United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 0-17557
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 1, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0251410
(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) has 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
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<CAPTION>
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 1, L.P.
BALANCE SHEET
- ----------------------------------------------------------------------------
JUNE 30,
ASSETS 1996
---------------------
(Unaudited)
CURRENT ASSETS:
<S> <C>
Cash $ 2,214
Accounts receivable - oil & gas sales 29,348
---------------------
Total current assets 31,562
---------------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests 1,578,968
Less accumulated depletion 1,534,386
---------------------
Property, net 44,582
---------------------
TOTAL $ 76,144
=====================
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 144
Payable to general partner 21,352
---------------------
Total current liabilities 21,496
---------------------
NONCURRENT PAYABLE TO GENERAL PARTNER 85,409
---------------------
PARTNERS' CAPITAL (DEFICIT):
Limited partners (35,035)
General partner 4,274
---------------------
Net partners' capital (deficit) (30,761)
---------------------
TOTAL $ 76,144
=====================
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
<TABLE>
<CAPTION>
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 1, L.P.
STATEMENTS OF OPERATIONS
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(UNAUDITED) QUARTER ENDED SIX MONTHS ENDED
------------------------------------ --------------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995
--------------- ----------------- ----------------- -----------------
REVENUES:
<S> <C> <C> <C> <C>
Oil and gas sales $ 11,107 $ 3,569 $ 26,278 $ 20,265
--------------- ----------------- ----------------- -----------------
EXPENSES:
Depletion 6,835 3,353 17,054 19,392
Impairment of property - - 333,294 -
Production taxes 1,582 272 2,756 974
General and administrative 3,994 3,782 9,194 7,977
--------------- ----------------- ----------------- -----------------
Total expenses 12,411 7,407 362,298 28,343
--------------- ----------------- ----------------- -----------------
NET (LOSS) $ (1,304) $ (3,838) $ (336,020) $ (8,078)
=============== ================= ================= =================
</TABLE>
See accompanying notes to financial statements.
- -------------------------------------------------------------------------
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<PAGE>
<TABLE>
<CAPTION>
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 1, L.P.
STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------------------------
(UNAUDITED)
SIX MONTHS ENDED
--------------------------------------------
JUNE 30, JUNE 30,
1996 1995
------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss) $ (336,020) $ (8,078)
------------------- -------------------
Adjustments to reconcile net (loss) to net cash
provided by operating activities:
Depletion 17,054 19,392
Impairment of property 333,294 -
(Increase) decrease in:
Accounts receivable - oil & gas sales (15,359) 8,414
Increase (decrease) in:
Accounts payable (2,358) (3,050)
Payable to general partner 5,130 (13,183)
------------------- -------------------
Total adjustments 337,761 11,573
------------------- -------------------
Net cash provided by operating activities 1,741 3,495
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions - (7,600)
------------------- -------------------
NET INCREASE (DECREASE) IN CASH 1,741 (4,105)
CASH AT BEGINNING OF YEAR 473 4,171
------------------- -------------------
CASH AT END OF PERIOD $ 2,214 $ 66
=================== ===================
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 1, 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.
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<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
Second Quarter 1995 Compared to Second Quarter 1996
Oil and gas sales for the second quarter increased to $11,107 in 1996 from
$3,569 in 1995. This represents an increase of $7,538 (211%). Oil sales
decreased by $212 or 15%. A 10% decrease in average net oil prices reduced sales
by $127. A 6% decrease in oil production reduced sales by an additional $85. Gas
sales increased by $7,750 or 359%. An 81% increase in gas production increased
sales by $1,747. A 154% increase in the average gas net sales price further
increased sales by $6,003. The decrease in oil production was primarily due to
natural production declines. The increase in gas production was primarily due to
higher production from the Corinne acquisition which had been shut-in for
over-production in the second quarter of 1995. The decrease in the average net
oil sales price was primarily due to higher operating costs charged against the
Company's net profits royalty properties, especially at the Bagley acquisition,
which had a workover in the second quarter of 1996, partially offset by higher
prices in the overall market for the sale of oil. The increase in the average
net gas sales price was primarily due to relatively higher production from the
Corinne acquisition which has a higher gas sales price, coupled with higher
prices in the overall market for the sale of gas.
Depletion expense increased to $6,835 in the second quarter of 1996 from $3,353
in the second quarter of 1995. This represents an increase of $3,482 (104%). The
changes in production, noted above, increased depletion expense by $1,886. A 30%
increase in the depletion rate increased depletion expense by an additional
$1,596. This rate increase was primarily the result of a relatively higher
production from properties with a higher depletion rate coupled with a downward
revision of the gas reserves during December 1995, partially offset by the lower
property basis resulting from the recognition of a $333,294 property impairment.
General and administrative expenses increased to $3,994 in 1996 from $3,782 in
1995. This increase of $212 (6%) is primarily due to more staff time being
required to manage the Company's operations.
First Six Months in 1995 Compared to First Six Months in 1996
Oil and gas sales for the first six months increased to $26,278 in 1996 from
$20,265 in 1995. This represents an increase of $6,013 (30%). Oil sales
increased by $230 or 4%. A 9% increase in the average net oil sales price
increased sales by $521. This increase was partially offset by a 5% decrease in
oil production. Gas sales increased by $5,783 or 41%. A 55% increase in gas
production increased sales by $7,632. This increase was partially offset by a 9%
decrease in the average gas sales price. The decrease in oil production was
primarily due to natural production declines. The increase in gas production was
primarily due to higher production from the Corinne acquisition which had been
shut-in for over-production in the second quarter of 1995. The increase in the
average net oil sales corresponds with higher prices in the overall market for
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<PAGE>
the sale of oil. The decrease in the average net gas sales price was primarily
due to workover expenses incurred on the Barnes Estate acquisition, on which the
Company receives a net profits royalty, partially offset by higher prices in the
overall market for the sale of gas.
Depletion expense decreased to $17,054 in the first six months of 1996 from
$19,392 in the first six months of 1995. This represents a decrease of $2,338
(12%). A 35% decrease in the depletion rate reduced depletion expense by $9,210.
This decrease was partially offset by the changes in production, noted above.
The decrease in the depletion rate was primarily due to the lower property basis
resulting from the recognition of a $333,294 property impairment 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. In the first quarter of
1996, the Company recognized a non-cash impairment provision of $333,294 for
certain oil and gas properties due to market conditions and reserve revisions on
the Lake Decade acquisition, which indicated that the carrying amounts were not
fully recoverable.
General and administrative expenses increased to $9,194 in 1996 from $7,977 in
1995. This increase of $1,217 (15%) is primarily due to more 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 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 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. Future periodic distributions will
be made once sufficient net revenues are accumulated.
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<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 June 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 88-89 INCOME AND
RETIREMENT FUND - SERIES 1, L.P.
(Registrant)
By:ENEX RESOURCES CORPORATION
General Partner
By: /s/ R. E. Densford
R. E. Densford
Vice President, Secretary
Treasurer and Chief Financial
Officer
August 13, 1996 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> 0000837896
<NAME> Enex 88-89 Income & Retirement Fund - Sr 1, L.P.
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> dec-31-1996
<PERIOD-START> jan-01-1996
<PERIOD-END> jun-30-1996
<CASH> 2214
<SECURITIES> 0
<RECEIVABLES> 29348
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 31562
<PP&E> 1578968
<DEPRECIATION> 1534386
<TOTAL-ASSETS> 76144
<CURRENT-LIABILITIES> 21496
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (30761)
<TOTAL-LIABILITY-AND-EQUITY> 76144
<SALES> 26278
<TOTAL-REVENUES> 26278
<CGS> 2756
<TOTAL-COSTS> 354104
<OTHER-EXPENSES> 9194
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (336020)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
