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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 2000
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, 2000)
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<PAGE> 2
FINANCIAL STATEMENTS
PYRAMID OIL COMPANY
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $499,724 $309,775
Trade accounts receivable 228,735 184,867
Crude oil inventory 35,153 35,153
Prepaid expenses 34,862 67,449
Deferred income taxes 72,910 75,650
------------ ------------
TOTAL CURRENT ASSETS 871,384 672,894
------------ ------------
PROPERTY AND EQUIPMENT, at cost
Oil and gas properties and equipment
(successful efforts method) 10,367,907 10,367,907
Drilling and operating equipment 3,110,077 3,179,652
Land, buildings and improvements 921,767 921,767
Automotive, office and other
property and equipment 1,101,074 1,055,857
------------ ------------
15,500,825 15,525,183
Less: accumulated depletion,
depreciation, amortization
and valuation allowance (13,895,353) (13,872,078)
------------ ------------
1,605,472 1,653,105
------------ ------------
$2,476,856 $2,325,999
============ ============
<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,
2000 1999
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 44,155 $ 44,621
Accrued professional fees 17,250 24,000
Accrued taxes, other than income taxes -- 20,567
Accrued payroll and related costs 31,750 30,985
Accrued royalties payable 77,354 74,082
Accrued insurance 6,716 21,613
Current maturities of long-term debt 20,756 17,604
------------ ------------
TOTAL CURRENT LIABILITIES 197,981 233,472
------------ ------------
LONG-TERM DEBT, net of current maturities 21,635 4,272
------------ ------------
DEFERRED INCOME AND OTHER TAXES 101,231 118,121
------------ ------------
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 1,084,399 898,524
------------ ------------
2,156,009 1,970,134
------------ ------------
$2,476,856 $2,325,999
============ ============
<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,
--------------------- ---------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES $482,280 $312,762 $937,338 $526,111
--------- --------- --------- ---------
COSTS AND EXPENSES:
Operating expenses 230,678 187,416 453,677 354,845
Exploration costs 16,408 -- 16,408 --
General and administrative 83,707 75,017 190,385 138,164
Taxes, other than income
and payroll taxes 10,051 17,244 21,334 28,784
Provision for depletion,
depreciation and
amortization 52,113 71,519 105,572 142,329
Other costs and expenses 8,226 6,818 9,100 7,604
--------- --------- --------- ---------
401,183 358,014 796,476 671,726
--------- --------- --------- ---------
OPERATING INCOME (LOSS) 81,097 (45,252) 140,862 (145,615)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income 4,481 3,631 7,803 6,272
Other income 3,300 3,300 26,550 10,800
Interest expense (1,156) (2,240) (2,465) (3,774)
--------- --------- --------- ---------
6,625 4,691 31,888 13,298
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME
TAX (BENEFIT) PROVISION 87,722 ( 40,561) 172,750 (132,317)
Income tax (benefit)
provision (13,350) 800 (13,125) 1,125
--------- --------- --------- ---------
NET INCOME (LOSS) $ 101,072 $( 41,361) $ 185,875 $(133,442)
========= ========= ========= =========
BASIC INCOME (LOSS)
PER COMMON SHARE $0.04 ($0.02) $0.07 ($0.05)
========= ========= ========= =========
DILUTED INCOME (LOSS)
PER COMMON SHARE $0.04 ($0.02) $0.07 ($0.05)
========= ========= ========= =========
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> Six months ended June 30,
<CAPTION> ---------------------------
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 185,875 $(133,442)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Provision for depletion,
depreciation and amortization 105,572 142,329
Exploration costs 16,408 --
Gain on sale of fixed assets (15,750) --
Income tax benefit (14,150) --
Changes in assets and liabilities:
Increase in trade accounts receivable (43,868) (62,997)
Decrease in prepaid expenses 32,587 52,371
Decrease in accounts payable
and accrued liabilities (38,643) (33,772)
--------- ---------
Net cash provided by (used in)
operating activities 228,031 (35,511)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (74,347) (3,038)
Proceeds from sales of fixed assets 15,750 --
--------- ---------
Net cash used in investing activities (58,597) (3,038)
--------- ---------
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 (19,485) (10,216)
Proceeds from issuance of long-term debt 40,000 --
--------- ---------
Net cash provided by (used in)
financing activities 20,515 (28,566)
--------- ---------
Net increase (decrease) in cash 189,949 ( 67,115)
Cash at beginning of period 309,775 318,317
--------- ---------
Cash at end of period $499,724 $251,202
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the six months for interest $2,465 $3,774
========= =========
Cash paid during the six months for income taxes $1,025 $1,125
========= =========
<FN> See Accompanying Notes to Financial Statements.
</TABLE>
<PAGE> 6 PYRAMID OIL COMPANY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(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, 1999 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, 1999 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, 2000 and the results of its operations and
its cash flows for the six month periods ended June 30, 2000 and 1999. 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, 2000 and
1999.
(3) COMMITMENTS
During 1998, the Company entered into a joint venture project, with several
other oil and gas companies, to explore for and develop potential natural gas
reserves in the Solano County area of California. This project is employing
3-D seismic technology and exploratory drilling, in hopes of finding and
developing natural gas reserves on approximately 3,200 acres of leased ground.
The Company's position is that of a non-operator.
Drilling operations on the first well began early in the first quarter of
2000. This well encountered substantial mechanical problems prior to reaching
its intended depth and was abandoned, due to these problems. Although the
first well was unsuccessful, this disappointing factor does not diminish the
Company's overall view of this project. The Operator has proposed a second
exploration well that is scheduled to begin drilling by the end of September
2000. The Company has elected to participate in the drilling of this well and
the estimated total cost for the Company to participate is $21,000.
<PAGE> 7
The Company expended approximately $18,000 for its share of costs in this
project during 1999. The Company expended an additional $16,000 on this
project in the first half of 2000.
Late in the fourth quarter of 1998, the Company was notified by the United
States Environmental Protection Agency (EPA) that the Company was identified
as a "de minimis" contributor to the Casmalia Disposal Site in Santa Barbara
County, California. The EPA claimed that all parties who contributed to the
disposal site were potentially liable for a share of the clean up costs.
After extensive examination of the EPA's documentation, upon which the EPA
based their claims, the Company determined that all of the materials sent to
the Casmalia disposal site, by the Company, between 1980 and 1983 were found
to be non-hazardous materials, specifically exempt under Federal and State
statutes, specifically CERCLA, Section 101(14), 42 U.S.C. Sec 9601(14)) EPA
manifests identified over 97% of the materials sent by the Company to this
site as being PRODUCED waste oil field water. The remaining 3% was composed of
water, crude oil and sand, from down hole workover operations.
In December 1999, the Company formally responded to the EPA, by denying all of
the allegations and providing factual evidence in support of the Company's
position. Currently, the EPA's position is that it does not consider parties
that only sent petroleum wastes to the site liable. Therefore, management
does not believe that the Company is, or will be, liable for any clean up
costs associated with the EPA's remediation of the Casmalia Disposal Site.
In April 2000, the Company was contacted by a law firm representing the
"Casmalia Steering Committee" requesting that the Company enter into a tolling
agreement to extend the statute of limitations associated with the Casmalia
Disposal Site. (The Steering Committee is a group of 54 public and private
entities, who compose the largest waste contributors to the Casmalia site and
under a 1997 Consent Decree with the United States, is committed to pay for
and/or preform certain cleanup activities at the Casmalia site.) The Steering
Committee proposed an 18-month extension of the statute of limitations that
were due to expire on June 27, 2000, in order to provide the Steering
Committee with additional time in which to sue the Company for alleged cleanup
contributions. Since the Company throughly investigated its position
concerning the issue of liability associated with the clean up costs at the
Casmalia Disposal Site before replying to the EPA, (as discussed above) the
Company declined to enter into the Steering Committee's proposed tolling
agreement.
In July, the Company informally became aware that the Steering Committee filed
a Federal lawsuit on June 26, 2000, against approximately 450 parties involved
in the Casmalia site, including the Company. This suit is seeking
contributions for response costs and damages incurred and to be incurred at
the Casmalia Disposal Site. Through its legal counsel, the Company has
contacted the Steering Committee and has requested production of any factual
proof, supporting the claims and allegations made in the Steering Committee's
legal action. As of this date, the steering Committee has not provided the
Company with any evidence in support of their claims.
<PAGE> 8
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. Average crude oil prices for the second quarter of 2000 increased
by approximately $10.45 per equivalent barrel when compared with the same
period for 1999. Average crude oil prices for the first six months of 2000
increased by approximately $13.00 per equivalent barrel when compared with the
same period for 1999. At the end of the second quarter of 2000, crude oil
prices increased by approximately $6.25 per barrel when compared with crude
oil prices at December 31, 1999. The Company cannot predict the future course
of crude oil prices.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $189,949 for the six months ended June
30, 2000. During the first half of 2000, operating activities increased cash
flows by $228,031. Capital expenditures and net principal payments on
long-term debt for the first six months of 2000, reduced cash by a combined
total of $93,832. This was offset by proceeds from sale of fixed assets of
$15,750 and proceeds from issuance of long-term debt of $40,000. 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.
FORWARD LOOKING INFORMATION
The Company's average crude oil price has decreased by approximately $1.00 per
barrel since June 30, 2000. Although crude oil prices continue to fluctuate
and remain unpredictable, management is concentrating on returning some of the
Company's previously shut in wells to production to take advantage of the
improved oil prices. Except for participation in a Joint Venture well
mentioned above, the majority of all developmental and capital expenditures
are being directed at enhancement of existing assets.
<PAGE> 9
Portions of the Quarterly Report, including Management's Discussion and
Analysis, contain forward-looking statements within the meaning of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the Company's actual results
and performance in future periods to be materially different from any future
results or performance suggested in forward-looking statements in this
release. Such forward-looking statements speak only as of the date of this
report and the Company expressly disclaims any obligation to update or revise
any forward-looking statements found herein to reflect any changes in Company
expectations or results or any change in events. Factors that could cause
results to differ materially include, but are not limited to: the timing and
extent of changes in commodity prices of oil, gas and electricity,
environmental risk, drilling and operational costs, uncertainties about
estimates of reserves and government regulations.
ANALYSIS OF SIGNIFICANT CHANGES IN RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 2000
COMPARED TO THE QUARTER ENDED JUNE 30, 1999
REVENUES
Oil and gas sales increased by 54% for the three months ended June 30, 2000
when compared with the same period for 1999. Oil and gas sales increased by
66% due to higher average crude oil prices for the second quarter of 2000.
The average price of the Company's oil and gas for the second quarter of 2000
increased by approximately $10.45 per equivalent barrel when compared to the
same period of 1999. The increase in revenues due to favorable prices was
offset by a 12% reduction in production. The Company's net revenue share of
crude oil production decreased by approximately thirty barrels per day for the
second quarter of 2000. The decline in crude oil production is primarily
attributable to one oil and gas lease that had no crude oil production during
the second quarter of 2000. This lease produced approximately thirty-two
barrels of crude oil per day during the second quarter of 1999.
OPERATING EXPENSES
Operating expenses increased by 23% for the second quarter of 2000. The cost
to produce an equivalent barrel of crude oil increased by approximately $3.30
for the second quarter of 2000 when compared with the second quarter of 1999.
Operating expenses increased due to the return to production of certain oil
and gas properties that were formerly shut-in because they were uneconomic at
the price levels that were experienced for most of 1998 and 1999. One of the
properties returned to production in 2000 accounted for 8% of the total
increase in operating expenses. As a result of the higher oil and gas sales
<PAGE> 10
prices, additional well maintenance work was performed in an effort to return
wells to production and to try to increase production on other producing
properties, thereby increasing operating expenses. During the second quarter
of 2000, the Company performed major work on a well in an attempt to return it
to production. The cost of this project increased operating expenses by
approximately 11% for the second quarter of 2000.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased by approximately 12% for the
quarter ended June 30, 2000. This increase was due primarily to an increase
in administrative salaries of 5% and an increase of 4% in professional
services for the second quarter of 2000.
PROVISION FOR DEPLETION, DEPRECIATION AND AMORTIZATION
The provision for depletion, depreciation and amortization decreased by 27%
for the second quarter of 2000,when compared with the same period for 1999.
The decrease is due primarily to the decline in the depletion rate for the oil
and gas properties. As a result of the write-down of certain oil and gas
properties in 1998, the depletable base of the oil and gas properties has
decreased.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000
COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1999
REVENUES
Oil and gas sales increased by 78% for the six months ended June 30, 2000
when compared with the same period for 1999. Oil and gas sales increased by
94% due to remarkably higher average crude oil prices for the first half of
2000. The average price of the Company's oil and gas for the first six months
of 2000 increased by approximately $13.00 per equivalent barrel when compared
with the same period for 1999. The increase in revenues due to favorable
prices was offset by a 16% reduction in production. The Company's net revenue
share of crude oil production decreased by approximately forty barrels per day
for the six months ended June 30, 2000. The decline in crude oil production
is primarily attributable to one oil and gas lease that had no crude oil
production during the first half of 2000. This lease produced approximately
thirty-one barrels of crude oil per day during the first six months of 1999.
<PAGE> 11
OPERATING EXPENSES
Operating expenses increased by 28% for the six months ended June 30, 2000.
The cost to produce an equivalent barrel of crude oil increased by
approximately $4.00 per barrel for the six months ended June 30, 2000.
Operating expenses increased due to the return to production of certain oil
and gas properties that were formerly shut-in because they were uneconomic at
the price levels that were experienced for most of 1998 and 1999. One of the
properties returned to production in 2000 accounted for approximately 10% of
the total increase in operating expenses. As a result of the higher oil and
gas sales prices, additional well maintenance work was performed in an effort
to return wells to production and to try to increase production on other
producing properties, thereby increasing operating expenses. During the
second quarter of 2000, the Company performed major work on a well in an
attempt to return it to production. The cost of this project increased
operating expenses by approximately 7% for the first six months of 2000.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased by 38% for the first six
months of 2000 when compared with the same period for 1999. Legal fees
increased by 24% for the first half of 2000 due to efforts related to a
lawsuit that was filed by the Company in 1995. The Company received a
favorable judgement in 1997 which was appealed by the defendant. The legal
costs for the first six months of 2000 were related to the efforts directed at
the appeal process. Legal fees related to this matter were nominal during the
first half of 1999.
PROVISION FOR DEPLETION, DEPRECIATION AND AMORTIZATION
The provision for depletion, depreciation and amortization decreased by 26%
for the first half of 2000,when compared with the same period for 1999.
The decrease is due primarily to the decline in the depletion rate for the oil
and gas properties. As a result of the write-down of certain oil and gas
properties in 1998, the depletable base of the oil and gas properties has
decreased.
OTHER INCOME
Other income increased due primarily to the gain on the sales of fixed assets
during the first quarter of 2000. The Company sold a well servicing rig for a
gain of $15,000 in the first quarter of 2000. No fixed assets were sold
during the first half of 1999.
<PAGE> 12
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 1, 2000, 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 2000. Each
item is fully described in the Company's Proxy dated
April 30, 2000.
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, 2000.
<PAGE> 13
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 14, 2000 J. BEN HATHAWAY
---------------------
J. Ben Hathaway
President
Dated: August 14, 2000 JOHN H. ALEXANDER
---------------------
John H. Alexander
Vice President
<PAGE> 14
EXHIBIT INDEX
Exhibit
No. Description
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27 Financial Data Schedule
