SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/Quarterly Report Pursuant to Section 13 or 15(d)of the
Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1995
or
/ /Transition Report Pursuant to Section 13 or 15(d)of the
Securities Exchange Act of 1934
For the Transition Period Ended ______________________
Commission File Number 0-10501
STERLING GAS DRILLING FUND 1981
(Exact name of registrant as specified in charter)
New York
(State or other jurisdiction of incorporation or
organization)
13-3098770
(IRS employer identification number)
One Landmark Square, Stamford, Connecticut 06901
(Address and Zip Code of principal executive offices)
(203) 358-5700
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 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 / /
Part I
Item 1. Financial Statements
The following Financial Statements are filed herewith:
Balance Sheets - September 30, 1995 and December 31, 1994.
Statements of Operations for the Nine and Three Months Ended September 30,
1995 and 1994.
Statements of Changes in Partners' Equity for the Nine and Three Months
Ended September 30, 1995 and 1994.
Statements of Cash Flows for the Nine Months Ended September 30, 1995 and
1994.
Note to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
1. Liquidity -
The oil and gas industry is intensely competitive in all its phases.
There is also competition among this industry and other industries in
supplying energy and fuel requirements of industrial and residential
consumers. It is not possible for the Registrant to calculate its
position in the industry as the Registrant competes with many other
companies having substantially greater financial and other resources.
In accordance with the terms of the Prospectus, the General Partners
of the Registrant will make cash distributions of as much of the
Partnership cash credited to the capital accounts of the Partners as
the General Partners have determined is not necessary or desirable for
the payment of any contingent debts, liabilities or expenses or for
the conduct of the Partnership's business. As of September 30, 1995,
the General Partners have distributed to the Limited Partners
$3,955,500. Such cash distributions are equivalent to 45 % of
original total Limited Partner capital contributions.
Columbia Gas Transmission Corp., a contract purchaser of the
Registrant's gas, filed a Chapter 11 petition in U.S. Bankruptcy Court
in Wilmington Delaware on July 31, 1991. At that time, the Bankruptcy
Court released Columbia from any current contracts. The Registrant
has filed a claim with the Bankruptcy Court to recover revenue
suspended at the time bankruptcy occurred. Such amounts were not
recorded as revenue during the applicable period, therefore, no loss
contingency exists. The Registrant has reviewed and accepted a
tentative settlement offer made by Columbia. The Registrant is
hopeful that Columbia will make a final settlement within the next
three months.
The net proved oil and gas reserves of the Partnership are considered
to be a primary indicator of financial strength and future liquidity.
The present value of unescalated future net revenues (SEC case)
associated with such reserves, discounted at 10% as of December 31,
1994 was approximately $703,000 as compared to the December 31, 1993
amount of $1,344,000.
The decline in undiscounted future net cash flows for the Partnership
properties at December 31, 1994 when compared to December 31, 1993,
was caused by a significant decline in prices between these two dates,
rather than changes in the estimated future production from the
properties. It is the opinion of management, and the general
consensus in the industry, that gas prices are unlikely to decline
significantly below the December 31, 1994 price in the near future.
However, there can be no assurances that such price declines will not
occur, and will not pose a threat to the Partnership's continued
viability.
2. Capital Resources -
The Registrant was formed for the sole purpose of drilling oil and gas
wells. The Registrant entered into a drilling contract with an
independent contractor in December 1981 for $6,900,000. Pursuant to
the terms of this contract, wells have been drilled resulting in
thirty-seven producing wells, three non commercial wells and one
plugged well. The Registrant has had a reserve report prepared which
details reserve value information, and such information is available
to the Limited Partners pursuant to the buy-out provisions of the
Prospectus as previously filed.
3. Results of Operations -
The Partnership's overall operating revenues decreasing minimally
from $194,956 in 1994 to $193,199 in 1995. The increased gas
production, from 70,535 MCF in 1994 to 71,018 MCF in 1995, was
offset by lower average price per MCF from $ 2.80 in 1994 to $2.54 in
1995. Although the Partnership receives only a minor amount of
revenue from oil, higher oil production and average oil prices in 1995
did contribute to minimize the decline in overall operating revenues.
Production expenses decreased from $85,420 in 1994 to $65,265 in 1995.
Additional location and road repairs were expended during the spring
and summer of last year. These costs were incurred because of the
freezing and flooding which occurred throughout the 1994 winter and
spring production periods. Most expenditures for repairs, locations
and labor in 1995 were used to maintain the general upkeep of the
wells and well sites.
General and administrative expenses have been segregated on the
financial statements to show expenses paid to PrimeEnergy Management
Corporation(PEMC), a general partner. These expenses are charged in
accordance with guidelines set forth in the Registrant's Management
Agreement. The expenses attributable to the affairs and operations of
the Partnership, reimbursed to PEMC, shall not exceed an annual amount
equal to 5% of the Limited Partners capital contributions. Amounts
related to both 1995 and 1994 are substantially less than the amounts
allocable to the Registrant under the Partnership Agreement. The
lower amounts reflect management's effort's to limit costs, both
incurred and allocated to the Registrant. Management continues to
reduce third party costs and use in-house resources to provide
efficient and timely services to the Partnership.
The Partnership records additional depreciation, depletion and
amortization to the extent that net capitalized costs exceed the
undiscounted future net cash flows attributable to the partnership
properties. A downward revision in reserve estimates due to lower year-
end gas prices in 1994 resulted in an additional charge of $250,000.
The lower depletion expense in 1995 is due to lower depletable cost
basis in oil and gas properties.
4. Other-
In, March, the Financial Accounting Standards Board issued Statement
of Financial Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of," (SFAS No.
121)which is effective for the fiscal years beginning after December
15, 1995. This statement establishes accounting standards for the
impairment of long-lived assets, requiring such assets to be reported
at the lower of carrying amount or fair value, less selling costs.
The statement amends SFAS No. 19, "Financial Accounting and Reporting
by Oil and Gas Producing Companies" by adding an impairment test for
proved properties in accordance with SFAS No. 121.
The Registrant currently performs a "ceiling test" by comparing the
total carrying value of oil and gas properties to the total future net
cash flows from the estimated production of proved oil and gas
properties. The effect of SFAS No. 121, which would change the way
this test is performed, is not known at this time.
PART II
Items 1 through 5 have been omitted in that each item is either
inapplicable or the answer is negative.Item . Exhibits and Reports on
Form 8-K
The Partnership was not required to file any reports on Form 8-K and
no such form was filed during the period covered by this report.
Exhibit 27 - Financial Data Schedule is attached to the electronic
filing of this report.
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
STERLING GAS DRILLING FUND 1981
November 13, 1995 BY: /S/Charles E.Drimal Jr.
(DATE) -----------------------
Charles E. Drimal, Jr.
General Partner
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Balance Sheets
(unaudited)
September December
30, 31, 1994
1995
Assets
Current Assets:
Cash and cash equivalents $ 25 $ 43
---------- -----------
Total current assets 25 43
Oil and Gas properties -
successful efforts method:
Leasehold costs 236,502 236,502
Well and related facilities 6,938,085 6,938,085
less accumulated
depreciation, depletion and
amortization (5,861,280) (5,785,763)
---------- ----------
1,313,307 1,388,824
---------- ----------
Total assets $ 1,313,332 $ 1,388,867
Liabilities and Partners' Equity
Current liabilities:
Due to affiliates $ 214,982 $ 252,719
---------- ----------
Total current liabilities 214,982 252,719
---------- ----------
Partners' Equity
Limited partners 1,218,950 1,261,971
General partners (120,600) (125,823)
---------- ----------
Total partners' equity 1,098,350 1,136,148
---------- ----------
Total liabilities and
partners' equity $ 1,313,332 $ 1,388,867
========== ==========
See accompanying note to the financial statements
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Nine Months Ended
September 30, 1995
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 162,577 $ 30,622 $ 193,199
-------- -------- -------
Total Revenue 162,577 30,622 193,199
-------- -------- -------
Costs and Expenses:
Production expense 54,920 10,345 65,265
General and administrative
to a related party 63,110 11,887 74,997
General and administrative 12,806 2,412 15,218
Depreciation, depletion
and amortization 74,762 755 75,517
-------- -------- -------
Total Costs and Expenses 205,598 25,399 230,997
-------- -------- -------
Net Income(loss) $ (43,021) $ 5,223 $ (37,798)
======== ======== =======
Net Income(loss)
per equity unit $ (4.89)
======
See accompanying note to the, financials
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Nine Months Ended
September 30, 1994
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 164,055 30,901 $ 194,956
-------- -------- -------
Total Revenue 164,055 30,901 194,956
-------- -------- -------
Costs and Expenses:
Production expense 71,881 13,539 85,420
General and administrative
to a related party 72,706 13,694 86,400
General and administrative 11,644 2,193 13,837
Depreciation, depletion
and amortization 81,603 824 82,427
-------- -------- -------
Total Costs and Expenses 237,834 30,250 268,084
-------- -------- -------
Net Income(loss) $ (73,779) 651 $ (73,128)
======== ======== =======
Net Income(loss)
per equity unit $ (8.39)
======
See accompanying note to the, financials
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ended
September 30, 1995
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 52,739 9,934 $ 62,673
-------- -------- ---------
Total Revenue 52,739 9,934 62,673
-------- -------- ---------
Costs and Expenses:
Production expense 15,893 2,994 18,887
General and administrative
to a related party 21,037 3,962 24,999
General and administrative 2,852 537 3,389
Depreciation, depletion
and amortization 24,920 252 25,172
-------- -------- ---------
Total Costs and Expenses 64,702 7,745 72,447
-------- -------- ---------
Net Income(loss) $ (11,963) 2,189 $ (9,774)
======== ======== =========
Net Income(loss)
per equity unit $ (1.36)
========
See accompanying note to the, financials
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ended
September 30, 1994
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 61,268 11,541 $ 72,809
-------- -------- -----------
Total Revenue 61,268 11,541 72,809
-------- -------- -----------
Costs and Expenses:
Production expense 23,177 4,365 27,542
General and administrative
to a related party 24,236 4,564 28,800
General and administrative 3,309 623 3,932
Depreciation, depletion
and amortization 27,202 274 27,476
-------- -------- -----------
Total Costs and Expenses 77,924 9,826 87,750
-------- -------- -----------
Net Income(loss) $ (16,656) $ 1,715 $ (14,941)
======== ======== ===========
Net Income(loss)
per equity unit $ (1.89)
======
See accompanying note to the, financials
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Nine Months Ended
September 30, 1995
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,261,971 $ (125,823) $ 1,136,148
Net Income(Loss) (43,021) 5,223 (37,798)
--------- -------- -----------
Balance at end of period $ 1,218,950 (120,600) $ 1,098,350
========= ======== ===========
Nine Months Ended
September 30, 1994
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,641,938 $ (120,979) $ 1,520,959
Net Income(Loss) (73,779) 651 (73,128)
--------- -------- ----------
Balance at end of period $ 1,568,159 (120,328) $ 1,447,831
========= ======== ==========
See accompanying note to the, financials
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Three Months Ended
September 30, 1995
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,230,913 $ (122,789) $ 1,108,124
Net Income(Loss) (11,963) 2,189 (9,774)
-------- -------- ----------
Balance at end of period $ 1,218,950 (120,600) $ 1,098,350
======== ======== ==========
Three Months Ended
September 30, 1994
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,584,815 $ (122,043) $ 1,462,772
Net Income(Loss) (16,656) 1,715 (14,941)
--------- -------- ----------
Balance at end of period $ 1,568,159 (120,328) $ 1,447,831
========= ========= ==========
See accompanying note to the, financials
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Cash Flows
(unaudited)
Nine months Nine months
ended ended
September September
30, 1995 30, 1994
Net cash provided by(used in)
operating activities $ (18) $ 1
---------- ---------
Net increase(decrease) in cash and
cash equivalents (18) 1
Cash and cash equivalents at
beginning of period 43 30
---------- ---------
Cash and cash equivalents at end of
period $ 25 $ 31
========== =========
See accompanying note to the, financials
STERLING GAS DRILLING FUND 1981
(a New York limited partnership)
Note to Financial Statements
September 30, 1995
1. The accompanying statements for the period ending September 30,
1995 are unaudited but reflect all the adjustments necessary to
present fairly the results of operations. Certain reclassifications
were made to the prior periods financial statements to conform to the
current period presentation.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Sterling Gas Drilling Fund 1981 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 23
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23
<PP&E> 7,174,587
<DEPRECIATION> (5,861,280)
<TOTAL-ASSETS> 1,313,332
<CURRENT-LIABILITIES> 214,982
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 1,098,350<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,313,332
<SALES> 193,199
<TOTAL-REVENUES> 193,199
<CGS> 230,997
<TOTAL-COSTS> 230,997
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (37,798)
<EPS-PRIMARY> (4.89)<F2>
<EPS-DILUTED> 0
<FN>
<F1> (other-se) includes total partner's equity.
<F2> (eps-primary) includes net income divided by total limited
partnership units of 8,790.
</FN>
</TABLE>
