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 0-18322
ENEX OIL & GAS INCOME PROGRAM IV - SERIES 3, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0251421
(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
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<CAPTION>
ENEX OIL & GAS INCOME PROGRAM IV - SERIES 3, L.P.
BALANCE SHEET
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September 30,
ASSETS 1996
----------------
(Unaudited)
CURRENT ASSETS:
<S> <C>
Cash $ 18,044
Accounts receivable - oil & gas sales 31,869
Other current assets 981
--------------
Total current assets 50,894
--------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 2,880,016
Less accumulated depreciation and depletion 2,816,792
--------------
Property, net 63,224
--------------
TOTAL $ 114,118
==============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 18,254
Payable to general partner 25,796
--------------
Total current liabilities 44,050
--------------
NONCURRENT PAYABLE TO GENERAL PARTNER 51,592
--------------
PARTNERS' CAPITAL (DEFICIT):
Limited partners (7,604)
General partner 26,080
--------------
Total partners' capital 18,476
--------------
TOTAL $ 114,118
==============
Number of $500 Limited Partner units outstanding 6,080
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
<TABLE>
<CAPTION>
ENEX OIL & GAS INCOME PROGRAM IV - SERIES 3, 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 $ 52,768 $ 32,703 $ 135,343 $ 101,128
--------------- ----------------- ----------------- -------------------
EXPENSES:
Depreciation and depletion 9,353 10,022 24,748 32,946
Impairment of property - - 538,207 -
Lease operating expenses 23,033 13,542 55,281 47,885
Production taxes 3,901 3,704 11,927 10,936
General and administrative 3,985 4,257 13,265 14,181
--------------- ----------------- ----------------- -------------------
Total expenses 40,272 31,525 643,428 105,948
--------------- ----------------- ----------------- -------------------
NET INCOME (LOSS) $ 12,496 $ 1,178 $ (508,085) $ (4,820)
=============== ================= ================= ===================
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
<TABLE>
<CAPTION>
ENEX OIL AND GAS INCOME PROGRAM IV - SERIES 3, L.P.
STATEMENTS OF CASH FLOWS
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(UNAUDITED)
NINE MONTHS ENDED
--------------------------------------------
September 30, September 30,
1996 1995
------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss) $ (508,085) $ (4,820)
------------------- -------------------
Adjustments to reconcile net (loss) to net cash
provided by operating activities:
Depreciation and depletion 24,748 32,946
Impairment of property 538,207 -
(Increase) decrease in:
Accounts receivable - oil & gas sales (14,366) 15,086
Other current assets - -
(Decrease) in:
Accounts payable (10,115) (19,752)
Payable to general partner (8,412) (10,657)
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Total adjustments 530,062 17,623
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Net cash provided by operating activities 21,977 12,803
------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property (additions) credits - development costs (3,977) 2,373
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions - (24,755)
------------------- -------------------
NET INCREASE (DECREASE) IN CASH 18,000 (9,579)
CASH AT BEGINNING OF YEAR 44 17,235
------------------- -------------------
CASH AT END OF PERIOD $ 18,044 $ 7,656
=================== ===================
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
ENEX OIL & GAS INCOME PROGRAM IV - 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 $538,207 for certain
oil and gas properties due to market indications that the carrying amounts
were not fully recoverable.
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<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operations.
Third Quarter 1995 Compared to Third Quarter 1996
Oil and gas sales for the third quarter increased to $52,768 in 1996 from
$32,703 in 1995. This represents an increase of $20,065 (61%). Oil sales
increased by $1,852 (8%). A 37% increase in the average oil sales price
increased sales by $7,021. This increase was partially offset by a 21% decrease
in oil production. Gas sales increased by $18,213 (219%). A 36% increase in the
average gas sales price increased sales by $12,492. A 68% increase in gas
production increased sales by an additional $5,721. The increases in average oil
and gas sales price correspond with higher prices in the overall market for the
sale of oil and gas. The decrease in oil production was primarily the result of
natural production declines, which were especially pronounced on the Brighton
acquisition. The increase in gas production was primarily due to a successful
workover on the Lake Decade acquisition in the third quarter of 1996.
Lease operating expenses increased to $23,033 in 1996 from $13,542 in 1995. The
increase of $9,491 (70%) is primarily due to workover costs incurred on the Lake
Decade acquisition in 1996.
Depreciation and depletion expense decreased to $9,353 in the third quarter of
1996 from $10,022 in the third quarter of 1995. This represents a decrease of
$669 (7%). A 9% decrease in the depletion rate reduced depreciation and
depletion expense by $964. This decrease was partially offset by the changes in
production, noted above. The rate decrease was primarily due to the lower
property basis resulting from the recognition of a $538,207 impairment of
property in the first quarter of 1996.
General and administrative expenses decreased to $3,985 in the third quarter of
1996 from $4,257 in the third quarter of 1995. This decrease of $272 (6%) 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 $135,343 in 1996 from
$101,128 in 1995. This represents an increase of $34,215 (34%). Oil sales
decreased by $3,582 (5%). A 22% decrease in oil production reduced sales by
$15,824. This decrease was partially offset by a 22% increase in the average oil
sales price. Gas sales increased by $37,797 (127%). A 134% increase in the
average gas sales price increased sales by $38,639. This increase was partially
offset by a 3% decrease in gas production. The increase in average oil sales
price corresponds with higher prices in the overall market for the sale of oil.
The decrease in oil production was primarily the result of natural production
declines, which were especially pronounced on the Brighton acquisition. The
decrease in gas production was primarily due to natural production declines,
partially offset by higher production from the Lake Decade acquisition which was
successfully
I-5
<PAGE>
reworked in 1996. The increase in the average gas sales price was primarily a
result of higher prices in the overall market for the sale of gas coupled with
relatively lower net profits royalty paid on the Lake Decade acquisition, which
incurred higher lease operating expenses in 1996.
Lease operating expenses increased to $55,281 in the first nine months of 1996
from $47,885 in the first nine months of 1995. The decrease of $7,396 (15%) is
primarily due to the changes in production, noted above.
Depreciation and depletion expense decreased to $24,748 in the first nine months
of 1996 from $32,946 in the first nine months of 1995. This represents a
decrease of $8,198 (25%). The changes in production, noted above, reduced
depreciation and depletion expense by $5,088. An 11% decrease in the depletion
rate reduced depreciation and depletion expense by an additional $3,110. The
rate decrease was primarily due to the lower property basis resulting from the
recognition of a $538,207 impairment of property in the first quarter of 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 $538,207 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 decreased to $13,265 in the first nine
months of 1996 from $14,181 in the first nine months of 1995. This decrease of
$916 (6%) is primarily due to less 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 after the payment of
its debt obligations. 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
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 activities.
I-6
<PAGE>
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. Future periodic distributions will
be made once sufficient net revenues are accumulated.
As of September 30, 1996, 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 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 OIL & GAS INCOME
PROGRAM IV - 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
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> 0000854221
<NAME> Enex Oil & Gas Income Program IV-Series 3,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> 18044
<SECURITIES> 0
<RECEIVABLES> 31869
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 50894
<PP&E> 2880016
<DEPRECIATION> 2816792
<TOTAL-ASSETS> 114118
<CURRENT-LIABILITIES> 44050
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 18476
<TOTAL-LIABILITY-AND-EQUITY> 114118
<SALES> 135343
<TOTAL-REVENUES> 135343
<CGS> 67208
<TOTAL-COSTS> 643428
<OTHER-EXPENSES> 576220
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (508085)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
