<PAGE> 1
             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 June 30, 1998

                             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> 2
Item 1.   Financial Statements

The following Financial Statements are filed herewith:

Balance Sheets - June 30, 1998 and December 31, 1997.

Statements of Operations for the Six and Three Months Ended June 30,
1998 and 1997.

Statements of Changes in Partners' Equity for the Six and Three Months
Ended June 30, 1998 and 1997.

Statements of Cash Flows for the Six Months Ended June 30, 1998
and 1997.

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 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 June 30, 1998,  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.

All  aspects  of  the Partnership's operations and administration  are
handled  through  the  use  of  managing  general  partner's  computer
systems.  Both, the operating company and the managing general partner
are taking steps to minimize any potential computer issues with regard
to any necessary changes for the year 2000. A complete system upgrade,
which  includes  but is not limited to, the year 2000 issue  has  been
implemented  by  both the operating company and the  managing  general
partner.  During  the  remainder  of this  year  both  companies  will
continue  to  monitor, test and verify data in  detail  to  avoid  any
potential reporting concerns or delays.

<PAGE>3


proved oil and gas reserves of the Partnership are considered to be  a
indicator  of  financial strength and future liquidity.   The  present
value of unescalated future net revenue (S.E.C. case) associated  with
such  reserves,  discounted  at  10%  as  of  December  31,  1997  was
approximately  $687,900 as compared to  the value as of  December  31,
1996  which  was approximately $817,000. Overall reservoir engineering
is a subjective process of estimating underground accumulations of gas
and oil that can not be measured in an exact manner.  The accuracy  of
any  reserve  estimate is a function of the quality of available  data
and  of  the  engineering and geological interpretation and  judgment.
Accordingly,  reserve  estimates  are  generally  different  from  the
quantities  of  gas  and oil that are ultimately  recovered  and  such
differences may have a material impact on the partnership's  financial
results and future liquidity.


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 -
Operating  Revenues  increased from $132,533 in 1997  to  $161,621  in
1998,  due  to  gas production increase, from 43,399 MCF  in  1997  to
54,339 MCF in 1998, combined with a slight increase in  average  price
per  MCF  from  $2.85  in 1997 to $2.93 in 1998. The  Partnership  has
expended funds to purchase additional equipment  and to complete light
repairs which , based upon the operator's evaluation, are designed  to
increase  production or to halt any further significant declines.  The
beneficial  effect looked for by the operator  is to increase, improve
or   sustain  production  on  a  particular  well.  These  costs   are
capitalized  if  they  meet  the  appropriate  criteria.    Production
expenses increased from $55,947 in 1997 to $66,528 in 1998 as a result
of  a combination of repairs and labor costs associated with the wells
and well sites. These repairs may also


<PAGE> 4
result in the well's temporarily shut-in which could account for  some
declines in production. The production expenses incurred in 1997  were
of a normal and recurring nature to upkeep the wells.

Overall general and administrative expenses remained stable and showed
little   change  from  1997  to  1998.  The  amounts  charged  reflect
management's  efforts 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. The  related party expenses attributable to  the  affairs
and operations of the Partnership, reimbursed to PEMC, are limited  to
an  annual  amount  not to exceed 5% of the Limited  Partners  capital
contributions.  Amounts related to both years are  substantially  less
than  the  amounts allocable to the Registrant under  the  Partnership
Agreement.

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.  The Partnership was not required to revise the properties
basis  in  either  1997  or first half of 1998.  The  lower  depletion
expense in 1998 is due to  overall lower depletable cost basis in  oil
and gas 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.

<PAGE>5
                                   
                          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
      
                                 BY:       /s/ Charles E. Drimal Jr.
                                         --------------------------
                                         Charles E. Drimal, Jr. 
                                         General Partner

August 12, 1998

<PAGE>6
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                            Balance Sheets
                                         June 30,      December 31,
                                           1998            1997
                                        (unaudited)      (audited)
                                             
Assets                                                              
Current Assets:                                                     
  Cash and cash equivalents          $            7  $            16
                                         ----------      -----------
      Total current assets                        7               16
                                                                    
Oil and Gas properties -                                            
successful efforts method:                                          
  Leasehold costs                           236,502          236,502
  Well and related facilities             6,959,472        6,948,063
   less accumulated                                                 
   depreciation, depletion and                                      
   amortization                          (6,060,825)      (6,023,905)
                                         ----------       ----------
                                          1,135,149        1,160,660
                                         ----------       ----------
       Total assets                  $    1,135,156  $     1,160,676
                                         ==========       ==========
                                                             
Liabilities and Partners' Equity                             
  Current liabilities:                                       
   Due to affiliates                 $       99,178  $       124,096
                                         ----------       ----------
        Total current liabilities            99,178          124,096
                                         ----------       ----------
                                                                    
  Partners' Equity                                                  
   Limited partners                       1,136,842        1,142,831
   General partners                        (100,864)        (106,251)
                                         ----------       ----------
         Total partners' equity           1,035,975        1,036,580
                                         ----------       ----------
                                                                    
         Total liabilities and                                      
          partners' equity           $    1,135,156  $     1,160,676
                                         ==========       ==========
                                                                    
                                   
                                   
See accompanying note to financial statements.

<PAGE>7
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Six Months Ending
                                     June 30, 1998

                               Limited       General        
                               Partners      Partners       Total
Revenue:                                                    
Operating revenue           $    136,003  $      256,170  $      161,620
                                --------        --------         -------
  Total Revenue                  136,003          25,617         161,620
                                --------        --------         -------
                                                            
Costs and Expenses:                                         
Production expense                55,983          10,545          66,528
General and administrative                                              
 to a related party               42,080           7,926          50,006
General and administrative         7,378           1,390           8,768
Depreciation, depletion                                                 
 and amortization                 36,551             369          36,920
                                --------        --------         -------
  Total Costs and Expenses       141,992          20,230         162,222
                                --------        --------         -------
  Net Income(loss)          $     (5,989)  $       5,387 $          (602)
                                ========        ========         =======
Net Income(loss)                                                        
    per equity unit         $       (.68)                                
                                  ======                                
                                   
                                   
                                   
See accompanying note to financial statements.

<PAGE>8
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Six Months Ending
                                     June 30, 1997

                               Limited       General      
                               Partners      Partners     Total
Revenue:                                                  
Operating revenue           $    111,527  $     21,006  $   132,533
                                --------      --------      -------
  Total Revenue                  111,527        21,006      132,533
                                --------      --------      -------
                                                          
Costs and Expenses:                                       
Production expense                47,079         8,868       55,947
General and administrative                                         
 to a related party               42,073         7,925       49,998
General and administrative         8,811         1,660       10,471
Depreciation, depletion                                            
 and amortization                 35,685           360       36,045
                                --------      --------      -------
  Total Costs and Expenses       133,648        18,813      152,461
                                --------      --------      -------
  Net Income(loss)          $    (22,121)  $     2,193  $   (19,928)
                                ========      ========      =======
Net Income(loss)                                                   
    per equity unit         $      (2.52)                           
                                  ======                           
                                   
                                   
                                   
See accompanying note to financial statements.


<PAGE>9
                                   
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                  Three Months Ending
                                     June 30, 1998

                               Limited       General                
                               Partners      Partners          Total
Revenue:                                                   
Operating revenue            $     67,850 $      12,780 $     80,630
                                 --------      --------    ---------
  Total Revenue                    67,850        12,780       80,630
                                 --------      --------    ---------
                                                                    
Costs and Expenses:                                                 
Production expense                 32,866         6,191       39,057
General and administrative                                          
 to a related party                21,037         3,960       24,999
General and administrative          4,008           755        4,763
Depreciation, depletion                                             
 and amortization                  18,406        11,094       18,592
                                 --------      --------    ---------
  Total Costs and Expenses         76,317        11,094       87,411
                                 --------      --------    ---------
  Net Income(loss)           $     (8,467) $       1,686 $    (6,781)
                                 ========      ========    =========
Net Income(loss)                                                    
    per equity unit          $       (.96)
                                 ========                           



See accompanying note to financial statements.


<PAGE> 10
                                   
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                  Three Months Ending
                                     June 30, 1997

                               Limited       General                
                               Partners      Partners          Total
Revenue:                                                   
Operating revenue            $     52,729 $       9,931 $     62,660
                                 --------      --------    ---------
  Total Revenue                    52,729         9,931       62,660
                                 --------      --------    ---------
                                                                    
Costs and Expenses:                                                 
Production expense                 25,739         4,849       30,588
General and administrative                                          
 to a related party                21,036         3,963       24,999
General and administrative          5,766         1,087        6,853
Depreciation, depletion                                             
 and amortization                  17,843           180       18,023
                                 --------      --------    ---------
  Total Costs and Expenses         70,384        10,079       80,463
                                 --------      --------    ---------
  Net Income(loss)           $    (17,655) $       (148) $   (17,803)
                                 ========      ========    =========
Net Income(loss)                                                    
    per equity unit          $      (2.01)
                                 ========                           



See accompanying note to financial statements.


<PAGE> 11
                                   
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
               Statement of Changes in Partners' Equity
                              (unaudited)
                                   
                                    Six Months Ended
                                     June 30, 1998


                            Limited        General                   
                            Partners       Partners             Total
                                                         
Balance at beginning of                                   
period                    $ 1,142,831      (106,251)   $  1,036,580
Net Income(loss)               (5,989)        5,387            (602)
                            ---------      --------      -----------
Balance at end of period  $ 1,136,842      (100,864)   $  1,035,978
                            =========      ========      ===========
                                           
                                           
                                   Six Months Ended
                                    June 30, 1997
                            Limited        General                   
                            Partners       Partners             Total
                                                         
Balance at beginning of                                               
period                    $  1,183,494      (112,355)  $     1,071,139
Net Income(Loss)               (22,121)        2,193           (19,928)
                             ---------      --------       -----------
Balance at end of period  $  1,161,373      (110,162)  $     1,051,211
                             =========      ========       ===========



See accompanying note to financial statements.


<PAGE>12
                                   
                                   
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
               Statement of Changes in Partners' Equity
                              (unaudited)
                                   
                                   Three Months Ended
                                     June 30, 1998

                               Limited       General                   
                               Partners      Partners             Total
                                                                       
Balance at beginning of                                                
period                      $   1,145,309 $    (102,550) $    1,042,759
  Net Income(Loss)                 (8,467)        1,686          (6,781)
                                 --------     --------       ----------
Balance at end of period    $   1,136,842 $    (100,864) $    1,035,978
                                 ========     ========       ==========
                                            
                                   Three Months Ended
                                     June 30, 1997
                               Limited       General                   
                               Partners      Partners             Total
                                                                       
Balance at beginning of                                                
period                      $   1,179,028 $   (110,014)  $    1,069,014
  Net Income(Loss)                (17,655)        (148)        (17,803)
                                 --------     --------       ----------
Balance at end of period    $   1,161,373 $   (110,162)  $    1,051,211
                                 ========     ========       ==========



See accompanying note to financial statements.



<PAGE>13
                                   
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Cash Flows
                              (unaudited)
                                   
                                                 Six           Six
                                               months        months
                                                ended         ended
                                              June 30,      June 30,
                                                1998          1997
                                                                     
Net cash provided by operating                                       
activities                                $       11,400 $         37
                                              ----------    ---------
 Cash(used in)investment activities:                                 
  Investment in wells and related                                    
      facilities                                 (11,409)           0
                                              ----------    ---------
 Net Cash used in investment                                         
     activities                                  (11,409)           0
                                              ----------    ---------
Net increase(decrease) in cash and                                   
  cash equivalents                                    (9)          37
Cash and cash equivalents at beginning                               
of period                                             16           26
                                              ----------    ---------
Cash and cash equivalents at end of                                  
period                                    $            7 $         63
                                              ==========    =========



see accompanying note to financial  statements.
<PAGE>14
                                   
                                   
STERLING GAS DRILLING FUND 1981(a New York limited partnership)Note to
                   Financial StatementsJune 30, 1998
1. The accompanying statements for the period ending June 30, 1998 are
unaudited but reflect all reflect the adjustments necessary to present
fairly the results of operations.
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1
             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 June 30, 1998

                             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   / /
2
Item 1.   Financial Statements

The following Financial Statements are filed herewith:

Balance Sheets - June 30, 1998 and December 31, 1997.

Statements of Operations for the Six and Three Months Ended June 30,
1998 and 1997.

Statements of Changes in Partners' Equity for the Six and Three Months
Ended June 30, 1998 and 1997.

Statements of Cash Flows for the Six Months Ended June 30, 1998
and 1997.

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 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 June 30, 1998,  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.

All  aspects  of  the Partnership's operations and administration  are
handled  through  the  use  of  managing  general  partner's  computer
systems.  Both, the operating company and the managing general partner
are taking steps to minimize any potential computer issues with regard
to any necessary changes for the year 2000. A complete system upgrade,
which  includes  but is not limited to, the year 2000 issue  has  been
implemented  by  both the operating company and the  managing  general
partner.  During  the  remainder  of this  year  both  companies  will
continue  to  monitor, test and verify data in  detail  to  avoid  any
potential reporting concerns or delays.
3

proved oil and gas reserves of the Partnership are considered to be  a
indicator  of  financial strength and future liquidity.   The  present
value of unescalated future net revenue (S.E.C. case) associated  with
such  reserves,  discounted  at  10%  as  of  December  31,  1997  was
approximately  $687,900 as compared to  the value as of  December  31,
1996  which  was approximately $817,000. Overall reservoir engineering
is a subjective process of estimating underground accumulations of gas
and oil that can not be measured in an exact manner.  The accuracy  of
any  reserve  estimate is a function of the quality of available  data
and  of  the  engineering and geological interpretation and  judgment.
Accordingly,  reserve  estimates  are  generally  different  from  the
quantities  of  gas  and oil that are ultimately  recovered  and  such
differences may have a material impact on the partnership's  financial
results and future liquidity.

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 -
Operating  Revenues  increased from $132,533 in 1997  to  $161,621  in
1998,  due  to  gas production increase, from 43,399 MCF  in  1997  to
54,339 MCF in 1998, combined with a slight increase in  average  price
per  MCF  from  $2.85  in 1997 to $2.93 in 1998. The  Partnership  has
expended funds to purchase additional equipment  and to complete light
repairs which , based upon the operator's evaluation, are designed  to
increase  production or to halt any further significant declines.  The
beneficial  effect looked for by the operator  is to increase, improve
or   sustain  production  on  a  particular  well.  These  costs   are
capitalized  if  they  meet  the  appropriate  criteria.    Production
expenses increased from $55,947 in 1997 to $66,528 in 1998 as a result
of  a combination of repairs and labor costs associated with the wells
and well sites. These repairs may also
4
result in the well's temporarily shut-in which could account for  some
declines in production. The production expenses incurred in 1997  were
of a normal and recurring nature to upkeep the wells.

Overall general and administrative expenses remained stable and showed
little   change  from  1997  to  1998.  The  amounts  charged  reflect
management's  efforts 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. The  related party expenses attributable to  the  affairs
and operations of the Partnership, reimbursed to PEMC, are limited  to
an  annual  amount  not to exceed 5% of the Limited  Partners  capital
contributions.  Amounts related to both years are  substantially  less
than  the  amounts allocable to the Registrant under  the  Partnership
Agreement.

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.  The Partnership was not required to revise the properties
basis  in  either  1997  or first half of 1998.  The  lower  depletion
expense in 1998 is due to  overall lower depletable cost basis in  oil
and gas 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.
5
                                   
                          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
      
                                 BY:       /s/ Charles E. Drimal Jr.
                                         --------------------------
                                         Charles E. Drimal, Jr. 
                                         General Partner

August 12, 1998
6
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                            Balance Sheets
                                         June 30,      December 31,
                                           1998            1997
                                        (unaudited)      (audited)
                                             
Assets                                                              
Current Assets:                                                     
  Cash and cash equivalents          $            7  $            16
                                         ----------      -----------
      Total current assets                        7               16
                                                                    
Oil and Gas properties -                                            
successful efforts method:                                          
  Leasehold costs                           236,502          236,502
  Well and related facilities             6,959,472        6,948,063
   less accumulated                                                 
   depreciation, depletion and                                      
   amortization                          (6,060,825)      (6,023,905)
                                         ----------       ----------
                                          1,135,149        1,160,660
                                         ----------       ----------
       Total assets                  $    1,135,156  $     1,160,676
                                         ==========       ==========
                                                             
Liabilities and Partners' Equity                             
  Current liabilities:                                       
   Due to affiliates                 $       99,178  $       124,096
                                         ----------       ----------
        Total current liabilities            99,178          124,096
                                         ----------       ----------
                                                                    
  Partners' Equity                                                  
   Limited partners                       1,136,842        1,142,831
   General partners                        (100,864)        (106,251)
                                         ----------       ----------
         Total partners' equity           1,035,975        1,036,580
                                         ----------       ----------
                                                                    
         Total liabilities and                                      
          partners' equity           $    1,135,156  $     1,160,676
                                         ==========       ==========
                                                                    
                                   
                                   
See accompanying note to financial statements.
7
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Six Months Ending
                                     June 30, 1998

                               Limited       General        
                               Partners      Partners       Total
Revenue:                                                    
Operating revenue           $    136,003  $      256,170  $      161,620
                                --------        --------         -------
  Total Revenue                  136,003          25,617         161,620
                                --------        --------         -------
                                                            
Costs and Expenses:                                         
Production expense                55,983          10,545          66,528
General and administrative                                              
 to a related party               42,080           7,926          50,006
General and administrative         7,378           1,390           8,768
Depreciation, depletion                                                 
 and amortization                 36,551             369          36,920
                                --------        --------         -------
  Total Costs and Expenses       141,992          20,230         162,222
                                --------        --------         -------
  Net Income(loss)          $     (5,989)  $       5,387 $          (602)
                                ========        ========         =======
Net Income(loss)                                                        
    per equity unit         $       (.68)                                
                                  ======                                
                                   
                                   
                                   
See accompanying note to financial statements.
8
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Six Months Ending
                                     June 30, 1997

                               Limited       General      
                               Partners      Partners     Total
Revenue:                                                  
Operating revenue           $    111,527  $     21,006  $   132,533
                                --------      --------      -------
  Total Revenue                  111,527        21,006      132,533
                                --------      --------      -------
                                                          
Costs and Expenses:                                       
Production expense                47,079         8,868       55,947
General and administrative                                         
 to a related party               42,073         7,925       49,998
General and administrative         8,811         1,660       10,471
Depreciation, depletion                                            
 and amortization                 35,685           360       36,045
                                --------      --------      -------
  Total Costs and Expenses       133,648        18,813      152,461
                                --------      --------      -------
  Net Income(loss)          $    (22,121)  $     2,193  $   (19,928)
                                ========      ========      =======
Net Income(loss)                                                   
    per equity unit         $      (2.52)                           
                                  ======                           
                                   
                                   
                                   
See accompanying note to financial statements.
9
                                   
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                  Three Months Ending
                                     June 30, 1998

                               Limited       General                
                               Partners      Partners          Total
Revenue:                                                   
Operating revenue            $     67,850 $      12,780 $     80,630
                                 --------      --------    ---------
  Total Revenue                    67,850        12,780       80,630
                                 --------      --------    ---------
                                                                    
Costs and Expenses:                                                 
Production expense                 32,866         6,191       39,057
General and administrative                                          
 to a related party                21,037         3,960       24,999
General and administrative          4,008           755        4,763
Depreciation, depletion                                             
 and amortization                  18,406        11,094       18,592
                                 --------      --------    ---------
  Total Costs and Expenses         76,317        11,094       87,411
                                 --------      --------    ---------
  Net Income(loss)           $     (8,467) $       1,686 $    (6,781)
                                 ========      ========    =========
Net Income(loss)                                                    
    per equity unit          $       (.96)
                                 ========                           

See accompanying note to financial statements.
10
                                   
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                  Three Months Ending
                                     June 30, 1997

                               Limited       General                
                               Partners      Partners          Total
Revenue:                                                   
Operating revenue            $     52,729 $       9,931 $     62,660
                                 --------      --------    ---------
  Total Revenue                    52,729         9,931       62,660
                                 --------      --------    ---------
                                                                    
Costs and Expenses:                                                 
Production expense                 25,739         4,849       30,588
General and administrative                                          
 to a related party                21,036         3,963       24,999
General and administrative          5,766         1,087        6,853
Depreciation, depletion                                             
 and amortization                  17,843           180       18,023
                                 --------      --------    ---------
  Total Costs and Expenses         70,384        10,079       80,463
                                 --------      --------    ---------
  Net Income(loss)           $    (17,655) $       (148) $   (17,803)
                                 ========      ========    =========
Net Income(loss)                                                    
    per equity unit          $      (2.01)
                                 ========                           

See accompanying note to financial statements.
11
                                   
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
               Statement of Changes in Partners' Equity
                              (unaudited)
                                   
                                    Six Months Ended
                                     June 30, 1998

                            Limited        General                   
                            Partners       Partners             Total
                                                         
Balance at beginning of                                   
period                    $ 1,142,831      (106,251)   $  1,036,580
Net Income(loss)               (5,989)        5,387            (602)
                            ---------      --------      -----------
Balance at end of period  $ 1,136,842      (100,864)   $  1,035,978
                            =========      ========      ===========
                                           
                                           
                                   Six Months Ended
                                    June 30, 1997
                            Limited        General                   
                            Partners       Partners             Total
                                                         
Balance at beginning of                                               
period                    $  1,183,494      (112,355)  $     1,071,139
Net Income(Loss)               (22,121)        2,193           (19,928)
                             ---------      --------       -----------
Balance at end of period  $  1,161,373      (110,162)  $     1,051,211
                             =========      ========       ===========

See accompanying note to financial statements.
12
                                   
                                   
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
               Statement of Changes in Partners' Equity
                              (unaudited)
                                   
                                   Three Months Ended
                                     June 30, 1998

                               Limited       General                   
                               Partners      Partners             Total
                                                                       
Balance at beginning of                                                
period                      $   1,145,309 $    (102,550) $    1,042,759
  Net Income(Loss)                 (8,467)        1,686          (6,781)
                                 --------     --------       ----------
Balance at end of period    $   1,136,842 $    (100,864) $    1,035,978
                                 ========     ========       ==========
                                            
                                   Three Months Ended
                                     June 30, 1997
                               Limited       General                   
                               Partners      Partners             Total
                                                                       
Balance at beginning of                                                
period                      $   1,179,028 $   (110,014)  $    1,069,014
  Net Income(Loss)                (17,655)        (148)        (17,803)
                                 --------     --------       ----------
Balance at end of period    $   1,161,373 $   (110,162)  $    1,051,211
                                 ========     ========       ==========

See accompanying note to financial statements.
13
                                   
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Cash Flows
                              (unaudited)
                                   
                                                 Six           Six
                                               months        months
                                                ended         ended
                                              June 30,      June 30,
                                                1998          1997
                                                                     
Net cash provided by operating                                       
activities                                $       11,400 $         37
                                              ----------    ---------
 Cash(used in)investment activities:                                 
  Investment in wells and related                                    
      facilities                                 (11,409)           0
                                              ----------    ---------
 Net Cash used in investment                                         
     activities                                  (11,409)           0
                                              ----------    ---------
Net increase(decrease) in cash and                                   
  cash equivalents                                    (9)          37
Cash and cash equivalents at beginning                               
of period                                             16           26
                                              ----------    ---------
Cash and cash equivalents at end of                                  
period                                    $            7 $         63
                                              ==========    =========

see accompanying note to financial  statements.
14
                                   
                                   
STERLING GAS DRILLING FUND 1981(a New York limited partnership)Note to
                   Financial StatementsJune 30, 1998
1. The accompanying statements for the period ending June 30, 1998 are
unaudited but reflect all reflect the adjustments necessary to present
fairly the results of operations.