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 June 30, 1995
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 0-15434
ENEX OIL & GAS INCOME PROGRAM III - SERIES 2, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0179824
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 200, Three Kingwood Place
Kingwood, Texas 77339
(Address of principal executive offices)
Issuer's telephone number:
(713) 358-8401
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes x No
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ENEX OIL & GAS INCOME PROGRAM III - SERIES 2, L.P.
BALANCE SHEET
JUNE 30,
ASSETS 1995
(Unaudited)
CURRENT ASSETS:
Cash $ 790
Accounts receivable - oil & gas sales 14,065
Other current assets 5,115
Total current assets 19,970
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 1,636,160
Less accumulated depreciation and depletion 1,260,462
Property, net 375,698
TOTAL $ 395,668
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 8,628
Current portion of payable to general partner 27,589
Total current liabilities 36,217
NONCURRENT PAYABLE TO GENERAL PARTNER 329,299
PARTNERS' CAPITAL (DEFICIT):
Limited partners (16,449)
General partner 46,601
Total partners' capital 30,152
TOTAL $ 395,668
See accompanying notes to financial statements.
I-1
ENEX OIL & GAS INCOME PROGRAM III - SERIES 2, L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED) QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1995 1994
REVENUES:
Oil and gas sales $ 43,694 $ 40,337 $ 89,546 $ 78,702
EXPENSES:
Depreciation and depletion 20,133 22,751 42,402 47,749
Lease operating expenses 8,775 21,353 24,162 68,790
Production taxes 1,905 1,907 4,071 3,724
General and administrative 4,645 5,010 10,698 11,647
Total expenses 35,458 51,021 81,333 131,910
INCOME (LOSS) FROM OPERATIONS 8,236 (10,684) 8,213 (53,208)
OTHER EXPENSE:
Interest expense (541) (2,186) (989) (3,281)
NET INCOME (LOSS) $ 7,695 $ (12,870) $ 7,224 $ (56,489)
See accompanying notes to financial statements.
I-2
ENEX OIL AND GAS INCOME PROGRAM III - SERIES 2, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 7,224 $ (56,489)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and depletion 42,402 47,749
(Increase) decrease in:
Accounts receivable - oil & gas sales (1,822) (1,311)
Other current assets 163 (222)
Increase (decrease) in:
Accounts payable (2,048) (39,914)
Payable to general partner (19,910) 14,619
Total adjustments 18,785 20,921
Net cash provided (used) by operating activitie 26,009 (35,568)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property (additions) credits - development (14,223) 19,612
CASH FLOWS FROM FINANCING ACTIVITIES:
(Increase) decrease in note payable to gener (11,490) 17,109
NET INCREASE IN CASH 296 1,153
CASH AT BEGINNING OF YEAR 494 1,498
CASH AT END OF PERIOD $ 790 $ 2,651
Cash paid during period for interest $ 989 $ 1,095
See accompanying notes to financial statements.
I-3
ENEX OIL & GAS INCOME PROGRAM III - SERIES 2, 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.In the fourth quarter of 1993, the Company borrowed $101,092 from the
general partner, the proceeds of which were used to pay off a note to a
bank. The resultant note payable to the general partner bore interest at
a rate of prime plus three fourths of one percent or 9.75% and 7.54% during
the second quarter of 1995 and 1994, respectively. Weighted average princi-
pal outstanding was $116,015 during the second quarter of 1994. Principal
payments of $7,925 completely repaid the note in the second quarter of 1995.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Second Quarter 1995 Compared to Second Quarter 1994
Oil and gas sales for the second quarter increased from $40,337 in 1994 to
$43,694 in 1995. This represents an increase of $3,357 (8%). Oil sales
increased by $3,591 (10%). A 16% increase in average oil sales price
increased sales by $5,417. This increase was partially offset by a 5%
decrease in oil production. Gas sales decreased by $234 (5%). A 20%
decrease in average gas sales prices reduced sales by $1,035. This decrease
was partially offset by an 18% increase in gas production. The increase in
gas production was primarily the result of the completion of a waterflood
project on the Schafter Lake field and the acquisition of additional interest
in the Concord acquisition in the fourth quarter of 1994. The slight decrease
in oil production was a result of the sale of the Florida acquisition,
partially offset by the purchase of additional interest in the Concord
acquisition. The changes in average sales prices correspond with changes in
the overall market for the sale of oil and gas.
Lease operating expenses decreased from $21,353 in 1994 to $8,775 in 1995.
The decrease of $12,578 (59%) is primarily due to operating and workover
expenses incurred in 1994 on the Florida acquisition which was sold in the
fourth quarter of 1994.
Depreciation and depletion expense decreased from $22,751 in the second
quarter of 1994 to $20,133 in the second quarter of 1995. This represents a
decrease of $2,618 (12%). The changes in production, noted above, reduced
depreciation and depletion expense by $257. A 10% decrease in the depletion
rate reduced depreciation and depletion expense by an additional $2,361.
The rate decrease is primarily due to the sale of the Florida acquisition,
which had a relatively higher depletion rate, partially offset by downward
revisions of the oil and gas reserves at December 31, 1994.
General and administrative expenses decreased from $5,010 in 1994 to $4,645
in 1995. This decrease of $365 (7%) is primarily due to less staff time
being required to manage the Company's operations.
First Six Months in 1995 Compared to First Six Months in 1994
Oil and gas sales for the first six months increased from $78,702 in 1994 to
$89,546 in 1995. This represents an increase of $10,844 (14%). Oil sales
increased by $11,615 (17%). A 19% increase in average oil sales price
increased sales by $12,880. This increase was partially offset by a 2%
decrease in oil production. Gas sales decreased by $771 (7%). A 23%
decrease in average gas sales prices reduced sales by $2,898. This decrease
was partially offset by a 20% increase in gas production. The increase in
gas production was primarily the result of the completion of a waterflood
project on the Schafter Lake field and the acquisition of additional interest
in the Concord acquisition in the fourth quarter of 1994. The slight
decrease in oil production was a result of the sale of the Florida
acquisition, partially offset by the purchase of additional interest in the
Concord acquisition. The changes in average sales prices correspond with
changes in the overall market for the sale of oil and gas.
Lease operating expenses decreased from $68,790 in 1994 to $24,162 in 1995.
The decrease of $44,628 (65%) is primarily due to operating and workover
expenses incurred in 1994 on the Florida acquisition, which was sold in the
fourth quarter of 1994. Depreciation and depletion expense decreased from
$47,749 in the first six months of 1994 to $42,402 in the first six months of
1995. This represents a decrease of $5,347 (11%). A 12% decrease in the
depletion rate reduced depreciation and depletion expense by $6,061. This
decrease was partially offset by the changes in production, noted above.
The rate decrease is primarily due to the sale of the Florida acquisition,
which had a relatively higher depletion rate, partially offset by downward
revisions of the oil and gas reserves at December 31, 1994.
General and administrative expenses decreased from $11,647 in 1994 to $10,698
in 1995. This decrease of $949 (8%) is primarily due to less staff time
being required to manage the Company's operations.
CAPITAL RESOURCES AND LIQUIDITY
The Company's cash flow is a direct result of the amount of net proceeds
realized from the sale of oil and gas production and the issuance of
additional debt. Accordingly, the changes in cash flow from 1994 to 1995
are primarily due to the changes in oil and gas sales described above and
the repayment of $11,490 on a note to the general partner in 1995 as compared
to proceeds of $14,923 from a loan from the general partner in 1994. It is
the general partner's intention to distribute substantially all of the
Company's remaining available cash flow to the Company's partners.
The Company discontinued the payment of distributions in the first quarter of
1994. Future distributions are dependent upon among other things, an
increase in the prices received for oil and gas. The Company will continue
to recover its reserves and reduce its obligations in 1995. Based upon
current projected cash flows from its property, it does not appear that the
Company will have sufficient cash to pay its operating expenses, repay its
debt obligations and pay distributions.
As of June 30, 1995, the Company had no material commitments for capital
expenditures. The Company does not intend to engage in any significant
developmental drilling activity.
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 June 30, 1995.
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 III - SERIES 2, 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
August 11, 1995 By: /s/ James A. Klein
James A. Klein
Controller and Chief
Accounting Officer
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 III - SERIES 2, L.P.
(Registrant)
By:ENEX RESOURCES CORPORATION
General Partner
By:
R. E. Densford
Vice President, Secretary
Treasurer and Chief Financial
Officer
August 11, 1995 By:
James A. Klein
Controller and Chief
Accounting Officer
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 790
<SECURITIES> 0
<RECEIVABLES> 14,065
<ALLOWANCES> 0
<INVENTORY> 5,115
<CURRENT-ASSETS> 19,970
<PP&E> 1,636,160
<DEPRECIATION> (1,260,462)
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<SALES> 89,546
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<CGS> 70,635
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