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 September 30, 1996
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 0-18328
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 4, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0251418
(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) has 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
Transitional Small Business Disclosure Format (Check one):
Yes No x
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 4, L.P.
BALANCE SHEET
- ------------------------------------------------------------------------------
September 30,
ASSETS 1996
---------------------
CURRENT ASSETS:
<S> <C>
Cash $ 3,031
Accounts receivable - oil & gas sales 13,663
---------------------
Total current assets 16,694
---------------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests 1,614,435
Less accumulated depletion 1,553,087
---------------------
Property, net 61,348
---------------------
TOTAL $ 78,042
=====================
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Payable to general partner $ 14,270
---------------------
Total current liabilities 14,270
NONCURRENT PAYABLE TO GENERAL PARTNER 71,338
---------------------
PARTNERS' CAPITAL (DEFICIT):
Limited partners (15,149)
General partner 7,583
---------------------
Total partners' capital (7,566)
---------------------
TOTAL $ 78,042
=====================
Number of $500 Limited Partner units outstanding 3,645
</TABLE>
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
I-1
<PAGE>
<TABLE>
<CAPTION>
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 4, L.P.
STATEMENTS OF OPERATIONS
- ---------------------------------------------------------------------------
(UNAUDITED) QUARTER ENDED NINE MONTHS ENDED
------------------------------------ ------------------------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
--------------- ----------------- ----------------- ---------------------
REVENUES:
<S> <C> <C> <C> <C>
Oil and gas sales $ 12,061 $ 12,249 $ 37,446 $ 32,878
--------------- ----------------- ----------------- ---------------------
EXPENSES:
Depletion and amortization 7,843 9,208 21,295 30,745
Impairment of property - - 240,044 -
Production taxes 98 107 279 328
General and administrative 2,283 2,522 8,565 7,386
--------------- ----------------- ----------------- ---------------------
Total expenses 10,224 11,837 270,183 38,459
--------------- ----------------- ----------------- ---------------------
NET INCOME (LOSS) $ 1,837 $ 412 $ (232,737) $ (5,581)
=============== ================= ================= =====================
</TABLE>
See accompanying notes to financial statements.
- ---------------------------------------------------------------------------
I-2
<PAGE>
<TABLE>
<CAPTION>
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 4, L.P.
STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------
(UNAUDITED)
NINE MONTHS ENDED
--------------------------------------------
September 30, September 30,
1996 1995
------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss) $ (232,737) $ (5,581)
------------------- -------------------
Adjustments to reconcile net (loss) to net cash
provided by operating activities:
Depletion and amortization 21,295 30,745
Impairment of property 240,044 -
(Increase) decrease in:
Accounts receivable - oil & gas sales (902) 5,530
(Decrease) in:
Accounts payable (2,356) (3,327)
Payable to general partner (22,440) (27,801)
------------------- -------------------
Total adjustments 235,641 5,147
------------------- -------------------
Net cash provided (used) by operating activities 2,904 (434)
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions - (5,822)
------------------- -------------------
NET INCREASE (DECREASE) IN CASH 2,904 (6,256)
CASH AT BEGINNING OF YEAR 127 6,490
------------------- -------------------
CASH AT END OF PERIOD $ 3,031 $ 234
=================== ===================
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------
I-3
<PAGE>
ENEX 88-89 INCOME AND RETIREMENT FUND - SERIES 4, 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 $50,639 for certain
oil and gas properties due market indications that the carrying amounts
were not fully recoverable.
I-4
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
Third Quarter 1995 Compared to Third Quarter 1996
Oil and gas sales for the third quarter decreased to $12,061 in 1996 from
$12,249 in 1995. This represents a decrease of $188 (2%). Oil sales decreased by
$6. This decrease was due mainly to a 8% decrease in oil production which
decreased sales by $540, offset by an 8% increase in the average net oil sales
price. Gas sales decreased by $182. A 19% decrease in the average net gas sales
price decreased sales by $1,257. This decrease was partially offset by a 20%
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
increased production from the Speary acquisition on which a compressor was
successfully reworked. The increases in average net oil sale prices corresponds
with higher prices in the overall market for the sale of oil. The decrease in
average net gas sales price was primarily due to lower net profits received on
the Speary acquisition which, incurred workover costs during the third quarter
of 1996.
Depletion expense decreased to $7,843 in the third quarter of 1996 from $9,208
in the third quarter of 1995. This represents a decrease of $1,365 (15%). A 19%
increase in the depletion rate increased depletion expense by $1,855. This
increase was partially offset by the changes in production, noted above. The
decrease in the depletion rate was due to the lower property basis resulting
from the recognition of a $240,044 property impairment in the first quarter of
1996.
General and administrative expenses decreased to $2,283 in 1996 from $2,522 in
1995. This decrease of $239 (9%) is primarily due to less staff time being
required to manage the Company's operations.
First Nine Months in 1995 Compared to First Nine Months in 1996
Oil and gas sales for the first nine months increased to $37,446 in 1996 from
$32,878 in 1995. This represents an increase of $4,568 (14%). Oil sales
increased by $2,232 or 11%. A 26% increase in the average net oil sales price
increased sales by $4,513. This increase was partially offset by a 12% decrease
in oil production. Gas sales increased by $2,336 or 18%. An 18% increase in the
average net gas sales price increased sales by $4,513. This increase was
partially offset by a 1% decrease in gas production. The decreases in oil and
gas production were primarily due to natural production declines, partially
offset by higher gas production from the Speary acquisition on which a
compressor was successfully reworked. The increases in average net sales prices
correspond with higher prices in the overall market for the sale of oil and gas.
Depletion expense decreased to $21,295 in the first nine months of 1996 from
$30,745 in the first nine months of 1995. This represents a decrease of $9,450
(31%). The changes in production, noted above, reduced depletion expense by
$1,663. A 24% decrease in the depletion rate reduced depletion expense by an
additional $7,787. The decrease in the depletion rate was primarily due to the
lower property basis resulting from the recognition of a $240,044 property
impairment in the first quarter of 1996.
I-5
<PAGE>
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 $240,044 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 increased to $8,565 in 1996 from $7,386 in
1995. This increase of $1,179 (16%) is primarily due to more staff time being
required to manage the Company's operations.
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 1995 to 1996 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 discontinued the payment of distributions during 1995. 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.
I-6
<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 September 30, 1996.
II-1
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
ENEX 88-89 INCOME AND RETIREMENT
FUND - SERIES 4, 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
November 13, 1996 By: /s/ James A. Klein
-------------------
James A. Klein
Controller and Chief
Accounting Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000854219
<NAME> Enex 88-89 Income & Retirement Fund - Sr 4, L.P.
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> dec-31-1996
<PERIOD-START> jan-01-1996
<PERIOD-END> sep-30-1996
<CASH> 3031
<SECURITIES> 0
<RECEIVABLES> 13663
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16694
<PP&E> 1614435
<DEPRECIATION> 1553087
<TOTAL-ASSETS> 78042
<CURRENT-LIABILITIES> 14270
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (7566)
<TOTAL-LIABILITY-AND-EQUITY> 78042
<SALES> 37446
<TOTAL-REVENUES> 37446
<CGS> 279
<TOTAL-COSTS> 270183
<OTHER-EXPENSES> 269904
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (232737)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
