United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
[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 0-17558
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 2, L.P.
(Exact name of registrant as specified in its Charter)
New Jersey 76-0251416
(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
<TABLE>
<CAPTION>
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 2, L.P.
BALANCE SHEET
- --------------------------------------------------------------------------
MARCH 31,
ASSETS 1997
---------------------
(Unaudited)
CURRENT ASSETS:
<S> <C>
Cash $ 3,224
Accounts receivable - oil & gas sales 7,646
---------------------
Total current assets 10,870
---------------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests 1,374,397
Less accumulated depletion 1,358,958
---------------------
Property, net 15,439
---------------------
TOTAL $ 26,309
=====================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 1,160
Payable to general partner 155,428
---------------------
Total current liabilities 156,588
---------------------
PARTNERS' CAPITAL (DEFICIT):
Limited partners (132,917)
General partner 2,638
---------------------
Total partners' capital (deficit) (130,279)
---------------------
TOTAL $ 26,309
=====================
Number of $500 Limited Partner units outstanding 3,097
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------
I-1
<PAGE>
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 2, 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 $ 6,427 $ 7,839
------------------- -------------------
EXPENSES:
Depletion 1,371 1,458
Impairment of property - 286,322
Production and other taxes 14 142
General and administrative 2,695 4,016
------------------- -------------------
Total expenses 4,080 291,938
------------------- -------------------
NET INCOME (LOSS) $ 2,347 $ (284,099)
=================== ===================
</TABLE>
See accompanying notes to financial statements.
- ----------------------------------------------------------------------------
I-2
<PAGE>
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 2, 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 $ 151,538 $ 1,432 $ 150,106 $ 48
NET INCOME (LOSS) (284,164) 834 (284,998) (92)
------------------ ------------------ ------------------ ------------------
BALANCE, DECEMBER 31, 1996 (132,626) 2,266 (134,892) (44)
NET INCOME 2,347 372 1,975 1
------------------ ------------------ ------------------ ------------------
BALANCE, MARCH 31, 1997 $ (130,279) $ 2,638 $ (132,917)(1)$ (43)
================== ================== ================== ==================
</TABLE>
(1) Includes 202 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 2, 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) $ 2,347 $ (284,099)
------------------- -------------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depletion 1,371 1,458
Impairment of property - 286,322
(Increase) in:
Accounts receivable - oil & gas sales (1,363) (211)
(Decrease) in:
Accounts payable (980) (1,474)
Payable to general partner (442) (1,687)
------------------- -------------------
Total adjustments (1,414) 284,408
------------------- -------------------
NET INCREASE IN CASH 933 309
------------------- -------------------
CASH AT BEGINNING OF YEAR 2,291 878
------------------- -------------------
CASH AT END OF PERIOD $ 3,224 $ 1,187
=================== ===================
</TABLE>
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
I-4
<PAGE>
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 2, 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 $286,322 for certain
oil and gas properties due primarily to downward reserve revisions on the
Lake Decade acquisition and lower prices in the market for the sale of oil
and gas. The Lake Decade acquisition included significant reserves that
were considered "proved" but not yet developed. Due to depressed gas prices
and the unsuccessful efforts of wells drilled near the acquisition, it was
determined by the operator of the acquisition that future drillings could
not be justified. The well which was holding the lease, which had
undeveloped reserves assigned to it, was recompleted by the operator in
1996 to a zone in which the Company did not own an interest. As a result,
the lease expired and the undeveloped reserves associated with the lease
had to be written off. This was the cause of both the downward reserve
revisions in 1996 and the reserve valuation writedowns taken by the Company
in the first quarter of 1996.
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 decreased from $7,839 in 1996 to $6,427
in 1997. This represents a decrease of $1,412 (18%). Oil sales decreased by $912
or 19%. A 39% decrease in oil production reduced sales by $1,833. This decrease
was partially offset by a 33% increase in the average net oil sales price. Gas
sales decreased by $500 or 16%. A 5% decrease in the average net gas sales price
reduced sales by $132. A 12% decline in gas production reduced sales by an
additional $3,678. The declines in oil and gas production were primarily due to
natural production declines which were especially pronounced on the Bagley
acquisition. The increase in average net oil prices corresponds with higher
prices in the overall market for the sale of oil. The decrease in average net
gas price was primarily due to relatively higher operating expenses on the El
Mac acquisition from which the Company receives a net profits royalty.
Depletion expense decreased from $1,458 in the first quarter of 1996 to $1,371
in the first quarter of 1997. This represents a decrease of $87 (6%). The
changes in production, noted above, reduced depletion expense by $382. This
decrease was partially offset by a 27% increase in the depletion rate. The
increase in the depletion rate was primarily due to a downward revision of the
oil and gas reserves during December 1996.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standard ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which requires
certain assets to be reviewed for impairment whenever events or circumstances
indicate the carrying amount may not be recoverable. Prior to this
pronouncement, the Company assessed properties on an aggregate basis. Upon
adoption of SFAS 121, the Company began assessing properties on an individual
basis, wherein total capitalized costs may not exceed the property's fair market
value. The fair market value of each property was determined by H. J. Gruy and
Associates 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 $286,322 for
certain oil and gas properties due primarily to downward reserve revisions on
the Lake Decade acquisition and lower prices in the market for the sale of oil
and gas. The Lake Decade acquisition included significant reserves that were
considered "proved" but not yet developed. Due to depressed gas prices and the
unsuccessful efforts of wells drilled near the acquisition, it was determined by
the operator of the acquisition that future drillings could not be justified.
The well which was holding the lease, which had undeveloped reserves assigned to
it, was recompleted by the operator in 1996 to a zone in which the Company did
not own an interest. As a result, the lease expired and the undeveloped reserves
associated with the lease had to be written off. This was the cause of both the
downward reserve revisions in 1996 and the reserve valuation writedowns taken by
the Company in the first quarter of 1996.
General and administrative expenses decreased from $4,016 in the first quarter
of 1996 to $2,695 in the first quarter of 1997. This decrease of $1,321 (33%) 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. Based upon current projected
cash flows from the properties, 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 2, 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
June 10, 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> 0000842829
<NAME> Enex 88-89 Income & Retirement Fund-Series 2, 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> 3224
<SECURITIES> 0
<RECEIVABLES> 7646
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10870
<PP&E> 1374397
<DEPRECIATION> 1358958
<TOTAL-ASSETS> 26309
<CURRENT-LIABILITIES> 156588
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (130279)
<TOTAL-LIABILITY-AND-EQUITY> 26309
<SALES> 6427
<TOTAL-REVENUES> 6427
<CGS> 14
<TOTAL-COSTS> 1385
<OTHER-EXPENSES> 2695
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2347
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
