SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d)of the
Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1995
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 2-84452-01
STERLING DRILLING FUND 1983-2
(Exact name of registrant as specified in charter)
New York
(State or other jurisdiction of corporation or organization)
13-3167551
(IRS employer identification number)
One 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 / /
PART I
Item 1. Financial Statements
The following Financial Statements are filed herewith:
Balance Sheets - September 30, 1995 and December 31, 1994.
Statements of Operations for the Nine and Three Months Ended September
30, 1995 and 1994.
Statements of Changes in Partners' Equity for the Nine and Three Months
Ended September 30, 1995 and 1994.
Statements of Cash Flows for the Nine Months Ended September 30, 1995 and
1994.
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 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 September 30, 1995, the General Partners have
distributed $1,632,488 or 10.40% of original Limited Partner capital
contributions to the Limited Partners.
Columbia Gas Transmission Corp., a contract purchaser of the
Registrant's gas, filed a Chapter 11 petition in U.S. Bankruptcy Court
in Wilmington Delaware on July 31, 1991. At that time, the Bankruptcy
Court released Columbia from any current contracts. The Registrant
has filed a claim with the Bankruptcy Court to recover revenue
suspended at the time bankruptcy occurred. Such amounts were not
recorded as revenue during the applicable period, therefore, no loss
contingency exists. The Registrant has reviewed and accepted a
tentative settlement offer made by Columbia. The Registrant is
hopeful that Columbia will make a final settlement within the next
three months.
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 estimated future net revenues (S.E.C.
case) associated with such reserves, discounted at 10%, as of December
31, 1994 was approximately $678,000 as compared to $1,863,000 at
December 31, 1993.
The decline in undiscounted future net cash flows for the Partnership
properties at December 31, 1994 when compared to December 31, 1993,
was caused by a significant decline in prices between these two dates,
rather than changes in the estimated future production from the
properties. It is the opinion of management, and the general
consensus in the industry, that gas prices are unlikely to decline
significantly below the December 31, 1994 price in the near future.
However, there can be no assurances that such price declines will not
occur, and will not pose a threat to the Partnership's continued
viability.
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 December 1983 for $13,400,000. Pursuant to
terms of this contract, fifty-two wells have been drilled resulting in
fifty-one producing wells and one dry hole.
3. Results of Operations -
Overall operating revenues decreased from $309,371 in 1994 to $242,475
in 1995. Gas production remained very consistent with prior years
production, 101,002 MCF in 1994 compared to 100,882 in 1995, Overall
revenue declined due to lower average price per MCF, from $ 2.82 in
1994 to $2.02 in 1995. The consistent production experienced during
1995 is a result of some workovers performed during the second half of
1994. These workovers were performed to increase, maintain or avoid a
drop off of a well's production.
Production expenses decreased from $150,706 in 1994 to $ 110,732 in
1995. The higher production expenses, in 1994, are attributable to
the severe weather extremes of the winter and spring of 1994. Some
typical examples of additional costs incurred include additional
maintenance, location, access road work and other repairs. Most of the
production expenses, in 1995, were to maintain the general upkeep of
the wells and well site.
General and administrative expenses have been segregated on the
financial statements to reflect expenses paid to PrimeEnergy
Management Corporation, a general partner. These expenses are charged
in accordance with guidelines set forth in the Registrant's Management
Agreement and are attributable to the affairs and operations of the
Partnership and shall not exceed an annual amount equal to 5% of the
limited partners capital contributions. Amounts related to both 1995
and 1994 are substantially less than the amounts allocable to the
Registrant under the Partnership Agreement. The lower amounts reflect
management's effort's to limit costs, both incurred and allocated to
the Registrant. Management continues to minimize 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. A downward revision in reserve estimates due to lower year-
end gas prices in 1994 resulted in an additional charge of $400,000.
Overall depreciation, depletion and amortization for nine months of
1995 showed only a minor decrease from same nine month period in
1994.
4. Other-
In, March, the Financial Accounting Standards Board issued Statement
of Financial Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of," (SFAS No.
121)which is effective for the fiscal years beginning after December
15, 1995. This statement establishes accounting standards for the
impairment of long-lived assets, requiring such assets to be reported
at the lower of carrying amount or fair value, less selling costs.
The statement amends SFAS No. 19,"Financial Accounting and Reporting
by Oil and Gas Producing Companies" by adding an impairment test for
proved properties in accordance with
SFAS No. 121.
The Registrant currently performs a "ceiling test" by comparing the
total carrying value of oil and gas properties to the total future net
cash flows from the estimated production of proved oil and gas
properties. The effect of SFAS No. 121, which would change the way the
test is performed, is not known at this time.
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.
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 1983-2
(Registrant)
By: /s/ Charles E. Drimal, Jr.
------------------------------
Charles E. Drimal, Jr.
General Partner
November 13, 1995
(Date)
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Balance Sheets
(unaudited)
September 30, December 31,
1995 1994
Assets
Current assets:
Cash and cash equivalents $ 2,204 $ 8,287
Due from others 2,281 0
----------- ------------
Total current assets 4,485 8,287
Oil and gas properties -
successful efforts method:
Leasehold costs 497,639 497,639
Well and related facilities 12,916,421 12,915,028
less accumulated depreciation,
depletion and amortization (12,081,527) (12,008,583)
----------- ------------
1,332,533 1,404,084
----------- ------------
Total assets $ 1,337,018 $ 1,412,371
=========== ============
Liabilities and partners' equity
Current liabilities:
Due to affiliates $ 39,124 $ 46,223
----------- ------------
Total current liabilities 39,124 46,223
----------- ------------
Partners' equity
Limited partners 1,317,182 1,380,721
General partners (19,288) (14,573)
----------- ------------
Total partners' equity 1,297,894 1,366,148
----------- ------------
Total liabilities and
partners' equity $ 1,337,018 $ 1,412,371
=========== ============
See accompanying note to financial statements.
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Nine Months Ended
September 30, 1995
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 185,493 56,982 $ 242,475
Interest income 400 37 437
-------- -------- -------
Total Revenue 185,893 57,019 242,912
-------- -------- -------
Costs and Expenses:
Production expense 84,710 26,022 110,732
General and administrative
to a related party 43,031 13,219 56,250
General and administrative 15,705 4,824 20,529
Depreciation, depletion
and amortization 66,744 6,200 72,944
-------- -------- -------
Total Costs and Expenses 210,190 50,265 260,455
-------- -------- -------
Net Income(loss) $ (24,297) 6,754 $ (17,543)
======== ======== =======
Net Income(loss)
per equity unit $ (1.55)
======
See accompanying note to financial statements.
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Nine Months Ended
September 30, 1994
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 236,669 72,702 $ 309,371
Interest income 335 31 366
-------- ------- --------
Total Revenue 237,004 72,733 309,737
-------- ------- --------
Costs and Expenses:
Production expense 115,290 35,416 150,706
General and administrative
to a related party 57,834 17,766 75,600
General and administrative 15,812 4,857 20,669
Depreciation, depletion
and amortization 67,241 6,246 73,487
-------- ------- --------
Total Costs and Expenses 256,177 64,285 320,462
-------- ------- --------
Net Income(loss) $ (19,173) 8,448 $ (10,725)
======== ======= ========
Net Income(loss)
per equity unit $ (1.22)
========
See accompanying note to financial statements.
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ended
September 30, 1995
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 56,324 17,303 $ 73,627
Interest income 80 7 87
-------- -------- --------
Total Revenue 56,404 17,310 73,714
-------- -------- --------
Costs and Expenses:
Production expense 28,548 8,770 37,318
General and administrative
to a related party 14,343 4,407 18,750
General and administrative 3,294 1,011 4,305
Depreciation, depletion
and amortization 22,292 2,071 24,363
-------- -------- --------
Total Costs and Expenses 68,477 16,259 84,736
-------- -------- --------
Net Income(loss) $ (12,073) 1,051 $ (11,022)
======== ======== ========
Net Income(loss)
per equity unit $ (0.77)
========
See accompanying note to the financial statements.
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ended
September 30, 1994
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 77,528 23,815 $ 101,343
Interest income 71 6 77
-------- -------- --------
Total Revenue 77,599 23,821 101,420
-------- -------- --------
Costs and Expenses:
Production expense 37,358 11,476 48,834
General and administrative
to a related party 19,278 5,922 25,200
General and administrative 5,719 1,756 7,475
Depreciation, depletion
and amortization 22,414 2,082 24,496
-------- -------- --------
Total Costs and Expenses 84,769 21,236 106,005
-------- -------- --------
Net Income(loss) $ (7,170) 2,585 $ (4,585)
======== ======== ========
Net Income(loss)
per equity unit $ (0.46)
======
See accompanying note to the financial statements.
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Nine Months Ended
September 30, 1995
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,380,721 (14,573) $ 1,366,148
Partner's Contributions 0 498 498
Cash Distributions (39,242) (11,967) (51,209)
Net Income(Loss) (24,297) 6,754 (17,543)
-------- -------- --------
Balance at end of period $ 1,317,182 (19,288) $ 1,297,894
======== ======== ========
Nine Months Ended
September 30, 1994
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,875,449 32,675 $ 1,908,124
Partner's Contributions 0 499 499
Cash Distributions (39,242) (11,998) (51,240)
Net Income(Loss) (19,173) 8,448 (10,725)
-------- -------- ---------
Balance at end of period $ 1,817,034 29,624 $ 1,846,658
======== ======== =========
See accompanying note to the financial statements.
STERLING DRILLING FUND 1983-1
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Three Months Ended
September 30, 1995
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,329,255 (20,837) $ 1,308,418
Partners' Contribution 0 498 498
Cash Distributions 0 0 0
Net Income(Loss) (12,073) 1,051 (11,022)
-------- -------- ---------
Balance at end of period $ 1,317,182 (19,288) $ 1,297,894
======== ======== =========
Three Months Ended
September 30, 1994
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,824,204 26,540 $ 1,850,744
Partner's Contributions 0 499 499
Cash Distributions 0 0 0
Net Income(Loss) (7,170) 2,585 (4,585)
----------- -------- ---------
Balance at end of period $ 1,817,034 29,624 $ 1,846,658
=========== ======== =========
See accompanying note to the financial statements.
STERLING DRILLING FUND 1983-1
(a New York Limited Partnership)
Statement of Cash Flows
(unaudited)
Nine months Nine months
ended ended
September 30, September 30,
1995 1994
Net cash provided by operating activities $ 46,021 $ 42,276
---------- ----------
Cash flows from financing activities:
Partners contributions 498 499
Distribution to partners (51,209) (51,240)
---------- ----------
Net cash used in financing activities (50,711) (50,741)
---------- ----------
Cash flows from investing activities:
Investment in well and related
facilities (1,393) (21,061)
---------- ---------
Net Cash used in investing activities (1,393) (21,061)
---------- ----------
Net decrease in cash and cash equivalents (6,083) (29,526)
Cash and cash equivalents at
beginning of period 8,287 31,269
---------- ----------
Cash and cash equivalents at end of
period $ 2,204 $ 1,743
========== ==========
See accompanying note to financial statements.
STERLING DRILLING FUND 1983-2
(a New York limited partnership)
Note to Financial Statements
September 30, 1995
1. The accompanying statements for the period ending September 30, 1995,
are unaudited but reflect all adjustments necessary to present fairly the
results of operations. Certain reclassifications were made to the prior
periods' financial statements to confirm to the current period
presentation.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Sterling Drilling Fund 1983-2 Form 10-Q and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,204
<SECURITIES> 0
<RECEIVABLES> 2,281
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,485
<PP&E> 13,414,060
<DEPRECIATION> (12,081,527)
<TOTAL-ASSETS> 1,337,018
<CURRENT-LIABILITIES> 39,124
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 1,297,894<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,337,018
<SALES> 242,475
<TOTAL-REVENUES> 242,912<F2>
<CGS> 260,455
<TOTAL-COSTS> 260,455
<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> (17,543)
<EPS-PRIMARY> (1.55)<F3>
<EPS-DILUTED> 0
<FN>
<F1> (other-se) includes total partnership equity.
<F2> (total-revenue) includes $437 of interest income.
<F3> (eps-primary) includes net income divided by total limited
partnership units of 15,697.
</FN>
</TABLE>
