United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
Amendment II
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from...............to...............
Commission file number 0-9378
ENEX RESOURCES CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 93-0747806
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 200, Three Kingwood Place
Kingwood, Texas 77339
(Address of principal executive offices)
Issuer's telephone number (713) 358-8401
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes x No
Transitional Small Business Disclosure Format (Check one):
Yes No x
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Class Outstanding at November 11, 1996
Common Stock, $.05 par value 1,364,235
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
ENEX RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------------
September 30, DECEMBER 31,
ASSETS 1996 1995
--------------- ---------------
(Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and certificates of deposit $ 1,489,837 $ 806,196
Accounts receivable:
Managed limited partnerships 610,435 756,741
Oil and gas sales 796,891 684,609
Joint owner 257,689 325,816
Receivable from property sales - 123,202
Other accounts receivable 1,128,200 1,298,698
Notes receivable from managed limited
partnerships 10,578 29,523
Federal income tax receivable 83,398 98,614
Deferred tax asset - current portion 108,325 112,174
Prepaid expenses & other current assets 481,090 505,206
--------------- ---------------
Total current assets 4,966,443 4,740,779
--------------- ---------------
PROPERTY:
Oil & gas properties (Successful efforts
accounting method) Proved mineral
interests and related equipment & facilities:
Direct ownership 6,983,907 8,134,074
Derived from investment in managed
limited partnerships 4,886,483 6,707,824
Furniture, fixtures and other (at cost) 343,758 341,507
--------------- ---------------
Total property 12,214,148 15,183,405
--------------- ---------------
Less accumulated depreciation,
depletion and amortization 5,737,840 5,602,987
--------------- ---------------
Property, net 6,476,308 9,580,418
--------------- ---------------
OTHER ASSETS
Receivable from managed limited
partnerships for start-up costs 1,291,225 2,171,636
Deferred tax asset 614,205 536,256
Deferred organization expenses and other 5,254 8,233
--------------- ---------------
Total other assets 1,910,684 2,716,125
--------------- ---------------
TOTAL $ 13,353,435 $ 17,037,322
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
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I-1
<PAGE>
<TABLE>
<CAPTION>
ENEX RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------------------------------
September 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
------------------- ---------------------
(Unaudited)
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 338,956 $ 725,110
Current portion of long-term debt - 850,000
------------------- -----------------------
Total current liabilities 338,956 1,575,110
------------------- -----------------------
COMMITMENTS AND
CONTINGENT LIABILITIES - -
------------------- -----------------------
TOTAL LIABILITIES 338,956 1,575,110
------------------- ---------------------
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;
1,665,359 shares issued at September 30, 1996 and
1,642,859 shares issued at December 31, 1995 83,268 82,143
Additional paid-in capital 10,104,700 9,944,967
Retained earnings 4,406,076 7,041,773
Less cost of treasury stock;
301,124 shares at September 30, 1996 and
315,136 shares at December 31, 1995 (1,579,565) (1,606,671)
------------------- -----------------------
TOTAL STOCKHOLDERS' EQUITY 13,014,479 15,462,212
------------------- -----------------------
TOTAL $ 13,353,435 $ 17,037,322
=================== =======================
</TABLE>
See accompanying notes to consolidated financial statements.
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I-2
<PAGE>
<TABLE>
<CAPTION>
ENEX RESOURCES CORPORATION
STATEMENTS OF OPERATIONS
- -----------------------------------------------------------------------------
(UNAUDITED) QUARTER ENDED NINE MONTHS ENDED
------------------------------------ -------------------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
--------------- ------------------- ----------------- -----------------
REVENUES:
<S> <C> <C> <C> <C>
Oil and gas sales $ 1,603,321 $ 1,210,145 $ 4,336,806 $ 3,715,802
Gas plant sales 121,063 101,496 357,386 303,826
Gain on sale of property 8,754 239,068 147,229 239,068
Other revenues 33,135 72,305 60,771 189,927
Interest income 1,111 5,057 12,185 25,762
--------------- ------------------- ----------------- -----------------
Total revenues 1,767,384 1,628,071 4,914,377 4,474,385
--------------- ------------------- ----------------- -----------------
EXPENSES:
General and administrative 292,064 304,387 968,548 887,162
Lease operating and other expenses 499,975 475,881 1,504,162 1,426,543
Gas purchases and plant operating expenses 93,243 68,710 281,460 201,700
Production taxes 94,244 71,783 250,972 230,509
Depreciation, depletion and amortization 354,313 410,228 886,763 1,191,496
Impairment of assets - - 3,581,603 -
Interest expense 142 43,773 12,384 143,525
--------------- ------------------- ----------------- -----------------
Total expenses 1,333,981 1,374,762 7,485,892 4,080,935
--------------- ------------------- ----------------- -----------------
Income (loss) before income taxes 433,403 253,309 (2,571,515) 393,450
--------------- ------------------- ----------------- -----------------
INCOME TAX CREDIT:
Deferred (24,854) (24,142) (74,101) (173,593)
--------------- ------------------- ----------------- -----------------
NET INCOME (LOSS) $ 458,257 $ 277,451 $ (2,497,414) $ 567,043
=============== =================== ================= =================
PRIMARY EARNINGS PER SHARE $ 0.32 $ 0.20 $ (1.83) $ 0.40
=============== =================== ================= =================
</TABLE>
See accompanying notes to consolidated financial statements.
- -----------------------------------------------------------------------------
I-3
<PAGE>
<TABLE>
<CAPTION>
ENEX RESOURCES CORPORATION
STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------------------------------------
(UNAUDITED) NINE MONTHS ENDED
------------------------------------------
September 30, September 30,
1996 1995
----------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ (2,497,414) $ 567,043
----------------- -------------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation, depletion and amortization 1,124,815 1,430,261
Impairment of assets 3,638,634 -
Gain on sale of property (157,099) (390,549)
Noncash expense from stock purchase plan 177,138 201,000
Increase in deferred tax asset (74,100) (173,593)
Minority interest share of net income after distributions (207,821) 179,980
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 798,909 447,088
(Increase) in prepaid expenses & other assets (196,850) (923,615)
(Decrease) in accounts payable (454,010) (543,732)
----------------- -------------------
Net cash provided by operating activities 2,152,202 793,883
----------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 227,913 768,778
Property additions (911,267) (1,506,966)
Reduction in notes receivable from
managed limited partnerships 6,324 38,887
----------------- -------------------
Net cash (used) by investing activities (677,030) (699,301)
----------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt - 260,000
Repayment of long-term debt (850,000) (484,000)
Purchase of treasury stock (89,174) -
Payment of cash dividend (138,283) (133,716)
Proceeds from exercise of stock options 100,000 39,000
----------------- -------------------
Net cash (used) by financing activities (977,457) (318,716)
----------------- -------------------
NET INCREASE (DECREASE) IN CASH 497,715 (224,134)
CASH AT BEGINNING OF YEAR 1,007,144 647,485
----------------- -------------------
CASH AT END OF PERIOD $ 1,504,859 $ 423,351
================= ===================
</TABLE>
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
I-4
<PAGE>
ENEX RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General - Enex Resources Corporation (the "Company") acquires interests
in producing oil and gas properties and manages investment limited
partnerships. As of September 30, 1996, the Company served as managing
general partner for the 41 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 $154 million,
at cost, of proved oil and gas properties in which the Company normally
has a 10% interest as the general partner in addition to its
proportional interest as a limited partner of approximately 1% to 54%.
Accumulated depreciation and depletion for such oil and gas properties
at September 30, 1996 was approximately $140 million.
The interim financial information included herein is unaudited;
however, such information reflects all adjustments. All such
adjustments were normal recurring adjustments, except for the
impairment of assets, discussed in note 5, which are, in the opinion of
management, necessary for a fair presentation of results for the
interim periods.
Income Per Share - Primary and fully diluted earnings per share are
based on the weighted average number of common shares outstanding and
common stock equivalents outstanding during the respective periods.
Common share equivalents include common stock options. Common share
equivalents are not included in the "Nine months ended September 30,
1996" number of shares because they are antidilutive. The weighted
average number of shares used to compute primary earnings per common
share was:
Primary
-----------------------
Quarter ended September 30, 1996 1,452,236
Quarter ended September 30, 1995 1,413,092
Nine months ended September 30, 1996 1,367,109
Nine months ended September 30, 1995 1,427,993
I-5
<PAGE>
2. DEBT
The long-term debt at December 31, 1995 consisted of an $850,000 loan
from a bank under a $2.8 million revolving line of credit. The bank
loan proceeds were primarily used to purchase producing oil and gas
properties and additional interests in managed limited partnerships.
The loan bore interest at a rate of prime plus three-quarters of one
percent (3/4%) or at an average rate of 9.60% during the third quarter
of 1995, and 9.00% during the first five months of 1996 and 9.50%
during the first nine months of 1995. Principal payments of $84,000
were made on the debt in the third quarter of 1995. The debt was
completely repaid in May 1996.
3. COMMITMENTS AND CONTINGENT LIABILITIES
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.
4. NOTES RECEIVABLE FROM MANAGED LIMITED PARTNERSHIPS
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 bears interest at the
Company's borrowing rate of prime plus three-fourths of one percent, or
a weighted average of 9.00% and 9.75% in the third quarter of 1996 and
1995, respectively, and 9.03% and 9.69% in the first nine months of
1996 and 1995, respectively. Principal payments of $7,538 and $23,235
were received on the note receivable in the third quarter of 1996 and
1995, respectively, and principal payments of $12,045 and $34,234 were
received in the first nine months of 1996 and 1995, respectively.
5. IMPAIRMENT OF ASSETS
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
I-6
<PAGE>
recognized a non-cash impairment provision of $3,638,634 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..
6. INCOME TAXES
The Company adopted Statement of Financial Standards (SFAS) No. 109,
"Accounting for Income Taxes," effective January 1, 1993. This
Statement supersedes SFAS No. 96, "Accounting for Income Taxes," which
was adopted by the company in 1988. The Company recognized a deferred
tax credit of $24,854 and $24,142 in the third quarter of 1996 and
1995, respectively, and $74,101 and $173,593 in the first nine months
of 1996 and 1995, respectively.
Deferred income taxes reflect the net tax 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 September 30, 1996, are as follows:
Difference between tax and book net property basis $ 396,117
Difference between basis in managed limited
partnerships for financial reporting purposes and income
tax purposes 4,284,695
Intangible drilling costs which remain capitalized for
financial reporting purposes which were deducted for
federal income tax purposes (170,198)
Timing difference from lawsuit contingency (50,683)
Net operating loss carryforward (expires 2009) 567,745
-----------------
Deferred tax asset 5,027,676
Valuation allowance (4,305,146)
-----------------
Net deferred tax asset $ 722,530
=================
The valuation allowance reserves the net deferred tax asset at
September 30, 1996 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.
I-7
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
In the third quarter of 1996, higher prices for oil and natural gas produced
higher earnings and cash flows for the Company.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow provided by operating, financing and investing activities increased to
$2,078,101 in the first nine months of 1996 as compared with $743,884in the same
period of 1995. This represents an increase of $1,334,217 , which was primarily
the result of higher sales prices for oil and natural gas which increased the
cash flows from oil and gas properties, and a $798,909 increase in the
collection of accounts receivable in 1996 as compared to an increase in the
collection of accounts receivable of $447,088 in the first nine months of 1995.
To this cash flow from operations, payments received on notes receivable from
managed limited partnerships added $6,324 in the first nine months of 1996
versus $38,887 received in 1995. The Company sold its interests in a number of
marginal and non-economic wells which yielded an additional $227,913 in the
first nine months of 1996 versus $768,778 in the first nine months of 1995. Net
payments on the Company's bank line-of-credit were $850,000, in 1996, which
completely repaid all of the Company's debt in May, 1996. In the first nine
months of 1995, payments on the line of credit were $484,000. Proceeds from the
exercise of stock options added $100,000 and $39,000 to the cash flow in 1996
and 1995, respectively. A $.10 per share cash dividend was paid in the first
nine months of both years utilizing $138,283 in 1996 and $133,716 in 1995. The
Company also reinstituted its treasury stock purchase program in June of 1996
expending $89,174.
The improved cash flow allowed the Company to continue to purchase additional
limited partnership interests and improve oil and gas properties. In the first
nine months of 1996, the Company used $911,267 to purchase interests in the
Company's managed limited partnerships, successfully drill two wells in the
Schlensker acquisition and one well in the Dent acquisition and reworked wells
in the Speary and Binger acquisitions.
In the first nine months of 1995, $1,456,967 of the cash flow was utilized to
purchase interests in the Company's managed limited partnerships, drill wells on
the A&W, Dent and FEC acquisitions, participate in a waterflood expansion
program at Shafter Lake and recomplete wells in the McBride and Florida
acquisitions.
Working capital improved to $3,809,715 at September 30, 1996 versus $2,296,842
at December 31, 1995. At September 30, 1996, the Company's current ratio was
9.65 to 1.00 and the Company had no long-term debt.
I-8
<PAGE>
Results of Operations
The Company reported net income in the third quarter of 1996 of $458,257, or
$.32 per share, as compared to $277,451, or $.20 per share, in the third quarter
of 1995. In the first nine months of 1996, the Company reported a net loss of
$2,497,414 or $1.83 per share. This loss includes a $3,638,634 nonrecurring
charge due to the implementation of SFAS 121. Excluding this charge, the Company
earned $1,141,220 or $.83 per share as compared to $567,043 or $.40 per share in
the first nine months of 1995. The higher net income in 1996 was attributable to
increased oil and gas revenues due primarily to higher oil and natural gas
prices.
Oil and gas sales were $1,925,387 in the third quarter of 1996 versus $1,483,183
in the corresponding period of 1995. This increase of $442,204or 30% was due
primarily to the higher oil and natural gas prices experienced in the market
during 1996. Oil revenues increased by $91,816 or 12% from $791,865 in the third
quarter of 1995 to $883,681 in the third quarter of 1996. A 21% increase in the
average oil sales price increased sales by $154,440 . This increase was
partially offset by an 8% decrease in oil production. The decrease in oil
production was primarily a result natural production declines, partially offset
by the additional interests acquired in the Company's managed limited
partnerships. The increase in the average oil sales price corresponds with
higher prices in the overall market for the sale of oil. Gas revenues increased
by 51% or $350,388 in the third quarter from $691,318 in 1995 to $1,041,706 in
1996. A 48% increase in the average gas sales price increased sales by $337,988
. A 2% increase in gas production increased sales by an additional $12,400 . The
increase in gas production was primarily a result of the acquisition of
additional partnership interests and additional production from two wells
drilled in the Schlensker acquisition and one well in the Dent acquisition,
partially offset by natural production declines. The increase in the average gas
price corresponds with higher prices in the overall market for the sale of
natural gas.
Gas plant sales increased to $220,949 in the third quarter of 1996 from $178,180
in the third quarter of 1995. This represents an increase of $42,769 or 24% . A
26% increase in the average price for the sale of plant products increased sales
by $45,007 . This increase was partially offset by a 1% decrease in the
production of gas plant products. The increase in the average price for the sale
of gas plant products corresponds with higher prices in the overall market for
the sale of gas plant products.
In the first nine months of 1996, oil and gas sales were $5,219,477 versus
$4,506,497 in the first nine months of 1995. This represents an increase of
$712,980 or 16% . During the first nine months of 1996, oil revenues increased
by $96,513 or 4% , from $2,455,459 in 1995 to $2,551,972 in the first nine
months of 1996. A 15% increase in the average oil sales price increased sales by
$331,792 . This increase was partially offset by a 10% decrease in oil
production. The increase in the average oil sales price corresponds with higher
prices in the overall market for the sale of oil. The decrease in oil production
was primarily the result of natural production declines, partially offset by the
purchase of additional interests in limited partnerships. Gas revenues increased
by 30% or $616,467
I-9
<PAGE>
from $2,051,038 in the first nine months of 1995 to $2,667,505 in the first nine
months of 1996. A 39% increase in the average gas sales price increased gas
sales by $746,631 . This increase was partially offset by a 6% decrease in gas
production. The increase in the average gas sales price corresponds with higher
prices in the overall market for the sale of gas. The decrease in gas production
was primarily a result of natural production declines, partially offset by the
acquisition of additional partnership interests.
Gas plant sales increased to $656,836 in the first nine months of 1996 from
$536,937 in the first nine months of 1995. This represents an increase of
$119,899 or 22% . A 26% increase in the average price for the sale of plant
products increased sales by $136,556 . This increase was partially offset by a
3% decrease in production of gas plant products. The increase in the average
price for the sale of gas plant products corresponds with higher prices in the
overall market for the sale of gas plant products. The decrease in production of
gas plant product was primarily a result of natural production declines.
Other revenues were $33,135 and $72,305 in the third quarter of 1996 and 1995,
respectively. For the first nine months of 1996, other revenues were $60,771
versus $189,927 in the first nine months of 1995. The decreases were primarily
due to a $88,069 gain from the early receipt of a notes receivable and $79,167
of rig rental and other revenues recognized in 1995. In 1996, the Company earned
$32,813 in rig rental revenues.
In the third quarter of 1995, the Company sold a portion of its interest in the
HNG acquisition, which it owns through its limited partner interest in Enex
Program I Partners, L.P. The proceeds from the sale were $742,662. A gain of
$427,964 was recognized by the Company from the HNG sale. Additionally, the
Company sold its interests in several other acquisitions for $26,116 . A net
gain of $12,584 was recognized by the Company from these sales. In the first
nine months of 1996, the Company sold its interests in a number of marginal and
non-economic wells for $227,913 recognizing a gain of $157,099 .
General and administrative expenses were $375,166 in the third quarter of 1996
versus $390,918 in the third quarter of 1995. This represents a decrease of
$15,752 or 4% . The decrease is a result of fewer staff working for the Company
in 1996. General and administrative expenses increased to $1,261,311 in the
first nine months of 1996 as compared to $1,193,951 in the first nine months of
1995. This represents an increase of $67,360 or 6% . The increase is primarily a
result of the Company retaining a higher proportion of allocated general and
administrative expenses in 1996, due to the acquisition of additional
partnership interests.
Lease operating and other expenses decreased to $568,832 in the third quarter of
1996 from $579,890 in the third quarter of 1995. This represents a decrease of
$11,058 or 2% . The decrease was primarily the result of the changes in
production, noted above. In the first nine months of 1996, lease operating
expenses increased by $44,123 or 3% from $1,703,519 in 1995 to $1,747,642 in
1996. The increase was primarily a result of the purchase of additional
interests in limited partnerships coupled with
I-10
<PAGE>
workover expenses incurred on the Speary and Binger acquisitions in 1996.
Depletion, depreciation and amortization expense decreased from $493,886 in the
third quarter of 1995 to $440,960 in the third quarter of 1996. This represents
a decrease of $52,926 or 11% . The changes in production, noted above, reduced
depreciation and depletion expenses by $9,591. A 9% decrease in the depletion
rate reduced depreciation and depletion expense by an additional $43,335 .
Depreciation, depletion and amortization decreased from $1,430,261 in the first
nine months of 1995 to $1,124,815 in the first nine months of 1996, a decrease
of $305,446 or 21% . The changes in production, noted above, reduced
depreciation and depletion expense by $100,883 . A 15% decrease in the depletion
rate reduced depreciation and depletion expense by an additional $204,563 . The
decreases in the depletion rate were the primarily due to the lower property
basis resulting from the recognition of a $3,638,634 impairment during the first
quarter of 1996.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standard ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which requires
certain assets to be reviewed for impairment whenever events or circumstances
indicate the carrying amount may not be recoverable. 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 $3,638,634 n oil and gas
properties and other assets.
In the third quarter of 1996, the Company had net interest income of $3,949 as
compared with net interest expense of $35,726 in the third quarter of 1995. In
the first nine months of 1996, the Company had net interest income of $2,781
versus net interest expense of $108,718 in the first nine months of 1995. The
decrease in net interest expense is a result of the repayment of the bank debt
during 1995 and the first five months of 1996.
In the first nine months of 1996, the Company recorded an income tax credit of
$74,101 as compared with a credit of $173,593 recognized in 1995. These credits
are primarily a result of the Company's continued utilization of its deferred
tax asset which resulted from the acquisition of properties with a higher tax
basis. At September 30, 1996, the Company had a substantial net deferred tax
asset of $5,027,676. Due to uncertainties inherent in the oil and gas market, a
valuation allowance reserved all but $722,530 of the net deferred tax asset.
Future Outlook
Higher prices for oil and gas continued in the third quarter of 1996 resulting
in increased revenue, earnings and cash flow. The increased earnings and cash
flow allowed the Company to reinstitute
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<PAGE>
its treasury stock repurchase program in the third quarter. The Company's board
of directors has authorized the purchase of up to 50,000 shares of its common
stock in the open market.
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, 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.
Higher earnings and cash flow have allowed the Company to continue to strengthen
its financial position. The current ratio improved to 9.65 with virtually no
debt. We continue 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.
In June 1996, the Company declared a $.10 per share dividend, which was paid to
shareholders on July 6, 1996. This payment continues the Company's regular
semi-annual dividend payment.
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<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable
Item 5. Other Information.
Not Applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(2) Not Applicable
(4) (a) Articles Fourth, Sixth, Seventh,
Fourteenth, Fifteenth, Seventeenth and
Twentieth of the Company's Certificate of
Incorporation and Article II of the
Company's By-Laws. Incorporated by reference
to the Company's Annual Report on Form
10-KSB for the fiscal year ended December
31, 1992, where the same appeared as part of
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.
II-1
<PAGE>
(15) Not Applicable
(18) Not Applicable
(19) Not Applicable
(20) Not Applicable
(23) Not Applicable
(24) Not Applicable
(25) Not Applicable
(28) Not Applicable
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter
ended September 30, 1996.
II-2
<PAGE>
EXHIBIT 11
<TABLE>
<CAPTION>
Enex Resources Corporation
Statement re: Computation of Per Share Earnings For the Nine Months Ended For the Nine Months Ended
September 30, 1996 September 30, 1995
--------------------------------- ---------------------------------
Primary Fully-diluted Primary Fully-diluted
Earnings per Earnings per Earnings per Earnings per
Share Share Share Share
--------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Net Income ($2,497,414) ($2,497,414) $567,043 $567,043
---------------- --------------- --------------- ----------------
Divided By:
Weighted average shares 1,367,109 1,367,109 1,322,025 1,322,025
Plus: Common Stock Equivalents - - 105,968 105,968
---------------- --------------- --------------- ----------------
(for stock options - treasury stock method)
Adjusted weighted average shares 1,367,109 1,367,109 1,427,993 1,427,993
---------------- --------------- --------------- ----------------
Earnings per Share ($1.83) ($1.83) $0.40 $0.40
================ =============== =============== ================
</TABLE>
<TABLE>
<CAPTION>
Enex Resources Corporation
Statement re: Computation of Per Share Earnings For the Quarter Ended For the Quarter Ended
September 30, 1996 September 30, 1995
--------------------------------- ---------------------------------
Primary Fully-diluted Primary Fully-diluted
Earnings per Earnings per Earnings per Earnings per
Share Share Share Share
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Net Income $458,257 $458,257 $277,451 $277,451
---------------- --------------- --------------- ----------------
Divided By:
Weighted average shares 1,368,105 1,368,105 1,325,722 1,325,722
Plus: Common Stock Equivalents 84,131 84,131 87,370 87,370
---------------- --------------- --------------- ----------------
(for stock options - treasury stock method)
Adjusted weighted average shares 1,452,236 1,452,236 1,413,092 1,413,092
---------------- --------------- --------------- ----------------
Earnings per Share $0.32 $0.32 $0.20 $0.20
================ =============== =============== ================
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has this report to be signed on its behalf by the undersigned
thereunto duly authorized.
ENEX RESOURCES CORPORATION
(Registrant)
By: /s/ R. E. Densford
R. E. Densford
Vice President, Secretary
Treasurer and Chief Financial
Officer
February 21, 1997 By: /s/ James A. Klein
-----------------------
James A. Klein
Controller and Chief
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000314864
<NAME> ENEX RESOURCES CORPORATION
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> dec-31-1996
<PERIOD-START> jan-01-1996
<PERIOD-END> sep-30-1996
<CASH> 1489837
<SECURITIES> 0
<RECEIVABLES> 4178416
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4966443
<PP&E> 11870390
<DEPRECIATION> 343758
<TOTAL-ASSETS> 13353435
<CURRENT-LIABILITIES> 338956
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 13014479
<TOTAL-LIABILITY-AND-EQUITY> 13353435
<SALES> 4841421
<TOTAL-REVENUES> 4914377
<CGS> 2923357
<TOTAL-COSTS> 7485892
<OTHER-EXPENSES> 968548
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2571515)
<INCOME-TAX> (74101)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2497414)
<EPS-PRIMARY> (1.83)
<EPS-DILUTED> (1.83)
</TABLE>
