<PAGE> 1
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 June 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 too
such filing requirements for the past 90 days. Yes/X/ No / /
<PAGE> 2
Item 1. Financial Statements
The following Financial Statements are filed herewith:
Balance Sheets - June 30, 1999 and December 31, 1998.
Statements of Operations for the Six and Three Months Ended June 30,
1999 and 1998.
Statements of Changes in Partners' Equity for the Six and Three Months
Ended June 30, 1999 and 1998.
Statements of Cash Flows for the Six Months Ended June 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> 3
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
<PAGE> 4
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
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 -
Overall operating revenues decreased from $166,554 in 1998 to $88,421 in
1999. The partnership experienced an decrease in gas production from
50,744 MCF's in 1998 to 41,846 MCF in 1999. The average price per MCF
received was $3.13 in 1998 and in 1999 was $2.04. 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. Production expenses declined from
$74,441 in 1998 to $48,776 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 include normal maintenance and
upkeep of the wells and well sites.
General and administrative expenses to a related party 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 1998 and
<PAGE> 5
1999 are substantially less than the amounts allocable to the Registrant
under the Partnership Agreement. Management continues to work on reducing
third party costs and use in-house resources to provide efficient and
timely services to the partnership.
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. The Partnership was
not required to revise the property basis in either 1998 or first half of
199. There were no additional capitalized well-related expenditures during
the first quarter of 1998. The lower depletion expense in 1999 is due to
overall lower cost basis in oil and gas 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> 6
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)
August 13, 1999 BY:/s/ Charles E. Drimal Jr.
(Date) -----------------------------
Charles E. Drimal, Jr.,
General Partner
<PAGE>7
STERLING DRILLING FUND 1983-1
(a New York Limited Partnership)
Balance Sheets
June 30, December
1999 31, 1998
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 49,012 $ 174,678
Due From affiliates 97,373 0
Due from others 0 36,882
----------- -----------
Total current assets 146,385 211,560
---------- -----------
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 (7,850,912) (7,817,328)
------------ -----------
1,389,925 1,423,159
----------- -----------
Total assets $ 1,536,310 $ 1,634,719
=========== ===========
Liabilities and Partners' Equity
Current Liabilities:
Due to others $ 1,736 $ 0
------------ -----------
Total current liabilities 1,736 0
------------ -----------
Partners' equity
Limited partners 1,496,682 1,579,044
General partners 37,892 55,675
----------- -----------
Total partners' equity 1,534,574 1,634,719
----------- -----------
Total liabilities and
Partners' equity $ 1,536,310 $ 1,634,719
=========== ===========
See accompanying note to the financial statements.
<PAGE>8
STERLING DRILLING FUND 1983-1
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Six Months Ending
June 30, 1999
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 67,642 20,779 $ 88,421
Other revenue 2,295 705 3,000
Interest income 3,546 329 3,875
-------- -------- --------
Total Revenue 73,483 21,813 95,296
-------- -------- -------
Costs and Expenses:
Production expense 37,314 11,462 48,776
General and administrative
to a related party 38,252 11,750 50,002
General and administrative 8,011 2461 10,472
Depreciation, depletion
and amortization 30,729 2,855 33,584
-------- -------- -------
Total Costs and Expenses 114,306 28,528 142,834
-------- -------- -------
Net Income (Loss) $ (40,823) (6,715) $ (47,538)
======== ======== =======
Net Income (Loss) per
equity unit $ (3.69)
======
See accompanying note to the financial statements.
<PAGE>9
STERLING DRILLING FUND 1983-1
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Six Months Ending
June 30, 1998
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 127,417 39,141 $ 166,558
Interest income 4,145 385 4,530
-------- -------- --------
Total Revenue 131,562 39,526 171,088
-------- -------- -------
Costs and Expenses:
Production expense 56,947 17,494 74,441
General and administrative
to a related party 38,255 11,751 50,006
General and administrative 7,274 2,235 9,509
Depreciation, depletion
and amortization 35,679 3,314 38,993
-------- -------- -------
Total Costs and Expenses 138,155 34,794 172,949
-------- -------- -------
Net Income (Loss) $ (6,593) 4,732 $ (1,861)
======== ======== =======
Net Income (Loss) per
equity unit $ (.60)
======
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 Ending
June 30, 1999
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 31,997 9,829 $ 41,826
Other revenue 2,295 705 3,000
Interest income 1,522 141 1,663
-------- -------- ---------
Total Revenue 35,814 10,675 46,489
-------- -------- ---------
Costs and Expenses:
Production expense 15,497 4,760 20,257
General and administrative
to a related party 19,124 5,875 24,999
General and administrative 6,759 2,076 8,835
Depreciation, depletion
and amortization 15,365 1,427 16,792
-------- -------- ---------
Total Costs and Expenses 56,745 14,138 70,883
-------- -------- ---------
Net Income(Loss) $ (20,931) (3,463) $ (24,394)
======== ======== =========
Net Income(Loss)
per equity unit $ (1.89)
========
See accompanying note to the financial statements.
<PAGE> 11
STERLING DRILLING FUND 1983-1
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ending
June 30, 1998
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 67,413 20,709 $ 88,122
Interest income 2,179 202 2,381
-------- -------- ---------
Total Revenue 69,592 20,911 90,503
-------- -------- ---------
Costs and Expenses:
Production expense 32,821 10,083 42,904
General and administrative
to a related party 19,125 5,874 24,999
General and administrative 3,640 1,119 4,759
Depreciation, depletion
and amortization 17,840 1,657 19,497
-------- -------- ---------
Total Costs and Expenses 73,426 18,733 92,159
-------- -------- ---------
Net Income(Loss) $ (3,834) 2,178 $ (1,656)
======== ======== =========
Net Income(Loss)
per equity unit $ (.35)
========
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)
Six Months Ended
June 30, 1999
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,579,044 55,675 $ 1,634,719
Cash Distributions (41,539) (11,068) (52,607)
Net Income(Loss) (40,823) (6,715) (47,538)
-------- -------- ---------
Balance at end of period $ 1,496,682 37,892 $ 1,534,574
======== ======== =========
Six Months Ended
June 30, 1998
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,635,538 57,451 $ 1,692,989
Cash Distributions (41,539) (11,257) (52,796)
Net Income(Loss) (6,593) 4,732 (1,861)
-------- -------- ---------
Balance at end of period $ 1,587,406 50,926 $ 1,638,332
======== ======== =========
See accompanying note to the financial statements.
<PAGE> 13
STERLING DRILLING FUND 1983-1
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Three Months Ended
June 30, 1999
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,559,152 52,423 $ 1,611,575
Cash Distributions (41,539) (11,068) (52,607)
Net Income(Loss) (20,931) (3,463) (24,394)
--------- -------- ---------
Balance at end of period $ 1,496,682 37,892 $ 1,534,574
========= ======== =========
Three Months Ended
June 30, 1998
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,632,779 60,005 $ 1,692,784
Cash Distributions (41,539) (11,257) (52,796)
Net Income(Loss) (3,834) 2,178 (1,656)
--------- -------- ---------
Balance at end of period $ 1,587,406 50,926 $ 1,638,332
========= ======== =========
See accompanying note to the financial statements.
<PAGE> 14
STERLING DRILLING FUND 1983-1
(a New York Limited Partnership)
Statement of Cash Flows
(unaudited)
Six Six
months months
ended ended
June 30, June 30,
1999 1998
Net cash provided by (used in)
operating activities $ (72,709) $ 45,489
--------- ---------
Cash Flows from investing activities:
Investment in wells 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)
--------- ---------
Net cash used in financing activities (52,607) (52,796)
--------- ---------
Net increase(decrease) in cash and
cash equivalents (125,666) (7,694)
Cash and cash equivalents at
beginning of period 174,678 145,635
--------- ---------
Cash and cash equivalents at end of
period $ 49,012 $ 137,941
========= =========
See accompanying note to the financial statements.
<PAGE> 15
STERLING DRILLING FUND 1983-1
(a New York limited partnership)
Note to Financial Statements
June 30, 1999
1. The accompanying statements for the period ending June 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 second quarter 10Q and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 49,012
<SECURITIES> 0
<RECEIVABLES> 97,373
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 146,385
<PP&E> 9,240,837
<DEPRECIATION> (7,850,912)
<TOTAL-ASSETS> 1,536,310
<CURRENT-LIABILITIES> 1,736
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,534,574<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,536,310
<SALES> 95,296<F2>
<TOTAL-REVENUES> 95,296
<CGS> 142,834
<TOTAL-COSTS> 142,834
<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> (47,538)
<EPS-BASIC> (3.69)<F3>
<EPS-DILUTED> 0
<FN>
<F1>Other se includes total partners' equity.
<F2>Sales includes $3,875 of interest income.
<F3>The income allocated to the limited partners was divided
by the number of total limited partner's units of 11,077.
</FN>
</TABLE>
