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, 1995
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 1984-2
(Exact name of registrant as specified in charter)
New York
(State or other jurisdiction of incorporation)
13-3234372
(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 / /
PART I
Item 1. Financial Statements
The following Financial Statements are filed herewith:
Balance Sheets - September 30, 1995 and December 31, 1994.
Statements of Operations for the Nine and Three Months Ended September
30, 1995 and 1994.
Statements of Changes in Partners' Equity for the Nine and Three
Months Ended September 30, 1995 and 1994.
Statements of Cash Flows for the Nine Months Ended September 30, 1995
and 1994.
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, 1995, the General Partners have distributed
$554,528 or 8.60% of original Limited Partner capital
contributions to the Limited Partners. The possible shut-in of
the Registrant's wells due to normal maintenance combined with
the current level of wellhead prices may have an adverse impact
on the cash available for distribution to the Limited Partners.
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 estimated
future net revenues (S.E.C. case) associated with such reserves,
discounted at 10% as of December 31, 1994 was approximately
$144,000 down from $522,000 in 1993.
The decline in undiscounted future net cash flows for the
Partnership properties at December 31, 1994 when compared to
December 31, 1993, was caused by a significant decline in prices
between these two dates, rather than changes in the estimated
future production from the properties. It is the opinion of
management, and the general consensus in the industry, that gas
prices are unlikely to decline significantly below the December
31, 1994 price in the near future. However, there can be no
assurances that such price declines will not occur, and will not
pose a threat to the Partnership's continued viability.
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 1984 for $5,400,000.
Pursuant to the terms of this contract, twenty wells have been
drilled, resulting in twenty producing wells.
3. Results of Operations -
Total operating revenues decreased from $108,120 in 1994 to
$87,408 in 1995. The partnership produced 28,138 MCF and 1,703
Bbls in 1994 and 26,617 MCF and 1,388 BBls in 1995. The average
price for gas decreased from $2.92 per MCF in 1994 to $2.32 in
1995. The average oil price received increased slightly from
$14.73 per bbls in 1994 to $15.93 per bbls in 1995. The lower oil
and gas production combined with lower average gas prices
resulted in less overall revenue for 1995 when compared to 1994.
Some of lower production can be attributed to the gathering
system's main line pressure being increased. The higher pressure
can cause the partnership's gas to flow less freely. The
gathering system and the partnership's operator have been
discussing ways to adjust and minimize the effect of the pressure
differences. The partnership is currently selling, at spot market
prices, to our normal purchasers until the partnership can lock
into a contract with a favorable price.
Production expenses decreased from $62,619 in 1994 to $45,023
in 1995. The higher production expenses, in 1994, are
attributable to the severe weather extremes of the winter and
spring of last year. Some typical examples of additional costs
incurred include additional maintenance, location, access road
work and other repairs. Most of the production expenses, in 1995,
were to maintain the general upkeep of the wells and well sites.
General and administrative expenses have been segregated on the
financial statements to show expenses attributable to the affairs
and operations of the Registrant payable to PrimeEnergy
Management Corporation(PEMC), a General Partner. These expenses
are charged in accordance with guidelines set forth in the
Registrant's Management Agreement and shall not exceed an annual
amount of 5% of limited partners capital contributed. Amounts
related to both 1995 and 1994 are substantially less than the
amounts allocable to the Registrant under the Partnership
Agreement. The lower amounts reflect management's effort's to
limit costs, both incurred and allocated to the Registrant.
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. A downward revision in reserve estimates
due to lower year-end gas prices in 1994 resulted in an
additional charge of $200,000. The lower depletion expense in
1995 is due to lower depletable cost basis in oil and gas
properties.
4. Other-
In, March, the Financial Accounting Standards Board issued
Statement of Financial Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of," (SFAS No. 121)which is effective for the fiscal
years beginning after December 15, 1995. This statement
establishes accounting standards for the impairment of long-lived
assets, requiring such assets to be reported at the lower of
carrying amount or fair value, less selling costs. The statement
amends SFAS No. 19, "Financial Accounting and Reporting by Oil
and Gas Producing Companies" by adding an impairment test for
proved properties in accordance with SFAS No. 121.
The Registrant currently performs a "ceiling test" by
comparing the total carrying value of oil and gas properties to
the total future net cash flows from the estimated production of
proved oil and gas properties. The effect of SFAS No. 121, which
would change the way this test is performed, is not known at this
time.
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.
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 1984-2
(Registrant)
November 13,1995 By: /s/ Charles E. Drimal, Jr.
(Date) ------------------------------
Charles E. Drimal, Jr.
General Partner
STERLING DRILLING FUND 1984-2
(a New York Limited Partnership)
Balance Sheets
(unaudited)
September 30, December 31,
1995 1994
Assets
Current Assets:
Cash and cash equivalents $ 12,730 $ 3,306
----------- ------------
Total current assets 12,730 3,306
----------- ------------
Oil and Gas properties -
successful efforts method:
Leasehold costs 225,680 225,680
Well and related facilities 5,395,739 5,395,739
less accumulated
depreciation, depletion and
amortization (5,435,176) (5,420,678)
----------- ------------
186,243 200,741
----------- ------------
Total assets $ 198,973 $ 204,047
============ ============
Liabilities and Partners'
Equity
Current liabilities:
Due to affiliates $ 93,977 $ 73,950
----------- ------------
Total current liabilities 93,977 73,950
----------- -----------
Partners' Equity
Limited partners 158,520 180,616
General partners (53,524) (50,519)
----------- ------------
Total partners' equity 104,996 130,097
----------- ------------
Total liabilities and
partners' equity $ 198,973 $ 204,047
=========== ============
See accompanying note to financials.
STERLING DRILLING FUND 1984-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Nine Months Ended
September 30, 1995
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 68,768 18,280 $ 87,048
Interest income 209 13 222
-------- -------- ---------
Total Revenue 68,977 18,293 87,270
-------- -------- ---------
Costs and Expenses:
Production expense 35,568 9,455 45,023
General and administrative
to a related party 14,810 3,937 18,747
General and administrative 10,947 2,910 13,857
Depreciation, depletion
and amortization 13,628 870 14,498
-------- -------- ---------
Total Costs and Expenses 74,953 17,172 92,125
-------- -------- ---------
Net Income(loss) $ (5,976) 1,121 $ (4,855)
======== ======== =========
Net Income(loss)
per equity unit $ (0.93)
=========
See accompanying note to financials.
STERLING DRILLING FUND 1984-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Nine Months Ended
September 30, 1994
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 85,415 22,705 $ 108,120
Interest income 128 8 136
-------- -------- ---------
Total Revenue 85,543 22,713 108,256
-------- -------- ---------
Costs and Expenses:
Production expense 49,469 13,150 62,619
General and administrative
to a related party 19,197 5,103 24,300
General and administrative 10,706 2,846 13,552
Depreciation, depletion
and amortization 18,133 1,157 19,290
-------- ------- ---------
Total Costs and Expenses 97,505 22,256 119,761
-------- ------- ---------
Net Income(loss) $ (11,962) 457 $ (11,505)
======== ======== =========
Net Income(loss)
per equity unit $ (1.86)
========
See accompanying note to financials.
STERLING DRILLING FUND 1984-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ended
September 30, 1995
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 19,664 5,227 $ 24,891
Interest income 29 1 30
-------- -------- ---------
Total Revenue 19,693 5,228 24,921
-------- -------- ---------
Costs and Expenses:
Production expense 11,638 3,094 14,732
General and administrative
to a related party 4,937 1,312 6,249
General and administrative 2,309 614 2,923
Depreciation, depletion
and amortization 4,542 290 4,832
-------- -------- ---------
Total Costs and Expenses 23,426 5,310 28,736
-------- -------- ---------
Net Income(loss) $ (3,733) (82) $ (3,815)
======== ======== =========
Net Income(loss)
per equity unit $ (0.58)
========
See accompanying note to financials.
STERLING DRILLING FUND 1984-2
(a New York Limited Partnership)
Statement of Operations
(unaudited)
Three Months Ended
September 30, 1994
Limited General
Partners Partners Total
Revenue:
Operating revenue $ 27,355 7.271 $ 34,626
Interest income 31 2 33
-------- -------- -----------
Total Revenue 27,386 7,273 34,659
-------- -------- -----------
Costs and Expenses:
Production expense 14,421 3,834 18,255
General and administrative
to a related party 6,399 1,701 8,100
General and administrative 3,399 904 4,303
Depreciation, depletion
and amortization 6,045 385 6,430
-------- -------- -----------
Total Costs and Expenses 30,264 6,824 37,088
-------- -------- -----------
Net Income(loss) $ (2,878) 449 $ (2,429)
======== ======== ===========
Net Income(loss)
per equity unit $ (0.45)
=========
see accompanying note to financials
STERLING DRILLING FUND 1984-2
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Nine Months Ended
September 30, 1995
Limited General
Partners Partners Total
Balance at beginning of
period $ 180,616 (50,519) $ 130,097
Partners' Contribution 0 113 113
Cash Distributions (16,120) (4,239) (20,359)
Net Income(Loss) (5,976) 1,121 (4,855)
-------- -------- ---------
Balance at end of period $ 158,520 (53,524) $ 104,996
======== ======== =========
Nine Months Ended
September 30, 1994
Limited General
Partners Partners Total
Balance at beginning of
period $ 426,323 (31,398) $ 394,925
Partners' Contribution 0 113 113
Cash Distributions (16,120) (4,257) (20,377)
Net Income(Loss) (11,962) 457 (11,505)
-------- -------- ---------
Balance at end of period $ 398,241 (35,085) $ 363,156
======== ======== =========
See accompanying note to financials.
STERLING DRILLING FUND 1984-2
(a New York Limited Partnership)
Statement of Changes in Partners' Equity
(unaudited)
Three Months Ended
September 30, 1995
Limited General
Partners Partners Total
Balance at beginning of
period $ 162,253 (53,555) $ 108,698
Partners' Contribution 0 113 113
Cash Distributions 0 0 0
Net Income(Loss) (3,733) (82) (3,815)
-------- -------- ---------
Balance at end of period $ 158,520 (53,524) $ 104,996
======== ======== =========
Three Months Ended
June 30, 1994
Limited General
Partners Partners Total
Balance at beginning of
period $ 401,119 (35,647) $ 365,472
Partners' Contribution 0 113 113
Cash Distributions 0 0 0
Net Income(Loss) (2,878) 449 (2,429)
--------- -------- ---------
Balance at end of period $ 398,241 (35,085) $ 363,156
========= ======== =========
See accompanying note to financials.
STERLING DRILLING FUND 1984-2
(a New York Limited Partnership)
Statement of Cash Flows
(unaudited)
Nine months Nine months
ended ended
September 30, September 30,
1995 1994
Net cash provided by operating $ 29,670 $ 15,697
activities
------------ ------------
Cash flows from financing
activities:
Partners' contributions 113 113
Distribution to partners (20,359) (20,377)
------------ ------------
Net cash used in financing (20,246) (20,264)
activities
------------ ------------
Net increase(decrease) in cash and
cash equivalents 9,424 (4,567)
Cash and cash equivalents at
beginning of period 3,306 7,850
------------ ------------
Cash and cash equivalents at end of
period $ 12,730 $ 3,283
============ ============
See accompanying note to financials.
STERLING DRILLING FUND 1984-2
(a New York limited partnership)
Note to Financial Statements
September 30, 1995
1. The accompanying statements for the period ending September
30, 1995 are unaudited but reflect all adjustments necessary to
present fairly the results of operations. Certain
reclassifications were made to the prior periods' financial
statements to conform to the current period presentation.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Sterling Drilling Fund 1984-2 third quarter form 10-q and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 12,730
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,730
<PP&E> 5,621,419
<DEPRECIATION> (5,435,176)
<TOTAL-ASSETS> 198,973
<CURRENT-LIABILITIES> 93,997
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 104,996<F1>
<TOTAL-LIABILITY-AND-EQUITY> 198,973
<SALES> 87,048
<TOTAL-REVENUES> 87,270<F2>
<CGS> 92,125
<TOTAL-COSTS> 92,125
<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> (4,855)
<EPS-PRIMARY> (0.93)<F3>
<EPS-DILUTED> 0
<FN>
<F1> (other-se) contains total partnership equity.
<F2> (total-revenues) includes $222 of interest income.
<F3> (eps-primary) includes net income divided by total limited partnership
units of 6,448.
</FN>
</TABLE>
