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 March 31, 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 / /
PART I
Item 1. Financial Statements
The following Financial Statements are filed herewith:
Balance Sheets - March 31, 1996 and December 31, 1995.
Statements of Operations for the Three Months Ended March 31, 1996 and
1995.
Statements of Changes in Partners' Equity for the year ended December 31,
1995 and for the Three Months Ended March 31, 1996.
Statements of Cash Flows for the Three Months Ended March 31, 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 March 31, 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,
1995 was approximately $765,000 as compared to the December 31, 1994
amount of $703,000. The increase in total estimated discounted future
net revenue was due primarily to higher year end gas prices as of
December 31, 1995, when compared to the low gas price as of December
31, 1994. 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
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 operating revenues decreased from $73,273 in 1995
to $63,677 in 1996. The partnership experienced a decline in gas
production from 23,919 MCF's in 1995 to 23,167 MCF's in 1996.
During the first quarter 1995 the partnership was paid for its gas
production based upon the spot market prices available. These spot
prices were higher during peak usage times of the year but could be
significantly lower during off-peak usage times. During the last
quarter of 1995, the partnership entered into a twelve month fixed
price contract for purchase of most of its production. This contract
price was in effect during the first quarter 1996 and was slightly
lower then the 1995 first quarter spot price. The combination of
these factors resulted in lower overall revenue. Production expenses
increased from $19,875 in 1995 to $22,131 in 1996. Most expenditures
for repairs, locations and labor in 1995 and 1996 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 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.
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. The partnership was not required to revise the properties
basis in either 1995 or first quarter 1996. The lower depletion
expense in 1996 is due to overall lower depletable cost basis in oil
and gas properties.
PART II
Items 1 through 5 have been omitted in that each item is either
inapplicable or the answer is negative.
Item 6. Exhibits and Reports on Form 8K
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
March 13, 1996 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)
March 31, December
1996 31, 1995
Assets
Current Assets:
Cash and cash equivalents $ 18 $ 29
---------- -----------
Total current assets 18 29
Oil and Gas properties -
successful efforts method:
Leasehold costs 236,502 236,502
Well and related facilities 6,942,902 6,938,085
less accumulated
depreciation, depletion and
amortization (5,889,086) (5,869,370)
---------- ----------
1,290,322 1,305,217
---------- ----------
Total assets $ 1,290,340 $ 1,305,246
Liabilities and Partners' Equity
Current liabilities:
Due to affiliates $ 183,011 $ 190,593
---------- ----------
Total current liabilities 183,011 190,593
---------- ----------
Partners' Equity
Limited partners 1,222,377 1,231,468
General partners (115,048) (116,815)
---------- ----------
Total partners' equity 1,107,329 1,114,653
---------- ----------
Total liabilities and
partners' equity $ 1,290,340 $ 1,305,246
========== ==========
See accompanying note to the financial statements
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ended
March 31, 1996
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 53,584 $ 10,093 $ 63,677
-------- -------- -------
Total Revenue 53,584 10,093 63,677
-------- -------- -------
Costs and Expenses:
Production expense 18,623 3,508 22,131
General and administrative
to a related party 21,037 3,962 24,999
General and administrative 3,496 659 4,155
Depreciation, depletion
and amortization 19,519 197 19,716
-------- -------- -------
Total Costs and Expenses 62,675 8,326 71,001
-------- -------- -------
Net Income(loss) $ (9,091) $ 1,767 $ (7,324)
======== ======== =======
Net Income(loss)
per equity unit $ (1.03)
======
See accompanying note to the financial statements.
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ended
March 31, 1995
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 61,659 11,614 $ 73,273
-------- -------- -------
Total Revenue 61,659 11,614 73,273
-------- -------- -------
Costs and Expenses:
Production expense 16,725 3,150 19,875
General and administrative
to a related party 21,037 3,962 24,999
General and administrative 3,514 662 4,176
Depreciation, depletion
and amortization 24,920 252 25,172
-------- -------- -------
Total Costs and Expenses 66,196 8,026 74,222
-------- -------- -------
Net Income(loss) $ (4,537) 3,588 $ (949)
======== ======== =======
Net Income(loss)
per equity unit $ (0.52)
======
See accompanying note to the financial statements.
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Limited General
Partners Partners Total
Balance at December 31, 1994 $ 1,261,971 $ (125,823) $ 1,136,148
Net Income(Loss) (30,503) 9,008 (21,495)
-------- -------- --------
Balance at December 31, 1995 $ 1,231,468 $ (116,815) $ 1,114,653
Net Income(Loss) (9,091) 1,767 (7,324)
-------- -------- --------
Balance at March 31, 1996 $ 1,222,377 $ (115,048) $ 1,107,329
======== ======== ========
See accompanying note to the financial statements.
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Cash Flows
(unaudited)
Three months Three months
ended March ended March
31,1996 31,1995
Net cash provided by(used in)
operating activities $ 4,810 $ 16
---------- ----------
Cash provided(used)in investment
activities:
Investment in wells and related
facilities (4,821) 0
---------- ----------
Net cash provided(used) in
investment activities (4,821) 0
---------- ----------
Net increase(decrease) in cash and
cash equivalents (11) 16
Cash and cash equivalents at
beginning of period 29 43
---------- ----------
Cash and cash equivalents at end of
period $ 18 $ 59
========== ==========
See accompanying note to the financial statements.
STERLING GAS DRILLING FUND 1981
(a New York limited partnership)
Note to Financial Statements
March 31, 1996
1. The accompanying statements for the period ending March 31, 1996
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 10Q for the period ended March 31,1996.
This information is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 18
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18
<PP&E> 7,179,404
<DEPRECIATION> (5,889,086)
<TOTAL-ASSETS> 1,290,340
<CURRENT-LIABILITIES> 183,011
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,107,329<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,290,340
<SALES> 63,677
<TOTAL-REVENUES> 63,677
<CGS> 71,001
<TOTAL-COSTS> 71,001
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,324)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,324)
<EPS-PRIMARY> (1.03)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Other -se includes total partners equity for the partnership.
<F2>Eps-primary is computed from total limited partner's share of net income
divided by total limited partner's units (8,790 units).
</FN>
</TABLE>
