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, 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 0-18328
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 1997
---------------------
CURRENT ASSETS:
<S> <C>
Cash $ 7,279
Accounts receivable - oil & gas sales 11,391
---------------------
Total current assets 18,670
---------------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests 1,614,435
Less accumulated depletion 1,558,370
---------------------
Property, net 56,065
---------------------
TOTAL $ 74,735
=====================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to general partner $ 58,803
---------------------
PARTNERS' CAPITAL :
Limited partners 5,470
General partner 10,462
---------------------
Total partners' capital 15,932
---------------------
TOTAL $ 74,735
=====================
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,
1997 1996 1997 1996
---------- ----------- ----------- ------------
REVENUES:
<S> <C> <C> <C> <C>
Oil and gas sales $ 6,764 $ 12,061 $ 31,563 $ 37,446
---------- ----------- ----------- ------------
EXPENSES:
Depletion 2,837 7,843 10,463 21,295
Impairment of property - - - 240,044
Production taxes - 98 23 279
General and administrative 6,834 2,283 11,983 8,565
---------- ----------- ----------- ------------
Total expenses 9,671 10,224 22,469 270,183
---------- ----------- ----------- ------------
NET INCOME (LOSS) $ (2,907) $ 1,837 $ 9,094 $ (232,737)
========== =========== =========== ============
</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 CHANGES IN PARTNERS' CAPITAL (DEFICIT)
FOR THE 'YEAR ENDED DECEMBER 31, 1996
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
- -------------------------------------------------------------------------------
PER $500
LIMITED
PARTNER
GENERAL LIMITED UNIT OUT-
TOTAL PARTNER PARTNERS STANDING
--------------- ---------------- --------------- -----------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 $ 225,171 $ 4,724 $ 220,447 $ 61
NET INCOME (LOSS) (218,333) 3,782 (222,115) (61)
--------------- ---------------- --------------- -----------
BALANCE, DECEMBER 31, 1996 6,838 8,506 (1,668) 0
NET INCOME 9,094 1,956 7,138 2
--------------- ---------------- --------------- -----------
BALANCE, SEPTEMBER 30, 1997 $ 15,932 $ 10,462 $ 5,470 (1) $ 2
=============== ================ =============== ===========
</TABLE>
(1) Includes 240 units purchased by the general partner as a limited partner.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------
I-3
<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,
1997 1996
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ 9,094 $ (232,737)
------------- -------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depletion 10,463 21,295
Impairment of property - 240,044
(Increase) decrease in:
Accounts receivable - oil & gas sales 5,832 (902)
(Decrease) in:
Accounts payable (2,329) (2,356)
Payable to general partner (22,658) (22,440)
------------- -------------
Total adjustments (8,692) 235,641
------------- -------------
NET INCREASE IN CASH 402 127
CASH AT BEGINNING OF YEAR 6,877 3,031
------------- -------------
CASH AT END OF PERIOD $ 7,279 $ 234
============= =============
</TABLE>
See accompanying notes to financial statements.
- ----------------------------------------------------------------------------
I-4
<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 $240,044 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 drilling 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 write downs taken by the
Company in the first quarter of 1996.
3. A Special Meeting, whose purpose was to vote on the proposal to sell
Partnership's assets and, thereafter, dissolve and liquidate the
partnership in accordance with the applicable provisions of the limited
partnership agreements, commenced at 2:00 P.M. on October 28, 1997.
The proxy votes received prior to the meeting were voted as follows.
Enex 88-89 Income & Retirement Fund, Series 4
For Against
Liquidation Liquidation Abstain
-------------- ------------------- ------------------
45.21% 4.11% 3.85%
I-5
<PAGE>
As indicated in the table above, while a large majority of the votes cast by the
limited partners of the Partnership were in favor of the proposed liquidation,
over 40% of the limited partnership interests failed to vote on the proposal.
This resulted in an inability to approve the proposal by a majority of the total
outstanding limited partnerships interests. As such, the meeting was adjourned
until December 1, 1997, to allow time for a sufficient number of votes to be
received to attain a majority-in-interest vote on the liquidation.
Subsequent to the Special Meeting, proxy votes were received in favor of the
proposed liquidation, which together with the above noted votes, represent a
majority-in-interest vote for the liquidation. As such, the Partnership will be
dissolved at the Special Meeting on December 1, 1997. The properties owned by
the partnership will be sold and any proceeds remaining after payment of all the
partnership's debt, will be distributed to the limited partners.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Third Quarter 1997 Compared to Third Quarter 1996
Oil and gas sales for the third quarter decreased from $12,061 in 1996 to $6,764
in 1997. This represents a decrease of $5,297 (44%). Oil sales decreased by
$2,121 or 31%. A 5% decrease in the average net oil sales price decreased sales
by $268. A 27% decrease in production decreased sales by an additional $1,853.
Gas sales decreased by $3,176 or 62%. A 52% decrease in gas production reduced
sales by $2,622. A 22% decrease in the average net gas sales price reduced sales
an additional $554. The decreases in oil and gas production were primarily due
to natural production declines which were especially pronounced on the Speary
acquisition. The decreases in average net oil and gas sales prices were
primarily the result of higher expenses incurred on the Company's net profit
interests, including higher expenses incurred on the Speary acquisition in the
third quarter of 1997.
Depletion expense decreased from $7,843 in the third quarter of 1996 to $2,837
in the third quarter of 1997. This represents a decrease of $5,006 (64%). The
declines in production, noted above, reduced depletion expense by $3,243. A 38%
decrease in the depletion rate reduced depletion expense by an additional
$1,763. The decrease in the depletion rate was due to higher production from
properties with a relatively lower depletion rate.
General and administrative expenses increased from $2,283 in 1996 to $6,834 in
1997. This increase of $4,551 (199%) is primarily due to more staff time being
required to manage the Company's operations.
I-6
<PAGE>
First Nine Months in 1997 Compared to First Nine Months in 1996
Oil and gas sales for the first nine months decreased from $37,446 in 1996 to
$31,563 in 1997. This represents a decrease of $5,883 (16%). Oil sales decreased
by $1,458 or 7%. A 20% decrease in oil production reduced sales by $4,382. This
decrease was partially offset by a 17% increase in the average net oil sales
price. Gas sales decreased by $4,425 or 28%. A 21% decrease in gas production
reduced sales by $3,263. A 9% decrease in the average net gas sales price
reduced sales by an additional $1,162. The decreases in oil and gas production
were primarily due to natural production declines. The increase in average net
oil sales price was primarily due to lower operating costs being charged Lake
Decade net profits acquisition, coupled with higher prices in the overall market
for the sale of oil. The decrease in average net gas sales price was primarily
the result of higher expenses incurred on the Speary acquisition in the third
quarter of 1997.
Depletion expense decreased from $21,295 in the first nine months of 1996 to
$10,463 in the first nine months of 1997. This represents a decrease of $10,832
(51%). The changes in production, noted above, reduced depletion expense by
$4,398. A 38% decrease in the depletion rate reduced depletion expense by an
additional $6,434. The decrease in the depletion rate was due to higher
production from properties with a relatively lower depletion rate.
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 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 drilling 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 write downs taken
by the Company in the first quarter of 1996.
General and administrative expenses increased from $8,565 in 1996 to $11,983 in
1997. This increase of $3,418 (40%) is primarily due to more staff time being
required to manage the Company's operations.
I-7
<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.
A Special Meeting, whose purpose was to vote on the proposal to sell
Partnership's assets and, thereafter, dissolve and liquidate the partnership in
accordance with the applicable provisions of the limited partnership agreements,
commenced at 2:00 P.M. on October 28, 1997.
The proxy votes received prior to the meeting were voted as follows.
Enex 88-89 Income & Retirement Fund, Series 4
For Against
Liquidation Liquidation Abstain
----------------- ---------------- ------------------
45.21% 4.11% 3.85%
As indicated in the table above, while a large majority of the votes cast by the
limited partners of the Partnership were in favor of the proposed liquidation,
over 40% of the limited partnership interests failed to vote on the proposal.
This resulted in an inability to approve the proposal by a majority of the total
outstanding limited partnerships interests. As such, the meeting was adjourned
until December 1, 1997, to allow time for a sufficient number of votes to be
received to attain a majority-in-interest vote on the liquidation.
Subsequent to the Special Meeting, proxy votes were received in favor of the
proposed liquidation, which together with the above noted votes, represent a
majority-in-interest vote for the liquidation. As such, the Partnership will be
dissolved at the Special Meeting on December 1, 1997. The properties owned by
the partnership will be sold and any proceeds remaining after payment of all the
partnership's debt, will be distributed to the limited partners.
I-8
<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, 1997.
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/ James A. Klein
-------------------
James A. Klein
Secretary, Treasurer and
Chief Financial Officer
November 11, 1997 By: /s/ Larry W. Morris
-----------------
Larry W. Morris
Controller and Chief
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000854219
<NAME> Enex 88-89 Income & Retirement Fund-Series 4, L.P.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> dec-31-1997
<PERIOD-START> jan-01-1997
<PERIOD-END> sep-30-1997
<CASH> 7279
<SECURITIES> 0
<RECEIVABLES> 11391
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18670
<PP&E> 1614435
<DEPRECIATION> 1558370
<TOTAL-ASSETS> 74735
<CURRENT-LIABILITIES> 58803
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 15932
<TOTAL-LIABILITY-AND-EQUITY> 74735
<SALES> 31563
<TOTAL-REVENUES> 31563
<CGS> 10486
<TOTAL-COSTS> 10486
<OTHER-EXPENSES> 11983
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9094
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
