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, 1998
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> 1
Item 1. Financial Statements
The following Financial Statements are filed herewith:
Balance Sheets - September 30, 1998 and December 31, 1997.
Statements of Operations for the Nine and Three Months Ended September 30,
1998 and 1997.
Statements of Changes in Partners' Equity for the Nine and Three Months
Ended September 30, 1998 and 1997.
Statements of Cash Flows for the Nine Months Ended September 30, 1998 and
1997.
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, 1998,
the General Partners have distributed to the Limited Partners
$3,955,500. Such cash distributions are equivalent to 45 % of
original total capital contributions distributed to the limited
partners.
All aspects of the Partnership's operations and administration are
handled through the use of the managing general partner's computer
systems. Both, the operating company and the managing general partner
are taking steps to minimize any potential computer issues with regard
to any necessary changes for the year 2000. A complete system
upgrade, which includes but is not limited to, the year 2000 issue has
been implemented by both the operating company and the managing
general partner. During the remainder of this year both companies will
continue to monitor, test and verify data in detail to avoid any
potential reporting concerns or delays.
<PAGE> 2
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,
1997 was approximately $687,900 as compared to the value as of
December 31, 1996 which was approximately $817,000. 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 -
The Partnership's operating revenue increased from $196,223 in 1997 to
$234,571 in 1998. The majority of the Partnership's revenue is from
gas production. The Partnership experienced an significant increase in
gas production from 65,119 MCF in 1997 to 79,177 MCF in 1998. There
was relatively little change in the average price per MCF the
Partnership received, from $2.87 in 1997 to $2.92 in 1998. The stable
price and higher gas produced resulted in a very favorable increase to
overall operating revenues.
Production expenses increased from $82,880 in 1997 to $91,504 in 1998.
The partnership did expend funds on additional capitalized well
equipment and other repairs performed on a few wells. The operator
will determine if additional equipment, for example lift equipment,
will have a beneficial effect on production. The operator will also
perform various repairs including but not limited to location work,
road repairs, pipeline repairs and additional labor cost as deemed
appropriate. In most cases large repairs are made to help maintain or
<PAGE> 3
increase overall production. Also the Partnership in both years
expended the necessary funds on the routine, general upkeep and
maintenance of the well 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 1998 and 1997 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 from 1997 to 1998.
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 1997 or in the three-quarters of 1998. 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> 4
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, 1998 BY: /S/Charles E. Drimal Jr.
(DATE) --------------------------
Charles E. Drimal, Jr.
General Partner
<PAGE> 5
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Balance Sheets
September December
30,1998 31, 1997
(unaudited) (audited)
Assets
Current Assets:
Cash and cash equivalents $ 3 $ 16
---------- -----------
Total current assets 3 16
Oil and Gas properties -
successful efforts method:
Leasehold costs 236,502 236,502
Well and related facilities 6,991,151 6,948,063
less accumulated
depreciation, depletion and
amortization (6,079,285) (6,023,905)
---------- ----------
Net oil & gas properties 1,148,368 1,160,660
---------- ----------
Total assets $ 1,148,371 $ 1,160,676
========== ==========
Liabilities and Partners' Equity
Current liabilities:
Due to affiliates $ 114,083 $ 124,096
---------- ----------
Total current liabilities 114,083 124,096
---------- ----------
Partners' Equity
Limited partners 1,132,677 1,142,831
General partners (98,389) (106,251)
---------- ----------
Total partners' equity 1,034,288 1,036,580
---------- ----------
Total liabilities and
partners' equity $ 1,148,371 $ 1,160,676
========== ==========
See accompanying note to the financial statements.
<PAGE> 5
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Nine Months Ended
September 30, 1998
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 197,391 $ 37,180 $ 234,571
Gain on sale of equipment 0 0 0
-------- -------- -------
Total Revenue 197,391 37,180 234,571
-------- -------- -------
Costs and Expenses:
Production expense 77,001 14,503 91,504
General and administrative
to a related party 63,117 11,888 75,005
General and administrative 12.601 2,373 14,974
Depreciation, depletion
and amortization 54,826 554 55,380
-------- -------- -------
Total Costs and Expenses 207,545 29,318 236,863
-------- -------- -------
Net Income(loss) $ (10,154) $ 7,862 $ (2,292)
======== ======== =======
Net Income(loss)
per equity unit $ (1.16)
======
See accompanying note to the financial statements.
<PAGE> 6
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> 8
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ended
September 30, 1998
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 61,388 $ 11,563 $ 72,951
Gain on sale of equipment 0 0 0
-------- -------- ---------
Total Revenue 61,88 11,563 72,951
-------- -------- ---------
Costs and Expenses:
Production expense 21,018 3,958 24,976
General and administrative
to a related party 21,037 3,962 24,999
General and administrative 5,223 983 6,206
Depreciation, depletion
and amortization 18,275 185 18,460
-------- -------- ---------
Total Costs and Expenses 65,553 9,088 74,641
-------- -------- ---------
Net Income(loss) $ (4,165) $ 2,475 $ (1,690)
======== ======== =========
Net Income(loss)
per equity unit $ (.48)
========
See accompanying note to the financial statements.
<PAGE> 9
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> 10
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Nine Months Ended
September 30, 1998
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,142,831 (106,251) $ 1,036,580
Net Income(Loss) (10,154) 7,862 (2,292)
--------- --------- ----------
Balance at end of period $ 1,132,677 (98,389) $ 1,034,288
========= ========= ==========
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
========= ========= ==========
See accompanying note to the financial statements.
<PAGE> 11
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Three Months Ended
September 30, 1998
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,136,842 (100,864) $ 1,035,978
Net Income(Loss) (4,165) 2,475 (1,690)
--------- --------- ----------
Balance at end of period $ 1,132,677 (98,389) $ 1,034,288
========= ========= ==========
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
========= ========= ==========
See accompanying note to the financial statements.
<PAGE> 12
STERLING DRILLING FUND 1981
(a New York Limited Partnership)
Statement of Cash Flows
(unaudited)
Nine months Nine months
Ended ended
September September
30, 1997 30, 1997
Net cash provided by(used in)
operating activities $ 43,075 $ (1,556)
---------- ----------
Cash flows from investing
activities:
Proceeds from sale ofequipment 0 1,550
Investment in well and related
Facilities 43,088 0
---------- --------
Net Cash provided by (used in)
investing activities (43,088) 1,550
---------- --------
Net increase(decrease) in cash
and cash equivalents (13) (6)
Cash and cash equivalents at
beginning of period 16 26
--------- --------
Cash and cash equivalents at end
of period $ 3 $ 20
========= =========
See accompanying note to the financial statements.
<PAGE> 13
STERLING GAS DRILLING FUND 1981
(a New York limited partnership)
Note to Financial Statements
September 30, 1998
1. The accompanying statements for the period ending September 30,
1998 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 10Q and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 3
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3
<PP&E> 7,227,653
<DEPRECIATION> (6,079,285)
<TOTAL-ASSETS> 1,148,371
<CURRENT-LIABILITIES> 114,083
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,034,288<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,148,371
<SALES> 234,571
<TOTAL-REVENUES> 234,571
<CGS> 236,863
<TOTAL-COSTS> 236,863
<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> (2,292)
<EPS-PRIMARY> (1.16)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Other se includes total partner's equity.
<F2>The limited partnership's income was divided by total number
of partnerhip units.
</FN>
</TABLE>
