SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT
FILED BY A PARTY OTHER THAN THE REGISTRANT [x]
CHECK THE APPROPRIATE BOX:
PRELIMINARY PROXY STATEMENT { }
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY {AS PERMITTED BY RULE
14A-6(E)(2)}
DEFINITIVE PROXY STATEMENT [x]
DEFINITIVE ADDITIONAL MATERIALS
SOLICITING MATERIAL PURSUANT TO RULE 14A-11(C) OR RULE 14A-12
ENEX OIL & GAS INCOME PROGRAM II-2, L.P.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ENEX RESOURCES CORPORATION
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(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN REGISTRANT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
O $125 PER EXCHANGE ACT RULES 0-11(C)(1)(II), 14A-6(I)(1), OR
14A-6(J)(2).
O $500 PER EACH PARTY TO THE CONTROVERSY PURSUANT TO EXCHANGE
ACT RULE 14A-6(I)(3).
O FEE COMPUTED ON TABLE BELOW PER EXCHANGE ACT RULES 14A-6(I)
(4) AND 0-11.
(1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION
APPLIES: $500 "UNITS" OF LIMITED PARTNERSHIP INTERESTS
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(2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTION
APPLIES: 21,108
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(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION
COMPUTED PURSUANT TO EXCHANGE ACT RULE 0-11:.{SET FORTH THE
AMOUNT ON WHICH THE FILING FEE IS CALCULATED AND STATE HOW
IT WAS DETERMINED.}:
$275,946 {PARTNERSHIP INDEBTEDNESS EXCEEDS ESTIMATED FAIR
MARKET VALUE OF PARTNERSHIP ASETS TO BE SOLD IN LIQUIDATION
PURSUANT TO PLAN OF DISSOLUTION.}
- --------------------------------------------------------------------------------
(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
$275,946
- --------------------------------------------------------------------------------
(5) TOTAL FEE PAID:
$56.00
- --------------------------------------------------------------------------------
[x] FEE PAID PREVIOUSLY WITH PRELIMINARY MATERIALS
O CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY EXCHANGE
ACT RULE 0-11(A)(2) AND IDENTIFY THE FILING FOR WHICH OFFSETTING FEE WAS PAID
PREVIOUSLY. IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR
THE FORM OR SCHEDULE AND THE DATE OF ITS FILING.
(1) AMOUNT PREVIOUSLY PAID:
- --------------------------------------------------------------------------------
(2) FORM, SCHEDULE OR REGISTRATION STATEMENT NO.
- --------------------------------------------------------------------------------
(3) FILING PARTY:
- --------------------------------------------------------------------------------
(4) DATE FILED:
- --------------------------------------------------------------------------------
<PAGE>
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ENEX
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ENEX OIL & GAS INCOME PROGRAM II-1, L.P.
ENEX OIL & GAS INCOME PROGRAM II-2, L.P.
ENEX OIL & GAS INCOME PROGRAM II-3, L.P.
ENEX OIL & GAS INCOME PROGRAM II-4, L.P.
Three Kingwood Place
Suite 200
800 Rockmead Drive
Kingwood, Texas 77339
NOTICE OF SPECIAL MEETINGS
To Be Held On December 30, 1995
To Our Limited Partners:
Special Meetings of the limited partners (the "Limited Partners") of
Enex Oil & Gas Income Program II-1, L.P., Enex Oil & Gas Income Program II-2,
L.P., Enex Oil & Gas Income Program II-3, L.P., and Enex Oil & Gas Income
Program II-4, L.P., all Texas limited partnerships (the "Partnerships" or
individually a "Partnership"), have been called for Saturday, December 30, 1995
at the offices of Enex Resources Corporation (the "General Partner") at Three
Kingwood Place, 800 Rockmead Drive, Kingwood, Texas 77339. Only Limited Partners
of record of one or more of the Partnerships at the close of business on
November 24, 1995 are entitled to notice of and to vote at the Meetings or any
adjournments thereof. The Limited Partners of each Partnership will be asked to
vote on a proposal to dissolve and liquidate their Partnership in accordance
with the applicable provisions of their Partnership Agreement.
You will find a detailed explanation of the proposal, including its
purpose, anticipated benefits and conditions in the Proxy Statement to follow
under separate cover. Please read it carefully. We think you will conclude that
the proposal to dissolve and liquidate the Partnerships is in the best interests
of the Limited Partners of each Partnership. After considering each
Partnership's financial condition and prospects, the Board of Directors of the
General Partner has unanimously approved the proposed transactions as being in
the best interests of the Limited Partners. The affirmative vote of a
majority-in-interest of the Limited Partners is required to approve the proposal
for each Partnership. The General Partner will vote all of the limited
partnership interests it owns (in excess of 44 percent in each Partnership) in
favor of the proposal.
It is very important that you cast your votes on this matter promptly,
regardless of the size of your holdings. Hence, even if you plan to attend the
Special Meetings in person, we urge you to complete, sign and return the proxy
(or proxies) that will accompany the Proxy Statement in order to assure the
presence of a quorum at each of the meetings. Any proxy may be revoked at any
time before it is exercised by following the instructions set forth in the Proxy
Statement.
BY ORDER OF THE GENERAL PARTNER,
ENEX RESOURCES CORPORATION
GERALD B. ECKLEY
President,
General Partner
November 30, 1995
<PAGE>
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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ENEX
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ENEX OIL & GAS INCOME PROGRAM II-1, L.P.
ENEX OIL & GAS INCOME PROGRAM II-2, L.P.
ENEX OIL & GAS INCOME PROGRAM II-3, L.P.
ENEX OIL & GAS INCOME PROGRAM II-4, L.P.
Three Kingwood Place
Suite 200
800 Rockmead Drive
Kingwood, Texas 77339
PROXY STATEMENT
Solicitation and Voting of Proxies
This Proxy Statement is furnished in connection with the solicitation
on behalf of Enex Resources Corporation ("Enex" or the "General Partner") of
proxies to be voted at special meetings (each a "Special Meeting") of the
limited partners (the "Limited Partners") of Enex Oil & Gas Income Program II-1,
L.P., Enex Oil & Gas Income Program II-2, L.P., Enex Oil & Gas Income Program
II-3, L.P., and Enex Oil & Gas Income Program II-4, L.P., all Texas limited
partnerships (the "Partnerships" or, individually, a "Partnership"), to be held
on December 30, 1995.
The Board of Directors of the General Partner has fixed the close of
business on November 24, 1995 as the record date for the determination of
Limited Partners of record entitled to notice of and to vote at the Special
Meetings. The Limited Partners of each Partnership will be asked to vote on a
proposal to dissolve the Partnership and liquidate it in accordance with the
applicable provisions of its Amended Certificate and Agreement of Limited
Partnership ("Partnership Agreement"). Due to the substantial amount of debt
owed the General Partner by each Partnership, it is unlikely that the Limited
Partners will receive cash or other tangible consideration from these
transactions.
The presence, in person or by proxy, of the holders of a
majority-in-interest of the issued and outstanding limited partnership interests
("Interests") of a Partnership entitled to vote will constitute a quorum for the
transaction of business by that Partnership. A proxy in the accompanying form
which is properly signed, dated and returned to the General Partner and not
revoked will be voted in accordance with instructions contained therein. If
Interests are held in joint name, a proxy signed by one of the joint owners or
by a majority of the joint owners will be voted in accordance with the
instructions contained therein. If no instructions are indicated, proxies will
be voted for the proposal recommended by the Board of Directors of the General
Partner. Proxies will be received and tabulated by the General Partner for each
Partnership. Votes cast in person will be tabulated by an election inspector
appointed by the General Partner.
Limited Partners who execute proxies may revoke them at any time prior
to their being exercised by delivering written notice to the Secretary of the
General Partner at the above address or by subsequently executing and delivering
another proxy at any time prior to the voting. Mere attendance at a Special
Meeting will not revoke the proxy, but a Limited Partner present at a Special
Meeting may revoke his proxy and vote in person.
The approximate date on which this Proxy Statement and the accompanying
proxy or proxies will first be mailed to Limited Partners is December 8, 1995.
The date of this Proxy Statement is December 7, 1995
1
<PAGE>
Expenses of Solicitation
The cost of soliciting proxies, which will primarily include expenses
in connection with the preparation and mailing of this Proxy Statement and all
papers which now accompany or may hereafter supplement it, will be borne by the
Partnerships pro rata in accordance with the estimated fair market value of
their respective assets (see Table 1 below). This basis for allocation was
chosen over others (such as the number of Unitholders of each Partnership or the
amount of each Partnership's original capital or allocating one-fourth of the
costs to each Partnership) because the largest share of the costs of this
solicitation consist of the fees incurred to obtain an independent valuation of
the Partnerships' properties and counsel fees in connection with the preparation
of this Proxy Statement. In the General Partner's opinion, these costs are most
equitably allocated in accordance with the value of the Partnerships' assets.
The solicitation will be made by mail. The General Partner will supply
brokers or persons holding Interests of record in their names or in the names of
their nominees for other persons, as beneficial owners, with such additional
copies of proxies, and proxy materials as may reasonably be requested in order
for such record holder to send one copy to each beneficial owner, and will, upon
request of such record holders, reimburse them for their reasonable expenses in
mailing such material.
Certain directors, officers and employees of the General Partner, not
especially employed for this purpose, may solicit Proxies, without additional
remuneration therefor, by mail, telephone, telegraph or personal interview.
TABLE OF CONTENTS
Solicitation and Voting of Proxies........................................ 1
Expenses of Solicitation.................................................. 2
Summary ............................................... 3
Special Factors........................................................... 4
The Proposal To Dissolve and Liquidate.................................... 8
Fairness of the Proposed Transactions.................................... 11
Partnership Operations and Financial Conditions........................... 13
Reasons for Proposed Transaction......................................... 13
Potential Benefits to the Partners................................ 14
Record Date, Voting and Security Ownership of Certain Beneficial
Owners and Management................................................... 15
Certain Transactions...................................................... 17
Dissenters' Rights........................................................ 18
Federal Income Tax Consequences............................................ 18
Description of Business................................................... 19
Description of Property and Oil and Gas Reserves.......................... 19
2
<PAGE>
Valuation of Oil and Gas Properties........................................ 19
Principal Executive Offices and Telephone Number........................... 21
Information Concerning the General Partner................................. 21
Other Matters.............................................................. 22
Documents Incorporated By Reference....................................... 22
The following discussion is intended to highlight certain information
contained elsewhere herein and, accordingly, should be read in conjunction with
such information. It is not a complete statement of all material features of the
matters being submitted to Limited Partners for their approval and is qualified
in its entirety by this Proxy Statement and each Partnership's Annual Report on
Form 10-KSB and Quarterly Reports on Form 10-QSB which accompany this Proxy
Statement. LIMITED PARTNERS ARE URGED TO READ THE PROXY STATEMENT AND THE ANNUAL
AND QUARTERLY REPORTS IN THEIR ENTIRETY.
<TABLE>
<CAPTION>
SUMMARY
<S> <C>
Person Soliciting Proxies......................... Enex Resources Corporation (the "General
Partner")
Date of Special Meetings.......................... December 30, 1995
Time and Place.................................... 2:00 P.M. local time, at the General
Partner's principal executive offices
located at Three Kingwood Place, Suite
200, 800 Rockmead Drive, Kingwood,
Texas 77339
Record Date....................................... November 24, 1995
Class of Securities Entitled
to Vote.......................................... Limited Partnership Interests in each
Partnership
</TABLE>
<TABLE>
<CAPTION>
Enex Oil & Gas Income Program
Units of Limited Partnership Interest II-1, L.P. II-2, L.P. II-3, L.P. II-4, L.P.
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Outstanding on the Record Date and Entitled to Vote* 20,796 19,914 13,094 11,580
Number of Limited Partners ........ 669 1,153 1,254 409
<PAGE>
3
Units of Limited Partnership Interest Beneficially
Owned by the General Partner .... 9,291 9,367 6,212 5,252
Percentage Interest Beneficially Owned by the
General Partner ................. 44.6765% 47.0504% 47.4442% 45.3574%
Percentage of Remaining Limited Partnership Interests
Needed to Approve the Proposal .. 5.3236% 2.9497% 2.5559% 4.6427%
Fair Market Value of Assets** ..... $271,068 $236,207 $220,611 $194,058
</TABLE>
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* The aggregate amount of the Limited Partners' initial subscriptions divided by
$500.
** The fair market value of each Partnership was determined by H.J. Gruy and
Associates, Inc. as of June 30, 1995, as described below in "Description of
Property and Oil and Gas Reserves".
Additionally, Gerald B. Eckley, President of the General Partner owns 30 units
or a 0.2565% Interest in Enex Oil and Gas Income Program II-4, L.P., which he
will vote in favor of the proposal. No other executive officer or director of
the General Partner owns an interest in any of the Partnerships. The General
Partner knows of no other person who has beneficial ownership of more than 5% of
the Interests in any of the Partnerships.
SPECIAL FACTORS
Proposal to Dissolve and Liquidate the Partnerships:
Due to the failure of oil and gas prices to return to their levels of
the early 1980s, the depletion of each Partnership's oil and gas reserves (see
"Oil and Gas Reserves" attached as Tables B and B-1), the magnitude of the
amounts owed by each Partnership to the General Partner (see Table 1 below and
"Selected Financial Data" attached as Table A), the Partnerships' inability to
distribute cash to their Limited Partners for more than five years, and the
ongoing costs of operating each Partnership (see "Partnership Operations and
Financial Conditions" below and "General and Administrative Costs" attached as
Table E), the General Partner has determined that Partnership operations are
unlikely to be profitable for the foreseeable future.
In light of the above-described circumstances, Limited Partners of each
Partnership will be asked to consider and vote upon the proposal to dissolve and
liquidate each Partnership in accordance with the provisions of its Partnership
Agreement. Adoption of the proposal to dissolve and liquidate each Partnership
requires the affirmative vote of a majority in interest of the Limited Partners
of each such Partnership. Because of the amount of Limited Partner interests of
each Partnership held by the General Partner, the proposals to dissolve and
liquidate each Partnership could be approved without the affirmative vote of a
majority of the interests held by all other Limited Partners of such
Partnership. If the proposals are adopted, the assets will be sold and the
proceeds of sale allocated to the Partners' capital accounts. In connection with
the proposed liquidations, the General Partner will act as a "buyer of last
resort" for the Partnership properties; i.e., if no third-party bid is received
at or above the fair market value of a property (as determined by H. J. Gruy and
Associates, Inc. ("Gruy"), an independent petroleum consulting firm retained by
the Partnerships to appraise the Partnerships' properties), the General Partner
will purchase such property at such fair market value. Except in such cases, the
General Partner will not purchase any Partnership properties.
Due to the substantial amount of debt owed the General Partner by each
Partnership, it is likely that the consideration paid by the General Partner for
any Partnership properties so purchased by the General Partner will be in the
form of the partial discharge of this debt and that all the funds raised in the
liquidation will be used to satisfy this debt. Therefore, it is unlikely that
the Limited Partners will receive cash or other tangible consideration from
these transactions.
4
<PAGE>
If the Partnerships are not liquidated and dissolved pursuant to the
proposed plans of dissolution and liquidation described herein, the General
Partner will likely withdraw as general partner of the Partnerships. If the
General Partner does withdraw, the Partnership Agreement of each Partnership
permits the Limited Partners of each Partnership to reconstitute and continue
the business of such Partnership, but this right requires the consent of a
majority of the outstanding Units within ninety (90) days after the notice of
withdrawal. In light of the poor financial condition and prospects of each
Partnership, the General Partner believes that it would be highly unlikely that
a substitute general partner could be found who would be willing to fund the
ongoing administrative and operating expenses of the Partnerships. If the
Partnerships are not reconstituted, they will dissolve effective on the
ninetieth day after the notice of withdrawal has been sent, but the Partnerships
will not be terminated until the assets of the Partnerships have been disposed
of.
The primary benefits to the Limited Partners of the proposed
dissolutions are the potential to realize favorable tax consequences (see
"Federal Income Tax Consequences" below), and the General Partner's willingness
to act as "buyer of last resort" which ensures a "floor" or minimum
consideration for Partnership properties and thereby ensures an equivalent
"ceiling" or maximum amount of forgiveness of indebtedness income each Limited
Partner will realize from the proposed transactions, upon which it will be
subject to federal income tax (see "Federal Income Tax Consequences" below). The
General Partner believes there are no detriments of the transactions to the
Limited Partners. The primary benefits to the General Partner would be the
satisfaction, in whole or in part, of the Partnerships' indebtedness to the
General Partner and relief from the ongoing administrative and operating
expenses incurred by the General Partner on behalf of the Partnerships, which
the Partnerships have no ability to repay.
The General Partner considered, as alternatives to liquidation,
consolidating the Partnerships with other partnerships managed by the General
Partner and continuing to manage the Partnerships on an ongoing basis. However,
the Board of Directors of the General Partner, a majority of whose members are
not employees of the General Partner or any affiliates of the General Partner,
has unanimously approved the proposed dissolutions and liquidations as being
fair and in the best interests of the Limited Partners based on the following
factors, in order of their significance: (i) each Partnership's poor financial
condition and prospects, (ii) the potential of the Limited Partners to realize
favorable tax consequences, and (iii) the General Partner's willingness to act
as a "buyer of last resort" at the estimated fair market values of the
Partnerships' properties as estimated by Gruy (even if all of a Partnership's
indebtedness to the General Partner has been satisfied out of proceeds of
earlier property sales) . These factors are discussed in detail under the
captions "Partnership Operations and Financial Conditions," "Federal Income Tax
Consequences," "The Proposal to Dissolve and Liquidate," "Fairness of the
Proposed Transactions," "Reasons for the Proposed Transactions" and "Valuation
of Oil and Gas Properties" below. No director or group of directors has retained
an unaffiliated representative to act solely on behalf of the Limited Partners
for the purposes of negotiating the terms of the proposed plan to dissolve and
liquidate the Partnerships or to prepare a report concerning the fairness of
such proposals. No firm offer has been made by any person during the preceding
18 months regarding the merger or consolidation of any of the Partnerships, the
sale or transfer of all or any substantial part of the assets of any Partnership
or securities of any Partnership which would enable the holder thereof to
exercise control of such Partnership.
Federal Income Tax Consequences:
In general, the General Partner believes that, with respect to
individuals who are citizens or residents of the United States, for federal
income tax purposes the proposed liquidation of each Partnership's assets will
result in a capital loss to the Unitholders of each Partnership. In addition to
the capital loss, each
5
<PAGE>
Partnership will have a net operating loss from the Partnership's current year
of operation which will be deductible by the Unitholders.
If the consideration received in liquidation is equal to the estimated
fair market value of the assets of a Partnership, the General Partner believes
the Unitholders will have a 1995 tax loss per $500 Unit of limited partnership
interest outstanding approximately equal to the amounts shown below:
<TABLE>
<CAPTION>
1995 Loss
Per $500 Unit
-------------
<S> <C> <C>
Enex Oil & Gas Income Program II-1, L.P. $ 153.02
Enex Oil & Gas Income Program II-2, L.P. $ 159.94
Enex Oil & Gas Income Program II-3, L.P. $ 158.42
Enex Oil & Gas Income Program II-4, L.P. $ 149.83
</TABLE>
Unitholders may also have suspended passive losses from prior years
which may be utilized in the current year to offset income from other sources.
The following amounts per $500 Unit of limited partnership interest
outstanding indicate the passive loss generated prior to 1995 which a Unitholder
has available for use in the current year if he or she is an original investor
and has never utilized any of the Partnership's passive losses in prior years.
<TABLE>
<CAPTION>
Passive Loss
Per $500 Unit
-------------
<S> <C> <C>
Enex Oil & Gas Income Program II-1, L.P. $ 105.43
Enex Oil & Gas Income Program II-2, L.P. $ 91.74
Enex Oil & Gas Income Program II-3, L.P. $ 79.50
Enex Oil & Gas Income Program II-4, L.P. $ 84.16
</TABLE>
Appraisal Report:
Quantitative information regarding each Partnership's oil and gas
reserves is included in Item 2 of each Partnership's 1994 Form 10-KSB
accompanying this Proxy Statement and in Tables B, B-1, C and D attached hereto.
Included in this information are fair market valuations of the properties of
each Partnership prepared by Gruy. Gruy has been preparing reserve estimates for
each of the Partnership's oil and gas reserves since the inception of each
Partnership's operations. Gruy was selected by the General Partner for this task
based upon its reputation, experience and expertise in this area. In 1995 and
1994, Enex Oil & Gas Income Program II-1, L.P., II-2, L.P., II-3, L.P., and
II-4, L.P. paid Gruy a total of $2,500 and $2,967, respectively, in fees for
annual reserve report valuations. In 1995, these Partnerships paid Gruy a total
of $1,989 for the fair market valuations described in this Proxy Statement. In
addition, Gruy has received compensation from the General Partner and other
limited partnerships of which Enex is the general partner during the past two
years in the aggregate amount of $123,398.
Gruy has estimated for each oil and gas property in which the Partnerships
own interests, as of June 30, 1995, the recoverable units of oil and gas and the
undiscounted and discounted future net cash flows by year commencing July 1,
1995 and continuing through the estimated productive lives of the properties.
The Limited Partners should be aware Gruy's reserve estimates are estimates only
and should not be construed
6
<PAGE>
as being exact amounts. 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 the following discount factors for risk, location,
type of ownership interest, operational characteristics and other factors: for
proved developed producing reserves, 25% to 33 1/2%; for proved developed
nonproducing reserves, 42% to 47%. See "Valuation of Oil and Gas Properties" and
Table B-1 below. Gruy allocated the estimates among the Partnerships on a
pro-rata basis in accordance with their respective ownership interest in each of
the properties evaluated. See Tables C and D. The resulting value for each
Partnership is included in Table 1 and in Table B and is labelled Fair Market
Value of Oil and Gas Reserves. Gruy estimated the fair market value of the oil
and gas properties of each of Enex Oil & Gas Income Program II-1, L.P., Enex Oil
& Gas Income Program II-2, L.P., Enex Oil & Gas Income Program II-3, L.P., and
Enex Oil & Gas Income Program II-4, L.P., as $271,068, $236,207, $220,611 and
$194,058, respectively.
No instructions were given and no limitations were imposed by the
General Partner on the scope of or methodology to be used in preparing the fair
market valuations by Gruy. All information provided by Enex and used by Gruy in
preparing such valuations were verified and corroborated through sources
unaffiliated with Enex. The fair market valuation report prepared by Gruy is
available for inspection and copying at the office of the General Partner during
regular business hours by any interested Limited Partner or his representative
who has been so designated in writing. A copy of such report will be mailed to
any interested Limited Partner or his representative upon written request.
7
<PAGE>
The Proposal To Dissolve and Liquidate
At the Special Meetings, the Limited Partners of each Partnership will
be asked to consider and vote upon a proposal to dissolve and liquidate each
Partnership in accordance with the provisions of its Partnership Agreement, as
described herein. Upon the winding up and termination of the business and
affairs of the Partnership, (i) its assets shall, to the extent practicable, be
sold, the proceeds allocated to the Partners in accordance with provisions of
the Partnership Agreement and the Partners' capital accounts adjusted
accordingly and (ii) the value of the remaining non-cash assets of the
Partnership shall be determined (as provided below) and the Partners' capital
accounts adjusted as if such remaining assets had been sold at a price equal to
such value and the applicable allocations had been made. The expenses related to
dissolving and liquidating each Partnership will be deducted from the proceeds
of the sale of Partnership oil and gas properties. These costs are estimated to
be approximately $6,216, $6,776, $6,742, and $4,290, for Enex Oil & Gas Income
Program II-1, L.P., Enex Oil & Gas Income Program II-2, L.P., Enex Oil & Gas
Income Program II-3, L.P., and Enex Oil & Gas Income Program II-4, L.P.,
respectively, with the principal expenses being legal fees incurred in
connection with the preparation of the Proxy Statement and related materials,
solicitation expenses, printing costs and Gruy's appraisal fees. If it becomes
necessary to engage the services of a broker or other agent to facilitate the
sale of the Partnerships' properties, customary commissions and selling fees
will have to be incurred, however. According to the Partnership Agreements, such
proceeds of all sales and remaining assets are to be distributed as follows:
(i) all of the Partnership's debts and liabilities to persons other
than the General Partner and the Limited Partners (collectively, the
"Partners"), which are immaterial in amount, shall be paid and discharged in
their order of priority, as provided by law;
(ii) all of the Partnership's debts and liabilities to the Partners
shall be paid and discharged (currently each of the Partnerships owes the
General Partner an amount in excess of the estimated fair market value of its
assets); and
(iii) any remaining cash and other assets of the Partnership shall be
distributed to the Partners in proportion to and in payment of the positive
balances in their respective capital accounts, with the effect of bringing such
capital accounts to zero. However, each Limited Partner's capital account has a
negative balance equal to the number of Units owned multiplied by the following
amounts:
Negative Capital
Account Balance
Per $500 Unit
-------------
Enex Oil & Gas Income Program II-1, L.P. $1.76
Enex Oil & Gas Income Program II-2, L.P. $3.71
Enex Oil & Gas Income Program II-3, L.P. $2.28
Enex Oil & Gas Income Program II-4, L.P. $2.18
The amount of the potential proceeds from the sale of each
Partnership's oil and gas properties and other assets cannot be readily
estimated. However, see Tables B, B-1 and C for quantitative information
regarding proved oil and gas reserves, estimated future net cash flows, and
discounted future net cash flows of each Partnership's oil and gas reserves as
of June 30, 1995 prepared by H.J. Gruy and Associates, Inc. ("Gruy"), an
independent petroleum consulting firm. Similar quantitative and cash flow
information is shown for each Partnership as of December 31, 1994, 1993 and
1992.
8
<PAGE>
Gruy has also prepared a fair market valuation as of June 30, 1995 for
every oil and gas property owned by each Partnership (see Table 1 below and
Table B-1). Because of the difficulty of estimating oil and gas reserves, the
proceeds of a sale may not reflect the full value of the properties to which
they relate. Such estimates are merely appraisals of value and may not
correspond to realized value. Every reasonable effort will be made by the
General Partner to sell the Partnerships' properties for the highest possible
price. Qualified potential buyers will be sought out, informed of the
availability of the properties for purchase, and distributed a sales brochure.
These qualified potential buyers will include, but not be limited to, operators
of the properties, other non-operating owners of the properties, and companies
and/or persons known to own or be interested in owning the types of properties
available.
The General Partner will not bid on any Partnership properties but will
prepare a bid package to be furnished to potential purchasers. The bid packages
will include sufficient information for prospective bidders to reasonably
determine values for the properties. A copy of the bid package will be mailed to
any Unitholder who notifies the General Partner that he or she is interested in
bidding on any Partnership properties. Additional data will be available in the
data room set up at the General Partner's office whereby potential bidders will
be able to review in detail the General Partner's records and files pertaining
to the properties. In addition, pursuant to the provisions of the Texas Revised
Uniform Limited Partnership Act (the "Texas Act"), each Partnership is required
to make available certain information to Limited Partners at such Partnership's
principal office, including such information regarding the business, affairs and
financial condition of such Partnership as is just and reasonable for the
Limited Partners to examine and copy. Sale at public auction will also be
considered, especially in the case of smaller working and royalty interests
and/or lower valued properties. At all times, and in particular in effectuating
the proposed plans of liquidation if approved, the General Partner has acted and
will continue to act in accordance with its fiduciary duties as a general
partner of a limited partnership governed by the Texas Act and applicable common
law principles.
In all cases, each Partnership property will be sold for the highest
possible price. In cases where the highest third party bid for a property is
less than its fair market value as determined by Gruy, the General Partner will
purchase the property at such fair market value. Thus, the General Partner will
act as a "buyer of last resort". Accordingly, as shown in Table 1 below, the
minimum amount to be received by each Partnership for its oil and gas properties
is $259,689 for Partnership II-1, L.P.; $226,260 for Partnership II- 2, L.P.;
$207,390 for Partnership II-3, L.P.; and $181,104 for Partnership II-4, L.P.
Until such time as a Partnership's total indebtedness has been discharged in
full, the consideration paid by the General Partner for any properties of such
Partnership purchased by the General Partner shall be in the form of
satisfaction of such indebtedness. At such time as a Partnership's indebtedness
has been discharged in full, the General Partner's purchase of such properties
from such Partnership as buyer of last resort will be for cash. In addition, all
cash proceeds of the proposed liquidations up to the amount of the indebtedness
of each Partnership will be distributed in accordance with the liquidation
provisions of the Partnership Agreements described above (i.e., used to retire
such indebtedness).
The Partnership Agreements permit the General Partner to purchase
Partnership properties following dissolution by matching the highest bona-fide
third-party offer received. In order to avoid the appearance of potential
conflicts of interest, however, the General Partner has elected to forego this
right in connection with the proposed dissolutions to be voted upon at the
Special Meetings.
For additional information concerning the Partnerships' properties ,
see "Description of Property and Oil and Gas Reserves" below.
9
<PAGE>
<TABLE>
<CAPTION>
Table 1
Enex Oil & Gas Income Program
-----------------------------
II-1, L.P. II-2, L.P. II-3, L.P. II-4, L.P.
---------- ---------- ---------- ----------
Fair Market Value of
Oil and Gas Reserves (1)
Property Name:
<S> <C> <C> <C> <C>
East Seven Sisters ........... $ 203,825 $ 212,350 $ 133,610 $ 110,360
Comite A ..................... 53,500 13,910 12,840 9,630
NW Esperance Pt. B&C ......... 2,364 -- -- --
Newport ...................... -- -- 24,600 24,600
Blair ........................ -- -- 8,200 10,250
Hanson ....................... -- -- 28,140 26,264
--------- --------- --------- ---------
Total ........................... 259,689 226,260 207,390 181,104
Cash on hand (2) .................. 356 1,105 351 984
Accounts Receivable (2) ........... 10,322 8,842 12,545 11,645
Other Assets (2) .................. 701 -- 325 325
--------- --------- --------- ---------
Fair Market Value of Assets ....... 271,068 236,207 220,611 194,058
Less:
Liability to General Partner 330,512 270,916 231,507 256,707
Liability to others (2) .... 966 2,066 2,104 2,268
--------- --------- --------- ---------
Partnership Net (Deficit) ......... ($ 60,410) ($ 36,775) ($ 13,000) ($ 64,917)
========= ========= ========= =========
(1) The fair market value of each Partnership was determined by H.J. Gruy and Associates, Inc. as of
June 30, 1995, as described below in "Description of Property and Oil and Gas Reserves" and
"Valuation of Oil and Gas Properties".
(2) Assets and liabilities per each Partnership's respective Form 10-QSB as
of June 30, 1995.
</TABLE>
As shown above, the estimated fair market value of each Partnership's oil
and gas reserves and other assets is less than the outstanding debt owed by each
Partnership to the General Partner. This may result in the General Partner
acquiring all of the assets of each Partnership without the payment of
consideration other than the discharge of its indebtedness to the General
Partner. If no bids for Partnership properties at or above their estimated fair
market value are received, the General Partner will purchase such properties
from each Partnership at such values in consideration for the discharge of
Partnership indebtedness to the General Partner. The indebtedness to the General
Partner that will remain following such purchases will be as follows:
10
<PAGE>
Enex Oil & Gas Income Program
-----------------------------
II-1, L.P. II-2, L.P. II-3, L.P. II-4, L.P.
--------- ---------- ---------- ----------
Indebtedness $60,410 $36,775 $13,000 $64,917
In any event, if the amount owed the General Partner by each Partnership is not
fully satisfied from proceeds received from property sales to third parties
and/or to the General Partner, such indebtedness of each Partnership will be
forgiven by the General Partner. See "Federal Income Tax Consequences" below for
a description of the tax consequences related to the forgiveness of this debt.
Although permitted to do so by the Partnership Agreements, the General
Partner will not distribute any Partnership assets in kind. As described above,
however, the General Partner may purchase Partnership properties pursuant to the
proposed Partnership liquidations in exchange solely for the discharge of
Partnership indebtedness to the General Partner when acting as "buyer of last
resort".
To the General Partner's knowledge, consummation of the proposal is not
subject to compliance with any federal or state regulatory requirements other
than those applicable to the solicitation of proxies pursuant to this Proxy
Statement. Following approval of the proposed dissolution and liquidation of the
Partnerships, the registration of the Limited Partnership Interests of the
Partnerships under Section 12(g) of the Exchange Act and the Partnerships'
obligations to file reports pursuant to Section 15(d) of the Exchange Act will
terminate.
Fairness of the Proposed Transactions:
Due to the poor financial condition of the Partnerships, the General
Partner's President, Gerald B. Eckley, and Vice President-Finance, Robert E.
Densford, began to consider the Partnerships' prospects in the Spring of 1995.
They reviewed each Partnership's cash flow from operations, indebtedness and
negative capital balances as well as the prospects for improvement in market
prices of oil and gas. In June 1995 Messrs. Eckley and Densford advised the
other memebers of the General Partner's Board of Directors of the Partnerships'
poor financial condition and that market prices for oil and gas would not
increase sufficiently to allow the Partnerships to repay their idebtedness, and
that the Partnerships should be dissoved and liquidated. The further advised the
Board that dissolution and liquidation would probably not provide the Limited
Partners with any tagible benefits, but that such tansactions would provide the
potential for favorable tax consequences to the Limited Partners. In June 1995
the General Partner's Board of Directors authorized the engagement of Gruy to
prepare fair market valuations of the Partnerships' properties to assist the
Board in evaluating alternatives. At the July and August Board meetings, the
Board considered dissolutin and liquidation of the Partnerships and, as
alternatives, consolidating the Partnerships with other partnerships managed by
the General Partner and continuing to manage the Partnerships on an ongoing
basis. Following receipt of Gruy's preliminary fair market value estimates the
General Partner's Board of Directors preliminarily approved the proposal to
dissolve and liquidate the Partnerships and the preparation of this Proxy
Statement and related materials at the August meeting. Finally, in November,
1995,the Board of Directors of the General Partner, a majority of whose members
are not employees of the General Partner or any affiliates of the General
Partner, unanimously approved the proposed dissolutions and liquidations as
being fair and in the best interests of the Limited Partners based on the
following factors, in order of their significance: (i) each Partnership's poor
financial condition and prospects, (ii) the potential of the Limited Partners to
realize favorable tax consequences, and (iii) the General Partner's willingness
to act as a "buyer of last resort" at the estimated fair market values of the
Partnerships' properties as estimated by Gruy (even if all of a Partnership's
indebtedness to the General Partner has been satisfied out of proceeds of
earlier property sales) which ensures a "floor" or minimum consideration for
Partnership properties and thereby ensures an equivalent "ceiling" or maximum
amount of forgiveness of indebtedness income each Limited Partner will realize
from the proposed transactions, upon which it will be subject to federal income
11
<PAGE>
tax (see "Federal Income Tax Consequences" below). All members of the General
Partner's Board of Directors were present at all meetings at which the proposed
transactions were considered.
As previously discussed, Limited Partners will not be receiving cash or
any other tangible consideration in connection with the proposed dissolutions
and liquidations of the Partnerships, because each Partnership's indebtedness to
the General Partner significantly exceeds the estimated fair market value of
such Partnership's assets. The primary benefit of the proposed transactions to
the Limited Partners is, in fact, the federal income tax consequences of the
proposed transactions. The General Partner did consider whether the
consideration or benefit to the Limited Partners from the proposed transactions
constitutes fair value in relation to current market prices, historical market
prices, net book value, going concern value, liquidation value, and the
estimated fair market values prepared by Gruy. Because the Limited Partners will
not be realizing any value from the Partnerships' properties due to the amount
of each Partnership's indebtedness, such values were not given any weight in
determining the fairness of the proposed transactions to the Limited Partners
beyond its reliance on Gruy's fair market value estimates to determine that the
Partnerships' liabilities substantially exceeded their assets.
Although the General Partner does not believe that alternative methods of
valuing the Partnership properties, such as using current or historical market
prices, prices recently paid the General Partner for units of limited
partnership interest in the Partnerships ($0 per Unit), net book value, going
concern value or liquidation value, would result in a higher valuation of
Partnership properties than that yielded by Gruy's valuation, even were such to
be the case, the General Partner would not consider it relevant to a
determination of the fairness of the transaction to the Limited Partners. As
discussed above, due to the poor financial condition of the Partnerships, in the
event the proposed transactions were not approved the General Partner would
withdraw as general partner likely leading to the dissolution and liquidation of
the Partnerships in any case. In the General Partners' experience, oil and gas
properties are generally purchased and sold at prices approximating the
purchasers' and sellers' estimates of the discounted present value of the
subject oil and gas reserves. Thus, the Gruy estimated fair market valuations,
as compared to the other above-referenced valuation methods, represents the best
estimation of the realizable value of the Partnership properties.
Adoption of the proposal to dissolve and liquidate each Partnership
requires the affirmative vote of a majority in interest of the Limited Partners
of each such Partnership. Because of the amount of Limited Partner interests of
each Partnership held by the General Partner, the proposals to dissolve and
liquidate each Partnership could be approved without the affirmative vote of a
majority of the interests held by all other Limited Partners of such
Partnership. No director or group of directors has retained an unaffiliated
representative to act solely on behalf of the Limited Partners for the purposes
of negotiating the terms of the proposed plan to dissolve and liquidate the
Partnerships or to prepare a report concerning the fairness of such proposals.
No firm offer has been made by any person during the preceding 18 months
regarding the merger or consolidation of any of the Partnerships, the sale or
transfer of all or any substantial part of the assets of any Partnership or
securities of any Partnership which would enable the holder thereof to exercise
control of such Partnership. The absence of the protections described in the
preceding two sentences was considered, but was judged to be immaterial, by the
General Partner in determining the fairness of the proposed transactions to the
Limited Partners.
12
<PAGE>
Partnership Operations and Financial Conditions
Enex Oil & Gas Income Program II - 1, L.P.
Cash flow provided by operating activities for the six months ended June
30, 1995 was $1,545. The Partnership was unable to make any payments on the
principal balance owed to the General Partner. The amount owed the General
Partner increased by $10,618 during that period to more than $330,000.
Enex Oil & Gas Income Program II - 2, L.P.
Cash flow provided by operating activities for the six months ended June
30, 1995 was $1,672. The Partnership was unable to make any payments on the
principal balance owed to the General Partner. The amount owed the General
Partner increased by $10,471 during that period to more than $270,000.
Enex Oil & Gas Income Program II - 3, L.P.
Cash flow provided by operating activities for the six months ended June
30, 1995 was $4,229. The Partnership was unable to make any payments on the
principal balance owed to the General Partner. The amount owed the General
Partner increased by $8,012 during that period to more than $231,000.
Enex Oil & Gas Income Program II - 4, L.P.
Cash flow provided by operating activities for the six months ended June
30, 1995 was $1,385. The Partnership was unable to make any payments on the
principal balance owed to the General Partner. The amount owed the General
Partner increased by $6,864 during that period to more than $256,000.
All Partnerships
It does not appear that even a significant increase in oil and gas
prices would generate sufficient cash flow for the Partnerships to pay their
operating and administrative expenses and repay their debt obligations. The
Partnerships have deficits in their Partners' capital accounts and under
generally accepted accounting principles are insolvent. Only if oil and gas
prices were to more than double would any of the Partnerships be able to cover
their ongoing administrative and operating expenses and pay down their
outstanding indebtedness to the General Partner. The General Partner believes
that an increase in oil and gas prices of this magnitude is extremely unlikely
anytime in the foreseeable future.
Reasons For Proposed Transactions
Due to the failure of oil and gas prices to return to their levels of
the early 1980s, the depletion of each Partnership's oil and gas reserves (see
"Oil and Gas Reserves" attached as Tables B and B-1), the magnitude of the
amounts owed by each Partnership to the General Partner (see Table 1 above and
"Selected Financial Data" attached as Table A), the Partnerships' inability to
distribute cash to their Limited Partners for more than five years, and the
ongoing costs of operating each Partnership (see "Partnership Operations and
Financial Conditions" above and "General and Administrative Costs" attached as
Table E), the General Partner has determined that Partnership operations are
unlikely to be profitable for the foreseeable future. As shown in Tables 1, A
and B, the fair market value of each Partnership's oil and gas reserves at June
30, 1995, as determined by Gruy, is less than the outstanding debt owed by each
Partnership to the General Partner. As a result, the General Partner believes
that the net proceeds from the sale of properties will be used to retire
outstanding debt, principally owed to the General Partner (see Table 1 ), and
that the Partners
13
<PAGE>
would receive little or no value in a consolidation, and that future cash
distributions to the Partners are unlikely.
If the Partnerships are not liquidated and dissolved pursuant to the
proposed plans of dissolution and liquidation described herein, the General
Partner will likely withdraw as general partner of the Partnerships. If the
General Partner does withdraw, the Partnership Agreement of each Partnership
permits the Limited Partners of each Partnership to reconstitute and continue
the business of such Partnership, but this right requires the consent of a
majority of the outstanding Units within ninety (90) days after the notice of
withdrawal. In light of the poor financial condition and prospects of each
Partnership, the General Partner believes that it would be highly unlikely that
a substitute general partner could be found who would be willing to fund the
ongoing administrative and operating expenses of the Partnerships. If the
Partnerships are not reconstituted, they will dissolve effective on the
ninetieth day after the notice of withdrawal has been sent, but the Partnerships
will not be terminated until the assets of the Partnerships have been disposed
of.
The General Partner considered, as alternatives to liquidation,
consolidating the Partnerships with other partnerships managed by the General
Partner and continuing to manage the Partnerships on an ongoing basis. However,
for the reasons mentioned above and the benefits the Limited Partners will
derive from approval of the proposed dissolutions, as described under "Fairness
of the Proposed Transaction" above and "Potential Benefits to the Partners - To
the Limited Partners" below, the General Partner has determined that it is in
the best interests of the Limited Partners to dissolve and liquidate the
Partnerships.
Consolidating the Partnerships. The possibility of consolidating the
Partnerships with the General Partner or with other partnerships managed by the
General Partner was considered. Because any consolidation of partnerships
managed by the General Partner or with the General Partner would be based on the
net fair market value of a partnership's assets less liabilities, the negative
net value of each of the Partnerships (see Table 1 above) and the inability of
any of the Partnerships to generate sufficient cash flow to liquidate their
liabilities, particularly to the General Partner, would not have permitted the
Partnerships to receive any consideration in any consolidation with profitable
partnerships or with the General Partner. Their participation would also be
unfair to the investors in the other entities. Consolidating just two or more of
the Partnerships was also considered. Although the aggregate general and
administrative expenses of the Partnerships would be reduced by such a
transactions, the reductions would not be sufficient to offset the losses
generated by the Partnerships (which the General Partner would be forced to
continue to carry) or to reduce their indebtedness to the General Partner, which
would remain outstanding following such a consolidation. (See Tables A and E
below.) Thus, the consolidated entity would continue to operate at a loss
without providing any benefit to the Limited Partners from the transaction. The
General Partner would not support such a transaction.
Continuing the Management of the Partnerships. The General Partner has
concluded that the Partnerships' inability to generate any profits in the
foreseeable future makes their continued operation unviable. Moreover, as
discussed above, if the Partnerships are not liquidated and dissolved pursuant
to the proposed plans of dissolution and liquidation described herein, the
General Partner will likely withdraw, and such a withdrawal would also most
likely lead to the dissolution and liquidation of the Partnerships.
Potential Benefits to the Partners
To the Limited Partners
The primary benefits of the proposed transactions to the Limited
Partners are the potential to realize favorable tax consequences (see "Federal
Income Tax Consequences" below), and the General Partner's willingness to act as
a "buyer of last resort", which ensures a "floor" or minimum consideration for
14
<PAGE>
Partnership properties and thereby ensures an equivalent "ceiling" or maximum
amount of forgiveness of indebtedness income each Limited Partner will realize
from the proposed transactions, upon which it will be subject to federal income
tax (see "Federal Income Tax Consequences" below). The General Partner believes
there are no detriments of the transactions to the Limited Partners.
Enex owns by far the largest limited partnership interest in each
Partnership (see "Record Date, Voting and Security Ownership of Certain
Beneficial Owners and Management"). If the proposed dissolutions are approved
Enex will participate as a Limited Partner to the extent of its limited
partnership interest in the consequences of the liquidation in the same manner
as all other Limited Partners.
To the General Partner
As General Partner, Enex will benefit from the proposed transactions by
collecting all or a portion of the amounts owed to it by each Partnership upon
the sale of each such Partnership's properties, either in the form of the cash
proceeds of such sales or, as buyer of last resort, the receipt of Partnership
properties in exchange for the discharge of Partnership indebtedness to the
General Partner. Also, upon the liquidation of the Partnerships, the General
Partner will cease to incur the ongoing expenses of administering and operating
the Partnerships. Actual administrative expenses paid by the General Partner for
each Partnership in 1994 and the first six months of 1995, as well as estimates
of such expenses for 1995 and 1996, are set forth in Table E. Expenses
associated with the Partnerships' reporting obligations under the Securities and
Exchange Act of 1934, as amended, the preparation of annual tax reports, and
annual audits, comprise a significant portion of such administrative expenses.
As discussed above, the amounts owed the General Partner by each Partnership
have increased since December 31, 1994. The liquidation and dissolution of the
Partnerships will prevent these liabilities from increasing further and reduce
the General Partner's risk that the receivables from each Partnership are/or may
in the future become uncollectible.
The General Partner intends to continue to hold any of the Partnership
properties it might acquire as a buyer of last resort. The General Partner has
no plans to dispose of any of such properties. Based upon 1994 results (see Item
7-Financial Statements and Supplemental Data to each Partnership's Annual Report
on Form 10-KSB for the year ended December 31, 1994) the Partnerships'
properties generated insufficient net income before general and administrative
expenses and interest charges to offset the interest accrued on their
indebtedness to the General Partner.
In the event that the General Partner acquires any Partnership
properties in connection the proposed plans of dissolution and liquidation of
the Partnerships, the General Partner believes that such properties will be
profitable due to the elimination of the current ongoing expenses associated
with administering and operating the Partnerships and the elimination of the
Partnerships' indebtedness.
Record Date, Voting and Security Ownership of Certain Beneficial Owners and
Management
As of the Record Date, the Partnerships had the following numbers of
"Units" of limited partnership interest (i.e., the aggregate amount of the
Limited Partners' initial subscriptions divided by $500) outstanding and
entitled to vote (in each case the number of Units represents 100% of the
outstanding limited partnership interests of the Partnership):
15
<PAGE>
Number of
Units
-----
Enex Oil & Gas Income Program II-1, L.P. 20,796
Enex Oil & Gas Income Program II-2, L.P. 19,914
Enex Oil & Gas Income Program II-3, L.P. 13,094
Enex Oil & Gas Income Program II-4, L.P. 11,580
From January 1, 1993 to the date hereof, the General Partner has purchased
an aggregate of 2,282.70, 2,690.94, 1,334.14 and 1,186.76 Units of Limited
Partnership Interest of Enex Oil & Gas Income Program II-1, L.P, Enex Oil & Gas
Income Program II-2, L.P., Enex Oil & Gas Income Program II-3, L.P., and Enex
Oil & Gas Income Program II-4, L.P., respectively (including approximately 22
such Units during the past sixty (60) days), at an average purchase price per
Unit of $1.39, $3.83, $4.97, and $.80, respectively, in accordance with its
annual offer to repurchase such interests as required by the Partnership
Agreements.
Approval of the proposal for each Partnership requires the affirmative
vote of the holders of a majority-in-interest of that Partnership. The term "the
holders of a majority-in-interest" refers to Limited Partners (including the
General Partner) holding more than fifty percent of the limited partnership
interests of all the Limited Partners of that Partnership. With respect to the
proposal, abstentions will be included in determining the presence of a quorum,
and will be treated as votes cast against the proposal. "Broker non- votes" will
be deemed absent for purposes of determining the presence of a quorum and will
be treated as votes cast against the proposal. Any unmarked proxies, including
those submitted by brokers and nominees, will be voted in favor of the
applicable proposal.
The following table sets forth for each Partnership, as of the Record
Date, the number and percentage of Units beneficially owned by the General
Partner and by Gerald B. Eckley, President of the General Partner. No other
executive officer or director of the General Partner owns an interest in any of
the Partnerships. The General Partner knows of no other person who has
beneficial ownership of more than 5% of the outstanding limited partnership
interests in any of the Partnerships.
<TABLE>
<CAPTION>
Enex Oil and Gas Income Program
-------------------------------
II-1, L.P. II-2, L.P. I-3, L.P. II-4, L.P.
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Units Beneficially Owned by the General Partner .... 9,291 9,367 6,212 5,252
Percentage Beneficially Owned by the General Partner 44.6765% 47.0504% 47.4442% 45.3574%
Units Beneficially Owned by Mr. G. B. Eckley ....... -- -- -- 30
Percentage Beneficially Owned by Mr. G. B. Eckley .. -- -- -- 0.2565%
</TABLE>
The General Partner and Mr. Eckley intend to vote all of the Units
they own in favor of the proposal. Therefore, for each Partnership, if the
following percentages of the outstanding Units are voted by other Limited
Partners in favor of the proposal, it will be approved:
16
<PAGE>
<TABLE>
<CAPTION>
Percentage of Units
Needed to Approve
Proposal
-------------------
<S> <C> <C>
Enex Oil & Gas Income Program II-1, L.P. 5.3236%
Enex Oil & Gas Income Program II-2, L.P. 2.9497%
Enex Oil & Gas Income Program II-3, L.P. 2.5559%
Enex Oil & Gas Income Program II-4, L.P. 4.6427%
</TABLE>
Certain Transactions
The following amounts relate to transactions between the General
Partner and the Partnerships which have occurred since January 1, 1993:
<TABLE>
<CAPTION>
Allocated General & Administrative Expenses
-------------------------------------------
1993 1994 9 months 1995
<S> <C> <C> <C>
Enex Oil & Gas Income Program II-1, L.P. 15,467 14,345 10,147
Enex Oil & Gas Income Program II-2, L.P. 14,338 10,920 8,056
Enex Oil & Gas Income Program II-3, L.P. 16,411 17,191 11,874
Enex Oil & Gas Income Program II-4, L.P. 16,459 17,338 11,965
</TABLE>
The Partnerships reimburse the General Partner for administrative costs
incurred on their behalf. Administrative costs allocated to the Partnerships are
computed on a cost basis in accordance with standard industry practices by
allocating the time spent by the General Partner's personnel among all projects
and by allocating rent and other overhead on the basis of the relative direct
time charges. The General Partner believes that these amounts are less than
administrative charges customarily charged other partnerships because the
General Partner manages 41 other partnerships and is, therefore, able to
allocate such similar charges over a larger base of partnerships.
<TABLE>
<CAPTION>
Interest Accrued on Indebtedness to the General Partner
-------------------------------------------------------
1993 1994 9 months 1995
<S> <C> <C> <C>
Enex Oil & Gas Income Program II-1, L.P. 23,340 23,871 20,692
Enex Oil & Gas Income Program II-2, L.P. 18,053 19,401 17,002
Enex Oil & Gas Income Program II-3, L.P. 16,122 15,819 12,896
Enex Oil & Gas Income Program II-4, L.P. 18,870 18,427 15,427
</TABLE>
<TABLE>
<CAPTION>
Payments of Interest and Principal
----------------------------------
1993 1994 9 months 1995
<S> <C> <C> <C>
Enex Oil & Gas Income Program II-1, L.P. 40,160 23,129 308
Enex Oil & Gas Income Program II-2, L.P. 17,567 10,099 1,998
Enex Oil & Gas Income Program II-3, L.P. 38,707 29,681 8,104
Enex Oil & Gas Income Program II-3, L.P. 30,130 23,573 3,573
</TABLE>
The Partnerships have notes payable to the General Partner for
unreimbursed expenses paid by the General Partner on each Partnership's behalf.
The above amounts represent the interest and principal repayments paid by each
Partnership to the General Partner for the periods indicated. The amounts paid
in 1995 represent partial payments of accrued interest only. The interest rate
charged the Partnerships is equal to the General Partner's cost of borrowing
from its bank (prime + 3/4 of one percent). No other amounts were charged or
allocated to the Partnerships by the General Partner or its affiliates since
January 1, 1993.
17
<PAGE>
Dissenters' Rights
Limited Partners will not have, nor be entitled to, any dissenters' or
appraisal rights with respect to the proposals under the Partnership Agreements
or under applicable law. Generally, in the absence of a breach of the General
Partner's fiduciary duty (i.e., to act fairly and in the best interests of the
Partnerships and their Limited Partners), Limited Partners who object to the
proposed dissolution and liquidation will have no remedy available to them under
state law or under the Partnership Agreements if the percentage of Units needed
to approve the proposal vote for it (see "Record Date, Voting and Security
Ownership of Certain Beneficial Owners and Management" above).
Federal Income Tax Consequences
In general, the General Partner believes that, with respect to
individuals who are citizens or residents of the United States, for federal
income tax purposes the proposed liquidation of each Partnership's assets will
result in a capital loss to the Unitholders of each Partnership. In addition to
the capital loss, each Partnership will have a net operating loss from the
Partnership's current year of operation which will be deductible. The
forgiveness of any indebtedness by the General Partner will constitute ordinary
income to the Unitholders of such Partnership; however, even with this income,
the General Partner anticipates that each Partnership will have a net operating
loss for 1995.
If the consideration received in liquidation is equal to the estimated
fair market value of the Partnerships' assets, the General Partner believes that
the Unitholders will have a 1995 loss (net of forgiveness of debt) per $500 Unit
of limited partnership interest outstanding approximately equal to the amounts
shown below:
<TABLE>
<CAPTION>
1995 Loss
Per $500 Unit
-------------
<S> <C> <C>
Enex Oil & Gas Income Program II-1, L.P. $ 153.02
Enex Oil & Gas Income Program II-2, L.P. $ 159.94
Enex Oil & Gas Income Program II-3, L.P. $ 158.42
Enex Oil & Gas Income Program II-4, L.P. $ 149.83
</TABLE>
Unitholders may also have suspended passive losses from prior years
which may be utilized in the current year to offset income from other sources.
The following amounts per $500 Unit of limited partnership interest
outstanding indicate the passive loss generated prior to 1995 which a Unitholder
has available for use in the current year if he or she is an original investor
and has never utilized any of the Partnership's passive losses in prior years.
18
<PAGE>
<TABLE>
<CAPTION>
Passive Loss
Per $500 Unit
-------------
<S> <C> <C>
Enex Oil & Gas Income Program II-1, L.P. $ 105.43
Enex Oil & Gas Income Program II-2, L.P. $ 91.74
Enex Oil & Gas Income Program II-3, L.P. $ 79.50
Enex Oil & Gas Income Program II-4, L.P. $ 84.16
</TABLE>
To calculate a Unitholder's passive loss, he must determine the number
of $500 Units he owns by dividing his original investment by $500. This number
multiplied by the passive loss shown above for the appropriate Partnership will
determine the Unitholder's passive loss for that Partnership. An original
investor who has not utilized passive losses in prior years, may use such
passive loss amount in the current year to offset income from other sources if
the proposal is adopted for his or her Partnership.
The actual tax consequences to any Unitholder will depend on the
Unitholder's own tax circumstances. No legal opinion concerning the tax
consequences of the proposed transactions has been obtained by the General
Partner. The foregoing discussion of the potential federal income tax
consequences of the proposed liquidation of the Partnerships has been prepared
by Robert E. Densford, Vice President-Finance, Secretary and Treasurer of the
General Partner and James A. Klein, Controller of the General Partner, both of
whom are certified public accountants. NEVERTHELESS, EACH UNITHOLDER SHOULD
CONSULT HIS OR HER OWN TAX ADVISER WITH RESPECT TO THE TAX CONSEQUENCES OF THE
PROPOSED TRANSACTIONS.
Description of Business
The Partnerships were formed under the Uniform Limited Partnership Act
of the State of Texas and subsequently became subject to the Texas Revised
Uniform Limited Partnership Act. The Partnerships are engaged in the oil and gas
business through the ownership of various interests in producing oil and gas
properties. For further information, see Item 1 of each Partnership's 1994 Form
10-KSB accompanying this Proxy Statement.
Description of Property and Oil and Gas Reserves
A summary of each Partnership's property acquisitions and quantitative
information regarding the Partnership's oil and gas reserves is included in Item
2 of each Partnership's 1994 Form 10-KSB accompanying this Proxy Statement and
in Table D. Certain oil and gas property reserve information is also included in
Tables B, B-1 and C attached hereto. Included in this information are fair
market valuations of the properties of each Partnership prepared by Gruy. Gruy
has been preparing reserve estimates for each of the Partnership's oil and gas
reserves since the inception of each Partnership's operations. Gruy was selected
by the General Partner for this task based upon its reputation, experience and
expertise in this area. Gruy is an international petroleum consulting firm with
offices in Houston and Dallas, Texas. Their staff includes petroleum engineers
and geology consultants. Services they provide include reserve estimates, fair
value appraisals, geologic studies, expert witness testimony and arbitration.
Valuation of Oil and Gas Properties
Gruy has estimated for each oil and gas property in which the
Partnerships own interests, as of June 30, 1995, the recoverable units of oil
and gas and the undiscounted and discounted future net cash flows by year
commencing July 1, 1995 and continuing through the estimated productive lives of
the properties. The Limited Partners should be aware that the reserves estimated
by Gruy include, in certain cases, estimates of probable reserves and possible
reserves in addition to proved reserves (including undeveloped reserves as well
19
<PAGE>
as developed reserves, both producing and nonproducing) and, in any event, are
estimates only and should not be construed as being exact amounts. Gruy
estimated each property's oil and gas reserves, applied the assumptions
regarding price and cost escalations set forth below, applied a 10% discount
factor for time and the following discount factors for risk, location, type of
ownership interest, operational characteristics and other factors as follows:
Gruy applies a 25% discount factor to all proved developed oil and gas reserves,
including all of the Partnership properties, to reflect the risk inherent in
estimating such reserves and that associated with an investment therein. Gruy
may further discount the value of oil and gas reserves to the extent it
determines appropriate based on its consideration of the particular location,
type of interest, category of reserves and operational characteristics of such
reserves.
To the 25% discount factor mentioned above, Gruy applied the following
additional discount factors: (i) between 8% and 9% to the proved developed
producing reserves in the Blair, Comite A, Hanson, Newport and NW Esperance Pt.
B & C properties; (ii) approximately 17% to the proved developed nonproducing
reserves in the Hanson property; and (iii) approximately 22% to the proved
developed nonproducing reserves in the East Seven Sisters property. The
additional discount in (i) above was applied to the proved developed producing
reserves in all Partnership properties other than East Seven Sisters because
these properties consist of working interests which are burdened by operating
costs, whereas the East Seven Sisters property consists of an overriding royalty
interest that is free and clear of such costs. The proved developed nonproducing
reserves in the East Seven Sisters property were discounted an additional 22%
from the 25% base discount to reflect the risk that such reserves may have been
drained by competing wells and may not be developed by the operator of the
property in a timely manner. The proved developed nonproducing reserves in the
Hanson property, on the other hand, were only discounted an additional 17%
because the development costs to recover these nonproducing reserves are
estimated to be minimal. See Table B-1. Gruy allocated the estimates among the
Partnerships on a pro-rata basis in accordance with their respective ownership
interest in each of the properties evaluated. See Tables C and D. The resulting
value for each Partnership is included in Table 1 and in Table B and is labelled
Fair Market Value of Oil and Gas Reserves.
Future net revenues were estimated by Gruy using an oil price of $17.00
per barrel and gas prices ranging from $1.50 per mcf to $1.90 per mcf, such gas
prices representing prices substantially as were in effect in June 1995. Future
operating costs and capital expenditures were estimated by the General Partner
and utilized by Gruy in the future cash flow estimates. Prices and costs were
escalated as follows: Oil prices were escalated 5.2% in 1996, 5.0% in 1997, 4.3%
in 1998 and 3.2% in 1999 and 3.3% each year thereafter to a maximum of $30.69
per barrel. Natural gas prices were escalated 7.2% in 1996, 7.3% in 1997, 4.2%
in 1998, and 3.0% each year thereafter to a maximum of $3.80 per thousand cubic
feet (mcf). Operating expenses and future capital investments were escalated at
the rate of 3.0% per year until the year in which the primary product reached
its maximum price.
According to Gruy, for the estimation of the fair market value of oil
and gas properties, there are basically two approaches; namely, the income
approach and the market data approach. The income approach requires the
estimation of reserves, identification of their categories (proved, probable and
possible), a detailed cash flow projection and the proper application of risk
factors. The market data approach utilizes comparable sales of properties in the
area. The fair market value was estimated using the income approach as opposed
to the market data approach because it is difficult to identify sales of oil and
gas properties that are comparable in net reserves, product prices, location,
operating expenses and operator expertise. For the proved producing properties,
the discounted future net revenue was reduced to a fair market value by
multiplying by a suitable fraction that accounts for the risk associated with an
investment. For proved developed non-producing reserves, a suitable risk factor
is applied and the present value of the capital investment required to initiate
production is subtracted from that value. This approach assumes that the capital
is invested with certainty and the resulting cash flow stream is burdened with
the uncertainty.
20
<PAGE>
Principal Executive Offices and Telephone Number
The principal executive offices and telephone number of each Partnership
are as follows: c/o Enex Resources Corporation, Three Kingwood Place, Suite 200,
800 Rockmead Drive, Kingwood, Texas 77339, attention Corporate Secretary,
telephone: 713-358-8401.
Information Concerning the General Partner
Enex was incorporated on August 17, 1979 in Colorado. On June 30, 1992,
Enex reincorporated in Delaware. Enex is engaged in the business of acquiring
interests in producing oil and gas properties and managing oil and gas income
limited partnerships. Enex's operations are concentrated in this single industry
segment.
Enex'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. Enex has no regional offices.
The names, present principal occupation or employment, and material
occupations and employments during the last 5 years of each of Enex's directors,
executive officers and controlling shareholders are as follows:
Gerald B. Eckley. Mr. Eckley is a director, President and Chief Executive
Officer of the General Partner and has served as such since its formation in
1979. Mr. Eckley is the beneficial owner of 281,400 shares of the General
Partner's common stock (representing 20.0% of such common stock) calculated in
accordance with Securities and Exchange Commission Rule 13d-3.
William C. Hooper, Jr. Mr. Hooper is a director of the General Partner.
From 1970 until the present, he has been self-employed as a consulting petroleum
engineer in Houston, Texas providing services to industry and government and
engaged in business as an independent oil and gas operator and investor.
Stuart Strasner. Mr. Strasner is a director of the General Partner. He is a
professor of business law at Oklahoma City University in Oklahoma City, Oklahoma
and was Dean of the law school at Oklahoma City University from July 1984 until
June 1991. He is a member of the Fellows of the American Bar Association and a
member of the Oklahoma Bar Association. Mr. Strasner is also a director of
Health Images, Inc., a public company which provides fixed site magnetic
resonance imaging ("MRI") services.
Martin J. Freedman. Mr. Freedman is a director of the General Partner.
Since 1985, he has been President of Freedman Oil & Gas Company in Denver,
Colorado, engaged primarily in the management of its exploration and producing
properties, and since 1988, the managing partner of MJF Energy which has an
interest in several gas pipelines and gas wells.
James Thomas Shorney. Mr. Shorney is a director of the General Partner. He
has been a petroleum consultant and Secretary/Treasurer of the Shorney Company
in Oklahoma City, Oklahoma, a privately held oil and gas exploration company,
from 1970 to date.
Robert D. Carl, III. Mr. Carl is a director of the General Partner. He is
Chief Executive Officer and Chairman of the Board of Health Images, Inc. in
Atlanta, Georgia, a NYSE listed company, which provides
21
<PAGE>
fixed site magnetic resonance imaging ("MRI") services. He has been employed by
Health Images, Inc. and its predecessor entities since 1981.
Robert E. Densford. Mr. Densford is a Director of the General Partner and
its Vice President- Finance, Secretary and Treasurer, a position he has held
since 1989. He was the General Partner's Controller from 1985 to 1989.
James A. Klein. Mr. Klein has been the General Partner's Controller since
February 1991. Since June 1993, he has been President and Principal of the
General Partner's subsidiary, Enex Securities Corporation. From June 1988 to
February 1991, he was employed by Positron Corporation in Houston.
Each of the General Partner's directors is a United States citizen and
maintains a business address in care of the General Partner. Enex knows of no
person other than those named above who might be deemed to control Enex.
OTHER MATTERS
Other Business
As of the date of this Proxy Statement, the only business which the General
Partner intends to present at the Special Meetings are the matters set forth in
the Notice of Special Meetings. The General Partner has no knowledge of any
other business to be presented at the Special Meetings. If other business
consisting of matters of which the General Partner has no current knowledge or
matters incident to the conduct of a Special Meeting is brought before a Special
Meeting, the persons named in the enclosed form of proxy will vote according to
their discretion.
Representatives of Deloitte & Touche LLP are expected to be present at
the Special Meetings. They will have the opportunity to make a statement if they
so desire and will be available to respond to appropriate questions.
DOCUMENTS INCORPORATED BY REFERENCE
This Proxy Statement incorporates by reference the following documents
which have been filed by each Partnership with the Commission:
(1) Each Partnership's Annual Report on Form 10-KSB for the year
ended December 31, 1994, copies of which accompany this Proxy
Statement;
(2) Each Partnership's Quarterly Reports on Form 10-QSB for the
quarters ended March 31, 1995, June 30, 1995 and September 30,
1995, copies of which accompany this Proxy Statement.
The Proxy Statement specifically incorporates herein by reference the
information set forth in the following sections contained in each Partnership's
Annual Report on Form 10-KSB: Item 1-Business; Item 2-Properties; Item 3-Legal
Proceedings; Item 5-Market for Common Equity and Related Security Holder
Matters; Item 6-Management's Discussion and Analysis of Results of Operations
and Financial Condition; and Item 7-Financial Statements and Supplementary Data.
The following sections of the
22
<PAGE>
Quarterly Reports on Form 10-QSB are specifically incorporated herein by
reference: Item 1-Financial Statements (unaudited).
By Order of the Board of Directors
of the General Partner
ROBERT E. DENSFORD
Vice President-Finance,
Secretary and Treasurer
23
<PAGE>
<TABLE>
<CAPTION>
TABLE A
Selected Financial Data
- -----------------------
Program II, Series 1, L.P.
------------------------------------------------------
Six months Year ended
ended June 30, December 31,
--------------- -------------------------------------
1995 1994 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total revenues $32,754 $73,233 $107,393 $104,648
Net income (loss) before extraordinary item ($9,190) ($20,722) $15,109 ($53,854)
Extraordinary item - Debt forgiveness
by general partner - - - $250,000
Net income (loss) ($9,190) ($20,722) $15,109 $196,146
Net income (loss) per $500 unit - ($1) $1 $9
Cash flow from operations $1,545 $22,880 $35,753 ($25,472)
Cash flow from operations per $500 unit - $1 $2 ($1)
Limited Partners' (deficit) ($36,577) ($27,387) ($6,665) ($20,468)
Limited Partners' (deficit) per $500 unit ($2) ($1) - ($1)
Cash distributions - - - -
Debt payable to general partner $330,512 $320,086 $320,988 $352,232
Total debt $331,478 $325,627 $325,885 $357,508
</TABLE>
<TABLE>
<CAPTION>
Program II, Series 2, L.P.
------------------------------------------------------
Six Months Year ended
ended June 30, December 31,
-------------- -------------------------------------
1995 1994 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total revenues $21,022 $42,303 $65,776 $66,633
Net (loss) before extraordinary item ($6,620) ($23,542) ($7,303) ($31,589)
Extraordinary item - Debt forgiveness
by general partner - - - $200,000
Net income (loss) ($6,620) ($23,542) ($7,303) $168,411
Net income (loss) per $500 unit - ($1) - $8
Cash flow from operations $1,672 $11,346 $12,916 ($25,664)
Cash flow from operations per $500 unit - $1 $1 ($1)
Limited Partners' capital (deficit) ($73,873) ($67,253) ($43,711) ($35,564)
Limited Partners' capital (deficit) per $500
unit ($4) ($3) ($2) ($2)
Cash distributions - - - -
Debt payable to general partner $270,916 $260,445 $251,495 $266,266
Total debt $272,982 $268,264 $260,668 $273,485
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE A
Program II, Series 3, L.P.
------------------------------------------------------
Six Months Year ended
ended June 30, December 31,
-------------- -------------------------------------
1995 1994 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total revenues $33,937 $65,970 $102,250 $110,688
Net income (loss) before extraordinary item ($4,608) ($25,628) ($1,917) ($12,679)
Extraordinary item - Debt forgiveness
by general partner - - - -
Net income (loss) ($4,608) ($25,628) ($1,917) ($12,679)
Net income (loss) per $500 unit - ($2) - ($1)
Cash flow from operations $4,229 $28,717 $35,753 $6,055
Cash flow from operations per $500 unit - $2 $3 -
Limited Partners' (deficit) ($29,800) ($25,192) $436 $3,691
Limited Partners' (deficit) per $500 unit ($2) ($2) - -
Cash distributions - - - -
Debt payable to general partner $231,507 $223,495 $223,526 $252,475
Total debt $233,611 $234,019 $237,879 $263,693
</TABLE>
<TABLE>
<CAPTION>
Program II, Series 4, L.P.
------------------------------------------------------
Six Months Year ended
ended June 30, December 31,
-------------- -------------------------------------
1995 1994 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total revenues $18,253 $62,018 $93,913 $102,920
Net (loss) before extraordinary item ($834) ($29,476) ($5,657) ($11,902)
Extraordinary item - Debt forgiveness
by general partner - - $15,509 -
Net income (loss) ($834) ($29,476) $9,852 ($11,902)
Net income (loss) per $500 unit - ($3) $1 ($1)
Cash flow from operations $1,385 $22,496 $24,734 $1,012
Cash flow from operations per $500 unit - $2 $2 -
Limited Partners' capital (deficit) ($25,243) ($18,681) $10,795 $3,326
Limited Partners' capital (deficit) per $500 ($2) ($2) $1 -
unit
Cash distributions - - - -
Debt payable to general partner $256,707 $249,843 $247,462 $286,530
Total debt $258,975 $225,946 $254,500 $294,163
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE B
Oil and gas reserves
- --------------------
Program II, Series 1, L.P.
------------------------------------------------------
At June 30, At December 31,
-------------- -------------------------------------
1995 1994 1993 1992
---- ---- ---- ----
Proved Reserves:
<S> <C> <C> <C> <C>
Oil (bbls) 4,360 3,765 3,156 2,174
Oil (bbls) per $500 unit - - - -
Gas (mcf) 525,272 540,549 535,567 517,911
Gas (mcf) per $500 unit 25 26 25 25
Estimated future net cash flows $635,493 $632,951 $998,556 $789,186
Estimated future net cash flows per $500 unit $30 $30 $48 $38
Discounted (at 10%) future net cash flows $304,326 $302,207 $377,965 $313,508
Discounted (at 10%) future net cash
flows per $500 unit $14 $14 $18 $15
Fair market value of oil and gas reserves $259,689
Fair market value of oil
and gas reserves per $500 unit $12
</TABLE>
<TABLE>
<CAPTION>
Program II, Series 2, L.P.
------------------------------------------------------
At June 30, At December 31,
-------------- -------------------------------------
1995 1994 1993 1992
---- ---- ---- ----
Proved Reserves:
<S> <C> <C> <C> <C>
Oil (bbls) 927 718 740 643
Oil (bbls) per $500 unit - - - -
Gas (mcf) 497,572 512,909 515,694 523,783
Gas (mcf) per $500 unit 25 26 26 26
Estimated future net cash flows $589,003 $593,845 $965,860 $790,846
Estimated future net cash flows per $500 unit $29 $30 $48 $39
Discounted (at 10%) future net cash flows $266,605 $269,097 $377,965 $299,466
Discounted (at 10%) future net cash
flows per $500 unit $13 $13 $19 $15
Fair market value of oil and gas reserves $226,260
Fair market value of oil
and gas reserves per $500 unit $11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE B
Oil and gas reserves
- --------------------
Program II, Series 1, L.P.
------------------------------------------------------
At June 30, At December 31,
-------------- -------------------------------------
1995 1994 1993 1992
---- ---- ---- ----
Proved Reserves:
<S> <C> <C> <C> <C>
Oil (bbls) 4,360 3,765 3,156 2,174
Oil (bbls) per $500 unit - - - -
Gas (mcf) 525,272 540,549 535,567 517,911
Gas (mcf) per $500 unit 25 26 25 25
Estimated future net cash flows $635,493 $632,951 $998,556 $789,186
Estimated future net cash flows per $500 unit $30 $30 $48 $38
Discounted (at 10%) future net cash flows $304,326 $302,207 $377,965 $313,508
Discounted (at 10%) future net cash
flows per $500 unit $14 $14 $18 $15
Fair market value of oil and gas reserves $259,689
Fair market value of oil
and gas reserves per $500 unit $12
</TABLE>
<TABLE>
<CAPTION>
Program II, Series 2, L.P.
------------------------------------------------------
At June 30, At December 31,
-------------- -------------------------------------
1995 1994 1993 1992
---- ---- ---- ----
Proved Reserves:
<S> <C> <C> <C> <C>
Oil (bbls) 927 718 740 643
Oil (bbls) per $500 unit - - - -
Gas (mcf) 497,572 512,909 515,694 523,783
Gas (mcf) per $500 unit 25 26 26 26
Estimated future net cash flows $589,003 $593,845 $965,860 $790,846
Estimated future net cash flows per $500 unit $29 $30 $48 $39
Discounted (at 10%) future net cash flows $266,605 $269,097 $377,965 $299,466
Discounted (at 10%) future net cash
flows per $500 unit $13 $13 $19 $15
Fair market value of oil and gas reserves $226,260
Fair market value of oil
and gas reserves per $500 unit $11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE B
Program II, Series 3, L.P.
------------------------------------------------------
At June 30, At December 31,
-------------- -------------------------------------
1995 1994 1993 1992
---- ---- ---- ----
Proved Reserves:
<S> <C> <C> <C> <C>
Oil (bbls) 7,866 7,210 7,001 8,563
Oil (bbls) per $500 unit 1 1 1 1
Gas (mcf) 355,142 368,192 388,322 383,813
Gas (mcf) per $500 unit 27 28 29 29
Estimated future net cash flows $480,637 $492,201 $756,624 $659,617
Estimated future net cash flows per $500 unit $36 $37 $57 $50
Discounted (at 10%) future net cash flows $254,353 $264,639 $327,557 $310,674
Discounted (at 10%) future net cash
flows per $500 unit $19 $20 $25 $23
Fair market value of oil and gas reserves $207,390
Fair market value of oil
and gas reserves per $500 unit $16
</TABLE>
<TABLE>
<CAPTION>
Program II, Series 4, L.P.
------------------------------------------------------
At June 30, At December 31,
-------------- -------------------------------------
1995 1994 1993 1992
---- ---- ---- ----
Proved Reserves:
<S> <C> <C> <C> <C>
Oil (bbls) 8,366 7,350 7,221 9,021
Oil (bbls) per $500 unit 1 1 1 1
Gas (mcf) 296,315 307,488 326,412 322,994
Gas (mcf) per $500 unit 25 26 28 28
Estimated future net cash flows $413,379 $422,042 $642,776 $570,668
Estimated future net cash flows per $500 unit $35 $36 $55 $49
Discounted (at 10%) future net cash flows $223,087 $231,229 $284,218 $275,941
Discounted (at 10%) future net cash
flows per $500 unit $19 $20 $24 $24
Fair market value of oil and gas reserves $181,104
Fair market value of oil
and gas reserves per $500 unit $15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE B-1
---------
ENEX OIL & GAS INCOME PROGRAM II-1, L.P.
----------------------------------------
RESERVE TYPE OF DISCOUNTED (@ 10%) DISCOUNT FAIR MARKET
PROPERTY NAME Category(1) Interest(2) Net Cash Flows Factors(3) Value
- ------------- ----------- ----------- ----------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
East Seven Sisters ............ PDP ORRI $119,221 .75004 $ 89,420
PDNP ORRI 214,933 .53228 114,405
--------
Subtotal ............. $203,825
Comite A ...................... PDP WI $ 80,144 .66755 $ 53,500
NW Esperance Pt. B&C .......... PDP WI $ 3,558 .66442 $ 2,364
--------
TOTAL $259,689
========
</TABLE>
<TABLE>
<CAPTION>
ENEX OIL & GAS INCOME PROGRAM II-2, L.P.
----------------------------------------
RESERVE TYPE OF DISCOUNTED (@ 10%) DISCOUNT FAIR MARKET
PROPERTY NAME CATEGORY(1) INTEREST(2) NET CASH FLOWS FACTORS(3) VALUE
- ------------- ----------- ----------- ------------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
East Seven Sisters ............ PDP ORRI $124,207 .75004 $ 93,160
PDNP ORRI $223,923 .53228 $119,190
--------
Subtotal ............. $212,350
Comite A ...................... PDP WI $ 20,837 .66756 $ 13,910
--------
TOTAL $226,260
=========
</TABLE>
<TABLE>
<CAPTION>
ENEX OIL & GAS INCOME PROGRAM II-3, L.P.
----------------------------------------
RESERVE TYPE OF DISCOUNTED (@ 10%) DISCOUNT FAIR MARKET
PROPERTY NAME CATEGORY(1) INTEREST(2) NET CASH FLOWS FACTORS(3) VALUE
- -------------- ----------- ----------- ------------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
East Seven Sisters ............ PDP ORRI $ 78,151 .75004 $ 58,616
PDNP ORRI $140,892 .53228 $ 74,994
-------- ------ --------
Subtotal ............. $133,610
Comite A ...................... PDP WI $ 19,235 .66753 $ 12,840
Newport ....................... PDP WI $ 36,980 .66522 $ 24,600
Blair ......................... PDP WI $ 12,338 .66461 $ 8,200
Hanson ........................ PDP WI $ 23,347 .66818 $ 15,600
PDNP $ 20,537 .61061 $ 12,540
--------
Subtotal ............. $ 28,140
--------
TOTAL $207,390
========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENEX OIL & GAS INCOME PROGRAM II-4, L.P.
----------------------------------------
RESERVE TYPE OF DISCOUNTED (@ 10%) DISCOUNT FAIR MARKET
PROPERTY NAME CATEGORY(1) INTEREST(2) NET CASH FLOWS FACTORS(3) VALUE
----------- ----------- ------------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
East Seven Sisters ............ PDP ORRI $ 64,551 .75004 $ 48,416
PDNP $116,375 .53228 $ 61,944
-------- ------ --------
Subtotal ............. $110,360
Comite A ...................... PDP WI $ 14,426 .66754 $ 9,630
Newport ....................... PDP WI $ 36,980 .66522 $ 24,600
Blair ......................... PDP WI $ 15,423 .66459 $ 10,250
Hanson ........................ PDP WI $ 21,791 .66817 $ 14,560
PDNP $ 19,167 .61063 $ 11,704
---------
Subtotal ............. $ 26,264
---------
TOTAL $ 181,104
=========
<FN>
(1) PDP = PROVED DEVELOPED PRODUCING RESERVES
PDNP = PROVED DEVELOPED NONPRODUCING RESERVES
(2) WI = WORKING INTEREST
ORRI = OVERRIDING ROYALTY INTEREST
(3) DISCOUNT FACTORS WERE DETERMINED BY H.J. GRUY AND ASSOCIATES AND CONSIDER RISK, LOCATION,
TYPE OF INTEREST, CATEGORY OF RESERVES AND OPERATIONAL CHARACTERISTICS OF EACH PROPERTY.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE C
PROPERTY DETAIL
Working Interest % Revenue Interest %
Acqui- --------------------------- ---------------------------
tion State FIELD Operator Name Well Name Type II-1 II-2 II-3 II-4 11-1 11-2 11-3 11-4
- ----- ----- ----- ------------- --------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Blair TX WWW Blair Operating Schenecker
Company Trust 01 OIL 4.85414 6.06768 3.64060 4.55076
Blair TX WWW Blair Operating Schenecker
Company Trust 02 OIL 4.85414 6.06768 3.64060 4.55076
Blair TX WWW Blair Operating Schenecker
Company Trust 03 OIL 4.85414 6.06768 3.64060 4.55076
Blair TX WWW Blair Operating
Company Mathews 01 OIL 5.00000 6.25000 3.75000 4.68750
Blair TX WWW Blair Operating
Company Mathews 02 OIL 5.00000 6.25000 3.75000 4.68750
Blair TX WWW Blair Operating
Company Gaddie 03 OIL 4.76562 5.95703 3.74984 4.68730
Blair TX WWW Blair Operating
Company Gaddie 04 OIL 4.76562 5.95703 3.74984 4.68730
Blair TX WWW Blair Operating
Company Gaddie 05 OIL 4.76562 5.95703 3.74984 4.68730
Blair TX WWW Blair Operating
Company Gaddie 06 OIL 4.76562 5.95703 3.74984 4.68730
Comite A TX Comite TGX Operating
Company Starkey 01 GAS 1.18983 0.30935 0.28556 0.21417
Comite A TX Comite TGX Operating
Company Sinclair 01 GAS 2.52911 0.65757 0.60699 0.45524
Comite A TX Comite TGX Operating
Company Cobb 01 GAS 0.78069 0.20298 0.18737 0.14052
East TX Seven Vastar
Seven Sisters Resources Inc.
Sisters E Gorman J 02 GAS 2.25242 2.34635 1.47615 1.21979
East TX Seven Vastar
Seven Sisters Resources Inc.
Sisters E Gorman J 03 GAS 2.25242 2.36435 1.47615 1.21979
East TX Seven Vastar
Seven Sisters Resources Inc.
Sisters E Gorman J 04 GAS 2.25242 2.34635 1.47615 1.21979
East TX Seven Vastar
Seven Sisters Resources Inc.
Sisters E Gorman J 05 GAS 2.25242 2.34635 1.47615 1.21979
East TX Sevem Vastar
Seven Sisters Resources Inc.
Sisters E Gorman J 06 GAS 2.25242 2.34635 1.47615 1.21979
East TX Seven Vastar
Seven Sisters Resources Inc.
Sisters E Gorman J 07 GAS 2.25242 2.34635 1.47615 1.21979
East TX Seven Vastar
Seven Sisters Resources Inc.
Sisters E Gorman J 08 GAS 2.25242 2.34635 1.47615 1.21979
Hanson TX Coquat Hanson Minerals
Co. Meider 02 GAS 0.58660 0.54749 0.36360 0.33936
Hanson TX Coquat Hanson Minerals
Co. Meider 03 GAS 1.83999 1.71733 1.34954 1.25957
Hanson TX Coquat Hanson Minerals
Co. Maguglin 01 GU GAS 0.57075 0.53270 0.29734 0.27752
Hanson TX George Hanson Minerals
Buck Co. Aviators GU 01 GAS 0.01432 0.01337 0.12512 0.11678
Hanson TX George Hanson Minerals
Buck Co. Aviators GU 03 GAS 0.39219 0.36604 0.28679 0.26767
Hanson TX Hampton Hanson Minerals
Co. Arco Hampton 30 01OIL 3.12593 2.91753 3.00089 2.80083
Hanson TX Malo Hanson Minerals
Domingo Co. Samsel GU 01 GAS 0.27161 0.25351 0.20402 0.19041
Hanson TX Malo Hanson Minerals
Domingo Co. Gordon Talk GU 01 GAS 0.31089 0.29017 0.23027 0.21491
Hanson TX Malo Hanson Minerals
Domingo Co. Gordon Talk GU 02 GAS 0.62554 0.58383 0.46479 0.43381
Hanson TX Sanger S Hanson Minerals
Co. Sanger Heirs 391 01GAS 1.44972 1.35308 1.14063 1.06458
Hanson TX Sanger S Hanson Minerals
Co. Sanger Heirs 391 02GAS 1.44972 1.35308 1.14063 1.06458
Hanson TX Sanger S Hanson Minerals
Co. Sanger Heirs 391 04GAS 1.48500 1.38600 1.16838 1.09049
Hanson TX Sanger S Hanson Minerals
Co. Sanger Heirs 392 01(UT) GAS 1.48500 1.38600 1.16838 1.09049
Hanson TX Sanger S Hanson Minerals
Co. Sanger Heirs 392 01(LT) GAS 1.48500 1.38600 1.16838 1.09049
Newport TX Alexander Mineral Development
Inc. Cooper 01 OIL 1.26667 1.26667 0.99975 0.99975
Newport TX Candice Mineral Development
Inc. Shelton 83-1 GAS 2.77600 2.77600 2.08200 2.08200
Newport TX Grange Mineral Development
Inc. Grange A 01 OIL 0.80000 0.80000 0.65600 0.65600
Newport TX Grange Mineral Development
Inc. Grange A 02 OIL 0.80000 0.80000 0.65600 0.65600
Newport TX Grange Mineral Development
Inc. Grange D 01 OIL 0.16000 0.16000 0.13120 0.13120
Esperance LA Esperance El Toro Production
Pt B&C Pt. Co. Hogue A 04 El Toro OIL 4.67188 3.50390
Esperance LA Esperance El Toro Production
Pt B&C Pt. Co. Hogue A 04 El Toro OIL 4.67188 3.50390
Steamboat LA Bell City
East Apache Corp Derouen Lee GAS 0.12228 0.42328 0.19753 0.19753
</TABLE>
<TABLE>
<CAPTION>
TABLE D
GROSS AND NET PRODUCTIVE AND GAS WELLS
AS OF JUNE 30, 1995
PRODUCTIVE OIL WELLS(1) PRODUCTIVE GAS WELLS(1)
--------------------------- -----------------------------
NET WORKING NET WORKING NET
PARTNERSHIP GROSS INTEREST ROYALTY GROSS INTEREST ROYALTY
WELLS(2) WELLS WELLS WELLS(2) WELLS WELLS
<S> <C> <C> <C> <C> <C> <C>
Enex Oil & Gas Income Program II-1, L.P. .... 2 0.094 -- 12 0.021 0.204
Enex Oil & Gas Income Program II-2,L.P ..... 0 0.000 -- 11 -- 0.180
Enex Oil & Gas Income Program II-3,L.P ...... 16 0.518 -- 11 0.128 0.116
Enex Oil & Gas Income Program II-4, L.P. .... 16 0.625 -- 28 0.121 0.960
====== ======= ====== ===== ========= ======
TOTAL ....................................... 18 1.237 -- 24 0.270 1.460
====== ======= ====== ===== ========= ======
<FN>
(1) 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. A net working interest (W.I.) well is deemed to exist when the sum of the
fractional ownership interests 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 gross royalty wells equals one. The number of net
royalty wells is the sum of the frational interests owned in gross royalty
wells, expressed as whole numbers and fractions thereof.
(2) Totals for gross wells have been reduced to adjust for ownership by more
than one Partnership.
</FN>
</TABLE>
<TABLE>
<CAPTION>
GROSS AND NET PRODUCTIVE ACREAGE
AND UNDEVELOPED ACREAGE
DEVELOPED(1)
WORKING INTEREST DEVELOPED(1)
ACREAGE(2) ROYALTY ACREAGE(2)
---------------- ------------------
GROSS NET GROSS NET
PARTNERSHIP ACRES ACRES ACRES ACRES
<S> <C> <C> <C> <C>
Enex Oil & Gas Income Program II-1,L.P ...... 720 17.29 3,038 42.06
Enex Oil & Gas Income Program II-2,L.P ...... -- -- 3,038 23.84
Enex Oil & Gas Income Program II-3,L.P ...... 5,458 63.97 2,958 16.78
Enex Oil & Gas Income Program II-4,L.P ...... 5,458 66.62 2,958 13.51
====== ====== ======= ======
TOTAL ....................................... 6,178 147.88 3,038 96.19
====== ====== ======= ======
<FN>
(1) Totals for gross acres have been reduced to adjust for ownership by more
than one Partnership.
(2) Developed acres are acres spaced or assigned to productive wells.
(3) 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 ownership of
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 whole numbers and fractions thereof. A net royalty acre is deemed
to exist when the sum of fractional ownership of 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 whole numbers and fractions
thereof.
(4) The Partnerships have no undeveloped acreage.
<PAGE>
</FN>
</TABLE>
<PAGE>
<TABLE>
TABLE E
-------
General and Administrative Charges
----------------------------------
<CAPTION>
Enex Oil & Six Months Ended
Gas Income 1994 June 30, 1995 1995 Estimated 1996 Estimated
--------------- ---------------- ----------------- --------------
Program Direct Total Direct Total Direct Total Direct Total
Costs Costs Costs Costs
- ------- -------- ----- --------- ------ ------ ----- ------ ------
(1) (1) (1) (1)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
II - 1, LP $6,332 $20,677 -- $ 6,731 $6,332 $19,794 $6,965 $20,427
II - 2, LP $7,044 $17,964 -- $ 5,526 $7,044 $18,096 $7,748 $18,800
II - 3, LP $7,650 $24,841 -- $ 8,255 $7,650 $24,160 $8,415 $24,925
II - 4, LP $6,559 $23,897 -- $ 7,740 $6,559 $22,039 $7,215 $22,695
<FN>
(1) Direct costs consist of tax preparation, audit and Securities Exchange
Commission filing fees.
</FN>
</TABLE>
<PAGE>
- ---------------------------
ENEX
- ---------------------------
ENEX OIL & GAS INCOME PROGRAM II-2, L.P.
Three Kingwood Place
Suite 200
800 Rockmead Drive
Kingwood, Texas 77339
PROXY FOR SPECIAL MEETING OF LIMITED PARTNERS
TO BE HELD
December 30, 1995
The undersigned hereby appoints GERALD B. ECKLEY, WILLIAM C. HOOPER, JR.
and ROBERT E. DENSFORD, and each or any of them, attorneys and proxies, with
full power of substitution, and authorizes them to vote all interests of Enex
Oil & Gas Income Program II-2, L.P., held of record by the undersigned on
November 24, 1995, at the Special Meeting of Limited Partners to be held on
December 30, 1995, and any adjournments thereof, hereby revoking all previous
proxies, with all powers the undersigned would possess if present, on all
matters mentioned in the Notice of Special Meeting dated November 29, 1995, as
follows:
INSTRUCTIONS: MARK ONLY ONE BOX FOR EACH NUMBERED MATTER
(1) To dissolve and liquidate Enex Oil & Gas Income Program II-2, L.P.,
a Texas limited partnership.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(2) In their discretion, to vote upon such other business as may
properly come before the Meeting or any adjournments thereof.
23
<PAGE>
Please mark, date, sign and return this Proxy promptly, using the
enclosed envelope.
Dated , 1995
-------------------------------------
Month Day
Signature
Signature
Please sign exactly as name appears
hereon, indicating official position
or representative capacity, if any.
I plan to attend the meeting.
Yes [ ] No [ ]
THIS PROXY IS SOLICITED ON BEHALF OF THE GENERAL PARTNER
OF THE PARTNERSHIP
24
