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 0-16575

             ENEX INCOME AND RETIREMENT FUND - SERIES 3, L.P.
     (Exact name of small business issuer as specified in its charter)

          New Jersey                                           76-0222818
(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 INCOME AND RETIREMENT FUND - SERIES 3, L.P.
BALANCE SHEET
-------------------------------------------------------------------------------

                                                              September 30,
ASSETS                                                             1996
                                                          ---------------------
                                                              (Unaudited)
CURRENT ASSETS:
<S>                                                       <C>                 
  Cash                                                    $              4,022
  Accounts receivable - oil & gas sales                                 28,526
                                                          ---------------------

Total current assets                                                    32,548
                                                          ---------------------

OIL & GAS PROPERTIES
  (Successful efforts accounting method) - Proved
   mineral interests                                                 1,312,406
  Less  accumulated depletion                                        1,148,442
                                                          ---------------------

Property, net                                                          163,964
                                                          ---------------------

TOTAL                                                     $            196,512
                                                          =====================

LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:

   Payable to general partner                             $             22,802
                                                          ---------------------



NONCURRENT PAYABLE TO GENERAL PARTNER                                   22,800
                                                          ---------------------

PARTNERS' CAPITAL:
   Limited partners                                                    142,074
   General partner                                                       8,836
                                                          ---------------------

Total partners' capital                                                150,910
                                                          ---------------------

TOTAL                                                     $            196,512
                                                          =====================

Number of $500 Limited Partner units outstanding                         2,988
</TABLE>



See accompanying notes to financial statements.
-------------------------------------------------------------------------------

                                       I-1
<PAGE>
<TABLE>
<CAPTION>
ENEX INCOME AND RETIREMENT FUND - 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               $      18,315     $         23,923     $         82,597     $           57,679
                               ---------------    -----------------    -----------------    -------------------

EXPENSES:
  Depletion                             3,197               17,964               23,344                 38,271
  Impairment of property                    -                    -               52,602                      -
  Production taxes                        988                2,023                4,075                  3,185
  General and administrative            5,974                7,125               21,607                 23,857
                               ---------------    -----------------    -----------------    -------------------

Total expenses                         10,159               27,112              101,628                 65,313
                               ---------------    -----------------    -----------------    -------------------

OTHER INCOME:
 Gain on sale of property                 209                    -                  209                      -
                               ---------------    -----------------    -----------------    -------------------

NET INCOME (LOSS)               $       8,365     $         (3,189)    $        (18,822)    $           (7,634)
                               ===============    =================    =================    ===================
</TABLE>



See accompanying notes to financial statements.
----------------------------------------------------------------------
                                       I-2
<PAGE>
<TABLE>
<CAPTION>
ENEX INCOME AND RETIREMENT FUND - SERIES 3, 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)                                         $          (18,822)            $     (7,634)    
                                                   -------------------      -------------------

Adjustments to reconcile net (loss) to net cash
   provided by operating activities
  Depletion                                                    23,344                   38,271
  Impairment of property                                       52,602                        -
  Gain on sale of property                                       (209)
(Increase) decrease in:
  Accounts receivable - oil & gas sales                       (15,365)                   9,576
Increase (decrease) in:
   Accounts payable                                            (4,292)                  (2,909)
   Payable to general partner                                 (36,901)                 (10,376)
                                                   -------------------      -------------------

Total adjustments                                              19,179                   34,562
                                                   -------------------      -------------------

Net cash provided by operating activities                         357                   26,928
                                                   -------------------      -------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Proceeds from sale of property                              1,640                        -
                                                   -------------------      -------------------

CASH FLOWS FROM FINANCING ACTIVITIES;
    Cash distributions                                              -                  (30,254)
                                                   -------------------      -------------------


NET (DECREASE) INCREASE IN CASH                                 1,997                   (3,326)

CASH AT BEGINNING OF YEAR                                       2,025                    7,518
                                                   -------------------      -------------------

CASH AT END OF PERIOD                              $            4,022             $      4,192     
                                                   ===================      ===================
</TABLE>



See accompanying notes to financial statements.
------------------------------------------------------------
                                       I-3

<PAGE>

ENEX INCOME AND RETIREMENT FUND - 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.       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.

3.   Effective  August 1, 1996 the Company  sold its interest in the Spider Lake
     3-2 well for $1,640. The Company recognized a gain of $209 from the sale.

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 of $52,602 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 1995 Compared to Third Quarter 1996

Oil and gas  sales for the  third  quarter  decreased  to  $18,315  in 1996 from
$23,923 in 1995. This represents a decrease of $5,608 (23%). Oil sales increased
by $1,540 or 47%. A 31%  increase in the  average net oil sales price  increased
sales by $420.  A 13%  increase  in oil  production  resulted  in an  additional
increase of $1,120.  Gas sales decreased by $7,148 or 33%. A 54% decrease in gas
production  decreased sales by $11,141.  This decrease was partially offset by a
46% increase in the average gas sales price.  The increase in oil production was
primarily  the result of higher  production  from the Pecan Island  acquisition,
which had a new well drilled on it in 1996.  The decrease in gas  production was
primarily due to lower production from the East Cameron  acquisition,  which was
shut in for a workover  in 1996.  The  increases  in the average net oil and gas
sales prices were due to relatively higher net profits royalty payments received
from the Barnes Estate  acquisition,  which had lower  operating  costs in 1996,
coupled with higher prices in the overall market for the sale of oil and gas.

Depletion  expense decreased to $3,197 in the third quarter of 1996 from $17,964
in the third quarter of 1995. This  represents a decrease of $14,767 (82%).  The
changes in production, noted above, decreased depletion expense by $8,683. A 66%
decrease in the  depletion  rate  decreased  depletion  expense by an additional
$6,084. The rate decrease was primarily due to an upward revision of the oil and
gas reserves  during  December 1995 and the lower property basis  resulting from
the recognition of a $52,602 property impairment in the first quarter of 1996.

Effective  August 1, 1996 the Company  sold its  interest in the Spider Lake 3-2
well for $1,640. The Company recognized a gain of $209 from the sale.

General and  administrative  expenses decreased to $5,974 in 1996 from $7,125 in
1995.  This  decrease of $1,151 (16%) 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 $82,597 in 1996 from
$57,679  in 1995.  This  represents  an  increase  of $24,918  (43%).  Oil sales
increased  by $3,813 or 40%. A 6% increase  in oil  production  caused  sales to
increase by $568.  A 33%  increase in the average net oil sales price  increased
sales by an  additional  $3,245.  Gas sales  increased  by $21,105 or 45%. A 61%
increase  in the  average  gas sales  price  increased  sales by  $26,195.  This
increase was partially offset by a 10% decrease in gas production. The increases
in oil production were primarily due to higher  production from the Pecan Island
acquisition  which had a new well  drilled on it in 1996.  The  decrease  in gas
production was due primarily to natural  production  declines.  The increases in
the average net oil and gas sales prices were due to relatively higher

                                       I-5

<PAGE>



net profits royalty payments received from the Barnes Estate acquisition,  which
had lower  operating  costs in 1996,  coupled with higher  prices in the overall
market for the sale of oil and gas.

Depletion  expense  decreased  to $23,344 in the first nine  months of 1996 from
$38,271 in the first nine months of 1995.  This represents a decrease of $14,927
(39%).  A 34%  decrease  in the  depletion  rate  reduced  depletion  expense by
$11,929.  Changes in  production  noted  above  decreased  depletion  expense an
additonal  $2,998.  The rate decrease was primarily due to an upward revision of
the oil and gas  reserves  during  December  1995 and the lower  property  basis
resulting  from the  recognition of a $52,602  property  impairment 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 of $52,602 for certain oil and gas
properties due to market  indications  that the carrying  amounts were not fully
recoverable.

Effective  August 1, 1996 the Company  sold its  interest in the Spider Lake 3-2
well for $1,640. The Company recognized a gain of $209 from the sale.

General and administrative expenses decreased to $21,607 in 1996 from $23,857 in
1995.  This  decrease of $2,250 (9%) is  primarily  due to less staff time being
required to manage the Company's operations.

Account receivable - oil and gas sales are  disproportionately  high in relation
to oil and gas sales as the revenues from the Corinne field were withheld by the
purchaser due to a gas balancing dispute.


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

                                       I-6

<PAGE>



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.  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.

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.

                                       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 Sepetmber 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 INCOME AND RETIREMENT
                                               FUND - 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>