<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ______ to _______
Commission File No. 0-9378
ENEX RESOURCES CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 93-0747806
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
777 Walker Street
Two Shell Plaza, Suite 2400
Houston, TX 77002
(Address of principal executive offices)
(713) 821-7100
(Issuer's telephone number)
N/A
(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of Exchange Act during the preceding 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 [_]
Number of shares outstanding of each of the Registrant's classes of common
stock, as of the latest practicable date:
Common stock, $.05 par value
1,342,672 shares as of September 30, 2000
Transitional Small Business Disclosure Format (check one)
Yes [_] No [X]
<PAGE>
ENEX RESOURCES CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
No.
----
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets-
September 30, 2000 (Unaudited) and December 31, 1999 ........... 1
Statements of Operations (Unaudited)-
Three and nine months ended September 30, 2000 and 1999 ........ 3
Statements of Cash Flows (Unaudited)-
Nine months ended September 30, 2000 and 1999 .................. 4
Notes to Financial Statements (Unaudited) ........................ 5
Item 2. Management's Discussion and Analysis
Of Financial Condition and Results of Operations ........ 7
Part II. Other Information
Item 6. Exhibits and reports on Form 8-K ......................... 9
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
ENEX RESOURCES CORPORATION
--------------------------
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
September 30,
2000 December 31,
ASSETS (unaudited) 1999
------ ----------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ - $ -
Accounts receivable:
Oil and gas sales 736,020 208,956
Joint owners 5,321 6,443
Preferred stock redemption 6,467,610 -
----------- -----------
Total current assets 7,208,951 215,399
----------- -----------
PROPERTY:
Oil and gas properties (successful efforts method): 3,363,264 3,363,151
Furniture, fixtures and other (at cost) 345,919 345,919
----------- -----------
3,709,183 3,709,070
Less accumulated depreciation,
depletion and amortization 2,988,685 2,918,652
----------- -----------
Net property 720,498 790,418
----------- -----------
OTHER ASSETS:
Preferred Stock-3TEC - 6,467,610
Note receivable-3TEC 7,219,687 6,310,942
----------- -----------
Total other assets 7,219,687 12,778,552
TOTAL ASSETS $15,149,136 $13,784,369
=========== ===========
</TABLE>
See accompanying notes to unaudited financial statements.
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1
<PAGE>
ENEX RESOURCES CORPORATION
--------------------------
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
September 30,
2000 December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited) 1999
------------------------------------ ----------- ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 186,109 $ 249,092
----------- -----------
Total current liabilities 186,109 249,092
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value;
5,000,000 shares authorized;
none issued
Common stock, $.05 par value; - -
10,000,000 shares authorized;
1,804,912 shares issued and outstanding at
September 30, 2000 and December 31,1999 90,246 90,246
Additional paid-in capital 10,807,472 10,807,472
Retained earnings 7,310,256 5,882,506
Less Cost of treasury stock:
462,240 shares at September 30, 2000 and December 31, 1999 (3,244,947) (3,244,947)
----------- -----------
Total stockholders' equity 14,963,027 13,535,277
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $15,149,136 $13,784,369
=========== ===========
</TABLE>
See accompanying notes to unaudited financial statements.
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2
<PAGE>
ENEX RESOURCES CORPORATION
--------------------------
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
---------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
September 30 September 30
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 537,547 $ 330,049 $1,256,724 $ 808,178
Gain on sale of assets - - 36,226 1,170
Preferred stock dividends 161,690 161,691 485,070 485,071
Interest income 102,866 99,445 320,766 289,343
Other income 136 (43,565) 2,574 (32,949)
---------- ---------- ---------- ----------
Total revenues 802,239 547,620 2,101,360 1,550,813
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
General and administrative 71,110 102,989 183,776 416,330
Lease operating and other 89,446 105,209 346,104 498,748
Production taxes 25,485 20,303 72,926 48,747
Depreciation, depletion and amortization 23,834 14,826 70,033 85,408
Interest expense - - 592 1,386
Other expense - - 179 -
---------- ---------- ---------- ----------
Total costs and expenses 209,875 243,327 673,610 1,050,619
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 592,364 304,293 1,427,750 500,194
INCOME TAX EXPENSE - 103,460 - 170,066
---------- ---------- ---------- ----------
NET INCOME $ 592,364 $ 200,833 $1,427,750 $ 330,128
========== ========== ========== ==========
NET INCOME PER SHARE
Basic $0.44 $0.15 $1.06 $0.25
========== ========== ========== ==========
Diluted $0.44 $0.15 $1.06 $0.25
========== ========== ========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 1,342,672 1,342,672 1,342,672 1,342,672
========== ========== ========== ==========
Diluted 1,342,672 1,342,672 1,342,672 1,342,672
========== ========== ========== ==========
</TABLE>
See accompanying notes to unaudited financial statements.
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3
<PAGE>
ENEX RESOURCES CORPORATION
--------------------------
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
-----------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $1,427,750 $ 330,128
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 70,033 85,408
Deferred income tax expense - 170,066
Gain on sale of properties (36,226) (1,170)
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable (525,942) 21,445
(Increase) Decrease in prepaid expenses
and other assets - 20,182
(Decrease) Increase in accounts payable (62,983) 6,515
---------- ---------
Net cash provided by operating activities 872,632 632,574
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in note receivable - 3TEC (908,745) (662,009)
Proceeds from sale of properties 36,226 1,170
Property additions (113) (5,384)
---------- ---------
Net cash used by investing activities (872,632) (666,223)
---------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS - (33,649)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD - 33,649
---------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ - $ -
=========== =========
</TABLE>
See accompanying notes to unaudited financial statements.
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4
<PAGE>
ENEX RESOURCES CORPORATION
Notes to Financial Statements
September 30, 2000
(Unaudited)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
Enex Resources Corporation (the "Company") was incorporated under the
laws of the state of Colorado on August 17, 1979. On September 30, 1992, the
Company reincorporated in Delaware. 3TEC Energy Corporation ("3TEC") owns 80% of
the common stock of the Company. The Company is engaged in the development and
production of oil and natural gas in the contiguous United States. The Company
considers its business to be a single operating segment.
Basis of Presentation
---------------------
In management's opinion, the accompanying consolidated financial
statements contain all adjustments (consisting solely of normal recurring
adjustments) necessary to present fairly the consolidated financial position of
the Company as of September 30, 2000 and December 31, 1999 and the consolidated
results of operations and consolidated cash flows for the periods ended
September 30, 2000 and 1999.
The consolidated financial statements were prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. An independent
accountant has not audited the accompanying consolidated financial statements.
Certain information and disclosures normally included in annual audited
financial statements prepared in accordance with generally accepted accounting
principles have been omitted, although the Company believes that the disclosures
made are adequate to make the information presented not misleading. These
consolidated financial statements should be read in conjunction with the
Company's financial statements and notes thereto included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1999.
Earnings Per Share
------------------
Basic earnings per share is based on the weighted average shares
outstanding without any dilutive effects considered. Diluted earnings per share
reflects dilution from all potential common shares, including options, warrants
and convertible preferred stock. The Company currently has no transactions with
a dilutive effect on diluted shares outstanding.
5
<PAGE>
ENEX RESOURCES CORPORATION
Notes to Financial Statements
September 30, 2000
(Unaudited)
(2) RELATED PARTY TRANSACTIONS
The Company has a note receivable from 3TEC, an owner of 80% of the
outstanding common stock of the Company, as of September 30, 2000 of $7,219,687
The principal balance of the note accrues interest at the prime rate and is due
on demand. The note consists of advances to 3TEC for general corporate purposes
and is unsecured. Interest of $947,845 was accrued on the note as of September
30, 2000 and is included in the note receivable balance.
The Company owns 1,293,522 shares of 3TEC Series C Preferred Stock ("Series
C"). As a holder of Series C, the Company is entitled to receive cumulative cash
dividends at an annual rate of $0.50 per share, payable March 31 and September
30 of each year. The Series C has a liquidation preference of $5.00 per share
plus an amount equal to all accumulated, accrued and unpaid dividends. Each
share of Series C is convertible into 1/3 share of 3TEC common stock. 3TEC has
the right to redeem all or a portion of the Series C at its option (upon 30 days
written notice), at a purchase price of $5.00 per share plus all accumulated,
accrued and unpaid dividends. On August 31, 2000, 3TEC sent notices to the
holders of its Series C Preferred Stock advising that the Series C would be
redeemed on September 30, 2000.
The Company is a party to the credit agreement between the Company, 3TEC
and certain banks. If certain properties are sold by the Company an amount
determined by the banks would have to be paid on the outstanding principal
balance of the debt. The debt payment could be made by 3TEC or the Company.
Amounts paid to the banks by the Company would reduce the amount of sales
proceeds the Company would retain. Amounts paid to the banks by 3TEC would
reduce the amount of cash available to be paid to the Company. The principal
balance of bank debt outstanding on 3TEC's financial statements at September 30,
2000 was approximately $55 million.
All but one of the officers and directors of the Company also serve as the
officers and directors of 3TEC.
(3) COMMITMENTS AND CONTINGENCIES
The Company is a defendant in various legal proceedings which are
considered routine litigation incidental to the Company's business, the
disposition of which management believes will not have a material effect on the
financial position or results of operations of the Company.
(4) ACCOUNTING PRONOUNCEMENTS
In September 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133, as amended, standardizes the
accounting for and disclosures of derivative instruments, including certain
derivative instruments embedded in other contracts. The statement is effective
for the Company's financial statements on January 1, 2001. As of September 30,
2000, the Company has not done a final review, but does not believe there are
any derivative instruments or hedging activities that will impact the 2001
operations and therefore does not expect any income statement or balance sheet
impact for 2001. However, the Company cannot assure that such instruments or
activities will not be put into place in the future.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
-------------------------------
The principal source of the Company's cash flow will be sales of oil and
natural gas and income from the Company's investment in 3TEC preferred stock and
the note receivable from 3TEC.
The Company does not anticipate any capital expenditures for acquisition or
exploration of oil and natural gas reserves in the future. The Company expects
to make expenditures to develop its proved undeveloped reserves, to maintain its
proved developed reserves and to plug and abandon certain wells in Florida. The
Company expects to incur a minimum of $50,000 in capital expenditures over the
next twelve months. The Company also expects that cash flows from operations,
proceeds from sales of certain oil and gas properties and advances from 3TEC
will be sufficient to fund the planned capital expenditures for the next twelve
months.
Because future cash flows from the Company's oil and gas properties are
subject to a number of variables, such as, the level of production and prices
received for oil and gas and the prices received on property sales, there can be
no assurance that the Company's capital resources will be sufficient to maintain
planned levels of capital expenditures and accordingly, oil and gas revenues and
operating results may be adversely affected.
As of September 30, 2000, the Company has not done a final review, but does
not believe there are any derivative instruments or hedging activities that will
impact the 2001 operations and therefore does not expect any income statement or
balance sheet impact as a result of the issuance of FAS 133. However, the
Company cannot assure that such instruments or activities will not be put into
place in the future.
The continued accrual of income from the Company's investment in 3TEC
preferred stock and the note receivable from 3TEC depends solely upon the
creditworthiness of the Company's 80% owner, 3TEC. Should 3TEC experience
problems that adversely affect its financial condition, the financial condition
and results of operations of the Company will be adversely affected. On August
31, 2000, 3TEC sent notices to the holders of its Series C Preferred Stock
advising that the Series C would be redeemed on September 30, 2000.
Results of Operations
---------------------
Three months ended September 30, 2000 and 1999
-----------------------------------------
The Company's total revenues increased 46% to $802,239 caused primarily by a
63% increase in oil and gas revenues to $537,547. Increases in oil and gas
prices caused the oil and gas revenue increase. During the current period, the
Company sold 4,287 barrels of oil at an average price of $29.79 per barrel and
97,999 Mcf of gas at an average price of $4.26 per Mcf. In the comparable
period, the Company sold 4,000 barrels of oil at an average price of $27.51 per
barrel and 86,000 Mcf of gas at an average price of $2.68 per Mcf.
7
<PAGE>
Total costs and expenses decreased 14% to $209,875 caused primarily by a
decline in lease operating and general and administrative expenses. Lease
operating expenses decreased because of operational improvements on the Segundo
field, as well as the sale of properties late in 1999. General and
administrative expenses decreased as a result of continued savings due to
consolidation of its administrative function into 3TEC.
The amount of current income tax expense calculated based on pre-tax income
for the three months ended September 30, 2000 was offset by a reduction in the
valuation allowance placed on the Company's deferred tax asset. Management of
the Company believes that sufficient evidence to date does not support a full
reversal of the valuation allowance placed on the Company's deferred tax asset.
The Company reported net income of $592,364 for the current period versus a
net income of $200,833 for the comparable period. The primary reason for the
increase was higher oil and gas revenues and lower lease operating and general
and administrative expenses.
Nine months ended September 30, 2000 and 1999
---------------------------------------
The Company's total revenues increased 36% to $2,101,360 caused primarily by
a 56% increase in oil and gas revenues to $1,256,724. Increases in oil and gas
prices caused the oil and gas revenue increase. During the current period, the
Company sold 10,973 barrels of oil at an average price of $26.67 per barrel and
283,450 Mcf of gas at an average price of $3.40 per Mcf. In the comparable
period, the Company sold 15,000 barrels of oil at an average price of $15.54 per
barrel and 271,000 Mcf of gas at an average price of $2.14 per Mcf.
Total costs and expenses decreased 36% to $673,610 caused primarily by a
decline in general and administrative lease operating expenses. General and
administrative expenses decreased because of the consolidation of the Company's
general and administrative functions which are now performed by 3TEC employees.
Lease operating expenses decreased because of operational improvements on the
Segundo field, as well as the sale of properties late in 1999.
The amount of current income tax expense calculated based on year-to-date
pre-tax income was offset by a reduction in the valuation allowance placed on
the Company's deferred tax asset. Management of the Company believes that
sufficient evidence to date does not support a full reversal of the valuation
allowance placed on the Company's deferred tax asset.
The Company reported net income of $1,427,750 for the current period versus a
net income of $330,128 for the comparable period. The primary reason for the
increase was higher oil and gas revenues and lower lease operating and general
and administrative expenses.
8
<PAGE>
PART II. OTHER INFORMATION
---------------------------
(a) Exhibits
3.1 Certificate of Incorporation of the Company as currently
in effect/(1)/
3.2 Bylaws of the Company as currently in effect/(1)/
4.1 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/(2)/
10.1 Enex Employees Stock Purchase Program/(3)/
10.2 1991 Non-Qualified Stock Option Award Program/(3)/
10.3 1990 Non-Qualified Stock Option Plan/(3)/
10.4 1984 Incentive Stock Option Plan and 1979 Employees Non-
Qualified Stock Option Plan/(4)/
10.5 Credit Agreement between the Company and Middle Bay Oil
Company, Inc., as borrower, and Compass Bank, as agent
and lender, Bank of Oklahoma, N.A., as a lender, and the
other lenders signatory thereto dated March 27,
1998/(5)/
16.1 from Deloitte & Touche, LLP regarding change in
certifying public accountants dated October 26,
1998/(6)/
21.1 Subsidiaries of the Company/(7)/
27.1 Financial Data Schedule (Filed herewith)
1. Incorporated by reference to Exhibits to Form 8-K dated September 30, 1992
2. Incorporated by reference to Exhibits to Form 8-K dated September 4, 1990
3. Incorporated by reference to Exhibits to Registration Statement on Form S-8
filed with the Securities and Exchange Commission on March 22, 1993
4. Incorporated by reference to Exhibits to Registration Statement on Form S-8
filed with the Securities and Exchange Commission on July 1, 1992
5. Incorporated by reference to Exhibits to Amendment No. 3 and Final
Amendment to Schedule 14D-1 filed by Middle Bay Oil Company, Inc. (MBOC) on
April 13, 1998
6. Incorporated by reference to Exhibits to Form 8-K filed October 29, 1998
7. Incorporated by reference to Exhibits to Annual Report on Form 10-K dated
March 16, 1992
9
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed by
the undersigned, thereunto duly authorized, as of November 16, 2000.
ENEX RESOURCES CORPORATION
(Registrant)
By: /s/ FLOYD C. WILSON
---------------------------------------
Floyd C. Wilson
Chief Executive Officer and Chairman
By: /s/ R.A. WALKER
---------------------------------------
R.A. Walker
President and
Chief Financial Officer
By: /s/ STEPHEN W. HEROD
---------------------------------------
Stephen W. Herod
Executive Vice President
Corporate Development
By: /s/ SHANE M. BAYLESS
---------------------------------------
Shane M. Bayless
Vice President - Controller
10
