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UNITED STATES 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, 2003OR
 [    ]
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
 For the transition
period
from                    to Commission File No. 2-84452-01 Sterling Drilling Fund 1983-2, L.P.  New York
    
    13-3167551(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)One Landmark SquareStamford, 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. [   ] Indicate by check mark whether Registrant is an accelerated filer as
defined in Exchange Act Rule 12-b-2. YES [   ] NO [X] 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, 2004,
was: 15,697. DOCUMENTS INCORPORATED BY REFERENCE NONE




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STERLING DRILLING FUND 1983-2, L.P. FORM 10-K ANNUAL REPORT
For the Fiscal Year Ended
December 31, 2003 
 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 the 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, and 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 were 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 2003, 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, 2003, and to
the date of this Report, the Partnership has not engaged in any drilling
activities nor participated in the acquisition of any material producing oil
and gas properties. During 2002, PrimeEnergy Management negotiated a Farmout Agreement with Ardent
Resources Inc. covering leasehold interests in acres located in Calhoun County,
West Virginia. Pursuant to this agreement, Ardent has the right but not the
obligation to select acreage and drill a deep well on the selected acreage,
subject to an overriding royalty interest due to the leasehold owners. If a
test well is not spudded by February 13, 2005, this agreement terminates.
Acreage held by Sterling Drilling Fund 1983-2 was included in the Farmout
Agreement; PrimeEnergy Management may discuss the possibility of farming out
additional deep rights held by the Partnership under the same terms with other
parties, however, there is no guarantee that any agreement will be entered
into. 2




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During early 2001, PrimeEnergy Management negotiated a Farmout Agreement
with Eastern American Energy (EAE) covering leasehold interests in
approximately 5,000 acres in Clay County, West Virginia. Acreage held by
Sterling Drilling Fund 1983-2, Limited Partnership has been included in the
Farmout Agreement. This agreement provided for a small cash bonus paid at
closing and gives EAE the right (but not the obligation) to select acreage and
drill a deep well on the selected acreage, subject to an overriding royalty
interest due to the leasehold owners. This agreement closed in May 2001. EAE
drilled a successful well in 2003 and pursuant to the agreements the
Partnership received $1,660 attributable to the overriding royalty interest in
2003. 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, along with and alternative energy sources such as coal,
nuclear power and hydro-electric power. The availability of a ready market for any oil and gas produced by the
Partnership at acceptable prices per unit of production will depend upon
numerous factors beyond the control of the Partnership. These include the
extent of domestic production and importation of oil and gas, the proximity of
the Partnerships producing properties to gas pipelines and availability and
capacity of such pipelines, the marketing of other competitive fuels,
fluctuation in demand, governmental regulation of production, refinement,
transportation and sales, general national and worldwide economic conditions,
and the pricing, use and allocation of oil, gas and their substitute fuels. The Partnership does not currently own or lease any bulk storage
facilities or pipelines other than those 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 2003, approximately $403,586 or 77.60% and $110,037 or
21.16% of the Partnerships gas production was sold to Dominion Field Services
(formerly named Phoenix Diversified) and Cabot Oil & Marketing Corporation
respectively, and about $45,469 or 100% of the Partnerships oil production was
sold to Clearfield Appalachian Holdings (formerly named 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. 3




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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 concerning
preservation of the environment during 2003 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 result in a future
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 transportation affects the marketing of
natural gas produced by the Partnership as well as the revenues received by the
Partnership for sales of such natural gas. Since the latter part of 1985,
through its Order Nos. 436, 500 and 636 rulemakings, the FERC has endeavored to
make natural gas transportation accessible to gas buyers and sellers on an open
and non-discriminatory basis. The FERCs efforts have significantly altered
the marketing and pricing of natural gas. No prediction can be made as to what
additional legislation may be proposed, if any, affecting the competitive
status of a gas producer, restricting the prices at which a producer may sell
its gas or the market demand for gas; nor can it be predicted which proposals,
including those presently under consideration, if enacted, might be effective. Additional proposals and proceedings that might affect the natural gas
industry are considered from time to time by Congress, the FERC, state
regulatory bodies and the courts. The Partnership cannot predict when or if
any such proposals may 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. 4




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Taxation The Partnership received an opinion from 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 or her 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, and production and reserves for the periods indicated. Producing Wells and Operating Information The Partnership, following its formation and also in December 1983,
contracted for the drilling of 52 development wells, which resulted in 51
producing wells and one dry hole. As of December 31, 2003, the Partnership had ownership interests in the
following gross and net producing oil and gas wells and gross and net producing
acres.(1) The Partnership has no material undeveloped leasehold, mineral or
royalty acreage. Producing wells: Gross
    
    NetOil Wells
    
    
    1
    
    
    
    1Gas Wells
    
    
    60
    
    
    
    48.3Producing acres
    
    
    6,086
    
    
    
    4,898
  (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: ALL YEARS ENDED DECEMBER 312003
    
    2002
    
    2001
    
    2000
    
    1999Production:Oil and Condensate (bbl)
    
    
    1,685
    
    
    
    1,335
    
    
    
    1,748
    
    
    
    1,861
    
    
    
    1,790Gas (Mcf)
    
    
    106,203
    
    
    
    124,178
    
    
    
    140,730
    
    
    
    141,004
    
    
    
    118,204Average Price of Sales:Oil and Condensate (bbl)
    
    
    26.99
    
    
    
    20.60
    
    
    
    22.69
    
    
    
    26.91
    
    
    
    15.63Gas (Mcf)
    
    
    4.90
    
    
    
    3.55
    
    
    
    5.20
    
    
    
    3.57
    
    
    
    2.48Production Expense per Dollar
Of Operating Revenue
    
    
    0.48
    
    
    
    0.60
    
    
    
    0.47
    
    
    
    0.43
    
    
    
    0.47
 5




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Oil and Gas Reserves The Partnerships interests in proved developed oil and gas properties
have been evaluated by Ryder Scott Company, L.P. for the periods indicated
below. All of the Partnerships reserves are located in the continental United
States. The following table summarizes the Partnerships oil and gas reserves
at the dates shown (figures rounded): Proved DevelopedAs of 12-31
    
    Oil (bbls)
    
    Gas (Mcf)1999
    
    
    21,460
    
    
    
    1,954,6002000
    
    
    20,400
    
    
    
    2,321,5402001
    
    
    21,340
    
    
    
    2,205,1002002
    
    
    19,600
    
    
    
    2,160,6002003
    
    
    22,310
    
    
    
    2,125,500
 The estimated future net revenue using current prices and costs as of the
dates indicated, exclusive of income taxes (at a 10% discount for estimated
timing of cash flow) for the Partnerships proved developed oil and gas
reserves for the periods indicated are summarized as follows (figures rounded): Proved DevelopedFuture Net
    
    Present Value ofAs of 12-31
    
    Revenue $
    
    Future Net Revenue $1999
    
    
    3,051,300
    
    
    
    1,368,5002000
    
    
    19,003,750
    
    
    
    7,413,3002001
    
    
    3,408,560
    
    
    
    1,477,0002002
    
    
    5,969,800
    
    
    
    2,491,4002003
    
    
    9,040,450
    
    
    
    3,778,960
 The estimated reserve and future income quantities are related to
hydrocarbon prices. Therefore, volumes of reserves actually recovered and
amounts of income actually received may differ significantly from the estimated
quantities presented in this report. In accordance with FASB Statement No. 69, December 31, 2003 market prices
were determined using the daily oil price or daily gas sales price (spot
price) adjusted for oilfield or gas gathering hub and wellhead price
differentials (e.g. grade, transportation, gravity, sulfur, and BS&W) as
appropriate. Also, in accordance with SEC and FASB specifications, changes in
market prices subsequent to December 31, 2003 and 2002 were not considered.
The spot price for gas on December 31, 2003 was $5.97 per MMBTU. The range of
spot prices during the year 2003 was a low of $3.96 and a high of $12.20; the
average price was $5.48. The spot price for gas at December 31, 2002 was $4.58
per MMBTU. The range of spot prices during the year 2002 was a low of $1.98 and
a high of $5.05; the average price was $3.38. The range during the first
quarter of 2004 has been from $5.08 to $7.01 with an average of $5.65. The
recent futures market prices have been in the $5.62 range. 6




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While it may be reasonably anticipated that the prices received by
Sterling Drilling Fund 1983-2 for the sale of its production may be higher or
lower than the prices used in this evaluation (as described above) and the
operating costs relating to such production may also increase or decrease from
existing levels; such possible changes in prices and costs were, in accordance
with rules adopted by the SEC, omitted from consideration in making this
evaluation for the SEC case. Actual volumes produced, prices received, and
costs incurred by the Partnership may vary significantly from the SEC case. 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 2003 for vote by the holders of
Partnership Units. PART II  Item 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 There is no market for the Limited Partnership Units (the Units) of the
Partnership. As of March 15, 2004, there were 773 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 2003 aggregated $78,485. Aggregate cash distributions
to the holders of the Units as of December 31, 2003 was $2,221,126. The Managing General Partner may purchase Units directly from the unit
holders if presented to the Managing General Partner. This is subject to
conditions such as, limitations on the number of Units, and will be carried out
at a price to be fixed by the Managing General Partner in accordance with
certain procedures-all as provided for in the Limited Partnership Agreement of
the Partnership. Item 6. SELECTED FINANCIAL DATA The information required hereunder is set forth under Selected Financial
Data in the Financial Information section included in this Report. The index
to the Financial Information section is at page F-1. 7




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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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Registrant is a small business issuer as defined in the Securities
and Exchange Act Rule 12b-2 and no information is required to be provided by
this Item 7A. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required hereunder is set forth under Report of
Independent Public Accountants, Balance Sheets, Statements of Operations,
Statements of Changes in Partners Equity, Statements of Cash Flows and
Notes to Financial Statements in the Financial Information section included
in this Report. The index to the Financial Information section is at 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. Item 9A. CONTROLS AND PROCEDURES PrimeEnergy Management Corporation (PEMC), the Managing General Partner
of the Partnership, maintains a system of controls and procedures designed to
provide reasonable assurance as to the reliability of the financial statements
and other disclosures included in this report, as well as to safeguard assets
from unauthorized use or disposition. Within 90 days prior to the filing of
this report, PEMCs Chief Executive Officer and Chief Financial Officer have
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures with the assistance and participation of other members
of management. Based upon that evaluation, PEMCs Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures
are effective for gathering, analyzing and disclosing the information the
Partnership is required to disclose in the reports it files under the
Securities Exchange Act of 1934 within the time periods specified in the SECs
rules and forms. There have been no significant changes in PEMCs internal
controls or in other factors, which could significantly affect internal
controls subsequent to the date PEMC carried out its evaluation. 8




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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, joint
ventures, and publicly held asset and income fund limited partnerships. As of
March 15, 2004, Management acts as the Managing General Partner in a total of
18 limited partnerships and joint ventures (of which two are publicly held) and
is the Managing Trustee of two Delaware Business Trusts. The primary activity
of such Partnerships, joint ventures and trusts is the production of oil and
gas. Management, as the Managing General Partner of the Partnership, will
devote such of its time as it believes necessary to the conduct and management
of the business and affairs of the Partnership. Management, and other of the
General Partners of the Partnership, are engaged in and intend to continue to
engage in the oil and gas business for their own accounts and for the accounts
of others. Management, which provides all of the executive, management and
administrative functions of the Partnership, is a wholly owned subsidiary of
PrimeEnergy Corporation (PrimeEnergy), a publicly held Delaware corporation.
The principal offices of PrimeEnergy and Management are in
Stamford, Connecticut. The operating subsidiaries of PrimeEnergy, Prime
Operating Company and Eastern Oil Well Service Company maintain their principal
offices in Houston, Texas, with district offices in Midland, Texas, Oklahoma
City, Oklahoma, and Charleston, West Virginia. PrimeEnergy and its
subsidiaries have approximately 207 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 56, 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 50, has been a Director and Vice President of
Finance with 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 44, 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. 9




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Joan Podlovits, age 38, has been Controller of PrimeEnergy Management
Corporation since September 2002. She joined Management in July 1989 as a staff
accountant. She held the position of Accounting Manager for Management from
April 1994 to August 2002. She is a graduate of Pace University with a
Bachelor of Business Administration degree in Public Accounting. James F. Gilbert, age 71, 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 2003 and
2002 the allocation of general and administrative expenses to the Partnership
was approximately $100,800 per year.  Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTER
 The following table shows as of March 16, 2004 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. NUMBERNAME AND ADDRESS OF BENEFICIAL OWNER
    
    OF UNITS
    
    PercentPrimeEnergy Management CorporationOne Landmark SquareStamford, CT 06901
    
    
    1,176
    
    
    
    7.49
    %PrimeEnergy CorporationOne Landmark SquareStamford, CT 06901
    
    
    5,646
    
    
    
    35.97
    %
 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. In 2003 Prime Operating Company was
paid well operating fees ranging from about $235 to $672 per month per well.
Well operating supplies and equipment and related servicing operations are
generally provided by Eastern Oil Well Service Company. 10




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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, 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
2003 and 2002, the Partnership paid an aggregate of $169,220 and $146,899
respectively, in such fees and expenses. Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The Partnership has been charged for audit fees the amounts of $9,500 in 2003
and $9,500 in 2002 for services rendered in connection with the audit of the
Partnerships Financial Statement by Pustorino, Puglisi & Co. LLP. No audit
related fees, tax related fees, and any other fees were incurred by the
Partnership. The Audit Committee of PrimeEnergy Management Corporation, as the
Managing General Partner, approved the fees and independent audit services
provide by Pustorino, Puglisi & Co. LLP. PART IV Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K  (a)
    
    The following documents are filed as a part of this Report:  1.
    
    Financial Statements (Index to the Financial
Information at page F-1)2.
    
    Financial Statement Schedules:

Schedule V Property and Equipment  Oil and Gas
Properties
Schedule VI Accumulated Depreciation, Depletion and
Amortization  Oil and Gas Properties3.
    
    Exhibits:  3
    
    Form of Agreement of Limited
Partnership of Sterling Drilling Fund 1983-2
(Incorporated by reference to Exhibit (3) of Sterling
Drilling Fund 1983-2 Form 10-K for the year ended
December 31, 1994.)23
    
    Consent of Ryder Scott Company, L.P. (filed herewith)31.1
    
    302 Certification of Chief Executive Officer (filed herewith)31.2
    
    302 Certification of Chief Financial Officer (filed herewith)32.1
    
    Certification of Chief Executive
Officer pursuant to 18. U.S.C. Section 1350, as adopted
pursuant to section 906 of the Sarbanes-Oxley Act of
2002. (filed herewith)32.2
    
    Certification of Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to section 906 of the Sarbanes-Oxley Act of
2002 (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. 11




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SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, there unto duly authorized, on the
29 day of
March, 2004 Sterling Drilling Fund 1983-2, L.P.By:
    
    PrimeEnergy Management CorporationManaging General PartnerBy:
    
    /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 29 day of March, 2004. /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. CummingsThe Principal Financialand Accounting Officer
 12




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STERLING DRILLING FUND 1983-2, L.P. (a New York limited partnership) Index to Financial Statements and Schedules Page No.Selected Financial Data
    
    
    F-2Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    F-2Report of Independent Public Accountants
    
    
    F-6Financial Statements:Balance Sheets, December 31, 2003 and 2002
    
    
    F-7Statements of Operations for the Years Ended December 31,
2003, 2002 and 2001
    
    
    F-8Statements of Changes in Partners Equity for the Years
Ended December 31, 2003, 2002 and 2001
    
    
    F-9Statements of Cash Flow for the Years Ended December 31,
2003, 2002, and 2001
    
    
    F-10Notes to Financial Statements
    
    
    F-11Schedules:V - Property
and Equipment - Oil and Gas Properties for
the Years Ended December 31, 2003, 2002 and 2001
    
    
    F-19VI - Accumulated Depreciation, Depletion, and Amortization -
Oil and Gas Properties for the Years Ended December 31,
2003, 2002 and 2001
    
    
    F-20
 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




---



##### 



Item 6. SELECTED FINANCIAL DATA The following table summarizes certain selected financial data to
highlight significant trends in the Registrants financial condition and
results of operations for the periods indicated. The selected financial data
should be read in conjunction with the financial statements and related notes
included elsewhere in this report. Year Ended December 31, (in thousands)2003
    
    2002
    
    2001
    
    2000
    
    1999Revenues:
    
    
    566
    
    
    
    469
    
    
    
    771
    
    
    
    553
    
    
    
    321Net Income(Loss)Limited Partners
    
    
    91
    
    
    
    17
    
    
    
    210
    
    
    
    104
    
    
    
    (23
    )General Partners
    
    
    37
    
    
    
    17
    
    
    
    77
    
    
    
    44
    
    
    
    5Per equity unit
    
    
    5.77
    
    
    
    1.11
    
    
    
    13.40
    
    
    
    6.61
    
    
    
    (1.47
    )Total assets
    
    
    1,260
    
    
    
    1,235
    
    
    
    1,507
    
    
    
    1,321
    
    
    
    1,224Cash Distributions:Limited Partners
    
    
    78
    
    
    
    235
    
    
    
    78
    
    
    
    39
    
    
    
    39General Partners
    
    
    24
    
    
    
    72
    
    
    
    23
    
    
    
    11
    
    
    
    11Limited partners
as a % of
original
contribution
    
    
    0.50
    %
    
    
    1.50
    %
    
    
    0.50
    %
    
    
    0.25
    %
    
    
    0.25
    %
 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, 2003, the General partners have distributed $2,221,126 or
12.15%, 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, 2002, was approximately
$2,491,356 as compared to the discounted reserves as of December 31, 2003,
which were approximately $3,778,957. Overall reservoir engineering is a
subjective process of estimating underground accumulations of gas and oil that
cannot be measured in an exact manner. The estimated reserve quantities and
future income quantities are related to hydrocarbon prices. Therefore, volumes
of reserves actually recovered and amounts of income actually received may
differ significantly from the estimated quantities presented in this report. F-2




---



##### 



In accordance with FASB Statement No. 69, December 31, 2003 market prices
were determined using the daily oil price or daily gas sales price (spot
price) adjusted for oilfield or gas gathering hub and wellhead price
differentials (e.g. grade, transportation, gravity, sulfur, and BS&W) as
appropriate. Also, in accordance with SEC and FASB specifications, changes in
market prices subsequent to December 31, 2003 and 2002 were not considered.
The spot price for gas at December 31, 2003 was $5.97 per MMBTU. The range of
spot prices during the year 2003 was a low of $3.96, a high of $12.20 and the
average was $5.48. The spot price for gas at December 31, 2002 was $4.58 per
MMBTU. The range of spot prices during the year 2002 was a low of $1.98, a high
of $5.05 and the average was $3.38. The range during the first quarter of 2004
has been from $5.08 to $7.01 with an average of $5.65. The recent futures
market prices have been in the $5.62 range. While it may be reasonably anticipated that the prices received by
Sterling Drilling Fund 1983-2 for the sale of its production may be higher or
lower than the prices used in this evaluation, as described above, and the
operating costs relating to such production may also increase or decrease from
existing levels, such possible changes in prices and costs were, in accordance
with rules adopted by the SEC, omitted from consideration in making this
evaluation for the SEC case. Actual volumes produced, prices received and
costs incurred by the partnership may vary significantly from the SEC case 2. Capital Resources: The Partnership was formed for the sole intention of
drilling oil and gas wells. The Partnership entered into a drilling contract
with an independent 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: 2003 compared to 2002 The Partnership gas production declined from 124,178 MCF in 2002 to
106,203 MCF in 2003. There was a slight increase oil production from 1,335
barrels in 2002 to 1,685 barrels in 2003. The Partnership average price per
MCF received was higher in 2003, from $3.55 in 2002 to $4.90 in 2003. The
Partnerships overall operating revenue, excluding other income, increased from
$468,803 in 2002 to $565,577 in 2003. In December 2002 the Partnership entered
into a contract to sell approximately seventy five percent of the amount of its
gas sold under a fixed contract price subject to transportation cost. The
remaining gas sold by the Partnership will be sold at current spot market
prices. This combination allows the Partnership to sell its gas and avoid some
of the more significant negative swings that could occur in the spot market. A
portion of the Partnerships wells were shut-in during November and December
2003 due to a fire at a compressor plant on one of the Purchasers
transportation lines servicing the Partnership wells. All wells were back on
line as of December 31, 2003 due to the main transport lines being re-routed
around the compressor plant. The Partnership did experience declines in its
gas production that can be directly attributed to this shut-in. The
Partnerships overall revenue increased due to the higher prices received per
mcf. Interest income fluctuates with changes in the interest rates received as
well as the amount of cash in the bank at any given time. F-3




---



##### 



Some production expenses may be variable in nature. Production volumes or
others are directly related to repairs, labor, location costs and maintenance
of the wells and well site. The production operating expenses in 2003 were for
normal maintenance and upkeep at the wells and well sites and were reasonable
based upon production volumes. The Partnerships production expenses decreased
from $282,342 in 2002 to $272,237 in 2003. General and administrative costs decreased slightly from $121,302 in 2002
to $119,017 in 2003. These amounts reflect managements efforts to limit costs
both incurred and allocated to the Partnership. Management uses 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 2002 or 2003. The overall
Partnership depreciation and depletion expense was consistent with the current
basis in the Partnership properties and the rates applied. 2002 compared to 2001 The Partnership gas and oil production declined from 140,730 MCF and 1,748
barrels in 2001 to 124,178 barrels and 1,335 MCF in 2002. The Partnership
average price per MCF received was lower in 2002,from $5.20 in 2001 to $3.55 in
2002. The combination of declines in oil and gas production and a much lower
average price per MCF resulted in a decline in operating revenue from $771,282
in 2001 to $468,803 in 2002. A new contract was entered into in December 2001
and the Partnership was paid based upon current spot market prices until
November 2002. The General Partners elected to sell a substantial portion of
the gas delivered under this contract from June 2002 through October 2002 at a
fixed price of $3.57 per MMBTU subject to transportation costs. In December
2002 the Partnership entered into a contract to sell approximately seventy five
percent of the amount of its gas sold under a fixed contract price subject to
transportation cost. The remaining gas sold by the Partnership will be sold at
current spot market prices. This combination allows the Partnership to sell
its gas and avoid some of the more significant negative swings that could occur
in the spot market. The Partnerships other income is a result of a cash bonus paid to the
partnership for an additional farmout agreement. The farmout agreement allows
a third party the right to drill a deep well on leasehold acreage owned by the
partnership for a period of two years. If the third party exercises their
rights within the two years the Partnership could receive an overriding royalty
interest. F-4




---



##### 



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. Production volumes or
others are directly related to repairs, labor, location costs and maintenance
of the wells and well site. The production operating expenses in 2002 were for
normal maintenance and upkeep at the wells and well sites and were reasonable
based upon production volumes. The Partnership expended additional funds on
light repairs or capital improvements, which the operator has deemed necessary.
The operator expended funds on capital improvements in the amount of $37,607.
These repairs and capital expenditures are considered an appropriate means to
increase, sustain or halt changes in production. The Partnerships production
expenses decreased from $363,020 in 2001 to $282,342 in 2002. General and administrative costs increased slightly from $116,851 in 2001
to $121,302 in 2002. These 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 2001 or 2002. The overall
Partnership depreciation and depletion expense was consistent with the current
basis in the Partnership properties and the rates applied. F-5




---



##### 



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, 2003 and 2002,
and the related statements of operations, changes in partners equity, and cash
flows for the years ended December 31, 2003, 2002 and 2001. 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 auditing standards generally
accepted in the United States of America. 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, 2003 and 2002, and the results of its
operations and cash flows for the years ended December 31, 2003, 2002 and 2001
in conformity with accounting principles generally accepted in the United
States of America. 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 29, 2004 F-6




---



##### 



STERLING DRILLING FUND 1983-2
(a New York limited partnership) BALANCE SHEETS DECEMBER 31, 2003 AND 2002 2003
    
    2002AssetsCurrent Assets:Cash and cash equivalents (Note 2)
    
    $
    270,267
    
    
    $
    160,778Due from affiliates (Note 6)
    
    
    9,020
    
    
    
    40,061Total Current Assets
    
    
    279,287
    
    
    
    200,839Oil and Gas Properties  successful efforts
methods (Note 3) -Leasehold costs
    
    
    497,639
    
    
    
    497,639Wells and related facilities
    
    
    13,071,867
    
    
    
    13,071,867Total
    
    
    13,569,506
    
    
    
    13,569,506Less  Accumulated depreciation, depletion
and amortization
    
    
    (12,588,547
    )
    
    
    (12,535,721
    )980,959
    
    
    
    1,033,785Total Assets
    
    $
    1,260,246
    
    
    $
    1,234,624Partners EquityPartners Equity:Limited partners
    
    $
    1,207,644
    
    
    $
    1,195,487General partners
    
    
    52,602
    
    
    
    39,137Total Partners Equity
    
    $
    1,260,246
    
    
    $
    1,234,624
 The Notes to Financial Statements are an integral part of these statements. F-7




---



##### 



STERLING DRILLING FUND 1983-2
(a New York limited partnership) STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2003, 2002, 2001 2003
    
    2002
    
    2001Limited
    
    General
    
    
    
    
    
    Limited
    
    General
    
    
    
    
    
    Limited
    
    GeneralPartners
    
    Partners
    
    Total
    
    Partners
    
    Partners
    
    Total
    
    Partners
    
    Partners
    
    TotalRevenue:Operating revenues
    
    $
    432,666
    
    
    $
    132,911
    
    
    $
    565,577
    
    
    $
    358,634
    
    
    $
    110,169
    
    
    $
    468,803
    
    
    $
    590,031
    
    
    $
    181,251
    
    
    $
    771,282Interest
    
    
    1,626
    
    
    
    500
    
    
    
    2,126
    
    
    
    2,516
    
    
    
    234
    
    
    
    2,750
    
    
    
    7,022
    
    
    
    652
    
    
    
    7,674Other revenue (Note
10)
    
    
    3,995
    
    
    
    371
    
    
    
    4,366
    
    
    
    21,819
    
    
    
    6,703
    
    
    
    28,522
    
    
    
    44,420
    
    
    
    13,646
    
    
    
    58,066Total Revenue
    
    
    438,287
    
    
    
    133,782
    
    
    
    572,069
    
    
    
    382,969
    
    
    
    117,106
    
    
    
    500,075
    
    
    
    641,473
    
    
    
    195,549
    
    
    
    837,022Costs and Expenses:Production expenses
    
    
    208,261
    
    
    
    63,976
    
    
    
    272,237
    
    
    
    215,992
    
    
    
    66,350
    
    
    
    282,342
    
    
    
    277,710
    
    
    
    85,310
    
    
    
    363,020Depreciation,
depletion and
amortization
    
    
    48,336
    
    
    
    4,490
    
    
    
    52,826
    
    
    
    56,703
    
    
    
    5,267
    
    
    
    61,970
    
    
    
    63,987
    
    
    
    5,944
    
    
    
    69,931General and
administrative
expenses (Note 7)
    
    
    91,048
    
    
    
    27,969
    
    
    
    119,017
    
    
    
    92,796
    
    
    
    28,506
    
    
    
    121,302
    
    
    
    89,391
    
    
    
    27,460
    
    
    
    116,851Total Expenses
    
    
    347,645
    
    
    
    96,435
    
    
    
    444,080
    
    
    
    365,491
    
    
    
    100,123
    
    
    
    465,614
    
    
    
    431,088
    
    
    
    118,714
    
    
    
    549,802Net Income
    
    $
    90,642
    
    
    $
    37,347
    
    
    $
    127,989
    
    
    $
    17,478
    
    
    $
    16,983
    
    
    $
    34,461
    
    
    $
    210,385
    
    
    $
    76,835
    
    
    $
    287,220Net Income Per
Equity Unit (Note 2)
    
    $
    5.75
    
    
    
    
    
    
    
    
    
    
    $
    1.11
    
    
    
    
    
    
    
    
    
    
    $
    13.40
 The Notes to Financial Statements are integral part of these statements. F-8




---



##### 



STERLING DRILLING FUND 1983-2
(a New York limited partnership) STATEMENTS OF CHANGES IN PARTNERS EQUITY FOR THE YEARS ENDED DECEMBER 31, 2003, 2002, 2001 Limited
    
    GeneralPartners
    
    Partners
    
    TotalBalance at December 31, 2001
    
    $
    1,281,564
    
    
    
    39,574
    
    
    
    1,321,138Partners contributions
    
    
    
    
    
    
    225
    
    
    
    225Distributions to partners
    
    
    (78,485
    )
    
    
    (22,835
    )
    
    
    (101,320
    )Net Income
    
    
    210,385
    
    
    
    76,835
    
    
    
    287,220Balance at December 31, 2001
    
    
    1,413,464
    
    
    
    93,799
    
    
    
    1,507,263Partners contributions
    
    
    
    
    
    
    684
    
    
    
    684Distributions to partners
    
    
    (235,455
    )
    
    
    (72,329
    )
    
    
    (307,784
    )Net Income
    
    
    17,478
    
    
    
    16,983
    
    
    
    34,461Balance at December 31, 2002
    
    $
    1,195,487
    
    
    
    39,137
    
    
    $
    1,234,624Partners contributions
    
    
    
    
    
    
    228
    
    
    
    228Distributions to partners
    
    
    (78,485
    )
    
    
    (24,110
    )
    
    
    (102,595
    )Net Income
    
    
    90,642
    
    
    
    37,347
    
    
    
    127,989Balance at December 31, 2003
    
    $
    1,207,644
    
    
    $
    52,602
    
    
    $
    1,260,246
 The Notes to Financial Statements are an integral part of these statements. F-9




---



##### 



STERLING DRILLING FUND 1983-2
(a New York limited partnership) STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2003, 2002, 2001 2003
    
    2002
    
    2001Cash Flows From Operating Activities:Net Income
    
    $
    127,989
    
    
    $
    34,461
    
    
    $
    287,220Adjustments to reconcile net income
to net cash provided by
operating activities:Depreciation, depletion and
Amortization
    
    
    52,826
    
    
    
    61,970
    
    
    
    69,931Changes in Assets and Liabilities:(Increase) decrease in due from affiliates
    
    
    31,041
    
    
    
    (14,328
    )
    
    
    12,714Net Cash Provided by Operating Activities
    
    
    211,856
    
    
    
    82,103
    
    
    
    369,865Cash Flows From Investing Activities:Equipment purchases
    
    
    
    
    
    
    
    
    
    
    (37,607
    )Cash Flows From Financing Activities:Partners contributions
    
    
    228
    
    
    
    684
    
    
    
    225Distributions to partners
    
    
    (102,595
    )
    
    
    (307,784
    )
    
    
    (101,320
    )Net Cash Used in Financing Activities
    
    
    (102,367
    )
    
    
    (307,100
    )
    
    
    (101,095
    )Net Increase (decrease) in cash and cash
Equivalents
    
    
    109,489
    
    
    
    (224,997
    )
    
    
    231,163Cash and cash equivalents, beginning of
Year
    
    
    160,778
    
    
    
    385,775
    
    
    
    154,612Cash and cash equivalents, end of year
    
    $
    270,267
    
    
    $
    160,778
    
    
    $
    385,775
 The Notes to Financial Statements are an integral part of these statements. F-10




---



##### 



STERLING DRILLING FUND 1983-2, L.P.
(a New York limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003, 2002 AND 2001  (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. F-11




---



##### 



STERLING DRILLING FUND 1983-2, L.P.
(a New York limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003, 2002 AND 2001  (2)
    
    Summary of Significant Accounting Policies  (Contd): Oil and Gas Producing Activities: The Partnership accounts for its oil and gas operations using the
successful efforts method of accounting on a property by property basis. The
Partnership only participates in developmental drilling. Accordingly, all
costs of drilling and equipping these wells, together with leasehold
acquisition costs, are capitalized. These capitalized costs are amortized on a
property by property basis by the unit-of-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 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-12




---



##### 



STERLING DRILLING FUND 1983-2, L.P.
(a New York limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003, 2002 AND 2001  (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, 2003,
2002 and 2001: 2003
    
    2002
    
    2001Average sales price per MCF of gas
    
    $
    4.90
    
    
    $
    3.55
    
    
    $
    5.20Average sales price per BBL of oil
and other liquids
    
    $
    26.99
    
    
    $
    20.60
    
    
    $
    22.69Production expense per dollar of
operating revenue
    
    $
    0.48
    
    
    $
    0.60
    
    
    $
    0.47
  (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, 2004. Petroleum engineers on the staff of PEC have also reviewed the data
presented below, as of December 31, 2003, for consistency with current year
production and operating history. All of the Partnerships oil and gas
reserves are located within the United States. (Unaudited)GAS (MCF)
    
    OIL (BBL)Reserves as of December 31, 2000
    
    
    2,321,544
    
    
    
    20,386Revisions of previous estimates
    
    
    24,288
    
    
    
    2,700Production
    
    
    (140,730
    )
    
    
    (1,748
    )Reserves as of December 31, 2001
    
    
    2,205,102
    
    
    
    21,338Revisions of previous estimates
    
    
    79,695
    
    
    
    (411
    )Production
    
    
    (124,178
    )
    
    
    (1,335
    )Reserves as of December 31, 2002
    
    
    2,160,619
    
    
    
    19,592Revisions of previous estimates
    
    
    71,083
    
    
    
    4,398Production
    
    
    (106,203
    )
    
    
    (1,684
    )Reserves as of December 31, 2003
    
    
    2,125,499
    
    
    
    22,306
 F-13




---



##### 



STERLING DRILLING FUND 1983-2, L.P.
(a New York limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003, 2002 AND 2001  (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 2003, 2002 and 2001. F-14




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##### 



STERLING DRILLING FUND 1983-2, L.P.
(a New York limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003, 2002 AND 2001  (5)
    
    Allocation of Partnership Revenues, Costs and Expenses:Under the terms of the Limited Partnership Agreement, all Partnership
revenues and expenses, including deductions attributable thereto, are to
be allocated as follows: Limited
    
    GeneralPartners
    
    PartnersParticipation in Costs:Sales commissions and dealer
manager fees in
excess of the $50,000 paid by PEMC
    
    
    100
    %
    
    
    0
    %Offering costs other than $75,000 paid by the
Partnership and the Sterling Drilling Fund, L.P
    
    
    0
    %
    
    
    100
    %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
    %
  (6)
    
    Transactions With Affiliates:  (a)
    
    The receivable from affiliates at December 2003 and 2002
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 $235 for
each producing gas well and $672 for each producing oil or
combination gas and oil well, based on the Partnerships F-15




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##### 



STERLING DRILLING FUND 1983-2, L.P.
(a New York limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003, 2002 AND 2001  (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 2003, 2002 and 2001, $148,394,
$119,026, and $182,130, 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, 2003,
$22,946 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, 2003, 2002, and 2001 for which it was billed
$20,826, $27,873, and $10,904, 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 2003, 2002 and 2001, the Partnership recognized general and
administrative expenses incurred on its behalf by a general partner of
$100,800, $100,800 and $100,000,respectively. F-16




---



##### 



STERLING DRILLING FUND 1983-2, L.P.
(a New York limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003, 2002 AND 2001  (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: Year Ended December 31,2003
    
    2002
    
    2001Net Income as reported on the
Partnerships federal income tax return
    
    
    180,815
    
    
    
    96,431
    
    
    $
    319,544Recompletion costs reported differently
for financial reporting purposes and
for income tax reporting purposes
    
    
    
    
    
    
    
    
    
    
    37,607Depreciation, depletion and amortization
for income tax purposes in excess of
(less than) financial reporting amounts
    
    
    (52,826
    )
    
    
    (61,970
    )
    
    
    (69,931
    )Net Income/(Loss) per accompanying
financial statements
    
    $
    127,989
    
    
    $
    34,461
    
    
    $
    287,220
 The tax returns of the Partnership, the qualifications of the Partnership
as such for tax purposes, and the amount of Partnership income or loss are
subject to examination by federal and state taxing authorities. If such
examinations result in changes with respect to Partnerships qualifications or
in changes to its income or loss, the tax liability of the partners would be
changed accordingly. F-17




---



##### 



STERLING DRILLING FUND 1983-2, L.P.
(a New York limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003, 2002 AND 2001  (9)
    
    Major Customers: A schedule of the major purchases of the Partnerships production is as
follows: Purchaser
    
    2003
    
    2002
    
    2001Dominion Field Services
    
    $
    403,586
    
    
    $
    369,055
    
    
    $
    637,121Cabot
    
    $
    110,037
    
    
    $
    66,282
    
    
    $
    86,219Clearfield Appalachian Holdings
    
    $
    45,469
    
    
    $
    27,509
    
    
    $
    39,656
 In December 2002 the Partnership entered into a contract to sell
approximately seventy five percent of the amount of its gas sold under a fixed
contract price subject to transportation cost. The remaining gas sold by the
Partnership will be sold at current spot market prices.  (10)
    
    Other Revenue: In 2003 the Partnerships other income is a result of a cash bonus paid to
the partnership for a three-year farmout agreement. The farmout agreement
allows a third party the right to drill a deep well on leasehold acreage owned
by the partnership for a period of three years. If the third party exercises
their rights with in the three years the Partnership could receive an
overriding royalty interest. In 2002 the Partnerships other income is a result of a cash bonus paid to
the partnership for a three-year farmout agreement. The farmout agreement
allows a third party the right to drill a deep well on leasehold acreage owned
by the partnership for a period of three years. If the third party exercises
their rights with in the three years the Partnership could receive an
overriding royalty interest. In 2001 the Partnerships other income is a result of a cash bonus paid to
the partnership for a two-year farmout agreement. The farmout agreement allows
a third party the right to drill a deep well on leasehold acreage owned by the
partnership for a period of two years. If the third party exercises their
rights with in the two years the Partnership could receive an overriding
royalty interest. In 2001 the Partnership was a member of Class of Oil Producers involved in
litigation alleging that the principal refiners of Penn Grade crude engaged in
a conspiracy to fix, lower, maintain and stabilize the purchase prices of crude
purchased by the refiners from the oil producers. The Partnership received
this amount pursuant to the Settlement Agreement of this litigation. F-18




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##### 



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, 2003, 2002 AND 2001 Balance at
    
    
    
    
    
    
    
    
    
    
    
    
    
    BalanceBeginning
    
    Additions
    
    
    
    
    
    Other
    
    at Endof Year
    
    at Cost
    
    Retirements
    
    Changes
    
    of YearYear Ended December 31, 2003:Leasehold costs
    
    $
    497,639
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    497,639Wells and related facilities
    
    
    13,071,867
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,071,867$
    13,569,506
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    13,569,506Year Ended December 31, 2002:Leasehold costs
    
    $
    497,639
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    497,639Wells and related facilities
    
    
    13,071,867
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,071,867$
    13,569,506
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    13,569,506Year Ended December 31, 2001:Leasehold costs
    
    $
    497,639
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    497,639Wells and related facilities
    
    
    13,034,260
    
    
    
    37,607
    
    
    
    
    
    
    
    
    
    
    
    13,071,867$
    13,531,899
    
    
    $
    37,607
    
    
    $
    
    
    
    $
    
    
    
    $
    13,569,506
 F-19




---



##### 



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, 2003, 2002 AND 2001 Balance at
    
    Charges to
    
    
    
    
    
    
    
    
    
    BalanceBeginning
    
    Costs and
    
    
    
    
    
    Other
    
    at Endof Year
    
    Expenses
    
    Retirements
    
    Changes
    
    of YearYear Ended December 31, 2003:Wells and related facilities
    
    $
    12,044,970
    
    
    $
    52,474
    
    
    $
    
    
    
    $
    
    
    
    $
    12,097,444Leasehold costs
    
    
    490,750
    
    
    
    352
    
    
    
    
    
    
    
    
    
    
    
    491,102$
    12,535,720
    
    
    $
    52,826
    
    
    $
    
    
    
    $
    
    
    
    $
    12,588,546Year Ended December 31, 2002:Wells and related facilities
    
    $
    11,983,414
    
    
    $
    61,556
    
    
    $
    
    
    
    $
    
    
    
    $
    12,044,970Leasehold costs
    
    
    490,336
    
    
    
    414
    
    
    
    
    
    
    
    
    
    
    
    490,750$
    12,473,750
    
    
    $
    61,970
    
    
    $
    
    
    
    $
    
    
    
    $
    12,535,720Year Ended December 31, 2001:Wells and related facilities
    
    $
    11,913,949
    
    
    $
    69,465
    
    
    $
    
    
    
    $
    
    
    
    $
    11,983,414Leasehold costs
    
    
    489,870
    
    
    
    466
    
    
    
    
    
    
    
    
    
    
    
    490,336$
    12,403,819
    
    
    $
    69,931
    
    
    $
    
    
    
    $
    
    
    
    $
    12,473,750
 F-20




---



##### 



INDEX TO EXHIBITS SequentiallyExhibit
    
    
    
    NumberedNumber
    
    Exhibit
    
    Page(3)
    
    Form 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 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)(31.1)
    
    302 Certification of Chief Executive Officer (Filed herewith)(31.2)
    
    302 Certification of Chief Financial Officer (Filed herewith)(32.1)
    
    Certification of Chief Executive Officer pursuant to
18.U.S.C. Section 1350, as adopted pursuant to section 906
of the Sarbanes-Oxley Act of 2002. (Filed herewith)(32.2)
    
    Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to section 906 of
the Sarbanes-Oxley Act of 2002 (Filed herewith)