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, 1998
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 x No
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, MARCH 31, 1998
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ASSETS
CURRENT ASSETS:
Cash $ 2,429,364
Accounts receivable - oil & gas sales 914,605
Receivable from litigation settlement 338,860
Other current assets 12,675
-------------------
Total current assets 3,695,504
-------------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 11,201,734
Less accumulated depreciation and depletion 1,306,967
-------------------
Property, net 9,894,767
-------------------
TOTAL $ 13,590,271
===================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 609,808
Payable to general partner 437,877
-----------------
Total current liabilities 1,047,685
-----------------
LIMITED PARTNERS' CAPITAL SUBJECT
TO REDEMPTION 12,462,291
GENERAL PARTNER CAPITAL 80,295
-------------------
TOTAL $ 13,590,271
===================
See accompanying notes to financial statements.
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I-1
ENEX CONSOLIDATED PARTNERS, L.P.
STATEMENTS OF OPERATIONS
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Enex Consolidated Predecessor
Partners, L.P. Partnerships
----------------------- ---------------------
Three Months Three Months
Ended Ended
March 31, March 31,
1998 1997
----------------------- ---------------------
REVENUES:
Oil and gas sales $ 1,778,885 $ 2,926,379
Gas plant sales 17,733 356,528
Gain from sale of property 671,923 5,940
Other revenues 1,432 15,060
Interest income 3,632 1,265
----------------------- ---------------------
Total revenues 2,473,605 3,305,172
----------------------- ---------------------
EXPENSES:
Depreciation and depletion 476,744 524,513
Lease operating expenses 688,638 833,137
Gas purchases and expenses 3,997 292,877
Production taxes 83,970 160,412
General and administrative:
Allocated from general partner 281,342 398,084
Direct expense 99,577 22,565
----------------------- ---------------------
Total expenses 1,634,268 2,231,588
----------------------- ---------------------
NET INCOME $ 839,337 $ 1,073,584
======================= =====================
See accompanying notes to financial statements.
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I-2
ENEX CONSOLIDATED PARTNERS, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1997 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1998
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LIMITED
PARTNERS'
CAPITAL
GENERAL SUBJECT TO
TOTAL PARTNER REDEMPTION
----------- ---------- ---------------------
PREDECESSOR BALANCE, JANUARY 1, 1997 14,250,339 $ 1,728,241 $ 12,522,098
CASH DISTRIBUTIONS (2,841,709) (512,192) (2,329,517)
NET INCOME 1,511,178 156,491 1,354,687
------------ ----------- ------------
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 (1,561,322) - (1,561,322)
RECOGNIZE CONVERSION OF PAYABLE TO
GENERAL PARTNER TO LIMITED PARTNER CAPITAL 2,420,858 - 2,420,858
RECOGNIZE CONVERSION OF GENERAL PARTNER
CAPITAL TO LIMITED PARTNER CAPITAL - (1,372,540) 1,372,540
EXPENSES OF CONSOLIDATION (549,158) - (549,158)
CASH DISTRIBUTIONS (2,310,678) (46,240) (2,264,438)
NET INCOME 1,951,873 117,375 1,834,498
----------- ---------- ---------
CONSOLIDATED BALANCE, DECEMBER 31, 1997 12,871,381 71,135 12,800,246
CASH DISTRIBUTIONS (1,168,132) (44,871) (1,123,261)
NET INCOME 839,337 54,031 785,306
----------- ----------- -----------
CONSOLIDATED BALANCE, MARCH 31, 1998 $ 12,542,586 $ 80,295 $12,462,291
============ =========== ===========
See accompanying notes to financial statements.
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I-3
ENEX CONSOLIDATED PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
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Enex Consolidated Predecessor
Partners, L.P. Partnerships
----------------- ---------------
Three Months Three Months
Ended Ended
March 31, 1998 March 31, 1997
----------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 839,337 $ 1,073,584
----------------- ---------------
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and depletion 476,744 524,513
Gain from sale of property (671,923) (5,940)
(Increase) decrease in:
Accounts receivable - oil & gas sales 351,265 305,426
Other current assets (7,335) 4,474
Increase (decrease) in:
Accounts payable 122,227 (32,554)
Payable to general partner 382,946 (139,394)
----------------- ---------------
Total adjustments 653,924 656,525
----------------- ---------------
Net cash provided by operating activities 1,493,261 1,730,109
----------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of properties 1,000,000 5,940
Property additions - development costs (38,204) (89,315)
----------------- ----------------
Net cash provided (used) by investing activities 961,796 (83,375)
----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions (1,168,132) (1,328,458)
----------------- ----------------
NET INCREASE IN CASH 1,286,925 318,276
CASH AT BEGINNING OF PERIOD 1,142,439 923,596
----------------- ----------------
CASH AT END OF PERIOD $ 2,429,364 $ 1,241,872
================= ================
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 55.66%.
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. 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.
Effective January 1, 1998, the Company sold its interest in the Dover Hennessey
Gas Plant for $1,000,000. A gain of $671,923 was recognized on the sale.
4. On March 27, 1998, Middle Bay Oil Company, Inc., ("Middle Bay") acquired
1,064,432 shares of the Common Stock of Enex for $15 per share pursuant to
Middle Bay's tender offer which began February 19, 1998. The Enex shares
acquired by Middle Bay represent 79.2% of the total outstanding Enex common
stock. Operations of the Company are not expected to be materially impacted by
the purchase of Enex.
I-5
Item 2. Management's Discussion and Analysis or Plan of Operations.
First Quarter 1997 Compared to First Quarter 1998
Oil and gas sales for the first quarter decreased from $2,926,379 in 1997 to
$1,778,885 in 1998. This represents a decrease of $1,147,494 (39%). Oil sales
decreased by $770,584 (46%). An 18% decline in oil production reduced sales by
$306,165. A 34% decrease in the average oil sales price reduced sales by an
additional $464,419. Gas sales decreased by $376,910 (30%). A 30% decrease in
gas production decreased sales by $204,931. A 17% decrease in the average gas
sales price reduced gas sales by an additional $171,979. The changes in the
average oil and gas sales price correspond with lower prices in the overall
market for oil and gas. The decrease in oil production was primarily due to
natural production declines. The decrease in gas production was due to natural
production declines which were especially pronounced on the Dent and Speary
acquisitions.
Sales of gas plant products decreased to $17,733 in the first quarter of 1998
from $356,528 in the first quarter of 1997. This represents a decrease of
$338,795 or 95%. This decrease was due to the sale of the Dover Hennessey Gas
Plant which was effective January 1,1998.
Lease operating expenses decreased from $833,137 in the first quarter of 1997 to
$688,638 in the first quarter of 1998. The decrease of $144,499 (17%) is
primarily due to the lower operating costs on the Speary acquisition and sale of
the Mcbride acquisition in 1997.
Depreciation and depletion expense decreased from $524,513 in the first quarter
of 1997 to $476,744 in the first quarter of 1998. This represents a decrease of
$47,769 or (9%). The changes in production, noted above, reduced depreciation
and depletion expense by $132,590. This was partially offset by a 2% increase in
the depletion rate. The rate increase was primarily due to the downward
revisions of the oil and gas reserves during December 1997.
Effective January 1, 1998, the Company sold its interest in the Dover Hennessey
Gas Plant for $1,000,000. A gain of $671,923 was recognized on the sale.
General and administrative expenses decreased from $420,649 in the first quarter
of 1997 to $380,919 in the first quarter of 1998. This decrease of $39,730 (9%)
is primarily due to a reduction in staff as a result of the Consolidation of the
Company in June 1997.
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 1997 to 1998 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. I-6 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.
In February 1998, Middle Bay Oil Company, Inc., an independent oil and gas
producer, announced a tender offer for all of the outstanding shares of Enex
Resources Corporation ("Enex"), the Company's general partner. The tender offer
was accepted by a majority of Enex shareholders and was completed on March 27,
1998. Operations of the Company are not expected to be materially impacted by
the purchase of Enex.
As of March 31, 1998 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, 1998.
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/ James A. Klein
James A. Klein
Secretary, Treasurer and
Chief Financial Officer
May 13, 1998 By: /s/ Larry W. Morris
Larry W. Morris
Controller and Chief
Accounting Officer