<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
STERLING DRILLING FUND 1983-1
(Exact name of Registrant as specified in its charter)
COMMISSION FILE NO. 2-84452
NEW YORK 13-3167549
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
ONE LANDMARK SQUARE
STAMFORD, CONNECTICUT 06901
(Address of principal executive offices) (Zip Code)
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
(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 15, 2000,
was: 11,077.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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<PAGE> 2
STERLING DRILLING FUND 1983-1, L.P.
FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999
PART I
ITEM 1. BUSINESS
Sterling Drilling Fund 1983-1, L.P., formerly Sterling-Fuel Resources
Drilling Fund 1983-1 (the "Registrant" or the "Partnership") is a limited
partnership formed under the laws of the State of New York on March 18, 1983.
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 $11,077,000, 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, Gilmer, 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 1999, 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, 2000, 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 hydroelectric power.
<PAGE> 3
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. In
1999, approximately $223,517 or 93.90%, of the Partnership's gas production was
sold to one unaffiliated purchaser, Phoenix Diversified and about $14,174 or
100%, of oil production was purchased by the American Refining Group. Neither
purchaser has any relationship or is otherwise affiliated with the Partnership.
Sales are made under short-term contractual arrangements. 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 1999 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 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 transporter's affects the marketing of natural
gas produced by the Partnership as well as the revenues received by the
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<PAGE> 4
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 to gas buyers and sellers on an open
and non-discriminatory basis. The FERC's 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.
Additional proposals and proceedings that might affect the natural gas
industry are considered from time to time by Congress, the FERC, state
regulatory bodies and the courts. The Partnership cannot predict when or if any
such proposals might become effective, or their effect, if any, on the
Partnership's operations. The Partnership believes that it will comply with all
orders and regulation changes 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 November, 1983, contracted
for the drilling of 38 development wells, which resulted in 37 producing wells
and one dry hole.
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<PAGE> 5
As of December 31, 1999, 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.
<TABLE>
<CAPTION>
Producing wells:
Gross Net
----- -----
<S> <C> <C>
Oil Wells.................................. 0 0
Gas Wells.................................. 39 31.3
Producing acres................................. 1,833 1,771
</TABLE>
(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>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Production
Oil and Condensate (bbl) 877 1,232 1,302 1,524 1,508
Gas (Mcf) 95,379 100,993 111,382 113,227 116,201
Average Price of Sales:
Oil and Condensate ($ per bbl) $ 16.16 $ 12.05 $ 19.64 $ 16.37 $ 17.82
Gas ($ per Mcf) $ 2.50 $ 3.17 $ 3.15 $ 2.31 $ 2.17
Production Expense per Dollar
Of Operating Revenue $ 0.46 $ 0.45 $ 0.44 $ 0.47 $ 0.46
</TABLE>
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<PAGE> 6
OIL AND GAS RESERVES
The Partnership's interests in proved developed oil and gas properties have
been evaluated by Ryder Scott Company, L.P. 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>
1995 15,500 2,210,000
1996 13,850 2,233,000
1997 14,000 2,034,300
1998 13,000 1,808,900
1999 11,900 1,587,600
</TABLE>
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):
Proved Developed
----------------
<TABLE>
<CAPTION>
As of Future Net Present Value of
12-31 Revenue Future Net Revenue
----- ---------- ------------------
<S> <C> <C>
1995 $2,272,900 $ 893,700
1996 $3,414,800 $1,313,750
1997 $2,940,800 $1,200,900
1998 $2,293,000 $ 915,800
1999 $2,597,600 $1,153,900
</TABLE>
Since January 1, 1999, 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 1999 for vote by the holders of
Partnership Units.
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<PAGE> 7
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 15, 2000, there were 643 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. Cash distributions to
the holders of Units for 1999 aggregated $41,539. Aggregate cash distributions
to the holders of the Units as of December 31, 1999, is $2,381,555.
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.
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.
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<PAGE> 8
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 15, 2000,
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 and its subsidiaries have
about 168 employees, including their principal officers providing management and
administrative services, accounting, 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 52, 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 Stamford University School of Law in 1973 and is a
member of the New York State Bar.
Beverly A. Cummings, age 47, has been a Director and Vice President of
Finance for Management since August 1985. She is also a Director and Vice
President of 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.
Lynne G. Pizor, age 40, 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
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<PAGE> 9
Management from January 1986 to August 1994, and PrimeEnergy from May 1990 to
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 67, 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 the holders of the
Partnership Units. During 1999 and 1998, the allocation of general and
administrative expenses to the Partnership was $100,000 for each year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
PRIMEENERGY CORPORATION
The Partnership does not know of any person, entity or group, other than
the Managing general Partner that beneficially owns more than five percent of
the Partnership Units. The following table shows as of March 15, 2000, the name
and address of such beneficial owners, and the number and percent of partnership
units beneficially owned by them, all of which are directly owned.
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner
------------------------------------ Number
of Units Percent
-------- -------
<S> <C> <C>
PrimeEnergy Management Corporation
One Landmark Square
Stamford, CT 06901 1,152 10.40
PrimeEnergy Corporation
One Landmark Square
Stamford, Connecticut 06901 2,206 19.92
</TABLE>
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<PAGE> 10
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 1999, was paid well operating
fees ranging from about $470 to $650 per month per well. 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 1999 and 1998, the Partnership paid an aggregate of $77,544 and
$106,151, respectively, in such fees and expenses.
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-Fuel
Resources Drilling Fund 1983-1, now Sterling Drilling Fund
1983-1, L.P. (Incorporated by reference to Exhibit (3) of
Sterling Drilling Fund 1983-1, L.P. Form 10-K for the year ended
December 31, 1994.)
(23) Consent of Ryder Scott Company, L.P. (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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<PAGE> 11
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 28th day of
March, 2000.
Sterling Drilling Fund 1983-1, L.P.
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 28th day of March, 2000.
/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
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<PAGE> 12
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
Index to Financial Information 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-5
Financial Statements:
Balance Sheets, December 31, 1999 and 1998 F-6
Statements of Operations for the Years Ended December 31,
1999, 1998 and 1997 F-7
Statements of Changes in Partners' Equity for the Years
Ended December 31, 1999, 1998 and 1997 F-8
Statements of Cash Flows for the Years
Ended December 31, 1999, 1998 and 1997 F-9
Notes to Financial Statements F-10
Schedules:
V - Property and Equipment - Oil and Gas Properties for
the Years Ended December 31, 1999, 1998, and 1997 F-18
VI - Accumulated Depreciation, Depletion and Amortization -
Oil and Gas Properties for the Years Ended December 31,
1999, 1998 and 1997 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)
---------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $ 261 346 386 297 361
Net income (loss):
Limited Partners $ (65) (15) (42) (3)
General Partners $ 6 9 15 2 23
Per equity unit $ (5.87) (1.35) 0.11 (3.79) (0.26)
Total assets $ 1,524 1,635 1,693 1,729 1,823
Cash distributions:
Limited Partners $ 42 42 42 42 28
General Partners $ 11 11 11 12 7
contribution 0.375% 0.375% 0.375% 0.375% 0.25%
</TABLE>
ITEM 7. MANAGEMENTS DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & 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 December 31, 1999, the General Partners have distributed to the Limited
Partners $2,381,555 or 21.50% of the total Limited Partner capital contributions
to the Limited 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, 1999, was approximately
$1,153,941 as compared to the discounted reserves as of December 31, 1998, which
were approximately $915,800. 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
F-2
<PAGE> 14
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.
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. The Partnership did not experience any problems as a result of
the Year 2000 issue.
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 November, 1983, for $9,400,000.
Pursuant to the terms of this contract, thirty-eight wells were drilled
resulting in thirty-seven producing wells and one dry-hole.
3. Results of Operations:
1999 compared to 1998
The Partnership receives some of its revenue from oil production as well as
gas production. The Partnership's oil production declined slightly from 1998 to
1999, 1232 bbls to 877 bbls respectively. The change in production was offset by
higher average price per barrel, from $12.05 in 1998 to $16.16 in 1999. The
Partnership's main source of revenue is from its gas produced and sold. A
decline in its gas production from 100,983 mcf in 1998 to 95,379 mcf in 1999
combined with a decline in average price per mcf from $3.17 in 1998 to $2.50 in
1999. Lower gas production can sometimes be attributed to shut-ins and higher
main transport line pressures. The higher main line pressure can inhibit or
restrict the free movement of the partnership's gas from the wells to the
purchaser's transport line. The combination of production and price declines
resulted in overall operating revenue to decline from $337,678 in 1998 to
$252,207 in 1999.
Interest income fluctuates with changes in the interest rates received as
well as the amount of cash in the bank at any given time.
Production expenses decreased from $152,083 in 1998 to $115,162 in 1999.
Production expenses can be variable in nature relating to the volumes produced.
Variable costs were reasonable based upon current production volumes during both
years. Other direct costs, which include but are not limited to, involve
repairs, labor, chemicals, and repairs to access the well sites. The majority of
the production expenditures during 1999 and 1998 related to routine maintenance
and upkeep at the well site. General and administrative costs remained
relatively unchanged between 1998 and 1999, from $120,356 to $122,972,
respectively. Management will use in-house resources if it will provide
efficient and timely services to the partnership. Amounts in both years are
substantially less than the $553,850 allowed to be allocated to the Partnership
under the Partnership Agreement.
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.
F-3
<PAGE> 15
No revisions to the basis of the Partnership properties were needed in 1999 or
1998. The overall depreciation and depletion for both years was consistent with
the rates used and the remaining property basis.
1998 compared to 1997
Overall operating revenues declined from $379,079 in 1997 to $337,678 in
1998. The Partnership receives some of its revenue from oil production as well
as gas production. The Partnership's oil production did not change significantly
from 1997 to 1998, 1302 bbls to 1232 bbls respectively. The stable production
was offset by significantly lower average price per barrel, from $19.64 in 1997
to $12.05 in 1998. The Partnership main source of revenue is from its gas
produced and sold. A decline in its gas production from 111,382 mcf in 1997 to
100,983 mcf in 1998 was only slightly offset by a very small increase in average
price per mcf from $3.15 in 1997 to $3.17 in 1998. Lower gas production can
sometimes be attributed to shut-ins and higher main transport line pressures.
The higher main line pressure can inhibit or restrict the free movement of the
partnership's gas from the wells to the purchaser's transport line.
Interest income fluctuates with changes in the interest rates received as
well as the amount of cash in the bank at any given time.
Production expenses decreased from $165,863 in 1997 to $152,083 in 1998.
Production expenses can be variable in nature relating to the volumes produced.
Other direct costs, which include but are not limited to, involve repairs,
labor, chemicals, and repairs to access the well sites. The majority of the
production expenditures during 1998 related to routine maintenance at the well
site. Variable costs were reasonable based upon current production volumes.
During 1997 the operator performed supplemental repairs which included location
work, road repairs, pipeline repairs and additional labor expenditures. In most
cases large repairs are made to help maintain overall production or to minimize
current declines. General and administrative costs remained relatively unchanged
between 1997 and 1998, from $121,632 to $120,356, respectively. Management will
use in-house resources if it will provide efficient and timely services to the
partnership. Amounts in both years are substantially less than the $553,850
allocable to the Partnership under the Partnership Agreement.
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 revisions to the basis of the
Partnership properties were needed in 1998 or 1997. The overall depreciation for
both years was consistent with the rates used and the remaining property basis.
F-4
<PAGE> 16
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Sterling Drilling Fund 1983-1, L.P.:
We have audited the accompanying balance sheets of Sterling Drilling Fund
1983-1, L.P. (a New York limited partnership) as of December 31, 1999 and 1998,
and the related statements of operations, changes in partners' equity, and cash
flows for the years ended December 31, 1999, 1998 and 1997. 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 Drilling Fund 1983-1,
L.P. as of December 31, 1999 and 1998, and the results of its operations and
cash flows for the years ended December 31, 1999, 1998 and 1997 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
March 3, 2000
F-5
<PAGE> 17
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Assets
1999 1998
----------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents (Note 2) $ 126,703 $ 174,678
Due from affiliates (Note 6) 40,368 36,882
----------- -----------
Total Current Assets 167,071 211,560
----------- -----------
Oil and Gas Properties - successful efforts
methods (Note 3) - (Schedules V and VI):
Leasehold costs 321,314 321,314
Wells and related facilities 8,934,084 8,919,173
----------- -----------
Total 9,255,398 9,240,487
Less - Accumulated depreciation, depletion and amortization (7,898,828) (7,817,328)
----------- -----------
1,356,570 1,423,159
----------- -----------
Total Assets $ 1,523,641 $ 1,634,719
=========== ===========
Liabilities and Partners' Equity
Total Liabilities $ -- $ --
----------- -----------
Partners' Equity:
Limited partners 1,472,473 1,579,044
General partners 51,168 55,675
----------- -----------
Total Partners' Equity 1,523,641 1,634,719
----------- -----------
Total Liabilities and Partners' Equity $ 1,523,641 $ 1,634,719
=========== ===========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-6
<PAGE> 18
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------------- ------------------------------ -----------------------------
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 $ 192,938 $59,269 $252,207 $258,324 $79,354 $337,678 $289,995 $89,084 $379,079
Other Revenue
(Note 10) 2,295 705 3,000 -- -- -- -- -- --
Interest 5,289 491 5,780 7,840 728 8,568 6,565 610 7,175
--------- ------- -------- -------- ------- -------- -------- ------- --------
Total Revenues 200,522 60,465 260,987 266,164 80,082 346,246 296,560 89,694 386,254
--------- ------- -------- -------- ------- -------- -------- ------- --------
Costs and Expenses:
Production expenses 96,909 18,253 115,162 116,344 35,739 152,083 126,885 38,978 165,863
Depreciation, 74,572 6,928 81,500 72,703 6,754 79,457 75,263 6,992 82,255
depletion and
amortization
General and 94,074 28,898 122,972 92,072 28,284 120,356 93,214 28,634 121,848
--------- ------- -------- -------- ------- -------- -------- ------- --------
administrative
expenses (Note 7)
Total Expenses 265,555 54,079 319,634 281,119 70,777 351,896 295,362 74,604 369,966
--------- ------- -------- -------- ------- -------- -------- ------- --------
Net Income (Loss) $ (65,033) $ 6,386 $(58,647) $(14,955) $ 9,305 $ (5,650) $ 1,198 $15,090 $ 16,288
========= ======= ======== ======== ======= ======== ======== ======= ========
Net income (Loss) Per $ (5.87) $ (1.35) $ 0.11
Equity Unit (Note 2) ========= ======== ========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-7
<PAGE> 19
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Limited General
Partners Partners Total
----------- ----------- -----------
<S> <C> <C> <C>
Balance at December 31, 1996 $ 1,675,879 $ 53,627 $ 1,729,506
Partners' contributions -- 177 177
Distributions to partners (41,539) (11,443) (52,982)
Net Income 1,198 15,090 16,288
----------- ----------- -----------
Balance at December 31, 1997 1,635,538 57,451 1,692,989
Partners' contributions -- 176 176
Distributions 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
Partners' contributions -- 175 175
Distributions to partners (41,538) (11,068) (52,606)
Net Income (Loss) (65,033) 6,386 (58,647)
----------- ----------- -----------
Balance at December 31, 1999 $ 1,472,473 $ 51,168 $ 1,523,641
=========== =========== ===========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-8
<PAGE> 20
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net (loss) income $ (58,647) $ (5,650) $ 16,288
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating
activities:
Depreciation, depletion and amortization 81,500 79,457 82,255
Changes in Assets and Liabilities -
Decrease (increase) in due from
affiliates (3,486) (36,882) (45,127)
Increase in due to affiliates -- 45,125 9,595
--------- --------- ---------
Net Cash Provided by Operating 19,367 82,050 63,011
--------- --------- ---------
Activities
Cash Flows From Investing Activities:
Equipment purchases (14,911) (387) (6,188)
--------- --------- ---------
Net Cash Used by Investing Activities (14,911) (387) (6,188)
--------- --------- ---------
Cash Flows From Financing Activities:
Partners' contributions 175 176 177
Distributions to partners (52,606) (52,796) (52,982)
--------- --------- ---------
Net Cash Used in Financing activities (52,431) (52,620) (52,805)
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents (47,975) 29,043 4,018
Cash and cash equivalents, beginning of year 174,678 145,635 141,617
--------- --------- ---------
Cash and cash equivalents, end of year $ 126,703 $ 174,678 $ 145,635
========= ========= =========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-9
<PAGE> 21
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(1) Organization and Capital Contributions:
Sterling Drilling Fund 1983-1, L.P., formerly Sterling-Fuel Resources
Drilling Fund 1983-1, a New York limited partnership (the "Partnership"),
was formed on March 18, 1983 for the primary purpose of acquiring,
developing 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), Charles E. Drimal, Jr.,
Oliver J. Sterling and Samuel R. Campbell. Eleven thousand seventy-seven
limited partnership units, (11,077), were sold at $1,000 per unit
aggregating total limited partner contributions of $11,077,000. The general
partners' contributions amounted to $902,847. Partnership operations
commenced on November 10, 1983.
(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 by the unit-of-
F-10
<PAGE> 22
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(2) Summary of Significant Accounting Policies - (Cont'd):
production method based upon the ratio of production to proved 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' Loss Per Equity Unit:
The limited partners' income (loss) per equity unit is computed on the
11,077 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 revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
F-11
<PAGE> 23
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(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. The Partnership currently pays
royalties of approximately 12.5% to 17.9% of the selling price of the oil
and gas 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,
1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Average sales price per MCF of gas $ 2.50 $ 3.17 $ 3.15
Average sales price per BBL of oil $16.16 $12.05 $19.64
and other liquids
Production expense per dollar of $ 0.46 $ 0.45 $ 0.44
operating revenue
</TABLE>
(4) Quantities of Oil and Gas Reserves:
The amount of proved developed reserves presented below have been estimated
by an independent firm of petroleum engineers as of January 1, 2000.
Petroleum engineers on the staff of PEC have reviewed the data presented
below, as of December 31, 1999, for consistency with current year
production and operating history. All of the Partnership's oil and gas
reserves are located within the United States:
<TABLE>
<CAPTION>
(Unaudited)
---------------------
GAS (MCF) OIL (BBL)
--------- ---------
<S> <C> <C>
Reserves as of December 31, 1996 2,233,187 13,849
Revisions of previous estimates (87,617) 1,490
Production (111,382) (1,302)
--------- -------
Reserves as of December 31, 1997 2,034,188 14,037
Revisions of previous estimates (124,297) 207
Production (100,993) (1,232)
--------- -------
Reserves as of December 31, 1998 1,808,898 13,012
Revisions of previous estimates (125,928) (223)
Production (95,379) (877)
--------- -------
Reserves as of December 31, 1999 1,587,591 11,912
========= =======
</TABLE>
F-12
<PAGE> 24
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(4) Quantities of Oil and Gas Reserves - (Cont'd):
Should future prices decline, 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 the
level included in the above table.
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. 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 for 1999, 1998 or 1997. 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 for 1999, 1998 or 1997.
F-13
<PAGE> 25
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(5) Allocation of Partnership Revenues, Costs and Expenses:
Under the terms of the Limited Partnership Agreement, all Partnership
revenues and expenses, including deductions attributable thereto, are to be
allocated as follows:
<TABLE>
<CAPTION>
Limited General
Partners Partners
-------- --------
<S> <C> <C>
Participation in Costs:
Sales commissions and dealer manager fees 100.0% --%
in excess of the $50,000 paid by PEMC
Offering costs other than $75,000
paid by the Partnership and the
Sterling Drilling Fund 1983-2, L.P. --% 100.0%
Management fee 100.0% --%
Lease acquisition costs 91.5% 8.5%
Drilling and completion costs 91.5% 8.5%
General and administrative expenses 76.5% 23.5%
Production operator's fee 76.5% 23.5%
Operating expenses 76.5% 23.5%
All other costs 91.5% 8.5%
Participation in Revenues:
Sale of production 76.5% 23.5%
Sale of properties 91.5% 8.5%
Sale of equipment 91.5% 8.5%
All other revenues 91.5% 8.5%
</TABLE>
(6) Transactions With Affiliates:
(a) The due from affiliates at December 1999 and 1998 represents general
and administrative and certain other expenses incurred on behalf of
the Partnership by PEC and its subsidiaries, and amounts due for
production operator's fees (Note 6(b)), net of production revenues
collected on behalf of the Partnership.
(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 $470 for each
producing gas well and $650 for each producing oil or combination gas
and oil well, based on the Partnership's
F-14
<PAGE> 26
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(6) Transactions With Affiliates - (Cont'd):
percentage of working interest in the well. Such fee is subject to
annual adjustment 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 1999, 1998 and 1997, $75,274, $104,801, and
$110,512 of production operator's fees were incurred, respectively.
(c) In accordance with the terms of the Partnership Agreement, the general
partners are required to pay 8.5% of drilling and completion costs,
lease acquisition costs and certain other costs, of which 1% will be
paid for by the general partners out of revenues received by them from
the Partnership. At December 31, 1999, $21,720 was due from certain
general partners for such costs.
(d) Eastern Oil Well Services Company (EOWSC), a subsidiary of PEC,
provided field services to the Partnership during the years ending
December 31, 1999, 1998, and 1997 for which it was billed $2,270,
$1,380, and $6,267 respectively.
(7) General and Administrative Expenses:
In accordance with the Management Agreement, the general partners are
reimbursed for the portion of their 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 expenses shall be borne by the general partners.
During 1999, 1998 and 1997, the Partnership recognized general and
administrative expenses incurred on its behalf by a general partner of
$100,000, for each year.
F-15
<PAGE> 27
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(8) Federal Income Taxes:
The following is a reconciliation between the net income 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,
-----------------------------------
1999 1998 1997
--------- -------- ---------
<S> <C> <C> <C>
Net income as
reported on the
Partnership's federal
income tax return $ 4,601 $ 68,370 $ 91,673
Recompletion costs reported
differently for financial
reporting purposes and for
income tax reporting
purposes 14,911 -- --
Depreciation, depletion and
amortization for income
tax purposes in excess
of (less than) financial
reporting amount (78,159) (74,020) (75,385)
-------- -------- --------
Net income (loss) per
accompanying financial
statements $(58,647) $ (5,650) $ 16,288
======== ======== ========
</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-16
<PAGE> 28
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(9) Major Customers:
A schedule of the major purchases of the Partnership's production is as
follows:
<TABLE>
<CAPTION>
Purchaser 1999 1998 1997
--------- -------- -------- --------
<S> <C> <C> <C>
Phoenix Diversified $223,517 $314,253 $323,563
</TABLE>
The Partnership renewed its gas purchase contract in December, 1999
resulting in a fixed price for one year.
(10) Other Revenue:
Other revenue represents settled claims against Columbia Gas Transmission
Corp. (Columbia) arising from amounts due from Columbia when they declared
bankruptcy. No significant additional claims are expected concerning this
matter.
F-17
<PAGE> 29
SCHEDULE V
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
PROPERTY AND EQUIPMENT - OIL AND GAS PROPERTIES
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<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, 1999:
Leasehold costs $ 321,314 $ -- $ -- $ -- $ 321,314
Wells and related facilities 8,919,173 14,911 -- -- 8,934,084
---------- ---------- ----- ----- ----------
$9,240,487 $ 14,911 $ -- $ -- $9,255,398
========== ========== ===== ===== ==========
Year ended December 31, 1998: $ 321,314 $ -- $ -- $ -- $ 321,314
Leasehold costs 8,918,786 387 -- -- 8,919,173
---------- ---------- ----- ----- ----------
Wells and related facilities $9,240,100 $ 387 $ -- $ -- $9,240,487
========== ========== ===== ===== ==========
Year Ended December 31, 1997:
Leasehold costs $ 321,314 $ -- $ -- $ -- $ 321,314
Wells and related facilities 8,912,598 6,188 -- -- 8,918,786
---------- ---------- ----- ----- ----------
$9,233,912 $ 6,188 $ -- $ -- $9,240,100
========== ========== ===== ===== ==========
</TABLE>
F-18
<PAGE> 30
SCHEDULE VI
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION - OIL AND GAS PROPERTIES
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Balance at Charges to Balance
Beginning Costs and Other at End
of Year Expenses Retirements Changes of Year
---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1999:
Wells and related facilities $7,496,014 $ 81,500 $ -- $ -- $7,577,514
Leasehold costs 321,314 -- -- -- 321,314
---------- ---------- ----- ---------- ----------
$7,817,328 $ 81,500 $ -- $ -- $7,898,828
========== ========== ===== ========== ==========
Year ended December 31, 1998:
Wells and related facilities $7,416,558 $ 79,456 $ -- $ -- $7,496,014
Leasehold costs 321,314 -- -- -- 321,314
---------- ---------- ----- ---------- ----------
$7,737,872 $ 79,456 $ -- $ -- $7,817,328
========== ========== ===== ========== ==========
Year Ended December 31, 1997:
Wells and related facilities $7,334,303 $ 82,255 $ -- $ -- $7,416,558
Leasehold costs 321,314 -- -- -- 321,314
---------- ---------- ----- ---------- ----------
$7,655,617 $ 82,255 $ -- $ -- $7,737,872
========== ========== ===== ========== ==========
</TABLE>
F-19
<PAGE> 31
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
(3) Form of Agreement of Limited Partnership of Sterling-Fuel Resources
Drilling Fund 1983-1 (now Sterling Drilling Fund 1983-1, L.P.)
(incorporated by reference to Exhibit (3) of Sterling Gas Drilling
Fund 1983-1 Form 10-K for the year ended December 31, 1994)
(23) Consent of Ryder Scott Company, L.P. (filed herewith)
(27) Financial Data Schedule. (filed herewith)
<PAGE> 1
EXHIBIT 23
[RYDER SCOTT COMPANY, L.P. LETTERHEAD]
CONSENT OF RYDER SCOTT COMPANY, L.P.
We consent to the use on the Form 10-K of Sterling Gas Drilling Fund 1983-1
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, L.P.
RYDER SCOTT COMPANY, L.P.
Denver, Colorado
March 20, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STERLING
DRILLING FUND 1983-1 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-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 126,703
<SECURITIES> 0
<RECEIVABLES> 40,368
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 167,071
<PP&E> 9,255,398
<DEPRECIATION> (7,898,828)
<TOTAL-ASSETS> 1,523,641
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,523,641<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,523,641
<SALES> 260,987<F2>
<TOTAL-REVENUES> 260,987
<CGS> 319,634
<TOTAL-COSTS> 319,634
<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> (58,647)
<EPS-BASIC> (5.87)<F3>
<EPS-DILUTED> 0
<FN>
<F1>OTHER - SE IS COMPOSED OF PARTNERSHIP EQUITY.
<F2>THE SALES LINE INCLUDES 5,780 OF NET INTEREST INCOME AND 3,000 OF SETTLED CLAIMS.
<F3>EPS - PRIMARY IS BASED UPON LIMITED PARTNERS SHARE OF NET INCOME DIVIDED BY THE
OUTSTANDING PARTNERSHIP UNITS OF 11,077.
</FN>
</TABLE>
