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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 March 31, 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 May 9, 2000
Transitional Small Business Disclosure Format (check one)
Yes [_] No [X]
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ENEX RESOURCES CORPORATION
INDEX
Page
No.
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PART I. CONSOLIDATED FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets-
March 31, 2000 (Unaudited) and December 31, 1999......... 1
Consolidated Statements of Operations (Unaudited)-
Three months ended March 31, 2000 and 1999............... 2
Consolidated Statements of Cash Flows (Unaudited)-
Three months ended March 31, 2000 and 1999............... 3
Notes to Consolidated Financial Statements (Unaudited)...... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 6
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K................... 7
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ENEX RESOURCES CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
Unaudited Audited
--------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 8,089 $ -
Accounts receivable 181,693 215,399
----------- -----------
Total current assets 189,782 215,399
----------- -----------
PROPERTY:
Oil and gas properties (successful efforts method): $ 3,363,151 3,363,151
Furniture, fixtures and other (at cost) 345,919 345,919
----------- -----------
3,709,070 3,709,070
Less accumulated depreciation, depletion and amortization 2,942,671 2,918,652
----------- -----------
Net property 766,399 790,418
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OTHER ASSETS:
Preferred Stock-3TEC 6,467,610 6,467,610
Note receivable-3TEC 6,618,521 6,310,942
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Total other assets 13,086,131 12,778,552
TOTAL ASSETS $14,042,312 $13,784,369
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 133,343 $ 249,091
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Total current liabilities 133,343 249,091
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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
March 31, 2000 and December 31,1999 90,246 90,246
Additional paid-in capital 10,807,472 10,807,472
Retained earnings 6,256,198 5,882,507
Less Cost of treasury stock:
462,240 shares at March 31, 2000 and December 31, 1999 (3,244,947) (3,244,947)
----------- -----------
Total stockholders' equity 13,908,969 13,535,278
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $14,042,312 $13,784,369
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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ENEX RESOURCES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31 (UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
REVENUES:
Oil and gas sales $ 313,928 $ 189,695
Preferred stock dividends 161,690 161,690
Interest income 111,755 95,675
Other income 20,053 26,747
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Total revenues 607,426 473,807
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COSTS AND EXPENSES:
General and administrative 40,799 196,114
Lease operating, production taxes and other 168,324 163,698
Depreciation, depletion and amortization 24,019 28,025
Interest expense 592 1,072
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Total costs and expenses 233,734 388,909
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INCOME BEFORE INCOME TAXES 373,692 84,898
INCOME TAX BENEFIT - (3,360)
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NET INCOME $ 373,692 $ 88,258
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NET INCOME PER SHARE $ 0.28 $ 0.07
========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 1,342,672 1,342,672
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
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ENEX RESOURCES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31 (UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 373,692 $ 88,258
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 24,019 28,025
Deferred income tax benefit - (3,360)
Changes in current assets and liabilities:
Decrease in accounts receivable 33,706 65
(Decrease) increase in accounts payable (115,748) 187,748
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Net cash provided by operating activities 315,669 300,736
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CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in note receivable - 3TEC (307,579) (330,250)
Property additions - (4,135)
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Net cash used by investing activities (307,579) (334,385)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,090 (33,649)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD - 33,649
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,090 $ -
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
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ENEX RESOURCES CORPORATION
Notes to Consolidated Financial Statements
March 31, 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 June 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 March 31, 2000 and December 31, 1999 and the consolidated
results of operations and consolidated cash flows for the periods ended March
31, 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.
4
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ENEX RESOURCES CORPORATION
Notes to Consolidated Financial Statements
March 31, 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 March 31, 2000 of $6,618,521. 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 $738,834 was accrued on the note as of March 31,
2000.
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 at a
purchase price of $5.00 per share plus all accumulated, accrued and unpaid
dividends.
The Company is a party to the credit agreement between the Company, 3TEC and
the 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 debt outstanding
on 3TEC's financial statements at March 31, 2000 was approximately $83.5
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.
5
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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 from operations 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 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.
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.
Results of Operations
Three months ended March 31, 2000 and 1999
The Company's total revenues increased 28% to $607,426 caused primarily by a
65% increase in oil and gas revenues to $313,928. Increases in oil and gas
prices caused the oil and gas revenue increase. During the current period, the
Company sold 3,500 barrels of oil at an average price of $24.49 per barrel and
90,480 Mcf of gas at an average price of $2.52 per Mcf. In the comparable
period, the Company sold 4,400 barrels of oil at an average price of $11.12 per
barrel and 85,000 Mcf of gas at an average price of $1.67 per Mcf.
6
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Total costs and expenses decreased 40% to $233,734 caused primarily by a
decline in general and administrative expenses. General and administrative
expenses ("G&A") decreased because of the consolidation of the Company's general
and administrative functions with those of 3TEC. Substantially all of the
general and administrative functions for the current period were performed by
3TEC employees. A portion of the Company's G&A expense is an expense allocation
from 3TEC.
The Company reported net income of $373,692 for the current period versus
net income of $88,258 for the comparable period. The primary reason for the
increase was higher oil and gas revenues and lower general and administrative
expenses.
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)
7
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16.1 Letter from Deloitte & Touche, LLP regarding change in
certifying public accountants dated October 26, 1998(6)
21.1 Subsidiaries of the Company(7)
1. Incorporated by reference to Exhibits to Form 8-K dated June 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
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 May 19, 2000.
ENEX RESOURCES CORPORATION
(Registrant)
By: /s/ Floyd C. Wilson
----------------------------------------------
Floyd C. Wilson
Chief Executive Officer and Chairman
By: /s/ R.A. Walker
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R.A. Walker
President and Chief Financial Officer
By: /s/ Stephen W. Herod
----------------------------------------------
Stephen W. Herod
Executive Vice President
8
