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, 2005
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)
(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, 2005)
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FINANCIAL STATEMENTS
PYRAMID OIL COMPANY
BALANCE SHEETS
ASSETS
June 30, December 31,
2005 2004
(Unaudited) (Audited)
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 922,672 $ 816,216
Short-term investments 850,000 850,000
Trade accounts receivable 301,826 216,821
Interest receivable 73,220 70,628
Employee loan receivable 7,916 8,801
Crude oil inventory 59,807 66,339
Prepaid expenses 49,706 110,164
Deferred income taxes 25,698 25,698
------------ ------------
TOTAL CURRENT ASSETS 2,290,845 2,164,667
------------ ------------
PROPERTY AND EQUIPMENT, at cost
Oil and gas properties and equipment
(successful efforts method) 11,294,102 11,208,833
Capitalized asset retirement costs 294,600 294,600
Drilling and operating equipment 2,134,844 2,067,006
Land, buildings and improvements 947,426 947,426
Automotive, office and other
property and equipment 950,683 961,519
------------ ------------
15,621,655 15,479,384
Less: accumulated depletion,
depreciation, amortization
and valuation allowance (13,313,388) (13,294,764)
------------ ------------
2,308,267 2,184,620
------------ ------------
OTHER ASSETS
Deposits 250,000 250,000
Other assets 11,557 15,556
Assets held for resale 9,633 9,633
------------ ------------
271,190 275,189
------------ ------------
$4,870,302 $4,624,476
============ ============
The Accompanying Notes Are an Integral Part of These Financial Statements.
3
PYRAMID OIL COMPANY
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
2005 2004
(Unaudited) (Audited)
------------ ------------
CURRENT LIABILITIES:
Accounts payable $ 74,613 $ 62,229
Accrued professional fees 16,000 28,220
Accrued taxes, other than income taxes -- 24,090
Accrued payroll and related costs 48,778 214,255
Accrued royalties payable 98,565 85,186
Accrued insurance 19,092 52,094
Current maturities of long-term debt 51,030 50,740
Deferred income taxes 25,698 25,698
------------ ------------
TOTAL CURRENT LIABILITIES 333,776 542,512
------------ ------------
LONG-TERM DEBT, net of current maturities 38,353 63,972
------------ ------------
LIABILITY FOR ASSET RETIREMENT OBLIGATION 945,551 946,566
------------ ------------
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 2,481,012 1,999,816
------------ ------------
3,552,622 3,071,426
------------ ------------
$4,870,302 $4,624,476
============ ============
The Accompanying Notes Are an Integral Part of These Financial Statements.
4 PYRAMID OIL COMPANY
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended Six months ended
June 30, June 30,
--------------------- ---------------------
2005 2004 2005 2004
--------- --------- --------- ---------
REVENUES $865,548 $666,871 $1,567,440 $1,266,167
--------- --------- --------- ---------
COSTS AND EXPENSES:
Operating expenses 390,429 339,787 709,034 641,401
General and administrative 119,045 101,057 220,226 190,637
Taxes, other than income
and payroll taxes 18,317 12,267 29,900 25,454
Provision for depletion,
depreciation and
amortization 61,117 44,194 117,647 89,700
Accretion expense 5,075 4,545 9,620 9,090
Other costs and expenses 9,093 7,630 12,749 11,256
--------- --------- --------- ---------
603,076 509,480 1,099,176 967,538
--------- --------- --------- ---------
OPERATING INCOME 262,472 157,391 468,264 298,629
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income 3,228 3,005 8,880 6,268
Gain on sale of other assets -- 4,200 -- 137,782
Other income 2,280 3,600 5,880 7,200
Interest expense ( 361) ( 63) ( 703) ( 63)
--------- --------- --------- ---------
5,147 10,742 14,057 151,187
--------- --------- --------- ---------
INCOME BEFORE
INCOME TAX PROVISION 267,619 168,133 482,321 449,816
Income tax provision 800 800 1,125 1,125
--------- --------- --------- ---------
NET INCOME $ 266,819 $ 167,333 $ 481,196 $ 448,691
========= ========= ========= =========
BASIC INCOME PER
COMMON SHARE $0.11 $0.07 $0.19 $0.18
========= ========= ========= =========
DILUTED INCOME PER
COMMON SHARE $0.11 $0.07 $0.19 $0.18
========= ========= ========= =========
Weighted average number of
common shares outstanding 2,494,430 2,494,430 2,494,430 2,494,430
========= ========= ========= =========
The Accompanying Notes Are an Integral Part of These Financial Statements.
5 PYRAMID OIL COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six months ended June 30,
---------------------------
2005 2004
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 481,196 $ 448,691
Adjustments to reconcile net income
to cash provided by (used in)
operating activities:
Provision for depletion,
depreciation and amortization 117,647 89,700
Accretion expense 9,620 9,090
Costs incurred for asset
retirement obligations (10,635) --
Loss on disposal of fixed assets 6,492 --
Gain on sale of fixed assets -- (137,782)
Changes in assets and liabilities:
Increase in trade accounts
and interest receivable (87,597) (268,735)
(Increase) Decrease in
crude oil inventories 6,532 (8,315)
Decrease in prepaid expenses 60,458 61,027
Decrease in accounts payable
and accrued liabilities (209,026) (72,263)
-------- --------
Net cash provided by operating activities 374,687 121,413
-------- --------
The Accompanying Notes Are an Integral Part of These Financial Statements.
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PYRAMID OIL COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six months ended June 30,
---------------------------
2005 2004
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash deposit with state of California
Division of Oil and Gas $ -- $(250,000)
Proceeds from sale of fixed assets -- 140,000
Capital expenditures (247,786) (227,112)
-------- --------
Net cash used in investing activities (247,786) (337,112)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit -- 100,000
Principal payments on loans to employees 4,884 --
Principal payments on long-term debt ( 25,329) ( 23,135)
-------- --------
Net cash provided by (used in)
financing activities ( 20,445) 76,865
-------- --------
Net increase (decrease) in cash 106,456 (138,834)
Cash at beginning of period 816,216 606,799
-------- --------
Cash at end of period $922,672 $467,965
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the six months for interest $ 703 $ 63
======== ========
Cash paid during the six months for income taxes $1,125 $1,125
======== ========
The Accompanying Notes Are an Integral Part of These Financial Statements.
7 PYRAMID OIL COMPANY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005
(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, 2004 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, 2004 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, 2005 and the results of its operations and
its cash flows for the six month periods ended June 30, 2005 and 2004. 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, 2005 and
2004.
(3) COMMITMENTS AND CONTINGENCIES
The Company has entered into various employment agreements with key executive
employees. In the event the key executives are dismissed, the Company would
incur approximately $960,000 in costs.
(4) INCOME TAX PROVISION
The Company's income tax provision consists mainly of current minimum taxes
for California and New York. The Company is utilizing its significant net
operating loss carryforwards to offset Federal income taxes.
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(5) CHANGE IN ACCOUNTING PRINCIPLE
In accordance with Statement of Financial Accounting Standards No. 143,
''Accounting for Assets Retirement Obligations'', effective January 1, 2003,
the Company changed its method of accounting for asset retirement obligations
(ARO) relating to well abandonment costs from expensing such costs in the year
the wells are abandoned to recording a liability when such costs are incurred
in order to provide a better matching of revenue and expenses and to improve
interim financial reporting.
Upon adoption of SFAS 143, the Company was required to recognize a liability
for the present value of all legal obligations associated with the retirement
of tangible long-lived assets and an asset retirement cost was capitalized as
part of the carrying value of the associated asset. Upon initial application
of SFAS 143, a cumulative effect of a change in accounting principle was also
required in order to recognize a liability for any existing ARO's adjusted for
cumulative accretion, an increase to the carrying amount of the associated
long-lived asset and accumulated depreciation on the capitalized cost.
Subsequent to initial measurement, liabilities are required to be accreted to
their present value each period and capitalized costs are depreciated over the
estimated useful life of the related assets. Upon settlement of the liability,
the Company will settle the obligation against its recorded amount and will
record any resulting gain or loss. As a result of the adoption of SFAS 143 on
January 1, 2003, the Company recorded a $272,649 increase in the net
capitalized cost of its oil and gas properties.
The effect of these changes for the six months ending June 30, 2005, resulted
in a decrease in income from continuing operations of $12,562. The cumulative
effect of these changes on years prior to January 1, 2003, approximately
$810,115 ($0.23 per common share), has been charged to operations in 2003.
The effect on net income of this change in accounting methods is as follows:
Amount Per Share
-------- ---------
Cumulative effect to January 1, 2003 $(810,115) $(0.23)
Effect on six months ended June 30, 2005 (12,562) --
Effect on six months ended June 30, 2004 (11,940) --
There are no legally restricted assets for the settlement of asset retirement
obligations. No income tax is applicable to the asset retirement obligation
as of June 30, 2005, because the Company records a valuation allowance on net
operating losses and deductible temporary differences due to the uncertainty
of its realization.
9
A reconciliation of the Company's asset retirement obligations from the
periods presented are as follows:
Amount
-------
Beginning Balance, January 1, 2005 $946,566
Incurred during the period (10,635)
Settled during the period --
Accretion expense 9,620
Revisions in estimates --
-------
Ending Balance, June 30, 2005 $945,551
=======
(6) DEPOSITS
In April 2004, the Company replaced its $250,000 state of California oil and
gas blanket performance surety bond, with a cash bond in the form of an
irrevocable certificate of deposit in the amount of $250,000.
(7) CHANGE IN CONTROL OF REGISTRANT
Pyramid Oil Company (the Company) has been notified that J. Ben
Hathaway, Jean Hathaway, Henry Hathaway, and John Hathaway have completed
their sale of 1,388,485 shares of the common stock of the Company
(approximately 56% of the Company's outstanding common stock) to Michael D.
Herman on June 15, 2005.
(8) CHANGE IN DIRECTORS OF REGISTRANT
Effective June 15, 2005, J. Ben Hathaway has resigned as Chairman of the
Board and as a Director of the Company. Mr. Hathaway had been a director of
the Company since 1984. Mr. Hathaway had retired as President and Chief
Executive Officer of the Company effective June 3, 2004. Mr. Hathaway's
resignation as a director was made in connection with the sale of all of the
shares of common stock of Pyramid Oil Company owned by Mr. Hathaway and his
family members. Mr. Hathaway agreed to resign from the Board of Directors
pursuant to the terms of an agreement with an unaffiliated third party, Mr.
Michael D. Herman.
The Company's Board of Directors, at a board of directors meeting held on
July 19, 2005, elected Mr. Michael D. Herman to fill the vacancy created by
Mr. Hathaway's resignation.
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(9) IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections. FASB Statement of Accounting Standards (SFAS) 154 establishes
new standards on accounting for changes in accounting principles. Pursuant to
the new rules, all such changes must be accounted for by retrospective
application to the financial statements of prior periods unless it is
impracticable to do so. SFAS 154 completely replaces Accounting Principles
Bulletin (APB) Opinion 20 and SFAS 3, though it carries forward the guidance
in those pronouncements with respect to accounting for changes in estimates,
changes in the reporting entity, and the correction of errors. The Statement
is effective for accounting changes and error corrections made in fiscal years
beginning after December 15, 2005, with early adoption permitted for changes
and corrections made in years beginning after May 2005. Management does not
expect adoption of SFAS No. 154 to have a material impact on the Company's
financial statements.
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 2005 increased
by approximately $9.16 when compared with the same period for 2004. Average
crude oil prices for the first six months of 2005 increased by approximately
$8.12 per equivalent barrel when compared with the same period for 2004. At
the end of the second quarter of 2005, crude oil prices had increased by
approximately $16.45 per barrel when compared with crude oil prices at
December 31, 2004.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $106,456 for the six months ended June
30, 2005. During the first half of 2005, operating activities provided cash
of $374,687. This was offset by capital expenditures of $247,786 and
principal payments on long-term debt totaling $25,329 during the first six
months of 2005. See the Statements of Cash Flows for additional detailed
information.
11
FORWARD LOOKING INFORMATION
The Company's management is very pleased with the addition of Mr. Michael D.
Herman to the Company's Board of Directors. Management believes that Mr.
Herman brings to the Company not only sound business experience but also
commitment to the growth of the Company.
Management is seeking to strengthen the Company's technical expertise by
hiring a petroleum reservoir engineer to assist in evaluations of existing
Company properties and prospects for additional oil and gas ventures.
Management believes that with the higher oil prices it is prudent to re-
evaluate all of the Company's oil and gas assets in light of the improved
economic conditions.
As of August 4, 2005, the Company's average crude oil price has decreased by
approximately $5.65 per barrel since June 30, 2005.
Announcements from the Company, including any updates of financial results and
SEC fillings can be found on the Company's WEB site, pyramidoil.com. The
Company uses the Web site to 'post' information about the Company's
activities. This site also provides an e-mail address, info@pyramidoil.com,
for shareholders or prospective shareholders to contact the Company.
The Company is pleased with the results of it's Santa Fe #15 well, drilled in
late 2004. This well is currently producing 27 barrels of oil per day and has
provided a great deal of valuable technical reservoir information relating to
the Carneros Creek field. Based in part on the information obtained,
management plans to drill four additional wells in this area in 2005. Two of
the wells have been located to target the shallower Carneros zone and two
wells will be located to target the Point of Rocks zone.
The Company's 2005 capital budget provides funds for drilling several new
developmental wells in the Company's Carneros Creek area. Additionally, this
budget provides funds for reworking and stimulating certain existing Company
wells and for specific lease acquisitions within California.
On March 18, 2005, the Company signed a Letter of Intent with E & B Natural
Resources of Bakersfield, CA. Pyramid and E & B have identified a potential
well location and are currently working to complete the Definitive Agreements
relating to the Joint Venture. The well is projected to be spudded sometime
late in the third quarter. Drilling rig availability will affect the timing of
this well.
The Company's growth in 2005 will be highly dependant on the amount of success
the Company has in its operations and capital investments, including the
outcome of wells that have not yet been drilled. The Company's capital
investment program may be modified during the year due to explorations and
development successes or failures, market conditions and other variables. The
production and sales of oil and gas involves many complex processes that are
subject to numerous uncertainties, including reservoir risk, mechanical
failures, human error and market conditions.
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The Company has positioned itself, over the past several years, to withstand
various types of economic uncertainties, with a program of consolidating
operations on certain producing properties and concentrating on properties
that provide the major revenue sources. The drilling of a new well and
several limited work-overs of certain wells have allowed the Company to
maintain its crude oil reserves for the last three years. The Company expects
to maintain its reserve base in 2005, by drilling new wells and routine
maintenance of its existing wells.
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.
Item 4. CONTROLS AND PROCEDURES
Based on their evaluation of the Company's disclosure controls and procedures
as of a date within 90 days of the filing of this Report, the Chief Executive
Officer and Chief Financial Officer have concluded that such controls and
procedures are effective. There were no significant changes in the Company's
internal controls or in other factors that could significantly affect such
controls subsequent to the date of their evaluation.
ANALYSIS OF SIGNIFICANT CHANGES IN RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 2005
COMPARED TO THE QUARTER ENDED JUNE 30, 2004
REVENUES
Oil and gas revenues increased by 30% for the three months ended June 30, 2005
when compared with the same period for 2004. Oil and gas revenues increased
by 27% due to higher average crude oil prices for the second quarter of 2005.
The average price of the Company's oil and gas for the second quarter of 2005
increased by approximately $9.16 per equivalent barrel when compared to the
same period of 2004. Revenues increased by 3% due to slightly higher crude
oil production/shipments. The Company's net revenue share of crude oil
production/sales increased by approximately 560 barrels for the second quarter
of 2005.
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OPERATING EXPENSES
Operating expenses increased by approximately 15% for the second quarter of
2005. The increase in operating costs for the second quarter of 2005 is
primarily the result of activity on three of the Company's oil and gas
properties. The cost to produce an equivalent barrel of crude oil increased
by approximately $2.00 (total cost of approximately $20.00 per equivalent
barrel) for the second quarter of 2005 when compared with the second quarter
of 2004.
The Company performed a frac job on one of its Anderson wells in the Carneros
Creek field on June 17, 2005, which increased operating expenses by
approximately 10% for the second quarter of 2005. The purpose of the frac job
is to stimulate production on this well. During 2003, the Company drilled a
new well on this lease and fractured the well upon completion. This well
responded favorably to the fracture. The Company is hoping that the well
fractured in June of 2005 will respond favorably to this procedure and
stimulate production on this well.
Operating expenses have increased by approximately 12% on the Company's
Delaney-Tunnell lease during the second quarter of 2005. This lease was shut-
in during the second quarter of 2004. This lease had been shut-in for
approximately three years due to the cost of disposing of produced waste
water. This lease was returned to production during the fourth quarter of
2004 due to higher crude oil prices.
This was offset by a decrease in costs of 10% on one of the Company's leases
during the second quarter of 2005. Work that was done on the Company's
Mitchel lease in 2004 to retrieve tubing stuck in the well in an effort to
return the well back to production was unsuccessful and this property has been
shut-in since the first quarter of 2004. No costs were expended in the first
quarter of 2005 for this property.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased by approximately 18% for the
quarter ended June 30, 2005. The increase in general and administrative
expenses is due primarily to an increase in audit fees of 12% due to the
additional burdens of complying with the Sarbanes-Oxley legislation. Legal
services increased by 5% during the second quarter of 2005, due primarily to
activity related to the change in control of the Company.
PROVISION FOR DEPLETION, DEPRECIATION AND AMORTIZATION
The provision for depletion, depreciation and amortization increased by 38%
for the second quarter of 2005, when compared with the same period for 2004.
The increase is due primarily to an increase of 34% in depletion charges. The
increase in depletion is due to an increase in the depletion rate due to
an increase in the depletable asset base at January 1, 2005. The depletable
asset base has increased due to the drilling of two new wells one, in 2004 and
one in 2003.
14
INCOME TAX PROVISION
The Company's income tax provision consists mainly of current minimum taxes
for California and New York. The Company is utilizing its significant net
operating loss carryforwards to offset Federal income taxes.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2005
COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2004
REVENUES
Oil and gas revenues increased by 24% for the six months ended June 30, 2005
when compared with the same period for 2004. Oil and gas revenues increased
by approximately 24% due to higher average crude oil prices for the first half
of 2005. The average price of the Company's oil and gas for the first six
months of 2005 increased by approximately $8.12 per equivalent barrel when
compared with the same period for 2004. The Company's net revenue share of
crude oil production/sales decreased by approximately 100 barrels for the six
months ended June 30, 2004.
OPERATING EXPENSES
Operating expenses increased by approximately 11% for the six months ended
June 30, 2005, when compared with the same period for 2004. The cost to
produce an equivalent barrel of crude oil increased by approximately $1.85 per
barrel (total cost of approximately $18.90 per equivalent barrel) for the six
months ended June 30, 2005. The increase in operating costs for the first
half of 2005 is primarily the result of activity on three of the Company's oil
and gas properties.
The Company performed a frac job on one of its Anderson wells in the Carneros
Creek field on June 17, 2005, which increased operating expenses by
approximately 7% for the first six months of 2005. The purpose of the frac
job is to stimulate production on this well. During 2003, the Company drilled
a new well on this lease and fractured the well upon completion. This well
responded favorably to the fracture. The Company is hoping that the well
fractured in June of 2005 will respond favorably to this procedure and
stimulate production on this well.
Operating expenses have increased by approximately 8% on the Company's
Delaney-Tunnell lease during the first six months of 2005. This lease was
shut-in during the same period of 2004. This lease had been shut-in for
approximately three years due to the cost of disposing of produced waste
water. This lease was returned to production during the fourth quarter of
2004 due to higher crude oil prices.
This was offset by a decrease in costs of 9% on one of the Company's leases
during the first six months of 2005. Work that was done on the Company's
Mitchel lease in 2004 to retrieve tubing stuck in the well in an effort to
15
return the well back to production was unsuccessful and this property has been
shut-in since the first quarter of 2004. No costs were expended in the first
six months of 2005 for this property.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased by approximately 16% for the
six months ended June 30, 2005. The increase in general and administrative
expenses is due primarily to an increase in audit fees of 11% due to the
additional burdens of complying with the Sarbanes-Oxley legislation. Legal
services increased by 3% due primarily to activity related to the change in
the control of the Company.
PROVISION FOR DEPLETION, DEPRECIATION AND AMORTIZATION
The provision for depletion, depreciation and amortization increased by 31%
for the six months ended June 30, 2005, when compared with the same period for
2004. The increase is due primarily to an increase of 28% in depletion
charges. The increase in depletion is due to an increase in the depletion
rate due to an increase in the depletable asset base at January 1, 2005. The
depletable asset base had increased due to the drilling of two new wells, one
in 2004 and one in 2003.
OTHER INCOME
The Company sold a well servicing hoist in the first quarter of 2004 for a
gain of approximately $134,000.
INCOME TAX PROVISION
The Company's income tax provision consists mostly of current minimum taxes
for California and New York. The Company is utilizing its significant net
operating loss carryforwards to offset Federal income taxes.
16
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 2, 2005, 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 Singer Lewak
Greenbaum & Goldstein, LLP as auditors for 2005. Each item is fully described
in the Company's Proxy dated May 10,2005.
Item 5. - Other Information -
None
Item 6. - Exhibits and Reports on Form 8-K -
a. Exhibits
99.1 Written Statement of the Chief Executive Officer Pursuant
to 18 U.S.C. Section 1350
99.2 Written Statement of the Chief Financial Officer Pursuant
to 18 U.S.C. Section 1350
b. The Company filed Form 8-K on June 20, 2005, describing the
change in control of the Company and the resignation of J. Ben
Hathaway as a Director and Chairman of the Board of the
Company.
c. The Company filed Form 8-K on July 25, 2005, describing the
election of Michael D. Herman as a Director and Chairman of the
Board to fill the vacancy on the Board created by the
resignation of J. Ben Hathaway.
17
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 8, 2005
JOHN H. ALEXANDER
---------------------
John H. Alexander
President
Dated: August 8, 2005
LEE G. CHRISTIANSON
---------------------
Lee G. Christianson
Chief Financial Officer PAGE <18>
Certification By Principal Executive Officer Pursuant
to Rule 13A-14 or 15D-14 of the SEC Exchange Act of 1934,
As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, John H. Alexander, the President of Pyramid Oil Company (the registrant),
certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Pyramid Oil
Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
PAGE <19>
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Dated: August 8, 2005
By: JOHN H. ALEXANDER
-----------------------
John H. Alexander
Chief Executive Officer PAGE <20>
Certification By Principal Financial Officer Pursuant
to Rule 13A-14 or 15D-14 of the SEC Exchange Act of 1934,
As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Lee G. Christianson, the Chief Financial Officer of Pyramid Oil Company
(the registrant), certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Pyramid Oil
Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
PAGE <21>
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Dated: August 8, 2005
By: LEE G. CHRISTIANSON
------------------------
Lee G. Christianson
Chief Financial Officer