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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 2-78441
STERLING GAS DRILLING FUND 1982
(Exact name of registrant as specified in its charter)
NEW YORK 13-3147901
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE LANDMARK SQUARE 06901
STAMFORD, CONNECTICUT (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (203) 358-5700
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTERESTS
(Title of Class)
Indicate by check mark whether 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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The Registrant has no voting stock. There is no market for the Units
and therefore no market value of the Units is reported.
The number of Units of the Registrant outstanding as of March 16, 1999,
was: 14,370.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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STERLING GAS DRILLING FUND 1982
FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1998
PART I
ITEM 1. BUSINESS
Sterling Gas Drilling Fund 1982 (the "Registrant" or the "Partnership")
is a limited partnership formed under the laws of the State of New York on July
28, 1982. The sole business of the Partnership was the drilling of formation
extension wells principally for natural gas in various locations in the State of
West Virginia. No exploratory drilling was undertaken.
The principal place of business of the Partnership is at One Landmark
Square, Stamford, Connecticut 06901, telephone (203) 358-5700. The Managing
General Partner of the Partnership is PrimeEnergy Management Corporation, a New
York corporation, which is a wholly-owned subsidiary of PrimeEnergy Corporation,
a publicly held Delaware corporation. Messrs. Charles E. Drimal, Jr., Oliver J.
Sterling and Samuel R. Campbell also are General Partners. Mr. Drimal is a
Director, President and Chief Executive Officer of PrimeEnergy Management
Corporation and PrimeEnergy Corporation, and Mr. Campbell is a Director of
PrimeEnergy Corporation.
The aggregate contributions to the Partnership were $14,370,000, all of
which, net of the organization expenses of the Partnership, was expended in the
drilling of such formation extension wells. Such properties are located in Clay,
Roane, Calhoun, Wirt, Kanawha, Lincoln and Putnam Counties, West Virginia. The
Partnership does not operate any of the properties in which it has an interest,
but generally such properties are operated and serviced by Prime Operating
Company, a Texas corporation, and Eastern Oil Well Service Company, a West
Virginia corporation, both wholly-owned subsidiaries of PrimeEnergy Corporation.
During 1998, the Partnership did not engage in any development drilling
activities or the acquisition of any significant additional properties, but
engaged in the production of oil and gas from its producing properties in the
usual and customary course. Since January 1, 1999, and to the date of this
Report, the Partnership has not engaged in any drilling activities nor
participated in the acquisition of any material producing oil and gas
properties.
COMPETITION AND MARKETS
Competitors of the Partnership in the marketing of its oil and gas
production include oil and gas companies, independent concerns, and individual
producers and operators, many of which have financial resources, staffs and
facilities substantially greater than those available to the Partnership.
Furthermore, domestic producers of oil and gas must not only compete with each
other in marketing their output, but must also compete with producers of
imported oil and gas and alternative energy sources such as coal, nuclear power
and hydro-electric power.
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The availability of a ready market for any oil and gas produced by the
Partnership at acceptable prices per unit of production will depend upon
numerous factors beyond the control of the Partnership, including the extent of
domestic production and importation of oil and gas, the proximity of the
Partnership's producing properties to gas pipelines and the availability and
capacity of such pipelines, the marketing of other competitive fuels,
fluctuation in demand, governmental regulation of production, refining,
transportation and sales, general national and worldwide economic conditions,
and pricing, use and allocation of oil and gas and their substitute fuels.
The Partnership does not currently own or lease any bulk storage
facilities or pipelines, other than adjacent to and used in connection with
producing wells. The Partnership deals with a number of major and independent
companies for the purchase of its oil and gas production, in the areas of
production. Sales are made under short-term contractual arrangements or monthly
spot prices. In 1998, approximately $271,216, or 86.54% of the Partnership's gas
production was purchased by Phoenix Diversified, and about $12,123, or 95.87%,
of the Partnership's oil production was purchased by the American Refining
Group. None of these purchasers has any relationship or is otherwise affiliated
with the Partnership. The Partnership believes that its current purchasers will
continue to purchase oil and gas products and, if not, could be replaced by
other purchasers.
ENVIRONMENTAL MATTERS
The petroleum industry is subject to numerous federal and state
environmental statutes, regulations and other pollution controls. In general,
the Partnership is, and will be subject to, present and future environmental
statutes and regulations, and in the future the cost of its activities may
materially increase as a result thereof. The Partnership's expenses relating to
preserving the environment during 1998 as they relate to its oil and gas
operations were not significant in relation to operating costs and the
Partnership expects no material change in the near future. The Partnership
believes that environmental regulations should not, in the future, result in a
curtailment of production or otherwise have a materially adverse effect on the
Partnership's operations or financial condition.
REGULATION
The Partnership's oil and gas operations are subject to a wide variety
of federal, state and local regulations. Administrative agencies in such
jurisdictions may promulgate and enforce rules and regulations relating to,
among other things, drilling and spacing of oil and gas wells, production rates,
prevention of waste, conservation of natural gas and oil, pollution control, and
various other matters, all of which may affect the Partnership's future
operations and production of oil and gas. The Partnership's natural gas
production and prices received for natural gas are regulated by the Federal
Energy Regulatory Commission ("FERC") and the Natural Gas Policy Act of 1978 and
various state regulations. The Partnership was subject to the Crude Oil Windfall
Profit Tax Act of 1980, which imposed an excise tax on producers of crude oil at
various rates for prices received in excess of certain historical base prices.
That Act was repealed in August, 1988. The Partnership is also subject to state
drilling and proration regulations affecting its drilling operations and
production rates.
The FERC continues to regulate interstate natural gas pipeline
transportation rates and service conditions pursuant to the NGA and NGPA.
Federal regulation of interstate transporters affects the marketing of natural
gas produced by the Partnership as well as the revenues received by the
Partnership for sales of such natural gas. Since the latter part of 1985,
through its Order Nos. 436, 500 and 636 rulemakings, the FERC has endeavored to
make natural gas transportation accessible
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<PAGE> 4
to gas buyers and sellers on an open and non-discriminatory basis. The FERC
efforts have significantly altered the marketing and pricing of natural gas. No
prediction can be made as to what additional legislation may be proposed, if
any, affecting the competitive status of a gas producer, restricting the prices
at which a producer may sell its gas, or the market demand for gas, nor can it
be predicted which proposals, including those presently under consideration, if
enacted, might be effective.
A number of legislative proposals have been introduced in Congress and
the state legislatures of various states, that, if enacted, would significantly
affect the petroleum industry. Such proposals involve, among other things, the
imposition of land and use controls and certain measures designed to prevent
petroleum companies from acquiring assets in other energy areas. In addition,
there is always the possibility that if market conditions change dramatically in
favor of oil and gas producers that some new form of "windfall profit" or
severance tax may be proposed for and imposed upon either oil or gas. At the
present time it is impossible to predict which proposals, if any, will actually
be enacted by Congress or the various state legislatures. The Partnership
believes that it will comply with all orders and regulations applicable to its
operations. However, in view of the many uncertainties with respect to the
current controls, including their duration and possible modification together
with any new proposals that may be enacted, the Partnership cannot predict the
overall effect, if any, of such controls on its operations.
TAXATION
The Partnership received an opinion of its counsel that the Partnership
would be classified as a partnership and the holders of Partnership Units would
be treated as limited partners for federal income tax purposes. The Partnership
itself, to the extent that it is treated for federal income tax purposes as a
partnership, is not subject to any federal income taxation, but it is required
to file annual partnership returns. Each holder of Partnership Units will be
allocated his distributive shares of the Partnership's income, gain, profit,
loss, deductions, credits, tax preference items and distributions for any
taxable year of the Partnership ending within or with his taxable year without
regard as to whether such holder has received or will receive any cash
distributions from the Partnership.
ITEM 2. PROPERTIES
The Partnership has no interest in any properties other than its oil
and gas properties. The information set forth below summarizes the Partnership's
oil and gas wells, production and reserves, for the periods indicated.
PRODUCING WELLS AND OPERATING INFORMATION
The Partnership, following its formation, and in December, 1982,
contracted for the drilling of 51 development wells, which resulted in 50
producing wells and one dry hole.
As of December 31, 1998, the Partnership had ownership interests in the
following gross and net producing oil and gas wells and gross and net producing
acres.(1) The Partnership has no material undeveloped leasehold, mineral or
royalty acreage.
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Producing wells:
<TABLE>
<CAPTION>
Gross Net
----- ---
<S> <C> <C>
Oil Wells.......................... 0 0.00
Gas Wells.......................... 59 48.05
Producing acres.................... 3,014 2,455
</TABLE>
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(1) A gross well is a well in which an interest is owned; a net
well is the sum of the interests owned in gross wells. Wells
are classified by their primary product. Some wells produce
both oil and gas.
The following table sets forth the Partnership's oil and gas
production, average sales prices and average production costs as of and for the
periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- --------- ---------- ---------- --------
Production:
<S> <C> <C> <C> <C> <C>
Oil and Condensate (bbl) ..... 982 2,089 1,783 1,723 2,186
Gas (Mcf) .................... 99,089 100,271 100,564 104,553 96,605
Average Price of Sales:
Oil and Condensate ($ per bbl) $ 11.69 18.73 19.52 16.28 12.61
Gas ($ per Mcf) .............. $ 3.14 3.17 2.47 2.21 2.89
Production Expense per Dollar
of Operating Revenue ......... $ 0.48 0.54 0.43 0.45 0.60
</TABLE>
OIL AND GAS RESERVES
The Partnership's interests in proved developed oil and gas properties
have been evaluated by Ryder Scott Company for the periods indicated below. All
of the Partnership's reserves are located in the continental United States. The
following table summarizes the Partnership's oil and gas reserves at the dates
shown (figures rounded):
<TABLE>
<CAPTION>
Proved Developed
As of -----------------------------------------
12-31 Oil (bbls) Gas (Mcf)
----- ---------- ---------
<S> <C> <C>
1994 12,000 1,150,000
1995 19,000 1,909,000
1996 15,700 1,868,000
1997 17,600 1,869,700
1998 14,900 1,846,400
</TABLE>
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<PAGE> 6
The estimated future net revenue (using current prices and costs as of
the dates indicated, exclusive of income taxes (at a 10% discount for estimated
timing of cash flow) for the Partnership's proved developed oil and gas reserves
for the periods indicated are summarized as follows (figures rounded):
<TABLE>
<CAPTION>
Proved Developed
-------------------------------------------
As of Future Net Present Value of
12-31 Revenue Future Net Revenue
----- ---------- ------------------
<S> <C> <C>
1994 $ 834,000 $ 415,000
1995 1,727,000 664,000
1996 2,438,900 928,400
1997 2,447,600 904,800
1998 2,215,200 768,500
</TABLE>
Since January 1, 1998, the Partnership has not filed any estimates of
its oil and gas reserves with, nor were any such estimates included in any
reports, to any federal authority or agency, other than the Securities and
Exchange Commission.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not a party to, nor is any of its property the
subject of, any legal proceedings actual or threatened, which would have a
material adverse effect on the business and affairs of the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted during 1998 for vote by the holders of
Partnership Units.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There is no market for the Limited Partnership Units (the "Units") of
the Partnership. As of March 16, 1999, there were 1,003 holders of record of the
Units.
The Units are not regarded as stock and payments or distributions to
holders of Units are not made in the form of dividends. There were no
distributions to the holders of Units in 1998 or 1997. Aggregate cash
distributions to the holders of the Units as of December 31, 1998, was
$1,402,512.
The Managing General Partner may purchase Units directly from the unit
holders if presented to the Managing General Partner, subject to conditions,
including limitations on numbers of Units, and at a price to be fixed by the
Managing General Partner in accordance with certain procedures, all as provided
for in the Limited Partnership Agreement of the Partnership.
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ITEM 6. SELECTED FINANCIAL DATA
The information required hereunder is set forth under "Selected
Financial Data" in the Financial Information section included in this Report.
The index to the Financial Information section is at page F-1.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required hereunder is set forth under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Financial Information section included in this Report. The index to the
Financial Information section is at page F-1.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required hereunder is set forth under "Report of
Independent Public Accountants," "Balance Sheets," "Statements of Operations,"
"Statements of Changes in Partners' Equity," "Statements of Cash Flows" and
"Notes to Financial Statements" in the Financial Information section included in
this Report. The index to the Financial Information section is at page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There was no disagreement between the Partnership and its certified
public accountants on any matter of accounting principles or practices or
financial statement disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Managing General Partner of the Partnership is PrimeEnergy
Management Corporation, a New York corporation ("Management"). The principal
business of Management is the management of the Partnership and other publicly
and privately held exploration and development limited partnerships and joint
ventures and publicly held asset and income fund limited partnerships. As of
March 16, 1999, Management acts as the Managing General Partner in a total of 51
limited partnerships and joint ventures, of which 5 are publicly held, and is
the Managing Trustee of 2 Delaware Business Trusts. The primary activity of such
Partnerships, joint ventures and trusts is the production of oil and gas and
Management, as the Managing General Partner of the Partnership, will devote such
of its time as it believes necessary in the conduct and management of the
business and affairs of the Partnership. Management, and other of the General
Partners of the Partnership, are engaged in and intend to continue to engage in
the oil and gas business for their own accounts and for the accounts of others.
Management, which provides all of the executive, management and
administrative functions of the Partnership, is a wholly-owned subsidiary of
PrimeEnergy Corporation ("PrimeEnergy"), a publicly held Delaware corporation.
The principal offices of PrimeEnergy and Management are in Stamford,
Connecticut. The operating subsidiaries of PrimeEnergy, Prime Operating Company
and Eastern Oil Well Service Company, maintain their principal offices in
Houston, Texas, with district offices in Midland, Texas, Oklahoma City,
Oklahoma, and Charleston, West Virginia. PrimeEnergy
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<PAGE> 8
and its subsidiaries have about 176 employees, including their principal
officers, providing management and administrative services, accounting,
engineers, geologists, production engineers, land department personnel and field
employees.
Set forth below is information concerning the directors and executive
officers of Management and PrimeEnergy who are involved with the conduct of the
business and operations of the Partnership.
Charles E. Drimal, Jr., age 51, is a Director and President of
Management and has held those positions since May, 1983. He is also a Director
and President of Prime Energy and the operating subsidiaries. He graduated from
the University of Maryland in 1970 and from Samford University School of Law in
1973 and is a member of the New York State Bar.
Beverly A. Cummings, age 46, has been a Director and Vice President,
Finance, of Management since August, 1985. She is also a Director and Vice
President, Finance, and Treasurer of PrimeEnergy and the operating subsidiaries.
Ms. Cummings is a Certified Public Accountant and holds a Bachelor of Science
degree from the State University of New York and a Master in Business
Administration from Rutgers University.
Bennie H. Wallace, Jr., age 47, is a Director and Vice President of
Management and has held such positions since May, 1989. He is Acquisitions
Manager for Management, a Vice President of PrimeEnergy since March, 1989, as a
Director of PrimeEnergy since June, 1993, and is a Vice President and Director
of the operating subsidiaries. He graduated from Louisiana State University in
1975 with a Bachelor of Science degree in petroleum engineering and is a
registered professional engineer in the States of Texas and Louisiana and was an
independent petroleum engineer engaged in the evaluation and operation of oil
and gas properties from 1983 to 1987.
Lynne G. Pizor, age 39, has been Controller of Prime Operating Company
since January, 1992, and Eastern Oil Well Service Company since September, 1990.
She also held that position with Management from January, 1986, through August,
1994, and Prime Energy from May, 1990, through August, 1994. She joined
Management in October, 1984, as Manager of Partnership Accounting. She is a
graduate of Wagner College with a Bachelor of Science degree in Economics and
Business Administration and is a Certified Public Accountant.
James F. Gilbert, age 66, has been Secretary of Management since June,
1990, and has been Secretary of PrimeEnergy since March, 1973, and was a
Director of PrimeEnergy from that date to October, 1987. He also serves as
Secretary of the operating subsidiaries. He is an attorney in Dallas, Texas.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers, directors or employees. The officers
and employees of the Managing General Partner and PrimeEnergy perform all
management and operational functions of the Partnership. The Partnership does
not pay any direct salaries or other remuneration to the officers, directors or
employees of the Managing General Partner or PrimeEnergy. The Managing General
Partner is reimbursed for the general and administrative expenses of the
Partnership which are allocated to the Partnership for expenses incurred on
behalf of the Partnership, together with administrative work by third parties
limited annually to 5% of the aggregate capital contribution of
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<PAGE> 9
the holders of the Partnership Units. During 1998 and 1997, the allocation of
general and administrative expenses to the Partnership was $85,000 and $85,000,
respectively.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Partnership does not know of any person, entity or group, other
than the Managing General Partner and PrimeEnergy Corporation that beneficially
owns more than five percent of the Partnership Units. The following table shows
as of March 16, 1999, the name and address of such beneficial owners, and the
number and percent of Partnership Units beneficially owned by them, all of which
are owned directly.
<TABLE>
<CAPTION>
Number
Name and Address of Beneficial Owner Of Units Percent
------------------------------------ -------- -------
<S> <C> <C>
PrimeEnergy Management Corporation
One Landmark Square
Stamford, CT 06901 .......................................... 1,249 8.69%
PrimeEnergy Corporation
One Landmark Square
Stamford, CT 06901 .......................................... 1,743 12.13%
</TABLE>
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prime Operating Company acts as the operator for most of the producing
oil and gas wells of the Partnership pursuant to operating agreements with the
Partnership and other working interest owners, including other partnerships
managed by the Managing General Partner, and in 1998 was paid well operating
fees ranging from about $468 to $846 per month per well. Together with well
operating supplies and equipment and related servicing operations are generally
provided by Eastern Oil Well Service Company. The Partnership pays its
proportionate part of such operating fees and expenses. Such fees and expenses
vary depending on such matters as the location of the well, the complexity of
the producing equipment, whether wells produce oil or gas or both and similar
factors. The Partnership believes that such services are as favorable to the
Partnership as they would be if the Partnership entered into such transactions
with unaffiliated third parties. In 1998 and 1997, the Partnership paid an
aggregate of $105,516 and $128,342, respectively, in such fees and expenses.
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<PAGE> 10
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Report:
1. Financial Statements (Index to the Financial Information at
page F-1)
2. Exhibits:
(3) Form of Agreement of Limited Partnership of Sterling
Gas Drilling Fund 1982 (Incorporated by reference to
Exhibit (3) of Sterling Gas Drilling Fund 1982 Form
10-K for the year ended December 31, 1994.)
(24) Consent of Ryder Scott Company (filed herewith)
(27) Financial Data Schedule. (filed herewith)
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the last quarter of
the year covered by this Report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 30th day of
March, 1999.
Sterling Gas Drilling Fund 1982
By: PrimeEnergy Management Corporation
Managing General Partner
By: /s/ CHARLES E. DRIMAL, JR.
------------------------------------
Charles E. Drimal, Jr.
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated and on the 30th day of March, 1999.
/s/ CHARLES E. DRIMAL, JR. Director and President,
- ---------------------------- PrimeEnergy Management Corporation;
Charles E. Drimal, Jr.
The Principal Executive Officer
/s/ BEVERLY A. CUMMINGS Director and Vice President and Treasurer,
- ---------------------------- PrimeEnergy Management Corporation;
Beverly A. Cummings
The Principal Financial and Accounting
Officer
/s/ BENNIE H. WALLACE, JR. Director, PrimeEnergy Management
- ---------------------------- Corporation
Bennie H. Wallace, Jr.
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STERLING GAS DRILLING FUND 1982
(A NEW YORK LIMITED PARTNERSHIP)
Index to Financial Statements and Schedules
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Selected Financial Data F-2
Management's Discussion and Analysis of Financial Condition
and Results of Operations F-2
Report of Independent Public Accountants F-6
Financial Statements:
Balance Sheets, December 31, 1998 and 1997 F-7
Statements of Operations for the Years Ended December 31,
1998, 1997 and 1996 F-8
Statements of Changes in Partners' Equity for the Years
Ended December 31, 1998, 1997 and 1996 F-9
Statements of Cash Flows for the Years Ended December 31,
1998, 1997 and 1996 F-10
Notes to Financial Statements F-11
Schedules:
V - Property and Equipment - Oil and Gas Properties for
the Years Ended December 31, 1998, 1997 and 1996 F-19
VI - Accumulated Depreciation, Depletion, and Amortization -
Oil and Gas Properties for the Years Ended December 31,
1998, 1997 and 1996 F-20
</TABLE>
All other schedules have been omitted as the information required is either
included in the financial statements, related notes, or is not applicable.
F-1
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected financial data to
highlight significant trends in the Registrant's financial condition and results
of operations for the periods indicated. The selected financial data should be
read in conjunction with the financial statements and related notes included
elsewhere in this report.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (000's omitted)
--------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues ...................... $ 323 $ 359 $ 283 $ 367 $ 302
Net income (loss):
Limited Partners ........... 14 13 15 77 (89)
General Partners ........... 9 9 10 22 (2)
Per equity unit ............ 1.00 0.91 1.06 5.32 (6.18)
Total assets .................. 689 726 754 783 826
Cash distributions:
Limited Partners ........... -- -- -- -- --
General Partners ........... -- -- -- -- --
Limited partners as
a % of original
contribution ............... -- -- -- -- --
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION &
RESULTS OF OPERATIONS
1. Liquidity: The oil and gas industry is competitive in all its
phases. There is also competition between 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
Agreement of Limited Partnership of the Partnership, 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 for the conduct of the Partnership business. As
of December 31, 1998, the General Partners have distributed to the Limited
Partners $1,402,512 or 9.76% of the total Limited Partner capital contributions.
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 the 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 to remediate
systems and replace equipment where required. Phase III, to be completed by
mid-1999, is the final testing of each major area of exposure to ensure
F-2
<PAGE> 14
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, is in the process of conducting an internal review of all systems and
contacting 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 expects to complete identification of
critical systems by June 1999 and to continue 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 this contingency plan by the second quarter
of 1999 but also expects to refine this plan throughout 1999.
Through 1998, 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 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.
F-3
<PAGE> 15
2. Capital resources: The Partnership was formed for the sole intention
of drilling oil and gas wells. The Partnership entered into a drilling contract
with an independent drilling 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 Partnership 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
provision of the Agreement of Limited Partnership of the Partnership.
3. Results of operations:
1998 compared to 1997
The Partnership's overall operating revenue declined from $359,296 in
1997 to $322,770 in 1998. The Partnership receives the majority of its revenue
from gas production combined with some oil production. During 1998 both the
Partnership's oil production and average price per barrel were substantially
lower than the previous year, from 2,089 bbls and $18.73 in 1997 to 982 bbls and
$11.69 in 1998. Also contributing to the overall revenue decline was lower gas
production, from 100,271 mcf in 1997 to 99,089 mcf in 1998 and a slightly lower
average price per mcf, from $3.17 in 1997 to $3.14 in 1998. Production declines
can be of a normal nature, a result of minor shut-ins due to repairs or even as
a result of variations in pressure flows between the well's gas lines and the
main transport line.
Production expenses showed a decrease from $192,073 in 1997 to $156,536
in 1998. During 1998, the production related expenditures included repairs,
maintenance, labor, supplies and other normal upkeep expenses. The operator of
the Partnership wells during 1997 expended funds on supplemented maintenance,
labor, location, access road work and other repairs at the individual wells or
the well sites in order to maintain production or minimize future declines.
General and administrative costs remained relatively unchanged from $105,832 in
1997 to $106,143 in 1998. Management will use in-house resources if it provides
efficient and timely services to the partnership. Amounts in both years are
substantially less than the $718,500 which may be allocable to the Partnership
under the Partnership Agreement. The lower allocable amounts reflect
management's efforts to limit costs, both incurred and allocated to the
Partnership.
The Partnership records additional depreciation, depletion and
amortization to the extent that the net capitalized costs exceed the
undiscounted future net cash flows attributable to the partnership. No
additional depletion was needed in 1998 or 1997. The overall depreciation,
depletion and amortization was consistent with the rates used and the existing
property basis.
1997 compared to 1996
Operating revenue increased from $283,908 in 1996 to $359,296 in 1997.
The partnerships gas production showed very little change from 1996 to 1997,
100,564 mcf to 100,271 mcf's, respectively. The Partnership does not receive the
bulk of its revenue from oil production but the oil produced in 1997, 2,089
barrels, was higher than oil produced in 1996, 1,783 barrels. The Partnership
generally renews its gas contracts as they come due for twelve month periods.
The Partnership was in a locked fixed price contract for all of 1997 and has
renewed its fixed price contract through November 30, 1998. The overall average
price per mcf was very favorable to
F-4
<PAGE> 16
the Partnership, $3.17 for 1997 as compared to $2.47 in 1996. Overall oil and
gas revenue was up significantly due to the price increases and the very stable
production.
Production expenses showed an increase from $122,477 in 1996 to
$192,073 in 1997. The Partnership may expend funds on additional equipment, for
example lift equipment, or repairs if the operator has determined that the
equipment and related repairs expenses will have a beneficial effect on
production. The effect looked for by the operator is to increase production,
halt any further significant declines or to maintain overall production on a
particular well. These additional costs may include, but are not limited to,
additional maintenance, labor, location, access road work and other repairs to
the individual wells or the well sites. The Partnership also expended funds, in
both years, for general upkeep and maintenance at all the partnership's well and
well sites. General and administrative costs experienced a moderate increase
from $95,478 in 1996 to $105,832 in 1997. Management continues to monitor any
third party costs and use in-house resources if it will provide efficient and
timely services to the Partnership. Amounts in both years are substantially less
than the $718,500 allocable to the Partnership under the Partnership Agreement.
The lower allocable amounts reflect management's efforts to limit costs, both
incurred and allocated to the Partnership.
The Partnership records additional depreciation, depletion and
amortization to the extent that the net capitalized costs exceeds the
undiscounted future net cash flows attributable to the Partnership. No
additional depletion was needed in 1997 or 1996. The overall depreciation,
depletion and amortization was consistent with the rates used and the existing
property basis.
F-5
<PAGE> 17
STERLING GAS DRILLING FUND 1982
(a New York limited partnership)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Sterling Gas Drilling Fund 1982:
We have audited the accompanying balance sheets of Sterling Gas Drilling Fund
1982 (a New York limited partnership) as of December 31, 1998 and 1997, and the
related statements of operations, changes in partners' equity, and cash flows
for the years ended December 31, 1998, 1997 and 1996. These financial statements
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sterling Gas Drilling Fund 1982
as of December 31, 1998 and 1997, and the results of its operations and cash
flows for the years ended December 31, 1998, 1997 and 1996 in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index to
financial statements and schedules are presented for purposes of complying with
the Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the examination of the basic financial statements and, in
our opinion, fairly state in all material respects the financial data required
to be set forth therein in relation to the basic financial statements taken as a
whole.
PUSTORINO, PUGLISI & CO., LLP
New York, New York
February 9, 1999
F-6
<PAGE> 18
STERLING GAS DRILLING FUND 1982
(a New York limited partnership)
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Assets
1998 1997
------------ ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents (Note 2) $ 20 $ 7
------------ ------------
Total Current Assets 20 7
------------ ------------
Oil and Gas Properties - successful efforts
methods (Note 3) - (Schedules V and VI):
Leasehold costs 466,804 466,804
Wells and related facilities 11,970,091 11,970,091
------------ ------------
Total 12,436,895 12,436,895
Less - Accumulated depreciation, depletion (11,747,491) (11,710,869)
------------ ------------
and amortization
689,404 726,026
------------ ------------
Total Assets $ 689,424 $ 726,033
============ ============
Liabilities and Partners' Equity
Current Liabilities:
Due to affiliates (Note 6) $ 262,068 $ 322,146
------------ ------------
Total Current Liabilities 262,068 322,146
------------ ------------
Partners' Equity:
Limited partners 699,647 685,336
General partners (272,291) (281,449)
------------ ------------
Total Partners' Equity 427,356 403,887
------------ ------------
Total Liabilities and Partners' Equity $ 689,424 $ 726,033
============ ============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-7
<PAGE> 19
STERLING GAS DRILLING FUND 1982
(a New York limited partnership)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------ ------------------------------ ------------------------------
Limited General Limited General Limited General
Partners Partners Total Partners Partners Total Partners Partners Total
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Operating revenues $271,611 $ 51,159 $322,770 $302,348 $ 56,948 $359,296 $238,909 $ 44,999 $283,908
-------- -------- -------- -------- -------- -------- -------- -------- --------
Costs and Expenses:
Production expenses 131,725 24,811 156,536 161,629 30,444 192,073 103,064 19,413 122,477
Depreciation,
depletion and
amortization 36,256 366 36,622 38,546 389 38,935 40,220 406 40,626
General and
Administrative
expenses (Note 7) 89,319 16,824 106,143 89,058 16,774 105,832 80,345 15,133 95,478
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total Expenses 257,300 42,001 299,301 289,233 47,607 336,840 223,629 34,952 258,581
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net Income (Loss) $ 14,311 $ 9,158 $ 23,469 $ 13,115 $ 9,341 $ 22,456 $ 15,280 $ 10,047 $ 25,327
======== ======== ======== ======== ======== ======== ======== ======== ========
Net Income (Loss) Per
Equity Unit (Note 2) $ 1.00 $ .91 $ 1.06
======== ======== ========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-8
<PAGE> 20
STERLING GAS DRILLING FUND 1982
(a New York limited partnership)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Limited General
Partners Partners Total
-------- --------- --------
<S> <C> <C> <C>
Balance at December 31, 1995 $656,941 $(300,837) $356,104
Net Income 15,280 10,047 25,327
-------- --------- --------
Balance at December 31, 1996 672,221 (290,790) 381,431
Net Income 13,115 9,341 22,456
-------- --------- --------
Balance at December 31, 1997 685,336 (281,449) 403,887
Net Income 14,311 9,158 23,469
-------- --------- --------
Balance at December 31, 1998 $699,647 $(272,291) $427,356
======== ========= ========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-9
<PAGE> 21
STERLING GAS DRILLING FUND 1982
(a New York limited partnership)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ 23,469 $ 22,456 $ 25,327
-------- -------- --------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation, depletion and amortization 36,622 38,935 40,626
Changes in Assets and Liabilities:
Due to affiliates (60,078) (50,862) (54,100)
-------- -------- --------
Total Adjustments (23,456) (11,927) (13,474)
-------- -------- --------
Net Cash Provided (Used) by 13 10,529 11,853
-------- -------- --------
Operating Activities
Cash Flows from Investing Activities:
Equipment purchases -- (10,556) (11,843)
-------- -------- --------
Net Cash Provided by Investing Activities -- (10,556) (11,843)
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents 13 (27) 10
Cash and cash equivalents, beginning of year 7 34 24
-------- -------- --------
Cash and cash equivalents, end of year $ 20 $ 7 $ 34
======== ======== ========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-10
<PAGE> 22
STERLING GAS DRILLING FUND 1982
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(1) Organization and Capital Contributions:
Sterling Gas Drilling Fund 1982, a New York limited partnership (the
"Partnership"),was formed on July 28, 1982 for the primary purpose of
acquiring, drilling, developing, operating and producing oil and gas in
the state of West Virginia. The general partners are: PrimeEnergy
Management Corporation (PEMC), a wholly owned subsidiary of PrimeEnergy
Corporation (PEC), formerly known as K.R.M. Petroleum Corporation
(KRM), Charles E. Drimal, Jr., Oliver J. Sterling and Samuel R.
Campbell. Fourteen thousand three hundred seventy limited partnership
units, (14,370), were sold at $1,000 per unit aggregating $14,370,000
in total limited partner capital contributions. The general partners'
made no capital contributions. Partnership operations commenced on
December 22, 1982.
(2) Summary of Significant Accounting Policies:
Revenue Recognition:
The Partnership recognizes operating revenues, consisting of sales of
oil and gas production, in the month of sale. Uncollected revenue is
accrued based on known facts and trends of the relevant oil and gas
properties on a monthly basis.
Basis of Accounting:
The accounts of the Partnership are maintained in accordance with
accounting practices permitted for federal income tax reporting
purposes. Under this method of accounting, (a) substantially all
exploration and development costs except leasehold and equipment costs
are expensed as paid, (b) costs of abandoned leases and equipment are
expensed when abandoned, and (c) depreciation (for equipment placed in
service) is provided on an accelerated basis. In order to present the
accompanying financial statements in accordance with generally accepted
accounting principles, memorandum adjustments have been made to account
for oil and gas properties, as discussed below.
Oil and Gas Producing Activities:
The Partnership accounts for its oil and gas operations using the
successful efforts method of accounting on a property by property
basis. The Partnership only participates in developmental drilling.
Accordingly, all costs of drilling and equipping these wells, together
with leasehold acquisition costs, are capitalized. These capitalized
costs are amortized on a property by property basis
F-11
<PAGE> 23
STERLING GAS DRILLING FUND 1982
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(2) Summary of Significant Accounting Policies - (Cont'd):
(utilizing aggregations of common geological structures) by the
unit-of-production method based upon the ratio of production to proved
developed oil and gas reserves. Additional depreciation, depletion and
amortization may be recorded if net capitalized costs exceed the
undiscounted future net cash flows attributable to Partnership
properties. (See Note 4)
Federal Income Taxes:
As federal income taxes are the liability of the individual partners,
the accompanying financial statements do not include any provision for
federal income taxes. (See Note 8)
Limited Partners' Income (Loss) Per Equity Unit:
The limited partners' income (loss) per equity unit is computed on the
14,370 limited partner equity units.
Cash and Cash Equivalents:
For purposes of the statements of cash flows the Partnership considers
all highly liquid debt instruments with a maturity of three months or
less to be cash equivalents.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
F-12
<PAGE> 24
STERLING GAS DRILLING FUND 1982
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(3) Oil and Gas Properties:
The Partnership acquired leases or farmouts from PEMC at its cost. Cost
is defined as any amount paid for delay rentals, lease bonuses, if any,
surveys and other expenses including such portion of any of the general
partners', or their affiliates' reasonable, necessary and actual
expenses for geological, geophysical, seismic, land, engineering,
drafting, accounting, legal and other services. During 1982, the
Partnership, as reimbursement of costs for leases it acquired from
PEMC, paid PEMC $466,804. The Partnership currently pays royalties of
approximately 12.5% to 19.8% of the selling price of the gas and oil
extracted.
The following table sets forth certain revenue and expense data
concerning the Partnership's oil and gas activities for the years ended
December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Average sales price per MCF of gas $ 3.14 $ 3.17 $ 2.47
Average sales price per BBL of 11.69 18.73 19.52
oil and other liquids
Production expense per dollar of .48 .54 .43
operating revenue
</TABLE>
(4) Quantities of Oil and Gas Reserves:
The amount of proved developed reserves presented below has been
estimated by an independent firm of petroleum engineers as of January
1, 1998. Petroleum engineers on the staff of PEC have reviewed the data
presented below, as of December 31, 1998, for consistency with current
year production and operating history. All of the Partnership's gas and
oil reserves are located within the United States:
<TABLE>
<CAPTION>
(Unaudited)
--------------------------
GAS (MCF) OIL (BBL)
--------- ---------
<S> <C> <C>
Reserves as of December 31, 1995 1,909,111 19,269
Revisions of previous estimates 59,665 (1,815)
Production (100,564) (1,783)
--------- -------
Reserves as of December 31, 1996 1,868,212 15,671
Revisions of previous estimates 101,804 4,018
Production (100,271) (2,089)
--------- -------
Reserves as of December 31, 1997 1,869,745 17,600
Revisions of previous estimates 75,722 (1,717)
Production (99,089) (982)
--------- -------
Reserves as of December 31, 1998 1,846,378 14,901
========= =======
</TABLE>
F-13
<PAGE> 25
STERLING GAS DRILLING FUND 1982
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(4) Quantities of Oil and Gas Reserves - (Cont'd):
The revisions of previous estimates are primarily due to price changes
that have occurred during the years. If current prices were to prevail
into the future, operation of certain wells would become uneconomic, on
a pretax basis, as production levels decline with age. In accordance
with the rules and regulations of the Securities and Exchange
Commission, proved reserves exclude production which would be
uneconomic. The partners are entitled to certain tax benefits and
credits which, if available in the future, may result in production
continuing beyond that included above.
Revisions arise from changes in current prices, as well as engineering
and geological data which would alter the useful life and therefore the
overall predicted production of each well. Future changes in these
estimates are common and would impact the reserve quantities used to
calculate depreciation, depletion, and amortization.
As discussed in Note 2, the Partnership may record additional
depreciation, depletion and amortization if net capitalized costs
exceed the undiscounted future net cash flows attributable to
Partnership properties. Significant price declines affect estimated
future net revenues both directly and as a consequence of their impact
on estimates of future production. The Partnership has recorded no
additional provision in 1998, 1997 and 1996. If the additional
provision had been computed based on the limited partners' interest in
capitalized costs and estimated future net revenues, rather than on the
basis of total Partnership interests, the limited partners income would
not have been reduced in 1998, 1997 and 1996.
F-14
<PAGE> 26
STERLING GAS DRILLING FUND 1982
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(5) Allocation of Partnership Revenues, Income, Costs and Expenses:
Under the terms of the Limited Partnership Agreement, all Partnership
income and expenditures, including deductions attributable thereto, are
to be allocated as follows:
<TABLE>
<S> <C>
Drilling and completion costs (paid out of initial capital contributions):
Limited partners 99.00%
General partners 1.00%
------
100.00%
======
Syndication costs sales commission and cost acquiring leases:
Limited partners - %
General partners 100.00%
------
100.00%
======
Offering costs up to $50,000 incurred by Dealer-Manager:
Limited partners - %
General partners 100.00%
------
100.00%
======
Offering costs other than $50,000 paid by the general partners (up to a maximum of $50,000):
Limited partners 99.00%
General partners 1.00%
------
100.00%
======
Net Revenue from oil and gas operations, general and administrative
expenses and production operating fees:
Limited partners 84.15%
General partners 15.85%
------
100.00%
======
All other income, gains, losses, costs, expenses, deductions and credits:
Limited partners 99.00%
General partners 1.00%
------
100.00%
======
</TABLE>
F-15
<PAGE> 27
STERLING GAS DRILLING FUND 1982
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(6) Transactions With Affiliates:
(a) The payable to affiliates at December 31, 1998 and 1997
represents general and administrative and certain other expenses
incurred on behalf of the Partnership by PEC and its
subsidiaries, including amounts due for production operator's
fees (Note 6(b)), and advances to finance the Partnerships' loan
payments net of revenues collected on behalf of the Partnership.
PEMC intends to continue to make advances to the Partnership to
fund any working capital deficiencies in the future on an
interest free basis.
(b) As operator of the Partnership's properties, Prime Operating
Company (POC), a subsidiary of PEC, receives, as compensation
from the Partnership, a monthly production operator's fee of
$468 for each producing gas well and $846 for each producing oil
or combination gas and oil well, based on the Partnership's
percentage of working interest in the well. These fees are
subject to annual adjustments by the percentage increase in the
Cost of Living Index published by the U.S. Department of Labor
over the year in which production began. During 1998, 1997 and
1996, $104,060, $120,616 and $68,193 of production operator's
fees were incurred, respectively.
(c) Eastern Oil Well Services Company (EOWSC), a subsidiary of PEC,
provided field services to the Partnership during the years
ending December 31, 1998 and 1997 for which it was billed
$1,456 and $7,726 respectively.
(7) General and Administrative Expenses:
In accordance with the Management Agreement, PEMC will be reimbursed
for the portion of PEMC's in-house overhead, including salaries and
related benefits, attributable to the affairs and operations of the
Partnership.
This amount combined with certain direct expenses for geology,
engineering, legal, accounting, auditing, insurance and other items
shall not exceed an annual amount equal to 5% of limited partner
capital contributions. Excess shall be borne by the general partners in
their individual capacity.
During 1998, 1997 and 1996, the Partnership recognized general and
administrative expenses incurred on its behalf by a general partner of
$85,000, $85,000, and $75,000, respectively.
F-16
<PAGE> 28
STERLING GAS DRILLING FUND 1982
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(8) Federal Income Taxes:
The following is a reconciliation between the net income (loss) as
reported on the Partnership's federal income tax return and the net
income (loss) reported in the accompanying financial statements:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Net income (loss)as
reported on the
Partnership's federal
income tax return $ 54,460 $ 55,489 $ 63,584
Depreciation, depletion and
amortization for financial
reporting purposes
greater than income
tax amount (30,991) (33,033) (38,257)
-------- -------- --------
Net income (loss) per
accompanying financial
statements $ 23,469 $ 22,456 $ 25,327
======== ======== ========
</TABLE>
The tax returns of the Partnership, the qualifications of the
Partnership as such for tax purposes, and the amount of Partnership
income or loss are subject to examination by federal and state taxing
authorities. If such examinations result in changes with respect to
Partnership's qualifications or in changes to its income or loss, the
tax liability of the partners would be changed accordingly.
The Tax Reform Act of 1976 provides that no part of any depletion
deduction with respect to oil and gas wells is to be determined by the
Partnership but must be computed separately by the partners. Thus, cost
or percentage depletion, as applicable, must be computed by each
partner so that a specific depletion computation can be made when each
partner files his U.S. income tax return. Information is furnished to
the partners to compute the depletion deduction.
F-17
<PAGE> 29
STERLING GAS DRILLING FUND 1982
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(9) Major Customers:
A schedule of the major purchases of the Partnership's production is as
follows:
<TABLE>
<CAPTION>
Purchaser 1998 1997 1996
--------- -------- -------- --------
<S> <C> <C> <C>
American River Terminals $ -- $ 38,702 $ 33,083
Phoenix Diversified $271,216 $264,743 $200,452
American Refining Group $ 12,123 $ -- $ --
</TABLE>
F-18
<PAGE> 30
SCHEDULE V
STERLING GAS DRILLING FUND 1982
(a New York limited partnership)
PROPERTY AND EQUIPMENT - OIL AND GAS PROPERTIES
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Balance at Balance
Beginning Additions Other at End
of Year at Cost Retirements Changes of Year
----------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1998:
Leasehold costs $ 466,804 $ -- $ -- $ -- $ 466,804
Wells and related equipment 11,970,091 -- -- -- 11,970,091
----------- -------- ------ ----------- -----------
$12,436,895 $ -- $ -- $ -- $12,436,895
=========== ======== ====== =========== ===========
Year ended December 31, 1997:
Leasehold costs $ 466,804 $ -- $ -- $ -- $ 466,804
Wells and related equipment $11,959,534 10,556 -- -- 11,970,091
----------- -------- ------ ----------- -----------
$12,426,338 $ 10,556 $ -- $ $12,436,895
=========== ======== ====== =========== ===========
Year Ended December 31, 1996:
Leasehold costs $ 466,804 $ -- $ -- $ -- $ 466,804
Wells and related equipment 11,947,691 11,843 -- -- 11,959,534
----------- -------- ------ ----------- -----------
$12,414,495 $ 11,843 $ -- $ -- $12,426,338
=========== ======== ====== =========== ===========
</TABLE>
F-19
<PAGE> 31
SCHEDULE VI
STERLING GAS DRILLING FUND 1982
(a New York limited partnership)
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION - OIL AND GAS PROPERTIES
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Balance at Charges to Balance
Beginning Costs and Other at End
of Year Expenses Retirements Retirements of Year
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1998:
Wells and related facilities $11,262,086 $ 35,713 $ -- $ -- $11,297,799
Leasehold costs 448,783 909 -- -- 449,692
----------- ----------- ------ ----------- -----------
$11,710,869 $ 36,622 $ -- $ -- $11,747,491
=========== =========== ====== =========== ===========
Year ended December 31, 1997:
Wells and related facilities $11,224,117 $ 37,969 $ -- $ -- $11,262,086
Leasehold costs 447,817 966 -- -- 448,783
----------- ----------- ------ ----------- -----------
$11,671,934 $ 38,935 $ -- $ -- $11,710,869
=========== =========== ====== =========== ===========
Year Ended December 31, 1996:
Wells and related facilities $11,184,513 $ 39,604 $ -- $ -- $11,224,117
Leasehold costs 446,795 1,022 -- -- 447,817
----------- ----------- ------ ----------- -----------
$11,631,308 $ 40,626 $ -- $ -- $11,671,934
=========== =========== ====== =========== ===========
</TABLE>
F-20
<PAGE> 32
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- ------ ------- ----
<S> <C> <C>
(3) Form of Agreement of Limited Partnership of Sterling Gas
Drilling Fund 1982 (incorporated by reference to Exhibit (3)
of Sterling Gas Drilling Fund 1982 Form 10-K for the year
ended December 31, 1994)
(24) Consent of Ryder Scott Company (filed herewith)
(27) Financial Data Schedule. (filed herewith)
</TABLE>
<PAGE> 1
EXHIBIT 24
[RYDER SCOTT COMPANY LETTERHEAD]
CONSENT OF RYDER SCOTT COMPANY
We consent to the use on the Form 10-K of Sterling Gas Drilling Fund 1982 of our
reserve report and all schedules, exhibits, and attachments thereto incorporated
by reference of Form 10-K and to any reference made to us on Form 10-K as a
result of such incorporation.
Very Truly Yours,
/s/ RYDER SCOTT COMPANY
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Denver, Colorado
March 17, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STERLING GAS
DRILLING FUND 1982 FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 20
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20
<PP&E> 12,436,895
<DEPRECIATION> (11,747,491)
<TOTAL-ASSETS> 689,404
<CURRENT-LIABILITIES> 262,068
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 427,356<F1>
<TOTAL-LIABILITY-AND-EQUITY> 689,424
<SALES> 322,770
<TOTAL-REVENUES> 322,770
<CGS> 299,301
<TOTAL-COSTS> 299,301
<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> 23,469
<EPS-PRIMARY> 1.00<F2>
<EPS-DILUTED> .0
<FN>
<F1>OTHER - SE IS COMPOSED OF PARTNERSHIP EQUITY.
<F2>EPS - PRIMARY IS BASED UPON LIMITED PARTNERS SHARE OF NET INCOME DIVIDED BY THE
OUTSTANDING PARTNERSHIP UNITS OF 14,370.
</FN>
</TABLE>
