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, 2004
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, 2004)
2
FINANCIAL STATEMENTS
PYRAMID OIL COMPANY
BALANCE SHEETS
ASSETS
June 30, December 31,
2004 2003
(Unaudited) (Audited)
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 467,965 $ 606,799
Short-term investments 850,000 850,000
Trade accounts receivable 484,235 217,460
Interest receivable 65,390 63,430
Crude oil inventory 56,732 48,417
Prepaid expenses 53,384 114,411
Deferred income taxes 27,927 27,927
------------ ------------
TOTAL CURRENT ASSETS 2,005,633 1,928,444
------------ ------------
PROPERTY AND EQUIPMENT, at cost
Oil and gas properties and equipment
(successful efforts method) 10,993,678 10,769,838
Capitalized asset retirement costs 290,450 290,450
Drilling and operating equipment 1,811,360 1,819,360
Land, buildings and improvements 947,426 947,426
Automotive, office and other
property and equipment 970,516 967,244
------------ ------------
15,013,430 14,794,318
Less: accumulated depletion,
depreciation, amortization
and valuation allowance (13,008,401) (12,925,901)
------------ ------------
2,005,029 1,868,417
------------ ------------
OTHER ASSETS
Deposits 250,000 --
Assets held for resale 36,819 38,237
------------ ------------
286,819 38,237
------------ ------------
$4,297,481 $3,835,098
============ ============
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,
2004 2003
(Unaudited) (Audited)
------------ ------------
CURRENT LIABILITIES:
Accounts payable $ 78,359 $ 95,651
Accrued professional fees 13,323 33,972
Accrued taxes, other than income taxes -- 19,785
Accrued payroll and related costs 47,499 38,727
Accrued royalties payable 85,323 78,084
Accrued insurance 17,278 47,825
Current maturities of long-term debt 44,049 44,049
Line of credit 100,000 --
Deferred income taxes 27,927 27,927
------------ ------------
TOTAL CURRENT LIABILITIES 413,758 386,020
------------ ------------
LONG-TERM DEBT, net of current maturities 36,113 59,248
------------ ------------
LIABILITY FOR ASSET RETIREMENT OBLIGATION 939,395 930,306
------------ ------------
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 1,836,605 1,387,914
------------ ------------
2,908,215 2,459,524
------------ ------------
$4,297,481 $3,835,098
============ ============
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,
--------------------- ---------------------
2004 2003 2004 2003
--------- --------- --------- ---------
REVENUES $666,871 $487,222 $1,266,167 $1,025,830
--------- --------- --------- ---------
COSTS AND EXPENSES:
Operating expenses 339,787 266,944 641,401 509,349
General and administrative 101,057 87,993 190,637 172,541
Taxes, other than income
and payroll taxes 12,267 13,121 25,454 27,738
Provision for depletion,
depreciation and
amortization 44,194 38,050 89,700 76,849
Accretion expense 4,545 4,800 9,090 9,611
Other costs and expenses 7,630 9,667 11,256 10,753
--------- --------- --------- ---------
509,480 420,575 967,538 806,841
--------- --------- --------- ---------
OPERATING INCOME 157,391 66,647 298,629 218,989
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income 3,005 5,248 6,268 9,504
Gain on sale of other assets 4,200 -- 137,782 --
Other income 3,600 3,600 7,200 7,200
Interest expense ( 63) ( 208) ( 63) (2,081)
--------- --------- --------- ---------
10,742 8,640 151,187 14,623
--------- --------- --------- ---------
INCOME BEFORE
INCOME TAX PROVISION 168,133 75,287 449,816 233,612
Income tax provision 800 800 1,125 1,125
--------- --------- --------- ---------
NET INCOME BEFORE CUMULATIVE
EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE 167,333 74,487 448,691 232,487
Cumulative effect on prior
years of change in method
of accounting for asset
retirement obligation -- -- -- (810,115)
--------- --------- --------- ---------
NET INCOME (LOSS) $ 167,333 $ 74,487 $ 448,691 $(577,628)
========= ========= ========= =========
The Accompanying Notes Are an Integral Part of These Financial Statements.
5 PYRAMID OIL COMPANY
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended Six months ended
June 30, June 30,
--------------------- ---------------------
2004 2003 2004 2003
--------- --------- --------- ---------
EARNINGS PER COMMON SHARE
Basic:
Income Before
Cumulative Effect of
Change in Accounting
Principle $0.07 $ 0.03 $ 0.18 $ 0.09
Cumulative effect on
prior years of change
in method of accounting
for asset retirement
obligation -- -- -- (0.32)
--------- --------- --------- ---------
Net Income (Loss) $0.07 $ 0.03 $ 0.18 $(0.23)
========= ========= ========= =========
Diluted:
Income Before
Cumulative Effect of
Change in Accounting
Principle $0.07 $ 0.03 $ 0.18 $ 0.09
Cumulative effect on
prior years of change
in method of accounting
for asset retirement
obligation -- -- -- (0.32)
--------- --------- --------- ---------
Net Income (Loss) $0.07 $ 0.03 $ 0.18 $(0.23)
========= ========= ========= =========
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.
6 PYRAMID OIL COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six months ended June 30,
---------------------------
2004 2003
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 448,691 $(577,628)
Adjustments to reconcile net income (loss)
to cash provided by (used in)
operating activities:
Cumulative effect on prior years
of change in method of accounting
for asset retirement obligation -- 810,115
Provision for depletion,
depreciation and amortization 89,700 76,849
Accretion expense 9,090 9,611
Decrease in asset retirement obligation -- (3,975)
Gain on sale of fixed assets (137,782) --
Changes in assets and liabilities:
Increase in trade accounts
and interest receivable (268,735) (16,473)
Increase in crude oil inventories (8,315) (1,642)
Decrease in prepaid expenses 61,027 55,758
Increase (decrease) in accounts payable
and accrued liabilities (72,263) 119,022
-------- --------
Net cash provided by operating activities 121,413 471,637
-------- --------
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,
---------------------------
2004 2003
------------ ------------
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 (227,112) (219,499)
-------- --------
Net cash used in investing activities (337,112) (219,499)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 100,000 --
Principal payments on long-term debt ( 23,135) (121,160)
-------- --------
Net cash provided by (used in)
financing activities 76,865 (121,160)
-------- --------
Net increase (decrease) in cash (138,834) 130,978
Cash at beginning of period 606,799 502,839
-------- --------
Cash at end of period $467,965 $633,817
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the six months for interest $ 63 $7,387
======== ========
Cash paid during the six months for income taxes $1,125 $1,125
======== ========
The Accompanying Notes Are an Integral Part of These Financial Statements.
8 PYRAMID OIL COMPANY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004
(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, 2003 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, 2003 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, 2004 and the results of its operations and
its cash flows for the six month periods ended June 30, 2004 and 2003. 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, 2004 and
2003.
(3) COMMITMENTS AND CONTINGENCIES
In April 2004, the Company entered into a Joint Venture Agreement with two oil
companies, Prime Natural Resources, LLC of Houston, Texas and North Arm
Resources, Inc. Of Wayzata, Minnesota for the drilling of a 5,500 foot
exploratory well in the Blackwell's Corner area of Kern Country California.
This drilling prospect contains approximately 1,100 acres and was developed by
employing 3-D seismic technology and geology. The Company purchased a 25%
position in the prospect for approximately $53,000 and will be the Operator.
The new well was drilled in May of 2004, with an estimated cost of
approximately $400,000 for a dry-hole look and $560,000 to complete as a
producer. The Company's share of these costs would be 25%. As of June 30,
2004, the Company's share of costs for drilling and competing the new well was
approximately $126,000. If this well is successful, additional wells may be
drilled within this prospect area.
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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 $1,042,000 in costs.
(4) OTHER INCOME
The Company sold a well servicing hoist in the first quarter of 2004 for a
gain of approximately $134,000.
(5) 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.
(6) 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.
10
The effect of these changes for the six months ending June 30, 2004, resulted
in a decrease in income from continuing operations of $11,940. 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, 2004 (11,940) --
Effect on six months ended June 30, 2003 (11,870) --
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, 2004, because the Company records a valuation allowance on net
operating losses and deductible temporary differences due to the uncertainty
of its realization.
A reconciliation of the Company's asset retirement obligations from the
periods presented are as follows:
Amount
-------
Beginning Balance, January 1, 2004 $930,306
Incurred during the period --
Settled during the period --
Accretion expense 9,090
Revisions in estimates --
Other ( 1)
-------
Ending Balance, June 30, 2004 $939,395
=======
(7) 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.
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(8) CHANGE IN REGISTRANT'S OFFICERS
Effective June 3, 2004, J. Ben Hathaway has retired as President and
Chief Executive Officer of Pyramid Oil Company. Mr. Hathaway will remain on
the Company's Board of Directors and will retain the title of Chairman of the
Board of Directors. The Board of Directors has elected John H. Alexander as
the new President of Pyramid Oil Company. Mr. Alexander had previously served
as Vice President of the Company since 1986. Mr. Alexander has also been a
Director of the Company since 1986. The Board of Directors has elected J. Ben
Hathaway, Jr. as Vice President of the Company to succeed Mr. Alexander. Mr.
Hathaway has been an employee of the Company since 1986.
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 2004 increased
by approximately $9.70 when compared with the same period for 2003. Average
crude oil prices for the first six months of 2004 increased by approximately
$5.50 per equivalent barrel when compared with the same period for 2003. At
the end of the second quarter of 2004, crude oil prices had increased by
approximately $4.40 per barrel when compared with crude oil prices at December
31, 2003. The Company cannot predict the future course of crude oil prices.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $138,834 for the six months ended June
30, 2004, primarily due to the Company depositing a $250,000 cash bond with
the state of California (see Deposits, Note 7). During the first half of
2004, operating activities provided cash of $121,413. Additional liquidity
was provided by proceeds from the sale of fixed assets of $140,000 and
proceeds from the line-of-credit of $100,000. This was offset by capital
expenditures of $227,112 and principal payments on long-term debt totaling
$23,135 during the first six months of 2004. Capital expenditures for the
second quarter of 2004 included approximately $126,000 for the drilling and
completion of a new well in partnership with two other oil Companies. See the
Statements of Cash Flows for additional detailed information.
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FORWARD LOOKING INFORMATION
The Company now has a WEB site, pyramidoil.com, where information, financial
results and SEC filings by the Company can be obtained. The Company intends
to use this site to ''post'' information about the Company's future
activities. This site also provides an e-mail address, info@pyramidoil.com,
for shareholders or prospective shareholders to contact the Company.
Management's 2004 capital budget, has provisions for both production
enhancement activities on existing wells, the drilling of a new well in its
Carneros Creek field, and a possible follow-up well in the Blackwell's corner
area if warranted. All of these activities are governed by various factors
including economics, production rates, results from testing and geological
interpretations and boundaries.
Additionally, funds have been allocated for other properties the Company owns,
both for production stimulation, facility upgrades and returning idle wells
back to production. Management also budgets and maintains cash reserves for
unexpected major expenses and for future oil and gas property purchases.
During the second quarter of 2004, the Company participated in a joint venture
with two other oil companies in the drilling of an exploratory well in the
Blackwell's corner area of Kern County, CA. The Company is the designated
operator of the joint venture and is responsible for all operations involving
this well. During the drilling phase of the well, two potential producing
zones were encountered. The deeper of the two zones provided good gas shows
and the well was completed after reaching its total depth. After perforating
the well and conducting various testing activities, gas flows from the deeper
zone have been less than expected. At the present time, the Company and its
partners are evaluating the post testing information to decide if further
testing of the deeper zone is warranted. If the deeper zone is determined to
be non-productive, the joint venture partners plans to abandon the lower
portion of the well and test the upper zone for potential oil production.
In July of 2004, the Company performed a gelled water frac treatment on one of
its wells in the Carneros Creek field to test a new crude oil producing zone.
If this procedure is successful, it could be applied to other wells in this
area. The cost of this procedure is estimated to be approximately $50,000.
At the present time, the Company does not have enough production information
from this well to comment further.
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
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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, 2004
COMPARED TO THE QUARTER ENDED JUNE 30, 2003
REVENUES
Oil and gas revenues increased by 37% for the three months ended June 30, 2004
when compared with the same period for 2003. Oil and gas revenues increased
by 38% due to higher average crude oil prices for the second quarter of 2004.
The average price of the Company's oil and gas for the second quarter of 2004
increased by approximately $9.70 per equivalent barrel when compared to the
same period of 2003. Revenues decreased by 1% due to slightly lower
production of crude oil. The Company's net revenue share of crude oil
production decreased by approximately 150 barrels for the second quarter of
2004.
OPERATING EXPENSES
Operating expenses increased by approximately 27% for the second quarter of
2004. Operating costs for the second quarter of 2004 increased due primarily
to work performed on three leases and increased costs of maintaining the
Company's trucks, vehicles and other production equipment. The cost to produce
an equivalent barrel of crude oil increased by approximately $4.00 for the
second quarter of 2004 when compared with the second quarter of 2003.
Costs increased by 10% on one of the Company's leases during the second
quarter of 2004 due to an effort to return the well to production. The well
had stopped producing due to serious mechanical problems with the tubing and
casing in the well. The Company has been unsuccessful, so far, in returning
this well back to production. Expenses increased by 6% on an oil producing
property that the Company has attempted to return to production during the
second quarter of 2004. This property has been shut-in for over two years due
to problems with economically disposing of produced waste water. The Company
has found an economic method of disposing of produced waste water and has been
working on returning this lease to production. The Company also worked on a
well during the second quarter of 2004 which increased operating costs by
approximately 6%. The work on this well has been done to explore a different
producing zone in an effort to increase production and to test this zone for
application on other wells on this same property. Repair and maintenance
costs for vehicles and production equipment increased by 5% due primarily to
increased costs for parts, supplies and tires. Repair and maintenance costs
are cyclical in nature and can vary significantly for period to period.
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GENERAL AND ADMINISTRATIVE
General and administrative expenses increased by approximately 15% for the
quarter ended June 30, 2004. Legal services increased by 5% during the
second quarter of 2004, due primarily to compliance with Sarbanes-Oxley.
Communications increased by 5% due primarily to a change in cell phone
provider for the Company's field personnel. Salaries also increased by 4%
during the second quarter of 2004 due to a salary increase that was effective
July 1, 2003.
PROVISION FOR DEPLETION, DEPRECIATION AND AMORTIZATION
The provision for depletion, depreciation and amortization increased by 16%
for the second quarter of 2004, when compared with the same period for 2003.
The increase is due primarily to an increase of 12% 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, 2004.
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, 2004
COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2003
REVENUES
Oil and gas revenues increased by 23% for the six months ended June 30, 2004
when compared with the same period for 2003. Oil and gas revenues increased
by approximately 20% due to higher average crude oil prices for the first half
of 2004. The average price of the Company's oil and gas for the first six
months of 2004 increased by approximately $5.50 per equivalent barrel when
compared with the same period for 2003. Revenues increased by 3% due to
higher production of crude oil. The Company's net revenue share of crude oil
production increased by approximately 1,200 barrels for the six months ended
June 30, 2003.
15
OPERATING EXPENSES
Operating expenses increased by approximately 26% for the six months ended
June 30, 2004, when compared with the same period for 2003. The cost to
produce an equivalent barrel of crude oil increased by approximately $3.00 per
barrel for the six months ended June 30, 2004. Operating costs for the six
months ended June 30, 2004, increased due primarily to work performed on three
leases and increased costs of maintaining the Company's trucks, vehicles and
other production equipment.
Costs increased by 9% on one of the Company's wells during the first six
months of 2004 due to an effort to return the well to production. The well
had stopped producing due to mechanical problems with the tubing in the well.
The Company has been unsuccessful, so far, in returning this well back to
production. Expenses increased by 6% on an oil producing property that the
Company has attempted to return to production during the first half of 2004.
This property has been shut-in for over two years due to problems with
economically disposing of produced waste water. The Company has found an
economic method of disposing of produced waste water and has been working on
returning this lease to production. The Company also worked on a well during
the first six months of 2004 which increased operating costs by approximately
8%. The work on this well has been done to explore a different producing zone
in an effort to increase production and to test this zone for application on
other wells on this same property. Repair and maintenance costs for vehicles
and production equipment increased by 3% due primarily to increased costs for
parts, supplies and tires. Repair and maintenance costs are cyclical in
nature and can vary significantly for period to period.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased by approximately 10% for the
six months ended June 30, 2004. Legal services increased by 3% during the
first half of 2004, due primarily to compliance with Sarbanes-Oxley.
Communications increased by 2% due primarily to a change in cell phone
provider for the Company's field personnel. Salaries also increased by 4%
during the first half of 2004 due to a salary increase that was effective July
1, 2003.
PROVISION FOR DEPLETION, DEPRECIATION AND AMORTIZATION
The provision for depletion, depreciation and amortization increased by 17%
for the six months ended June 30, 2004, when compared with the same period for
2003. The increase is due primarily to an increase of 12% in depletion
charges. The increase in depletion is due to an decrease in the depletion
rate due to an increase in the depletable asset base at January 1, 2004.
OTHER INCOME
The Company sold a well servicing hoist in the first quarter of 2004 for a
gain of approximately $134,000.
16
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.
Item 3. 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.
17
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, 2004, the Company held its Annual Meeting of Shareholders in
Bakersfield, California. Three items were voted on during the meeting;
election of Directors, approval of Auditors and a shareholder resolution
relating to a dividend policy. 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 2003. The shareholders defeated the
shareholder resolution for a dividend policy. Each item is fully described in
the Company's Proxy dated May 12,2004.
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 15, 2004, describing the
changes in the Company's officers.
18
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, 2004
JOHN H. ALEXANDER
---------------------
John H. Alexander
President
Dated: August 13, 2004
LEE G. CHRISTIANSON
---------------------
Lee G. Christianson
Chief Financial Officer
PAGE <19>
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 <20>
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 13, 2004
By: JOHN H. ALEXANDER
-----------------------
John H. Alexander
Chief Executive Officer
PAGE <21>
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 <22>
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 13, 2004
By: LEE G. CHRISTIANSON
------------------------
Lee G. Christianson
Chief Financial Officer