<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 March 31, 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> 2
PART I
Item 1. Financial Statements
The following Financial Statements are filed herewith:
Balance Sheets - March 31, 1999 and December 31, 1998.
Statements of Operations for the Three Months Ended March 31, 1999 and 1998.
Statements of Changes in Partners' Equity for the year ended
December 31,1998 and for the Three Months Ended March 31, 1999.
Statements of Cash Flows for the Three Months Ended March 31, 1999 and 1998.
Note to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
1. Liquidity: The oil and gas industry is intensely competitive in all its
phases. There is also competition between this industry and other
industries in supplying energy and fuel requirements of industrial and
residential consumers. It is not possible for the Partnership to calculate
its position in the industry as the Partnership 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 Partnership 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 March 31,
1999, the General Partners have distributed to the Limited Partners
$2,340,016 or 21.125% of the total Limited Partner capital contributions to
the Limited Partnership.
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.
<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, to be
completed by mid-1999, 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, 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,
<PAGE> 4
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
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 $78,436 in 1998 to $46,595 in
1999, The Partnership experianced sharp declines in gas production,
average price per mcf and the average price per barrel. The gas production
changed from 27,719 MCF's 1998 to 23,653 MCF `sin 1999. The significant
production change combined with very low prices resulted in low overall
operating revenue. Production expenses decreased from $31,537 in 1998 to
$28,519 in 1999. The costs for 1998 include those associated with repairs
needed for access to the well and well sites and the related labor costs.
Also, variable expenses in 1998 were higher but were reasonable based upon
production data. Variable costs include, but are not limited to, the
related well taxes which are based upon production volumes and price. The
production expenses incurred in the first quarter 1999 were for typical
and customary well and well site costs.
General and administrative costs from 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 years are
<PAGE> 5
substantially less than the amounts allocable to the Registrant under the
Partnership Agreement. Management continues to use all its in-house
resources as efficiently and timely as possible to minimize costs.
General and administrative expenses to a related party and to third
parties remained relatively unchanged from 1998 to 1999.
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 properties basis in either 1998 or first quarter
1999 due to capitalized costs exceeding the undiscounted future net cash
flows attributable to the partnership properties. Depletion expense in 1998
and 1999 was reasonable based upon the asset basis and rates applied.
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)
May 14, 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
(unaudited)
March 31, December 31,
1999 1998
Assets
Current assets:
Cash and cash equivalents $ 206,295 $ 174,678
Due from others 13,826 36,882
----------- -----------
Total current assets 220,121 211,560
----------- -----------
Oil and gas properties -
successful efforts method:
Leasehold costs 321,314 321,314
Well and related facilities 8,919,173 8,919,173
less accumulated
depreciation, depletion and
amortization (7,834,120) (7,817,328)
----------- -----------
1,406,367 1,423,159
----------- -----------
Total assets $ 1,626,488 $ 1,634,719
=========== ===========
Liabilities and Partner's Equity
Current Liabilities
Due to affiliates $ 14,913 $ 0
----------- -----------
Total current liabilities $ 14,913 $ 0
----------- -----------
Partners' equity
Limited partners 1,559,152 1,579,044
General partners 52,423 55,675
----------- -----------
Total partners' equity 1,611,575 1,634,719
----------- -----------
Total partners' equity
and liabilities $ 1,626,488 $ 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)
Three Months Ended
March 31, 1999
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 35,645 10,950 46,595
Interest income 2,024 188 2,212
-------- -------- -------
Total Revenue 37,669 11,138 48,807
-------- -------- -------
Costs and Expenses:
Production expense 21,817 6,702 28,519
General and administrative
to a related party 19,127 5,876 25,003
General and administrative 1,252 385 1,637
Depreciation, depletion
and amortization 15,365 1,427 16,792
Total Costs and Expenses 57,561 14,390 71,951
-------- -------- -------
Net Income (Loss) $ (19,892) (3,252) $ (23,144)
-------- -------- -------
Net Income (Loss)
per equity unit $ (1.80)
======
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
March 31, 1998
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 60,004 18,432 $ 78,436
Interest income 1,966 183 2,149
-------- -------- -------
Total Revenue 61,970 18,615 80,585
-------- -------- -------
Costs and Expenses:
Production expense 24,126 7,411 31,537
General and administrative
to a related party 19,130 5,877 25,007
General and administrative 3,634 1,116 4,750
Depreciation, depletion
and amortization 17,839 1,657 19,496
-------- -------- -------
Total Costs and Expenses 64,729 16,061 80,790
-------- -------- -------
Net Income/ (Loss) $ (2,759) 2,554 $ (205)
======== ======== =======
Net Income/(Loss)
per equity unit $ (0.25)
======
See accompanying note to the financial statements.
<PAGE> 10
STERLING DRILLING FUND 1983-1
Statement of Changes in Partners' Equity
(unaudited)
Limited General
Partners Partners Total
Balance at December 31, 1997 $ 1,635,538 $ 57,451 $ 1,692,989
Partners' contributions --- 176 176
Distribution to partners (41,539) (11,257) (52,796)
Net Income/(Loss) (14,955) 9,305 (5,650)
-------- -------- --------
Balance at December 31, 1998 $ 1,579,044 $ 55,675 $ 1,634,719
Net Income (Loss) (19,892) (3,252) (23,144)
-------- -------- --------
Balance at March 31, 1999 $ 1,559,152 $ 52,423 $ 1,611,575
======== ======== ========
See accompanying note to the financial statements.
<PAGE> 11
STERLING DRILLING FUND 1983-1
(a New York Limited Partnership)
Statement of Cash Flows
(unaudited)
Three months Three months
ended March ended March
31, 1999 31, 1998
Net cash provided by operating
activities $ 31,617 $ 43,114
--------- ---------
Cash Flows from investing activities:
Investment in wells and related
facilities 0 (387)
--------- ---------
Net Cash (used in)investing activities 0 (387)
Net increase in cash and
cash equivalents 31,617 42,727
Cash and cash equivalents at
beginning of period 174,678 145,635
--------- ---------
Cash and cash equivalents at end of
period $ 206,295 $ 188,362
========= =========
See accompanying note to the financial statements.
<PAGE> 12
STERLING DRILLING FUND 1983-1
(a New York limited partnership)
Note to Financial Statements
March 31, 1999
1. The accompanying statements for the period ending March 31,
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 first quarter 1999 10Q and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 206,295
<SECURITIES> 0
<RECEIVABLES> 13,826
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 220,121
<PP&E> 9,240,487
<DEPRECIATION> (7,834,120)
<TOTAL-ASSETS> 1,626,488
<CURRENT-LIABILITIES> 14,913
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,611,575<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,626,488
<SALES> 48,807<F2>
<TOTAL-REVENUES> 48,807
<CGS> 71,951
<TOTAL-COSTS> 71,951
<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> (23,144)
<EPS-PRIMARY> (1.80)<F3>
<EPS-DILUTED> 0
<FN>
<F1>Other se includes total partners' equity.
<F2>Sales include $2,212 of interest income.
<F3>The limited partner's share of net income was divided by total number
of limited partnership units of 11,077.
</FN>
</TABLE>
