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

For the Quarterly Period Ended September 30, 1997

                             or

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

For the Transition Period Ended ______________________

                    Commission File Number 0-10501


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

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

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

                       (203) 358-5700

    (Registrant's telephone number, including area code)

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

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

Balance Sheets - September 30, 1997 and December 31, 1996.

Statements of Operations for the Nine and Three Months Ended September 30,
1997 and 1996.

Statements of Changes in Partners' Equity for the Nine and Three Months
Ended September 30, 1997 and 1996.

Statements of Cash Flows for the Nine Months Ended September 30, 1997 and
1996.

Note to Financial Statements

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

1.   Liquidity -

The oil and gas industry is intensely competitive in all its phases.
There is also competition among this industry and other industries in
supplying energy and fuel requirements of industrial and residential
consumers.  It is not possible for the Registrant to calculate its
position in the industry as the Registrant competes with many other
companies having substantially greater financial and other resources.
In accordance with the terms of the Prospectus, the General Partners
of the Registrant will make cash distributions of as much of the
Partnership cash credited to the capital accounts of the Partners as
the General Partners have determined is not necessary or desirable for
the payment of any contingent debts, liabilities or expenses or for
the conduct of the Partnership's business.  As of September 30, 1997,
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  an   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, 1996 was approximately $805,400 as compared to  the value
as  of  December  31,  1995  which  was approximately  $765,500.   The
increase  in total estimated discounted future net revenue was due  in
part  to  higher year end gas prices as of December 31, 1996  compared
the  gas price  in effect as of December 31, 1995.   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.


<PAGE>

2.   Capital Resources -

The Registrant was formed for the sole purpose of drilling oil and gas
wells. The Registrant entered into a drilling contract with an
independent contractor in December 1981 for $6,900,000.  Pursuant to
the terms of this contract, wells have been drilled resulting in
thirty-seven producing wells, three non commercial wells and one
plugged well.   The Registrant has had a reserve report prepared which
details reserve value information, and such information is available
to the Limited Partners pursuant to the buy-out provisions of the
Prospectus as previously filed.
3.   Results of Operations -
 The Partnership's overall operating revenues increased $182,149 in
1996 to $196,223 in 1997. Although the Partnership receives only a
minor amount of revenue from oil, stable oil production and  higher
average oil prices in 1997 did contribute to overall positive increase
in revenue.  The majority of the Partnership's revenue is from gas
production. The gas  revenue increased due to  a higher average price
per mcf, on average $0.26 per mcf, The price increase was offset by
the decline in gas production from 67,901 MCF in 1996 to 65,119 MCF in
1997. Production expenses increased from $69,397 in 1996 to $82,880 in
1997. The higher production expenses can be partially attributed to
some severe weather conditions in the counties where the Partnership
wells are located. These conditions contributed to additional cost
incurred,  which may include additional maintenance, labor, location,
access road work and other repairs. The majority of the production
costs expended for both years were for general upkeep and  maintenance
at the well and well-sites.

General and administrative expenses have been segregated on the
financial statements to show expenses paid to PrimeEnergy Management
Corporation(PEMC), a general partner.  These expenses are charged in
accordance with guidelines set forth in the Registrant's Management
Agreement.  The expenses attributable to the affairs and operations of
the Partnership, reimbursed to PEMC, shall not exceed an annual amount
equal to 5% of the Limited Partners capital contributions. Amounts
related to both 1997 and 1996 are substantially less than the amounts
allocable to the Registrant under the Partnership Agreement.  The
lower amounts 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. General and
administrative  charges were stable and showed only a minor decline
from 1996 to 1997.






<page)

The   Partnership  records  additional  depreciation,  depletion   and
amortization  to  the  extent that net capitalized  costs  exceed  the
undiscounted  future net cash flows attributable  to  the  partnership
properties. No additional depreciation, depletion or amortization  was
needed  in  1996 or in the three quarters of 1997. Although  the  1997
expense  is  lower than 1996, the expense recorded is consistent  with
the current basis of the Partnership's properties.

PART II

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

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

<PAGE>

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



                                         STERLING GAS DRILLING FUND 1981
 November 12, 1997                       BY: /S/Charles E. Drimal Jr. 
 (DATE)                                     ----------------------------
                                            Charles E. Drimal, Jr.

                                            General Partner


<PAGE>

                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                            Balance Sheets
                                         September       December
                                            30,          31, 1996
                                            1997
                                        (unaudited)     (audited)
Assets                                                             
Current Assets:                                                    
  Cash and cash equivalents           $           20 $           29
                                          ----------    -----------
      Total current assets                        20             29
                                                                   
Oil and Gas properties -                                           
successful efforts method:                                         
  Leasehold costs                            236,502        236,502
  Well and related facilities              6,948,063      6,948,063
   less accumulated                                                
   depreciation, depletion and                                     
    amortization                           (5,999,981)   (5,945,914)
                                          ----------     ----------
      Net oil & gas properties             1,184,584      1,238,651
                                          ----------     ----------
       Total assets                   $    1,184,604 $    1,238,677
                                          ==========     ==========
                                                             
Liabilities and Partners' Equity                             
  Current liabilities:                                       
   Due to affiliates                  $      141,572 $      167,538
                                          ----------     ----------
        Total current liabilities            141,572        167,538
                                          ----------     ----------
                                                                   
  Partners' Equity                                                 
   Limited partners                        1,152,044      1,183,494
   General partners                         (109,012)      (112,355)
                                          ----------     ----------
         Total partners' equity            1,043,032      1,071,139
                                          ----------     ----------
                                                                   
         Total liabilities and                                     
          partners' equity            $    1,184,604 $    1,238,677
                                          ==========     ==========
                                   
                                   
                                   
See accompanying note to the financial statements
                                   
<PAGE>
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Nine Months Ended
                                   September 30, 1997

                               Limited      General     
                               Partners     Partners    Total
Revenue:                                                
Operating revenue           $    165,122 $    31,101  $   196,223
Gain on sale of Equipment          1,535          15        1,550
                                --------    --------      -------
  Total Revenue                  166,657      31,116      197,773
                                --------    --------      -------
                                                        
Costs and Expenses:                                     
Production expense                69,744      13,136       82,880
General and administrative                                       
 to a related party               63,110      11,887       74,997
General and administrative        11,727       2,209       13,936
Depreciation, depletion                                          
 and amortization                 53,526         541       54,067
                                --------    --------      -------
  Total Costs and Expenses       198,107      27,773      225,880
                                --------    --------      -------
  Net Income(loss)          $    (31,450) $   3,343   $   (28,107)
                                ========    ========      =======
Net Income(loss)                                                 
    per equity unit         $      (3.58)                         
                                  ======                         
                                                                 
                                                                 
                                   
                                   
See accompanying note to the financial statements.
                                   
<PAGE>
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Nine Months Ended
                                   September 30, 1996

                               Limited      General     
                               Partners     Partners    Total
Revenue:                                                
Operating revenue           $    153,278 $    28,871  $   182,149
                                --------    --------      -------
  Total Revenue                  153,278      28,871      182,149
                                --------    --------      -------
                                                        
Costs and Expenses:                                     
Production expense                58,398      10,999       69,397
General and administrative                                       
 to a related party               63,110      11,887       74,997
General and administrative        12,719       2,396       15,115
Depreciation, depletion                                          
 and amortization                 58,666         593       59,259
                                --------    --------      -------
  Total Costs and Expenses       192,893      25,875      218,768
                                --------    --------      -------
  Net Income(loss)          $    (39,615) $   2,996   $   (36,619)
                                ========    ========      =======
Net Income(loss)                                                 
    per equity unit         $      (4.51)                         
                                  ======                         
                                                                 
                                                                 
                                   
                                   
See accompanying note to the financial statements.
                                   
<PAGE>
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Three Months Ended
                                   September 30, 1997

                               Limited       General                
                               Partners      Partners          Total
Revenue:                                                 
Operating revenue            $    53,595   $  10,0095  $      63,690
Gain on sale of Equipment          1,535           15          1,550
                                --------     --------      ---------
  Total Revenue                   55,130       10,110         65,240
                                --------     --------      ---------
                                                                    
Costs and Expenses:                                                 
Production expense                22,665        4,268         26,853
General and administrative                                          
 to a related party               21,037        3,962         24,999
General and administrative         2,916          549          3,465
Depreciation, depletion                                             
 and amortization                 17,841          181         18,022
                                --------     --------      ---------
  Total Costs and Expenses        64,459        8,960         73,419
                                --------     --------      ---------
  Net Income(loss)           $    (9,329)  $    1,150  $      (8,179)
                                ========     ========      =========
Net Income(loss)                                                    
    per equity unit          $     (1.06)
                                ========                            
                                   
                                   
See accompanying note to the financial statements.
                                   
                                   
<PAGE>

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

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

<PAGE>

                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
               Statement of Changes in Partners' Equity
                              (unaudited)
                                   
                                   Nine Months Ended
                                   September 30, 1997


                            Limited        General                   
                            Partners       Partners             Total
                                                          
Balance at beginning of                                               
period                   $     1,183,494      (112,355)  $   1,071,139
Net Income(Loss)                 (31,450)        3,343         (28,107)
                               ---------     ---------      ----------
Balance at end of period $     1,152,044      (109,012) $    1,043,032
                               =========     =========      ==========
                                          
                                          
                                  Nine Months Ended
                                 September 30, 1996

                               Limited       General                   
                               Partners      Partners             Total
                                                                       
Balance at beginning of                                                
period                       $  1,231,468     (116,815)   $   1,114,653
  Net Income(Loss)                (39,615)       2,996          (36,619)
                                ---------    ---------       ----------
Balance at end of period     $  1,191,853     (113,819)  $    1,078,034
                                =========     ========      ===========
                                   
                                   
See accompanying note to the financial statements.
                                   
                                   
                                   
<PAGE>
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
               Statement of Changes in Partners' Equity
                              (unaudited)
                                   
                                   Three Months Ended
                                   September 30, 1997


                               Limited      General                    
                               Partners     Partners              Total
                                                                       
Balance at beginning of                                                
period                      $   1,161,373     (110,162) $     1,051,211
  Net Income(Loss)                 (9,329)       1,150          (8,179)
                                ---------    ---------       ----------
Balance at end of period    $   1,152,044     (109,012)  $    1,043,032
                                =========    =========       ==========
                                            
                                            
                                   Three Months Ended
                                   September 30, 1996

                              Limited      General         
                              Partners     Partners        Total
                                                           
Balance at beginning of                                               
period                      $  1,202,717    (115,269)  $     1,087,448
  Net Income(Loss)               (10,864)      1,450            (9,414)
                               ---------   ---------         ----------
Balance at end of period    $  1,191,853    (113,819)  $     1,078,034
                               =========    ========         ==========
                                                           
                                   
See accompanying note to the financial statements.
                                   
                                   
<PAGE>
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Cash Flows
                              (unaudited)
                                   
                                         Nine months       Nine
                                            ended         months
                                          September        ended
                                           30, 1997      September
                                                         30, 1996
                                                                  
Net cash provided by(used in)                                     
operating activities                   $      (1,556)  $     7,270
                                           ----------    ---------
                                                                  
Cash flows from investing activities:                             
  Proceeds from sale of equipment              1,550             0
  Investment in well and related                                  
  facilities                                       0        (7,278)
                                           ----------     --------
Net Cash provided by/ (used in)                                   
investing activities                           1,550        (7,278)
                                           ----------     --------
                                                                  
                                                                  
Net increase(decrease) in cash and                                 
  cash equivalents                                (6)           (8)
Cash and cash equivalents at beginning                            
of period                                          26           29
                                            ---------     --------
Cash and cash equivalents at end of                               
period                                 $           20  $        21
                                            =========    =========

See accompanying note to the financial statements.

<PAGE>
                  STERLING GAS DRILLING FUND 1981
                  (a New York limited partnership)
                     Note to Financial Statements
                         September 30, 1997

1.   The accompanying statements for the period ending September 30,
1997 are unaudited but reflect all the adjustments necessary to
present fairly the results of operations.
[{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 26675}]
{"company-data": {"conformed-name": "STERLING GAS DRILLING FUND 1981", "cik": "0000356448", "assigned-sic": "1381", "irs-number": "133098770", "state-of-incorporation": "NY", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-10501", "film-number": "97713492"}, "business-address": {"street1": "ONE LANDMARK SQ", "city": "STAMFORD", "state": "CT", "zip": "06901", "phone": "2033585700"}, "mail-address": {"street1": "ONE LANDMARK SQUARE", "city": "STAMFORD", "state": "CT", "zip": "06901"}}
SECURITIES AND EXCHANGE COMMISSION
                   Washington, D.C. 20549
                              
                          FORM 10-Q
                              
                              
/X/Quarterly  Report Pursuant to Section 13 or  15(d)of  the
Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 1997

                             or

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

For the Transition Period Ended ______________________

                    Commission File Number 0-10501

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

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

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

                       (203) 358-5700

    (Registrant's telephone number, including area code)

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

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

Balance Sheets - September 30, 1997 and December 31, 1996.

Statements of Operations for the Nine and Three Months Ended September 30,
1997 and 1996.

Statements of Changes in Partners' Equity for the Nine and Three Months
Ended September 30, 1997 and 1996.

Statements of Cash Flows for the Nine Months Ended September 30, 1997 and
1996.

Note to Financial Statements

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

1.   Liquidity -

The oil and gas industry is intensely competitive in all its phases.
There is also competition among this industry and other industries in
supplying energy and fuel requirements of industrial and residential
consumers.  It is not possible for the Registrant to calculate its
position in the industry as the Registrant competes with many other
companies having substantially greater financial and other resources.
In accordance with the terms of the Prospectus, the General Partners
of the Registrant will make cash distributions of as much of the
Partnership cash credited to the capital accounts of the Partners as
the General Partners have determined is not necessary or desirable for
the payment of any contingent debts, liabilities or expenses or for
the conduct of the Partnership's business.  As of September 30, 1997,
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  an   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, 1996 was approximately $805,400 as compared to  the value
as  of  December  31,  1995  which  was approximately  $765,500.   The
increase  in total estimated discounted future net revenue was due  in
part  to  higher year end gas prices as of December 31, 1996  compared
the  gas price  in effect as of December 31, 1995.   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 -
 The Partnership's overall operating revenues increased $182,149 in
1996 to $196,223 in 1997. Although the Partnership receives only a
minor amount of revenue from oil, stable oil production and  higher
average oil prices in 1997 did contribute to overall positive increase
in revenue.  The majority of the Partnership's revenue is from gas
production. The gas  revenue increased due to  a higher average price
per mcf, on average $0.26 per mcf, The price increase was offset by
the decline in gas production from 67,901 MCF in 1996 to 65,119 MCF in
1997. Production expenses increased from $69,397 in 1996 to $82,880 in
1997. The higher production expenses can be partially attributed to
some severe weather conditions in the counties where the Partnership
wells are located. These conditions contributed to additional cost
incurred,  which may include additional maintenance, labor, location,
access road work and other repairs. The majority of the production
costs expended for both years were for general upkeep and  maintenance
at the well and well-sites.

General and administrative expenses have been segregated on the
financial statements to show expenses paid to PrimeEnergy Management
Corporation(PEMC), a general partner.  These expenses are charged in
accordance with guidelines set forth in the Registrant's Management
Agreement.  The expenses attributable to the affairs and operations of
the Partnership, reimbursed to PEMC, shall not exceed an annual amount
equal to 5% of the Limited Partners capital contributions. Amounts
related to both 1997 and 1996 are substantially less than the amounts
allocable to the Registrant under the Partnership Agreement.  The
lower amounts 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. General and
administrative  charges were stable and showed only a minor decline
from 1996 to 1997.
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                         STERLING GAS DRILLING FUND 1981
 November 12, 1997                       BY: /S/Charles E. Drimal Jr. 
 (DATE)                                     ----------------------------
                                            Charles E. Drimal, Jr.

                                            General Partner
STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                            Balance Sheets
                                         September       December
                                            30,          31, 1996
                                            1997
                                        (unaudited)     (audited)
Assets                                                             
Current Assets:                                                    
  Cash and cash equivalents           $           20 $           29
                                          ----------    -----------
      Total current assets                        20             29
                                                                   
Oil and Gas properties -                                           
successful efforts method:                                         
  Leasehold costs                            236,502        236,502
  Well and related facilities              6,948,063      6,948,063
   less accumulated                                                
   depreciation, depletion and                                     
    amortization                           (5,999,981)   (5,945,914)
                                          ----------     ----------
      Net oil & gas properties             1,184,584      1,238,651
                                          ----------     ----------
       Total assets                   $    1,184,604 $    1,238,677
                                          ==========     ==========
                                                             
Liabilities and Partners' Equity                             
  Current liabilities:                                       
   Due to affiliates                  $      141,572 $      167,538
                                          ----------     ----------
        Total current liabilities            141,572        167,538
                                          ----------     ----------
                                                                   
  Partners' Equity                                                 
   Limited partners                        1,152,044      1,183,494
   General partners                         (109,012)      (112,355)
                                          ----------     ----------
         Total partners' equity            1,043,032      1,071,139
                                          ----------     ----------
                                                                   
         Total liabilities and                                     
          partners' equity            $    1,184,604 $    1,238,677
                                          ==========     ==========
                                   
                                   
                                   
See accompanying note to the financial statements
STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Nine Months Ended
                                   September 30, 1997

                               Limited      General     
                               Partners     Partners    Total
Revenue:                                                
Operating revenue           $    165,122 $    31,101  $   196,223
Gain on sale of Equipment          1,535          15        1,550
                                --------    --------      -------
  Total Revenue                  166,657      31,116      197,773
                                --------    --------      -------
                                                        
Costs and Expenses:                                     
Production expense                69,744      13,136       82,880
General and administrative                                       
 to a related party               63,110      11,887       74,997
General and administrative        11,727       2,209       13,936
Depreciation, depletion                                          
 and amortization                 53,526         541       54,067
                                --------    --------      -------
  Total Costs and Expenses       198,107      27,773      225,880
                                --------    --------      -------
  Net Income(loss)          $    (31,450) $   3,343   $   (28,107)
                                ========    ========      =======
Net Income(loss)                                                 
    per equity unit         $      (3.58)                         
                                  ======                         
                                                                 
                                                                 
                                   
                                   
See accompanying note to the financial statements.
STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Nine Months Ended
                                   September 30, 1996

                               Limited      General     
                               Partners     Partners    Total
Revenue:                                                
Operating revenue           $    153,278 $    28,871  $   182,149
                                --------    --------      -------
  Total Revenue                  153,278      28,871      182,149
                                --------    --------      -------
                                                        
Costs and Expenses:                                     
Production expense                58,398      10,999       69,397
General and administrative                                       
 to a related party               63,110      11,887       74,997
General and administrative        12,719       2,396       15,115
Depreciation, depletion                                          
 and amortization                 58,666         593       59,259
                                --------    --------      -------
  Total Costs and Expenses       192,893      25,875      218,768
                                --------    --------      -------
  Net Income(loss)          $    (39,615) $   2,996   $   (36,619)
                                ========    ========      =======
Net Income(loss)                                                 
    per equity unit         $      (4.51)                         
                                  ======                         
                                                                 
                                                                 
                                   
                                   
See accompanying note to the financial statements.
STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Three Months Ended
                                   September 30, 1997

                               Limited       General                
                               Partners      Partners          Total
Revenue:                                                 
Operating revenue            $    53,595   $  10,0095  $      63,690
Gain on sale of Equipment          1,535           15          1,550
                                --------     --------      ---------
  Total Revenue                   55,130       10,110         65,240
                                --------     --------      ---------
                                                                    
Costs and Expenses:                                                 
Production expense                22,665        4,268         26,853
General and administrative                                          
 to a related party               21,037        3,962         24,999
General and administrative         2,916          549          3,465
Depreciation, depletion                                             
 and amortization                 17,841          181         18,022
                                --------     --------      ---------
  Total Costs and Expenses        64,459        8,960         73,419
                                --------     --------      ---------
  Net Income(loss)           $    (9,329)  $    1,150  $      (8,179)
                                ========     ========      =========
Net Income(loss)                                                    
    per equity unit          $     (1.06)
                                ========                            
                                   
                                   
See accompanying note to the financial statements.
STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Three Months Ended
                                   September 30, 1996

                               Limited       General                
                               Partners      Partners          Total
Revenue:                                                 
Operating revenue            $    53,599   $   10,096  $      63,695
                                --------     --------      ---------
  Total Revenue                   53,599       10,096         63,695
                                --------     --------      ---------
                                                                    
Costs and Expenses:                                                 
Production expense                20,449        3,851         24,300
General and administrative        21,037        3,962         24,999
 to a related party
General and administrative         3,367          634          4,001
Depreciation, depletion                                             
 and amortization                 19,610          199         19,809
                                --------     --------      ---------
  Total Costs and Expenses        64,463        8,646         73,109
                                --------     --------      ---------
  Net Income(loss)           $   (10,864)  $    1,450  $      (9,414)
                                ========     ========      =========
Net Income(loss)                                                    
    per equity unit          $     (1.24)
                                ========                            
                                   
                                   
See accompanying note to the financial statements.
STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
               Statement of Changes in Partners' Equity
                              (unaudited)
                                   
                                   Nine Months Ended
                                   September 30, 1997

                            Limited        General                   
                            Partners       Partners             Total
                                                          
Balance at beginning of                                               
period                   $     1,183,494      (112,355)  $   1,071,139
Net Income(Loss)                 (31,450)        3,343         (28,107)
                               ---------     ---------      ----------
Balance at end of period $     1,152,044      (109,012) $    1,043,032
                               =========     =========      ==========
                                          
                                          
                                  Nine Months Ended
                                 September 30, 1996

                               Limited       General                   
                               Partners      Partners             Total
                                                                       
Balance at beginning of                                                
period                       $  1,231,468     (116,815)   $   1,114,653
  Net Income(Loss)                (39,615)       2,996          (36,619)
                                ---------    ---------       ----------
Balance at end of period     $  1,191,853     (113,819)  $    1,078,034
                                =========     ========      ===========
                                   
                                   
See accompanying note to the financial statements.
STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
               Statement of Changes in Partners' Equity
                              (unaudited)
                                   
                                   Three Months Ended
                                   September 30, 1997

                               Limited      General                    
                               Partners     Partners              Total
                                                                       
Balance at beginning of                                                
period                      $   1,161,373     (110,162) $     1,051,211
  Net Income(Loss)                 (9,329)       1,150          (8,179)
                                ---------    ---------       ----------
Balance at end of period    $   1,152,044     (109,012)  $    1,043,032
                                =========    =========       ==========
                                            
                                            
                                   Three Months Ended
                                   September 30, 1996

                              Limited      General         
                              Partners     Partners        Total
                                                           
Balance at beginning of                                               
period                      $  1,202,717    (115,269)  $     1,087,448
  Net Income(Loss)               (10,864)      1,450            (9,414)
                               ---------   ---------         ----------
Balance at end of period    $  1,191,853    (113,819)  $     1,078,034
                               =========    ========         ==========
                                                           
                                   
See accompanying note to the financial statements.
STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Cash Flows
                              (unaudited)
                                   
                                         Nine months       Nine
                                            ended         months
                                          September        ended
                                           30, 1997      September
                                                         30, 1996
                                                                  
Net cash provided by(used in)                                     
operating activities                   $      (1,556)  $     7,270
                                           ----------    ---------
                                                                  
Cash flows from investing activities:                             
  Proceeds from sale of equipment              1,550             0
  Investment in well and related                                  
  facilities                                       0        (7,278)
                                           ----------     --------
Net Cash provided by/ (used in)                                   
investing activities                           1,550        (7,278)
                                           ----------     --------
                                                                  
                                                                  
Net increase(decrease) in cash and                                 
  cash equivalents                                (6)           (8)
Cash and cash equivalents at beginning                            
of period                                          26           29
                                            ---------     --------
Cash and cash equivalents at end of                               
period                                 $           20  $        21
                                            =========    =========

See accompanying note to the financial statements.
STERLING GAS DRILLING FUND 1981
                  (a New York limited partnership)
                     Note to Financial Statements
                         September 30, 1997

1.   The accompanying statements for the period ending September 30,
1997 are unaudited but reflect all the adjustments necessary to
present fairly the results of operations.