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, 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 0-13457
Sterling Drilling Fund 1984-1
(Exact name of registrant as specified in charter)
New York
(State or other jurisdiction of incorporation or organization)
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> 1
Part I
Item 1. Financial Statements
The following Financial Statements are filed herewith:
Balance Sheets - September 30, 1999 and December 31, 1998.
Statements of Operations for the Nine and Three Months Ended September 30, 1999
and 1998.
Statements of Changes in Partners' Equity for the Nine and Three Months Ended
September 30, 1999 and 1998.
Statements of Cash Flows for the Nine Months Ended September 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 September 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 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.
<PAGE> 2
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.
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.
<PAGE> 3
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.
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 -
The Partnership's gas and oil production decreased, from 59,376 MCF and
1,552 BBLS in 1998 to 52,194 MCF and 1,635 BBLS in 1999. The Partnership's
average price per MCF and per barrel declined to $2.31 per MCF and $14.30
per barrel in 1999. The combination of both price and production declines
resulted in an overall operating revenue decrease from $215,630 in 1998 to
$144,125 in 1999. Production declines could be directly attributed to shut-
in's of purchaser's transport lines or compressor down times to complete
needed annual repairs. These situations directly impact volumes therefore
lowering revenue but generally do not increase costs unless significant
repairs are needed to specific wells or Partnership owned transport lines.
Production expenses declined from $102,950 in 1998 to $85,591 in 1999. The
production expenses were lower as a result of a combination of items,
including variable costs associated with volume changes, repairs and labor
costs associated with the wells and well sites. Current production
expenses, during both years, has been limited to normal maintenance and
upkeep of the wells and well sites.
General and administrative expenses have been segregated on the financial
statements to reflect expenses paid to PrimeEnergy Management
Corporation(PEMC), a General Partner. These expenses are
<PAGE> 4
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 1999 and
1998 are substantially less than the amounts allocable to the Registrant
under the Partnership Agreement. The lower amounts allocated and spent
reflect management's effort 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 1998 or in the three-
quarters of 1999. The expense recorded, in both years, 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 . 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> 5
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
BY: /s/ Charles E. Drimal Jr
----------------------------
Charles E. Drimal, Jr.
General Partner
November 12, 1999
(Date)
<PAGE> 6
STERLING DRILLING FUND 1984-1
(a New York Limited Partnership)
Balance Sheets
September 30, December 31,
1999 1998
(unaudited) (audited)
Assets
Current Assets:
Cash and cash equivalents $ 36,259 $ 43,948
Due from other 7,757 21,341
----------- ---------
Total current assets 44,016 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
(7,050,232) (7,011,961)
----------- -----------
931,912 970,183
----------- ------------
Total assets $ 975,928 $ 1,035,472
========== ===========
Liabilities & Partners' Equity
Current Liabilities:
Due to affliates $ 2,575 $ 0
----------- ----------
Total liabilities 2,575 0
----------- ----------
Partners' Equity
Limited partners 977,540 1,033,627
General partners (4,187) 1,845
----------- -----------
Total partners' equity $ 973,353 $ 1,035,472
----------- -----------
Total Liabilities &
Partner's Equity $ 975,928 $ 1,035,472
========== ===========
See accompanying note to the financial statements
<PAGE> 7
STERLING DRILLING FUND 1984-1
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Nine Months Ended
September 30, 1999
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 113,859 30,266 $ 144,125
Other revenue 2,300 611 2,911
Interest income 1,046 67 1,113
--------- -------- --------
Total Revenue 117,205 30,944 148,149
-------- -------- --------
Costs and Expenses:
Production expense 67,617 17,974 85,591
General and administrative
to a related party 35,550 9,450 45,000
General and administrative 11,060 2,940 14,000
Depreciation, depletion
and amortization 35,975 2,296 38,271
-------- -------- --------
Total Costs and Expenses 150,202 32,660 182,862
-------- -------- --------
Net Income/(loss) $ (32,997) (1,716) $ (34,713)
======== ======== ========
Net (Loss) per equity unit $ (3.57)
======
See accompanying note to the financial statements
<PAGE> 8
STERLING DRILLING FUND 1984-1
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Nine Months Ended
September 30, 1998
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 170,348 45,282 $ 215,630
Interest income 849 54 903
-------- -------- -------
Total Revenue 171,197 45,336 216,533
-------- -------- -------
Costs and Expenses:
Production expense 81,331 21,619 102,950
General and administrative
to a related party 35,550 9,450 45,000
General and administrative 12,199 3,243 15,442
Depreciation, depletion
and amortization 35,449 2,263 37,712
-------- -------- -------
Total Costs and Expenses 164,529 36,575 201,104
-------- -------- -------
Net Income $ 6,668 8,761 $ 15,429
======== ======== =======
Net Income per equity unit $ .72
======
See accompanying note to the financial statements
<PAGE> 9
STERLING DRILLING FUND 1984-1
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ended
September 30, 1999
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 55,634 14,788 70,422
Other revenue 0 0 0
Interest income 189 12 201
--------- -------- --------
Total Revenue 55,823 14,800 70,623
--------- -------- --------
Costs and Expenses:
Production expense 25,591 6,802 32,393
General and administrative
To a related party 11,850 3,150 15,000
General and administrative 3,238 861 4,099
Depreciation, depletion
And amortization 11,992 765 12,757
--------- -------- --------
Total Costs and Expenses 52,671 11,578 64,249
--------- -------- --------
Net Income $ 3,152 3,222 6,374
======== ======== ========
Net Income per equity unit $ 0.34
========
See accompanying note to the financial statements
<PAGE> 10
STERLING DRILLING FUND 1984-1
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ended
September 30, 1998
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 54,974 14,613 $ 69,587
Interest income 202 13 215
-------- -------- --------
Total Revenue 55,176 14,626 69,802
-------- -------- --------
Costs and Expenses:
Production expense 25,234 6,707 31,941
General and administrative
to a related party 11,850 3,150 15,000
General and administrative 4,963 1,319 6,282
Depreciation, depletion
and amortization 11,816 754 12,570
-------- -------- --------
Total Costs and Expenses 53,863 11,930 65,793
-------- -------- --------
Net Income $ 1,313 2,696 $ 4,009
======== ======== ========
Net Income per equity unit $ .14
========
See accompanying note to the financial statements
<PAGE> 11
STERLING DRILLING FUND 1984-1
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Nine Months Ended
September 30, 1999
Limited General
Partners Partners Total
Balance at beginning of $
period $ 1,033,627 1,845 1,035,472
Partners' Contribution 0 1,501 1,501
Cash Distributions (23,090) (5,817) (28,907)
Net Income/(Loss) (32,997) (1,716) (34,713)
--------- -------- ----------
Balance at end of period $ 977,540 (4,187) $ 973,353
========= ======== ==========
Nine Months Ended
September 30, 1998
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,049,271 (6,871) $ 1,042,400
Partners' Contribution 0 2,586 2,586
Cash Distributions (23,090) (5,829) (28,919)
Net Income 6,668 8,761 15,429
--------- -------- ----------
Balance at end of period $ 1,032,849 (1,353) $ 1,031,496
========= ======== ==========
See accompanying note to the financial statements
<PAGE> 12
STERLING DRILLING FUND 1984-1
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Three Months Ended
September 30, 1999
Limited General
Partners Partners Total
Balance at beginning of
period $ 974,388 (8,064) $ 966,324
Partners' Contribution 0 655 655
Cash Distributions 0 0 0
Net Income 3,152 3,222 6,374
--------- -------- ---------
Balance at end of period $ 977,540 (4,187) $ 973,353
========= ======== =========
Three Months Ended
September 30, 1998
Limited General
Partners Partners Total
Balance at beginning of
period $ 1,031,536 (5,093) $ 1,026,443
Partners' Contribution 0 1,044 1,044
Cash Distributions 0 0 0
Net Income(Loss) 1,313 2,696 4,009
--------- -------- ---------
Balance at end of period $ 1,032,849 (1,353) $ 1,031,496
========= ======== =========
See accompanying note to the financial statements
<PAGE> 13
STERLING DRILLING FUND 1984-1
(a New York Limited Partnership)
Statement of Cash Flows
(unaudited)
Nine months Nine months
Ended ended
September September
30, 1999 30, 1998
Net cash provided by operating
activities $ 19,717 $ 37,203
---------- ----------
Cash flows from financing activities:
Partners' contributions 1,501 2,586
Distribution to partners (28,907) (28,919)
----------- -----------
Net cash (used in)financing activities (27,406) (26,333)
----------- -----------
Cash flows from investing activities:
Investment in wells and related
facilities 0 (530)
---------- ----------
Net cash (used in)investing activities 0 (530)
----------- -----------
Net increase/(decrease) in cash and
cash equivalents (7,689) 10,340
Cash and cash equivalents at
beginning of period 43,948 26,270
----------- -----------
Cash and cash equivalents at end of
period $ 36,259 $ 36,610
=========== ===========
see accompanying note to the financial statements
<PAGE> 14
STERLING DRILLING FUND 1984-1
(a New York limited partnership)
Note to Financial Statements
September 30, 1999
1. The accompanying statements for the period ending
September 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 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 36,259
<SECURITIES> 0
<RECEIVABLES> 7,757
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 44,016
<PP&E> 7,982,144
<DEPRECIATION> (7,050,232)
<TOTAL-ASSETS> 975,928
<CURRENT-LIABILITIES> 2,575
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 973,353<F1>
<TOTAL-LIABILITY-AND-EQUITY> 975,928
<SALES> 148,149<F2>
<TOTAL-REVENUES> 148,149
<CGS> 182,862
<TOTAL-COSTS> 182,862
<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> (34,713)
<EPS-BASIC> (3.57)<F3>
<EPS-DILUTED> 0
<FN>
<F1>Other -Se includes total partners' equity.
<F2>Sales includes $1,113 of interest income.
<F3>The income associated with the limited partner group was divided by the
total number of limited partnerhsip units of 9,236.
</FN>
</TABLE>
