STERLING GAS DRILLING FUND 1982 - 10-Q Quarterly Report

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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, 2002

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period Ended______________________

Commission File Number 2-784441

STERLING GAS DRILLING FUND 1982

(Exact name of registrant as specified in charter)

New York

(State or other jurisdiction of incorporation or organization)

13-3147901

(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

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PART I

Item 1. Financial Statements

The following Financial Statements are filed herewith:

Balance Sheets June 30, 2002 and December 31, 2002.

Statements of Operations for the Six and the Three Months Ended June 30, 2002 and 2001.

Statements of Changes in Partners' Equity for the Six and the Three Months Ended June 30, 2002 and 2001.

Statements of Cash Flows for the Six Months Ended June 30, 2002 and 2001.

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 among this industry and other industries in supplying energy and fuel requirements of industrial and individual 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, 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 or for the conduct of the Partnership's business. As of June 30, 2002, the General partners have distributed to the Limited partners $1,402,512 or 9.76%of the total Limited Partner capital contributions to the Limited partners.

In accordance with FASB Statement No. 69, December 31, 2001 market prices were determined using the daily oil price or daily gas sales price ("spot price") adjusted for oilfield or gas gathering hub and wellhead price differentials (e.g. grade, transportation, gravity, sulfur, and BS&W) as appropriate. Also, in accordance with SEC and FASB specifications, changes in market prices subsequent to December 31, 2001 and December 31, 2000 were not considered. The spot price for gas at December 31, 2000 was $9.23 per MMBTU. The range of spot prices during the year 2000 was a low of $2.14 and a high of $10.50 and the average was $4.28. The spot price for gas at December 31, 2001 was $2.63 per MMBTU. The range of spot prices during

the year 2001 was a low of $1.77 and a high of $10.29 and the average was $3.94. The Partnership actually received an average price for gas sold of $5.93 during the first six months of 2001. The range during the first half of 2002 has been from $1.98 to $3.70 with an average of $2.96. The recent futures market prices have been in the $2.89 range.

The present value of unescalated future net revenue (S.E.C. case) associated with such reserves, discounted at 10% as of December 31, 2001 was approximately $788,035 as compared to December 31, 2000, of about $4,363,671. While it may reasonably be anticipated that the prices received by Sterling Gas Drilling Fund 1982 for the sale of its production may be higher or lower than the prices used in this evaluation, as described above, and the operating costs relating to such production may also increase or decrease from existing levels, such possible changes in prices and costs were, in accordance with rules adopted by the SEC, omitted from consideration in making this evaluation for the SEC case. Actual volumes produced, prices received and costs incurred by the partnership may vary significantly from the SEC case

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 1982 for $11,400,000. Pursuant to the terms of this contract, fifty-one wells have been drilled resulting in fifty producing wells and one dry hole. The Registrant has had a reserve report prepared which details reserve value information, and such information is available to the Limited Partners pursuant to the buy-out provisions of the Prospectus as previously filed.

During 2002, PrimeEnergy Management negotiated a Farmout Agreement with Ardent Resources Inc. covering leasehold interests in acres located in Calhoun County, West Virginia. Pursuant to this agreement, Ardent has the right but not the obligation to select acreage and drill a deep well on the selected acreage, subject to an overriding royalty interest due to the leasehold owners. If a test well is not spudded by February 13, 2005 this agreement terminates. Acerage held by Sterling Gas Drilling Fund 1982 was included in the Farmout Agreement, PrimeEnergy Management may discuss the possibility of farming out additional deep rights held by the Partnership under the same terms with other parties, however, there is no guarantee that any agreement will be entered into.

3. Results of Operations -

The Partnership experienced reduced gas and oil production, from 38,018 MCF and 483 BBLS in 2001 to 35,871 MCF and 445 BBLS in 2002. The production volume variations can be a result of changes in transportation line pressures, miscellaneous shut-ins for maintence and natural declines. The average prices changed from $5.93 per MCF and $24.04 per barrel in 2001 to $3.20 per MCF and $18.28 BBLS in 2002. Overall operating revenue declined from $237,131 in 2001 to $122,936 in as a direct result of the lower price and production received for both gas and oil sold. Some of the Partnership's gas sold was sold under a new contract starting in December 2001. The Partnership was paid based upon monthly spot market prices through May 2002 production. The General Partner's elected to sell a substaintial portion of the gas delivered under this contract from June 2002 through October 2002 at a fixed price of $3.57 per MMBTU subject to transportation costs. The aver age price per MCF for the first quarter 2002 was only $2.61 as compared to the six months of 2002 when the average price increased over fifty-nine cents per MCF. Production expenses decreased to $56,867 in 2002 from $124,929 in 2001. The production expenses include variable costs associated with volume changes, repairs and labor costs associated with the wells and well sites. Production expenses, during 2002, were a result of normal maintenance, upkeep of the wells and well sites and lower variable production cost. During 2001 some additional maintenance was performed at various sites, which included small tools and supplies purchased, electrical work, chemicals and labor costs.

The Partnership's other income is a result of a cash bonus paid to the Partnership under the farmout agreement, previously discussed.

General and administrative expenses have been segregated on the financial statements to reflect expenses paid to PrimeEnergy Management Corporation, a general partner. These 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 2002 and 2001 are substantially less than the amounts allocable to the Registrant under the Partnership Agreement. Management continues to work on reducing 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 property basis in either 2001 or 2002. Depletion, depreciation and amortization expense was consistent with the current property basis and the rates applied.

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

(a) Exhibit 99: Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002

(b)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.

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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 and Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

STERLING GAS DRILLING FUND 1982

(Registrant)

BY: /S/ Charles E. Drimal Jr.

Charles E. Drimal, Jr.

General Partner

August 9, 2002

(Date)

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STERLING DRILLING FUND 1982

(A New York Limited Partnership)

Balance Sheets

		June 30, 2002		December 31, 2001
		(unaudited)		(audited)
Assets
Current Assets:
Cash and cash equivalents	$	92,282	$	24,038
Due from affiliates		27,594		26,507
Due from others		0		0
		-----------------		--------------
Total current assets		119,876		50,545
		-----------------		--------------
Oil and Gas properties - successful efforts method:
Leasehold costs		466,804		466,804
Well and related facilities		11,970,091		11,970,091
less accumulated depreciation, depletion and
amortization		(11,868,063)		(11,851,977)
		-----------------		--------------
Total Oil and Gas Properties		568,832		584,918
		-----------------		---------------
Total assets	$	688,708	$	635,463
		==========		===========

Liabilities and Partners' Equity
Current liabilities:
Due to affiliates	$	2,420	$	0
		----------------		---------------
Total current liabilities		2,420		0
		----------------		------------------

Partners' Equity
Limited partners		899,712		859,261
General partners		(213,424)		(223,798)
		----------------		--------------
Total partners' equity		686,288		635,463
		----------------		-----------------

Total liabilities and partners' equity	$	688,708	$	635,463
		=========		==========

See accompanying footnote to the financial statements

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STERLING DRILLING FUND 1982

(a New York Limited Partnership)

Statement of Operations

(unaudited)

Six Months Ending

June 30, 2002

		Limited Partners		General Partners		Total
Revenue:
Operating revenue	$	103,451	$	19,485	$	122,936
Other income		51,929		9,781		61,710
Interest income		474		5		479
		--------------		--------------		--------------
Total Revenue		155,854		29,271		185,125
		--------------		--------------		--------------
Costs and Expenses:
Production expense		47,854		9,013		56,867
General and administrative to a related party		42,412		7,988		50,400
General and administrative		9,213		1,735		10,948
Depreciation, depletion and amortization		15,924		161		16,085
		--------------		--------------		--------------
Total Costs and Expenses		115,403		18,897		134,300
		--------------		--------------		--------------
Net Income (Loss)	$	40,451	$	10,374	$	50,825
		========		========		========
Net Income (Loss) per Equity unit	$	2.81
		========

See accompanying footnote to the financial statements

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STERLING DRILLING FUND 1982

(a New York Limited Partnership)

Statement of Operations

(unaudited)

Six Months Ending

June 30, 2001

		Limited Partners		General Partners		Total
Revenue:
Operating revenue	$	199,546	$	37,585	$	237,131
Other income		55,322		559		55,881
		--------------		--------------		--------------
Total Revenue		254,868		38,144		293,012
		--------------		--------------		--------------

Costs and Expenses:
Production expense		105,128		19,801		124,929
General and administrative to a related party		42,412		7,988		50,400
General and administrative		6,620		1,247		7,867
Depreciation, depletion and amortization		15,165		153		15,318
		--------------		--------------		--------------
Total Costs and Expenses		169,325		29,189		198,514
		--------------		--------------		--------------
Net Income(Loss)	$	85,543	$	8,955	$	94,498
		========		========		========
Net Income(Loss) per equity unit	$	5.95
		=======

See accompanying footnote to the financial statements

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STERLING DRILLING FUND 1982

(a New York Limited Partnership)

Statement of Operations

(unaudited)

Three Months Ending

June 30, 2002

		Limited Partners		General Partners		Total
Revenue:
Operating revenue	$	63,162	$	11,896	$	75,058
Other income		0		0		0
Interest income		330		4		334
		-------------		-------------		-------------
Total Revenue		63,492		11,900		75,392
		-------------		-------------		-------------
Costs and Expenses:
Production expense		21,729		4,092		25,821
General and administrative to a related party		21,206		3,994		25,200
General and administrative		5,971		1,124		7,095
Depreciation, depletion and amortization		7,961		81		8,042
		-------------		-------------		-------------
Total Costs and Expenses		56,867		9,291		66,158
		-------------		-------------		-------------
Net Income (Loss)	$	6,625	$	2,609	$	9,234
		=======		=======		=======
Net Income (Loss) per equity unit	$	.46
		=======

See accompanying footnote to the financial statements

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STERLING DRILLING FUND 1982

(a New York Limited Partnership)

Statement of Operations

(unaudited)

Three Months Ending

June 30, 2001

		Limited Partners		General Partners			Total
Revenue:
Operating revenue	$	98,563	$	18,565		$	117,128
Other income		55,322			559			55,881
		-------------		-------------			-------------
Total Revenue		153,885		19,124			173,009
		-------------		-------------			-------------

Costs and Expenses:
Production expense		51,486		9,697			61,183
General and administrative to a related party		21,206		3,994			25,200
General and administrative		2,822		532			3,354
Depreciation, depletion and amortization		7,583		76			7,659
		-------------		-------------			-------------
Total Costs and Expenses		83,097		14,299			97,396
		-------------		-------------			-------------
Net Income (Loss)	$	70,788	$	4,825		$	75,613
		=======		=======			=======
Net Income (Loss) per equity unit	$	4.93
		=======

See accompanying footnote to the financial statements

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STERLING DRILLING FUND 1982

(a New York Limited Partnership)

Statement of Changes in Partners' Equity

(unaudited)

Six Months Ending

June 30, 2002

		Limited Partners		General Partners					Total

Balance at beginning of period	$	859,261	$	(223,798)			$		635,463
Net Income(Loss)		40,451		10,374					50,825
		-------------		-------------					-------------
Balance at end of period	$	899,712		(213,424)			$		686,288
		========		========					========

						Six Months Ending June 30, 2001
		Limited Partners			General Partners					Total

Balance at beginning of period	$	745,531	$		(251,215)			$		494,316
Net Income(Loss)		85,543			8,955					94,498
		-------------			-------------					-------------
Balance at end of period	$	831,074			(242,260)			$		588,814
		========			========					========

See accompanying footnote to the financial statements

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STERLING DRILLING FUND 1982

(a New York Limited Partnership)

Statement of Changes in Partners' Equity

(unaudited)

Three Months Ending

June 30, 2002

				Limited Partners					General Partners				Total

Balance at beginning of period	$			893,087			$		(216,033)		$		677,054
Net Income(Loss)				6,625					2,609				9,234
				-------------					-------------				-------------
Balance at end of period	$			899,712			$		(213,424)		$		686,288
				========					========				========



					Three Months Ending June 30, 2001
			Limited Partners					General Partners				Total

Balance at beginning of period		$	760,286			$		(247,085)		$		513,201
Net Income(Loss)			70,788					4,825				75,613
			-------------					-------------				-------------
Balance at end of period		$	831,074			$		(242,260)		$		588,814
			========					========				========

See accompanying footnote to the financial statements

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STERLING DRILLING FUND 1982

(a New York Limited Partnership)

Statement of Cash Flows

(unaudited)

		Six months Ended June 30, 2002		Six months Ended June 30, 2001

Net cash provided by operating activities	$	68,244	$	1
		---------------		---------------

Net increase(decrease) in cash and cash equivalents		68,244		1

Cash and cash equivalents at beginning of period		24,038		3
		---------------		---------------
Cash and cash equivalents at end of period	$	92,282	$	6
		=========		=========

See accompanying footnote to the financial statements

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STERLING GAS DRILLING FUND 1982

(a New York limited partnership)

Note to Financial Statements

June 30, 2002

1. The accompanying statements for the period ending June 30, 2002 are unaudited, but reflect all adjustments necessary to present fairly the results of operations.