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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from...............to...............
Commission file number 0-16553
ENEX OIL & GAS INCOME
PROGRAM III - Series 5, L.P.
(Name of small business issuer in its charter)
New Jersey 76-0214445
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
800 Rockmead Drive
Three Kingwood Place
Kingwood, Texas 77339
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (713) 358-8401
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Limited Partnership Interest
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
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.[x]
State issuer's revenues for its most recent fiscal year. $ 312,547
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock as of a specified date within
the past 60 days (See definition of affiliate in Rule 12b-2 of the Exchange
Act):
Not Applicable
Documents Incorporated By Reference:
None
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<PAGE>
TABLE OF CONTENTS
FORM 10-KSB ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 1995
ENEX OIL & GAS INCOME
PROGRAM III - Series 5, L.P.
Item No. Part I Page
- ------- ------ ----
1 Description of Business I-1
2 Description of Property I-3
3 Legal Proceedings I-5
4 Submission of Matters to a Vote
of Security Holders I-5
Part II
------------
5 Market for Common Equity and
Related Security Holder Matters II-1
6 Management's Discussion and Analysis
or Plan of Operation II-2
7 Financial Statements and Supplementary
Data II-4
8 Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure II-14
Part III
---------------
9 Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a)
of the Exchange Act III-1
10 Executive Compensation III-3
11 Security Ownership of Certain
Beneficial Owners and Management III-4
12 Certain Relationships and Related
Transactions III-4
13 Exhibits and Reports on Form 8-K III-4
Signatures S-1
<PAGE>
PART I
Item 1. Description of Business
General
Enex Oil & Gas Income Program III-Series 5, L.P. (the
"Company") was formed under the New Jersey Uniform Limited Partnership Law
(1976) on February 13, 1987 and commenced operations on August 11, 1987 with
aggregate subscriptions of $5,398,602, $5,344,616 of which was received from
2,660 limited partners, including investors whose distributions from earlier
partnerships sponsored by the Company's general partner, Enex Resources
Corporation ("Enex"), were automatically invested in the Company.
The Company is engaged in the oil and gas business through the
ownership of various interests in producing oil and gas properties. If
warranted, the Company may further develop its oil and gas properties. However,
the Company does not intend to engage in significant drilling activities. Such
activities may be conducted, however, as an incidental part of the management of
producing properties or with a view toward enhancing the value of producing
properties. In no event will the Company engage in exploratory drilling, or use
any of the limited partners' net subscriptions to fund drilling activities. Any
developmental drilling will be financed primarily through third party borrowing
or with funds provided from operations. The expenses of drilling, completing and
equipping and operating development wells are allocated 90% to the limited
partners and 10% to the general partner. See Note 1 to the Financial Statements
for information relating to the allocation of costs and revenues between the
limited partners and the general partner. The Company's operations are
concentrated in a single industry segment.
The principal executive office of the Company is maintained at Suite 200,
Three Kingwood Place, Kingwood, Texas 77339. The telephone number at this office
is (713) 358-8401. The Company has no regional offices.
The Company has no employees. On March 1, 1996, Enex and its subsidiaries
employed 24 persons.
Marketing
The marketing of oil and gas produced by the Company is
affected by a number of factors which are beyond the Company's control, the
exact nature of which cannot be accurately predicted. These factors include the
quantity and price of crude oil imports, fluctuating supply and demand, pipeline
and other transportation facilities, the marketing of competitive fuels, state
and federal regulation of oil and gas production and distribution and other
matters affecting the availability of a ready market. All of these factors are
extremely volatile.
Sunniland Pipe Line Company and American Exploration Company
accounted for 25% and 23%, respectively, of the total oil and gas sales in 1995.
Sunniland Pipe Line Company and American Exploration Company accounted for 26%
and 22%, respectively, of the total oil and gas sales in 1994.
I-1
<PAGE>
No other purchaser individually accounted for more than 10% of such sales.
Although the Company marketed a significant portion of its sales to the above
noted companies, such a concentration does not pose a significant risk due to
the commodity nature of the Company's products.
Environmental and Conservation Regulation
State regulatory authorities in the states in which the Company
owns producing properties are empowered to make and enforce regulations to
prevent waste of oil and gas and to protect correlative rights and opportunities
to produce oil and gas for owners of a common reservoir. Each of such regulatory
authorities also regulates the amount of oil and gas produced by assigning
allowable rates of production, which may be increased or decreased in accordance
with supply and demand. Requirements regarding the prevention and clean-up of
pollution and similar environmental matters are also generally applicable. The
costs, if any, the Company may incur in this regard cannot be predicted.
The existence of such regulations has had no material adverse
effects on the Company's operations to date, and the cost of compliance has not
yet been material. There are no material administrative or judicial proceedings
arising under such laws or regulations pending against the Company. The Company
is unable to assess or predict the impact that compliance with environmental and
pollution control laws and regulations may have on its future operations,
capital expenditures, earnings or competitive position.
Tax Laws
The operations of the Company are affected by the federal
income tax laws contained in the Internal Revenue Code of 1986, as amended (the
"Code"). Under the Code, generally, the Company will report income from the sale
of oil and gas, against which it may deduct its ordinary business expenses,
depletion, depreciation and intangible drilling and development costs.
It is anticipated that most of the Company's income, if any,
will be from a "passive activity" for purposes of the Code. A passive activity
includes an activity in which the taxpayer does not materially participate,
including the ownership of a limited partnership interest, such as an interest
in the Company. "Passive income", however, does not include portfolio income
(i.e. dividends, interest, royalties, etc.). Although taxpayers generally may
not deduct losses or use tax credits derived from passive activities in an
amount greater than their income derived from such activities, if and to the
extent that the Company generates passive income, it will be available to offset
the limited partners' passive losses from other sources.
Partnerships with interests that are "publicly traded" are
taxed as corporations unless at least 90% of their income is "qualifying
income." Because the Company's income will be qualifying income for this
purpose, the Company will not be taxed as a corporation under this rule. Passive
income or losses from "publicly traded" partnerships that are not taxed as
corporations generally cannot be used to offset passive income or losses from
other sources. Enex believes that the Company is not publicly traded.
Consequently, limited partners should continue to be able to utilize their
income and losses from the Company to offset losses and income from their other
passive activities.
In order to prevent the adverse tax consequences that would
affect the limited partners if the Company's limited partnership interests were
to become publicly traded in the future, the general partner
I-2
<PAGE>
may, after final regulations have been issued by the Internal Revenue Service,
submit to a vote of limited partners a proposal to amend the Company's agreement
of limited partnership to provide, among other things, (a) that Enex shall have
the right to refuse to recognize any transfer of limited partnership interests
if it believes that such transfer occurred on a secondary market or the
substantial equivalent thereof; and (b) that all assignors and assignees of the
limited partnership interests shall be required to represent to Enex that any
transfer of limited partnership interests did not, to the best of their
knowledge, occur on a secondary market or the substantial equivalent thereof.
Item 2. Description of Property
Presented below is a summary of the Company's property
acquisitions.
BURNS POND, EAST acquisition. This acquisition consists of
working interests in 5 producing wells in Union County, Arkansas. The Company's
general partner has assumed operation of these wells. The Company acquired its
interests effective July 1987 for $1,525,500. Effective March 1, 1991, the
Company sold its interests in the acquisition for $94,013. The Company
recognized a loss of $372,646 on the sale.
HIGHTOWER acquisition. The Company acquired working interests
in 3 oil wells in the Ellenburger formation in Andrews and Gaines Counties,
Texas from Jack D. Hightower and Amber Energy, Inc. of Midland, Texas for a
purchase price of $614,000 effective March 1, 1988. The acquisition is operated
by Tamarack Petroleum, Cross Timbers Oil Co., and Sharp Drilling Co. The Company
retains working interests ranging from 7.12% to 7.93% of the total Hightower
acquisition at December 31, 1995.
CORKSCREW acquisition. Working interests in 3 oil wells producing from the
Sunniland Lime formation in Corkscrew Field, Collier County, Florida were
purchased from R. K. Petroleum Corp. of Midland, Texas for $1,267,200 effective
June 1, 1988. The Company's general partner has assumed operation of these
wells. The Company retains a 26.4% working interest in the wells in the
Corkscrew acquisition at December 31, 1995.
MICHIGAN acquisition. This acquisition consists of working
interests in 27 oil wells located in 8 counties in Michigan. The Company
acquired its interests effective May 1988 and August 1988 for $674,440. The
acquisition is operated by ten different oil and gas companies. The Company
retains working interests ranging from .32% to 1.88% of the total Michigan
acquisition at December 31, 1995.
RIC acquisition. This acquisition consists of working interests
in 69 wells located in 8 states, but primarily in Texas and Oklahoma. The
Company acquired these interests for $549,885 from Resources Investment
Corporation of Denver, Colorado effective September 1, 1988. The acquisition is
operated by 21 different oil and gas companies, including the Company's general
partner. The Company retains working interests ranging from 0.78% to 28.0% of
the total RIC acquisition at December 31, 1995.
ENEXCO acquisition. Effective October 1, 1988, the Company
acquired working interests in two wells located in Blaine County, Oklahoma and
Dawson County, Texas. These interests were purchased from Janex Oil Co., Inc. of
Dallas, Texas for $72,100. The acquisition is operated by Samedan Oil Corp.
Effective October 1, 1995, the Company sold its interest in the Kidd #1 well in
the
I-3
<PAGE>
Enexco acquisition to Humphrey Oil Co. for $54,600. A gain from the sale of
$48,589 was recognized by the Company. The Company retains a 7.71% working
interest in the wells in the Enexco acquisition at December 31, 1995.
Purchase price as used above is defined as the actual contract
price plus finders' fees, if applicable. Miscellaneous acquisition expenses,
subsequent capital items, etc. are not included.
Oil and Gas Reserves
For quantitative information regarding the Company's oil and
gas reserves, please see Supplementary Oil and Gas Information and related
tables which follow the Notes to Financial Statements in Item 7 of this report.
The Company has not filed any current oil and gas reserve estimates or included
any such estimates in reports to any federal or foreign governmental authority
or agency, including the Securities and Exchange Commission.
Proved oil and gas reserves reported herein are based on
engineering reports prepared by the petroleum engineering consulting firm of H.
J. Gruy and Associates, Inc. The reserves included in this report are estimates
only and should not be construed as exact quantities. Future conditions may
affect recovery of estimated reserves and revenue, and all reserves may be
subject to revision as more performance data become available. The proved
reserves used in this report conform to the applicable definitions promulgated
by the Securities and Exchange Commission. No major discovery or other favorable
or adverse event that could potentially cause a significant change in the
estimated proved reserves has occurred since December 31, 1995.
Net Oil and Gas Production
The following table shows for the years ended December 31, 1995
and 1994, the approximate production attributable to the Company's oil and gas
interests. The figures in the table represent "net production"; i.e., production
owned by the Company and produced to its interest after deducting royalty and
other similar interests. All production occurred in the United States.
1995 1994
----- -----
Crude oil and condensate (Bbls).......... 19,400 25,352
Natural gas (Mcf)........................ 32,430 38,971
The following table sets forth the Company's average sales price per barrel
of oil, per Mcf of gas, and average production cost per unit produced for the
years ended December 31, 1995 and 1994.
1995 1994
------ -----
Average sales price per barrel of oil....... $ 13.42 $11.97
Average sales price per Mcf of gas.......... 1.61 1.82
Average production cost per equivalent
barrel of production...................... 8.41 6.53
I-4
<PAGE>
Current Activities
The Company completed its acquisition phase in 1988. Additional
interests in oil and gas properties may be acquired; however, the primary focus
of present activities is on the efficient management of properties currently
owned.
Item 3. Legal Proceedings
There are no material pending legal proceedings to which the
Company is a party.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during
the fourth quarter of the fiscal year covered by this report.
I-5
<PAGE>
PART II
Item 5. Market for Common Equity and Related Security Holder Matters
Market Information
There is no established public trading market for the Company's
outstanding limited partnership interests.
Number of Equity Security Holders
Number of Record Holders
Title of Class (as of March 1, 1996)
--------------- ------------------------
General Partner's Interests 1
Limited Partnership Interests 1,771
Dividends
The Company made cash distributions to partners of $4 and $8 per
$500 investment in 1995 and 1994 respectively. The Company discontinued the
payment of distributions in the third quarter of 1995. 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
obligations in 1996. Based upon current projected cash flows from its property,
it does not appear that the Company will have sufficient net cash flow after
debt service to pay distributions.
II-1
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation
Results of Operations
This discussion should be read in conjunction with the
financial statements of the Company and the notes thereto included in this Form
10-KSB.
Oil and gas sales in 1995 were $312,547 as compared with
$374,421 in 1994. This represents a decrease of $61,874 or 17%. Oil sales
decreased by $43,088 or 14%. A 23% decline in oil production caused sales to
decrease by $71,218. This decrease was partially offset by a 12% increase in the
average oil sales price. Gas sales decreased by $18,786 or 26%. A 17% decrease
in gas production reduced sales by $11,976, while a 12% decrease in the average
gas sales price lowered sales by an additional $6,810. The lower oil production
was primarily the result of the shut-in of production in August, 1995, from the
Corkscrew acquisition in Florida due to hurricane damage. The decrease in gas
production was primarily a result of natural production declines which were
especially pronounced on the RIC acquisition. The changes in average oil and gas
sales prices correspond with changes in the overall market for the sale of oil
and gas.
Lease operating expenses increased to $191,678 in 1995, from
$187,056 in 1994. The increase of $4,622 or 2% was primarily a result of
workover expenses incurred on the Corkscrew acquisition to repair hurricane
damage in 1995.
Depreciation and depletion expense decreased to $87,220 in 1995
from $109,477 in 1994. This represents a decrease of $22,257 or 20%. The changes
in production, noted above, caused depreciation and depletion expense to
decrease by $24,207. This decrease was partially offset by a 2% increase in the
depletion rate. The depletion rate increase was primarily due to downward
revisions of the oil reserves during 1995, partially offset by upward revisions
of the gas reserves during 1995.
Effective October 1, 1995, the Company sold its interest in the
Kidd #1 well in the Enexco acquisition to Humphrey Oil Co. for $54,600. A gain
from the sale of $48,589 was recognized by the Company.
General and administrative expenses decreased to $52,387 in
1995 from $60,664 in 1994. The decrease of $8,277 or 14% was primarily due to
less 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 from the sale of oil and gas production after payment
of its debt obligations. Accordingly, the changes in cash flow from 1994 to 1995
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 net cash flow to the Company's partners.
II-2
<PAGE>
The Company discontinued the payment of distributions in the
third quarter of 1995. 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 1996. The general
partner does not intend to accelerate the repayment of the debt beyond the cash
flow provided by operating activities. The Company plans to repay the amount
owed to the general partner over a five year period. 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 in the near future.
At December 31, 1995, the Company had no material commitments
for capital expenditures. The Company does not intend to engage in any
significant developmental drilling activity.
II-3
<PAGE>
Item 7. Financial Statements and Supplementary Data
INDEPENDENT AUDITORS' REPORT
The Partners
Enex Oil & Gas Income
Program III - Series 5, L.P.:
We have audited the accompanying balance sheet of Enex Oil & Gas Income Program
III - Series 5, L.P. (a New Jersey limited partnership) as of December 31, 1995
and the related statements of operations, changes in partners' capital, and cash
flows for each of the two years in the period ended December 31, 1995. These
financial statements are the responsibility of the general partner of Enex Oil &
Gas Income Program III - Series 5, L.P. Our responsibility is to express an
opinion on the financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Enex Oil & Gas Income Program III - Series
5, L.P. at December 31, 1995 and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Houston, Texas
March 18, 1996
II-4
<PAGE>
ENEX OIL & GAS INCOME PROGRAM III - SERIES 5, L.P.
BALANCE SHEET, DECEMBER 31, 1995
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<TABLE>
<CAPTION>
ASSETS
1995
------------
CURRENT ASSETS:
<S> <C>
Cash $ 13,280
Accounts receivable - oil & gas sales 26,632
Other current assets 3,415
------------
Total current assets 43,327
------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 3,554,081
Less accumulated depreciation and depletion 3,203,759
------------
Property, net 350,322
------------
TOTAL $ 393,649
============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 33,144
Payable to general partner 33,426
------------
Total current liabilities 66,570
------------
NONCURRENT PAYABLE TO GENERAL PARTNER 133,707
------------
PARTNERS' CAPITAL:
Limited partners 165,893
General partner 27,479
------------
Total partners' capital 193,372
------------
TOTAL $ 393,649
============
</TABLE>
See accompanying notes to financial statements.
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II-5
<PAGE>
ENEX OIL & GAS INCOME PROGRAM III - SERIES 5, L.P.
STATEMENTS OF OPERATIONS
FOR THE TWO YEARS ENDED DECEMBER 31, 1995
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<TABLE>
<CAPTION>
1995 1994
----------- -----------
REVENUES:
<S> <C> <C>
Oil and gas sales $ 312,547 $ 374,421
----------- -----------
EXPENSES:
Depreciation and depletion 87,220 109,477
Lease operating expenses 191,678 187,056
Production taxes 16,917 20,930
General and administrative:
Allocated from general partner 43,150 51,440
Direct expense 9,237 9,224
----------- -----------
Total expenses 348,202 378,127
----------- -----------
LOSS FROM OPERATIONS (35,655) (3,706)
----------- -----------
OTHER INCOME:
Gain from sale of property 48,589 -
----------- -----------
NET INCOME (LOSS) $ 12,934 $ (3,706)
=========== ===========
</TABLE>
See accompanying notes to financial statements.
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II-6
<PAGE>
ENEX OIL & GAS INCOME PROGRAM III - SERIES 5, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE TWO YEARS ENDED DECEMBER 31, 1995
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<TABLE>
<CAPTION>
PER $500
LIMITED
PARTNER
GENERAL LIMITED UNIT OUT-
TOTAL PARTNER PARTNERS STANDING
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 326,545 21,129 $ 305,416 $ 28
CASH DISTRIBUTIONS (96,892) (9,690) (87,202) (8)
NET INCOME (LOSS) (3,706) 10,577 (14,283) (1)
---------- --------- ---------- ----------
BALANCE, DECEMBER 31, 1994 225,947 22,016 203,931 19
CASH DISTRIBUTIONS (45,509) (4,552) (40,957) (4)
NET INCOME 12,934 10,015 2,919 -
---------- --------- ---------- ----------
BALANCE, DECEMBER 31, 1995 193,372 27,479 $ 165,893 (1) $ 15
========== ========= ========== ==========
</TABLE>
(1) Includes 1,814 units purchased by the general partner as a limited partner.
See accompanying notes to financial statements.
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II-7
<PAGE>
ENEX OIL AND GAS INCOME PROGRAM III - SERIES 5, L.P.
STATEMENTS OF CASH FLOWS
FOR THE TWO YEARS ENDED DECEMBER 31, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ 12,934 $ (3,706)
---------- ----------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation and depletion 87,220 109,477
Gain from sale of property (48,589) -
(Increase) decrease in:
Accounts receivable - oil & gas sales 13,129 (7,810)
Other current assets (1,451) (1,763)
Increase (decrease) in:
Accounts payable 7,559 (19,654)
Payable to general partner (62,092) 38,250
---------- ----------
Total adjustments (4,224) 118,500
---------- ----------
Net cash provided by operating activities 8,710 114,794
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 54,600 -
Property additions - development costs (14,953) (20,175)
---------- ----------
Net cash provided (used) by investing activities 39,647 (20,175)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions (45,509) (96,892)
---------- ----------
NET INCREASE (DECREASE) IN CASH 2,848 (2,273)
CASH AT BEGINNING OF YEAR 10,432 12,705
---------- ----------
CASH AT END OF YEAR $ 13,280 $ 10,432
========== ==========
</TABLE>
See accompanying notes to financial statements.
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II-8
<PAGE>
ENEX OIL & GAS INCOME PROGRAM III - Series 5, L.P.
NOTES TO FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------
1. PARTNERSHIP ORGANIZATION
Enex Oil & Gas Income Program III - Series 5, L.P. (the
"Company"), a New Jersey limited partnership, commenced
operations on August 11, 1987 for the purpose of acquiring
proved oil and gas properties. Total limited partner
contributions were $5,398,602, of which $53,986 was
contributed by Enex Resources Corporation ("Enex"), the
general partner.
In accordance with the partnership agreement, the Company paid
commissions of $517,721 for solicited subscriptions to Enex
Securities Corporation, a subsidiary of Enex, and reimbursed
Enex for organization expenses of approximately $162,000.
Information relating to the allocation of costs and revenues
between Enex, as general partner, and the limited partners is
as follows:
Limited
Enex Partners
------ --------
Commissions and selling expenses 100%
Company reimbursement of organization
expense 100%
Company property acquisition 100%
General and administrative costs 10% 90%
Costs of drilling and completing
development wells 10% 90%
Revenues from temporary investment of
partnership capital 100%
Revenues from producing properties 10% 90%
Operating costs (including general and
administrative costs associated with
operating producing properties) 10% 90%
At the point in time when the cash distributions to the limited
partners equal their subscriptions ("payout"), the costs of
drilling and completing development wells, revenues from
producing properties, general and administrative costs and
operating costs will be allocated 15% to the general partner
and 85% to the limited partners.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Oil and Gas Properties - The Company uses the successful
efforts method of accounting for its oil and gas operations.
Under this method, the costs of all development wells are
capitalized. Capitalized costs are amortized on the
units-of-production method based on estimated total proved
reserves. The acquisition costs of proved oil and gas
properties are capitalized and periodically assessed for
impairments.
II-9
<PAGE>
The Financial Accounting Standards Board has issued Statement
of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long Lived Assets and for Long-Lived Assets to Be
Disposed Of." This statement requires that long-lived assets
and certain identifiable intangibles held and used by the
Company be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset
may not be recoverable.
The Company has not determined the effect, if any, on its
financial position or results of operations which may result
from the adoption of this statement in the first quarter of
1996.
Cash Flows - The Company has presented its cash flows using the
indirect method and considers all highly liquid investments
with an original maturity of three months or less to be cash
equivalents.
General and Administrative Expenses - The Company reimburses
the General Partner for direct costs and administrative costs
incurred on its behalf. Administrative costs allocated to the
Company 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.
Uses of Estimates - The preparation of the financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contigent assets and liabilities at the date of
the financial statements and the reported amounts of revenue
and expenses during the reporting periods. Actual results could
differ from these estimates.
3. FEDERAL INCOME TAXES
General - The Company is not a taxable entity for federal
income tax purposes. Such taxes are liabilities of the
individual partners and the amounts thereof will vary depending
on the individual situation of each partner. Accordingly, there
is no provision for income taxes in the accompanying financial
statements.
II-10
<PAGE>
Set forth below is a reconciliation of net income as reflected in the
accompanying financial statements and net income (loss) for federal income tax
purposes for the year ended December 31, 1995:
<TABLE>
<CAPTION>
Allocable to
--------------------- Per $500 Limited
General Limited Partner Unit
TOTAL Partner Partners Outstanding
--------- ---------- ---------- --------------
Net income as reflected in the
<S> <C> <C> <C> <C>
accompanying financial statements $ 12,934 $ 10,015 $ 2,919 $ -
Reconciling items:
Intangible drilling costs capitalized
for financial reporting purposes
which were charged-off for
federal income tax purposes (2,798) (280) (2,518) -
Difference in depreciation, depletion
and amortization computed for
federal income tax purposes and
the amount computed for
financial reporting purposes (77,878) - (77,878) (7)
Difference in gain on property sales for
federal income tax purposes and
the amount computed for financial
reporting purposes 1,553 (4,859) 6,412 1
--------- ---------- ---------- --------------
Net income (loss) for federal
income tax purposes $(66,189) $ 4,876 $ (71,065) $ (6)
========= ========== ========== ==============
</TABLE>
Net income (loss) for federal income tax purposes is a summation of ordinary
income (loss), portfolio income (loss), cost depletion and intangible drilling
costs as presented in the Company's federal income tax return.
Set forth below is a reconciliation between partners' capital as reflected in
the accompanying financial statements and partners' capital for federal income
tax purposes as of December 31, 1995:
<TABLE>
<CAPTION>
Allocable to
--------------------- Per $500 Limited
General Limited Partner Unit
TOTAL Partner Partners Outstanding
---------- ---------- ---------- ----------------
Partners' capital as reflected in the
<S> <C> <C> <C> <C>
accompanying financial statements $ 193,372 $ 27,479 $ 165,893 $ 15
Reconciling items:
Intangible drilling costs capitalized
for financial reporting purposes
which were charged-off for
federal income tax purposes (203,923) (20,396) (183,527) (17)
Difference in accumulated depreciation
depletion and amortization for
financial reporting and federal
income tax purposes 353,712 - 353,712 33
Accumulated difference in property
sales for financial reporting purposes
and for federal income tax purposes 1,553 (4,859) 6,412 1
Commissions and syndication
fees capitalized for federal
income tax purposes 517,721 - 517,721 48
---------- ---------- ---------- ----------------
Partners' capital for federal
income tax purposes $ 862,435 $ 2,224 $ 860,211 $ 80
========== ========== ========== ================
</TABLE>
II-11
<PAGE>
4. PAYABLE TO GENERAL PARTNER
The payable to general partner primarily consists of general and
administrative expenses allocated to the Company by Enex during the
Company's start-up phase and for its ongoing operations. The Company
plans to repay the amounts owed to the general partner over a five
year period.
5. REPURCHASE OF LIMITED PARTNER INTERESTS
In accordance with the partnership agreement, the general partner is
required to purchase limited partner interests (at the option of the
limited partners) at annual intervals beginning after the second
year following the formation of the Company. The purchase price, as
specified in the partnership agreement, is based primarily on
reserve reports prepared by independent petroleum engineers as
reduced by a specified risk factor.
6. SIGNIFICANT PURCHASERS
Sunniland Pipe Line Company and American Exploration Company
accounted for 25% and 23%, respectively, of the total oil and gas
sales in 1995. Sunniland Pipe Line Company and American Exploration
Company accounted for 26% and 22%, respectively, of the total oil
and gas sales in 1994. No other purchaser individually accounted for
more than 10% of such sales.
7. SALE OF PROPERTY
Effective October 1, 1995, the Company sold its interest in the Kidd
#1 well in the Enexco acquisition to Humphrey Oil Co. for $54,600. A
gain from the sale of $48,589 was recognized by the Company.
II-12
<PAGE>
ENEX OIL & GAS INCOME PROGRAM III - SERIES 5, L.P.
SUPPLEMENTARY OIL AND GAS INFORMATION
FOR THE TWO YEARS ENDED DECEMBER 31, 1995
Proved Oil and Gas Reserve Quantities (Unaudited)
The following presents an estimate of the Company's proved oil and gas reserve
quantities and changes therein for each of the two years in the period ended
December 31, 1995. Oil reserves are stated in barrels ("BBLS") and natural gas
in thousand cubic feet ("MCF"). The amounts per $500 limited partner unit do not
include a potential 5% reduction after payout. All of the Company's reserves are
located within the United States.
<TABLE>
<CAPTION>
Per $500 Per $500
Limited Natural Limited
Oil Partner Unit Gas Partner Unit
(BBLS) Outstanding (MCF) Outstanding
PROVED DEVELOPED AND
UNDEVELOPED RESERVES:
<S> <C> <C> <C> <C>
January 1, 1994 111,473 9 114,127 9
Revisions of previous estimates 33,658 3 34,968 3
Production (25,352) (2) (38,971) (3)
December 31, 1994 119,779 10 110,124 9
Revisions of previous estimates (20,505) (2) 22,157 2
Sales of minerals in place (2,186) - (454) -
Production (19,400) (2) (32,430) (3)
December 31, 1995 77,688 6 99,397 8
PROVED DEVELOPED RESERVES:
January 1, 1994 111,473 9 114,127 9
December 31, 1994 119,779 10 110,124 9
December 31, 1995 77,688 6 99,397 8
</TABLE>
II-13
<PAGE>
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
Not Applicable
II-14
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
- ---------------------------------------------------------------------
The Company's sole General Partner is Enex Resources Corporation, a
Delaware corporation. The Company has no Directors or executive officers. The
Directors and executive officers of Enex are:
Gerald B. Eckley. Mr. Eckley, age 69, has served as a Director, President
and Chief Executive Officer of the General Partner since its formation in 1979.
He was employed by Shell Oil Company from 1951 to 1967 and served in managerial
capacities from 1959 to 1967. From 1967 to 1969, he was Director of Fund Raising
at the University of Oklahoma and from 1969 to 1971, was Vice President of Land
and Operations for Imperial American Management Company. In 1971, Mr. Eckley was
a petroleum consultant and in 1972-1973 was General Counsel and Executive
Director of the Oil Investment Institute. From 1973 to 1974, he was Manager of
Oil Properties, Inc. and from 1974 to 1976, was Vice President, Land and Joint
Ventures for Petro-Lewis Corporation. From 1977 to August 1979, Mr. Eckley was
President of Eckley Energy, Inc., a company engaged in purchasing and selling
oil and gas properties. Mr. Eckley received an L.L.B. degree from the University
of Oklahoma in 1951 and a Juris Doctor degree from the University of Oklahoma in
1970.
William C. Hooper, Jr. Mr. Hooper, age 58, has been a Director of the
General Partner since its formation in 1979 and is a member of the General
Partner's Audit and Compensation and Options Committees. In 1960 he was a staff
engineer in the Natural Gas Department of the Railroad Commission of Texas, with
principal duties involving reservoir units and gas proration. In 1961 he was
employed by the California Company as a Drilling Engineer and Supervisor. In
1963 he was employed as a Staff Engineer by California Research Corporation and
in 1964 rejoined the California Company as a project manager having various
duties involving drilling and reservoir evaluations. In 1966 he was Executive
Vice President for Moran Bros. Inc., coordinating and managing all company
activities, drilling operations, bidding and engineering. From 1970 until the
present, he has been self-employed as a consulting petroleum engineer providing
services to industry and government and engaged in business as an independent
oil and gas operator and investor. From 1975 to 1987 he was also a Director and
President of Verna Corporation, a drilling contractor and service organization.
He received a B.S. degree in Petroleum Engineering in 1960 from the University
of Texas and an M.S. degree in Petroleum Engineering from that same University
in 1961.
Stuart Strasner. Mr. Strasner, age 66, was a Director of the General
Partner from its formation until October of 1986. He was reappointed to the
Board on April 19, 1990 to fill a vacancy. He is a member of the Audit
Committee. He is a professor of business law at Oklahoma City University and was
Dean of the law school at Oklahoma City University from July 1984 until June
1991. Prior to July 1984, Mr. Strasner was an attorney in private practice with
McCollister, McCleary, Fazio and Holliday in Oklahoma City, Oklahoma. From 1959
to 1974, he was employed by various banks, bank holding companies and an
insurance company in executive capacities. From 1974 to 1978, he was a
consultant to various corporations such as insurance companies, bank holding
companies and small business investment companies. From 1978 until late 1981, he
was Executive Director of the Oklahoma Bar Association, and from 1981 to 1983
was a Director and President of PRST Enterprises, Inc., a real estate
development company. Mr. Strasner holds an A.B. degree from Panhandle A&M
College, Oklahoma, and a J.D. degree from the University of Oklahoma. 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.
III-1
<PAGE>
Martin J. Freedman. Mr. Freedman, age 71, was one of the General Partner's
founders and a member of its Board of Directors as well as a board member of
Enex Securities Corporation until June of 1986. He was reappointed to the Board
on April 19, 1990 to fill a vacancy. He is a member of the Compensation and
Options Committee. He is currently President of Freedman Oil & Gas Company,
engaged primarily in the management of its exploration and producing properties,
and the managing partner Martin J. Freedman & Company which has an interest in
approximately one hundred producing oil and/or gas wells. Mr. Freedman is a
lifetime member of the Denver Petroleum Club as well as being a lifetime member
of the Denver Association of Petroleum Landmen. He was an officer and Director
and/or founder of several former private and public companies. Mr. Freedman
entered the oil and gas business in 1954 when he joined Mr. Marvin Davis of the
Davis Oil Company. In 1956, he became President of Central Oil Corporation, a
company engaged in oil and gas exploration. From 1958 on, Mr. Freedman operated
as Martin J. Freedman Oil Properties and was President of Oil Properties, Inc.,
a private corporation. Mr. Freedman attended Long Island University and New York
University. He received a bachelor's degree in Psychology and also attended New
York University's graduate school.
James Thomas Shorney. Mr. Shorney, age 70, has been a Director of the
General Partner since April of 1990 and is a member of the Compensation and
Options Committee. He has been a petroleum consultant and Secretary/Treasurer of
the Shorney Company, a privately held oil and gas exploration company, from 1970
to date. From 1970 to 1976, he also served as a petroleum consultant in Land and
Lease Research Analysis Studies for the GHK Company. He was an oil and gas lease
broker from 1962 to 1970 and employed by Shell Oil Company in the Land
Department from 1954 to 1962. Before joining Shell Oil Company, he served as
Public Information Officer in the U.S. Army Air Force from 1950 to 1953
including attending Georgetown University Graduate School in 1952. Mr. Shorney
graduated from the University of Oklahoma with a B.A. degree in Journalism in
1950. From 1943 to 1945, he served in the U.S. Army Air Force as an air crew
member on a B-24 Bomber. Mr. Shorney is a member of the Oklahoma City
Association of Petroleum Landmen on which he has served as Director and
Secretary/Treasurer. He is an active member of the American Association of
Petroleum Landmen. In 1975, Mr. Shorney was first listed in the London Financial
Times' Who's Who in World Oil and Gas.
Robert D. Carl, III. Mr. Carl, age 42, was appointed a Director of the
General Partner on July 30, 1991 and is a member of the Audit Committee. He is
President, Chief Executive Officer and Chairman of the Board of Health Images,
Inc., a public company whose securities are traded on NYSE, which provides fixed
site magnetic resonance imaging ("MRI") services. From 1978 to 1981, Mr. Carl
also served as President of Carl Investment Associates, Inc. a registered
investment advisor. In 1981, Mr. Carl joined Cardio-Tech, Inc., as general
counsel and as an officer and Director. Upon the sale and reorganization of
Cardio-Tech, Inc. into Cardiopul Technologies in 1982, he served as its
Executive Vice President and as a Director. In March, 1985 he was elected
President, Chief Executive Officer and Chairman of Cardiopul Technologies which
spun off its non-imaging medical services business and changed its name to
Health Images, Inc. Mr. Carl received a B.A. in History from Franklin and
Marshall College, Lancaster, Pennsylvania in 1975 and a J.D. from Emory
University School of Law, Atlanta, Georgia in 1978. Mr. Carl is a trustee of
Franklin & Marshall College and is a member of the State Bar of Georgia.
On January 4, 1996, the SEC filed a complaint in the United States District
Court for the District of Columbia against Mr. Carl alleging that Mr. Carl
violated Section 16(a) of the Securities Exchange Act of 1934 ("Exchange Act"),
and Rule 16a-2 and 16a-3 (and former Rule 16a-1) thereunder, by failing to
timely file reports concerning thirty-eight securities transactions in his
mother's brokerage accounts involving shares of Health Images, Inc. stock.
Although Mr. Carl's mother apparently did not
III-2
<PAGE>
live in his household, the SEC took the position that because Mr. Carl (1)
provided substantial financial support to his mother, (2) commingled his
mother's assets with his own, (3) provided a substantial portion of the funds
used to purchase the shares in question, and (4) received from his mother a
substantial portion of the sales proceeds, he, therefore, had a pecuniary
interest in, and was a beneficial owner of, the shares in question.
In response to the SEC's action, Mr. Carl disgorged to Health Images, Inc.
approximately $92,400 in short-swing profits from the trading in his mother's
account, plus interest thereon of approximately $52,600. The SEC further
requested the court to impose a $10,000 civil penalty against Mr. Carl pursuant
to Section 21(d)(3) of the Exchange Act. Without admitting or denying the
allegations in the complaint, Mr. Carl consented to the entry of a final
judgement imposing the $10,000 penalty. On January 12, 1996, a federal judge
entered the final judgement in this matter, and Mr. Carl has since filed amended
reports on Forms 4 and 5 reflecting these transactions in his mother's accounts.
In relation to the same matter, the SEC has issued an administrative Order
pursuant to Section 21C of the Exchange Act against Mr. Carl, finding that he
violated Section 16(a) and the rules thereunder and requiring him to cease and
desist from committing or causing any violation or future violation of those
provisions. Without admitting or denying allegations in the SEC's Order, Mr.
Carl consented to the entry of the Order.
Robert E. Densford. Mr. Densford, age 38, was appointed a Director of the
General Partner on September 11, 1991. He joined the General Partner as
Controller on May 1, 1985 and became Vice President-Finance, Secretary and
Treasurer on March 1, 1989. From January 1983 to April 1985, he was Senior
Accountant for Deloitte Haskins & Sells in Houston, Texas, auditing both closely
held and publicly owned oil and gas companies. From September 1981 to December
1982, he was a staff accountant for Coopers & Lybrand in Houston. Mr. Densford
is a C.P.A. and holds a B.B.A. degree in Accounting and an M.S. degree in Oil
and Gas Accounting from Texas Tech University and is a member of the American
Institute of Certified Public Accountants and the Texas Society of Certified
Public Accountants.
James A. Klein. Mr. Klein, age 32, joined the General Partner as Controller
in February 1991. In June 1993, he was appointed President and Principal of Enex
Securities Corporation. From June 1988 to February 1991, he was employed by
Positron Corporation in Houston. From July 1987 to May 1988, he was employed by
Transworld Oil Company in Houston and from September 1985 until July 1987, he
was an accountant with Deloitte Haskins & Sells in Houston, Texas, auditing oil
and gas and oil service companies. Mr. Klein is a Certified Public Accountant
and holds a B.A. in Accounting (1985) from the University of Iowa. He is a
member of the American Institute of Certified Public Accountants and the Iowa
Society of Certified Public Accountants.
Item 10. Executive Compensation
The Company has no Directors or executive officers.
The Company does not pay a proportional or fixed share of the compensation
paid to the officers of the General Partner.
The Company reimburses the General Partner for direct costs and
administrative costs incurred on its behalf. Administrative costs allocated to
the Company 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.
III-3
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
$500 Limited
Name of Partner Units Percent
Title of Class Beneficial Owner Owned Directly of Class
Limited Partner Enex Resources 1,814 16.8011%
Item 12. Certain Relationships and Related Transactions
See the Statements of Operations included in the Financial
Statements in Item 7 of this report for information concerning general and
administrative costs incurred by Enex and allocated to the Company, and Note 1
to such Financial Statements for information concerning payments to Enex
Securities Corporation, a wholly owned subsidiary of Enex and to Enex for
certain offering and organization expenses incurred by the Company.
Item 13. Exhibits and Reports on Form 8-K
Sequential
Page No.
----------
(a) Exhibits
(3) a. Certificate of Limited Partnership, as amended.
Incorporated by reference to Exhibit 3(a) to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1987.
b. Amended Agreement of Limited Partnership.
Incorporated by reference to Exhibit 3(a) to
Post-Effective Amendment No. 1 to the
Registration Statement on Form S-1 (No. 33-
4755) of Enex Oil and Gas Income Program III
filed with the Securities and Exchange
Commission on April 9, 1987.
(4) Not Applicable
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(18) Not Applicable
(19) Not Applicable
III-4
<PAGE>
(22) Not Applicable
(23) Not Applicable
(24) Not Applicable
(25) Not Applicable
(28) Not Applicable
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last
quarter of the period covered by this report.
III-5
<PAGE>
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ENEX OIL AND GAS INCOME PROGRAM III -
SERIES 5, L.P.
By: ENEX RESOURCES CORPORATION
the General Partner
March 18, 1996 By: /s/ G. B. Eckley
-------------------
G. B. Eckley, President
In accordance with the Exchange Act, this report has been
signed below on March 18, 1996, by the following persons in the capacities
indicated.
ENEX RESOURCES CORPORATION General Partner
By: /s/ G. B. Eckley
------------------------
G. B. Eckley, President
/s/ G. B. Eckley
President, Chief Executive
------------------ Officer and Director
G. B. Eckley
/s/ R. E. Densford Vice President, Secretary, Treasurer,
Chief Financial Officer and Director
-------------------
R. E. Densford
/s/ James A. Klein Controller and Chief Accounting Officer
-----------------
James A. Klein
S-1
<PAGE>
/s/ Robert D. Carl, III
--------------------------
Robert D. Carl, III Director
/s/ Martin J. Freedman
--------------------------
Martin J. Freedman Director
/s/ William C. Hooper, Jr.
--------------------------
William C. Hooper, Jr. Director
/s/ Tom Shorney
--------------------------
Tom Shorney Director
/s/ Stuart Strasner
--------------------------
Stuart Strasner Director
S-2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000825247
<NAME> Enex Oil & Gas Income Program III - Series 5, L.P.
<S> <C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> dec-31-1995
<PERIOD-START> jan-01-1995
<PERIOD-END> dec-31-1995
<CASH> 13280
<SECURITIES> 0
<RECEIVABLES> 26632
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 43327
<PP&E> 3554081
<DEPRECIATION> 3203759
<TOTAL-ASSETS> 393649
<CURRENT-LIABILITIES> 66570
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 193372
<TOTAL-LIABILITY-AND-EQUITY> 393649
<SALES> 312547
<TOTAL-REVENUES> 361136
<CGS> 208595
<TOTAL-COSTS> 295815
<OTHER-EXPENSES> 52387
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12934
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
