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 33-45253
ENEX OIL & GAS INCOME PROGRAM VI - SERIES 1, L.P.
(Exact name of small business issuer as specified in its charter)
New Jersey 76-0303885
(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 VI - SERIES 1, L.P.
BALANCE SHEET
- --------------------------------------------------------------------------
September 30,
ASSETS 1996
------------------
(Unaudited)
CURRENT ASSETS:
<S> <C>
Cash $ 5,415
Accounts receivable - oil & gas sales 41,172
------------------
Total current assets 46,587
------------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 1,148,605
Less accumulated depreciation and depletion 532,550
------------------
Property, net 616,055
------------------
ORGANIZATION COSTS
(Net of accumulated amortization of $11,451) 20,881
------------------
TOTAL 683,523
==================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable 30,501
Note payable to general partner 11,338
Payable to general partner 20,237
------------------
Total current liabilities 62,076
------------------
NONCURRENT PAYABLE TO GENERAL PARTNER 40,476
------------------
PARTNERS' CAPITAL:
Limited partners 561,776
General partner 19,195
------------------
Total partners' capital 580,971
------------------
TOTAL $ 683,523
==================
Number of $500 Limited Partner units outstanding 2,021
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------
I-1
<PAGE>
<TABLE>
<CAPTION>
ENEX OIL & GAS INCOME PROGRAM VI - SERIES 1, L.P.
STATEMENT OF OPERATIONS
- ---------------------------------------------------------------------------
QUARTER ENDED NINE MONTHS ENDED
---------------------------------------- ----------------------------------------
(UNAUDITED)
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------------- ----------------- ----------------- -------------------
REVENUES:
<S> <C> <C> <C> <C>
Oil and gas sales $ 93,159 $ 96,848 $ 281,965 $ 294,037
------------------- ----------------- ----------------- -------------------
EXPENSES:
Depreciation, depletion and amortization 29,490 46,581 89,714 131,064
Impairment of property - - 201,736 -
Lease operating expenses 27,698 25,345 130,929 143,470
Production taxes 4,448 4,425 13,362 13,517
General and administrative 7,869 5,425 22,248 19,994
------------------- --------------- ----------------- -------------------
Total expenses 69,505 81,776 457,989 308,045
------------------- ----------------- ----------------- -------------------
INCOME (LOSS) FROM OPERATIONS 23,654 15,072 (176,024) (14,008)
------------------- ----------------- ----------------- -------------------
OTHER INCOME (EXPENSE):
Interest expense (424) (1,358) (2,356) (5,260)
Interest income - 127 - 127
------------------- ----------------- ----------------- -------------------
Net other income (expense) (424) (1,231) (2,356) (5,133)
------------------- ----------------- ----------------- -------------------
NET INCOME (LOSS) $ 23,230 $ 13,841 $ (178,380) $ (19,141)
=================== ================= ================= ===================
</TABLE>
See accompanying notes to financial statements.
- -----------------------------------------------------
I-2
<PAGE>
<TABLE>
<CAPTION>
ENEX OIL AND GAS INCOME PROGRAM VI - SERIES 1, L.P.
STATEMENT OF CASH FLOWS
- ---------------------------------------------------------------------
(UNAUDITED) NINE MONTHS ENDED
--------------------------------------------
September 30, September 30,
1996 1995
------------------- ---------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss) $ (178,380) $ (19,141)
------------------- ---------------------
Adjustments to reconcile net (loss) to net cash
provided by operating activities:
Depreciation, depletion and amortization 89,714 131,064
Impairment of property 201,736 -
(Increase) decrease in:
Accounts receivable - oil & gas sales (14,704) (4,977)
Other current assets 2,132 226
Increase (decrease) in:
Accounts payable (230) (2,966)
Payable to general partner (18,364) 32,699
------------------- ---------------------
Total adjustments 260,284 156,046
------------------- ---------------------
Net cash provided by operating activities 81,904 136,905
------------------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions - development costs (27,337) (52,821)
------------------- ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of note payable to general partner (30,922) (44,740)
Cash distributions (21,040) (30,480)
------------------- ---------------------
Net cast provided (used) by financing activities (51,962) (75,220)
------------------- ---------------------
NET INCREASE IN CASH 2,605 8,864
CASH AT BEGINNING OF PERIOD 2,810 1,966
------------------- ---------------------
CASH AT END OF PERIOD $ 5,415 $ 10,830
=================== =====================
</TABLE>
See accompanying notes to financial statements.
- ----------------------------------------------------------------------------
I-3
<PAGE>
ENEX OIL & GAS INCOME PROGRAM VI - SERIES 1, L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. The 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 period.
2. A cash distribution was made to the limited partners of the Company in
the amount of $6,033 representing net revenues from the temporary
investment of proceeds from subscriptions by the Company. This
distribution was made on July 31, 1996.
3. On December 29, 1994, in order to partially finance the purchase of
producing oil and gas properties, the Company borrowed $87,000 from the
general partner. The resulting note payable to the general partner bears
interest at the general partner's borrowing rate of prime plus
three-fourths of one-percent. Principal repayments of $11,264 were made on
the note during the third quarter of 1996. The weighted average principal
outstanding during the third quarter of 1996 and 1995 was $27,786 and
$58,622, respectively, and bore interest at an average rate of 9.00% and
9.75% in the third quarter of 1996 and 1995, respectively, and 9.00% and
9.66% in the first nine months of 1996 and 1995, respectively.
4. 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.
5. 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 $201,736 for certain
oil and gas properties due to 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 1996 Compared to Third Quarter 1995
Oil and gas sales for the third quarter decreased from $96,848 in 1995 to
$93,159 in 1996. This represents a decrease of $3,689 (4%). Oil sales decreased
by $4,747 or 5%. A 28% decrease in oil production reduced sales by $25,385. This
decrease was partially offset by a 32% increase in average oil sales prices. Gas
sales increased by $1,058 or 18%. A 30% increase in average gas sales prices
increased sales by $1,620. This increase was partially offset by a 10% decrease
in gas production. The decreases in oil and gas production were primarily the
result of natural production declines. The higher average oil and gas sales
prices correspond with higher prices in the overall market for the sale of oil
and gas.
Lease operating expenses increased from $25,345 in the third quarter of 1995 to
$27,698 in the third quarter of 1996. The increase of $2,353 (8%) is primarily
due to higher operating costs incurred on the McBride acquisition in 1996.
Depreciation and depletion expense decreased from $44,560 in the third quarter
of 1995 to $27,469 in the third quarter of 1996. This represents a decrease of
$17,091 (37%). The changes in production, noted above, reduced depreciation and
depletion expense by $12,079. A 15% decrease in the depletion rate reduced
depreciation and depletion expense by an additional $5,012. The rate decrease is
primarily due to the lower property basis resulting from the recognition of an
impairment of property for $201,736 in the first quarter of 1996.
General and administrative expenses increased from $5,425 in the third quarter
of 1995 to $7,869 in the third quarter of 1996. This increase of $2,444 (45%) is
primarily due to more staff time being required to manage the Company's
operations.
First Nine Months of 1995 Compared to First Nine Months of 1996
Oil and gas sales for the first nine months decreased from $294,037 in 1995 to
$281,965 in 1996. This represents a decrease of $12,072 (4%). Oil sales
decreased by $20,135 or 7%. A 22% decrease in oil production reduced sales by
$62,917. This decrease was offset by a 20% increase in average oil sales prices.
Gas sales increased by $8,063 or 52%. A 8% increase in gas production increased
sales by $1,248. A 41% increase in average gas sales price increased sales by an
additional $6,815. The decrease in oil production was primarily the result of
natural production declines coupled with lower production from the McBride
acquisition which was shut- in during January and February of 1996 due to
extreme low temperatures. The higher average oil sales price corresponds with
higher prices in the overall market for the sale of oil. The increase in gas
production was primarily the result of enhanced production improvements on the
Concord acquisition. The increase in average gas prices was due to relatively
higher production from the Concord acquisition, which has a higher gas sales
price, coupled with higher prices in the overall market for the sale of gas.
I-5
<PAGE>
Lease operating expenses decreased from $143,470 in the first nine months of
1995 to $130,929 in the first nine months of 1996. The decrease of $12,541 (9%)
is primarily due to lower operating costs incurred on the McBride acquisition in
1996, as a result of new techniques utilized to control paraffin build-up.
Depreciation and depletion expense decreased from $125,002 in the first nine
months of 1995 to $83,652 in the first nine months of 1996. This represents a
decrease of $41,350 (33%). The changes in production, noted above, reduced
depreciation and depletion expense by $22,805. An 18% decrease in the depletion
rate reduced depreciation and depletion expense by an additional $18,545. The
rate decrease is primarily due to the lower property basis resulting from the
recognition of an impairment of property for $201,736 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 $201,736 for certain
oil and gas properties due to market indications that the carrying amounts were
not fully recoverable.
General and administrative expenses increased from $19,994 in the first nine
months of 1995 to $22,248 in the first nine months of 1996. This increase of
$2,254 (11%) 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's "available cash flow" is essentially equal to
the net amount of cash provided by operating activities.
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.
I-6
<PAGE>
Nonetheless, the general partner believes the Company will continue to have
sufficient cash flow to fund operations and to maintain a regular pattern of
distributions.
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
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
ENEX OIL & GAS INCOME
PROGRAM VI - 1, 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> 0000883474
<NAME> Enex Oil & Gas Income Program VI - Sr 1, 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> 5415
<SECURITIES> 0
<RECEIVABLES> 41172
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 46587
<PP&E> 1148605
<DEPRECIATION> 532550
<TOTAL-ASSETS> 683523
<CURRENT-LIABILITIES> 62076
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 580971
<TOTAL-LIABILITY-AND-EQUITY> 683523
<SALES> 281965
<TOTAL-REVENUES> 281965
<CGS> 144291
<TOTAL-COSTS> 457989
<OTHER-EXPENSES> 313698
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (178380)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
