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 June 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 0-18322
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:
(281) 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
ENEX OIL & GAS INCOME PROGRAM IV - SERIES 3, L.P.
BALANCE SHEET
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30,
ASSETS 1997
---------------
(Unaudited)
CURRENT ASSETS:
<S> <C>
Cash $ 14,497
Accounts receivable - oil & gas sales 27,208
---------------
Total current assets 41,705
---------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 2,880,544
Less accumulated depreciation and depletion 2,827,600
---------------
Property, net 52,944
---------------
TOTAL $ 94,649
===============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 22,493
Payable to general partner 54,999
---------------
Total current liabilities 77,492
---------------
PARTNERS' CAPITAL:
Limited partners (9,870)
General partner 27,027
---------------
Total partners' capital 17,157
---------------
TOTAL $ 94,649
===============
Number of $500 Limited Partner units outstanding 6,079
</TABLE>
See accompanying notes to financial statements.
- -----------------------------------------------------------------------------
I-1
<PAGE>
ENEX OIL & GAS INCOME PROGRAM IV - SERIES 3, L.P.
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED) QUARTER ENDED SIX MONTHS ENDED
-------------------------- ----------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1997 1996 1997 1996
----------- ----------- ------------ ------------
REVENUES:
<S> <C> <C> <C> <C>
Oil and gas sales $ 19,995 $ 43,946 $ 58,624 $ 82,575
----------- ----------- ------------ ------------
EXPENSES:
Depreciation and depletion 948 6,924 9,419 15,395
Impairment of property - - - 538,207
Lease operating expenses 16,218 18,029 30,437 32,248
Production taxes 1,840 3,920 5,946 8,026
General and administrative 2,977 4,454 7,803 9,280
----------- ----------- ------------ ------------
Total expenses 21,983 33,327 53,605 603,156
----------- ----------- ------------ ------------
NET INCOME (LOSS) $ (1,988) $ 10,619 $ 5,019 $ (520,581)
=========== =========== ============ ============
</TABLE>
See accompanying notes to financial statements.
- -----------------------------------------------------------------------------
I-2
<PAGE>
ENEX OIL & GAS INCOME PROGRAM IV - SERIES 3, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1997
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
PER $500
LIMITED
PARTNER
GENERAL LIMITED UNIT OUT-
TOTAL PARTNER PARTNERS STANDING
--------------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 $ 526,561 $ 20,593 $ 505,968 83
NET INCOME (LOSS) (514,423) 4,992 (519,415) (85)
--------------- ------------ ----------- ----------
BALANCE, DECEMBER 31, 1996 12,138 25,585 (13,447) (2)
NET INCOME 5,019 1,442 3,577 1
--------------- ------------ ----------- ----------
BALANCE, JUNE 30, 1997 $ 17,157 $ 27,027 $ (9,870)(1) (2)
=============== ============ =========== ==========
</TABLE>
(1) Includes 1,156 units purchased by the general partner as a limited partner.
See accompanying notes to financial statements.
- -------------------------------------------------------------------------------
I-3
<PAGE>
ENEX OIL AND GAS INCOME PROGRAM IV - SERIES 3, L.P.
STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------------
JUNE 30, JUNE 30,
1997 1996
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ 5,019 $ (520,581)
------------ -----------
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Depreciation and depletion 9,419 15,395
Impairment of property - 538,207
(Increase) decrease in:
Accounts receivable - oil & gas sales 2,398 (11,891)
Other current assets 981 -
Increase (decrease) in:
Accounts payable (9,520) (9,320)
Payable to general partner (181) 1,635
------------ -----------
Total adjustments 3,097 534,026
------------ -----------
Net cash provided by operating activities 8,116 13,445
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions - development costs (254) (1,034)
------------ -----------
NET INCREASE IN CASH 7,862 12,411
CASH AT BEGINNING OF YEAR 6,635 44
------------ -----------
CASH AT END OF PERIOD $ 14,497 $ 12,455
============ ===========
</TABLE>
See accompanying notes to financial statements.
- ----------------------------------------------------------------------------
I-4
<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
primarily due to downward reserve revisions on the Lake Decade
acquisition. 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 driled 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 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 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. The terms and conditions of the
proposed liquidation are set forth in such proxy material.
I-4
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operations.
Second Quarter 1996 Compared to Second Quarter 1997
Oil and gas sales for the second quarter decreased from $43,946 in 1996 to
$19,995 in 1997. This represents a decrease of $23,951 (55%). Oil sales
decreased by $10,820 (6%). A 51% decrease in the average oil sales price reduced
sales by $11,303. This decrease was partially offset by a 5% increase in oil
production. Gas sales decreased by $13,131 (60%). A 35% decrease in the average
gas sales price reduced sales by $9,638. A 16% decrease in gas production
reduced sales by an additional $3,493. The decrease in average oil sales price
was a result of lower lease operating expenses on the Bagley acquisition, on
which the Company pays a net profits royalty. The increase in oil production was
primarily the result of higher production from the Bagley acquisition, which was
shut-in for workovers during the second quarter of 1996, partially offset by
lower production from the Lake Decade acquisition due to natural production
declines. The decrease in gas production was primarily due to natural production
declines. The decrease in the average gas sales price was primarily a result of
higher net profits royalty paid on the Bagley acquisition, which incurred higher
lease operating expenses in 1996.
Lease operating expenses decreased from $18,029 in 1996 to $16,218 in 1997. The
decrease of $1,811 (10%) is primarily due to the workover expenses incurred on
the Bagley acquisition during the second quarter of 1996.
Depreciation and depletion expense decreased from $6,924 in the second quarter
of 1996 to $948 in the second quarter of 1997. This represents a decrease of
$5,976 (86%). The changes in production, noted above, reduced depreciation and
depletion expense by $295. An 86% decrease in the depletion rate reduced
depreciation and depletion expense by an additional $5,681. The rate decrease
was primarily due to relatively higher production from the Bagley acquisition
which has a relatively lower depletion rate.
General and administrative expenses decreased from $4,454 in the second quarter
of 1996 to $2,977 in the second quarter of 1997. This decrease of $1,477 (33%)
is primarily due to less staff time being required to manage the Company's
operations.
First Six Months in 1997 Compared to First Six Months in 1996
Oil and gas sales for the first six months decreased from $82,575 in 1996 to
$58,624 in 1997. This represents a decrease of $23,951 (29%). Oil sales
decreased by $10,820 (26%). A 26% decrease in oil production reduced sales by
$10,852. This decrease was partially offset by a 1% increase in the average oil
sales price. Gas sales decreased by $13,131 (32%). A 28% decrease in the average
gas sales price decreased sales by $4,879. A 20% decrease in gas production
reduced sales by an additional $8,252. The increase in average oil sales price
corresponds with higher prices in the overall market for the sale of oil
partially offset by higher net profits payments on the Bagley acquisition in
1997. The decrease in oil production was primarily the result of natural
production
I-5
<PAGE>
declines, which were especially pronounced on the Lake Decade acquisition. The
decrease in gas production was primarily due to natural production declines,
which were especially pronounced on the Lake Decade acquisition. The decrease in
the average gas sales price was primarily a result of relatively higher net
profits royalty paid on the Bagley acquisition, which incurred higher lease
operating expenses in 1996.
Lease operating expenses decreased from $32,248 in the first six months of 1996
to $30,436 in the first six months of 1997. The decrease of $1,812 (6%) is
primarily due to workover charges incurred on the Bagley acquisition in the
second quarter of 1996.
Depreciation and depletion expense decreased from $15,395 in the first six
months of 1996 to $9,419 in the first six months of 1997. This represents a
decrease of $5,976 (39%). The changes in production, noted above, reduced
depreciation and depletion expense by $3,669. A 20% decrease in the depletion
rate reduced depreciation and depletion expense by an additional $2,307. The
rate decrease was primarily due to relatively higher production from the Bagley
acquisition which has 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 $538,207 for certain
oil and gas properties primarily due to downward reserve revisions on the Lake
Decade acquisition. The Lake Decade acquisition included significant reserves
that were considered <0- 32>proved<0- 31> 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 <0- 32>proved undeveloped<0- 31> 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 driled 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 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
I-6
<PAGE>
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 $9,280 in the first six
months of 1996 to $7,803 in the first six months of 1997. This decrease of
$1,477 (16%) 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 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 discontinued the payment of distributions in the third quarter of
1995. Future distributions are dependent upon among other things, the prices
received for oil and gas. The Company will continue to recover its reserves and
reduce its obligations in 1997. The general partner does not intend to
accelerate the repayment of the debt beyond the cash flow provided by operating
activities. Based upon current projected cash flows from its property, it does
not appear that the Company will have sufficient cash to pay its operating
expenses, repay its debt obligations and pay distributions in the near future.
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. The terms and conditions of the proposed liquidation
are set forth in such proxy material.
As of June 30, 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 June 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 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
August 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> 0000854221
<NAME> Enex Oil & Gas Income Program IV Series 3 LP
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> dec-31-1997
<PERIOD-START> jan-01-1997
<PERIOD-END> jun-30-1997
<CASH> 14,497
<SECURITIES> 0
<RECEIVABLES> 27208
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 41705
<PP&E> 2880544
<DEPRECIATION> 2827600
<TOTAL-ASSETS> 94649
<CURRENT-LIABILITIES> 77492
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 17157
<TOTAL-LIABILITY-AND-EQUITY> 94649
<SALES> 19995
<TOTAL-REVENUES> 19995
<CGS> 19006
<TOTAL-COSTS> 19006
<OTHER-EXPENSES> 2977
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1988)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
