<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 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>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 $1,708,660 or 18.50% 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
<PAGE> 3
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.
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.
<PAGE> 4
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
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.
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.
<PAGE> 5
3. Results of Operations -
Operating revenues decreased from $71,894 in 1998 to $39,683 in 1999.
This decline is related to declines in gas production, average price
per MCF and declines in average price per BBL. The Partnership's gas
production and average price per MCF changed from 20,188 MCF and
$3.20 in 1998 to 16,958 MCF and $2.70 in 1999. Although the
Parntership receives most of its revenue from gas production it did
show a slight increase in its oil production from 515 BBL in 1998 to
880 BBL in 1999. This increase in oil production was offset by lower
average prices per barrel in 1999 as compared to 1998. Production
expenses declined slightly from $35,037 in 1998 to $33,587 in 1999.
Variable costs associated with production decreased, for example the
related well taxes which are based upon production data. 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 and to third
parties declined slightly from 1998 to 1999. Management continues to
use in-house resources to provide efficient and timely services to the
partnership. The related party 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 due to additional
depletion. Depletion expense is reasonable, in both years, based upon
the rates and property basis reported.
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.
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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
May 14, 1999
(date)
<PAGE> 7
STERLING DRILLING FUND 1984-1
(a New York Limited Partnership)
Balance Sheets
(unaudited)
March 31, December 31,
1999 1998
Assets
Current Assets:
Cash and cash equivalents $ 63,676 $ 43,948
Due from affiliates 0 21,341
Due from others 2,417 0
----------- -----------
Total current assets 66,093 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 (7,024,718) (7,011,961)
----------- -----------
957,426 970,183
----------- -----------
Total assets $ 1,023,519 $ 1,035,472
============ ============
Liabilities and Partner's Equity
Current Liabilities
Due to affiliates 10,733 0
----------- -----------
Total current liabilities 10,733 0
----------- -----------
Partners' Equity
Limited partners $ 1,013,218 $ 1,033,627
General partners (432) 1,845
----------- -----------
Total partners' equity $ 1,012,786 $ 1,035,472
----------- -----------
Total Liabilities and
Partner's Equity $ 1,023,519 $ 1,035,472
============ ============
See accompanying note to financial statements.
<PAGE> 8
STERLING DRILLING FUND 1984-1
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ended
March 31, 1999
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 31,350 8,333 $ 39,683
Interest income 595 38 633
-------- -------- ---------
Total Revenue 31,945 8,371 40,316
-------- -------- ---------
Costs and Expenses:
Production expense 26,534 7,053 33,587
General and administrative
to a related party 11,850 3,150 15,000
General and administrative 1,978 526 2,504
Depreciation, depletion
and amortization 11,992 765 12,757
-------- -------- ---------
Total Costs and Expenses 52,354 11,494 63,848
-------- -------- ---------
Net Loss $ (20,409) (3,123) $ (23,532)
======== ======== =========
Net Income per equity unit $ (2.21)
========
See accompanying note to financial statements.
<PAGE> 9
STERLING DRILLING FUND 1984-1
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ended
March 31, 1998
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 56,796 15,098 $ 71,894
Interest income 288 18 306
-------- -------- ---------
Total Revenue 57,084 15,116 72,200
-------- -------- ---------
Costs and Expenses:
Production expense 27,679 7,358 35,037
General and administrative
to a related party 11,850 3,150 15,000
General and administrative 3,292 875 4,167
Depreciation, depletion
and amortization 11,817 754 12,571
-------- -------- ---------
Total Costs and Expenses 54,638 12,137 66,775
-------- -------- ---------
Net Income $ 2,446 2,979 5,425
======== ======== =========
Net Income per equity unit $ 0.26
========
See accompanying note to financial statements.
<PAGE> 10
STERLING DRILLING FUND 1984-1
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Limited General
Partners Partners Total
Balance at December 31, 1997 $ 1,049,271 $ (6,871) $ 1,042,400
Partners' contribution 0 2,586 2,586
Distribution to partners (23,090) (5,829) (28,919)
Net Income 7,446 11,959 19,405
-------- -------- --------
Balance at December 31, 1998 $ 1,033,627 $ 1,845 $ 1,035,472
Partners' contribution 0 846 846
Net Income (20,409) (3,123) (23,532)
-------- -------- --------
Balance at March 31, 1999 $ 1,013,218 (432) 1,012,786
======== ======== ========
See accompanying note to financial statements.
<PAGE> 11
STERLING DRILLING FUND 1984-1
(a New York Limited Partnership)
Statement of Cash Flows
(unaudited)
Three Three
months months
ended March ended March
31, 1999 31, 1998
Net cash provided by operating
activities $ 18,882 $ 2,846
---------- ----------
Cash flows from investing activities
Investment in wells and
related facilities 0 (530)
---------- ----------
Net cash used in investing activities 0 (530)
---------- ----------
Cash flows from financing activities
Partners' contribution 846 1,542
---------- ----------
Net cash provided by financing
activities 846 1,542
---------- ----------
Net increase(decrease) in cash and
cash equivalents 19,728 3,858
Cash and cash equivalents at
beginning of period 43,948 26,270
---------- -----------
Cash and cash equivalents at end of
period $ 63,676 $ 30,128
=========== ===========
See accompanying note to financial statements.
<PAGE> 12
STERLING DRILLING FUND 1984-1
(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>
