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 0-18617
ENEX OIL & GAS INCOME PROGRAM IV - SERIES 7, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0251427
(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 OIL & GAS INCOME PROGRAM IV - SERIES 7, L.P.
BALANCE SHEET
- -----------------------------------------------------------------------------
September 30,
ASSETS 1996
---------------------
(Unaudited)
CURRENT ASSETS:
<S> <C>
Cash $ 3,543
Accounts receivable - oil & gas sales 40,490
Other current assets 3,717
------------
Total current assets 47,750
------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 1,747,861
Less accumulated depreciation and depletion 1,409,925
------------
Property, net 337,936
------------
TOTAL $ 385,686
============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 25,763
PARTNERS' CAPITAL:
Limited partners 335,521
General partner 24,402
------------
Total partners' capital 359,923
------------
TOTAL $ 385,686
============
Number of $500 Limited Partner units outstanding 5,021
</TABLE>
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
I-1
<PAGE>
<TABLE>
<CAPTION>
ENEX OIL & GAS INCOME PROGRAM IV - SERIES 7, 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 $ 97,154 $ 68,719 $ 268,222 $ 260,088
----------------- ------------------ ------------------ ---------------------
EXPENSES:
Depreciation, depletion and amortization 19,455 27,278 54,649 107,799
Impairment of property - - 73,979 -
Lease operating expenses 40,220 38,452 142,076 124,449
Production taxes 6,143 4,290 16,805 16,800
General and administrative 7,956 8,573 28,694 29,105
----------------- ------------------ ------------------ ---------------------
Total expenses 73,774 78,593 316,203 278,153
----------------- ------------------ ------------------ ---------------------
INCOME (LOSS FROM) OPERATIONS 23,380 (9,874) (47,981) (18,065)
----------------- ------------------ ------------------ ---------------------
OTHER INCOME:
Gain on sale of property - - 1,076 -
----------------- ------------------ ------------------ ---------------------
NET INCOME (LOSS) $ 23,380 $ (9,874) $ (46,905) $ (18,065)
================= ================== ================== =====================
</TABLE>
See accompanying notes to financial statements.
- -----------------------------------------------------------------------------
I-2
<PAGE>
<TABLE>
<CAPTION>
ENEX OIL AND GAS INCOME PROGRAM IV - SERIES 7, 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) $ (46,905) (18,065)
------------------- -------------------
Adjustments to reconcile net (loss) to net cash
provided by operating activities
Depreciation, depletion and amortization 54,649 107,799
Impairment of property 73,979 -
Gain on sale of property (1,076) -
(Increase) decrease in:
Accounts receivable - oil & gas sales (4,013) 5,939
Other current assets (1,613) (91)
(Decrease) in:
Accounts payable (743) (4,185)
Payable to general partner (3,231) (72,546)
------------------- -------------------
Total adjustments 117,952 36,916
------------------- -------------------
Net cash provided by operating activities 71,047 18,851
------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of property 1,076 -
Property additions - development costs (59,278) (15,757)
------------------- -------------------
Net cash used by investing activities (58,202) (15,757)
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions (24,682) (21,847)
------------------- -------------------
NET (DECREASE) IN CASH (11,837) (18,753)
CASH AT BEGINNING OF YEAR 15,380 23,587
------------------- -------------------
CASH AT END OF PERIOD $ 3,543 4,834
=================== ===================
</TABLE>
See accompanying notes to financial statements.
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I-3
<PAGE>
ENEX OIL & GAS INCOME PROGRAM IV - SERIES 7, 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. On August 9, 1996, the Company's General Partner submitted preliminary
proxy material to the Securities Exchange Commission with respect to a
proposed consolidation of the Company with 33 other managed limited
partnerships. On November 13, 1996, the Company submitted amended
preliminary proxy material to the SEC with respect to this consolidationThe
terms and conditions of the proposed consolidation are set forth in such
preliminary proxy material.
3. A cash distribution was made to the limited partners of the Company in the
amount of $5,842, representing net revenues from the sale of oil and gas
produced from properties owned by the Company. This distribution was made
on July 31,1996.
4. 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 $73,979 for certain
oil and gas properties due to market indications that the carrying amounts
were not fully recoverable.
5. Effective January 1, 1996, the Company sold its interest in the Nunley
Ranch acquisition for $1,076. The Company recognized a gain of $1,076 on
the sale.
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 increased to $97,154 in 1996 from
$68,719 in 1995. This represents An increase of $28,435 (41%). Oil sales
increased by $24,008 (49%). A 13% increase in oil production increased sales by
$6,488. A 31% increase in the average oil sales price increased sales by an
additional $17,520. Gas sales increased by $4,427 (22%). A 28% increase in the
average gas sales price increased sales by $5,145. This increase was partially
offset by a 4% decrease in gas production. The increase in oil production was
primarily the result of higher production from the El Mac acquisition which had
an acidization treatment in the third quarter of 1996. The decrease in gas
production was primarily due to natural production declines. The changes in
average sales prices correspond with changes in the overall market for the sale
of oil and gas.
Lease operating expenses increased to $40,220 in the third quarter of 1996 from
$38,452 in the third quarter of 1995. The increase of $1,768 is primarily due to
the changes in production, noted above.
Depreciation and depletion expense decreased to $19,455 in the third quarter of
1996 from $27,278 in the third quarter of 1995. This represents a decrease of
$7,823 (29%). A 32% decrease in the depletion rate reduced depreciation and
depletion expense by $9,018. 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 an impairment of property of
$73,979 in the first quarter of 1996.
General and administrative expenses decreased to $7,956 in the third quarter of
1996 from $8,573 in 1995. This decrease of $617 (7%) 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 six months increased to $268,222 in 1996 from
$260,088 in 1995. This represents an increase of $8,134 or 3%. Oil sales
increased by $26,912 (17%). An 18% increase in the average oil sales price
increased sales by $29,309. This increase was partially offset by a 1% decrease
in oil production. Gas sales decreased by $18,778 (19%). A 29% decrease in gas
production reduced sales by $28,231. This decrease was partially offset by a 15%
increase in the average gas sales price. The decrease in oil production was
primarily the result of natural production declines. The decrease in gas
production was primarily due to the sale of the Nunley Ranch acquisition,
effective January 1, 1996, and the shut-in of production from the Binger
acquisition to perform a workover, together with natural production declines.
The changes in average sales prices correspond with changes in the overall
market for the sale of oil and gas.
Lease operating expenses increased to $142,076 in the first nine months of 1996
from $124,449 in the first nine months of 1995. The increase of $17,627 (14%) is
primarily due to the conversion of a well in the Binger acquisition to a gas
injection well in 1996.
I-5
<PAGE>
Depreciation and depletion expense decreased to $54,649 in the first nine months
of 1996 from $107,799 in the first nine months of 1995. This represents a
decrease of $53,150 (49%). The changes in production, noted above, reduced
depreciation and depletion expense by $24,567. A 34% decrease in the depletion
rate reduced depreciation and depletion expense by an additional $28,583. The
rate decrease was primarily due to the lower property basis resulting from the
recognition of an impairment of property of $73,979 in the first quarter of
1996.
Effective January 1, 1996, the Company sold its interest in the Nunley Ranch
acquisition for $1,076. The Company recognized a gain of $1,076 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 $73,979 for certain
oil and gas properties due to market indications that the carrying amounts were
not fully recoverable.
General and administrative expenses decreased to $28,694 in the first nine
months of 1996 from $29,105 in 1995. This decrease of $411 (1%) 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. 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's "available cash flow" is essentially equal to
the net amount of cash provided by operating activities.
The Company discontinued the payment of distributions during 1995. In July 1995,
the Company reinstated distributions to its limited partners. 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, 1995
reserve report prepared by Gruy, there appears to be sufficient future net
revenues to pay all obligations and expenses. The General Partner does not
intend to accelerate the repayment of the debt beyond the Company's cash flow
provided by operating activities. Future periodic distributions will be made
once sufficient net revenues are accumulated.
I-6
<PAGE>
On August 9, 1996, the Company's General Partner submitted preliminary proxy
material to the Securities Exchange Commission with respect to a proposed
consolidation of the Company with 33 other managed limited partnerships. On
November 13, 1996, the Company submitted amended preliminary proxy material to
the SEC with respect to this consolidation. The terms and conditions of the
proposed consolidation are set forth in such preliminary proxy material.
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 7, 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> 0000864177
<NAME> Enex Oil & Gas Income Program IV-Series 7,L.P.
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> dec-31-1996
<PERIOD-START> jan-01-1996
<PERIOD-END> dec-30-1996
<CASH> 3543
<SECURITIES> 0
<RECEIVABLES> 40490
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 47750
<PP&E> 1747861
<DEPRECIATION> 1409925
<TOTAL-ASSETS> 385686
<CURRENT-LIABILITIES> 25763
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 359923
<TOTAL-LIABILITY-AND-EQUITY> 385686
<SALES> 268222
<TOTAL-REVENUES> 268222
<CGS> 158881
<TOTAL-COSTS> 316203
<OTHER-EXPENSES> 157322
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (46905)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
