<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-QSB
/X/ Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
/ / For the quarterly period ended June 30, 1996
OR
Transition report pursuant to section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from to
-------------------------
Commission File Number 0-5525
-------------------------
PYRAMID OIL COMPANY
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-0787340
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
2008 - 21ST. STREET,
BAKERSFIELD, CALIFORNIA 93301
(Address of principal executive offices) (Zip Code)
(805) 325-1000
(Registrant's telephone number, including area code)
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 periods 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
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the period covered by this report.
COMMON STOCK WITHOUT PAR VALUE 2,494,430
(Class) (Outstanding at June 30, 1996)
<PAGE> 2
FINANCIAL STATEMENTS
PYRAMID OIL COMPANY
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $504,515 $452,348
Trade accounts receivable 195,149 185,662
Crude oil inventory 76,376 76,376
Prepaid expenses 42,581 80,612
Deferred income taxes 73,646 75,954
------------ ------------
TOTAL CURRENT ASSETS 892,267 870,952
------------ ------------
PROPERTY AND EQUIPMENT, at cost
Oil and gas properties and equipment
(successful efforts method) 9,700,096 9,678,168
Drilling and operating equipment 3,976,249 3,965,817
Land, buildings and improvements 923,714 923,714
Automotive, office and other
property and equipment 1,105,529 1,099,492
------------ ------------
15,705,588 15,667,191
Less: accumulated depletion,
depreciation, amortization
and valuation allowance (13,367,302) (13,175,439)
------------ ------------
2,338,286 2,491,752
------------ ------------
OTHER ASSETS 4,715 4,715
------------ ------------
$3,235,268 $3,367,419
============ ============
<FN> See Accompanying Notes to Financial Statements.
</TABLE>
<PAGE> 3
PYRAMID OIL COMPANY
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 56,529 $ 53,925
Accrued professional fees 22,250 28,000
Accrued taxes, other than income taxes -- 30,115
Accrued payroll and related costs 28,675 29,684
Accrued royalties payable 61,389 66,658
Accrued insurance 9,081 23,804
Current maturities of long-term debt 54,416 61,615
Line of credit -- 25,000
------------ ------------
TOTAL CURRENT LIABILITIES 232,340 318,801
------------ ------------
LONG-TERM DEBT, net of current maturities 99,785 113,535
------------ ------------
DEFERRED INCOME AND OTHER TAXES 116,117 118,425
------------ ------------
COMMITMENTS (note 3)
STOCKHOLDERS' EQUITY:
Common stock-no par value;
10,000,000 authorized shares;
2,494,430 shares issued and
outstanding 1,071,610 1,071,610
Retained earnings 1,715,416 1,745,048
------------ ------------
2,787,026 2,816,658
------------ ------------
$3,235,268 $3,367,419
============ ============
<FN> See Accompanying Notes to Financial Statements.
</TABLE>
<PAGE> 4
PYRAMID OIL COMPANY
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
--------------------- ---------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES $485,048 $399,706 $902,704 $798,384
--------- --------- --------- ---------
COSTS AND EXPENSES:
Operating expenses 249,887 177,883 509,660 374,628
General and administrative 97,013 92,284 190,551 167,689
Taxes, other than income
and payroll taxes 10,705 10,461 29,994 26,631
Provision for depletion,
depreciation and
amortization 105,463 88,126 206,983 174,905
Other costs and expenses 7,336 8,737 9,093 10,135
--------- --------- --------- ---------
470,404 377,491 946,281 753,988
--------- --------- --------- ---------
OPERATING INCOME (LOSS) 14,644 22,215 (43,577) 44,396
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income 5,739 5,353 11,782 9,933
Other income 7,350 3,401 12,400 43,028
Interest expense (4,639) (6,001) (9,089) (10,620)
--------- --------- --------- ---------
8,450 2,753 15,093 42,341
--------- --------- --------- ---------
INCOME (LOSS) BEFORE
INCOME TAX PROVISION 23,094 24,968 (28,484) 86,737
Income tax provision 800 1,166 1,148 1,166
--------- --------- --------- ---------
NET INCOME (LOSS) $ 22,294 $ 23,802 $ (29,632) $ 85,571
========= ========= ========= =========
INCOME (LOSS) PER COMMON SHARE $0.01 $0.01 ($0.01) $0.03
========= ========= ========= =========
Weighted average number of
common shares outstanding 2,494,430 2,494,430 2,494,430 2,494,430
========= ========= ========= =========
<FN> See Accompanying Notes to Financial Statements.
</TABLE>
<PAGE> 5
PYRAMID OIL COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $( 29,632) $ 85,571
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Provision for depletion,
depreciation and amortization 206,983 174,905
Gain on sale of fixed assets (2,500) (36,250)
Changes in assets and liabilities:
Increase in trade accounts receivable (9,487) (43,737)
Decrease in prepaid expenses 38,031 27,757
Decrease in accounts payable
and accrued liabilities (54,262) (115,739)
Decrease in deferred taxes -- (442)
--------- ---------
Net cash provided by operating activities 149,133 92,065
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (53,517) (421,377)
Proceeds from sale of property and equipment 2,500 160,000
--------- ---------
Net cash used in investing activities (51,017) (261,377)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 31,000 100,000
Principal payments on line of credit (56,000) (50,000)
Proceeds from new borrowing 15,650 30,978
Principal payments on long-term debt (36,599) (28,398)
--------- ---------
Net cash (used in) provided by
financing activities (45,949) 52,580
--------- ---------
Net increase (decrease) in cash
and cash equivalents 52,167 (116,732)
Cash and cash equivalents at beginning of period 452,348 469,009
--------- ---------
Cash and cash equivalents at end of period $504,515 $352,277
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the six months for interest $9,089 $10,620
========= =========
<FN> See Accompanying Notes to Financial Statements.
</TABLE>
<PAGE> 6
PYRAMID OIL COMPANY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements include the accounts of Pyramid Oil Company (the
Company). Such financial statements included herein have been prepared by the
Company, without an audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading.
A summary of the Company's significant accounting policies is contained in its
December 31, 1995 Form 10-KSB which is incorporated herein by reference. The
financial data presented herein should be read in conjunction with the
Company's December 31, 1995 financial statements and notes thereto, contained
in the Company's Form 10-KSB.
In the opinion of the Company, the unaudited financial statements, contained
herein, include all adjustments (consisting of normal recurring accruals and
the elimination of inter-division transactions) necessary to present fairly
the Company's financial position as of June 30, 1996 and the results of its
operations and its cash flows for the three and six months periods ended June
30, 1996 and 1995. The results of operations for an interim period are not
necessarily indicative of the results to be expected for a full year.
(2) DIVIDENDS
No cash dividends were paid during the six months ended June 30, 1996 and
1995.
(3) COMMITMENTS
Pursuant to a specific oil and gas lease in the Carneros Creek field, the
Company is obligated to drill at least one well per year on this lease. If
the price of oil reaches $20 per barrel or above and continues for a period of
60 consecutive days, the Company will thereafter be obligated to drill at
least one well per quarter on this lease. The price of oil on this lease was
approximately $19.60 per barrel at August 12, 1996. Failure to drill the
necessary well(s) will result in relinquishment of future drilling acreage on
this specific lease. The Company drilled and completed a well on this lease
in the second quarter of 1995. The cost of drilling and completing a well can
vary significantly. The Company's total share of the costs of drilling and
completing the one well on this lease in 1995 was approximately $312,000.
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
IMPACT OF CHANGING PRICES
The Company's revenue is connected directly to crude oil prices posted by
the major oil companies. Average crude oil prices for the second quarter of
1996 increased by approximately $1.60 per equivalent barrel over second
quarter 1995 crude prices. Average crude oil prices for the first six months
of 1996 have increased by approximately $1.70 per equivalent barrel as
compared with the same period of 1995. Crude oil prices have been very
volatile during the first six months of 1996. During the first six months of
1996, the Company experienced twenty-six separate price changes. For the
same period of 1995 the Company experienced nine price changes. At the end of
the second quarter of 1996, crude oil prices had increased by approximately
$2.60 over December 31, 1995 price levels. The Company cannot predict the
future course of crude oil prices for the foreseeable future.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $52,167 for the six months ended
June 30, 1996. Capital spending for the first six months of 1996 decreased
cash by $51,017. Net cash provided by operating activities was $149,133 for
the six months ended June 30, 1996. The Company has reduced its long-term
debt by $45,949 during the six months ended June 30, 1996. See the Statements
of Cash Flows for additional detailed information.
Crude oil prices during the first six months of 1996 and continuing into the
third quarter of 1996 continue to be favorable. However, over the
last ten years, crude oil prices have fluctuated dramatically, thus the
Company has continued with its approach of focusing on its most profitable
properties to optimize the Company's resources. Cost reductions and
consolidations in all areas of operations have been maintained in an effort to
offset the decline in revenues and conserve capital. In prior years, the
Company shut-in or reduced operations on certain other oil and gas properties
that were uneconomic. Many of these properties continue to be shut-in.
Despite the factors described above and the economic conditions existing in
the oil and gas industry since 1986, the Company has been able to maintain its
oil and gas reserves.
FORWARD LOOKING INFORMATION
The Company has experienced two price changes since June 30, 1996. The net
effect of these price changes has been to increase crude oil prices by
approximately fifty cents per barrel. This is an encouraging sign for the
third quarter. However, crude oil prices continue to remain unstable and
unpredictable. With the continuing crude oil market instability, management
feels that it must continue to reduce costs. Except for a specific commitment
mentioned above, the majority of all developmental and capital expenditures
are being deferred at this time.
<PAGE> 8
In April of 1996, the Company acquired a new oil producing property with one
well that is presently producing approximately twenty barrels per day. The
Company estimates that its investment in this property will payout in
approximately six months at current prices.
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1996 COMPARED TO QUARTER ENDED JUNE 30, 1995
REVENUES
Revenues for oil and gas operations increased by 21.4% for the three months
ended June 30, 1996 as contrasted with the same period of 1995. Crude oil
sales increased by 11.1% due to higher crude prices for the second quarter of
1996. The average equivalent crude oil price for the second quarter of 1996
increased by approximately $1.60 per equivalent barrel as compared with the
same period in 1995. Revenues also increased by 10.3% due to an increase in
crude oil production during the second quarter of 1996. The Company's net
revenue share of crude oil production increased by approximately thirty
barrels per day during the second quarter of 1996. The increase in production
is the result of acquiring a new producing property in April of 1996, higher
gas production and returning certain shut-in wells to production due to the
higher crude oil prices.
OPERATING EXPENSES
Operating expenses for crude oil and natural gas producing activities
increased by 40.5% for the second quarter of 1996 as compared with the same
period of 1995. The average cost to produce an equivalent barrel of crude oil
increased by approximately $2.00 per barrel for the second quarter of 1996 as
compared with the second quarter of 1995. Labor costs, equipment fuel,
operating supplies, outside services and chemical costs increased by a
combined total of approximately 35% for the second quarter of 1996.
During the second quarter of 1995, the Company devoted a portion of its labor,
supplies and fuel resources to the drilling of one oil well. Those costs
which were associated with the drilling were capitalized as Oil and Gas
Properties and Equipment. In 1996, the Company has, thus far, devoted all of
its resources to the ongoing maintenance and operation of its producing wells.
All costs associated with the ongoing maintenance and operation of these wells
are expensed in the current period. As a result, second quarter 1996
operating costs increased by 20.5% over the second quarter of 1995.
Chemicals increased by 5% for the second quarter of 1996. Chemicals have
increased due to the use of more and different types of chemicals in an
attempt to enhance production on certain of the Company's oil and gas
properties. The remaining increase in operating costs, including outside
services, is due to the overall increased level of activity for the second
quarter of 1996. Certain oil and gas properties that had been shut-in during
most of the first
<PAGE> 9
six months of 1995 were back in full operation during the second quarter of
1996, due primarily to the increase in crude oil prices.
PROVISION FOR DEPLETION, DEPRECIATION AND AMORTIZATION
The provision for depletion, depreciation and amortization has increased by
20% for the second quarter of 1996 due primarily to higher depletion rates for
1996. This was caused by the change in the Company's oil and gas reserves at
December 31, 1995 and the resulting increase in its depletion rates.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
REVENUES
Revenues increased by 13% for the six months ended June 30, 1996 as compared
with the same period in 1995. Revenues increased by 11% due to an increase in
the average price per barrel. The average equivalent crude oil price
increased by approximately $1.70 per barrel for the six months ended June 30,
1996. Revenues also increased by 2% due to an increase in oil and gas
production. The Company's net revenue interest share of oil and gas
production increased by approximately 1,000 barrels for the six months ended
June 30, 1996.
OPERATING EXPENSES
Operating expenses increased by 36% for the six months ended June 30, 1996.
The cost to produce an equivalent barrel of crude oil increased by
approximately $2.40 per barrel for the six months ended June 30, 1996. Labor
costs, equipment fuel, operating supplies, outside services and chemical costs
increased by a combined total of approximately 28% for the first six months of
1996.
During the first and second quarter of 1995, the Company devoted a portion of
its labor, supplies and fuel resources to the drilling of two oil wells.
Those costs which were associated with the drilling were capitalized as Oil
and Gas Properties and Equipment. In 1996, the Company has, thus far, devoted
all of its resources to the ongoing maintenance and operation of its producing
wells. All costs associated with the ongoing maintenance and operation of
these wells are expensed in the current period. As a result, operating costs
for the first six months of 1996 increased by 14% over the first six months
of 1995.
Chemicals increased by 5% for the first six months of 1996. Chemicals have
increased due to the use of more and different types of chemicals in an
attempt to enhance production on certain of the Company's oil and gas
properties. The remaining increase in operating costs, including outside
services, is due to the overall increased level of activity for the first six
months of 1996. Certain oil and gas properties that had been shut-in during
most of the first six months of 1995 were back in full operation during the
first six months of 1996, due primarily to the increase in crude oil prices.
<PAGE> 10
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased by 13.6% for the first six
months of 1996 when compared with the same period in 1995. During the first
quarter of 1995, the Company's general and administrative expenses were offset
by a recovery of certain accounts receivable balances that had been fully
reserved for in prior periods. This contributed to a 7.5% decrease in general
and administrative expenses for the first six months of 1995 when compared
with the same period in 1996.
OTHER INCOME
Other income has decreased by approximately $27,000 for the first six months
of 1996 as compared with the same period of 1995. In the first quarter of
1995, the Company sold certain real property it owned in Taft, Kern County,
California and realized a gain on the sale of approximately $33,000.
PROVISION FOR DEPLETION, DEPRECIATION AND AMORTIZATION
The provision for depletion, depreciation and amortization has increased by
18% for the first six months of 1996 due primarily to higher depletion rates
for 1996. This was caused by the change in the Company's oil and gas reserves
at December 31, 1995 and the resulting increase in its depletion rates.
<PAGE> 11
PYRAMID OIL COMPANY
PART II - OTHER INFORMATION
Item 1. - Legal Proceedings
None
Item 2. - Changes in Securities
None
Item 3. - Defaults Upon Senior Securities
None
Item 4. - Submission of Matters to a Vote of Security Holders
On June 6, 1996, the Company held its Annual Meeting
of Shareholders in Bakersfield, California. Two items
were voted on during the meeting; election of
Directors and approval of Auditors. The shareholders
elected J. Ben Hathaway, John H. Alexander, Otto
Hackel, John E. Turco and Jack W. Wood to serve as the
Company's Directors until the next scheduled Annual
Meeting. The shareholders also approved the selection
of Arthur Andersen LLP as auditors for 1996. Each
item is fully described in the Company's Proxy dated
April 22, 1996.
Item 5. - Other Information -
None
Item 6. - Exhibits and Reports on Form 8-K -
No Form 8-K's were filed during the three months
ended June 30, 1996.
<PAGE> 12
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
PYRAMID OIL COMPANY
(registrant)
Dated: August 12, 1996 J. BEN HATHAWAY
---------------------
J. Ben Hathaway
President
Dated: August 12, 1996 JOHN H. ALEXANDER
---------------------
John H. Alexander
Vice President
<PAGE> 13
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of the Company for the six months ended June 30, 1996 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 504,515
<SECURITIES> 0
<RECEIVABLES> 199,149
<ALLOWANCES> 4,000
<INVENTORY> 76,376
<CURRENT-ASSETS> 892,267
<PP&E> 15,705,588
<DEPRECIATION> 13,367,302
<TOTAL-ASSETS> 3,235,268
<CURRENT-LIABILITIES> 232,340
<BONDS> 0
0
0
<COMMON> 1,071,610
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,235,268
<SALES> 902,704
<TOTAL-REVENUES> 926,886
<CGS> 716,643
<TOTAL-COSTS> 946,281
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,089
<INCOME-PRETAX> (28,484)
<INCOME-TAX> 1,148
<INCOME-CONTINUING> (29,632)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (29,632)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
