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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, 1996
[ ] 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 0-9378
ENEX RESOURCES CORPORATION
(Name of small business issuer in its charter)
Delaware 93-0747806
State or other jurisdiction of (I.R.S. Employer
ncorporation or organization) Identification No.)
800 Rockmead Drive
Three Kingwood Place
Kingwood, Texas 77339
(Address of principal executive offices)(Zip Code)
Issuer's telephone number: (281) 358-8401
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.05 par value
(Title of class)
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 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. $8,596,844
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)
$7,358,075 at March 13, 1997.
Applicable Only to Corporate Registrants
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: At March 13, 1997 -
1,322,729.
Documents Incorporated by Reference:
NONE
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<PAGE>
TABLE OF CONTENTS
FORM 10-KSB ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 1996
ENEX RESOURCES CORPORATION
Item No. Part I Page
- -------- -------- ------
1 Description of Business I-1
2 Description of Property I-3
3 Legal Proceedings I-8
4 Submission of Matters to a Vote of Security Holders I-8
Part II
---------
5 Market for Common Equity and
Related Stockholder Matters II-1
6 Management's Discussion and Analysis
or Plan of Operation II-2
7 Financial Statements and Supplementary Data II-7
8 Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure II-25
Part III
-----------
9 Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a)
of the Exchange Act III-1
10 Executive Compensation III-1
11 Security Ownership of Certain
Beneficial Owners and Management III-1
12 Certain Relationships and Related Transactions III-1
13 Exhibits and Reports on Form 8-K III-1
Signatures S-1
<PAGE>
PART I
Item 1. Description of Business
General
Enex Resources Corporation ("Enex" or the "Company") was incorporated
on August 17, 1979 in Colorado. On June 30, 1992, the Company reincorporated in
Delaware. The Company is engaged in the business of acquiring interests in
producing oil and gas properties and managing oil and gas income limited
partnerships. The Company's operations are concentrated in a single industry
segment.
The Company's principal executive offices are maintained at 800 Rockmead
Drive, Three Kingwood Place, Kingwood, Texas 77339. The telephone number at
these offices is (713) 358-8401. The Company has no regional offices.
As of March 1, 1997, the Company and one of its subsidiaries, Enex
Securities Corporation, employed 23 persons. All employees are engaged on a
full-time basis.
Since 1982, the Company has financed most of its oil and gas
activities through the public sale of interests in limited partnerships formed
to purchase and hold working interests and other operating and non operating
interests in producing oil and gas properties (the "Partnerships"). Until 1986,
most of the Company's ownership of proved reserves was derived through the
purchase of producing properties by the Partnerships. The Company acts as
general partner in, and contributes capital to, each such Partnership. As
general partner, the Company has a 10% interest in the net revenues and gains
generated by properties owned by these Partnerships, which, in most instances,
will increase to 15% should the limited partners receive distributions in total
equal to their aggregate subscriptions. As general partner, the Company is
obligated to periodically offer to repurchase the interests of those limited
partners electing to present their interests to the Company, except for
interests in the Partnerships in Programs I, V and VI.
Prior to 1994, 55 Partnerships commenced operations with aggregate
investor subscriptions of $222.5 million received from 68,678 investors,
including reinvestors. Producing property acquisitions for those Partnerships
totaled approximately $199.6 million.
During 1994, one Partnership commenced operations with aggregate
subscriptions of $1.0 million received from 461 investors, including
reinvestors. Producing property acquisitions for the Partnership totaled
approximately $1.1 million, including $.1 million from borrowed funds. During
1995, four partnerships, with aggregate investor subscriptions totaling $33.0
million, were liquidated. During 1996, two additional partnerships, with
aggregate investor subscriptions totaling $11.8 million, were liquidated.
Aggregate investor subscriptions through December 31, 1996 in all Partnerships
totaled $223.5 million. The properties include interests in more than 12,000
wells in 15 states. In addition to these Partnership activities, the Company
owns and manages oil and gas producing properties for its own account.
Prior to May 1994, the Company marketed interests in the oil and gas
partnerships it sponsored through its subsidiary, Enex Securities Corporation, a
registered broker-dealer and member of the National Association of Securities
Dealers, Inc., and through other registered broker-dealers. As the distributor
of such interests, Enex Securities Corporation received commissions,
substantially all of which were paid to dealers and others, and received other
selling expense allowances.
I-1
<PAGE>
Approximately 59% of the Company's estimated future net revenues from
proved reserves at December 31, 1996 is attributable to its interests in the
Partnerships and approximately 41% is attributable to the properties owned
directly by the Company.
In acquiring properties for its own account, the Company is required
to avoid conflicts of interest with the Partnerships for which it acts as
general partner. Such requirements may restrict the Company's operations for its
own account. The Company is also contingently liable for partnership
obligations.
Competition
The business of exploring for, developing and producing oil and gas
is intensely competitive. The Company competes with companies which have greater
financial resources, larger staffs and labor forces, more equipment for
exploration and longer operating experience than the Company. The oil and gas
industry is dominated by a number of companies with greater assets and resources
than the Company.
Marketing and Prices
The marketing and prices of oil and gas found and produced by the
Company are 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, the availability of adequate 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. In
addition, in recent years there have been surpluses in crude oil and natural gas
supplies which have caused a decline in oil and gas prices.
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 between 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 existence of such regulations has had no material adverse effect
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 operation, capital
expenditures, earnings or competitive position.
I-2
<PAGE>
Recent Tax Laws
In General. The operations of the Company are affected by federal
income tax laws, particularly those provisions of the Internal Revenue Code of
1986, as amended, which provide certain tax benefits to owners of economic
interests in oil and gas properties. In general, the major sources of federal
income tax deduction available to the Company are the deductions for the greater
of cost depletion or percentage depletion, if available, depreciation of
tangible lease and well equipment and the deduction for intangible drilling and
development costs.
The Company is subject to regular income tax at graduated rates up to
a maximum 34% rate. Additionally, the Company may also be subject to the
corporate alternative minimum tax which is imposed at a rate of 20%. Tax
preference items which may cause the Company to incur the alternative minimum
tax include the following:
* the excess of accelerated depreciation over depreciation using the
alternative minimum tax lives
and method
* the limitation on the deduction of net operating losses to 90% of the
Company's alternative minimum taxable income (with the disallowed
portion of the net operating loss carried over to other years)
* 75% of the excess of the Company's adjusted current earnings over its
alternative minimum taxable income (determined without regard to such
adjustment and prior to reduction by operating losses.)
Item 2. Description of Property
Oil and Gas Properties
Until 1986, the Company had acquired most of its interests in
producing oil and gas properties through purchases made by the Partnerships.
Prior to 1994, the Partnerships acquired approximately $199.6 million of
producing oil and gas properties. A total of $1.1 million was spent on
Partnership property acquisitions in 1994. The Company, as general partner, in
most instances, has a 10% interest in the net revenues and gains generated by
properties owned by these Partnerships, which, in most instances, increases to
15% should the limited partners receive distributions in total equal to their
aggregate subscriptions.
In addition to Partnership activities, the Company owns interests in
378 oil and gas productive properties for its own account, and is the operator
of 161 properties. The total properties for its own account and the Partnerships
include interests in more than 12,000 producing wells in 15 states.
I-3
<PAGE>
The producing oil and gas properties in which the Company owns
interests are all located within the United States. The Company's interests in
these properties (including properties in which the Company's interest is
derived through the Partnerships for which it acts as general partner*) at
December 31, 1996 are summarized below:
* As general partner, the Company generally has a 10% interest in the net
revenues and gains generated by the Partnerships' properties, which, in most
instances, increases to 15% should the limited partners receive distributions in
total equal to their aggregate subscriptions. In most instances, the Company has
purchased additional interests in each Partnership which entitle the Company to
an additional 3% to 55% of each Partnership's net income and capital. Unless
otherwise indicated, quantitative information contained in this report regarding
the Company's oil and gas properties, the production therefrom and related data
includes the Company's indirect interest in the properties owned by the
Partnerships.
Developed Acres Undeveloped Acres
Gross Net Gross Net
Working Interests 363,215 12,983 6,529 3,610
Royalty Interests 561,186 2,937 21,045 3,674
"Developed acres" are acres spaced or assigned to productive wells.
"Undeveloped acres" are those leased acres on which wells have not been
drilled or completed to a point that permits the production of commercial
quantities of oil and gas, regardless of whether such acreage contains proved
reserves.
A "gross acre" is an acre in which an interest is owned. The number of
gross acres is the total number of acres in which such interest is owned.
A "net working interest acre" is deemed to exist when the sum of
fractional working interests owned in gross acres equals one. The number of net
working interest acres is the sum of fractional working interests owned in gross
acres expressed as a whole number.
A "net royalty acre" is deemed to exist when the sum of fractional royalty
interests owned in gross acres equals one. The number of net royalty acres is
the sum of fractional royalty interests owned in gross acres expressed as a
whole number.
I-4
<PAGE>
Property Acquisitions
The following acquisitions were made by the Company during 1994:
McBride acquisition. Working interests in forty-one wells located in
Caldwell and Bastrop Counties, Texas, were purchased in two
transactions. The first transaction, for $663,493, was effective
January 1, 1994. The second, for $134,900, was effective May 1, 1994.
Larto Lake acquisition. Working interests in seven oil wells located
primarily in Catahoula Parish, Louisiana, were purchased from a
managed limited partnership effective October 1, 1994 for $199,928.
Florida acquisition. Working interests in three wells located in
Hendry County, Florida, were purchased from a managed limited
partnership for $99,196 effective November 1, 1994.
The following acquisitions were made by the Company during 1995:
East Seven Sisters acquisition. Royalty interests in the Gorman Gas
Unit in Duval County, Texas were purchased from four managed limited
partnerships effective December 1, 1995 for $660,290.
Blair acquisition. Working interests in nine wells located in WWW
Field, Ward County, Texas were purchased from two managed limited
partnerships effective December 1, 1995 for $18,450.
This acquisition was sold in 1996.
Comite acquisition. Overriding royalty interests in four gas wells
located in East Baton Rouge Parish, Louisiana, were purchased from
four managed limited partnerships for $89,880 effective December 1,
1995. This acquisition was sold in 1996.
No acquisitions were made by the Company during 1996.
Net Oil and Gas Production
The following table shows for the years ended December 31, 1996, 1995
and 1994, the approximate production attributable to the Company's oil and gas
interests including interests derived through the Company's interests in the
Partnerships. The figures in the table represent "net production"; i.e.,
production owned by the Company or the Partnerships and produced to the
Company's interest after deducting royalty and other similar interests. All
production occurred in the United States.
1996 1995 1994
---------- ---------- ----------
Crude oil and condensate (Bbls) 177,793 200,778 194,467
Natural gas - leasehold or royalty (Mcf) 1,649,530 1,671,517 1,435,593
Natural gas liquids (Bbls) (1) 34,316 35,388 22,916
Natural gas - gas plant sales (Mcf) (1) 232,778 230,899 143,820
The following table sets forth the Company's average sales price per
barrel of oil, per Mcf of gas, per barrel of natural gas liquids ("NGL"), per
Mcf of gas plant gas sales and average production cost per unit produced for the
years ended December 31, 1996, 1995 and 1994:
1996 1995 1994
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Average sales price per Bbl of crude oil and
condensate $ 19.42 $ 15.82 $ 14.74
Average sales price per Mcf of natural gas 2.32 1.64 1.94
Average production cost per equivalent barrel of
production 6.19 5.49 5.35
Average sales price per Bbl of NGL (1) 13.34 9.07 8.06
Average sales price per Mcf of gas plant gas (1) 1.96 1.51 1.71
Average production cost per equivalent Bbl of
NGL production (1)(2) 9.10 6.89 9.84(3)
(1) Natural gas liquids production and gas plant gas sales were obtained
through gas processing plant ownership rather than through leasehold
ownership.
(2) Includes cost of gas purchased at plants for processing.
(3) Includes the recognition of processing charges related to a lawsuit
brought against the Company's interest in a gas plant. Without such
charges, the average production cost would have been $7.11 per
equivalent Bbl of NGL production in 1994.
The following table shows, as of December 31, 1996, the approximate
number of gross and net producing oil and gas wells in which the Company own
interests, including wells in which the Company's interest is derived through
its interests in the Partnerships:
Productive Oil Wells Productive Gas Wells
Net Working Net Net Working Net
Gross Interest Royalty Gross Interest Royalty
Wells Wells Wells Wells Wells Wells
11,211 61.333 3.427 1,143 51.791 20.799
"Productive wells" are producing wells and wells capable of production,
including shut-in wells.
A "gross well" is a well in which an interest is held. The number of gross
wells is the total number of wells in which an interest is owned.
I-5
<PAGE>
A "net working interest (`W.I.') well" is deemed to exist when the sum of
fractional interests owned in gross W.I. wells equals one. The number of net
W.I. wells is the sum of the fractional interests owned in gross W.I. wells,
expressed as whole numbers and fractions thereof.
A "net royalty well" is deemed to exist when the sum of fractional
interests owned in gross royalty wells equals one. The number of net royalty
wells is the sum of the fractional interests owned in gross royalty wells,
expressed as whole numbers and fractions thereof.
Oil and Gas Reserves
Proved oil and gas reserves reported herein for the Company are based
primarily on engineering studies performed by the Company's engineering staff.
Proved oil and gas reserves reported herein for the Partnerships and for the
Company's share of such Partnership reserves are based primarily on engineering
studies performed 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 revenues, and all reserves may be subject to
revision as more performance data becomes 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 is believed to have caused a significant change in the estimated proved
reserves has occurred since December 31, 1996.
Drilling Activities
In 1996, the Company and its affiliated Limited Partnerships
participated in the drilling of twelve oil wells and six gas wells, all of which
were successful. The Company owns a direct interest in two of the oil wells
drilled - at SW Muldoon field, Fayette County, Texas and North Buck Draw field,
Campbell County, Wyoming. In conjunction with the partnerships, three gas wells
and one oil well were drilled at Sibley field, Webster Parish, Louisian. Two oil
wells were drilled in Oklahoma and the remainder of the wells drilled were
located in various fields in Texas.
In 1995 and 1994, the Company did not participate in any significant
developmental drilling for its own account or as an operator of Partnership
properties.
Current Activities
The Company is continuing to acquire interests in producing oil and
gas properties and to operate properties both for its own account and for its
managed limited partnerships.
Offices
The Company's corporate headquarters are at 800 Rockmead Drive, Three
Kingwood Place, Kingwood, Texas, where it leases 13,354 square feet of office
space for itself and on behalf of Enex Securities Corporation.
I-6
<PAGE>
Item 3. Legal Proceedings
The Company and one of its managed limited partnerships, Enex Program
I Partners, L.P. ("Program I"), in which the Company owns general and limited
partnership interests, were named as parties to a lawsuit filed by Texas Crude,
Inc. ("Texas Crude"). 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.
During the third quarter of 1993 Program I accrued a liability for $504,350
related to this judgement.
The Company 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 Company and Program I. Accordingly, the contingent
liability, initially recognized in 1993, was reversed in 1994 and established a
receivable for $254,588.
There are no other material pending legal proceedings to which the
Company or any of its subsidiaries are a party or to which any of their
properties are subject.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
I-7
<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The principal market where the Company's common stock is traded is the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ").
Price Range of Common Stock
The following table shows the range of closing prices for the common stock in
the over-the-counter market for each quarter during the Company's past two
fiscal years, as reported by the NASDAQ National Market System. The quotations
represent prices in the over-the-counter market between dealers in securities
and do not include retail markup, markdown or commissions and do not necessarily
represent actual transactions.
1996 1995
Period High Low High Low
------------------- -----------------
First Quarter . . . . . . . 8 3/4 7 3/4 10 1/4 8 1/4
Second Quarter . . . . . . 11 3/4 8 10 1/2 8 1/2
Third Quarter . . . . . . . 10 8 1/4 9 1/2 7 3/4
Fourth Quarter . . . . . . 10 1/2 8 1/8 9 7 3/4
Number of Equity Security Holders
Number of Record Holders
(as of March 1, 1997)
Title of Class ---------------------------------
Common Stock ($.05 par value) 919*
- ---------------------------
(*) Includes "nominee" or "street" name holders of record.
Dividends
The Company increased its semi-annual dividend in December of 1996 to $.15 per
common share. As a result, the Company paid dividends totaling $.25 per common
share in 1996. During 1995 and 1994, the Company paid dividends of $.20 per
common share. The payment of future cash dividends will depend on the Company's
earnings, financial condition, capital requirements and other factors, although
the Company intends to continue with regular dividends.
II-1
<PAGE>
Item 6. Managements Discussion and Analysis or Plan of Operation
Selected Financial Data
<TABLE>
<CAPTION>
(Dollar amounts in thousands, except per share data)
Selected Statement of Operations Data 1996 1995 1994 1993 1992
--------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Total revenues $ 8,597 $ 7,950 $ 6,871 $ 6,247 $ 7,880
Earnings before income taxes $ (2,415) $ 870 $ 630 $ 968 $ 1,268
Net income $ (2,322) $ 1,269 $ 1,051 $ 932 $ 1,141
Net income per primary share $ (1.70) $ 0.90 $ 0.75 $ 0.69 $ 0.82
Cash dividend declared per
common share $ 0.25 $ 0.20 $ 0.20 $ 0.19 $ 0.15
Selected Balance Sheet Data
Total assets $ 15,075 $ 18,827 $ 19,236 $ 15,177 $ 17,698
Long-term debt, excluding current
maturities $ - $ - $ 974 $ 259 $ 401
Stockholders' equity $ 12,763 $ 15,462 $ 14,214 $ 13,259 $ 12,343
Stockholders' equity per share $ 9.48 11.65 $ 11.02 $ 10.60 $ 10.04
Statistical:
Cumulative number of limited
partnerships formed 57 57 57 56 56
Cumulative amount of limited
partnership capital raised $ 223,500 $ 223,500 $ 223,500 $ 222,489 $ 222,489
Proved reserves at December 31:
Barrels of oil (000's) 812 907 1,089 633 765
Bcf of gas 12.98 11.57 12.45 10.56 7.79
Standardized measure of discounted
future net cash flows of proved oil
and gas reserves at December 31 $ 24,103 $ 15,179 $ 13,448 $ 10,718 $ 9,280
</TABLE>
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II-2
<PAGE>
In 1996, higher prices from the sale of oil and gas allowed ENEX to increase
revenues and cash flows. In the first quarter of 1996, the Company recognized an
impairment of property of $3,908,370. Absent this impairment, net income was
$1,586,849, an increase of 25% from 1995. At December 31, 1996, ENEX had a
current ratio of 6.30 with no long-term debt.
Liquidity and Capital Resources
Operating activities provided cash flow of $3,020,581 in 1996 as compared to
$2,541,845 in 1995 and $2,341,038 in 1994. The higher cash flows in 1996 and
1995 were primarily the result of higher revenues.
In May 1996, the Company fully repaid its long-term debt with repayments of
$850,000 in the first five months of 1996. The Company repaid a net of
$1,074,000 of its long-term debt in 1995. In 1994, the Company borrowed a net
$974,127 of long-term debt in order to finance the purchase of oil and gas
properties and additional interests in its managed limited partnerships.
In 1996, proceeds from the sales of property added $555,557 to the Company's
cash flow. In 1995 and 1994, proceeds from the sale of property added $991,623
and $45,392, respectively. Receipts collected on notes receivable from managed
limited partnerships added $16,902, $49,816 and $310,312 in 1996, 1995 and 1994,
respectively.
A significant portion of ENEX's cash flow has continued to be reinvested in oil
and gas properties. A total of $1,333,111, $1,927,925 and $2,990,574 was used
for the acquisition and development of oil and gas properties during 1996, 1995
and 1994, respectively. In 1996, ENEX drilled eighteen developmental oil and gas
wells, including, wells in the Sibley Field, Webster Parish, Louisiana, which
added 750,000 MCF of gas equivalent to reserves. In 1995, ENEX acquired royalty
interests in the Gorman gas unit in Duval County, Texas, overriding royalty
interests in four gas wells located in East Baton Rouge Parish, Louisiana and
working interests in nine wells located in WWW Field, Ward County, Texas from
managed limited partnerships for $660,290, $89,880 and $18,450, respectively. In
1994, ENEX acquired over 320,000 equivalent barrels of oil reserves through the
purchase of interests in managed limited partnerships for $1,271,377. The
Company also obtained working interests in 41 wells in McBride Field, in
Caldwell and Bastrop Counties, Texas for $798,393. These wells, which are
operated by the Company, have development potential which will allow the Company
to increase future production. The Company also purchased working interests in
the Larto Lake and Florida acquisitions in 1994 for $199,928 and $99,196,
respectively.
ENEX increased its semi-annual dividend to its shareholders in December 1996
from $.10 per share to $.15 per share. The Company utilized $345,542 of cash
flow to pay $.25 per share of dividends in 1996. In 1995 and 1994, the Company
utilized $268,200 and $259,681, respectively, to pay dividends of $.20 per
share.
In 1996, the Company reinstituted its stock repurchase program, utilizing
$333,250 to purchase 34,494 shares of its common stock. In 1994, the Company
utilized $171,845 to purchase 19,161 shares of its common stock in 1994.
As a result of the higher net income and reduction of debt, working capital
increased to $3,969,402 at December 31, 1996, from $2,296,842 at December 31,
1995. At December 31, 1996, the Company's current ratio was 6.30 and it had no
long-term debt.
II-3
<PAGE>
Results of Operations
In 1996, the Company recorded a loss of $2,321,521 or $1.70 per share. This loss
was the result of a $3,908,370 non-recurring impairment recognized in 1996.
Excluding the impairment, the Company recorded net income of $1,586,849. This
compares to net income of $1,269,400 in 1995 and $1,051,476 in 1994. Excluding
the impairment, earnings per share were $1.16 in 1996 as compared to $.90 in
1995 and $.75 in 1994. The increase in net income in 1996 from 1995 was
primarily due to higher oil and gas revenues. The increase in net income in 1995
as compared to 1994 was primarily the result of lower general and administrative
expenses and a larger gain from the sale of properties.
Oil, natural gas and gas plant sales were $8,202,331 in 1996, $6,594,438 in 1995
and $6,082,700 in 1994. Sales increased by $1,607,893 or 24% in 1996 from 1995.
Oil sales increased by $277,366 or 9% in 1996 from 1995. A 23% increase in the
average oil sales price increased oil by $640,966. This increase was partially
offset by an 11% decrease in oil production. Gas sales increased by $1,084,708
or 39%. A 41% increase in the average gas sales price increased sales by
$1,120,862. This increase was partially offset by a 1% decrease in gas
production. Gas plant sales increased by $245,819 or 37%. A 38% increase in the
average sales price of gas plant products increased sales by $252,701. This
increase was partially offset by a 1% decrease in the production of gas plant
products. The decreases in production were primarily the result of natural
production declines, partially offset by the development of eighteen oil and gas
wells in 1996. The increases in average sales prices correspond with higher
prices in the overall market for the sale of oil, gas and gas plant products.
Oil, natural gas and gas plant gas sales increased by $511,738 or 8% from 1994
to 1995. Oil sales increased $309,866 or 11% in 1995 from 1994. A 3% increase in
oil production increased sales by $93,024. A 7% increase in average oil sales
prices increased sales by an additional $216,848. Gas sales decreased by $47,349
or 2% in 1995 from 1994. This decrease was primarily the result of a 16%
decrease in average gas sales prices, which reduced sales by $501,455. The lower
prices were partially offset by a 16% increase in gas production. Gas plant
sales increased by 59% or $249,187. A 58% increase in gas plant production
increased sales by $242,067. A 1% increase in the average gas plant prices
increased sales by an additional $7,120. The decrease in oil production was
primarily a result of natural production declines. The increases in natural gas
and gas plant gas production were primarily the result of the recognition of the
minority interest of Enex Program I Partners, L.P. ("Program I") for the entire
year in 1995, partially offset by natural production declines. The changes in
average sales prices correspond with changes in the overall market for the sale
of oil, gas and gas plant products.
Other revenues were a net $88,259 in 1996 as compared with $687,401 in 1995 and
$757,832 in 1994. Such revenues included rig rental revenues of $153,346,
$106,144 and $24,885 in 1996, 1995 and 1994, respectively, and gain recognized
from the early receipt of notes receivable of $393,980 and $201,000 in 1995 and
1994, respectively. Also included in the 1996 amount is a net loss on the
liquidation of managed partnerships totaling $125,015. Included in the 1995
amount is mineral lease rental income of $105,686 to lease 2,113.73 acres in San
Augustine County, Texas. Commission fee income of $45,089 was recorded in 1994.
The decrease in other revenues from 1995 to 1996 was primarily the result of the
recognition, in 1996, of the loss arising from the liquidation of managed
partnerships, and the gain recognized in 1995, from the early receipt of
receivables. The decrease in other revenues from 1994 to 1995 was primarily due
to the reversal of a litigation contingency accrual, which was initially
recorded in 1993, and the recognition of a related receivable, plus accrued
interest, from an appellate court verdict which was rendered in December 1994 in
favor of one of the Company's managed limited partnerships. The Company's share
of the contingency reversal and receivable increased other income by $421,065 in
1994. See Note 8 of the Notes to Consolidated Financial Statements for further
information. The receipt of unrecognized notes receivable
II-4
<PAGE>
was accelerated in 1995 as a result of the liquidation of four managed limited
partnerships. As a result, there was no longer an unrecognized notes receivable
as of December 31, 1995.
General and administrative expenses increased to $1,826,762 in 1996 from
$1,689,742 in 1995. In 1994, such expenses were $1,751,773. This represents an
increase of $137,020 or 8% from 1995 to 1996. The increase was primarily the
result of the additional interests acquired in managed limited partnerships in
1996. The decrease from 1994 to 1995 was primarily the result of lower employee
compensation and legal expenses in 1995.
Lease operating expenses were $2,490,701 in 1996 as compared to $2,322,509 in
1995 and $2,009,175 in 1994. Lease operating expenses increased by $168,192 or
7% from 1995 to 1996. The increases were primarily a result of the purchase of
additional interests in limited partnerships coupled with work over expenses
incurred on the Speary and Binger acquisitions in 1996. Lease operating expenses
increased by $313,334 or 16% from 1994 to 1995. This increase was primarily the
result of operating costs incurred on properties and partnership interests
acquired during 1994. The properties acquired during 1994 (McBride, Larto Lake
and Florida acquisitions) added $146,762 to lease operating expenses, while the
additional partnership interests acquired in 1994 and 1995 added approximately
$250,000.
Depletion, depreciation and amortization expense ("DD&A") was $1,338,602 in
1996, $1,909,857 in 1995 and $1,517,278 in 1994. DD&A decreased by $571,255 or
30% from 1995 to 1996. A 26% decrease in the depletion rate reduced DD&A by
$476,636. The changes in production, noted above, reduced DD&A by an additional
$94,619. The decrease in the depletion rate was primarily the result of the
recognition of a nonrecurring impairment of $3,908,370 in the first quarter of
1996, coupled with upward revisions of the oil and gas reserves during December
1996. DD&A increased by $392,579 or 26% from 1994 to 1995. The changes in
production, noted above, increased DD&A by $229,246. A 9% increase in the
depletion rate increased DD&A by an additional $163,333. The increase in the
depletion rate was primarily the result of the acquisition of properties with a
relatively higher depletion rate coupled with a downward revision of the gas
reserves during 1995, partially offset by an upward revision of the oil reserves
during 1995.
In 1996, the Company earned $35,039 of net interest income. The company incurred
$117,062 of net interest expense in 1995 and $116,858 in 1994. Net interest
income increased in 1996 from 1995 and net interest expense decreased from 1994
to 1995 due to the repayment of long-term debt.
The Company recognized an income tax credit of $92,981, $399,658 and $421,125 in
1996, 1995 and 1994, respectively. The income tax credits represent the
recognition of a portion of the Company's deferred tax asset that is expected to
be realized in future years. The credit recognized in 1994 was also a result of
the Company filing amended returns for $127,034 to reflect additional expenses
allowed to the Company in prior years and from the carry back of a tax net
operating loss of $133,702. At December 31, 1996, the Company had a substantial
deferred tax asset of $5,394,190. Due to uncertainties inherent in the oil and
gas market, a valuation allowance reserved all but $741,411 of the asset.
II-5
<PAGE>
Future Outlook
In 1996, ENEX generated higher revenues and cash flows as result of a surge in
oil and gas prices in the latter half of the year. This allowed ENEX to entirely
repay its debt outstanding of $850,000 at January 1, 1996 and reinstate its
stock buy back program. In November, the Board of Directors authorized the
Company to purchase an additional 50,000 shares of its common stock. The debt
reduction further strengthened ENEX's financial position as evidenced by the
Company's current ratio of 6.30 to 1.0.
During 1995, four managed limited partnerships, which were operating at marginal
levels were liquidated. In 1996, two additional managed limited partnerships
were liquidated. A major reorganization of the remaining managed limited
partnerships is planned for 1997. This restructuring will allow us to revamp
administrative processes, yielding further reductions in general and
administrative expenses.
On August 9, 1996, the Company submitted preliminary proxy material to the
Securities and Exchange Commission ("SEC") with respect to a proposed
consolidation of thirty-four of the Company's managed limited partnerships. On
November 13, 1996, January 9, 1997 and February 27, 1997, the Company submitted
amended preliminary proxy material to the SEC with respect to this
consolidation. The terms and conditions of the proposed consolidation are set
forth in such preliminary proxy material.
ENEX continues to evaluate potential joint ventures or business combinations in
order to maximize shareholder value. Cash flow will continue to be used to
acquire additional producing properties. The Company has evaluated several
drilling locations for further development. While the Company has no other
material commitments for capital, a line of credit is maintained which allows
the Company to respond to acquisition and investment opportunities.
II-6
<PAGE>
Item 7. Financial Statements and Supplementary Data
INDEPENDENT AUDITORS' REPORT
Enex Resources Corporation:
We have audited the accompanying consolidated balance sheets of Enex Resources
Corporation and its subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of Enex Resources
Corporation's management. 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 consolidated financial statements present fairly, in all
material respects, the financial position of Enex Resources Corporation and
subsidiaries at December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1996 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Houston, Texas
March 18, 1997
II-7
<PAGE>
ENEX RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1996 AND 1995
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1996 1995
------------------ -----------------
CURRENT ASSETS:
<S> <C> <C>
Cash and certificates of deposit $ 1,862,281 $ 1,007,144
Accounts receivable:
Managed limited partnerships 522,283 756,741
Oil and gas sales 1,242,923 862,529
Joint owner 178,291 325,816
Receivable from property sales - 123,202
Notes receivable from managed limited
partnerships - 16,902
Federal income tax receivable - 98,614
Prepaid expenses and other current assets 806,443 697,664
Deferred tax asset 105,464 112,174
------------------ -----------------
Total current assets 4,717,685 4,000,786
------------------ -----------------
PROPERTY:
Oil and gas properties (successful efforts
accounting method) Proved mineral interests
and related equipment and facilities:
Direct ownership 6,940,811 8,134,074
Derived from investment in managed
limited partnerships 9,130,403 10,729,113
Furniture, fixtures and other (at cost) 350,019 341,507
------------------ -----------------
Total property 16,421,233 19,204,694
Less accumulated depreciation,
depletion and amortization 7,988,452 7,250,769
------------------ -----------------
Property, net 8,432,781 11,953,925
------------------ -----------------
OTHER ASSETS:
Receivable from managed limited partnerships 1,153,267 2,171,636
Deferred tax asset 635,947 536,256
Other accounts receivable 131,004 156,252
Deferred organization expenses and other 4,694 8,233
------------------ -----------------
Total other assets 1,924,912 2,872,377
------------------ -----------------
TOTAL $ 15,075,378 $ 18,827,088
================== =================
</TABLE>
See accompanying notes to consolidated financial statements.
- -----------------------------------------------------------------------------
II-8
<PAGE>
ENEX RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1996 AND 1995
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
-------------------- -------------------
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 748,283 $ 853,944
Current portion of long-term debt - 850,000
-------------------- -------------------
Total current liabilities 748,283 1,703,944
-------------------- -------------------
COMMITMENTS AND
CONTINGENT LIABILITIES - -
-------------------- -------------------
TOTAL LIABILITIES 748,283 1,703,944
-------------------- -------------------
MINORITY INTEREST 1,564,058 1,660,932
-------------------- -------------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value;
5,000,000 shares authorized;
no shares issued
Common stock, $.05 par value;
10,000,000 shares authorized;
1,673,359 shares issued at December 31, 1996
and 1,642,859 shares issued at December 31, 1995 83,668 82,143
Additional paid-in capital 10,128,300 9,944,967
Retained earnings 4,374,710 7,041,773
Less cost of treasury stock;
326,830 shares at December 31, 1996 and
315,136 shares at December 31, 1995 (1,823,641) (1,606,671)
-------------------- -------------------
TOTAL STOCKHOLDERS' EQUITY 12,763,037 15,462,212
-------------------- -------------------
TOTAL $ 15,075,378 $ 18,827,088
==================== ===================
</TABLE>
See accompanying notes to consolidated financial statements.
- ------------------------------------------------------------------------------
II-9
<PAGE>
ENEX RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
------------------ ---------------- ------------------
REVENUES:
<S> <C> <C> <C>
Oil and gas sales $ 7,286,738 $ 5,924,664 $ 5,662,113
Gas plant sales 915,593 669,774 420,587
Gain from sale of property 258,786 614,758 2,812
Other revenues 88,259 687,401 757,832
Interest income 47,468 53,776 27,594
------------------ ---------------- ------------------
Total revenues 8,596,844 7,950,373 6,870,938
------------------ ---------------- ------------------
EXPENSES:
General and administrative 1,826,762 1,689,742 1,751,773
Lease operating and other expenses 2,490,701 2,322,509 2,009,175
Gas purchases and
plant operating expenses 664,990 503,438 460,207
Production taxes 426,731 368,014 334,576
Depreciation, depletion and amortization 1,338,602 1,909,857 1,517,278
Impairment expense 3,908,370 - -
Interest expense 12,429 170,838 144,452
------------------ ---------------- ------------------
Total expenses 10,668,585 6,964,398 6,217,461
------------------ ---------------- ------------------
Earnings (loss) before minority interest
and income taxes (2,071,741) 985,975 653,477
MINORITY INTEREST (342,761) (116,233) (23,126)
------------------ ---------------- ------------------
Earnings (loss) before income taxes (2,414,502) 869,742 630,351
------------------ ---------------- ------------------
INCOME TAX CREDIT
Current - - (260,736)
Deferred (92,981) (399,658) (160,389)
------------------ ---------------- ------------------
Net income tax credit (92,981) (399,658) (421,125)
------------------ ---------------- ------------------
NET INCOME (LOSS) $ (2,321,521) $ 1,269,400 $ 1,051,476
================== ================ ==================
Primary Earnings (Loss) per Share $ (1.70) $ 0.90 $ 0.75
================== ================ ==================
Fully Diluted Earnings (Loss) per Share $ (1.70) $ 0.90 $ 0.75
================== ================ ==================
</TABLE>
See accompanying notes to consolidated financial statements.
- ----------------------------------------------------------------------------
II-10
<PAGE>
ENEX RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional
---------------------------
Paid-in Retained Treasury
Shares Amount Capital Earnings Stock Total
------------- ------------ ------------ ---------------- ----------------- ------------
BALANCE,
<S> <C> <C> <C> <C> <C> <C>
January 1, 1994 1,599,859 $79,993 $9,630,749 $5,248,778 ($1,700,165) $13,259,355
Exercise of stock options 28,000 1,400 89,850 91,250
Reissue 30,610 shares of
Treasury stock through SPP 94,018 148,939 242,957
Purchase of 19,161 shares
of Treasury stock (171,845) (171,845)
Payment of $.20 per share
cash dividend (259,681) (259,681)
Net income 1,051,476 1,051,476
------------- ------------ ------------ ---------------- ----------------- ------------
BALANCE,
December 31, 1994 1,627,859 81,393 9,814,617 6,040,573 (1,723,071) 14,213,512
Exercise of stock options 15,000 750 45,750 46,500
Reissue 22,800 shares of
Treasury stock through SPP 84,600 116,400 201,000
Payment of $.20 per share
cash dividend (268,200) (268,200)
Net income 1,269,400 1,269,400
------------- ------------ ------------ ---------------- ----------------- ------------
BALANCE,
December 31, 1995 1,642,859 82,143 9,944,967 7,041,773 (1,606,671) 15,462,212
Exercise of stock options 30,500 1,525 122,475 124,000
Reissue 22,800 shares of
Treasury stock through SPP 60,858 116,280 177,138
Purchase of 34,494 shares
of Treasury stock (333,250) (333,250)
Payment of $.25 per share
cash dividend (345,542) (345,542)
Net loss (2,321,521) (2,321,521)
------------- ------------ ------------ ---------------- ----------------- ------------
BALANCE,
December 31, 1996 1,673,359 $83,668 $10,128,300 $4,374,710 ($1,823,641) $12,763,037
============= ============ ============ ================ ================= ============
</TABLE>
See accompanying notes to consolidated financial statements.
- ------------------------------------------------------------------------
II-11
<PAGE>
ENEX RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
------------------ ------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss) $ (2,321,521) $ 1,269,400 $ 1,051,476
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation, depletion and amortization 1,338,602 1,909,857 1,517,278
Impairment of property 3,908,370 - -
Increase in deferred tax asset (92,981) (399,677) (160,389)
Noncash expense from stock purchase plan 177,138 201,000 242,957
Net gain on sale of property (258,786) (614,758) (2,812)
Minority interest share of net income after distributions (107,126) (226,600) 23,126
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 860,422 1,000,933 (377,758)
(Increase) in prepaid expenses and other assets (337,372) (277,380) (152,847)
Increase (decrease) in accounts payable (146,165) (320,930) 247,900
(Decrease) in other liabilities - - (47,893)
------------------ ------------------ ------------------
Net cash provided by operating activities 3,020,581 2,541,845 2,341,038
------------------ ------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 555,557 991,623 45,392
Property additions (1,333,111) (1,927,925) (2,990,574)
Decrease in notes receivable from
managed limited partnerships 16,902 49,816 310,312
------------------ ------------------ ------------------
Net cash used by investing activities (760,652) (886,486) (2,634,870)
------------------ ------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt - 260,000 2,805,583
Repayment of long-term debt (850,000) (1,334,000) (1,831,456)
Purchase of treasury stock (333,250) - (171,845)
Proceeds from exercise of stock options 124,000 46,500 91,250
Payment of cash dividend (345,542) (268,200) (259,681)
------------------ ------------------ ------------------
Net cash provided (used) by financing activities (1,404,792) (1,295,700) 633,851
------------------ ------------------ ------------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 855,137 359,659 340,019
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 1,007,144 647,485 307,466
------------------ ------------------ ------------------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 1,862,281 $ 1,007,144 $ 647,485
================== ================== ==================
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 12,429 $ 176,089 $ 139,201
Income taxes $ - $ - $ -
Noncash transaction - Sale of oil and gas property $ - $ 123,202 $ -
</TABLE>
See accompanying notes to consolidated financial statements.
- -----------------------------------------------------------------------------
II-12
<PAGE>
ENEX RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
- ------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General - Enex Resources Corporation (the "Company") acquires interests
in producing oil and gas properties and sponsors and manages oil and gas
income limited partnerships. At December 31, 1996, the Company served as
managing general partner for 39 publicly offered limited partnerships of
Enex Program I Partners, L.P., Enex Oil & Gas Income Programs II, III,
IV, V, VI, Enex Income and Retirement Fund, Enex 88-89 Income and
Retirement Fund, and Enex 90-91 Income and Retirement Fund
(collectively, the "Partnerships"). The Partnerships own $142 million,
at cost, of proved oil and gas properties in which the Company generally
has a 10% interest as the general partner in addition to its
proportional interest as a limited partner which ranges from 5% to 55%.
Accumulated depreciation and depletion for such oil and gas properties
at December 31, 1996 totaled $128 million.
In addition to Partnership activities, the Company owns interests in 378
productive oil and gas properties for its own account, and is the
operator of 161 properties. The total properties managed for its own
account and the Partnerships include interests in more than 12,000
producing wells in 15 states.
Principles of Consolidation - The accompanying consolidated financial
statements include the accounts of the Company, its wholly owned
subsidiaries, Enex Securities Corporation and Gulf-Tex Maintenance
Corporation and Enex Program I Partners, L.P., and the Company's pro
rata share of the assets, liabilities, revenues and expenses of the
managed limited partnerships in which it participates as the general
partner. The Company uses pro rata consolidation for those partnerships
in which it owns less than a 50% interest and fully consolidates Enex
Program I Partners, L.P. in which it owns greater than 50% interest. The
equity of minority partners' in Enex Program I Partners, L.P. is shown
in the consolidated balance as "minority interest'. All intercompany
balances and transactions have been eliminated in consolidation.
Uses 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.
Accounts Receivable from Joint Owners - The General Partner, as operator
for jointly-owned properties, bills joint owners monthly for cost
expended by the General Partner for the joint owners' share of operating
costs and capital expenditures.
Other Accounts Receivable - The General Partner records, in
consolidation, distributions to limited partnerships which exceed their
pro rata ownership percentage as other accounts receivable.
Distributions to limited partners exceed their pro rata ownership
percentage when distributions to the general partner have been
curtailed.
II-13
<PAGE>
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. The costs of
unsuccessful exploratory wells are charged to earnings. Capitalized
costs are amortized on the units-of-production method based on
production and estimated total proved reserves. The Company has not
capitalized any internal costs into property.
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. This standard requires the evaluation of oil and gas assets
on an individual property basis versus a company-wide basis. Prior to
this pronouncement, the Company assessed properties on an aggregate
basis. Upon adoption of SFAS 121, the Company began assessing properties
on an individual basis, wherein total capitalized costs may not exceed
the property's fair market value. The fair market value of each property
was determined by H.J. Gruy and Associates, Inc. ("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 implemented SFAS 121 and recognized a
non-cash impairment provision of $3,908,370 for certain oil and gas
properties and other assets 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.
Furniture, Fixtures and Other - The Company records expenditures for
furniture and fixtures at cost. Expenditures for improvements are
capitalized. Expenditures for maintenance and repairs are charged to
operations as incurred. The Company provides for depreciation of its
furniture, fixtures and other equipment using the straight-line method
over an estimated useful life not to exceed five years.
Deferred Organization Expenses - The Company's pro rata share of the
organization costs of the managed limited partnerships is being
amortized on a straight-line basis over a five-year period.
Commission Income - Through April 30, 1994, Enex Securities Corporation
("Securities") marketed interests in the Partnerships. Securities earned
a commission of up to 10% of solicited subscriptions of which up to 8%
was reallowed to soliciting dealers. Commission income was recognized
upon the attainment of a $1 million level of subscriptions for
Partnership interests and is presented in the accompanying consolidated
financial statements net of reallowed commissions of approximately
$92,000 in 1994. Net commission income is included in other revenues in
the Consolidated Statements of Income.
Income Taxes - The Company uses the asset and liability method to
account for deferred income taxes, which focuses on the future tax
return consequences of temporary differences in determining the deferred
tax balances. Under this method, the deferred tax expense is calculated
as the change in the deferred tax balance sheet accounts during the
period. Temporary differences are measured at the balance sheet date and
are valued in accordance with current tax laws. See Note 4 for more
information.
II-14
<PAGE>
Cash Flows - The Company presents 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.
Reclassifications - Certain reclassifications have been made to the
prior year balances to conform to current year presentation.
Income Per Common Share - Primary and fully diluted earnings per common
share are based on the weighted average number of shares of common stock
and common share equivalents outstanding during the year. Common share
equivalents include common stock options. Common share equivalents are
not included in the number of shares for 1996 because they are
antidilutive. The weighted average number of shares used to compute
primary earnings per common share was:
Shares
-----------------
1996 1,365,008
1995 1,416,474
1994 1,397,870
Managed Limited Partnerships - The Company serves as the general partner
to the Partnerships and also participates as a limited partner to the
extent of limited partnership interests purchased directly by the
Company.
The Company is generally entitled as general partner to 10% of
partnership production revenues less 10% of partnership expenses, other
than the costs of acquiring partnership properties. In most instances,
at such time as the limited partners receive distributions in total
equal to their aggregate subscriptions, the Company is entitled to 15%
of such net revenues. The Company recognizes its share of these net
revenues as they are sold.
If, after certain time periods, the aggregate purchase price of the
interests in certain programs plus cumulative distributions to the
limited partners does not equal limited partner subscriptions (the
"Deficiency"), the general partner will forego its 10% share of such
Program's net revenues. The foregone net revenues will be allocated to
the limited partners until such time as no Deficiency exists. During
1994, 1995 and 1996, the general partner's 10% share of Program II net
revenues, totaling $41,119, $64,046 and $84,621, respectively, was
allocated to the limited partners. During 1994, 1995 and 1996, the
general partner's 10% share of Program I net revenues, totaling $31,830,
$99,154 and $132,175, respectively, was allocated to the limited
partners.
In addition to the above, the Company is reimbursed for direct
expenditures made on behalf of the partnership operations. Overhead
billed to the managed limited partnerships, which is treated as a
reduction in general and administrative expenses, was $1,818,685,
$1,783,373, and $2,240,194 in 1996, 1995 and 1994, respectively.
II-15
<PAGE>
2. COSTS REIMBURSABLE BY AND RECEIVABLE FROM
MANAGED LIMITED PARTNERSHIPS
Certain startup and ongoing general and administrative costs are
incurred by the Company on behalf of its managed limited partnerships.
These costs are allocated to the partnerships in accordance with the
Partnership Agreements and are reimbursed to the Company over a period
generally not to exceed five years. The anticipated receipt of such
receivables have been scheduled in accordance with projected future net
revenues and based upon historical collections. The receivables have
been classified as current or non-current in accordance with such
projections.
3. DEBT
The long-term debt at December 31, 1995 consisted of a $850,000 loan
from a bank under a $2.8 million revolving line of credit collaterized
by substantially all of the assets of the Company. The bank loan bore
interest at an average rate of 9.63% and 9.00% in 1995 and the first
five months of 1996, respectively. The loan was completely repaid in the
first five months of 1996.
The long-term debt at December 31, 1994 consisted of a $1,924,000 loan
from a bank under a $5.925 million revolving line of credit collaterized
by substantially all of the assets of the Company. The bank loan bore
interest at an average rate of 8.16% in 1994. In 1995, the Company
repaid a net $1,074,000.
4. INCOME TAXES
Total income tax expense for 1996, 1995 and 1994 was different from the
amount computed by applying the federal statutory income tax rate of 34%
to earnings before income taxes for the following reasons:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- --------------- ---------------
<S> <C> <C> <C>
Computed statutory tax expense $ (820,931) $ 295,712 $ 214,319
Increase (reduction) in taxes resulting from:
Increase (reduction) in
unrecognized deferred tax asset 726,447 (697,250) (624,317)
Other, net 1,503 1,880 (11,127)
----------------- --------------- ---------------
Income tax credit $ (92,981) $ (399,658) $ (421,125)
================= =============== ===============
The components of income tax credit are as follows:
1996 1995 1994
--------------- --------------- ----------------
Income taxes currently payable (receivable)$ - $ - $ (260,736)
Deferred income credit (92,981) (399,658) (160,389)
--------------- --------------- ---------------
Income tax credit $ (92,981) $ (399,658) $ (421,125)
=============== =============== ===============
</TABLE>
II-16
<PAGE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amount used for income tax
purposes. The tax effects of significant items comprising the Company's
net deferred tax asset as of December 31, 1996 and 1995 were as
follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
--------------------- -------------------
Difference between tax and book net property
<S> <C> <C>
basis $ 333,839 $ 4,613
Difference between basis in managed limited
partnerships for financial reporting purposes and
income tax purposes 4,000,344 4,016,570
Intangible drilling costs which remain capitalized
for financial reporting purposes which were
deducted for federal income tax purposes (85,485) (74,483)
Net operating loss carry forward 1,129,347 719,741
(expires 2009-2011)
Allowance for bad debts not yet recognized
for income tax purposes 61,997 -
Timing difference from lawsuit contingency (51,471) (50,683)
Other, net 5,619 (40,996)
------------ ------------
Gross deferred tax asset 5,394,190 4,574,762
Valuation allowance (4,652,779) (3,926,332)
------------ ------------
Net deferred tax asset recognized $ 741,411 $ 648,430
============ ============
</TABLE>
The difference in basis of the managed limited partnerships is
primarily the result of differences in the underlying properties of the
partnerships. The valuation allowance reserves the net deferred tax
asset due to uncertainties inherent in the oil and gas market. The
Company estimated the amount of future tax benefit to be received from
the deferred tax asset using estimated future net revenues and future
tax expenses. The remaining amount of the gross deferred tax asset is
reserved by a valuation allowance. The valuation allowance increased by
$726,447 in 1996. The valuation allowance decreased by $697,250 in
1995.
II-17
<PAGE>
5. NOTES RECEIVABLE FROM MANAGED LIMITED PARTNERSHIPS
On December 3, 1990, a managed limited partnership borrowed $191,577
from the Company in order to finance work over costs. The Company
received monthly principal payments from the partnership on the
resulting demand note plus interest at the Company's borrowing rate of
prime plus three-fourths of one percent on the unpaid principal. The
note was repaid in 1994.
On August 8, 1991, in conjunction with the EAC Acquisition, the Company
acquired notes receivable from certain partnerships. The notes, which
accrued interest at prime plus three-fourths of one percent, were
recorded at their discounted realizable value. The gain recognized from
the early receipt of notes was $393,989 and $201,000 in 1995, and 1994,
respectively.
In 1993, five managed limited partnerships borrowed a total of $438,168
from the Company to repay bank debt and finance work over costs. The
Company received monthly principal payments from the partnerships on
the resulting demand notes plus interest at the Company's borrowing
rate of prime plus three-fourths of one percent on the unpaid
principal. In 1994, an additional $39,281 was borrowed by two limited
partnerships to finance work over costs. The notes were completely
repaid in the first half of 1995.
On December 29, 1994, in order to partially finance the purchase of a
property acquisition, a managed limited partnership borrowed a net
$60,572 from the Company. The resulting note receivable bore interest
at the Company's borrowing rate of prime plus three-fourths of one
percent, or a weighted average of 9.76% and 8.35% during 1996 and 1995,
respectively. Principal payments of $31,049 and $29,523 were received
on the note receivable in 1995 and 1996, respectively. The note was
completely repaid in the fourth quarter of 1996.
6. COMMON STOCK OPTIONS
The Company has an incentive stock option plan and a nonqualified stock
option plan, which authorize the issuance of options to purchase up to
362,000 shares of common stock to directors, officers and key
employees. The Company has also granted options not covered by a plan.
The options expire at various dates through 2003 and are exercisable at
prices ranging from $3 - $8 per share. The exercise price of any
options granted may not be less than the fair market value of the
Company's stock at the date of the grant. The following table
summarizes the Company's stock option activity:
<TABLE>
<CAPTION>
1996 1995 1994
Number Average Number Average Number Average
of shares price of shares price of shares price
-------------- ------------- -------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year 194,000 $ 4.81 209,000 $4.69 237,000 $ 4.52
Exercised (30,500) 4.07 (15,000) 3.10 (28,000) 3.26
-------------- ------------- -------------- ------------- -------------- --------------
Outstanding, end of year 163,500 $ 4.95 194,000 $ 4.81 209,000 $ 4.69
============== ============= ============== ============= ============== ==============
</TABLE>
The Company recognizes compensation expense with respect to any
nonqualified option pursuant to Accounting Principles Board (APB)
Opinion No. 25 as the difference between the market price per share and
the option price per share on the date of the grant. Accordingly, no
compensation expense has been recognized in connection with the
issuance of options, since the option price per
II-18
<PAGE>
share has equalled the market price per share on all options granted.
The Company does not intend to adopt Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" which requires an
alternative method for measuring compensation cost. The provisions of
the statement, if adopted, would not have affected reported amounts for
net income (loss) per share in 1996 and 1995, since no options were
granted.
On May 19, 1992, the Company's shareholders approved the Enex Resources
Corporation Employee Stock Purchase Program (the "SPP"). All full-time
employees, officers and directors were eligible for participation in
the SPP, which provided for the monthly contribution of shares of the
Company's common stock equal to 50% of a participant's open market
purchases of the Company's common stock for the preceding month (the
"Stock Contribution"). The Stock Contribution was limited to a maximum
of 2,500 shares per participant per SPP year. Each Stock Contribution,
although immediately vested, was held in escrow for a six month holding
period prior to its distribution to the participant. During 1996, 1995
and 1994, 22,800, 22,800 and 30,610 shares, respectively, were
contributed to participants in the SPP. The Company recognized an
expense of $177,138, $201,000 and $242,957 from the SPP in 1996, 1995
and 1994, respectively.
7. LEASE COMMITMENTS
The Company is the lessee under noncancelable operating leases for
office space and equipment. The following is a schedule of the
Company's remaining future rental requirements under the leases as of
December 31, 1996:
1997 $ 174,251
1998 13,368
1999 8,912
--------------
Total payments required $ 196,531
--------------
Rent expense for all operating leases was $213,459, $211,038 and
$254,004 for the years ended December 31, 1996, 1995 and 1994,
respectively.
8. LITIGATION SETTLEMENTS
The Company and one of its managed limited partnerships, Enex Program I
Partners, L.P. ("Program I"), in which the Company owns general and
limited partnership interests, were named as parties to a lawsuit filed
by Texas Crude, Inc. ("Texas Crude"). 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. During the third quarter of
1993 Program I accrued a liability for $504,350 related to this
judgement.
The Company 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 Company and Program I.
Accordingly, the contingent liability, initially recognized in 1993,
was reversed in 1994 and established a receivable for $254,588.
II-19
<PAGE>
9. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is committed to offer to repurchase the limited partners'
interests in its managed limited partnerships formed under the Programs
(except for Programs I,V and VI) at annual intervals. The purchase
price is based primarily on reserve reports prepared by independent
petroleum engineers, reduced by a risk factor. Generally, for the first
three annual purchase offers after the formation of a partnership, the
Company's annual repurchase obligation is limited to the lesser of 10%
to 25% of initial partnership subscriptions or $1,000,000 per
partnership. As of December 31, 1996, such commitments totaled
$3,952,698. During 1996, 1995 and 1994, the Company paid cash to
repurchase limited partner interests as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- ---------------- ----------------
<S> <C> <C> <C>
Program I $ 56,189 $ 43,409 $ 750,019
Program II 50,268 23,607 130,441
Program III 42,748 8,544 66,061
Program IV 10,166 7,847 98,351
Program V 36,870 13,875 63,730
Program VI 4,902 393 7,222
Income and Retirement Fund 26,911 12,232 73,264
88-89 Income and Retirement Fund 6,520 5,987 43,022
90-91 Income and Retirement Fund 19,694 10,653 39,267
--------------- ---------------- ----------------
TOTAL $ 254,268 $ 126,547 $ 1,271,377
=============== ================ ================
</TABLE>
As general partner, the Company is contingently liable for all debts
and actions of the managed limited partnerships. However, in
management's opinion, the existing assets of the limited partnerships
are sufficient to satisfy any such partnership indebtedness.
The Company has an employment agreement with its founder and President,
Gerald B. Eckley. The agreement, which was amended on May 19, 1992,
provides that Mr. Eckley will be paid a minimum salary of $240,000 per
year for a five year term. As long as Mr. Eckley is employed by the
Company, the agreement will be automatically extended every May 19th
for an additional year. The agreement provides for compensation
continuation benefits in the event of Mr. Eckley's death or disability.
If Mr. Eckley terminates the agreement following a change of control of
the Company or because of a breach of the material provisions of the
agreement or because performance of his duties becomes hazardous to his
health, he will remain entitled to the full base compensation then in
effect as severance pay until the normal expiration of the agreement.
II-20
<PAGE>
ENEX RESOURCES CORPORATION
SUPPLEMENTARY OIL AND GAS INFORMATION
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Costs Incurred
The following costs were incurred in connection with the Company's oil and gas
activities for the years ended December 31:
1996 1995 1994
----------- ----------- -----------
Acquisition of proved mineral interests
<S> <C> <C> <C>
and related equipment and facilities $ 205,955 $ 411,545 $ 2,415,803
Development costs 1,127,156 1,516,380 551,488
</TABLE>
Capitalized Costs
The following presents the Company's capitalized costs at December 31, relating
to its oil and gas activities:
1996 1995
----------- ------------
Proved mineral interests and
related equipment and facilities $16,071,214 $18,863,187
Accumulated depreciation,
depletion and amortization 7,690,171 6,967,242
II-21
<PAGE>
Proved Oil and Gas Reserves Quantities (Unaudited)
The following presents an estimate of the Company's proved oil and gas reserve
quantities. Oil reserves are stated in barrels and natural gas reserves in
thousand cubic feet ("Mcf"). All of the Company's reserves are located within
the United States.
<TABLE>
<CAPTION>
Oil Natural Gas
PROVED DEVELOPED AND UNDEVELOPED RESERVES: (Barrels) (Mcf)
--------------- ----------------
<S> <C> <C>
January 1, 1994 633,390 10,561,830
Revisions of previous estimates 167,620 (672,816)
Purchases of minerals in place 490,774 4,022,385
Sales of minerals in place (8,130) (29,767)
Production (194,467) (1,435,593)
--------------- ----------------
December 31, 1994 1,089,187 12,446,039
Revisions of previous estimates (6,586) 711,925
Purchases of minerals in place 31,887 727,929
Sales of minerals in place (6,841) (643,277)
Production (200,778) (1,671,517)
--------------- ----------------
December 31, 1995 906,869 11,571,099
Revisions of previous estimates 71,599 2,374,691
Extensions and discoveries 3,840 740,853
Purchases of minerals in place 42,950 194,978
Sales of minerals in place (35,535) (251,188)
Production (177,793) (1,649,530)
--------------- ----------------
December 31, 1996 811,930 12,980,903
=============== ================
Minority Interest in Developed and
Undeveloped Reserves 50,604 2,564,650
=============== ================
PROVED DEVELOPED RESERVES:
December 31, 1994 995,637 12,290,064
=============== ================
December 31, 1995 808,829 11,407,758
=============== ================
December 31, 1996 745,998 12,980,903
=============== ================
</TABLE>
Minority Interest in Proved Developed Reserves 50,604 2,564,650
II-22
<PAGE>
Standardized Measure of Discounted Future Net Cash Flows and Changes Therein
Relating to Proved Oil and Gas Reserves at December 31, 1996, 1995 and 1994
(Unaudited)
- ------------------------------------------------------------------------------
The following presents the Company's standardized measure of discounted
future net cash flows as of December 31:
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- -------------
<S> <C> <C> <C>
Future cash inflows $ 69,214,417 $ 39,963,675 $ 38,142,479
Future production and development costs (20,231,158) (15,363,195) (15,330,091)
-------------- -------------- -------------
Future net cash flows before income taxes 48,983,259 24,600,480 22,812,388
10% annual discount (20,570,795) (9,421,006) (8,606,239)
Future income taxes, net of 10%
annual discount (4,309,259) - (758,358)
-------------- -------------- -------------
Standardized measure of future
discounted net cash flows of proved
oil and gas reserves $ 24,103,205 $ 15,179,474 $ 13,447,791
============== ============== =============
Minority interest in standardized measure of
future discounted net cash flows of proved
oil and gas reserves $ 4,695,294 $ 2,783,461 $ 3,013,127
============== ============== =============
</TABLE>
The future net cash flows were computed using year-end prices and costs and
year-end statutory tax rates that relate to proved oil and gas reserves in
which the Company has an interest.
The following presents the principal sources of change in the standardized
measure of discounted future net cash flows during 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- ---------------
Sales and transfers of oil and gas
<S> <C> <C> <C>
produced, net of production costs $ (4,369,306) $ (3,234,141) $ (3,318,362)
Net changes in prices and production
costs 11,231,070 2,316,665 (1,740,278)
Purchases of minerals in place 728,187 815,480 5,552,744
Extensions and discoveries, net of future
production and development costs 1,572,413 - -
Sales of minerals in place (317,042) (580,008) (97,533)
Revisions of previous quantity estimates 4,426,533 582,703 236,046
Accretion of discount 1,517,947 1,420,615 1,194,564
Net change in income taxes (4,309,259) 758,358 469,323
Changes in production rates (timing) (1,556,812) (347,989) 433,328
and other
-------------- -------------- ---------------
Change in standardized measure of
discounted future net cash flows $ 8,923,731 $ 1,731,683 $ 2,729,832
============== ============== ===============
</TABLE>
II-23
<PAGE>
In addition to the above presented oil and gas reserves, the Company
also has interests in certain gas processing plants and gas gathering
systems. The total estimated future production of plant products is
340,921 barrels. The discounted future net cash flows (net of estimated
future income taxes) relating to the Company's interests in these
facilities are estimated to be approximately $1,429,044. The minority
interest in this future production is 154,912 barrels and $649,348 of
the discounted future net cash flows.
This valuation procedure does not purport to represent the fair market
value of the Company's oil and gas properties. An estimate of fair
market value would also take into account, among other
factors, anticipated changes in future prices of oil and gas and
related development and production costs and the likelihood of future
recoveries of oil and gas quantities different from the current
estimate of proved reserves.
----------------------------------------------------------------------
II-24
<PAGE>
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
Not applicable
II-25
<PAGE>
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
---------------------------------------------------------------
Information related to this Item has been omitted pursuant to
General Instruction E(3). Such information is incorporated herein by reference
to the Proxy Statement for the 1997 Annual Meeting of Shareholders, which is
intended to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A within 120 days after the end of the fiscal year covered by this
report.
Item 10. Executive Compensation
Information related to this Item has been omitted pursuant to
General Instruction E(3). Such information is incorporated herein by reference
to the Proxy Statement for the 1997 Annual Meeting of Shareholders, which is
intended to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A within 120 days after the end of the fiscal year covered by this
report.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Information related to this Item has been omitted pursuant to
General Instruction E(3). Such information is incorporated herein by reference
to the Proxy Statement for the 1997 Annual Meeting of Shareholders, which is
intended to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A within 120 days after the end of the fiscal year covered by this
report.
Item 12. Certain Relationships and Related Transactions
See Note 1 to the Consolidated Financial Statements for information
regarding the Company's stock repurchase from EDP.
Not Applicable
Item 13. Exhibits and Reports on Form 8-K Sequential
Page No.
--------------
(a) Exhibits
(3) (a) Certificate of Incorporation of the Company as
currently in effect. Incorporated by reference to
the Registrant's Current Report on Form 8-K dated
June 30, 1992 where the same appeared as Exhibit 2.
III-1
<PAGE>
(b) By-Laws of the Company as currently in effect.
Incorporated by reference to the Registrant's
Current Report on Form 8-K, dated June 30, 1992,
where the same appeared as Exhibit 3.
(4) (a) Articles Four, Six, Seven, Fourteen, Fifteen,
Seventeen and Twenty of the
Company's Certificate of Incorporation and Article
II of the Company's By-Laws. See Exhibits 3(a) and
3(b).
(b) Form of Rights Agreement dated as of September 4,
1990 between the Company's predecessor-in-interest,
Enex Resources Corporation, a Colorado corporation
(the "Predecessor") and American Securities
Transfer, Incorporated, as Rights Agent, which
includes as exhibits thereto the Form of Rights
Certificate and the Summary of Rights to Purchase
Common Stock. Incorporated by reference to the
Predecessor's Current Report on Form 8-K, dated as
of September 4, 1990, where the same appeared as
Exhibit 4.
(9) Not Applicable
(10) (a) Employment Agreement between the Company and
Gerald B. Eckley, as amended May 19, 1992.
Incorporated by reference to the Predecessor's
Current Report on Form 8-K dated May 19, 1992, where
the same appeared as Exhibit 2.
(b) Enex Employees Stock Purchase Program. Incorporated
by reference to the Registration Statement on Form
S-8 in Registration Statement No. 33-48644
filed with the Securities and Exchange Commission
on March 22, 1993, where the same appeared as
Exhibit 4.
(c) 1991 Non-qualified Stock Option Award Program.
Incorporated by reference to the Registration
Statement on Form S-8 in Registration Statement
No. 33-60086 filed with the Securities and Exchange
Commission on March 22, 1993, where the same
appeared as Exhibit 4.
(d) 1990 Non-qualified Stock Option Plan. Incorporated
by reference to the Registration Statement on Form
S-8 in Registration Statement No. 33-60084
filed with the Securities and Exchange Commission
on March 22, 1993, where the same appeared as
Exhibit 4.
(e) 1984 Incentive Stock Option Plan and 1979 Employees
Non-qualified Stock Option Plan. Incorporated by
reference to the Registration Statement on Form S-8
in Registration Statement No. 2-93688 filed with the
Securities and Exchange Commission on July 1, 1992,
where the same appeared as Exhibits 4(a) and 4(b).
(11) Not Applicable
(13) Not Applicable
(18) Not Applicable
III-2
<PAGE>
(19) Not Applicable
(22) Subsidiaries of Registrant. Incorporated by
reference to Annual Report Form 10-K filed with the
Securities and Exchange Commission on March 16,
1992.
(23) Not Applicable
(24) Not Applicable
(25) Not Applicable
(28) Not Applicable
(29) Not Applicable
(b) Reports on Form 8-K
No current report on Form 8-K was filed by the Company during the
last quarter of the period covered by this report.
III-3
<PAGE>
<PAGE>
EXHIBIT 24
Consent of Independent Auditors
Enex Resources Corporation:
We consent to the incorporation by reference of our report dated March 18, 1997,
appearing in this Annual Report on Form 10-KSB of Enex Resources Corporation for
the year ended December 31, 1996 in the Enex Employee Stock Purchase Plan filed
in Registration Statement No. 33-48644 on Form S-8 on March 22, 1993; in the
1984 Incentive Stock Option Plan and 1979 Employees Non-qualified Stock Option
Plan filed in Registration Statement No. 2-93688 on Form S-8 on July 1, 1992; in
the 1990 Non-Qualified Stock Option Plan filed in Registration Statement No.
33-60084 on Form S-8 on March 22, 1993 and the 1991 Non- Qualified Stock Option
Award Program filed in Registration Statement No. 33-60086 on Form S-8 on March
22, 1993.
DELOITTE & TOUCHE, LLP
Houston, Texas
March 27, 1997
<PAGE>
EXHIBIT II
Enex Resources Corporation
Statement re: Computation of Per Share Earnings
<TABLE>
<CAPTION>
For the Year Ended December 31,
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Net Income ($2,321,521) $1,269,400 $1,051,476
Divided By: 1,365,008 1,323,204 1,284,409
Weighted average shares - 93,270 113,461
(for stock options - ----------- ---------- ----------
treasury stock method)
Adjusted weighted average shares 1,365,008 1,416,474 1,397,870
----------- ---------- ----------
Earnings per Share ($1.70) $0.90 $0.75
=========== ========== ==========
</TABLE>
<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 RESOURCES CORPORATION
March 18, 1997 By: /s/ G. B. Eckley
-----------------------------
G. B. Eckley, President
In accordance with the Exchange Act, this report has been signed below
on March 18, 1997, by the following persons in the capacities indicated.
ENEX RESOURCES CORPORATION General Partner
By: /s/ G. B. Eckley
------------------
G. B. Eckley President, Chief Executive
Officer and Director
/s/ R. E. Densford
-------------------
R. E. Densford Vice President, Secretary, Treasurer,
Chief Financial Officer and Director
/s/ James A. Klein
-------------------
James A. Klein Controller and Chief Accounting Officer
S-1
<PAGE>
/s/ Robert D. Carl, III
---------------------------------
Robert D. Carl, III Director
/s/ Martin J. Freedman
---------------------------------
Martin J. Freedman Director
/s/ William C. Hooper, Jr.
---------------------------------
William C. Hooper, Jr. Director
/s/ Tom Shorney
---------------------------------
Tom Shorney Director
/s/ Stuart Strasner
---------------------------------
Stuart Strasner Director
S-2
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000314864
<NAME> Enex Resources Corporation
<S> <C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> dec-31-1996
<PERIOD-START> jan-01-1996
<PERIOD-END> dec-31-1996
<CASH> 1862281
<SECURITIES> 0
<RECEIVABLES> 3227768
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4717685
<PP&E> 16421233
<DEPRECIATION> 7988452
<TOTAL-ASSETS> 15075378
<CURRENT-LIABILITIES> 748283
<BONDS> 0
0
0
<COMMON> 83668
<OTHER-SE> 14503010
<TOTAL-LIABILITY-AND-EQUITY> 15075378
<SALES> 8596844
<TOTAL-REVENUES> 8596844
<CGS> 5025184
<TOTAL-COSTS> 10668585
<OTHER-EXPENSES> 5246972
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12429
<INCOME-PRETAX> (2414502)
<INCOME-TAX> (92981)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2321521)
<EPS-PRIMARY> (1.70)
<EPS-DILUTED> (1.70)
</TABLE>
