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 March 31, 1997
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 0-16575
ENEX INCOME AND RETIREMENT FUND - SERIES 3, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0222818
(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
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ENEX INCOME AND RETIREMENT FUND - SERIES 3, L.P.
BALANCE SHEET
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31,
ASSETS 1997
---------------------
(Unaudited)
CURRENT ASSETS:
<S> <C>
Cash $ 16,613
Accounts receivable - oil & gas sales 36,478
---------------------
Total current assets 53,091
---------------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests 1,312,406
Less accumulated depletion 1,159,717
---------------------
Property, net 152,689
---------------------
TOTAL $ 205,780
=====================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 1,202
Payable to general partner 34,894
---------------------
Total current liabilities 36,096
---------------------
PARTNERS' CAPITAL:
Limited partners 157,842
General partner 11,842
---------------------
Total partners' capital 169,684
---------------------
TOTAL $ 205,780
=====================
Number of $500 Limited Partner units outstanding 2,988
</TABLE>
See accompanying notes to financial statements.
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I-1
<PAGE>
ENEX INCOME AND RETIREMENT FUND - SERIES 3, L.P.
STATEMENTS OF OPERATIONS
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED) THREE MONTHS ENDED
----------------------------------------
MARCH 31, MARCH 31,
1997 1996
------------------- -------------------
REVENUES:
<S> <C> <C>
Oil and gas sales $ 39,715 $ 28,398
------------------- -------------------
EXPENSES:
Depletion 9,204 11,377
Impairment of property - 52,602
Production taxes 1,448 1,260
General and administrative 6,979 8,495
------------------- -------------------
Total expenses 17,631 73,734
------------------- -------------------
NET INCOME (LOSS) $ 22,084 $ (45,336)
=================== ===================
</TABLE>
See accompanying notes to financial statements.
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I-2
<PAGE>
ENEX INCOME AND RETIREMENT FUND - SERIES 3, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1997
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
PER $500
LIMITED
PARTNER
GENERAL LIMITED UNIT OUT-
TOTAL PARTNER PARTNERS STANDING
----------------- ------------------ ------------------ -----------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 $ 169,732 $ 3,124 $ 166,608 $ 56
CASH DISTRIBUTIONS (14,442) (1,444) (12,998) (4)
NET INCOME (LOSS) 4,918 8,293 (3,375) (1)
----------------- ------------------ ------------------ -----------------
BALANCE, DECEMBER 31, 1996 160,208 9,973 150,235 51
CASH DISTRIBUTIONS (12,608) (1,260) (11,348) (4)
NET INCOME 22,084 3,129 18,955 6
----------------- ------------------ ------------------ -----------------
BALANCE, MARCH 31, 1997 $ 169,684 $ 11,842 $ 157,842 (1) $ 53
================= ================== ================== =================
</TABLE>
(1) Includes 505 units purchased by the general partner as a limited partner.
See accompanying notes to financial statements.
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<PAGE>
ENEX INCOME AND RETIREMENT FUND - SERIES 3, L.P.
STATEMENTS OF CASH FLOWS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
------------------------------------------
MARCH 31, MARCH 31,
1997 1996
------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ 22,084 $ (45,336)
------------------- -------------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depletion 9,204 11,377
Impairment of property - 52,602
(Increase) in:
Accounts receivable - oil & gas sales (1,821) (11,112)
(Decrease) in:
Accounts payable (976) (3,850)
Payable to general partner (7,514) (3,360)
------------------- -------------------
Total adjustments (1,107) 45,657
------------------- -------------------
Net cash provided by operating activities 20,977 321
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions (12,608) -
------------------- -------------------
NET INCREASE IN CASH 8,369 321
CASH AT BEGINNING OF YEAR 8,244 2,025
------------------- -------------------
CASH AT END OF PERIOD $ 16,613 $ 2,346
=================== ===================
</TABLE>
See accompanying notes to financial statements.
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I-4
<PAGE>
ENEX INCOME AND RETIREMENT FUND - SERIES 3, 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 $11,348 representing net revenues from the sale of oil
and gas produced from properties owned by the Company. This
distribution was made on January 31, 1997.
3. On April 7, 1997, the Company's General Partner mailed proxy material
to the limited partners with respect to a proposed consolidation of the
Company with 33 other managed limited partnerships. The terms and
conditions of the proposed consolidation are set forth in such proxy
material.
4. 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 of $52,602 for certain oil and gas
properties due to changes in the overall market for the sale of oil and gas
and significant decreases in the projected production from certain of the
Company's oil and gas properties.
I-5
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
First Quarter 1997 Compared to First Quarter 1996
Oil and gas sales for the first quarter increased from $28,398 in 1996 to
$39,715 in 1997. This represents an increase of $11,317 (40%). Oil sales
decreased by $1,422 or 25%. A 54% decrease in oil production caused sales to
decrease by $3,132. This decrease was partially offset by a 64% increase in
average net oil sales prices. Gas sales increased by $12,739 or 56%. A 54%
increase in average net gas sales prices increased sales by $12,451. A 1%
increase in gas production increased sales by an additional $288. The decrease
in oil production was primarily the result of a shut in of production from the
Bagley acquisition to perform a workover, coupled with natural production
declines. The increase in gas production was primarily the result of additional
wells drilled on the Pecan Island acquisition in 1996, partially offset by
natural production declines. The increases in the average oil and gas net sales
prices were primarily due to higher prices in the overall market for the sale of
oil and gas.
Depletion expense decreased from $11,377 in the first quarter of 1996 to $9,204
in the first quarter of 1997. This represents a decrease of $2,173 (24%). A 14%
decrease in the depletion rate reduced depletion expense by $1,476. The changes
in production, noted above, reduced depletion expense by an additional $697. The
rate decrease was primarily due to an upward revision of the oil and gas
reserves during December 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 of $52,602 for certain oil and gas
properties due to changes in the overall market for the sale of oil and gas and
significant decreases in the projected production from certain of the Company's
oil and gas properties.
General and administrative expenses decreased from $8,495 in the first quarter
of 1996 to $6,979 in the first quarter of 1997. This decrease of $1,516 (18%) is
primarily due to less staff time being required to manage the Company's
operations in 1997.
CAPITAL RESOURCES AND LIQUIDITY
The Company's cash flow from operations is a direct result of the amount of net
proceeds realized
I-6
<PAGE>
from the sale of oil and gas production. Accordingly, the changes in cash flow
from 1996 to 1997 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, financing and investing activities.
The Company discontinued the payment of distributions during 1995. A
distribution was made in the first quarter of 1997. 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. The Company does not intend to purchase
additional properties or fund extensive development of existing oil and gas
properties, and as such; has no long-term liquidity needs. The Company's
projected cash flows from operations will provide sufficient funding to pay its
operating expenses and debt obligations. Based on the December 31, 1996 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, financing and investing activities. Future periodic distributions
will be made once sufficient net revenues are accumulated.
On April 7, 1997, the Company's General Partner mailed proxy material to the
limited partners with respect to a proposed consolidation of the Company with 33
other managed limited partnerships. The terms and conditions of the proposed
consolidation are set forth in such proxy material.
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 March 31, 1997.
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
ENEX INCOME AND RETIREMENT
FUND - SERIES 3, 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
May 11, 1997 By: /s/ James A. Klein
-------------------
James A. Klein
Controller and Chief
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000830320
<NAME> Enex Income & Retirement Fund - Series 3, L.P.
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> dec-31-1997
<PERIOD-START> jan-31-1997
<PERIOD-END> mar-31-1997
<CASH> 16613
<SECURITIES> 0
<RECEIVABLES> 36478
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 53091
<PP&E> 1312406
<DEPRECIATION> 1159717
<TOTAL-ASSETS> 205780
<CURRENT-LIABILITIES> 36096
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 169684
<TOTAL-LIABILITY-AND-EQUITY> 205780
<SALES> 39715
<TOTAL-REVENUES> 39715
<CGS> 1448
<TOTAL-COSTS> 10652
<OTHER-EXPENSES> 6979
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22084
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
