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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
STERLING DRILLING FUND 1983-1
(Exact name of Registrant as specified in its charter)
COMMISSION FILE NO. 2-84452
NEW YORK 13-3167549
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
ONE LANDMARK SQUARE
STAMFORD, CONNECTICUT 06901
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 358-5700
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP
(Title of Class)
Indicate by check mark whether 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The Registrant has no voting stock. There is no market for the Units
and therefore no market value of the Units is reported.
The number of Units of the Registrant outstanding as of March 15, 2001,
was: 11,077.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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STERLING DRILLING FUND 1983-1, L.P.
FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2000
PART I
ITEM 1. BUSINESS
Sterling Drilling Fund 1983-1, L.P., formerly Sterling-Fuel Resources
Drilling Fund 1983-1 (the "Registrant" or the "Partnership") is a limited
partnership formed under the laws of the State of New York on March 18, 1983.
The sole business of the Partnership was the drilling of formation extension
wells principally for natural gas in various locations in the State of West
Virginia. No exploratory drilling was undertaken.
The principal place of business of the Partnership is at One Landmark
Square, Stamford, Connecticut 06901, telephone (203) 358-5700. The Managing
General Partner of the Partnership is PrimeEnergy Management Corporation, a New
York corporation which is a wholly-owned subsidiary of PrimeEnergy Corporation,
a publicly held Delaware corporation. Messrs. Charles E. Drimal, Jr., Oliver J.
Sterling and Samuel R. Campbell also are General Partners. Mr. Drimal is a
Director, President and Chief Executive Officer of PrimeEnergy Management
Corporation and PrimeEnergy Corporation, and Mr. Campbell is a Director of
PrimeEnergy Corporation.
The aggregate contributions to the Partnership were $11,077,000, all of
which, net of the organization expenses of the Partnership, was expended in the
drilling of such formation extension wells. Such properties are located in Clay,
Roane, Calhoun, Gilmer, Wirt, Kanawha, Lincoln and Putnam Counties, West
Virginia. The Partnership does not operate any of the properties in which it has
an interest, but generally such properties are operated and serviced by Prime
Operating Company, a Texas corporation, and Eastern Oil Well Service Company, a
West Virginia corporation, both wholly-owned subsidiaries of PrimeEnergy
Corporation.
During 2000, the Partnership did not engage in any development drilling
activities or the acquisition of any significant additional properties, but
engaged in the production of oil and gas from its producing properties in the
usual and customary course. Since January 1, 2001, and to the date of this
Report, the Partnership has not engaged in any drilling activities nor
participated in the acquisition of any material producing oil and gas
properties.
During 2000, PrimeEnergy Management negotiated a Farmout Agreement with
Columbia Natural Resources, Inc. (CNR) covering leasehold interests in
approximately 5,000 acres in Clay County, West Virginia. Pursuant to this
agreement, CNR 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. This agreement terminates in April 2001. At this
time it is unlikely that CNR will exercise their rights to select acreage and
drill a well. If CNR does not exercise their rights under this agreement
PrimeEnergy will attempt to find other parties interested in this acreage.
Although
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acreage held by Sterling Drilling Fund 1983-1 was not included in the
CNR Farmout Agreement, PrimeEnergy Management may discuss the possibility of
farming out deep rights held by the Partnership under the same terms with other
parties, however, there is no guarantee that an agreement will be entered into.
COMPETITION AND MARKETS
Competitors of the Partnership in the marketing of its oil and gas
production include oil and gas companies, independent concerns, and individual
producers and operators, many of which have financial resources, staffs and
facilities substantially greater than those available to the Partnership.
Furthermore, domestic producers of oil and gas must not only compete with each
other in marketing their output, but must also compete with producers of
imported oil and gas and alternative energy sources such as coal, nuclear power
and hydroelectric power.
The availability of a ready market for any oil and gas produced by the
Partnership at acceptable prices per unit of production will depend upon
numerous factors beyond the control of the Partnership, including the extent of
domestic production and importation of oil and gas, the proximity of the
Partnership's producing properties to gas pipelines and the availability and
capacity of such pipelines, the marketing of other competitive fuels,
fluctuation in demand, governmental regulation of production, refining,
transportation and sales, general national and worldwide economic conditions,
and pricing, use and allocation of oil and gas and their substitute fuels.
The Partnership does not currently own or lease any bulk storage
facilities or pipelines, other than adjacent to and used in connection with
producing wells. The Partnership deals with a number of major and independent
companies for the purchase of its oil and gas production, in the areas of
production. In 2000, approximately $345,794 or 94.95% of the Partnership's gas
production was sold to one unaffiliated purchaser, Phoenix Diversified and about
$34,249 or 100% of oil production was purchased by the American Refining Group.
Neither purchaser has any relationship or is otherwise affiliated with the
Partnership. Sales are made under short-term contractual arrangements. The
Partnership believes that its current purchasers will continue to purchase oil
and gas products and, if not, could be replaced by other purchasers.
ENVIRONMENTAL MATTERS
The petroleum industry is subject to numerous federal and state
environmental statutes, regulations and other pollution controls. In general,
the Partnership is, and will be subject to, present and future environmental
statutes and regulations, and in the future the cost of its activities may
materially increase as a result thereof. The Partnership's expenses relating to
preserving the environment during 2000 as they relate to its oil and gas
operations were not significant in relation to operating costs and the
Partnership expects no material change in the near future. The Partnership
believes that environmental regulations should not, in the future, result in a
curtailment of production or otherwise have a materially adverse effect on the
Partnership's operations or financial condition.
REGULATION
The Partnership's oil and gas operations are subject to a wide variety
of federal, state and local regulations. Administrative agencies in such
jurisdictions may promulgate and enforce rules
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and regulations relating to, among other things, drilling and spacing of oil and
gas wells, production rates, prevention of waste, conservation of natural gas
and oil, pollution control, and various other matters, all of which may affect
the Partnership's future operations and production of oil and gas. The
Partnership's natural gas production and prices received for natural gas are
regulated by the Federal Energy Regulatory Commission ("FERC") and the Natural
Gas Policy Act of 1978 and various state regulations. The Partnership is also
subject to state drilling and proration regulations affecting its drilling
operations and production rates.
The FERC continues to regulate interstate natural gas pipeline
transportation rates and service conditions pursuant to the NGA and NGPA.
Federal regulation of interstate transporter's affects the marketing of natural
gas produced by the Partnership as well as the revenues received by the
Partnership for sales of such natural gas. Since the latter part of 1985,
through its Order Nos. 436, 500 and 636 rulemakings, the FERC has endeavored to
make natural gas transportation accessible to gas buyers and sellers on an open
and non-discriminatory basis. The FERC's efforts have significantly altered the
marketing and pricing of natural gas. No prediction can be made as to what
additional legislation may be proposed, if any, affecting the competitive status
of a gas producer, restricting the prices at which a producer may sell its gas,
or the market demand for gas, nor can it be predicted which proposals, including
those presently under consideration, if enacted, might be effective.
Additional proposals and proceedings that might affect the natural gas
industry are considered from time to time by Congress, the FERC, state
regulatory bodies and the courts. The Partnership cannot predict when or if any
such proposals might become effective, or their effect, if any, on the
Partnership's operations. The Partnership believes that it will comply with all
orders and regulation changes applicable to its operations. However, in view of
the many uncertainties with respect to the current controls, including their
duration and possible modification together with any new proposals that may be
enacted, the Partnership cannot predict the overall effect, if any, of such
controls on its operations.
TAXATION
The Partnership received an opinion of its counsel that the Partnership
would be classified as a partnership and the holders of Partnership Units would
be treated as limited partners for federal income tax purposes. The Partnership
itself, to the extent that it is treated for federal income tax purposes as a
partnership, is not subject to any federal income taxation, but it is required
to file annual partnership returns. Each holder of Partnership Units will be
allocated his distributive shares of the Partnership's income, gain, profit,
loss, deductions, credits, tax preference items and distributions for any
taxable year of the Partnership ending within or with his taxable year without
regard as to whether such holder has received or will receive any cash
distributions from the Partnership.
ITEM 2. PROPERTIES
The Partnership has no interest in any properties other than its oil
and gas properties. The
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information set forth below summarizes the Partnership's oil and gas wells,
production and reserves, for the periods indicated.
PRODUCING WELLS AND OPERATING INFORMATION
The Partnership, following its formation, and in November, 1983,
contracted for the drilling of 38 development wells, which resulted in 37
producing wells and one dry hole.
As of December 31, 2000, the Partnership had ownership interests in the
following gross and net producing oil and gas wells and gross and net producing
acres(1). The Partnership has no material undeveloped leasehold, mineral or
royalty acreage.
Producing wells:
Gross Net
----- ---
Oil Wells 0 0
Gas Wells 39 31.3
Producing acres 1,833 1,771
(1) A gross well is a well in which an interest is owned; a net
well is the sum of the interests owned in gross wells. Wells
are classified by their primary product. Some wells produce
both oil and gas.
The following table sets forth the Partnership's oil and gas
production, average sales prices and average production costs as of and for the
periods indicated:
YEARS ENDED DECEMBER 31,
------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Production
Oil and Condensate (bbl) 1,263 877 1,232 1,302 1,524
Gas (Mcf) 103,533 95,379 100,993 111,382 113,227
Average Price of Sales:
Oil and Condensate ($ per bbl) $27.11 $16.16 $12.05 $19.64 $16.37
Gas ($ per Mcf) $3.52 $2.50 $3.17 $3.15 $2.31
Production Expense per Dollar
Of Operating Revenue $0.46 $0.46 $0.45 $0.44 $0.47
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OIL AND GAS RESERVES
The Partnership's interests in proved developed oil and gas properties
have been evaluated by Ryder Scott Company, L.P. for the periods indicated
below. All of the Partnership's reserves are located in the continental United
States. The following table summarizes the Partnership's oil and gas reserves at
the dates shown (figures rounded):
Proved Developed
As of ----------------
12-31 Oil (bbls) Gas (mcf)
----- ---------- ---------
1996 13,850 2,233,000
1997 14,000 2,034,300
1998 13,000 1,808,900
1999 11,900 1,587.600
2000 11,300 1,793,400
The estimated future net revenue using current prices and costs as of the dates
indicated, exclusive of income taxes (at a 10% discount for estimated timing of
cash flow) for the Partnership's proved developed oil and gas reserves for the
periods indicated are summarized as follows (figures rounded):
Proved Developed
----------------
As of Future Net Present Value of
12-31 Revenue Future Net Revenue
----- ---------- ------------------
1996 $3,414,800 $1,313,750
1997 2,940,800 1,200,900
1998 2,293,000 915,800
1999 2,597,600 1,153,900
2000 14,397,393 5,503,164
The estimated reserve quantities and future income quantities are
related to hydrocarbon prices. Therefore, volumes of reserves actually recovered
and amounts of income actually received may differ significantly from the
estimated quantities presented in this report.
In accordance with FASB Statement No. 69, December 31, 2000 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, 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 range during the first quarter of 2001 has been from $4.67 to $10.69
with an average of $6.42. The recent futures market prices have been in the
$5.00 range. While it may reasonably be anticipated that the prices received by
Sterling Drilling Fund 1983-1 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
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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.
Since January 1, 2000, the Partnership has not filed any estimates of
its oil and gas reserves with, nor were any such estimates included in any
reports, to any federal authority or agency, other than the Securities and
Exchange Commission.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not a party to, nor is any of its property the
subject of, any legal proceedings actual or threatened, which would have a
material adverse effect on the business and affairs of the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted during 2000 for vote by the holders of
Partnership Units.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
There is no market for the Limited Partnership Units (the "Units") of
the Partnership. As of March 15, 2001, there were 605 holders of record of the
Units.
The Units are not regarded as stock and payments or distributions to
holders of Units are not made in the form of dividends. Cash distributions to
the holders of Units for 2000 aggregated $27,693. Aggregate cash distributions
to the holders of the Units as of December 31, 2000, is $2,409,248.
The Managing General Partner may purchase Units directly from the unit
holders if presented to the Managing General Partner, subject to conditions,
including limitations on numbers of Units, and at a price to be fixed by the
Managing General Partner in accordance with certain procedures, all as provided
for in the Limited Partnership Agreement of the Partnership.
ITEM 6. SELECTED FINANCIAL DATA
The information required hereunder is set forth under "Selected
Financial Data" in the Financial Information section included in this Report.
The index to the Financial Information section is at page F-1.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required hereunder is set forth under "Management's
Discussion and
8
Analysis of Financial Condition and Results of Operations" in the Financial
Information section included in this Report. The index to the Financial
Information section is at page F-1.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Registrant is a "small business issuer" as defined in the Securities
and Exchange Act Rule 12b-2 and no information is required to be provided by
this Item 7A.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required hereunder is set forth under "Report of
Independent Public Accountants," "Balance Sheets," "Statements of Operations"
"Statements of Changes in Partners' Equity," "Statements of Cash Flows" and
"Notes to Financial Statements" in the Financial Information section included in
this Report. The index to the Financial Information section is at
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There was no disagreement between the Partnership and its certified
public accountants on any matter of accounting principles or practices or
financial statement disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Managing General Partner of the Partnership is PrimeEnergy
Management Corporation, a New York corporation ("Management"). The principal
business of Management is the management of the Partnership and other publicly
and privately held exploration and development limited partnerships and joint
ventures and publicly held asset and income fund limited partnerships. As of
March 15, 2001, Management acts as the Managing General Partner in a total of 47
limited partnerships and joint ventures, of which 5 are publicly held, and is
the Managing Trustee of 2 Delaware Business Trusts. The primary activity of such
Partnerships, joint ventures and trusts is the production of oil and gas and
Management, as the Managing General Partner of the Partnership, will devote such
of its time as it believes necessary in the conduct and management of the
business and affairs of the Partnership. Management, and other of the General
Partners of the Partnership, are engaged in and intend to continue to engage in
the oil and gas business for their own accounts and for the accounts of others.
Management, which provides all of the executive, management and
administrative functions of the Partnership, is a wholly-owned subsidiary of
PrimeEnergy Corporation ("PrimeEnergy"), a publicly held Delaware corporation.
The principal offices of PrimeEnergy and Management are in Stamford,
Connecticut. The operating subsidiaries of PrimeEnergy, Prime Operating Company
and Eastern Oil Well Service Company, maintain their principal offices in
Houston, Texas, with district offices in Midland, Texas, Oklahoma City,
Oklahoma, and Charleston, West Virginia. PrimeEnergy and its subsidiaries have
about 180 employees, including their principal officers providing
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management and administrative services, accounting, geologists, production
engineers, land department personnel and field employees.
Set forth below is information concerning the directors and executive
officers of Management and PrimeEnergy who are involved with the conduct of the
business and operations of the Partnership.
Charles E. Drimal, Jr., age 53, is a Director and President of
Management and has held those positions since May 1983. He is also a Director
and President of Prime Energy and the operating subsidiaries. He graduated from
the University of Maryland in 1970 and from Stamford University School of Law in
1973 and is a member of the New York State Bar.
Beverly A. Cummings, age 48, has been a Director, Executive Vice
President and Treasurer of Management since August 1985. She is also a Director
and Executive Vice President and Treasurer of PrimeEnergy and the operating
subsidiaries. Ms. Cummings is a Certified Public Accountant and holds a Bachelor
of Science degree from the State University of New York and a Master in Business
Administration from Rutgers University.
Lynne G. Pizor, age 41, has been Controller of Prime Operating Company
since January 1992 and Eastern Oil Well Service Company since September 1990.
She also held that position with Management from January 1986 to August 1994,
and PrimeEnergy from May 1990 to August, 1994. She joined Management in October
1984, as Manager of Partnership Accounting. She is a graduate of Wagner College
with a Bachelor of Science degree in Economics and Business Administration and
is a Certified Public Accountant.
James F. Gilbert, age 68, has been Secretary of Management since June
1990, and has been Secretary of PrimeEnergy since March 1973, and was a Director
of PrimeEnergy from that date to October, 1987. He also serves as Secretary of
the operating subsidiaries. He is an attorney in Dallas, Texas.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers, directors or employees. The officers
and employees of the Managing General Partner and PrimeEnergy perform all
management and operational functions of the Partnership. The Partnership does
not pay any direct salaries or other remuneration to the officers, directors or
employees of the Managing General Partner or PrimeEnergy. The Managing General
Partner is reimbursed for the general and administrative expenses of the
Partnership which are allocated to the Partnership for expenses incurred on
behalf of the Partnership, together with administrative work by third parties,
limited annually to 5% of the aggregate capital contribution of the holders of
the Partnership Units. During 2000 and 1999, the allocation of general and
administrative expenses to the Partnership was $100,000 for each year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Partnership does not know of any person, entity or group, other
than the Managing general Partner that beneficially owns more than five percent
of the Partnership Units. The following
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table shows as of March 15, 2001, the name and address of such beneficial
owners, and the number and percent of partnership units beneficially owned by
them, all of which are directly owned.
Name and Address of Beneficial Owner
------------------------------------ Number
of Units Percent
-------- -------
PrimeEnergy Management Corporation
One Landmark Square
Stamford, CT 06901 1,152 10.40%
PrimeEnergy Corporation
One Landmark Square
Stamford, Connecticut 06901 2,622 23.67%
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prime Operating Company acts as the operator for most of the producing
oil and gas wells of the Partnership pursuant to operating agreements with the
Partnership and other working interest owners, including other partnerships
managed by the Managing General Partner, and in 2000, was paid well operating
fees ranging from about $467 to $647 per month per well. Well operating supplies
and equipment and related servicing operations are generally provided by Eastern
Oil Well Service Company. The Partnership pays its proportionate part of such
operating fees and expenses. Such fees and expenses vary depending on such
matters as the location of the well, the complexity of the producing equipment,
whether wells produce oil or gas or both and similar factors. The Partnership
believes that such services are as favorable to the Partnership as they would be
if the Partnership entered into such transactions with unaffiliated third
parties. In 2000 and 1999, the Partnership paid an aggregate of $117,196 and
$77,544, respectively, in such fees and expenses.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Report:
1. Financial Statements (Index to the Financial Information at
page F-1)
2. Financial Statement Schedules:
Schedule V Property and Equipment - Oil and Gas Properties
Schedule VI Accumulated Depreciation, Depletion and
Amortization - Oil and Gas Properties
3. Exhibits:
(3) Form of Agreement of Limited Partnership of
Sterling Drilling Fund 1983-1 (Incorporated by
reference to Exhibit (3) of Sterling Drilling Fund
1983-1 Form 10-K for the year ended December 31,
1994.)
(23) Consent of Ryder Scott Company, L.P. (filed
herewith)
(b) Reports on Form 8-K: No reports on Form 8-K have been filed during
the last quarter of the year covered by this Report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 28th day of
March, 2001.
Sterling Drilling Fund 1983-1, L.P.
By: PrimeEnergy Management Corporation
Managing General Partner
By: /S/ Charles E. Drimal Jr.
-------------------------
Charles E. Drimal, Jr.
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated and on the 28th day of March, 2001.
/S/ Charles E. Drimal Jr Director and President,
- ------------------------ PrimeEnergy Management Corporation;
Charles E. Drimal, Jr. The Principal Executive Officer
/S/ Beverly A Cummings Director, Executive Vice President and
- ---------------------- Treasurer, PrimeEnergy Management
Beverly A. Cummings Corporation; The Principal Financial and
Accounting Officer
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STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
Index to Financial Information and Schedules
PAGE NO.
--------
Selected Financial Data F-2
Management's Discussion and Analysis of Financial Condition
and Results of Operations F-2
Report of Independent Public Accountants F-5
Financial Statements:
Balance Sheets, December 31, 2000 and 1999 F-6
Statements of Operations for the Years Ended December 31,
2000, 1999 and 1998 F-7
Statements of Changes in Partners' Equity for the Years
Ended December 31, 2000, 1999 and 1998 F-8
Statements of Cash Flows for the Years
Ended December 31, 2000, 1999 and 1998 F-9
Notes to Financial Statements F-10
Schedules:
V - Property and Equipment - Oil and Gas Properties for
the Years Ended December 31, 2000, 1999, and 1998 F-18
VI - Accumulated Depreciation, Depletion and Amortization -
Oil and Gas Properties for the Years Ended December 31,
2000, 1999 and 1998 F-19
All other schedules have been omitted as the information required is either
included in the financial statements, related notes, or is not applicable.
F-1
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ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected financial data to
highlight significant trends in the Registrant's financial condition and results
of operations for the periods indicated. The selected financial data should be
read in conjunction with the financial statements and related notes included
elsewhere in this report.
YEAR ENDED DECEMBER 31, (000's omitted)
---------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
Revenues $ 419 261 346 386 297
Net income (loss):
Limited Partners $ 23 (65) (15) 1 (42)
General Partners $ 20 6 9 15 2
Per equity unit $ 2.12 (5.87) (1.35) 0.11 (3.79)
Total assets $1,532 1,524 1,635 1,693 1,729
Cash distributions:
Limited Partners $ 28 42 42 42 42
General Partners $ 7 11 11 11 12
Limited Partners as a % of
original contribution 0.25% 0.375% 0.375% 0.375% 0.375%
ITEM 7. MANAGEMENTS DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & 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 Partnership to calculate its position in
the industry as the Partnership 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 Partnership 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 December 31, 2000, the General Partners have distributed to the
Limited Partners $2,409,248 or 21.75% of the total Limited Partner capital
contributions to the Limited 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 revenue (S.E.C. case) associated with
such reserves, discounted at 10% as of December 31, 2000, was approximately
$5,503,164 as compared to the discounted reserves as of December 31, 1999, which
were approximately $1,153,941. Reservoir engineering is a subjective process of
estimating underground accumulations of gas and oil that can not be measured in
an exact manner. The estimated reserve quantities and future income quantities
are related to hydrocarbon prices.
F-2
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Therefore, volumes of reserves actually recovered and amounts of income actually
received may differ significantly from the estimated quantities presented in
this report.
In accordance with FASB Statement No. 69, December 31, 2000 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, 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 range during the first quarter of 2001 has been from $4.67 to $10.69
with an average of $6.42. The recent futures market prices have been in the
$5.00 range. While it may reasonably be anticipated that the prices received by
Sterling Drilling Fund 1983-1 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 Partnership was formed for the sole intention
of drilling oil and gas wells. The Partnership entered into a drilling contract
with an independent drilling contractor in November, 1983, for $9,400,000.
Pursuant to the terms of this contract, thirty-eight wells were drilled
resulting in thirty-seven producing wells and one dry-hole.
3. Results of Operations:
2000 compared to 1999
The Partnership receives some of its revenue from oil production as
well as gas production. The Partnership's increased oil production and the
significant positive change in average price per barrel contributed to overall
increase in revenue, from 877 barrel in 1999 and an average price of $16.16 to
1,263 barrels in 2000 and an average price of $27.11. The Partnership's main
source of revenue is from its gas produced and sold. An increase in its gas
production from 95,379 mcf in 1999 to 103,533 mcf in 2000 combined with a higher
average price per mcf from $2.50 in 1999 to $3.52 in 2000 resulted in a
significant increase in gas revenue. The Partnership also received funds from
the one time settlement of a class action lawsuit in the amount of $10,503. The
combination of production and price increases resulted in an overall operating
revenue to increase from $252,207 in 1999 to $398,448 in 2000.
Interest income fluctuates with changes in the interest rates received
as well as the amount of cash in the bank at any given time.
Production expenses increased from $115,162 in 1999 to $ 182,826 in
2000. Production expenses can be variable in nature relating to the volumes
produced. Variable costs were reasonable based upon current production volumes
during both years. Other direct costs, which include but are not limited to,
involve repairs, labor, chemicals, and repairs to access the well sites. The
majority
F-3
15
of the production expenditures during 2000 and 1999 related to routine
maintenance and upkeep at the well site. General and administrative costs
remained relatively unchanged between 1999 and 2000, from $122,972 to $ 119,184,
respectively. Management will use in-house resources if it will provide
efficient and timely services to the partnership. Amounts in both years are
substantially less than the $553,850 allowed to be allocated to the Partnership
under the Partnership Agreement.
The Partnership records additional depreciation, depletion and
amortization to the extent that the net capitalized costs exceed the
undiscounted future net cash flows attributable to the Partnership. No revisions
to the basis of the Partnership properties were needed in 2000 or 1999. The
overall depreciation and depletion for both years was consistent with the rates
used and the remaining property basis.
1999 compared to 1998
The Partnership receives some of its revenue from oil production as
well as gas production. The Partnership's oil production declined slightly from
1998 to 1999, 1232 bbls to 877 bbls respectively. The change in production was
offset by higher average price per barrel, from $12.05 in 1998 to $16.16 in
1999. The Partnership's main source of revenue is from its gas produced and
sold. A decline in its gas production from 100,983 mcf in 1998 to 95,379 mcf in
1999 combined with a decline in average price per mcf from $3.17 in 1998 to
$2.50 in 1999. Lower gas production can sometimes be attributed to shut-ins and
higher main transport line pressures. The higher main line pressure can inhibit
or restrict the free movement of the partnership's gas from the wells to the
purchaser's transport line. The combination of production and price declines
resulted in overall operating revenue to decline from $337,678 in 1998 to
$252,207 in 1999.
Interest income fluctuates with changes in the interest rates received
as well as the amount of cash in the bank at any given time.
Production expenses decreased from $152,083 in 1998 to $115,162 in
1999. Production expenses can be variable in nature relating to the volumes
produced. Variable costs were reasonable based upon current production volumes
during both years. Other direct costs, which include but are not limited to,
involve repairs, labor, chemicals, and repairs to access the well sites. The
majority of the production expenditures during 1999 and 1998 related to routine
maintenance and upkeep at the well site. General and administrative costs
remained relatively unchanged between 1998 and 1999, from $120,356 to $122,972,
respectively. Management will use in-house resources if it will provide
efficient and timely services to the partnership. Amounts in both years are
substantially less than the $553,850 allowed to be allocated to the Partnership
under the Partnership Agreement.
The Partnership records additional depreciation, depletion and
amortization to the extent that the net capitalized costs exceed the
undiscounted future net cash flows attributable to the Partnership. No revisions
to the basis of the Partnership properties were needed in 1999 or 1998. The
overall depreciation and depletion for both years was consistent with the rates
used and the remaining property basis.
F-4
16
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Sterling Drilling Fund 1983-1, L.P.:
We have audited the accompanying balance sheets of Sterling Drilling Fund
1983-1, L.P. (a New York limited partnership) as of December 31, 2000 and 1999,
and the related statements of operations, changes in partners' equity, and cash
flows for the years ended December 31, 2000, 1999 and 1998. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sterling Drilling Fund 1983-1,
L.P. as of December 31, 2000 and 1999, and the results of its operations and
cash flows for the years ended December 31, 2000, 1999 and 1998 in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index to
financial statements and schedules are presented for purposes of complying with
the Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the examination of the basic financial statements and, in
our opinion, fairly state in all material respects the financial data required
to be set forth therein in relation to the basic financial statements taken as a
whole.
PUSTORINO, PUGLISI & CO., LLP
New York, New York
March 1, 2001
F-5
17
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
Assets
2000 1999
---- -----
Current Assets:
Cash and cash equivalents (Note 2) $ 198,847 $ 126,703
Due from affiliates (Note 6) 50,573 40,368
----------- -----------
Total Current Assets 249,420 167,071
----------- -----------
Oil and Gas Properties - successful efforts methods (Note 3) - (Schedules V and
VI):
Leasehold costs 321,314 321,314
Wells and related facilities 8,934,084 8,934,084
----------- -----------
Total 9,255,398 9,255,398
Less - Accumulated depreciation, depletion and amortization (7,972,868) (7,898,828)
----------- -----------
1,282,530 1,356,570
----------- -----------
Total Assets $ 1,531,950 $ 1,523,641
=========== ===========
Liabilities and Partners' Equity
Total Liabilities $ -- $ --
----------- -----------
Partners' Equity:
Limited partners 1,477,086 1,472,473
General partners 54,864 51,168
----------- -----------
Total Partners' Equity 1,531,950 1,523,641
----------- -----------
Total Liabilities and Partners' Equity $ 1,531,950 $ 1,523,641
=========== ===========
The Notes to Financial Statements are an integral part of these statements.
F-6
18
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
----------------------------- ------------------------------- ------------------------------
Limited General Limited General Limited General
Partners Partners Total Partners Partners Total Partners Partners Total
-------- -------- ----- -------- -------- ----- -------- -------- -----
Revenues:
Operating revenues $ 304,813 $ 93,635 $ 398,448 $ 192,938 $ 59,269 $ 252,207 $ 258,324 $ 79,354 $ 337,678
Other Revenue
(Note 10) 8,035 2,468 10,503 2,295 705 3,000 -- -- --
Interest 9,433 876 10,309 5,289 491 5,780 7,840 728 8,568
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Revenues 322,281 96,979 419,260 200,522 60,465 260,987 266,164 80,082 346,246
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Costs and Expenses:
Production expenses 139,862 42,964 182,826 88,099 27,063 115,162 116,344 35,739 152,083
Depreciation,
depletion and
amortization 67,747 6,293 74,040 74,572 6,928 81,500 72,703 6,754 79,457
General and
administrative
expenses (Note 7) 91,176 28,008 119,184 94,074 28,898 122,972 92,072 28,284 120,356
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Expenses 298,785 77,265 376,050 256,745 62,889 319,634 281,119 70,777 351,896
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net Income (Loss) $ 23,496 $ 19,714 $ 43,210 $ (56,223) $ (2,424) $ (58,647) $ (14,955) $ 9,305 $ (5,650)
========= ========= ========= ========= ========= ========= ========= ========= =========
Net income (Loss) Per
Equity Unit (Note 2) $ 2.12 $ (5.08) $ (1.35)
========= ========= =========
The Notes to Financial Statements are an integral part of these statements.
F-7
19
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
Limited General
Partners Partners Total
---------- -------- ----------
Balance at December 31, 1997 $1,635,538 $ 57,451 $1,692,989
Partners' contributions -- 176 176
Distributions to partners (41,539) (11,257) (52,796)
Net Income (Loss) (14,955) 9,305 (5,650)
---------- -------- ----------
Balance at December 31, 1998 1,579,044 55,675 1,634,719
Partners' contributions -- 175 175
Distributions to partners (41,538) (11,068) (52,606)
Net (Loss) (56,223) (2,424) (58,647)
---------- -------- ----------
Balance at December 31, 1999 1,481,283 42,358 1,523,641
Partners' contributions 117 117
Distributions to partners (27,693) (7,325) (35,018)
Net Income 23,496 19,714 43,210
---------- -------- ----------
Balance at December 31, 2000 $1,477,086 $ 54,864 $1,531,950
========== ======== ==========
The Notes to Financial Statements are an integral part of these statements.
F-8
20
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
-------- -------- --------
Net (loss) income $ 43,210 $(58,647) $ (5,650)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation, depletion and
Amortization 74,040 81,500 79,457
Changes in Assets and Liabilities -
Increase in due from affiliates (10,205) (3,486) (36,882)
Increase in due to affiliates -- -- 45,125
-------- -------- --------
Net Cash Provided by Operating
Activities 107,045 19,367 82,050
-------- -------- --------
Cash Flows From Investing Activities:
Equipment purchases -- (14,911) (387)
-------- -------- --------
Net Cash Used by Investing
Activities -- (14,911) (387)
-------- -------- --------
Cash Flows From Financing Activities:
Partners' contributions 117 175 176
Distributions to partners (35,018) (52,606) (52,796)
-------- -------- --------
Net Cash Used in Financing
Activities (34,901) (52,431) (52,620)
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents 72,144 (47,975) 29,043
Cash and cash equivalents, beginning of
year 126,703 174,678 145,635
-------- -------- --------
Cash and cash equivalents, end of year $198,847 $126,703 $174,678
======== ======== ========
The Notes to Financial Statements are an integral part of these statements.
F-9
21
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000, 1999 AND 1998
(1) Organization and Capital Contributions:
Sterling Drilling Fund 1983-1, L.P., formerly Sterling-Fuel Resources
Drilling Fund 1983-1, a New York limited partnership (the
"Partnership"), was formed on March 18, 1983 for the primary purpose of
acquiring, developing and producing oil and gas in the state of West
Virginia. The general partners are: PrimeEnergy Management Corporation
(PEMC), a wholly owned subsidiary of PrimeEnergy Corporation (PEC),
Charles E. Drimal, Jr., Oliver J. Sterling and Samuel R. Campbell.
Eleven thousand seventy-seven limited partnership units, (11,077), were
sold at $1,000 per unit aggregating total limited partner contributions
of $11,077,000. The general partners' contributions amounted to
$902,847. Partnership operations commenced on November 10, 1983.
(2) Summary of Significant Accounting Policies:
Revenue Recognition:
The Partnership recognizes operating revenues, consisting of sales of
oil and gas production, in the month of sale. Uncollected revenue is
accrued based on known facts and trends of the relevant oil and gas
properties on a monthly basis.
Basis of Accounting:
The accounts of the Partnership are maintained in accordance with
accounting practices permitted for federal income tax reporting
purposes. Under this method of accounting, (a) substantially all
exploration and development costs except leasehold and equipment costs
are expensed as paid, (b) costs of abandoned leases and equipment are
expensed when abandoned, and (c) depreciation (for equipment placed in
service) is provided on an accelerated basis. In order to present the
accompanying financial statements in accordance with generally accepted
accounting principles, memorandum adjustments have been made to account
for oil and gas properties, as discussed below.
Oil and Gas Producing Activities:
The Partnership accounts for its oil and gas operations using the
successful efforts method of accounting on a property by property
basis. The Partnership only participates in developmental drilling.
Accordingly, all costs of drilling and equipping these wells, together
with leasehold acquisition costs, are capitalized. These capitalized
costs are amortized on a property by property basis by the unit-of-
F-10
22
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000, 1999 AND 1998
(2) Summary of Significant Accounting Policies - (Cont'd):
production method based upon the ratio of production to proved oil and
gas reserves. Additional depreciation, depletion and amortization may
be recorded if net capitalized costs exceed the undiscounted future net
cash flows attributable to Partnership properties. (See Note 4)
Federal Income Taxes:
As federal income taxes are the liability of the individual partners,
the accompanying financial statements do not include any provision for
federal income taxes. (See Note 8)
Limited Partners' Loss Per Equity Unit:
The limited partners' income (loss) per equity unit is computed on the
11,077 limited partner equity units.
Cash and Cash Equivalents:
For purposes of the statements of cash flows the Partnership considers
all highly liquid debt instruments with a maturity of three months or
less to be cash equivalents.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
F-11
23
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000, 1999 AND 1998
(3) Oil and Gas Properties:
The Partnership acquired leases or farmouts from PEMC at its cost. Cost
is defined as any amount paid for delay rentals, lease bonuses, if any,
surveys and other expenses including such portion of any of the general
partners', or their affiliates' reasonable, necessary and actual
expenses for geological, geophysical, seismic, land, engineering,
drafting, accounting, legal and other services. The Partnership
currently pays royalties of approximately 12.5% to 17.9% of the selling
price of the oil and gas extracted.
The following table sets forth certain revenue and expense data
concerning the Partnership's oil and gas activities for the years ended
December 31, 2000, 1999 and 1998:
2000 1999 1998
---- ---- ----
Average sales price per MCF of gas $ 3.52 $ 2.50 $ 3.17
Average sales price per BBL of oil
and other liquids $27.11 $16.16 $12.05
Production expense per dollar of
operating revenue $ 0.46 $ 0.46 $ 0.45
(4) Quantities of Oil and Gas Reserves:
The amount of proved developed reserves presented below have been
estimated by an independent firm of petroleum engineers as of January
1, 2001. Petroleum engineers on the staff of PEC have reviewed the data
presented below, as of December 31, 2000, for consistency with current
year production and operating history. All of the Partnership's oil and
gas reserves are located within the United States:
(Unaudited)
---------------------------
GAS (MCF) OIL (BBL)
--------- ---------
Reserves as of December 31, 1997 2,034,188 14,037
Revisions of previous estimates (124,297) 207
Production (100,993) (1,232)
--------- -------
Reserves as of December 31, 1998 1,808,898 13,012
Revisions of previous estimates (125,928) (223)
Production (95,379) (877)
--------- -------
Reserves as of December 31, 1999 1,587,591 11,912
Revisions of previous estimates 309,340 657
Production (103,533) (1,263)
---------- -------
Reserves as of December 31, 2000 1,793,398 11,306
========= =======
F-12
24
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000, 1999 AND 1998
(4) Quantities of Oil and Gas Reserves - (Cont'd):
Should future prices decline, operation of certain wells would become
uneconomic, on a pretax basis, as production levels decline with age.
In accordance with the rules and regulations of the Securities and
Exchange Commission, proved reserves exclude production which would be
uneconomic. The partners are entitled to certain tax benefits and
credits which, if available in the future, may result in production
continuing beyond the level included in the above table.
Revisions arise from changes in current prices, as well as engineering
and geological data which would alter the useful life and therefore the
overall predicted production of each well. Future changes in these
estimates are common and would impact the reserve quantities used to
calculate depreciation, depletion and amortization.
As discussed in Note 2, the Partnership may record additional
depreciation, depletion and amortization if net capitalized costs
exceed the undiscounted future net cash flows attributable to
Partnership properties. Price declines affect estimated future net
revenues both directly and as a consequence of their impact on
estimates of future production. The Partnership has recorded no
additional provision for 2000, 1999 or 1998. If the additional
provision had been computed based on the limited partners' interest in
capitalized costs and estimated future net revenues, rather than on the
basis of total Partnership interests, the limited partners' income
would not have been reduced for 2000, 1999 or 1998.
F-13
25
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000, 1999 AND 1998
(5) Allocation of Partnership Revenues, Costs and Expenses:
Under the terms of the Limited Partnership Agreement, all Partnership
revenues and expenses, including deductions attributable thereto, are
to be allocated as follows:
Limited General
Partners Partners
-------- --------
Participation in Costs:
Sales commissions and dealer manager fees 100.0% -- %
in excess of the $50,000 paid by PEMC
Offering costs other than $75,000
paid by the Partnership and the
Sterling Drilling Fund 1983-2, L.P. -- % 100.0%
Management fee 100.0% -- %
Lease acquisition costs 91.5% 8.5%
Drilling and completion costs 91.5% 8.5%
General and administrative expenses 76.5% 23.5%
Production operator's fee 76.5% 23.5%
Operating expenses 76.5% 23.5%
All other costs 91.5% 8.5%
Participation in Revenues:
Sale of production 76.5% 23.5%
Sale of properties 91.5% 8.5%
Sale of equipment 91.5% 8.5%
All other revenues 91.5% 8.5%
91.5% 8.5%
(6) Transactions With Affiliates:
(a) The due from affiliates at December 2000 and 1999 represents
general and administrative and certain other expenses incurred
on behalf of the Partnership by PEC and its subsidiaries, and
amounts due for production operator's fees (Note 6(b)), net of
production revenues collected on behalf of the Partnership.
(b) As operator of the Partnership's properties, Prime Operating
Company (POC), a subsidiary of PEC, receives, as compensation
from the Partnership, a monthly production operator's fee of
$467 for each producing gas well and $647 for each producing
oil or combination gas and oil well, based on the
Partnership's
F-14
26
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000, 1999 AND 1998
(6) Transactions With Affiliates - (Cont'd):
percentage of working interest in the well. Such fee is subject
to annual adjustment by the percentage increase in the Cost of
Living Index published by the U.S. Department of Labor over the
year in which production began. During 2000, 1999 and 1998,
$105,833, $75,274, and $104,801 of production operator's fees
were incurred, respectively.
(c) In accordance with the terms of the Partnership Agreement, the
general partners are required to pay 8.5% of drilling and
completion costs, lease acquisition costs and certain other
costs, of which 1% will be paid for by the general partners out
of revenues received by them from the Partnership. At December
31, 2000, $21,720 was due from certain general partners for such
costs.
(d) Eastern Oil Well Services Company (EOWSC), a subsidiary of PEC,
provided field services to the Partnership during the years
ending December 31, 2000, 1999 and 1998 for which it was billed
$11,363, $2,270, and $1,380 respectively.
(7) General and Administrative Expenses:
In accordance with the Management Agreement, the general partners are
reimbursed for the portion of their in-house overhead, including
salaries and related benefits, attributable to the affairs and
operations of the Partnership.
This amount, combined with certain direct expenses for geology,
engineering, legal, accounting, auditing, insurance and other items
shall not exceed an annual amount equal to 5% of limited partner
capital contributions. Excess expenses shall be borne by the general
partners.
During 2000, 1999 and 1998, the Partnership recognized general and
administrative expenses incurred on its behalf by a general partner of
$100,000, for each year.
F-15
27
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000, 1999 AND 1998
(8) Federal Income Taxes:
The following is a reconciliation between the net income as reported on
the Partnership's federal income tax return and the net income (loss)
reported in the accompanying financial statements:
Year Ended December 31,
----------------------------
2000 1999 1998
---- ---- ----
Net income as
reported on the
Partnership's federal
income tax return $ 112,241 $ 4,601 $ 68,370
Recompletion costs reported
differently for financial
reporting purposes and for
income tax reporting
purposes -- 14,911 --
Depreciation, depletion and
amortization for income
tax purposes in excess
of (less than) financial
reporting amount (69,031) (78,159) (74,020)
--------- --------- ---------
Net income (loss) per
accompanying financial
statements $ 43,210 $ (58,647) $ (5,650)
========= ========= =========
The tax returns of the Partnership, the qualifications of the
Partnership as such for tax purposes, and the amount of Partnership
income or loss are subject to examination by federal and state taxing
authorities. If such examinations result in changes with respect to
Partnership's qualifications or in changes to its income or loss, the
tax liability of the partners would be changed accordingly.
F-16
28
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000, 1999 AND 1998
(9) Major Customers:
A schedule of the major purchases of the Partnership's production is as
follows:
Purchaser 2000 1999 1998
--------- ---- ---- ----
Phoenix Diversified $345,794 $223,517 $314,253
The Partnership renewed its gas purchase contract in December, 2000
resulting in a fixed price for one year.
(10) Other Revenue:
In 2000 the Partnership was a member of a Class of Oil Producers
involved in litigation alleging that the principal refiners of Penn
Grade crude engaged in a conspiracy to fix, lower, maintain and
stabilize the purchase prices of crude purchased by the refiners from
the oil producers. The Partnership received this amount pursuant to the
Settlement Agreement of this litigation.
In 1999 other revenue represents settled claims against Columbia Gas
Transmission Corp. (Columbia) arising from amounts due from Columbia
when they declared bankruptcy. No significant additional claims are
expected concerning this matter.
F-17
29
SCHEDULE V
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
PROPERTY AND EQUIPMENT - OIL AND GAS PROPERTIES
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
Balance at Balance
Beginning Additions Other at End
of Year at Cost Retirements Changes of Year
---------- --------- ----------- ------- -------
Year Ended December 31, 2000:
Leasehold costs $ 321,314 $ -- $ -- $ -- $ 321,314
Wells and related facilities 8,934,084 -- -- -- 8,934,084
---------- ---------- ---------- ---------- ----------
$9,255,398 $ -- $ -- $ -- $9,255,398
========== ========== ========== ========== ==========
Year ended December 31, 1999:
Leasehold costs $ 321,314 $ -- $ -- $ -- $ 321,314
Wells and related facilities 8,919,173 14,911 -- -- 8,934,084
---------- ---------- ---------- ---------- ----------
$9,240,487 $ 14,911 $ -- $ -- $9,255,398
========== ========== ========== ========== ==========
Year Ended December 31, 1998:
Leasehold costs $ 321,314 $ -- $ -- $ -- $ 321,314
Wells and related facilities 8,918,786 387 -- -- 8,919,173
---------- ---------- ---------- ---------- ----------
$9,240,100 $ 387 $ -- $ -- $9,240,487
========== ========== ========== ========== ==========
F-18
30
SCHEDULE VI
STERLING DRILLING FUND 1983-1, L.P.
(a New York limited partnership)
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION - OIL AND GAS PROPERTIES
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
Balance at Charges to Balance
Beginning Costs and Other at End
of Year Expenses Retirements Changes of Year
---------- ---------- ----------- ------- -------
Year Ended December 31, 2000:
Wells and related facilities $7,577,514 $ 74,040 $ -- $ -- $7,651,554
Leasehold costs 321,314 -- -- -- 321,314
---------- ---------- ----------- ---------- ----------
$7,898,828 $ 74,040 $ -- $ -- $7,972,868
========== ========== =========== ========== ==========
Year ended December 31, 1999:
Wells and related facilities $7,496,014 $ 81,500 $ -- $ -- $7,577,514
Leasehold costs 321,314 -- -- -- 321,314
---------- ---------- ----------- ---------- ----------
$7,817,328 $ 81,500 $ -- $ -- $7,898,828
========== ========== =========== ========== ==========
Year Ended December 31, 1998:
Wells and related facilities $7,416,558 $ 79,456 $ -- $ -- $7,496,014
Leasehold costs 321,314 -- -- -- 321,314
---------- ---------- ----------- ---------- ----------
$7,737,872 $ 79,456 $ -- $ -- $7,817,328
========== ========== =========== ========== ==========
F-19
31
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- ------- ------- ------------
(3) Form of Agreement of Limited Partnership of Sterling-Fuel Resources
Drilling Fund 1983-1 (now Sterling Drilling Fund 1983-1, L.P.)
(incorporated by reference to Exhibit (3) of Sterling Gas Drilling
Fund 1983-1 Form 10-K for the year ended December 31, 1994)
(23) Consent of Ryder Scott Company, L.P. (filed herewith)