<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 September 30, 1997
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
incorporation or organization) Identification 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 September 30, 1997)
<PAGE> 2
FINANCIAL STATEMENTS
PYRAMID OIL COMPANY
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $644,586 $682,043
Trade accounts receivable 180,549 260,553
Crude oil inventory 117,892 117,892
Prepaid expenses 28,898 94,573
Deferred income taxes 79,859 78,759
------------ ------------
TOTAL CURRENT ASSETS 1,051,784 1,233,820
------------ ------------
PROPERTY AND EQUIPMENT, at cost
Oil and gas properties and equipment
(successful efforts method) 10,174,386 9,734,780
Drilling and operating equipment 3,174,270 3,993,349
Land, buildings and improvements 919,117 890,603
Automotive, office and other
property and equipment 1,036,974 1,037,397
------------ ------------
15,304,747 15,656,129
Less: accumulated depletion,
depreciation, amortization
and valuation allowance (12,984,685) (13,370,310)
------------ ------------
2,320,062 2,285,819
------------ ------------
$3,371,846 $3,519,639
============ ============
<FN> See Accompanying Notes to Financial Statements.
</TABLE>
<PAGE> 3
PYRAMID OIL COMPANY
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 70,184 $106,652
Accrued professional fees 35,500 32,750
Accrued taxes, other than income taxes 15,271 29,236
Accrued payroll and related costs 30,912 32,898
Accrued royalties payable 75,290 85,066
Accrued insurance 3,323 35,202
Current maturities of long-term debt 24,904 49,570
------------ ------------
TOTAL CURRENT LIABILITIES 255,384 371,374
------------ ------------
LONG-TERM DEBT, net of current maturities 51,293 80,231
------------ ------------
DEFERRED INCOME AND OTHER TAXES 122,330 121,230
------------ ------------
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 1,871,229 1,875,194
------------ ------------
2,942,839 2,946,804
------------ ------------
$3,371,846 $3,519,639
============ ============
<FN> See Accompanying Notes to Financial Statements.
</TABLE>
<PAGE> 4
PYRAMID OIL COMPANY
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------- ---------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES $388,519 $464,289 $1,242,895 $1,366,993
--------- --------- --------- ---------
COSTS AND EXPENSES:
Operating expenses 273,460 246,501 694,450 756,161
General and administrative 91,497 84,448 304,117 274,999
Taxes, other than income
and payroll taxes 18,688 17,054 49,102 47,048
Provision for depletion,
depreciation and
amortization 107,860 109,923 322,919 316,906
Other costs and expenses 1,743 1,518 11,381 10,611
--------- --------- --------- ---------
493,248 459,444 1,381,969 1,405,725
--------- --------- --------- ---------
OPERATING INCOME (LOSS) (104,729) 4,845 (139,074) (38,732)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income 4,540 6,096 17,093 17,878
Other income 88,144 8,990 124,978 21,390
Interest expense (2,433) (3,588) (5,814) (12,677)
--------- --------- --------- ---------
90,251 11,498 136,257 26,591
--------- --------- --------- ---------
INCOME (LOSS) BEFORE
INCOME TAX PROVISION (14,478) 16,343 (2,817) (12,141)
Income tax provision -- -- 1,148 1,148
--------- --------- --------- ---------
NET INCOME (LOSS) $ (14,478) $ 16,343 $ (3,965) $ (13,289)
========= ========= ========= =========
INCOME (LOSS) PER COMMON SHARE ($0.01) $0.01 $0.00 ($0.01)
========= ========= ========= =========
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> Nine months ended
September 30,
-------------------------
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,965) $ (13,289)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Provision for depletion,
depreciation and amortization 322,919 316,906
Gain on sale of fixed assets (77,294) (2,250)
Changes in assets and liabilities:
Decrease (increase) in
trade accounts receivable 80,004 (30,515)
Decrease in prepaid expenses 65,675 8,490
Decrease in accounts payable
and accrued liabilities (91,324) (5,475)
--------- ---------
Net cash provided by operating activities 296,015 273,867
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (503,568) (99,305)
Proceeds from sale of property and equipment 223,700 3,100
--------- ---------
Net cash used in investing activities (279,868) (96,205)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 30,000 31,000
Principal payments on line of credit (30,000) (56,000)
Proceeds from new borrowing -- 28,650
Principal payments on long-term debt (53,604) (57,631)
--------- ---------
Net cash used in financing activities (53,604) (53,981)
--------- ---------
Net (decrease) increase in cash
and cash equivalents (37,457) 123,681
Cash and cash equivalents at beginning of period 682,043 452,348
--------- ---------
Cash and cash equivalents at end of period $644,586 $576,029
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the nine months for interest $5,814 $12,677
========= =========
Cash paid during the nine months for income taxes $1,148 $1,148
========= =========
<FN> See Accompanying Notes to Financial Statements.
</TABLE>
<PAGE> 6
PYRAMID OIL COMPANY
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
(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, 1996 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, 1996 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 necessary to present fairly the Company's
financial position as of September 30, 1997 and the results of its operations
and its cash flows for the three and nine months periods ended September 30,
1997 and 1996. 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 nine months ended September 30, 1997
and 1996.
(3) COMMITMENTS
Pursuant to a specific oil and gas lease with respect to 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 $16.75 per barrel at November 10, 1997.
Failure to drill the necessary well(s) will result in the potential
relinquishment of any undrilled or unproven acreage on this specific lease.
Any relinquishment would not affect wells already drilled and producing on
this lease. The Company drilled and completed a well on this lease during
the
<PAGE> 7
first half of 1997. The cost of drilling and completing a well can vary
significantly. The Company's total costs of drilling and completing the one
well on this lease in 1997 were approximately $256,000.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
IMPACT OF CHANGING PRICES
The Company's revenue is directly influenced by crude oil prices posted by
major oil companies. Average crude oil prices for the third quarter of 1997
decreased by approximately $1.60 per equivalent barrel over third quarter 1996
crude prices. Average crude oil prices for the first nine months of 1997 have
decreased by approximately twenty cents per equivalent barrel as compared with
the same period for 1996. Crude oil prices continued to be erratic during the
first nine months of 1997. The Company experienced thirty-three separate
price changes during the first nine months of 1997. For the same period of
1996 the Company experienced thirty-two price changes. At the end of the
third quarter of 1997, crude oil prices had decreased by approximately $4.70
since December 31, 1996. The Company cannot predict the future course of
crude oil prices.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by approximately $37,000 for the nine
months ended September 30, 1997. For the nine months ended September 30, 1997
the Company generated cash flows of approximately $296,000 from operating
activities and $224,000 in proceeds from the sale of well servicing rigs.
This was offset by capital spending for the nine months ended September 30,
1997 of $504,000 and principal payments on long-term debt of $54,000. Capital
expenditures for the nine months ended September 30, 1997 included the
drilling of a new well and significant remedial work on one of the Company's
existing wells. See the Statements of Cash Flows for additional detailed
information.
During 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 to conserve
capital. In prior years, the Company shut-in or reduced operations on certain
other oil and gas properties that were uneconomic. During 1996 and continuing
into 1997, certain of these properties were returned to production due to
favorable crude oil prices during 1996 and the first quarter of 1997.
FORWARD LOOKING INFORMATION
Crude oil prices have decreased by seventy-five cents per barrel since
September 30, 1997. Crude oil prices continue to remain unstable and
unpredictable. With the continuing crude oil market instability, management
<PAGE> 8
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.
During the second quarter of 1997, the Company completed a well that was
drilled in the first quarter of 1997. This well is currently producing
approximately twenty-five barrels of crude oil per day. In March of 1997, one
of the Company's oil wells that was producing approximately 60 barrels of
crude oil per day was shut-in due to water entry into the well caused by a
failure of the well casing. The Company has done significant remedial work on
this well and returned the well to production in the second quarter of 1997.
This well is currently producing approximately ten barrels of crude oil per
day during the third quarter of 1997.
ANALYSIS OF SIGNIFICANT CHANGES IN RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1997
COMPARED TO THE QUARTER ENDED SEPTEMBER 30, 1996
REVENUES
Oil and gas sales decreased by 16.3% for the three months ended September 30,
1997 when compared with the same period for 1996. Oil and gas sales decreased
by 8.4% due to lower average crude oil prices for the third quarter of 1997.
The average price of the Company's oil and gas for the third quarter of 1997
decreased by approximately $1.60 per equivalent barrel compared to the same
period for 1996. Oil and gas sales also decreased by 8% due to lower crude
oil production during the third quarter of 1997. The Company's net revenue
share of crude oil production decreased by approximately 20 barrels per day
during the third quarter of 1997. Approximately half of the decrease in crude
oil production is due to one lease.
OPERATING EXPENSES
Operating expenses increased by 10.9% for the third quarter of 1997. The
average cost to produce an equivalent barrel of crude oil increased by
approximately $1.90 per barrel for the third quarter of 1997 when compared
with the third quarter of 1996. During the third quarter of 1997, the Company
incurred certain costs to abandon four oil wells. This activity increased
third quarter 1997 operating expenses by 8%. No such expenditures were
incurred in the third quarter of 1996.
OTHER INCOME
Other income for the third quarter of 1997 includes a gain of $57,000 from the
sale of one of the Company's well servicing rigs. Other income for the third
quarter of 1997 also includes a gain of $28,000 from the sale of surplus
production supplies and scrap metal.
<PAGE> 9
RESULTS OF OPERATIONS FOR THE NINE ENDED SEPTEMBER 30, 1997
COMPARED TO THE NINE ENDED SEPTEMBER 30, 1996
REVENUES
Oil and gas sales decreased by 9% for the nine months ended September 30, 1997
when compared with the same period for 1996. Oil and gas sales decreased by
8% due to lower crude oil production for the nine months ended September 30,
1997. The Company's net revenue interest share of oil and gas production
decreased by approximately 20 barrels per day for the nine months ended
September 30, 1997. Average sales prices for the nine months ended September
30, 1997 and 1996 were comparable between periods.
OPERATING EXPENSES
Operating expenses decreased by 8% for the nine months ended September 30,
1997. During the first and second quarters of 1997, the Company devoted a
portion of its labor, supplies and fuel resources to the drilling of one oil
well and remedial work on a second well. The costs associated with the
drilling and remedial well work were capitalized as Oil and Gas Properties and
Equipment. In 1996, the Company 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 first
nine months of 1996. As a result, operating costs for the first nine months
of 1997 decreased by 11.3% over the first nine months of 1996.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased by 10.6% for the first nine
months of 1997 when compared with the same period for 1996. Professional fees
increased by 8.4% for the nine months ended September 30, 1997 due to higher
costs for legal services. The Company is a plaintiff in a continuing legal
action, that generated the increase in legal fees for 1997.
OTHER INCOME
Other income for the nine months ended September 30, 1997 includes gains of
$77,000 from the sales of five of the Company's well servicing rigs. Other
income for 1997 also includes a gain of $34,000 from the sale of surplus
production supplies and scrap metal.
<PAGE> 10
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
None
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 September 30, 1997.
<PAGE> 11
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: November 10, 1997 J. BEN HATHAWAY
---------------------
J. Ben Hathaway
President
Dated: November 10, 1997 JOHN H. ALEXANDER
---------------------
John H. Alexander
Vice President
<PAGE> 12
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 644,586
<SECURITIES> 0
<RECEIVABLES> 184,549
<ALLOWANCES> 4,000
<INVENTORY> 117,892
<CURRENT-ASSETS> 1,051,784
<PP&E> 15,304,747
<DEPRECIATION> 12,984,685
<TOTAL-ASSETS> 3,371,846
<CURRENT-LIABILITIES> 255,384
<BONDS> 0
0
0
<COMMON> 1,071,610
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,371,846
<SALES> 1,242,895
<TOTAL-REVENUES> 1,384,966
<CGS> 1,017,369
<TOTAL-COSTS> 1,370,588
<OTHER-EXPENSES> 11,381
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,814
<INCOME-PRETAX> (2,817)
<INCOME-TAX> 1,148
<INCOME-CONTINUING> (3,965)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,965)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
