement
Fund, and the three partnerships in Enex 90-91 Income and Retirement Fund
(collectively the "Partnerships").
The consolidation of the Company was recorded using the purchase method
of accounting; as such, assets are recorded at their fair market value.
The statements of operations and cash flows, in the accompanying
financial statements, are presented on a combined historical basis. The
balance sheet has been adjusted to reflect the conversion of the
payable to the general partner and the general partner's capital
account into limited partner capital units. The general partner has a
4.11% revenue interest in addition to its proportional interest as a
limited partner of 52.63%.
2. 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.
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 Partnerships assessed properties on an aggregate
basis. Upon adoption of SFAS 121, the Partnerships 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 Combined entities recognized a non-cash impairment provision of
$2,315,081 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
4. Pro forma information, assuming that the consolidation occurred January
1, 1997 and January 1, 1996, respectively, is as follows:
Six Months ended Six Months ended
June 30, 1997 June 30, 1996
---------------- ----------------
Revenues $ 5,819,825 $ 5,765,081
Income from Operations $ 1,586,651 $ 1,073,565
Net Income $ 1,614,856 $ 1,216,888
5. Effective January 1, 1996, the Company sold its interest in the Nunley
Ranch A acquisition for $2,600. The Company recognized a gain of $2,600 on
the sale. Effective February 1, 1996, the Company sold its interests in the
Credo acquisition for $105,000. A gain of $6,555 was recognized on the
sale. Effective May 1, 1996, the Company sold its interests in the Comite
acquisition for $55,100. A gain of $21,649 was recognized on the sale.
Effective April 1, 1996, the Company sold its interests in the Kidd wells
in the Enexco acquisition for $64,000. A gain of $61,648 was recognized on
the sale. Effective June 1, 1996, the Company sold its interests in the
Harper well in the RIC acquisition for $55,616. A gain of $45,258 was
recognized on the sale. The impact of these sales on current and future net
revenues are not expected to be material.
Effective January 1, 1997, the Company sold its interests in the Perkins
well in the Burkholder acquisition for $5,940. A gain of $5,940 was
recognized on this sale.
I-6
Item 2. Management's Discussion and Analysis or Plan of Operations.
Second Quarter 1996 Compared to Second Quarter 1997
Oil and gas sales for the second quarter decreased from $2,577,530 in 1996 to
$2,326,210 in 1997. This represents a decrease of $251,320 (11%). Oil sales
decreased by $324,035 (19%). A 9% decline in oil production reduced sales by
$160,516. An 11% decrease in the average oil sales price reduced sales by an
additional $163,519. Gas sales increased by $70,364 (8%). An 8% increase in gas
production increased sales by $72,764. This increase was partially offset by a
slight decrease in the average gas sales price. The decrease in oil production
was primarily due to natural production declines. The increase in gas production
was due to higher production from the Dent acquisition which had new wells
drilled in the Sibley field during the second half of 1996 and the first half of
1997. The changes in average sales prices correspond with changes in the overall
market for the sale of oil and gas.
Sales of gas plant products decreased to $210,708 in the second quarter of 1997
from $259,154 in the second quarter of 1996. This represents a decrease of
$48,446 or 19%. A 5% decrease in the production of gas plant products reduced
sales by $11,778. A 15% decrease in the average sales price of gas plant
products reduced sales by an additional $36,668. The decrease in production of
gas plant products was primarily the result of natural production declines. The
decrease in the average sales price of gas plant product corresponds with lower
prices in the overall market for the sale of gas plant products.
Lease operating expenses increased from $868,412 in the second quarter of 1996
to $910,704 in the second quarter of 1997. The increase of $42,292 (5%) is
primarily due to the increase in production of natural gas from the Dent
acquisition, as noted above.
Depreciation and depletion expense decreased from $723,275 in the second quarter
of 1996 to $523,900 in the second quarter of 1997. This represents a decrease of
$199,375 (28%). The changes in production, noted above, reduced depreciation and
depletion expense by $15,315. A 26% decrease in the depletion rate reduced
depreciation and depletion expense by an additional $184,060. The rate decrease
was primarily due to relatively higher production from properties with a lower
depletion rate, coupled with upward revisions of the oil and gas reserves during
December 1996.
Effective May 1, 1996, the Company sold its interests in the Comite acquisition
for $55,100. A gain of $21,649 was recognized on the sale. Effective April 1,
1996, the Company sold its interests in the Kidd wells in the Enexco acquisition
for $64,000. A gain of $61,648 was recognized on the sale. Effective June 1,
1996, the Company sold its interests in the Harper well in the RIC acquisition
for $55,616. A gain of $45,258 was recognized on the sale. The impact of these
sales on current and future net revenues are not expected to be material.
General and administrative expenses decreased from $444,934 in the second
quarter of 1996 to $395,998 in the second quarter of 1997. This decrease of
$48,936 (11%) is primarily due to less staff time being required to manage the
Company's operations.
I-7
First Six Months in 1997 Compared to First Six Months in 1996
Oil and gas sales for the first six months decreased from $5,261,288 in 1996 to
$5,200,270 in 1997. This represents a decrease of $61,018 (1%). Oil sales
decreased by $433,194 (13%). A 15% decrease in oil production reduced sales by
$526,453. This decrease was partially offset by a 3% increase in the average oil
sales price. Gas sales increased by $375,943 (21%). A 16% increase in the
average gas sales price increased sales by $302,263. A 4% increase in gas
production increased sales by an additional $73,680. The increases in average
oil & gas sales prices correspond with higher prices in the overall market for
the sale of oil & gas. The decrease in oil production was primarily the result
of natural production declines. The increase in gas production was due to higher
production from the Dent acquisition which had new wells drilled in the Sibley
field during the second half of 1996 and the first half of 1997.
Gas plant sales increased from $503,793 in the first half of 1996 to $619,555
in the first half of 1997. This represents an increase of $115,762 or 23%. A 27%
increase in the average gas plant sales price increased sales by $131,540. This
increase was partially offset by a 3% decrease in the production of gas plant
product.
Lease operating expenses decreased from $1,803,219 in the first six months of
1996 to $1,743,841 in the first six months of 1997. The decrease of $59,378 (3%)
is primarily due to the changes in production, as noted above.
Depreciation and depletion expense decreased from $1,388,450 in the first six
months of 1996 to $1,048,413 in the first six months of 1997. This represents a
decrease of $340,037 (24%). The changes in production, noted above, reduced
depreciation and depletion expense by $91,807. A 19% decrease in the depletion
rate reduced depreciation and depletion expense by an additional $248,230. The
rate decrease was primarily due to relatively higher production from properties
with a lower depletion rate, coupled with 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 Partnerships assessed properties on an aggregate basis. Upon
adoption of SFAS 121, the Partnerships 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 Combined entities recognized a non-cash impairment
provision of $2,315,081 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-8
Effective January 1, 1996, the Company sold its interest in the Nunley Ranch A
acquisition for $2,600. The Company recognized a gain of $2,600 on the sale.
Effective February 1, 1996, the Company sold its interests in the Credo
acquisition for $105,000. A gain of $6,555 was recognized on the sale. Effective
May 1, 1996, the Company sold its interests in the Comite acquisition for
$55,100. A gain of $21,649 was recognized on the sale. Effective April 1, 1996,
the Company sold its interests in the Kidd wells in the Enexco acquisition for
$64,000. A gain of $61,648 was recognized on the sale. Effective June 1, 1996,
the Company sold its interests in the Harper well in the RIC acquisition for
$55,616. A gain of $45,258 was recognized on the sale. The impact of these sales
on current and future net revenues are not expected to be material.
Effective January 1, 1997, the Company sold its interests in the Perkins well in
the Burkholder acquisition for $5,940. A gain of $5,940 was recognized on this
sale.
General and administrative expenses decreased from $975,408 in the first six
months of 1996 to $816,647 in the first six months of 1997. This decrease of
$158,761 (16%) 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 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 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
the 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.
As of June 30, 1997, the Company had no material commitments for capital
expenditures. The Company does not intend to engage in any significant
developmental drilling activity.
I-9
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, 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 CONSOLIDATED PARTNERS, 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 11, 1997 By: /s/ James A. Klein
-------------------
James A. Klein
Controller and Chief
Accounting Officer