1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2008
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 period 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 by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
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.
(Class) (Outstanding at March 31,2008)
COMMON STOCK WITHOUT PAR VALUE 3,741,721
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PYRAMID OIL COMPANY
BALANCE SHEETS
ASSETS
March 31, December 31,
2008 2007
(Unaudited) (Audited)
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 836,845 $ 618,448
Short-term investments 1,492,268 1,478,979
Trade accounts receivable 882,867 643,340
Interest receivable 4,579 2,251
Employee loan receivable 1,200 --
Crude oil inventory 80,785 71,298
Deferred taxes 56,000 --
Prepaid expenses 139,724 170,913
------------ ------------
TOTAL CURRENT ASSETS 3,494,268 2,985,229
------------ ------------
PROPERTY AND EQUIPMENT, at cost
Oil and gas properties and equipment
(successful efforts method) 15,422,676 14,734,929
Capitalized asset retirement costs 310,579 310,579
Drilling and operating equipment 2,073,137 2,050,556
Land, buildings and improvements 1,043,744 1,010,847
Automotive, office and other
property and equipment 1,148,025 1,141,451
------------ ------------
19,998,161 19,248,362
Less: accumulated depletion,
depreciation, amortization
and valuation allowance (14,203,430) (14,040,610)
------------ ------------
5,794,731 5,207,752
------------ ------------
OTHER ASSETS
Deposits 250,000 250,000
Deferred taxes 99,100 --
Other assets 7,380 7,380
Assets held for resale 9,633 9,633
------------ ------------
$9,655,112 $8,459,994
============ ============
The Accompanying Notes are an Integral Part of These Financial Statements.
3
PYRAMID OIL COMPANY
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31 December 31,
2008 2007
(Unaudited) (Audited)
------------ ------------
CURRENT LIABILITIES:
Accounts payable $ 513,836 $ 108,500
Accrued professional fees 43,500 54,165
Accrued taxes, other than income taxes 61,954 61,684
Accrued payroll and related costs 55,975 57,647
Accrued royalties payable 252,539 212,916
Accrued insurance 49,763 65,999
Accrued income taxes 92,753 145,815
Current maturities of long-term debt 25,800 26,868
------------ ------------
TOTAL CURRENT LIABILITIES 1,096,120 733,594
------------ ------------
LONG-TERM DEBT, net of current maturities 38,653 44,542
------------ ------------
LIABILITY FOR SHARE BASED COMPENSATION 65,400 67,000
------------ ------------
LIABILITY FOR ASSET RETIREMENT OBLIGATION 1,016,713 1,010,903
------------ ------------
COMMITMENTS (note 5)
STOCKHOLDERS' EQUITY:
Preferred stock - no par value;
10,000,000 authorized shares;
no shares issued or outstanding -- --
Common stock - no par value;
50,000,000 authorized shares;
3,741,721 shares issued and
outstanding 1,071,610 1,071,610
Retained earnings 6,366,616 5,532,345
------------ ------------
7,438,226 6,603,955
------------ ------------
$9,655,112 $8,459,994
============ ============
The Accompanying Notes are an Integral Part of These Financial Statements.
4 PYRAMID OIL COMPANY
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended March 31,
---------------------------
2008 2007
------------ ------------
REVENUES $1,589,896 $826,180
------------ ------------
COSTS AND EXPENSES:
Operating expenses 422,806 362,663
Exploration costs ( 28,812) 4,835
General and administrative 232,512 275,154
Taxes, other than income
and payroll taxes 35,510 27,156
Provision for depletion,
depreciation and amortization 162,820 97,670
Accretion expense 5,810 5,631
Other costs and expenses 19,552 8,692
------------ ------------
850,198 781,801
------------ ------------
OPERATING INCOME 739,698 44,379
------------ ------------
OTHER INCOME (EXPENSE):
Interest income 22,077 23,789
Other income 9,662 3,600
Interest expense (641) ( 14)
------------ ------------
31,098 27,375
------------ ------------
INCOME BEFORE INCOME TAX PROVISION 770,796 71,754
Income taxes
Current 91,625 13,825
Deferred (155,100) --
----------- ------------
( 63,475) 13,825
------------ ------------
NET INCOME $834,271 $ 57,929
============ ============
EARNINGS PER COMMON SHARE
Basic Income Per Common Share $ 0.22 $ 0.02
============ ============
Diluted Income Per Common Share $ 0.22 $ 0.02
============ ============
Weighted average number of
common shares outstanding 3,741,721 3,741,721
============ ============
The Accompanying Notes are an Integral Part of These Financial Statements.
5
PYRAMID OIL COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three months ended March 31,
2008 2007
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 834,271 $ 57,929
Adjustments to reconcile net income
to cash provided by (used in)
operating activities:
Provision for depletion,
depreciation and amortization 162,820 97,670
Accretion expense 5,810 5,631
Exploration costs (28,812) 4,835
Severance award agreement ( 1,600) 79,200
Deferred taxes (155,100) --
Changes in assets and liabilities:
Increase in trade accounts
and interest receivable (241,855) (105,337)
Increase in crude oil inventories ( 9,487) (16,359)
Decrease in prepaid expenses 31,189 31,809
Increase (Decrease) in accounts payable
and accrued liabilities 363,594 (21,071)
--------- ---------
Net cash provided by operating activities 960,830 134,307
--------- ---------
The Accompanying Notes are an Integral Part of These Financial Statements.
6
PYRAMID OIL COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three months ended March 31,
2008 2007
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures $(720,987) $ (579,260)
Redemption of certificate of deposit -- 200,000
Increase in short-term investments (13,289) (13,143)
---------- ----------
Net cash used in investing activities (734,276) (392,403)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt ( 6,957) (10,903)
Proceeds from line of credit -- 50,000
Loans to employees ( 1,500) --
Principal payments from loans to employees 300 --
---------- ---------
Net cash (used in) provided by
financing activities (8,157) 39,097
---------- ---------
Net increase (decrease) in cash 218,397 (218,999)
Cash at beginning of period 618,448 619,001
---------- ----------
Cash at end of period $ 836,845 $ 400,002
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the three months for interest $ 641 $ 14
========= =========
Cash paid during the three months
for income taxes $144,687 $ 325
========= =========
The Accompanying Notes are an Integral Part of These Financial Statements.
7 PYRAMID OIL COMPANY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2008
(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, 2007 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, 2006 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 March 31, 2008 and the results of its operations and
its cash flows for the three month periods ended March 31, 2008 and 2007. The
results of operations for any interim period are not necessarily indicative of
the results to be expected for a full year.
Income taxes: When tax returns are filed, it is highly certain that some
positions taken would be sustained upon examination by the taxing authorities,
while others are subject to uncertainty about the merits of the position taken
or the amount of the position that would be ultimately sustained. The benefit
of a tax position is recognized in the financial statements in the period
during which, based on all available evidence, management believes it is more
likely than not that the position will be sustained upon examination,
including the resolution of appeals or litigation processes, if any. Tax
positions taken are not offset or aggregated with other positions. Tax
positions that meet the more-likely-than-not recognition threshold are
measured as the largest amount of tax benefit that is more than 50 percent
likely of being realized upon settlement with the applicable taxing authority.
The portion of the benefits associated with tax positions taken that exceeds
the amount measured as described above is reflected as a liability for
unrecognized tax benefits in the accompanying balance sheets along with any
associated interest and penalties that would be payable to the taxing
authorities upon examination.
Interest associated with unrecognized tax benefits are classified as interest
expense and penalties are classified in selling, general and administrative
expenses in the statements of income.
8
2. Impact of Recent Accounting Pronouncements
In March 2008, the FASB issued Statement of Financial Accounting
Standards No 161 "Disclosures about Derivative Instruments and Hedging
Activities-an amendment of FASB Statement No. 133" (SFAS 161). Under
this standard, companies with derivative instruments are required to
disclose information that enables financial-statement users to
understand how and why a company uses derivative instruments, how
derivative instruments and related hedged items are accounted for under
Statement 133, and how derivative instruments and related hedged items
affect a company's financial position, financial performance, and cash
flows. The new standard must be applied prospectively for interim
periods and fiscal years beginning after November 15, 2008. The adoption
of this standard will have no impact to the Company's financial
position, result of operations, or cash flows.
3. Dividends
No cash dividends were paid during the three months ended March 31, 2008 and
2007.
4. Income Taxes
The Company adopted the provisions of FASB Interpretation No. 48, Accounting
for Uncertainty in Income Taxes, on January 1, 2007. As a result of the
implementation of FIN 48, the company made a comprehensive review of its
portfolio of tax positions in accordance with recognition standards
established by FIN 48. As a result of the implementation of Interpretation
48, the Company recognized no material adjustments to liabilities or
stockholders equity.
The Company files income tax returns in the U.S. federal jurisdiction,
California and New York states. With few exceptions, the Company is no longer
subject to U.S. federal tax examination for the years before 2004. State
jurisdictions that remain subject to examination range from 2003 to 2007. The
Company does not believe there will be any material changes in its
unrecognized tax positions over the next 12 months.
The Company policy is to recognize interest and penalties accrued on any
unrecognized tax benefits as a component of income tax expense. As of the
date of adoption of FIN 48, the Company did not have any accrued interest or
penalties associated with any unrecognized tax benefits, nor was any interest
expense recognized during the quarter.
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5. Commitments
In February 2002, the Company entered into an employment agreement with
John H. Alexander pursuant to which Mr. Alexander agreed to serve as the
Company's Vice President. On June 3, 2004, Mr. Alexander was appointed as the
Company's President and Chief Executive Officer. The employment agreement is
for an initial term of six years, which term automatically renews annually if
written notice is not tendered.
Pursuant to the employment agreement, the Company may terminate Mr.
Alexander's employment with or without cause at any time before its term
expires upon providing written notice. In the event the Company terminates
Mr. Alexander's employment without cause, Mr. Alexander would be entitled to
receive a severance amount equal to his annual base salary and benefits for
the balance of the term of his employment agreement. In the event of
termination by reason of Mr. Alexander's death or permanent disability, his
legal representative will be entitled to receive his annual salary and
benefits for the remaining term of his employment agreement. In the event of,
or termination following, a change in control of the Company, as defined in
the agreement, Mr. Alexander would be entitled to receive his annual salary
and benefits for the remainder of the term of his agreement. In the event
that Mr. Alexander is terminated the Company would incur approximately
$600,000 in costs.
6. Income Tax Provision
The Company recognized a net income tax benefit of $63,475 for the first
quarter of 2008 compared to income tax expense of $13,825 for the same period
in 2007. Income tax benefits were realized by the Company due to the
utilization of statutory depletion allowance carryovers that became available
to the Company as a result of significant market increases in the price of
oil. Income tax benefits were realized as a result of adjustments to the
Company's deferred tax asset valuation allowance account.
Net income tax benefit for the first quarter was calculated as follows:
Federal State Total
-------- --------- --------
Current tax provision $ 72,150 $ 19,475 $ 91,625
Deferred tax benefit (120,977) (34,123) (155,100)
------- ------- -------
$( 48,827) $(14,648) $( 63,475)
======= ====== =======
Deferred income taxes are recognized using the asset and liability method by
applying income tax rates to cumulative temporary differences based on when
and how they are expected to affect the tax returns. Deferred tax assets and
liabilities are adjusted for income tax rate changes. Deferred income tax
assets have been offset by a valuation allowance of $1,516,900 as of March 31,
2008. Management reviews deferred income taxes regularly throughout the year,
and accordingly makes any necessary adjustments to properly reflect the
valuation allowance based upon current financial trends and projected results.
10
7. Severance Award Agreement
On January 9, 2007, the Company and John Alexander entered into a Severance
Award Agreement pursuant to which the Company awarded Mr. Alexander a
supplemental payment in connection with his future severance of employment
with the Company. Mr. Alexander serves as the Company's Chief Executive
Officer. Pursuant to the Severance Award Agreement and following the
termination of Mr. Alexander's employment, he will be entitled to receive (at
the Company's option) 20,000 shares of the Company's common stock or the
then-fair market value of the shares. The closing price of a share of the
Company's common stock on March 31, 2008 was $3.27 for a total of $65,400.
8. Incentive and Retention Plan
On January 9, 2007, the Company's Board of Directors adopted an Incentive and
Retention Plan pursuant to which the Company's officers and other employees
selected by the Company's Compensation Committee are entitled to receive
payments if they are employed by the Company as of the date of a 'Corporate
Transaction,' as defined in the Incentive and Retention Plan. A 'Corporate
Transaction' includes certain mergers involving the Company, sales of Company
assets, and other changes in the control of the Company, as specified in the
Incentive and Retention Plan. In general, the amount that is payable to each
plan participant will equal the number of plan units that have been granted to
him or her, multiplied by the increase in the value of the Company between
January 9, 2007 and the date of a Corporate Transaction. There has been no
Corporate Transaction since the adoption of the Incentive and Retention Plan.
9. Related-party Transaction
Effective January 1, 1990, John H. Alexander, an officer and director of the
Company participated with a group of investors that acquired the mineral and
fee interest on one of the Company's oil and gas leases (Santa Fe Energy
lease) in the Carneros Creek field after the Company declined to participate.
The thirty-three percent interest owned by Mr. Alexander represents a minority
interest in the investor group. Royalties on oil and gas production from this
property paid to the investor group approximated $96,400 during the first
quarter of 2008.
10. Investor Relations Consultants
On March 12, 2008, the Company entered into an agreement with Pfeiffer High
Investor Relations, Inc. (PHIR) pursuant to which PHIR will serve as an
investor relations consultant to the Company. PHIR will receive a monthly fee
of $5,000 and will be reimbursed for approved out-of-pocket expenses. The
agreement also provides for the payment of a 1.5% finder's fee to PHIR upon
the closing of a specified transaction, such as a merger, a sale of assets or
a sale of equity securities, if PHIR is responsible for initiating the
transaction.
11
If Company and PHIR mutually decide to extend the agreement after its initial
six-month term, the Company will grant to PHIR's two principals, for a total
purchase price of $20.00, fully vested warrants to purchase a total of 20,000
shares of the Company's common stock at an exercise price of $4.00 per share.
The warrants will have a two-year term, will be assignable and will have
piggyback registration rights and cashless exercise provisions.
Item 2. 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 first quarter of 2008 increased
by approximately $38.50 per equivalent barrel when compared with the same
period for 2007. During the first quarter of 2008 the Company experienced
separate price changes compared with 59 price changes during the same period
for 2007. The Company cannot predict the future course of crude oil prices.
LIQUIDITY AND CAPITAL RESOURCES
Cash increased by $218,397 for the three months ended March 31, 2008. During
the first quarter of 2008, operating activities provided cash of $960,830.
Capital spending of $720,987 reduced cash for the first quarter of 2008.
See the Statements of Cash Flows for additional detailed information. The
Company had available a line of credit of $500,000 and short-term investments
of $1,492,268 that could have provided additional liquidity during the first
quarter of 2008.
FORWARD LOOKING INFORMATION
Crude oil prices have increased by $29.75 per barrel as of May 13, 2008,
compared to prices at December 31, 2007. There have been 91 separate price
changes since December 31, 2007.
In early May the Company was informed that its Texas joint venture operator
had executed a gas contract and operations on the gas sales pipeline right-of-
way and construction would begin shortly. The joint venture anticipates that
gas sales from this project will begin sometime this summer. In January the
Company's joint venture operations in Texas hydraulically fractured its gas
well with the injection of 9,700 barrels of gelled fluid carrying 500,000
pounds of proppant. Post-frac testing indicated natural gas rates of over
4,000,000 cubic feet a day and approximately 40 barrels a day of condensate.
The gas tested at over 1,200 Btu per cubic foot and the bottom hole pressures
observed were in excess of 8,000 psi during testing. Currently the well is
shut-in waiting for the installation of a 3.8 mile gas sales pipeline.
Participants in the joint venture expect gas sales to begin sometime in mid-
2008. The joint venture group currently holds oil and gas leases on
approximately 5,700 contiguous acres surrounding this well. The Company
12
expects additional joint venture drilling operations on this acreage to begin
shortly after completion of the gas sales pipeline. Pyramid Oil Company owns
a gross 12.5% working interest (before payout) in this joint venture prospect.
In March the Company drilled a new well on its Santa Fe property in its
Carneros Creek field. This well was drilled and completed to the intended
depth and currently the well is in the process of completion and testing
operations. Production results will be released after testing operations have
been completed.
The Company's growth in 2008 will be highly dependant on the amount of success
that 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.
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 2008, by drilling new wells and routine
maintenance of its existing wells.
The Company may be subject to future costs necessary for compliance with the
new implementation of air and water environmental quality requirements of the
various state and federal governmental agencies. The requirements and costs
are unknown at this time, but management believes that costs could be
significant in some cases. As the scope of the requirements become more
clearly defined, management may be better equipped to determine the true costs
to the Company.
The Company continues to absorb the costs for various state and local fees and
permits under new environmental programs, the sum of which were not material
during 2007. The Company retains outside consultants to assist the Company in
maintaining compliance with these regulations. The Company is actively
pursuing an ongoing policy of upgrading and restoring older properties to
comply with current and proposed environmental regulations. The costs of
upgrading and restoring older properties to comply with environmental
regulations have not been determined. Management believes that these costs
will not have a material adverse effect upon its financial position or results
of operations.
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
PAGE <13>
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 MARCH 31, 2008
COMPARED TO THE QUARTER ENDED MARCH 31, 2007
REVENUES
Oil and gas revenue increased by 92.4% for the three months ended March 31,
2008 when compared with the same period for 2007. Oil and gas revenue
increased by 80.9% due to substantially higher average crude oil prices for
the first quarter of 2008. The average price of the Company's oil and gas for
the first quarter of 2008 increased by approximately $38.50 per equivalent
barrel when compared to the same period of 2007. Revenues also increased by
approximately 11.5% due to higher crude oil production/sales. The Company's
net revenue share of crude oil production increased by approximately 1,800
barrels for the first three months of 2008. The increase in crude oil
production is primarily the result of production from a new well that was
drilled in the fourth quarter of 2007.
OPERATING EXPENSES
Operating expenses increased by 16.6% for the first quarter of 2008. The cost
to produce an equivalent barrel of crude oil during the first quarter of
2008 was $24.36 per barrel, an increase of approximately $1.05 per barrel when
compared with production costs for the first quarter of 2007. The increase in
lease operating expenses is caused by many factors. These include higher
costs for labor, parts and supplies, equipment fuel, pump repairs and
production equipment repair and maintenance.
Labor costs increased by 3.5% due to increased overtime hours worked in 2008
and an increase in the hourly wage rates as compared with the rates for 2007.
Parts and supplies increased by 3.4% due primarily to increased maintenance
activity on the Company's Anderson oil gas property. Equipment fuel costs
increased by 3% due primarily to the higher cost of gasoline and diesel fuel.
Down-hole pump repairs increased by 3.6% due primarily to increased
maintenance activity on the Company's Anderson oil gas property. Production
equipment repair and maintenance costs increased by 2.9% due to a higher level
of activity for the first quarter of 2008.
PAGE <14>
EXPLORATION COSTS
In the first quarter of 2008, the Company received a payment, from it's joint
venture partner, in the amount of $28,812 for its share of certain tangible
completion equipment on an exploratory well that had been abandoned in 2006.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased by approximately 15.5% for the
first three months of 2008 when compared with the same period for 2007.
Compensation costs decreased by 27% due to the approval of the Severance Award
Agreement by the Board of Directors on January 9, 2007. In the first quarter
of 2007, the Company recognized the impact of the Severance award agreement in
the amount of $79,200. During the first quarter of 2008, the Company reduced
compensation costs by $1,600 to adjust the share based compensation to the
share price at March 31, 2008 from the value shown as of December 31, 2007.
Professional fees increased by 9.4% for the three months ended March 31, 2008,
due primarily to an increase in fees for the annual engineering oil and gas
reserve report and the compliance costs associated with Sarbanes-Oxley Section
404, management's report on internal controls over financial reporting.
PROVISION FOR DEPLETION, DEPRECIATION AND AMORTIZATION
The provision for depletion, depreciation and amortization increased by 66.7%
for the first quarter of 2008, when compared with the same period for 2007.
The increase is due primarily to a 62.3% increase in depletion of the
Companies oil and gas properties. The increase in depletion is due primarily
to an increase in the depletable base of oil and gas properties due to the
drilling of two new wells in 2007 and three new wells in 2006.
Item 4. Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have concluded, based
on their evaluation as of the end of the period covered by this report, that
our disclosure controls and procedures (as defined in the Securities Exchange
Act of 1934 Rules 13a-15(e) and 15d-15(e)) are effective to ensure that
information required to be disclosed in the reports that we file or submit
under the Securities Exchange Act of 1934 is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange
Commission's rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosures.
There was no change in our internal control over financial reporting that
occurred during the quarter ended March 31, 2008 that has materially affected,
or is reasonably likely to materially affect, our internal control over
financial reporting.
15
PART II - OTHER INFORMATION
Item 1. - Legal Proceedings
None
Item 1A. - Risk Factors
See the risk factors that are included in the Company's Annual Report on
Form 10KSB for the fiscal year ended December 31, 2007.
Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds
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
a. Exhibits
99.1 Certification by Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification by Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
16
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: May 14, 2008 JOHN H. ALEXANDER
---------------------
John H. Alexander
President
Dated: May 14, 2008 LEE G. CHRISTIANSON
---------------------
Lee G. Christianson
Chief Financial Officer
PAGE <17>
Certification By Principal Executive Officer Pursuant
to 15 U.S.C. - 7241 - 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-Q 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-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
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 and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end of
the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors:
a) All significant deficiencies and material weaknesses in the design or
operation of internal over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
PAGE <18>
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Dated: May 14, 2008
By: JOHN H. ALEXANDER
-----------------------
John H. Alexander
Chief Executive Officer
PAGE <19>
Certification By Principal Financial Officer Pursuant
to 15 U.S.C. - 7241 - 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-Q 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-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
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 and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end of
the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors:
a) All significant deficiencies and material weaknesses in the design or
operation of internal over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
PAGE <20>
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
Dated: May 14, 2008
By: LEE G. CHRISTIANSON
------------------------
Lee G. Christianson
Chief Financial Officer