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 June 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 / /
Item 1. Financial Statements
The following Financial Statements are filed herewith:
Balance Sheets - June 30, 1996 and December 31, 1995.
Statements of Operations for the Six and Three Months Ended June 30,
1996 and 1995.
Statements of Changes in Partners' Equity for the Six and Three Months
Ended June 30, 1996 and 1995.
Statements of Cash Flows for the Six Months Ended June 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 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 June 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,
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 -
Operating Revenues decreased from $130,526 in 1995 to $118,454 in
1996. The gas production decline, from 47,265 MCF in 1995 to 44,268
MCF in 1996, was partially offset by minor increase in average price
per MCF from $2.55 in 1995 to $2.61 in 1996. Although the partnership
receives very little revenue from oil production, the oil revenue for
1996 is higher than 1995 due to a higher average price per barrel
combined with a increased oil production. The lower production can be
partially attributed to compressor down times, main line pressure
differences and fluid in some wells. The partnership may allocate
some operating funds to perform a workover a well. A workover may be
performed in order to halt further production declines or to increase
current production. The costs for the workover may be in additional
equipment purchases or additional repairs which will be capitalized or
expensed based upon the appropriate criteria. Some production
expenses vary with the amount of production, other costs are for
general upkeep and maintenance of the well and well sites and still
other equipment costs are incurred to help maintain or increase
production level. The production expenses incurred by the
partnership showed a very slight decline from $46,378 in 1995 to
$45,097 in 1996.
General and administrative expenses have been segregated on the
financial statements to show expenses paid to PrimeEnergy Management
Corporation, 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 the first half of 1996. The lower depletion
expense in 1996 is due to 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 . 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
August 8, 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)
June 30, December 31,
1996 1995
Assets
Current Assets:
Cash and cash equivalents $ 23 $ 29
----------- ----------
Total current assets 23 29
Oil and Gas properties -
successful efforts method:
Leasehold costs 236,502 236,502
Well and related facilities 6,943,492 6,938,085
less accumulated
depreciation, depletion and
amortization (5,908,820) (5,869,370)
----------- ----------
1,271,174 1,305,217
---------- ----------
Total assets $ 1,271,197 $ 1,305,246
Liabilities and Partners' Equity
Current liabilities:
Due to affiliates $ 183,749 $ 190,593
----------- ----------
Total current liabilities 183,749 190,593
----------- ----------
Partners' Equity
Limited partners 1,202,717 1,231,468
General partners (115,269) (116,815)
----------- ----------
Total partners' equity 1,087,448 1,114,653
----------- ----------
Total liabilities and
partners' equity $ 1,271,197 $ 1,305,246
=========== ==========
See accompanying note to financial statements.
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Six Months Ending
June 30, 1996
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 99,679 $ 18,775 $ 118,454
-------- -------- -------
Total Revenue 99,679 18,775 118,454
-------- -------- -------
Costs and Expenses:
Production expense 37,949 7,148 45,097
General and administrative
to a related party 42,073 7,925 49,998
General and administrative 9,352 1,762 11,114
Depreciation, depletion
and amortization 39,056 394 39,450
-------- -------- -------
Total Costs and Expenses 128,430 17,229 145,659
-------- -------- -------
Net Income(loss) $ (28,751) $ 1,546 $ (27,205)
======== ======== =======
Net Income(loss)
per equity unit $ (3.27)
======
See accompanying note to financial statements.
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Six Months Ending
June 30, 1995
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 109,838 $ 20,688 $ 130,526
-------- -------- -------
Total Revenue 109,838 20,688 130,526
-------- -------- -------
Costs and Expenses:
Production expense 39,027 7,351 46,378
General and administrative 42,073 7,925 49,998
to a related party
General and administrative 9,954 1,875 11,829
Depreciation, depletion
and amortization 49,842 503 50,345
-------- -------- -------
Total Costs and Expenses 140,896 17,654 158,550
-------- -------- -------
Net Income(loss) $ (31,058) $ 3,034 $ (28,024)
======== ======== =======
Net Income(loss)
per equity unit $ (3.53)
======
See accompanying note to financial statements.
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ending
June 30, 1996
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 46,095 $ 46,095 $ 54,777
-------- -------- ---------
Total Revenue 46,095 46,095 54,777
-------- -------- ---------
Costs and Expenses:
Production expense 19,326 3,640 22,966
General and administrative
to a related party 21,036 3,963 24,999
General and administrative 5,856 1,103 6,959
Depreciation, depletion
and amortization 19,537 197 19,734
-------- -------- ---------
Total Costs and Expenses 65,755 8,903 74,658
-------- -------- ---------
Net Income(loss) $ (19,660) $ (221) $ (19,881)
======== ======== =========
Net Income(loss)
per equity unit $ (2.24)
========
See accompanying note to financial statements.
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ending
June 30, 1995
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 48,179 $ 9,074 $ 57,253
-------- -------- ---------
Total Revenue 48,179 9,074 57,253
-------- -------- ---------
Costs and Expenses:
Production expense 22,302 4,201 26,503
General and administrative
to a related party 21,036 3,963 24,999
General and administrative 6,440 1,213 7,653
Depreciation, depletion
and amortization 24,992 251 25,173
-------- -------- ---------
Total Costs and Expenses 74,700 9,628 84,328
-------- -------- ---------
Net Income(loss) $ (26,521) $ (554) $ (27,075)
======== ======== =========
Net Income(loss)
per equity unit $ (3.02)
========
See accompanying note to financial statements.
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Six Months Ended
June 30, 1996
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,231,468 $ (116,815) $ 1,114,653
Net Income(Loss) (28,751) 1,546 (27,205)
--------- -------- -----------
Balance at end of period $ 1,202,717 $ (115,269) $ 1,087,448
========= ======== ===========
Six Months Ended
June 30, 1995
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,261,971 $ (125,823) $ 1,136,148
Net Income(Loss) (31,058) 3,3034 (28,024)
--------- -------- ----------
Balance at end of period $ 1,230,913 $ (122,789) $ 1,108,124
========= ======== ==========
See accompanying note to financial statements.
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Three Months Ended
June 30, 1996
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,222,377 $ (115,048) $ 1,107,329
Net Income(Loss) (19,660) (221) (19,881)
-------- -------- ----------
Balance at end of period $ 1,202,717 $ (115,269) $ 1,087,448
======== ======== ==========
Three Months Ended
June 30, 1995
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,257,434 $ (122,235) $ 1,135,199
Net Income(Loss) (26,521) (554) (27,075)
-------- -------- ---------
Balance at end of period $ 1,230,913 $ (122,789) $ 1,108,124
======== ======== =========
See accompanying note to financial statements.
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Cash Flows
(unaudited)
Six months Six months
ended ended
June 30, June 30,
1996 1995
Net cash provided by operating
activities $ 5,401 $ 54
---------- ----------
Cash(used in)investment activities:
Investment in wells and related
facilities (5,407) 0
---------- ----------
Net Cash used in investment
activities (5,407) 0
Net increase(decrease) in cash and
cash equivalents (6) 54
Cash and cash equivalents at
beginning of period 29 43
---------- ----------
Cash and cash equivalents at end of
period $ 23 $ 97
========== ==========
see accompanying note to financial statements.
STERLING GAS DRILLING FUND 1981
(a New York limited partnership)
Note to Financial Statements
June 30, 1996
1. The accompanying statements for the period ending June 30, 1996
are unaudited but reflect all reflect 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 second quarter 1996 10Q and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 23
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23
<PP&E> 7,179,994
<DEPRECIATION> (5,908,820)
<TOTAL-ASSETS> 1,271,197
<CURRENT-LIABILITIES> 183,749
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,087,448<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,271,197
<SALES> 118,454
<TOTAL-REVENUES> 118,454
<CGS> 145,659
<TOTAL-COSTS> 145,659
<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> (27,205)
<EPS-PRIMARY> (3.27)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Other se includes total partners' equity.
<F2>The share of limited partners' net income was divided by the total
outstanding limited partners units of 8,790.
</FN>
</TABLE>
