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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 September 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 September 30, 2000)
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<PAGE> 2
FINANCIAL STATEMENTS
PYRAMID OIL COMPANY
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $755,005 $309,775
Trade accounts receivable 255,277 184,867
Crude oil inventory 35,153 35,153
Prepaid expenses 25,602 67,449
Deferred income taxes 73,210 75,650
------------ ------------
TOTAL CURRENT ASSETS 1,144,247 672,894
------------ ------------
PROPERTY AND EQUIPMENT, at cost
Oil and gas properties and equipment
(successful efforts method) 10,377,697 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 1,070,955 1,055,857
------------ ------------
15,480,496 15,525,183
Less: accumulated depletion,
depreciation, amortization
and valuation allowance (13,874,653) (13,872,078)
------------ ------------
1,605,843 1,653,105
------------ ------------
$2,750,090 $2,325,999
============ ============
<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,
2000 1999
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 59,544 $ 44,621
Accrued professional fees 18,000 24,000
Accrued taxes, other than income taxes 11,290 20,567
Accrued payroll and related costs 34,007 30,985
Accrued royalties payable 88,632 74,082
Accrued insurance 307 21,613
Current maturities of long-term debt 24,993 17,604
------------ ------------
TOTAL CURRENT LIABILITIES 236,773 233,472
------------ ------------
LONG-TERM DEBT, net of current maturities 33,864 4,272
------------ ------------
DEFERRED INCOME AND OTHER TAXES 87,381 118,121
------------ ------------
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 1,320,462 898,524
------------ ------------
2,392,072 1,970,134
------------ ------------
$2,750,090 $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 Nine months ended
September 30, September 30,
--------------------- ---------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES $561,860 $403,579 $1,499,198 $929,690
--------- --------- --------- ---------
COSTS AND EXPENSES:
Operating expenses 245,287 200,434 698,964 555,279
Exploration costs 3,251 -- 19,659 --
General and administrative 88,205 79,032 278,590 217,196
Taxes, other than income
and payroll taxes 13,538 12,479 34,872 41,263
Provision for depletion,
depreciation and
amortization 50,924 69,804 156,496 212,133
Other costs and expenses 2,520 1,513 11,620 9,116
--------- --------- --------- ---------
403,725 363,262 1,200,201 1,034,987
--------- --------- --------- ---------
OPERATING INCOME (LOSS) 158,135 40,317 298,997 (105,297)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income 7,677 3,005 15,480 9,276
Other income 57,596 15,365 84,146 26,165
Interest expense (1,495) (2,342) (3,960) (6,116)
--------- --------- --------- ---------
63,778 16,028 95,666 29,325
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME
TAX (BENEFIT) PROVISION 221,913 56,345 394,663 (75,972)
Income tax (benefit)
provision (14,150) -- (27,275) 1,125
--------- --------- --------- ---------
NET INCOME (LOSS) $ 236,063 $ 56,345 $ 421,938 $( 77,097)
========= ========= ========= =========
BASIC INCOME (LOSS)
PER COMMON SHARE $0.09 $0.02 $0.17 ($0.03)
========= ========= ========= =========
DILUTED INCOME (LOSS)
PER COMMON SHARE $0.09 $0.02 $0.17 ($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> Nine months ended September 30,
<CAPTION> ---------------------------
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 421,938 $( 77,097)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Provision for depletion,
depreciation and amortization 156,496 212,133
Exploration costs 19,659 --
Gain on sale of fixed assets (58,750) --
Income tax benefit (28,300) --
Changes in assets and liabilities:
Increase in trade accounts receivable (70,410) (84,288)
Decrease in prepaid expenses 41,847 62,372
Decrease in accounts payable
and accrued liabilities ( 4,088) ( 3,682)
--------- ---------
Net cash provided by operating activities 478,392 109,438
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (130,893) (26,880)
Proceeds from sales of fixed assets 60,750 --
--------- ---------
Net cash used in investing activities (70,143) (26,880)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on line of credit -- (160,000)
Proceeds from line of credit -- 81,650
Principal payments on long-term debt (33,019) (15,489)
Proceeds from issuance of long-term debt 70,000 --
--------- ---------
Net cash provided by (used in)
financing activities 36,981 (93,839)
--------- ---------
Net increase (decrease) in cash 445,230 ( 11,281)
Cash at beginning of period 309,775 318,317
--------- ---------
Cash at end of period $755,005 $307,036
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the nine months for interest $3,390 $6,116
========= =========
Cash paid during the nine 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
SEPTEMBER 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 September 30, 2000 and the results of its operations
and its cash flows for the nine month periods ended September 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 nine months ended September 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 began drilling in October of 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 on the first
well during 1999. The Company expended an additional $16,000 on the first
well 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 cleanup 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 oilfield 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 cleanup
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 cleanup 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 third quarter of 2000 increased
by approximately $10.00 per equivalent barrel when compared with the same
period for 1999. Average crude oil prices for the first nine months of 2000
increased by approximately $12.00 per equivalent barrel when compared with the
same period for 1999. At the end of the third quarter of 2000, crude oil
prices increased by approximately $5.00 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 $445,230 for the nine months ended
September 30, 2000. During the first nine months of 2000, operating
activities increased cash flows by $478,392. Capital expenditures and net
principal payments on long-term debt for the first nine months of 2000,
reduced cash by a combined total of $163,912. This was offset by proceeds
from sales of fixed assets of $60,750 and proceeds from issuance of long-term
debt of $70,000. 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 increased by approximately $3.35 per
barrel since September 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 SEPTEMBER 30, 2000
COMPARED TO THE QUARTER ENDED SEPTEMBER 30, 1999
REVENUES
Oil and gas sales increased by 39% for the three months ended September 30,
2000 when compared with the same period for 1999. Oil and gas sales increased
by 50% due to higher average crude oil prices for the third quarter of 2000.
The average price of the Company's oil and gas for the third quarter of 2000
increased by approximately $10.00 per equivalent barrel when compared to the
same period of 1999. The increase in revenues due to favorable prices was
offset by a 11% reduction in production. The Company's net revenue share of
crude oil production decreased by approximately 26 barrels per day for the
third 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 third quarter of 2000. This lease produced approximately 22 barrels of
crude oil per day during the third quarter of 1999.
OPERATING EXPENSES
Operating expenses increased by 22% for the third quarter of 2000. The cost
to produce an equivalent barrel of crude oil increased by approximately $3.30
for the third quarter of 2000 when compared with the third 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 11% 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.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased by approximately 12% for the
quarter ended September 30, 2000. This increase was due primarily to an
increase in communications of 4.5%, administrative salaries of 2.5% and an
increase of 2% in professional services for the third quarter of 2000.
PROVISION FOR DEPLETION, DEPRECIATION AND AMORTIZATION
The provision for depletion, depreciation and amortization decreased by 27%
for the third 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 NINE MONTHS ENDED SEPTEMBER 30, 2000
COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 1999
REVENUES
Oil and gas sales increased by 61% for the nine months ended September 30,
2000 when compared with the same period for 1999. Oil and gas sales increased
by 75% due to extremely high average crude oil prices for the first nine
months of 2000. The average price of the Company's oil and gas for the first
nine months of 2000 increased by approximately $12.00 per equivalent barrel
when compared with the same period for 1999. This was offset by a 14%
reduction in revenues due to lower crude oil production. The Company's net
revenue share of crude oil production decreased by approximately 35 barrels
per day for the nine months ended September 30, 2000. The decline in crude
oil production is primarily attributable to one oil and gas lease that has had
negligible crude oil production during the first nine months of 2000. This
lease produced approximately 28 barrels of crude oil per day during the first
nine months of 1999.
<PAGE> 11
OPERATING EXPENSES
Operating expenses increased by 26% for the nine months ended September 30,
2000. The cost to produce an equivalent barrel of crude oil increased by
approximately $3.80 per barrel for the nine months ended September 30, 2000.
Operating expenses increased because certain oil and gas properties were
returned to production that had been shut-in for most of 1998 and 1999. These
properties had been uneconomical at the price levels in 1998 and 1999. One
property 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 and third 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 nine months of 2000.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased by 28% for the first nine months
of 2000 when compared with the same period for 1999. Professional fees
increased by 20% for the first nine months of 2000 due primarily 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 increase in legal costs for 2000 were related to the efforts directed at
the appeal process.
PROVISION FOR DEPLETION, DEPRECIATION AND AMORTIZATION
The provision for depletion, depreciation and amortization decreased by 26%
for the first nine months of 2000,when compared with the same period for 1999.
The decrease is due primarily to a decline in the depletion rate for oil and
gas properties. The depletable base of the oil and gas properties has
decreased as a result of the write-down of certain oil and gas properties in
1998.
OTHER INCOME
Other income increased by approximately $58,000 due primarily to gains on the
sales of fixed assets during 2000. No fixed assets were sold during 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
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, 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: November 14, 2000 J. BEN HATHAWAY
---------------------
J. Ben Hathaway
President
Dated: November 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
