<PAGE> 1
                  U.S. SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.  20549

                                 FORM 10-KSB

[X]  Annual report under Section 13 or 15(d) of the Securities
     Exchange Act of 1934 for the fiscal year ended December 31, 2005

[ ]  Transition report under 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
                (Name of small business issuer in its charter)

          CALIFORNIA                                     94-0787340
(State or other jurisdiction of                       (I.R.S. Employer
 incorporation or organization)                       Identification No.)

        2008 - 21st. Street, P. O. Box 832                 93302
              Bakersfield, California
      (Address of principal executive offices)           (Zip Code)

   Issuer's telephone number:  (661) 325-1000

   Securities registered under Section 12 (b) of the Exchange Act:  NONE

   Securities registered under Section 12 (g) of the Exchange Act:

                               Common Stock
                             (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Securities Exchange Act of 1934 during the past 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

Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.  [ X ]

The issuer's revenues for the fiscal year ended December 31, 2005 were
$3,477,572.

The aggregate market value on March 24, 2006, of the voting shares held by
non-affiliates was approximately $4,600,000 based on the closing sales price
of the registrant's Common Stock on such date.

At March 22, 2006, there were 2,494,430 shares of Common Stock outstanding.
<PAGE> 2
                     DOCUMENTS INCORPORATED BY REFERENCE

   Portions of the registrant's definitive proxy statement for its 2006 Annual
Meeting of Shareholders to be filed with the Securities and Exchange
Commission within 120 days after the close of the registrant's fiscal year are
incorporated by reference into Part III.

   TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (check one): Yes    No  X




     
<PAGE>
<PAGE> 3
                          PYRAMID OIL COMPANY

                    2005 FORM 10-KSB ANNUAL REPORT

                          Table of Contents

                                                                Page
                               PART I


Item  1.    Description of Business   . .  . .  . .  . .          4

Item  2.    Description of Property   . .  . .  . .  . .          9

Item  3.    Legal Proceedings .  . .  . .  . .  . .  . .         12

Item  4.    Submission of Matters to a Vote of
              Security Holders.  . .  . .  . .  . .  . .         12

                               PART II

Item  5.    Market for Common Equity and Related
              Stockholder Matters. .  . .  . .  . .  . .         12

Item  6.    Management's Discussion and Analysis
              or Plan of Operation .  . .  . .  . .  . .         13

Item  7.    Financial Statements . .  . .  . .  . .  . .         24

Item  8.    Changes In and Disagreements with Accountants on
              Accounting and Financial Disclosure .  . .         54

Item  8A.   Controls and Procedures . . .  . .  . .  . .         54

Item  8B.   Other Information . . . . . .  . .  . .  . .         54

                               PART III

Item  9.    Directors, Executive Officers, Promoters and
              Control Persons; Compliance With Section
              16(a) of the Exchange Act .  . .  . .  . .         54

Item 10.    Executive Compensation .  . .  . .  . .  . .         54

Item 11.    Security Ownership of Certain Beneficial
              Owners and Management and Related
              Stockholder Matters  .  . .  . .  . .  . .         55

Item 12.    Certain Relationships and Related Transactions       55

Item 13.    Exhibits   . . . . . . . . . . . .  . .  . .         56

Item 14.    Principal Accountant Fees and Services   . .         56

<PAGE> 4

CAUTIONARY STATEMENT FOR PURPOSES OF THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995 AND OTHER FEDERAL SECURITIES LAWS

Pyramid Oil Company is including the following discussion to inform existing
and potential security holders generally of some of the risks and
uncertainties that can affect the Company and to take advantage of the "safe
harbor" protection for forward-looking statements afforded under the federal
securities laws.  Statements made in this Annual Report on Form 10-KSB may be
forward-looking statements.  In addition, from time to time, the Company may
otherwise make forward-looking statements to inform existing and potential
security holders about the Company.  These statements may include projections
and estimates concerning the timing and success of specific projects and the
Company's future (1) income, (2) oil and gas production, (3) oil and gas
reserves and reserve replacement and (4) capital spending.  Forward-looking
statements are generally accompanied by words such as "estimate," "project,"
"predict," "believe," "expect," "anticipate," "plan," "goal" or other words
that convey the uncertainty of future events or outcomes.  In addition, except
for the historical information contained in this report, the matters discussed
in this report are forward-looking statements.  These statements by their
nature are subject to certain risks, uncertainties and assumptions and will be
influenced by various factors.  Should any of the assumptions underlying a
forward-looking statement prove incorrect, actual results could vary
materially.


                                   PART I
                                   ------
ITEM 1 - DESCRIPTION OF BUSINESS

GENERAL BUSINESS DESCRIPTION

Pyramid Oil Company is a California corporation that has been in the oil and
gas business continuously, since it was incorporated on October 9, 1909.
Pyramid Oil Company, hereinafter referred to as "Pyramid" or the "Company," is
engaged in the business of exploration, development and production of crude
oil and natural gas.

Pyramid acquires interests in land and producing properties through
acquisition and lease on which it drills and/or operates crude oil or natural
gas wells in efforts to discover and/or to produce oil and gas.  Crude oil and
natural gas produced from these properties are sold to various refineries and
pipeline companies.  The majority of all oil and gas properties that Pyramid
owns and operates is for its own account.  Pyramid also participates in
specific joint ventures with other companies in the development of oil and gas
properties.  Pyramid's interests in these properties will vary depending on
the availability of said interests and their locations.  Although the Company
owns some minor oil and gas interests in New York and Wyoming, all of the
Company's operations and major revenue producing properties are in California.




<PAGE> 5

The Company's executive offices are located at 2008 21st Street, Bakersfield,
California, 93301, telephone (661) 325-1000, facsimile (661) 325-0100.


DESCRIPTION OF BUSINESS - OIL AND GAS OPERATIONS

EXPLORATION AND DEVELOPMENT

Pyramid operates in a highly competitive industry wherein many companies, from
large multinational companies to small independent producers, are competing
for a finite amount of oil and gas resources.  The Company seeks out
properties to explore for oil and gas by drilling and also seeks out producing
oil and gas properties that can be purchased and operated.  Management
believes that under the right economic conditions, several of the producing
properties that the Company owns could have further developmental potential.
Certain oil properties currently owned and operated by the Company may be
receptive to enhanced oil recovery procedures under certain economic
conditions.

OIL AND GAS PRODUCTION OPERATIONS

Pyramid owns and operates 27 oil and gas leases (properties) located within
Kern and Santa Barbara Counties in the State of California.  All of these
properties are capable of producing oil or natural gas, although not all of
these properties are considered profitable under certain economic conditions.
During 2005, the Company operated 17 leases within California, with total
annual gross oil production exceeding 1,000 barrels per lease.  Production
activities primarily consist of the daily pumping of oil from a well(s) into
tanks, maintaining the production facilities both at the well and tank
settings, preparing and shipping the crude oil to buyers.  Daily operations
differ from one property to another, depending on the number of wells, the
depth of the wells, the gravity of the oil produced and the location of the
property.  All of Pyramid's oil production is classified as primary recovery
production at this time; although certain properties may be conducive to
secondary recovery operations in the future, depending on the prevailing price
of oil.

Primary recovery of oil and gas is by means of natural flow(s) or artificial
lift of oil and gas from a single well bore.  Natural gas and petroleum fluids
enter the well bore by means of reservoir pressure or gravity flow; fluids and
gases are moved to the surface by natural pressure or by means of artificial
lift (pumping).  In secondary recovery operations, liquids or gases are
injected into the reservoirs for the purpose of augmenting reservoir energy or
increasing reservoir temperatures. Secondary recovery operations, usually, but
not always, are done after the primary-recovery phase has passed.







<PAGE> 6

The Company employs field personnel (i.e., pumpers, rig crews, roustabouts and
equipment operators) that perform basic daily activities associated with
producing oil and gas. Daily operations include inspections of surface
facilities and equipment, gauging, reporting and shipping oil, and routine
maintenance and repair activities on wells, production facilities and
equipment. The Company owns and maintains various pieces of equipment
necessary for employees to perform various repair and maintenance tasks on
Company properties. Such equipment consists of service rigs, mobile pumps,
vacuum trucks, hot oil truck, backhoe, trucks and trailers.

Occasionally, the Company drills new wells or redrills existing wells on
properties owned by the Company in an attempt to increase oil and gas
production.  In the last five years, the Company has utilized the services of
outside drilling contractors for drilling new wells and redrilling existing
wells.  Maintenance and repairs of existing wells to maintain or increase oil
and gas production are carried out by Company personnel on a continuing basis.
Most maintenance and repair work is performed with Company rigs.

Economic factors associated with the price of oil and gas and the productive
output of wells determine the number of active wells the Company operates.
Under certain economic conditions, the Company has the potential to operate
approximately 119 wells, and of these, approximately 66 were in operation
during 2005.  In December of 2005, the Company hired a petroleum engineer on a
part-time basis to review all of the Company's oil and gas properties.  One of
the major objectives of this review is to identify the Company's current
inactive wells that have the best potential to be returned to production under
the current price levels.  The Company also owns other oil and gas interests
outside of California that it does not operate.  These interests are located
in Wyoming and New York.


MARKETING OF CRUDE OIL AND NATURAL GAS

The Company sells its crude oil to ConocoPhillips and Kern Oil & Refining,
accounting for approximately 55% and 41%, respectively, of Pyramid's crude
oil and gas sales in 2005.  While revenue from these customers is significant,
and the loss of any one could have an adverse effect on the Company, it is
management's opinion that the oil and gas it produces could be sold to other
crude oil purchasers, refineries or  pipeline companies.  ConocoPhillips and
Kern Oil have been customers of the Company for over ten years.  Natural
gas is sold to companies in the area of operations.  The Company sells its oil
pursuant to short-term contracts.  Accordingly, the amount of oil the Company
sells is dependent upon market demand.  Market demand for Pyramid's production
is subject to various influences and can never be assured, especially in an
era of changing prices.  The base values for crude oil the Company sells is
set by major oil companies in response to area and market strengths and
international influences.  Types and qualities of crude oil vary substantially
in base values posted by crude oil buyers in various areas of the country.
Pyramid's crude oil sales are not seasonal, but uniform throughout the year.




<PAGE> 7

RISKS, COMPETITION AND INDUSTRY CONDITIONS

The profitability of the Company's operations depends primarily on the
production of oil and gas in commercially profitable quantities.  Oil and gas
properties often fail to provide a return sufficient to repay the substantial
sums of money required for their acquisition, exploration and development.
The acquisition, exploration and development of oil and gas properties is a
highly competitive business.  Many entities with which the Company competes
have significantly greater financial and staff resources.  Such competitive
disadvantages could materially and adversely affect the Company's ability to
acquire new properties or develop existing properties.


REGULATIONS

The Company's business is affected by numerous governmental laws and
regulations, including energy, environmental, conservation, tax and other laws
and regulations relating to the petroleum industry.  Changes in any of these
laws and regulations could have a material and adverse effect on the Company's
business and financial stability.  In view of the many uncertainties with
respect to current laws and regulations, including their applicability to the
Company, the Company cannot predict the overall effect of such laws and
regulations on future operations.


TAXATION

The operations of the Company, as is the case in the petroleum industry
generally, are significantly affected by federal tax laws. Federal, as well as
state, tax laws have many provisions applicable to corporations which could
affect the future tax liability of the Company.


ENVIRONMENTAL

The Company's activities are subject to existing federal and state laws and
regulations governing environmental quality and pollution control.  These laws
may require the acquisition of permits relating to certain ongoing operations,
for drilling, emissions, waste water disposal and other air and water quality
controls.  In view of the uncertainty and unpredictability of environmental
statutes and regulations, the Company cannot ensure that such laws and
regulations will not materially and adversely affect the business of the
Company.  The Company does not currently anticipate any material effect on its
capital expenditures or earnings as the result of governmental regulations,
enacted or proposed, concerning environmental protection or the discharge of
material into the environment.  The Company is actively pursuing an ongoing
policy of upgrading and restoring older properties to comply with current and
proposed environmental regulations.





<PAGE> 8

COMMITMENTS AND CONTINGENCIES

The Company is liable for future dismantlement and abandonment costs
associated with its oil and gas properties.  These costs include down-hole
plugging and abandonment of wells, future site restoration, post closure and
other environmental exit costs.  The costs of future dismantlement and
abandonment have been accrued and recorded in the financial statements.  See
Note 9 of Notes to Financial Statements included in Item 7 of this Form
10-KSB.

During 2005, the Company entered into a new oil and gas lease, the Santa Fe
Energy Section 32 lease that is currently undeveloped.  In the first quarter
of 2006, the Company and its joint venture partner drilled an exploratory well
on this lease and is currently completing the well to test the economic status
of the well.  Under the terms of the new lease, if oil or gas can be produced
in paying quantities, the Company is obligated to drill a new well every 180
days until the property is fully developed, in order to retain the undeveloped
acreage.  If the Company should determine in the future to discontinue the
drilling obligation under this lease, it would surrender to the lessor all the
undeveloped acreage and retain 10 acres around each producing well.


OTHER

The Company employed twelve full-time people as of December 31, 2005, three of
whom were office or administrative personnel, and the rest of whom were field
personnel.  The Company contracts for additional labor services when needed.
The Company is not a party to any union or labor contracts.

The Company had no material research and development costs for the three years
ended December 31, 2005.

All of the Company's revenues during 2005 were derived from domestic sources.

The Company does not have any patents or trademarks, and it does not believe
that its business or operations are dependent upon owning any patents or
trademarks.















<PAGE> 9

ITEM 2 - DESCRIPTION OF PROPERTY

(a)  DESCRIPTION OF PROPERTIES

The principal assets of the Company consist of proven and unproven oil and
gas properties, oil and gas production related equipment and developed and
undeveloped real estate holdings.  The Company's oil and gas properties are
located exclusively in the continental United States, in California, Wyoming
and New York.

Developed oil and gas properties are those on which sufficient wells have been
drilled to economically recover the estimated reserves calculated for the
property.  Undeveloped properties do not presently have sufficient wells to
recover the estimated reserves.  The Company had no significant proved
undeveloped properties at December 31, 2005, 2004 and 2003.


(b)  OIL AND GAS PROPERTIES

The Company's estimated future net recoverable oil and gas reserves from
proved reserves, both developed and undeveloped properties, were assembled by
SI International, Inc., independent petroleum engineers, and are as follows:

<Table>
<Caption>
                                  Crude Oil          Natural Gas
                                    (BBLS)              (MCF)
                                  ---------          -----------
<S>                               <C>                <C>
     January 1, 2006               715,000              94,000
                2005               522,000              83,000
                2004               555,000              83,000
                2003               554,000             105,000
                2002               323,000              37,000
</Table>

The Company's estimated future net recoverable oil and gas reserves, noted in
the table above, have not been filed with any other Federal authority or
agency since January 1, 2005.

Using year-end oil and gas prices and lease operating expenses, the estimated
value of future net revenues to be derived from Pyramid's proved developed oil
and gas reserves, discounted at 10%, were $12,594,000 at December 31, 2005,
$4,636,000 at December 31, 2004, $4,617,000 at December 31, 2003, $4,325,000
at December 31, 2002, and $1,250,000 at December 31, 2001.

Pyramid participates in the drilling of developmental wells, no single one of
which would cause a significant change in the net reserve figure.




<PAGE> 10

Pyramid's net oil and gas production after royalty and other working interests
for the past five years ending December 31, were as follows.

<Table>
<Caption>
                       2005      2004      2003       2002       2001
                       ----      ----      ----       ----       ----
<S>                  <C>       <C>       <C>         <C>       <C>
Crude oil (Bbls)      71,000    72,000    74,000     66,000     77,000

Natural gas (MCF)      7,000     8,300     7,500     11,000      9,000

</Table>

Pyramid's average sales prices per barrel or per MCF of crude oil and natural
gas, respectively, and production costs per equivalent barrel (gas production
is converted to equivalent barrels at the rate of 6 MCF per barrel,
representing the estimated relative energy content of gas to oil) for the past
five years ending December 31, were as follows:

<Table>
<Caption>
                       2005       2004      2003      2002       2001
                       ----       ----      ----      ----       ----
<S>                   <C>        <C>       <C>       <C>        <C>
Sales price:
  Crude oil           $47.96     $36.24    $27.60    $22.86     $21.02
                       =====      =====     =====     =====      =====
  Natural gas         $ 6.77     $ 5.89    $ 5.77    $ 3.08     $ 4.80
                       =====      =====     =====     =====      =====

Production costs      $19.30     $18.20    $15.80    $15.30     $13.30
                       =====      =====     =====     =====      =====
</Table>

The average selling price of Pyramid's crude oil at December 31, 2005, was
approximately $53.10 per barrel and the average selling price of Pyramid's gas
at December 31, 2005, was approximately $11.53 per MCF.

As of December 31, 2005, Pyramid had the following gross and net position in
wells and proved acres:

<Table>
                         WELLS                    PROVED ACRES
                   -----------------           -----------------
                   Gross (1)  Net (1)          Gross (2)  Net (2)
                   --------   ------           --------   ------
                   <C>        <C>              <C>        <C>
                     143       127              21,387     5,844
                     ===       ===              ======     =====
</Table>


<PAGE> 11

    (1)  "Gross wells" represents the total number of wells in which the
         Company has a working interest.  "Net wells" represents the number
         of gross wells multiplied by the percentage of the working
         interests therein held by the Company.

    (2)  "Gross acreage" represents all acres in which the Company has a
         working interest.  "Net acres" represents the aggregate of the
         working interests of the Company in the gross acres.

The Company drilled two new wells in 2004, one on the Santa Fe lease and one
joint-venture well.  The Company participated with two other oil companies as
operator in the drilling of the joint venture well.  The Company also drilled
a well in 2003 on the Anderson lease in the Carneros Creek Field.  No wells
were drilled in 2002 and 2001, although the Company did participate as a
non-operator in 2001 in the drilling of joint-venture wells.

         "Unproven" oil and gas properties are those on which the presence of
         commercial quantities of reserves of crude oil or natural gas has not
         been established.

         "Undeveloped" acreage exists on those oil and gas properties where
         economically recoverable reserves are estimated to exist in proved
         reservoirs from wells to be drilled in the future.

As of December 31, 2005, Pyramid held positions in unproven acreage in the
following locations:

<Table>
<Caption>
                                                       ACRES
                                                 ------------------
                                                  Gross        Net
                                                 ------      ------
<S>                                              <C>         <C>
New York
    Mount Morris and Livingston Counties         34,800       9,788
                                                 ======       =====
</Table>


(c)  REAL PROPERTY OWNED

Pyramid owned the following real property as of December 31, 2005, all located
in California.

    County of Kern
         Mullaney yard                         20 acres
         Grazing land                         160 acres
         Miller property                      112 acres
         Ranton property                       80 acres

    City of Bakersfield                         3 lots

<PAGE> 12

Located on the three lots of real property in the city of Bakersfield is the
Company's executive offices.  This property was acquired by the Company in
1986.  The office building located on this property is a one story structure
with approximately 4,200 square feet in good condition.


ITEM 3 - LEGAL PROCEEDINGS

The Company is subject to potential litigation within the normal course of
business.  The resolution in any reporting period of such litigation could
have a material impact on Pyramid's financial position or results of
operations for that period.  Pyramid is not party to any proceedings or
actions which management believes might have a material effect upon its
financial position or results of operations.



ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of 2005.


                                  PART II

ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)  PRICE RANGE OF COMMON SHARES

The common stock of Pyramid is traded on the OTC Bulletin Board under the
symbol "PYOL".  The following are high and low sales prices for each quarter
of 2005 and 2004, and reflect inter-dealer prices without retail markup,
markdown or commission.

<Table>
<Caption>
                                        High         Low
                                        ----        -----
<S>                                    <C>         <C>
    Fiscal Quarter Ending 2005
         March 31,                    $6.0000      $2.9000
         June 30,                      4.5000       2.1500
         September 30,                 5.7500       3.2500
         December 31,                  5.1000       3.9000
    Fiscal Quarter Ending 2004
         March 31,                     2.1200       0.7500
         June 30,                      1.3500       1.0600
         September 30,                 1.9000       1.1600
         December 31,                  4.3500       1.5000
</Table>


<PAGE> 13

At December 31, 2005, the Company had 313 shareholders of record, and an
unknown number of additional holders whose stock is held in "street name".

The Company has paid no dividends on its common shares for the past five
years.  The Company had received a proposal from a shareholder to pay a cash
dividend in 2004.  This dividend proposal was included in the proxy statement
for the 2004 Annual Meeting of Shareholders and was voted upon by the
shareholders.  The dividend proposal was defeated.

The Company did not issue or repurchase any securities during 2005.


ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION


IMPACT OF CHANGING PRICES

Average prices increased by approximately $11.76 per equivalent crude oil and
gas barrel sold during 2005 as compared with average prices for 2004.  In 2005
there were 228 separate crude oil price changes, as compared with 216 price
changes in 2004.  The difference between the highest ($65.75) and lowest
($33.75) posted prices in 2005 was $32.00 per barrel.  By comparison, this
same differential in 2004 was $17.40 per barrel.


LIQUIDITY AND CAPITAL RESOURCES

The Company had cash and cash equivalents of $1,300,475 at December 31, 2005,
for an increase of $484,259, when compared to December 31, 2004.  Operating
activities in 2005 generated cash of $1,191,818.  During 2005, cash was
consumed by capital spending of $493,585, additional purchases of short-term
cash investments of $500,000 and principal payments on the Company's long-term
debt totaling $50,781.  This was offset by proceeds from the sale of property
and equipment in the amount of $333,643.  The components of the changes in
cash for 2005 are described in the Statements of Cash Flows included in Item 7
of this Form 10-KSB.  Adequate funds were available to carry out all necessary
oil and gas operations and to maintain its equipment.  During 2005, the
Company had short-term investments of $1,350,000 which provided additional
liquidity.  Short-term investments consist of certificates of deposit having
original maturities of three months or more.  A $200,000 line of credit,
unused at December 31, 2005, also provided additional liquidity during 2005.











<PAGE> 14

The Company believes that its existing current assets and the amount of cash
it anticipates it will generate from current operations will be sufficient to
fund the anticipated liquidity and capital resource needs of the Company for
the fiscal year ended December 31, 2006.  In addition to its current assets,
the Company also has a credit facility for $200,000 available in the event
that it needs other resources to fund its liquidity and capital resource
needs.  Although the Company may increase its capital expenditures during the
current fiscal year to enhance its current oil production capacities, it does
not anticipate that such expenditures would exceed the amount of liquidity
currently available to the Company.  The Company's beliefs that its existing
assets and the cash expected to be generated from operations will be
sufficient during the current fiscal year are based on the following:

     As of December 31, 2005, the amount of cash, cash equivalents, and short
     term investments was equal to $2,650,000 in the aggregate.

     As of December 31, 2005, the Company had approximately $3,318,000 in
     current assets, and only $684,000 of current liabilities.

     As of December 31, 2005, the Company had only $27,000 of long-term
     indebtedness (net of current maturities).

The Company is not a party to any off-balance sheet arrangements and does not
engage in trading activities involving non-exchange traded contracts.  In
addition, the Company has no financial guarantees, debt or lease agreements or
other arrangements that could trigger a requirement for an early payment or
that could change the value of the Company's assets.  Management continues to
examine various alternatives for increasing capital resources including, among
other things, participation with industry and/or private partners in drilling
and exploration prospects and specific rework of existing properties to
enhance production and expansion of its sales of crude oil and natural gas in
California.  If necessary, Pyramid could sell certain nonessential assets to
raise capital for the benefit of these programs.

The Company drilled two wells in the year ended December 31, 2004.  The
Company drilled one well in the year ended December 31, 2003.  The Company's
crude oil reserves for the years ended December 31, 2005 and 2004, were
stable.  The Company was able to replace current production by drilling the
wells in 2004 and 2003.  One of the wells drilled in 2004, during the second
quarter, was not capable of producing economic quantities of crude oil and is
scheduled to be abandoned in 2005. The other well was drilled in the fourth
quarter of 2004.










<PAGE> 15

Certain properties that the Company owns have become uneconomic and have been
shut-in.  When these properties are not operated, any reserves that could be
assigned to these properties are not included in the year-end engineering
report of total Company reserves.  Another major factor that directly affects
the Company's future reserve base is the price of crude oil at December 31 of
any given year.  The year-end price of oil and gas has a significant impact on
the estimated future net recoverable oil and gas reserves from proved
developed properties.  At certain depressed price levels, some of the
Company's oil and gas properties are not economical to operate and thus its
year-end engineering reserve reports do not assign any oil and gas reserves to
these properties.  Conversely, if year-end prices should increase to a certain
level, the reserves on these leases would be economic to produce and would
increase the Company's reserves.


FORWARD-LOOKING INFORMATION

Looking forward into 2006, crude oil prices have increased by $2.75 per
barrel as of March 24, 2006, compared to prices at December 31, 2005.  There
have been 54 separate price changes since December 31, 2005.

The first two months of 2006 has been busy for the Company, with the drilling
of three new developmental wells within the Company's Carneros Creek field and
one joint venture exploratory  well just outside of the existing field
boundaries.  This is the highest level of drilling activity the Company has
had in the past twenty years.

The first well was programed to be drilled to 3,100 feet to evaluate four
known oil zones but drilling problems occurred in the last 100 feet.
Production casing was run and cemented at 3,000 feet based upon favorable mud
and electric log results from the upper three oil zones.  Plans are to
stimulate the lower zone first with a sand-oil fracturing process.

The second well was drilled to 2,600 feet, penetrating all of the expected
zones and production casing was run.  This well was designed, located and
drilled to test several separate shallow oil zones known to be present in
certain areas of the field.  These shallower zones are known to contain oil
in the 15 to 20 gravity range which is lower than the deeper Point of Rocks
zone containing 30 gravity oil.

The third well was located and drilled to take advantage of an area within the
field that had been missed in earlier drilling activities.  This well went to
a depth of 3,200 feet encountering all of the expected producing zones, in
addition to a deeper pay interval not normally found in other wells in the
area.  Production casing was run and completion activities have begun on this
well.  Specific zones in this well will be stimulated by sand-oil fracturing
processes, to enhance production.





<PAGE> 16

The fourth well was an exploratory well located approximately one mile south
of the existing producing area of the Carneros Creek field.  This well is a
joint venture project between the Company, who owns 52% and E&B Natural
Resources Management Corporation who owns 48% and is the operator.  The well
was drilled to 3,702 feet and encountered a good show in the Point of Rocks
formation and based upon the results of the mud log and electric log,
production casing was run.  Completion activities have begun and the results
will be announced in the future.  This well will be stimulated by sand-oil
fracturing processes, to enhance production.  It is anticipated that follow-up
wells will be drilled in this new area of the field.

Management is reviewing several additional prospects for possible 2006
drilling.  Drilling rig availability will be major factor in the timing of any
new wells or re-drills the Company may desire to do.

The Company's growth in 2006 will be highly dependant on the amount of success
the Company has in its operations and capital investments, including the
outcome of wells that have not yet been drilled.  The Company's capital
investment program may be modified during the year due to explorations and
development successes or failures, market conditions and other variables.  The
production and sales of oil and gas involves many complex processes that are
subject to numerous uncertainties, including reservoir risk, mechanical
failures, human error and market conditions.

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 2006, 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 2005.  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.


<PAGE> 17

ANALYSIS OF SIGNIFICANT CHANGES IN RESULTS OF OPERATIONS

Results of Operations for the Fiscal Year Ended December 31, 2005
  Compared to the Fiscal Year Ended December 31, 2004


REVENUES

Oil and gas sales increased by 30% for the year ended December 31, 2005, when
compared with the same period for 2004.  Oil and gas sales increased by 32%
due to higher average prices for 2005.  The average price of the Company's oil
and gas increased by approximately $11.76 per equivalent barrel for 2005 when
compared to 2004.  This was offset by a decrease in crude oil production/sales
of approximately 1,400 barrels.


OPERATING EXPENSES

Operating expenses increased by approximately 5% for the year ended December
31, 2005, when compared with the same period of 2004.  The cost to produce an
equivalent barrel of crude oil increased by approximately $1.20 per barrel for
2005 when compared to 2004, for a total cost of approximately $19.30 per
equivalent barrel.  Operating costs for the twelve months ended December 31,
2005, increased due to a number of differing factors, there were offsetting
positive and negative changes in operating expenses during 2005 that resulted
in the overall 5% increase in crude oil production costs.

Operating parts and supplies increased by approximately 2% due to higher
levels of repair and maintenance on producing properties.  As a result of the
higher crude oil prices, repair and maintenance that had been deferred in
prior years due to lower crude prices, are now economically feasible.
Equipment fuel, used in Company owned vehicles and equipment, increased by
approximately 2% due to increased usage of gasoline and diesel fuels and
higher per gallon prices.  Gas engine repair and maintenance increased by
approximately 1% due to the catch-up on deferred repair and maintenance as a
result of higher crude oil prices.  Gas engine repairs reflects the costs of
maintaining the engines used to power some of the Company's producing
properties, primarily in the Carneros Creek area.  Utilities increased by
approximately 1% due primarily to higher rates for electric power.  Electric
power is used to power the engines on some of the Company's producing
properties, primarily in the Mountain View and Edison fields.  Waste water
disposal increased by approximately 1% due primarily to the cost of waste
water disposal on one of the Company's producing properties.  This property
had been shut-in until the fourth quarter of 2004.  The increase is due
primarily to the fact that the lease has been in full operation during 2005.
Costs for well testing have increased by 1% due to the Company electing to
test more of the tubing and pipe each time that down-hole work is performed on
a well.  The purpose of the testing is to identify tubing or pipe that will
fail.  The Company replaces the bad tubing or pipe thus increasing the run
time of wells and decreasing the cost of well pulling activities.



<PAGE> 18

The costs of tool rental decreased by approximately 2% during 2005.  During
2004, the Company performed a fishing job, with rental tools, on one of its
wells in an attempt to return the well to production, this effort was
unsuccessful.  Outside services decreased by 2% during 2005.  During 2004, the
Company contracted with third-party well servicing companies to perform well
work, primarily fracturing services.  Fewer such activities were contracted
for in 2005.


GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses increased by approximately 31% for the
year ended December 31, 2005, when compared with the same period for 2004.
Audit fees increased by approximately 17% due to an increase in fees billed by
the Company's outside auditors, Singer, Lewak, Greembaum & Goldstein.   Legal
services increased by approximately 5% due primarily to activities related to
the change in the control of the Company and additional compliance efforts in
the area of corporate governance which ere required by Sarbanes-Oxley.
Consulting services increased by approximately 4% due to work done by an
outside geologist and petroleum engineer who evaluated the Company's existing
oil and gas properties for potential rework or re-drilling prospects.


PROVISION FOR DEPLETION, DEPRECIATION, AMORTIZATION
 AND VALUATION ALLOWANCES

The provision for depletion, depreciation, amortization and valuation
allowances increased by approximately 17% for the twelve months ended December
31, 2005, when compared with the same period for 2004. The increase is due
primarily to an increase of 15% in depletion.  The increase in depletion is
due to an increase in the depletion rate due to an increase in the depletable
asset base at January 1, 2005.  The depletable asset base has increased due to
the drilling of two new wells in 2004 and 2003.


GAIN ON SALE OF FIXED ASSETS

The Company recognized a gain on the sale of fixed assets during the third
quarter of 2005 in the amount of approximately $292,000 with the sale of a
well servicing hoist.  The Company sold two well servicing hoists in 2004 for
a gain of approximately $190,000.  During 2004, the Company also sold;
equipment from the category of assets held for resale for a gain of $54,000,
and other vehicles, equipment and tubing for a gain of $66,000.  All of the
assets sold in 2005 and 2004 had little or no net book values.


TERMINATION COSTS

Termination costs of $424,000 for 2005, reflect the costs of the termination
agreement between the Company and Benny Hathaway, Vice President of the
Company.  See Note 12 for additional information about the terms of the
termination agreement.  The termination costs for 2004, reflect the settlement

PAGE <19>

of the employment contract with J. Ben Hathaway.  Mr. Hathaway voluntarily
resigned as President of Pyramid Oil Company and pursuant to the terms of his
employment contract, he received a payment of approximately $170,000.

INCOME TAX PROVISION

The Company's income tax provision consists mainly of current tax for
California and minimum tax for New York.  The Company is utilizing its
net operating loss carryforwards to offset Federal income taxes.



Results of Operations for the Fiscal Year Ended December 31, 2004
  Compared to the Fiscal Year Ended December 31, 2003

REVENUES

Oil and gas sales increased by 29% for the year ended December 31, 2004, when
compared with the same period for 2003.  Oil and gas sales increased by 30%
due to higher average prices for 2004.  The average price of the Company's oil
and gas increased by approximately $8.50 per equivalent barrel for 2004 when
compared to 2003.  This was offset by a decrease in crude oil production/sales
of approximately 900 barrels.


OPERATING EXPENSES

Operating expenses increased by approximately 13% for the year ended December
31, 2004, when compared with the same period of 2003.  The cost to produce an
equivalent barrel of crude oil increased by approximately $2.20 per barrel for
2004 when compared to 2003. Operating costs for the twelve months ended
December 31, 2004, increased due to a number of differing factors.

The Company worked on a well on one of its leases in the Carneros Creek area
during 2004, increasing operating costs by approximately 6%. The work on this
well had been done to explore a different producing zone in an effort to
increase production and to test this zone for application on other wells on
this same property.  The work on this well did not generate any additional
production for this lease.

Expenses increased by 5% on a property that the Company returned to production
during the fourth quarter of 2004.  This property has been shut-in for over
two years due to problems with economically disposing of produced waste water.
As a result of the higher crude oil prices during 2004, it became economical
for the Company to cover the costs of disposing of the waste water.

Labor costs increased by approximately 2% due to increases in hourly wage
rates, overtime and the addition of one new field employee in August of 2004,
bringing the total number of field personnel from seven to eight employees.
Operating expenses were generally higher in 2004, as a result of the Company
placing greater emphasis on maintaining and enhancing crude oil production to
take advantage of the higher crude oil prices during 2004.

<PAGE> 20

EXPLORATION COSTS

In April 2004, the Company entered into a Joint Venture Agreement with two oil
companies, Prime Natural Resources, LLC of Houston, Texas and North Arm
Resources, Inc. Of Wayzata, Minnesota for the drilling of a 5,500 foot
exploratory well in the Blackwell's Corner area of Kern Country California.
This drilling prospect contains approximately 1,100 acres and was developed by
employing 3-D seismic technology and geology.  The Company purchased a 25%
position in the prospect for approximately $53,000 and will be the operator.
The new well was drilled in May of 2004, with an estimated cost of
approximately $400,000 for a dry-hole look and $560,000 to complete as a
producer.  The Company's share of these costs would be 25%.  As of December
31, 2004, the Company's share of costs for drilling and competing the new well
was approximately $201,000. In the fourth quarter of 2004, a decision was made
by the Company and its joint venture partners to abandon this well.  It was
determined in the fourth quarter of 2004, that the well could not produce
economic quantities of oil and gas.  Therefore, the Company reclassified its
share of costs of $201,000 for drilling and completing this well as
exploration costs.


GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses increased by approximately 59% for the
year ended December 31, 2004, when compared with the same period for 2003.
General and administrative expenses increased by approximately 49% due to the
settlement of the employment contract with J. Ben Hathaway.  Mr. Hathaway
voluntarily resigned as President of Pyramid Oil Company and pursuant to the
terms of his employment contract, he received a payment of approximately
$170,000.  General and administrative expenses also increased due to increased
administrative salaries of approximately 5%.  Legal services also increased by
approximately 2% due to additional compliance efforts required by the recently
enacted Sarbanes-Oxley legislation.


PROVISION FOR DEPLETION, DEPRECIATION, AMORTIZATION
 AND VALUATION ALLOWANCES

The provision for depletion, depreciation, amortization and valuation
allowances increased by approximately 28% for the twelve months ended December
31, 2004, when compared with the same period for 2003. The increase is due
primarily to an increase of 12% in valuation allowances.  At December 31,
2004, the Company was required to provide a valuation allowance against an oil
and gas property whose book value exceeded the undiscounted net value of its
future net cash flows by approximately $21,000.  Depletion also increased by
approximately 11%.  The increase in depletion is due to an increase in the
depletion rate due to an increase in the depletable asset base at January 1,
2005 and a decline in proved developed reserves.  Depreciation of fixed assets
also increased by 5% due primarily to the replacement of fully depreciated
pickup trucks with new trucks.



<PAGE> 21

GAIN ON SALES OF PROPERTY AND EQUIPMENT

During 2004, the Company sold two well servicing hoists for a gain of
approximately $190,000.  Also in 2004;  the Company sold from the category,
assets held for resale, equipment for a gain of $54,000, the Company sold
three excess pickups and other equipment for a gain of approximately $13,000.
All of the assets sold in 2004 had little or no net book values.


OTHER INCOME

The Company sold excess tubing and sundry used oilfield supplies and
production equipment during 2004, which resulted in approximately $53,000 of
other income.


CRITICAL ACCOUNTING POLICIES

COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES

The Company has adopted the "successful efforts" method of accounting for its
oil and gas exploration and development activities, as set forth in the
Statement of Financial Accounting Standards No. 19, as amended, issued by the
Financial Accounting Standards Board.

The Company initially capitalizes expenditures for oil and gas property
acquisitions until they are either determined to be successful (capable of
commercial production) or unsuccessful.  The carrying value of all undeveloped
oil and gas properties is evaluated periodically and reduced if such carrying
value appears to have been impaired.  Leasehold costs relating to successful
oil and gas properties remain capitalized while leasehold costs which have
been proven unsuccessful are charged to operations in the period the leasehold
costs are proven unsuccessful.  Costs of carrying and retaining unproved
properties are expensed as incurred.

The costs of drilling and equipping development wells are capitalized, whether
the wells are successful or unsuccessful.  The costs of drilling and equipping
exploratory wells are capitalized until they are determined to be either
successful or unsuccessful.  If the wells are successful, the costs of the
wells remain capitalized.  If, however, the wells are unsuccessful, the
capitalized costs of drilling the wells, net of any salvage value, are charged
to operations in the period the wells are determined to be unsuccessful.

The Company adopted the Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" (the
Statement).  The Statement specifies when an impairment loss should be
recognized and how impairment losses should be measured for long-lived assets
to be held and used and for long-lived assets to be disposed of.  In
accordance with the Statement, the costs of proved oil and gas properties and
equipment are periodically assessed on a lease by lease basis to determine if
such costs exceed undiscounted future cash flows, and if conditions warrant an
<PAGE> 22

impairment reserve will be provided based on the estimated future discounted
cash flows.  The Company recorded an impairment reserve of $21,699 at December
31, 2004.  There were no material impairment reserves recorded in the two
years ended December 31, 2003.


DEPLETION, DEPRECIATION, AND AMORTIZATION

Depletion of leasehold costs of producing oil and gas properties is provided
on the unit-of-production method, by individual property unit, based on
estimated recoverable proved reserves.  Depreciation and amortization of the
costs of producing wells and related equipment are provided on the
unit-of-production method, by individual property unit, based on estimated
recoverable proved developed reserves.  Amortization of the costs of
undeveloped oil and gas properties is based on the Company's experience,
giving consideration to the holding periods of leaseholds.  The average
depletion per equivalent barrel of crude oil produced for 2005, 2004 and 2003
were $1.99, $1.50 and $0.95, respectively.

Drilling and operating equipment, buildings, automotive, office and other
property and equipment and leasehold improvements are stated at cost.
Depreciation and amortization are computed using the straight-line method over
the shorter of the estimated useful lives or the applicable lease terms (range
of 3 to 19 years).  Any permanent impairment of the carrying value of property
and equipment is provided for at the time such impairments become known.


IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued SFAS No. 123(R), 'Share-Based Payment'.
SFAS 123(R) amends SFAS No. 123, 'Accounting for Stock-Based Compensation',
and APB Opinion 25, 'Accounting for Stock Issued to Employees'.  SFAS
No.123(R) requires that the cost of share-based payment transactions
(including those with employees and non-employees) be recognized in the
financial statements.  SFAS No. 123(R) applies to all share-based payment
transactions in which an entity acquires goods or services by issuing (or
offering to issue) its shares, share options, or other equity instruments
(except for those held by an ESOP) or by incurring liabilities (1) in amounts
based (even in part) on the price of the entity's shares or other equity
instruments, or (2) that require (or may require) settlement by the issuance
of an entity's shares or other equity instruments.  This statement is
effective, as of the first interim period or fiscal year beginning after
December 15, 2005.  This statement did not have any impact on the Company's
financial statements for the year ended December 31, 2005.  At the present
time, the Company does not have any share-based compensation plans for
employees or non-employees.  Management is currently assessing the effect of
SFAS No.123(R) on the Company's financial statements, if the Company should
adopt a stock option plan in the future for employees or non-employees.





<PAGE> 23

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections.  FASB Statement of Accounting Standards (SFAS) 154 establishes
new standards on accounting for changes in accounting principles. Pursuant to
the new rules, all such changes must be accounted for by retrospective
application to the financial statements of prior periods unless it is
impracticable to do so. SFAS 154 completely replaces Accounting Principles
Bulletin (APB) Opinion 20 and SFAS 3, though it carries forward the guidance
in those pronouncements with respect to accounting for changes in estimates,
changes in the reporting entity, and the correction of errors.  The Statement
is effective for accounting changes and error corrections made in fiscal years
beginning after December 15, 2005, with early adoption permitted for changes
and corrections made in years beginning after May 2005.  Management does not
expect adoption of SFAS No. 154 to have a material impact on the Company's
financial statements.

In February 2006 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) 155 Accounting for Certain Hybrid
Financial Instruments.  SFAS 155 amends SFAS 133 to narrow the scope
exception for interest-only and principal-only strips on debt instruments to
include only such strips representing rights to receive a specified portion of
the contractual interest or principal cash flows. SFAS 155 also amends SFAS
140 to allow qualifying special-purpose entities to hold a passive derivative
financial instrument pertaining to beneficial interests that itself is a
derivative financial instrument. Generally, FASB Statement of Financial
Accounting Standards SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, requires that a derivative embedded in a host contract
that does not meet the definition of a derivative be accounted for separately
(referred to as bifurcation) under certain conditions. That general rule
notwithstanding, SFAS No. 133 (prior to amendments made to it by SFAS No. 155)
provides a broad exception for interest-only and principal-only strips
initially resulting from the separation of rights to receive contractual cash
flows of a financial instrument that itself does not contain an embedded
derivative that would have been accounted for separately. SFAS 155 amends SFAS
133 to restrict the scope exception to strips that represent rights to receive
only a portion of the contractual interest cash flows or of the contractual
principal cash flows of a specific debt instrument.  Prior to amendments made
by SFAS 155, SFAS 140, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities, permitted a qualifying
special-purpose entity (SPE) to hold only passive derivative financial
instruments pertaining to beneficial interests (other than another derivative
financial instrument) issued or sold to parties other than the transferor.
SFAS 155 amends SFAS 140 to allow a qualifying SPE to hold a derivative
instrument pertaining to beneficial interests that itself is a derivative
financial instrument.  Management does not expect adoption of SFAS No. 155 to
have a material impact on the Company's financial statements.





<PAGE>
<PAGE> 24

ITEM 7- FINANCIAL STATEMENTS

                           PYRAMID OIL COMPANY

                      INDEX TO FINANCIAL STATEMENTS

                            DECEMBER 31, 2005

                                                                     Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM . . . . . .   25


FINANCIAL STATEMENTS:

    Balance sheets - December 31, 2005 and 2004 . . . . . . . . . .   26-27
    Statements of operations - years ended
      December 31, 2005, 2004 and 2003  . . . . . . . . . . . . . .   28-29
    Statements of shareholders' equity - years ended
      December 31, 2005, 2004 and 2003  . . . . . . . . . . . . . .   30
    Statements of cash flows - years
      ended December 31, 2005, 2004 and 2003  . . . . . . . . . . .   31-32
    Notes to financial statements . . . . . . . . . . . . . . . . .   33


<PAGE>
<PAGE> 25


            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors
  and Shareholders of
Pyramid Oil Company
Bakersfield, California


We have audited the balance sheets of Pyramid Oil Company (the Company) as
of December 31, 2005 and 2004, and the related statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 2005.  These financial statements are the responsibility of
the Company's management.  Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe that our
audits provided a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pyramid Oil Company as of
December 31, 2005 and 2004, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2005, in
conformity with U.S. generally accepted accounting principles.


SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
March 10, 2006








<PAGE>
<PAGE> 26
                             FINANCIAL STATEMENTS
                              PYRAMID OIL COMPANY
                                BALANCE SHEETS
                                    ASSETS

<Table>
<Caption>                                                December 31,
                                                  --------------------------
                                                     2005            2004
                                                  ----------    ------------
<S>                                              <C>             <C>
CURRENT ASSETS:
   Cash and cash equivalents                    $ 1,300,475      $    816,216
   Short-term investments                         1,350,000           850,000
   Trade accounts receivable
     (net of reserve for doubtful accounts
     of $4,000 in 2005 and 2004)                    327,173           216,821
   Interest receivable                               91,717            70,628
   Employee loan receivable                           8,015             8,801
   Crude oil inventory                               58,962            66,339
   Prepaid expenses                                 120,367           110,164
   Deferred income taxes                             60,954            25,698
                                                  ---------        ----------
         Total current assets                     3,317,663         2,164,667
                                                  ---------        ----------
PROPERTY AND EQUIPMENT, at cost:
   Oil and gas properties and equipment
     (successful efforts method)                 11,505,375        11,208,833
   Capitalized asset retirement costs               294,600           294,600
   Drilling and operating equipment               1,945,882         2,067,006
   Land, buildings and improvements                 976,965           947,426
   Automotive, office and
     other property and equipment                   961,902           961,519
                                                 ----------        ----------
                                                 15,684,724        15,479,384
   Less - accumulated depletion,
     depreciation, amortization
     and valuation allowances                   (13,307,424)      (13,294,764)
                                                 ----------        ----------
                                                  2,377,300         2,184,620
                                                 ----------        ----------
OTHER ASSETS
   Deposits                                         250,000           250,000
   Other assets                                      13,178            15,556
   Assets held for resale
     (net of accumulated depreciation
     of $382,346 in 2005 and 2004)                    9,633             9,633
                                                 ----------        ----------
                                                $ 5,967,774       $ 4,624,476
                                                 ==========        ==========
The accompanying notes are an integral part of these balance sheets.
</Table>

<PAGE> 27
                              PYRAMID OIL COMPANY
                                BALANCE SHEETS
                      LIABILITIES AND SHAREHOLDERS' EQUITY

<table>
<Caption>
                                                     December 31,
                                              ----------------------------
                                                  2005              2004
                                              ----------        ----------

<S>                                           <C>               <C>
CURRENT LIABILITIES:
   Accounts payable                         $    83,749        $    62,229
   Accrued professional fees                     51,741             28,220
   Accrued taxes, other than
     income taxes                                29,151             24,090
   Accrued payroll and related costs             51,039             44,201
   Accrued royalties payable                    115,762             85,186
   Accrued insurance                             54,826             52,094
   Accrued income taxes                          54,050                 --
   Accrued termination costs                    146,047            170,054
   Current maturities of long-term debt          37,073             50,740
   Deferred income taxes                         60,954             25,698
                                              ---------         ----------
      Total current liabilities                 684,392            542,512
                                              ---------         ----------

LONG-TERM DEBT, net of current
 maturities                                      26,858             63,972
                                              ---------         ----------
LIABILITY FOR TERMINATION COSTS                 141,333                 --
                                              ---------         ----------
LIABILITY FOR ASSET RETIREMENT OBLIGATIONS      955,169            946,566
                                              ---------         ----------
COMMITMENTS AND CONTINGENCIES (Note 6)

SHAREHOLDERS' EQUITY:
   Common stock, no par value -
     Authorized - 10,000,000 shares
     Issued and outstanding -
       2,494,430 shares                       1,071,610          1,071,610
   Retained earnings                          3,088,412          1,999,816
                                             ----------         ----------
                                              4,160,022          3,071,426
                                             ----------         ----------

                                            $ 5,967,774        $ 4,624,476
                                             ==========         ==========

The accompanying notes are an integral part of these balance sheets.
</Table>


<PAGE> 28
                             PYRAMID OIL COMPANY
                           STATEMENTS OF OPERATIONS
<Table>
<Caption>
                                              Year ended December 31,
                                       --------------------------------------
                                          2005          2004          2003
                                       ----------    ----------    ----------
<S>                                    <C>          <C>           <C>
REVENUES:                             $ 3,477,572   $ 2,674,902   $ 2,070,414
                                       ----------    ----------    ----------
COSTS AND EXPENSES:
  Operating expenses                    1,397,491     1,337,542     1,186,632
  Exploration costs                            --       201,388            --
  General and administrative              499,025       381,872       346,568
  Taxes, other than income and
    payroll taxes                          64,020        54,064        53,521
  Provision for depletion,
    depreciation, amortization
    and valuation allowances              251,083       214,673       168,268
  Accretion expense                        19,238        18,221        54,262
  Other costs and expenses                 19,670        19,350        18,663
                                        ---------     ---------    ----------
                                        2,250,527     2,227,110     1,827,914
                                        ---------     ---------    ----------
OPERATING INCOME                        1,227,045       447,792       242,500
                                        ---------     ---------    ----------
OTHER INCOME (EXPENSE):
  Interest income                          38,237        16,551        20,246
  Termination costs                    (  424,000)   (  170,054)           --
  Gain on sales of property
    and equipment                         291,868       252,421            --
  Loss on disposal of assets           (    8,047)           --            --
  Other income                             20,077        67,251        14,400
  Interest expense                     (    1,409)   (      934)   (    2,095)
                                       ----------     ---------     ---------
                                       (   83,274)      165,235        32,551
                                       ----------     ---------     ---------
INCOME BEFORE INCOME
 TAX PROVISION                          1,143,771       613,027       275,051
  Income tax provision                     55,175         1,125         1,125
                                       ----------     ---------     ---------
NET INCOME BEFORE
 CUMULATIVE EFFECT OF A CHANGE
 IN ACCOUNTING PRINCIPLE                1,088,596       611,902       273,926
  Cumulative effect on prior years
   of change in method of accounting
   for asset retirement obligation            --             --    (  810,115)
                                       ----------     ---------     ---------
NET INCOME (LOSS)                     $ 1,088,596   $   611,902   $(  536,189)
                                       ==========     =========     =========
The accompanying notes are an integral part of these statements.
</Table>

<PAGE> 29
                             PYRAMID OIL COMPANY
                           STATEMENTS OF OPERATIONS
<Table>
<Caption>
                                              Year ended December 31,
                                       --------------------------------------
                                          2005          2004          2003
                                       ----------    ----------    ----------
<S>                                    <C>          <C>           <C>
EARNINGS PER COMMON SHARE

  Basic:
   Income before cumulative
    effect of change in
    accounting principle              $       .44   $       .25   $       .11
   Cumulative effect on prior
    years of change in method
    of accounting for asset
    retirement obligation                      --            --          (.32)
                                       ----------     ---------     ---------
   BASIC INCOME (LOSS)                $       .44   $       .25   $      (.21)
                                       ==========     =========     =========
 Diluted:
  Income before cumulative
    effect of change in
    accounting principle              $       .44   $       .25   $       .11
   Cumulative effect on prior
    years of change in method
    of accounting for asset
    retirement obligation                      --            --          (.32)
                                       ----------     ---------     ---------
   DILUTED INCOME (LOSS)              $       .44   $       .25   $      (.21)
                                       ==========     =========     =========
Weighted average number of
  common shares outstanding             2,494,430     2,494,430     2,494,430
                                       ==========     =========    ==========

The accompanying notes are an integral part of these statements.
</Table>














<PAGE> 30

                              PYRAMID OIL COMPANY

                       STATEMENTS OF SHAREHOLDERS' EQUITY




<Table>
<Caption>

                              Common Shares
                               Issued and         Common         Retained
                               Outstanding         Stock         Earnings
                              -------------      ----------     ----------
<S>                           <C>                <C>            <C>

Balances, December 31, 2002      2,494,430       $1,071,610     $1,924,103

  Net loss                              --               --     (  536,189)
                                 ---------        ---------      ---------
Balances, December 31, 2003      2,494,430        1,071,610      1,387,914

  Net income                            --               --        611,902
                                 ---------        ---------      ---------
Balances, December 31, 2004      2,494,430        1,071,610      1,999,816

  Net income                            --               --      1,088,596
                                 ---------        ---------      ---------
Balances, December 31, 2005      2,494,430       $1,071,610     $3,088,412
                                 =========        =========      =========


The accompanying notes are an integral part of these statements.

</Table>
<PAGE>
<PAGE> 31
                            PYRAMID OIL COMPANY
                          STATEMENTS OF CASH FLOWS


<Table>
<Caption>
                                               Year ended December 31,
                                          --------------------------------
                                             2005       2004        2003
                                          ---------   --------    --------
<S>                                       <C>        <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

  Net income (loss)                      $1,088,596  $ 611,902    $(536,189)
  Adjustments to reconcile net income
    (loss) to net cash provided
    by operating activities:
      Cumulative effect on prior years of
        change in method of accounting
        for asset retirement obligation          --         --      810,115
      Provision for depletion,
        depreciation, amortization
        and valuation allowances            251,083    214,673      168,268
      Accretion expense                      19,238     18,221       54,262
      Decrease in asset
        retirement obligations              (10,635)   ( 1,961)     ( 3,973)
      Exploration costs                          --    201,388           --
      Gain on sale of
        property and equipment             (291,868)  (252,421)          --
      Loss on disposal of fixed assets        8,047         --        7,000
      Accrued termination costs             141,333         --           --
  Changes in operating assets
    and liabilities:
      (Increase) in trade accounts
        and interest receivable            (131,441)   ( 6,559)     (24,424)
      Decrease (increase) in crude
        oil inventories                       7,377    (17,922)       1,736
      (Increase) decrease in
        prepaid expenses                    (10,203)     4,247      (11,087)
      Increase in accounts payable
        and accrued liabilities             120,291    152,030       64,265
                                          ---------    -------      -------
  Net cash provided by
    operating activities                  1,191,818    923,598      529,973
                                          ---------    -------      -------

      The accompanying notes are an integral part of these statements.
</Table>






<PAGE> 32
                                PYRAMID OIL COMPANY
                              STATEMENTS OF CASH FLOWS
                                   (CONTINUED)
<Table>
<Caption>

                                                 Year ended December 31,
                                              ------------------------------
                                                 2005      2004        2003
                                               -------    -------    -------
<S>                                            <C>        <C>         <C>
CASH FLOWS FROM INVESTING ACTIVITIES:

  Capital expenditures                       $(493,585) $(732,739)  $(360,416)
  Cash deposit with the state of
    California Division of Oil and Gas              --   (250,000)         --
  Purchase of short-term investments          (500,000)        --          --
  Other cash deposits                         (  6,000)        --          --
  Proceeds from sale of
    property and equipment                     333,643    281,500          --
                                               -------    -------     -------
  Net cash used in investing activities       (665,942)  (701,239)   (360,416)
                                               -------    -------     -------

CASH FLOWS FROM FINANCING ACTIVITIES:

  Proceeds from line of credit                      --    100,000          --
  Payments on line of credit                        --   (100,000)         --
  Principal payments on long-term debt        ( 50,781)  ( 48,434)   (136,047)
  Proceeds from issuance of long-term debt          --     59,849      70,450
  Principal payments from loans to employees     9,164                     --
  Loans to employees                                --    (24,357)         --
                                               -------    -------     -------
Net cash used in financing activities         ( 41,617)  ( 12,942)   ( 65,597)
                                               -------    -------     -------
Net increase in cash
  and cash equivalents                         484,259    209,417     103,960

Cash and cash equivalents
  at beginning of year                         816,216    606,799     502,839
                                             ---------    -------     -------
Cash and cash equivalents at end of year    $1,300,475  $ 816,216   $ 606,799
                                             =========    =======     =======
SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid during the year
  for interest                               $   1,409  $     934   $   7,609
                                               =======    =======     =======
Cash paid during the year
  for income taxes                           $   1,125  $   1,125   $   1,125
                                               =======    =======     =======
The accompanying notes are an integral part of these statements.
</Table>

<PAGE> 33
                                 PYRAMID OIL COMPANY
                            NOTES TO FINANCIAL STATEMENTS
                                  DECEMBER 31, 2005

1.  SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

Pyramid Oil Company (the Company), a California Corporation, has been in the
oil and gas business continuously for 96 years since it was incorporated on
October 9, 1909.  The Company is in the business of exploration, development
and production of crude oil and natural gas.  The Company operated and has
interests in 27 oil and gas leases in Kern and Santa Barbara Counties in the
State of California.  The Company also owns oil and gas interests in Wyoming
and New York that it does not operate.  The Company grants short-term credit
to its customers and historically receives payment within 30 days.


PERVASIVENESS OF ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those
estimates.


CASH AND CASH EQUIVALENTS

Cash and cash equivalents principally consist of demand deposits and
certificates of deposits having original maturities of three months or less.


INVESTMENTS

Investments consist of certificates of deposit having original maturities of
three months or more and are valued at cost.


INVENTORY

Inventories of crude oil and condensate are valued at the lower of cost,
predominately on a first-in, first-out (FIFO) basis, or market, and include
certain costs directly related to the production process.


DEPOSITS

In April 2004, the Company replaced its state of California oil and gas
blanket performance surety bond, with a cash bond in the form of an
irrevocable certificate of deposit in the amount of $250,000.

<PAGE> 34

                                 PYRAMID OIL COMPANY
                       NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 2005

ASSETS HELD FOR RESALE

Assets held for resale reflect fixed assets, net of depreciation, of the
Company's former well service division, that was shut-down during 1993.  These
assets are non-productive and are being held for resale.


COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES

The Company has adopted the "successful efforts" method of accounting for its
oil and gas exploration and development activities, as set forth in the
Statement of Financial Accounting Standards No. 19, as amended, issued by the
Financial Accounting Standards Board.

The Company initially capitalizes expenditures for oil and gas property
acquisitions until they are either determined to be successful (capable of
commercial production) or unsuccessful.  The carrying value of all undeveloped
oil and gas properties is evaluated periodically and reduced if such carrying
value appears to have been impaired.  Leasehold costs relating to successful
oil and gas properties remain capitalized while leasehold costs which have
been proven unsuccessful are charged to operations in the period the leasehold
costs are proven unsuccessful.  Costs of carrying and retaining unproved
properties are expensed as incurred.

The costs of drilling and equipping development wells are capitalized, whether
the wells are successful or unsuccessful.  The costs of drilling and equipping
exploratory wells are capitalized until they are determined to be either
successful or unsuccessful.  If the wells are successful, the costs of the
wells remain capitalized.  If, however, the wells are unsuccessful, the
capitalized costs of drilling the wells, net of any salvage value, are charged
to operations in the period the wells are determined to be unsuccessful.

The Company adopted the Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" (the
Statement).  The Statement specifies when an impairment loss should be
recognized and how impairment losses should be measured for long-lived assets
to be held and used and for long-lived assets to be disposed of.  In
accordance with the Statement, the costs of proved oil and gas properties and
equipment are periodically assessed on a lease by lease basis to determine if
such costs exceed undiscounted future cash flows, and if conditions warrant an
impairment reserve will be provided based on the estimated future discounted
cash flows.  The Company recorded an impairment reserve of $21,699 at December
31, 2004.  There were no material impairment reserves recorded during the
years ended December 31, 2003 and 2005.



<PAGE> 35

                                  PYRAMID OIL COMPANY
                        NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   DECEMBER 31, 2005


DEPLETION, DEPRECIATION, AND AMORTIZATION

Depletion of leasehold costs of producing oil and gas properties is provided
on the unit-of-production method, by individual property unit, based on
estimated recoverable proved reserves.  Depreciation and amortization of the
costs of producing wells and related equipment are provided on the
unit-of-production method, by individual property unit, based on estimated
recoverable proved developed reserves.  Amortization of the costs of
undeveloped oil and gas properties is based on the Company's experience,
giving consideration to the holding periods of leaseholds.  The average
depletion per equivalent barrel of crude oil produced for 2005, 2004 and 2003
were $1.99, $1.50 and $0.95, respectively.

Drilling and operating equipment, buildings, automotive, office and other
property and equipment and leasehold improvements are stated at cost.
Depreciation and amortization are computed using the straight-line method over
the shorter of the estimated useful lives or the applicable lease terms (range
of 3 to 19 years).  Any permanent impairment of the carrying value of property
and equipment is provided for at the time such impairments become known.


MAINTENANCE AND REPAIRS

Maintenance, repairs and replacement expenditures are charged to operations as
incurred, while major renewals and betterments are capitalized and depreciated
over their useful lives.


RETIREMENT OR DISPOSAL OF PROPERTIES AND EQUIPMENT

Costs and accumulated depletion, depreciation, amortization and valuation
allowances of property and equipment retired, abandoned, or otherwise disposed
of are removed from the accounts upon disposal, and any resulting gain or loss
is included in operations in the year of disposition.  However, upon disposal
of a portion of an oil and gas property, any proceeds received are treated as
a recovery of cost and no gain or loss is recognized in the year of
disposition.


INCOME TAXES

The Company uses the asset and liability method of accounting for income
taxes.  Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing



<PAGE> 36

                                  PYRAMID OIL COMPANY
                        NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   DECEMBER 31, 2005


assets and liabilities and their respective tax bases.  Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be recovered or settled.  The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in the period that includes the
enactment date.


CONCENTRATION OF CREDIT RISK

The Company sells its crude oil to ConocoPhillips and Kern Oil & Refining,
accounting for approximately 55%, and 41%, respectively, of  Pyramid's crude
oil and gas sales in 2005.  While revenue from these customers is significant,
and the loss of any one could have a short-term adverse effect on the Company,
it is management's opinion that the oil and gas it produces could be sold to
other crude oil purchasers, refineries or pipeline companies. Trade
receivables were approximately 59% and 38% attributable to ConocoPhillips and
Kern Oil and Refining respectively at December 31, 2005. Trade receivables
were approximately 47% and 38% attributable to ConocoPhillips and Kern Oil and
Refining respectively at December 31, 2004.


IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued SFAS No. 123(R), 'Share-Based Payment'.
SFAS 123(R) amends SFAS No. 123, 'Accounting for Stock-Based Compensation',
and APB Opinion 25, 'Accounting for Stock Issued to Employees'.  SFAS
No.123(R) requires that the cost of share-based payment transactions
(including those with employees and non-employees) be recognized in the
financial statements.  SFAS No. 123(R) applies to all share-based payment
transactions in which an entity acquires goods or services by issuing (or
offering to issue) its shares, share options, or other equity instruments
(except for those held by an ESOP) or by incurring liabilities (1) in amounts
based (even in part) on the price of the entity's shares or other equity
instruments, or (2) that require (or may require) settlement by the issuance
of an entity's shares or other equity instruments.  This statement is
effective, as of the first interim period or fiscal year beginning after
December 15, 2005.  This statement did not have any impact on the Company's
financial statements for the year ended December 31, 2005.  At the present
time, the Company does not have any share-based compensation plans for
employees or non-employees.  Management is currently assessing the effect of
SFAS No.123(R) on the Company's financial statements, if the Company should
adopt a stock option plan in the future for employees or non-employees.





<PAGE> 37

                                  PYRAMID OIL COMPANY
                        NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   DECEMBER 31, 2005

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections.  FASB Statement of Accounting Standards (SFAS) 154 establishes
new standards on accounting for changes in accounting principles. Pursuant to
the new rules, all such changes must be accounted for by retrospective
application to the financial statements of prior periods unless it is
impracticable to do so. SFAS 154 completely replaces Accounting Principles
Bulletin (APB) Opinion 20 and SFAS 3, though it carries forward the guidance
in those pronouncements with respect to accounting for changes in estimates,
changes in the reporting entity, and the correction of errors.  The Statement
is effective for accounting changes and error corrections made in fiscal years
beginning after December 15, 2005, with early adoption permitted for changes
and corrections made in years beginning after May 2005.  Management does not
expect adoption of SFAS No. 154 to have a material impact on the Company's
financial statements.

In February 2006 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) 155 Accounting for Certain Hybrid
Financial Instruments.  SFAS 155 amends SFAS 133 to narrow the scope
exception for interest-only and principal-only strips on debt instruments to
include only such strips representing rights to receive a specified portion of
the contractual interest or principal cash flows. SFAS 155 also amends SFAS
140 to allow qualifying special-purpose entities to hold a passive derivative
financial instrument pertaining to beneficial interests that itself is a
derivative financial instrument. Generally, FASB Statement of Financial
Accounting Standards SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, requires that a derivative embedded in a host contract
that does not meet the definition of a derivative be accounted for separately
(referred to as bifurcation) under certain conditions. That general rule
notwithstanding, SFAS No. 133 (prior to amendments made to it by SFAS No. 155)
provides a broad exception for interest-only and principal-only strips
initially resulting from the separation of rights to receive contractual cash
flows of a financial instrument that itself does not contain an embedded
derivative that would have been accounted for separately. SFAS 155 amends SFAS
133 to restrict the scope exception to strips that represent rights to receive
only a portion of the contractual interest cash flows or of the contractual
principal cash flows of a specific debt instrument.  Prior to amendments made
by SFAS 155, SFAS 140, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities, permitted a qualifying
special-purpose entity (SPE) to hold only passive derivative financial
instruments pertaining to beneficial interests (other than another derivative
financial instrument) issued or sold to parties other than the transferor.
SFAS 155 amends SFAS 140 to allow a qualifying SPE to hold a derivative
instrument pertaining to beneficial interests that itself is a derivative
financial instrument.  Management does not expect adoption of SFAS No. 155 to
have a material impact on the Company's financial statements.




<PAGE> 38
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 2005

2.  LONG-TERM DEBT AND LINE OF CREDIT

Long-term debt at December 31, 2005 and 2004, is summarized as follows:

<Table>                                                  December 31,
<Caption>                                           ----------------------
                                                       2005         2004
                                                    ---------    ---------
<S>                                                 <C>          <C>
  Note payable to GMAC, secured by equipment
    purchased with the proceeds of the loan,
    payable in monthly installments of $999
    principal only, zero interest charges,
    final payment in 2005.                          $      --     $ 11,982

  Note payable to GMAC, secured by equipment
    purchased with the proceeds of the loan,
    payable in monthly installments of $1,114
    principal only, zero interest charges,
    final payment in 2006.                             11,143       24,516

  Note payable to GMAC, secured by equipment
    purchased with the proceeds of the loan,
    payable in monthly installments of $632
    principal only, zero interest charges,
    final payment in 2007.                             15,167       22,750

  Note payable to GMAC, secured by equipment
    purchased with the proceeds of the loan,
    payable in monthly installments of $431
    principal only, zero interest charges,
    final payment in 2008.                             14,225       19,397

  Note payable to GMAC, secured by equipment
    purchased with the proceeds of the loan,
    payable in monthly installments of $1,154
    principal and interest, interest at 3.9%,
    final payment in 2007.                             23,396       36,067
                                                      -------      -------
                                                       63,931      114,712
  Less - current maturities                          ( 37,073)    ( 50,740)
                                                      -------      -------
                                                     $ 26,858     $ 63,972
                                                      =======      =======
</Table>




 <PAGE> 39
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 2005

At December 31, 2005 approximately $140,000 of gross property and equipment
was pledged as collateral to secure approximately $64,000 principal amount of
long-term debt.

Maturities of long-term debt are as follows:
<Table>
<Caption>
            <S>                                      <C>
            Year ending December 31, 2007            $ 22,979
                                     2008               3,879
                                                      -------
                                                     $ 26,858
                                                      =======
</Table>

At December 31, 2005, the Company had an unsecured line of credit with a bank,
under which the Company may borrow up to $200,000 through May 31, 2006.
Interest on any borrowing is accrued at the bank's index rate plus 0.50
percentage points.  The bank's index rate was 7.75% at December 31, 2005.

3.   INCOME TAXES

   Income tax provision (benefit) consists of the following:
<Table>
<Caption>
                                            Year Ended December 31,
                                      -----------------------------------
                                       2005           2004          2003
                                      -------        -------       ------
<S>                                  <C>            <C>           <C>
   Federal income taxes:
     Current                        $ 310,093       $ 86,148     $  32,016
     Utilization of NOL's            (310,093)       (86,148)      (32,016)
     Deferred                              --             --            --
                                      -------        -------       -------
                                           --             --            --
                                      -------        -------       -------
   State income taxes:
     Current                           67,975         14,511       ( 3,542)
     Utilization of NOL's             (12,800)       (13,386)        4,667
     Deferred                              --             --            --
                                      -------        -------       -------
                                       55,175          1,125         1,125
                                      -------        -------       -------
   Income tax provision              $ 55,175       $  1,125      $  1,125
                                      =======        =======       =======
</Table>


<PAGE> 40
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 2005

Differences exist between certain accounting policies and related provisions
included in federal income tax rules.  The amounts by which these differences
and other factors cause the total income tax provision to differ from an
amount computed by applying the federal statutory income tax rate to financial
income is set forth in the following reconciliation:
<Table>
<Caption>
                                                Year Ended December 31,
                                          -----------------------------------
                                            2005         2004          2003
                                          --------     --------      --------
<S>                                     <C>          <C>           <C>
   Federal income tax expense
     (benefit) at statutory rate         $ 388,882    $ 208,047     $(182,304)
   Net operating loss carryover           (255,243)    ( 93,097)     ( 54,438)
   Statutory depletion                    (171,622)    (120,558)     ( 60,047)
   Termination pay                          96,107           --            --
   Cumulative effect of change in
     accounting principle                       --           --       295,736
   Other                                  (  2,949)       6,733         2,178
                                          --------     --------      --------
   Income tax provision                  $  55,175    $   1,125     $   1,125
                                          ========     ========      ========
</Table>

The components of net deferred tax asset (liability) are as follows:
<Table>
<Caption>
                                             December 31,
                               ---------------------------------------
                                   2005          2004          2003
                               -----------   -----------   -----------
<S>                           <C>             <C>           <C>
Current deferred taxes:
  Gross assets                $     60,954   $    25,698   $    27,927
  Gross liabilities                     --            --            --
                                ----------    ----------    ----------
                                    25,698        25,698        27,927
                                ----------    ----------    ----------
Noncurrent deferred taxes:
  Gross assets                   1,720,272     2,077,164     2,156,444
  Gross liabilities             (  159,351)   (   96,849)   (   86,164)
  Valuation allowance           (1,621,875)   (2,006,013)   (2,098,207)
                                ----------     ---------     ---------
                                (   60,954)   (   25,698)   (   27,927)
                                ----------     ---------     ---------
                               $        --   $        --   $        --
                                ==========     =========     =========
</Table>

<PAGE> 41
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 2005

The tax effect of significant temporary differences representing deferred tax
assets and (liabilities) are as follows:

<Table>
<Caption>
                                                  December 31,
                                    ---------------------------------------
                                        2005          2004          2003
                                    -----------   -----------   -----------
<S>                                <C>            <C>           <C>
    Accounts receivable             $     1,712    $    1,600   $     1,600
    Net operating loss
      carry forwards                     20,808       377,700       456,979
    Statutory depletion
      carryover                       1,699,464     1,699,464     1,699,464
    Accrued liabilities                  59,242        24,098        26,327
                                     ----------     ---------     ---------
    Total deferred tax assets         1,781,226     2,102,862     2,184,370
    Property and equipment           (  159,351)   (   96,849)   (   86,163)
    Valuation allowance              (1,621,875)   (2,006,013)   (2,098,207)
                                     ----------     ---------     ---------
                                    $        --   $        --   $        --
                                     ==========     =========     =========
</Table>

At December 31, 2005, a valuation allowance has been provided against a
significant portion of the deferred tax assets generated and the statutory
depletion carryover due to the uncertainty of its future utilization.

The Company has federal income tax net operating loss carry forwards of
approximately $61,000.  For California franchise tax purposes, as of December
31, 2005 the Company has no unused net operating loss carryforwards.

At December 31, 2005, the Company has, for federal income tax purposes, a
statutory depletion carryover of approximately $4,998,000, which currently
has no expiration date.

As of December 31, 2005, the Company has no investment tax credit carryforward
available to reduce future taxes payable for financial reporting and federal
income tax purposes.









<PAGE> 42
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 2005


4. 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 $221,400, $143,000 and
$122,000 in 2005, 2004 and 2003, respectively.

On January 14, 2000, pursuant to specific terms, conditions and obligations
contained within the May 1984 oil and gas lease between Santa Fe Energy
Company as lessor and Pyramid Oil Company as lessee, Pyramid quit-claimed all
unearned acreage in said lease back to the lessors.  Under the terms of the
lease, Pyramid retained specific producing intervals within 10 acre spacings
surrounding each well bore.

Effective April 1, 2002, the Company acquired the remaining 36.5 % working
interest in the Santa Fe oil and gas lease in the Carneros Creek field
and working interests (approximately 36.5%) in two other leases in the same
area from the investor group noted above.  The investor group acquired these
working interests from the Company's former joint venture partner in these
three oil and gas leases as the result of a court ordered settlement agreement
concluding litigation between the investor group and the joint venture
partner.  The investor group sold the working interests to the Company for
$217,000.  Mr. John H. Alexander, Vice President of the Company, owns a
thirty-three percent interest in the investor group.  The Company had notes
payable to the investor group in the amount of $108,502 at the end of December
31, 2002, of which $108,502 was paid-off on the notes payable in 2003.

During August 2005, after approval by the Company's Board of Directors, the
Company leased additional acreage from the investor group.  The new lease,
Santa Fe Energy Section 32, is adjacent to the Company's existing Santa Fe
Energy lease.  The Company paid the investor group $22,000 for an oil and gas
lease on 440 acres for a term of 3 years.  The Company drilled a discovery
well with a joint venture partner on this property in the first quarter of
2006.  At the time of filing, the well is in the process of completion and
will be tested and a determination will be made about the economic status of
the well and the potential for further drilling on this acreage.

As a director, Mr. Alexander has abstained from voting on any of the above
matters that have been brought before the Board of Directors, involving the
Santa Fe lease.





<PAGE> 43
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 2005

5. FOURTH QUARTER RESULTS (UNAUDITED)

During the fourth quarter of 2004, the Company reclassified its investment in
the costs of drilling and completing a well that was drilled in June of 2004.
The costs of drilling this well were capitalized during the second and third
quarters of 2004.  A decision was made in the fourth quarter of 2004 by the
Company and its joint-venture partners to abandon the well.  The Company's
share of the costs for this well in the amount of $201,000 were charged to
exploration costs in the fourth quarter of 2004.

During the fourth quarter of 2004, the Company made a payment to J. Ben
Hathaway, the former President of the Company, under the terms of the
employment contract with Mr. Hathaway and the Company.  Mr. Hathaway
voluntarily resigned as President of Pyramid Oil Company and pursuant to the
terms of his employment contract, he received a payment of approximately
$170,000 in December of 2004.

During the fourth quarter of 2004, the Company made adjustments to the
carrying value of one of its oil and gas properties.  The Company recorded a
valuation allowance in the amount of $20,699 to reflect the change in the
projected future undiscounted net cash flows for this property, as the
result of the analysis of the Company's oil and gas reserves by independent
consultants.

During the fourth quarter of 2003, the Company adjusted the liability for
asset retirement obligation due to a change in the remaining life of certain
of its oil and gas properties.  These changes were based on adjustments made
to the Company's oil and gas reserves by independent consultants.  The effect
of these adjustments was to decrease net income by approximately $36,000 in
the fourth quarter of 2003.

6. COMMITMENTS AND CONTINGENCIES

The Company is liable for future dismantlement and abandonment costs
associated with its oil and gas properties.  These costs include down-hole
plugging and abandonment of wells, future site restoration, post closure and
other environmental exit costs.  The costs of future dismantlement and
abandonment have been accrued and recorded in the financial statements.  See
Note 9, Change in Accounting Principles.

The Company is subject to potential litigation within the normal course of
business.  In management's opinion, the resolution of such litigation would
not have a material adverse effect upon the financial position of the Company,
although the resolution in any reporting period of such litigation could have
a material impact on Pyramid's results of operations for that period.

The Company has entered into an employment agreement with the President of the
Company, John H. Alexander.  In the event the Mr. Alexander is dismissed, the
Company would incur approximately $500,000 in costs as of December 31, 2005.

<PAGE> 44
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 2005
7.  OTHER INCOME

During 2005, The Company sold a well servicing hoist for a gain of
approximately $292,000.  During 2004, the Company sold two well servicing
hoists for a gain of approximately $190,000 and sold surplus equipment from
the category, assets held for resale, for a gain of approximately $54,000.
The Company also sold pickups, equipment, surplus tubing and sundry used
oilfield supplies for a gain of approximately $66,000.   All of the assets
sold in 2005 and 2004 had little or no net book values.


8.  DEFINED CONTRIBUTION PLAN

The Company has a defined contribution plan (Simple IRA) available to all
employees meeting certain service requirements.  Employees may contribute up
to a maximum of $6,000 of their compensation to the plan.  The Company will
make a contribution to the plan in an amount equal to the employees
contributions up to 3% of their salaries.  Contributions of $9,775, $11,849
and $11,052 were made during the years ended December 31, 2005, 2004 and 2003,
respectively.


(9) CHANGE IN ACCOUNTING PRINCIPLE

In accordance with Statement of Financial Accounting Standards No. 143,
''Accounting for Assets Retirement Obligations'', effective January 1, 2003,
the Company changed its method of accounting for asset retirement obligations
(ARO) relating to well abandonment costs from expensing such costs in the year
the wells are abandoned to recording a liability when such costs are incurred
in order to provide a better matching of revenue and expenses and to improve
interim financial reporting.

Upon adoption of SFAS 143, the Company was required to recognize a liability
for the present value of all legal obligations associated with the retirement
of tangible long-lived assets and an asset retirement cost was capitalized as
part of the carrying value of the associated asset. Upon initial application
of SFAS 143, a cumulative effect of a change in accounting principle was also
required in order to recognize a liability for any existing ARO's adjusted for
cumulative accretion, an increase to the carrying amount of the associated
long-lived asset and accumulated depreciation on the capitalized cost.

Subsequent to initial measurement, liabilities are required to be accreted to
their present value each period and capitalized costs are depreciated over the
estimated useful life of the related assets. Upon settlement of the liability,
the Company will settle the obligation against its recorded amount and will
record any resulting gain or loss. As a result of the adoption of SFAS 143 on
January 1, 2003, the Company recorded a $290,450 and $225,983 increase in the
capitalized cost and accumulated depreciation, respectively, of its oil and
gas properties.


<PAGE> 45
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 2005

The effect of these changes for the twelve months ending December 31, 2005 and
2004, resulted in a decrease in income from continuing operations of $  ,
and $23,657, respectively.  The cumulative effect of these changes on years
prior to January 1, 2003, approximately $810,115 ($0.23 per common share), has
been charged to operations in 2003.  The effect on net income of this change
in accounting methods is as follows:

<Table>
<Caption>                                           Amount         Per Share
                                                   --------        ---------
<S>                                               <C>              <C>
     Cumulative effect to January 1, 2003         $(810,115)         $(0.23)

     Effect on twelve months ended
       December 31, 2005                            (25,120)          (0.01

     Effect on twelve months ended
       December 31, 2004                            (23,957)          (0.01)

     Effect on twelve months ended
       December 31, 2003                            (59,698)          (0.02)

</Table>

There are no legally restricted assets for the settlement of asset retirement
obligations.  No income tax is applicable to the asset retirement obligation
as of December 31, 2005 and 2004, because the Company records a valuation
allowance on net operating losses and deductible temporary differences due to
the uncertainty of its realization.

A reconciliation of the Company's asset retirement obligations from the
periods presented are as follows:

<Table>
<Caption>                                                 Amount
                                                         -------
<S>                                                     <C>
     Beginning Balance, January 1, 2005                 $946,566
        Incurred during the period                      ( 10,635)
        Settled during the period                             --
        Accretion expense                                 19,238
                                                         -------
     Ending Balance, December 31, 2005                  $955,169
                                                         =======
</Table>




<PAGE> 46
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 2005


(10) CHANGE IN CONTROL OF REGISTRANT

Effective June 15, 2005, the former majority shareholders of the Company, J.
Ben Hathaway, Jean Hathaway, Henry Hathaway, and John Hathaway sold 1,388,485
shares of the common stock of the Company (approximately 56% of the Company's
outstanding common stock) to Michael D. Herman.


(11) CHANGE IN DIRECTORS OF REGISTRANT

Effective June 15, 2005, J. Ben Hathaway resigned as Chairman of the Board and
as a Director of the Company.  Mr. Hathaway's resignation as a director was
made in connection with the sale of all of the shares of common stock of
Pyramid Oil Company owned by Mr. Hathaway and his family members.

The Company's Board of Directors, at a board of directors meeting held on
July 19, 2005, elected Mr. Michael D. Herman to fill the vacancy created by
Mr. Hathaway's resignation.


(12) TERMINATION OF EMPLOYMENT AGREEMENT

The Company entered into a Termination of Employment Agreement (the Agreement)
with Benny Hathaway, Jr., Vice President of the Company.  The Agreement was
effective September 30, 2005, and replaced the Employment Agreement that had
been in effect since February 21, 2002.  Mr. Benny Hathaway submitted his
voluntary resignation which was effective November 11, 2005.  The Agreement
provides for a termination payment of $400,000, which may be paid in three
equal annual installments of $133,334, beginning in December 2005.  Under the
terms of the Agreement, the Company will continue to provide health insurance
until the agreed upon termination payments have been paid, approximately two
years.  The Company recorded a one-time charge of $424,000 for the estimated
costs for termination pay and insurance benefits.





                              
<PAGE>
<PAGE> 47
                                 PYRAMID OIL COMPANY
                          SUPPLEMENTAL INFORMATION (UNAUDITED)
                            OIL AND GAS PRODUCING ACTIVITIES
                                  DECEMBER 31, 2005


Statement of Financial Accounting Standards No. 19 (SFAS No. 19), "Financial
Accounting and Reporting by Oil and Gas Producing Companies", as amended,
requires disclosure of certain financial data for oil and gas operations and
reserve estimates of oil and gas.  This information, presented here, is
intended to enable the reader to better evaluate the operations of the
Company.  All of the Company's oil and gas reserves are located in the United
States.

The aggregate amounts of capitalized costs relating to oil and gas producing
activities and the related accumulated depletion, depreciation, and
amortization and valuation allowances as of December 31, 2005, 2004 and 2003
were as follows:

<Table>
<Caption>
                                         2005         2004         2003
                                      ----------   ----------   ----------
<S>                                  <C>          <C>          <C>
Proved properties                    $11,326,800  $11,030,300  $10,591,300
Unproved properties
  being amortized                        178,600      178,600      178,600
Unproved properties
  not being amortized                         --           --           --
Capitalized asset retirement costs       294,600      294,600      290,500
Accumulated depletion,
  depreciation, amortization
  and valuation allowances           (10,659,000) (10,510,700) (10,306,400)
                                      ----------   ----------   ----------
                                     $ 1,141,000  $   992,800  $   754,000
                                      ==========   ==========   ==========
</Table>
<PAGE>
<PAGE> 48
                                 PYRAMID OIL COMPANY
                        SUPPLEMENTAL INFORMATION (UNAUDITED)
                                  DECEMBER 31, 2005


The estimated quantities and the change in proved reserves, both developed and
undeveloped, for the Company are as follows:

<Table>
<Caption>
                                  2005            2004           2003
                              ------------   -------------  -------------
                               Oil     Gas      Oil    Gas     Oil    Gas
                             (MBbls) (MMCF)  (MBbls) (MMCF) (MBbls) (MMCF)
                              -----   ----    -----   ----   -----   ----
<S>                          <C>     <C>     <C>     <C>    <C>     <C>
Proved developed and
 undeveloped reserves:
  Beginning of year            522      83     555      83     554    105
  Revisions of previous
    estimates                  113      18     (10)      8      75    (15)
  Extensions, discoveries
    and other additions        151      --      49      --      --     --
  Production                   (71)    ( 7)    (72)    ( 8)    (74)   ( 7)
                              ----    ----    ----    ----    ----   ----
  End of year                  715      94     522      83     555     83
                              ====    ====    ====    ====    ====   ====
Proved developed reserves:
  Beginning of year            473      83     555      83     554    105
                              ====    ====    ====    ====    ====   ====
  End of year                  539      94     473      83     555     83
                              ====    ====    ====    ====    ====   ====
</Table>

The foregoing estimates have been prepared by the Company from data prepared
by an independent petroleum engineer in respect to certain producing
properties.  Revisions in previous estimates as set forth above resulted from
analysis of new information, as well as from additional production experience
or from a change in economic factors.

The reserve estimates are believed to be reasonable and consistent with
presently known physical data concerning size and character of the reservoirs
and are subject to change as additional knowledge concerning the reservoirs
becomes available.










<PAGE> 49
                                 PYRAMID OIL COMPANY
                        SUPPLEMENTAL INFORMATION (UNAUDITED)
                                 DECEMBER 31, 2005


The present value of estimated future net revenues of proved developed
reserves, discounted at 10%, were as follows:

<Table>
<Caption>
                                            December 31,
                               --------------------------------------
                                  2005          2004          2003
                               ----------    ----------    ----------
<S>                            <C>           <C>           <C>
Proved developed and
 undeveloped reserves
  (Present value before
   income taxes)              $12,594,000    $4,643,000    $4,617,000
                               ==========     =========     =========

</Table>

SFAS No. 69, "Disclosures About Oil and Gas Producing Activities", requires
certain disclosures of the costs and results of exploration and production
activities and established a standardized measure of oil and gas reserves and
the year-to-year changes therein.

In addition to the foregoing disclosures, SFAS No. 69 established a
"Standardized Measure of Discounted Future Net Cash Flows and Changes Therein
Relating to Proved Oil and Gas Reserves".

Costs incurred, both capitalized and expensed, of oil and gas property
acquisition, exploration and development for the years ended December 31,
2005, 2004 and 2003 were as follows:

<Table>
<Caption>
                                       2005          2004          2003
                                      -------       -------       -------
<S>                                  <C>           <C>           <C>
Property acquisition costs           $ 47,500      $ 14,000      $     --
Exploration costs - expensed               --       201,000            --
Development costs                     249,000       418,000       255,000
Asset retirement costs                     --         4,000       290,500

</Table>







<PAGE> 50
                                 PYRAMID OIL COMPANY
                        SUPPLEMENTAL INFORMATION (UNAUDITED)
                                 DECEMBER 31, 2005


The results of operations for oil and gas producing activities for the years
ended December 31, 2005, 2004 and 2003 were as follows:

<Table>
<Caption>
                                     2005          2004         2003
                                  ----------    ----------    ----------
<S>                              <C>           <C>           <C>
Sales                            $ 3,478,000   $ 2,675,000   $ 2,071,000
Production costs                   1,454,000     1,383,000     1,232,000
Exploration costs                         --       202,000            --
Accretion expense                     19,000        18,000        54,000
Depletion, depreciation,
  amortization and
  valuation allowance                148,000       115,000        77,000
                                   ---------     ---------     ---------
                                   1,857,000       957,000       708,000
Income tax (benefit) provision        55,000         1,200         1,200
                                   ---------     ---------     ---------
Results of operations from
  production activities          $ 1,802,000   $   955,800   $   706,800
                                   =========     =========     =========

</Table>

The standardized measure of discounted estimated future net cash flows
relating to proved oil and gas reserves for the years ended December 31, 2005,
2004 and 2003 were as follows:

<Table>
<Caption>
                                     2005          2004          2003
                                  ----------    ----------    ----------
<S>                              <C>           <C>           <C>
Future cash inflows              $40,734,000   $18,448,000   $17,380,000
Future development and
  production costs                17,915,000     9,908,000     8,792,000
Future abandonment costs             755,000       730,000       736,000
Future income tax expense          6,016,000        12,000        12,000
                                  ----------    ----------    ----------
Future net cash flow              16,048,000     7,798,000     7,840,000
10% annual discount                6,888,000     3,162,000     3,230,000
Standardized measure              ----------    ----------    ----------
  of discounted future
  net cash flow                  $ 9,160,000   $ 4,636,000   $ 4,610,000
                                  ==========    ==========    ==========
</Table>


<PAGE> 51
                                 PYRAMID OIL COMPANY
                         SUPPLEMENTAL INFORMATION (UNAUDITED)
                                  DECEMBER 31, 2005


The principal changes in the standardized measure of discounted future net
cash flows during the years ended December 31, 2005, 2004 and 2003 were as
follows:

<Table>
<Caption>
                                         2005          2004          2003
                                      ----------    ----------    ----------
<S>                                 <C>           <C>           <C>
Extensions                           $ 3,094,000   $   490,000   $        --
Revisions of previous estimates
 Price changes                         4,715,000       654,000       952,000
 Quantity estimate                     2,175,000      ( 82,000)      690,000
Change in production rates,
  timing and Other                       247,000       381,000      (208,000)
Development costs incurred               249,000       418,000       255,000
Changes in estimated future
  development costs                     (179,000)     (348,000)     (255,000)
Estimated future
  abandonment costs                     (755,000)     (730,000)     (736,000)
Sales of oil and gas, net of
  production costs                    (2,024,000)   (1,292,000)     (839,000)
Accretion of discount                    537,000       535,000       433,000
                                      ----------    ----------    ----------
                                       8,059,000        26,000       292,000
Net change in income taxes             3,535,000            --            --
                                      ----------    ----------    ----------
Net increase                         $ 4,524,000   $    26,000   $   292,000
                                      ==========    ==========    ==========
</Table>


Estimated future cash inflows are computed by applying year-end prices of oil
and gas to year-end quantities of proved reserves.  Estimated future
development and production costs are determined by estimating the expenditures
to be incurred in developing and producing the proved oil and gas reserves, as
well as certain abandonment costs, based on year-end cost estimates and
assuming continuation of existing economic conditions.  Estimated future
income tax expense is calculated by applying the year-end effective tax rate
to estimated future pretax net cash flows related to proved oil and gas
reserves, less the tax basis of the properties involved.








<PAGE> 52
                                 PYRAMID OIL COMPANY
                        SUPPLEMENTAL INFORMATION (UNAUDITED)
                                  DECEMBER 31, 2005

These estimates are furnished and calculated in accordance with requirements
of the Financial Accounting Standards Board and the Securities and Exchange
Commission.  Because of the unpredictable variances in expenses and capital
forecasts, crude oil and natural gas price changes being largely influenced
and controlled by United States and foreign governmental actions, and the fact
that the basis for such estimates vary significantly, management believes the
usefulness of these projections is limited.  Estimates of future net cash
flows do not represent management's assessment of future profitability or
future actual cash flows of the Company.  It should be recognized that
applying current costs and prices and a ten percent standard discount rate
allows for comparability but does not convey absolute value.  The discounted
amounts arrived at are only one measure of financial quantification of proved
reserves.

The standardized measure of discounted future cash flows before income taxes
increased by $8,059,000 at December 31, 2005.  The change in income taxes
decreased discounted future cash flows by $3,535,000 for a net increase in
future cash flows of $4,524,000 after income taxes as of December 31, 2005.
One of the major factors contributing to the increase in cash flows is higher
crude oil prices.  Average crude oil prices at December 31, 2005, increased by
approximately $21.00 per barrel.  This price increase contributed to an
increase in discounted cash flows due to price changes of $4,715,000 and
quantity estimate revisions of $2,175,000.  Another major factor that
increased discounted future cash flows were extensions of $3,094,000 resulting
from data that was obtained from drilling three wells in the Carneros Creek
field in the first quarter of 2006.  This was offset by sales of oil and gas,
net of production costs, in the amount of $2,024,000 and estimated future
abandonment costs of $755,000.  The increase in estimated discounted future
income taxes is due to the Company's utilization of it's net operating loss
carryforwards (NOL's) during 2005.  At December 31, 2005, the Company had
approximately $62,000 in federal NOL's to carryforward to future tax periods.

The increase in the standardized measure of discounted future net cash flows
at December 31, 2004, of $26,000 is the result of several factors.  Sales of
oil and gas, net of production costs, reduced future cash flows by
approximately $1,292,000.  The recognition of future abandonment costs
decreased future cash flows by $730,000.  This was offset by an increase in
future cash flows due to higher crude oil prices at December 31, 2004
($654,000) and the recognition of proved developed non-producing reserves
(extensions) at December 31, 2004 ($490,000).

The increase in the standardized measure of discounted future net cash flows
at December 31, 2003, of $292,000 is due primarily to higher crude oil prices
at year end.  Higher crude oil prices at the end of 2003 increased the
discounted future net cash flows by approximately $690,000 due to revisions of
previous quantity estimates and by $952,000 due to price changes.  This was
offset by the recognition of future abandonment costs of $736,000.


<PAGE> 53
                                PYRAMID OIL COMPANY
                         SUPPLEMENTAL INFORMATION (UNAUDITED)
                                 QUARTERLY RESULTS

<Table>
<Caption>                              2005          2004
                                    ----------    ----------
<S>                                 <C>           <C>
    REVENUES:

      Quarter Ended:
          March 31                  $   701,892   $   599,296
          June 30                       865,548       666,871
          September 30                1,015,138       702,899
          December 31                   894,994       705,836
                                     ----------    ----------
                                    $ 3,477,572   $ 2,674,902
                                     ==========    ==========
    NET INCOME (LOSS):

      Quarter Ended:
          March 31                  $   214,377   $   281,358
          June 30                       266,819       167,333
          September 30 (a)              293,451       346,540
          December 31                   313,949      (183,329) (b)
                                     ----------    ----------
                                    $ 1,088,596   $   611,902
                                     ==========    ==========
    INCOME (LOSS) PER COMMON SHARE:

      Quarter Ended:
          March 31                  $       .09   $       .11
          June 30                           .11           .07
          September 30 (a)                  .12           .14
          December 31                       .12          (.07) (b)
                                     ----------    ----------
                                    $       .44   $       .25
                                     ==========    ==========
</Table>

(a) Reflects the costs of termination pay in the amount of $424,000 associated
with the settlement of an employment agreement (see Note 12 of Notes to
Financial Statements included in Item 7 of this Form 10-KSB).  This was offset
by a gain of $291,868 on the sale of a well servicing hoist in the third
quarter of 2005.

(b) Reflects the following items in the fourth quarter of 2004;  exploration
costs for the drilling and completion of an exploration well that was
abandoned in the fourth quarter of 2004 in the amount of $201,388, the
settlement of an employment agreement in the amount of $170,054 and a
valuation allowance in the amount of $20,699 (see Note 5 of Notes to Financial
Statements included in Item 7 of this Form 10-KSB).


<PAGE> 54

ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
           ON ACCOUNTING AND FINANCIAL DISCLOSURE

                         None

ITEM 8A - CONTROLS AND PROCEDURES

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the
Exchange Act), the Company's management, with the participation of the Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of
the Company's disclosure controls and procedures as of the end of the period
covered by this report.  Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure controls
and procedures are effective in ensuring that information required to the
disclosed in reports that the Company files or submits under the Exchange Act
is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms.  No
change in the Company's internal control over financial reporting occurred
during the most recent fiscal quarter that materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.

ITEM 8B - OTHER INFORMATION

The Company is aware of no information that was required to be disclosed in a
report on Form 8-K during the fourth quarter of 2005 but was not reported.


                                  PART III

ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

The Company hereby incorporates by reference the information to be contained
under the section entitled "Directors and Executive Officers" or a similarly
entitled section from its definitive Proxy Statement to be filed with the
Securities and Exchange Commission in connection with its 2006 Annual Meeting
of Shareholders.

The Company has adopted a code of ethics that is applicable to all of its
directors, officers and employees.  A copy of the code is available at no
charge to any person who sends a request for a copy to the Corporate
Secretary, Pyramid Oil Company, P.O. Box 832, Bakersfield, California 93302.


ITEM 10 - EXECUTIVE COMPENSATION

The Company hereby incorporates by reference the information to be contained
under the section entitled "Compensation of Directors and Executive Officers"
or a similarly entitled section from its definitive Proxy Statement to be
filed with the Securities and Exchange Commission in connection with its 2006
Annual Meeting of Shareholders.

<PAGE> 55

ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
            AND RELATED STOCKHOLDER MATTERS

The Company hereby incorporates by reference the information to be contained
under the section entitled "Voting Securities and Principal Holders Thereof"
or a similarly entitled section from its definitive Proxy Statement to be
filed with the Securities and Exchange Commission in connection with its 2006
Annual Meeting of Shareholders.

ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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 $221,400 in 2005, $143,000 in
2004 and $122,000 in 2003.

On January 14, 2000, pursuant to specific terms, conditions and obligations
contained within the May 1984 oil and gas lease between Santa Fe Energy
Company as lessor and Pyramid Oil Company as lessee, Pyramid quit-claimed all
unearned acreage in said lease back to the lessors.  Under the terms of the
lease, Pyramid retained specific producing intervals within 10 acre spacings
surrounding each well bore.

Effective April 1, 2002, the Company acquired the remaining 36.5% working
interest in the Santa Fe oil and gas lease in the Carneros Creek field
and working interests (approximately 36.5%) in two other leases in the same
area from the investor group noted above.  The investor group acquired these
working interests from the Company's former joint venture partner in these
three oil and gas leases as the result of a court ordered settlement agreement
concluding litigation between the investor group and the joint venture
partner.  The investor group sold the working interests to the Company for
$217,000.  Mr. John H. Alexander, Vice President of the Company, owns a
thirty-three percent interest in the investor group.  The Company had notes
payable to the investor group in the amount of $108,502 at the end of December
31, 2002, of which $108,502 was paid-off on the notes payable in 2003.

During August 2005, after approval by the Company's Board of Directors, the
Company leased additional acreage from the investor group.  The new lease,
Santa Fe Energy Section 32, is adjacent to the Company's existing Santa Fe
Energy lease.  The Company paid the investor group $22,000 for an oil and gas
lease on 440 acres for a term of 3 years.  The Company drilled a discovery
well with a joint venture partner on this property in the first quarter of
2006.  At the time of filing, the well is in the process of completion and
will be tested and a determination will be made about the economic status of
the well and the potential for further drilling on this acreage.   As a
director, Mr. Alexander has abstained from voting on any of the above
matters that have been brought before the Board of Directors, involving the
Santa Fe lease.

<PAGE> 56

ITEM 13 - EXHIBITS

         3.1      Registrant's Articles of Incorporation (1)
         3.2      Registrant's By Laws (1)
         3.2.1    Registrant's Amendment to the By Laws (2)
        10.1      Employment Agreement of J. Ben Hathaway, dated August 1,
                    2001 (3)
        10.2      Employment Agreement of John H. Alexander, dated August 1,
                    2001 (3)
        10.3      Employment Agreement of John H. Alexander, dated February
                    21, 2002 (4)
        10.4      Employment Agreement of Benny Hathaway, Jr. dated February
                    21, 2002 (4)

        31.1  Certification of Chief Executive Officer Pursuant to 15 U.S.C.
              Section 7241, as Adopted Pursuant to Section 302 of the
              Sarbanes-Oxley Act of 2002.

        31.2  Certification of Chief Financial Officer pursuant to 15 U.S.C.
              Section 7241, as adopted pursuant to Section 302 of the
              Sarbanes-Oxley Act of 2002.

        32.1  Certification of Chief Executive Officer pursuant to 18 U.S.C.
              Section 1350, as adopted pursuant to Section 906 of the
              Sarbanes-Oxley Act of 2002.

        32.2  Certification of Chief Financial Officer pursuant to 18 U.S.C.
              Section 1350, as adopted pursuant to Section 906 of the
              Sarbanes-Oxley Act of 2002.

        99    Letter to Securities and Exchange Commission regarding
                Arthur Andersen's representations (4)

(1) Incorporated by reference from Exhibits 18-1 and 18-2, respectively, to
         the Registrant's 1971 Form 10.

(2) Incorporated by reference from the Registrant's August 25, 1986 Proxy
         Statement.

(3) Incorporated by reference from Exhibits 10.1 and 10.2 to the Registrants
         June 30, 2001 Form 10-QSB.

(4) Incorporated by reference from Exhibits 10.3, 10.4 and 99 to the
         Registrants December 31, 2001 Form 10-KSB.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Company hereby incorporates by reference the information contained under
the section entitled ''Principal Accounting Fees and Services'' or a similarly
entitled section from its definitive Proxy Statement to be filed with the
Securities and Exchange Commission in connection with its 2006 Annual Meeting
of Shareholders.
<PAGE>
<PAGE> 57

                                  SIGNATURES


In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                            PYRAMID OIL COMPANY


March 24, 2006                         By:   JOHN H. ALEXANDER
                                           ----------------------
                                             John H. Alexander
                                             Director/President
                                          Chief Executive Officer

In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.


     JOHN H. ALEXANDER        Director/President            March 24, 2006
---------------------------     Chief Executive Officer
     John H. Alexander


     MICHAEL D. HERMAN        Director                      March 24, 2006
---------------------------     Chairman of the Board
     Michael D. Herman


      THOMAS W. LADD          Director                      March 24, 2006
---------------------------
      Thomas W. Ladd


      GARY L. RONNING         Director                      March 24, 2006
---------------------------
      Gary L. Ronning


       JOHN E.  TURCO         Director                      March 24, 2006
---------------------------
       John E. Turco


   LEE G. CHRISTIANSON       Corporate Secretary/           March 24, 2006
---------------------------    Principal Accounting and
   Lee G. Christianson         Financial Officer