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, 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 - June 30, 1997 and December 31, 1996.

Statements of Operations for the Six and Three Months Ended June 30,
1997 and 1996.

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

Statements of Cash Flows for the Six Months Ended June 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 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, 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 -
Operating  Revenues  increased from $118,454 in 1996  to  $132,533  in
1997.   The gas production decline, from 44,268 MCF in 1996 to  43,399
MCF  in 1997, was partially offset by minor increase in  average price
per MCF from $2.61 in 1996 to $2.85 in 1997.  Although the Partnership
receives very little revenue from oil production, the oil revenue  for
1997  is  higher  than 1996 due to a higher average price  per  barrel
combined  with increased oil production. Production expenses increased
from  $45,097 in 1996 to $55,947 in 1997. The current year  production
expenses  incurred included costs for general upkeep  and  repairs  to
wells.  Occasionally  the  Partnership may expend  funds  to  purchase
additional equipment  or to complete light repairs which , based  upon
the  operator's evaluation, is designed to increase production  or  to
halt  any further significant declines. The beneficial  effect  looked
for by the operator  is to increase, improve or sustain production  on
a  particular  well  These  costs are capitalized  if  they  meet  the
appropriate  criteria. The current year production expenses  increased
as  a  result  of a combination of repairs and labor costs  associated
with  the wells and well sites. These repairs may also result  in  the
well's  temporarily shut-in which could account for some  declines  in
production. The production expenses incurred in 1996 were of a  normal
and recurring nature to upkeep the wells.

Overall general and administrative expenses remained stable and showed
little   change  from  1996  to  1997.  The  amounts  charged  reflect
management's  efforts to limit costs, both incurred and  allocated  to
the  Registrant. Management continues to reduce third party costs  and
use in-house resources to provide efficient and timely services to the
Partnership. The  related party expenses attributable to  the  affairs
and operations of the Partnership, reimbursed to PEMC, are limited  to
an  annual  amount  not to exceed 5% of the Limited  Partners  capital
contributions.  Amounts related to both years are  substantially  less
than  the  amounts allocable to the Registrant under  the  Partnership
Agreement.

The Partnership records additional depreciation, depletion and
amortization to the extent that net capitalized costs exceed the
undiscounted future net cash flows attributable to the Partnership
properties.  The Partnership was not required to revise the properties
basis in either 1996 or first half of 1997. The lower depletion
expense in 1997 is due to  overall lower depletable cost basis in oil
and gas properties.
<PAGE>

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

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

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



                                  STERLING  GAS   DRILLING FUND 1981 
                                   BY:/s/ Charles E. Drimal Jr.
                                   --------------------------
                                     Charles E. Drimal, Jr. 
                                     General Partner
August 14, 1997
(date)



<PAGE>                                
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                            Balance Sheets
                                         June 30,      December 31,
                                           1997            1996
                                        (unaudited)      (audited)
                                             
Assets                                                              
Current Assets:                                                     
  Cash and cash equivalents          $           63  $            26
                                         ----------      -----------
      Total current assets                       63               26
                                                                    
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                          (5,981,959)      (5,945,914)
                                         ----------       ----------
                                          1,202,606        1,238,677
                                         ----------       ----------
       Total assets                  $    1,202,669  $     1,238,677
                                         ==========       ==========
                                                             
Liabilities and Partners' Equity                             
  Current liabilities:                                       
   Due to affiliates                 $      151,458  $       167,538
                                         ----------       ----------
        Total current liabilities           151,458          167,538
                                         ----------       ----------
                                                                    
  Partners' Equity                                                  
   Limited partners                       1,161,373        1,183,494
   General partners                        (110,162)        (112,355)
                                         ----------       ----------
         Total partners' equity           1,051,211        1,071,139
                                         ----------       ----------
                                                                    
         Total liabilities and                                      
          partners' equity           $    1,202,669  $     1,238,677
                                         ==========       ==========
                                                                    


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

                               Limited       General        
                               Partners      Partners       Total
Revenue:                                                    
Operating revenue           $    111,527  $       21,006  $      132,533
                                --------        --------         -------
  Total Revenue                  111,527          21,006         132,533
                                --------        --------         -------
                                                            
Costs and Expenses:                                         
Production expense                47,079           8,868          55,947
General and administrative                                              
 to a related party               42,073           7,925          49,998
General and administrative         8,811           1,660          10,471
Depreciation, depletion                                                 
 and amortization                 35,685             360          36,045
                                --------        --------         -------
  Total Costs and Expenses       133,648          18,813         152,461
                                --------        --------         -------
  Net Income(loss)          $    (22,121)  $        2,193 $     (19,928)
                                ========        ========         =======
Net Income(loss)                                                        
    per equity unit         $     (2.52)                                
                                  ======                                
                                   
                                   
                                   
See accompanying note to financial statements.
<PAGE>
                                   
                      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.
<PAGE>
                                   
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                  Three Months Ending
                                     June 30, 1997

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



See accompanying note to financial statements.
<PAGE>
                                   
                                   
                                   
                      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.
<PAGE>
                                   
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
               Statement of Changes in Partners' Equity
                              (unaudited)
                                   
                                    Six Months Ended
                                     June 30, 1997


                            Limited        General                   
                            Partners       Partners             Total
                                                         
Balance at beginning of                                               
period                    $  1,183,494      (112,355)  $     1,071,139
Net Income(Loss)              (22,121)         2,193          (19,928)
                             ---------      --------       -----------
Balance at end of period  $  1,161,373      (110,162)  $     1,051,211
                             =========      ========       ===========
                                           
                                           
                                   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
                             =========      ========       ===========



See accompanying note to financial statements.
<PAGE>
                                   
                                   
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
               Statement of Changes in Partners' Equity
                              (unaudited)
                                   
                                   Three Months Ended
                                     June 30, 1997

                               Limited       General                   
                               Partners      Partners             Total
                                                                       
Balance at beginning of                                                
period                      $   1,179,028 $   (110,014)  $    1,069,014
  Net Income(Loss)                (17,655)        (148)        (17,803)
                                 --------     --------       ----------
Balance at end of period    $   1,161,373 $   (110,162)  $    1,051,211
                                 ========     ========       ==========
                                            
                                   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
                                 ========     ========       ==========



See accompanying note to financial statements.
<PAGE>
                                   
                                   
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Cash Flows
                              (unaudited)
                                   
                                             Six months        Six
                                                ended        months
                                              June 30,        ended
                                                1997        June 30,
                                                              1996
                                                                     
Net cash provided by operating                                       
activities                                $           37 $      5,401
                                              ----------    ---------
 Cash(used in)investment activities:                                 
  Investment in wells and related                                    
     facilities                                        0      (5,407)
                                              ----------    ---------
 Net Cash used in investment                                         
     activities                                        0      (5,407)
                                                                     
Net increase(decrease) in cash and                                   
  cash equivalents                                    37          (6)
Cash and cash equivalents at beginning                               
of period                                             26           29
                                              ----------    ---------
Cash and cash equivalents at end of                                  
period                                    $           63 $         23
                                              ==========    =========



see accompanying note to financial  statements.
<PAGE>


                                 
                                   
                      STERLING GAS DRILLING FUND 1981
                      (a New York limited partnership)
                       Note to Financial Statements
                             June 30, 1997



1. The accompanying statements for the period ending June 30, 1997 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, 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 - June 30, 1997 and December 31, 1996.

Statements of Operations for the Six and Three Months Ended June 30,
1997 and 1996.

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

Statements of Cash Flows for the Six Months Ended June 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 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, 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 -
Operating  Revenues  increased from $118,454 in 1996  to  $132,533  in
1997.   The gas production decline, from 44,268 MCF in 1996 to  43,399
MCF  in 1997, was partially offset by minor increase in  average price
per MCF from $2.61 in 1996 to $2.85 in 1997.  Although the Partnership
receives very little revenue from oil production, the oil revenue  for
1997  is  higher  than 1996 due to a higher average price  per  barrel
combined  with increased oil production. Production expenses increased
from  $45,097 in 1996 to $55,947 in 1997. The current year  production
expenses  incurred included costs for general upkeep  and  repairs  to
wells.  Occasionally  the  Partnership may expend  funds  to  purchase
additional equipment  or to complete light repairs which , based  upon
the  operator's evaluation, is designed to increase production  or  to
halt  any further significant declines. The beneficial  effect  looked
for by the operator  is to increase, improve or sustain production  on
a  particular  well  These  costs are capitalized  if  they  meet  the
appropriate  criteria. The current year production expenses  increased
as  a  result  of a combination of repairs and labor costs  associated
with  the wells and well sites. These repairs may also result  in  the
well's  temporarily shut-in which could account for some  declines  in
production. The production expenses incurred in 1996 were of a  normal
and recurring nature to upkeep the wells.

Overall general and administrative expenses remained stable and showed
little   change  from  1996  to  1997.  The  amounts  charged  reflect
management's  efforts to limit costs, both incurred and  allocated  to
the  Registrant. Management continues to reduce third party costs  and
use in-house resources to provide efficient and timely services to the
Partnership. The  related party expenses attributable to  the  affairs
and operations of the Partnership, reimbursed to PEMC, are limited  to
an  annual  amount  not to exceed 5% of the Limited  Partners  capital
contributions.  Amounts related to both years are  substantially  less
than  the  amounts allocable to the Registrant under  the  Partnership
Agreement.

The Partnership records additional depreciation, depletion and
amortization to the extent that net capitalized costs exceed the
undiscounted future net cash flows attributable to the Partnership
properties.  The Partnership was not required to revise the properties
basis in either 1996 or first half of 1997. The lower depletion
expense in 1997 is due to  overall lower depletable cost basis in oil
and gas properties.
PART II
Items  1  through  5  have been omitted in that each  item  is  either
inapplicable or the answer is negative.Item .  Exhibits and Reports on
Form 8-K
The  Partnership was not required to file any reports on Form 8-K  and
no such form was filed during the period covered by this report.

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

                                  STERLING  GAS   DRILLING FUND 1981 
                                   BY:/s/ Charles E. Drimal Jr.
                                   --------------------------
                                     Charles E. Drimal, Jr. 
                                     General Partner
August 14, 1997
(date)
STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                            Balance Sheets
                                         June 30,      December 31,
                                           1997            1996
                                        (unaudited)      (audited)
                                             
Assets                                                              
Current Assets:                                                     
  Cash and cash equivalents          $           63  $            26
                                         ----------      -----------
      Total current assets                       63               26
                                                                    
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                          (5,981,959)      (5,945,914)
                                         ----------       ----------
                                          1,202,606        1,238,677
                                         ----------       ----------
       Total assets                  $    1,202,669  $     1,238,677
                                         ==========       ==========
                                                             
Liabilities and Partners' Equity                             
  Current liabilities:                                       
   Due to affiliates                 $      151,458  $       167,538
                                         ----------       ----------
        Total current liabilities           151,458          167,538
                                         ----------       ----------
                                                                    
  Partners' Equity                                                  
   Limited partners                       1,161,373        1,183,494
   General partners                        (110,162)        (112,355)
                                         ----------       ----------
         Total partners' equity           1,051,211        1,071,139
                                         ----------       ----------
                                                                    
         Total liabilities and                                      
          partners' equity           $    1,202,669  $     1,238,677
                                         ==========       ==========
                                                                    

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

                               Limited       General        
                               Partners      Partners       Total
Revenue:                                                    
Operating revenue           $    111,527  $       21,006  $      132,533
                                --------        --------         -------
  Total Revenue                  111,527          21,006         132,533
                                --------        --------         -------
                                                            
Costs and Expenses:                                         
Production expense                47,079           8,868          55,947
General and administrative                                              
 to a related party               42,073           7,925          49,998
General and administrative         8,811           1,660          10,471
Depreciation, depletion                                                 
 and amortization                 35,685             360          36,045
                                --------        --------         -------
  Total Costs and Expenses       133,648          18,813         152,461
                                --------        --------         -------
  Net Income(loss)          $    (22,121)  $        2,193 $     (19,928)
                                ========        ========         =======
Net Income(loss)                                                        
    per equity unit         $     (2.52)                                
                                  ======                                
                                   
                                   
                                   
See accompanying note to financial statements.
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)
                                   
                                  Three Months Ending
                                     June 30, 1997

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

See accompanying note to financial statements.
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 Changes in Partners' Equity
                              (unaudited)
                                   
                                    Six Months Ended
                                     June 30, 1997

                            Limited        General                   
                            Partners       Partners             Total
                                                         
Balance at beginning of                                               
period                    $  1,183,494      (112,355)  $     1,071,139
Net Income(Loss)              (22,121)         2,193          (19,928)
                             ---------      --------       -----------
Balance at end of period  $  1,161,373      (110,162)  $     1,051,211
                             =========      ========       ===========
                                           
                                           
                                   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
                             =========      ========       ===========

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, 1997

                               Limited       General                   
                               Partners      Partners             Total
                                                                       
Balance at beginning of                                                
period                      $   1,179,028 $   (110,014)  $    1,069,014
  Net Income(Loss)                (17,655)        (148)        (17,803)
                                 --------     --------       ----------
Balance at end of period    $   1,161,373 $   (110,162)  $    1,051,211
                                 ========     ========       ==========
                                            
                                   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
                                 ========     ========       ==========

See accompanying note to financial statements.
STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Cash Flows
                              (unaudited)
                                   
                                             Six months        Six
                                                ended        months
                                              June 30,        ended
                                                1997        June 30,
                                                              1996
                                                                     
Net cash provided by operating                                       
activities                                $           37 $      5,401
                                              ----------    ---------
 Cash(used in)investment activities:                                 
  Investment in wells and related                                    
     facilities                                        0      (5,407)
                                              ----------    ---------
 Net Cash used in investment                                         
     activities                                        0      (5,407)
                                                                     
Net increase(decrease) in cash and                                   
  cash equivalents                                    37          (6)
Cash and cash equivalents at beginning                               
of period                                             26           29
                                              ----------    ---------
Cash and cash equivalents at end of                                  
period                                    $           63 $         23
                                              ==========    =========

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

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