<PAGE>   1

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               ------------------


                                    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, 1998
                                       OR
[ ]         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                  FOR THE TRANSITION PERIOD FROM           TO
                           COMMISSION FILE NO. 2-78441

                         STERLING GAS DRILLING FUND 1982
             (Exact name of registrant as specified in its charter)

              NEW YORK                                         13-3147901      
   (State or other jurisdiction of                          (I.R.S. Employer   
   incorporation or organization)                          Identification No.) 
                                                                               
          ONE LANDMARK SQUARE                                     06901        
         STAMFORD, CONNECTICUT                                  (Zip Code)     
(Address of principal executive offices)                   


       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 INTERESTS
                                (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 16, 1999,
was: 14,370.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      NONE

================================================================================
<PAGE>   2



                         STERLING GAS DRILLING FUND 1982

                             FORM 10-K ANNUAL REPORT
                            FOR THE FISCAL YEAR ENDED
                                DECEMBER 31, 1998

                                     PART I

ITEM 1.        BUSINESS

         Sterling Gas Drilling Fund 1982 (the "Registrant" or the "Partnership")
is a limited partnership formed under the laws of the State of New York on July
28, 1982. 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 $14,370,000, 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, 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 1998, 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, 1999, 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.

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 hydro-electric power.


                                       -1-

<PAGE>   3




         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. Sales are made under short-term contractual arrangements or monthly
spot prices. In 1998, approximately $271,216, or 86.54% of the Partnership's gas
production was purchased by Phoenix Diversified, and about $12,123, or 95.87%,
of the Partnership's oil production was purchased by the American Refining
Group. None of these purchasers has any relationship or is otherwise affiliated
with the Partnership. 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 1998 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 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 was subject to the Crude Oil Windfall
Profit Tax Act of 1980, which imposed an excise tax on producers of crude oil at
various rates for prices received in excess of certain historical base prices.
That Act was repealed in August, 1988. 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 transporters 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



                                       -2-

<PAGE>   4




to gas buyers and sellers on an open and non-discriminatory basis. The FERC
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.

         A number of legislative proposals have been introduced in Congress and
the state legislatures of various states, that, if enacted, would significantly
affect the petroleum industry. Such proposals involve, among other things, the
imposition of land and use controls and certain measures designed to prevent
petroleum companies from acquiring assets in other energy areas. In addition,
there is always the possibility that if market conditions change dramatically in
favor of oil and gas producers that some new form of "windfall profit" or
severance tax may be proposed for and imposed upon either oil or gas. At the
present time it is impossible to predict which proposals, if any, will actually
be enacted by Congress or the various state legislatures. The Partnership
believes that it will comply with all orders and regulations 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 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 December, 1982,
contracted for the drilling of 51 development wells, which resulted in 50
producing wells and one dry hole.

         As of December 31, 1998, 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.


                                       -3-

<PAGE>   5




         Producing wells:
<TABLE>
<CAPTION>
                                                          Gross         Net
                                                          -----         ---
<S>                                                       <C>       <C> 
                  Oil Wells..........................         0         0.00
                  Gas Wells..........................        59        48.05

                  Producing acres....................     3,014        2,455
</TABLE>

---------------------------

         (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:

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                      ---------------------------------------------------------------------
                                         1998           1997           1996          1995            1994
                                      ----------      ---------     ----------     ----------      --------

Production:
<S>                                   <C>            <C>            <C>            <C>            <C>
   Oil and Condensate (bbl) .....            982          2,089          1,783          1,723         2,186
   Gas (Mcf) ....................         99,089        100,271        100,564        104,553        96,605
Average Price of Sales:
   Oil and Condensate ($ per bbl)     $    11.69          18.73          19.52          16.28         12.61
   Gas ($ per Mcf) ..............     $     3.14           3.17           2.47           2.21          2.89
Production Expense per Dollar
   of Operating Revenue .........     $     0.48           0.54           0.43           0.45          0.60
</TABLE>

OIL AND GAS RESERVES

         The Partnership's interests in proved developed oil and gas properties
have been evaluated by Ryder Scott Company 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):

<TABLE>
<CAPTION>
                                           Proved Developed
          As of                -----------------------------------------
          12-31                Oil (bbls)                      Gas (Mcf)
          -----                ----------                      ---------
<S>                            <C>                             <C>      
           1994                  12,000                         1,150,000
           1995                  19,000                         1,909,000
           1996                  15,700                         1,868,000
           1997                  17,600                         1,869,700
           1998                  14,900                         1,846,400
</TABLE>

                                       -4-

<PAGE>   6




         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):

<TABLE>
<CAPTION>
                                               Proved Developed
                                    -------------------------------------------
           As of                    Future Net                 Present Value of
           12-31                     Revenue                 Future Net Revenue
           -----                    ----------               ------------------
<S>                              <C>                           <C>      
           1994                     $  834,000                    $ 415,000
           1995                      1,727,000                      664,000
           1996                      2,438,900                      928,400

           1997                      2,447,600                      904,800
           1998                      2,215,200                      768,500
</TABLE>

         Since January 1, 1998, 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 1998 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 16, 1999, there were 1,003 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. There were no
distributions to the holders of Units in 1998 or 1997. Aggregate cash
distributions to the holders of the Units as of December 31, 1998, was
$1,402,512.

         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.



                                       -5-

<PAGE>   7




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 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 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 page F-1.

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 16, 1999, Management acts as the Managing General Partner in a total of 51
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


                                       -6-

<PAGE>   8




and its subsidiaries have about 176 employees, including their principal
officers, providing management and administrative services, accounting,
engineers, 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 51, 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 Samford University School of Law in
1973 and is a member of the New York State Bar.

         Beverly A. Cummings, age 46, has been a Director and Vice President,
Finance, of Management since August, 1985. She is also a Director and Vice
President, Finance, 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.

         Bennie H. Wallace, Jr., age 47, is a Director and Vice President of
Management and has held such positions since May, 1989. He is Acquisitions
Manager for Management, a Vice President of PrimeEnergy since March, 1989, as a
Director of PrimeEnergy since June, 1993, and is a Vice President and Director
of the operating subsidiaries. He graduated from Louisiana State University in
1975 with a Bachelor of Science degree in petroleum engineering and is a
registered professional engineer in the States of Texas and Louisiana and was an
independent petroleum engineer engaged in the evaluation and operation of oil
and gas properties from 1983 to 1987.

         Lynne G. Pizor, age 39, 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, through August,
1994, and Prime Energy from May, 1990, through 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 66, 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


                                       -7-

<PAGE>   9




the holders of the Partnership Units. During 1998 and 1997, the allocation of
general and administrative expenses to the Partnership was $85,000 and $85,000,
respectively.

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 and PrimeEnergy Corporation that beneficially
owns more than five percent of the Partnership Units. The following table shows
as of March 16, 1999, the name and address of such beneficial owners, and the
number and percent of Partnership Units beneficially owned by them, all of which
are owned directly.

<TABLE>
<CAPTION>
                                                                         Number
         Name and Address of Beneficial Owner                           Of Units          Percent
         ------------------------------------                           --------          -------

<S>                                                                     <C>               <C>    
         PrimeEnergy Management Corporation
           One Landmark Square
           Stamford, CT 06901 ..........................................  1,249              8.69%

         PrimeEnergy Corporation
           One Landmark Square
           Stamford, CT 06901 ..........................................  1,743             12.13%
</TABLE>

------------

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 1998 was paid well operating
fees ranging from about $468 to $846 per month per well. Together with 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 1998 and 1997, the Partnership paid an
aggregate of $105,516 and $128,342, respectively, in such fees and expenses.



                                       -8-

<PAGE>   10




                                     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.   Exhibits:

                    (3)  Form of Agreement of Limited Partnership of Sterling
                         Gas Drilling Fund 1982 (Incorporated by reference to
                         Exhibit (3) of Sterling Gas Drilling Fund 1982 Form
                         10-K for the year ended December 31, 1994.)

                    (24) Consent of Ryder Scott Company (filed herewith)

                    (27) Financial Data Schedule. (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.



                                       -9-

<PAGE>   11





                                   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 30th day of
March, 1999.


                                    Sterling Gas Drilling Fund 1982
                                    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 30th day of March, 1999.



/s/ CHARLES E. DRIMAL, JR.             Director and President,
----------------------------         PrimeEnergy Management Corporation;
Charles E. Drimal, Jr.                  

                                   The Principal Executive Officer




/s/ BEVERLY A. CUMMINGS              Director and Vice President and Treasurer,
----------------------------         PrimeEnergy Management Corporation;
Beverly A. Cummings                     

                                   The Principal Financial and Accounting 
                                      Officer




/s/ BENNIE H. WALLACE, JR.           Director, PrimeEnergy Management
----------------------------         Corporation
Bennie H. Wallace, Jr.                  


                                      -10-

<PAGE>   12



                         STERLING GAS DRILLING FUND 1982
                        (A NEW YORK LIMITED PARTNERSHIP)

                   Index to Financial Statements and Schedules


<TABLE>
<CAPTION>
                                                                                                     Page No.
                                                                                                     --------
<S>                                                                                                  <C>
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-6

Financial Statements:

       Balance Sheets, December 31, 1998 and 1997                                                       F-7

       Statements of Operations for the Years Ended December 31,
       1998, 1997 and 1996                                                                              F-8

       Statements of Changes in Partners' Equity for the Years
       Ended December 31, 1998, 1997 and 1996                                                           F-9

       Statements of Cash Flows for the Years Ended December 31,
       1998, 1997 and 1996                                                                              F-10

       Notes to Financial Statements                                                                    F-11


Schedules:

       V    -  Property and Equipment - Oil and Gas Properties for
               the Years Ended December 31, 1998, 1997 and 1996                                         F-19

       VI   -  Accumulated Depreciation, Depletion, and Amortization -
               Oil and Gas Properties for the Years Ended December 31,
               1998, 1997 and 1996                                                                      F-20
</TABLE>


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

<PAGE>   13




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.


<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31, (000's omitted)
                                                      --------------------------------------------
                                                      1998      1997      1996       1995     1994
                                                      ----      ----      ----       ----     ----
<S>                                                 <C>       <C>         <C>       <C>       <C>
                  Revenues ......................     $ 323     $ 359     $ 283     $ 367     $ 302
                  Net income (loss):
                     Limited Partners ...........        14        13        15        77       (89)
                     General Partners ...........         9         9        10        22        (2)
                     Per equity unit ............      1.00      0.91      1.06      5.32     (6.18)
                  Total assets ..................       689       726       754       783       826
                  Cash distributions:
                     Limited Partners ...........        --        --        --        --        --
                     General Partners ...........        --        --        --        --        --
                     Limited partners as
                     a % of original
                     contribution ...............        --        --        --        --        --
</TABLE>

ITEM 7.        MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & 
               RESULTS OF OPERATIONS

         1. Liquidity: The oil and gas industry is competitive in all its
phases. There is also competition between this industry and other industries in
supplying energy and fuel requirements of industrial and residential consumers.
It is not possible for the Registrant to calculate its position in the industry
as the Registrant competes with many other companies having substantially
greater financial and other resources. In accordance with the terms of the
Agreement of Limited Partnership of the Partnership, the General Partners of the
Registrant will make cash distributions of as much of the Partnership cash
credited to the capital accounts of the partners as the General Partners have
determined is not necessary or desirable for the payment of any contingent
debts, liabilities or expenses for the conduct of the Partnership business. As
of December 31, 1998, the General Partners have distributed to the Limited
Partners $1,402,512 or 9.76% of the total Limited Partner capital contributions.

         The Year 2000 (Y2K) issue is the definition and resolution of potential
problems resulting from computer application programs or imbedded chip
instruction sets utilizing two-digits, as opposed to four digits, to define a
specific the year. Such date sensitive systems may be unable to properly
interpret dates, which could cause a system failure or other computer errors,
leading to disruptions in operations. The Partnership relies on the Managing
General Partner for all management and administrative functions. Consequently,
the Partnership's exposure to the Y2K problems is determined by what Year 2000
efforts have been undertaken by the Managing General Partner.

         In 1997, the Managing General Partner developed a three-phase program
for the Y2K information systems compliance. Phase I is to identify those systems
with which the Partnership has exposure to Y2K issues. Phase II is to remediate
systems and replace equipment where required. Phase III, to be completed by
mid-1999, is the final testing of each major area of exposure to ensure


                                       F-2

<PAGE>   14




compliance. The Managing General Partner has identified four major areas
determined to be critical for successful Y2K compliance: (1) financial and
informational system applications, (2) communications applications, (3) oil and
gas producing operations, and (4) third-party relationships.

         The Managing General Partner, in accordance with Phase I of the
program, is in the process of conducting an internal review of all systems and
contacting all software suppliers to determine major areas of exposure to Y2K
issues. The Managing General Partner has completed the modifications to its core
financial and reporting systems and is continuing to test compliance in this
area. These modifications were made in conjunction with an upgrade of the
financial reporting applications provided by the Managing General Partner's
software vendor. Conversion to the new system was completed during 1998. Due to
the technology advances in the communications area the Managing General Partner
has upgraded such equipment regularly over the past three years. Y2K compliance
was a specification requirement of each installation. Consequently, the Managing
General Partner expects exposure in this area to be limited to third party
readiness. The Managing General Partner is in the process of identifying areas
of exposure resulting from equipment used in its oil and gas producing
operations. The Managing General Partner expects to complete identification of
critical systems by June 1999 and to continue remediation and testing throughout
1999. In the third-party area, the Managing General Partner has received
assurance from its significant service suppliers that they intend to be Y2K
compliant by 2000. The Managing General Partner has implemented a program to
request Year 2000 certification or other assurance from other third parties
during 1999.

         The Partnership recognizes that, notwithstanding the efforts described
above, the Partnership could experience disruptions to its operations or
administrative functions, including those resulting from non-compliant systems
utilized by unrelated third party governmental and business entities. The
Managing General Partner is in the process of developing a contingency plan in
order to mitigate potential disruption to business operations. The Managing
General Partner expects to complete this contingency plan by the second quarter
of 1999 but also expects to refine this plan throughout 1999.

         Through 1998, the Managing General Partner has handled identifying,
remediating and testing systems for Year 2000 compliance within the scope of
routine upgrades and systems evaluations. The Managing General Partner expects
to complete the review of oil and gas operations exposure in the same manner,
without incurring substantial additional costs. However, information resulting
from the oil and gas operations review may indicate required expenditures not
currently contemplated by the Partnership.

         The net proved oil and gas reserves of the Partnership are considered
to be a primary indicator of financial strength and future liquidity. The
present value of unescalated future net revenue (S.E.C. case) associated with
such reserves, discounted at 10% as of December 31, 1998 was approximately
$768,500, as compared to December 31, 1997, of about $904,800. Overall reservoir
engineering is a subjective process of estimating underground accumulations of
gas and oil that can not be measure in an exact manner. The accuracy of any
reserve estimate is a function of the quality of available data and of the
engineering and geological interpretation and judgment. Accordingly, reserve
estimates are generally different from the quantities of gas and oil that are
ultimately recovered and such differences may have a material impact on the
Partnership's financial results and future liquidity.



                                       F-3
<PAGE>   15




         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 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 Partnership 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
provision of the Agreement of Limited Partnership of the Partnership.

         3. Results of operations:

         1998 compared to 1997

         The Partnership's overall operating revenue declined from $359,296 in
1997 to $322,770 in 1998. The Partnership receives the majority of its revenue
from gas production combined with some oil production. During 1998 both the
Partnership's oil production and average price per barrel were substantially
lower than the previous year, from 2,089 bbls and $18.73 in 1997 to 982 bbls and
$11.69 in 1998. Also contributing to the overall revenue decline was lower gas
production, from 100,271 mcf in 1997 to 99,089 mcf in 1998 and a slightly lower
average price per mcf, from $3.17 in 1997 to $3.14 in 1998. Production declines
can be of a normal nature, a result of minor shut-ins due to repairs or even as
a result of variations in pressure flows between the well's gas lines and the
main transport line.

         Production expenses showed a decrease from $192,073 in 1997 to $156,536
in 1998. During 1998, the production related expenditures included repairs,
maintenance, labor, supplies and other normal upkeep expenses. The operator of
the Partnership wells during 1997 expended funds on supplemented maintenance,
labor, location, access road work and other repairs at the individual wells or
the well sites in order to maintain production or minimize future declines.
General and administrative costs remained relatively unchanged from $105,832 in
1997 to $106,143 in 1998. Management will use in-house resources if it provides
efficient and timely services to the partnership. Amounts in both years are
substantially less than the $718,500 which may be allocable to the Partnership
under the Partnership Agreement. The lower allocable amounts reflect
management's efforts to limit costs, both incurred and allocated to the
Partnership.

         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
additional depletion was needed in 1998 or 1997. The overall depreciation,
depletion and amortization was consistent with the rates used and the existing
property basis.

         1997 compared to 1996

         Operating revenue increased from $283,908 in 1996 to $359,296 in 1997.
The partnerships gas production showed very little change from 1996 to 1997,
100,564 mcf to 100,271 mcf's, respectively. The Partnership does not receive the
bulk of its revenue from oil production but the oil produced in 1997, 2,089
barrels, was higher than oil produced in 1996, 1,783 barrels. The Partnership
generally renews its gas contracts as they come due for twelve month periods.
The Partnership was in a locked fixed price contract for all of 1997 and has
renewed its fixed price contract through November 30, 1998. The overall average
price per mcf was very favorable to

                                       F-4

<PAGE>   16




the Partnership, $3.17 for 1997 as compared to $2.47 in 1996. Overall oil and
gas revenue was up significantly due to the price increases and the very stable
production.

         Production expenses showed an increase from $122,477 in 1996 to
$192,073 in 1997. The Partnership may expend funds on additional equipment, for
example lift equipment, or repairs if the operator has determined that the
equipment and related repairs expenses will have a beneficial effect on
production. The effect looked for by the operator is to increase production,
halt any further significant declines or to maintain overall production on a
particular well. These additional costs may include, but are not limited to,
additional maintenance, labor, location, access road work and other repairs to
the individual wells or the well sites. The Partnership also expended funds, in
both years, for general upkeep and maintenance at all the partnership's well and
well sites. General and administrative costs experienced a moderate increase
from $95,478 in 1996 to $105,832 in 1997. Management continues to monitor any
third party costs and use in-house resources if it will provide efficient and
timely services to the Partnership. Amounts in both years are substantially less
than the $718,500 allocable to the Partnership under the Partnership Agreement.
The lower allocable amounts reflect management's efforts to limit costs, both
incurred and allocated to the Partnership.

         The Partnership records additional depreciation, depletion and
amortization to the extent that the net capitalized costs exceeds the
undiscounted future net cash flows attributable to the Partnership. No
additional depletion was needed in 1997 or 1996. The overall depreciation,
depletion and amortization was consistent with the rates used and the existing
property basis.



                                       F-5

<PAGE>   17

                         STERLING GAS DRILLING FUND 1982
                        (a New York limited partnership)





                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Partners of
Sterling Gas Drilling Fund 1982:


We have audited the accompanying balance sheets of Sterling Gas Drilling Fund
1982 (a New York limited partnership) as of December 31, 1998 and 1997, and the
related statements of operations, changes in partners' equity, and cash flows
for the years ended December 31, 1998, 1997 and 1996. 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 Gas Drilling Fund 1982
as of December 31, 1998 and 1997, and the results of its operations and cash
flows for the years ended December 31, 1998, 1997 and 1996 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
February 9, 1999



                                      F-6

<PAGE>   18




                         STERLING GAS DRILLING FUND 1982
                        (a New York limited partnership)

                                 BALANCE SHEETS

                           DECEMBER 31, 1998 AND 1997





<TABLE>
<CAPTION>
                                     Assets

                                                                                      1998              1997    
                                                                                  ------------      ------------
<S>                                                                             <C>                 <C>       
Current Assets:
  Cash and cash equivalents (Note 2)                                              $         20      $          7
                                                                                  ------------      ------------
     Total Current Assets                                                                   20                 7
                                                                                  ------------      ------------

Oil and Gas Properties - successful efforts
 methods (Note 3) - (Schedules V and VI):
  Leasehold costs                                                                      466,804           466,804
  Wells and related facilities                                                      11,970,091        11,970,091
                                                                                  ------------      ------------
      Total                                                                         12,436,895        12,436,895
  Less - Accumulated depreciation, depletion                                       (11,747,491)      (11,710,869)
                                                                                  ------------      ------------
          and amortization
                                                                                       689,404           726,026
                                                                                  ------------      ------------

     Total Assets                                                                 $    689,424      $    726,033
                                                                                  ============      ============



                        Liabilities and Partners' Equity

Current Liabilities:
  Due to affiliates (Note 6)                                                      $    262,068      $    322,146
                                                                                  ------------      ------------
     Total Current Liabilities                                                         262,068           322,146
                                                                                  ------------      ------------

Partners' Equity:
  Limited partners                                                                     699,647           685,336
  General partners                                                                    (272,291)         (281,449)
                                                                                  ------------      ------------
     Total Partners' Equity                                                            427,356           403,887
                                                                                  ------------      ------------

     Total Liabilities and Partners' Equity                                       $    689,424      $    726,033
                                                                                  ============      ============
</TABLE>









   The Notes to Financial Statements are an integral part of these statements.



                                      F-7
<PAGE>   19



                         STERLING GAS DRILLING FUND 1982
                        (a New York limited partnership)

                            STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


<TABLE>
<CAPTION>
                                      1998                             1997                             1996            
                          ------------------------------   ------------------------------   ------------------------------
                          Limited    General               Limited    General               Limited    General
                          Partners   Partners    Total     Partners   Partners    Total     Partners   Partners     Total 
                          --------   --------   --------   --------   --------   --------   --------   --------   --------
<S>                       <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>     
Revenues:
  Operating revenues      $271,611   $ 51,159   $322,770   $302,348   $ 56,948   $359,296   $238,909   $ 44,999   $283,908
                          --------   --------   --------   --------   --------   --------   --------   --------   --------

Costs and Expenses:
  Production expenses      131,725     24,811    156,536    161,629     30,444    192,073    103,064     19,413    122,477
  Depreciation,
   depletion and
   amortization             36,256        366     36,622     38,546        389     38,935     40,220        406     40,626
  General and
   Administrative
   expenses (Note 7)        89,319     16,824    106,143     89,058     16,774    105,832     80,345     15,133     95,478
                          --------   --------   --------   --------   --------   --------   --------   --------   --------

    Total Expenses         257,300     42,001    299,301    289,233     47,607    336,840    223,629     34,952    258,581
                          --------   --------   --------   --------   --------   --------   --------   --------   --------

     Net Income (Loss)    $ 14,311   $  9,158   $ 23,469   $ 13,115   $  9,341   $ 22,456   $ 15,280   $ 10,047   $ 25,327
                          ========   ========   ========   ========   ========   ========   ========   ========   ========

  Net Income (Loss) Per
   Equity Unit (Note 2)   $   1.00                         $    .91                         $   1.06
                          ========                         ========                         ========
</TABLE>





   The Notes to Financial Statements are an integral part of these statements.



                                      F-8
<PAGE>   20




                         STERLING GAS DRILLING FUND 1982
                        (a New York limited partnership)

                    STATEMENTS OF CHANGES IN PARTNERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996




<TABLE>
<CAPTION>
                                                                Limited               General
                                                                Partners              Partners                  Total  
                                                                --------              ---------               --------
<S>                                                            <C>                   <C>                     <C>    
Balance at December 31, 1995                                    $656,941              $(300,837)              $356,104

Net Income                                                        15,280                 10,047                 25,327
                                                                --------              ---------               --------

Balance at December 31, 1996                                     672,221               (290,790)               381,431

Net Income                                                        13,115                  9,341                 22,456
                                                                --------              ---------               --------

Balance at December 31, 1997                                     685,336               (281,449)               403,887

Net Income                                                        14,311                  9,158                 23,469
                                                                --------              ---------               --------

Balance at December 31, 1998                                    $699,647              $(272,291)              $427,356
                                                                ========              =========               ========
</TABLE>










   The Notes to Financial Statements are an integral part of these statements.


                                      F-9
<PAGE>   21




                         STERLING GAS DRILLING FUND 1982
                        (a New York limited partnership)

                            STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996








<TABLE>
<CAPTION>
                                                    1998        1997        1996  
                                                  --------    --------    --------
<S>                                               <C>         <C>         <C>     
Cash Flows From Operating Activities:
 Net income (loss)                                $ 23,469    $ 22,456    $ 25,327
                                                  --------    --------    --------
 Adjustments to reconcile net income (loss) to
  net cash provided by operating activities:
   Depreciation, depletion and amortization         36,622      38,935      40,626
   Changes in Assets and Liabilities:
    Due to affiliates                              (60,078)    (50,862)    (54,100)
                                                  --------    --------    --------

        Total Adjustments                          (23,456)    (11,927)    (13,474)
                                                  --------    --------    --------

      Net Cash Provided (Used) by                       13      10,529      11,853
                                                  --------    --------    --------
       Operating Activities

Cash Flows from Investing Activities:
 Equipment purchases                                    --     (10,556)    (11,843)
                                                  --------    --------    --------

      Net Cash Provided by Investing Activities         --     (10,556)    (11,843)
                                                  --------    --------    --------

Net increase (decrease) in cash and cash
 equivalents                                            13         (27)         10

Cash and cash equivalents, beginning of year             7          34          24
                                                  --------    --------    --------

Cash and cash equivalents, end of year            $     20    $      7    $     34
                                                  ========    ========    ========

</TABLE>




   The Notes to Financial Statements are an integral part of these statements.



                                      F-10
<PAGE>   22




                        STERLING GAS DRILLING FUND 1982
                        (a New York limited partnership)

                         NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 1998, 1997 AND 1996


(1)      Organization and Capital Contributions:

         Sterling Gas Drilling Fund 1982, a New York limited partnership (the
         "Partnership"),was formed on July 28, 1982 for the primary purpose of
         acquiring, drilling, developing, operating 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), formerly known as K.R.M. Petroleum Corporation
         (KRM), Charles E. Drimal, Jr., Oliver J. Sterling and Samuel R.
         Campbell. Fourteen thousand three hundred seventy limited partnership
         units, (14,370), were sold at $1,000 per unit aggregating $14,370,000
         in total limited partner capital contributions. The general partners'
         made no capital contributions. Partnership operations commenced on
         December 22, 1982.


(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




                                      F-11
<PAGE>   23




                         STERLING GAS DRILLING FUND 1982
                        (a New York limited partnership)

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 1998, 1997 AND 1996


(2)      Summary of Significant Accounting Policies - (Cont'd):

         (utilizing aggregations of common geological structures) by the
         unit-of-production method based upon the ratio of production to proved
         developed 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' Income (Loss) Per Equity Unit:

         The limited partners' income (loss) per equity unit is computed on the
         14,370 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 revenue
         and expenses during the reporting period. Actual results could differ
         from those estimates.








                                      F-12
<PAGE>   24




                         STERLING GAS DRILLING FUND 1982
                        (a New York limited partnership)

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 1998, 1997 AND 1996


(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. During 1982, the
         Partnership, as reimbursement of costs for leases it acquired from
         PEMC, paid PEMC $466,804. The Partnership currently pays royalties of
         approximately 12.5% to 19.8% of the selling price of the gas and oil
         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, 1998, 1997 and 1996:

<TABLE>
<CAPTION>
                                                                        1998          1997          1996 
                                                                       ------        ------        ------
<S>                                                                    <C>            <C>           <C>  
              Average sales price per MCF of gas                       $ 3.14         $ 3.17       $ 2.47
              Average sales price per BBL of                            11.69          18.73        19.52
               oil and other liquids
              Production expense per dollar of                            .48            .54          .43
               operating revenue
</TABLE>


(4)      Quantities of Oil and Gas Reserves:

         The amount of proved developed reserves presented below has been
         estimated by an independent firm of petroleum engineers as of January
         1, 1998. Petroleum engineers on the staff of PEC have reviewed the data
         presented below, as of December 31, 1998, for consistency with current
         year production and operating history. All of the Partnership's gas and
         oil reserves are located within the United States:

<TABLE>
<CAPTION>
                                                                                              (Unaudited)      
                                                                                       --------------------------
                                                                                       GAS (MCF)        OIL (BBL)
                                                                                       ---------        ---------
<S>                                                                                   <C>                <C>   
         Reserves as of December 31, 1995                                              1,909,111          19,269
         Revisions of previous estimates                                                  59,665          (1,815)
         Production                                                                     (100,564)         (1,783)
                                                                                       ---------         -------

         Reserves as of December 31, 1996                                              1,868,212          15,671
         Revisions of previous estimates                                                 101,804           4,018
         Production                                                                     (100,271)         (2,089)
                                                                                       ---------         -------

         Reserves as of December 31, 1997                                              1,869,745          17,600
         Revisions of previous estimates                                                  75,722          (1,717)
         Production                                                                      (99,089)           (982)
                                                                                       ---------         -------

         Reserves as of December 31, 1998                                              1,846,378          14,901
                                                                                       =========         =======
</TABLE>



                                      F-13
<PAGE>   25




                         STERLING GAS DRILLING FUND 1982
                        (a New York limited partnership)

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 1998, 1997 AND 1996


(4)      Quantities of Oil and Gas Reserves - (Cont'd):

         The revisions of previous estimates are primarily due to price changes
         that have occurred during the years. If current prices were to prevail
         into the future, 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 that included above.

         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. Significant 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 in 1998, 1997 and 1996. 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 in 1998, 1997 and 1996.











                                      F-14
<PAGE>   26



                         STERLING GAS DRILLING FUND 1982
                        (a New York limited partnership)

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 1998, 1997 AND 1996


(5)      Allocation of Partnership Revenues, Income, Costs and Expenses:

         Under the terms of the Limited Partnership Agreement, all Partnership
         income and expenditures, including deductions attributable thereto, are
         to be allocated as follows:

<TABLE>
<S>                                                                                     <C>   
         Drilling and completion costs (paid out of initial capital contributions):
             Limited partners                                                           99.00%
             General partners                                                            1.00%
                                                                                       ------ 
                                                                                       100.00%
                                                                                       ====== 

         Syndication costs sales commission and cost acquiring leases:
             Limited partners                                                             -  %
             General partners                                                          100.00%
                                                                                       ------ 
                                                                                       100.00%
                                                                                       ====== 

         Offering costs up to $50,000 incurred by Dealer-Manager:
             Limited partners                                                             -  %
             General partners                                                          100.00%
                                                                                       ------ 
                                                                                       100.00%
                                                                                       ====== 

         Offering costs other than $50,000 paid by the general partners (up to a maximum of $50,000):
             Limited partners                                                           99.00%
             General partners                                                            1.00%
                                                                                       ------ 
                                                                                       100.00%
                                                                                       ====== 

         Net Revenue from oil and gas operations, general and administrative
         expenses and production operating fees:
             Limited partners                                                           84.15%
             General partners                                                           15.85%
                                                                                       ------ 
                                                                                       100.00%
                                                                                       ====== 

         All other income, gains, losses, costs, expenses, deductions and credits:
             Limited partners                                                           99.00%
             General partners                                                            1.00%
                                                                                       ------ 
                                                                                       100.00%
                                                                                       ====== 

</TABLE>





                                      F-15
<PAGE>   27




                         STERLING GAS DRILLING FUND 1982
                        (a New York limited partnership)

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 1998, 1997 AND 1996


(6)      Transactions With Affiliates:

         (a)    The payable to affiliates at December 31, 1998 and 1997
                represents general and administrative and certain other expenses
                incurred on behalf of the Partnership by PEC and its
                subsidiaries, including amounts due for production operator's
                fees (Note 6(b)), and advances to finance the Partnerships' loan
                payments net of revenues collected on behalf of the Partnership.
                PEMC intends to continue to make advances to the Partnership to
                fund any working capital deficiencies in the future on an
                interest free basis.

         (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
                $468 for each producing gas well and $846 for each producing oil
                or combination gas and oil well, based on the Partnership's
                percentage of working interest in the well. These fees are
                subject to annual adjustments 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 1998, 1997 and
                1996, $104,060, $120,616 and $68,193 of production operator's
                fees were incurred, respectively.

         (c)    Eastern Oil Well Services Company (EOWSC), a subsidiary of PEC,
                provided field services to the Partnership during the years
                ending December 31, 1998 and 1997 for which it was billed
                $1,456 and $7,726 respectively.


(7)      General and Administrative Expenses:

         In accordance with the Management Agreement, PEMC will be reimbursed
         for the portion of PEMC's 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 shall be borne by the general partners in
         their individual capacity.

         During 1998, 1997 and 1996, the Partnership recognized general and
         administrative expenses incurred on its behalf by a general partner of
         $85,000, $85,000, and $75,000, respectively.






                                      F-16
<PAGE>   28






                         STERLING GAS DRILLING FUND 1982
                        (a New York limited partnership)

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 1998, 1997 AND 1996


(8)      Federal Income Taxes:

         The following is a reconciliation between the net income (loss) as
         reported on the Partnership's federal income tax return and the net
         income (loss) reported in the accompanying financial statements:


<TABLE>
<CAPTION>
                                                                       Year Ended December 31,     
                                                          ----------------------------------------------
                                                            1998              1997                1996   
                                                          --------          --------            --------
<S>                                                       <C>               <C>                 <C>     
          Net income (loss)as                             
          reported on the
          Partnership's federal
          income tax return                               $ 54,460          $ 55,489            $ 63,584

         Depreciation, depletion and                       
          amortization for financial
          reporting purposes
          greater than income
          tax amount                                       (30,991)          (33,033)            (38,257)
                                                          --------          --------            --------

         Net income (loss) per                            
          accompanying financial
          statements                                      $ 23,469          $ 22,456            $ 25,327
                                                          ========          ========            ========
</TABLE>

         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.

         The Tax Reform Act of 1976 provides that no part of any depletion
         deduction with respect to oil and gas wells is to be determined by the
         Partnership but must be computed separately by the partners. Thus, cost
         or percentage depletion, as applicable, must be computed by each
         partner so that a specific depletion computation can be made when each
         partner files his U.S. income tax return. Information is furnished to
         the partners to compute the depletion deduction.





                                      F-17
<PAGE>   29



                         STERLING GAS DRILLING FUND 1982
                        (a New York limited partnership)

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 1998, 1997 AND 1996


 (9)     Major Customers:

         A schedule of the major purchases of the Partnership's production is as
         follows:

<TABLE>
<CAPTION>
             Purchaser                           1998       1997       1996  
             ---------                         --------   --------   --------
<S>                                            <C>        <C>        <C>  
         American River Terminals              $     --   $ 38,702   $ 33,083
         Phoenix Diversified                   $271,216   $264,743   $200,452
         American Refining Group               $ 12,123   $     --   $     --
</TABLE>






                                      F-18
<PAGE>   30





                                   SCHEDULE V


                         STERLING GAS DRILLING FUND 1982
                        (a New York limited partnership)

                 PROPERTY AND EQUIPMENT - OIL AND GAS PROPERTIES

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996



<TABLE>
<CAPTION>
                                   Balance at                                               Balance
                                   Beginning      Additions                  Other          at End
                                    of Year        at Cost   Retirements    Changes         of Year
                                  -----------     --------   -----------  -----------     -----------
<S>                               <C>             <C>          <C>        <C>             <C>        
Year Ended December 31, 1998:
  Leasehold costs                 $   466,804     $     --     $   --     $        --     $   466,804
  Wells and related equipment      11,970,091           --         --              --      11,970,091
                                  -----------     --------     ------     -----------     -----------
                                  $12,436,895     $     --     $   --     $        --     $12,436,895
                                  ===========     ========     ======     ===========     ===========


Year ended December 31, 1997:
  Leasehold costs                 $   466,804     $     --     $   --     $        --     $   466,804
  Wells and related equipment     $11,959,534       10,556         --              --      11,970,091
                                  -----------     --------     ------     -----------     -----------
                                  $12,426,338     $ 10,556     $   --               $     $12,436,895
                                  ===========     ========     ======     ===========     ===========



Year Ended December 31, 1996:
  Leasehold costs                 $   466,804     $     --     $   --     $        --     $   466,804
  Wells and related equipment      11,947,691       11,843         --              --      11,959,534
                                  -----------     --------     ------     -----------     -----------
                                  $12,414,495     $ 11,843     $   --     $        --     $12,426,338
                                  ===========     ========     ======     ===========     ===========

</TABLE>








                                      F-19
<PAGE>   31





                                   SCHEDULE VI


                         STERLING GAS DRILLING FUND 1982
                        (a New York limited partnership)

  ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION - OIL AND GAS PROPERTIES

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996





<TABLE>
<CAPTION>
                                             Balance at       Charges to                                  Balance
                                             Beginning        Costs and                   Other           at End
                                              of Year          Expenses    Retirements  Retirements       of Year
                                             -----------     -----------   -----------  -----------     -----------
<S>                                          <C>             <C>             <C>        <C>             <C>        
Year Ended December 31, 1998:
  Wells and related facilities               $11,262,086     $    35,713     $   --     $        --     $11,297,799
  Leasehold costs                                448,783             909         --              --         449,692
                                             -----------     -----------     ------     -----------     -----------
                                             $11,710,869     $    36,622     $   --     $        --     $11,747,491
                                             ===========     ===========     ======     ===========     ===========


Year ended December 31, 1997:
  Wells and related facilities               $11,224,117     $    37,969     $   --     $        --     $11,262,086
  Leasehold costs                                447,817             966         --              --         448,783
                                             -----------     -----------     ------     -----------     -----------
                                             $11,671,934     $    38,935     $   --     $        --     $11,710,869
                                             ===========     ===========     ======     ===========     ===========


Year Ended December 31, 1996:
  Wells and related facilities               $11,184,513     $    39,604     $   --     $        --     $11,224,117
  Leasehold costs                                446,795           1,022         --              --         447,817
                                             -----------     -----------     ------     -----------     -----------
                                             $11,631,308     $    40,626     $   --     $        --     $11,671,934
                                             ===========     ===========     ======     ===========     ===========
</TABLE>





                                      F-20
<PAGE>   32


                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
                                                                                                 SEQUENTIALLY
EXHIBIT                                                                                           NUMBERED
NUMBER                                               EXHIBIT                                        PAGE     
------                                               -------                                        ----     
<S>              <C>                                                                           <C>    

         (3)      Form of Agreement of Limited Partnership of Sterling Gas
                  Drilling Fund 1982 (incorporated by reference to Exhibit (3)
                  of Sterling Gas Drilling Fund 1982 Form 10-K for the year
                  ended December 31, 1994)

        (24)      Consent of Ryder Scott Company (filed herewith)

        (27)      Financial Data Schedule. (filed herewith)
</TABLE>