SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT
FILED BY A PARTY OTHER THAN THE REGISTRANT X
CHECK THE APPROPRIATE BOX:
X PRELIMINARY PROXY STATEMENT
X CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY {AS PERMITTED BY RULE
14A-6(E)(2)}
DEFINITIVE PROXY STATEMENT
DEFINITIVE ADDITIONAL MATERIALS
SOLICITING MATERIAL PURSUANT TO RULE 14A-11(C) OR RULE 14A-12
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 1, L.P.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ENEX RESOURCES CORPORATION
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(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN REGISTRANT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
$125 PER EXCHANGE ACT RULES 0-11(C)(1)(II), 14A-6(I)(1), OR 14A-6(J)(2).
$500 PER EACH PARTY TO THE CONTROVERSY PURSUANT TO EXCHANGE ACT
RULE 14A-6(I)(3).
X FEE COMPUTED ON TABLE BELOW PER EXCHANGE ACT RULES 14A-6(I)(4) AND 0-11.
(1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:
$500 "UNITS" OF LIMITED PARTNERSHIP INTERESTS
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(2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTION APPLIES:
3,605
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(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION COMPUTED
PURSUANT TO EXCHANGE ACT RULE 0-11:. {SET FORTH THE AMOUNT ON
WHICH THE FILING FEE IS CALCULATED AND STATE HOW IT WAS
DETERMINED.}:
$86,431 {PARTNERSHIP INDEBTEDNESS EXCEEDS ESTIMATED
FAIR MARKET VALUE OF PARTNERSHIP ASETS TO BE SOLD IN LIQUIDATION
PURSUANT TO PLAN OF DISSOLUTION.}
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(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
$86,431
- --------------------------------------------------------------------------------
(5) TOTAL FEE PAID:
$17.29
- --------------------------------------------------------------------------------
FEE PAID PREVIOUSLY WITH PRELIMINARY MATERIALS
CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY EXCHANGE
ACT RULE 0-11(A)(2) AND IDENTIFY THE FILING FOR WHICH OFFSETTING
FEE WAS PAID PREVIOUSLY. IDENTIFY THE PREVIOUS FILING BY REGISTRA-
TION STATEMENT NUMBER, OR THE FORM OR SCHEDULE AND THE DATE OF ITS
FILING.
(1) AMOUNT PREVIOUSLY PAID:
- --------------------------------------------------------------------------------
(2) FORM, SCHEDULE OR REGISTRATION STATEMENT NO.
- --------------------------------------------------------------------------------
(3) FILING PARTY:
- --------------------------------------------------------------------------------
(4) DATE FILED:
- --------------------------------------------------------------------------------
<PAGE>
CONFIDENTIAL
FOR USE OF THE SECURITIES AND EXCHANGE COMMISSION ONLY
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ENEX
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ENEX OIL & GAS INCOME PROGRAM IV - SERIES 3, L.P.
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 1, L.P.
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 2, L.P.
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 3, L.P.
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 4, L.P.
Three Kingwood Place
Suite 200
800 Rockmead Drive
Kingwood, Texas 77339
NOTICE OF SPECIAL MEETINGS
To Be Held On xxxxx xx, 1997
To Our Limited Partners:
Special meetings of the limited partners (the "Limited Partners") of
Enex Oil & Gas Income Program IV Series 3, L.P., Enex 88-89 Income and
Retirement Fund - Series 1, L.P., Enex 88-89 Income and Retirement Fund Series
2, L.P., Enex 88-89 Income and Retirement Fund - Series 3, L.P., and Enex 88-89
Income and Retirement Fund - Series 4, L.P., all New Jersey limited partnerships
(the "Partnerships" or individually a "Partnership"), have been called for
xxxxxx xx, 1997 at 2:00 P.M. at the offices of Enex Resources Corporation (the
"General Partner") at Three Kingwood Place, 800 Rockmead Drive, Kingwood, Texas
77339. Only Limited Partners of record of one or more of the Partnerships at the
close of business on xxxxxxx xx, 1997 are entitled to notice of and to vote at
the special meetings or any adjournments thereof. The Limited Partners of each
Partnership will be asked to vote on a proposal to dissolve and liquidate their
Partnership in accordance with the applicable provisions of their Partnership
Agreement.
You will find a detailed explanation of the proposal, including its
purpose, anticipated benefits and conditions in the attached Proxy Statement.
Please read it carefully. We think you will conclude that the proposal to
dissolve and liquidate the Partnerships is in the best interests of the Limited
Partners of each Partnership. After considering each Partnership's financial
condition and prospects, the Board of Directors of the General Partner has
unanimously approved the proposed transactions as being in the best interests of
the Limited Partners. The affirmative vote of a majority-in-interest of the
Limited Partners is required to approve the proposal for each Partnership. The
General Partner will vote all of the limited partnership interests it owns in
favor of the proposal.
It is very important that you cast your votes on this matter promptly,
regardless of the size of your holdings. Hence, even if you plan to attend the
special meetings in person, we urge you to complete, sign and return the
enclosed proxy (or proxies) as soon as possible in the enclosed envelope in
order to assure the presence of a quorum at each of the meetings. Any proxy may
be revoked at any time before it is exercised by following the instructions set
forth on page one of the accompanying Proxy Statement.
BY ORDER OF THE GENERAL PARTNER,
ENEX RESOURCES CORPORATION
GERALD B. ECKLEY
President,
General Partner
xxxx xx, 1997
<PAGE>
CONFIDENTIAL
FOR USE OF THE SECURITIES AND EXCHANGE COMMISSION ONLY
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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ENEX
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ENEX OIL & GAS INCOME PROGRAM IV - SERIES 3, L.P.
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 1, L.P.
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 2, L.P.
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 3, L.P.
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 4, L.P.
Three Kingwood Place
Suite 200
800 Rockmead Drive
Kingwood, Texas 77339
PROXY STATEMENT
Solicitation and Voting of Proxies
This Proxy Statement is furnished in connection with the solicitation
on behalf of Enex Resources Corporation ("Enex" or the "General Partner") of
proxies to be voted at special meetings (each a "Special Meeting") of the
limited partners (the "Limited Partners") of Enex Oil & Gas Income Program IV -
Series 3, L.P., Enex 88-89 Income and Retirement Fund - Series 1, L.P., Enex
88-89 Income and Retirement Fund - Series 2, L.P., Enex 88-89 Income and
Retirement Fund - Series 3, L.P., and Enex 88-89 Income and Retirement Fund -
Series 4, L.P., all New Jersey limited partnerships (the "Partnerships" or,
individually, a "Partnership"), to be held on xxxxxx xx, 1997
The Board of Directors of the General Partner has fixed the close of
business on xxxxxx xx, 1997 as the record date for the determination of Limited
Partners of record entitled to notice of and to vote at the Special Meetings.
The Limited Partners of each Partnership will be asked to vote on a proposal to
dissolve the Partnership and liquidate it in accordance with the applicable
provisions of its Amended Certificate and Agreement of Limited Partnership
("Partnership Agreement"). Due to the substantial amount of debt owed by each
Partnership, it is likely that the Limited Partners will receive no or very
little cash or other tangible consideration from these transactions.
The presence, in person or by proxy, of the holders of a
majority-in-interest of the issued and outstanding limited partnership interests
("Interests") of a Partnership entitled to vote will constitute a quorum for the
transaction of business by that Partnership. A proxy in the accompanying form
which is properly signed, dated and returned to the General Partner and not
revoked will be voted in accordance with the instructions contained therein. If
Interests are held in joint name, a proxy signed by one of the joint owners or
by a majority of the joint owners will be voted in accordance with the
instructions contained therein. If no instructions are indicated, proxies will
be voted for the proposal recommended by the Board of Directors of the General
Partner. Proxies will be received and tabulated by the General Partner for each
Partnership. Votes cast in person will be tabulated by an election inspector
appointed by the General Partner.
Limited Partners who execute proxies may revoke them at any time prior
to their being exercised by delivering written notice to the Secretary of the
General Partner at the above address or by subsequently executing and delivering
another proxy at any time prior to the voting. Mere attendance at a Special
Meeting will not revoke the proxy, but a Limited Partner present at a Special
Meeting may revoke his proxy and vote in person.
The approximate date on which this Proxy Statement and the accompanying
proxy or proxies will first be mailed to Limited Partners is xxxxxx xx, 1997.
The date of this Proxy Statement is xxxxxx xx, 1997
1
<PAGE>
Expenses of Solicitation
The cost of soliciting proxies, which will primarily include expenses
in connection with the preparation and mailing of this Proxy Statement and all
papers which now accompany or may hereafter supplement it, will be borne by the
Partnerships pro rata in accordance with the estimated fair market value of
their respective assets (see Table 1 below). This basis for allocation was
chosen over others (such as the number of Limited Partners of each Partnership
or the amount of each Partnership's original capital or allocating one-fifth of
the costs to each Partnership) because the largest share of the costs of this
solicitation consist of solicitation expenses and counsel fees in connection
with the preparation of this Proxy Statement. In the General Partner's opinion,
these costs are most equitably allocated in accordance with the value of the
Partnerships' assets.
The solicitation will be made by mail. The General Partner will supply
brokers or persons holding Interests of record in their names or in the names of
their nominees for other persons, as beneficial owners, with such additional
copies of proxies, and proxy materials as may reasonably be requested in order
for such record holder to send one copy to each beneficial owner, and will, upon
request of such record holders, reimburse them for their reasonable expenses in
mailing such material.
Certain directors, officers and employees of the General Partner, not
especially employed for this purpose, may solicit Proxies, without additional
remuneration therefor, by mail, telephone, telegraph or personal interview.
TABLE OF CONTENTS
Solicitation and Voting of Proxies.................. 1
Expenses of Solicitation............................ 2
Summary ........................................... 3
Special Factors..................................... 4
The Proposal to Dissolve and Liquidate.............. 7
Reasons for Proposed Transactions.................. 10
Partnership Operations and Financial Condition...... 11
Fairness of the Proposed Transactions.............. 12
Potential Benefits to the Partners.................. 13
Record Date, Voting and Security Ownership of
Certain Beneficial Owners and Management........... 14
Certain Transactions................................ 15
Dissenters' Rights.................................. 16
Federal Income Tax Consequences...................... 16
Description of Business............................. 17
Description of Property and Oil and Gas Reserves.... 17
Valuation of Oil and Gas Properties.................. 17
Principal Executive Offices and Telephone Number..... 18
Information Concerning the General Partner........... 18
Other Matters........................................ 18
Documents Incorporated By Reference................. 18
2
<PAGE>
SUMMARY
The following discussion is intended to highlight certain information
contained elsewhere herein and, accordingly, should be read in conjunction with
such information. It is not a complete statement of all material features of the
matters being submitted to Limited Partners for their approval and is qualified
in its entirety by this Proxy Statement and each Partnership's Annual Report on
Form 10-KSB which accompanies this Proxy Statement. LIMITED PARTNERS ARE URGED
TO READ THIS PROXY STATEMENT AND THE ANNUAL REPORTS IN THEIR ENTIRETY.
Person Soliciting Proxies...... Enex Resources Corporation (the "General
Partner")
Date of Special Meetings....... xxxxxx xx, 1997
Time and Place................. 2:00 P.M. local time, at the General Partner's
principal executive offices located at
Three Kingwood Place, Suite 200, 800 Rockmead
Drive, Kingwood, Texas 77339
Record Date.................... xxxxxx xx, 1997
Class of Securities Entitled
to Vote......................Limited Partnership Interests in each
Partnership
<TABLE>
<CAPTION>
Enex
OGIP IV Enex 88-89 Income and Retirement Fund
Units of Limited Partnership Interest Series 3 Series 1 Series 2 Series 3 Series 4
-------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Outstanding on the Record Date and Entitled to Vote*........ 6,080 3,605 3,098 3,414 3,645
Number of Limited Partners.................................... 1,464 234 259 217 360
Units of Limited Partnership Interest Beneficially
Owned by the General Partner................................ 1,156 437 202 226 238
Percentage Interest Beneficially Owned by the
General Partner............................................. 19.0905% 12.1239% 7.1641% 6.9149% 6.5218%
Percentage of Remaining Limited Partnership Interests
Needed to Approve the Proposal.............................. 30.9095% 37.8761% 42.8359% 43.0851% 43.4782%
Fair Market Value of Assets**................................. $2,549 $(1,777) $(125,587) $(25,712) $22,011
</TABLE>
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* The aggregate amount of the Limited Partners' initial subscriptions divided by
$500.
** The fair market value of each Partnership was determined by H.J. Gruy
and Associates, Inc. as of December 31, 1996, as described below in "Description
of Property and Oil and Gas Reserves".
No executive officer or director of the General Partner owns an interest in any
of the Partnerships. The General Partner knows of no other person who has
beneficial ownership of more than 5% of the Interests in any of the
Partnerships.
3
<PAGE>
SPECIAL FACTORS
Proposal to Dissolve and Liquidate the Partnerships:
Due to the depletion of each Partnership's producing oil and gas
reserves and the write-down of the undeveloped reserves, (see "Oil and Gas
Reserves" attached as Tables B and B-1), the magnitude of the amounts owed by
each Partnership to the General Partner (see Table 1 below and "Selected
Financial Data" attached as Table A), the Partnerships' inability to distribute
cash to their Limited Partners for the last year, and the ongoing costs of
operating each Partnership (see "Partnership Operations and Financial
Conditions" below and "General and Administrative Costs" attached as Table E),
the General Partner has determined that Partnership operations are likely to be
either unprofitable or only marginally profitable for the foreseeable future.
In light of the above-described circumstances, the Limited Partners of
each Partnership will be asked to consider and vote upon the proposal to
dissolve and liquidate each Partnership in accordance with the provisions of its
Partnership Agreement. Adoption of the proposal to dissolve and liquidate each
Partnership requires the affirmative vote of a majority in interest of the
Limited Partners of each such Partnership. Because the General Partner holds
Interests in each Partnership, the proposals to dissolve and liquidate can be
approved without the affirmative vote of a majority of the Interests held by all
other Limited Partners. If the proposals are adopted, the assets will be sold
and the proceeds of sale allocated to the Partners' capital accounts. In
connection with the proposed liquidations, the General Partner will act as a
"buyer of last resort" for the Partnership properties; i.e., if no third-party
bid is received at or above the fair market value of a property (as determined
by H.J. Gruy and Associates, Inc. ("Gruy"), an independent petroleum consulting
firm retained by the Partnerships to appraise the Partnerships' properties), the
General Partner will purchase such property at such fair market value. Except in
such cases, the General Partner will not purchase any Partnership properties.
Due to the substantial amount of debt owed the General Partner by each
Partnership, it is likely that the consideration paid by the General Partner for
any Partnership properties so purchased by the General Partner will be
substantially in the form of the full or partial discharge of this debt. For
Enex Income and Retirement Fund - Series 1, L.P., Series 2, L.P. and Series 3,
L.P., all the funds raised in the liquidation will likely be used to satisfy
this debt. Therefore, it is unlikely that the Limited Partners of these three
Partnerships will receive cash or other tangible consideration from these
transactions. For Limited Partners of Enex Oil & Gas Income Program IV - Series
3, L.P. and Enex 88-89 Income and Retirement Fund - Series 4, L.P., if the
Partnership's indebtedness does not increase prior to sale, a small liquidating
cash distribution is expected to be distributed to the partners.
If the Partnerships are not liquidated and dissolved pursuant to the
proposed plans of dissolution and liquidation described herein, the General
Partner will likely withdraw as general partner of the Partnerships effective on
120 days written notice to the Limited Partners. If the General Partner does
withdraw, the Partnership Agreement of each Partnership permits the Limited
Partners of each Partnership to reconstitute and continue the business of such
Partnership, but this right requires the unanimous written consent of the
Limited Partners within ninety (90) days after the notice of withdrawal becomes
effective. In light of the poor financial condition and prospects of each
Partnership, the General Partner believes that it would be highly unlikely that
a substitute general partner could be found who would be willing to fund the
ongoing administrative and operating expenses of the Partnerships. If the
Partnerships are not reconstituted, they will dissolve effective on the one
hundred twentieth day after the notice of withdrawal has been sent, but the
Partnerships will not be terminated until the assets of the Partnerships have
been disposed of.
The primary benefit to the Limited Partners of the proposed
dissolutions is the potential to realize favorable tax consequences (see
"Federal Income Tax Consequences" below) and the General Partner's willingness
to act as a "buyer of last resort" which ensures a "floor" or minimum
consideration for Partnership properties and thereby ensures an equivalent
"ceiling" or maximum amount of forgiveness of indebtedness income each Limited
Partner that is not a tax-exempt entity will realize from the proposed
transactions, upon which it will be subject to federal income tax (see "Federal
Income Tax Consequences" below), and, in the case of the Limited Partners of
Enex Oil & Gas Income Program IV Series 3, L.P. and Enex 88-89 Income and
Retirement Fund - Series 4, L.P., the receipt of a small liquidating cash
4
<PAGE>
distribution. However, if the Limited Partner owns their Interest in an IRA,
Keogh or other tax-exempt account (which represents the majority of Limited
Partners of the four Enex 88-89 Income and Retirement Fund Partnerships), they
will not realize these favorable tax consequences. The General Partner believes
there are no detriments of the transactions to the Limited Partners. The primary
benefits to the General Partner would be the satisfaction, in whole or in part,
of the Partnerships' indebtedness to the General Partner and relief from the
ongoing administrative and operating expenses incurred by the General Partner on
behalf of the Partnerships, which in the case of Enex 88-89 Income and
Retirement Fund - Series 1, 2, and 3, L.P., the Partnership has no ability to
repay.
The General Partner considered, as alternatives to liquidation,
consolidating the Partnerships with other partnerships managed by the General
Partner and continuing to manage the Partnerships on an ongoing basis. However,
the Board of Directors of the General Partner, a majority of whose members are
not employees of the General Partner or any affiliates of the General Partner,
has unanimously approved the proposed dissolutions and liquidations as being
fair and in the best interests of the Limited Partners based on the following
factors, in order of their significance: (i) each Partnership's poor financial
condition and prospects; (ii) the potential of certain Limited Partners to
realize favorable tax consequences; (iii) for Enex Oil and Gas Income Program IV
- - Series 3, L.P. and Enex 88-89 Income and Retirement Fund - Series 4, L.P. the
potential for the Limited Partners to receive a liquidating cash distribution,
and (iv) the General Partner's willingness to act as a "buyer of last resort" at
the estimated fair market values of the Partnerships' properties as estimated by
Gruy (even if all of a Partnership's indebtedness to the General Partner has
been satisfied out of proceeds of earlier property sales). These factors are
discussed in detail under the captions "Partnership Operations and Financial
Condition," "Federal Income Tax Consequences," "The Proposal to Dissolve and
Liquidate," "Fairness of the Proposed Transactions," "Reasons for the Proposed
Transactions" and "Valuation of Oil and Gas Properties" below. No director or
group of directors has retained an unaffiliated representative to act solely on
behalf of the Limited Partners for the purposes of negotiating the terms of the
proposed plan to dissolve and liquidate the Partnerships or to prepare a report
concerning the fairness of such proposals. No firm offer has been made by any
person during the preceding 18 months regarding the merger or consolidation of
any of the Partnerships, the sale or transfer of all or any substantial part of
the assets of any Partnership or securities of any Partnership which would
enable the holder thereof to exercise control of such Partnership.
Federal Income Tax Consequences:
In general, the General Partner believes that, with respect to
individuals who are citizens or residents of the United States, for federal
income tax purposes the proposed liquidation of each Partnership's assets will
result in a capital loss to the Limited Partners of each Partnership. In
addition to the capital loss, each Partnership will have a net operating loss
from the Partnership's current year of operation which will be deductible by the
Limited Partners.
If the consideration received in liquidation is equal to the estimated
fair market value of the assets of a Partnership, the General Partner believes
the Limited Partners will have a 1997 tax loss per $500 Unit of limited
partnership interest outstanding approximately equal to the amounts shown below:
1997 Loss
Per $500 Unit
Enex Oil & Gas Income Program IV - Series 3, L.P. $99.52
Enex 88-89 Income and Retirement Fund - Series 1, L.P. $136.74
Enex 88-89 Income and Retirement Fund - Series 2, L.P. $205.19
Enex 88-89 Income and Retirement Fund - Series 3, L.P. $204.46
Enex 88-89 Income and Retirement Fund - Series 4, L.P. $185.07
Limited Partners of Enex Oil and Gas Income Program IV - Series 3, L.P. may
also have suspended passive losses from prior years which may be utilized in the
current year to offset income from other sources. Enex 88-89 Income and
Retirement Fund Series 1, L.P. - Series 2, L.P., Series 3, L.P., and Series 4,
L.P. own solely royalty interests in oil and
5
<PAGE>
gas properties, and all losses generated prior to 1997 for these partnerships
were utilizable by the limited partners in the year the loss was generated.
Accordingly, these four Partnerships have no suspended losses.
A Limited Partner in Enex Oil & Gas Income Program IV - Series 3, L.P.
has available for use in the current year a passive loss of $285.87 per $500
Unit of limited partnership interest generated prior to 1997 if he or she is an
original investor and has never utilized any of the Partnership's passive losses
in prior years.
Appraisal Report:
Quantitative information regarding each Partnership's oil and gas
reserves is included in Item 2 of each Partnership's 1996 Form 10-KSB
accompanying this Proxy Statement and in Tables B, B-1, C and D attached hereto.
Included in this information are fair market valuations of the properties of
each Partnership prepared by H. J. Gruy and Associates, Inc. (Gruy), independent
petroleum consultants. Gruy has been preparing reserve estimates for each of the
Partnership's oil and gas reserves since the inception of each Partnership's
operations. Gruy was selected by the General Partner for this task based upon
its reputation, experience and expertise in this area. In 1996 and 1995, Enex
Oil & Gas Income Program IV - Series 3, L.P. and Enex 88-89 Income and
Retirement Fund - Series 1, L.P., Series 2, L.P., Series 3, L.P. and Series 4,
L.P. paid Gruy a total of $275, $1,127, $564, $563 and $1,014, respectively, in
fees for annual reserve report valuations. In 1997, these Partnerships paid Gruy
a total of $470 for the fair market valuations described in this Proxy
Statement. In addition, Gruy has received compensation from the General Partner
and other limited partnerships of which Enex is the general partner during the
past two years in the aggregate amount of $114,634.
Gruy has estimated for each oil and gas property in which the
Partnerships own interests, as of December 31, 1996, the recoverable units of
oil and gas and the undiscounted and discounted future net cash flows by year
commencing January 1, 1997 and continuing through the estimated productive lives
of the properties. The Limited Partners should note that Gruy's reserve
estimates are estimates only and should not be construed as being exact amounts.
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
discount factors for risk, location, type of ownership interest, operational
characteristics and other factors ranging from 66.0% to 75.9%. All of the
Partnerships' reserves are proved developed producing reserves. See "Valuation
of Oil and Gas Properties" and Table B-1 below. Gruy allocated the estimates
among the Partnerships on a pro-rata basis in accordance with their respective
ownership interests in each of the properties evaluated. See Tables C and D. The
resulting value for each Partnership is included in Table 1 and in Tables B and
B-1 and is labeled Fair Market Value of Oil and Gas Reserves. Gruy estimated the
fair market value of the oil and gas properties of each of Enex Oil & Gas Income
Program IV, Series 3, L.P., Enex 88-89 Income and Retirement Fund, Series 1,
L.P., Enex 88-89 Income and Retirement Fund, Series 2, L.P., Enex 88-89 Income
and Retirement Fund, Series 3, L.P., and Enex 88-89 Income and Retirement Fund,
Series 4, L.P., as $52,520, $98,850, $23,849, $52,159 and $81,706, respectively.
No instructions were given and no limitations were imposed by the
General Partner on the scope of or methodology to be used in preparing the fair
market valuations by Gruy. All information provided by Enex and used by Gruy in
preparing such valuations were verified and corroborated through sources
unaffiliated with Enex. The fair market valuation report prepared by Gruy is
available for inspection and copying at the office of the General Partner during
regular business hours by any interested Limited Partner or his representative
who has been so designated in writing. A copy of such report will be mailed to
any interested Limited Partner or his representative upon written request.
6
<PAGE>
THE PROPOSAL TO DISSOLVE AND LIQUIDATE
At the Special Meetings, the Limited Partners of each Partnership will
be asked to consider and vote upon a proposal to dissolve and liquidate each
Partnership in accordance with the provisions of its Partnership Agreement, as
described herein. Upon the winding up and termination of the business and
affairs of the Partnership, its assets shall be sold, the proceeds allocated to
the Partners in accordance with provisions of the Partnership Agreement and the
Partners' capital accounts adjusted accordingly. The expenses related to
dissolving and liquidating each Partnership will be deducted from the proceeds
of the sale of Partnership oil and gas properties. These costs are estimated to
be approximately $9,098, $3,420, $3,537, $3,343, and $4,002 for Enex Oil & Gas
Income Program IV - Series 3, L.P., Enex 88-89 Income and Retirement Fund -
Series 1, L.P., Enex 88-89 Income and Retirement Fund - Series 2, L.P., Enex
88-89 Income and Retirement Fund - Series 3, L.P., and Enex 88-89 Income and
Retirement Fund - Series 4, L.P., respectively, with the principal expenses
being legal fees incurred in connection with the preparation of the Proxy
Statement and related materials, solicitation expenses, printing costs and
Gruy's appraisal fees. If it becomes necessary to engage the services of a
broker or other agent to facilitate the sale of the Partnerships' properties,
customary commissions and selling fees will have to be incurred, however.
According to the Partnership Agreements, such proceeds of all sales are to be
distributed as follows:
(i) all of the Partnership's debts and liabilities to persons other
than the General Partner and the Limited Partners (collectively, the
"Partners"), which are anticipated to be immaterial in amount, shall be paid and
discharged in their order of priority, as provided by law;
(ii) all of the Partnership's debts and liabilities to the Partners
shall be paid and discharged (currently each of Enex 88-89 Income and Retirement
Fund - Series 1, L.P., Series 2, L.P. and Series 3, L.P. owes the General
Partner an amount in excess of the estimated fair market value of its assets);
and
(iii) any remaining cash shall be distributed to the Partners in
proportion to and in payment of the positive balances in their respective
capital accounts, with the effect of bringing such capital accounts to zero.
However, each Limited Partner's capital account has a negative balance equal to
the number of Units owned multiplied by the following amounts:
Negative Capital
Account Balance
Per $500 Unit
Enex Oil & Gas Income Program IV - Series 3, L.P. $ 2.21
Enex 88-89 Income and Retirement Fund - Series 1, L.P. $ 6.97
Enex 88-89 Income and Retirement Fund - Series 2, L.P. $ 43.56
Enex 88-89 Income and Retirement Fund - Series 3, L.P. $ 13.44
Enex 88-89 Income and Retirement Fund - Series 4, L.P. $ 0.46
The amount of the potential proceeds from the sale of each
Partnership's oil and gas properties and other assets cannot be readily
estimated. However, see Tables B, B-1 and C for quantitative information
regarding proved oil and gas reserves, estimated future net cash flows, and
discounted future net cash flows of each Partnership's oil and gas reserves as
of December 31, 1996 prepared by Gruy. Similar quantitative and cash flow
information is shown for each Partnership as of December 31, 1995 and 1994.
Gruy has also prepared a fair market valuation as of December 31, 1996
for every oil and gas property owned by each Partnership (see Table 1 below and
Tables B and B-1). Because of the difficulty of estimating oil and gas reserves,
the proceeds of a sale may not reflect the full value of the properties to which
they relate. Such estimates are merely appraisals of value and may not
correspond to realized value. Every reasonable effort will be made by the
General Partner to sell the Partnerships' properties for the highest possible
price. Qualified potential buyers will be sought out,
7
<PAGE>
informed of the availability of the properties for purchase, and distributed a
sales brochure. These qualified potential buyers will include, but not be
limited to, operators of the properties, other non-operating owners of the
properties, and companies and/or persons known to own or be interested in owning
the types of properties available.
Neither the General Partner nor any other affiliate of any Partnership
or of the General Partner will bid on any Partnership properties but will
prepare a bid package to be furnished to potential purchasers. The bid packages
will include sufficient information for prospective bidders to reasonably
determine values for the properties. A copy of the bid package will be mailed to
any Limited Partner who notifies the General Partner that he or she is
interested in bidding on any Partnership properties. Additional data will be
available in the data room set up at the General Partner's office, where
potential bidders will be able to review in detail the General Partner's records
and files pertaining to the properties. In addition, pursuant to the provisions
of the New Jersey Uniform Limited Partnership Law (1976) (the "New Jersey Act"),
each Partnership is required to make available certain information to Limited
Partners at such Partnership's principal office, including information regarding
the state of the business and financial condition of such Partnership and such
other information regarding its affairs as is just and reasonable for the
Limited Partners to examine and copy. Sale at public auction will also be
considered, especially in the case of smaller working and royalty interests
and/or lower valued properties. At all times, and in particular in effectuating
the proposed liquidations if approved, the General Partner has acted and will
continue to act in accordance with its fiduciary duties as a general partner of
a limited partnership governed by the New Jersey Act and applicable common law
principles.
In all cases, each Partnership property will be sold for the highest
possible price. In cases where the highest third party bid for a property is
less than its fair market value as determined by Gruy, the General Partner will
purchase the property at such fair market value. Thus, the General Partner will
act as a "buyer of last resort". Accordingly, as shown in Table 1 below, the
minimum amount to be received by each Partnership for its oil and gas properties
is $52,520 for Enex Oil & Gas Income Program IV- Series 3, L.P.; $98,950 for
Enex 88-89 Income and Retirement Fund - Series 1, L.P.; $23,849 for Enex 88-89
Income and Retirement Fund - Series 2, L.P.; $52,159 for Enex 88-89 Income and
Retirement Fund - Series 3, L.P.; and $81,706 for Enex 88-89 Income and
Retirement Fund - Series 4, L.P. Until such time as a Partnership's total
indebtedness has been discharged in full, the consideration paid by the General
Partner for any properties of such Partnership purchased by the General Partner
shall be in the form of satisfaction of such indebtedness. At such time as a
Partnership's indebtedness has been discharged in full, the General Partner's
purchase of such properties from such Partnership as buyer of last resort will
be for cash. However, due to the substantial amount of debt owed the General
Partner by each Partnership, it is likely that the consideration paid by the
General Partner for any Partnership properties so purchased by the General
Partner will be solely in the form of the full or partial discharge of this
debt. For Enex 88-89 Income and Retirement Fund - Series 1, L.P., Series 2,
L.P., and Series 3, L.P. all the funds raised in the liquidation will likely be
used to satisfy this debt. Therefore, it is unlikely that the Limited Partners
of these three Partnerships will receive cash or any other tangible
consideration from these transactions. For Limited Partners of Enex Oil & Gas
Income Program IV - Series 3, L.P. and Enex 88-89 Income and Retirement Fund -
Series 4, L.P., if the Partnership's indebtedness does not increase prior to the
sale, a small liquidating cash distribution will be received by the Limited
Partners.
The Partnership Agreements permit the General Partner to purchase
Partnership properties following dissolution by matching the highest bona-fide
third-party offer received. In order to avoid the appearance of potential
conflicts of interest, however, the General Partner has elected to forego this
right in connection with the proposed dissolutions to be voted upon at the
Special Meetings.
For additional information concerning the Partnerships' properties ,
see "Description of Property and Oil and Gas Reserves" below.
8
<PAGE>
<TABLE>
<CAPTION>
TABLE 1
Enex
OGIP IV Enex 88-89 Income and Retirement Fund
-------------- --------------------------------------------------------------------------
Series 3, Series 1, Series 2, Series 3, Series 4
L.P. L.P. L.P. L.P. L.P.
------------- -------------- -------------- ------------- --------------
Fair Market Value of
Oil & Gas Reserves (1)
Property Name:
<S> <C> <C> <C> <C> <C>
Bagley $29,000 $15,000 $8,000 $8,500 $9,000
Bryum B - 5,100 4,950 4,950 -
Corinne - 78,750 - - -
Brighton 23,520 - - - -
Lake Decade - - - - -
Elmac - - 10,899 38,709 17,706
Speary - - - - 55,000
------------- -------------- -------------- ------------- --------------
Total 52,520 98,850 23,849 52,159 81,706
Cash on hand (2) 6,635 3,324 2,291 6,174 6,877
Accounts receivable (2) 29,606 18,215 6,283 13,121 17,223
Other current assets (2) 981 - - - -
------------- -------------- -------------- ------------- --------------
Fair Market Value
of Assets 89,742 120,389 32,423 71,454 105,806
Less:
Liability to General 55,180 86,431 155,870 95,435 81,461
Partner
Liabilities to others (2) 32,013 2,485 2,140 1,731 2,329
------------- -------------- -------------- ------------- --------------
Partnership Net Capital
(Deficit) $2,549 ($31,473) ($125,587) ($25,712) $22,016
============= ============== ============== ============= ==============
</TABLE>
(1) The fair market value of each Partnership's oil and gas reserves was
determined by H.J. Gruy and Associates, Inc. as of December 31, 1996, as
described below in "Description of Property and Oil and Gas Reserves" and
"Valuation of Oil and Gas Properties".
(2) Assets and liabilities per each Partnership's respective Form 10-KSB as of
December 31, 1996.
As shown above, the estimated fair market value of each Partnership's oil and
gas reserves and other assets for Enex 88-89 Income and Retirement Fund - Series
1, L.P, Series 2, L.P., and Series 3, L.P. is less than the outstanding debt
owed by each of these Partnerships to the General Partner. This may result in
the General Partner acquiring all of the assets of each of these Partnerships
without the payment of consideration other than the discharge of indebtedness
owed to the General Partner. If no bids for Partnership properties at or above
their estimated fair market values are received, the General Partner will
purchase such properties from each Partnership at such estimated fair market
values in consideration for the discharge of Partnership indebtedness to the
General Partner. For Enex Oil & Gas Income Program IV - Series 3, L.P. and Enex
88-89 Income and Retirement Fund - Series 4, L.P., the fair market value of each
Partnership's oil and gas reserves at December 31, 1996, as determined by Gruy,
is slightly greater than the outstanding debt owed by each Partnership.
Accordingly, if such indebtedness does not increase prior to the sale, the
Limited Partners of these two Partnerships will receive a small liquidating cash
distribution.
9
<PAGE>
If the amount owed the General Partner by each Partnership is not fully
satisfied from proceeds received from property sales to third parties and/or to
the General Partner, such indebtedness of each Partnership will be forgiven by
the General Partner. See "Federal Income Tax Consequences" below for a
description of the tax consequences related to the forgiveness of this debt.
Although permitted to do so by the Partnership Agreements, the General
Partner will not distribute any Partnership assets in kind. As described above,
however, the General Partner may purchase Partnership properties pursuant to the
proposed Partnership liquidations in exchange solely for the discharge of
Partnership indebtedness to the General Partner when acting as "buyer of last
resort".
To the General Partner's knowledge, consummation of the proposal is not
subject to compliance with any federal or state regulatory requirements other
than those applicable to the solicitation of proxies pursuant to this Proxy
Statement. Following approval of the proposed dissolution and liquidation of the
Partnerships, the registration of the Limited Partnership Interests of the
Partnerships under Section 12(g) of the Exchange Act and the Partnerships'
obligations to file reports pursuant to Section 15(d) of the Exchange Act will
terminate.
Reasons For Proposed Transactions
Due to the depletion of each Partnerships' producing oil and gas
reserves and to the write-down of undeveloped reserves, (see "Oil and Gas
Reserves" attached as Tables B and B-1), the magnitude of the amounts owed by
each Partnership to the General Partner (see Table 1 above and "Selected
Financial Data" attached as Table A), the Partnerships' inability to generate
sufficient cash flow to consistently maintain regular cash distributions to
their Limited Partners, and the ongoing costs of operating each Partnership (see
"Partnership Operations and Financial Condition" below and "General and
Administrative Costs" attached as Table E), the General Partner has determined
that Partnership operations are likely to be either unprofitable or only
marginally profitable for the foreseeable future. The write-down of undeveloped
reserves was primarily in the undeveloped oil and gas reserves at Lake Decade
field, Terrebonne Parish, Louisiana. This reduction was due both to the lack of
successful drilling on the Partnerships' acreage, as well as on offset acreage,
and to the depletion characteristics of existing known producing reservoirs in
the Lake Decade field. As shown in Tables 1, A, B and B-1, for Enex 88-89 Income
and Retirement Fund - Series 1, L.P., Series 2, L.P., and Series 3, L.P. the
fair market value of each Partnership's oil and gas reserves at December 31,
1996, as determined by Gruy, is less than the outstanding debt owed by each
Partnership to the General Partner. As a result, the General Partner believes
that the net proceeds from the sale of properties will be used to retire
outstanding debt, principally owed to the General Partner (see Table 1 and Table
A), and that future cash distributions to the Limited Partners of these
Partnerships are unlikely.
If the Partnerships are not liquidated and dissolved pursuant to the
proposed plans of dissolution and liquidation described herein, the General
Partner will likely withdraw as general partner of the Partnerships effective on
120 days written notice to the Limited Partners. If the General Partner does
withdraw, the Partnership Agreement of each Partnership permits the Limited
Partners of each Partnership to reconstitute and continue the business of such
Partnership, but this right requires the unanimous written consent of the
Limited Partners within ninety (90) days after the notice of withdrawal becomes
effective. In light of the poor financial condition and prospects of each
Partnership, the General Partner believes that it would be highly unlikely that
a substitute general partner could be found who would be willing to fund the
ongoing administrative and operating expenses of the Partnerships. If the
Partnerships are not reconstituted, they will dissolve effective on the one
hundred twentieth day after the notice of withdrawal has been sent, but the
Partnerships will not be terminated until the assets of the Partnerships have
been disposed of.
The General Partner considered, as alternatives to liquidation,
consolidating the Partnerships with other partnerships managed by the General
Partner and continuing to manage the Partnerships on an ongoing basis. However,
for the reasons mentioned above and the benefits the Limited Partners will
derive from approval of the proposed dissolutions, as described under "Fairness
of the Proposed Transaction" and "Potential Benefits to the Partners--To the
10
<PAGE>
Limited Partners" below, the General Partner has determined that it is in the
best interests of the Limited Partners to dissolve and liquidate the
Partnerships.
Consolidating the Partnerships. The possibility of consolidating the
Partnerships with the General Partner or with other partnerships managed by the
General Partner was considered. Because any consolidation of partnerships
managed by the General Partner or with the General Partner would be based on the
net fair market value of a partnership's assets less liabilities, the negative
net value of Enex 88-89 Income and Retirement Fund - Series 1, L.P., Series 2,
L.P. and Series 3, L.P. and the very small positive net value for Enex Oil & Gas
Income Program IV - Series 3, L.P. and Enex 88-89 Income and Retirement Fund -
Series 4, L.P. (see Table 1 above) and the inability of any of the Partnerships
to generate sufficient cash flow to liquidate their liabilities and pay cash
distributions would have permitted the Partnerships to receive very little or no
consideration in any consolidation with profitable partnerships or with the
General Partner. Their participation would also be unfair to the investors in
the other entities. Consolidating just two or more of the Partnerships was also
considered. Although the aggregate general and administrative expenses of the
Partnerships would be reduced by such a transaction, the reductions would not be
sufficient to offset the losses generated by the Partnerships (which the General
Partner would be forced to continue to carry) or to reduce their indebtedness to
the General Partner, which would remain outstanding following such a
consolidation. (See Tables A and E below.) Thus, the consolidated entity would
continue to operate at a loss without providing any benefit to the Limited
Partners from the transaction. The General Partner would not support such a
transaction.
Continuing the Management of the Partnerships. The General Partner has
concluded that the Partnerships' inability to generate sufficient cash flow to
repay their indebtedness and pay cash distributions in the foreseeable future
makes their continued operation unviable. Moreover, as discussed above, if the
Partnerships are not liquidated and dissolved pursuant to the proposed plans of
dissolution and liquidation described herein, the General Partner will likely
withdraw, and such a withdrawal would also most likely lead to the dissolution
and liquidation of the Partnerships.
Partnership Operations and Financial Condition
Enex Oil & Gas Income Program IV - Series 3, L.P.
Cash flow provided by operating activities for the year ended December 31,
1996 was $10,842. The amount owed the General Partner at December 31, 1996 was
$55,180.
Enex 88-89 Income and Retirement Fund - Series 1, L.P.
Cash flow provided by operating activities for the year ended December 31,
1996 was $2,851. The amount owed the General Partner at December 31, 1996 was
$86,431.
Enex 88-89 Income and Retirement Fund - Series 2, L.P.
Cash flow provided by operating activities for the year ended December 31,
1996 was $1,413. The amount owed the General Partner at December 31, 1996 was
$155,870.
Enex 88-89 Income and Retirement Fund - Series 3, L.P.
Cash flow used by operating activities for the year ended December 31, 1996
was $5,398. The amount owed the General Partner at December 31, 1996 was
$95,435.
Enex 88-89 Income and Retirement Fund - Series 4, L.P.
Cash flow provided by operating activities for the year ended December 31,
1996 was $6,750. The amount owed the General Partner at December 31, 1996 was
$81,461.
11
<PAGE>
All Partnerships
It does not appear that even significant increases in oil and gas
prices will enable the Partnerships to generate sufficient cash flow to pay
their operating and administrative expenses and repay their debt obligations.
All of the Partnerships have deficits in their Limited Partners' capital
accounts and Enex 88-89 Income and Retirement Fund - Series 1, L.P., Series 2,
L.P. and Series 3, L.P. are insolvent under generally accepted accounting
principles. Only if oil and gas prices were to sustain much higher levels for a
significant period of time would any of the Partnerships be able to cover their
ongoing administrative and operating expenses and pay down their outstanding
indebtedness to the General Partner. The General Partner believes that an
increase in oil and gas prices of this magnitude and duration is extremely
unlikely anytime in the foreseeable future.
Fairness of the Proposed Transactions
Due to the loss of a significant portion of the oil and gas reserves of
each Partnership and the resulting poor financial condition of the Partnerships,
the General Partner began to consider the Partnerships' future prospects. Each
Partnership's cash flow from operations, indebtedness and negative limited
partner capital balances as well as the limited prospects for improvement in
market prices of oil and gas were reviewed. At its December 3, 1996 meeting, the
General Partner's Board of Directors was advised of the Partnerships' reserve
loss and poor financial condition and that market prices for oil and gas were
not likely to increase sufficiently to allow the Partnerships to repay their
indebtedness, and that the Partnerships should be dissolved and liquidated. The
Board was further advised that dissolution and liquidation would probably not
provide the Limited Partners of Enex 88-89 Income and Retirement Fund - Series
1, L.P., Series 2, L.P. and Series 3, L.P. with any tangible benefits and only
nominal tangible benefits to the Limited Partners of Enex Oil & Gas Income
Program IV - Series 3, L.P. and Enex 88-89 Income and Retirement Fund - Series
4, L.P. However, such transactions would provide the potential for favorable tax
consequences to the Limited Partners if they do not own their Interests in an
IRA, Keogh or other tax-exempt account. It was noted, however, that a majority
of the Interests in the four Enex 88-89 Income and Retirement Fund Partnerships
are held in such tax-exempt accounts.
As previously noted, the General Partner considered, as alternatives to
liquidation, consolidating the Partnerships with other partnerships managed by
the General Partner and continuing to manage the Partnerships on an ongoing
basis. However, in January, 1996, the Board of Directors of the General Partner,
a majority of whose members are not employees of the General Partner or any
affiliates of the General Partner, unanimously approved the proposed
dissolutions and liquidations as being fair and in the best interests of the
Limited Partners based on the following factors, in order of their significance:
(i) each Partnership's poor financial condition and prospects, (ii) the
potential for certain Limited Partners to realize favorable tax consequences,
(iii) for Enex Oil & Gas Income Program IV - Series 3, L.P. and Enex 88-89
Income and Retirement Fund - Series 4, L.P. the potential for the Limited
Partners to receive a liquidating cash distribution, and (iv) the General
Partner's willingness to act as a "buyer of last resort" at the estimated fair
market values of the Partnerships' properties as estimated by Gruy (even if all
of a Partnership's indebtedness to the General Partner has been satisfied out of
proceeds of earlier property sales) which ensures a "floor" or minimum
consideration for Partnership properties and thereby ensures an equivalent
"ceiling" or maximum amount of forgiveness of indebtedness income each Limited
Partner that is not a tax-exempt entity will realize from the proposed
transactions, upon which it will be subject to federal income tax (see "Federal
Income Tax Consequences" below). All members of the General Partner's Board of
Directors were present at all meetings at which the proposed transactions were
considered.
As previously discussed, it is more than likely that the Limited
Partners of Enex 88-89 Income and Retirement Fund - Series 1, L.P., Series 2,
L.P. and Series 3, L.P. will not be receiving cash or any other tangible
consideration and that the Limited Partners of Enex Oil & Gas Income Program IV
- - Series 3, L.P. and Enex 88-89 Income and Retirement Fund - Series 4, L.P. will
receive only a nominal cash distribution in connection with the proposed
dissolutions and liquidations of the Partnerships. The primary benefit of the
proposed transactions to the Limited Partners is, in fact, the federal income
tax consequences of the proposed transactions to those Limited Partners that are
not tax-exempt. Therefore, the General Partner did consider whether the
consideration or benefit to the Limited Partners from the proposed transactions
constitutes fair value in relation to current market prices, historical market
prices, net book value, going
12
<PAGE>
concern value, liquidation value, and the estimated fair market values prepared
by Gruy. Because it is more than likely that the Limited Partners of Enex 88-89
Income and Retirement Fund - Series 1, L.P., Series 2, L.P. and Series 3, L.P.
will not be realizing any value from the Partnerships' properties due to the
amount of each Partnership's indebtedness, such values were not given any weight
in determining the fairness of the proposed transactions to the Limited Partners
beyond the General Partner's reliance on Gruy's fair market value estimates to
determine that the Partnerships' liabilities substantially exceeded their
assets. In addition, the General Partner believes that alternative methods of
valuing all the Partnerships' properties, such as using current or historical
market prices, prices recently paid by the General Partner for units of
Interests ($0 per Unit for each of the Partnerships), net book value, going
concern value or Gruy's fair market value would not result in a higher valuation
of Partnership properties than the values the General Partner expects to realize
through the sale of the Partnerships' oil and gas properties.
Although the General Partner does not believe that alternative methods
of valuing the Partnership properties, such as using current or historical
market prices, prices recently paid the General Partner for Interests in the
Partnerships, net book value, going concern value or liquidation value, would
result in a higher valuation of Partnership properties than that yielded by
Gruy's valuation, even were such to be the case, the General Partner would not
consider it relevant to a determination of the fairness of the transaction to
the Limited Partners. As discussed above, due to the poor financial condition of
the Partnerships, in the event the proposed transactions were not approved the
General Partner would withdraw as general partner likely leading to the
dissolution and liquidation of the Partnerships in any case. In the General
Partners' experience, oil and gas properties are generally purchased and sold at
prices approximating the purchasers' and sellers' estimates of the discounted
present value of the subject oil and gas reserves. Thus, the Gruy estimated fair
market valuations, as compared to the other above-referenced valuation methods,
represents the best estimation of the realizable value of the Partnership
properties.
Adoption of the proposal to dissolve and liquidate each Partnership
requires the affirmative vote of a majority in interest of the Limited Partners
of each such Partnership. Because the General Partner holds Interests in each
Partnership, the proposals to dissolve and liquidate can be approved without the
affirmative vote of a majority of the Interests held by all other Limited
Partners. No director or group of directors has retained an unaffiliated
representative to act solely on behalf of the Limited Partners for the purposes
of negotiating the terms of the proposed plan to dissolve and liquidate the
Partnerships or to prepare a report concerning the fairness of such proposals.
No firm offer has been made by any person during the preceding 18 months
regarding the merger or consolidation of any of the Partnerships, the sale or
transfer of all or any substantial part of the assets of any Partnership or
securities of any Partnership which would enable the holder thereof to exercise
control of such Partnership. The absence of the protections described in the
preceding two sentences was considered, but was judged to be immaterial, by the
General Partner in determining the fairness of the proposed transactions to the
Limited Partners.
Potential Benefits to the Partners
To the Limited Partners
The primary benefits of the proposed transactions to the Limited Partners of
Enex Oil & Gas Income Program IV - Series 3, L.P. and Enex 88-89 Income and
Retirement Fund - Series 4, L.P. are the possible receipt of a liquidating cash
distribution and for the Limited Partners of all of the Partnerships, the
potential to realize favorable tax consequences if the Limited Partner is not a
tax-exempt entity and the General Partner's willingness to act as a "buyer of
last resort", which ensures a "floor" or minimum consideration for Partnership
properties and thereby ensures an equivalent "ceiling" or maximum amount of
forgiveness of indebtedness income each Limited Partner that is not a tax-exempt
entity will realize from the proposed transactions, upon which he will be
subject to federal income tax (see "Federal Income Tax Consequences" below). The
General Partner believes there are no detriments of the transactions to the
Limited Partners, other than the potential loss of income that might be earned
in the future if oil and gas prices rise significantly.
Enex owns the largest limited partnership interest in each Partnership
(see "Record Date, Voting and Security Ownership of Certain Beneficial Owners
and Management"). If the proposed dissolutions are approved Enex will
13
<PAGE>
participate as a Limited Partner to the extent of its limited partnership
interest in the consequences of the liquidation in the same manner as all other
Limited Partners.
To the General Partner
As General Partner, Enex will benefit from the proposed transactions by
collecting all or a portion of the amounts owed to it by each Partnership upon
the sale of each such Partnership's properties, either in the form of cash
proceeds of such sales, or as buyer of last resort, the receipt of Partnership
properties in exchange for the discharge of Partnership indebtedness to the
General Partner. Also, upon the liquidation of the Partnerships, the General
Partner will cease to incur the ongoing expenses of administering and operating
the Partnerships. Actual administrative expenses paid by the General Partner for
each Partnership in 1995 and 1996, as well as estimates of such expenses for
1997 and 1998, are set forth in Table E. Expenses associated with the
Partnerships' reporting obligations under the Securities and Exchange Act of
1934, as amended, the preparation of annual tax reports, and annual audits,
comprise a significant portion of such administrative expenses. The liquidation
and dissolution of the Partnerships will prevent the amounts owed to the General
Partner from increasing and reduce the General Partner's risk that the
receivables from each Partnership are/or may in the future become uncollectible.
The General Partner intends to continue to hold any of the Partnership
properties it might acquire as a buyer of last resort. The General Partner has
no plans to dispose of any of such properties.
In the event that the General Partner acquires any Partnership
properties in connection the proposed plans of dissolution and liquidation of
the Partnerships, the General Partner believes that such properties will be
profitable due to the elimination of the current ongoing expenses associated
with administering and operating the Partnerships.
Record Date, Voting and Security Ownership of Certain Beneficial Owners and
Management
As of the Record Date, the Partnerships had the following numbers of
"Units" of limited partnership interest (i.e., the aggregate amount of the
Limited Partners' initial subscriptions divided by $500) outstanding and
entitled to vote (in each case the number of Units represents 100% of the
outstanding limited partnership interests of the Partnership):
Number of
Units
Enex Oil & Gas Income Program IV - Series 3, L.P. 6,079
Enex 88-89 Income and Retirement Fund - Series 1, L.P. 3,605
Enex 88-89 Income and Retirement Fund - Series 2, L.P. 3,097
Enex 88-89 Income and Retirement Fund - Series 3, L.P. 3,413
Enex 88-89 Income and Retirement Fund - Series 4, L.P. 3,644
From January 1, 1995 to the date hereof, the General Partner has
purchased an aggregate of 257.68, 123.24, 64.34, 15.96 and 43.97 Units of
Limited Partnership Interest of Enex Oil & Gas Income Program IV - Series 3,
L.P, Enex 88-89 Income and Retirement Fund - Series 1, L.P., Enex 88-89 Income
and Retirement Fund - Series 2, L.P., Enex 88- 89 Income and Retirement Fund -
Series 3, L.P., and Enex 88/89 Income and Retirement Fund - Series 4, L.P.,
respectively, (including 4.78, 0, 20.00, 9.75 and 0, respectively, of such Units
during the past sixty (60) days), at an average purchase price per Unit of
$7.18, $18.48, $0.00, $0.00 and $0.03, respectively, in accordance with its
annual offer to repurchase such interests as required by the Partnership
Agreements.
Approval of the proposal for each Partnership requires the affirmative
vote of the holders of a majority-in-interest of that Partnership. The term "the
holders of a majority-in-interest" refers to Limited Partners (including the
General Partner) holding more than fifty percent of the limited partnership
interests of all the Limited Partners of that Partnership. With respect to the
proposal, abstentions will be included in determining the presence of a quorum,
and will be treated as votes cast against the proposal. "Broker non-votes" will
be deemed absent for purposes of determining the presence
14
<PAGE>
of a quorum and will be treated as votes cast against the proposal. Any unmarked
proxies, including those submitted by brokers and nominees, will be voted in
favor of the applicable proposal.
The following table sets forth for each Partnership, as of the Record
Date, the number and percentage of Units beneficially owned by the General
Partner. No executive officer or director of the General Partner owns an
interest in any of the Partnerships. The General Partner knows of no other
person who has beneficial ownership of more than 5% of the outstanding limited
partnership interests in any of the Partnerships.
<TABLE>
<CAPTION>
Enex
OGIP IV Enex 88-89 Income and Retirement Fund
Series 3 Series 1 Series 2 Series 3 Series 4
<S> <C> <C> <C> <C> <C>
Units Beneficially Owned by the General Partner 1,156 437 202 226 238
Percentage Beneficially Owned by the General Partner 19.0905 12.1239 7.1641 6.9149 6.5218
</TABLE>
The General Partner intends to vote all of the Units it owns in favor
of the proposal. Therefore, for each Partnership, if the following percentages
of the outstanding Units are voted by other Limited Partners in favor of the
proposal, it will be approved:
Percentage of Units
Needed to Approve
Proposal
Enex Oil & Gas Income Program IV - Series 3, L.P. 30.9096%
Enex 88-89 Income and Retirement Fund - Series 1, L.P. 37.8762%
Enex 88-89 Income and Retirement Fund - Series 2, L.P. 42.8360%
Enex 88-89 Income and Retirement Fund - Series 3, L.P. 43.0852%
Enex 88-89 Income and Retirement Fund - Series 4, L.P. 43.4783%
Certain Transactions
The following amounts relate to transactions between the General
Partner and the Partnerships which have occurred since January 1, 1995:
<TABLE>
<CAPTION>
Allocated General & Administrative Expenses
1995 1996
<S> <C> <C> <C>
Enex Oil & Gas Income Program IV - Series 3, L.P. $17,729 $17,221
Enex 88-89 Income and Retirement Fund - Series 1, L.P. 15,999 16,197
Enex 88-89 Income and Retirement Fund - Series 2, L.P. 12,287 12,635
Enex 88-89 Income and Retirement Fund - Series 3, L.P. 10,993 11,370
Enex 88-89 Income and Retirement Fund - Series 4, L.P. 10,455 10,909
</TABLE>
The Partnerships reimburse the General Partner for administrative costs
incurred on their behalf. Administrative costs allocated to the Partnerships 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. The General Partner believes that these amounts are less than
administrative charges customarily charged other partnerships because the
General Partner manages 34 other partnerships and is, therefore, able to
allocate such similar charges over a larger base of partnerships.
Additional information regarding transactions between the Partnerships
and the General Partner is hereby incorporated by reference to Item 7 -
Financial Statements and Supplemental Data to each Partnership's Annual Report
on Form 10-KSB for the year ended December 31, 1996.
15
<PAGE>
Dissenters' Rights
Limited Partners will not have, nor be entitled to, any dissenters' or
appraisal rights with respect to the proposals under the Partnership Agreements
or under applicable law. Generally, in the absence of a breach of the General
Partner's fiduciary duty (i.e., to act fairly and in the best interests of the
Partnerships and their Limited Partners), Limited Partners who object to the
proposed dissolution and liquidation will have no remedy available to them under
state law or under the Partnership Agreements if the percentage of Units needed
to approve the proposal vote for it (see "Record Date, Voting and Security
Ownership of Certain Beneficial Owners and Management" above).
Federal Income Tax Consequences
In general, the General Partner believes that, with respect to
individuals who are citizens or residents of the United States, for federal
income tax purposes the proposed liquidation of each Partnership's assets will
result in a capital loss to the Limited Partners of each Partnership. In
addition to the capital loss, each Partnership will have a net operating loss
from the Partnership's current year of operation which will be deductible.
However, if a Limited Partner owns his interest in an IRA, Keogh or other
tax-exempt account, he will not be able to utilize the capital loss or the net
operating loss. The forgiveness of any indebtedness by the General Partner will
constitute ordinary income to the Limited Partners of such Partnership; however,
even with this income, the General Partner anticipates that each Partnership
will have a net operating loss for 1997.
If the consideration received in liquidation is equal to the estimated
fair market value of the Partnerships' assets, the General Partner believes that
the Limited Partners will have a 1997 loss (net of forgiveness of debt) per $500
Unit of limited partnership interest outstanding approximately equal to the
amounts shown below:
1997 Loss
Per $500 Unit
Enex Oil & Gas Income Program IV - Series 3, L.P. $99.09
Enex 88-89 Income and Retirement Fund - Series 1, L.P. $136.74
Enex 88-89 Income and Retirement Fund - Series 2, L.P. $205.12
Enex 88-89 Income and Retirement Fund - Series 3, L.P. $204.40
Enex 88-89 Income and Retirement Fund - Series 4, L.P. $183.52
Limited Partners of Enex Oil & Gas Income Program IV - Series 3, L.P.
may also have suspended passive losses from prior years which may be utilized in
the current year to offset income from other sources.
A Limited Partner of Enex Oil & Gas Income Program IV - Series 3, L.P.
also has available for use in the current year a passive loss of $285.87 per
$500 Unit of limited partnership interest generated prior to 1997 if he or she
is an original investor and has never utilized any of the Partnership's passive
losses in prior years. To calculate a Limited Partner's passive loss, he must
determine the number of $500 Units he owns by dividing his original investment
by $500. This number multiplied by $285.87 will determine his or her passive
loss. If the proposal is adopted, an original investor in Enex Oil & Gas Income
Program IV - Series 3, L.P. who has not utilized passive losses in prior years,
may use such passive loss amount in the current year to offset income from other
sources.
Enex 88-89 Income and Retirement Fund - Series 1, L.P., Series 2, L.P.,
Series 3, L.P., and Series 4, L.P. own solely royalty interests in oil and gas
properties, and all losses generated prior to 1997 for these partnerships were
utilizable by the limited partners in the year the loss was generated.
Accordingly, these Partnerships have no suspended losses.
The actual tax consequences to any Limited Partner will depend on the
Limited Partner's own tax circumstances. No legal opinion concerning the tax
consequences of the proposed transactions has been obtained by the General
Partner. The foregoing discussion of the potential federal income tax
consequences of the proposed liquidation of the Partnerships has been prepared
by Robert E. Densford, Vice President-Finance, Secretary and Treasurer of the
General Partner and
16
<PAGE>
James A. Klein, Controller of the General Partner, both of whom are certified
public accountants. NEVERTHELESS, EACH LIMITED PARTNER SHOULD CONSULT HIS OR HER
OWN TAX ADVISER WITH RESPECT TO THE TAX CONSEQUENCES OF THE PROPOSED
TRANSACTIONS.
Description of Business
The Partnerships were formed under the New Jersey Uniform Limited
Partnership Law (1976). The Partnerships are engaged in the oil and gas business
through the ownership of various interests in producing oil and gas properties.
For further information, see Item 1 of each Partnership's 1996 Form 10-KSB
accompanying this Proxy Statement.
Description of Property and Oil and Gas Reserves
A summary of each Partnership's property acquisitions and quantitative
information regarding the Partnership's oil and gas reserves is included in Item
2 of each Partnership's 1996 Form 10-KSB accompanying this Proxy Statement and
in Table D. Certain oil and gas property reserve information is also included in
Tables B, B-1 and C attached hereto. Included in this information are fair
market valuations of the properties of each Partnership prepared by Gruy. Gruy
has been preparing reserve estimates for each of the Partnership's oil and gas
reserves since the inception of each Partnership's operations. Gruy was selected
by the General Partner for this task based upon its reputation, experience and
expertise in this area. Gruy is an international petroleum consulting firm with
offices in Houston and Dallas, Texas. Their staff includes petroleum engineers
and geology consultants. Services they provide include reserve estimates, fair
value appraisals, geologic studies, expert witness testimony and arbitration.
Valuation of Oil and Gas Properties
Gruy has estimated for each oil and gas property in which the
Partnerships own interests, as of December 31, 1996, the recoverable units of
oil and gas and the undiscounted and discounted future net cash flows by year
commencing January 1, 1997 and continuing through the estimated productive lives
of the properties. The Limited Partners should be aware that the reserves
estimated by Gruy are estimates only and should not be construed as being exact
amounts. Gruy estimated each Partnership's oil and gas reserves and applied
certain assumptions described below regarding price and cost escalations. Future
cash flow by year was calculated for each property. The future annual cash flows
were then discounted at 10% for time using mid-year discounting. The 10%
discount factor, as used by Gruy, is considered to be the industry standard for
valuing oil and gas properties. Additionally, it is the standard promulgated by
the Securities and Exchange Commission for the valuation of oil and gas
properties. Following the time value discounting described above, a risk factor
was then applied by Gruy to the total discounted cash flow of each property. The
risk factor was applied for each reserve type and ownership type. The risk
factor is applied by Gruy to the extent it determines appropriate based on its
considerations of the particular location, type of interest, category of
reserves and operational characteristics of such reserves. The risk factors
applied to proved producing reserves ranged from a low of 66.0% to a high of
72.4% where Partnership properties consisted of working interests and net
profits interests and from 74.6% to 75.9% where properties consisted of
overriding royalty interests. See attached Table B-1 for a list of properties,
the various risk factors applied to each property, and the Partnerships which
own the property. Gruy allocated the estimates among the Partnerships on a
pro-rata basis in accordance with their respective ownership interest in each of
the properties evaluated. See Tables C and D. The resulting value for each
Partnership is included in Table 1 and in Table B and is labeled Fair Market
Value of Oil and Gas Reserves.
Future net revenues were estimated by Gruy using an oil price of $20.75
per barrel and gas prices ranging from $1.15 per mcf to $2.65 per mcf, such gas
prices representing average prices received over the last 12 months in each
field or property. Future operating costs and capital expenditures were
estimated by the General Partner and utilized by Gruy in the future cash flow
estimates. Prices and costs were escalated as follows: Oil prices were escalated
2.65% in 1998, 3.52% in 1999, 3.49% in 2000, 3.55% in 2001, and 3.5% each year
thereafter to a maximum of $34.00 per barrel. Natural gas prices were escalated
1.33% in 1998, 3.51% in 1999, 3.39% in 2000, 3.60% in 2001, and 3.5% thereafter
17
<PAGE>
to a maximum of $3.70 per thousand cubic feet. Operating expenses and future
capital investments were escalated at the rate of 3.5% per year until the year
in which the primary product reached its maximum price.
According to Gruy, there are basically two approaches for the
estimation of the fair market value of oil and gas properties; the income
approach and the market data approach. The income approach requires the
estimation of reserves, identification of their categories (proved, probable and
possible), a detailed cash flow projection and the proper application of risk
factors. The market data approach utilizes comparable sales of properties in the
area. Fair market values were estimated using the income approach as opposed to
the market data approach because it is difficult to identify sales of oil and
gas properties that are comparable in net reserves, product prices, location,
operating expenses and operator expertise. For proved producing properties, the
estimated discounted future net revenue was reduced to a fair market value by
multiplying by a suitable fraction that accounts for the risk associated with
such an investment. The fair market value method is considered to more
accurately value all types of properties as compared to the net present value
method. The net present value method, where the cash flow stream is discounted
at some rate higher than the weighted cost of capital, tends to undervalue
long-life properties and overvalue short-life properties.
Principal Executive Offices and Telephone Number
The principal executive offices and telephone number of each Partnership
are as follows: c/o Enex Resources Corporation, Three Kingwood Place, Suite 200,
800 Rockmead Drive, Kingwood, Texas 77339, attention Corporate Secretary,
telephone: (281) 358-8401.
Information Concerning the General Partner
Enex was incorporated on August 17, 1979 in Colorado. On June 30, 1992,
Enex reincorporated in Delaware. Enex is engaged in the business of acquiring
interests in producing oil and gas properties and managing oil and gas income
limited partnerships. Enex's operations are concentrated in this single industry
segment.
Enex's principal executive offices are maintained at 800 Rockmead
Drive, Three Kingwood Place, Kingwood, Texas 77339. The telephone number at
these offices is (281) 358-8401. Enex has no regional offices.
OTHER MATTERS
Other Business
As of the date of this Proxy Statement, the only business which the
General Partner intends to present at the Special Meetings are the matters set
forth in the accompanying Notice of Special Meetings. The General Partner has no
knowledge of any other business to be presented at the Special Meetings. If
other business consisting of matters of which the General Partner has no current
knowledge or matters incident to the conduct of a Special Meeting is brought
before a Special Meeting, the persons named in the enclosed form of proxy will
vote according to their discretion.
Representatives of Deloitte & Touche LLP are expected to be present at
the Special Meetings. They will have the opportunity to make a statement if they
so desire and will be available to respond to appropriate questions.
DOCUMENTS INCORPORATED BY REFERENCE
This Proxy Statement incorporates by reference the following documents
which have been filed by each Partnership with the Commission:
18
<PAGE>
(1) Each Partnership's Annual Report on Form 10-KSB for the year
ended December 31, 1996, copies of which accompany this Proxy
Statement;
The Proxy Statement specifically incorporates herein by reference the
information set forth in the following sections contained in each Partnership's
Annual Report on Form 10-KSB: Item 1-Business; Item 2-Properties; Item 3- Legal
Proceedings; Item 5-Market for Common Equity and Related Security Holder
Matters; Item 6-Management's Discussion and Analysis of Results of Operations
and Financial Condition; and Item 7-Financial Statements and Supplementary Data.
By Order of the Board of Directors
of the General Partner
ROBERT E. DENSFORD
Vice President-Finance,
Secretary and Treasurer
19
<PAGE>
<TABLE>
<CAPTION>
TABLE A
Selected Financial Data Enex Oil & Gas Income
Program IV - Series 3, L.P.
-----------------------------------------------------
Year ended
December 31,
-----------------------------------------------------
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Total revenues $158,257 $117,994 $292,260 $259,991
Net (loss) ($514,423) ($15,990) ($159,910) ($279,442)
Net (loss) per $500 unit ($85) ($3) ($29) ($47)
Cash flow from operations $10,842 $5,214 $178,248 $61,230
Cash flow from operations per $500 unit $2 $1 $29 $10
Limited Partners' capital (deficit) ($13,447) $505,968 $546,510 $782,974
Limited Partners' capital (deficit) per $500 unit ($2) $83 $90 $129
Cash distributions to Limited Partners - $22,282 $62,872 $56,873
Cash distributions to Limited Partners per $500 unit - $4 $10 $9
Debt payable to general partner $55,180 $85,800 $106,486 $162,282
Total debt $87,193 $114,169 $155,623 $223,256
</TABLE>
<TABLE>
<CAPTION>
TABLE A
Selected Financial Data
Enex 88-89 Income & Retirement
Fund-Series 1, L.P.
-----------------------------------------------------
Year ended
December 31,
-----------------------------------------------------
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Total revenues $45,540 $36,385 $96,831 $109,677
Net (loss) ($325,307) ($39,273) ($24,899) ($98,953)
Net (loss) per $500 unit ($90) ($11) ($7) ($30)
Cash flow from operations $2,851 $3,902 $72,136 $76,998
Cash flow from operations per $500 unit $1 $1 $20 $21
Limited Partners' capital (deficit) ($25,117) $302,419 $349,914 $444,760
Limited Partners' capital (deficit) per $500 unit ($7) $84 $97 $123
Cash distributions to Limited Partners - $6,840 $69,947 $79,076
Cash distributions to Limited Partners per $500 unit - $2 $19 $22
Debt payable to general partner $86,431 $101,631 $121,735 $117,337
Total debt $88,916 $104,133 $124,785 $118,501
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE A
Selected Financial Data Enex 88-89 Income & Retirement
Fund - Series 2, L.P.
-----------------------------------------------------
Year ended
December 31,
-----------------------------------------------------
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Total revenues $24,079 $22,555 $34,264 $29,847
Net income (loss) ($284,164) ($8,412) ($121,166) ($140,242)
Net income (loss) per $500 unit ($92) ($3) ($39) ($46)
Cash flow from operations $1,413 ($436) $29,727 $20,622
Cash flow from operations per $500 unit $0 $0 $10 $7
Limited Partners' capital (deficit) ($134,892) $150,106 $163,349 $307,970
Limited Partners' capital (deficit) per $500 unit ($44) $48 $53 $99
Cash distributions to Limited Partners - $3,958 $21,935 $22,376
Cash distributions to Limited Partners per $500 unit - $1 $7 $7
Debt payable to general partner $155,870 $162,401 $174,344 $162,061
Total debt $158,010 $164,000 $177,167 $162,976
</TABLE>
<TABLE>
<CAPTION>
TABLE A
Selected Financial Data Enex 88-89 Income & Retirement
Fund - Funde- Series.3, L.P.
-----------------------------------------------------
Year ended
December 31,
-----------------------------------------------------
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Total revenues $40,352 $35,495 $45,980 $48,119
Net income (loss) ($245,531) $96 ($90,585) ($146,837)
Net income (loss) per $500 unit ($72) $0 ($27) ($44)
Cash flow from operations $5,398 ($1,734) $34,332 ($29,204)
Cash flow from operations per $500 unit $2 ($1) $10 ($9)
Limited Partners' capital (deficit) ($45,881) $202,291 $209,046 $328,747
Limited Partners' capital (deficit) per $500 unit ($13) $59 $61 $96
Cash distributions to Limited Partners - $4,525 $26,273 $29,204
Cash distributions to Limited Partners per $500 unit - $1 $8 $9
Debt payable to general partner $95,435 $111,254 $140,539 $135,559
Total debt $97,166 $112,849 $143,401 $136,533
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE A
Selected Financial Data Enex 88-89 Income & Retirement
Fund - Series 4, L.P.
-----------------------------------------------------
Year ended
December 31,
-----------------------------------------------------
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Total revenues $51,886 $42,536 $63,887 $28,405
Net (loss) ($218,333) ($1,658) ($89,707) ($103,530)
Net (loss) per $500 unit ($60) ($0) ($25) ($29)
Cash flow from operations $6,750 ($541) $34,483 $24,406
Cash flow from operations per $500 unit $2 $0 $9 $7
Limited Partners' capital (deficit) ($1,668) $220,447 $230,320 $351,069
Limited Partners' capital (deficit) per $500 unit ($0) $60 $63 $96
Cash distributions to Limited Partners - $4,633 $94,452 $27,552
Cash distributions to Limited Partners per $500 unit - $1 $26 $7
Debt payable to general partner $81,461 $108,048 $143,307 $150,295
Total debt $83,790 $110,404 $146,634 $151,944
</TABLE>
<PAGE>
TABLE B
<TABLE>
<CAPTION>
Oil and gas reserves Enex Oil & Gas Income
Program IV - Series 3, L.P.
----------------------------------------------------------
At December 31,
-------------------------------------------------------
1996 1995 1994 1993
Proved Reserves:
<S> <C> <C> <C> <C>
Oil (bbls) 6,303 13,241 17,512 24,439
Oil (bbls) per $500 unit 1 2 3 4
Gas (mcf) 16,266 279,759 336,916 359,087
Gas (mcf) per $500 unit 2 41 50 53
Estimated future net cash flows $138,684 $735,530 $663,244 $945,469
Estimated future net cash flows per $500 unit $23 $121 $109 $156
Discounted (at 10%) future net cash flows $120,508 $582,866 $549,817 $756,548
Discounted (at 10%) future net cash
flows per $500 unit $20 $96 $90 $124
Fair market value of oil and gas reserves $52,520
Fair market value of oil
and gas reserves per $500 unit $9
</TABLE>
TABLE B
<TABLE>
<CAPTION>
Oil and gas reserves Enex 88-89 Income & Retirement
Fund - Series 1, L.P.
------------------------------------------------------
At December 31,
------------------------------------------------------
1996 1995 1994 1993
Proved Reserves:
<S> <C> <C> <C> <C>
Oil (bbls) 2,255 7,286 8,001 9,311
Oil (bbls) per $500 unit 1 2 2 2
Gas (mcf) 75,388 295,695 335,946 360,412
Gas (mcf) per $500 unit 19 74 84 90
Estimated future net cash flows $292,569 $654,570 $598,589 $995,458
Estimated future net cash flows per $500 unit $81 $182 $166 $276
Discounted (at 10%) future net cash flows $217,921 $361,969 $364,469 $596,231
Discounted (at 10%) future net cash
flows per $500 unit $60 $100 $101 $165
Fair market value of oil and gas reserves $98,850
Fair market value of oil
and gas reserves per $500 unit $27
</TABLE>
TABLE B
<TABLE>
<CAPTION>
Oil and gas reserves Enex 88-89 Income & Retirement
Fund - Series 2, L.P.
----------------------------------------------------------
At December 31,
-------------------------------------------------------
1996 1995 1994 1993
Proved Reserves:
<S> <C> <C> <C> <C>
Oil (bbls) 2,340 5,380 6,194 7,889
Oil (bbls) per $500 unit 1 2 2 2
Gas (mcf) 10,335 152,019 179,883 193,647
Gas (mcf) per $500 unit 3 44 52 56
Estimated future net cash flows $67,026 $375,329 $326,472 $462,847
Estimated future net cash flows per $500 unit $22 $121 $105 $149
Discounted (at 10%) future net cash flows $53,793 $294,809 $270,561 $370,427
Discounted (at 10%) future net cash
flows per $500 unit $17 $95 $87 $120
Fair market value of oil and gas reserves $23,849
Fair market value of oil
and gas reserves per $500 unit $8
</TABLE>
TABLE B
<TABLE>
<CAPTION>
Oil and gas reserves Enex 88-89 Income & Retirement
Fund - Series 3, L.P.
------------------------------------------------------
At December 31,
------------------------------------------------------
1996 1995 1994 1993
Proved Reserves:
<S> <C> <C> <C> <C>
Oil (bbls) 4,876 7,620 8,254 9,998
Oil (bbls) per $500 unit 1 2 2 3
Gas (mcf) 19,486 148,547 173,824 187,344
Gas (mcf) per $500 unit 5 39 46 49
Estimated future net cash flows $144,895 $391,293 $332,598 $451,613
Estimated future net cash flows per $500 unit $42 $115 $97 $132
Discounted (at 10%) future net cash flows $110,882 $306,500 $275,782 $362,893
Discounted (at 10%) future net cash
flows per $500 unit $32 $90 $81 $106
Fair market value of oil and gas reserves $52,159
Fair market value of oil
and gas reserves per $500 unit $15
</TABLE>
TABLE B
<TABLE>
<CAPTION>
Enex 88-89 Income & Retirement
Oil and gas reserves Fund - Series 4, L.P.
-------------------------------------------------------
At December 31,
-------------------------------------------------------
1996 1995 1994 1993
Proved Reserves:
<S> <C> <C> <C> <C>
Oil (bbls) 5,524 7,979 9,417 12,875
Oil (bbls) per $500 unit 1 2 2 3
Gas (mcf) 93,757 179,012 200,633 205,307
Gas (mcf) per $500 unit 23 44 50 50
Estimated future net cash flows $294,355 $392,657 $354,103 $487,614
Estimated future net cash flows per $500 unit $81 $108 $97 $134
Discounted (at 10%) future net cash flows $211,952 $310,904 $294,689 $394,412
Discounted (at 10%) future net cash
flows per $500 unit $58 $85 $81 $108
Fair market value of oil and gas reserves $81,706
Fair market value of oil
and gas reserves per $500 unit $22
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE B-1
Enex Oil & Gas Income Program IV - Series 3, L.P.
Reserve Type of Discounted (@ 10%) Risk Fair Market
Property Name Category(1) Interest(2) Net Cash Flows Factors(3) Value
<S> <C> <C> <C>
Bagley PDP WI $ 40,051 .72408 $ 29,000
Brighton PDP WI $ 33,336 .70554 $ 23,520
Lake Decade PDP WI $ 4,797 - $ 0
Total $ 52,520
Enex 88-89 Income and Retirement Fund - Series 1, L.P.
Reserve Type of Discounted (@ 10%) Risk Fair Market
Property Name Category(1) Interest(2) Net Cash Flows Factors(3) Value
Corinne PDP ORRI $ 103,695 .75944 $ 78,750
Byrum B PDP ORRI $ 6,837 .74594 $ 5,100
Bagley PDP NPI $ 20,716 .72407 $ 15,000
Lake Decade PDP NPI $ 1,199 - $ 0
Total $ 98,850
Enex 88-89 Income and Retirement Fund - Series 2, L.P.
Reserve Type of Discounted (@ 10%) Risk Fair Market
Property Name Category(1) Interest(2) Net Cash Flows Factors(3) Value
Byrum B PDP ORRI $ 6,636 .74593 $ 4,950
Bagley PDP NPI $ 11,049 .72405 $ 8,000
Elmac PDP NPI $ 16,515 .65995 $ 10,899
Lake Decade PDP NPI $ 2,549 - $ 0
Total $ 23,849
Enex 88-89 Income and Retirement Fund - Series 3, L.P.
Reserve Type of Discounted (@ 10%) Risk Fair Market
Property Name Category(1) Interest(2) Net Cash Flows Factors(3) Value
Byrum B PDP ORRI $ 6,636 .74593 $ 4,950
Bagley PDP NPI $ 11,739 .72408 $ 8,500
Elmac PDP NPI $ 58,655 .65994 $ 38,709
Lake Decade PDP NPI $ 2,399 - $ 0
Total $ 52,159
Enex 88-89 Income and Retirement Fund - Series 4, L.P.
Reserve Type of Discounted (@ 10%) Risk Fair Market
Property Name Category(1) Interest(2) Net Cash Flows Factors(3) Value
Lake Decade PDP NPI $ 2,174 - $ 0
Bagley PDP NPI $ 12,430 .72405 $ 9,000
Elmac PDP NPI $ 26,830 .65993 $ 17,706
Speary PDP NPI $ 75,938 .72428 $ 55,000
Total $ 81,706
</TABLE>
(1) PDP = proved developed producing reserves
(2) WI = working interest
ORRI = overriding royalty interest
NPI = net profit royalty interest
(3) Risk factors were determined by H.J. Gruy and Associates and consider
risk, location, type of interest, category of reserves and
operational characteristics of each property.
<PAGE>
TABLE C
PROPERTY DETAIL
<TABLE>
<CAPTION>
Working Interest %*
-------------------------------------------
Acquisition State Field Operator Name Well Name Type 403 521 522 523 524
<S> <C> <C> <C> <C> <C>
Corinne MS Corinne Samson Resources Co. Dabbs 4-2 GAS
Corinne MS Corinne Samson Resources Co. Dabbs RT 01 GAS
Corinne MS Corinne Samson Resources Co. Dabbs RT 02 GAS
Corinne MS Corinne Samson Resources Co. Dabbs RT 2-2 GAS
Corinne MS Corinne Samson Resources Co. Dabbs Richardson 6-2 GAS
Corinne MS Corinne Samson Resources Co. Duke 13-3 OIL
Corinne MS Corinne Samson Resources Co. Gore Heirs Unit 1-12 GAS
Corinne MS Corinne Samson Resources Co. Richardson 4-2 GAS
Corinne MS Corinne Samson Resources Co. Richardson T A 02 GAS
Corinne MS Corinne Samson Resources Co. Richardson T A 04 GAS
Corinne MS Corinne Samson Resources Co. Richardson T A 5-1 & 5-2 GAS
Corinne MS Corinne Samson Resources Co. Richardson T A 06 GAS
Corinne MS Corinne Samson Resources Co. Scott Turner Unit GAS
Speary TX Speary Enex Resources Corp Bessie Hackney Gas Unit GAS
Speary TX Speary Enex Resources Corp John A Hackney GAS
Speary TX Speary Enex Resources Corp Landgrebe Leroy OIL
Speary TX Speary Enex Resources Corp Lyons Unit 1 OIL
Speary TX Speary Enex Resources Corp Wessendorff Joe C 01 OIL
Bryum B MI Onondaga Global Nat'l Resources Byrum 1-28 OIL
Brighton MI Brighton Global Nat'l Resources Caid 1-11 OIL 6.30000
Brighton MI Brighton Global Nat'l Resources Swan 1-11 OIL 7.45500
Lake Decade LA Lake Decade Southwestern Energy Fina Fee 06 GAS 1.94100
Elmac Hills MI Charlton Don Yohe Enterprises Elmac Hills 1-19 OIL 0.84406 2.99780 1.37122
Elmac Hills MI Charlton Don Yohe Enterprises Elmac Hills 1-18 OIL
Elmac Hills MI Charlton Don Yohe Enterprises Elmac Hills 2-18 OIL
Bagley MI Bagley Terra Energy Limited Bagley Unit OIL 4.31608 2.23245 1.19064 1.26506 1.33947
</TABLE>
============================
* "403" refers to Enex Oil & Gas Income Program IV - Series 3, L. P.
"521" refers to Enex 88-89 Income and Retirement Fund - Series 1, L. P.
"522" refers to Enex 88-89 Income and Retirement Fund - Series 2, L.P.
"523" refers to Enex 88-89 Income and Retirement Fund - Series 3, L. P.
"524" refers to Enex 88-89 Income and Retirement Fund - Series 4, L.P.
<PAGE>
<TABLE>
<CAPTION>
TABLE C
PROPERTY DETAIL
Revenue Interest %*
---------------------------------------------
Acquisition State Field Operator Name Well Name Type 403 521 522 523 524
<S> <C> <C> <C> <C>
Corinne MS Corinne Samson Resources Co. Dabbs 4-2 GAS 0.05127
Corinne MS Corinne Samson Resources Co. Dabbs RT 01 GAS 0.05127
Corinne MS Corinne Samson Resources Co. Dabbs RT 02 GAS 0.82032
Corinne MS Corinne Samson Resources Co. Dabbs RT 2-2 GAS 0.82032
Corinne MS Corinne Samson Resources Co. Dabbs Richardson 6-2 GAS 1.73668
Corinne MS Corinne Samson Resources Co. Duke 13-3 OIL 0.8203125
Corinne MS Corinne Samson Resources Co. Gore Heirs Unit 1-12 GAS 0.410158
Corinne MS Corinne Samson Resources Co. Richardson 4-2 GAS 2.606772
Corinne MS Corinne Samson Resources Co. Richardson T A 02 GAS 0.893228
Corinne MS Corinne Samson Resources Co. Richardson T A 04 GAS 2.606775
Corinne MS Corinne Samson Resources Co. Richardson T A 5-1 & 5-2 GAS 3.57292
Corinne MS Corinne Samson Resources Co. Richardson T A 06 GAS 1.73689
Corinne MS Corinne Samson Resources Co. Scott Turner Unit GAS 0.82031
Speary TX Speary Enex Resources Corp Bessie Hackney Gas Unit GAS 7.73598
Speary TX Speary Enex Resources Corp John A Hackney GAS 7.85660
Speary TX Speary Enex Resources Corp Landgrebe Leroy OIL 8.03400
Speary TX Speary Enex Resources Corp Lyons Unit 1 OIL 7.72500
Speary TX Speary Enex Resources Corp Wessendorff Joe C 01 OIL 7.70000
Bryum B MI Onondaga Global Nat'l Resources Byrum 1-28 OIL 1.02000 0.99000 0.99000
Brighton MI Brighton Global Nat'l Resources Caid 1-11 OIL 5.5125
Brighton MI Brighton Global Nat'l Resources Swan 1-11 OIL 6.49032
Lake Decade LA Lake Decade Southwestern Energy Fina Fee 06 GAS 1.38146 0.345366 0.73390 0.69073 0.62597
Elmac Hills MI Charlton Don Yohe Enterprises Elmac Hills 1-19 OIL 0.66435 2.35953 1.07928
Elmac Hills MI Charlton Don Yohe Enterprises Elmac Hills 1-18 OIL
Elmac Hills MI Charlton Don Yohe Enterprises Elmac Hills 2-18 OIL
Bagley MI Bagley Terra Energy Limited Bagley Unit OIL 3.611799 1.86816 0.99636 1.05863 1.120905
</TABLE>
============================
* "403" refers to Enex Oil & Gas Income Program IV - Series 3, L. P.
"521" refers to Enex 88-89 Income and Retirement Fund - Series 1, L. P.
"522" refers to Enex 88-89 Income and Retirement Fund - Series 2, L.P.
"523" refers to Enex 88-89 Income and Retirement Fund - Series 3, L. P.
"524" refers to Enex 88-89 Income and Retirement Fund - Series 4, L.P.
<PAGE>
TABLE D
GROSS AND NET PRODUCTIVE OIL AND GAS WELLS
AS OF December 31, 1996
<TABLE>
<CAPTION>
RODUCTIVE OIL WELLS(1) PRODUCTIVE GAS WELLS(1)
--------------------------------- ------------------------------
NET WORKING NET NET WORKING NET
PARTNERSHIP GROSS INTEREST ROYALTY GROSS INTEREST ROYALTY
WELLS(2) WELLS WELLS WELLS(2) WELLS WELLS
<S> <C> <C> <C> <C> <C>
Enex Oil & Gas Income Program IV-Series 3, L.P. 9 0.442 - 2 0.047 -
Enex 88-89 Inc. & Ret. Fund - Series 1, L.P. 9 - 0.175 17 - 0.256
Enex 88-89 Inc. & Ret. Fund - Series 2, L.P. 11 - 0.119 5 - 0.047
Enex 88-89 Inc. & Ret. Fund - Series 3, L.P. 11 - 0.189 5 - 0.036
Enex 88-89 Inc. & Ret. Fund - Series 4, L.P. 14 - 0.536 7 - 0.153
</TABLE>
(1) Productive wells are producing wells and wells capable of production,
including shut-in wells. A gross well is a well in which an an interest is held.
The number of gross wells is the total number of wells in which an interest is
owned. A net working interest (W.I.) well is deemed to exist when the sum of the
fractional ownership interests in gross W.I. wells equals one. The number of net
W.I. wells is the sum of the fractional interests owned in gross W.I. wells,
expressed as whole numbers and fractions thereof. A net royalty well is deemed
to exist when the sum of gross royalty wells equals one. The number of net
royalty wells is the sum of the fractional owned in gross royalty wells,
expressed as whole numbers and fractions thereof.
(2) Totals for gross wells have been reduced to adjust for ownership by more
than one Partnership.
GROSS AND NET PRODUCTIVE ACREAGE
AND UNDEVELOPED ACREAGE(1)
<TABLE>
<CAPTION>
DEVELOPED (2) DEVELOPED (2)
WORKING INTEREST ROYALTY
ACREAGE(3) ACREAGE (3)
--------------------------- -----------------------
GROSS NET GROSS NET
PARTNERSHIP ACRES(4) ACRES ACRES(4) ACRES
<S> <C> <C> <C>
Enex Oil & Gas Income Program IV-3, L.P. 1,824 68.57 - -
Enex 88-89 Inc. & Ret. Fund - Series 1, L.P. - - 4,465 69.76
Enex 88-89 Inc. & Ret. Fund - Series 2, L.P. - - 2,785 30.26
Enex 88-89 Inc. & Ret. Fund - Series 3, L.P. - - 2,785 33.07
Enex 88-89 Inc. & Ret. Fund - Series 4, L.P. - - 3,457 112.98
</TABLE>
(1) The Partnerships have no undeveloped acreage.
(2) Developed acres are acres spaced or assigned to productive wells.
(3) A gross acre is an acre in which an interest is owned. The number of gross
acres is the total number of acres in which such interest is owned a net working
interest acre is deemed to exist when the sum of fractional ownership of working
interests owned in gross acres equals one. The number of net working interest
acres is the sum of fractional working interests owned in gross acres expressed
in whole numbers and fractions thereof. A net royalty acre is deemed to exist
when the sum of fractional ownership of royalty interests owned in gross acres
equals one. The number of net royalty acres is the sum of fractional royalty
interests owned in gross acres expressed as whole numbers and fractions thereof.
(4) Totals for gross acres have been reduced to adjust for ownership by more
than one Partnership.
<PAGE>
TABLE E
General and Administrative Charges
<TABLE>
<CAPTION>
Partnership 1995 1996 1997 Estimated 1998 Estimated
---------------------- ------------------------ ------------------------- ----------------------
Number Direct Costs Total Direct Costs Total Direct Costs Total Direct Costs Total
(1) (2) (2) (2) (2)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
403 $2,018 $19,747 $7,937 $25,158 $8,731 $27,674 $9,604 $30,441
521 $1,991 $17,990 $3,036 $19,233 $3,340 $21,156 $3,674 $23,272
522 $862 $13,149 $2,601 $15,236 $2,861 $16,760 $3,147 $18,436
523 $776 $11,769 $2,171 $13,541 $2,388 $14,895 $2,627 $16,385
524 $1,897 $12,352 $2,881 $10,909 $3,169 $12,000 $3,486 $13,200
</TABLE>
(1) See Table C for partnership names.
(2) Direct costs consist of tax preparation, audit and Securities Exchange
Commission filing fees.
<PAGE>
- ---------------------------
ENEX
- ---------------------------
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 1, L.P.
Three Kingwood Place
Suite 200
800 Rockmead Drive
Kingwood, Texas 77339
PROXY FOR SPECIAL MEETING OF LIMITED PARTNERS
TO BE HELD
xxxxxx xx, 1997
The undersigned hereby appoints GERALD B. ECKLEY, WILLIAM C. HOOPER, JR.
and ROBERT E. DENSFORD, and each or any of them, attorneys and proxies, with
full power of substitution, and authorizes them to vote all interests of Enex
88-89 Income and Retirement Fund - Series 1, L.P., held of record by the
undersigned on xxxxxx xx, 1997, at the Special Meeting of Limited Partners to be
held on xxxxxx xx, 1997, and any adjournments thereof, hereby revoking all
previous proxies, with all powers the undersigned would possess if present, on
all matters mentioned in the Notice of Special Meeting dated xxxxxx xx, 1997, as
follows:
INSTRUCTIONS: MARK ONLY ONE BOX FOR EACH NUMBERED MATTER
(1) To dissolve and liquidate Enex 88-89 Income and Retirement Fund -
Series 1, L.P., a New Jersey limited partnership.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(2) In their discretion, to vote upon such other business as may
properly come before the Meeting or any adjournments thereof.
22
<PAGE>
Please mark, date, sign and return this Proxy promptly, using the
enclosed envelope.
Dated , 1997
-------------------------------------
Month Day
Signature
Signature
Please sign exactly as name appears
hereon, indicating official position
or representative capacity, if any.
I plan to attend the meeting.
Yes [ ] No [ ]
THIS PROXY IS SOLICITED ON BEHALF OF THE GENERAL PARTNER
OF THE PARTNERSHIP
23
