<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 31,1999
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, 1999 and December 31, 1998.
Statements of Operations for the Three Months Ended March 31, 1999 and
1998.
Statements of Changes in Partners' Equity for the year ended December 31,
1998 and for the Three Months Ended March 31, 1999.
Statements of Cash Flows for the Three Months Ended March 31, 1999 and
1998.
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 the Registrant competes with
many other companies having substantially greater financial and other
resources. In accordance with the terms of the Agreement of Limited
Partnership of the Partnership, 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 any contingent debts, liabilities or expenses for the conduct of
the Partnership business. As of March 31,1999, the General partners
have distributed $1,750,215, or 11.15%, of original Limited Partner
capital contributions, to the Limited Partners.
The Year 2000 (Y2K) issue is the definition and resolution of
potential problems resulting from computer application programs or
imbedded chip instruction sets utilizing two-digits, as opposed to
four digits, to define a specific the year. Such date sensitive
systems may be unable to properly interpret dates, which could cause a
system failure or other computer errors, leading to disruptions in
operations. The Partnership relies on the Managing General Partner for
all management and administrative functions. Consequently, the
Partnership's exposure to the Y2K problems is determined by what Year
2000 efforts have been undertaken by the Managing General Partner.
<PAGE> 3
In 1997, the Managing General Partner developed a three-phase program
for the Y2K information systems compliance. Phase I is to identify
those systems with which the Partnership has exposure to Y2K issues.
Phase II is to remediate systems and replace equipment where required.
Phase III, to be completed by mid-1999, is the final testing of each
major area of exposure to ensure compliance. The Managing General
Partner has identified four major areas determined to be critical for
successful Y2K compliance: (1) financial and informational system
applications, (2) communications applications, (3) oil and gas
producing operations, and (4) third-party relationships.
The Managing General Partner, in accordance with Phase I of the
program, is in the process of conducting an internal review of all
systems and contacting all software suppliers to determine major areas
of exposure to Y2K issues. The Managing General Partner has completed
the modifications to its core financial and reporting systems and is
continuing to test compliance in this area. These modifications were
made in conjunction with an upgrade of the financial reporting
applications provided by the Managing General Partner's software
vendor. Conversion to the new system was completed during 1998. Due to
the technology advances in the communications area the Managing
General Partner has upgraded such equipment regularly over the past
three years. Y2K compliance was a specification requirement of each
installation. Consequently, the Managing General Partner expects
exposure in this area to be limited to third party readiness. The
Managing General Partner is in the process of identifying areas of
exposure resulting from equipment used in its oil and gas producing
operations. The Managing General Partner expects to complete
identification of critical systems by June 1999 and to continue
remediation and testing throughout 1999. In the third-party area, the
Managing General Partner has received assurance from its significant
service suppliers that they intend to be Y2K compliant by 2000. The
Managing General Partner has implemented a program to request Year
2000 certification or other assurance from other third parties during
1999.
The Partnership recognizes that, notwithstanding the efforts described
above, the Partnership could experience disruptions to its operations
or administrative functions, including those resulting from non-
compliant systems utilized by unrelated third party governmental and
business entities. The Managing General Partner is in the process of
developing a contingency plan in order to mitigate potential
disruption to business operations. The Managing General Partner
expects to complete this contingency plan by the second quarter of
1999 but also expects to refine this plan throughout 1999.
Through 1998, the Managing General Partner has handled identifying,
remediating and testing systems for Year 2000 compliance within the
scope of routine upgrades and systems evaluations. The Managing
<PAGE> 4
General Partner expects to complete the review of oil and gas
operations exposure in the same manner, without incurring substantial
additional costs. However, information resulting from the oil and gas
operations review may indicate required expenditures not currently
contemplated by the Partnership.
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 future net revenues (S.E.C. case)
associated with such reserves, discounted at 10% as of December 31,
1998, was approximately $1,009,000 as compared to the discounted
reserves as of December 31, 1997, which were approximately $1,288,000.
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 $88,666 in 1998 to $60,855
in 1999. The partnership's gas production decreased slightly from
29,799 MCF in 1998 to 29,213 MCf in 1999. The average price per MCF
in 1998 of $2.72 was significantly higher then the average price per
MCF of $ 2.57 in 1999. The Partnership's oil revenue was low due to
drops in average price per barrel and actual production. Production
expenses were lowered from $45,793 in 1998 to $26,144 in 1999. The
cost associated with 1998 include those associated with repairs needed
for access to the well and well sites and the related labor costs. The
Partnership expended funds on typical and customary well and well
site costs during the first quarter 1999.
General and administrative expenses to a related party in 1999
remained consistent with amounts incurred in 1998. The Partnership's
third party costs showed a slight decline. Management continues to
<PAGE> 5
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 1998 and 1999 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 1998 or first quarter 1999. Depletion expense for both
years 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.
<PAGE> 6
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 14, 1999
(Date)
<PAGE> 7
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Balance Sheets
(unaudited)
March 31, December 31,
1999 1998
Assets
Current assets:
Cash and cash equivalents $ 132,615 $ 88,554
Due from affiliates 0 39,510
Due from others 15,938 0
----------- -----------
Total current assets 148,553 128,064
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 (12,282,876) (12,268,244)
----------- -----------
1,148,957 1,163,589
----------- -----------
Total assets $ 1,297,510 $ 1,291,653
=========== ============
Liabilities and Partner's Equity
Current Liabilities
Due to affiliates $ 11,348 $ 0
----------- -----------
Total current liabilities $ 11,348 $ 0
----------- -----------
Partners' equity
Limited partners $ 1,273,129 $ 1,279,323
General partners 13,033 12,330
----------- -----------
Total partners' equity $ 1,286,162 $ 1,291,653
----------- -----------
Total Liabilities and 1,297,510 1,291,653
Partner's Equity $ =========== $ ===========
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, 1999
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 46,554 14,301 $ 60,855
Interest income 1,220 113 1,333
------- ------- -------
Total Revenue 47,774 14,414 62,188
------- ------- -------
Costs and Expenses:
Production expense 20,000 6,144 26,144
General and administrative
to a related party 19,127 5,876 25,003
General and administrative 1,453 447 1,900
Depreciation, depletion
and amortization 13,388 1,244 14,632
------- ------- -------
Total Costs and Expenses 53,968 13,711 67,679
------- ------- -------
Net Income (Loss) $ (6,194) 703 $ (5,491)
======= ======= =======
Net Income(Loss)
per equity unit $ (0.39)
======
See accompanying note to financial statements.
<PAGE> 9
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> 10
STERLING DRILLING FUND 1983-2
Statement of Changes in Partners' Equity
(unaudited)
Limited General
Partners Partners Total
Balance at December 31, 1997 $ 1,318,829 $ 12,525 $ 1,331,354
Parnters' contributions --- 113 113
Distribution to partners (39,242) (11,497) (50,739)
Net Income(Loss) (264) 11,189 10,925
-------- -------- --------
Balance at December 31, 1998 $ 1,279,323 $ 12,330 $ 1,291,653
Net Income (Loss) (6,194) 703 (5,491)
-------- -------- --------
Balance at March 31, 1999 $ 1,273,129 13,033 1,286,162
======== ======== ========
See accompanying note to financial statements.
<PAGE> 11
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Cash Flows
(unaudited)
Three months Three months
ended March ended March
31, 1999 31, 1998
Net cash provided by operating activities $ 44,061 $ 42,784
---------- ----------
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 44,061 42,784
Cash and cash equivalents at
beginning of period 88,554 57,413
---------- ----------
Cash and cash equivalents at end of
period $ 132,615 $ 100,197
========== ==========
See accompanying note to financial statements.
<PAGE> 12
STERLING DRILLING FUND 1983-2
(a New York limited partnership)
Note to Financial Statements
March 31, 1999
1. The accompanying statements for the period ending March 31, 1999
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 1984-1 first quarter 1999 10Q and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 63,676
<SECURITIES> 0
<RECEIVABLES> 2,417
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 66,093
<PP&E> 7,982,144
<DEPRECIATION> (7,024,718)
<TOTAL-ASSETS> 1,023,519
<CURRENT-LIABILITIES> 10,733
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,012,786<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,023,519
<SALES> 40,316<F2>
<TOTAL-REVENUES> 40,316
<CGS> 63,848
<TOTAL-COSTS> 63,848
<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> (23,532)
<EPS-PRIMARY> (2.21)<F3>
<EPS-DILUTED> 0
<FN>
<F1>Other se includes total partners' equity.
<F2>Sales includes $633 of interest income.
<F3>The limited partners' share of net income was divided by
the total number of limited partnership units of 9,236.
</FN>
</TABLE>
