<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, 2006

[ ]  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 ]

Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).  YES [   ]  NO [   ]

The issuer's revenues for the fiscal year ended December 31, 2006 were
$3,957,588.


<PAGE> 2

The aggregate market value on March 28, 2007, of the voting shares held by
non-affiliates was approximately $5,368,000 based on the closing sales price
of the registrant's Common Stock on such date.

At March 28, 2007, there were 3,741,721 shares of Common Stock outstanding.

                     DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement for its 2007 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
                    2006 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,
              And Director Independence                          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.  Eight of these
properties were shut-in during 2006.  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 2006, the
Company operated 19 leases within California, 17 of these leases had 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 121 wells, and of these, approximately 61 were in operation
during 2006.  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 57.5% and 39%, respectively, of Pyramid's crude
oil and gas sales in 2006.  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.


OTHER

The Company employed thirteen full-time people as of December 31, 2006, 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, 2006.

All of the Company's revenues during 2006 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, 2006, 2005 and 2004.


(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, 2007               741,000              65,000
                2006               715,000              94,000
                2005               522,000              83,000
                2004               555,000              83,000
                2003               554,000             105,000
</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, 2006.

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 $12,358,000 at December 31, 2006,
$12,694,000 at December 31, 2005, $4,643,000 at December 31, 2004, $4,617,000
at December 31, 2003, and $4,325,000 at December 31, 2002.

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>
                       2006      2005      2004       2003       2002
                       ----      ----      ----       ----       ----
<S>                  <C>       <C>       <C>         <C>       <C>
Crude oil (Bbls)      66,000    71,000    72,000     74,000     66,000

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

</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>
                       2006       2005      2004      2003       2002
                       ----       ----      ----      ----       ----
<S>                   <C>        <C>       <C>       <C>        <C>
Sales price:
  Crude oil           $58.88     $47.96    $36.24    $27.60     $22.86
                       =====      =====     =====     =====      =====
  Natural gas         $ 7.28     $ 6.77    $ 5.89    $ 5.77     $ 3.08
                       =====      =====     =====     =====      =====

Production costs      $22.80     $19.30    $18.20    $15.80     $15.30
                       =====      =====     =====     =====      =====
</Table>

The average selling price of Pyramid's crude oil at December 31, 2006, was
approximately $55.57 per barrel and the average selling price of Pyramid's gas
at December 31, 2006, was approximately $ 8.45 per MCF.

As of December 31, 2006, 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>
                     145       129              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 four new wells in 2006, two on the Santa Fe lease, one on
the Anderson lease and one joint-venture well.  The Company participated with
one other oil company as non-operator in the drilling of the joint venture
well.  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 2005.

         "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, 2006, 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, 2006, 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 2006.


                                  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" until August 21, 2006.  Effective August 21, 2006, the Company's
common stock began trading on the American Stock Exchange under the symbol
"PDO".  The following are high and low sales prices for each quarter
of 2006 and 2005, and reflect inter-dealer prices without retail markup,
markdown or commission.

<Table>
<Caption>
                                        High         Low
                                        ----        -----
<S>                                    <C>         <C>
    Fiscal Quarter Ending 2006
         March 31,                   $ 3.6335      $2.8668
         June 30,                     10.5000       3.1335
         September 30,                 7.4900       4.2300
         December 31,                  4.7000       3.7000
    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
</Table>

<PAGE> 13

At December 31, 2006, the Company had 279 shareholders of record, and an
unknown number of additional holders whose stock is held in "street name".

On March 28, 2006, the Company's Board of Directors approved a 3 for 2 stock
split payable on May 1, 2006, to shareholders of record as of April 17, 2006.

The Company did not repurchase any securities during 2006.


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


IMPACT OF CHANGING PRICES

Average prices increased by approximately $10.66 per equivalent crude oil and
gas barrel sold during 2006 as compared with average prices for 2005.  In 2006
there were 240 separate crude oil price changes, as compared with 228 price
changes in 2005.  The difference between the highest ($65.75) and lowest
($33.75) posted prices in 2006 was $32.00 per barrel.  By comparison, this
same differential in 2005 was $32.00 per barrel.


LIQUIDITY AND CAPITAL RESOURCES

The Company had cash and short-term investments of $2,070,000 at December 31,
2006, for a net decrease of $672,000, when compared to December 31, 2005.
Short-term investments consist of certificates of deposit having
original maturities of three months or more.  Operating activities generated
cash of $1,206,000 during 2006.  During 2006, cash was consumed by capital
spending of $1,907,000 and principal payments on the Company's long-term debt
totaling $59,000.  This was offset by proceeds from the issuance of long-term
debt of $32,000.  The components of the changes in cash for 2006 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.  A $500,000 line of credit,
unused at December 31, 2006, also provided additional liquidity during 2006.

















<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, 2007.  In addition to its current assets,
the Company also has a credit facility for $500,000 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, 2006, the amount of cash, cash equivalents, and short
     term investments was equal to $2,070,000 in the aggregate.

     As of December 31, 2006, the Company had approximately $2,797,000 in
     current assets, and only $593,000 of current liabilities.

     As of December 31, 2006, the Company had only $11,000 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 four wells in the year ended December 31, 2006.  The
Company drilled two wells in the year ended December 31, 2004.  The Company
drilled one well in the year ended December 31, 2003.  No wells were drilled
in 2002 and 2005.  Two of the wells drilled, one each in 2006 and 2004 were
exploratory wells.   The exploratory wells drilled in 2004 and 2006 were
abandoned due to non-economic production of crude oil.

The Company's crude oil reserves for the year ended December 31, 2006
increased due primarily to the drilling of four wells in 2006.  The  Company's
crude oil reserves for the year ended December 31, 2005 increased due
primarily to the recognition of proved developed non-producing and proved
undeveloped reserves as a result of the review of the Company's geological
data by independent petroleum engineers.  The Company's crude oil reserves for
the years ended December 31, 2004, 2003 and 2002, were stable.  The Company
was able to replace current production for 2004 and 2005, by drilling the
wells in 2004 and 2003.


<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 2007, crude oil prices have increased by approximately
$3.70 per barrel as of March 28, 2007, compared to prices at December 31,
2006.  There have been 57 separate price changes since December 31, 2006.

In January 2007, the Company drilled and completed a new well on its Anderson
property, located within the Carneros Creek Field.  The well was bottomed and
completed at 3,390 feet after penetrating four oil bearing formations.  The
lowest zone, the Point of Rocks formation, was stimulated by a sand-oil
fracturing processes and after the recovery of all stimulating fluids, oil
production has been approximately 37 barrels per day of clean 31 gravity oil.
The well has three oil zones behind pipe.

The Company plans to drill one or more additional well in the Carneros Creek
area later this year, when a drilling rig becomes available.  In addition to
new drilling, the Company plans to re-work and stimulate several existing
wells, with expectations of increasing oil production.

In January 2007, the Company and E&B Natural Resources Management Corporation
abandoned it's joint venture exploratory well, drilled in 2006.  After
extensive testing it was determined that the formation was proved to be too
tight even after two stimulation procedures and oil production was un-
economical.

The Company continues to seek and evaluate opportunities within the energy
sector, to enhance the value of the Company.

The Company's growth in 2007 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.


<PAGE> 16

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 2007, 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 2006.  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, 2006
  Compared to the Fiscal Year Ended December 31, 2005


REVENUES

Oil and gas sales increased by 14% for the year ended December 31, 2006, when
compared with the same period for 2005.  Oil and gas sales increased by 21%
due to higher average prices for 2006.  The average price of the Company's oil
and gas increased by approximately $10.66 per equivalent barrel for 2006 when
compared to 2005.  This was offset by a decrease in crude oil production/sales
of approximately 5,000 barrels.


OPERATING EXPENSES

Operating expenses increased by approximately 10% for the year ended December
31, 2006, when compared with the same period of 2005.  The cost to produce an
equivalent barrel of crude oil increased by approximately $3.50 per barrel for
2006 when compared to 2005, for a total cost of approximately $22.80 per
equivalent barrel.  The increase in operating expenses is due to an increase
of 6% in labor costs, an increase of 2% in equipment rental and an increase of
2% in insurance expense.  This was offset by a decrease of 4% in outside
services.  The remaining increase in operating expenses of 4%, is due to a
number of offsetting positive and negative changes in various cost categories
of less than 1% each.

Labor costs increased due to an increase in hourly labor rates and a bonus
payment that was awarded to all employees.  The increase in labor costs was
necessary to ensure that the Company remained competitive with the local labor
market.  In addition, the Company hired an additional field level employee in
March of 2006.  Equipment rental increased due to rental of equipment for the
Anderson #6 well.  The Company rented a temporary crude oil storage tank,
blowout prevention equipment and gas flare for this well.  This accounted for
almost all of the increase in equipment rental. Insurance costs increased due
to higher premiums for liability insurance and health insurance.  The
reduction in the cost of outside services is due to lower expenditures for
well work-overs.  Fewer work-overs were done in the year ended December 31,
2006 versus the same period for 2005.


EXPLORATION COSTS

In 2005, the Company entered into a Joint Venture Agreement with E & B Natural
Resources for the drilling of an exploratory well on the Company's Santa Fe
energy lease, section 32.  E & B Natural Resources was the operator during the
drilling of this well.  The new well was drilled in the first quarter of 2006.
As of December 31, 2006, the Company's share of costs for leaseholds and the
drilling and completion of this well was approximately $348,000.  In November

<PAGE> 18

of 2006, a decision was made by the Company and its joint venture partners to
abandon this well due to the fact that the well could not produce economic
quantities of oil and gas.  Therefore, the Company reclassified its share of
costs for this well as exploration costs in the fourth quarter of 2006.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses increased by approximately 28% for the
year ended December 31, 2006.  The increase is due primarily to a 13% increase
in salaries.  The increase in salaries is due primarily to bonuses that were
paid during the third quarter of 2006 and salary increases that were effective
July 1, 2006.  Outside consulting fees increased by 6% due to the hiring of a
petroleum engineer on a part-time basis.  Audit fees increased by 4% due to
additional costs of complying with Sarbanes-Oxley legislation

PROVISION FOR DEPLETION, DEPRECIATION AND AMORTIZATION

The provision for depletion, depreciation and amortization increased by 29%
for 2006, when compared with the same period for 2005. The increase is due
primarily to a 23% increase in depletion of the Companies oil and gas
properties.  The increase in depletion is due primarily to an increase in
depletion on two of the Company's oil and gas properties, the Santa Fe Energy
and Anderson leases.  The increase on these two properties is due primarily to
higher crude oil production due to the completion of two new wells in the
second quarter of 2006 and a new well in the third quarter of 2006.

OTHER COSTS AND EXPENSES

Other costs and expenses increased by approximately $67,000.  The increase is
due primarily to the costs associated with the listing of the Company's common
stock on the American Stock Exchange (AMEX) that was effective August 21,
2006.

INTEREST INCOME

Interest income increased by approximately $30,000 due to higher interest
rates for 2006, as compared with the same period of 2005.

OTHER INCOME

The increase in other income is due primarily to the sale of excess oil tools
in the amount of $25,000.

INCOME TAX PROVISION

The Company's income tax provision consists of the current income tax for
Federal and California Franchise tax, and the minimum corporate tax for New
York.





PAGE <19>

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.


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.


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

<PAGE> 20

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.

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.


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 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 are 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.

<PAGE> 21

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
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.


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.


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.



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

<PAGE> 22

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 $9,302 and $21,699
at December 31, 2006 and 2004, respectively.  There were no material
impairment reserves recorded in the year ended 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 2006, 2005 and 2004
were $3.22, $1.99 and $1.50, 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.












<PAGE> 23

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of
Financial Assets - an amendment of FASB Statement No.140 (SFAS 156).  The
provisions of SFAS 156 are effective for fiscal years beginning after
September 15, 2006.  This statement was issued to simplify the accounting for
servicing rights and to reduce the volatility that results from using
different measurement attributes.  Management does not believe the adoption of
SFAS 156 will have a material impact on the Company's financial position or
results of operations.

In July 2006, the FASB released FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (FIN
48).  FIN 48 clarifies the accounting and reporting for uncertainties in
income tax law.  This interpretation prescribes a comprehensive model for the
financial statement recognition, measurement, presentation and disclosure of
uncertain tax positions taken or expected to be taken in income tax returns.
This statement is effective for fiscal years beginning after December 15,
2006.  The Company is currently in the process of evaluating the expected
effect of FIN 48 on its results of operations and financial position.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
(SFAS 157).  SFAS 157 establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements.  SFAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007.  The Company is required to
adopt the provision of SFAS 157, as applicable, beginning in calendar year
2008.  The Company is currently in the process of evaluating the expected
effect of SFAS 157 on its results of operations and financial position.




<PAGE>
<PAGE> 24

ITEM 7- FINANCIAL STATEMENTS

                           PYRAMID OIL COMPANY

                      INDEX TO FINANCIAL STATEMENTS

                            DECEMBER 31, 2006

                                                                     Page

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


FINANCIAL STATEMENTS:

    Balance sheets - December 31, 2006 and 2005 . . . . . . . . . .   26-27
    Statements of operations - years ended
      December 31, 2006, 2005 and 2004  . . . . . . . . . . . . . .   28
    Statements of shareholders' equity - years ended
      December 31, 2006, 2005 and 2004  . . . . . . . . . . . . . .   29
    Statements of cash flows - years
      ended December 31, 2006, 2005 and 2004  . . . . . . . . . . .   30-31
    Notes to financial statements . . . . . . . . . . . . . . . . .   32


<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, 2006 and 2005, and the related statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 2006.  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, 2006 and 2005, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2006, in
conformity with U.S. generally accepted accounting principles.


SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
March 26, 2007








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

<Table>
<Caption>                                                December 31,
                                                  --------------------------
                                                     2006            2005
                                                  ----------    ------------
<S>                                              <C>             <C>
CURRENT ASSETS:
   Cash and cash equivalents                    $   619,001       $ 1,332,834
   Short-term investments                         1,450,910         1,409,358
   Trade accounts receivable
     (net of reserve for doubtful accounts
     of $4,000 in 2006 and 2005)                    324,495           327,173
   Employee loan receivable                              --             8,015
   Crude oil inventory                               56,539            58,962
   Prepaid expenses                                 152,899           120,367
   Income taxes receivable                          193,130                --
                                                  ---------        ----------
         Total current assets                     2,796,974         3,256,709
                                                  ---------        ----------
PROPERTY AND EQUIPMENT, at cost:
   Oil and gas properties and equipment
     (successful efforts method)                 12,891,756        11,505,375
   Capitalized asset retirement costs               304,199           294,600
   Drilling and operating equipment               2,008,397         1,945,882
   Land, buildings and improvements                 978,702           976,965
   Automotive, office and
     other property and equipment                 1,068,670           961,902
                                                 ----------        ----------
                                                 17,251,724        15,684,724
   Less - accumulated depletion,
     depreciation, amortization
     and valuation allowances                   (13,620,171)      (13,307,424)
                                                 ----------        ----------
                                                  3,631,553         2,377,300
                                                 ----------        ----------
OTHER ASSETS
   Deposits                                         250,000           250,000
   Other assets                                       7,380            13,178
   Assets held for resale
     (net of accumulated depreciation
     of $382,346 in 2006 and 2005)                    9,633             9,633
                                                 ----------        ----------
                                                $ 6,695,540       $ 5,906,820
                                                 ==========        ==========
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,
                                              ----------------------------
                                                  2006              2005
                                              ----------        ----------
<S>                                           <C>               <C>
CURRENT LIABILITIES:
   Accounts payable                         $    69,060        $    83,749
   Accrued professional fees                     50,114             51,741
   Accrued taxes, other than
     income taxes                                45,570             29,151
   Accrued payroll and related costs             60,374             51,039
   Accrued royalties payable                    136,826            115,762
   Accrued insurance                             62,857             54,826
   Accrued income taxes                              --             54,050
   Accrued termination costs                    142,157            146,047
   Current maturities of long-term debt          25,965             37,073
                                              ---------         ----------
      Total current liabilities                 592,923            623,438
                                              ---------         ----------

LONG-TERM DEBT, net of current
 maturities                                      11,334             26,858
                                              ---------         ----------
LIABILITY FOR TERMINATION COSTS                      --            141,333
                                              ---------         ----------
LIABILITY FOR ASSET RETIREMENT OBLIGATIONS      982,389            955,169
                                              ---------         ----------
COMMITMENTS AND CONTINGENCIES (Note 6)

SHAREHOLDERS' EQUITY:
   Preferred stock, no par value (Note 12)
     Authorized - 10,000,000 shares
     Issued and outstanding - none                   --                 --
   Common stock, no par value (Note 11 & 12)
     Authorized - 50,000,000 shares
     Issued and outstanding -
       3,741,721 shares                       1,071,610          1,071,610
   Retained earnings                          4,037,284          3,088,412
                                             ----------         ----------
                                              5,108,894          4,160,022
                                             ----------         ----------
                                            $ 6,695,540        $ 5,906,820
                                             ==========         ==========

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,
                                       --------------------------------------
                                          2006          2005          2004
                                       ----------    ----------    ----------
<S>                                    <C>          <C>           <C>
REVENUES:
  Oil and gas sales                   $ 3,957,588   $ 3,477,572   $ 2,674,902
  Gain on sales of fixed assets                --       283,821       252,421
                                       ----------    ----------    ----------
                                        3,957,588     3,761,393     2,927,323
                                       ----------    ----------    ----------
COSTS AND EXPENSES:
  Operating expenses                    1,538,227     1,397,491     1,337,542
  Exploration costs                       348,132            --       201,388
  General and administrative              637,120       499,025       381,872
  Termination costs                            --       424,000       170,054
  Taxes, other than income and
    payroll taxes                          81,712        64,020        54,064
  Provision for depletion,
    depreciation, amortization
    and valuation allowances              322,909       251,083       214,673
  Accretion expense                        20,343        19,238        18,221
  Other costs and expenses                 86,450        19,670        19,350
                                        ---------     ---------    ----------
                                        3,034,893     2,674,527     2,397,164
                                        ---------     ---------    ----------
OPERATING INCOME                          922,695     1,086,866       530,159
                                        ---------     ---------    ----------
OTHER INCOME (EXPENSE):
  Interest income                          67,988        38,237        16,551
  Other income                             41,219        20,077        67,251
  Interest expense                     (    7,205)   (    1,409)   (      934)
                                       ----------     ---------     ---------
                                          102,002        56,905        82,868
                                       ----------     ---------     ---------
INCOME BEFORE INCOME
 TAX PROVISION                          1,024,697     1,143,771       613,027
  Income tax provision                     75,825        55,175         1,125
                                       ----------     ---------     ---------
NET INCOME                            $   948,872   $ 1,088,596   $   611,902
                                       ==========     =========     =========
BASIC INCOME PER COMMON SHARE         $      0.25   $      0.29   $      0.16
                                       ==========     =========     =========
DILUTED INCOME PER COMMON SHARE       $      0.25   $      0.29   $      0.16
                                       ==========     =========     =========
Weighted average number of
 common shares outstanding              3,741,721     3,741,721     3,741,721
                                       ==========     =========     =========
The accompanying notes are an integral part of these statements.
</Table>

<PAGE> 29

                              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, 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

  3 for 2 stock split            1,247,291
  Net income                            --               --        948,872
                                 ---------        ---------      ---------
Balances, December 31, 2006      3,741,721       $1,071,610     $4,037,284
                                 =========        =========      =========


The accompanying notes are an integral part of these statements.

</Table>
<PAGE>
<PAGE> 30
                            PYRAMID OIL COMPANY
                          STATEMENTS OF CASH FLOWS


<Table>
<Caption>
                                               Year ended December 31,
                                          --------------------------------
                                             2006       2005        2004
                                          ---------   --------    --------
<S>                                       <C>        <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

  Net income                             $  948,872  $1,088,596   $  611,902
  Adjustments to reconcile net income
     to net cash provided
    by operating activities:
      Provision for depletion,
        depreciation, amortization
        and valuation allowances            322,909     251,083      214,673
      Accretion expense                      20,343      19,238       18,221
      Costs incurred for asset
        retirement obligations              ( 2,722)    (10,635)     ( 1,961)
      Exploration costs                     339,459          --      201,388
      Gain on sale of
        property and equipment                   --    (291,868)    (252,421)
      Loss on disposal of fixed assets           --       8,047           --
      Accrued termination costs            (141,333)    141,333           --
  Changes in operating assets
    and liabilities:
      (Increase) in trade accounts
        and interest receivable            (232,004)   ( 99,082)     ( 6,559)
      Decrease (increase) in crude
        oil inventories                       2,423       7,377      (17,922)
      (Increase) decrease in
        prepaid expenses                    (32,532)    (10,203)       4,247
      (Decrease) increase in accounts
        Payable and accrued liabilities     (19,407)    120,291      152,030
                                          ---------   ---------      -------
  Net cash provided by
    operating activities                  1,206,008   1,224,177      923,598
                                          ---------   ---------      -------

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








<PAGE> 31
                                PYRAMID OIL COMPANY
                              STATEMENTS OF CASH FLOWS
                                   (CONTINUED)
<Table>
<Caption>
                                                 Year ended December 31,
                                              ------------------------------
                                                 2006      2005        2004
                                               -------    -------    -------
<S>                                            <C>        <C>         <C>
CASH FLOWS FROM INVESTING ACTIVITIES:

  Capital expenditures                     $(1,907,023) $(493,585)  $(732,739)
  Cash deposit with the state of
    California Division of Oil and Gas              --         --    (250,000)
  Purchase of short-term investments          (100,000)  (500,000)         --
  Redemption of certificate of deposit         100,000         --          --
  Other cash deposits                         (  1,380)  (  6,000)         --
  Proceeds from sale of
    property and equipment                          --    333,643     281,500
                                             ---------    -------     -------
  Net cash used in investing activities     (1,908,403)  (665,942)   (701,239)
                                             ---------    -------     -------

CASH FLOWS FROM FINANCING ACTIVITIES:

  Proceeds from line of credit                 452,000         --     100,000
  Payments on line of credit                  (452,000)        --    (100,000)
  Principal payments on long-term debt        ( 59,025)  ( 50,781)   ( 48,434)
  Proceeds from issuance of long-term debt      32,393         --      59,849
  Principal payments from loans to employees    18,494      9,164          --
  Loans to employees                          (  3,300)        --    ( 24,357)
                                               -------    -------     -------
Net cash used in financing activities         ( 11,438)  ( 41,617)   ( 12,942)
                                               -------    -------     -------
Net (decrease) increase in cash
  and cash equivalents                        (713,833)   516,618     209,417

Cash and cash equivalents
  at beginning of year                       1,332,834    816,216     606,799
                                             ---------  ---------     -------
Cash and cash equivalents at end of year    $  619,001 $1,332,834   $ 816,216
                                             =========  =========     =======
SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid during the year
  for interest                               $   7,205  $   1,409   $     934
                                               =======    =======     =======
Cash paid during the year
  for income taxes                           $ 268,955  $   1,125   $   1,125
                                               =======    =======     =======
The accompanying notes are an integral part of these statements.
</Table>

<PAGE> 32
                                 PYRAMID OIL COMPANY
                            NOTES TO FINANCIAL STATEMENTS
                                  DECEMBER 31, 2006

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> 33

                                 PYRAMID OIL COMPANY
                       NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 2006

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 $9,302 and $21,699
at December 31, 2006 and 2004, respectively.  There were no material
impairment reserves recorded during the year ended December 31, 2005.  The
accumulated impairment reserve was $1,244,970 and $1,235,668 at December 31,
2006 and 2005, respectively.


<PAGE> 34

                                  PYRAMID OIL COMPANY
                        NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   DECEMBER 31, 2006


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 2006, 2005 and 2004
were $3.22, $1.99 and $1.50, 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> 35

                                  PYRAMID OIL COMPANY
                        NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   DECEMBER 31, 2006


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 57.5%, and 39.3%, respectively, of  Pyramid's
crude oil and gas sales in 2006.  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 65.5% and 34% attributable to ConocoPhillips
and Kern Oil and Refining respectively at December 31, 2006. Trade receivables
were approximately 59% and 38% attributable to ConocoPhillips and Kern Oil and
Refining respectively at December 31, 2005.


IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of
Financial Assets - an amendment of FASB Statement No.140 (SFAS 156).  The
provisions of SFAS 156 are effective for fiscal years beginning after
September 15, 2006.  This statement was issued to simplify the accounting for
servicing rights and to reduce the volatility that results from using
different measurement attributes.  Management does not believe the adoption of
SFAS 156 will have a material impact on the Company's financial position or
results of operations.

In July 2006, the FASB released FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (FIN
48).  FIN 48 clarifies the accounting and reporting for uncertainties in
income tax law.  This interpretation prescribes a comprehensive model for the
financial statement recognition, measurement, presentation and disclosure of
uncertain tax positions taken or expected to be taken in income tax returns.
This statement is effective for fiscal years beginning after December 15,
2006.  The Company is currently in the process of evaluating the expected
effect of FIN 48 on its results of operations and financial position.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
(SFAS 157).  SFAS 157 establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements.  SFAS 157 is effective for financial statements issued for

<PAGE> 36

                                  PYRAMID OIL COMPANY
                        NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   DECEMBER 31, 2006

fiscal years beginning after November 15, 2007.  The Company is required to
adopt the provision of SFAS 157, as applicable, beginning in calendar year
2008.  The Company is currently in the process of evaluating the expected
effect of SFAS 157 on its results of operations and financial position.


RECLASSIFICATIONS

Reclassifications have been made to the financial statements for 2005 to
conform to the 2006 presentation.







































<PAGE> 37
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 2006

2.  LONG-TERM DEBT AND LINE OF CREDIT

Long-term debt at December 31, 2006 and 2005, is summarized as follows:

<Table>                                                  December 31,
<Caption>                                           ----------------------
                                                       2006         2005
                                                    ---------    ---------
<S>                                                 <C>          <C>
  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

  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.                              7,583       15,167

  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.                              9,052       14,225

  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.                              2,298       23,396

  Note payable to GMAC, secured by equipment
    purchased with the proceeds of the loan,
    payable in monthly installments of $942
    principal and interest, interest at 2.9%,
    final payment in 2008.                             18,366           --
                                                      -------      -------
                                                       37,299       63,931
  Less - current maturities                          ( 25,965)    ( 37,073)
                                                      -------      -------
                                                     $ 11,334     $ 26,858
                                                      =======      =======
</Table>




 <PAGE> 38
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 2006

At December 31, 2006 approximately $137,400 of gross property and equipment
was pledged as collateral to secure approximately $37,000 principal amount of
long-term debt.

Maturities of long-term debt are as follows:
<Table>
<Caption>
            <S>                                      <C>
            Year ending December 31, 2007            $ 25,965
                                     2008              11,334
                                                      -------
                                                     $ 37,299
                                                      =======
</Table>

At December 31, 2006, the Company had an unsecured line of credit with a bank,
under which the Company may borrow up to $500,000 through May 31, 2007.
Interest on any borrowing is accrued at the bank's index rate plus 0.50
percentage points.  The bank's index rate was 8.75% at December 31, 2006.

3.   INCOME TAXES

   Income tax provision (benefit) consists of the following:
<Table>
<Caption>
                                            Year Ended December 31,
                                      -----------------------------------
                                       2006           2005          2004
                                      -------        -------       ------
<S>                                  <C>            <C>           <C>
   Federal income taxes:
     Current                         $ 76,908      $ 310,093     $  86,148
     Utilization of NOL's            ( 16,908)      (310,093)      (86,148)
     Deferred                              --             --            --
                                      -------        -------       -------
                                       60,000             --            --
                                      -------        -------       -------
   State income taxes:
     Current                           15,825         67,975        14,511
     Utilization of NOL's                  --        (12,800)      (13,386)
     Deferred                              --             --            --
                                      -------        -------       -------
                                       15,825         55,175         1,125
                                      -------        -------       -------
   Income tax provision              $ 75,825       $ 55,175      $  1,125
                                      =======        =======       =======
</Table>


<PAGE> 39
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 2006

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,
                                          -----------------------------------
                                            2006         2005          2004
                                          --------     --------      --------
<S>                                     <C>          <C>           <C>
   Federal income tax expense
     (benefit) at statutory rate         $ 313,448    $ 388,882     $ 208,047
   Net operating loss carryover           ( 16,908)    (255,243)     ( 93,097)
   Statutory depletion                    (143,401)    (171,622)     (120,558)
   Termination pay                        ( 44,438)      96,107            --
   Intangible Drilling Costs              ( 73,161)          --            --
   Other                                    40,285      ( 2,949)        6,733
                                          --------     --------      --------
   Income tax provision                  $  75,825    $  55,175     $   1,125
                                          ========     ========      ========
</Table>

The components of net deferred tax asset (liability) are as follows:
<Table>
<Caption>
                                             December 31,
                               ---------------------------------------
                                   2006          2005          2004
                               -----------   -----------   -----------
<S>                           <C>             <C>           <C>
Current deferred taxes:
  Gross assets                $    104,173   $    60,954   $    25,698
  Gross liabilities                     --            --            --
                                ----------    ----------    ----------
                                   104,173        60,954        25,698
                                ----------    ----------    ----------
Noncurrent deferred taxes:
  Gross assets                   2,118,208     1,720,272     2,077,164
  Gross liabilities             (  193,269)   (  159,351)   (   96,849)
  Valuation allowance           (2,029,112)   (1,621,875)   (2,006,013)
                                ----------     ---------     ---------
                                 ( 104,173)   (   60,954)   (   25,698)
                                ----------     ---------     ---------
                               $        --   $        --   $        --
                                ==========     =========     =========
</Table>

<PAGE> 40
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 2006

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

<Table>
<Caption>
                                                  December 31,
                                    ---------------------------------------
                                        2006          2005          2004
                                    -----------   -----------   -----------
<S>                                <C>            <C>           <C>
    Accounts receivable             $     1,712    $    1,712   $     1,600
    Net operating loss
      carry forwards                         --        20,808       377,700
    Asset retirement obligations        420,462            --            --
    Statutory depletion
      carryover                       1,697,746     1,699,464     1,699,464
    Accrued liabilities                 102,461        59,242        24,098
                                     ----------     ---------     ---------
    Total deferred tax assets         2,222,381     1,781,226     2,102,862
    Property and equipment           (  193,269)   (  159,351)   (   96,849)
    Valuation allowance              (2,029,112)   (1,621,875)   (2,006,013)
                                     ----------     ---------     ---------
                                    $        --   $        --   $        --
                                     ==========     =========     =========
</Table>

At December 31, 2006, 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.

At December 31, 2006, the Company has no federal income tax or California
franchise tax net operating loss carryforwards.

At December 31, 2006, the Company has, for federal income tax purposes, a
statutory depletion carryover of approximately $4,998,000, which currently
has no expiration date.

At December 31, 2006, the Company had income taxes receivable of approximately
$193,000 for overpayment of estimated taxes during 2006.  Approximately
$137,000 of the overpayment of estimated taxes is related to the Company's
decision to write-off the costs capitalized earlier in the year for the
drilling of an exploratory well.  The decision to write-off the costs for
drilling the well was made in the fourth quarter of 2006.






<PAGE> 41
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 2006


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 $307,600, $221,400 and
$143,000 in 2006, 2005 and 2004, 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. A decision was made in the fourth quarter of 2006 to abandon this well.

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> 42
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 2006

5. FOURTH QUARTER RESULTS (UNAUDITED)

During the fourth quarter of 2006, the Company reclassified its investment in
the costs of drilling and completing a well that was drilled in 2006.
The costs of drilling this well were capitalized during 2006.  A decision was
made in the fourth quarter of 2006 by the Company and its joint-venture
partner to abandon the well.  The Company's share of the costs for this well
in the amount of $348,132 were charged to exploration costs in the fourth
quarter of 2006.  The write-off created a tax benefit of approximately
$141,000 for a net reduction in income of approximately $207,000.

During the fourth quarter of 2006, the Company recorded additional depletion
of approximately $31,000 on its oil and gas properties as a result of the
analysis of the Company's oil and gas reserves by independent consultants.

During the fourth quarter of 2006, 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 $9,302 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 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.







<PAGE> 43
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 2006


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.

In February 2002, the Company entered into an employment agreement with
John H. Alexander pursuant to which Mr. Alexander agreed to serve as the
Company's Vice President. On June 3, 2004, Mr. Alexander was appointed as the
Company's President and Chief Executive Officer.  The employment agreement is
for an initial term of six years, which term automatically renews annually if
written notice is not tendered.

Pursuant to the employment agreement, the Company may terminate Mr.
Alexander's employment with or without cause at any time before its term
expires upon providing written notice.  In the event the Company terminates
Mr. Alexander's employment without cause, Mr. Alexander would be entitled to
receive a severance amount equal to his annual base salary and benefits for
the balance of the term of his employment agreement.  In the event of
termination by reason of Mr. Alexander's death or permanent disability, his
legal representative will be entitled to receive his annual salary and
benefits for the remaining term of his employment agreement.  In the event of,
or termination following, a change in control of the Company, as defined in
the agreement, Mr. Alexander would be entitled to receive his annual salary
and benefits for the remainder of the term of his agreement.  In the event
that Mr. Alexander is terminated the Company would incur approximately
$600,000 in costs.


7.  GAIN ON SALE OF FIXED ASSETS

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.


<PAGE> 44
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 2006

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 $11,748, $9,775
and $11,849 were made during the years ended December 31, 2006, 2005 and 2004,
respectively.


(9) ASSETS RETIREMENT OBLIGATIONS

The Company recognizes a liability at discounted fair value for the future
retirement of tangible long-lived assets and associated assets retirement cost
associated with the petroleum and natural gas properties. The fair value of
the liability is capitalized as part of the cost of the related asset and
amortized to expense over its useful life. The liability accretes until the
date of expected settlement of the retirement obligations. The related
accretion expense is recognized in the statement of operations. The provision
will be revised for the effect of any changes to timing related to cash flow
or undiscounted abandonment costs. Actual expenditures incurred for the
purpose of site reclamation are charged to the asset retirement obligations to
the extent that the liability exists on the balance sheet. Differences between
the actual costs incurred and the fair value of the liability recorded are
recognized in income in the period the actual costs are incurred.

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, 2006, 2005 and 2004, because the Company records a
valuation allowance on 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>
                                               December 31,
                                    ---------------------------------
                                      2006         2005        2004
                                    ---------   ---------   ---------
<S>                                 <C>         <C>         <C>
Beginning balance                   $955,169     $946,566   $930,305
  Incurred during the period        (  2,722)   ( 10,635)   ( 6,110)
  Additions for new wells              9,926           --      4,150
  Accretion expense                   20,016       19,238     18,221
                                     -------      -------    -------
Ending Balance                      $982,389     $955,169   $945,566
                                     =======      =======    =======
</Table>

<PAGE> 45
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 2006

(10) 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.


(11) STOCK SPLIT

On March 28, 2006, the Company's Board of Directors approved a 3 for 2 stock
split payable on May 1, 2006, to shareholders of record as of April 17, 2006.

                                                         Common Stock
                                                           ---------
     Shares outstanding at December 31, 2005               2,494,430
     Shares issued 3 for 2 stock split May 1, 2006         1,247,291
                                                           ---------
     Shares outstanding at December 31, 2006               3,741,721
                                                           =========

(12) CHANGE IN AUTHORIZED SHARES

At the Annual Meeting of Shareholders held on June 1, 2006, the Shareholders
approved an amendment to the Company's Articles of Incorporation to increase
the number of authorized shares of Common Stock from 10,000,000 to 50,000,000
and to authorize the issuance of up to 10,000,000 shares of a newly created
class of Preferred Stock.


(13) 2006 EQUITY INCENTIVE PLAN

At the Annual Meeting of Shareholders held on June 1, 2006, the Shareholders
approved the Pyramid Oil Company 2006 Equity Incentive Plan (the Plan).  The
Plan authorizes the granting of the following types of awards to persons who
are employees, officers or directors of the Company or its subsidiaries or
who are consultants or advisers to such entities:

          INCENTIVE STOCK OPTIONS that are intended to satisfy the
          requirements of Section 422 of the Internal Revenue Code of 1986, as
          amended, and the regulations thereunder;


<PAGE> 46
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 2006

          NON-QUALIFIED STOCK OPTIONS that are not intended to be incentive
          options;

          Shares of Common Stock that are subject to specified restrictions;
          and

          Stock appreciation rights that permit the holder to receive the
          excess of the fair market value of the Common Stock on the exercise
          date over its fair market value (or a greater specified base value)
          on the grant date, either in tandem with options or as separate and
          independent grants.

A summary of the plan is contained in the Company's Schedule 14a, Proxy
Statement dated May 10, 2006 which is incorporated herein by reference.  A
copy of the Plan is attached as Appendix A to the Proxy Statement.  As of the
date of the filing of this Form 10-KSB, no shares have been awarded under this
Plan.


(14) SUBSEQUENT EVENTS

On January 9, 2007, the Company and John Alexander entered into a Severance
Award Agreement pursuant to which the Company awarded Mr. Alexander a
supplemental payment in connection with his future severance of employment
with the Company.  Mr. Alexander serves as the Company's Chief Executive
Officer.  Pursuant to the Severance Award Agreement and following the
termination of Mr. Alexander's employment, he will be entitled to receive (at
the Company's option) 20,000 shares of the Company's common stock or the
then-fair market value of the shares.  The closing price of a share of the
Company's common stock on January 12, 2007 was $3.99.

On January 9, 2007, the Company's Board of Directors adopted an Incentive and
Retention Plan pursuant to which the Company's officers and other employees
selected by the Company's Compensation Committee are entitled to receive
payments if they are employed by the Company as of the date of a 'Corporate
Transaction,' as defined in the Incentive and Retention Plan.  A 'Corporate
Transaction' includes certain mergers involving the Company, sales of Company
assets, and other changes in the control of the Company, as specified in the
Incentive and Retention Plan.  In general, the amount that is payable to each
plan participant will equal the number of plan units that have been granted to
him or her, multiplied by the increase in the value of the Company between
January 9, 2007 and the date of a Corporate Transaction.


<PAGE>
<PAGE> 47
                                 PYRAMID OIL COMPANY
                          SUPPLEMENTAL INFORMATION (UNAUDITED)
                            OIL AND GAS PRODUCING ACTIVITIES
                                  DECEMBER 31, 2006


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, 2006, 2005 and 2004
were as follows:

<Table>
<Caption>
                                         2006         2005         2004
                                      ----------   ----------   ----------
<S>                                  <C>          <C>          <C>
Proved properties                    $12,534,500  $11,326,800  $11,030,300
Unproved properties
  being amortized                        178,600      178,600      178,600
Unproved properties
  not being amortized                         --           --           --
Capitalized asset retirement costs       304,200      294,600      294,600
Accumulated depletion,
  depreciation, amortization
  and valuation allowances           (10,879,500) (10,659,000) (10,510,700)
                                      ----------   ----------   ----------
                                     $ 2,137,800  $ 1,141,000  $   992,800
                                      ==========   ==========   ==========
</Table>
<PAGE>
<PAGE> 48
                                 PYRAMID OIL COMPANY
                        SUPPLEMENTAL INFORMATION (UNAUDITED)
                                  DECEMBER 31, 2006


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

<Table>
<Caption>
                                  2006            2005           2004
                              ------------   -------------  -------------
                               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            715      94     522      83     555     83
  Revisions of previous
    estimates                   82     (22)    113      18     (10)     8
  Extensions, discoveries
    and other additions         10      --     151      --      49     --
  Production                   (66)    ( 7)    (71)    ( 7)    (72)   ( 8)
                              ----    ----    ----    ----    ----   ----
  End of year                  741      65     715      94     522     83
                              ====    ====    ====    ====    ====   ====
Proved developed reserves:
  Beginning of year            539      94     473      83     555     83
                              ====    ====    ====    ====    ====   ====
  End of year                  556      65     539      94     473     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, 2006


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

<Table>
<Caption>
                                            December 31,
                               --------------------------------------
                                  2006          2005          2004
                               ----------    ----------    ----------
<S>                            <C>           <C>           <C>
Proved developed and
 undeveloped reserves
  (Present value before
   income taxes)              $12,358,000   $12,694,000    $4,643,000
                               ==========    ==========     =========

</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,
2006, 2005 and 2004 were as follows:

<Table>
<Caption>
                                      2006           2005          2004
                                    ---------       -------       -------
<S>                                <C>            <C>           <C>
Property acquisition costs         $    2,000      $ 47,500      $ 14,000
Exploration costs - expensed          339,500            --       201,000
Development costs                   1,386,000       249,000       418,000
Asset retirement costs                  9,600            --         4,000

</Table>







<PAGE> 50
                                 PYRAMID OIL COMPANY
                        SUPPLEMENTAL INFORMATION (UNAUDITED)
                                 DECEMBER 31, 2006


The results of operations for oil and gas producing activities for the years
ended December 31, 2006, 2005 and 2004 were as follows:

<Table>
<Caption>
                                     2006          2005         2004
                                  ----------    ----------    ----------
<S>                              <C>           <C>           <C>
Sales                            $ 3,958,000   $ 3,478,000   $ 2,675,000
Production costs                   1,613,000     1,454,000     1,383,000
Exploration costs                    348,000            --       202,000
Accretion expense                     20,000        19,000        18,000
Depletion, depreciation,
  amortization and
  valuation allowance                220,000       148,000       115,000
                                   ---------     ---------     ---------
                                   1,757,000     1,857,000       957,000
Income tax provision                  76,000        55,000         1,200
                                   ---------     ---------     ---------
Results of operations from
  production activities          $ 1,681,000   $ 1,802,000   $   955,800
                                   =========     =========     =========

</Table>

The standardized measure of discounted estimated future net cash flows
relating to proved oil and gas reserves for the years ended December 31, 2006,
2005 and 2004 were as follows:

<Table>
<Caption>
                                     2006          2005          2004
                                  ----------    ----------    ----------
<S>                              <C>           <C>           <C>
Future cash inflows              $42,353,000   $40,734,000   $18,448,000
Future development and
  production costs                20,630,000    17,915,000     9,908,000
Future abandonment costs             982,000       755,000       730,000
Future income tax expense          4,994,000     6,016,000        12,000
                                  ----------    ----------    ----------
Future net cash flow              15,747,000    16,048,000     7,798,000
10% annual discount                6,325,000     6,888,000     3,162,000
Standardized measure              ----------    ----------    ----------
  of discounted future
  net cash flow                  $ 9,422,000   $ 9,160,000   $ 4,636,000
                                  ==========    ==========    ==========
</Table>


<PAGE> 51
                                 PYRAMID OIL COMPANY
                         SUPPLEMENTAL INFORMATION (UNAUDITED)
                                  DECEMBER 31, 2006


The principal changes in the standardized measure of discounted future net
cash flows during the years ended December 31, 2006, 2005 and 2004 were as
follows:

<Table>
<Caption>
                                         2006          2005          2004
                                      ----------    ----------    ----------
<S>                                 <C>           <C>           <C>
Extensions                           $   223,000   $ 3,094,000   $   490,000
Revisions of previous estimates
 Price changes                        (1,161,000)    4,715,000       654,000
 Quantity estimate                     1,226,000     2,175,000      ( 82,000)
Change in production rates,
  timing and Other                       160,000       247,000       381,000
Development costs incurred             1,386,000       249,000       418,000
Changes in estimated future
  development costs                     (286,000)     (179,000)     (348,000)
Estimated future
  abandonment costs                     ( 37,000)     (755,000)     (730,000)
Sales of oil and gas, net of
  production costs                    (1,996,000)   (2,024,000)   (1,292,000)
Accretion of discount                  1,344,000       537,000       535,000
                                      ----------    ----------    ----------
                                         859,000     8,059,000        26,000
Net change in income taxes              (597,000)    3,535,000            --
                                      ----------    ----------    ----------
Net increase                         $   262,000   $ 4,524,000   $    26,000
                                      ==========    ==========    ==========
</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.

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

<PAGE> 52
                                 PYRAMID OIL COMPANY
                        SUPPLEMENTAL INFORMATION (UNAUDITED)
                                  DECEMBER 31, 2006

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 increase in the standardized measure of discounted future net cash flows
at December 31, 2006, of $262,000 is the result of several offsetting factors.
Discounted future net cash flows increased by $859,000 and was offset by lower
projected income taxes of $597,000.  Sales of oil and gas, net of production
costs, reduced future cash flows by approximately $1,996,000.  Development
costs incurred of $1,386,000 increased future cash flows due to the drilling
of three new wells in 2006.  This was offset by an increase in estimated
future development costs of $286,000.  Accretion of discount also contributed
to a change in future cash flows of $1,344,000.

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).





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

<Table>
<Caption>                              2006          2005
                                    ----------    ----------
<S>                                 <C>           <C>
    REVENUES:

      Quarter Ended:
          March 31                  $   912,211   $   701,892
          June 30                     1,096,664       865,548
          September 30                1,080,199     1,015,138
          December 31                   868,514       894,994
                                     ----------    ----------
                                    $ 3,957,588   $ 3,477,572
                                     ==========    ==========
    NET INCOME (LOSS):

      Quarter Ended:
          March 31                  $   278,603   $   214,377
          June 30                       371,229       266,819
          September 30                  332,353       293,451  (b)
          December 31 (a)              ( 33,313)      313,949
                                     ----------    ----------
                                    $   948,872   $ 1,088,596
                                     ==========    ==========
    INCOME (LOSS) PER COMMON SHARE:

      Quarter Ended:
          March 31                  $       .07   $       .06
          June 30                           .10           .07
          September 30                      .09           .08  (b)
          December 31 (a)                  (.01)          .08
                                     ----------    ----------
                                    $       .25   $       .29
                                     ==========    ==========
</Table>


(a) Reflects exploration costs of $207,000, net of income tax benefit of
$141,000, additional depletion of $31,000 and a valuation allowance of $9,900
(see Note 5 of Notes to Financial Statements included in Item 7 of this Form
10-KSB).

(b) 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.



<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 2006 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 2007 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 2007
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 2007
Annual Meeting of Shareholders.

ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
            INDEPENDENCE

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 $307,600 in 2006, $221,400 in
2005 and $143,000 in 2004.

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. A decision was made in the fourth quarter of 2006 to abandon this well.

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 2007 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 29, 2007                         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 29, 2007
---------------------------     Chief Executive Officer
     John H. Alexander


     MICHAEL D. HERMAN        Director                      March 29, 2007
---------------------------     Chairman of the Board
     Michael D. Herman


      THOMAS W. LADD          Director                      March 29, 2007
---------------------------
      Thomas W. Ladd


      GARY L. RONNING         Director                      March 29, 2007
---------------------------
      Gary L. Ronning


       JOHN E.  TURCO         Director                      March 29, 2007
---------------------------
       John E. Turco


   LEE G. CHRISTIANSON       Corporate Secretary/           March 29, 2007
---------------------------    Principal Accounting and
   Lee G. Christianson         Financial Officer