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, 1999
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 2-784441
STERLING GAS DRILLING FUND 1982
(Exact name of registrant as specified in charter)
New York
(State or other jurisdiction of incorporation or organization)
13-3147901
(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
PART I
Item 1. Financial Statements
The following Financial Statements are filed herewith:
Balance Sheets - September 30, 1999 and December 31, 1998.
Statements of Operations for the Nine and the Three Months Ended September 30,
1999 and 1998.
Statements of Changes in Partners' Equity for the Nine and the Three Months
Ended September 30, 1999 and September 30, 1998.
Statements of Cash Flows for the Nine Months Ended September 30, 1999 and
1998.
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 individual 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, 1999, the General partners have distributed to the Limited partners
$1,402,512 or 9.76% of the total Limited Partner capital contributions to
the Limited partners.
The Year 2000 (Y2K) issue is the definition and resolution of potential
problems resulting from computer application programs or imbedded chip
instruction sets utilizing two-digits, as opposed to four digits, to define
a specific year. Such date sensitive systems may be unable to properly
interpret dates, which could cause a system failure or other computer
errors, leading to disruptions in operations. The Partnership relies on the
Managing General Partner for all management and administrative functions.
Consequently, the Partnership's exposure to the Y2K problems is determined
by what Year 2000 efforts have been undertaken by the Managing General
Partner.
In 1997, the Managing General Partner developed a three-phase program for
the Y2K information systems compliance. Phase I is to identify those
systems with which the Partnership has exposure to Y2K issues. Phase II is
<PAGE> 2
final testing of each major area of exposure to ensure compliance. The
Managing General Partner has identified four major areas determined to be
critical for successful Y2K compliance: (1) financial and informational
system applications, (2) communications applications, (3) oil and gas
producing operations, and (4) third-party relationships.
The Managing General Partner, in accordance with Phase I of the program,
conducted an internal review of all systems and contacted all software
suppliers to determine major areas of exposure to Y2K issues. The Managing
General Partner has completed the modifications to its core financial and
reporting systems and is continuing to test compliance in this area. These
modifications were made in conjunction with an upgrade of the financial
reporting applications provided by the Managing General Partner's software
vendor. Conversion to the new system was completed during 1998. Due to the
technology advances in the communications area the Managing General Partner
has upgraded such equipment regularly over the past three years. Y2K
compliance was a specification requirement of each installation.
Consequently, the Managing General Partner expects exposure in this area to
be limited to third party readiness. The Managing General Partner is in the
process of identifying areas of exposure resulting from equipment used in
its oil and gas producing operations. The Managing General Partner intends
to continue identification, remediation and testing throughout 1999. In the
third-party area, the Managing General Partner has received assurance from
its significant service suppliers that they intend to be Y2K compliant by
2000. The Managing General Partner has implemented a program to request
Year 2000 certification or other assurance from other third parties during
1999.
The Partnership recognizes that, notwithstanding the efforts described
above, the Partnership could experience disruptions to its operations or
administrative functions, including those resulting from non-compliant
systems utilized by unrelated third party governmental and business
entities. The Managing General Partner is in the process of developing a
contingency plan in order to mitigate potential disruption to business
operations. The Managing General Partner expects to complete and to
refine this plan throughout 1999.
The Managing General Partner has handled identifying, remediating and
testing systems for Year 2000 compliance within the scope of routine
upgrades and systems evaluations. The Managing General Partner expects to
complete the review of oil and gas operations exposure in the same manner,
without incurring substantial additional costs. However, information
resulting from the oil and gas operations review may indicate required
expenditures not currently contemplated by the Partnership.
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 revenue (S.E.C. case) associated
with such reserves, discounted at 10% as of December 31, 1998 was
approximately $768,500, as compared to December 31, 1997, of about
$904,800. Overall reservoir engineering is a subjective process of
estimating underground accumulations of gas and oil that can not be measure
in an exact manner. The accuracy of any reserve estimate is a function of
<PAGE> 3
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 intention of drilling oil and gas
wells. The Registrant entered into a drilling contract with an independent
contractor in December 1982 for $11,400,000. Pursuant to the terms of this
contract, fifty-one wells have been drilled resulting in fifty producing
wells and one dry-hole. 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 $ 235,721 in 1998 to $161,978 in 1999
The Partnership experienced lower gas production and stable oil production
, 72,645 MCF and 801 BBLS in 1998 to 63,478 MCF and 874 BBLS in 1999. The
average prices changed from $3.12 per MCF and $ 11.74 per barrel in 1998 to
$2.38 per MCF and $12.54 per barrel in 1999. The Partnership's oil revenue
declined substantially due to lower average price. The combination of low
average price per MCF and reduced gas production were the main reasons for
lower overall revenue. The drop in gas production can be attributed to shut-
ins of the purchaser's transport line for annual repairs or compressor
down times. Production expenses decreased from $110,700 in 1998 to $87,715
in 1999. The production expenses were lower as a result of a combination
of items, including variable costs associated with volume changes, repairs
and labor costs associated with the wells and well sites. The expenses
associated with both 1998 and 1999 production included normal, recurring
maintenance and repairs at the well locations.
General and administrative expenses are segregated on the financial
statements to show expenses paid to PrimeEnergy Management Corporation
(PEMC), a General Partner. The expenses charged are in accordance with the
guidelines set forth in the Registrant's Management Agreement. PEMC is
reimbursed expenses attributable to the affairs and operations of the
Partnership. These costs shall not exceed an annual amount equal to 5% of
Limited Partner capital contributions. Amounts related to both 1999 and
1998 are substantially less than the amounts allocable to the Registrant
under the Partnership Agreement. PEMC continues to perform these
functions as cost effectively as possible either through efficient use of
in-house resources or using third parties when applicable.
The Partnership records additional depreciation, depletion and amortization
to the extent that net capitalized costs exceed the undiscounted future net
cash flow attributable to the Partnership properties. No additional
<PAGE> 4
three-quarters of 1999. 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 6: 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> 5
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15 (d) of the Securities and
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 1982
(Registrant)
BY: /S/ Charles E. Drimal Jr.
-------------------------
Charles E. Drimal, Jr.
General Partner
November 12, 1999
(Date)
<PAGE> 6
STERLING DRILLING FUND 1982
(a New York Limited Partnership)
Balance Sheets
September 30, December 31,
1999 1998
(unaudited) (audited)
Assets
Current Assets:
Cash and cash equivalents $ 22 $ 20
----------- -------------
Total current assets 22 20
------------- -------------
Oil and Gas properties -
successful efforts method:
Leasehold costs 466,804 466,804
Well and related facilities 11,970,091 11,970,091
less accumulated depreciation,
depletion and amortization (11,773,553) (11,747,491)
----------- -------------
663,342 689,404
----------- -------------
Total assets $ 663,364 $ 689,424
=========== =============
Liabilities and Partners' Equity
Current liabilities:
Due to affiliates $ 262,454 $ 262,068
------------ -------------
Total current liabilities 262,454 262,068
----------- -------------
Partners' Equity
Limited partners 673,523 699,647
General partners (272,613) (272,291)
----------- -------------
Total partners' equity 400,910 427,356
----------- -------------
Total liabilities and
Partners' equity $ 663,364 $ 689,424
=========== =============
See accompanying note to the financial statements
<PAGE> 7
STERLING DRILLING FUND 1982
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Nine Months Ended
September 30, 1999
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 136,304 $ 25,674 $ 161,978
Other Revenue 3,594 677 4,271
-------- -------- --------
Total Revenue 139,898 26,351 166,249
-------- -------- --------
Costs and Expenses:
Production expense 73,812 13,903 87,715
General and administrative
to a related party 53,646 10,105 63,751
General and administrative 12,763 2,404 15,167
Depreciation, depletion
and amortization 25,801 261 26,062
-------- -------- --------
Total Costs and Expenses 166,022 26,673 192,695
-------- -------- --------
Net Income/(Loss) $ (26,124) (322) $ (26,446)
======== ======== ========
Net (Loss) per equity unit $ (1.82)
======
See accompanying note to the financial statements.
<PAGE> 8
STERLING DRILLING FUND 1982
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Nine Months Ended
September 30, 1998
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 198,359 $ 37,362 $ 235,721
Gain on sale of equipment 0 0 0
-------- -------- --------
Total Revenue 198,359 37,362 235,721
-------- -------- --------
Costs and Expenses:
Production expense 93,154 17,546 110,700
General and administrative
to a related party 53,646 10,105 63,751
General and administrative 14,683 2,766 17,449
Depreciation, depletion
and amortization 27,439 277 27,716
-------- -------- --------
Total Costs and Expenses 188,922 30,694 219,616
-------- -------- --------
Net Income $ 9,437 6,668 $ 16,106
======== ======== ========
Net Income per equity unit $ .66
======
See accompanying note to the financial statements.
<PAGE> 9
STERLING DRILLING FUND 1982
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ended
September 30, 1999
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 61,910 11,661 $ 73,571
-------- -------- ---------
Total Revenue 61,910 11,661 73,571
-------- -------- ---------
Costs and Expenses:
Production expense 28,583 5,384 33,967
General and administrative
to a related party 17,881 3,368 21,249
General and administrative 3,836 722 4,558
Depreciation, depletion
and amortization 8,601 87 8,688
-------- -------- ---------
Total Costs and Expenses 58,901 9,561 68,462
-------- -------- ---------
Net Income(loss) $ 3,009 2,100 $ 5,109
======== ======== =========
Net Income(loss)
per equity unit $ .20
========
See accompanying note to the financial statements.
<PAGE> 10
STERLING DRILLING FUND 1982
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ended
September 30, 1998
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 66,714 12,566 $ 79,280
Gain on sale of equipment 0 0 0
-------- -------- ---------
Total Revenue 66,714 12,566 79,280
-------- -------- ---------
Costs and Expenses:
Production expense 33,515 6,313 39,828
General and administrative
to a related party 17,881 3,368 21,249
General and administrative 5,708 1,076 6,784
Depreciation, depletion
and amortization 9,146 92 9,238
-------- -------- ---------
Total Costs and Expenses 66,250 10,849 77,099
-------- -------- ---------
Net Income(loss) $ 464 1,717 $ 2,181
======== ======== =========
Net Income(loss)
per equity unit $ .04
========
See accompanying note to the financial statements.
<PAGE> 11
STERLING DRILLING FUND 1982
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Nine Months Ended
September 30, 1999
Limited General
Partners Partners Total
Balance at beginning of
period $ 699,647 (272,291) $ 427,356
Net Income/(Loss) (26,124) (322) (26,446)
-------- --------- ---------
Balance at end of period $ 673,523 (272,613) $ 400,910
======== ========= =========
Nine Months Ended
September 30, 1998
Limited General
Partners Partners Total
Balance at beginning of
period $ 685,336 (281,449) $ 403,887
Net Income 9,437 6,668 16,105
-------- --------- ---------
Balance at end of period $ 694,773 (274,781) $ 419,992
======== ========= =========
See accompanying note to the financial statements.
<PAGE> 12
STERLING DRILLING FUND 1982
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Three Months Ended
September 30, 1999
Limited General
Partners Partners Total
Balance at beginning of
period $ 670,514 (274,713) $ 395,801
Net Income(Loss) 3,009 2,100 5,109
-------- --------- ---------
Balance at end of period $ 673,523 (272,613) $ 400,910
======== ========= =========
Three Months Ended
September 30, 1998
Limited General
Partners Partners Total
Balance at beginning of
period $ 694,309 (276,498) $ 417,811
Net Income(Loss) 464 1,717 2,181
-------- --------- --------
Balance at end of period $ 694,773 (274,781) $ 419,992
======== ========= ========
See accompanying note to the financial statements.
<PAGE> 13
STERLING DRILLING FUND 1982
(a New York Limited Partnership)
Statement of Cash Flows
(unaudited)
Nine Nine
months months
ended ended
September September
30, 1999 30, 1998
Net cash provided (used )by
operating activities $ 2 $ (1)
---------- ----------
Cash flows from investing
activities:
Proceeds from sale of equipment 0 0
Investment in well and related
facilities 0 0
--------- ---------
Net Cash (used in) investing
activities 0 0
--------- ---------
Net increase(decrease) in cash and
cash equivalents 2 (1)
Cash and cash equivalents at
Beginning of period 20 7
---------- ----------
Cash and cash equivalents at end of
period $ 22 $ 6
========== ==========
See accompanying note to the financial statements.
<PAGE> 14
STERLING GAS DRILLING FUND 1982
(a New York limited partnership)
Note to Financial Statements
September 30, 1999
1. The accompanying statements for the period ending September
30, 1999 are unaudited, but reflect all 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 1982 third quarter 1999 10Q and is qualified
in its entirety by refernce to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 22
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 22
<PP&E> 12,436,895
<DEPRECIATION> (11,773,553)
<TOTAL-ASSETS> 663,364
<CURRENT-LIABILITIES> 252,454
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 400,910<F1>
<TOTAL-LIABILITY-AND-EQUITY> 663,364
<SALES> 166,249
<TOTAL-REVENUES> 166,249
<CGS> 192,695
<TOTAL-COSTS> 192,695
<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> (26,446)
<EPS-BASIC> (1.82)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Other -SE includes total partners equity.
<F2>The income allocated to the limited partner's group was divided
by the total number of limited partnership units of 14,370.
</FN>
</TABLE>
