SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d)of the
Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1996
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 - June 30, 1996 and December 31, 1995.
Statements of Operations for the Six and Three Months Ended June 30,
1996 and 1995 .
Statements of Changes in Partners' Equity for the Six and Three Months
Ended June 30, 1996 and 1995.
Statements of Cash Flows for the Six Months Ended June 30, 1996 and 1995.
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 June 30, 1996, the General Partners have distributed
$1,671,731 or 10.65% of original Limited Partner capital contributions
to the Limited Partners.
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%, was
approximately $947,600 as of December 31, 1995 and was $678,000 as of
December 31, 1994. The increase in total estimated discounted future
net revenue was due primarily to higher year end gas prices as of
December 31, 1995, when compared to the low gas price as of December
31, 1994. 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, 1995 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 increased from $168,848 in 1995 to $175,860
in 1996. Both lower gas and oil production, from 66,639 MCF and 1,617
Bbls in 1995 to 62,907 MCF and 1,217 Bbls in 1996, were offset by
increased prices. The average price per MCF in 1995 and 1996 was,
respectively, $2.00 and 2.48. The average oil price per barrel in
1995 was $16.13 and was $18.21 in 1996. The partnership's gas in
1995 was sold based upon spot market prices. Late in 1995, running for
a twelve month period, the majority of the partnership's gas started
to be sold through a fixed price contract. Spot prices received
during 1995 fluctuated significantly throughout the year and were
especially low during non-peak usage times. the lower production can
be partially attributed to a combination of high main line pressure
differences, which can restrict gas flow to main transport lines as
well as possible fluid in some wells. After evaluating the wells if a
well looks like additional work should be performed to maintain or
increase production, some operating funds may be spent on a workover.
A workover may entail equipment replacements or general repairs. Some
of the costs may be capitalized or expensed based upon the appropriate
criteria. Production expenses showed a slight increase from 1995 to
1996, $73,414 and $77,559, respectively. The increase may be
partially attributed to additional repairs and the general upkeep of
the wells and well sites.
General and administrative expenses have been segregated on the
financial statements to reflect expenses paid to PrimeEnergy
Management Corporation, a general partner. These expenses are charged
in accordance with guidelines set forth in the Registrant's Management
Agreement and are attributable to the affairs and operations of the
Partnership and shall not exceed an annual amount equal to 5% of the
limited partners capital contributions. Amounts related to both 1996
and 1995 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 reduce 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. No additional depreciation, depletion and amortization
was needed in 1995 or in the first half of 1996. Although the
Partnership's depletion, deprecaition and amortization is lower in
1996 than 1995, the expense recorded is consistent with the current
basis of the Partnership's properties.
PART II
Items 1 through 5 have been omitted in that each item is either
inapplicable or the answer is negative.
Item 6: Exhibits and Reports on Form 8-K
The Partnership was not required to file any reports on Form 8-K and
no such form was filed during the period covered by this report.
Exhibit 27 - Financial Data Schedule is attached to the electronic
filing of this report.
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
August 8, 1996
(Date)
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Balance Sheets
(unaudited)
June 30, December 31,
1996 1995
Assets
Current assets:
Cash and cash equivalents $ 16,228 $ 8,410
Due from others 41 26,555
----------- ------------
Total current assets 16,269 34,965
Oil and gas properties -
successful efforts method:
Leasehold costs 497,639 497,639
Well and related facilities 12,931,061 12,916,422
less accumulated depreciation,
depletion and amortization (12,112,126) (12,078,506)
----------- ------------
1,316,574 1,335,555
----------- ------------
Total assets $ 1,332,843 $ 1,370,520
=========== ============
Partners' equity
Limited partners 1,334,097 1,367,959
General partners (1,254) 2,561
----------- ------------
Total partners' equity $ 1,332,843 $ 1,370,520
=========== ============
See accompanying note to financial statements.
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Six Months Ending
June 30, 1996
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 134,533 41,327 $ 175,860
Interest income 521 48 569
-------- ------- -------
Total Revenue 135,054 41,375 176,429
-------- ------- -------
Costs and Expenses:
Production expense 59,333 18,226 77,559
General and administrative
to a related party 28,688 8,812 37,500
General and administrative 10,891 3,345 14,236
Depreciation, depletion
and amortization 30,762 2,858 33,620
-------- ------- -------
Total Costs and Expenses 129,674 33,241 162,915
-------- ------- -------
Net Income $ 5,380 $ 8,134 $ 13,514
======== ======= =======
Net Income per equity unit $ .34
======
See accompanying note to financial statements.
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Six Months Ending
June 30, 1995
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 129,169 $ 39,679 $ 168,848
Interest income 320 30 350
-------- -------- -------
Total Revenue 129,489 39,709 169,198
-------- -------- -------
Costs and Expenses:
Production expense 56,162 17,252 73,414
General and administrative
to a related party 28,688 8,812 37,500
General and administrative 12,411 3,813 16,224
Depreciation, depletion
and amortization 44,452 4,129 48,581
-------- -------- -------
Total Costs and Expenses 141,713 34,006 175,719
-------- -------- -------
Net Income(loss) $ (12,224) $ 5,703 $ (6,521)
======== ======== =======
Net Income(loss)
per equity unit $ (.78)
======
See accompanying note to financial statements.
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ending
June 30, 1996
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 71,583 $ 21,989 $ 93,573
Interest income 308 28 336
-------- ------- -------
Total Revenue 71,891 22,017 93,908
-------- ------- -------
Costs and Expenses:
Production expense 31,528 9,684 41,212
General and administrative
to a related party 14,344 4,406 18,750
General and administrative 6,444 1,979 8,423
Depreciation, depletion
and amortization 15,491 1,439 16,930
-------- ------- -------
Total Costs and Expenses 67,807 17,508 85,315
-------- ------- -------
Net Income $ 4,084 $ 4,509 $ 8,593
======== ======= =======
Net Income per equity unit
$ .26
======
See accompanying note to the financial statements.
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ending
June 30, 1995
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 51,552 $ 15,836 $ 67,388
Interest income 146 14 160
-------- -------- --------
Total Revenue 51,698 15,850 67,548
-------- -------- --------
Costs and Expenses:
Production expense 29,278 8,993 38,271
General and administrative
to a related party 14,344 4,406 18,750
General and administrative 8,005 2,460 10,465
Depreciation, depletion
and amortization 22,226 2,064 24,290
-------- -------- --------
Total Costs and Expenses 73,853 17,923 91,776
-------- -------- --------
Net Income(loss) $ (22,155) $ (2,073) $ (24,228)
======== ======== ========
Net Income(loss)
per equity unit $ (1.41)
========
See accompanying note to the financial statements.
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Six Months Ended
June 30, 1996
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,367,959 $ 2,561 $ 1,370,520
Cash Distributions (39,242) (11,949) (51,191)
Net Income(Loss) 5,380 8,134 13,514
-------- -------- ---------
Balance at end of period $ 1,334,097 $ (1,254) $ 1,332,843
======== ======== =========
Six Months Ended
June 30, 1995
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,380,721 $ (14,573) $ 1,366,148
Cash Distributions (39,242) (11,967) (51,209)
Net Income(Loss) (12,224) 5,703 (6,521)
-------- -------- ---------
Balance at end of period $ 1,329,255 $ (20,837) $ 1,308,418
======== ======== =========
See accompanying note to the financial statements.
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Three Months Ended
June 30, 1996
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,369,255 $ 6,186 $ 1,375,441
Cash Distributions (39,242) (11,949) (51,191)
Net Income(Loss) 4,084 4,509 8,593
--------- -------- ---------
Balance at end of period $ 1,334,097 $ (1,254) $ 1,332,843
========= ======== =========
Three Months Ended
June 30, 1995
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,390,652 $ (6,797) $ 1,383,855
Cash Distributions (39,242) (11,967) (51,209)
Net Income(Loss) (22,155) (2,073) (24,228)
--------- -------- ---------
Balance at end of period $ 1,329,255 $ (20,837) $ 1,308,418
========= ======== =========
See accompanying note to the financial statements.
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Cash Flows
(unaudited)
Six months Six months
ended ended
June 30, June 30,
1996 1995
Net cash provided by operating activities $ 73,648 $ 47,236
---------- ----------
Cash flows from financing activities:
Distribution to partners (51,191) (51,209)
---------- ----------
Net cash used in financing activities (51,191) (51,209)
---------- ----------
Cash flows from investing activities:
Investment in well and related
facilities (14,639) (1,393)
---------- ----------
Net Cash used in investing activities (14,639) (1,393)
---------- ----------
Net (decrease) in cash and cash
equivalents (2,585) (5,366)
Cash and cash equivalents at
beginning of period 5,405 8,287
---------- ----------
Cash and cash equivalents at end of
period $ 2,830, $ 2,921
========== ==========
See accompanying note to financial statements.
STERLING DRILLING FUND 1983-2
(a New York limited partnership)
Note to Financial Statements
June 30, 1996
1. The accompanying statements for the period ending June 30, 1996, 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 1983-2's second quarter 10q and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 16,228
<SECURITIES> 0
<RECEIVABLES> 41
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,269
<PP&E> 13,428,700
<DEPRECIATION> (12,112,126)
<TOTAL-ASSETS> 1,332,843
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,332,843<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,332,843
<SALES> 176,429<F2>
<TOTAL-REVENUES> 176,429
<CGS> 162,915
<TOTAL-COSTS> 162,915
<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> 13,514
<EPS-PRIMARY> 0.34<F3>
<EPS-DILUTED> 0
<FN>
<F1>Other se includes total partners' equity.
<F2>Sales includes $569 of interest income.
<F3>The net income received by the limited partners was divided by 15,697
limited partner units.
</FN>
</TABLE>
