United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from...............to...............
Commission file number 0-17557
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 1, L.P.
(Exact name of registrant as specified in its Charter)
New Jersey 76-0251410
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 200, Three Kingwood Place
Kingwood, Texas 77339
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(713) 358-8401
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 1, L.P.
BALANCE SHEET
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31,
ASSETS 1997
---------------------
(Unaudited)
CURRENT ASSETS:
<S> <C>
Cash $ 8,055
Accounts receivable - oil & gas sales 22,897
---------------------
Total current assets 30,952
---------------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests 1,578,968
Less accumulated depletion 1,538,641
---------------------
Property, net 40,327
---------------------
TOTAL $ 71,279
=====================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 1,211
Payable to general partner 80,846
---------------------
Total current liabilities 82,057
---------------------
PARTNERS' CAPITAL (DEFICIT):
Limited partners (17,474)
General partner 6,696
---------------------
Total partners' capital (deficit) (10,778)
---------------------
TOTAL $ 71,279
=====================
Number of $500 Limited Partner units outstanding 3,605
</TABLE>
See accompanying notes to financial statements.
- ----------------------------------------------------------------------------
I-1
<PAGE>
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 1, L.P.
STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED) THREE MONTHS ENDED
------------------------------------------
MARCH 31, MARCH 31,
1997 1996
------------------- -------------------
REVENUES:
<S> <C> <C>
Oil and gas sales $ 20,693 $ 15,171
------------------- -------------------
EXPENSES:
Depletion 7,002 10,219
Impairment of property - 333,294
Production taxes 1,047 1,174
General and administrative 3,374 5,200
------------------- -------------------
Total expenses 11,423 349,887
------------------- -------------------
NET INCOME (LOSS) $ 9,270 $ (334,716)
=================== ===================
</TABLE>
See accompanying notes to financial statements.
- ---------------------------------------------------------------------------
I-2
<PAGE>
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 1, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1997
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PER $500
LIMITED
PARTNER
GENERAL LIMITED UNIT OUT-
TOTAL PARTNER PARTNERS STANDING
------------------ ------------------ ----------------- -----------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 $ 305,259 $ 2,840 $ 302,419 $ 84
NET INCOME (LOSS) (325,307) 2,229 (327,536) (91)
------------------ ------------------ ----------------- -----------------
BALANCE, DECEMBER 31, 1996 (20,048) 5,069 (25,117) (7)
NET INCOME 9,270 1,627 7,643 2
------------------ ------------------ ----------------- -----------------
BALANCE, MARCH 31, 1997 $ (10,778) $ 6,696 $ (17,474)(1) $ (5)
================== ================== ================= =================
</TABLE>
(1) Includes 437 units purchased by the general partner as a limited partner.
See accompanying notes to financial statements.
- -----------------------------------------------------------------------------
I-3
<PAGE>
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 1, L.P.
STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
------------------------------------------
MARCH 31, MARCH 31,
1997 1996
------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ 9,270 $ (334,716)
------------------- -------------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depletion 7,002 10,219
Impairment of property - 333,294
(Increase) in:
Accounts receivable - oil & gas sales (4,682) (9,734)
Increase (decrease) in:
Accounts payable (1,274) (2,245)
Payable to general partner (5,585) 3,092
------------------- -------------------
Total adjustments (4,539) 334,626
------------------- -------------------
NET INCREASE (DECREASE) IN CASH 4,731 (90)
------------------- -------------------
CASH AT BEGINNING OF YEAR 3,324 473
------------------- -------------------
CASH AT END OF PERIOD $ 8,055 $ 383
=================== ===================
</TABLE>
See accompanying notes to financial statements.
- ----------------------------------------------------------------------------
I-4
<PAGE>
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 1, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. The interim financial information included herein is unaudited;
however, such information reflects all adjustments (consisting solely
of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of results for the
interim periods.
2. The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standard ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which
requires certain assets to be reviewed for impairment whenever events or
circumstances indicate the carrying amount may not be recoverable. Prior to
this pronouncement, the Company assessed properties on an aggregate basis.
Upon adoption of SFAS 121, the Company began assessing properties on an
individual basis, wherein total capitalized costs may not exceed the
property's fair market value. The fair market value of each property was
determined by H. J. Gruy and Associates Inc., (Gruy"). To determine the
fair market value, Gruy estimated each property's oil and gas reserves,
applied certain assumptions regarding price and cost escalations, applied a
10% discount factor for time and certain discount factors for risk,
location, type of ownership interest, category of reserves, operational
characteristics, and other factors. In the first quarter of 1996, the
Company recognized a non-cash impairment provision of $333,294 for certain
oil and gas properties due to market conditions and reserve revisions on
the Lake Decade acquisition, which indicated that the carrying amounts were
not fully recoverable.
3. On April 24, 1997, the Company's General Partner submitted preliminary
proxy material to the Securities Exchange Commission with respect to a
proposed liquidation of the Company.
I-5
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
First Quarter 1997 Compared to First Quarter 1996
Oil and gas sales for the first quarter increased from $15,171 in 1996 to
$20,693 in 1997. This represents an increase of $5,522 (36%). Oil sales
decreased by $2,865 or 54%. A 56% decline in oil production reduced sales by
$2,930. This decrease was partially offset by a 5% increase in the average net
oil sales price. Gas sales increased by $8,387 or 85%. A 40% increase in the
average net gas sales price increased sales by $5,215. A 32% increase in gas
production increased sales by an additional $3,172. The decrease in oil
production was primarily the result of natural production declines, which were
especially pronounced on the Bagley acquisition. The increase in gas production
was primarily the result of a successful workover on the T.A. Richardson 6-2 in
the Corinne acquisition. The increases in the average net sales prices
correspond with higher prices in the overall market for the sale of oil and gas.
Depletion expense decreased from $10,219 in the first quarter of 1996 to $7,002
in the first quarter of 1997. This represents a decrease of $3,217 (31%). A 37%
decrease in the depletion rate reduced depletion expense by $4,067. This
decrease was partially offset by the changes in production, noted above. The
decrease in the depletion rate was primarily due to an upward revision of the
gas reserves during December 1996.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standard ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which requires
certain assets to be reviewed for impairment whenever events or circumstances
indicate the carrying amount may not be recoverable. Prior to this
pronouncement, the Company assessed properties on an aggregate basis. Upon
adoption of SFAS 121, the Company began assessing properties on an individual
basis, wherein total capitalized costs may not exceed the property's fair market
value. The fair market value of each property was determined by H. J. Gruy and
Associates Inc., (Gruy"). To determine the fair market value, Gruy estimated
each property's oil and gas reserves, applied certain assumptions regarding
price and cost escalations, applied a 10% discount factor for time and certain
discount factors for risk, location, type of ownership interest, category of
reserves, operational characteristics, and other factors. In the first quarter
of 1996, the Company recognized a non-cash impairment provision of $333,294 for
certain oil and gas properties due to market conditions and reserve revisions on
the Lake Decade acquisition, which indicated that the carrying amounts were not
fully recoverable.
General and administrative expenses decreased from $5,200 in the first quarter
of 1996 to $3,374 in the first quarter of 1997. This decrease of $1,826 (35%) is
primarily due to less staff time being required to manage the Company's
operations.
I-6
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
The Company's cash flow from operations is a direct result of the amount of net
proceeds realized from the sale of oil and gas production. Accordingly, the
changes in cash flow from 1996 to 1997 are primarily due to the changes in oil
and gas sales described above. It is the general partner's intention to
distribute substantially all of the Company's available cash flow to the
Company's partners.
The Company will continue to recover its reserves and distribute to the limited
partners the net proceeds realized from the sale of oil and gas production after
payment of its debt obligations. Distribution amounts are subject to change if
net revenues are greater or less than expected. The general partner does not
intend to accelerate the repayment of the debt beyond the cash flow provided by
operating activities. Based upon current projected cash flows from its property,
it does not appear that the Company will have sufficient cash to pay its
operating expenses, repay its debt obligations and pay distributions.
On April 24, 1997, the Company's General Partner submitted preliminary proxy
material to the Securities Exchange Commission with respect to a proposed
liquidation of the Company.
I-7
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults upon Senior Securities.
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable
Item 5. Other Information.
Not Applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) There are no exhibits to this report.
(b) The Company filed no reports on Form 8-K during the
quarter ended March 31, 1997.
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
ENEX 88-89 INCOME AND
RETIREMENT FUND - SERIES 1, L.P.
-------------------------------
(Registrant)
By:ENEX RESOURCES CORPORATION
--------------------------
General Partner
By: /s/ R. E. Densford
--------------
R. E. Densford
Vice President, Secretary
Treasurer and Chief Financial
Officer
May 11, 1997 By: /s/ James A. Klein
-------------------
James A. Klein
Controller and Chief
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000837896
<NAME> Enex 88-89 Income & Retirement Fund-Series 1, L.P.
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> dec-31-1997
<PERIOD-START> jan-01-1997
<PERIOD-END> mar-31-1997
<CASH> 8055
<SECURITIES> 0
<RECEIVABLES> 22897
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 30952
<PP&E> 1578968
<DEPRECIATION> 1538641
<TOTAL-ASSETS> 71279
<CURRENT-LIABILITIES> 82057
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (10778)
<TOTAL-LIABILITY-AND-EQUITY> 71279
<SALES> 20693
<TOTAL-REVENUES> 20693
<CGS> 1047
<TOTAL-COSTS> 8049
<OTHER-EXPENSES> 3374
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9270
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
