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 2-84452
STERLING DRILLING FUND 1983-1
(Exact name of registrant as specified in charter)
New York
(State or other jurisdiction of incorporation or organization)
13-3167549
(IRS employer identification number)
1 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, 1999 and December 31, 1998.
Statements of Operations for the Nine and Three Months Ended September
30, 1999 and 1998.
Statements of Changes in Partners' Equity for the Nine and Three Months
Ended September 30, 1999 and 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
Liquidity -
The oil and gas industry is intensely 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 Registrant competes with many other companies having
substantially greater financial and other resources. In accordance with the
terms of the Prospectus as filed by the Registrant, 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
contingent debts, liabilities or expenses for the conduct of the
Partnership's business. As of June 30, 1999, the General Partners' have
distributed $ $2,381,555.00 or 21.50% of original 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.
<PAGE> 2
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 is the
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 $915,800 as compared to the discounted reserves as of
<PAGE> 3
December 31, 1997, which were approximately $1,200,900. 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 intention of drilling oil and gas
wells. The Registrant entered into a drilling contract with an independent
contractor in November 1983 for $9,400,000. Pursuant to terms of this
contract thirty-eight wells have been drilled resulting in thirty-seven
producing wells and one dry hole.
3. Results of Operations -
The Partnership revenue's decreased from $245,853 in 1998 to $167,656 in
1999. The Partnership experienced declines in both gas and oil production,
from 75,204 MCF and 719 BBLS in 1998 to 68,954 MCF and 460 BBLS. The
average price per MCF decreased, from $3.16 in 1998 to $2.33 in 1999. A
substantial portion of the Partnership's production was shut-in for the
month of June 1999 due to required maintenance of the gas transporter's
pipeline. All properties were returned to production in July 1999. The
combination of lower production and lower average prices contributed
directly to reduced overall operating revenues. Production expenses
decreased from $105,186 in 1998 to $76,250 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. Current production expenses, during 1999, has been
limited to normal maintenance and upkeep of the wells and well sites.
General and administrative expenses have been segregated on the financial
statements to reflect expenses paid to PrimeEnergy Management Corporation,
a general partner. These expenses are charged in accordance with
guidelines set forth in the Registrant's Management Agreement and are
attributable to the affairs and operations of the Partnership and shall not
exceed an annual amount equal to 5% of the Limited Partners capital
contributions. Amounts related to both 1999 and 1998 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. Third-party general and
administrative expenses decreased slightly. Management will use in house
resources if it will be more efficient and cost effective to do so.
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
<PAGE> 4
depreciation, depletion or amortization was needed in 1998 or in the 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
Exchange Act of 1934, Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
STERLING DRILLING FUND 1983-1
(Registrant)
BY: /s/ Charles E. Drimal Jr.
-----------------------------
Charles E. Drimal, Jr.,
General Partner
November 12, 1999
(date)
<PAGE> 6
STERLING DRILLING FUND 1983-1
(a New York Limited Partnership)
Balance Sheets
September 30, December
1999 31, 1998
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 149,819 $ 174,678
Due From affiliates 0 0
Due from others 21,871 36,882
----------- -----------
Total current assets 171,690 211,560
----------- -----------
Oil and gas properties -
successful efforts method:
Leasehold costs 321,314 321,314
Well and related facilities 8,919,523 8,919,173
less accumulated
depreciation, depletion and
amortization (7,869,733) (7,817,328)
----------- -----------
1,371,104 1,423,159
----------- -----------
Total assets $ 1,542,794 $ 1,634,719
=========== ===========
Liabilities and Partners' Equity
Current Liabilities:
Due to affiliates $ 3,916 $ 0
------------ ------------
Total current liabilities 3,916 0
------------ ------------
Partners' equity
Limited partners $ 1,496,122 $ 1,579,044
General partners 41,756 55,675
---------- -----------
Total partners' equity $ 1,538,878 $ 1,634,719
---------- -----------
Total liabilities and
Partners' equity 1,542,794 1,634,719
============= ===========
See accompanying note to the financial statements.
<PAGE> 7
STERLING DRILLING FUND 1983-1
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Nine Months Ended
September 30, 1999
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 128,257 $ 39,399 $ 167,656
Interest income 4,187 390 4,577
Other Revenue 2,295 705 3,000
-------- -------- -------
Total Revenue 134,739 40,494 175,233
-------- -------- -------
Costs and Expenses:
Production expense 58,331 17,919 76,250
General and administrative
to a related party 57,376 17,625 75,001
General and administrative 11,464 3,522 14,986
Depreciation, depletion
and amortization 47,951 4,454 52,405
-------- -------- -------
Total Costs and Expenses 175,122 43,520 218,642
-------- -------- -------
Net Income (Loss) $ (40,383) $ (3,026) $ (43,409)
======== ======== =======
Net Income(loss)
per equity unit $ (3.65)
======
See accompanying note to the financial statements.
<PAGE> 8
STERLING DRILLING FUND 1983-1
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Nine Months Ended
September 30, 1998
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 188,078 $ 57,775 $ 245,853
Interest income 5,964 554 6,518
Other Revenue 0 0 0
-------- -------- -------
Total Revenue 194,042 58,329 252,371
-------- -------- -------
Costs and Expenses:
Production expense 80,467 24,719 105,186
General and administrative
to a related party 57,379 17,626 75,005
General and administrative 12,454 3,826 16,280
Depreciation, depletion
and amortization 53,517 4,972 58,489
-------- -------- -------
Total Costs and Expenses 203,817 51,143 254,960
-------- -------- -------
Net Income/(Loss) $ (9,775) $ 7,186 $ (2,589)
======== ======== =======
Net Income/(Loss) per $
equity unit (.88)
======
See accompanying note to the financial statements.
<PAGE> 9
STERLING DRILLING FUND 1983-1
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ended
September 30, 1999
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 60,615 $ 18,620 $ 79,235
Interest income 641 61 702
Other Revenue 0 0 0
-------- -------- ---------
Total Revenue 61,256 18,681 79,937
-------- -------- ---------
Costs and Expenses:
Production expense 21,017 6,457 27,474
General and administrative
to a related party 19,124 5,875 24,999
General and administrative 3,453 1,061 4,514
Depreciation, depletion
and amortization 17,222 1,599 18,821
-------- -------- ---------
Total Costs and Expenses 60,816 14,992 75,808
-------- -------- ---------
Net Income(loss) $ 440 $ 3,689 $ 4,129
======== ======== =========
Net Income(loss)
per equity unit $ .04
========
See accompanying note to the financial statements.
<PAGE> 10
STERLING DRILLING FUND 1983-1
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ended
September 30, 1998
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 60,661 $ 18,634 $ 79,295
Interest income 1,819 169 1,988
Other Revenue 0 0 0
-------- -------- ---------
Total Revenue 62,480 18,803 81,283
-------- -------- ---------
Costs and Expenses:
Production expense 23,520 7,225 30,745
General and administrative
to a related party 19,124 5,875 24,999
General and administrative 5,180 1,591 6,771
Depreciation, depletion
and amortization 17,838 1,658 19,496
-------- -------- ---------
Total Costs and Expenses 65,662 16,349 82,011
-------- -------- ---------
Net Income(loss) $ (3,182) $ 2,454 $ (728)
======== ======== =========
Net Income(loss)
per equity unit $ (.28)
========
See accompanying note to the financial statements.
<PAGE>11
STERLING DRILLING FUND 1983-1
(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 $ 1,579,044 55,675 $ 1,634,719
Partner's contributions 0 175 175
Cash distributions (41,539) (11,068) (52,607)
Net income/(loss) (40,383) (3,026) (43,409)
--------- -------- ------------
Balance at end of period $ 1,496,122 41,756 $ 1,538,878
========= ======== ============
Nine Months Ended
September 30, 1998
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,635,538 57,451 $ 1,692,989
Partner's contributions 0 176 176
Cash distributions (41,539) (11,257) (52,796)
Net income(loss) (9,775) 7,186 (2,589)
--------- -------- ------------
Balance at end of period $ 1,584,224 53,556 $ 1,637,780
========= ======== ============
See accompanying note to the financial statements.
<PAGE> 12
STERLING DRILLING FUND 1983-1
(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 $ 1,496,682 37,892 $ 1,534,574
Partner's contributions 0 175 175
Cash distributions 0 0 0
Net income(loss) 440 3,689 4,129
--------- -------- ----------
Balance at end of period $ 1,497,122 41,756 $ 1,538,878
========= ======== ==========
Three Months Ended
September 30, 1998
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,587,466 50,926 $ 1,638,332
Partner's contributions 0 176 176
Cash distributions 0 0 0
Net income(loss) (3,182) 2,454 (728)
--------- -------- ----------
Balance at end of period $ 1,584,224 53,556 $ 1,637,780
========= ======== ==========
See accompanying note to the financial statements.
<PAGE> 13
STERLING DRILLING FUND 1983-1
(a New York Limited Partnership)
Statement of Cash Flows
(unaudited)
Nine months Nine months
ended Ended
September September
30, 1999 30, 1998
Net cash provided by operating
activities $ 27,923 $ 83,844
--------- ---------
Cash flows from investing activities:
Proceeds from sale of equipment 0 0
Investment in Well and
related facilities (350) (387)
--------- ---------
Net Cash(used in) investing activities (350) (387)
Cash flows from financing activities:
Distribution to partners (52,607) (52,796)
Partners contribution 175 176
--------- ---------
Net cash(used in) financing activities (52,432) (52,620)
--------- ---------
Net increase(decrease) in cash and
cash equivalents (24,859) 30,837
Cash and cash equivalents at
Beginning of period 174,678 145,635
--------- ---------
Cash and cash equivalents at end of
period $ 149,819 $ 176,472
========= =========
See accompanying note to the financial statements.
<PAGE> 14
STERLING DRILLING FUND 1983-1
(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 Drilling Fund 1983-1 third quarter 1999 10Q and it is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 149,819
<SECURITIES> 0
<RECEIVABLES> 21,871
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 171,690
<PP&E> 9,240,837
<DEPRECIATION> (7,869,733)
<TOTAL-ASSETS> 1,542,794
<CURRENT-LIABILITIES> 3,916
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,538,878<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,542,794
<SALES> 175,233<F2>
<TOTAL-REVENUES> 175,233
<CGS> 218,642
<TOTAL-COSTS> 218,642
<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> (43,409)
<EPS-BASIC> (3.65)<F3>
<EPS-DILUTED> 0
<FN>
<F1>Other se includes total partners' equity.
<F2>Sales includes $4,577 of interest income.
<F3>The income allocated to the limited partnership group was divided
by the total number of limited partnerhsip units of 11,077.
</FN>
</TABLE>
