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 0-17562
ENEX OIL & GAS INCOME PROGRAM III - SERIES 8, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0214442
(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 8, L.P.
BALANCE SHEET
- -------------------------------------------------------------------------------
September 30,
ASSETS 1996
---------------------
(Unaudited)
CURRENT ASSETS:
<S> <C>
Accounts receivable - oil & gas sales $ 40,852
Other current assets 3,110
---------------------
Total current assets 43,962
---------------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 2,517,564
Less accumulated depreciation and depletion 2,335,124
---------------------
Property, net 182,440
---------------------
TOTAL $ 226,402
=====================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 26,597
Payable to general partner 76,933
---------------------
Total current liabilities 103,530
---------------------
PARTNERS' CAPITAL:
Limited partners 71,660
General partner 51,212
---------------------
Total partners' capital 122,872
---------------------
TOTAL $ 226,402
=====================
Number of $500 Limited Partner units outstanding 7,196
</TABLE>
See accompanying notes to financial statements.
- -------------------------------------------------------------------------------
I-1
<PAGE>
<TABLE>
<CAPTION>
ENEX OIL & GAS INCOME PROGRAM III - SERIES 8, 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 $ 76,349 $ 75,849 $ 227,086 $ 236,376
---------------- ----------------- ----------------- -----------------
EXPENSES:
Depreciation, depletion and amortization 16,227 46,425 47,841 132,644
Impairment of property - - 291,307 -
Lease operating expenses 31,966 44,781 110,041 133,187
Production taxes 4,469 4,192 14,767 14,339
General and administrative 6,829 12,754 25,840 51,912
---------------- ----------------- ----------------- -----------------
Total expenses 59,491 108,152 489,796 332,082
---------------- ----------------- ----------------- -----------------
INCOME (LOSS) FROM OPERATIONS 16,858 (32,303) (262,710) (95,706)
---------------- ----------------- ----------------- -----------------
OTHER INCOME:
Interest income 208 - 208 -
Gain from sale of property 161 - 13,793 -
---------------- ----------------- ----------------- -----------------
NET INCOME (LOSS) $ 17,227 $ (32,303) $ (248,709) $ (95,706)
================ ================= ================= =================
</TABLE>
See accompanying notes to financial statements.
- -------------------------------------------------------------------------
I-2
<PAGE>
<TABLE>
<CAPTION>
ENEX OIL AND GAS INCOME PROGRAM III - SERIES 8, 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) $ (248,709) $ (95,706)
------------------- -------------------
Adjustments to reconcile net (loss) to net cash
provided by operating activities:
Depreciation and depletion 47,841 132,644
Impairment of property 291,307 -
Gain on sale of property (13,793) -
(Increase) decrease in:
Accounts receivable - oil & gas sales (11,117) 1,594
Other current assets (236) (1,694)
Increase (decrease) in:
Accounts payable 9,561 (13,772)
Payable to general partner (73,236) (6,637)
------------------- -------------------
Total adjustments 250,327 112,135
------------------- -------------------
Net cash provided by operating activities 1,618 16,429
------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 38,117 -
Property additions - development costs (23,924) (8,759)
------------------- -------------------
Net cash provided (used) by investing activities 14,193 (8,759)
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions (18,400) (18,201)
------------------- -------------------
NET (DECREASE) IN CASH (2,589) (10,531)
CASH AT BEGINNING OF YEAR 2,589 16,214
------------------- -------------------
CASH AT END OF PERIOD $ 0 $ 5,683
=================== ===================
</TABLE>
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
I-3
<PAGE>
ENEX OIL & GAS INCOME PROGRAM III - SERIES 8, 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 February 1, 1996, the Company sold its interest in the Credo
acquisition for $22,575. The Company recognized a gain of $1,409 on the
sale. Effective April 1, 1996, the Company sold its interest in the Kidd
well in the Enexco acquisition for $7,680. The Company recognized a $7,100
gain from the sale. Effective June 1, 1996, the Company sold its interest
in the Harper well in the RIC acquisition for $6,674. The Company
recognized a gain of $5,123 from the sale. Effective August 1, 1996 the
Company sold its interest in the Spider Lake 3-2 well for $1,188. The
Company recognized a gain of $161 from the sale.
3. On August 9, 1996, the Company's General Partner submitted preliminary
proxy material to the Securities Exchange Commission with respect to a
proposed consolidation of the Company with 33 other managed limited
partnerships. On November 13, 1996, the Company submitted amended
preliminary proxy material to the SEC with respect to this consolidationThe
terms and conditions of the proposed consolidation are set forth in such
preliminary proxy material.
4. A cash distribution was made to the limited partners of the Company in
the amount of $13,502, 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.
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
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 $291,307 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 $76,349 in 1996 from
$75,849 in 1995. This represents an increase of $500. Oil sales decreased by
$3,624 (8%). A 33% decrease in production caused sales to decrease by $15,861.
This was partially offset by a 37% increase in the average oil sales price. Gas
sales increased by $4,124 (15%). A 10% decrease in gas production reduced sales
by $2,694. This decrease was partially offset by a 27% increase in the average
gas sales price. The decreases in oil and gas production were primarily the
result of the sale of the Credo acquisition in the first quarter of 1996 and the
sale of the Kidd well in the Enexco acquisition in the second quarter of 1996
coupled with natural production declines. The higher average oil and gas sales
prices correspond with higher prices in the overall market for the sale of oil
and gas.
Lease operating expenses decreased to $31,966 in the third quarter of 1996 from
$44,781 in the third quarter of 1995. The decrease of $12,815 (29%) is primarily
due to the changes in production, noted above.
Depreciation and depletion expense decreased to $16,227 in the third quarter of
1996 from $46,425 in the third quarter of 1995. This represents a decrease of
$30,198 (65%). The changes in production, noted above, reduced depreciation and
depletion expense by $11,932. A 53% decrease in the depletion rate reduced
depreciation and depletion expense by an additional $18,266. The rate decrease
is primarily due to the lower property basis resulting from the recognition of
an impairment of property for $291,307 in the first quarter of 1996.
Effective August 1, 1996 the Company sold its interest in the Spider Lake 3-2
well for $1,188. The Company recognized a gain of $161 from the sale.
General and administrative expenses decreased to $6,829 in the third quarter of
1996 from $12,754 in the third quarter of 1995. This decrease of $5,925 is
primarily due to with 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 decreased to $227,086 in 1996 from
$236,376 in 1995. This represents a decrease of $9,290 (4%). Oil sales decreased
by $4,648 (3%). A 15% decrease in oil production reduced sales by $22,344. This
decrease was partially offset by a 14% increase in the average oil sales price.
Gas sales decreased by $4,642 (5%). A 16% decrease in gas production reduced
sales by $14,151. This decrease was partially offset by a 14% increase in the
average gas sales price. The decreases in oil and gas production were primarily
the result of the sale of the Credo acquisition in the first quarter of 1996 and
the sale of the Kidd well in
I-5
<PAGE>
the Enexco acquisition in the second quarter of 1996 coupled with natural
production declines. The changes in the average sales prices correspond with
changes in the overall market for the sale of oil and gas.
Lease operating expenses decreased to $110,041 in the first nine months of 1996
from $133,187 in the first nine months of 1995. The decrease of $23,146 (17%) is
primarily due to the changes in production, noted above.
Depreciation and depletion expense decreased to $47,841 in the first nine months
of 1996 from $132,644 in the first nine months of 1995. This represents a
decrease of $84,803 (64%). A 57% decrease in the depletion rate reduced
depreciation and depletion expense by $63,658. The changes in production, noted
above, reduced depreciation and depletion expense by an additional $21,145. The
rate decrease is primarily due to the lower property basis resulting from the
recognition of an impairment of property for $291,307 in the first quarter of
1996.
Effective February 1, 1996, the Company sold its interest in the Credo
acquisition for $22,575. The Company recognized a gain of $1,409 on the sale.
Effective April 1, 1996, the Company sold its interest in the Kidd well in the
Enexco acquisition for $7,680. The Company recognized a $7,100 gain from the
sale. Effective June 1, 1996, the Company sold its interest in the Harper well
in the RIC acquisition for $6,674. The Company recognized a gain of $5,123 from
the sale. Effective August 1, 1996 the Company sold its interest in the Spider
Lake 3-2 well for $1,188.
The Company recognized a gain of $161 from the sale.
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 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 $291,307 for certain
oil and gas properties due to market indications that the carrying amounts were
not fully recoverable.
On April 2, 1996, the Company settled a property interest dispute on the Barnes
Estate acquisition. In the settlement, the Company agreed to pay $5,250 to the
plaintiff and convey 0.21% overriding royalty interest in the Barnes Estate #1
and #2 wells. Such conveyance should not have a material impact on the current
or future revenues of the Company.
I-6
<PAGE>
General and administrative expenses decreased to $25,840 in 1996 to $51,912 in
1995. This decrease of $26,072 (50%) is primarily due to $11,938 of legal costs
incurred in the second quarter of 1995 for a property interest dispute on the
Barnes Estate acquisition coupled with less staff time being required to manage
the Company's operations in 1996.
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 after the repayment of its debt
obligations. 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
remaining available cash flow to the Company's partners. The Company's
"available cash flow" is essentially equal to the net amount of cash provided by
operating activities.
The Company 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. Future periodic distributions will be made
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 consolidationThe 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 8, 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> 0000837894
<NAME> Enex Oil & Gas Income Program III-Series 8,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> 40852
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 43962
<PP&E> 2517564
<DEPRECIATION> 2335124
<TOTAL-ASSETS> 226402
<CURRENT-LIABILITIES> 103530
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 122872
<TOTAL-LIABILITY-AND-EQUITY> 226402
<SALES> 227086
<TOTAL-REVENUES> 227086
<CGS> 124808
<TOTAL-COSTS> 489796
<OTHER-EXPENSES> 364988
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (248709)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
