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

                                FORM 10-KSB

/X/  Annual Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 (Fee Required)

               For the fiscal year ended December 31, 1998

/ /  Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934

               For the transition period from              to              

                        Commission File Number 0-5525

                             PYRAMID OIL COMPANY                             
          (Exact name of registrant as specified in its charter)

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

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

   Registrant's telephone number, including area code:  (661) 325-1000    

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

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

                        Common Stock Without Par Value                        
                             (Title of Class)

   Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.         YES  X      NO     

   Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not 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 ]

<PAGE> 2

State the registrant's revenues for its most recent fiscal year:  $951,015

   The aggregate market value on March 22, 1999, of Common shares held by
non-affiliates was approximately $320,000 based on the average closing bid and
asked prices of the registrant's Common shares on such date, as quoted by the
National Quotation Bureau.
 
       At March 22, 1999, there were 2,494,430 Common shares outstanding.     
                                                   
                     DOCUMENTS INCORPORATED BY REFERENCE

   Portions of the registrant's definitive proxy statement for its 1999 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> 3
                          PYRAMID OIL COMPANY

                    1998 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. .  . .  . .  . .  . .         13 

Item  6.    Management's Discussion and Analysis of Financial
              Condition and Results of Operations .  . .         14

Item  7.    Financial Statements . .  . .  . .  . .  . .         20

Item  8.    Changes In and Disagreements with Accountants on   
              Accounting and Financial Disclosure .  . .         45

                               PART III

Item  9.    Directors, Executive Officers, Promoters and
              Control Persons; Compliance With Section 
              16(a) of the Exchange Act .  . .  . .  . .         45

Item 10.    Executive Compensation .  . .  . .  . .  . .         45

Item 11.    Security Ownership of Certain Beneficial
              Owners and Management.  . .  . .  . .  . .         45

Item 12.    Certain Relationships and Related Transactions       46

                               PART IV

Item 13.    Exhibits and Reports on Form 8-K .  . .  . .         47

<PAGE> 4

Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995
-----------------------------

Except for the historical information contained herein, the matters discussed 
in this Annual Report are forward-looking statements which involve risks and 
uncertainties, including but not limited to economic, competitive, political, 
regulatory and governmental factors affecting the Company's revenues, 
operations, markets and prices, properties and other factors discussed in the 
Company's various filings with the Securities and Exchange Commission. 


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

(a)  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 oil or 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 others 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.

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


(b)  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. 

<PAGE> 5

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 when economic conditions
improve. 

Oil and Gas Production Operations 
---------------------------------

At the beginning of 1998, Pyramid operated 23 oil and gas leases (properties)
that produce crude oil and/or natural gas (production) in Kern and Santa
Barbara Counties in the State of California.  At the end of 1998, the Company
had reduced the leases in operation to 16 due to the low oil prices for 1998.  
Production operations consist primarily of pumping oil from a well(s) into
tanks and selling the oil to a buyer and  maintaining production facilities. 
Operations of properties 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; certain properties may
be conducive to secondary recovery operations in the future, depending on the
prevailing price of oil.

Primary recovery production is oil and/or gas recovered by any method (natural 
flow or artificial lift) that may be employed to produce them through a single 
well bore; the fluid enters the well bore by the action of native reservoir 
energy or gravity.  Secondary recovery operations employs any method of 
recovery (artificial flowing or pumping) to produce oil and/or gas through the 
joint use of two or more well bores.  Secondary recovery may be obtained by 
the injection of liquids or gases into the reservoir for the purpose of 
augmenting reservoir energy.  Secondary recovery, usually, but not always, is 
done after the primary-recovery phase has passed.

All basic production and associated activities including daily inspections,
gauging and shipping of oil produced, daily routine maintenance of wells, and
maintenance and repairs of production facilities and equipment, are performed
by Pyramid employees.  Various equipment necessary to perform maintenance and
repair activities on the properties is owned and maintained by the Company. 
Such equipment consists of service rigs, mobile pumps, vacuum trucks, hot oil
truck, backhoe, trucks and trailers.  The Company maintains shop facilities
and mechanics to perform maintenance and repairs on vehicles and equipment. 
The Company employs field level personnel that perform daily activities in
support of all operations (i.e., pumpers, rig crews, roustabouts and equipment
operators).

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.   

<PAGE> 6

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
134 total wells, and of these, approximately 57 were in daily operation during
1998.  Operations continue to be reduced on specific properties that are
currently generating a marginal gross profit in an effort to hold the 
properties until economic conditions warrant full scale operations.

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 Kern Oil & Refining and Tosco Refining
Company, accounting for approximately 50.6%, and 43.4%, respectively, of
Pyramid's crude oil and gas sales in 1998.  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. 
Natural gas is sold to companies in the area of operations.  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; however, there are some seasonal influences that may
affect natural gas sales from the interests owned in the State of New York.


(C)  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
disadvantage could materially and adversely affect the Company's ability to
acquire new properties or develop existing properties.

The oil and gas industry, in general, has been adversely affected by several
factors beyond the Company's control, including unstable oil and gas prices,
uncertainty regarding the effect of pricing agreements and production quotas
and allocations established by the Organization of Petroleum Exporting
Countries, political instability in the Middle East and the status of
ever-changing federal and state legislation and regulation.  

<PAGE> 7

Given the uncertainty of international and domestic political actions and
their impact on the energy markets, it is difficult, if not impossible, to
predict the price or market situation for any oil or gas which is currently
owned or which could be developed by the Company.  Continued depressed oil and
gas prices or significant curtailment in the Company's oil and gas production
from its better properties would have a material adverse effect on the
Company's operations.


(d)  REGULATIONS
     -----------

The Company's business is affected by an abundance of 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 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.

During 1996, the Company was required by the Bureau of Land Management to
perform certain lease remediation efforts on two Federal leases that the
Company operates.  The cost of these efforts in 1996 was approximately
$48,000.  During the fourth quarter of 1998, the Company was notified by the
United States Environmental Protection Agency of its potential liability for 

<PAGE> 8

waste material it disposed of at the Casmalia Disposal Site in Santa Barbara
County, California.  Management does not believe that the Company will be
liable for any costs for the remediation of the Casmalia Disposal Site.


(e) Commitments and Contingencies
    -----------------------------
         
Pursuant to a specific oil and gas lease with respect to the Carneros Creek 
field, the Company is obligated to drill at least one well per year on this 
property.  If the price of oil reaches $20 per barrel or above and continues 
for a period of 60 consecutive days, the Company will thereafter be obligated 
to drill at least one well per quarter on this property.  The Company secured 
a waiver of its commitment to drill a well on this property in 1996.  The
Company drilled and completed a new well on this property in 1997.  The
Company did not drill a new well or obtain a waiver of this drilling
commitment in 1998.

Failure to drill the necessary well could result in the potential
relinquishment of any undrilled or unproved acreage on this lease.  Any
relinquishment would not affect wells already drilled and producing on this
lease.  This property had no proved undeveloped reserves of crude oil and
natural gas at December 31, 1998.

The cost of drilling and completing a well can vary significantly.  The
Company's total share of the costs of drilling and completing one well on this 
lease in 1997 was approximately $256,000.  The price of oil on this specific 
Carneros Creek field lease was $8.70 per barrel at December 31, 1998 and 
$13.25 per barrel at March 29, 1999.
                                                                          
The Company is liable for future dismantlement and abandonment costs 
associated with its oil and gas properties.  These costs include future site 
restoration, post closure and other environmental exit costs.  The costs of 
future dismantlement and abandonment have not been determined.  Management 
believes that these costs will not have a material adverse effect upon its 
financial position or results of operations.

The Company is subject to certain 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.

<PAGE> 9

(f)  OTHER
     -----

The Company employed eleven full-time people as of December 31, 1998.

The Company had no material research and development costs for the three years
ended December 31, 1998.

All of the Company's revenues during 1998 were derived from domestic sources.


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.  There are also well servicing and drilling
equipment, truck and automotive, office and other equipment.  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 has no significant proved
undeveloped properties at December 31, 1998.  The Company had one producing
property with proved undeveloped reserves as of December 31, 1997.

(b)  OIL AND GAS PROPERTIES
     ----------------------

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

<TABLE>
<CAPTION>
                                  Crude Oil          Natural Gas
                                    (BBLS)              (MCF)
                                  ---------          -----------
<S>                               <C>                <C>    
   December 31, 1998               384,000             127,000
                1997               435,000             145,000
                1996               499,000             278,000
                1995               451,000             171,000
                1994               479,000             170,000
</TABLE>                                                                       

<PAGE> 10

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, 1998.

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%, was $1,001,000 at December 31, 1998,
$1,688,000 at December 31, 1997, $3,958,000 at December 31, 1996, $2,155,000
at December 31, 1995, and $2,262,000 at December 31, 1994.

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

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

<TABLE>
<CAPTION>
                       1998      1997      1996       1995      1994
                       ----      ----      ----       ----      ----
<S>                  <C>       <C>       <C>         <C>       <C>
Crude oil (Bbls)      85,000    91,000   101,000    104,000    122,000 

Natural gas (MCF)     36,000    35,000    48,000     37,000     35,000   

</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 were as follows:

<TABLE>
<CAPTION>
                       1998       1997      1996      1995       1994
                       ----       ----      ----      ----       ----
<S>                   <C>        <C>       <C>       <C>        <C>
Sales price:
  Crude oil           $10.73     $17.07    $18.80    $15.41     $14.09
                       =====      =====     =====     =====      ===== 
  Natural gas         $ 1.64     $ 1.99    $ 1.35    $ 1.11     $ 1.62
                       =====      =====     =====     =====      =====

Production costs      $ 8.61     $ 9.90    $ 9.60    $ 8.50     $ 6.70 
                       =====      =====     =====     =====      =====
</TABLE>

The average selling price of Pyramid's crude oil at December 31, 1998, was
approximately $8.13 per barrel and the average selling price of Pyramid's gas
at December 31, 1998, was approximately $1.23 per MCF.   

<PAGE> 11

As of December 31, 1998, 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>
                     155       134              22,857     6,899 
                     ===       ===              ======     =====
</TABLE>

    (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. 

During the years ended December 31, 1997, 1995 and 1994, Pyramid
participated in the drilling of 1 well each year.  No wells were drilled in
1998 and 1996.  All of these wells were drilled in California and completed as
producing wells.

         "Unproven" oil and gas properties are those on which the presence of  
         commercial quantities of reserves of crude oil or natural gas has not 
         been established.
 
         "Undeveloped" acreage exists on those oil and gas properties where    
         economically recoverable reserves are estimated to exist in proved    
         reservoirs from wells to be drilled in the future.

As of December 31, 1998, 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>


<PAGE> 12

(c)  REAL PROPERTY OWNED
    -------------------

Pyramid owned the following real property as of December 31, 1998, 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

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
--------------------------

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 1998.                                                        

<PAGE> 13

                                  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 over-the-counter market.  The
following are high and low "bid" quotations for each quarter of 1998 and 1997,
and reflect inter-dealer prices without retail markup, markdown or commission
and may not necessarily represent actual transactions.

<TABLE>
<CAPTION>
                                    High         Low 
                                    Bid          Bid 
                                    ----        -----
<S>                                <C>         <C>
    1998
         First Quarter             $ 7/16      $ 3/8 
         Second Quarter             13/32        5/16 
         Third Quarter               5/16        1/4
         Fourth Quarter              1/4         1/8 
    1997
         First Quarter               5/16        3/16
         Second Quarter              3/8         1/8   
         Third Quarter               1/2         1/4   
         Fourth Quarter              5/8         3/8 

</TABLE>

(b)  APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS

                              Title of Class
                              --------------
                     Common Shares, without par value


                Approximate Number of Holders of Record of
                   the Outstanding Common Shares as of
                             December 31, 1998              
                -------------------------------------------

                                    745    

The Company has paid no dividends on its common shares for the past five years
and does not anticipate paying any dividends in the foreseeable future.  
Dividends on the common shares, if any, will be dependent upon the Company's 
earnings, financial conditions and other relevant factors as determined by the 
Board of Directors.

<PAGE> 14

ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
----------------------------------------------------------
         CONDITION AND RESULTS OF OPERATIONS
         -----------------------------------

IMPACT OF CHANGING PRICES                         
-------------------------

Average crude oil prices decreased by approximately $5.60 per equivalent
barrel sold during 1998 as compared with average prices for 1997.  Crude oil
prices in 1998 were at the lowest levels encountered for decades.  In 1998
there were sixty-two separate crude oil price changes, as compared with
forty-four price changes in 1997.  The price fluctuations experienced in 1998
were as extreme as they have been in prior years.  The difference between the
highest and lowest posted prices in 1998 was $6.00 per barrel.  By comparison,
this same differential in 1997 and 1996 was $8.60 and $6.65 per barrel,
respectively.  Continuing uncertainty in crude oil prices  has made it
impractical for the Company to make any commitments to further develop its oil
and gas properties.  Crude oil prices must stabilize for a long-term period,
at economic levels, before resources would be available to expand the
Company's oil and gas reserves.


LIQUIDITY AND CAPITAL RESOURCES                                
-------------------------------

Cash decreased by $282,677 as of December 31, 1998 when compared to December
31, 1997.  The Company used $141,756 in cash for operating activities in 1998.
Capital spending of $214,824 and principal payments on the Company's
long-term debt totaling $26,097 further reduced cash reserves in 1998.  These
cash reductions in 1998 were offset by borrowings from the Company's line of
credit.  The components of the changes in cash for 1998 are more fully
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. Management believes the Company
could also secure funds, if necessary, from other outside sources to finance
acquisitions or other capital projects.
 
Management continues to examine various alternatives for increasing capital
resources including, among other things, participation with industry and/or
private partners 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 has not generated sufficient cash flows to enable it to further 
develop its oil and gas properties and to risk exploratory drilling costs in 
attempts to expand its oil and gas reserves.  The Company drilled one well in 
1997 and no wells were drilled in 1998 or 1996. The Company completed a
redrill of an existing well in the second quarter of 1998.


<PAGE> 15

The Company's crude oil reserves increased for the year ended December 31,
1996, due primarily to higher crude oil prices at year end.  The Company's
crude oil reserves decreased for the years ended December 31, 1998 and 1997,
due primarily to lower crude oil prices at year end.

The Company's business plan, implemented to deal with the unstable crude oil
market, has been to concentrate its efforts and resources on maintaining oil
and gas production on existing properties and deferring certain developmental
and exploration activities until crude oil prices increase.  Drilling
obligations on specific properties have been renegotiated with the property
owners to link the level of future drilling activities to the price of crude
oil (see Note 6 of Notes to Financial Statements included in Item 7 of this
Form 10-KSB).  This has enabled the Company to preserve its position on
certain developmental properties during the periods of low oil prices and to
conserve its capital.

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.  

During 1998, the Company entered into a joint venture agreement to participate
as a non-operator in the development of gas wells in Solano County, 
California.  The Company's share of costs for this project in 1998 were
$14,200 and estimated costs for completion of the project in 1999 are
approximately $72,000.

The Company's business plan incorporates the concept that when crude oil
prices increase and stabilize at a profitable level, renewed developmental and
exploratory drilling activities will escalate accordingly.  The plan also
projects that the Company would have sufficient cash flows from operations to
enable it to develop its existing oil and gas properties and the ability to
acquire additional producing properties and/or exploratory prospects, thereby,
replacing and/or increasing its present oil and gas reserves. 

The Company has reviewed the compliance of its computer systems for year 2000
readiness.  The Company's main accounting software is scheduled by it's third-
party vendor to be compliant with the year 2000 in the second quarter of 1999.
There is no additional cost for this update to the Company's main accounting
software.  All of the Company's hardware and it's network software, with the
exception of the network file server, is currently compliant with the year
2000.  The Company's network file server will either be replaced or upgraded

<PAGE> 16

to comply with the year 2000.  The Company does not believe that the efforts
and the costs to be fully compliant for the year 2000 will be material.  The
Company is not aware of any third-party issues regarding year 2000 readiness. 
The Company has no computer systems that interface electronically with third-
party computer systems.  The Company does not have any electronic micro-
controllers for any of it's equipment that is used for it's field operations. 
The Company has not identified any potential material lost revenue as a result
of any non-compliance with the year 2000 issues.  In the worst case scenario,
the Company is of the opinion that the existing computer systems will be
adequate come January 1, 2000.  However, the Company continues to believe that
it will be fully compliant with the year 2000 issues.


FORWARD-LOOKING INFORMATION
---------------------------

Looking forward into 1999, crude oil prices have increased by $4.50 per barrel
as of March 29, 1999, compared to prices at December 31, 1998.  There have
been eleven separate price changes since December 31, 1998.  The Company is
unable to predict any future price changes that would impact the remainder of
1999.

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.  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 1999,
by 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 be burdened with additional costs for various state
and local fees and permits under new environmental programs, the sum of which
were not material during 1998.  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, 1998
Compared to the Fiscal Year Ended December 31, 1997
---------------------------------------------------

REVENUES
--------

Oil and gas sales decreased by 38% for the year ended December 31, 1998, when
compared with the same period for 1997.  Oil and gas sales decreased by 33%
due to lower average prices for 1998.  The average price of the Company's oil
and gas decreased by approximately $5.60 per equivalent barrel for 1998 when
compared to 1997.  Oil and gas sales decreased by 5% due to a decrease in
production for 1998.  Production for 1998 decreased by approximately fourteen
barrels per day when compared with production in 1997.  The decline in
production for 1998 is due primarily to the shut-in of certain oil and gas
properties, that were produced last year, which became uneconomic due to
the low oil prices experienced in 1998.


OPERATING EXPENSES
------------------

Operating expenses decreased by 19% for the year ended December 31, 1998 when
compared with the same period of 1997.  The cost to produce an equivalent
barrel of crude oil decreased by approximately $1.45 per barrel for 1998 when
compared to 1997. The decrease in operating expenses is due primarily to the
shut-in of certain oil and gas properties as noted above.  In addition,
expenditures were reduced for production equipment repair and maintenance, and
other well related maintenance activities on producing properties to reduce
operating costs.  Labor costs were lower, due primarily to a reduction in
field personnel during 1998.


GENERAL AND ADMINISTRATIVE
--------------------------

General and administrative expenses decreased by 16% for the year ended
December 31, 1998 when compared to the same period for 1997. Outside
professional services (legal and accounting) were lower by 9% for 1998.  Legal
services were lower due to a reduction in the level of legal activity for
1998.  Accounting services were lower due to a reduction in the activities
related to the preparation of the Company's tax returns for 1998.

<PAGE> 18

DEPLETION, DEPRECIATION, AMORTIZATION
  AND VALUATION ALLOWANCE 
-------------------------------------

The provision for depletion, depreciation and amortization increased by 61%
for the year ended December 31, 1998, when compared with the same period for
1997.  The Company recorded an increase in valuation allowances of $270,000 in
the fourth quarter of 1998 due to an impairment in the value of certain oil
and gas properties (see Note 1 of Notes to Financial Statements, Significant
Accounting Policies, Costs Incurred in Oil and Gas Producing Activities). 
This was offset by a decrease in depreciation resulting from a number of the
Company's production equipment and production vehicles becoming fully
depreciated during the year.


OTHER INCOME
------------

Other income decreased by approximately $110,000 for the twelve months ended
December 31, 1998.  In 1997, the Company sold five well servicing rigs for a
gain of $77,000.  No well servicing rigs or other fixed assets were sold in
1998.  The Company also sold certain excess tubular goods, production
equipment and scrap metal during 1997 for a decrease of approximately $29,000
when compared to the same period of 1998. 



Results of Operations for the Fiscal Year Ended December 31, 1997,
Compared to the Fiscal Year Ended December 31, 1996
---------------------------------------------------

REVENUES
--------

Oil and gas sales decreased by 21% for the year ended December 31, 1997 when
compared with the same period for 1996.  Oil and gas sales decreased by 11%
due to lower average prices for 1997.  The average price of the Company's oil
and gas decreased by approximately $2.25 per equivalent barrel for 1997
compared to 1996.  Due to a decline in production, oil and gas sales decreased
by 10% for 1997.  The Company's net share of crude oil sales decreased by
approximately thirty barrels per day for 1997 when compared with production in
1996.  The decline in production is due to normal well decline and to
mechanical problems on certain wells in 1997.


<PAGE> 19

OPERATING EXPENSES
------------------

Operating expenses decreased by 8% for the year ended December 31, 1997 when
compared with the same period of 1996.  The cost to produce an equivalent
barrel of crude oil increased by approximately thirty cents per barrel for
1997 when compared to 1996.  This was offset by lower crude oil production for
1997 which reduced operating expenses.  

During the first and second quarter of 1997, the Company devoted a portion of
its labor, supplies and fuel resources to the drilling of one oil well and the
major rework of an existing oil well.  The costs associated with the drilling
and rework were capitalized as Oil and Gas Properties and Equipment.  In 1996,
the Company devoted all of its resources to the ongoing maintenance and
operation of its producing wells.  All costs associated with the ongoing
maintenance and operation of these wells are expensed in the current period. 
As a result, lease operating expenses for 1997 decreased by 9% over the same
period for 1996.


GENERAL AND ADMINISTRATIVE
--------------------------

General and administrative expenses decreased by 2% for the year ended
December 31, 1997 when compared to the same period for 1996.  There were no
significant changes in general and administrative expenses for the two years
ended December 31, 1997 and 1996.


DEPLETION, DEPRECIATION AND AMORTIZATION 
-----------------------------------------

The provision for depletion, depreciation and amortization increased by 24% on
a per barrel equivalent basis for the year ended December 31, 1997 when
compared with the same period for 1996.  This increase was caused by higher
capital costs offset by lower production.


OTHER INCOME
------------

Other income increased by approximately $107,000 for the twelve months ended
December 31, 1997.  In 1997, the Company sold five well servicing rigs for a
gain of $77,000.  No well servicing rigs or other fixed assets were sold in
1996 for any significant gains or losses.  The Company also sold certain
excess tubular goods, production equipment and scrap metal during 1997 for a
variance of approximately $27,000. 

<PAGE> 20


ITEM 7- FINANCIAL STATEMENTS
-----------------------------

                           PYRAMID OIL COMPANY

                      INDEX TO FINANCIAL STATEMENTS     

                            DECEMBER 31, 1998

                                                                     Page

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS. . . . . . . . . . . . . .   21


FINANCIAL STATEMENTS:

    Balance sheets - December 31, 1998 and 1997 . . . . . . . . . .   22-23
    Statements of operations - years ended
      December 31, 1998, 1997 and 1996  . . . . . . . . . . . . . .   24
    Statements of shareholders' equity - years ended
      December 31, 1998, 1997 and 1996  . . . . . . . . . . . . . .   25
    Statements of cash flows - years
      ended December 31, 1998, 1997 and 1996  . . . . . . . . . . .   26-27
    Notes to financial statements . . . . . . . . . . . . . . . . .   28

<PAGE> 21

                 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                 ----------------------------------------


To the Shareholders and the Board of Directors of
   Pyramid Oil Company:


We have audited the accompanying balance sheets of Pyramid Oil Company (a
California corporation) as of December 31, 1998 and 1997, and the related
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1998.  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 generally accepted auditing
standards.  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 provide 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, 1998 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles.


                                  ARTHUR ANDERSEN LLP
                             

Los Angeles, California
February 26, 1999

<PAGE> 22
                             FINANCIAL STATEMENTS
                              PYRAMID OIL COMPANY

                                BALANCE SHEETS
-----------------------------------------------------------------------------  

                                        
                                    ASSETS
                                    ------
<TABLE>
<CAPTION>
                                                 December 31,                  
                                          -------------------------         
                                             1998            1997            
                                          ----------    ------------
<S>                                      <C>             <C>

CURRENT ASSETS:
   Cash                                  $  318,317       $   600,994
   Trade accounts receivable 
     (net of reserve for doubtful
     accounts of $4,000 in 1998
     and 1997)                               77,315           153,821
   Crude oil inventory                       38,371            61,194
   Prepaid expenses                          81,128            93,587
   Deferred income taxes                     73,350            79,853        
                                          ---------        ----------   
         Total current assets               588,481           989,449         
                                          ---------        ---------- 
PROPERTY AND EQUIPMENT, at cost:
   Oil and gas properties and 
     equipment (successful 
     efforts method)                     10,375,606        10,174,516
   Drilling and operating equipment       3,177,722         3,177,722
   Land, buildings and improvements         921,767           919,117
   Automotive, office and                                          
     other property and equipment         1,036,459         1,036,073        
                                         ----------        ----------
                                         15,511,554        15,307,428       
   Less - accumulated depletion,   
     depreciation, amortization 
     and valuation allowances           (13,632,061)      (13,035,692)
                                         ----------        ----------     
                                          1,879,493         2,271,736
                                         ----------        ----------
                                        $ 2,467,974       $ 3,261,185  
                                         ==========        ========== 

The accompanying notes are an integral part of these balance sheets.


</TABLE>

<PAGE> 23

                              PYRAMID OIL COMPANY

                                BALANCE SHEETS
-----------------------------------------------------------------------------  
                                                            
                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------
<TABLE>
<CAPTION>
                                                 December 31,                 
                                          ----------------------------  
                                              1998              1997
                                          ----------        ----------        
<S>                                       <C>               <C>              
CURRENT LIABILITIES:
   Accounts payable                     $    52,975        $    44,584
   Accrued professional fees                 18,250             33,500 
   Accrued taxes, other than
     income taxes                            27,704             34,569
   Accrued payroll and related costs         25,191             25,466
   Accrued royalties payable                 42,331             75,482
   Accrued insurance                         23,756             35,533
   Current maturities of long-term debt      17,604             23,399
   Line of credit                           100,000                 --
                                          ---------         ----------
      Total current liabilities             307,811            272,533
                                          ---------         ----------

LONG-TERM DEBT, net of current
 maturities                                  25,145             45,447
                                          ---------         ----------
DEFERRED INCOME AND OTHER TAXES             115,821            122,324   
                                          ---------         ----------
COMMITMENTS AND CONTINGENCIES (Note 6)

SHAREHOLDERS' EQUITY:
   Common stock, no par value -
     Authorized - 10,000,000 shares
     Issued and outstanding - 
       2,494,430 shares                   1,071,610          1,071,610
   Retained earnings                        947,587          1,749,271
                                         ----------         ----------
                                          2,019,197          2,820,881
                                         ----------         ----------

                                        $ 2,467,974        $ 3,261,185
                                         ==========         ==========

The accompanying notes are an integral part of these balance sheets.

</TABLE>

<PAGE> 24        
                             PYRAMID OIL COMPANY

                           STATEMENTS OF OPERATIONS
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                         Year ended December 31,       
                                  --------------------------------------
                                     1998          1997          1996          
                                  ----------    ----------    ----------
<S>                               <C>          <C>           <C>
REVENUES:                        $   951,015   $ 1,537,832   $ 1,954,274
                                  ----------    ----------    ----------
COSTS AND EXPENSES:
  Operating expenses                 780,259       962,119     1,045,691   
  General and administrative         332,513       395,032       402,407
  Taxes, other than income and
    payroll taxes                     59,743        61,604        59,491
  Provision for depletion, 
    depreciation, amortization
    and valuation allowance          607,067       377,209       335,162
  Other costs and expenses            16,082        13,153        12,293
                                   ---------     ---------    ----------
                                   1,795,664     1,809,117     1,855,044
                                   ---------     ---------    ----------
OPERATING INCOME (LOSS)             (844,649)     (271,285)       99,230 
                                   ---------     ---------    ----------
OTHER INCOME (EXPENSE):
  Interest income                     30,192        23,309        24,340
  Other income                        21,594       131,834        24,440
  Interest expense                (    7,696)   (    8,648)   (   16,716)
                                  ----------     ---------     ---------
                                      44,090       146,495        32,064 
                                  ----------     ---------     ---------
INCOME (LOSS) BEFORE INCOME
 TAX PROVISION                     ( 800,559)    ( 124,790)      131,294  
  Income tax provision                 1,125         1,133         1,148 
                                  ----------     ---------     ---------
NET INCOME (LOSS)                $ ( 801,684)  $ ( 125,923)  $   130,146 
                                  ==========     =========     =========
BASIC INCOME (LOSS)
 PER COMMON SHARE                $      (.32)  $      (.05)  $       .05 
                                  ==========     =========     =========
DILUTED INCOME (LOSS)
  PER COMMON SHARE               $      (.32)  $      (.05)  $       .05
                                  ==========     =========     =========
Weighted average number of 
  common shares outstanding        2,494,430     2,494,430     2,494,430 
                                  ==========     =========    ==========

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

<PAGE> 25

                              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, 1995      2,494,430       $1,071,610     $1,745,048   
 
  Net income                            --               --        130,146 
                                 ---------        ---------      ---------
Balances, December 31, 1996      2,494,430        1,071,610      1,875,194 

  Net income                            --               --      ( 125,923) 
                                 ---------        ---------      ---------
Balances, December 31, 1997      2,494,430        1,071,610      1,749,271

  Net loss                              --               --      ( 801,684) 
                                 ---------        ---------      ---------
Balances, December 31, 1998      2,494,430       $1,071,610    $   947,587
                                 =========        =========      =========


The accompanying notes are an integral part of these statements.

</TABLE>

<PAGE> 26        
                            PYRAMID OIL COMPANY

                          STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                              Year ended December 31,        
                                          -------------------------------
                                             1998       1997        1996
                                          ---------   --------    --------
<S>                                       <C>        <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

  Net (loss) income                       $(801,684) $(125,923)   $130,146 
  Adjustments to reconcile net (loss)    
    income to net cash (used in)
    provided by operating activities:
      Provision for depletion,
        depreciation, amortization
        and valuation allowance             607,067    377,209     335,162
      (Gain)loss on sale of  
        property and equipment                   --    (77,294)        250 
  Changes in operating assets
    and liabilities:
      Decrease (increase) in trade
        accounts receivable                  76,506    106,732     (74,891)
      Decrease (increase) in
        crude oil inventories                22,823     56,698     (41,516)
      Decrease (increase) in
          prepaid expenses                   12,459        986     (13,961)
      (Decrease) increase in
         accounts payable and
         accrued liabilities                (58,927)   (72,670)     89,618 
      Other                                      --         --       4,715  
                                            -------    -------     -------
  Net cash (used in) provided by 
    operating activities                   (141,756)   265,738     429,523 
                                            -------    -------     -------
CASH FLOWS FROM INVESTING ACTIVITIES:

  Capital expenditures                     (214,824)  (509,532)   (132,579)
  Proceeds from sale of
    property and equipment                       --    223,700       3,100
                                            -------    -------     -------
  Net cash used in 
    investing activities                   (214,824)  (285,832)   (129,479)
                                            -------    -------     -------

The accompanying notes are an integral part of these statements.

</TABLE>

<PAGE> 27
                                PYRAMID OIL COMPANY

                              STATEMENTS OF CASH FLOWS 
                                   (CONTINUED)                 
-----------------------------------------------------------------------------  


<TABLE>
<CAPTION>

                                              Year ended December 31,       
                                           ------------------------------
                                              1998      1997        1996
                                            -------    -------    -------   
<S>                                         <C>        <C>         <C>
CASH FLOWS FROM FINANCING ACTIVITIES:

  Principal payments on line
    of credit                              ( 62,596)  ( 30,000)   ( 96,000)
  Proceeds from line of credit              162,596     30,000      71,000
  Principal payments on long-term
    debt                                   ( 26,097)  ( 60,955)   ( 98,999)
  Proceeds from borrowings of
    long-term debt                               --         --      53,650
                                            -------    -------     -------   
  Net cash provided by (used in)       
    financing activities                     73,903    (60,955)    (70,349)
                                            -------    -------     -------

Net (decrease) increase in cash            (282,677)  ( 81,049)    229,695 

Cash at beginning of year                   600,994    682,043     452,348
                                            -------    -------     -------
Cash at end of year                       $ 318,317  $ 600,994   $ 682,043
                                            =======    =======     =======
SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid during the year
  for interest                            $   7,696  $   8,648   $  15,997
                                            =======    =======     =======
Cash paid during the year
  for income taxes                        $   1,125  $   1,133   $   1,148
                                            =======    =======     =======

The accompanying notes are an integral part of these statements.

</TABLE>

<PAGE> 28        
                                 PYRAMID OIL COMPANY
                            NOTES TO FINANCIAL STATEMENTS 
                                  DECEMBER 31, 1998
----------------------------------------------------------------------------   


1.  Significant Accounting Policies
    -------------------------------

    Nature of Operations
    --------------------

     Pyramid Oil Company (the Company), a California Corporation, has been in
     the oil and gas business continuously 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 28 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 generally receives 
     payment within 30 days.

    
    Pervasiveness of Estimates
    --------------------------

     The preparation of financial statements in conformity with generally     
     accepted accounting principles 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.

    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.

<PAGE> 29

                                 PYRAMID OIL COMPANY
                       NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 1998
 
----------------------------------------------------------------------------  

    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. 121, "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 of $270,000 in the fourth quarter of 1998 under these       
    guidelines.  This impairment is reflected as additional depletion,      
    depreciation, amortization and valuation allowance in the accompanying     
    statement of operations.


    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 1998, 1997 and 1996 were $5.78, $2.69 and $2.17,
    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

<PAGE> 30

                                  PYRAMID OIL COMPANY
                        NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   DECEMBER 31, 1998
------------------------------------------------------------------------------

    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   
    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 Kern Oil & Refining and Tosco Refining
    Company, accounting for approximately 50.6%, and 43.4%, respectively, of
    Pyramid's crude oil and gas sales in 1998.  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. 

<PAGE> 31
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 1998   
------------------------------------------------------------------------------

2.  Long-Term Debt and Line of Credit
    ---------------------------------

Long-term debt at December 31, 1998 and 1997, is summarized as follows:

<TABLE>
                                                         December 31,       
<CAPTION>                                           ----------------------
                                                       1998         1997
                                                    ---------    ---------    
<S>                                                 <C>          <C>
  Note payable to a bank, secured by a deed
    of trust on the corporate office, payable
    in monthly installments of $1,467 principal,
    with interest at the prime rate (7.75% at
    December 31, 1998) plus 1.25%, payments
    continuing through June 2001, with the
    remaining principal and interest due in
    June 2001.                                       $ 42,749     $ 63,051

  Line of credit                                      100,000        5,795
                                                      -------      -------
                                                      142,749       68,846
  Less - current maturities                          (117,604)    ( 23,399)
                                                      -------      -------
                                                     $ 25,145     $ 45,447
                                                      =======      =======
</TABLE>

At December 31, 1998 approximately $379,000 of gross property and equipment
was pledged as collateral to secure $43,000 principal amount of long-term
debt.

Maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
            <S>                                      <C>
            Year ending December 31, 1999           $ 117,604          
                                     2000              17,604
                                     2001               7,541
                                     2002                  --                 
                                                      -------
                                                    $ 142,749
                                                      =======
</TABLE>

<PAGE> 32
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 1998
-----------------------------------------------------------------------------

At December 31, 1998, the Company had an unsecured line of credit with a bank,
under which the Company may borrow up to $100,000 through May 31, 1999.  
Interest on any borrowing is accrued at the bank's index rate plus 0.50
percentage points.  The bank's index rate was 7.75% at December 31, 1998.


3.   Income Taxes 
     ------------
   Income tax provision consists of the following:

<TABLE>
<CAPTION>
                                         Year Ended December 31,        
                                   -----------------------------------        
                                    1998           1997          1996   
                                   -------        -------       ------
<S>                               <C>            <C>           <C>
   Federal income taxes:      
     Current                     $      --       $     --      $     --  
     Deferred                           --             --            --
                                   -------        -------       -------
                                        --             --            --
                                   -------        -------       -------
   State income taxes:
     Current                         1,125          1,133         1,148 
     Deferred                           --             --            -- 
                                   -------        -------       -------
                                     1,125          1,133         1,148
                                   -------        -------       -------
   Income tax provision           $  1,125       $  1,133      $  1,148
                                   =======        =======       =======
</TABLE>

<PAGE> 33
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 1998
-----------------------------------------------------------------------------

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,      
                                        -----------------------------------
                                          1998         1997          1996
                                        --------     --------      --------
<S>                                    <C>          <C>           <C> 
   Federal income tax expense 
     (benefit) at statutory rate       $(180,390)   $ (42,429)    $  44,640 
   Net operating loss carryover          183,591       42,269       (44,823)
   Other                                  (2,076)       1,293         1,331
                                        --------     --------      --------
   Income tax provision                $   1,125    $   1,133     $   1,148
                                        ========     ========      ========
</TABLE>

The components of net deferred tax asset (liability) are as follows:

<TABLE>
<CAPTION>
                                             December 31,
                               --------------------------------------- 
                                   1998          1997          1996    
                               -----------   -----------   -----------
<S>                           <C>             <C>           <C>
Current deferred taxes:
  Gross assets                $     73,350   $    79,853   $    78,759
  Gross liabilities                     --            --            --
                                ----------    ----------    ----------  
                                    73,350        79,853        78,759
                                ----------    ----------    ----------  
Noncurrent deferred taxes:
  Gross assets                   3,121,533     2,982,570     3,027,779
  Gross liabilities              ( 435,430)    ( 458,840)    ( 520,768)
  Valuation allowance           (2,801,924)   (2,646,054)   (2,628,241)
                                ----------     ---------     ---------
                                 ( 115,821)   (  122,324)   (  121,230)
                                ----------     ---------     --------- 
                               $(   42,471)  $(   42,471)  $(   42,471)
                                ==========     =========     =========
</TABLE>

<PAGE> 34
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 1998
-----------------------------------------------------------------------------

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

<TABLE>
<CAPTION>
                                             December 31,
                               ---------------------------------------
                                   1998          1997          1996    
                               -----------   -----------   -----------
<S>                           <C>            <C>           <C>
    Accounts receivable        $     1,600    $    1,600   $     1,600
    Inventory                       55,200        55,200        55,200
    Property and equipment       ( 435,430)    ( 458,640)    ( 520,768)
    Net operating loss
      carry forwards             1,394,984     1,288,935     1,326,686
    Investment tax credits         162,556       162,556       162,556
    Statutory depletion
      carryover                  1,563,993     1,531,079     1,538,537
    Accrued liabilities             16,550        23,053        21,959
    Valuation allowance         (2,801,924)   (2,646,254)   (2,628,241)
                                ----------     ---------     ---------
                               $(   42,471)  $(   42,471)  $(   42,471)
                                ==========     =========     =========
</TABLE>

                                          
At December 31, 1998, a valuation allowance has been provided against a
significant portion of the deferred tax assets generated by net operating loss
carryforwards, investment tax credits and the statutory depletion carryover
due to the uncertainty of their future utilization.

The Company has federal income tax net operating loss carry forwards of
approximately $3,938,000, which expire, to the extent not used, starting in
2001.  For California franchise tax purposes, as of December 31, 1998, the
Company has unused net operating loss carryforwards of approximately $603,000,
a portion of which expire each year through 2001.

At December 31, 1998, the Company has, for federal income tax purposes, a 
statutory depletion carryover of approximately $4,600,000, which currently
has no expiration date.

As of December 31, 1998, the Company has an investment tax credit carryforward
of approximately $163,000 available to reduce future taxes payable for
financial reporting and federal income tax purposes.  The investment tax
credit, to the extent not used, will expire in varying amounts from 1999
through 2000.  Upon expiration, the Company will be able to claim a current
deduction on their federal tax return.

<PAGE> 35
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 1998
-----------------------------------------------------------------------------  

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 in the Carneros Creek 
field after the Company declined to participate.  The thirty-three percent
interest acquired 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 $69,000, $130,000 and $143,000 in 1998,
1997 and 1996, respectively.


5. Fourth Quarter Results (Unaudited)
   ---------------------------------

During the fourth quarter of 1998, 1997 and 1996, the Company adjusted the
provision for depletion, depreciation and amortization to reflect the
adjustments made to the Company's oil and gas reserves by independent
consultants.  The effect of these adjustments was to increase net income by 
approximately $54,000, $50,000 and $88,000 in 1998, 1997 and 1996,
respectively.  The Company recorded an increase in valuation allowances of
$270,000 in the fourth quarter of 1998 due to an impairment in the value of
certain oil and gas properties (see Note 1 of Notes to Financial Statements,
Significant Accounting Policies, Costs Incurred in Oil and Gas Producing
Activities).


6. Commitments and Contingencies
   -----------------------------
         
Pursuant to a specific oil and gas lease with respect to the Carneros Creek 
field, the Company is obligated to drill at least one well per year on this 
property.  If the price of oil reaches $20 per barrel or above and continues 
for a period of 60 consecutive days, the Company will thereafter be obligated 
to drill at least one well per quarter on this property.  The Company secured 
a waiver of its commitment to drill a well on this property in 1996.  The
Company drilled and completed a new well on this property in 1997.  The
Company did not drill a well or obtain a waiver of this drilling commitment in
1998.

Failure to drill the necessary well could result in the  potential
relinquishment of any undrilled or unproved acreage on this lease.  Any
relinquishment would not affect wells already drilled and producing on this
lease.  This property has no proved undeveloped reserves at December 31, 1998.

<PAGE> 36
                                 PYRAMID OIL COMPANY
                      NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                  DECEMBER 31, 1998
-----------------------------------------------------------------------------  

The cost of drilling and completing a well can vary significantly.  The
Company's total share of the costs of drilling and completing one well on this 
lease in 1997 was approximately $256,000.  The price of oil on this specific 
Carneros Creek field lease was $8.70 per barrel at December 31, 1998 and 
$9.45 per barrel at February 26, 1999.
                                                                          
The Company is liable for future dismantlement and abandonment costs 
associated with its oil and gas properties.  These costs include future site 
restoration, post closure and other environmental exit costs.  The costs of 
future dismantlement and abandonment have not been determined.  Management 
believes that these costs will not have a material adverse effect upon its 
financial position or results of operations.

The Company is subject to certain 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.

During 1998, the Company entered into a joint venture agreement to participate
as a non-operator in the development of gas wells in Solano County,
California.  The Company's share of costs for this project in 1998 were
$14,200 and estimated costs for completion of the project in 1999 are
approximately $72,000.

During the fourth quarter of 1998, the Company was notified by the United
States Environmental Protection Agency of its potential liability for waste
material it disposed of at the Casmalia Disposal Site in Santa Barbara County,
California.  Management does not believe that the Company will be liable for
any costs for the remediation of the Casmalia Disposal Site.

<PAGE> 37
                                 PYRAMID OIL COMPANY
                          SUPPLEMENTAL INFORMATION (UNAUDITED)
                            OIL AND GAS PRODUCING ACTIVITIES
                                  DECEMBER 31, 1998
-----------------------------------------------------------------------------  



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, 1998, 1997 and 1996
were as follows:

<TABLE>
<CAPTION>      
                                      1998         1997         1996    
                                   ----------   ----------   ----------
<S>                               <C>          <C>          <C>
Proved properties                 $10,197,000  $ 9,995,900  $ 9,545,500
Unproved properties
  being amortized                     178,600      178,600      189,300
Unproved properties
  not being amortized                      --           --           --
Accumulated depletion,
  depreciation, amortization
  and valuation allowances         (9,632,600)  (9,109,500)  (8,848,700)
                                    ---------    ---------    ---------
                                  $   743,000  $ 1,065,000  $   886,100
                                    =========    =========    =========
</TABLE>

<PAGE> 38
                                 PYRAMID OIL COMPANY
                        SUPPLEMENTAL INFORMATION (UNAUDITED) 
                                  DECEMBER 31, 1998
-----------------------------------------------------------------------------  



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

<TABLE>
<CAPTION>
                                  1998            1997           1996
                              ------------   -------------  ------------- 
                               Oil     Gas      Oil    Gas     Oil    Gas      
                             (MBbls) (MMCF)  (MBbls) (MMCF) (MBbls) (MMCF)
                              -----   ----    -----   ----   -----   ----
<S>                          <C>     <C>     <C>     <C>    <C>     <C>
Proved reserves:
  Beginning of year            462     169     517     294     474    191 
  Revisions of previous 
    estimates                    2     ( 6)    (20)   (126)     96    128 
  Extensions, discoveries
    and other additions          5      --      56      36      48     23
  Production                   (85)    (36)   ( 91)    (35)   (101)   (48)
                              ----    ----    ----    ----    ----   ----
  End of year                  384     127     462     169     517    294
                              ====    ====    ====    ====    ====   ====
Proved developed reserves:
  Beginning of year            435     145     499     278     451    171
                              ====    ====    ====    ====    ====   ====
  End of year                  384     127     435     145     499    278
                              ====    ====    ====    ====    ====   ====
</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> 39 
                                 PYRAMID OIL COMPANY
                        SUPPLEMENTAL INFORMATION (UNAUDITED) 
                                 DECEMBER 31, 1998
---------------------------------------------------------------------------

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

<TABLE>
<CAPTION>
                                            December 31,             
                               --------------------------------------
                                  1998          1997          1996   
                               ----------    ----------    ----------
<S>                            <C>           <C>           <C>
Proved developed reserves
  (Present value before
   income taxes)               $1,001,000    $1,688,000    $3,958,000
                                =========     =========     =========

</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,
1998, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>
                                       1998          1997          1996
                                      -------       -------       -------
<S>                                  <C>           <C>           <C>
Property acquisition costs           $ 14,000      $  4,000      $ 18,200
Exploration costs                          --            --            --
Development costs                     201,000       435,700        38,400

</TABLE>

<PAGE> 40 
                                 PYRAMID OIL COMPANY
                        SUPPLEMENTAL INFORMATION (UNAUDITED) 
                                 DECEMBER 31, 1998
---------------------------------------------------------------------------

The results of operations for oil and gas producing activities for the years
ended December 31, 1998, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>
                                     1998          1997          1996   
                                  ----------    ----------    ----------
<S>                              <C>           <C>           <C>
Sales                            $   951,000   $ 1,537,800   $ 1,954,300
Production costs                     826,800     1,015,300     1,097,200
Exploration costs                         --            --            --
Depletion, depreciation,      
  and amortization                   523,100       260,800       236,200
                                   ---------     ---------     ---------
                                   ( 398,900)      261,700       620,900 
Income tax provision                   1,200         1,200         1,200
                                   ---------     ---------     ---------
Results of operations from 
  production activities          $ ( 400,100)  $   260,500   $   619,700 
                                   =========     =========     =========

</TABLE>

The standardized measure of discounted estimated future net cash flows
relating to proved oil and gas reserves for the years ended December 31, 1998,
1997 and 1996 were as follows:

<TABLE>
<CAPTION>
                                     1998          1997          1996   
                                  ----------    ----------    ----------
<S>                              <C>           <C>           <C>
Future cash inflows              $ 3,262,000   $ 6,682,000   $11,747,000
Future development and
  production costs                 1,973,000     4,368,000     6,342,000
Future income tax expense             12,000        12,000        12,000
                                  ----------    ----------    ---------- 
Future net cash flow               1,277,000     2,302,000     5,393,000
10% annual discount                  286,000       570,000     1,252,000
Standardized measure              ----------    ----------    ----------
  of discounted future
  net cash flow                  $   991,000   $ 1,732,000   $ 4,141,000
                                  ==========    ==========    ==========
</TABLE>

<PAGE> 41
                                 PYRAMID OIL COMPANY
                         SUPPLEMENTAL INFORMATION (UNAUDITED) 
                                  DECEMBER 31, 1998
-----------------------------------------------------------------------------  


                                                                          
The principal changes in the standardized measure of discounted future net
cash flows during the years ended December 31, 1998, 1997 and 1996 were as
follows:

<TABLE>
<CAPTION>
                                     1998          1997          1996
                                  ----------    ----------    ----------
<S>                              <C>           <C>           <C>
Extensions                       $    11,000   $   239,000   $   389,000
Revisions of previous estimates
  Price changes                     (948,000)   (1,998,000)    1,572,000 
  Quantity estimate                    2,000      (162,000)      899,000  
Other, net                          ( 56,000)     (317,000)     (227,000) 
Development costs incurred           181,000       440,000        57,000
Changes in estimated future
  development costs                   19,000      (503,000)     (197,000)
Sales of oil and gas, net of
  production costs                  (124,000)     (523,000)     (857,000)
Accretion of discount                174,000       415,000       229,000
                                  ----------    ----------    ----------
                                 (   741,000)  ( 2,409,000)    1,865,000 
Net change in income taxes                --            --            -- 
                                  ----------    ----------    ----------
Net increase (decrease)          ($  741,000)  $(2,409,000)  $ 1,865,000 
                                  ==========    ==========    ==========
</TABLE>

<PAGE> 42        
                                 PYRAMID OIL COMPANY
                        SUPPLEMENTAL INFORMATION (UNAUDITED) 
                                  DECEMBER 31, 1998 
------------------------------------------------------------------------------ 



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 at
the end of the year, based on year-end costs 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
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 decrease of $741,000 and $2,409,000 in the Company's standardized measure
of future net cash flows for the years ended December 31, 1998 and 1997,
respectively, is due primarily to revisions of previous estimates due to price
changes.  The changes in crude oil prices at the end of each year has a
significant impact on the valuation of the Company's reserves and discounted
future net cash flows.  Lower crude oil prices at the end of 1998 and 1997
reduced the discounted future net cash flows by approximately $948,000 and
$1,998,000, respectively.

The increase in the standardized measure of discounted future net cash flows
at December 31, 1996 of $1,865,000 is due primarily to higher crude oil prices
at year end.  

<PAGE> 43
                                PYRAMID OIL COMPANY
                         SUPPLEMENTAL INFORMATION (UNAUDITED)
                                 QUARTERLY RESULTS                            
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                        1998         1997      
                                    ----------    ----------
<S>                                 <C>           <C>
    REVENUES:

      Quarter Ended:
    
          March 31                  $   252,780   $   473,190   
          June 30                       230,186       381,186   
          September 30                  260,173       388,519   
          December 31                   207,876       294,937   
                                     ----------    ----------
                                    $   951,015   $ 1,537,832   
                                     ==========    ==========

    NET INCOME (LOSS):                

      Quarter Ended:
    
          March 31                  $(  158,111)  $    41,472   
          June 30                    (  165,479)   (   30,959)  
          September 30               (  114,025)   (   14,478)  
          December 31 (a)            (  364,069)   (  121,958)   
                                     ----------    ----------
                                    $(  801,684)  $(  125,923)   
                                     ==========    ==========

    INCOME (LOSS) PER COMMON SHARE:   

      Quarter Ended:
    
          March 31                  $      (.06)  $       .02   
          June 30                          (.07)         (.01)  
          September 30                     (.05)         (.01)  
          December 31 (a)                  (.14)         (.05)  
                                     ----------    ----------
                                    $      (.32)  $      (.05)  
                                     ==========    ==========
</TABLE>

(a)  Adjustments to depletion, depreciation, amortization and valuation
allowances made by the Company are recorded in the fourth quarter amounts (see
Note 5 of Notes to Financial Statements included in Item 7 of this Form
10-KSB).  The adjustments were required due to changes in estimates of oil and
gas reserves by independent consultants.

<PAGE> 44
                                 PYRAMID OIL COMPANY
                                CORPORATE INFORMATION
                                                                              


Board of Directors....J. Ben Hathaway, President, Pyramid Oil Company
                      John H. Alexander, Vice President, Pyramid Oil Company
                      John E. Turco, Private Investor
                      Thomas W. Ladd, Independent Oil Producer and Geologist
                      Gary L. Ronning, Independent Oil Producer and Geologist
            
Officers..............J. Ben Hathaway, President and Chairman of the Board
                      John H. Alexander, Vice President
                      Lee G. Christianson, Secretary-Treasurer

Accountants and
Business Advisors.....Arthur Andersen LLP - Los Angeles, California       

Transfer Agent
and Registrar.........U.S. Stock Transfer Corp.
                      1745 Gardena Avenue, Suite 200
                      Glendale, California  91204

Corporate Offices.....2008 21st Street
                      Bakersfield, California  93302

District Offices......Bakersfield, California
                      
Legal Counsel.........Troy & Gould - Los Angeles, California
                      Ganong & Kleier - Bakersfield, California
                      
Investor 
Information...........Availability of Form 10-KSB:  The Annual Report of 
                      Pyramid Oil Company on Form 10-KSB, as filed with the
                      Securities and Exchange Commission, is available to any
                      stockholder upon request without charge.  Please
                      address all such requests to:

                             Corporate Secretary
                             Pyramid Oil Company
                             P.O. Box 832
                             Bakersfield, California  93302

                      COMMON STOCK:  The Company's common stock is traded on   
                      the Over-The-Counter Bulletin Board market using symbol  
                      PYOL.

<PAGE> 45

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

                         None

  
                                  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 1999 Annual Meeting 
of Shareholders.


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 1999 
Annual Meeting of Shareholders.


ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------

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 1999 
Annual Meeting of Shareholders.

<PAGE> 46

ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

The information in Note 4 of Notes to Financial Statements included in Item 7
of this Form 10-KSB is incorporated herein by reference.

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 in the Carneros Creek
field after the Company declined to participate.  The thirty-three percent
interest acquired 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 $69,000 in 1998, $130,000 in 1997 and
$143,000 in 1996.<PAGE>
<PAGE> 47                                               
                     
       
                                   PART IV
 

ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------

(a)  1.  Financial Statements
         --------------------

         These documents are listed and included in Part II, Item 7 of this    
         report: 

            Report of Independent Public Accountants
            Balance Sheets at December 31, 1998 and 1997.
            Statements of Operations for the three years in the period
              ended December 31, 1998.
            Statements of Shareholders' Equity for the three
              years in the period ended December 31, 1998.
            Statements of Cash Flows for the three 
              years in the period ended December 31, 1998.
            Notes to Financial Statements.


(a)  3.  Exhibit
         -------
         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      Agreement and Plan of Reorganization and Corporate           
                    Separation, dated January 1, 1987. (3)
        16.1      Letter regarding the change in Registrant's certified        
                    accountant. (4)
        27        Financial Data schedule

(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 Exhibit 1 to the Registrant's August 25, 
         1986 Proxy Statement.
(4) Incorporated by reference from Exhibit 1 to the Registrant's June 4,
         1987 Form 8-K.

(b) Reports on Form 8-K
    -------------------

      No reports on Form 8-K were filed during the fourth quarter of 1998.

<PAGE> 48

                                  SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                            PYRAMID OIL COMPANY


March 30, 1999                         By:    J. BEN HATHAWAY                  
                                           ----------------------             
                                              J. Ben Hathaway
                                             Director/President


Pursuant to the requirements of 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.


     J. BEN HATHAWAY          Director/President            March 30, 1999
---------------------------
     J. Ben Hathaway


    JOHN H. ALEXANDER         Director/Vice President       March 30, 1999
---------------------------
    John H. Alexander


      THOMAS W. LADD          Director                      March 30, 1999
---------------------------
      Thomas W. Ladd 

      GARY L. RONNING         Director                      March 30, 1999
---------------------------
      Gary L. Ronning 

                              Director                      March 30, 1999
---------------------------
       John E. Turco     


   LEE G. CHRISTIANSON       Corporate Secretary/           March 30, 1999
---------------------------  Principal Accounting Officer
   Lee G. Christianson