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, 1996
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 / /
<PAGE>
Item 1. Financial Statements
The following Financial Statements are filed herewith:
Balance Sheets - September 30, 1996 and December 31, 1995.
Statements of Operations for the Nine and Three Months Ended September 30,
1996 and 1995.
Statements of Changes in Partners' Equity for the Nine and Three Months
Ended September 30, 1996 and 1995.
Statements of Cash Flows for the Nine Months Ended September 30, 1996 and
1995.
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, 1996,
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.
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, 1995
reserves of $765,500. The increase in undiscounted future net cash
flows for the Partnership properties was caused by higher year end
prices in effect at December 31, 1995 compared to lower year end
prices as of December 31, 1994. There were no significant 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, 1995 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.
<PAGE>
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 decreased from $193,199
in 1995 to $182,149 in 1996. Although the Partnership receives only a
minor amount of revenue from oil, stable oil production and higher
average oil prices in 1996 did contribute to minimize the decline in
overall operating revenues. The majority of the partnership's revenue
is from gas production. The gas revenue received for 1996 was lower
then 1995 mainly due to a production decline, from 71,018 MCF in 1995
to 67,901 MCF in 1996. Average price per MCF of gas increased by about
$0.08 per MCF. Production expenses increased from $65,265 in 1995 to
$69,397 in 1996. The higher production expenses, in 1996, can be
attributed to some severe storms during the late spring and summer of
1996. These storms resulted in additional cost incurred, which may
include additional maintenance, location, access road work and other
repairs. Most of the production expenses, in 1995, were to maintain
the general upkeep of the wells and well site.
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 1996 and 1995 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. General and
administrative charges were stable and showed only a minor change
from 1995 to 1996.
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. No additional depreciation, depletion or amortization was
needed in 1995 or in the three quarters of 1996. Although the 1996
expense is lower than 1995, the expense recorded is consistent with
the current basis of the partnership's properties.
<PAGE>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.
<PAGE>
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 8, 1996 BY: /S/Charles E.Drimal Jr.
(DATE) ------------------------
Charles E. Drimal, Jr.
General Partner
<PAGE>
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Balance Sheets
September December
30, 31, 1995
1996
(unaudited) (audited)
Assets
Current Assets:
Cash and cash equivalents $ 21 $ 29
---------- -----------
Total current assets 21 29
Oil and Gas properties -
successful efforts method:
Leasehold costs 236,502 236,502
Well and related facilities 6,945,363 6,938,085
less accumulated
depreciation, depletion and
amortization (5,928,629) (5,869,370)
---------- ----------
Net oil & gas properties 1,253,236 1,305,217
---------- ----------
Total assets $ 1,253,257 $ 1,305,246
========== ==========
Liabilities and Partners' Equity
Current liabilities:
Due to affiliates $ 175,223 $ 190,593
---------- ----------
Total current liabilities 175,223 190,593
---------- ----------
Partners' Equity
Limited partners 1,191,853 1,231,468
General partners (113,819) (116,815)
---------- ----------
Total partners' equity 1,078,034 1,114,653
---------- ----------
Total liabilities and
partners' equity $ 1,253,257 $ 1,305,246
========== ==========
See accompanying note to the financial statements
<PAGE>
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Nine Months Ended
September 30, 1996
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 153,278 $ 28,871 $ 182,149
-------- -------- -------
Total Revenue 153,278 28,871 182,149
-------- -------- -------
Costs and Expenses:
Production expense 58,398 10,999 69,397
General and administrative 63,110 11,887 74,997
to a related party
General and administrative 12,719 2,396 15,115
Depreciation, depletion
and amortization 58,666 593 59,259
-------- -------- -------
Total Costs and Expenses 192,893 25,875 218,768
-------- -------- -------
Net Income(loss) $ (39,615) $ 2,996 $ (36,619)
======== ======== =======
Net Income(loss)
per equity unit $ (4.51)
======
See accompanying note to the financial statements.
<PAGE>
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 financial statements.
<PAGE>
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ended
September 30, 1996
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 53,599 $ 10,096 $ 63,695
-------- -------- ---------
Total Revenue 53,599 10,096 63,695
-------- -------- ---------
Costs and Expenses:
Production expense 20,449 3,851 24,300
General and administrative 21,037 3,962 24,999
to a related party
General and administrative 3,367 634 4,001
Depreciation, depletion
and amortization 19,610 199 19,809
-------- -------- ---------
Total Costs and Expenses 64,463 8,646 73,109
-------- -------- ---------
Net Income(loss) $ (10,864) $ 1,450 $ (9,414)
======== ======== =========
Net Income(loss)
per equity unit $ (1.24)
========
See accompanying note to the financial statements.
<PAGE>
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 financial statements.
<PAGE>
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Nine Months Ended
September 30, 1996
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,231,468 (116,815) $ 1,114,653
Net Income(Loss) (39,615) 2,996 (36,619)
--------- --------- ----------
Balance at end of period $ 1,191,853 (113,819) $ 1,078,034
========= ========= ==========
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
========= ======== ===========
See accompanying note to the financial statements.
<PAGE>
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Three Months Ended
September 30, 1996
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,202,717 (115,269) $ 1,087,448
Net Income(Loss) (10,864) 1,450 (9,414)
--------- --------- ----------
Balance at end of period $ 1,191,853 (113,819) $ 1,078,034
========= ========= ==========
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
========= ======== ==========
See accompanying note to the financial statements.
<PAGE>
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Cash Flows
(unaudited)
Nine Nine
months months
ended ended
September September
30, 1996 30, 1995
Net cash provided by(used in)
operating activities $ 7,270 $ (18)
---------- -------
Cash flows from investing activities:
Investment in well and related
facilities (7,278) 0
---------- -------
Net Cash used in investing activities (7,278) 0
---------- -------
Net increase(decrease) in cash and
cash equivalents (8) (18)
Cash and cash equivalents at beginning
of period 29 43
--------- --------
Cash and cash equivalents at end of
period $ 21 $ 25
========= ========
See accompanying note to the financial statements.
<PAGE>
STERLING GAS DRILLING FUND 1981
(a New York limited partnership)
Note to Financial Statements
September 30, 1996
1. The accompanying statements for the period ending September 30,
1996 are unaudited but reflect all the adjustments necessary to
present fairly the results of operations.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Sterling Gas Drilling Fund 1981 Third Quarter 1996 10-Q
and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 21
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21
<PP&E> 7,181,865
<DEPRECIATION> (5,928,629)
<TOTAL-ASSETS> 1,253,257
<CURRENT-LIABILITIES> 175,223
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,078,034<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,253,257
<SALES> 182,149
<TOTAL-REVENUES> 182,149
<CGS> 218,768
<TOTAL-COSTS> 218,768
<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> (36,619)
<EPS-PRIMARY> (4.51)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Other - se includes total partners' equity.
<F2>The limited partnership net income was divided by total
number of limited partnership units of 8,790.
</FN>
</TABLE>
