United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from...............to...............
Commission file number 0-14250
ENEX OIL & GAS INCOME PROGRAM II - 7, L.P.
(Exact name of small business issuer as specified in its charter)
Texas 76-0163130
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 200, Three Kingwood Place
Kingwood, Texas 77339
(Address of principal executive offices)
Registrant's telephone number:
(713) 358-8401
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes x No
Transitional Small Business Disclosure Format (Check one):
Yes No x
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
ENEX OIL & GAS INCOME PROGRAM II - 7, L.P.
BALANCE SHEET
- ---------------------------------------------------------------------------
September 30,
ASSETS 1996
-----------------
(Unaudited)
CURRENT ASSETS:
<S> <C>
Cash and cash equivalents $ 48,933
Accounts receivable - oil & gas sales 45,423
Other current assets 2,225
--------------
Total current assets 96,581
--------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 2,955,296
Less accumulated depreciation and depletion 2,215,464
--------------
Property, net 739,832
--------------
TOTAL $ 836,413
==============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 6,309
Payable to general partner 3,883
--------------
Total current liabilities 10,192
--------------
PARTNERS' CAPITAL:
Limited partners 788,591
General partner 37,630
--------------
Total partners' capital 826,221
--------------
TOTAL $ 836,413
==============
Number of $500 Limited Partner units outstanding 8,870
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENEX OIL & GAS INCOME PROGRAM II - 7, L.P.
STATEMENTS OF OPERATIONS
- -----------------------------------------------------
(UNAUDITED) QUARTER ENDED NINE MONTHS ENDED
------------------------------------- --------------------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
---------------- ----------------- ----------------- -----------------
REVENUES:
<S> <C> <C> <C> <C>
Oil and gas sales $ 106,625 $ 90,043 $ 320,734 $ 270,054
---------------- ----------------- ----------------- -----------------
EXPENSES:
Depreciation and depletion 30,143 51,126 98,125 149,398
Lease operating expenses 14,390 18,809 49,824 61,313
Production taxes 5,146 3,975 15,364 12,161
General and administrative 7,217 7,250 30,091 22,077
---------------- ----------------- ----------------- -----------------
Total expenses 56,896 81,160 193,404 244,949
---------------- ----------------- ----------------- -----------------
INCOME FROM OPERATIONS 49,729 8,883 127,330 25,105
---------------- ----------------- ----------------- -----------------
OTHER EXPENSE:
Interest expense - - 206 (112)
---------------- ----------------- ----------------- -----------------
NET INCOME $ 49,729 $ 8,883 $ 127,536 $ 24,993
================ ================= ================= =================
</TABLE>
See accompanying notes to financial statements.
- ---------------------------------------------------------------------------
I-2
<PAGE>
<TABLE>
<CAPTION>
ENEX OIL AND GAS INCOME PROGRAM II - 7, L.P.
STATEMENTS OF CASH FLOWS
- ---------------------------------------------------------------------------
(UNAUDITED)
NINE MONTHS ENDED
------------------------------------------
September 30, September 30,
1996 1995
------------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 127,536 $ 24,993
------------------- -----------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and depletion 98,125 149,398
(Increase) decrease in:
Accounts receivable - oil & gas sales (18,105) (2,367)
Other current assets 5,705 6,145
Increase (decrease) in:
Accounts payable (15,623) 985
Payable to general partner (49,214) (82,646)
------------------- -----------------
Total adjustments 20,888 71,515
------------------- -----------------
Net cash provided by operating activities 148,424 96,508
------------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions - development costs (19,409) (39,607)
------------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions (93,054) (47,671)
------------------- -----------------
NET INCREASE IN CASH 35,961 9,230
CASH AT BEGINNING OF YEAR 12,972 4,870
------------------- -----------------
CASH AT END OF PERIOD $ 48,933 $ 14,100
=================== =================
</TABLE>
See accompanying notes to financial statements.
- ---------------------------------------------------------------------------
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<PAGE>
ENEX OIL & GAS INCOME PROGRAM II - 7, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. The interim financial information included herein is unaudited;
however, such information reflects all adjustments (consisting solely
of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of results for the
interim periods.
2. A cash distribution was made to the limited partners of the Company in
the amount of $32,739, representing net revenues from the sale of oil
and gas produced from properties owned by the Company. This
distribution was made on July 31, 1996.
3. On August 9, 1996, the Company's General Partner submitted preliminary
proxy material to the Securities Exchange Commission with respect to a
proposed consolidation of the Company with 33 other managed limited
partnerships. On November 13, 1996, the Company submitted amended
preliminary proxy material to the SEC with respect to this consolidation
The terms and conditions of the proposed consolidation are set forth in
such preliminary proxy material.
I-4
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
Third Quarter 1996 Compared to Third Quarter 1995
Oil and gas sales for the third quarter increased to $106,625 in 1996 from
$90,043 in 1995. This represents an increase of $16,582 (18%). Oil sales
increased by $15,540 (20%). A 32% increase in the average oil sales price
increased sales by $23,053. This increase was partially offset by a 10% decrease
in oil production. Gas sales increased by $1,042 (9%). A 57% increase in the
average gas sales price increased sales by $4,527. This increase was partially
offset by a 30% decrease in gas production. The decrease in oil and gas
production was primarily due to natural production delines. The increases in the
average sales prices correspond with changes in the overall market for the sale
of oil and gas.
Lease operating expenses decreased to $14,390 in the third quarter of 1996 from
$18,809 in the third quarter of 1995. The decrease of $4,419 (23%) is primarily
due to the changes in production, noted above.
Depreciation and depletion expense decreased to $30,143 in the third quarter of
1996 from $51,126 in the third quarter of 1995. This represents a decrease of
$20,983 (41%). A 32% decrease in the depletion rate reduced depreciation and
depletion expense by $14,050. The changes in production, noted above, reduced
depreciation and depletion expense by an additional $6,933. The decrease in the
depletion rate is primarily the result of an upward revision of the oil and gas
reserves during December 1995.
General and administrative expenses decreased to $7,217 in the third quarter of
1995 from $7,250 in the third quarter of 1995. This decrease of $33 is primarily
due to less staff time being required to manage the Company's operations.
First Nine Months in 1996 Compared to the First Nine Months in 1995
- --------------------------------------------------------------------
Oil and gas sales for the first nine months increased to $320,734 in 1996 from
$270,054 in 1995. This represents an increase of $50,680 (19%). Oil sales
increased by $34,875 (15%). A 23% increase in the average oil sales price caused
sales to increase by $50,421. This increase was partially offset by a 7%
decrease in oil production. Gas sales increased by $15,805 (51%). A 44% increase
in the average gas sales price increased sales by $14,410. A 5% increase in gas
production increased sales by an additional $1,395. The increases in the average
sales prices correspond with changes in the overall market for the sale of oil
and gas. The decrease in oil production was primarily due to natural production
declines. The increase in gas production was primarily the result of the
enhanced production improvements on the Concord acquisition.
Lease operating expenses for the first nine months decreased to $49,824 in 1996
from $61,313 in 1995. The decrease of $11,489 (19%) is primarily due to costs
incurred on the Concord acquisition in the first quarter of 1995 to increase
production.
I-5
<PAGE>
Depreciation and depletion expense decreased to $98,125 in the first nine months
of 1996 from $149,398 in the first nine months of 1995. This represents a
decrease of $51,273 (34%). A 31% decrease in the depletion rate reduced
depreciation and depletion by $44,685. The changes in production, noted above,
reduced depreciation and depletion expense by an additional $6,588. The decrease
in the depletion rate is primarily the result of an upward revision of the oil
and gas reserves during December 1995.
General and administrative expenses increased to $30,091 in the first nine
months of 1996 from $22,097 in the first nine months of 1995. This increase of
$8,014 (36%) is primarily due to more staff time being required to manage the
Company's operations.
CAPITAL RESOURCES AND LIQUIDITY
The Company's cash flow from operations is a direct result of the amount of net
proceeds realized from the sale of oil and gas production. Accordingly, the
changes in cash flow from 1995 to 1996 are primarily due to the changes in oil
and gas sales described above. It is the general partner's intention to
distribute substantially all of the Company's available cash flow to the
Company's partners. The Company's "available cash flow" is essentially equal to
the net amount of cash provided by operating activities.
The Company will continue to recover its reserves and distribute to the limited
partners the net proceeds realized from the sale of oil and gas production.
Distribution amounts are subject to change if net revenues are greater or less
than expected. Nonetheless, the general partner believes the Company will
continue to have sufficient cash flow to fund operations and to maintain a
regular pattern of distributions.
On August 9, 1996, the Company's General Partner submitted preliminary proxy
material to the Securities Exchange Commission with respect to a proposed
consolidation of the Company with 33 other managed limited partnerships. On
November 13, 1996, the Company submitted amended preliminary proxy material to
the SEC with respect to this consolidation. The terms and conditions of the
proposed consolidation are set forth in such preliminary proxy material.
As of September 30, 1996, the Company had no material commitments for capital
expenditures. The Company does not intend to engage in any significant
developmental drilling activity.
I-6
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable
Item 5. Other Information.
Not Applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) There are no exhibits to this report.
(b) The Company filed no reports on Form 8-K during the
quarter ended September 30, 1996
II-1
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
ENEX OIL & GAS INCOME
PROGRAM II - 7, L.P.
(Registrant)
By:ENEX RESOURCES CORPORATION
General Partner
By: /s/ R. E. Densford
R. E. Densford
Vice President, Secretary
Treasurer and Chief Financial
Officer
November 13, 1996 By: /s/ James A. Klein
-------------------
James A. Klein
Controller and Chief
Accounting Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000782335
<NAME> Enex Oil & Gas Income Program II - 7, L.P.
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> dec-31-1996
<PERIOD-START> jan-01-1996
<PERIOD-END> sep-30-1996
<CASH> 48933
<SECURITIES> 0
<RECEIVABLES> 45423
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 96581
<PP&E> 2955296
<DEPRECIATION> 2215464
<TOTAL-ASSETS> 739832
<CURRENT-LIABILITIES> 10192
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 826221
<TOTAL-LIABILITY-AND-EQUITY> 836413
<SALES> 320734
<TOTAL-REVENUES> 320734
<CGS> 163313
<TOTAL-COSTS> 163313
<OTHER-EXPENSES> 30297
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
