<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, 1999

                                       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. 2-84452-01

                       STERLING DRILLING FUND 1983-2, L.P.
             (Exact name of Registrant as specified in its charter)


             NEW YORK                                    13-3167551
  (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, 2000,
was: 15,697.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      NONE

--------------------------------------------------------------------------------
<PAGE>   2




                       STERLING DRILLING FUND 1983-2, L.P.

                             FORM 10-K ANNUAL REPORT
                            FOR THE FISCAL YEAR ENDED
                                DECEMBER 31, 1999

                                     PART I

ITEM 1. BUSINESS

     Sterling Drilling Fund 1983-2, L.P., formerly Sterling-Fuel Resources
Drilling Fund 1983-2 (the "Registrant" or the "Partnership") is a limited
partnership formed under the laws of the State of New York on May 26, 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 $15,697,000, 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 1999, the Partnership did not engage in any other 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, 2000, 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.

<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. In
1999, approximately $234,637, or 79.97% and $52,100, or 17.75%, of the
Partnership's gas production was sold to Phoenix Diversified and Cabot Oil &
Marketing Corporation, respectively, and about $27,985, or 100%, of the
Partnership's oil production was sold to the American Refining Group. None of
the 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 1999 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 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


                                       -2-
<PAGE>   4
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 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, 1983, contracted
for the drilling of 52 development wells, which resulted in 51 producing wells
and one dry hole.


                                       -3-
<PAGE>   5


     As of December 31, 1999, 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.

<TABLE>
<CAPTION>

     Producing wells:                                   Gross            Net
                                                        -----           -----
     <S>                                                  <C>            <C>
                  Oil Wells...............................1                1
                  Gas Wells..............................60             48.3
                  Producing acres.....................6,086            4,898
</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,
                                                                      -----------------------




                                                        1999          1998         1997         1996           1995
                                                        ----          ----         ----         ----           ----
<S>                                                    <C>           <C>          <C>          <C>            <C>
Production:
Oil and Condensate (bbl)                               1,790         2,049        2,158        1,598          2,766
Gas (Mcf)                                            118,204       114,667      121,542      129,675        134,028
Average Price of Sales:
Oil and Condensate (bbl)                               15.63         12.14        18.50        19.45          15.83
Gas (Mcf)                                               2.48          2.95         3.11         2.43           2.10
Production Expense per Dollar
    Of Operating Revenue                                0.47          0.51         0.46         0.44           0.46
</TABLE>





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):

<TABLE>
<CAPTION>
                                                                      Proved Developed
                 As of                                                ----------------
                 12-31                                Oil (bbls)                            Gas (Mcf)
                 -----                                ----------                            ---------

<S>                                                     <C>                                 <C>
                 1995                                   17,400                              2,554,600

                 1996                                   19,500                              2,535,000

                 1997                                   21,000                              2,384,000

                 1998                                   17,700                              2,165,400

                 1999                                   21,460                              1,954,600
</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>
                    1995                             $2,410,900           $ 947,600


                    1996                              3,967,000           1,578,300


                    1997                              3,351,400           1,288,800


                    1998                              2,708,600           1,009,000


                    1999                              3,051,300           1,368,500
</TABLE>


         Since January 1, 1999, 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 1999 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, 2000, 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. Cash distributions to
the holders of Units for 1999 aggregated $39,242. Aggregate cash distributions
to the holders of the Units as of December 31, 1999, is $1,789,458.

     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 15, 2000,
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



                                       -6-
<PAGE>   8

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 168 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 that are involved with the conduct of the
business and operations of the Partnership.

     Charles E. Drimal, Jr., age 52, 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 47, 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.

     Lynne G. Pizor, age 40, 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 PrimeEnergy 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 67, 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, together with
administrative work by third parties limited annually to 5% of the aggregate
capital contribution of the holders of the Partnership Units. During 1999, the
allocation of general and administrative expenses to the Partnership was
$100,000.



                                       -7-

<PAGE>   9

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table shows as of March 16, 1999, the name and address and
the number and percent of Units beneficially and directly owned by each person,
entity or group, known to the Partnership to own more than 5% of the Units.

<TABLE>

                                                                          NUMBER
         NAME AND ADDRESS OF BENEFICIAL OWNER                            OF UNITS             PERCENT
         ------------------------------------                            --------             -------
<S>                                                                      <C>                  <C>
         PrimeEnergy Management Corporation
                  One Landmark Square
                  Stamford, CT 06901.............................         1,171                7.46%

         PrimeEnergy Corporation
                  One Landmark Square
                  Stamford, CT 06901.............................         2,717               17.31%
</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. PrimeOperating Company was paid, in
1999, well operating fees ranging from about $470 to $650 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 1999 and 1998, the Partnership paid an
aggregate of $103,521 and $129,391, 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-Fuel
                  Resources Drilling Fund 1983-2, now Sterling Drilling Fund
                  1983-2, L.P. (Incorporated by reference to Exhibit (3) of
                  Sterling Drilling Fund 1983-2, L.P. Form 10-K for the year
                  ended December 31, 1994.)

             (23) Consent of Ryder Scott Company, L.P. (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 28th day of
March, 2000.


                                Sterling Drilling Fund 1983-2, 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, 2000.



/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





                                      -10-
<PAGE>   12

                       STERLING DRILLING FUND 1983-2, L.P.

                        (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-5

Financial Statements:

       Balance Sheets, December 31, 1999 and 1998                                    F-6

       Statements of Operations for the Years Ended December 31,
       1999, 1998 and 1997                                                           F-7

       Statements of Changes in Partners' Equity for the Years
       Ended December 31, 1999, 1998 and 1997                                        F-8

       Statements of Cash Flow for the Years Ended December 31,
       1999, 1998 and 1997                                                           F-9

       Notes to Financial Statements                                                 F-10

Schedules:

       V  -   Property and Equipment - Oil and Gas Properties for the Years
              Ended December 31, 1999, 1998 and 1997                                 F-18

       VI -   Accumulated Depreciation, Depletion, and Amortization -
              Oil and Gas Properties for the Years Ended December 31,
              1999, 1998 and 1997                                                    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.
</TABLE>


                                       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)
                               -----------------------------------------
                          1999        1998       1997         1996        1995
                          ----        ----       ----         ----        ----
<S>                        <C>         <C>        <C>          <C>         <C>
Revenues:                  321         364        431          350         387

Net Income(Loss)
 Limited Partners          (23)      (0.2)         33          (4)          26
 General Partners             5         11         22           12          29
 Per equity unit         (1.47)     (0.02)       2.10       (0.23)        1.69
Total assets              1,224      1,292      1,331        1,327       1,371
Cash Distributions:
 Limited Partners            39         39         39           39          39
 General Partners            11         11         12           12          12
 Limited partners as a %
of original contribution   0.25%      0.25%     0.25%        0.25%       0.25%
</TABLE>

ITEM 7. MANAGEMENT'S 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 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, 1999, the General partners have distributed $1,789,458 or
11.40%, of original Limited Partner capital contributions, to the Limited
Partners.

     The net proved oil and gas reserves of the Partnership are considered to be
a primary indicator of financial strength and future liquidity. The present
value of unescalated future net revenues (S.E.C. case) associated with such
reserves, discounted at 10% as of December 31, 1999, was approximately
$1,368,563 as compared to the discounted reserves as of December 31, 1998, which
were approximately $1,009,000. Overall reservoir engineering is a subjective
process of estimating underground accumulations of gas and oil that can not be
measured in an exact manner. The accuracy of any reserve estimate is a function
of the quality of available data and of the engineering and geological
interpretation and judgment. Accordingly, reserve estimates are generally
different from the quantities of gas and oil that are ultimately recovered and
such differences may have a material impact on the Partnership's financial
results and future liquidity.

                                       F-2
<PAGE>   14

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 year. The
Partnership did not experience any problems as a result of the Year 2000 issue.

     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 contractor in December, 1993, for $13,400,000. Pursuant to
the terms of this contract fifty-two wells were drilled resulting in fifty-one
producing wells and one dry hole.

     3. Results of operations:

     1999 compared to 1998

     The Partnership experienced changes in gas and oil production 114,667 mcf
and 2,049 bbls in 1998 to 118,204 mcf and 1,790 bbls. The partnership received a
lower average price per mcf from $2.95 in 1998 to $2.48 in 1999. The lower gas
prices and gas production resulted in lower gas revenue. Although the
Partnership's main source of income is from its gas production, it did have
slightly higher oil revenue because of the increased oil production and the
increased average price per barrel from $12.14 in 1998 to $15.63 in 1999. The
combination of production and prices changes contributed to overall revenue
decline from $363,714 in 1998 to $321,377 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.

     Some production expenses may be variable in nature, vary with production
volumes or others are directly related to repairs, labor, location costs and
maintenance of the wells and well site. The expenditures made in 1998 and 1999
were for the general upkeep and maintenance of the Partnership's wells. The
Partnership's production expenses declined from $170,900 in 1998 to $150,423 in
1999.

     General and administrative costs remained relatively unchanged from
$124,413 in 1998 to $126,852 in 1999. The stable amounts reflect management's
efforts to limit costs, both incurred and allocated to the Partnership.
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 $784,850 allocable 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 additional depletion deduction
was needed in 1998 or 1999. The overall Partnership depreciation and depletion
expense was consistent with the current basis in the Partnership properties and
the rates applied.


                                       F-3
<PAGE>   15

     1998 compared to 1997

     The Partnership experienced declines in gas and oil production from 121,542
mcf and 2,158 bbls in 1997 to 114,667 mcf and 2,049 bbls in 1998. The declines
in gas production may be attributable to shut-in's for repairs and high main
line pressures. The pressure variances between the well and the transport line
may reduce or inhibit the free movement of gas through the transport lines. The
average price per mcf or barrel was also lower in 1998 than 1997, $3.11 and
$18.50 for 1997 and $2.95 and $12.14 in 1998. The combination of lower average
prices and lower production resulted in overall lower revenues from $431,111 in
1997 to $363,714 in 1998. During 1997, the operator sold tubing, pipes and rods
no longer needed by the Partnership's wells. These funds were included in
overall operating revenues for that year.

     Interest income fluctuates with changes in the interest rates received as
well as the amount of cash in the bank at any given time.

     Some production expenses may be variable in nature, vary with production
volumes or others are directly related to repairs, labor, location costs and
maintenance of the wells and well site. During 1997, the operator determined
that supplementary repairs were necessary to maintain various well's production.
These repairs included miscellaneous part replacements, location work, labor and
roadwork to access the well site. The expenditures made in 1998 were for the
general upkeep and maintenance of the Partnership's wells. No major expenditures
were made on supplementary repairs for the current year. Therefore the
Partnership's production expenses declined from $192,587 in 1997 to $170,900 in
1998.

     General and administrative costs remained relatively unchanged from
$123,440 in 1997 to $124,413 in 1998. The stable amounts reflect management's
efforts to limit costs, both incurred and allocated to the Partnership.
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 $784,850 allocable 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 additional depletion was needed
in 1997 or 1998. The overall Partnership depreciation was consistent with the
current basis in the Partnership properties and the rates applied.


                                   F-4
<PAGE>   16





                       STERLING DRILLING FUND 1983-2, L.P.
                        (a New York limited partnership)






                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Partners of
Sterling Drilling Fund 1983-2, L.P.:


We have audited the accompanying balance sheets of Sterling Drilling Fund
1983-2, L.P. (a New York limited partnership) as of December 31, 1999 and 1998,
and the related statements of operations, changes in partners' equity, and cash
flows for the years ended December 31, 1999, 1998 and 1997. 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 1983-2,
L.P. as of December 31, 1999 and 1998, and the results of its operations and
cash flows for the years ended December 31, 1999, 1998 and 1997 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 3, 2000


                                      F-5
<PAGE>   17



                       STERLING DRILLING FUND 1983-2, L.P.
                        (a New York limited partnership)

                                 BALANCE SHEETS

                           DECEMBER 31, 1999 AND 1998



<TABLE>
<CAPTION>



                                     Assets

                                                         1999           1998
                                                   ------------    ------------

Current Assets:
<S>                                                         <C>             <C>
  Cash and cash equivalents (Note 2)               $     75,872    $     88,554
  Due from affiliate (Note 6)                            39,003          39,510
                                                   ------------    ------------
     Total Current Assets                               114,875         128,064
                                                   ------------    ------------

Oil and Gas Properties - successful efforts
 method (Note 3) - (Schedules V and  VI):
  Leasehold costs                                       497,639         497,639
  Wells and related facilities                       12,946,528      12,934,194
                                                   ------------    ------------
      Total                                          13,444,167      13,431,833

  Less - Accumulated depreciation, depletion        (12,335,303)    (12,268,244)
         and amortization                          ------------    ------------
                                                      1,108,864       1,163,589
                                                   ------------    ------------

     Total Assets                                  $  1,223,739    $  1,291,653
                                                   ============    ============
</TABLE>



                        Liabilities and Partners' Equity

     Total Current Liabilities                         $       --     $       --
                                                       ----------     ----------

Partners' Equity:
  Limited partners                                      1,216,998      1,279,323
  General partners                                          6,741         12,330
                                                       ----------     ----------
     Total Partners' Equity                             1,223,739      1,291,653
                                                       ----------     ----------

     Total Liabilities and Partners' Equity            $1,223,739     $1,291,653
                                                       ==========     ==========








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


                                      F-6
<PAGE>   18






                       STERLING DRILLING FUND 1983-2, L.P.
                        (a New York limited partnership)

                            STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


<TABLE>
<CAPTION>


                                              1999                                             1998
                           -----------------------------------------        ------------------------------------------
                           Limited          General                          Limited         General
                           Partners         Partners         Total          Partners         Partners          Total
                           --------         --------       ---------        --------         --------        ---------
<S>                         <C>             <C>             <C>             <C>             <C>            <C>
Revenues:
  Operating revenues        $  245,853      $   75,524      $  321,377      $  278,241      $   85,473     $  363,714
  Interest                       2,686             249           2,935           3,787             352          4,139
  Other (Note 10)                1,854             570           2,424              --              --             --
                            ----------      ----------      ----------      ----------      ----------     ----------

     Total Revenues            250,393          76,343         326,736         282,028          85,825        367,853
                            ----------      ----------      ----------      ----------      ----------     ----------

Costs and Expenses:
  Production expenses          115,074          35,349         150,423         130,738          40,162        170,900
  Depreciation,                 61,359           5,700          67,059          56,378           5,237         61,615
   depletion and
   amortization
  General and
  administrative
  expenses (Note 7)             97,042          29,810         126,852          95,176          29,237        124,413
                            ----------      ----------      ----------      ----------      ----------     ----------
    Total Expenses             273,475          70,859         344,334         282,292          74,636        356,928
                            ----------      ----------      ----------      ----------      ----------     ----------

     Net Income (Loss)      $  (23,082)     $    5,484      $  (17,598)     $     (264)     $   11,189     $   10,925
                            ==========      ==========      ==========      ==========      ==========     ==========

  Net Income (Loss) Per
   Equity Unit (Note 2)     $    (1.47)                                     $     (.02)
                           ===========                                       =========
<CAPTION>


                                            1997
                           ----------------------------------------
                            Limited        General
                            Partners       Partners        Total
                           ----------     ----------     ----------
<S>                        <C>            <C>            <C>

Revenues:
  Operating revenues       $  329,800     $  101,311     $  431,111
  Interest                      2,030            189          2,219
  Other (Note 10)                  --             --             --
                           ----------     ----------     ----------

     Total Revenues           331,830        101,500        433,330
                           ----------     ----------     ----------

Costs and Expenses:
  Production expenses         147,329         45,258        192,587
  Depreciation,                57,152          5,309         62,461
   depletion and
   amortization
  General and
   administrative
   expenses (Note 7)           94,432         29,008        123,440
                           ----------     ----------     ----------
    Total Expenses            298,913         79,575        378,488
                           ----------     ----------     ----------

     Net Income (Loss)     $   32,917     $   21,925     $   54,842
                           ==========     ==========     ==========

  Net Income (Loss) Per
   Equity Unit (Note 2)    $     2.10
                           ==========
</TABLE>

                                      F-7





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



<PAGE>   19




                       STERLING DRILLING FUND 1983-2, L.P.
                        (a New York limited partnership)

                    STATEMENTS OF CHANGES IN PARTNERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997



<TABLE>
<CAPTION>



                                   Limited          General
                                   Partners         Partners           Total
                                 -----------      -----------      -----------
<S>                                  <C>              <C>              <C>

Balance at December 31, 1996     $ 1,325,155      $     2,341      $ 1,327,496

Partners' Contributions                   --              114              114

Distributions to partners            (39,243)         (11,855)         (51,098)

Net Income                            32,917           21,925           54,842
                                 -----------      -----------      -----------

Balance at December 31, 1997     $ 1,318,829      $    12,525      $ 1,331,354

Partners' contributions                   --              113              113

Distributions to partners            (39,242)         (11,497)         (50,739)

Net Income (Loss)                       (264)          11,189           10,925
                                 -----------      -----------      -----------

Balance at December 31, 1998       1,279,323           12,330        1,291,653

Partners' contributions                   --              112              112

Distributions to partners            (39,243)         (11,185)         (50,428)

Net Income (Loss)                    (23,082)           5,484          (17,598)
                                 -----------      -----------      -----------

Balance at December 31, 1999     $ 1,216,998      $     6,741      $ 1,223,739
                                 ===========      ===========      ===========
</TABLE>





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


                                      F-8
<PAGE>   20



                       STERLING DRILLING FUND 1983-2, L.P.
                        (a New York limited partnership)

                            STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


<TABLE>
<CAPTION>



                                                       1999            1998          1997
                                                    ----------    ----------    ----------
<S>                                                 <C>           <C>           <C>

Cash Flows From Operating Activities:
 Net income (loss)                                  $  (17,598)   $   10,925    $   54,842
 Adjustments to reconcile net (loss) to
  net cash provided by operating activities:
   Depreciation, depletion and amortization             67,059        61,615        62,461
   Changes in Assets and Liabilities:
   (Increase) decrease due from affiliates                 507       (39,510)      (48,737)
    Increase (decrease) in due to affiliates                --        48,737        22,836
                                                    ----------    ----------    ----------

      Net Cash Provided by Operating Activities         49,968        81,767        91,402
                                                    ----------    ----------    ----------

Cash Flows From Investing Activities:
  Equipment purchases                                  (12,334)           --        (5,023)
                                                    ----------    ----------    ----------

Cash Flows From Financing Activities:
  Partners' contributions                                  112           113           114
  Distributions to partners                            (50,428)      (50,739)      (51,098)
                                                    ----------    ----------    ----------
     Net Cash (Used in) Financing activities           (50,316)      (50,626)      (50,984)
                                                    ----------    ----------    ----------

Net increase (decrease) in cash and cash
     equivalents                                       (12,682)       31,141        35,395

Cash and cash equivalents at beginning of year          88,554        57,413        22,018
                                                    ----------    ----------    ----------

Cash and cash equivalents at end of year            $   75,872    $   88,554    $   57,413
                                                    ==========    ==========    ==========
</TABLE>







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


                                      F-9
<PAGE>   21




                       STERLING DRILLING FUND 1983-2, L.P.
                        (a New York limited partnership)

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 1999, 1998 AND 1997



(1)  Organization and Capital Contributions:

     Sterling Drilling Fund 1983-2, L.P., a New York limited partnership (the
     "Partnership"), was formed on May 26, 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. Fifteen thousand
     six hundred ninety-seven limited partnership units, (15,697), were sold at
     $1,000 per unit aggregating total limited partner contributions of
     $15,697,000. The general partners' contributions amounted to $1,284,839.
     Partnership operations commenced on December 22, 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


                                      F-10
<PAGE>   22



                       STERLING DRILLING FUND 1983-2, L.P.
                        (a New York limited partnership)

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 1999, 1998 AND 1997



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


     capitalized costs are amortized on a property by property basis by the
     unit-of-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
     15,697 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
<PAGE>   23
                       STERLING DRILLING FUND 1983-2, L.P.
                        (a New York limited partnership)

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 1999, 1998 AND 1997



(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 12.50% to 18.75% 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,
     1999, 1998 and 1997:
<TABLE>
<CAPTION>

                                                                   1999             1998              1997
                                                                  --------         --------          ------
<S>                                                               <C>               <C>              <C>

Average sales price per MCF of gas                                $ 2.48            $ 2.95           $ 3.11
Average sales price per BBL of oil                                $15.63            $12.14           $18.50
 and other liquids
Production expense per dollar of                                  $ 0.47            $ 0.51           $ 0.46
 operating revenue
</TABLE>

(4)  Quantities of Oil and Gas Reserves:

     The amount of proved reserves (all of which are developed) presented below
     has been estimated by an independent firm of petroleum engineers as of
     January 1, 2000. Petroleum engineers on the staff of PEC have also reviewed
     the data presented below, as of December 31, 1999, for consistency with
     current year production and operating history. All of the Partnership's oil
     and gas reserves are located within the United States.

<TABLE>
<CAPTION>
                                                                                           (Unaudited)
                                                                                    --------------------------
                                                                                     GAS (MCF)       OIL (BBL)
                                                                                    ----------      ----------
<S>                                                                                <C>                <C>
Reserves as of December 31, 1996                                                     2,534,734          19,501
Revisions of previous estimates                                                        (29,081)          3,666
Production                                                                            (121,542)         (2,158)
                                                                                    ----------      ----------

Reserves as of December 31, 1997                                                     2,384,111          21,009
Revisions of previous estimates                                                       (103,995)         (1,239)
Production                                                                            (114,667)         (2,049)
                                                                                    ----------      ----------

Reserves as of December 31, 1998                                                     2,165,449          17,721
Revisions of previous estimates                                                        (92,642)          5,532
Production                                                                            (118,204)         (1,790)
                                                                                    ----------      ----------

Reserves as of December 31, 1999                                                     1,954,603          21,463
                                                                                    ==========      ==========
</TABLE>


                                      F-12
<PAGE>   24




                       STERLING DRILLING FUND 1983-2, L.P.
                        (a New York limited partnership)

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 1999, 1998 AND 1997



(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. 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 for 1999, 1998 or 1997. 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.


                                      F-13
<PAGE>   25




                       STERLING DRILLING FUND 1983-2, L.P.
                        (a New York limited partnership)

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 1999, 1998 AND 1997



(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:

<TABLE>
<CAPTION>

                                                                   Limited        General
                                                                   Partners       Partners
                                                                   --------       --------
<S>                                                                 <C>            <C>
 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 1983-1, 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%
</TABLE>


(6)  Transactions With Affiliates:


     (a)  The receivable from affiliates at December 1999 and 1998 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 $470 for each
          producing gas well and $650 for each producing oil or combination gas
          and oil well, based on the Partnership's


                                      F-14
<PAGE>   26



                       STERLING DRILLING FUND 1983-2, L.P.
                        (a New York limited partnership)

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 1999, 1998 AND 1997



(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 1999, 1998 and 1997, $84,742, $121,816, and
          $117,831 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, 1999, $25,927 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, 1999, 1998, and 1997 for which it was billed $18,779,
          $7,575, and $7,799 respectively.


(7)  General and Administrative Expenses:


     In accordance with the Management Agreement, the general partners will be
     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 in
     their individual capacity.

     During 1999, 1998 and 1997, the Partnership recognized general and
     administrative expenses incurred on its behalf by a general partner of
     $100,000, for each year.


                                      F-15
<PAGE>   27
                       STERLING DRILLING FUND 1983-2, L.P.
                        (a New York limited partnership)

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 1999, 1998 AND 1997



(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,
                                  --------------------------------------------
                                      1999             1998             1997
                                  ----------       ----------      -----------
<S>                               <C>              <C>              <C>
Net income as reported
 on the Partnership's
 federal income tax
 return                           $  34,690        $  68,484        $ 112,218

Recompletion costs reported
 differently for financial
 reporting purposes and for
 income tax reporting
 purposes                            12,335               --               --

Depreciation, depletion and
 amortization for income
 tax purposes in excess
 of (less than) financial
 reporting amount                   (64,623)         (57,559)         (57,376)
                                  ----------       ---------       ----------
Net income (loss) per
 accompanying financial
 statements                       $ (17,598)       $  10,925        $  54,842
                                  =========        =========        =========
</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-16
<PAGE>   28




                       STERLING DRILLING FUND 1983-2, L.P.
                        (a New York limited partnership)

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 1999, 1998 AND 1997



(9)  Major Customers:


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

<TABLE>
<CAPTION>

     Purchaser                       1999            1998           1997
                                   --------       --------       --------
<S>                                <C>            <C>            <C>
     Phoenix Diversified           $234,637       $294,607       $298,961
     Cabot                         $ 52,100         51,167         62,310
     American Refining Group       $ 27,985         24,627         41,256
</TABLE>

     The Partnership renewed its gas purchase contracts in December, 1999
     resulting in a fixed price for one year.


(10) Other Revenue:


     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
<PAGE>   29







                                   SCHEDULE V


                       STERLING DRILLING FUND 1983-2, L.P.
                        (a New York limited partnership)

                 PROPERTY AND EQUIPMENT - OIL AND GAS PROPERTIES

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<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, 1999:
  Leasehold costs                  $   497,639     $        --     $        --     $        --     $   497,639
  Wells and related facilities      12,934,194          12,334              --              --      12,946,528
                                   -----------     -----------     -----------     -----------     -----------
                                   $13,431,833     $    12,334     $        --     $        --     $13,444,167
                                   ===========     ===========     ===========     ===========     ===========



Year Ended December 31, 1998:
  Leasehold costs                  $   497,639     $        --     $        --     $        --     $   497,639
  Wells and related facilities      12,934,194              --              --              --      12,934,194
                                   -----------     -----------     -----------     -----------     -----------
                                   $13,431,833     $        --     $        --     $        --     $13,431,833
                                   ===========     ===========     ===========     ===========     ===========



Year ended December 31, 1997:
  Leasehold costs                  $   497,639     $        --     $        --     $        --     $   497,639
  Wells and related facilities      12,929,171           5,023              --              --      12,934,194
                                   -----------     -----------     -----------     -----------     -----------
                                   $13,426,810     $     5,023     $        --     $        --     $13,431,833
                                   ===========     ===========     ===========     ===========     ===========
</TABLE>




                                      F-18

<PAGE>   30







                                   SCHEDULE VI


                       STERLING DRILLING FUND 1983-2, L.P.
                        (a New York limited partnership)

  ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION - OIL AND GAS PROPERTIES

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>



                                   Balance at         Charges to                                     Balance
                                   Beginning          Costs and                       Other           at End
                                    of Year            Expenses    Retirements       Changes         of Year
                                   -----------     -----------     -----------     -----------     -----------
<S>                                <C>             <C>             <C>             <C>             <C>
Year Ended December 31, 1999:
  Wells and related facilities     $11,779,344     $    66,561     $        --     $        --     $11,845,905
  Leasehold costs                      488,900             498              --              --         489,398
                                   -----------     -----------     -----------     -----------     -----------
                                   $12,268,244     $    67,059     $        --     $        --     $12,335,303
                                   ===========     ===========     ===========     ===========     ===========



Year Ended December 31, 1998:
  Wells and related facilities     $11,718,191     $    61,153     $        --     $        --     $11,779,344
  Leasehold costs                      488,438             462              --              --         488,900
                                   -----------     -----------     -----------     -----------     -----------
                                   $12,206,629     $    61,615     $        --     $        --     $12,268,244
                                   ===========     ===========     ===========     ===========     ===========



Year ended December 31, 1997:
  Wells and related facilities     $11,656,199     $    61,992     $        --     $        --     $11,718,191
  Leasehold costs                      487,969             469              --              --         488,438
                                   -----------     -----------     -----------     -----------     -----------
                                   $12,144,168     $    62,461     $        --     $        --     $12,206,629
                                   ===========     ===========     ===========     ===========     ===========
</TABLE>


                                      F-19
<PAGE>   31




                                INDEX TO EXHIBITS
<TABLE>
<CAPTION>

                                                                               Sequentially
Exhibit                                                                          Numbered
Number                           Exhibit                                           Page
-------                          -------                                           -----
<S>          <C>                                                                 <C>
 (3)         Form  Agreement  of  Limited  Partnership  of  Sterling-Fuel
             Resources  Drilling Fund 1983-1 (now Sterling  Drilling Fund
             1983-2, L.P.) (incorporated by reference to Exhibit (3) of
             Sterling Gas Drilling  Fund  1983-2,L.P.,  Form 10-K for the
             year ended December 31, 1994)

(23)         Consent of Ryder Scott Company, L.P.(filed herewith)

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