United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Amendment II)
[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 0-17595
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 3, L.P.
(Exact name of registrant as specified in its Charter)
New Jersey 76-0251417
(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 3, L.P.
BALANCE SHEET
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31,
ASSETS 1997
---------------------
(Unaudited)
CURRENT ASSETS:
<S> <C>
Cash $ 6,210
Accounts receivable - oil & gas sales 15,536
---------------------
Total current assets 21,746
---------------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests 1,510,573
Less accumulated depletion 1,476,777
---------------------
Property, net 33,796
---------------------
TOTAL $ 55,542
=====================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 1,081
Payable to general partner 88,580
---------------------
Total current liabilities 89,661
---------------------
PARTNERS' CAPITAL (DEFICIT):
Limited partners (40,591)
General partner 6,472
---------------------
Total partners' capital (deficit) (34,119)
---------------------
TOTAL $ 55,542
=====================
Number of $500 Limited Partner units outstanding 3,413
</TABLE>
See accompanying notes to financial statements.
- ----------------------------------------------------------------------------
I-1
<PAGE>
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 3, 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 $ 12,587 $ 11,120
------------------- -------------------
EXPENSES:
Depletion 3,670 1,372
Impairment of property - 258,758
Production taxes 20 103
General and administrative 2,611 3,637
------------------- -------------------
Total expenses 6,301 263,870
------------------- -------------------
NET INCOME (LOSS) $ 6,286 $ (252,750)
=================== ===================
</TABLE>
See accompanying notes to financial statements.
- ----------------------------------------------------------------------------
I-2
<PAGE>
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 3, 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 $ 205,126 $ 2,835 $ 202,291 $ 59
NET INCOME (LOSS) (245,531) 2,641 (248,172) (73)
------------------ ------------------ ----------------- -----------------
BALANCE, DECEMBER 31, 1996 (40,405) 5,476 (45,881) (14)
NET INCOME 6,286 996 5,290 2
------------------ ------------------ ----------------- -----------------
BALANCE, MARCH 31, 1997 $ (34,119) $ 6,472 $ (40,591)(1) $ (12)
================== ================== ================= =================
</TABLE>
(1) Includes 232 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 3, 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) $ 6,286 $ (252,750)
------------------- -------------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depletion 3,670 1,372
Impairment of property - 258,758
(Increase) in:
Accounts receivable - oil & gas sales (2,415) (900)
(Decrease) in:
Accounts payable (650) (1,483)
Payable to general partner (6,855) (5,055)
------------------- -------------------
Total adjustments (6,250) 252,692
------------------- -------------------
NET INCREASE (DECREASE) IN CASH 36 (58)
CASH AT BEGINNING OF YEAR 6,174 776
------------------- -------------------
CASH AT END OF PERIOD $ 6,210 $ 718
=================== ===================
</TABLE>
See accompanying notes to financial statements.
- -------------------------------------------------------------------------------
I-4
<PAGE>
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 3, 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, ("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 $258,758 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. Proved undeveloped reserves
were assigned to these leases based on offset production in existing wells
and on geologic mapping of the existing wells north of the producing wells.
Enex and its affiliated entities owned less than 10% of this acquisition.
The other working interest owners which held the remaining interest in the
acquisition, including the operator of the field, also carried these
reserves as "proved undeveloped" reserves prior to 1996. Wells drilled near
the acquisition in an attempt to increase production from the field were
dry holes. Revised geologic mapping, based on production from existing
wells and the unsuccessful wells drilled offsetting the property, indicated
a much smaller productive area than had been originally calculated. It was
determined by the operator of the acquisition that future drillings could
not be justified. The well which has 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 increased from $11,120 in 1996 to
$12,587 in 1997. This represents an increase of $1,467 (13%). Oil sales
increased by $1,537 or 21%. A 35% increase in average net oil prices increased
sales by $2,409. This increase was partially offset by an 11% decrease in oil
production. Gas sales decreased by $70 or 2%. A 19% decrease in average net gas
prices reduced sales by $794. This decrease was partially offset by a 21%
increase in gas production. The decrease in oil production was primarily due to
natural production declines. The increase in gas production was primarily due to
higher production from the El Mac acquisition which had an acidization
treatment. 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 increased from $1,372 in the first quarter of 1996 to $3,670
in the first quarter of 1997. This represents an increase of $2,298. The changes
in production, noted above, increased depletion expense by $37. A 160% increase
in the depletion rate increased depletion expense by an additional $2,261. 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, ("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 $258,758 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. Proved undeveloped reserves were assigned to
these leases based on offset production in existing wells and on geologic
mapping of the existing wells north of the producing wells. Enex and its
affiliated entities owned less than 10% of this acquisition. The other working
interest owners which held the remaining interest in the acquisition, including
the operator of the field, also carried these reserves as "proved undeveloped"
reserves prior to 1996. Wells drilled near the acquisition in an attempt to
increase production from the field were dry holes. Revised geologic mapping,
based on production from existing wells and the unsuccessful wells drilled
offsetting the property, indicated a much smaller productive area than had been
originally calculated. It was determined by the operator of the acquisition that
future drillings could not be justified. The well which has 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 $3,637 in the first quarter
of 1996 to $2,611 in the first quarter of 1997. This decrease of $1,026 (28%) 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 3, 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
July 30, 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> 0000848081
<NAME> Enex 88-89 Income & Retirement Fund-Series 3, 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> 6210
<SECURITIES> 0
<RECEIVABLES> 15536
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21746
<PP&E> 1510573
<DEPRECIATION> 1476777
<TOTAL-ASSETS> 55542
<CURRENT-LIABILITIES> 89661
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (34119)
<TOTAL-LIABILITY-AND-EQUITY> 55542
<SALES> 12587
<TOTAL-REVENUES> 12587
<CGS> 20
<TOTAL-COSTS> 3690
<OTHER-EXPENSES> 2611
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6286
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
