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, 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 - June 30, 1996 and December 31, 1995.

Statements of Operations for the Six and Three Months Ended June 30,
1996 and 1995.

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

Statements of Cash Flows for the Six Months Ended June 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 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, 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,
1995  was approximately $765,000 as compared to the December 31,  1994
amount  of $703,000. The increase in total estimated discounted future
net  revenue  was due primarily to higher year end gas  prices  as  of
December  31, 1995, when compared to the low gas price as of  December
31,  1994.  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 -
Operating Revenues decreased from $130,526 in 1995 to $118,454 in
1996.  The gas production decline, from 47,265 MCF in 1995 to 44,268
MCF in 1996, was partially offset by minor increase in  average price
per MCF from $2.55 in 1995 to $2.61 in 1996.  Although the partnership
receives very little revenue from oil production, the oil revenue for
1996 is higher than 1995 due to a higher average price per barrel
combined with a increased oil production.  The lower production can be
partially attributed to compressor down times, main line pressure
differences and fluid in some wells.  The partnership may allocate
some operating funds to perform a workover a well.  A workover may be
performed in order to halt further production declines or to increase
current production.  The costs for the workover may be in additional
equipment purchases or additional repairs which will be capitalized or
expensed based upon the appropriate criteria.  Some production
expenses  vary with the amount of production, other costs are for
general upkeep and maintenance of the well and well sites and still
other equipment costs are incurred to help maintain or increase
production level.   The production expenses incurred by the
partnership showed a very slight decline from $46,378 in 1995 to
$45,097 in 1996.

General and administrative expenses have been segregated on the
financial statements to show expenses paid to PrimeEnergy Management
Corporation, 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.



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 1995 or the first half of 1996.  The lower depletion
expense in 1996 is due to 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.








                          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
 August 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
                              (unaudited)
                                         June 30,     December 31,
                                           1996           1995
Assets                                                             
Current Assets:                                                    
  Cash and cash equivalents          $           23   $          29
                                        -----------      ----------
      Total current assets                       23              29
                                                                   
Oil and Gas properties -                                           
successful efforts method:                                         
  Leasehold costs                           236,502         236,502
  Well and related facilities             6,943,492       6,938,085
   less accumulated                                                
   depreciation, depletion and                                     
   amortization                          (5,908,820)     (5,869,370)
                                        -----------      ----------
                                          1,271,174       1,305,217
                                        ----------       ----------
       Total assets                  $    1,271,197  $    1,305,246
                                                            
Liabilities and Partners' Equity                            
  Current liabilities:                                      
   Due to affiliates                 $      183,749  $      190,593
                                        -----------      ----------
        Total current liabilities           183,749         190,593
                                        -----------      ----------
                                                                   
  Partners' Equity                                                 
   Limited partners                       1,202,717       1,231,468
   General partners                        (115,269)       (116,815)
                                        -----------      ----------
         Total partners' equity           1,087,448       1,114,653
                                        -----------      ----------
                                                                   
         Total liabilities and                                     
          partners' equity           $    1,271,197  $    1,305,246
                                        ===========      ==========
                                                                   


                                   
See accompanying note to financial statements.
                                   
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Six Months Ending
                                     June 30, 1996

                               Limited       General      
                               Partners      Partners     Total
Revenue:                                                  
Operating revenue           $     99,679  $     18,775  $   118,454
                                --------      --------      -------
  Total Revenue                   99,679        18,775      118,454
                                --------      --------      -------
                                                          
Costs and Expenses:                                       
Production expense                37,949         7,148       45,097
General and administrative                                         
 to a related party               42,073         7,925       49,998
General and administrative         9,352         1,762       11,114
Depreciation, depletion                                            
 and amortization                 39,056           394       39,450
                                --------      --------      -------
  Total Costs and Expenses       128,430        17,229      145,659
                                --------      --------      -------
  Net Income(loss)          $    (28,751)  $     1,546    $ (27,205)
                                ========      ========      =======
Net Income(loss)                                                   
    per equity unit         $      (3.27)                           
                                  ======                           
                                   
                                   
                                   
See accompanying note to financial statements.
                                   


                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Six Months Ending
                                     June 30, 1995

                               Limited       General      
                               Partners      Partners     Total
Revenue:                                                  
Operating revenue           $     109,838  $   20,688  $  130,526
                                 --------    --------     -------
  Total Revenue                   109,838      20,688     130,526
                                 --------    --------     -------
                                                          
Costs and Expenses:                                       
Production expense                 39,027       7,351      46,378
General and administrative         42,073       7,925      49,998
 to a related party
General and administrative          9,954       1,875      11,829
Depreciation, depletion                                          
 and amortization                  49,842         503      50,345
                                 --------    --------     -------
  Total Costs and Expenses        140,896      17,654     158,550
                                 --------    --------     -------
  Net Income(loss)          $     (31,058)  $   3,034  $  (28,024)
                                 ========    ========     =======
Net Income(loss)                                                 
    per equity unit         $       (3.53)                        
                                   ======                        
See accompanying note to financial statements.





                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                  Three Months Ending
                                     June 30, 1996

                               Limited      General                 
                               Partners     Partners           Total
Revenue:                                                  
Operating revenue            $    46,095 $     46,095   $     54,777
                                --------     --------      ---------
  Total Revenue                   46,095       46,095         54,777
                                --------     --------      ---------
                                                                    
Costs and Expenses:                                                 
Production expense                19,326        3,640         22,966
General and administrative                                          
 to a related party               21,036        3,963         24,999
General and administrative         5,856        1,103          6,959
Depreciation, depletion                                             
 and amortization                 19,537          197         19,734
                                --------     --------      ---------
  Total Costs and Expenses        65,755        8,903         74,658
                                --------     --------      ---------
  Net Income(loss)           $   (19,660) $      (221)   $   (19,881)
                                ========     ========      =========
Net Income(loss)                                                    
    per equity unit          $     (2.24)
                                ========                            
See accompanying note to financial statements.





                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                  Three Months Ending
                                     June 30, 1995

                               Limited      General                
                               Partners     Partners          Total
Revenue:                                                 
Operating revenue           $     48,179 $     9,074  $      57,253
                                --------    --------      ---------
  Total Revenue                   48,179       9,074         57,253
                                --------    --------      ---------
                                                                   
Costs and Expenses:                                                
Production expense                22,302       4,201         26,503
General and administrative                                         
 to a related party               21,036       3,963         24,999
General and administrative         6,440       1,213          7,653
Depreciation, depletion                                            
 and amortization                 24,992         251         25,173
                                --------    --------      ---------
  Total Costs and Expenses        74,700       9,628         84,328
                                --------    --------      ---------
  Net Income(loss)          $    (26,521)  $    (554)  $    (27,075)
                                ========    ========      =========
Net Income(loss)                                                   
    per equity unit         $      (3.02)
                                ========                           
See accompanying note to financial statements.


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


                            Limited        General                   
                            Partners       Partners             Total
                                                         
Balance at beginning of                                               
period                    $  1,231,468  $   (116,815)  $     1,114,653
Net Income(Loss)               (28,751)        1,546           (27,205)
                             ---------      --------       -----------
Balance at end of period  $  1,202,717  $   (115,269)  $     1,087,448
                             =========      ========       ===========
                                           
                                           
                                   Six Months Ended
                                    June 30, 1995

                              Limited        General                  
                              Partners       Partners            Total
                                                            
Balance at beginning of                                              
period                      $  1,261,971  $    (125,823)  $ 1,136,148
Net Income(Loss)                 (31,058)        3,3034       (28,024)
                               ---------       --------     ----------
Balance at end of period    $  1,230,913  $    (122,789)  $ 1,108,124
                               =========       ========     ==========
See accompanying note to financial statements.






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


                               Limited       General                   
                               Partners      Partners             Total
                                                                       
Balance at beginning of                                                
period                      $   1,222,377 $   (115,048)  $    1,107,329
  Net Income(Loss)                (19,660)        (221)         (19,881)
                                 --------     --------       ----------
Balance at end of period    $   1,202,717 $   (115,269)  $    1,087,448
                                 ========     ========       ==========
                                            
                                            
                                   Three Months Ended
                                     June 30, 1995

                              Limited        General                   
                              Partners       Partners             Total
                                                                       
Balance at beginning of                                               
period                      $  1,257,434  $    (122,235)  $  1,135,199
  Net Income(Loss)               (26,521)          (554)       (27,075)
                                --------       --------      ---------
Balance at end of period    $  1,230,913  $    (122,789) $    1,108,124
                                ========        ========     =========
                                                             
See accompanying note to financial statements.






                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Cash Flows
                              (unaudited)
                                   
                                          Six months     Six months
                                            ended           ended
                                           June 30,       June 30,
                                             1996           1995
                                                                    
Net cash provided by operating                                      
activities                            $        5,401   $          54
                                          ----------      ----------
 Cash(used in)investment activities:                                
  Investment in wells and related                                   
      facilities                              (5,407)              0
                                          ----------      ----------
 Net Cash used in investment                                        
      activities                              (5,407)              0
                                                                    
Net increase(decrease) in cash and                                  
  cash equivalents                                (6)             54
Cash and cash equivalents at                                        
beginning of period                               29              43
                                          ----------      ----------
Cash and cash equivalents at end of                                 
period                                $           23   $          97
                                          ==========      ==========

see accompanying note to financial  statements.


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

1.   The accompanying statements for the period ending June 30, 1996
are unaudited but reflect all reflect 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 June 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 - June 30, 1996 and December 31, 1995.

Statements of Operations for the Six and Three Months Ended June 30,
1996 and 1995.

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

Statements of Cash Flows for the Six Months Ended June 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 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, 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,
1995  was approximately $765,000 as compared to the December 31,  1994
amount  of $703,000. The increase in total estimated discounted future
net  revenue  was due primarily to higher year end gas  prices  as  of
December  31, 1995, when compared to the low gas price as of  December
31,  1994.  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 -
Operating Revenues decreased from $130,526 in 1995 to $118,454 in
1996.  The gas production decline, from 47,265 MCF in 1995 to 44,268
MCF in 1996, was partially offset by minor increase in  average price
per MCF from $2.55 in 1995 to $2.61 in 1996.  Although the partnership
receives very little revenue from oil production, the oil revenue for
1996 is higher than 1995 due to a higher average price per barrel
combined with a increased oil production.  The lower production can be
partially attributed to compressor down times, main line pressure
differences and fluid in some wells.  The partnership may allocate
some operating funds to perform a workover a well.  A workover may be
performed in order to halt further production declines or to increase
current production.  The costs for the workover may be in additional
equipment purchases or additional repairs which will be capitalized or
expensed based upon the appropriate criteria.  Some production
expenses  vary with the amount of production, other costs are for
general upkeep and maintenance of the well and well sites and still
other equipment costs are incurred to help maintain or increase
production level.   The production expenses incurred by the
partnership showed a very slight decline from $46,378 in 1995 to
$45,097 in 1996.

General and administrative expenses have been segregated on the
financial statements to show expenses paid to PrimeEnergy Management
Corporation, 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.

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 1995 or the first half of 1996.  The lower depletion
expense in 1996 is due to 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.

                          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
 August 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
                              (unaudited)
                                         June 30,     December 31,
                                           1996           1995
Assets                                                             
Current Assets:                                                    
  Cash and cash equivalents          $           23   $          29
                                        -----------      ----------
      Total current assets                       23              29
                                                                   
Oil and Gas properties -                                           
successful efforts method:                                         
  Leasehold costs                           236,502         236,502
  Well and related facilities             6,943,492       6,938,085
   less accumulated                                                
   depreciation, depletion and                                     
   amortization                          (5,908,820)     (5,869,370)
                                        -----------      ----------
                                          1,271,174       1,305,217
                                        ----------       ----------
       Total assets                  $    1,271,197  $    1,305,246
                                                            
Liabilities and Partners' Equity                            
  Current liabilities:                                      
   Due to affiliates                 $      183,749  $      190,593
                                        -----------      ----------
        Total current liabilities           183,749         190,593
                                        -----------      ----------
                                                                   
  Partners' Equity                                                 
   Limited partners                       1,202,717       1,231,468
   General partners                        (115,269)       (116,815)
                                        -----------      ----------
         Total partners' equity           1,087,448       1,114,653
                                        -----------      ----------
                                                                   
         Total liabilities and                                     
          partners' equity           $    1,271,197  $    1,305,246
                                        ===========      ==========
                                                                   

                                   
See accompanying note to financial statements.
                                   
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Six Months Ending
                                     June 30, 1996

                               Limited       General      
                               Partners      Partners     Total
Revenue:                                                  
Operating revenue           $     99,679  $     18,775  $   118,454
                                --------      --------      -------
  Total Revenue                   99,679        18,775      118,454
                                --------      --------      -------
                                                          
Costs and Expenses:                                       
Production expense                37,949         7,148       45,097
General and administrative                                         
 to a related party               42,073         7,925       49,998
General and administrative         9,352         1,762       11,114
Depreciation, depletion                                            
 and amortization                 39,056           394       39,450
                                --------      --------      -------
  Total Costs and Expenses       128,430        17,229      145,659
                                --------      --------      -------
  Net Income(loss)          $    (28,751)  $     1,546    $ (27,205)
                                ========      ========      =======
Net Income(loss)                                                   
    per equity unit         $      (3.27)                           
                                  ======                           
                                   
                                   
                                   
See accompanying note to financial statements.
                                   

                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Six Months Ending
                                     June 30, 1995

                               Limited       General      
                               Partners      Partners     Total
Revenue:                                                  
Operating revenue           $     109,838  $   20,688  $  130,526
                                 --------    --------     -------
  Total Revenue                   109,838      20,688     130,526
                                 --------    --------     -------
                                                          
Costs and Expenses:                                       
Production expense                 39,027       7,351      46,378
General and administrative         42,073       7,925      49,998
 to a related party
General and administrative          9,954       1,875      11,829
Depreciation, depletion                                          
 and amortization                  49,842         503      50,345
                                 --------    --------     -------
  Total Costs and Expenses        140,896      17,654     158,550
                                 --------    --------     -------
  Net Income(loss)          $     (31,058)  $   3,034  $  (28,024)
                                 ========    ========     =======
Net Income(loss)                                                 
    per equity unit         $       (3.53)                        
                                   ======                        
See accompanying note to financial statements.

                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                  Three Months Ending
                                     June 30, 1996

                               Limited      General                 
                               Partners     Partners           Total
Revenue:                                                  
Operating revenue            $    46,095 $     46,095   $     54,777
                                --------     --------      ---------
  Total Revenue                   46,095       46,095         54,777
                                --------     --------      ---------
                                                                    
Costs and Expenses:                                                 
Production expense                19,326        3,640         22,966
General and administrative                                          
 to a related party               21,036        3,963         24,999
General and administrative         5,856        1,103          6,959
Depreciation, depletion                                             
 and amortization                 19,537          197         19,734
                                --------     --------      ---------
  Total Costs and Expenses        65,755        8,903         74,658
                                --------     --------      ---------
  Net Income(loss)           $   (19,660) $      (221)   $   (19,881)
                                ========     ========      =========
Net Income(loss)                                                    
    per equity unit          $     (2.24)
                                ========                            
See accompanying note to financial statements.

                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                  Three Months Ending
                                     June 30, 1995

                               Limited      General                
                               Partners     Partners          Total
Revenue:                                                 
Operating revenue           $     48,179 $     9,074  $      57,253
                                --------    --------      ---------
  Total Revenue                   48,179       9,074         57,253
                                --------    --------      ---------
                                                                   
Costs and Expenses:                                                
Production expense                22,302       4,201         26,503
General and administrative                                         
 to a related party               21,036       3,963         24,999
General and administrative         6,440       1,213          7,653
Depreciation, depletion                                            
 and amortization                 24,992         251         25,173
                                --------    --------      ---------
  Total Costs and Expenses        74,700       9,628         84,328
                                --------    --------      ---------
  Net Income(loss)          $    (26,521)  $    (554)  $    (27,075)
                                ========    ========      =========
Net Income(loss)                                                   
    per equity unit         $      (3.02)
                                ========                           
See accompanying note to financial statements.

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

                            Limited        General                   
                            Partners       Partners             Total
                                                         
Balance at beginning of                                               
period                    $  1,231,468  $   (116,815)  $     1,114,653
Net Income(Loss)               (28,751)        1,546           (27,205)
                             ---------      --------       -----------
Balance at end of period  $  1,202,717  $   (115,269)  $     1,087,448
                             =========      ========       ===========
                                           
                                           
                                   Six Months Ended
                                    June 30, 1995

                              Limited        General                  
                              Partners       Partners            Total
                                                            
Balance at beginning of                                              
period                      $  1,261,971  $    (125,823)  $ 1,136,148
Net Income(Loss)                 (31,058)        3,3034       (28,024)
                               ---------       --------     ----------
Balance at end of period    $  1,230,913  $    (122,789)  $ 1,108,124
                               =========       ========     ==========
See accompanying note to financial statements.

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

                               Limited       General                   
                               Partners      Partners             Total
                                                                       
Balance at beginning of                                                
period                      $   1,222,377 $   (115,048)  $    1,107,329
  Net Income(Loss)                (19,660)        (221)         (19,881)
                                 --------     --------       ----------
Balance at end of period    $   1,202,717 $   (115,269)  $    1,087,448
                                 ========     ========       ==========
                                            
                                            
                                   Three Months Ended
                                     June 30, 1995

                              Limited        General                   
                              Partners       Partners             Total
                                                                       
Balance at beginning of                                               
period                      $  1,257,434  $    (122,235)  $  1,135,199
  Net Income(Loss)               (26,521)          (554)       (27,075)
                                --------       --------      ---------
Balance at end of period    $  1,230,913  $    (122,789) $    1,108,124
                                ========        ========     =========
                                                             
See accompanying note to financial statements.

                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Cash Flows
                              (unaudited)
                                   
                                          Six months     Six months
                                            ended           ended
                                           June 30,       June 30,
                                             1996           1995
                                                                    
Net cash provided by operating                                      
activities                            $        5,401   $          54
                                          ----------      ----------
 Cash(used in)investment activities:                                
  Investment in wells and related                                   
      facilities                              (5,407)              0
                                          ----------      ----------
 Net Cash used in investment                                        
      activities                              (5,407)              0
                                                                    
Net increase(decrease) in cash and                                  
  cash equivalents                                (6)             54
Cash and cash equivalents at                                        
beginning of period                               29              43
                                          ----------      ----------
Cash and cash equivalents at end of                                 
period                                $           23   $          97
                                          ==========      ==========

see accompanying note to financial  statements.

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

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