<PAGE> 1
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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, 1999
OR
Transition report pursuant to section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission File Number 0-5525
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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)
(661) 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, 1999)
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<PAGE> 2
FINANCIAL STATEMENTS
PYRAMID OIL COMPANY
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $251,202 $318,317
Trade accounts receivable 140,312 77,315
Crude oil inventory 38,371 38,371
Prepaid expenses 28,757 81,128
Deferred income taxes 70,400 73,350
------------ ------------
TOTAL CURRENT ASSETS 529,042 588,481
------------ ------------
PROPERTY AND EQUIPMENT, at cost
Oil and gas properties and equipment
(successful efforts method) 10,378,644 10,375,606
Drilling and operating equipment 3,177,722 3,177,722
Land, buildings and improvements 921,767 921,767
Automotive, office and other
property and equipment 1,036,459 1,036,459
------------ ------------
15,514,592 15,511,554
Less: accumulated depletion,
depreciation, amortization
and valuation allowance (13,774,390) (13,632,061)
------------ ------------
1,740,202 1,879,493
------------ ------------
$2,269,244 $2,467,974
============ ============
<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,
1999 1998
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 32,171 $ 52,975
Accrued professional fees 30,107 18,250
Accrued taxes, other than income taxes -- 27,704
Accrued payroll and related costs 37,045 25,191
Accrued royalties payable 57,112 42,331
Accrued insurance -- 23,756
Current maturities of long-term debt 17,604 17,604
Line of credit 81,650 100,000
------------ ------------
TOTAL CURRENT LIABILITIES 255,689 307,811
------------ ------------
LONG-TERM DEBT, net of current maturities 14,929 25,145
------------ ------------
DEFERRED INCOME AND OTHER TAXES 112,871 115,821
------------ ------------
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 814,145 947,587
------------ ------------
1,885,755 2,019,197
------------ ------------
$2,269,244 $2,467,974
============ ============
<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,
--------------------- ---------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES $312,762 $230,186 $526,111 $482,966
--------- --------- --------- ---------
COSTS AND EXPENSES:
Operating expenses 187,416 182,581 354,845 399,863
General and administrative 75,017 89,544 138,164 176,704
Taxes, other than income
and payroll taxes 17,244 20,496 28,784 32,211
Provision for depletion,
depreciation and
amortization 71,519 101,432 142,329 203,868
Other costs and expenses 6,818 7,975 7,604 9,448
--------- --------- --------- ---------
358,014 402,028 671,726 822,094
--------- --------- --------- ---------
OPERATING LOSS (45,252) (171,842) (145,615) (339,128)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income 3,631 4,953 6,272 9,684
Other income 3,300 3,300 10,800 9,994
Interest expense (2,240) (1,890) (3,774) (3,007)
--------- --------- --------- ---------
4,691 6,363 13,298 16,671
--------- --------- --------- ---------
LOSS BEFORE INCOME
TAX PROVISION ( 40,561) (165,479) (132,317) (322,457)
Income tax provision 800 -- 1,125 1,133
--------- --------- --------- ---------
NET LOSS $( 41,361) $(165,479) $(133,442) $(323,590)
========= ========= ========= =========
BASIC LOSS PER
COMMON SHARE ($0.02) ($0.07) ($0.05) ($0.13)
========= ========= ========= =========
DILUTED LOSS PER
COMMON SHARE ($0.02) ($0.07) ($0.05) ($0.13)
========= ========= ========= =========
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,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(133,442) $(323,590)
Adjustments to reconcile net loss to net
cash used in operating activities:
Provision for depletion,
depreciation and amortization 142,329 203,868
Changes in assets and liabilities:
(Increase) decrease in trade
accounts receivable (62,997) 56,704
Decrease in prepaid expenses 52,371 46,826
Decrease in accounts payable
and accrued liabilities (33,772) ( 4,972)
--------- ---------
Net cash used in operating activities (35,511) (21,164)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,038) (183,644)
--------- ---------
Net cash used in investing activities (3,038) (183,644)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on line of credit (100,000) --
Proceeds from line of credit 81,650 --
Principal payments on long-term debt (10,216) (15,637)
--------- ---------
Net cash used in financing activities (28,566) (15,637)
--------- ---------
Net decrease in cash (67,115) (220,445)
Cash at beginning of period 318,317 600,994
--------- ---------
Cash at end of period $251,202 $380,549
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the six months for interest $3,774 $3,007
========= =========
Cash paid during the six months for income taxes $1,125 $1,133
========= =========
<FN> See Accompanying Notes to Financial Statements.
</TABLE>
<PAGE> 6 PYRAMID OIL COMPANY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(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, 1998 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, 1998 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, 1999 and the results of its operations and
its cash flows for the six month periods ended June 30, 1999 and 1998. 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, 1999 and
1998.
(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 property. The price of oil on
this lease was approximately $19.30 per barrel at August 13, 1999.
Failure to drill the necessary well(s) in the future will result in the
potential relinquishment of any undrilled or unproved acreage on this lease.
Any relinquishment would not affect wells already drilled and producing on
this lease. The Company drilled and completed a well on this lease in the
first quarter of 1997. The Company did not drill a well or obtain a waiver of
this drilling commitment in 1998. The cost of drilling and completing a well
can vary significantly. The Company's total share of the costs of drilling
<PAGE> 7
and completing the one well on this lease in 1997 was approximately $256,000.
During 1998, the Company entered into a joint venture agreement to participate
as a non-operator in the development of gas wells in Solano County,
California. The Company's share of costs for this project in 1998 were
$14,200 and estimated costs for completion of the project in 1999 are
approximately $72,000.
During the fourth quarter of 1998, the Company was notified by the United
States Environmental Protection Agency of its potential liability for waste
material it disposed of at the Casmalia Disposal Site in Santa Barbara County,
California. Management does not believe that the Company will be liable for
any costs for the remediation of the Casmalia Disposal Site.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
IMPACT OF CHANGING PRICES
The Company's revenue is affected by crude oil prices paid by the major oil
companies. Crude oil prices plummeted during the first quarter of 1998 and
remained at historic lows throughout 1998 and continuing into the first
quarter of 1999. Crude oil prices rebounded during the second quarter of
1999. Average crude oil prices for the second quarter of 1999 increased by
approximately $3.00 per equivalent barrel when compared with the same period
for 1998. Average crude oil prices for the first six months of 1999 increased
by approximately sixty cents per equivalent barrel when compared with the same
period for 1998. At the end of the second quarter of 1999, crude oil prices
increased by approximately $7.00 per barrel when compared with crude oil
prices at December 31, 1998. The Company cannot predict the future course of
crude oil prices.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $67,115 for the six months ended June
30, 1999. During the first half of 1999, operating activities reduced cash
flows by $35,511. Capital expenditures and net principal payments on
long-term debt for the first six months of 1999, further reduced cash by a
combined total of $31,604. 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
oil and gas properties that were uneconomic.
<PAGE> 8
FORWARD LOOKING INFORMATION
Crude oil prices have increased by $3.50 per barrel since June 30, 1999
and by $10.50 per barrel since December 31, 1998. Crude oil prices continue
to remain unstable and unpredictable. With the continuing crude oil market
uncertainty, 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.
The Company has reviewed the compliance of its computer systems for year 2000
readiness. The Company's main accounting software is scheduled by it's third-
party vendor to be compliant with the year 2000 in the third quarter of 1999.
There is no additional cost for this update to the Company's main accounting
software. All of the Company's hardware and it's network software, with the
exception of the network file server, is currently compliant with the year
2000. The Company's network file server will either be replaced or upgraded
to comply with the year 2000. The Company does not believe that the efforts
and the costs to be fully compliant for the year 2000 will be material. The
Company is not aware of any third-party issues regarding year 2000 readiness.
The Company has no computer systems that interface electronically with third-
party computer systems. The Company does not have any electronic micro-
controllers for any of it's equipment that is used for it's field operations.
The Company has not identified any potential material lost revenue as a result
of any non-compliance with the year 2000 issues. In the worst case scenario,
the Company is of the opinion that the existing computer systems will be
adequate come January 1, 2000. However, the Company continues to believe that
it will be fully compliant with the year 2000 issues.
<PAGE> 9
ANALYSIS OF SIGNIFICANT CHANGES IN RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 1999
COMPARED TO THE QUARTER ENDED JUNE 30, 1998
REVENUES
Oil and gas sales increased by 36% for the three months ended June 30, 1999
when compared with the same period for 1998. Oil and gas sales increased by
33% due to higher average crude oil prices for the second quarter of 1999.
The average price of the Company's oil and gas for the second quarter of 1999
increased by approximately $3.00 per equivalent barrel when compared to the
same period of 1998. Revenues increased by 3% due to higher production of
crude oil. The Company's net revenue share of crude oil production increased
by approximately seven barrels per day for the second quarter of 1999.
OPERATING EXPENSES
Operating expenses increased by 3% for the second quarter of 1999. The cost
to produce an equivalent barrel of crude oil remained unchanged for the first
three months of 1999 when compared with the first quarter of 1998.
GENERAL AND ADMINISTRATIVE
General and administrative expenses decreased by 16% for the second quarter of
1999 when compared with the same period for 1998. Professional fees decreased
by 13% for the second quarter of 1999 due to lower costs for legal and
accounting services.
PROVISION FOR DEPLETION, DEPRECIATION AND AMORTIZATION
The provision for depletion, depreciation and amortization for the three
months ended June 30, 1999, was favorable by 30% due primarily to lower
depletion charges for 1999. The estimated depletion rate for 1999 is lower
due to the reduction in the carrying value of certain oil and gas properties
at December 31, 1998. The Company recorded an impairment in the fourth
quarter of 1998, under the Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of.
<PAGE> 10
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999
COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1998
REVENUES
Oil and gas sales increased by 9% for the six months ended June 30, 1999
when compared with the same period for 1998. Oil and gas sales increased by
5.5% due to slightly higher average crude oil prices for the first half of
1999. The average price of the Company's oil and gas for the first six months
of 1999 increased by approximately sixty cents per equivalent barrel when
compared with the same period for 1998. The remaining increase in revenues of
3.5% is due to higher production of crude oil. The Company's net revenue
interest share of oil and gas production increased somewhat by approximately
eight barrels per day for the six months ended June 30, 1999.
OPERATING EXPENSES
Operating expenses decreased by 11% for the six months ended June 30, 1999.
The cost to produce an equivalent barrel of crude oil decreased by
approximately $1.30 per barrel for the six months ended June 30, 1999.
Operating costs decreased due primarily to the continuing 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.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses decreased by 22% for the first six
months of 1999 when compared with the same period for 1998. Professional fees
decreased by 17% for the six months ended June 30, 1999 due to lower costs
for legal and accounting services.
PROVISION FOR DEPLETION, DEPRECIATION AND AMORTIZATION
The provision for depletion, depreciation and amortization for the six months
ended June 30, 1999, was favorable by 30% due primarily to lower depletion
charges for 1999. The estimated depletion rate for 1999 is lower due to the
reduction in the carrying value of certain oil and gas properties at December
31, 1998. The Company recorded an impairment in the fourth quarter of 1998,
under the Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of.
<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 3, 1999, 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 1999. Each
item is fully described in the Company's Proxy dated
April 30, 1999.
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, 1999.
<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 13, 1999 J. BEN HATHAWAY
---------------------
J. Ben Hathaway
President
Dated: August 13, 1999 JOHN H. ALEXANDER
---------------------
John H. Alexander
Vice President
<PAGE> 13
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
27 Financial Data Schedule
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1999
[PERIOD-END] JUN-30-1999
[CASH] 251,202
[SECURITIES] 0
[RECEIVABLES] 144,312
[ALLOWANCES] 4,000
[INVENTORY] 38,371
[CURRENT-ASSETS] 529,042
[PP&E] 15,514,592
[DEPRECIATION] 13,774,390
[TOTAL-ASSETS] 2,269,244
[CURRENT-LIABILITIES] 255,689
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 1,071,610
[OTHER-SE] 0
[TOTAL-LIABILITY-AND-EQUITY] 2,269,244
[SALES] 526,111
[TOTAL-REVENUES] 543,183
[CGS] 497,174
[TOTAL-COSTS] 664,122
[OTHER-EXPENSES] 7,604
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 3,774
[INCOME-PRETAX] (132,317)
[INCOME-TAX] 1,125
[INCOME-CONTINUING] (133,442)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (133,442)
[EPS-BASIC] (0.05)
[EPS-DILUTED] (0.05)
</TABLE>
