SECURITIES AND EXCHANGE COMMISSION
                   Washington, D.C. 20549
                              
                          FORM 10-Q
                              
                              
/X/Quarterly  Report Pursuant to Section 13 or  15(d)of  the
Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 1996

                             or

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

For the Transition Period Ended ______________________

                    Commission File Number 0-10501


               STERLING GAS DRILLING FUND 1981
     (Exact name of registrant as specified in charter)

                          New York
      (State or other jurisdiction of incorporation or
                        organization)
                              
                         13-3098770
            (IRS employer identification number)

      One Landmark Square, Stamford, Connecticut  06901
    (Address and Zip Code of principal executive offices)

                       (203) 358-5700

    (Registrant's telephone number, including area code)

                       Not Applicable
   (Former name, former address and former fiscal year, if
                 changed since last report)

Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes  /X/  No   / /

<PAGE>
Item 1.   Financial Statements
The following Financial Statements are filed herewith:

Balance Sheets - September 30, 1996 and December 31, 1995.

Statements of Operations for the Nine and Three Months Ended September 30,
1996 and 1995.

Statements of Changes in Partners' Equity for the Nine and Three Months
Ended September 30, 1996 and 1995.

Statements of Cash Flows for the Nine Months Ended September 30, 1996 and
1995.

Note to Financial Statements

Item 2.   Management's Discussion and Analysis of Financial Condition
and Results of Operations

1.   Liquidity -

The oil and gas industry is intensely competitive in all its phases.
There is also competition among this industry and other industries in
supplying energy and fuel requirements of industrial and 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 Prospectus, the General Partners
of the Registrant will make cash distributions of as much of the
Partnership cash credited to the capital accounts of the Partners as
the General Partners have determined is not necessary or desirable for
the payment of any contingent debts, liabilities or expenses or for
the conduct of the Partnership's business.  As of September 30, 1996,
the General Partners have distributed to the Limited Partners
$3,955,500.  Such cash distributions are equivalent to 45 % of
original total Limited Partner capital contributions.

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  (SEC  case)
associated  with such reserves, discounted at 10% as of  December  31,
1994  was approximately $703,000 as compared to the December 31,  1995
reserves  of $765,500.  The increase in undiscounted future  net  cash
flows  for the Partnership properties  was caused by higher  year  end
prices  in  effect  at December 31, 1995 compared to  lower  year  end
prices  as of December 31, 1994. There were no significant changes  in
the  estimated  future  production from the  properties.   It  is  the
opinion of management, and the general consensus in the industry, that
gas  prices  are unlikely to decline significantly below the  December
31,  1995  price  in  the  near future.   However,  there  can  be  no
assurances that such price declines will not occur, and  will not pose
a threat to the Partnership's continued viability.


<PAGE>

2.   Capital Resources -

The Registrant was formed for the sole purpose of drilling oil and gas
wells. The Registrant entered into a drilling contract with an
independent contractor in December 1981 for $6,900,000.  Pursuant to
the terms of this contract, wells have been drilled resulting in
thirty-seven producing wells, three non commercial wells and one
plugged well.   The Registrant has had a reserve report prepared which
details reserve value information, and such information is available
to the Limited Partners pursuant to the buy-out provisions of the
Prospectus as previously filed.
3.   Results of Operations -
 The Partnership's overall operating revenues decreased from $193,199
in 1995 to $182,149 in 1996. Although the Partnership receives only a
minor amount of revenue from oil, stable oil production and  higher
average oil prices in 1996 did contribute to minimize the decline in
overall operating revenues. The majority of the partnership's revenue
is from gas production. The gas revenue received for 1996 was lower
then 1995 mainly due to a production decline, from 71,018 MCF in 1995
to 67,901 MCF in 1996. Average price per MCF of gas increased by about
$0.08 per MCF. Production expenses increased from $65,265 in 1995 to
$69,397 in 1996. The higher production expenses, in 1996, can be
attributed to some severe storms during the late spring and summer of
1996. These storms resulted in additional cost incurred,  which may
include additional maintenance, location, access road work and other
repairs. Most of the production expenses, in 1995, were to maintain
the general upkeep of the wells and well site.

General and administrative expenses have been segregated on the
financial statements to show expenses paid to PrimeEnergy Management
Corporation(PEMC), a general partner.  These expenses are charged in
accordance with guidelines set forth in the Registrant's Management
Agreement.  The expenses attributable to the affairs and operations of
the Partnership, reimbursed to PEMC, shall not exceed an annual amount
equal to 5% of the Limited Partners capital contributions. Amounts
related to both 1996 and 1995 are substantially less than the amounts
allocable to the Registrant under the Partnership Agreement.  The
lower amounts reflect management's effort's to limit costs, both
incurred and allocated to the Registrant. Management continues to
reduce third party costs and use in-house resources to provide
efficient and timely services to the Partnership. General and
administrative  charges were stable and showed only a minor change
from 1995 to 1996.

The   partnership  records  additional  depreciation,  depletion   and
amortization  to  the  extent that net capitalized  costs  exceed  the
undiscounted  future net cash flows attributable  to  the  partnership
properties. No additional depreciation, depletion or amortization  was
needed  in  1995 or in the three quarters of 1996. Although  the  1996
expense  is  lower than 1995, the expense recorded is consistent  with
the current basis of the partnership's properties.

<PAGE>PART II

Items 1 through 5 have been omitted in that each item is either
inapplicable or the answer is negative.Item .  Exhibits and Reports on
Form 8-K
The Partnership was not required to file any reports on Form 8-K and
no such form was filed during the period covered by this report.

Exhibit 27 - Financial Data Schedule is attached to the electronic
filing of this report.

<PAGE>

                          S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.




                           STERLING GAS DRILLING FUND 1981
 November 8, 1996           BY: /S/Charles E.Drimal Jr. 
 (DATE)                        ------------------------
                                Charles E. Drimal, Jr.
                                General Partner


<PAGE>

                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                            Balance Sheets
                                         September       December
                                            30,          31, 1995
                                            1996
                                        (unaudited)     (audited)
Assets                                                             
Current Assets:                                                    
  Cash and cash equivalents           $           21 $           29
                                          ----------    -----------
      Total current assets                        21             29
                                                                   
Oil and Gas properties -                                           
successful efforts method:                                         
  Leasehold costs                            236,502        236,502
  Well and related facilities              6,945,363      6,938,085
   less accumulated                                                
   depreciation, depletion and                                     
   amortization                           (5,928,629)    (5,869,370)
                                          ----------     ----------
      Net oil & gas properties             1,253,236      1,305,217
                                          ----------     ----------
       Total assets                   $    1,253,257 $    1,305,246
                                          ==========     ==========
                                                             
Liabilities and Partners' Equity                             
  Current liabilities:                                       
   Due to affiliates                  $      175,223 $      190,593
                                          ----------     ----------
        Total current liabilities            175,223        190,593
                                          ----------     ----------
                                                                   
  Partners' Equity                                                 
   Limited partners                        1,191,853      1,231,468
   General partners                         (113,819)      (116,815)
                                          ----------     ----------
         Total partners' equity            1,078,034      1,114,653
                                          ----------     ----------
                                                                   
         Total liabilities and                                     
          partners' equity            $    1,253,257 $    1,305,246
                                          ==========     ==========
                                   
                                   
                                   
See accompanying note to the financial statements
                                   
<PAGE>
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Nine Months Ended
                                   September 30, 1996

                               Limited      General     
                               Partners     Partners    Total
Revenue:                                                
Operating revenue           $    153,278 $    28,871  $   182,149
                                --------    --------      -------
  Total Revenue                  153,278      28,871      182,149
                                --------    --------      -------
                                                        
Costs and Expenses:                                     
Production expense                58,398      10,999       69,397
General and administrative        63,110      11,887       74,997
 to a related party
General and administrative        12,719       2,396       15,115
Depreciation, depletion                                          
 and amortization                 58,666         593       59,259
                                --------    --------      -------
  Total Costs and Expenses       192,893      25,875      218,768
                                --------    --------      -------
  Net Income(loss)          $    (39,615) $    2,996   $  (36,619)
                                ========    ========      =======
Net Income(loss)                                                 
    per equity unit         $      (4.51)                         
                                  ======                         
                                                                 
                                                                 
                                   
                                   
See accompanying note to the financial statements.
                                   
<PAGE>
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Nine Months Ended
                                   September 30, 1995

                               Limited       General     
                               Partners      Partners    Total
Revenue:                                                 
Operating revenue           $    162,577  $    30,622  $   193,199
                                --------     --------      -------
  Total Revenue                  162,577       30,622      193,199
                                --------     --------      -------
                                                         
Costs and Expenses:                                      
Production expense                54,920       10,345       65,265
General and administrative                                        
 to a related party               63,110       11,887       74,997
General and administrative        12,806        2,412       15,218
Depreciation, depletion                                           
 and amortization                 74,762          755       75,517
                                --------     --------      -------
  Total Costs and Expenses       205,598       25,399      230,997
                                --------     --------      -------
  Net Income(loss)          $    (43,021)  $    5,223   $  (37,798)
                                ========     ========      =======
Net Income(loss)                                                  
    per equity unit         $      (4.89)                          
                                  ======                          
                                   
                                   
See accompanying note to the financial statements.
                                   
                                   
<PAGE>
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Three Months Ended
                                   September 30, 1996

                               Limited       General                
                               Partners      Partners          Total
Revenue:                                                 
Operating revenue            $    53,599   $   10,096  $      63,695
                                --------     --------      ---------
  Total Revenue                   53,599       10,096         63,695
                                --------     --------      ---------
                                                                    
Costs and Expenses:                                                 
Production expense                20,449        3,851         24,300
General and administrative        21,037        3,962         24,999
 to a related party
General and administrative         3,367          634          4,001
Depreciation, depletion                                             
 and amortization                 19,610          199         19,809
                                --------     --------      ---------
  Total Costs and Expenses        64,463        8,646         73,109
                                --------     --------      ---------
  Net Income(loss)           $   (10,864)  $    1,450  $      (9,414)
                                ========     ========      =========
Net Income(loss)                                                    
    per equity unit          $     (1.24)
                                ========                            
                                   
                                   
See accompanying note to the financial statements.
                                   
                                   
<PAGE>
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Three Months Ended
                                   September 30, 1995

                               Limited     General       
                               Partners    Partners      Total
Revenue:                                                 
Operating revenue           $     52,739 $      9,934  $     62,673
                                --------     --------     ---------
  Total Revenue                   52,739        9,934        62,673
                                --------     --------     ---------
                                                                   
Costs and Expenses:                                                
Production expense                15,893        2,994        18,887
General and administrative                                         
 to a related party               21,037        3,962        24,999
General and administrative         2,852          537         3,389
Depreciation, depletion                                            
 and amortization                 24,920          252        25,172
                                --------     --------     ---------
  Total Costs and Expenses        64,702        7,745        72,447
                                --------     --------     ---------
  Net Income(loss)          $    (11,963) $     2,189  $     (9,774)
                                ========     ========     =========
Net Income(loss)                                                   
    per equity unit         $      (1.36)
                                ========                           


See accompanying note to the financial statements.


<PAGE>

                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
               Statement of Changes in Partners' Equity
                              (unaudited)
                                   
                                   Nine Months Ended
                                   September 30, 1996


                            Limited        General                   
                            Partners       Partners             Total
                                                          
Balance at beginning of                                               
period                   $    1,231,468      (116,815)  $    1,114,653
Net Income(Loss)                (39,615)        2,996          (36,619)
                              ---------     ---------       ----------
Balance at end of period $    1,191,853      (113,819)  $    1,078,034
                              =========     =========       ==========
                                          
                                          
                                  Nine Months Ended
                                 September 30, 1995

                               Limited       General                   
                               Partners      Partners             Total
                                                                       
Balance at beginning of                                                
period                       $  1,261,971  $ (125,823)   $    1,136,148
  Net Income(Loss)                (43,021)      5,223           (37,798)
                                ---------     --------      -----------
Balance at end of period     $  1,218,950    (120,600)  $     1,098,350
                                =========     ========      ===========
                                   
                                   
See accompanying note to the financial statements.
                                   
                                   
                                   
<PAGE>
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
               Statement of Changes in Partners' Equity
                              (unaudited)
                                   
                                   Three Months Ended
                                   September 30, 1996


                               Limited      General                    
                               Partners     Partners              Total
                                                                       
Balance at beginning of                                                
period                      $   1,202,717     (115,269) $      1,087,448
  Net Income(Loss)                (10,864)       1,450            (9,414)
                                ---------    ---------        ----------
Balance at end of period    $   1,191,853     (113,819) $      1,078,034
                                =========    =========        ==========
                                            
                                            
                                   Three Months Ended
                                   September 30, 1995

                              Limited      General         
                              Partners     Partners        Total
                                                           
Balance at beginning of                                               
period                      $  1,230,913 $  (122,789)  $     1,108,124
  Net Income(Loss)               (11,963)      2,189            (9,774)
                               ---------    --------         ----------
Balance at end of period    $  1,218,950    (120,600)  $     1,098,350
                               =========    ========         ==========
                                                           
                                   
See accompanying note to the financial statements.
                                   
                                   
<PAGE>
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Cash Flows
                              (unaudited)
                                   
                                            Nine         Nine
                                           months       months
                                           ended         ended
                                         September     September
                                          30, 1996     30, 1995
                                                                
Net cash provided by(used in)                                   
operating activities                   $      7,270  $      (18)
                                         ----------     -------
                                                                
Cash flows from investing activities:                           
  Investment in well and related                                
  facilities                                 (7,278)          0
                                         ----------     -------
Net Cash used in investing activities        (7,278)          0
                                         ----------     -------
                                                                
                                                                
Net increase(decrease) in cash and                               
  cash equivalents                               (8)        (18)
Cash and cash equivalents at beginning                          
of period                                        29          43
                                          ---------    --------
Cash and cash equivalents at end of                             
period                                 $         21  $       25
                                          =========    ========

See accompanying note to the financial statements.

<PAGE>


                  STERLING GAS DRILLING FUND 1981
                  (a New York limited partnership)
                  Note to Financial Statements
                        September 30, 1996



1.   The accompanying statements for the period ending September 30,
1996 are unaudited but reflect all the adjustments necessary to
present fairly the results of operations.
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SECURITIES AND EXCHANGE COMMISSION
                   Washington, D.C. 20549
                              
                          FORM 10-Q
                              
                              
/X/Quarterly  Report Pursuant to Section 13 or  15(d)of  the
Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 1996

                             or

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

For the Transition Period Ended ______________________

                    Commission File Number 0-10501

               STERLING GAS DRILLING FUND 1981
     (Exact name of registrant as specified in charter)

                          New York
      (State or other jurisdiction of incorporation or
                        organization)
                              
                         13-3098770
            (IRS employer identification number)

      One Landmark Square, Stamford, Connecticut  06901
    (Address and Zip Code of principal executive offices)

                       (203) 358-5700

    (Registrant's telephone number, including area code)

                       Not Applicable
   (Former name, former address and former fiscal year, if
                 changed since last report)

Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes  /X/  No   / /
Item 1.   Financial Statements
The following Financial Statements are filed herewith:

Balance Sheets - September 30, 1996 and December 31, 1995.

Statements of Operations for the Nine and Three Months Ended September 30,
1996 and 1995.

Statements of Changes in Partners' Equity for the Nine and Three Months
Ended September 30, 1996 and 1995.

Statements of Cash Flows for the Nine Months Ended September 30, 1996 and
1995.

Note to Financial Statements

Item 2.   Management's Discussion and Analysis of Financial Condition
and Results of Operations

1.   Liquidity -

The oil and gas industry is intensely competitive in all its phases.
There is also competition among this industry and other industries in
supplying energy and fuel requirements of industrial and 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 Prospectus, the General Partners
of the Registrant will make cash distributions of as much of the
Partnership cash credited to the capital accounts of the Partners as
the General Partners have determined is not necessary or desirable for
the payment of any contingent debts, liabilities or expenses or for
the conduct of the Partnership's business.  As of September 30, 1996,
the General Partners have distributed to the Limited Partners
$3,955,500.  Such cash distributions are equivalent to 45 % of
original total Limited Partner capital contributions.

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  (SEC  case)
associated  with such reserves, discounted at 10% as of  December  31,
1994  was approximately $703,000 as compared to the December 31,  1995
reserves  of $765,500.  The increase in undiscounted future  net  cash
flows  for the Partnership properties  was caused by higher  year  end
prices  in  effect  at December 31, 1995 compared to  lower  year  end
prices  as of December 31, 1994. There were no significant changes  in
the  estimated  future  production from the  properties.   It  is  the
opinion of management, and the general consensus in the industry, that
gas  prices  are unlikely to decline significantly below the  December
31,  1995  price  in  the  near future.   However,  there  can  be  no
assurances that such price declines will not occur, and  will not pose
a threat to the Partnership's continued viability.
2.   Capital Resources -

The Registrant was formed for the sole purpose of drilling oil and gas
wells. The Registrant entered into a drilling contract with an
independent contractor in December 1981 for $6,900,000.  Pursuant to
the terms of this contract, wells have been drilled resulting in
thirty-seven producing wells, three non commercial wells and one
plugged well.   The Registrant has had a reserve report prepared which
details reserve value information, and such information is available
to the Limited Partners pursuant to the buy-out provisions of the
Prospectus as previously filed.
3.   Results of Operations -
 The Partnership's overall operating revenues decreased from $193,199
in 1995 to $182,149 in 1996. Although the Partnership receives only a
minor amount of revenue from oil, stable oil production and  higher
average oil prices in 1996 did contribute to minimize the decline in
overall operating revenues. The majority of the partnership's revenue
is from gas production. The gas revenue received for 1996 was lower
then 1995 mainly due to a production decline, from 71,018 MCF in 1995
to 67,901 MCF in 1996. Average price per MCF of gas increased by about
$0.08 per MCF. Production expenses increased from $65,265 in 1995 to
$69,397 in 1996. The higher production expenses, in 1996, can be
attributed to some severe storms during the late spring and summer of
1996. These storms resulted in additional cost incurred,  which may
include additional maintenance, location, access road work and other
repairs. Most of the production expenses, in 1995, were to maintain
the general upkeep of the wells and well site.

General and administrative expenses have been segregated on the
financial statements to show expenses paid to PrimeEnergy Management
Corporation(PEMC), a general partner.  These expenses are charged in
accordance with guidelines set forth in the Registrant's Management
Agreement.  The expenses attributable to the affairs and operations of
the Partnership, reimbursed to PEMC, shall not exceed an annual amount
equal to 5% of the Limited Partners capital contributions. Amounts
related to both 1996 and 1995 are substantially less than the amounts
allocable to the Registrant under the Partnership Agreement.  The
lower amounts reflect management's effort's to limit costs, both
incurred and allocated to the Registrant. Management continues to
reduce third party costs and use in-house resources to provide
efficient and timely services to the Partnership. General and
administrative  charges were stable and showed only a minor change
from 1995 to 1996.

The   partnership  records  additional  depreciation,  depletion   and
amortization  to  the  extent that net capitalized  costs  exceed  the
undiscounted  future net cash flows attributable  to  the  partnership
properties. No additional depreciation, depletion or amortization  was
needed  in  1995 or in the three quarters of 1996. Although  the  1996
expense  is  lower than 1995, the expense recorded is consistent  with
the current basis of the partnership's properties.
PART II

Items 1 through 5 have been omitted in that each item is either
inapplicable or the answer is negative.Item .  Exhibits and Reports on
Form 8-K
The Partnership was not required to file any reports on Form 8-K and
no such form was filed during the period covered by this report.

Exhibit 27 - Financial Data Schedule is attached to the electronic
filing of this report.
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                           STERLING GAS DRILLING FUND 1981
 November 8, 1996           BY: /S/Charles E.Drimal Jr. 
 (DATE)                        ------------------------
                                Charles E. Drimal, Jr.
                                General Partner
STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                            Balance Sheets
                                         September       December
                                            30,          31, 1995
                                            1996
                                        (unaudited)     (audited)
Assets                                                             
Current Assets:                                                    
  Cash and cash equivalents           $           21 $           29
                                          ----------    -----------
      Total current assets                        21             29
                                                                   
Oil and Gas properties -                                           
successful efforts method:                                         
  Leasehold costs                            236,502        236,502
  Well and related facilities              6,945,363      6,938,085
   less accumulated                                                
   depreciation, depletion and                                     
   amortization                           (5,928,629)    (5,869,370)
                                          ----------     ----------
      Net oil & gas properties             1,253,236      1,305,217
                                          ----------     ----------
       Total assets                   $    1,253,257 $    1,305,246
                                          ==========     ==========
                                                             
Liabilities and Partners' Equity                             
  Current liabilities:                                       
   Due to affiliates                  $      175,223 $      190,593
                                          ----------     ----------
        Total current liabilities            175,223        190,593
                                          ----------     ----------
                                                                   
  Partners' Equity                                                 
   Limited partners                        1,191,853      1,231,468
   General partners                         (113,819)      (116,815)
                                          ----------     ----------
         Total partners' equity            1,078,034      1,114,653
                                          ----------     ----------
                                                                   
         Total liabilities and                                     
          partners' equity            $    1,253,257 $    1,305,246
                                          ==========     ==========
                                   
                                   
                                   
See accompanying note to the financial statements
STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Nine Months Ended
                                   September 30, 1996

                               Limited      General     
                               Partners     Partners    Total
Revenue:                                                
Operating revenue           $    153,278 $    28,871  $   182,149
                                --------    --------      -------
  Total Revenue                  153,278      28,871      182,149
                                --------    --------      -------
                                                        
Costs and Expenses:                                     
Production expense                58,398      10,999       69,397
General and administrative        63,110      11,887       74,997
 to a related party
General and administrative        12,719       2,396       15,115
Depreciation, depletion                                          
 and amortization                 58,666         593       59,259
                                --------    --------      -------
  Total Costs and Expenses       192,893      25,875      218,768
                                --------    --------      -------
  Net Income(loss)          $    (39,615) $    2,996   $  (36,619)
                                ========    ========      =======
Net Income(loss)                                                 
    per equity unit         $      (4.51)                         
                                  ======                         
                                                                 
                                                                 
                                   
                                   
See accompanying note to the financial statements.
STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Nine Months Ended
                                   September 30, 1995

                               Limited       General     
                               Partners      Partners    Total
Revenue:                                                 
Operating revenue           $    162,577  $    30,622  $   193,199
                                --------     --------      -------
  Total Revenue                  162,577       30,622      193,199
                                --------     --------      -------
                                                         
Costs and Expenses:                                      
Production expense                54,920       10,345       65,265
General and administrative                                        
 to a related party               63,110       11,887       74,997
General and administrative        12,806        2,412       15,218
Depreciation, depletion                                           
 and amortization                 74,762          755       75,517
                                --------     --------      -------
  Total Costs and Expenses       205,598       25,399      230,997
                                --------     --------      -------
  Net Income(loss)          $    (43,021)  $    5,223   $  (37,798)
                                ========     ========      =======
Net Income(loss)                                                  
    per equity unit         $      (4.89)                          
                                  ======                          
                                   
                                   
See accompanying note to the financial statements.
STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Three Months Ended
                                   September 30, 1996

                               Limited       General                
                               Partners      Partners          Total
Revenue:                                                 
Operating revenue            $    53,599   $   10,096  $      63,695
                                --------     --------      ---------
  Total Revenue                   53,599       10,096         63,695
                                --------     --------      ---------
                                                                    
Costs and Expenses:                                                 
Production expense                20,449        3,851         24,300
General and administrative        21,037        3,962         24,999
 to a related party
General and administrative         3,367          634          4,001
Depreciation, depletion                                             
 and amortization                 19,610          199         19,809
                                --------     --------      ---------
  Total Costs and Expenses        64,463        8,646         73,109
                                --------     --------      ---------
  Net Income(loss)           $   (10,864)  $    1,450  $      (9,414)
                                ========     ========      =========
Net Income(loss)                                                    
    per equity unit          $     (1.24)
                                ========                            
                                   
                                   
See accompanying note to the financial statements.
STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Three Months Ended
                                   September 30, 1995

                               Limited     General       
                               Partners    Partners      Total
Revenue:                                                 
Operating revenue           $     52,739 $      9,934  $     62,673
                                --------     --------     ---------
  Total Revenue                   52,739        9,934        62,673
                                --------     --------     ---------
                                                                   
Costs and Expenses:                                                
Production expense                15,893        2,994        18,887
General and administrative                                         
 to a related party               21,037        3,962        24,999
General and administrative         2,852          537         3,389
Depreciation, depletion                                            
 and amortization                 24,920          252        25,172
                                --------     --------     ---------
  Total Costs and Expenses        64,702        7,745        72,447
                                --------     --------     ---------
  Net Income(loss)          $    (11,963) $     2,189  $     (9,774)
                                ========     ========     =========
Net Income(loss)                                                   
    per equity unit         $      (1.36)
                                ========                           

See accompanying note to the financial statements.
STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
               Statement of Changes in Partners' Equity
                              (unaudited)
                                   
                                   Nine Months Ended
                                   September 30, 1996

                            Limited        General                   
                            Partners       Partners             Total
                                                          
Balance at beginning of                                               
period                   $    1,231,468      (116,815)  $    1,114,653
Net Income(Loss)                (39,615)        2,996          (36,619)
                              ---------     ---------       ----------
Balance at end of period $    1,191,853      (113,819)  $    1,078,034
                              =========     =========       ==========
                                          
                                          
                                  Nine Months Ended
                                 September 30, 1995

                               Limited       General                   
                               Partners      Partners             Total
                                                                       
Balance at beginning of                                                
period                       $  1,261,971  $ (125,823)   $    1,136,148
  Net Income(Loss)                (43,021)      5,223           (37,798)
                                ---------     --------      -----------
Balance at end of period     $  1,218,950    (120,600)  $     1,098,350
                                =========     ========      ===========
                                   
                                   
See accompanying note to the financial statements.
STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
               Statement of Changes in Partners' Equity
                              (unaudited)
                                   
                                   Three Months Ended
                                   September 30, 1996

                               Limited      General                    
                               Partners     Partners              Total
                                                                       
Balance at beginning of                                                
period                      $   1,202,717     (115,269) $      1,087,448
  Net Income(Loss)                (10,864)       1,450            (9,414)
                                ---------    ---------        ----------
Balance at end of period    $   1,191,853     (113,819) $      1,078,034
                                =========    =========        ==========
                                            
                                            
                                   Three Months Ended
                                   September 30, 1995

                              Limited      General         
                              Partners     Partners        Total
                                                           
Balance at beginning of                                               
period                      $  1,230,913 $  (122,789)  $     1,108,124
  Net Income(Loss)               (11,963)      2,189            (9,774)
                               ---------    --------         ----------
Balance at end of period    $  1,218,950    (120,600)  $     1,098,350
                               =========    ========         ==========
                                                           
                                   
See accompanying note to the financial statements.
STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Cash Flows
                              (unaudited)
                                   
                                            Nine         Nine
                                           months       months
                                           ended         ended
                                         September     September
                                          30, 1996     30, 1995
                                                                
Net cash provided by(used in)                                   
operating activities                   $      7,270  $      (18)
                                         ----------     -------
                                                                
Cash flows from investing activities:                           
  Investment in well and related                                
  facilities                                 (7,278)          0
                                         ----------     -------
Net Cash used in investing activities        (7,278)          0
                                         ----------     -------
                                                                
                                                                
Net increase(decrease) in cash and                               
  cash equivalents                               (8)        (18)
Cash and cash equivalents at beginning                          
of period                                        29          43
                                          ---------    --------
Cash and cash equivalents at end of                             
period                                 $         21  $       25
                                          =========    ========

See accompanying note to the financial statements.
STERLING GAS DRILLING FUND 1981
                  (a New York limited partnership)
                  Note to Financial Statements
                        September 30, 1996

1.   The accompanying statements for the period ending September 30,
1996 are unaudited but reflect all the adjustments necessary to
present fairly the results of operations.