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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from...............to...............
Commission file number 0-18322
ENEX CONSOLIDATED PARTNERS, L.P.
(Name of small business issuer in its charter)
New Jersey 76-0508488
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
800 Rockmead Drive
Three Kingwood Place
Kingwood, Texas 77339
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (281) 358-8401
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Limited Partnership Interest
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
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.[x]
State issuer's revenues for its most recent fiscal year. $11,997,301
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock as of a specified date within the past 60
days (See definition of affiliate in Rule 12b-2 of the Exchange Act):
Not Applicable
Documents Incorporated By Reference:
None
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<PAGE>
TABLE OF CONTENTS
FORM 10-KSB ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 1997
ENEX CONSOLIDATED PARTNERS, L.P.
Item No. Part I Page
- -------- ------- -----
1 Description of Business I-1
2 Description of Property I-3
3 Legal Proceedings I-5
4 Submission of Matters to a Vote
of Security Holders I-5
Part II
---------
5 Market for Common Equity and
Related Security Holder Matters II-1
6 Management's Discussion and Analysis
or Plan of Operation II-2
7 Financial Statements and Supplementary
Data II-6
8 Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure II-18
Part III
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9 Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a)
of the Exchange Act III-1
10 Executive Compensation III-4
11 Security Ownership of Certain
Beneficial Owners and Management III-4
12 Certain Relationships and Related
Transactions III-4
13 Exhibits and Reports on Form 8-K III-4
Signatures S-1
<PAGE>
PART I
Item 1. Description of Business
General
Enex Consolidated Partners, L.P. (the "Company") was formed under the New
Jersey Uniform Limited Partnership Law (1976) on June 30, 1997 from the
combination of thirty-four Enex Oil and Gas Limited 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 "Predecessor Partnerships").
The historical information presented in this Form 10-KSB consists of the
cumulative historical totals of the Predecessor Partnerships for the year ended
December 31, 1996 and for the six months ended June 30, 1997. The amounts for
the six months ended December 31, 1997 are the result of the operations of the
Company.
The Company is engaged in the oil and gas business through the ownership of
various interests in producing oil and gas properties, as detailed in Item 2,
below. If warranted, the Company may further develop its oil and gas properties.
However, the Company does not intend to engage in significant drilling
activities. Such activities may be conducted, however, as an incidental part of
the management of producing properties or with a view toward enhancing the value
of producing properties. In no event will the Company engage in exploratory
drilling, or use any of the limited partners' net revenues to fund exploratory
drilling activities. Any developmental drilling will be financed primarily
through third party borrowings or with funds provided from operations. The
expenses of drilling, completing and equipping and operating development wells
are allocated 96% to the limited partners and 4% to the general partner. See
Note 1 to the Financial Statements for information relating to the allocation of
costs and revenues between the limited partners and the general partner, Enex
Resources Corporation ("Enex"). The Company's operations are concentrated in a
single industry segment.
The Company owns royalty interests in certain oil and gas properties. A
"royalty interest" is an interest retained by the lessor in the lease and
payable out of 100% of proceeds before deducting any other interests. The
Company also owns overriding royalty interests in certain oil and gas
properties. An "overriding royalty interest" is an interest in a property which
was carved out of the working interest that is not subject to most operating
costs associated with the property. The Company also owns working interests in
certain oil and gas properties. A "working interest" is a portion of the
operating interest which is subject to most of the costs associated with a well.
The principal executive office of the Company is maintained at Suite 200,
Three Kingwood Place, Kingwood, Texas 77339. The telephone number at this office
is (281) 358-8401. The Company has no regional offices.
The Company has no employees. On March 1, 1998, Enex and its subsidiaries
employed 18 persons.
I-1
<PAGE>
Marketing
The marketing of oil and gas produced by the Company is affected by a
number of factors which are beyond the Company's control, the exact nature of
which cannot be accurately predicted. These factors include the quantity and
price of crude oil imports, fluctuating supply and demand, pipeline and other
transportation facilities, the marketing of competitive fuels, state and federal
regulation of oil and gas production and distribution and other matters
affecting the availability of a ready market. All of these factors are extremely
volatile.
Gulfmark Inc. accounted for 11% of the Company's total sales in 1997. No
ther purchaser individually accounted for more than 10% of such sales.
The operators of the Company's major properties are noted in Item 2 below.
Although a significant portion of the Company's properties were operated by a
limited number of operators, this concentration does not pose a significant risk
since the Company's rights are secured by joint operating agreements.
Environmental and Conservation Regulation
State regulatory authorities in the states in which the Company owns
producing properties are empowered to make and enforce regulations to prevent
waste of oil and gas and to protect correlative rights and opportunities to
produce oil and gas for owners of a common reservoir. Each of such regulatory
authorities also regulates the amount of oil and gas produced by assigning
allowable rates of production, which may be increased or decreased in accordance
with supply and demand. Requirements regarding the prevention and clean-up of
pollution and similar environmental matters are also generally applicable. The
costs, if any, the Company may incur in this regard cannot be predicted.
The existence of such regulations has had no material adverse effects on
the Company's operations to date, and the cost of compliance has not yet been
material. There are no material administrative or judicial proceedings arising
under such laws or regulations pending against the Company. The Company is
unable to assess or predict the impact that compliance with environmental and
pollution control laws and regulations may have on its future operations,
capital expenditures, earnings or competitive position.
Tax Laws
The operations of the Company are affected by the federal income tax laws
contained in the Internal Revenue Code of 1986, as amended (the "Code"). Under
the Code, generally, the Company will report income from the sale of oil and
gas, against which it may deduct its ordinary business expenses, depletion,
depreciation and intangible drilling and development costs.
It is anticipated that most of the Company's income, if any, will be from a
"passive activity" for purposes of the Code. A passive activity includes an
activity in which the taxpayer does not materially
I-2
<PAGE>
participate, including the ownership of a limited partnership interest, such as
an interest in the Company. "Passive income," however, does not include
portfolio income (i.e. dividend, interest, royalties, etc.). Although taxpayers
generally may not deduct losses or use tax credits derived from passive
activities in an amount greater than their income derived from such activities,
if and to the extent that the Company generates passive income, it will be
available to offset the limited partners' passive losses from other sources.
Partnerships with interests that are "publicly traded" are taxed as
corporations unless at least 90% of their income is "qualifying income". Passive
income or loss from publicly traded partnerships that are not taxed as
corporations generally cannot be applied against passive income or loss from
other sources. As stated in Item 5 of this Annual Report, there is no
established public trading market for the Company's limited partnership
interests. In addition, the Company derives more than 90% of its income from oil
and gas activities, which constitutes qualifying income from oil and gas
activities, which constitutes qualifying income within the meaning of section
7704(d) of the Code. Therefore, the Company should not be affected by the
publicly traded partnership rules.
In order to prevent the adverse tax consequences that would affect the
limited partners if the Company's limited partnership interests were to become
publicly traded in the future, the general partner may, after final regulations
have been issued by the Internal Revenue Service, submit to a vote of limited
partners a proposal to amend the Company's agreement of limited partnership to
provide, among other things, (a) that Enex shall have the right to refuse to
recognize any transfer of limited partnership interests if it believes that such
transfer occurred on a secondary market or the substantial equivalent thereof;
and (b) that all assignors and assignees of the limited partnership interests
shall be required to represent to Enex that any transfer of limited partnership
interests did not, to the best of their knowledge, occur on a secondary market
or the substantial equivalent thereof.
Item 2. Description of Property
On June 30, 1997, the Predecessor Partnerships transferred all of their
assets to the Company, subject to corresponding liabilities. These properties
continue to be operated by the Company as they were operated by the Predecessor
Partnerships. Presented below is a brief description of the Company's major
property holdings, all of which were transferred to it by the Predecessor
Partnerships.
CONCORD acquisition. The Concord acquisition consists of working interest and
royalty interest in more than 10,600 wells in 137 counties in Texas, with very
minor interests in 12 other states.
H.N.G. acquisition. The H.N.G. acquisition began with the purchase of overriding
royalty interests in over 300 gas wells in Texas, New Mexico, and Oklahoma and
culminated five transactions later with the last purchase of overriding royalty
interests in these properties. The H.N.G. acquisition is operated by eight
different oil and gas companies. The Company owns working interests ranging from
.104% to 8.999% in the H.N.G. acquisition at December 31, 1997.
EAST SEVEN SISTERS acquisition. The East Seven Sisters acquisition was comprised
of six transactions in which parts of a mineral interest and the associated
royalty interest in the Gorman Gas Unit in the East Seven Sisters Field, Duval
County, Texas were acquired. The East Seven Sisters acquisition is operated by
Vastar Resources Inc. The Company owns a 9.81% royalty interest in the East
Seven Sisters acquisition at December 31, 1997.
I-3
<PAGE>
The Company has thirty additional acquisitions which were transferred from the
Predecessor Partnerships. In total, the Company has interests in 11,118 oil well
properties and 1,078 gas well properties which are primarily located in Texas,
Oklahoma and Louisiana.
Oil and Gas Reserves
For quantitative information regarding the Company's oil and gas reserves,
please see Supplementary Oil and Gas Information and related tables which follow
the Notes to Financial Statements in Item 7 of this report. The Company has not
filed any current oil and gas reserve estimates or included any such estimates
in reports to any federal or foreign governmental authority or agency, including
the Securities and Exchange Commission.
Proved oil and gas reserves reported herein are based on engineering
reports prepared by the petroleum engineering consulting firm of H. J. Gruy and
Associates, Inc. The reserves included in this report are estimates only and
should not be construed as exact quantities. Future conditions may affect
recovery of estimated reserves and revenue, and all reserves may be subject to
revision as more performance data become available. The proved reserves used in
this report conform to the applicable definitions promulgated by the Securities
and Exchange Commission. No major discovery or other favorable or adverse event
that could potentially cause a significant change in the estimated proved
reserves has occurred since December 31, 1997.
Net Oil and Gas Production
The following table shows for the years ended December 31, 1997 and 1996,
the approximate production attributable to the Predecessor Partnerships' and the
Company's oil, gas, and gas plant product interests. The figures in the table
represent "net production"; i.e., production owned by the Predecessor
Partnerships and the Company and produced to their interest after deducting
royalty and other similar interests. All production occurred in the United
States.
1997 1996
---- ----
Crude oil and condensate (Bbls) . . . . . . . . . . 323,231 368,484
Natural gas (Mcf) . . . . . . . . . . . . . . . . 1,765,438 1,865,875
Natural gas liquids (Bbls) (1) . . . . . . . . . 33,019 34,316
Natural gas - gas plant sales (Mcf) (1) . . . . . . 220,193 232,825
The following table sets forth the Predecessor Partnerships' and the
Company's average sales price per barrel of oil, per Mcf of gas, and average
production cost per equivalent barrel of production for the years ended December
31, 1997 and 1996.
I-4
<PAGE>
1997 1996
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Average sales price per barrel of oil ...........$ 17.72 $ 19.40
Average sales price per Mcf of gas ............. 2.51 2.29
Average production cost per equivalent
barrel of production ....................... 6.73 6.27
Average sales price per barrel of natural
gas liquids (1) ............................ 12.16 13.34
Average sales price per Mcf of gas plant
gas sales (1) .............................. 2.73 1.96
Average production cost per equivalent
barrel of gas plant production (1)(2) ...... 11.61 9.06
(1) Natural gas liquid production was obtained through gas processing
plant ownership rather than through leasehold ownership.
(2) Includes cost of gas purchases.
Item 3. Legal Proceedings
A Predecessor Partnership was named as a party to a suit filed by Texas
Crude, Inc. ("Texas Crude"). In the suit, Texas Crude sought to recover legal
and other fees totaling $600,000. In August 1993, a judgement was granted in
favor of Texas Crude for $414,203 plus interest by the 101st Judicial District
Court of Texas. The Partnership recognized a contingent liability at December
31, 1993 for $504,350.
The Partnership appealed the verdict and filed a counterclaim for funds
that were wrongfully withheld by Texas Crude. In December 1994, the Fifth
District Court of Appeals reversed the judgement of the trial court and rendered
judgement in favor of the Partnership, in which the Partnership will recover
$163,019 from Texas Crude plus interest. Accordingly, the contingent liability,
initially recognized in 1993, was reversed in December 1994 and a receivable for
$254,588 was established in 1994.
Both the Partnership and Texas Crude have filed Motions for Rehearing,
which have been pending for more than a year. The accrued receivable balance at
December 31, 1997 was $338,860.
There are no other material pending legal proceedings to which the Company
is a party or to which any of their properties are subject.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
I-5
<PAGE>
PART II
Item 5. Market for Common Equity and Related Security Holder Matters
Market Information
There is no established public trading market for the Company's outstanding
limited partnership interests.
Number of Equity Security Holders
Number of Record Holders
Title of Class (as of March 1, 1998)
-------------- ---------------------
General Partner's Interests 1
Limited Partnership Interests 10,360
Dividends
The Company and its Predecessor Partnerships made cash distributions to
limited partners of $4,593,955 and $2,464,947 in 1997 and 1996, respectively.
This equated to $4.17 and $2.24 per $10 consolidated limited partner unit in
1997 and 1996, respectively. The payment of future distributions will depend on
the Company's earnings, financial condition, working capital requirements and
other factors, although it is anticipated that regular quarterly distributions
will continue through 1998.
II-1
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation
Results of Operations
This discussion should be read in conjunction with the financial statements
of the Company and its Predecessor Partnerships the notes thereto included in
this Form 10-KSB.
The Company was formed on June 30, 1997 from the combination of thirty-four
limited partnerships. The Consolidation created a new accounting basis in the
carrying value of property. Oil and gas property was written down by $1,561,322
from the net carrying value of property in the combined Predecessor
Partnerships. The decremental depletion associated with the net decrease in
property was approximately $123,000 for the last six months of 1997.
To facilitate comparisons between periods, results of operations are
presented on both an actual basis for the Enex Consolidated Partnership, L.P.
and the Predecessor Partnerships and on a pro forma basis as if the
Consolidation had taken place at the beginning of each period presented. These
results do not reflect the results which would have been obtained if the
Consolidation had actually occurred on the dates indicated or the results that
may be expected in the future.
The following financial information consists of pro forma financial data
for the years ended December 31, 1997 and 1996 for the combined partnerships
assuming the consolidation had taken place at January 1, 1997 and 1996,
respectively.
II-2
<PAGE>
ENEX CONSOLIDATED PARTNERS, L.P.
The following financial information consists of pro forma financial data for the
years ended December 31, 1997 and 1996 for the combined partnerships assuming
the consolidation had taken place at January 1, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
---- ----
-------------------- ----------------
<S> <C> <C>
REVENUES:
Oil and gas sales $10,003,768 $11,296,811
Gas plant sales 1,157,068 1,048,688
Gain from sale of property 741,617 242,389
Other revenues 21,000 49
Interest income 73,848 8,800
----------- ------------
Total revenues 11,997,301 12,596,737
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EXPENSES:
Depreciation and depletion 1,839,877 2,145,385
Lease operating expenses 3,589,836 3,616,133
Gas purchases and expenses 809,336 670,358
Production taxes 568,321 637,476
General and administrative:
Allocated from general partner 1,270,556 1,646,201
Direct expense 340,665 329,800
Interest expense -- 2,498
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Total expenses 8,418,591 9,047,851
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NET INCOME $ 3,578,710 $ 3,548,886
============ =============
</TABLE>
See accompanying notes to financial statements.
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II-3
<PAGE>
The total combined oil, gas and gas plant sales decreased to $11,160,836 in
1997 from $12,345,499 in 1996. This represents a decrease of $1,184,663 or 10%.
Oil sales decreased by $1,419,810 or 20%. A 12% decrease in oil production due
to natural production declines caused sales to decrease by $877,908. A 9%
decrease in the average oil sales price decreased oil sales by an additional
$541,902. Gas sales increased by $147,655 or 3%. A 10% increase in the average
gas sales price increased revenues by $388,395. This was offset by a 5% decrease
in gas production. Sales of natural gas liquids and gas plant gas increased by
$87,492 or 10%. A 15% increase in the average gas plant products sales price
increased sales by $130,370. This increase was partially offset by a 5% decrease
in production of gas plant products. The decreases in oil, natural gas and gas
plant products production were primarily a result of natural production
declines. The decrease in oil sales price corresponds with changes in the
overall market for the sale of oil. The increases in the gas and gas plant
products average sales price correspond with changes in the overall market for
these products.
The total combined lease operating expenses decreased to $3,589,836 in 1997
from $3,616,133 in 1996. The decrease of $26,297 or 1% was primarily due to the
changes in production, noted above.
The total combined depreciation and depletion expense decreased to
$1,839,877 in 1997 from $2,145,385 in 1996. This represents a decrease of
$305,508 or 14%. A 1% decrease in the depletion rate reduced depreciation and
depletion expense by $116,822. The changes in production, noted above, reduced
depreciation and depletion expense by an additional $188,686. The decrease in
the depletion rate was primarily due to relatively higher production from
properties with a relatively lower depletion rate, partially offset by downward
revisions of oil and gas reserves during December 1997.
The total combined general and administrative expenses decreased to
$1,611,221 in 1997 from $1,976,001 in 1996. This represents a decrease of
$364,780 or 18% from 1996 to 1997. This decrease was primarily due to less staff
time being required to manage the Company's operations as a result of the
consolidation of the Predecessor Partnerships.
In 1996, the Predecessor Partnerships sold their interests in the Grass
Island, Enexco and Comite acquisitions for $235,000, $64,000 and $55,000,
respectively. Gains of $69,731, $61,648 and $21,649, respectively, were
recognized on these sales. The Predecessor Partnerships also sold their
interests in the E.M. Lane well and the Harper #1 well for $57,970 and $55,000,
respectively. Gains of $31,310 and $44,642, respectively, were recognized on
these sales. The Predecessor Partnerships also sold their interests in three
other wells in 1996 for $59,630. These sales resulted in a net gain of $13,409
to the Predecessor Partnerships. The impact of these sales on current and future
revenues is not expected to be material, as such interests represented less than
10% of historical and future net revenues.
In 1997, the Company sold its interest in the North Buck Draw Unit for
$857,120. A gain of $758,969 was recognized on the sale. The Company sold its
interest in the Mcbride acquisition for $56,306. A loss of $25,405 was
recognized on the sale. The Company also sold its interest in two other
acquisitions for $8,053. A net gain of $8,053 was recognized by the Company from
the sales. The impact of these sales on current and future revenues is not
expected to be material, as such interests represented less than 10% of
historical and future net revenues.
II-4
<PAGE>
Capital Resources and Liquidity
The Company's cash flow provided by operating, financing and investing
activities 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 net cash flow to the Company's partners.
In 1997 and 1996, the Company and its Predecessor Partnerships paid total
combined distributions of $4,593,955 and $2,464,947, respectively, to its
limited partners. 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 debt obligations. The Company plans to
repay the amount owed to the general partner in 1998. The payment of future
distributions will depend on the Company's earnings, financial conditions,
working capital requirements and other factors, although it is anticipated that
regular quarterly distributions will continue through 1998.
At December 31, 1997, the Company had no material commitments for capital
expenditures. The Company does not intend to engage in any significant
developmental drilling activity. The Company does not intend to purchase
additional properties or fund extensive development of existing oil and gas
properties, and as such; has no long-term liquidity needs. The Company's
projected cash flows from operations are expected to provide sufficient funding
to pay its operating expenses and debt obligations.
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. Operations of the Company are
not expected to be materially impacted by the purchase of Enex.
The Company does not anticipate that it will incur any significant
expenditures to address Year 2000 issues, nor do Year 2000 issues represent a
known material event or uncertainty to the Company. To the extent that the
Company may be adversely affected by the Year 2000 issues of its suppliers,
customers and other entities, the Company does not believe that it will be more
adversely affected than other companies in its industry with similar operations.
II-5
<PAGE>
Item 7. Financial Statements and Supplementary Data
INDEPENDENT AUDITORS' REPORT
The Partners
Enex Consolidated Partners, L.P.:
We have audited the accompanying balance sheet of Enex Consolidated Partners,
L.P. (a New Jersey limited partnership) as of December 31, 1997 and the related
statements of operations, changes in partners' capital, and cash flows for Enex
Consolidated Partners, L.P. and the Predecessor Partnerships for the six month
periods ended December 31, 1997 and June 30, 1997 and the year ended December
31, 1996. These financial statements are the responsibility of the general
partner of Enex Consolidated Partners, L.P. Our responsibility is to express an
opinion on the financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Enex Consolidated Partners, L.P. at December
31, 1997 and the results of its and the Predecessor Partnerships' operations and
cash flows for the six month periods ended December 31, 1997 and June 30, 1997
and the year ended December 31, 1996 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Houston, Texas
March 25, 1998
II-6
<PAGE>
ENEX CONSOLIDATED PARTNERS, L.P.
BALANCE SHEET, DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
1997
-------------------
CURRENT ASSETS:
<S> <C>
Cash $ 1,142,439
Accounts receivable - oil & gas sales 1,265,870
Receivable from litigation settlement 338,860
Other current assets 5,340
-------------------
Total current assets 2,752,509
-------------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 11,543,205
Less accumulated depreciation and depletion 881,821
-------------------
Property, net 10,661,384
-------------------
TOTAL $ 13,413,893
===================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 487,581
Payable to general partner 54,931
-----------------
Total current liabilities 542,512
-----------------
LIMITED PARTNERS' CAPITAL SUBJECT
TO REDEMPTION 12,800,246
GENERAL PARTNER CAPITAL 71,135
-------------------
TOTAL $ 13,413,893
===================
</TABLE>
See accompanying notes to financial statements.
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II-7
<PAGE>
ENEX CONSOLIDATED PARTNERS, L.P.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTH PERIODS ENDED DECEMBER 31, 1997
AND JUNE 30, 1997 AND FOR THE YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Enex Consolidated
Partners, L.P. Predecessor Partnerships
----------------- -------------------------
Six Months Six Months Year Ended
Ended Ended December 31,
December 31, 1997 June 30, 1997 1996
----------------- ------------- ------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 4,803,498 $ 5,200,270 $11,296,811
Gas plant sales 537,513 619,555 1,048,688
Gain from sale of property 735,677 5,940 242,389
Other revenues -- 21,000 49
Interest income 72,583 1,265 8,800
----------- ----------- -----------
Total revenues 6,149,271 5,848,030 12,596,737
----------- ----------- -----------
EXPENSES:
Depreciation and depletion 907,123 1,048,413 2,369,278
Impairment of property -- -- 2,315,081
Lease operating expenses 1,845,995 1,743,841 3,616,133
Gas purchases and expenses 369,966 439,370 670,358
Production taxes 279,740 288,581 637,476
General and administrative:
Allocated from general partner 512,258 758,298 1,646,201
Direct expense 282,316 58,349 329,800
Interest expense -- -- 2,498
----------- ----------- -----------
Total expenses 4,197,398 4,336,852 11,586,825
----------- ----------- -----------
NET INCOME 1,951,873 $ 1,511,178 $ 1,009,912
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
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II-8
<PAGE>
ENEX CONSOLIDATED PARTNERS, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE TWO YEARS ENDED DECEMBER 31, 1997
- -------------------------------------------------------------------------- -----
<TABLE>
<CAPTION>
LIMITED
PARTNERS'
CAPITAL
GENERAL SUBJECT TO
TOTAL PARTNER REDEMPTION
----------------- -------------- -----------------
<S> <C> <C> <C>
PREDECESSOR 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 (2,841,709) (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
============ ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
II-9
<PAGE>
ENEX CONSOLIDATED PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31,1997 AND JUNE 30, 1997
AND FOR THE YEAR ENDED DECEMBER 31, 1996. Predecesssor Partnerships
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Six Months Year ended
December 31, Ended December 31,
1997 June 30, 1997 1996
----------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,951,873 $ 1,511,178 $ 1,009,912
----------- ----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and depletion 907,123 1,048,413 2,369,278
Impairment of property -- -- 2,315,081
Gain from sale of property (735,677) (5,940) (242,389)
(Increase) decrease in:
Accounts receivable - oil & gas sales 15,551 599,008 (699,380)
Other current assets (23,322) 172,568 23,729
Increase (decrease) in:
Accounts payable (11,236) (401,102) 36,435
Payable to general partner 45,780 47,924 (1,348,665)
----------- ----------- -----------
Total adjustments 198,219 1,460,871 2,454,089
----------- ----------- -----------
Net cash provided by operating activities 2,150,092 2,972,049 3,464,001
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of properties 915,539 5,940 526,600
Property additions - development costs (565,601) (106,789) (1,026,456)
----------- ----------- -----------
Net cash provided (used) by investing activities 349,938 (100,849) (499,856)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions (2,310,678) (2,841,709) (2,744,270)
----------- ----------- -----------
NET INCREASE IN CASH 189,352 29,491 219,875
CASH AT BEGINNING OF PERIOD 953,087 923,596 703,721
----------- ----------- -----------
CASH AT END OF PERIOD $ 1,142,439 $ 953,087 $ 923,596
=========== =========== ===========
NONCASH TRANSACTIONS RESULTING FROM THE
CONSOLIDATION
Decrease in Accounts Payable $ 1,871,700 -- --
Adjustment to record property at Fair Market Value $ 1,561,322 -- --
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
II-10
<PAGE>
ENEX CONSOLIDATED PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. PARTNERSHIP ORGANIZATION
Enex Consolidated Partners, L.P. (the "Company") was formed under the
New Jersey Uniform Limited Partnership Law (1976) on June 30, 1997
from the combination of thirty-four Enex Oil and Gas Limited
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 "Predecessor Partnerships").
The historical information presented in this Form 10-KSB consists of
the cumulative historical totals of the Predecessor Partnerships for
the year ended December 31, 1996 and for the six months ended June 30,
1997. The amounts for the six months ended December 31, 1997 are the
result of the operations of the Company. The Consolidation created a
new accounting basis in the carrying value of property. Oil and gas
property was written down by $1,561,322 from the net carrying value of
property in the combined Predecessor Partnerships.
Information relating to the allocation of costs and revenues between
Enex, as general partner, and the limited partners is as follows:
Limited
Enex Partners
Commissions and selling expenses ................... -- 100%
Company reimbursement of organization
expense .......................................... -- 100%
Company property acquisition ....................... -- 100%
General and administrative costs ................... 4.1% 95.9%
Costs of drilling and completing
development wells ................................ 4.1% 95.9%
Revenues from temporary investment of
partnership capital .............................. -- 100%
Revenues from producing properties ................. 4.1% 95.9%
Operating costs (including general and
administrative costs associated with
operating producing properties) .................. 4.1% 95.9%
In addition to the above general partner inerest, Enex has a 55.5008%
limited partner interest in the Company.
II-11
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Oil and Gas Properties - The Company uses the successful efforts
method of accounting for its oil and gas operations. Under this
method, the costs of all development wells are capitalized.
Capitalized costs are amortized on the units-of-production method
based on estimated total proved reserves. The acquisition costs
of proved oil and gas properties are capitalized and periodically
assessed for impairments.
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
Predecessor Partnerships assessed properties on an aggregate
basis. Upon adoption of SFAS 121, the Predecessor 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 Company 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.
The Company's operating interests in oil and gas properties are
recorded using the pro rata consolidation method pursuant to
Interpretation 2 of Accounting Principles Board Opinion 18.
Cash Flows - The Company has presented its cash flows using the
indirect method and considers all highly liquid investments with
an original maturity of three months or less to be cash
equivalents.
General and Administrative Expenses - The Company reimburses the
General Partner for direct costs and administrative costs
incurred on its behalf. Administrative costs allocated to the
Company are computed on a cost basis in accordance with standard
industry practices by allocating the time spent by the General
Partner's personnel among all projects and by allocating rent and
other overhead on the basis of the relative direct time charges.
Use of Estimates - The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses
during the reporting periods. Actual results could differ from
these estimates.
II-12
<PAGE>
3. FEDERAL INCOME TAXES
General - The Company is not a taxable entity for federal income
tax purposes. Such taxes are liabilities of the individual
partners and the amounts thereof will vary depending on the
individual situation of each partner. Accordingly, there is no
provision for income taxes in the accompanying financial
statements.
II-13
<PAGE>
Set forth below is a reconciliation of net income as reflected in the
accompanying financial statements and net income (loss) for federal income tax
purposes for the year ended December 31, 1997:
<TABLE>
<CAPTION>
Allocable to
------------------------ Per Limited
General Limited Partner Unit
TOTAL Partner Partners Outstanding
-------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
Net income as reflected in the
accompanying financial statements $ 3,463,051 $ 273,866 $ 3,189,185 $ 3
Reconciling items:
Intangible drilling costs capitalized
for financial reporting purposes
which were charged-off for federal
income tax purposes (97,373) (3,998) (93,375) (0)
Difference in gain on property sales for
federal income tax purposes and
the amount computed for financial
reporting purposes (377,830) -- (377,830) (0)
Difference in depreciation and depletion
computed for federal income tax
purposes and the amount computed
for financial reporting purposes (11,269) (15,564) 4,295 0
Other timing differences (2,787,155) (195,830) (2,591,325) (3)
----------- -----------
Net income (loss) for federal
income tax purposes $ 189,424 $ 58,474 $ 130,950 $ 0
=========== =========== ============ ============
</TABLE>
Net income (loss) for federal income tax purposes is a summation of ordinary
income (loss), portfolio income (loss), cost depletion and intangible drilling
costs as presented in the Company's federal income tax return.
Set forth below is a reconciliation between partners' capital as reflected in
the accompanying financial statements and partners' capital for federal income
tax purposes as of December 31, 1997:
<TABLE>
<CAPTION>
Allocable to
------------------------ Per Limited
General Limited Partner Unit
TOTAL Partner Partners Outstanding
----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Partners' capital as reflected in the
accompanying financial statements $ 12,871,381 $ 71,135 $ 12,800,246 $ 12
Reconciling items:
Intangible drilling costs capitalized
for financial reporting purposes
which were charged-off for federal
income tax purposes (5,733,247) (521,110) (5,212,137) (5)
Accumulated difference in property
sales for financial reporting purposes
and for federal income tax purposes (705,279) (7,105) (698,174) 0
Difference in accumulated depreciation,
depletion and amortization for financial
reporting purposes and tax purposes 17,653,897 (15,327) 17,669,224 16
Commissions and syndication fees
capitalized for income tax purposes 15,889,041 -- 15,889,041 14
Costs of consolidation 485,435 48,544 436,891 0
Consolidation of Partnerships 310,378 1,372,540 (1,062,162) (1)
Other timing differences (3,413,248) 78,140 (3,491,388) (3)
------------ ------------ ------------ ------------
Partners' capital for federal
income tax purposes 37,358,358 1,026,817 $ 36,331,541 33 $
============ ============ ============ ============
</TABLE>
II-14
<PAGE>
4. SIGNIFICANT PURCHASERS
Gulfmark Inc. accounted for 11% of the Company's total sales in
1997. Dreyfus Energy, Inc., Exxon Company, USA and Koch
Hydrocarbons, Inc. accounted for 14%, 14% and 10%, respectively,
of the Company's total sales in 1996. No other purchaser
individually accounted for more than 10% of such sales.
5. LITIGATION SETTLEMENTS
A Predecessor Partnership was named as a party to a suit filed by
Texas Crude, Inc. ("Texas Crude"). In the suit, Texas Crude
sought to recover legal and other fees totaling $600,000. In
August 1993, a judgement was granted in favor of Texas Crude for
$414,203 plus interest by the 101st Judicial District Court of
Texas. The Partnership recognized a contingent liability at
December 31, 1993 for $504,350.
The Partnership appealed the verdict and filed a counterclaim for
funds that were wrongfully withheld by Texas Crude. In December
1994, the Fifth District Court of Appeals reversed the judgement
of the trial court and rendered judgement in favor of the
Partnership, in which the Partnership will recover $163,019 from
Texas Crude plus interest. Accordingly, the contingent liability,
initially recognized in 1993, was reversed in December 1994 and a
receivable for $254,588 was established in 1994.
Both the Partnership and Texas Crude have filed Motions for
Rehearing, which have been pending for several years. Interest
has accrued on the receivable balance at a rate of ten percent
(10%) per annum. The accrued receivable balance at December 31,
1997 was $338,860.
6. PROPERTY TRANSACTIONS
In 1996, the Predecessor Partnerships sold their interests in the
Grass Island, Enexco and Comite acquisitions for $235,000,
$64,000 and $55,000, respectively. Gains of $69,731, $61,648 and
$21,649, respectively were recognized on these sales. The
Predecessor Partnerships also sold their interests in the E.M.
Lane well and the Harper #1 well for $57,970 and $55,000,
respectively. Gains of $31,310 and $44,642, respectively, were
recognized on these sales. The Predecessor Partnerships also sold
their interests in three other wells in 1996 for $59,630. These
sales resulted in a net gain of $13,409 to the Predecessor
Partnerships. The impact of these sales on current and future
revenues is not expected to be material, as such interests
represented less than 10% of historical and future net revenues.
In 1997, the Company sold its interest in the North Buck Draw
Unit for $857,120. A gain of $758,969 was recognized on the sale.
The Company sold its interest in the Mcbride acquisition for
$56,306. A loss of $25,405 was recognized on the sale. The
Company also sold its interest in three other acquisitions for
$8,053. A net gain of $8,053 was recognized by the Company from
the sales. The impact of these sales on current and future
revenues is not expected to be material, as such interests
represented less than 10% of historical and future net revenues.
II-15
<PAGE>
7. PAYABLE TO GENERAL PARTNER
The payable to general partner primarily consists of general and
administrative expenses allocated to the Company by Enex for its
ongoing operations. The Company plans to repay the amounts owed
to the general partner during 1998.
8. SUBSEQUENT EVENT
In February 1998, Middle Bay Oil Company, Inc. ("Middle Bay"), an
independent oil and gas producer, announced a tender offer for
all of the outstanding shares of Enex Resources Corporation, the
Company's General Partner. The tender offer was accepted by a
majority of Enex's shareholders.
II-16
<PAGE>
ENEX CONSOLIDATED PARTNERS, L.P.
SUPPLEMENTARY OIL AND GAS INFORMATION
FOR THE TWO YEARS ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
Proved Oil and Gas Reserve Quantities (Unaudited)
The following presents an estimate of the Predecessor Partnerships' and the
Company's proved oil and and gas reserve quantities and changes therein for each
of the two years in the period ended December 31, 1997. Oil reserves are stated
in 'barrels ("BBLS") and natural gas in thousand cubic feet ("MCF"). All of the
Company's reserves are located within the United States. The number of Limited
Partners units outstanding is 1,102,631.
<TABLE>
<CAPTION>
Per Per
Limited Natural Limited
Oil Partner Unit Gas Partner Unit
(BBLS) Outstanding (MCF) Outstanding
------------ --------------- ----------- ----------------
<S> <C> <C> <C> <C>
PROVED DEVELOPED AND
UNDEVELOPED RESERVES:
January 1, 1996 1,911,612 2 12,258,727 11
Revisions of previous estimates 364,267 -- 2,376,951 2
Extensions and Discoveries 3,840 -- 740,853 1
Sales of minerals in place (34,188) -- (176,205) --
Production (368,484) -- (1,865,875) (2)
----------- ----------- ----------- -----------
December 31, 1996 1,877,047 2 13,334,451 12
Revisions of previous estimates (358,975) (1) (437,247) --
Sales of minerals in place (44,549) -- (49,955) --
Production (323,231) -- (1,765,438) (2)
----------- ----------- ----------- -----------
December 31, 1997 1,150,292 1 11,081,811 10
=========== =========== =========== ===========
PROVED DEVELOPED RESERVES:
January 1, 1996 1,875,188 2 12,153,701 11
=========== =========== =========== ===========
December 31, 1996 1,861,770 2 13,334,451 12
=========== =========== =========== ===========
December 31, 1997 1,150,292 1 11,081,811 10
=========== =========== =========== ===========
</TABLE>
II-17
<PAGE>
Item 8. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure
Not Applicable
II-18
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------
The Company's sole General Partner is Enex Resources Corporation, a
Delaware corporation. The Company has no Directors or executive officers. The
Directors and executive officers of Enex are:
Gerald B. Eckley. Mr. Eckley, age 71, has served as a Director, President
and Chief Executive Officer of the General Partner since its formation in 1979.
He was employed by Shell Oil Company from 1951 to 1967 and served in managerial
capacities from 1959 to 1967. From 1967 to 1969, he was Director of Fund Raising
at the University of Oklahoma and from 1969 to 1971, was Vice President of Land
and Operations for Imperial American Management Company. In 1971, Mr. Eckley was
a petroleum consultant and in 1972- 1973 was General Counsel and Executive
Director of the Oil Investment Institute. From 1973 to 1974, he was Manager of
Oil Properties, Inc. and from 1974 to 1976, was Vice President, Land and Joint
Ventures for Petro- Lewis Corporation. From 1977 to August 1979, Mr. Eckley was
President of Eckley Energy, Inc., a company engaged in purchasing and selling
oil and gas properties. Mr. Eckley received an L.L.B. degree from the University
of Oklahoma in 1951 and a Juris Doctor degree from the University of Oklahoma in
1970.
William C. Hooper, Jr. Mr. Hooper, age 60, has been a Director of the
General Partner since its formation in 1979 and is a member of the General
Partner's Audit and Compensation and Options Committees. In 1960 he was a staff
engineer in the Natural Gas Department of the Railroad Commission of Texas, with
principal duties involving reservoir units and gas proration. In 1961 he was
employed by the California Company as a Drilling Engineer and Supervisor. In
1963 he was employed as a Staff Engineer by California Research Corporation and
in 1964 rejoined the California Company as a project manager having various
duties involving drilling and reservoir evaluations. In 1966 he was Executive
Vice President for Moran Bros. Inc., coordinating and managing all company
activities, drilling operations, bidding and engineering. From 1970 until the
present, he has been self-employed as a consulting petroleum engineer providing
services to industry and government and engaged in business as an independent
oil and gas operator and investor. From 1975 to 1987 he was also a Director and
President of Verna Corporation, a drilling contractor and service organization.
He received a B.S. degree in Petroleum Engineering in 1960 from the University
of Texas and an M.S. degree in Petroleum Engineering from that same University
in 1961.
Stuart Strasner. Mr. Strasner, age 68, was a Director of the General
Partner from its formation until October of 1986. He was reappointed to the
Board on April 19, 1990 to fill a vacancy. He is a member of the Audit
Committee. He is a professor of business law at Oklahoma City University and was
Dean of the law school at Oklahoma City University from July 1984 until June
1991. Prior to July 1984, Mr. Strasner was an attorney in private practice with
McCollister, McCleary, Fazio and Holliday in Oklahoma City, Oklahoma. From 1959
to 1974, he was employed by various banks, bank holding companies and an
insurance company in executive capacities. From 1974 to 1978, he was a
consultant to various corporations such as insurance companies, bank holding
companies and small business investment companies. From 1978 until late 1981, he
was Executive Director of the Oklahoma Bar Association, and from 1981 to 1983
was a Director and President of PRST Enterprises, Inc., a real estate
development company. Mr. Strasner holds an A.B. degree from Panhandle A&M
College, Oklahoma, and a J.D. degree from the University of Oklahoma. He is a
member of the Fellows of the American Bar Association and a member of the
Oklahoma Bar Association. Mr. Strasner is also a director of Health Images,
Inc., a public company which provides fixed site magnetic resonance imaging
("MRI") services.
Martin J. Freedman. Mr. Freedman, age 73, was one of the General Partner's
founders and a member of its Board of Directors as well as a board member of
Enex Securities Corporation until June of 1986. He was reappointed to the Board
on April 19, 1990 to fill a vacancy. He is a member of the
III-1
<PAGE>
Compensation and Options Committee. He is currently President of Freedman Oil &
Gas Company, engaged primarily in the management of its exploration and
producing properties, and the managing partner Martin J. Freedman & Company
which has an interest in approximately one hundred producing oil and/or gas
wells. Mr. Freedman is a lifetime member of the Denver Petroleum Club as well as
being a lifetime member of the Denver Association of Petroleum Landmen. He was
an officer and Director and/or founder of several former private and public
companies. Mr. Freedman entered the oil and gas business in 1954 when he joined
Mr. Marvin Davis of the Davis Oil Company. In 1956, he became President of
Central Oil Corporation, a company engaged in oil and gas exploration. From 1958
on, Mr. Freedman operated as Martin J. Freedman Oil Properties and was President
of Oil Properties, Inc., a private corporation. Mr. Freedman attended Long
Island University and New York University. He received a bachelor's degree in
Psychology and also attended New York University's graduate school.
James Thomas Shorney. Mr. Shorney, age 72, has been a Director of the
General Partner since April of 1990 and is a member of the Compensation and
Options Committee. He has been a petroleum consultant and Secretary/Treasurer of
the Shorney Company, a privately held oil and gas exploration company, from 1970
to date. From 1970 to 1976, he also served as a petroleum consultant in Land and
Lease Research Analysis Studies for the GHK Company. He was an oil and gas lease
broker from 1962 to 1970 and employed by Shell Oil Company in the Land
Department from 1954 to 1962. Before joining Shell Oil Company, he served as
Public Information Officer in the U.S. Army Air Force from 1950 to 1953
including attending Georgetown University Graduate School in 1952. Mr. Shorney
graduated from the University of Oklahoma with a B.A. degree in Journalism in
1950. From 1943 to 1945, he served in the U.S. Army Air Force as an air crew
member on a B-24 Bomber. Mr. Shorney is a member of the Oklahoma City
Association of Petroleum Landmen on which he has served as Director and
Secretary/Treasurer. He is an active member of the American Association of
Petroleum Landmen. In 1975, Mr. Shorney was first listed in the London Financial
Times' Who's Who in World Oil and Gas.
Robert D. Carl, III. Mr. Carl, age 44, was appointed a Director of the
General Partner on July 30, 1991 and is a member of the Audit Committee. He is
President, Chief Executive Officer and Chairman of the Board of Health Images,
Inc., a public company whose securities are traded on NYSE, which provides fixed
site magnetic resonance imaging ("MRI") services. From 1978 to 1981, Mr. Carl
also served as President of Carl Investment Associates, Inc. a registered
investment advisor. In 1981, Mr. Carl joined Cardio-Tech, Inc., as general
counsel and as an officer and Director. Upon the sale and reorganization of
Cardio-Tech, Inc. into Cardiopul Technologies in 1982, he served as its
Executive Vice President and as a Director. In March, 1985 he was elected
President, Chief Executive Officer and Chairman of Cardiopul Technologies which
spun off its non-imaging medical services business and changed its name to
Health Images, Inc. Mr. Carl received a B.A. in History from Franklin and
Marshall College, Lancaster, Pennsylvania in 1975 and a J.D. from Emory
University School of Law, Atlanta, Georgia in 1978. Mr. Carl is a trustee of
Franklin & Marshall College and is a member of the State Bar of Georgia.
On January 4, 1996, the SEC filed a complaint in the United States District
Court for the District of Columbia against Mr. Carl alleging that Mr. Carl
violated Section 16(a) of the Securities Exchange Act of 1934 ("Exchange Act"),
and Rule 16a-2 and 16a-3 (and former Rule 16a-1) thereunder, by failing to
timely file reports concerning thirty-eight securities transactions in his
mother's brokerage accounts involving shares of Health Images, Inc. stock. The
SEC took the position that because Mr. Carl (1) provided substantial financial
support to his mother, (2) commingled his mother's assets with his own, (3)
provided a substantial portion of the funds used to purchase the shares in
question, and (4) received from his mother a substantial portion of the sales
proceeds, he, therefore, had a pecuniary interest in, and was a beneficial owner
of, the shares in question.
III-2
<PAGE>
In response to the SEC's action, Mr. Carl disgorged to Health Images, Inc.
approximately $92,400 in short-swing profits from the trading in his mother's
account, plus interest thereon of approximately $52,600. The SEC further
requested the court to impose a $10,000 civil penalty against Mr. Carl pursuant
to Section 21(d)(3) of the Exchange Act. Without admitting or denying the
allegations in the complaint, Mr. Carl consented to the entry of a final
judgement imposing the $10,000 penalty. On January 12, 1996, a federal judge
entered the final judgement in this matter, and Mr. Carl has since filed amended
reports on Forms 4 and 5 reflecting these transactions in his mother's accounts.
In relation to the same matter, the SEC has issued an administrative Order
pursuant to Section 21C of the Exchange Act against Mr. Carl, finding that he
violated Section 16(a) and the rules thereunder and requiring him to cease and
desist from committing or causing any violation or future violation of those
provisions. Without admitting or denying allegations in the SEC's Order, Mr.
Carl consented to the entry of the Order.
John J. Bassett. Mr. Bassett, age 39, is Middle Bay's President and Chief
Executive Officer, a position he has held since 1992. Mr. Bassett has also
served as the Chairman of the Board of Directors of Middle Bay since 1992. In
March 1998, he was named to the board of directors of Enex, the Company's
general partner. He has also served as President, chief executive officer and a
director of Bay City Energy Group, Inc., a company that explores for oil and gas
in the United States and is a principal shareholder of Middle Bay.
Stephen W. Herod. Mr. Herod, age 39, currently serves as Vice President for
Corporate Development and as director of Middle Bay, positions he has held since
July 1997. In March 1998, he was named to the board of directors of Enex, the
Company's general partner. From April 1992 to June 1997 Mr. Herod served as
President of Shore Oil Company, a privately held independent exploration and
production company, which was acquired by Middle Bay in June 1997.
Gary R. Christopher. Mr. Christopher, age 48, is the Acquisition
Coordinator for Kaiser-Francis Oil Company, a position he has held since
February 1995. In March 1998, he was named to the board of directors of Enex,
the Company's general partner. From January 1993 to February 1995, Mr.
Christopher served as Senior Vice President and Manager of Energy Lending for
the Bank of Oklahoma, which he continues to serve as a consultant. Mr.
Christopher has been a director of Middle Bay since May 1997. He also serves on
the board of Petrocorp Incorporated and is a member of the Society of Petroleum
Engineers and the Society of Petroleum Evaluation Engineers.
James A. Klein. Mr. Klein, age 35, joined the General Partner as Controller
in February 1991. In June 1993, he was appointed President and Principal of Enex
Securities Corporation. In October 1997 he was appointed Chief Financial
Officer, Treasurer and Secretary of Enex. From June 1988 to February 1991, he
was employed by Positron Corporation in Houston. From July 1987 to May 1988, he
was employed by Transworld Oil Company in Houston and from September 1985 until
July 1987, he was an accountant with Deloitte Haskins & Sells in Houston, Texas,
auditing oil and gas and oil service companies. Mr. Klein is a Certified Public
Accountant and holds a B.A. in Accounting (1985) from the University of Iowa. He
is a member of the American Institute of Certified Public Accountants and the
Iowa Society of Certified Public Accountants.
Larry W. Morris. Mr. Morris, age 48, joined the General Partner as Revenue
Accountant in March 1984. In May 1986 he was appointed to Revenue Accounting
Manager. In June 1990, he was appointed to Assistant Controller, then in October
1997 Mr. Morris was appointed Controller. From 1981 to 1984, Mr. Morris was
employed with Inexco Oil Company as a revenue accountant. Prior to 1981, he was
III-3
<PAGE>
employed in various accounting positions. Mr. Morris holds a B.S. in accounting
from Western Kentucky University.
Item 10. Executive Compensation
The Company has no Directors or executive officers.
The Company does not pay a proportional or fixed share of the compensation
paid to the officers of the General Partner.
The Company reimburses the General Partner for direct costs and
administrative costs incurred on its behalf. Administrative costs allocated to
the Company are computed on a cost basis in accordance with standard industry
practices by allocating the time spent by the General Partner's personnel among
all projects and by allocating rent and other overhead on the basis of the
relative direct time charges. The Company and its Predecessor Partnerships
incurred $1,270,556 and $1,646,201 of such administrative costs payable to the
General Partner in 1997 and 1996, respectively.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Limited
Name of Partner Units Percent
Title of Class Beneficial Owner Owned Directly of Class
Limited Partner Enex Resources 607,095 55.5088%
Item 12. Certain Relationships and Related Transactions
See the Statements of Operations included in the Financial Statements in
Item 7 of this report for information concerning general and administrative
costs incurred by Enex and allocated to the Company, and Note 1 to such
Financial Statements for information concerning payments to Enex Securities
Corporation, a wholly owned subsidiary of Enex and to Enex for certain offering
and organization expenses incurred by the Company.
See Item Number 2 - "Description of Property" in this report for a
description of the properties operated by Enex. Enex operates such properties
under the terms of a Joint Operating Agreement ("JOA"). Overhead charges allowed
to third parties under the JOA in accordance with the Council of Petroleum
Accountants Societies are not charged to the Company. Such costs are considered
to be within the general and administrative overhead charges allocated to the
Company.
III-4
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
Sequential
Page No.
--------------
(a) Exhibits
(3) a. Certificate of Limited Partnership of the Company as
currently in effect. Incorporated by reference to Exhibit 3(2) to
the Company's Registration Statement on Form S-4 of the
Partnership (Registration No. 33-09953) filed with the Securities
and Exchange Commission on March 19, 1997.
b. Articles of Limited Partnership of the Company as
currently in effect. Incorporated by reference to Appendix B
to the Prospectus/Proxy Statement that appeared as Exhibit
(3.2) to the Company's Registration Statement under the
Securities Exchange Act of 1934 on Form 8-B filed with the
Securities and Exchange Commission on August 14, 1997.
(4) Not Applicable
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(18) Not Applicable
(19) Not Applicable
(22) Not Applicable
(23) Not Applicable
(24) Not Applicable
(25) Not Applicable
(28) Not Applicable
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the
period covered by this report.
III-5
<PAGE>
SIGNATURES
In accordance with Section 13 or 15 (d) 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.
By: ENEX RESOURCES CORPORATION
the General Partner
March 25, 1998 By: /s/ G. B. Eckley
--------------------------
G. B. Eckley, President
In accordance with the Exchange Act, this report has been signed below on
March 25, 1998, by the following persons in the capacities indicated.
ENEX RESOURCES CORPORATION General Partner
By: /s/ G. B. Eckley
-----------------------
G. B. Eckley, President
/s/ G. B. Eckley
------------------------
G. B. Eckley President, Chief Executive
Officer and Director
/s/ James A. Klein
-------------------------
James A. Klein Secretary, Treasurer, and Chief
Financial Officer
/s/ Larry W. Morris
--------------------------
Larry W. Morris Controller and Chief Accounting
Officer
S-1
<PAGE>
/s/ John Bassett
---------------------------------
John Bassett Director
/s/ Robert D. Carl, III
---------------------------------
Robert D. Carl, III Director
/s/ Gary R. Christopher
---------------------------------
Gary R. Christopher Director
/s/ Martin F. Freedman
---------------------------------
Martin F. Freedman Director
/s/ Stephen W. Herod
---------------------------------
Stephen W. Herod Director
/s/ William C. Hooper, Jr.
---------------------------------
William C. Hooper, Jr. Director
/s/ James T. Shorney
---------------------------------
James T. Shorney Director
/s/ Stuart Strasner
---------------------------------
Stuart Strasner Director
S-2
