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 March 31, 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 0-16575

                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) 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
<PAGE>
                              PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ENEX INCOME AND RETIREMENT FUND - SERIES 3, L.P.
BALANCE SHEET
---------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                            MARCH 31,
ASSETS                                                         1997
                                                      ---------------------
                                                           (Unaudited)
CURRENT ASSETS:
<S>                                                   <C>                 
  Cash                                                $             16,613
  Accounts receivable - oil & gas sales                             36,478
                                                      ---------------------

Total current assets                                                53,091
                                                      ---------------------

OIL & GAS PROPERTIES
  (Successful efforts accounting method) - Proved
   mineral interests                                             1,312,406
  Less  accumulated depletion                                    1,159,717
                                                      ---------------------

Property, net                                                      152,689
                                                      ---------------------

TOTAL                                                 $            205,780
                                                      =====================

LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
   Accounts payable                                   $              1,202
   Payable to general partner                                       34,894
                                                      ---------------------

Total current liabilities                                           36,096
                                                      ---------------------

PARTNERS' CAPITAL:
   Limited partners                                                157,842
   General partner                                                  11,842
                                                      ---------------------

Total partners' capital                                            169,684
                                                      ---------------------

TOTAL                                                 $            205,780
                                                      =====================


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






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

                                       I-1

<PAGE>
ENEX INCOME AND RETIREMENT FUND - SERIES 3, L.P.
STATEMENTS OF OPERATIONS
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
 
(UNAUDITED)                               THREE MONTHS ENDED
                                   ----------------------------------------

                                      MARCH 31,              MARCH 31,
                                         1997                  1996
                                 -------------------    -------------------

REVENUES:
<S>                              <C>                        <C>              
Oil and gas sales                $           39,715         $       28,398   
                                 -------------------    -------------------

EXPENSES:
  Depletion                                   9,204                 11,377
  Impairment of property                          -                 52,602
  Production taxes                            1,448                  1,260
  General and administrative                  6,979                  8,495
                                 -------------------    -------------------

Total expenses                               17,631                 73,734
                                 -------------------    -------------------

NET INCOME (LOSS)                $           22,084        $       (45,336)  
                                 ===================    ===================
</TABLE>


See accompanying notes to financial statements.
---------------------------------------------------------------------------
                                       I-2

<PAGE>
ENEX  INCOME AND RETIREMENT FUND - SERIES 3, L.P.

STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1997
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                            PER $500
                                                                                             LIMITED
                                                                                             PARTNER
                                                       GENERAL            LIMITED           UNIT OUT-
                                  TOTAL                PARTNER           PARTNERS           STANDING
                            -----------------    ------------------ ------------------  -----------------

<S>              <C>        <C>                  <C>                <C>                      <C>            
BALANCE, JANUARY 1, 1996    $        169,732     $           3,124  $         166,608        $        56    

CASH DISTRIBUTIONS                   (14,442)               (1,444)           (12,998)                (4)

NET INCOME (LOSS)                      4,918                 8,293             (3,375)                (1)
                            -----------------    ------------------ ------------------  -----------------

BALANCE, DECEMBER 31, 1996           160,208                 9,973            150,235                 51

CASH DISTRIBUTIONS                   (12,608)               (1,260)           (11,348)                (4)

NET INCOME                            22,084                 3,129             18,955                  6
                            -----------------    ------------------ ------------------  -----------------

BALANCE, MARCH 31, 1997     $        169,684     $          11,842  $         157,842 (1)    $        53    
                            =================    ================== ==================  =================
</TABLE>


(1)  Includes 505 units purchased by the general partner as a limited partner.



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

<PAGE>
ENEX INCOME AND RETIREMENT FUND - SERIES 3, L.P.
STATEMENTS OF CASH FLOWS
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>

(UNAUDITED)
                                                                  THREE MONTHS ENDED
                                                            ------------------------------------------

                                                               MARCH 31,                MARCH 31,
                                                                  1997                    1996
                                                          -------------------      -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                       <C>                          <C>              
Net income (loss)                                         $           22,084           $      (45,336)  
                                                          -------------------      -------------------

Adjustments to reconcile net income (loss) to net cash
   provided by operating activities
  Depletion                                                            9,204                   11,377
  Impairment of property                                                   -                   52,602
(Increase) in:
  Accounts receivable - oil & gas sales                               (1,821)                 (11,112)
(Decrease) in:
   Accounts payable                                                     (976)                  (3,850)
   Payable to general partner                                         (7,514)                  (3,360)
                                                          -------------------      -------------------

Total adjustments                                                     (1,107)                  45,657
                                                          -------------------      -------------------

Net cash provided by operating activities                             20,977                      321
                                                          -------------------      -------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Cash distributions                                               (12,608)                       -
                                                          -------------------      -------------------

NET INCREASE IN CASH                                                   8,369                      321

CASH AT BEGINNING OF YEAR                                              8,244                    2,025
                                                          -------------------      -------------------

CASH AT END OF PERIOD                                     $           16,613           $        2,346   
                                                          ===================      ===================
</TABLE>


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

                                       I-4


<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.       A cash  distribution was made to the limited partners of the Company in
         the amount of $11,348  representing  net revenues  from the sale of oil
         and  gas  produced  from   properties   owned  by  the  Company.   This
         distribution was made on January 31, 1997.

3.       On April 7, 1997, the Company's  General  Partner mailed proxy material
         to the limited partners with respect to a proposed consolidation of the
         Company  with 33 other  managed  limited  partnerships.  The  terms and
         conditions  of the proposed  consolidation  are set forth in such proxy
         material.

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 changes in the overall market for the sale of oil and gas
     and significant  decreases in the projected  production from certain of the
     Company's oil and gas properties.

                                       I-5

<PAGE>



Item 2.            Management's Discussion and Analysis or Plan of Operation.

First Quarter 1997 Compared to First Quarter 1996

Oil and gas  sales for the  first  quarter  increased  from  $28,398  in 1996 to
$39,715  in 1997.  This  represents  an  increase  of $11,317  (40%).  Oil sales
decreased  by $1,422 or 25%. A 54%  decrease in oil  production  caused sales to
decrease by $3,132.  This  decrease  was  partially  offset by a 64% increase in
average  net oil sales  prices.  Gas sales  increased  by  $12,739 or 56%. A 54%
increase  in average  net gas sales  prices  increased  sales by  $12,451.  A 1%
increase in gas production  increased sales by an additional  $288. The decrease
in oil production  was primarily the result of a shut in of production  from the
Bagley  acquisition  to perform a  workover,  coupled  with  natural  production
declines.  The increase in gas production was primarily the result of additional
wells  drilled on the Pecan  Island  acquisition  in 1996,  partially  offset by
natural production declines.  The increases in the average oil and gas net sales
prices were primarily due to higher prices in the overall market for the sale of
oil and gas.

Depletion  expense decreased from $11,377 in the first quarter of 1996 to $9,204
in the first quarter of 1997.  This represents a decrease of $2,173 (24%). A 14%
decrease in the depletion rate reduced depletion expense by $1,476.  The changes
in production, noted above, reduced depletion expense by an additional $697. The
rate  decrease  was  primarily  due to an  upward  revision  of the  oil and gas
reserves during December 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 changes in the overall market for the sale of oil and gas and
significant  decreases in the projected production from certain of the Company's
oil and gas properties.

General and  administrative  expenses decreased from $8,495 in the first quarter
of 1996 to $6,979 in the first quarter of 1997. This decrease of $1,516 (18%) is
primarily  due to less  staff  time  being  required  to  manage  the  Company's
operations in 1997.

CAPITAL RESOURCES AND LIQUIDITY

The Company's cash flow from  operations is a direct result of the amount of net
proceeds realized

                                       I-6

<PAGE>



from the sale of oil and gas production.  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  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, financing and investing activities.

The  Company   discontinued  the  payment  of   distributions   during  1995.  A
distribution  was made in the first quarter of 1997.  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.  The  Company  does  not  intend  to  purchase
additional  properties  or fund  extensive  development  of existing oil and gas
properties,  and as  such;  has no  long-term  liquidity  needs.  The  Company's
projected cash flows from operations will provide  sufficient funding to pay its
operating expenses and debt obligations.  Based on the December 31, 1996 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,  financing and investing  activities.  Future periodic  distributions
will be made once sufficient net revenues are accumulated.

On April 7, 1997,  the Company's  General  Partner  mailed proxy material to the
limited partners with respect to a proposed consolidation of the Company with 33
other managed  limited  partnerships.  The terms and  conditions of the proposed
consolidation are set forth in such 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 March 31, 1997.


                                      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 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




May 11, 1997                                      By: /s/ James A. Klein
                                                     -------------------
                                                          James A. Klein
                                                       Controller and Chief
                                                        Accounting Officer