<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, 1998
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 June 30, 1998)
<PAGE> 2
FINANCIAL STATEMENTS
PYRAMID OIL COMPANY
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $380,549 $600,994
Trade accounts receivable 97,117 153,821
Crude oil inventory 61,194 61,194
Prepaid expenses 46,761 93,587
Deferred income taxes 75,582 79,853
------------ ------------
TOTAL CURRENT ASSETS 661,203 989,449
------------ ------------
PROPERTY AND EQUIPMENT, at cost
Oil and gas properties and equipment
(successful efforts method) 10,355,716 10,174,516
Drilling and operating equipment 3,177,722 3,177,722
Land, buildings and improvements 921,767 919,117
Automotive, office and other
property and equipment 1,025,169 1,036,073
------------ ------------
15,480,374 15,307,428
Less: accumulated depletion,
depreciation, amortization
and valuation allowance (13,228,862) (13,035,692)
------------ ------------
2,251,512 2,271,736
------------ ------------
$2,912,715 $3,261,185
============ ============
<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,
1998 1997
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $120,582 $ 44,584
Accrued professional fees 22,823 33,500
Accrued taxes, other than income taxes -- 34,569
Accrued payroll and related costs 34,647 25,466
Accrued royalties payable 57,433 75,482
Accrued insurance 8,677 35,533
Current maturities of long-term debt 18,389 23,399
------------ ------------
TOTAL CURRENT LIABILITIES 262,551 272,533
------------ ------------
LONG-TERM DEBT, net of current maturities 34,820 45,447
------------ ------------
DEFERRED INCOME AND OTHER TAXES 118,053 122,324
------------ ------------
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 1,425,681 1,749,271
------------ ------------
2,497,291 2,820,881
------------ ------------
$2,912,715 $3,261,185
============ ============
<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,
--------------------- ---------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES $230,186 $381,186 $482,966 $854,376
--------- --------- --------- ---------
COSTS AND EXPENSES:
Operating expenses 182,581 207,668 399,863 420,990
General and administrative 89,544 90,865 176,704 212,621
Taxes, other than income
and payroll taxes 20,496 13,076 32,211 30,414
Provision for depletion,
depreciation and
amortization 101,432 107,426 203,868 215,059
Other costs and expenses 7,975 8,559 9,448 9,637
--------- --------- --------- ---------
402,028 427,594 822,094 888,721
--------- --------- --------- ---------
OPERATING (LOSS) (171,842) (46,408) (339,128) (34,345)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income 4,953 5,634 9,684 12,553
Other income 3,300 12,900 9,994 36,834
Interest expense (1,890) (1,937) (3,007) (3,381)
--------- --------- --------- ---------
6,363 16,597 16,671 46,006
--------- --------- --------- ---------
INCOME (LOSS) BEFORE
INCOME TAX PROVISION (165,479) (29,811) (322,457) 11,661
Income tax provision -- 1,148 1,133 1,148
--------- --------- --------- ---------
NET INCOME (LOSS) $(165,479) $ (30,959) $(323,590) $ 10,513
========= ========= ========= =========
BASIC INCOME (LOSS)
PER COMMON SHARE ($0.07) ($0.01) ($0.13) $0.00
========= ========= ========= =========
DILUTED INCOME (LOSS)
PER COMMON SHARE ($0.07) ($0.01) ($0.13) $0.00
========= ========= ========= =========
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,
-------------------------
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(323,590) $ 10,513
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Provision for depletion,
depreciation and amortization 203,868 215,059
Gain on sale of fixed assets -- (20,634)
Changes in assets and liabilities:
Decrease in trade accounts receivable 56,704 94,815
Decrease in prepaid expenses 46,826 57,922
Decrease in accounts payable
and accrued liabilities (4,972) (101,904)
--------- ---------
Net cash(used in)provided by
operating activities (21,164) 255,771
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (183,644) (475,624)
Proceeds from sale of property and equipment -- 48,000
--------- ---------
Net cash used in investing activities (183,644) (427,624)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit -- 25,000
Principal payments on long-term debt (15,637) (41,918)
--------- ---------
Net cash used in financing activities (15,637) (16,918)
--------- ---------
Net decrease in cash and cash equivalents (220,445) (188,771)
Cash and cash equivalents at beginning of period 600,994 682,043
--------- ---------
Cash and cash equivalents at end of period $380,549 $493,272
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the six months for interest $3,007 $3,381
========= =========
Cash paid during the six months for income taxes $1,133 $1,148
========= =========
<FN> See Accompanying Notes to Financial Statements.
</TABLE>
<PAGE> 6
PYRAMID OIL COMPANY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(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, 1997 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, 1997 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 June 30, 1998, the results of its operations for the
three and six months periods ended June 30, 1998 and 1997, and its cash flows
for the six months ended June 30, 1998 and 1997. 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, 1998 and
1997.
(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 $11.25 per barrel at August 12, 1998.
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. Due to the continuing
low crude oil prices, the Company plans to secure a waiver for the commitment
to drill a well on this lease for 1998.
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. Crude oil prices plummeted during the first half of
1998. In June of 1998, crude oil prices sunk to levels not experienced for
decades. Average crude oil prices for the second quarter of 1998 decreased by
approximately $5.70 per equivalent barrel over second quarter 1997 crude
prices. Average crude oil prices for the first six months of 1998 have
decreased by approximately $6.85 per equivalent barrel as compared with the
same period for 1997. During the first six months of 1998, the Company
experienced forty separate price changes. For the same period of 1997 the
Company experienced twenty-eight price changes. At the end of the second
quarter of 1998, crude oil prices had decreased by approximately $3.25 since
December 31, 1997. The Company cannot predict the future course of crude oil
prices.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $200,445 for the six months ended
June 30, 1998. During the first half of 1998 operating activities decreased
cash flows by $21,164, along with capital spending for the first six months of
1998 of $183,644 and principal payments on long-term debt of $15,637. Capital
expenditures for 1998 includes the re-drilling of 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. During
the first six months of 1998, the Company has shut-in certain oil and gas
properties that are unprofitable at current price levels.
<PAGE> 8
FORWARD LOOKING INFORMATION
Crude oil prices continue to remain unstable and unpredictable. Current
forecasts by industry analysts predict that the current price levels will
persist into the fourth quarter of this year. With the continuing crude oil
market instability, management feels that it must continue to reduce costs.
The Company has reduced field personnel in an effort to reduce operating
costs. The majority of all developmental and capital expenditures are being
deferred at this time.
During the second quarter of 1998, the Company re-drilled an existing well.
This well is currently producing approximately eighty barrels of crude oil per
day through the end of July 1998. This well was returned to production at the
end of June 1998. The production from this well should restore the Company to
a positive cash flow from operations.
ANALYSIS OF SIGNIFICANT CHANGES IN RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 1998
COMPARED TO THE QUARTER ENDED JUNE 30, 1997
REVENUES
Oil and gas sales decreased by 39.6% for the three months ended June 30, 1998
when compared with the same period for 1997. Oil and gas sales decreased by
32.9% due to significantly lower average crude oil prices for the second
quarter of 1998. The average price of the Company's oil and gas for the second
quarter of 1997 decreased by approximately $5.70 per equivalent barrel
compared to the same period for 1997. Oil and gas sales also decreased by
6.7% due to lower crude oil production during the second quarter of 1998. The
Company's net revenue share of crude oil production decreased by approximately
17 barrels per day during the second quarter of 1998. The decrease in
production is primarily the result of certain oil and gas properties, which
are uneconomic at current price levels, being shut-in during the second
quarter 1998.
OPERATING EXPENSES
Operating expenses decreased by 12% for the second quarter of 1998. The
average cost to produce an equivalent barrel of crude oil decreased by
approximately fifty cents per barrel for the second quarter of 1998 when
compared with the second quarter of 1997.
During the second quarter 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 which were associated with the drilling and
remedial well work were capitalized as Oil and Gas Properties and Equipment.
In 1998, the Company again, capitalized costs associated with the redrill of
an existing well. However, the costs capitalized in 1998 were lower than the
costs capitalized in 1997. The result of the differences in the costs
<PAGE> 9
capitalized between 1998 and 1997 was to increase costs for 1998 by 18.7% when
compared with the costs that were capitalized in 1997. This was offset by a
30.7% decrease in other costs due primarily to the shut-in of certain
unprofitable oil and gas properties, reductions in maintenance activities on
company owned equipment, reductions in field personnel and a general reduction
in costs due to lower levels of activities in all cost categories.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998
COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997
REVENUES
Oil and gas sales decreased by 43.5% for the six months ended June 30, 1998
when compared with the same period for 1997. Oil and gas sales decreased by
35.2% due to lower average crude oil prices for the first half of 1998. The
average price of the Company's oil and gas for the first six months of 1998
decreased by approximately $6.85 per equivalent barrel when compared with the
same period for 1997. The remaining decline in revenues of 8.3% is due to
lower production of crude oil. The Company's net revenue interest share of
oil and gas production decreased by approximately twenty-two barrels per day
for the six months ended June 30, 1998. The decrease in production is
primarily the result of certain oil and gas properties, which are uneconomic
at current price levels, being shut-in during the first half of 1998.
OPERATING EXPENSES
Operating expenses decreased by 5% for the six months ended June 30, 1998.
The cost to produce an equivalent barrel of crude oil increased by
approximately thirty cents per barrel for the six months ended June 30, 1998.
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 1998, the Company again, capitalized costs associated with the redrill of
an existing well. However, the costs capitalized in 1998 were lower than the
costs capitalized in 1997. The result of the differences in the costs
capitalized between 1998 and 1997 was to increase costs for 1998 by 17% when
compared with the costs that were capitalized in 1997. This was offset by a
22% decrease in other costs due primarily to the shut-in of certain
unprofitable oil and gas properties, reductions in maintenance activities on
company owned equipment, reductions in field personnel and a general reduction
in costs due to lower levels of activities in all cost categories.
<PAGE> 10
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses decreased by 17% for the first six
months of 1998 when compared with the same period for 1997. Professional fees
decreased by 12% for the six months ended June 30, 1998 due to lower 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
The decrease in other income is due primarily to a gain of $21,000 on the sale
of four of the Company's well servicing rigs in the first quarter of 1997. No
sale of fixed assets has occurred in 1998.
<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 4, 1998, 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, Thomas W.
Ladd, Gary L. Ronning and John E. Turco 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 1998. Each
item is fully described in the Company's Proxy dated
April 30, 1998.
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, 1998.
<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, 1998 J. BEN HATHAWAY
---------------------
J. Ben Hathaway
President
Dated: August 12, 1998 JOHN H. ALEXANDER
---------------------
John H. Alexander
Vice President
<PAGE> 13
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 380,549
<SECURITIES> 0
<RECEIVABLES> 101,117
<ALLOWANCES> 4,000
<INVENTORY> 61,194
<CURRENT-ASSETS> 661,203
<PP&E> 15,480,374
<DEPRECIATION> 13,228,862
<TOTAL-ASSETS> 2,912,715
<CURRENT-LIABILITIES> 262,551
<BONDS> 0
0
0
<COMMON> 1,071,610
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,912,715
<SALES> 482,966
<TOTAL-REVENUES> 502,644
<CGS> 635,942
<TOTAL-COSTS> 812,646
<OTHER-EXPENSES> 9,448
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,007
<INCOME-PRETAX> (322,457)
<INCOME-TAX> (323,590)
<INCOME-CONTINUING> (323,590)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (323,590)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
