<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, 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 - June 30, 1999 and December 31, 1998.
Statements of Operations for the Six and Three Months Ended June 30,
1999 and 1998 .
Statements of Changes in Partners' Equity for the Six and Three Months
Ended June 30, 1999 and 1998.
Statements of Cash Flows for the Six Months Ended June 30, 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 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, 1999, the General Partners have distributed
$1,789,458.00 or 11.40% 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 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
<page 3>
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.
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 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, conducted an internal review of all systems and contacted 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
intends to continue identification, 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 and to refine this plan throughout 1999.
<PAGE> 4
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 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 $183,675 in 1998 to $123,112
in 1999. The Partnership experienced a decline in gas production,
from 58,603 MCF 1998 to 53,412 MCF in 1999. The average price per MCF
in 1998 was $2.93 and $2.04 in 1999. A substantial portion of the
Partnership's production was shut-in for the month of June 1999 due to
required maintenance of the gas transporter's pipeline. All
properties were returned to production in July 1999. Production
expenses decreased from $88,187 in 1998 to $59,493 in 1999. The
production costs incurred in 1999, reflect the lower production
volumes and were normal and recurring to the upkeep of the wells and
well-sites.
<PAGE> 5
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 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 1998 or during the first half of 1999. 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> 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
August 13, 1999
(Date)
<PAGE> 7
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Balance Sheets
June 30, December 31,
1999 1998
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 3,830 88,554
Due from affiliates 71,872 39,510
Due from others 7,440 0
----------- ------------
Total current assets 83,142 128,064
----------- ------------
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 (12,297,508) (12,268,244)
----------- ------------
1,134,325 1,163,589
----------- ------------
Total assets $ 1,217,467 1,291,653
=========== ============
Partners' equity
Limited partners 1,217,832 1,279,323
General partners (365) 12,330
----------- ------------
Total partners' equity $ 1,217,467 1,291,653
=========== ============
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, 1999
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 94,181 28,931 $ 123,112
Other Income 1,854 570 2,424
Interest income 1,935 180 2,115
-------- ------- -------
Total Revenue 97,970 29,681 127,651
-------- ------- -------
Costs and Expenses:
Production expense 45,512 13,981 59,493
General and administrative
to a related party 38,252 11,750 50,002
General and administrative 9,678 2,973 12,651
Depreciation, depletion
and amortization 26,777 2,487 29,264
-------- ------- -------
Total Costs and Expenses 120,219 31,191 151,410
-------- ------- -------
Net Income/(loss) $ (22,249) (1,510) $ (23,759)
======== ======= =======
Net loss per equity unit $ (1.42)
========
See accompanying note to financial statements.
<PAGE> 9
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> 10
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ending
June 30, 1999
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 47,627 14,630 $ 62,257
Other Income 1,854 570 2,424
Interest income 715 67 782
-------- ------- -------
Total Revenue 50,196 15,267 65,463
-------- ------- -------
Costs and Expenses:
Production expense 25,512 7,837 33,349
General and administrative
to a related party 19,125 5,874 24,999
General and administrative 8,225 2,526 10,751
Depreciation, depletion
and amortization 13,389 1,243 14,632
-------- ------- -------
Total Costs and Expenses 66,251 17,480 83,731
-------- ------- -------
Net Income/(loss) $ (16,055) (2,213) $ (18,268)
======== ======= =======
Net (loss) per equity unit
$ (1.02)
======
See accompanying note to the financial statements.
<PAGE> 11
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> 12
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Six Months Ended
June 30, 1999
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,279,323 12,330 $ 1,291,653
Cash Distributions (39,242) (11,185) (50,427)
Net Income(Loss) (22,249) (1,510) (23,759)
-------- -------- --------
Balance at end of period $ 1,217,832 (365) $ 1,217,467
======== ======== =========
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
======== ======== =========
See accompanying note to the financial statements.
<PAGE> 13
STERLING DRILLING FUND 1983-2
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Three Months Ended
June 30, 1999
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,273,129 13,033 $ 1,286,162
Cash Distributions (39,242) (11,185) (50,427)
Net Income(Loss) (16,055) (2,213) (18,268)
--------- -------- ---------
Balance at end of period $ 1,217,832 (365) $ 1,217,467
========= ======== =========
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
========= ======== =========
See accompanying note to the financial statements.
<PAGE> 14
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,
1999 1998
Net cash provided by/(used in)
operating activities $ (34,297) $ 40,646
---------- ----------
Cash flows from financing activities:
Distribution to partners (50,427) (50,739)
---------- ----------
Net cash used in financing activities (50,427) (50,739)
---------- ----------
Net increase (decrease) in cash and cash
equivalents (84,724) (10,093)
Cash and cash equivalents at
beginning of period 88,554 57,413
---------- ----------
Cash and cash equivalents at end of
period $ 3,380 $ 47,320
========== ==========
See accompanying note to financial statements.
<PAGE> 15
STERLING DRILLING FUND 1983-2
(a New York limited partnership)
Note to Financial Statements
June 30, 1999
1. The accompanying statements for the period ending June 30, 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
Sterling Dilling Fund 1983-2 second quarter 1999 10 Q and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,830
<SECURITIES> 0
<RECEIVABLES> 79,312
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 83,142
<PP&E> 13,431,833
<DEPRECIATION> (12,297,508)
<TOTAL-ASSETS> 1,217,467
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,217,467<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,217,467
<SALES> 127,651<F2>
<TOTAL-REVENUES> 127,651
<CGS> 151,410
<TOTAL-COSTS> 151,410
<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> (23,759)
<EPS-BASIC> (1.42)<F3>
<EPS-DILUTED> 0
<FN>
<F2>Sales includes $ 2,115 of interest income.
<F1>Other -se includes total partners' equity.
<F3>The income allocated to the limited partners was divided by
the total number of outstanding limited partner units of 15,697.
</FN>
</TABLE>
