-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VlJ0P6TUBjUY4E+KyuzjurULb2KetM9QTk0buEjG3f7h+MzpAYtruKyE9zh4FKVE FrD08Awt4aVwNks1X5hWRg== 0000081318-09-000007.txt : 20090814 0000081318-09-000007.hdr.sgml : 20090814 20090814131158 ACCESSION NUMBER: 0000081318-09-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20090630 FILED AS OF DATE: 20090814 DATE AS OF CHANGE: 20090814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PYRAMID OIL CO CENTRAL INDEX KEY: 0000081318 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 940787340 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-32989 FILM NUMBER: 091014039 BUSINESS ADDRESS: STREET 1: 2008 21ST ST CITY: BAKERSFIELD STATE: CA ZIP: 93301 BUSINESS PHONE: 6613251000 MAIL ADDRESS: STREET 1: P O BOX 832 CITY: BAKERSFIELD STATE: CA ZIP: 93302 10-Q 1 pocqtr-b.txt FORM 10-Q 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 June 30, 2009 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes [ ] 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] 2 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [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 June 30,2009) COMMON STOCK WITHOUT PAR VALUE 4,677,728 3 PYRAMID OIL COMPANY FORM 10-Q JUNE 30, 2009 Table of Contents Page ---- PART I Item 1. Financial Statements Balance Sheets - June 30, 2009 and December 31, 2008 4 Condensed Statements of Operations - Three months ended June 30, 2009 and 2008 6 Six months ended June 30, 2009 and 2008 8 Condensed - Statements of Cash Flows - Six months ended June 30, 2009 and 2008 10 Notes to Financial Statements 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 19 Item 3. Quantitative and Qualitative Disclosures About Market Risk 24 Item 4. Controls and Procedures 24 PART II Item 1. Legal Proceedings 25 Item 1A. Risk Factors 25 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 25 Item 3. Defaults Upon Senior Securities 25 Item 4. Submission of Matters to a Vote of Security Holders 25 Item 5. Other Information 25 Item 6. Exhibits 26 4 PART I - FINANCIAL STATEMENTS Item 1. Financial Statements PYRAMID OIL COMPANY BALANCE SHEETS ASSETS
June 30, 2009 December 31, (Unaudited) 2008 ------------ ------------ CURRENT ASSETS: Cash and cash equivalents $1,009,273 $1,793,563 Short-term investments 3,325,389 2,789,099 Trade accounts receivable 286,581 213,588 Income taxes receivable 60,555 -- Crude oil inventory 80,832 82,025 Prepaid expenses and other assets 87,787 186,353 Deferred income taxes 195,800 108,000 ------------ ------------ TOTAL CURRENT ASSETS 5,046,217 5,172,628 ------------ ------------ PROPERTY AND EQUIPMENT, at cost Oil and gas properties and equipment (successful efforts method) 15,922,218 15,755,472 Capitalized asset retirement costs 382,550 382,550 Drilling and operating equipment 2,109,993 2,109,993 Land, buildings and improvements 1,065,371 1,065,371 Automotive, office and other property and equipment 1,163,076 1,162,324 ------------ ------------ 20,643,208 20,475,710 Less: accumulated depletion, depreciation, amortization and valuation allowance (16,465,613) (16,147,157) ------------ ------------ 4,177,595 4,328,553 ------------ ------------ OTHER ASSETS Deposits 250,000 250,000 Deferred income taxes 428,245 509,245 Other assets 17,013 17,013 ------------ ------------ $ 9,919,070 $10,277,439 ============ ============ The Accompanying Notes Are an Integral Part of These Financial Statements.
5 PYRAMID OIL COMPANY BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, 2009 December 31, (Unaudited) 2008 ------------ ------------ CURRENT LIABILITIES: Accounts payable $ 54,429 $ 40,820 Accrued professional fees 76,871 130,261 Accrued taxes, other than income taxes -- 76,222 Accrued payroll and related costs 89,276 50,451 Accrued royalties payable 146,561 132,472 Accrued insurance 21,865 59,096 Accrued income taxes -- 239,815 Current maturities of long-term debt 24,371 23,901 ------------ ------------ TOTAL CURRENT LIABILITIES 413,373 753,038 ------------ ------------ LONG-TERM DEBT, net of current maturities 8,336 20,640 ------------ ------------ LIABILITY FOR ASSET RETIREMENT OBLIGATION 1,163,504 1,151,706 ------------ ------------ COMMITMENTS (Note 3) 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; 4,677,728 shares issued and outstanding 1,515,945 1,306,010 Retained earnings 6,817,912 7,046,045 ------------ ------------ 8,333,857 8,352,055 ------------ ------------ $ 9,919,070 $10,277,439 ============ ============ The Accompanying Notes Are an Integral Part of These Financial Statements.
6 PYRAMID OIL COMPANY STATEMENTS OF OPERATIONS (UNAUDITED) Three months ended June 30,
--------------------------- 2009 2008 ------------ ------------ REVENUES $ 801,901 $2,123,186 ------------ ------------ COSTS AND EXPENSES: Operating expenses 325,189 461,477 General and administrative 229,797 209,088 Severance award agreement 209,935 -- Taxes, other than income and payroll taxes 32,486 21,100 Provision for depletion, depreciation and amortization 160,142 191,239 Accretion expense 5,932 5,811 Other costs and expenses 45,975 56,020 ------------ ------------ 1,009,456 944,735 ------------ ------------ OPERATING INCOME (LOSS) (207,555) 1,178,451 ------------ ------------ OTHER INCOME (EXPENSE): Interest income 21,395 19,934 Other income 3,600 9,152 Interest expense (358) (593) ------------ ------------ 24,637 28,493 ------------ ------------ INCOME (LOSS) BEFORE INCOME TAX PROVISION (BENEFIT) (182,918) 1,206,944 Income tax provision (benefit) Current ( 34,200) 182,850 Deferred (109,800) 116,100 ----------- ------------ (144,000) 298,950 ------------ ------------ NET INCOME (LOSS) $( 38,918) $907,994 ============ ============ The Accompanying Notes are an Integral Part of These Financial Statements.
7 PYRAMID OIL COMPANY STATEMENTS OF OPERATIONS (UNAUDITED) Three months ended June 30,
--------------------------- 2009 2008 ------------ ------------ EARNINGS PER COMMON SHARE Basic Income (Loss) Per Common Share $(0.01) $ 0.19 ============ ============ Diluted Income (Loss) Per Common Share $(0.01) $ 0.19 ============ ============ Weighted average number of common shares outstanding 4,677,728 4,677,728 ============ ============ Diluted average number of common shares outstanding 4,677,728 4,677,728 ============ ============ The Accompanying Notes are an Integral Part of These Financial Statements.
8 PYRAMID OIL COMPANY STATEMENTS OF OPERATIONS (UNAUDITED) Six months ended June 30,
--------------------------- 2009 2008 ------------ ------------ REVENUES $1,395,946 $3,713,082 ------------ ------------ COSTS AND EXPENSES: Operating expenses 676,539 884,283 Exploration costs -- ( 28,812) General and administrative 455,102 441,600 Severance award agreement 209,935 -- Taxes, other than income and payroll taxes 80,784 56,610 Provision for depletion, depreciation and amortization 318,456 354,059 Accretion expense 11,798 11,621 Other costs and expenses 70,145 75,572 ------------ ------------ 1,822,759 1,794,933 ------------ ------------ OPERATING INCOME (LOSS) (426,813) 1,918,149 ------------ ------------ OTHER INCOME (EXPENSE): Interest income 47,870 42,011 Other income 7,200 18,814 Interest expense (773) (1,234) ------------ ------------ 54,297 59,591 ------------ ------------ INCOME (LOSS) BEFORE INCOME TAX PROVISION (BENEFIT) (372,516) 1,977,740 Income tax provision (benefit) Current (137,583) 274,475 Deferred ( 6,800) ( 39,000) ----------- ------------ (144,383) 235,475 ------------ ------------ NET INCOME (LOSS) $ (228,133) $1,742,265 ============ ============ The Accompanying Notes are an Integral Part of These Financial Statements.
9 PYRAMID OIL COMPANY STATEMENTS OF OPERATIONS (UNAUDITED) Six months ended June 30,
--------------------------- 2009 2008 ------------ ------------ EARNINGS PER COMMON SHARE Basic Income (Loss) Per Common Share $(0.05) $ 0.37 ============ ============ Diluted Income (Loss) Per Common Share $(0.05) $ 0.37 ============ ============ Weighted average number of common shares outstanding 4,677,728 4,677,728 ============ ============ Diluted average number of common shares outstanding 4,677,728 4,677,728 ============ ============ The Accompanying Notes are an Integral Part of These Financial Statements.
10 PYRAMID OIL COMPANY STATEMENTS OF CASH FLOWS (UNAUDITED) Six months ended June 30,
--------------------------- 2009 2008 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (228,133) $1,742,265 Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Provision for depletion, depreciation and amortization 318,456 354,059 Accretion expense 11,798 11,621 Exploration costs -- ( 28,812) Severance award agreement 209,935 ( 1,600) Deferred taxes ( 6,800) ( 39,000) Changes in assets and liabilities: Increase in trade accounts, interest and income taxes receivable (133,548) (415,879) Decrease (increase) in crude oil inventories 1,193 (3,559) Decrease in prepaid expenses 98,466 86,521 (Decrease) increase in accounts Payable and accrued liabilities (340,135) 6,539 --------- --------- Net cash (used in) provided by operating activities ( 68,768) 1,712,155 --------- --------- The Accompanying Notes Are an Integral Part of These Financial Statements.
11 PYRAMID OIL COMPANY STATEMENTS OF CASH FLOWS (UNAUDITED) Six months ended June 30,
--------------------------- 2009 2008 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures $(167,498) $(908,263) Purchases of short-term investments (500,000) -- Increase in short-term investments ( 36,290) ( 26,346) -------- --------- Net cash (used in) investing activities (703,788) (934,609) -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Loans to employees (1,100) (2,100) Principal payments from loans to employees 1,200 1,500 Principal payments on long-term debt ( 11,834) ( 13,969) -------- -------- Net cash (used in) financing activities (11,734) (14,569) -------- -------- Net (decrease) increase in cash (784,290) 762,977 Cash at beginning of period 1,793,563 618,448 --------- --------- Cash at end of period $1,009,273 $1,381,425 ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the six months for interest $ 773 $ 1,234 ======== ======== Cash paid during the six months for income taxes $162,787 $230,085 ======== ======== The Accompanying Notes Are an Integral Part of These Financial Statements.
12 PYRAMID OIL COMPANY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (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, 2008 Form 10-K which is incorporated herein by reference. The financial data presented herein should be read in conjunction with the Company's December 31, 2008 financial statements and notes thereto, contained in the Company's Form 10-K. 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, 2009 and December 31, 2008 and the results of its operations and its cash flows for the three and six month periods ended June 30, 2009 and 2008. The results of operations for an 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. 13 2. Impact of Recent Accounting Pronouncements In April 2009, the FASB issued three related FASB Staff Positions: (i) FSP FAS No. 115-2 and FAS No. 124-2, Recognition and Presentation of Other-Than- Temporary Impairments (FSP FAS 115-2 and FAS 124-2); (ii) FSP FAS No. 107-1 and Accounting Principles Board Opinion (APB) No. 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP FAS 107-1 and APB 28-1), and; (iii) FSP FAS No. 157-4, Determining the Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP FAS 157-4), which are effective for interim and annual reporting periods ending after June 15, 2009. FSP FAS 115-2 and FAS 124-2 amend the other-than-temporary impairment guidance in GAAP for debt securities to modify the requirement for recognizing other- than-temporary impairments, change the existing impairment model and modify the presentation and frequency of related disclosures. FSP FAS 107-1 and APB 28-1 require disclosures about fair value of financial instruments for interim reporting periods as well as in annual financial statements. FSP FAS 157-4 provides additional guidance for estimating fair value in the current economic environment and reemphasizes that the objective of a fair value measurement remains an exit price. If we were to conclude that there has been a significant decrease in the volume and level of activity of the asset or liability in relation to normal market activities, quoted market values may not be representative of fair value and we may conclude that a change in valuation technique or the use of multiple valuation techniques may be appropriate in accordance with SFAS No. 157. These pronouncements are not expected to have a material impact on our operations and financial condition. In April 2009, the FASB issued FSP SFAS No. 141R-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies. FSP SFAS 141R-1 amends the guidance in SFAS 141R relating to the initial recognition and measurement, subsequent measurement and accounting and disclosures of assets and liabilities arising from contingencies in a business combination. FSP SFAS 141R is effective for fiscal years beginning after December 15, 2008. We adopted FSP SFAS 141R as of the beginning of fiscal 2009. We will apply the requirements of FSP FAS 141R-1 prospectively to any future acquisitions. In May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS 165), which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The provisions of SFAS 165 are effective for interim and annual reporting periods ending after June 15, 2009. The adoption of SFAS 165 did not have any impact on our financial statements. The subsequent events have been evaluated through August 14, 2009, which was the date the Financial Statements were issued. In June 2009, the FASB approved the FASB Accounting Standards Codification (Codification), which launched on July 1, 2009, and will be effective for financial statements for interim or annual reporting periods ending after September 15, 2009. The Codification is not expected to change GAAP, but will combine all authoritative standards into a comprehensive, topically organized online database. After the Codification launch on July 1, 2009 only one level 14 of authoritative GAAP exists, other than guidance issued by the SEC. All other accounting literature excluded from the Codification will be considered non-authoritative. We are currently evaluating the potential effect on the financial statements. 3. Dividends No cash dividends were paid during the six months ended June 30, 2009 and 2008. 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. 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 15 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 Income tax benefits of $144,383 were realized by the Company for the first six months of 2009, due primarily to a net loss before income tax benefit of $372,516 for the six months ended June 30, 2009. The income tax provision of $235,475 for the six months ended June 30, 2008 is due primarily to a net income of $1,977,740 before income tax provision for the six months ended June 30, 2008. Net income tax benefit for the first six months ended June 30, 2009 was calculated as follows: Federal State Total -------- --------- -------- Current tax provision $(115,000) $(22,583) $(137,583) Deferred tax benefit ( 5,800) ( 1,000) ( 6,800) ------- ------- ------- $(120,800) $(23,583) $(144,383) ======= ====== ======= 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 $1,762,000 as of June 30, 2009. 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. The first quarter tax provision was based on one quarter of the full year estimate due to the inability to accurately calculate certain tax temporary differences at that time. As of the second quarter such calculations have been made. 16 7. Stock Split On June 5, 2008, the Company's Board of Directors approved a 5 for 4 stock split payable on July 3, 2008, to shareholders of record as of June 24, 2008. The effective date of the split is July 7, 2008. Common Stock --------- Shares outstanding at June 30, 2008 3,741,721 Shares issued 5 for 4 stock split July 3, 2008 936,007 --------- Shares outstanding at July 7, 2008 4,677,728 ========= All share and per share data for the periods presented have been retroactively restated to reflect this stock split. 8. Severance Award Agreements On June 4, 2009, 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 and recorded an increase to stockholders' equity of $209,935. 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) 25,000 shares of the Company's common stock or the then-fair market value of the shares. As of June 30, 2009, the Company intends to deliver the Company's common shares for the Severance Award; therefore, in accordance with SFAS 123(R), management has classified the share-based compensation as stockholders' equity at June 30, 2009. 9. 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. 17 10. 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 $79,000 during the first six months of 2009. 11. 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. The Company and PHIR mutually decided to extend the agreement after its initial six-month term, the Company granted to PHIR's two principals, fully vested warrants to purchase a total of 25,000 shares of the Company's common stock at an exercise price of $3.20 per share. The warrants will have a two-year term, will be assignable and will have piggyback registration rights and cashless exercise provisions. See Note 12. The Company and PHIR verbally agreed to extend the arrangement on a month-to-month basis. Effective April 1, 2009, the Company and PHIR verbally agreed to reduce the monthly fee from $5,000 to $2,500. 18 12. Warrants Issued The Company issued warrants to purchase common shares of the Company as compensation for consulting services. The value of warrants issued for compensation is accounted for as a non-cash expense to the Company at the fair value of the warrants issued. The Company values the warrants at fair value as calculated by using the Black-Scholes option-pricing model. The following table summarizes the warrant activity for the six months ended June 30, 2009: Number Weighted-Average (Unaudited) of Warrants Exercise Price ----------- ---------------- Outstanding, December 31, 2008 25,000 $3.20 Granted -- -- Exercised -- -- Cancelled -- -- ------ ---- Outstanding, June 30, 2009 25,000 $3.20 ====== ==== The following summarizes the warrants issued, outstanding and exercisable as of June 30, 2009: Grant Date November, 2008 Strike Price $3.20 Expiration Date November, 2010 Warrants Remaining 25,000 Proceeds if Exercised $80,000 Call Feature None 13. Fair Value Effective January 1, 2009, we adopted SFAS No. 157 for our nonfinancial assets and nonfinancial liabilities measured on a non-recurring basis. We adopted the provisions of SFAS No. 157 for measuring the fair value of our financial assets and liabilities during 2008. As defined in SFAS No. 157, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We utilize market data or assumptions that we believe market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. SFAS No. 157 establishes a three-tiered fair value hierarchy which prioritizes the inputs used in measuring fair value as follows: Level 1 - Observable inputs such as quoted prices in active markets; Level 2 - Inputs, other than quoted prices, that are observable for the PAGE <19> asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The carrying amount of our cash and equivalents, short term investments, and accounts payable reported in the condensed consolidated balance sheets approximates fair value because of the short maturity of those instruments. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD LOOKING INFORMATION Looking forward into the balance of fiscal 2009, crude oil prices have increased by fifty cents per barrel. The Company announced in March 2009 that it had participated with its Texas joint venture partners in re-entry operations on a joint venture well and expected the operations to be finished by the end of March. Well bore conditions encountered in the bottom section of the re-entry required a change in the operations, which included the drilling of a side tack section in the bottom of the well. The new section encountered approximately twice the amount of gas zone than had been expected. The joint venture partners currently are awaiting recommendations from the operator as to completion stimulation procedures, which may involve a hydraulic frac of the well. The Company is currently evaluating a potential investment in a 1,900-acre joint venture drilling prospect located in the state of Louisiana. The prospect involves drilling a 12,000-foot exploratory well for oil and gas. If the Company enters into this joint venture, its participation likely will be in the 10 to 12 percent range. In mid October 2008 the Company postponed a developmental well in the Company's Carneros Creek field, located in Kern County California. Management intends to re-evaluate the possibility of drilling this well sometime in the second half of 2009. The Company was well prepared for, and is effectively managing, the present economic downturn, as management positioned the Company with no debt and significant cash reserves. Management continues to believe that during the next 12 months there will be an expanding range of opportunities to invest in oil and gas assets at more attractive valuations than have been available during the past several years. The Company's growth in 2009 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 20 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 2009, 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 2008 and for the six months ended June 30, 2009. 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 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. 21 ANALYSIS OF SIGNIFICANT CHANGES IN RESULTS OF OPERATIONS RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 2009 COMPARED TO THE QUARTER ENDED JUNE 30, 2008 REVENUES The decrease in revenues of $1,321,285 is due to lower average prices for the second quarter of 2009 and lower crude oil production. Oil and gas revenues decreased by 62% for the three months ended June 30, 2009 when compared with the same period for 2008. Oil and gas revenues decreased by 43% due to lower average crude oil prices for the second quarter of 2009. The average price of the Company's oil and gas for the second quarter of 2009 decreased by approximately $62.53 per equivalent barrel when compared to the same period of 2008. Revenues decreased by 19% due to lower crude oil production/shipments. The Company's net revenue share of crude oil production/sales decreased by approximately 3,500 barrels for the second quarter of 2009. The decrease in crude oil production is primarily the result of the decline in production on the Company's Anderson lease. OPERATING EXPENSES Operating expenses decreased by $136,288 for the second quarter of 2009. Operating expenses decreased by 30% for the second quarter of 2009. The cost to produce an equivalent barrel of crude oil during the second quarter of 2009 was approximately $22.34 per barrel, a decrease of approximately $3.22 per barrel when compared with production costs for the second quarter of 2008. The decrease in lease operating expenses is caused by many factors. These include lower costs for labor, equipment fuel, parts and supplies, equipment rental and pump repairs Company labor as a component of total operating expenses decreased by approximately 7% due to a reduction in overtime hours worked, a reduction in hourly labor rates and a reduction in personnel. Equipment fuel as a component of total operating expenses was lower by approximately 6% due to lower overall maintenance activities and lower prices for gasoline and diesel during the second quarter of 2009. Parts and supplies as a component of total operating expenses decreased by approximately 5% due to a reduction in maintenance activities. The Company has reduced its maintenance activities as a result of the lower crude oil sales prices. Pump repairs as a component of total operating expenses were lower by approximately 4% due to the decline in maintenance work in the second quarter of 2009 and the replacement of down-hole pumps in prior years with more expensive pumps that are more efficient and have better longevity. 22 GENERAL AND ADMINISTRATIVE General and administrative expenses increased by $20,709 for the second quarter of 2009 when compared with the same period for 2008. During the second quarter of 2009, the Board of Directors approved the payment of a bonus to Mr. Alexander of $25,000. No bonus was paid during the second quarter of 2008. PROVISION FOR DEPLETION, DEPRECIATION AND AMORTIZATION The provision for depletion, depreciation and amortization decreased by $31,097. The provision for depletion, depreciation and amortization decreased by approximately 16% for the second quarter of 2009, when compared with the same period for 2008. The decrease is due primarily to a decrease in depletion of the Company's oil and gas properties. The decrease in depletion is due primarily to a decrease in crude oil production for the second quarter of 2009. RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2009 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2008 REVENUES The decrease in revenues of $2,317,136 is due to lower average prices for the first six months of 2009 and lower crude oil production. Oil and gas revenues decreased by 62% for the six months ended June 30, 2009 when compared with the same period for 2008. Oil and gas revenues decreased by 47% due to lower average crude oil prices for the first six months of 2009. The average price of the Company's oil and gas for the first six months of 2009 decreased by approximately $58.10 per equivalent barrel when compared to the same period of 2008. Revenues decreased by 15% due to lower crude oil production/shipments. The Company's net revenue share of crude oil production/sales decreased by approximately 5,500 barrels for the first six months of 2009. The decrease in crude oil production is primarily the result of the decline in production on the Company's Anderson lease. OPERATING EXPENSES Operating expenses decreased by $207,744 for the first six months of 2009. Operating expenses decreased by 24% for the first six months of 2009. The cost to produce an equivalent barrel of crude oil during the first half of 2009 was approximately $22.66 per barrel, a decrease of approximately $2.31 per barrel when compared with production costs for the same period of 2008. The decrease in lease operating expenses is caused by many factors. These include lower costs for parts and supplies, equipment fuel, labor, and pump repairs. 23 Parts and supplies as a component of total operating expenses decreased by approximately 6% due to a reduction in maintenance activities during the first half of 2009. The Company has reduced its maintenance activities as a result of the lower crude oil sales prices. Equipment fuel as a component of total operating expenses was lower by approximately 5% due to lower overall maintenance activities and lower prices for gasoline and diesel for the first six months of 2009. Company labor as a component of total operating expenses decreased by approximately 4% due to a reduction in overtime hours worked, a reduction in hourly labor rates and a reduction in personnel. Pump repairs as a component of total operating expenses were lower by approximately 4% due to the decline in maintenance work in the first half of 2009 and the replacement of down-hole pumps in prior years with more expensive pumps that are more efficient and have better longevity. EXPLORATION COSTS In the first quarter of 2008, the Company received a payment, from its 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 EXPENSES General and administrative expenses increased by $13,502 for the first six months of 2009 when compared with the same period for 2008. During June of 2009, the Board of Directors approved the payment of a bonus to Mr. Alexander of $25,000. No bonus was paid during the first six months of 2008. Salaries increased by approximately $17,000 due to salary increases that were effective June 1, 2008. This was offset by lower costs for accounting services of approximately $29,000 due primarily to lower costs incurred for SOX-404 Internal Control Compliance and tax related matters. PROVISION FOR DEPLETION, DEPRECIATION AND AMORTIZATION The provision for depletion, depreciation and amortization decreased by $35,603. The provision for depletion, depreciation and amortization decreased by approximately 10% for the first six months of 2009, when compared with the same period for 2008. The decrease is due primarily to a decrease in depletion of the Company's oil and gas properties. The decrease in depletion is due primarily to a decrease in crude oil production for the six months of 2009. 24 LIQUIDITY AND CAPITAL RESOURCES Cash decreased by $784,290 for the six months ended June 30, 2009. During the first half of 2009, operating activities used cash of $68,768. Additional cash was used for the purchase of short-term investments of $500,000, capital spending of $167,498 and payments on long-term debt of $11,834. 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 $3,325,389 that provided additional liquidity during the first six months of 2009. 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 six of 2009 decreased by approximately 62% ($58.10 per equivalent barrel) when compared with the same period for 2008. The Company cannot predict the future course of crude oil prices. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not Applicable 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 three months ended June 30, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 25 PYRAMID OIL COMPANY 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 10-K for the fiscal year ended December 31, 2008. 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 On June 4, 2009, the Company held its Annual Meeting of Shareholders at the Corporate Offices in Bakersfield, California. At the meeting the holders of our outstanding common stock acted on the following matters: (1) The shareholders voted for 5 directors, each to serve for a term of one year. Each nominee received the following votes: Name of Nominee Votes For Withheld ---------------- --------- -------- Michael D. Herman 3,962,345 83,373 John H. Alexander 3,884,418 161,300 Thomas W. Ladd 3,975,923 69,795 John E. Turco 3,971,069 74,649 Gary L. Ronning 3,971,100 74,618 (2) The shareholders voted for the ratification of the appointment of SingerLewak LLP as our independent auditors for our fiscal year ending December 31, 2009. Votes cast were as follows: Votes For 3,854,201 Votes Against 155,168 Abstain 36,349 Item 5. - Other Information - None 26 Item 6. - Exhibits a. Exhibits 3.1 Registrant's Amended By-Laws 31.1 Certification of the Registrant's Principal Executive Officer under Exchange Act Rules 13a-14(a) and 15-d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of the Registrant's Principal Financial Officer under Exchange Act Rules 13a-14(a) and 15-d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of the Registrant's Principal Executive Officer under 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of the Registrant's Principal Financial Officer under 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 27 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, 2009 JOHN H. ALEXANDER --------------------- John H. Alexander President Dated: August 13, 2009 LEE G. CHRISTIANSON --------------------- Lee G. Christianson Chief Financial Officer EX-3 2 amendbylaws.txt EXHIBIT 3.1 AMENDED BY-LAWS 1 EXHIBIT 3.1 BY-LAWS OF PYRAMID OIL COMPANY A CALIFORNIA CORPORATION ARTICLE I PLACE OF BUSINESS The principal office for the transaction of the business of the corporation shall be located at such place or places within the State of California, as the Board of Directors shall from time to time, determine. (Revised on April 20, 1990) ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. PLACE. All meetings of the shareholders shall be held at the principal office of the corporation in the State of California, or such other place as the directors shall designate at least 30 days prior to such meeting. Section 2. ANNUAL MEETING OF SHAREHOLDERS (Amended June 6, 1976). The annual meeting of the shareholders shall be held on the First Thursday of June, in each year, if not a legal holiday, and if a legal holiday, then on the next succeeding business day, at an hour designated by the Board of Directors at least 30 days prior to such meeting, at which time the shareholders shall elect by plurality vote a Board of Directors, consider reports of the affairs of the Corporation, and transact such other business as may properly be brought before the meeting. (Revised on April 20, 1990) Section 3. SPECIAL SHAREHOLDER MEETING. Special meetings of the shareholders, for any purpose or purposes whatsoever, may be called at any time by the President, or by the Board of Directors, or by any two or more members thereof, or by one or more shareholders holding not less than one- fifth of the voting power of the corporation. Section 4. NOTICE OF MEETINGS AND ADJOURNED MEETINGS. Notices of shareholder meetings, annual or special, shall be given in writing to shareholders entitled to vote by the Secretary or the Assistant Secretary, or if there be no such officer, or in case of his neglect or refusal, by any director or shareholder. Such notices shall be sent to the shareholder's address appearing on the books of the corporation, or supplied by him to the corporation for the purpose of notice, not less than seven days before such meeting. Notice of any meeting of shareholders shall specify the place, the day and the hour of meeting, and in case of special meeting, as provided by the Corporations Code of California, the general nature of the business to be transacted. 2 When a meeting is adjourned for thirty days or more, notice of the adjourned meeting shall be given as in case of an original meeting. Save, as aforesaid, is shall not be necessary to give any notice of the adjournment or of the business to be transacted at an adjourned meeting other than by announcement at the meeting at which such adjournment is taken. Section 5. ENTRY OF NOTICE. Whenever any shareholder entitled to vote has been absent from any meeting of shareholders, whether annual or special, an entry in the minutes to the effect that notice has been duly given shall be sufficient evidence that due notice of such meeting was given to such shareholder, as required by law and the by-laws of the corporation. Section 6. CONSENT TO SHAREHOLDERS' MEETINGS. The transaction of any meeting of shareholders, however called and noticed, shall be valid as though had at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each of the shareholders entitled to vote, not present in person or by proxy, sign a written waiver of notice, or a consent to the holding of such meeting, or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Any action which may be taken at a meeting of the shareholders may be taken without a meeting if authorized by a writing signed by all of the holders of shares who would be entitled to vote at a meeting for such purpose, and filed with the Secretary of the corporation. Section 7. QUORUM. The holders of a majority of the shares entitled to vote thereat, present in person, or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by law, by the Articles of Incorporation, or by these By-Laws. If, however, such majority shall not be present or represented at any meeting of the shareholders, the shareholders entitled to vote thereat, present in person, or by proxy, shall have power to adjourn the meeting from time to time, until the requisite amount of voting shares shall be present. At such adjourned meeting at which the requisite amount of voting shares shall be represented, any business may be transacted which might have been transacted at the meeting as originally notified. Section 8. VOTING. Only persons in whose names shares entitled to vote stand on the stock records of the corporation on the day of any meeting of shareholders, unless some other day be fixed by the Board of Directors for the determination of shareholders of record, then on such other day, shall be entitled to vote at such meeting. Every shareholder entitled to vote shall be entitled to one vote for each of said shares and shall have the right to accumulate his votes as provided in Section 2235 Corporations Code of California. 3 Section 9. PROXIES. Every person entitled to vote or execute consents may do so either in person or by one or more agents authorized by a written proxy executed by the person or his duly authorized agent and filed with the secretary of the corporation. ARTICLE III DIRECTORS - MANAGEMENT Section 1. POWERS. Subject to the limitation of the Articles of Incorporation, of the By-Laws and of the Laws of the State of California as to actions to be authorized or approved by the shareholders, all corporate powers shall be exercised by or under authority of, and the business and affairs of this corporation shall be controlled by, a Board of Directors. Section 2. NUMBER OF DIRECTORS AND QUALIFICATIONS. (AMENDED September 18, 1986) The authorized number of directors of the corporation shall be five (5). At the Annual Meeting of Shareholders of PYRAMID OIL COMPANY held on September 18, 1986 the following RESOLUTION was adopted by the majority vote of the Shareholders, upon a motion duly made and seconded: RESOLVED that Article III, Section 2 of the Company's By-Laws, the Number of Directors and Qualifications is hereby amended to reduce the size of the Company's Board of Directors from seven to five individuals. (Revised on September 18, 1986) Section 3. ELECTION AND TENURE OF OFFICE. The directors shall be elected by ballot at the annual meeting of the shareholders, to serve for one year and until their successors are elected and have qualified. Their term of office shall begin immediately after election. Section 4. VACANCIES. Vacancies in the Board of Directors may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director, and each director so elected shall hold office until his successor is elected at an annual meeting of shareholders or at a special meeting called for that purpose. The Shareholders may at any time elect a director to fill any vacancy not filled by the directors, and may elect the additional directors at the meeting at which an amendment of the ByLaws is voted authorizing an increase in the number of directors. A vacancy or vacancies shall be deemed to exist in case of the death, resignation or removal of any director, or if the shareholders shall increase the authorized number of directors but shall fail at the meeting at which such increase is authorized, or at an adjournment thereof, to elect the additional director so provided for, or in case the shareholders fail at any time to elect the full number of authorized directors. If the Board of Directors accepts the resignation of a Director tendered to take effect at a future time, The Board, or the shareholders, shall have power to elect a successor to take office when the resignation shall become effective. 4 No reduction of the number of directors shall have the effect of removing any director prior to the expiration of his term of office. The entire Board of Directors or any individual director may be removed from office as provided by Section 810 of the Corporations Code of the State of California. Section 5. PLACE OF MEETINGS. Meetings of the Board of Directors shall be held at the office of the corporation in the State of California, as designated for this purpose, from time to time, by resolution of the Board of Directors or written consent of all of the Members of the Board. Any meeting shall be valid, wherever held, if held by the written consent of all Members of the Board of Directors, given either before or after the meeting and filed with the Secretary of the corporation. Section 6. ORGANIZATION MEETING. The organizational meetings of the Board of Directors shall be held immediately following the adjournment of the annual meetings of the shareholders. Section 7. OTHER REGULAR MEETINGS. (Amended August 30, 1984) Other than the Annual Shareholder Meeting and the Organizational Meeting as set forth in the By-Laws, regular meetings of the Board of Directors shall be held at a date mutually agreed upon by a majority of the Board of Directors and all other meetings will be called by the President or two or more of the Board of Directors at a time and place set forth at the time the meeting is called. No notice should be given if all members of the Board are present when date of next meeting is set but if all members are not present notice should be mailed or a Waiver signed by all attending said called meeting. Section 8. SPECIAL MEETINGS and NOTICE THEREOF. Special meetings of the Board of Directors for any purpose or purposes shall be called at any time by the President or if he is absent or unable or refuses to act, by any Vice- President or by any two directors. Written notice of the time and place of special meetings shall be delivered personally to the directors or sent to each director by letter or by telegram, charges prepaid, addressed to him at his address as it is shown upon the records of the corporation, or if it is not so shown on such records or is not readily ascertainable, at the place in which the meetings of the directors are regularly held. In case such notice is mailed or telegraphed, it shall be deposited in the United States mail or delivered to the telegraph company in the place in which the principal office of the corporation is located at least forty-eight (48) hours prior to the time of the holding of the meeting. In case such notice is delivered as above provided; it shall be so delivered at least twenty-four (24) hours prior to the time of the holding of the meeting. Such mailing, telegraphing or delivery as above provided shall be due, legal and personal notice to such director. Section 9. WAIVER OF NOTICE. When all the directors are present at any directors' meeting, however called or noticed, and sign a written consent thereto on the records of such meeting, or, if a majority of the directors are present, and if those not present sign in writing a waiver of notice of such meeting, whether prior to or after the holding of such meeting, which said 5 waiver shall be filed with the Secretary of the corporation, the transactions thereof are as valid as if had at a meeting regularly called and noticed. Section 10. NOTICE OF ADJOURNMENT. Notice of the time and place of holding an adjourned meeting need not be given to absent directors if the time and place be fixed at the meeting adjourned. Section 11. QUORUM. A majority of the number of directors as fixed by the articles or By-Laws shall be necessary to constitute a quorum for the transaction of business, and the action of a majority of the directors present at any meeting at which there is a quorum, when duly assembled, is valid as a corporate act; provided that a minority of the directors, in the absence of a quorum, may adjourn from time to time, but may not transact any business. Section 12. DIRECTORS ACTING WITHOUT A MEETING. (Amended November 14, 1985) Any action required or permitted to be taken by the Board of Directors under any provision of this Article may be taken without a meeting, if a majority of the Board shall individually or collectively consent in writing to such action. Such consent or consents shall be ratified and be filed with the minutes of the proceedings of the Board at the next regular scheduled meeting. Such action shall have the same force and effect as a unanimous vote of such directors. Any certificate or other document filed under any provision of this Article which relates to action so taken shall state that the action was taken by a majority consent of the Board of Directors without a meeting, and that the By-Laws, authorize the directors to so act, and such statements shall be prima facie evidence of such authority. ARTICLE IV OFFICERS Section 1. OFFICERS. The officers of the corporations shall be 1. President 2. Vice-President 3. Secretary 4. Treasurer The corporation may also have, at the discretion of the Board of Directors, a Chairman of the Board, one or more additional vice-presidents, one or more assistant-secretaries, one or more assistant-treasurers, and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article. One person may hold two or more offices, except those of president and secretary. Section 2. ELECTIONS. The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 3 or 5 of this Article, shall be chosen annually by the Board of Directors, and each shall hold his or her office at the pleasure of the Board of Directors, who may, either at a regular or special meeting, remove any such officer and appoint his or her successor. 6 Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may appoint such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in the By-Laws or as the Board of Directors may from time to time determine. Section 4. RESIGNATION AND REMOVAL. An officer may be removed, either with or without cause, by five-sevenths (5/7) of the directors at the time in office at a regular or special meeting of the board, or, except in case of an officer chosen by the Board of Directors, by any officer upon whom such power of removal may be conferred by the Board of Directors. Any officer may resign at any time by giving written notice to the Board of Directors or to the president, or to the secretary of the corporation. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 5. VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in the ByLaws for regular appointments to such office. Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Boards, if there shall be such an officer, shall, if present, preside at all meetings of the Board of Directors, and exercise and perform such other powers and duties as may be from time to time assigned to him or her by the Board of Directors as prescribed by the By-Laws. Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, if there be such an officer, the president shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and affairs of the corporation. He shall: (1) Preside at all meetings of the shareholders, and in the absence of the chairmen of the Board, or if there be none, at all meetings of the Board of Directors; (2) Be a member of all the standing committees, including the executive committee, if any, and shall have the general powers and duties of management usually vested in the office of president of a corporation. (3) Have such other powers and duties as may be prescribed by the Board of Directors or the By-Laws. Section 8. VICE-PRESIDENTS. In the absence or disability of the president, the vice-presidents in order of their rank as fixed by the Board of Directors, or if not ranked, the vice-president designated by the Board of Directors, shall perform all the duties of the president, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the 7 president. The vice-presidents shall have such other powers and perform such other duties as from time to time may be prescribed for him by the Board of Directors or the By-Laws. Section 9. SECRETARY. The secretary shall: (1) Keep, or cause to be kept, a book of minutes at the principal office or such other place as the Board of Directors may order, of all meetings of directors and shareholders, with the time and place of holding, whether regular or special, and if special, how authorized, the notice thereof given, the names of those directors and shareholders present, the names of those present at the directors' meeting, the number of shares present or represented at shareholders' meetings and the proceedings thereof; (2) Keep, or cause to be kept, at the principal office or at the office of the corporation's transfer agent, a share register, or a duplicate share register, showing the names of the shareholders and their addresses; the number and classes of shares held by each; the number and date of certificates issued for the same; the number and date of cancellation of every certificate surrendered for cancellation; (3) Give or cause to be given, notice of all meetings of shareholders and the Board of Directors, as required by the By-Laws or By-Law to be given; (4) Keep the seal of the corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or the By-Laws. Section 10. TREASURER. The treasurer shall: (1) Keep and maintain, or cause to be kept and maintained, adequate and correct accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, surplus and surplus shares. Any surplus, including earned surplus, paid-in surplus and surplus arising from a reduction of stated capital, shall be classified according to source and shown in a separate account. The books of account shall at all times be open for inspection by any director; (2) Shall deposit all monies and other valuables in the name and to the credit of the corporation with such depositories as maybe designated by the Board of Directors; (3) Disburse the funds of the corporation as may be ordered by the Board of Directors; (4) Render to the president and directors, when they request it, an account of all of his or her transactions as treasurer and of the financial condition of the corporation; (5) Have such other powers and perform such other duties as may be prescribed by the Board of Directors or the By-Laws. 8 ARTICLE V RECORDS - REPORTS - INSPECTION Section 1. RECORDS. The corporation shall maintain adequate and correct accounts, books and records of its business and properties. All of such books, records and accounts shall be kept at its principal place of business in the State of California, as fixed by the Board of Directors from time to time. Section 2. INSPECTION. The share register or duplicate share register, the books of account, and minutes of proceedings of the shareholders and directors shall be open to inspection upon the written demand of any shareholder or the holder or a voting trust certificate, at any reasonable time, and for a purpose reasonably related to his or her interests as a shareholder, and shall be exhibited at any time when required by the demand of ten per cent of the shares represented at any shareholders' meeting. Such inspection may be made in person or by an agent or attorney, and shall include the right to make extracts. Demand of inspection other than at a shareholders' meeting shall be made in writing upon the president, secretary or assistant- secretary of the corporation. Section 3. CHECKS, DRAFT, ETC. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness issued in the name of or payable to the corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board of Directors. Section 4. ANNUAL REPORT. The Board of Directors of the corporation shall cause to be sent to the shareholders not later than 120 days after the close of the fiscal or calendar year an annual report in compliance with the provisions of Section 3006 of the California Corporation Code, unless the By- Laws expressly dispense with such report. Section 5. CONTRACTS, ETC. The Board of Directors, except as the By- Laws or Articles of Incorporation otherwise provide, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances; and unless so authorized by the Board of Directors, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or agreement or to pledge its credit to render it liable for any purpose or to any amount. Section 6. INSPECTION OF BY-LAWS. The corporation shall keep in its principal office for the transaction of business the original or a copy of the By-Laws as amended or otherwise altered to date, certified by the secretary, which shall be open to inspection by the shareholders at all reasonable times during business hours. 9 ARTICLE VI CERTIFICATES OF STOCK Section 1. STOCK CERTIFICATES. (Amended June 4, 2009) Every holder of shares in the Corporation shall be entitled to have a certificate or certificates signed in the name of the Corporation by the Chief Executive Officer or the President and by the Secretary or any Assistant Secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue. Notwithstanding the preceding paragraph or any other provision of these Bylaws that refers to certificates evidencing shares of the Corporation's outstanding shares of capital stock, shares of the Corporation may be evidenced by registration in the holder's name in uncertificated, book-entry form in accordance with the direct registration system approved by the United States Securities and Exchange Commission and by the principal securities exchange on which the stock of the Corporation may from time to time be traded, or as may be otherwise authorized by Section 416(b) of the California General Corporation Law or any successor statute, as any of the foregoing may be approved from time to time by the Board of Directors. Every holder of uncertificated shares of the Corporation shall be entitled to receive a statement of holdings as evidence of share ownership. Section 2. TRANSFER. Upon surrender to the Secretary\or transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 3. LOST OR DESTROYED CERTIFICATES. Any person claiming a certificate of stock to be lost or destroyed shall make an affidavit or affirmation of that fact and advertise the same in such manner as the Board of Directors may require. He shall, if the directors so require, give the corporation a bond of indemnity, in a form satisfactory to the Board of Directors, whereupon a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to be lost or destroyed. Section 4. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may appoint one or more transfer agents or transfer clerks, and one or more registrars, which shall be an incorporated bank or trust company, either domestic or foreign, who shall be appointed at such times and places as the requirements of the corporation may necessitate and the Board of Directors may designate. 10 Section 5. CLOSING STOCK TRANSFER BOOKS. The Board of Directors may Close the transfer books in their discretion for a period not exceeding thirty days preceding any meeting, annual or special, of the shareholders, or the day appointed for the payment of a dividend. ARTICLE VII AMENDMENTS Section 1. POWER OF SHAREHOLDERS. These By-Laws may be repealed or amended, or new By-Laws may be adopted at such annual meeting, or at any other meeting of the shareholders, called for the purpose by the Board of Directors, by a vote representing a majority of the shares entitled to vote, or by the written assent of such shareholders. Section 2. POWER OF DIRECTORS. Subject to the right of shareholders as provided in Section 1 of this Article VII to adopt, amend or repeal By-Laws, Bylaws other than a By-Law or amendment thereof changing the authorized number of directors may be adopted, amended or repealed by the Board of Directors. Section 3. RECORD OF AMENDMENTS. Whenever an amendment or new By-Law is adopted, it shall be copied in the Book of By-Laws with the original By-Laws, in the appropriate place. If any By-Law is repealed, the fact of repeal with the date of the meeting at which the repeal was enacted or written assent was filed shall be stated in said book. ARTICLE VIII SEAL Section 1. CORPORATE SEAL. The Corporation shall adopt and use a corporate seal consisting of a circle setting forth on its circumference the name of the corporation and showing the State and date of incorporation. KNOWN ALL MEN BY THESE PRESENTS: That we, the undersigned, being all the directors of PYRAMID OIL COMPANY, a corporation incorporated, organized and existing under the laws of the State of California, do hereby certify that the foregoing By-Laws, were duly adopted as the By-Laws of the said corporation. IN WITNESS WHEREOF, we have hereunto subscribed our names this 20th day of April 1994. DIRECTORS J. BEN HATHAWAY JOHN H. ALEXANDER OTTO HACKEL H. TOM HUNNEWELL JACK W. WOOD 11 KNOWN ALL MEN BY THESE PRESENTS: That I, the undersigned, the duly elected, and acting Secretary of PYRAMID OIL COMPANY do hereby certify, that the above and foregoing By-Laws were adopted as the ByLaws of said corporation on April 20, 1994. IN WITNESS WHEREOF, I have hereunto subscribed my name this 20th day of April 1994. LEE G. CHRISTIANSON ------------------- Secretary EX-31 3 certqtrb.txt CERTIFICATIONS PAGE <1> Exhibit 31.1 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, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Pyramid Oil Company; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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 report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) 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 d) 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 (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and PAGE <2> 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 the registrant's board of directors (or persons performing the equivalent functions): 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 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: August 13, 2009 By: JOHN H. ALEXANDER ----------------------- John H. Alexander Chief Executive Officer PAGE <3> Exhibit 31.2 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, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Pyramid Oil Company; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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 report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) 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 d) 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 (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and PAGE <4> 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 the registrant's board of directors (or persons performing the equivalent functions): 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 b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Dated: August 13, 2009 By: LEE G. CHRISTIANSON ------------------------ Lee G. Christianson Chief Financial Officer PAGE <5> Exhibit 32.1 Pyramid Oil Company Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 As Adopted Pursuant to Section 906 Of The Sarbanes-Oxley Act of 2002 Solely for the purposes of complying with 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, I, the undersigned President of Pyramid Oil Company (the "Company"), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2009 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: August 13, 2009 JOHN H. ALEXANDER ----------------- John H. Alexander President PAGE <6> Exhibit 32.2 Pyramid Oil Company Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 As Adopted Pursuant to Section 906 Of The Sarbanes-Oxley Act of 2002 Solely for the purposes of complying with 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, I, the undersigned Chief Financial Officer of Pyramid Oil Company (the "Company"), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2009 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: August 13, 2009 LEE G. CHRISTIANSON ------------------- Lee G. Christianson Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----