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 0-16553
ENEX OIL & GAS INCOME PROGRAM III - SERIES 5, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0214445
(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
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 III - SERIES 5, L.P.
BALANCE SHEET
- --------------------------------------------------------------------------------
September 30,
ASSETS 1996
--------------------
CURRENT ASSETS (Unaudited)
<S> <C>
Accounts receivable - oil & gas sales $ 42,419
Other current assets 3,656
--------------------
Total current assets 46,075
--------------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 3,480,304
Less accumulated depreciation and depletion 3,284,074
--------------------
Property, net 196,230
--------------------
TOTAL $ 242,305
====================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 32,122
Payable to general partner 26,166
--------------------
Total current liabilities 58,288
--------------------
NONCURRENT PAYABLE TO GENERAL PARTNER 78,498
--------------------
PARTNERS' CAPITAL:
Limited partners 67,449
General partner 38,070
--------------------
Total partners' capital 105,519
--------------------
TOTAL $ 242,305
====================
Number of $500 Limited Partner units outstanding 10,797
</TABLE>
See accompanying notes to financial statements.
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I -1
<PAGE>
<TABLE>
<CAPTION>
ENEX OIL & GAS INCOME PROGRAM III - SERIES 5, 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 $ 90,285 $ 85,160 $ 283,979 $ 274,569
---------------- ----------------- ----------------- -------------------
EXPENSES:
Depreciation and depletion 16,472 27,814 45,831 80,627
Impairment of property - - 147,948 -
Lease operating expenses 45,977 53,548 146,170 148,256
Production taxes 5,149 4,625 16,767 15,227
General and administrative 8,929 10,319 32,095 34,866
---------------- ----------------- ----------------- -------------------
Total expenses 76,527 96,306 388,811 278,976
---------------- ----------------- ----------------- -------------------
INCOME (LOSS) FROM OPERATIONS 13,758 (11,146) (104,832) (4,407)
---------------- ----------------- ----------------- -------------------
OTHER INCOME:
Gain on sale of property 1,606 - 33,244 -
---------------- ----------------- ----------------- -------------------
NET INCOME (LOSS) $ 15,364 $ (11,146) $ (71,588) $ (4,407)
================ ================= ================= ===================
</TABLE>
See accompanying notes to financial statements.
- -----------------------------------------------------------------------------
I-2
<PAGE>
<TABLE>
<CAPTION>
ENEX OIL AND GAS INCOME PROGRAM III - SERIES 5, 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 (loss) $ (71,588) $ (4,407)
------------------- -------------------
Adjustments to reconcile net (loss) to
net cash provided by operating activities:
Depreciation, depletion and amortization 45,831 80,627
Impairment of property 147,948 -
Gain on sale of property (33,244) -
(Increase) decrease in:
Accounts receivable - oil & gas sales (15,787) 2,246
Other current assets (241) (1,239)
(Decrease) in:
Accounts payable (1,022) (4,870)
Payable to general partner (62,469) (12,973)
------------------- -------------------
Total adjustments 81,016 63,791
------------------- -------------------
Net cash provided by operating activities 9,428 59,384
------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 35,098 -
Property additions - development costs (41,541) (9,389)
------------------- -------------------
Net cash (used) by investing activities (6,443) (9,389)
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions (16,265) (45,509)
------------------- -------------------
NET INCREASE (DECREASE) IN CASH (13,280) 4,486
CASH AT BEGINNING OF YEAR 13,280 10,432
------------------- -------------------
CASH AT END OF PERIOD $ 0 $ 14,918
=================== ===================
</TABLE>
See accompanying notes to financial statements.
- ---------------------------------------------------------------------------
I -3
<PAGE>
ENEX OIL & GAS INCOME PROGRAM III - SERIES 5, 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. Effective April 1, 1996, the Company sold its interest in the Kidd well
in the Enexco acquisition for $17,920. The Company recognized a $17,920
gain from the sale. Effective June 1, 1996, the Company sold its
interest in the Harper well in the RIC acquisition for $15,572. The
Company recognized a gain of $13,718 from the sale. Effective August 1,
1996 the Company sold its interest in the Spider Lake 3-2 well for
$1,606. The Company recognized a gain of $1,606 from the sale.
3. A cash distribution was made to the limited partners of the Company in
the amount of $11,892, 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.
4. 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.
5. The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standard ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which
requires certain assets to be reviewed for impairment whenever events or
circumstances indicate the carrying amount may not be recoverable. Prior to
this pronouncement, the Company assessed properties on an aggregate basis.
Upon adoption of SFAS 121, the Company began assessing properties on an
individual basis, wherein total capitalized costs may not exceed the
property's fair market value. The fair market value of each property was
determined by H. J. Gruy and Associates, ("Gruy"). To determine the fair
market value, 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 certain discount factors for risk, location,
type of ownership interest, category of reserves, operational
characteristics, and other factors. In the first quarter of 1996, the
Company recognized a non-cash impairment provision of $147,948 for certain
oil and gas properties due to market indications that the carrying amounts
were not fully recoverable.
I-4
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
Third Quarter 1995 Compared to Third Quarter 1996
Oil and gas sales for the third quarter increased to $90,285 in 1996 from
$85,160 in 1995. This represents an increase of $5,125 (6%). Oil sales decreased
by $488 (1%) A 28% decrease in oil production reduced sales by $20,822. This
decrease was partially offset by a 38% increase in the average oil sales price.
Gas sales increased by $5,202 (50%). A 55% increase in the average gas sales
price increased sales by $5,503. This increase was partially offset by a 3%
decrease in gas production. The changes in average sales prices correspond with
changes in the overall market for the sale of oil and gas. The lower oil and gas
production was primarily the result of the sale of the Kidd well in the Enexco
acquisition, effective April 1, 1996, coupled with natural production declines.
Lease operating expenses decreased to $45,977 in 1996 from $53,548 in 1995. The
decrease of $7,571 (14%) is primarily due to workover costs incurred on the
Hightower and Corkscrew acquisitions in 1995.
Depreciation and depletion expense decreased to $16,472 in the third quarter of
1996 from $27,814 in the third quarter of 1995. This represents a decrease of
$11,342 (41%). A 22% decrease in the depletion rate reduced depreciation and
depletion expense by $4,679. The changes in production, noted above reduced
depreciation and depletion expense by an additional $6,663. The rate decrease
was primarily due to the lower property basis resulting from the recognition of
an impairment of property for $147,948 in the first quarter of 1996.
Effective August 1, 1996 the Company sold its interest in the Spider Lake 3-2
well for $1,606. The Company recognized a gain of $1,606 from the sale.
General and administrative expenses decreased to $8,929 in the third quarter of
1996 from $10,319 in the third quarter of 1995. This decrease of $1,390 (13%) is
primarily due to less staff time being required to manage the Company's
operations in 1996.
First Nine Months in 1995 Compared to First Nine Months in 1996
Oil and gas sales for the first nine months increased to $283,979 in 1996 from
$274,569 in 1995. This represents an increase of $9,410 (3%). Oil sales
decreased by $620. A 14% decrease in oil production reduced sales by $33,467.
This decrease was partially offset by a 16% increase in the average oil sales
price. Gas sales increased by $9,619 (25%). A 38% increase in the average gas
sales price increased sales by $13,451. This increase was partially offset by a
10% decrease in gas production. The changes in average sales prices correspond
with changes in the overall market for the sale of oil and gas. The lower oil
production was primarily the result of natural production declines, partially
offset by production from the Corkscrew acquisition which had been shut-in
during the second quarter of 1995 for rod repairs. The lower gas production was
primarily the result of the sale of the Kidd well in the Enexco acquisition,
effective April 1, 1996, coupled with natural production declines.
I-5
<PAGE>
Lease operating expenses decreased to $146,170 in the first nine months of 1996
from $148,256 in the first nine months of 1995. The decrease of $2,086 (1%) is
primarily due to the changes in production, as noted above, partially offset by
road repair expenses incurred on the Corkscrew acquisition in the first quarter
of 1996.
Depreciation and depletion expense decreased to $45,831 in the first nine months
of 1996 from $80,627 in the first nine months of 1995. This represents a
decrease of $34,796 (43%). The changes in production, noted above, reduced
depreciation and depletion expense by $10,795. A 34% decrease in the depletion
rate reduced depreciation and depletion expense by an additional $24,001. The
rate decrease was primarily due to the lower property basis resulting from the
recognition of an impairment of property for $147,948 in the first quarter of
1996.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standard ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long- Lived Assets to be Disposed Of," which requires
certain assets to be reviewed for impairment whenever events or circumstances
indicate the carrying amount may not be recoverable. Prior to this
pronouncement, the Company assessed properties on an aggregate basis. Upon
adoption of SFAS 121, the Company began assessing properties on an individual
basis, wherein total capitalized costs may not exceed the property's fair market
value. The fair market value of each property was determined by H. J. Gruy and
Associates, ("Gruy"). To determine the fair market value, 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 certain discount
factors for risk, location, type of ownership interest, category of reserves,
operational characteristics, and other factors. In the first quarter of 1996,
the Company recognized a non-cash impairment provision of $147,948 for certain
oil and gas properties due to market indications that the carrying amounts were
not fully recoverable.
Effective April 1, 1996, the Company sold its interest in the Kidd well in the
Enexco acquisition for $17,920. The Company recognized a $17,920 gain from the
sale. Effective June 1, 1996, the Company sold its interest in the Harper well
in the RIC acquisition for $15,572. The Company recognized a gain of $13,718
from the sale. Effective August 1, 1996 the Company sold its interest in the
Spider Lake 3-2 well for $1,606. The Company recognized a gain of $1,606 from
the sale.
General and administrative expenses decreased to $32,095 in the first nine
months 1996 from $34,866 in the first nine months of 1995. This decrease of
$2,771 (8%) is primarily due to less staff time being required to manage the
Company's operations in 1996.
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.
I-6
<PAGE>
The Company discontinued the payment of distributions during 1995. Future
distributions are dependent upon, among other things, an increase in prices
received for oil and gas. The Company will continue to recover its reserves and
distribute to the limited partners the net proceeds realized form the sale of
oil and gas production. Distribution amounts are subject to change if net
revenues are greater or less than expected. Based on the December 31, 1995
reserve report prepared by Gruy, there appears to be sufficient future net
revenues to pay all obligations and expenses. The General Partner does not
intend to accelerate the repayment of the debt beyond the Company's cash flow
provided by operating activities. The Company did make distributions in the
amount of $11,892 on July 31, 1996. Future periodic distributions will continue
once sufficient net revenues are accumulated.
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-7
<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 III - SERIES 5, 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> 0000825247
<NAME> Enex Oil & Gas Income Program III-Series 5,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> 0
<SECURITIES> 0
<RECEIVABLES> 42419
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 46075
<PP&E> 3480304
<DEPRECIATION> 3284074
<TOTAL-ASSETS> 242305
<CURRENT-LIABILITIES> 58288
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 105519
<TOTAL-LIABILITY-AND-EQUITY> 242305
<SALES> 283979
<TOTAL-REVENUES> 283979
<CGS> 162937
<TOTAL-COSTS> 388811
<OTHER-EXPENSES> 225874
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (71588)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
