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, 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 - September 30, 1997 and December 31, 1996.
Statements of Operations for the Nine and Three Months Ended September 30,
1997 and 1996.
Statements of Changes in Partners' Equity for the Nine and Three Months
Ended September 30, 1997 and 1996.
Statements of Cash Flows for the Nine Months Ended September 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 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, 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.
<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 increased $182,149 in
1996 to $196,223 in 1997. Although the Partnership receives only a
minor amount of revenue from oil, stable oil production and higher
average oil prices in 1997 did contribute to overall positive increase
in revenue. The majority of the Partnership's revenue is from gas
production. The gas revenue increased due to a higher average price
per mcf, on average $0.26 per mcf, The price increase was offset by
the decline in gas production from 67,901 MCF in 1996 to 65,119 MCF in
1997. Production expenses increased from $69,397 in 1996 to $82,880 in
1997. The higher production expenses can be partially attributed to
some severe weather conditions in the counties where the Partnership
wells are located. These conditions contributed to additional cost
incurred, which may include additional maintenance, labor, location,
access road work and other repairs. The majority of the production
costs expended for both years were for general upkeep and maintenance
at the well 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 1997 and 1996 are substantially less than the amounts
allocable to the Registrant under the Partnership Agreement. The
lower amounts 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. General and
administrative charges were stable and showed only a minor decline
from 1996 to 1997.
<page)
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 1996 or in the three quarters of 1997. Although the 1997
expense is lower than 1996, the expense recorded is consistent with
the current basis of the Partnership's 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.
<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 12, 1997 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, 1996
1997
(unaudited) (audited)
Assets
Current Assets:
Cash and cash equivalents $ 20 $ 29
---------- -----------
Total current assets 20 29
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 (5,999,981) (5,945,914)
---------- ----------
Net oil & gas properties 1,184,584 1,238,651
---------- ----------
Total assets $ 1,184,604 $ 1,238,677
========== ==========
Liabilities and Partners' Equity
Current liabilities:
Due to affiliates $ 141,572 $ 167,538
---------- ----------
Total current liabilities 141,572 167,538
---------- ----------
Partners' Equity
Limited partners 1,152,044 1,183,494
General partners (109,012) (112,355)
---------- ----------
Total partners' equity 1,043,032 1,071,139
---------- ----------
Total liabilities and
partners' equity $ 1,184,604 $ 1,238,677
========== ==========
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, 1997
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 165,122 $ 31,101 $ 196,223
Gain on sale of Equipment 1,535 15 1,550
-------- -------- -------
Total Revenue 166,657 31,116 197,773
-------- -------- -------
Costs and Expenses:
Production expense 69,744 13,136 82,880
General and administrative
to a related party 63,110 11,887 74,997
General and administrative 11,727 2,209 13,936
Depreciation, depletion
and amortization 53,526 541 54,067
-------- -------- -------
Total Costs and Expenses 198,107 27,773 225,880
-------- -------- -------
Net Income(loss) $ (31,450) $ 3,343 $ (28,107)
======== ======== =======
Net Income(loss)
per equity unit $ (3.58)
======
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
to a related party 63,110 11,887 74,997
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)
Three Months Ended
September 30, 1997
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 53,595 $ 10,0095 $ 63,690
Gain on sale of Equipment 1,535 15 1,550
-------- -------- ---------
Total Revenue 55,130 10,110 65,240
-------- -------- ---------
Costs and Expenses:
Production expense 22,665 4,268 26,853
General and administrative
to a related party 21,037 3,962 24,999
General and administrative 2,916 549 3,465
Depreciation, depletion
and amortization 17,841 181 18,022
-------- -------- ---------
Total Costs and Expenses 64,459 8,960 73,419
-------- -------- ---------
Net Income(loss) $ (9,329) $ 1,150 $ (8,179)
======== ======== =========
Net Income(loss)
per equity unit $ (1.06)
========
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 Changes in Partners' Equity
(unaudited)
Nine Months Ended
September 30, 1997
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,183,494 (112,355) $ 1,071,139
Net Income(Loss) (31,450) 3,343 (28,107)
--------- --------- ----------
Balance at end of period $ 1,152,044 (109,012) $ 1,043,032
========= ========= ==========
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
========= ======== ===========
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, 1997
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,161,373 (110,162) $ 1,051,211
Net Income(Loss) (9,329) 1,150 (8,179)
--------- --------- ----------
Balance at end of period $ 1,152,044 (109,012) $ 1,043,032
========= ========= ==========
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
========= ======== ==========
See accompanying note to the financial statements.
<PAGE>
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Cash Flows
(unaudited)
Nine months Nine
ended months
September ended
30, 1997 September
30, 1996
Net cash provided by(used in)
operating activities $ (1,556) $ 7,270
---------- ---------
Cash flows from investing activities:
Proceeds from sale of equipment 1,550 0
Investment in well and related
facilities 0 (7,278)
---------- --------
Net Cash provided by/ (used in)
investing activities 1,550 (7,278)
---------- --------
Net increase(decrease) in cash and
cash equivalents (6) (8)
Cash and cash equivalents at beginning
of period 26 29
--------- --------
Cash and cash equivalents at end of
period $ 20 $ 21
========= =========
See accompanying note to the financial statements.
<PAGE>
STERLING GAS DRILLING FUND 1981
(a New York limited partnership)
Note to Financial Statements
September 30, 1997
1. The accompanying statements for the period ending September 30,
1997 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 1997 10 Q and it is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 20
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20
<PP&E> 7,184,565
<DEPRECIATION> (5,999,981)
<TOTAL-ASSETS> 1,184,604
<CURRENT-LIABILITIES> 141,572
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,043,032<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,184,604
<SALES> 197,773<F2>
<TOTAL-REVENUES> 197,773
<CGS> 225,880
<TOTAL-COSTS> 225,880
<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> (28,107)
<EPS-PRIMARY> (3.58)<F3>
<EPS-DILUTED> 0
<FN>
<F1>Other se includes total partners' equity
<F2>Sales includes $1,550 of gain on sale of equipment.
<F3>The limited partners share of net income was divided by the
total number of limited partnership units of 8,790.
</FN>
</TABLE>
