United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from...............to...............
Commission file number 0-17560
ENEX OIL & GAS INCOME PROGRAM IV - SERIES 2, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0251420
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 200, Three Kingwood Place
Kingwood, Texas 77339
(Address of principal executive offices)
Issuer's telephone number (713) 358-8401
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes x No
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ENEX OIL & GAS INCOME PROGRAM IV - SERIES 2, L.P.
BALANCE SHEET
- ------------------------------------------------------------------------------
MARCH 31,
ASSETS 1997
---------------
(Unaudited)
CURRENT ASSETS:
Cash $ 13,843
Accounts receivable 12,387
Other current assets 529
---------------
Total current assets 26,759
---------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 1,117,983
Less accumulated depreciation and depletion 1,100,902
---------------
Property, net 17,081
---------------
TOTAL $ 43,840
===============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 6,510
Payable to general partner 7,926
---------------
Total current liabilities 14,436
---------------
PARTNERS' CAPITAL (DEFICIT):
Limited partners (8,876)
General partner 38,280
---------------
Total partners' capital (deficit) 29,404
---------------
TOTAL $ 43,840
===============
Number of $500 Limited Partner units outstanding 4,938
See accompanying notes to financial statements.
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I-1
<PAGE>
ENEX OIL & GAS INCOME PROGRAM IV - 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 $ 24,318 $ 52,626
------------------- -------------------
EXPENSES:
Depreciation and depletion 970 6,218
Impairment of property - 142,465
Lease operating expenses 7,717 14,892
Production taxes 940 3,046
General and administrative 4,286 5,602
------------------- -------------------
Total expenses 13,913 172,223
------------------- -------------------
INCOME (LOSS) FROM OPERATIONS 10,405 (119,597)
------------------- -------------------
OTHER INCOME:
Gain from sale of property - 1,868
------------------- -------------------
NET INCOME (LOSS) $ 10,405 $ (117,729)
=================== ===================
</TABLE>
See accompanying notes to financial statements.
- -----------------------------------------------------------------------------
I-2
<PAGE>
ENEX OIL & GAS INCOME PROGRAM IV - SERIES 2, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
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 $ 137,566 $ 33,983 $ 103,583 $ 21
CASH DISTRIBUTIONS (7,138) (713) (6,425) (1)
NET INCOME (LOSS) (96,523) 5,362 (101,885) (21)
----------------- ------------------ ------------------ ------------------
BALANCE, DECEMBER 31, 1996 33,905 38,632 (4,727) (1)
CASH DISTRIBUTIONS (14,906) (1,490) (13,416) (3)
NET INCOME 10,405 1,138 9,267 2
----------------- ------------------ ------------------ ------------------
BALANCE, MARCH 31, 1997 $ 29,404 $ 38,280 $ (8,876)(1)$ (2)
================= ================== ================== ==================
</TABLE>
(1) Includes 751 units purchased by the general partner as a limited partner.
See accompanying notes to financial statements.
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I-3
<PAGE>
ENEX OIL AND GAS INCOME PROGRAM IV - 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) $ 10,405 $ (117,729)
------------------- -------------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and depletion 970 6,218
Impairment of property - 142,465
Gain on sale of property - (1,868)
(Increase) decrease in:
Accounts receivable - oil & gas sales 8,393 (12,823)
(Decrease) in:
Accounts payable (3,243) (3,241)
Payable to general partner (490) (41,190)
------------------- -------------------
Total adjustments 5,630 89,561
------------------- -------------------
Net cash provided (used) by operating activities 16,035 (28,168)
------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property - 29,925
Property (additions) credits - development costs 193 (727)
------------------- -------------------
Net cash provided by investing activities 193 29,198
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions (14,906) -
------------------- -------------------
NET INCREASE IN CASH 1,322 1,030
CASH AT BEGINNING OF YEAR 12,521 1,630
------------------- -------------------
CASH AT END OF PERIOD $ 13,843 $ 2,660
=================== ===================
</TABLE>
See accompanying notes to financial statements.
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I-4
<PAGE>
ENEX OIL & GAS INCOME PROGRAM IV - 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, ("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 $142,465 for certain
oil and gas properties due to changes in the overall market for the sale of
oil and gas and significant decreases in the projected production from
certain of the Company's oil and gas properties.
3. Effective February 1, 1996, the Company sold its interest in the Credo
acquisition for $29,925. The Company recognized a gain of $1,868 on the sale.
4. On April 7, 1997, the Company's General Partner mailed proxy material
to the limited partners with respect to a proposed consolidation of the
Company with 33 other managed limited partnerships. The terms and
conditions of the proposed consolidation are set forth in such proxy
material.
5. A cash distribution was made to the limited partners of the Company in
the amount of $13,416, representing net revenues from the sale of oil
and gas produced from properties owned by the Company. This
distribution was made on January 31, 1997.
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 $52,626 in 1996 to
$24,318 in 1997. This represents a decrease of $28,308 (54%). Oil sales
decreased by $17,893 or 78%. An 82% decline in oil production caused sales to
decrease by $18,643. This decrease was partially offset by an 18% increase in
the average oil sales price. Gas sales decreased by $10,415 or 35%. A 53%
decrease in gas production reduced sales by $15,697. This decrease was partially
offset by a 38% increase in the average gas sales price. The decreases in oil
and gas production were primarily due to the sale of the Credo acquisition in
the first quarter of 1996, coupled with natural production declines, which were
especially pronounced on the Barnes Estate acquisition. The changes in average
prices correspond with changes in the overall market for the sale of oil and
gas.
Lease operating expenses decreased from $14,892 in the first quarter of 1996 to
$7,717 in the first quarter of 1997. The decrease of $7,175 (48%) is primarily
due to the changes in production, noted above.
Depreciation and depletion expense decreased from $6,218 in the first quarter of
1996 to $970 in the first quarter of 1997. This represents a decrease of $5,248
(84%). The changes in production, noted above, reduced depreciation and
depletion expense by $3,884. A 58% decrease in the depletion rate reduced
depreciation and depletion expense by an additional $1,364. The decrease in the
depletion rate was primarily due to an upward revision of the oil and gas
reserves during December 1996.
Effective February 1, 1996, the Company sold its interest in the Credo
acquisition for $29,925. The Company recognized a gain of $1,868 on the sale.
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 $142,465 for certain
oil and gas properties due to changes in the overall market for the sale of oil
and gas and significant decreases in the projected production from certain of
the Company's oil and gas properties.
General and administrative expenses decreased from $5,602 in the first quarter
of 1996 to $4,286 in the first quarter of 1997. This decrease of $1,316 (23%) is
primarily due to less staff time being required to manage the Company's
operations.
I-6
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
On April 7, 1997, the Company's General Partner mailed proxy material to the
limited partners with respect to a proposed consolidation of the Company with 33
other managed limited partnerships. The terms and conditions of the proposed
consolidation are set forth in such proxy material.
The Company's cash flow is a direct result of the amount of net proceeds
realized from the sale of oil and gas production after payment of its debt
obligations. 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
remaining available cash flow to the Company's partners. The Company's
"available cash flow" is essentially equal to the net amount of cash provided by
operating, financing and investing activities.
The Company discontinued the payment of distributions during 1995. Future
distributions are dependent upon, among other things, an increase in prices
received for oil and gas. The Company will continue to recover its reserves and
distribute to the limited partners the net proceeds realized form the sale of
oil and gas production. Distribution amounts are subject to change if net
revenues are greater or less than expected. Based on the December 31, 1996
reserve report prepared by Gruy, there appears to be sufficient future net
revenues to pay all obligations and expenses. The Company does not intend to
purchase additional properties or fund extensive development of existing oil and
gas properties, and as such; has no long-term liquidity needs. The Company's
projected cash flows from operations will provide sufficient funding to pay its
operating expenses and debt obligations. The general partner does not intend to
accelerate the repayment of the debt beyond the cash flow provided by operating,
financing and investing activities. Based upon current projected cash flows from
its property, it does not appear that the Company will have sufficient cash to
pay distributions and pay its operating expenses, and meet its debt obligations.
Future periodic distributions will be made once sufficient net revenues are
accumulated.
As of March 31, 1997, the Company had no material commitments for capital
expenditures. The Company does not intend to engage in any significant
developmental drilling activity.
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 OIL & GAS INCOME
PROGRAM IV - 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
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> 0000848463
<NAME> Enex Oil & Gas Income Program IV - 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> 13843
<SECURITIES> 0
<RECEIVABLES> 12387
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26759
<PP&E> 1117983
<DEPRECIATION> 1100902
<TOTAL-ASSETS> 43840
<CURRENT-LIABILITIES> 14436
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 29404
<TOTAL-LIABILITY-AND-EQUITY> 43840
<SALES> 24318
<TOTAL-REVENUES> 24318
<CGS> 8657
<TOTAL-COSTS> 8657
<OTHER-EXPENSES> 4286
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10405
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
