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, 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> 1
PART I
Item 1. Financial Statements
The following Financial Statements are filed herewith:
Balance Sheets - September 30, 1998 and December 31, 1997.
Statements of Operations for the Nine and Three Months Ended September
30, 1998 and 1997.
Statements of Changes in Partners' Equity for the Nine and Three
Months Ended September 30, 1998 and 1997.
Statements of Cash Flows for the Nine Months Ended September 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 September 30, 1998, the General Partner's 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
<PAGE> 2
issue has been implemented by both the operating company 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 $1,578,300 as compared to
$1,288,800 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 -
The Partnership experienced declines in both its gas and oil
production, from 93,148 MCF and 1,619 BBLS in 1997 to 85,835 MCF and
1,363 BBLS in 1998. The average price per MCF received for gas sold in
1998 was $2.95 per MCF as compared to $2.99 in 1997. The
Partnership's main income comes from gas production sold but can be
influenced by changes to its oil income. In this case the lower oil
production combined with lower oil prices was a contributing factor in
lower partnership income from $310,298 in 1997 to $269,838 in 1998.
The main contributing factor to lower revenue was the decline in gas
production. This can be attributed to shut-ins, higher main transport
line pressures and down time on some compressors used by Partnership
wells. Production expenses decreased from $146,250 in 1997 to $
120,518 in 1998. The higher production expenses, in 1997, are related
to weather conditions, which resulted in additional costs incurred.
These costs may have included additional maintenance, location, access
road work and other repairs. The expenses incurred in 1998 were
normal recurring maintenance and repairs at the wells and well sites.
<PAGE> 3
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 1997
and 1998 are substantially less than the amounts allocable to the
Registrant under the Partnership Agreement. The lower amounts reflect
management's efforts to limit costs, both incurred and allocated to
the Registrant.
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 or amortization was
needed in 1997 or in the three-quarters of 1998. 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.
<PAGE> 4
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 12, 1998
(Date)
<PAGE> 5
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Balance Sheets
September 30, December 31,
1998 1997
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 85,377 $ 57,413
Due from others 27,695 48,737
----------- ------------
Total current assets 113,072 106,150
----------- -----------
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 (12,251,196) (12,206,629)
----------- ------------
1,180,637 1,225,205
----------- ------------
Total assets $ 1,293,709 $ 1,331,354
=========== ============
Partners' equity
Limited partners $ 1,283,300 $ 1,318,829
General partners 10,409 12,525
----------- ------------
Total partners' equity $ 1,293,709 $ 1,331,354
=========== ============
See accompanying note to the financial statements.
<PAGE> 6
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Nine Months Ended
September 30, 1998
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 206,426 $ 63,412 $ 269,838
Gain on sale of equipment 0 0 0
Interest income 2,851 265 3,116
-------- -------- -------
Total Revenue 209,277 63,677 272,954
-------- -------- -------
Costs and Expenses:
Production expense 92,196 28,322 120,518
General and administrative
to a related party 57,379 17,626 75,005
General and administrative 15,210 4,673 19,883
Depreciation, depletion
and amortization 40,779 3,788 44,567
-------- -------- -------
Total Costs and Expenses 205,564 54,409 259,973
-------- -------- -------
Net Income $ 3,713 $ 9,268 $ 12,981
======== ======== =======
Net Income per equity unit $ .24
======
See accompanying note to the financial statements.
<PAGE>7
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Nine Months Ended
September 30, 1997
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 237,378 $ 72,920 $ 310,298
Gain on sale of equipment 11,512 1,069 12,581
Interest income 1,392 129 1,521
-------- -------- -------
Total Revenue 250,282 74,118 324,400
-------- -------- -------
Costs and Expenses:
Production expense 111,881 34,369 146,250
General and administrative
to a related party 57,373 17,624 74,997
General and administrative 14,323 4,400 18,723
Depreciation, depletion
and amortization 42,943 3,989 46,932
-------- -------- -------
Total Costs and Expenses 226,520 60,382 286,902
-------- -------- -------
Net Income $ 23,762 $ 13,736 $ 37,498
======== ======== =======
Net Income per equity unit $ 1.51
======
See accompanying note to the financial statements.
<PAGE> 8
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ended
September 30, 1998
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 65,915 $ 20,248 $ 86,163
Gain on sale of equipment 0 0 0
Interest income 764 71 835
-------- -------- --------
Total Revenue 66,679 20,319 86,998
-------- -------- --------
Costs and Expenses:
Production expense 24,733 7,598 32,331
General and administrative
to a related party 19,124 5,875 24,999
General and administrative 5,553 1,706 7,259
Depreciation, depletion
and amortization 13,593 1,263 14,856
-------- -------- --------
Total Costs and Expenses 63,003 16,442 79,445
-------- -------- --------
Net Income $ 3,676 $ 3,877 $ 7,553
======== ======== ========
Net Income per equity unit $ .24
========
See accompanying note to the financial statements.
<PAGE>9
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ended
September 30, 1997
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 73,988 $ 22,728 $ 96,716
Gain on sale of equipment 4,357 404 4,761
Interest income 420 39 459
-------- -------- --------
Total Revenue 78,765 23,171 101,936
-------- -------- --------
Costs and Expenses:
Production expense 38,783 11,914 50,697
General and administrative
to a related party 19,125 5,874 24,999
General and administrative 3,455 1,061 4,516
Depreciation, depletion
and amortization 14,366 1,334 15,700
-------- -------- --------
Total Costs and Expenses 75,729 20,183 95,912
-------- -------- --------
Net Income $ 3,036 $ 2,988 $ 6,024
======== ======== ========
Net Income per equity unit $ .19
========
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)
Nine Months Ended
September 30, 1998
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,318,829 12,525 $ 1,331,354
Partner's Contributions 0 113 113
Cash Distributions (39,242) (11,497) (50,739)
Net Income 3,713 9,268 12,981
--------- -------- ---------
Balance at end of period $ 1,283,300 10,409 $ 1,293,709
========= ======== =========
Nine Months Ended
September 30, 1997
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,325,155 2,341 $ 1,327,496
Partner's Contributions 0 113 113
Cash Distributions (39,242) (11,855) (51,097)
Net Income 23,762 13,736 37,498
--------- -------- ---------
Balance at end of period $ 1,309,675 4,335 $ 1,314,010
========= ======== =========
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
September 30, 1998
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,279,624 6,419 $ 1,286,043
Partners' Contribution 0 113 113
Cash Distributions 0 0 0
Net Income 3,676 3,877 7,553
--------- -------- ---------
Balance at end of period $ 1,283,300 10,409 $ 1,293,709
========= ======== =========
Three Months Ended
September 30, 1997
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,306,639 1,234 $ 1,307,873
Partner's Contributions 0 113 113
Cash Distributions 0 0 0
Net Income(Loss) 3,036 2,988 6,024
--------- -------- ---------
Balance at end of period $ 1,309,675 4,335 $ 1,314,010
========= ======== =========
See accompanying note to the financial statements.
<PAGE> 12
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Cash Flows
(unaudited)
Nine months Nine months
ended Ended
September September
30, 1998 30, 1997
Net cash provided by operating activities $ 78,590 $ 68,135
---------- ----------
Cash flows from financing activities:
Partners contributions 113 113
Distribution to partners (50,739) (51,097)
---------- ----------
Net cash used in financing activities (50,626) (50,984)
---------- ----------
Cash flows from investing activities:
Proceeds from sale of equipment 0 12,581
Investment in well and related
facilities 0 (2,305)
---------- ----------
Net Cash used in investing activities 0 10,276
---------- ----------
Net increase in cash and cash equivalents 27,964 27,427
Cash and cash equivalents at
beginning of period 57,413 22,018
---------- ----------
Cash and cash equivalents at end of
period $ 85,377 $ 49,445
========== ==========
See accompanying note to the financial statements.
<PAGE>13
STERLING DRILLING FUND 1983-2
(a New York limited partnership)
Note to Financial Statements
September 30, 1998
1. The accompanying statements for the period ending September 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 third quarter 1998 10Q and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 85,377
<SECURITIES> 0
<RECEIVABLES> 27,695
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 113,072
<PP&E> 13,431,833
<DEPRECIATION> (12,251,196)
<TOTAL-ASSETS> 1,293,709
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,293,709<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,293,709
<SALES> 272,954<F2>
<TOTAL-REVENUES> 272,954
<CGS> 259,973
<TOTAL-COSTS> 259,973
<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> 12,981
<EPS-PRIMARY> 0.24<F3>
<EPS-DILUTED> 0
<FN>
<F1>Other se includes total partners' equity.
<F2>Sales includes $3,116 of interest income.
<F3>The limited partnerhsip income was divided by total number of
limited partnership units of 15,697.
</FN>
</TABLE>
