<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d)of the
Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1998
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 / /
<PAGE> 2
PART I
Item 1. Financial Statements
The following Financial Statements are filed herewith:
Balance Sheets - June 30, 1998 and December 31, 1997.
Statements of Operations for the Six and Three Months Ended June 30,
1998 and 1997 .
Statements of Changes in Partners' Equity for the Six and Three Months
Ended June 30, 1998 and 1997.
Statements of Cash Flows for the Six Months Ended June 30, 1998 and
1997.
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, 1998, the General Partners have distributed
$1,750,215 or 11.15% of original Limited Partner capital contributions
to the Limited Partners.
All aspects of the Partnership's operations and administration are
handled through the use of the managing general partner's computer
systems. Both, the operating company and the managing general partner
are taking steps to minimize any potential computer issues with regard
to any necessary changes for the year 2000. A complete system upgrade,
which includes but is not limited to, the year 2000 issue has been
implemented by both the operating company
<PAGE> 3
and the managing general partner. During the remainder of this year
both companies will continue to monitor, test and verify data in
detail to avoid any potential reporting concerns or delays
The net proved oil and gas reserves of the partnership are considered
to be an 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,
1997 was approximately $1,288,800 as compared to $1,578,300 as of
December 31, 1996. Overall reservoir engineering is a subjective
process of estimating underground accumulations of gas and oil that
can not be measured in an exact manner. The accuracy of any reserve
estimate is a function of the quality of available data and of the
engineering and geological interpretation and judgment. Accordingly,
reserve estimates are generally different from the quantities of gas
and oil that are ultimately recovered and such differences may have a
material impact on the partnership's financial results and future
liquidity
2. Capital Resources -
The Registrant was formed for the sole intention of drilling oil and
gas wells. The Registrant entered into a drilling contract with an
independent contractor in 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 $213,582 in 1997 to $183,675
in 1998. The Partnership experienced a decline in gas and in oil
production, from 61,014 MCF and 1,458 Bbls in 1997 to 58,603 MCF and
973 Bbls in 1998. The average price per MCF in 1997 and 1998 was,
respectively, $3.01 and $2.93. The average oil price per barrel in
1997 was $18.65 and was $12.56 in 1998. The majority of the
Partnership's revenue is received from its gas production. The
combination of lower average price and reduced production did lower
overall revenue. The Partnership may experience declines in gas
production due to pressure variances in the main transport lines.
These variances may hinder or occasionally restrict the normal flow of
the Partnership's gas to the main purchaser. Production expenses
showed an decrease from 1997 to 1998, $95,553 and $88,187
respectively. In 1997, some additional expenditures were made in
order to perform repairs associated with entry to the well sites and
<PAGE> 4
the related labor costs. The production costs incurred in 1998 were
of normal and recurring manner to upkeep the wells and well-sites.
Management continues to reduce third party costs and use in-house
resources to provide efficient and timely services to the Partnership.
The related party general and administrative 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 1997
and 1998 are substantially less than the amounts allocable to the
Registrant under the Partnership Agreement.
The Partnership records additional depreciation, depletion and
amortization to the extent that net capitalized costs exceed the
undiscounted future net cash flows attributable to the Partnership
properties. The Partnership was not required to revise the properties
basis in 1997 or during the first half of 1998. The current
depreciation was reasonable based upon the remaining basis in the
Partnership properties.
PART II
Items 1 through 5 have been omitted in that each item is either
inapplicable or the answer is negative.
Item 6: Exhibits and Reports on Form 8-K
The Partnership was not required to file any reports on Form 8-K and
no such form was filed during the period covered by this report.
Exhibit 27 - Financial Data Schedule is attached to the electronic
filing of this report.
<PAGE> 5
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 12, 1998
(Date)
<PAGE> 6
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Balance Sheets
June 30, December 31,
1998 1997
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 47,320 57,413
Due from affiliates 43,230 48,737
----------- ------------
Total current assets 90,550 106,150
----------- ------------
Oil and gas properties -
successful efforts method:
Leasehold costs 497,639 497,639
Well and related facilities 12,934,194 12,934,194
less accumulated depreciation,
depletion and amortization (12,236,340) (12,206,629)
----------- ------------
1,195,493 1,225,204
----------- ------------
Total assets $ 1,286,043 1,331,354
=========== ============
Partners' equity
Limited partners 1,279,624 1,318,829
General partners 6,419 12,525
----------- ------------
Total partners' equity $ 1,286,043 1,331,354
=========== ============
See accompanying note to financial statements.
<PAGE> 7
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Six Months Ending
June 30, 1998
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 140,511 43,164 $ 183,675
Interest income 2,087 194 2,281
-------- ------- -------
Total Revenue 142,598 43,358 185,956
-------- ------- -------
Costs and Expenses:
Production expense 67,463 20,724 88,187
General and administrative
to a related party 38,255 11,751 50,006
General and administrative 9,657 2,967 12,624
Depreciation, depletion
and amortization 27,186 2,525 29,711
-------- ------- -------
Total Costs and Expenses 142,561 37,967 180,528
-------- ------- -------
Net Income $ 37 5,391 $ 5,428
======== ======= =======
Net Income per equity unit $ .00
========
See accompanying note to financial statements.
<PAGE> 8
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Six Months Ending
June 30, 1997
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 163,390 50,192 $ 213,582
Gain on sale of equipment 7,155 665 7,820
Interest income 972 90 1,062
-------- ------- -------
Total Revenue 171,517 50,947 222,464
-------- ------- -------
Costs and Expenses:
Production expense 73,098 22,455 95,553
General and administrative
to a related party 38,248 11,750 49,998
General and administrative 10,868 3,339 14,207
Depreciation, depletion
and amortization 28,577 2,655 31,232
-------- ------- -------
Total Costs and Expenses 150,791 40,199 190,990
-------- ------- -------
Net Income $ 20,726 10,748 $ 31,474
======== ======= =======
Net Income per equity unit $ 1.32
========
See accompanying note to financial statements.
<PAGE> 9
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ending
June 30, 1998
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 72,682 22,327 $ 95,009
Interest income 1,141 106 1,247
-------- ------- -------
Total Revenue 73,823 22,433 96,256
-------- ------- -------
Costs and Expenses:
Production expense 32,431 9,963 42,394
General and administrative
to a related party 19,125 5,874 24,999
General and administrative 5,277 1,621 6,898
Depreciation, depletion
and amortization 13,593 1,262 14,855
-------- ------- -------
Total Costs and Expenses 70,426 18,720 89,146
-------- ------- -------
Net Income $ 3,397 3,713 $ 7,110
======== ======= =======
Net Income per equity unit
$ .22
======
See accompanying note to the financial statements.
<PAGE> 10
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ending
June 30, 1997
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 76,314 23,443 $ 99,757
Gain on sale of equipment 7,155 665 7,820
Interest income 601 55 656
-------- ------- -------
Total Revenue 84,070 24,163 108,233
-------- ------- -------
Costs and Expenses:
Production expense 34,663 10,648 45,311
General and administrative
to a related party 19,124 5,875 24,999
General and administrative 6,890 2,117 9,007
Depreciation, depletion
and amortization 14,288 1,328 15,616
-------- ------- -------
Total Costs and Expenses 74,965 19,968 94,933
-------- ------- -------
Net Income $ 9,105 4,195 $ 13,300
======== ======= =======
Net Income per equity unit
$ .58
======
See accompanying note to the financial statements.
<PAGE> 10
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Six Months Ended
June 30, 1998
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,318,829 12,525 $ 1,331,354
Cash Distributions (39,242) (11,497) (50,739)
Net Income(Loss) 37 5,391 5,428
-------- -------- --------
Balance at end of period $ 1,279,624 6,419 $ 1,286,043
======== ======== =========
Six Months Ended
June 30, 1997
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,325,155 2,341 $ 1,327,496
Cash Distributions (39,242) (11,855) (51,097)
Net Income(Loss) 20,726 10,748 31,474
-------- -------- --------
Balance at end of period $ 1,306,639 1,234 $ 1,307,873
======== ======== =========
See accompanying note to the financial statements.
<PAGE> 11
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Three Months Ended
June 30, 1998
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,315,469 14,203 $ 1,329,672
Cash Distributions (38,242) (11,497) (50,739)
Net Income(Loss) 3,397 3,713 7,110
--------- -------- ---------
Balance at end of period $ 1,279,624 6,419 $ 1,286,043
========= ======== =========
Three Months Ended
June 30, 1997
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,336,776 8,894 $ 1,345,670
Cash Distributions (39,242) (11,855) (51,097)
Net Income(Loss) 9,105 4,195 13,300
--------- -------- ---------
Balance at end of period $ 1,306,639 1,234 $ 1,307,873
========= ======== =========
See accompanying note to the financial statements.
<PAGE> 12
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,
1998 1997
Net cash provided by operating activities $ 40,646 $ 46,512
---------- ----------
Cash flows from financing activities:
Distribution to partners (50,739) (51,097)
---------- ----------
Net cash used in financing activities (50,739) (51,097)
---------- ----------
Cash flows from investing activities:
Sale of equipment 0 7,820
---------- ----------
Net Cash used in investing activities 0 7,820
---------- ----------
Net increase (decrease) in cash and cash
equivalents (10,093) 3,235
Cash and cash equivalents at
beginning of period 57,413 22,018
---------- ----------
Cash and cash equivalents at end of
period $ 47,320 $ 25,253
========== ==========
See accompanying note to financial statements.
<PAGE> 13
STERLING DRILLING FUND 1983-2
(a New York limited partnership)
Note to Financial Statements
June 30, 1998
1. The accompanying statements for the period ending June 30, 1998,
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 second quarter 1998 10Q and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 47,320
<SECURITIES> 0
<RECEIVABLES> 43,230
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 90,550
<PP&E> 13,431,833
<DEPRECIATION> (12,236,340)
<TOTAL-ASSETS> 1,286,043
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,286,043<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,286,043
<SALES> 185,956<F2>
<TOTAL-REVENUES> 185,956
<CGS> 180,528
<TOTAL-COSTS> 180,528
<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> 5,428
<EPS-PRIMARY> (0.00)<F3>
<EPS-DILUTED> 0
<FN>
<F1>Other-se includes total partner's equity.
<F2>Sales includes $2,281 of interest income.
<F3>The limited partner's sahre of net income was divided by 15,697 limited
partnership units.
</FN>
</TABLE>
