<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 2-91966-01
STERLING DRILLING FUND 1984-1
(Exact name of registrant as specified in charter)
New York
(State or other jurisdiction of incorporation)
13-3234373
(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 $1,731,750.00 or 18.75% 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
<PAGE> 3
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.
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
<page 4>
order to mitigate potential disruption to business operations.
The Managing General Partner expects to complete and to refine
this plan throughout 1999.
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 $649,800, as
compared to $974,200 as of December 31, 1997. 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.
<page 5>
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 October 1984 for $7,750,000.
Pursuant to the terms of this contract, thirty-two wells have
been drilled, resulting in thirty-two producing wells.
3. Results of Operations -
Total operating revenues decreased from $ 146,046 in 1998
to $73,703 in 1999. The Partnership's production of gas
decreased from 40,111 MCF in 1998 to 30,968 MCF in 1999. Also
the Partnership was paid an average price per MCF of $ 3.34 in
1998 compared to the decreased average price per MCF of $1.98 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
$71,009 in 1998 to $53,198 in 1999. The Partnership's regular
operating expenses can vary based upon the needs of the
particular wells and well sites. The current 1999 expenditures
were consistent with lower production volumes and decreased
expenditures for road repairs, related labor costs and other
repairs at the well site.
General and administrative expenses to a related party 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. Management continues to reduce
third party costs and use in-house resources to provide efficient
and timely services to the Partnership.
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
current remaining basis in the Partnership properties.
<PAGE> 6
PART II
Items 1 to 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
during the period covered by this report.
Exhibit 27 - Financial data schedule is attached to the current
filling of this report.
<PAGE>7
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 1984-1
(Registrant)
August 13, 1999 By: /S/ Charles E. Drimal Jr.
(Date) ---------------------------
Charles E. Drimal, Jr.
General Partner
<PAGE>8
STERLING DRILLING FUND 1984-1
(a New York Limited Partnership)
Balance Sheets
June 30, December 31,
1999 1998
(unaudited) (audited)
Assets
Current Assets:
Cash and cash equivalents $ 5,460 $ 43,948
Due from affiliates 28,482 21,341
----------- ------------
Total current assets 33,942 65,289
----------- ------------
Oil and Gas properties -
successful efforts method:
Leasehold costs 323,260 323,260
Well and related facilities 7,658,884 7,658,884
less accumulated
depreciation, depletion and
amortization (7,037,475) (7,011,961)
----------- ------------
944,669 970,183
----------- ------------
Total assets $ 978,611 $ 1,035,472
============ ============
Liabilities and Partners' Equity
Current Liabilities:
Due to others $ 12,287 $ 0
------------ ------------
Total current liabilities 12,287 0
------------ ------------
Partners' Equity
Limited partners 974,388 1,033,627
General partners (8,064) 1,845
----------- -----------
Total partners' equity 966,324 1,035,472
----------- -----------
Total liabilities and
Partners' equity $ 978,611 $ 1,035,472
=========== ============
See accompanying note to financial statements.
<PAGE>9
STERLING DRILLING FUND 1984-1
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Six Months Ending
June 30, 1999
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 58,225 15,478 $ 73,703
Other revenue 2,300 611 2,911
Interest income 857 55 912
-------- -------- --------
Total Revenue 61,382 16,144 77,526
-------- -------- --------
Costs and Expenses:
Production expense 42,026 11,172 53,198
General and administrative
to a related party 23,700 6,300 30,000
General and administrative 7,822 2,079 9,901
Depreciation, depletion
and amortization 23,983 1,531 25,514
-------- -------- --------
Total Costs and Expenses 97,531 21,082 118,613
-------- -------- --------
Net Income (Loss) $ (36,149) (4,938) $ (41,087)
======== ======== ========
Net Income (Loss) per
equity unit $ (3.91)
=========
See accompanying note to financial statements.
<PAGE> 10
STERLING DRILLING FUND 1984-1
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Six Months Ending
June 30, 1998
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 115,374 30,669 $ 146,043
Interest income 647 41 688
-------- -------- --------
Total Revenue 116,021 30,710 146,731
-------- -------- --------
Costs and Expenses:
Production expense 56,097 14,912 71,009
General and administrative
to a related party 23,700 6,300 30,000
General and administrative 7,236 1,724 9,160
Depreciation, depletion
and amortization 23,633 1,509 25,142
-------- -------- --------
Total Costs and Expenses 110,666 24,645 135,311
-------- -------- --------
Net Income $ 5,355 6,065 $ 11,420
======== ======== ========
Net Income per equity unit $ .58
=========
See accompanying note to financial statements.
<PAGE> 11
STERLING DRILLING FUND 1984-1
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ending
June 30, 1999
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 26,875 7,145 $ 34,020
Other revenue 2,300 611 2,911
Interest income 262 17 279
-------- -------- -------
Total Revenue 29,437 7,773 37,210
-------- -------- -------
Costs and Expenses:
Production expense 15,492 4,119 19,611
General and administrative
to a related party 11,850 3,150 15,000
General and administrative 5,844 1,553 7,397
Depreciation, depletion
and amortization 11,991 766 12,757
-------- -------- -------
Total Costs and Expenses 45,177 9,588 54,765
-------- -------- -------
Net Income (Loss) $ (15,740) (1,815) $ (17,555)
======== ======== =======
Net Income (Loss) per
equity unit $ (1.70)
========
See accompanying note to financial statements.
<PAGE> 12
STERLING DRILLING FUND 1984-1
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ending
June 30, 1998
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 58,578 15,571 $ 74,149
Interest income 359 23 382
-------- -------- -------
Total Revenue 58,937 15,594 74,531
-------- -------- -------
Costs and Expenses:
Production expense 28,418 7,554 35,972
General and administrative
to a related party 11,850 3,150 15,000
General and administrative 3,944 1,049 4,993
Depreciation, depletion
and amortization 11,816 755 12,571
-------- -------- -------
Total Costs and Expenses 56,028 12,508 $ 68,536
-------- -------- -------
Net Income $ 2,909 3,086 5,995
======== ======== =======
Net Income per equity unit $ .32
========
See accompanying note to financial statements.
<PAGE> 13
STERLING DRILLING FUND 1984-1
(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 $ 1,033,627 1,845 $ 1,035,472
Partners' Contribution 0 846 846
Cash Distributions (23,090) (5,817) (28,907)
Net Income (Loss) (36,149) (4,938) (41,087)
-------- --------- ---------
Balance at end of period $ 974,388 (8,064) $ 966,324
======== ========= =========
Six Months Ended
June 30, 1998
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,049,271 (6,871) $ 1,042,400
Partners' Contribution 0 1,542 1,542
Cash Distributions (23,090) (5,829) (28,919)
Net Income 5,355 6,065 11,420
-------- -------- ---------
Balance at end of period $ 1,031,536 (5,093) $ 1,026,443
======== ======== =========
See accompanying note to financial statements.
<PAGE> 14
STERLING DRILLING FUND 1984-1
(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 $ 1,013,218 (432) $ 1,012,786
Partners' Contribution 0 0 0
Cash Distributions (23,090) (5,817) (28,907)
Net Income (Loss) (15,740) (1,815) (17,555)
-------- -------- ----------
Balance at end of period $ 974,388 (8,064) $ 966,324
======== ======== ==========
Three Months Ended
June 30, 1998
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,051,717 (2,350) $ 1,049,367
Partners' Contribution 0 0 0
Cash Distributions (23,090) (5,529) (28,919)
Net Income 2,909 3,086 5,995
-------- -------- ----------
Balance at end of period $ 1,031,536 (5,093) $ 1,026,443
======== ======== ==========
See accompanying note to financial statements.
<PAGE> 15
STERLING DRILLING FUND 1984-1
(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 $ (10,427) $ 3,519
------------ -----------
Cash flows from financing
activities:
Partners' contributions 846 1,542
Distribution to partners (28,907) (28,919)
------------ -----------
Net cash (used in) financing
activities (28,061) (27,377)
------------ -----------
Cash flows from investing
activities:
Investments in wells and well
Related facilities 0 (530)
------------ -----------
Net cash (used by) investing
activities 0 (530)
----------- -----------
Net increase(decrease) in cash and
cash equivalents (38,488) (24,338)
Cash and cash equivalents at
Beginning of period 43,948 26,270
------------ -----------
Cash and cash equivalents at end of
period $ 5,460 $ 1,882
============ ===========
See accompanying note to financial statements.
<PAGE> 16
STERLING DRILLING FUND 1984-1
(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 from
Sterling Drilling Fund 1984-1 second quarter 1999 10Q and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 5,460
<SECURITIES> 0
<RECEIVABLES> 28,482
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 33,942
<PP&E> 7,982,144
<DEPRECIATION> (7,037,475)
<TOTAL-ASSETS> 978,611
<CURRENT-LIABILITIES> 12,287
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 966,324<F1>
<TOTAL-LIABILITY-AND-EQUITY> 978,611
<SALES> 77,256<F2>
<TOTAL-REVENUES> 77,256
<CGS> 118,613
<TOTAL-COSTS> 118,613
<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> (41,357)
<EPS-BASIC> (3.91)<F3>
<EPS-DILUTED> 0
<FN>
<F1>Other-se includes total partners' equity.
<F2>Sales includes $912 of interest income.
<F3>The income allocated to the limited partners was divided by the
total limited partner units of 9,236.
</FN>
</TABLE>
