<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 March 31,1998
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 - March 31, 1998 and December 31, 19976.
Statements of Operations for the Three Months Ended March 31, 1998 and
1997.
Statements of Changes in Partners' Equity for the year ended December 31,
1997 and for the Three Months Ended March 31, 1998.
Statements of Cash Flows for the Three Months Ended March 31, 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 March 31, 1998 the General partners have distributed
$1 ,710,973 or 10.90% 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 operating and managing general
partner's computer systems. Both , the operations 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 will be implemented with in the next nine
months by both the operating company and the managing general partner.
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Both companies' upgrades and year 2000 changes are part of their
normal course of business and no material costs should be allocated to
the partnership for the implementation necessary by either company.
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 $113,825 in 1997 to $88,666
in 1998. The partnership's gas production increased slightly from
28,664 MCF in 1997 to 29,799 MCF in 1998. The average price per MCF
and Barrel of$3.28 and $20.20 in 1997 was significantly higher then
the average price per MCF and Barrel in 1998 of $2.72 and $12.51. A
large amount of the gas production is sold under a locked twelve
month fixed price contract that commenced in December 1997. Overall
the partnership benefits from the current pricing because the current
market prices are lower then what the partnership received through the
contract. The lower gas and oil prices directly impacted operating
revenue. Production expenses decreased from $50,242 in 1997 to
$45,793 in 1997. In 1997 some additional costs for general maintenance
were incurred. These costs include those associated with repairs
needed for access to the well and well sites and the related labor
costs. The production expenses incurred in 1998 were of a normal and
recurring nature to upkeep the wells.
General and administrative expenses to a related party in 1998
remained consistent with amounts incurred in 1997. The Partnership's
third party costs showed a slight decline. Management continues to
<PAGE> 4
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 either 1997 or first quarter 1998. Depletion expense for both
1997 and 1998 was reasonable based upon the property basis and rates
applied.
PART II
Items 1 through 5 have been omitted in that each item is either
inapplicable or the answer is negative.
Item 6: Exhibits and Reports on Form 8-K
The Partnership was not required to file any reports on Form 8-K and
no such form was filed during the period covered by this report.
Exhibit 27 - Financial Data Schedule is attached to the electronic
filing of this report.
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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
May 12, 1998
(Date)
<PAGE> 6
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Balance Sheets
(unaudited)
March 31, December 31,
1998 1997
Assets
Current assets:
Cash and cash equivalents $ 100,197 $ 57,413
Due from affiliates 19,127 48,737
----------- ------------
Total current assets 119,324 106,150
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 (12,221,485) (12,206,629)
----------- ------------
1,210,348 1,225,204
----------- ------------
Total assets $ 1,329,672 $ 1,331,354
=========== ============
Partners' equity
Limited partners 1,315,469 1,318,829
General partners 14,293 12,525
----------- ------------
Total partners' equity $ 1,329,672 $ 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)
Three Months Ended
March 31, 1998
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 67,829 20,837 $ 88,666
Interest income 946 88 1034
------- ------- -------
Total Revenue 68,775 20,925 89,700
------- ------- -------
Costs and Expenses:
Production expense 35,032 10,761 45,793
General and administrative
to a related party 19,130 5,877 25,007
General and administrative 4,380 1,346 5,726
Depreciation, depletion
and amortization 13,593 1,263 14,856
------- ------- -------
Total Costs and Expenses 72,135 19,247 91,382
------- ------- -------
Net Income (Loss) $ (3,360) 1,678 $ (1,682)
======= ======= =======
Net Income(Loss)
per equity unit $ (0.21)
======
See accompanying note to financial statements.
<PAGE> 8
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ended
March 31, 1997
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 87,076 26,749 $ 113,825
Interest income 371 35 406
------- ------- -------
Total Revenue 87,447 26,784 114,231
------- ------- -------
Costs and Expenses:
Production expense 38,435 11,807 50,242
General and administrative
to a related party 19,124 5,875 24,999
General and administrative 3,978 1,222 5,200
Depreciation, depletion
and amortization 14,289 1,327 15,616
------- ------- -------
Total Costs and Expenses 75,826 20,231 96,057
------- ------- -------
Net Income $ 11,621 6,553 $ 18,174
======= ======= =======
Net Income per equity unit $ 0.74
======
See accompanying note to financial statements.
<PAGE> 9
STERLING DRILLING FUND 1983-2
Statement of Changes in Partners' Equity
(unaudited)
Limited General
Partners Partners Total
Balance at December 31, 1996 $ 1,325,155 $ 2,341 $ 1,327,496
Partners' contributions 0 114 114
Cash distributions (39,243) (11,855) (51,098)
Net Income(Loss) 32,917 21,925 54,842
-------- -------- --------
Balance at December 31, 1997 $ 1,318,829 $ 12,525 $ 1,331,354
Net Income (Loss) (3,360) 1,678 (1,682)
-------- -------- --------
Balance at March 31, 1998 $ 1,315,469 $ 14,203 $ 1,329,672
======== ======== ========
See accompanying note to financial statements.
<PAGE> 10
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Cash Flows
(unaudited)
Three months Three months
ended March ended March
31, 1998 31, 1997
Net cash provided by operating activities $ 42,784 $ 30,579
---------- ----------
Cash flows from investing activities:
Investment in well and related
facilities 0 0
---------- ----------
Net Cash used in investing activities 0 0
---------- ----------
Net increase in cash and cash equivalents 42,784 30,579
Cash and cash equivalents at
beginning of period 57,413 22,018
---------- ----------
Cash and cash equivalents at end of
period $ 100,197 $ 52,597
========== ==========
See accompanying note to financial statements.
<PAGE> 11
STERLING DRILLING FUND 1983-2
(a New York limited partnership)
Note to Financial Statements
March 31, 1998
1. The accompanying statements for the period ending March 31, 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 first quarter 1998 10 Q and is qualified
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 100,197
<SECURITIES> 0
<RECEIVABLES> 19,127
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 119,324
<PP&E> 13,431,833
<DEPRECIATION> (12,221,485)
<TOTAL-ASSETS> 1,329,672
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,329,672<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,329,672
<SALES> 89,700<F2>
<TOTAL-REVENUES> 89,700
<CGS> 91,382
<TOTAL-COSTS> 91,382
<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> (1,682)
<EPS-PRIMARY> (0.21)<F3>
<EPS-DILUTED> 0
<FN>
<F1>Other se includes total partners' equity.
<F2>Sales includes $1,034 of interest income.
<F3>The limited partners net income was divided by total number
of limited partner units of 15,697.
</FN>
</TABLE>
