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, 1997
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 - June 30, 1997 and December 31, 1996.
Statements of Operations for the Six and Three Months Ended June 30,
1997 and 1996.
Statements of Changes in Partners' Equity for the Six and Three Months
Ended June 30, 1997 and 1996.
Statements of Cash Flows for the Six Months Ended June 30, 1997
and 1996.
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, 1997, 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 an indicator of financial strength and future
liquidity. The present value of unescalated future net revenue
(S.E.C. case) associated with such reserves, discounted at 10% as of
December 31, 1996 was approximately $805,400 as compared to the value
as of December 31, 1995 which was approximately $765,500. The
increase in total estimated discounted future net revenue was due in
part to higher year end gas prices as of December 31, 1996 compared
the gas price in effect as of December 31, 1995. Overall reservoir
engineering is a subjective process of estimating underground
accumulations of gas and oil that can not be measured in an exact
manner. The accuracy of any reserve estimate is a function of the
quality of available data and of the engineering and geological
interpretation and judgment. Accordingly, reserve estimates are
generally different from the quantities of gas and oil that are
ultimately recovered and such differences may have a material impact
on the Partnership's financial results and future liquidity.
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 increased from $118,454 in 1996 to $132,533 in
1997. The gas production decline, from 44,268 MCF in 1996 to 43,399
MCF in 1997, was partially offset by minor increase in average price
per MCF from $2.61 in 1996 to $2.85 in 1997. Although the Partnership
receives very little revenue from oil production, the oil revenue for
1997 is higher than 1996 due to a higher average price per barrel
combined with increased oil production. Production expenses increased
from $45,097 in 1996 to $55,947 in 1997. The current year production
expenses incurred included costs for general upkeep and repairs to
wells. Occasionally the Partnership may expend funds to purchase
additional equipment or to complete light repairs which , based upon
the operator's evaluation, is designed to increase production or to
halt any further significant declines. The beneficial effect looked
for by the operator is to increase, improve or sustain production on
a particular well These costs are capitalized if they meet the
appropriate criteria. The current year production expenses increased
as a result of a combination of repairs and labor costs associated
with the wells and well sites. These repairs may also result in the
well's temporarily shut-in which could account for some declines in
production. The production expenses incurred in 1996 were of a normal
and recurring nature to upkeep the wells.
Overall general and administrative expenses remained stable and showed
little change from 1996 to 1997. The amounts charged reflect
management's efforts 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 related party expenses attributable to the affairs
and operations of the Partnership, reimbursed to PEMC, are limited to
an annual amount not to exceed 5% of the Limited Partners capital
contributions. Amounts related to both years are substantially less
than the amounts allocable to the Registrant under the Partnership
Agreement.
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 1996 or first half of 1997. The lower depletion
expense in 1997 is due to overall lower depletable cost basis in oil
and gas 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
BY:/s/ Charles E. Drimal Jr.
--------------------------
Charles E. Drimal, Jr.
General Partner
August 14, 1997
(date)
<PAGE>
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Balance Sheets
June 30, December 31,
1997 1996
(unaudited) (audited)
Assets
Current Assets:
Cash and cash equivalents $ 63 $ 26
---------- -----------
Total current assets 63 26
Oil and Gas properties -
successful efforts method:
Leasehold costs 236,502 236,502
Well and related facilities 6,948,063 6,948,063
less accumulated
depreciation, depletion and
amortization (5,981,959) (5,945,914)
---------- ----------
1,202,606 1,238,677
---------- ----------
Total assets $ 1,202,669 $ 1,238,677
========== ==========
Liabilities and Partners' Equity
Current liabilities:
Due to affiliates $ 151,458 $ 167,538
---------- ----------
Total current liabilities 151,458 167,538
---------- ----------
Partners' Equity
Limited partners 1,161,373 1,183,494
General partners (110,162) (112,355)
---------- ----------
Total partners' equity 1,051,211 1,071,139
---------- ----------
Total liabilities and
partners' equity $ 1,202,669 $ 1,238,677
========== ==========
See accompanying note to financial statements.
<PAGE>
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Six Months Ending
June 30, 1997
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 111,527 $ 21,006 $ 132,533
-------- -------- -------
Total Revenue 111,527 21,006 132,533
-------- -------- -------
Costs and Expenses:
Production expense 47,079 8,868 55,947
General and administrative
to a related party 42,073 7,925 49,998
General and administrative 8,811 1,660 10,471
Depreciation, depletion
and amortization 35,685 360 36,045
-------- -------- -------
Total Costs and Expenses 133,648 18,813 152,461
-------- -------- -------
Net Income(loss) $ (22,121) $ 2,193 $ (19,928)
======== ======== =======
Net Income(loss)
per equity unit $ (2.52)
======
See accompanying note to financial statements.
<PAGE>
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.
<PAGE>
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ending
June 30, 1997
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 52,729 $ 9,931 $ 62,660
-------- -------- ---------
Total Revenue 52,729 9,931 62,660
-------- -------- ---------
Costs and Expenses:
Production expense 25,739 4,849 30,588
General and administrative
to a related party 21,036 3,963 24,999
General and administrative 5,766 1,087 6,853
Depreciation, depletion
and amortization 17,843 180 18,023
-------- -------- ---------
Total Costs and Expenses 70,384 10,079 80,463
-------- -------- ---------
Net Income(loss) $ (17,655) $ (148) $ (17,803)
======== ======== =========
Net Income(loss)
per equity unit $ (2.01)
========
See accompanying note to financial statements.
<PAGE>
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.
<PAGE>
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Six Months Ended
June 30, 1997
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,183,494 (112,355) $ 1,071,139
Net Income(Loss) (22,121) 2,193 (19,928)
--------- -------- -----------
Balance at end of period $ 1,161,373 (110,162) $ 1,051,211
========= ======== ===========
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
========= ======== ===========
See accompanying note to financial statements.
<PAGE>
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Three Months Ended
June 30, 1997
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,179,028 $ (110,014) $ 1,069,014
Net Income(Loss) (17,655) (148) (17,803)
-------- -------- ----------
Balance at end of period $ 1,161,373 $ (110,162) $ 1,051,211
======== ======== ==========
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
======== ======== ==========
See accompanying note to financial statements.
<PAGE>
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Cash Flows
(unaudited)
Six months Six
ended months
June 30, ended
1997 June 30,
1996
Net cash provided by operating
activities $ 37 $ 5,401
---------- ---------
Cash(used in)investment activities:
Investment in wells and related
facilities 0 (5,407)
---------- ---------
Net Cash used in investment
activities 0 (5,407)
Net increase(decrease) in cash and
cash equivalents 37 (6)
Cash and cash equivalents at beginning
of period 26 29
---------- ---------
Cash and cash equivalents at end of
period $ 63 $ 23
========== =========
see accompanying note to financial statements.
<PAGE>
STERLING GAS DRILLING FUND 1981
(a New York limited partnership)
Note to Financial Statements
June 30, 1997
1. The accompanying statements for the period ending June 30, 1997 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's second quarter 1997 10Q and it is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 63
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 63
<PP&E> 7,184,565
<DEPRECIATION> (5,981,959)
<TOTAL-ASSETS> 1,202,669
<CURRENT-LIABILITIES> 151,458
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,051,211<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,202,669
<SALES> 132,533
<TOTAL-REVENUES> 132,533
<CGS> 152,461
<TOTAL-COSTS> 152,461
<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> (19,928)
<EPS-PRIMARY> (2.52)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Other- se includes total partners' equity.
<F2>The limited partners' share of net income was divided by the total
number of limited partnership units of 8,790.
</FN>
</TABLE>
