DEF 14A 1 v071926_def14a.htm
 
 THE RESERVE PETROLEUM COMPANY
6801 N. Broadway, Suite 300
Oklahoma City, Oklahoma 73116-9092

 
SECURTIES AND EXCHANGE COMMISSION
Washington DC

 
Dear Sir:

Forwarded herewith is the Proxy Statement, Form of Proxy and Notice of Annual Meeting of the Stockholders, to be held on May 22, 2007. The proxy material will be mailed to the Stockholders on or about April 20, 2007.

Preliminary proxy material was not filed because the only matter to be acted upon is the election of the board of directors.
 
   
 
Very truly yours,

THE RESERVE PETROLEUM COMPANY
   
   
Date: April 20, 2007 /s/ James L. Tyler
   
 
James L. Tyler
2nd Vice President
      
 


United States
Securities and Exchange Commission
 
SCHEDULE 14A INFORMATION
 
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No.)

Filed by the Registrant x
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for use of the Commission only (as permitted by Rule 14a-6(e)(2))
x Definitive Proxy Statement
o Definitive Additional Materials
o  Soliciting Material Pursuant to ' 240.14a-11 (c) or ' 240.14a-12

THE RESERVE PETROLEUM COMPANY
(Name of Registrant as Specified in Its Charter)
 
(Name of Person(s) Filing Proxy Statement if Other than Registrant)

 
Payment of Filing Fee (Check the appropriate box):
x
No Fee Required.
o
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
     
 
1)
Title of each class of securities to which transaction applies:
      
     
 
2)
Aggregate number of securities to which transaction applies:
      
     
 
3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):
      
     
 
4)
Proposed maximum aggregate value of transaction:
      
     
 
5)
Total fee paid:
      
   
o
Fee paid with Preliminary Proxy Statement
o
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
     
 
1)
Amount Previously Paid:
      
     
 
2)
Form, Schedule or Registration Statement No.:
      
     
 
3)
Filing Party:
      
     
 
4)
Date Filed:
     


 
______________________________________________
 
THE RESERVE PETROLEUM COMPANY
______________________________________________
 

 
Notice of 2007
Annual Meeting
and
Proxy Statement
 

 
 
THE RESERVE PETROLEUM COMPANY
6801 N. Broadway, Suite 300
Oklahoma City, Oklahoma 73116-9092
 
April 20, 2007
 
Dear Stockholder:
 
On behalf of the Board of Directors, it is my pleasure to invite you to attend the 2007 Annual Meeting of Stockholders of The Reserve Petroleum Company on Tuesday, May 22, 2007, at 3:00 p.m. local time, in Oklahoma City, Oklahoma. Information about the Annual Meeting is presented in the following pages.
 
The Annual Meeting will begin with a discussion and vote on the matters set forth in the accompanying Notice of 2007 Annual Meeting of Stockholders and Proxy Statement, followed by a discussion on any other business matters that are properly brought before the Annual Meeting.
 
Your vote is very important. We encourage you to read the Proxy Statement and vote your shares as soon as possible. Whether or not you plan to attend, you can be sure your shares are represented at the Annual Meeting by promptly completing, signing, dating and returning your Proxy Card in the enclosed envelope.
 
If you will need special assistance at the Annual Meeting because of a disability, please contact James L. Tyler, 2nd Vice President, at (405) 848-7551.
 
Thank you for your continued support of The Reserve Petroleum Company. We look forward to seeing you on May 22nd.

 
 
Sincerely,

/s/ Mason McLain
 
Chairman of the Board and President
 

i
 
TABLE OF CONTENTS

Notice of 2007 Annual Meeting of Stockholders
iii
   
Proxy Statement
1
   
General
1
   
Solicitation of Proxies
1
   
Voting Rights and Outstanding Shares
1
   
Information Relating to Directors, Nominees and Executive Officers
2
   
Security Ownership of Certain Beneficial Owners and Management
6
   
Information Relating to the Board of Directors and Committees
7
   
Executive Compensation
9
   
Code of Ethics for Senior Officers
10
   
Information Regarding Communications With Auditors 
10
   
Section 16(a) Beneficial Ownership Reporting Compliance
11
   
Independent Public Accountants
11
   
Additional Information
12
   
 

ii

THE RESERVE PETROLEUM COMPANY
6801 N. Broadway, Suite 300
Oklahoma City, Oklahoma 73116-9092
 
NOTICE OF 2007 ANNUAL MEETING OF STOCKHOLDERS
    
To The Stockholders:

The 2007 Annual Meeting of Stockholders of The Reserve Petroleum Company (the “Company”) will be held on Tuesday, May 22, 2007, at 3:00 p.m. local time, at the offices of the Company at 6801 N. Broadway, Suite 300, Oklahoma City, Oklahoma for the following purposes:

 
1.
Electing nine (9) directors to serve for the next year and until their successors are elected and qualified.
     
  2. Transacting such other business as may properly be brought before the Annual Meeting or any adjournment thereof.
 
The Board of Directors has fixed the close of business on April 16, 2007 as the record date for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting of Stockholders.

STOCKHOLDERS ARE URGED TO VOTE, SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE ENCLOSED PREPAID ENVELOPE. It is desirable that as many stockholders as possible be represented at the Annual Meeting. Consequently, whether or not you now plan to attend in person, please vote, sign, date and return the enclosed Proxy Card. If you attend the Annual Meeting, you may vote your shares in person even though you have previously signed and returned your Proxy Card.

By Order of the Board of Directors,
 
/s/ Mason McLain

Mason McLain, President



iii
 
PROXY STATEMENT
 
GENERAL
 
The enclosed proxy is solicited on behalf of the Board of Directors (the “Board”) of The Reserve Petroleum Company (“Company”, “we”, “our” or “us”) for the 2007 Annual Meeting of Stockholders (the “Annual Meeting”) to be held at the principal executive offices of the Company, 6801 N. Broadway, Oklahoma City, Oklahoma 73116-9092, on Tuesday, May 22, 2007, at 3:00 p.m. local time, or any adjournment thereof. This Proxy Statement and Proxy Card are first being sent to the stockholders on or about April 20, 2007. The proxy will be voted at the Annual Meeting if the signer of the Proxy Card was a stockholder of record on April 16, 2007 (the “Record Date”).
 
SOLICITATION OF PROXIES
 
The Company will bear the costs of solicitation, which are estimated to be approximately $27,000, of which amount approximately $20,000 has been spent to date. Solicitation of proxies may be made by personal interview, mail, telephone or telegram by Directors, officers, and regular employees of the Company. Copies of proxy material and of the Company’s 2006 Annual Report on Form 10-KSB may also be supplied to holders of record, as well as to brokers, dealers, banks and voting trustees, or their nominees, for the purpose of soliciting proxies from the beneficial owners, and the Company will reimburse such holders for their reasonable forwarding expenses.
 
 
Voting rights are vested exclusively in the holders of the Company’s common stock, par value $.50 per share, with each share entitled to one (1) vote on each matter coming before the Annual Meeting. Only stockholders of record at the close of business on the Record Date will be entitled to receive notice of and to vote at the Annual Meeting. On the Record Date, there were 162,868.64 shares of common stock of the Company outstanding and entitled to be voted. 

The presence, in person or by proxy, of the holders of a majority of the outstanding shares of common stock of the Company entitled to vote is necessary to constitute a quorum at the Annual Meeting. The shares represented by any and all proxies received by the Company will be counted towards a quorum, notwithstanding that any such proxies contain thereon an abstention or a broker non-vote. Notwithstanding the Record Date specified above, the Company’s stock transfer books will not be closed and shares may be transferred subsequent to the Record Date. However, all votes must be cast in the names of the stockholders of record on the Record Date.

All votes will be tabulated by the Inspector of Election appointed for the Annual Meeting, who will separately tabulate affirmative votes, abstentions and broker non-votes. The election of the nominees to the Board requires the affirmative vote of a majority of the shares of common stock represented at the Annual Meeting and entitled to vote, provided a quorum is present. Proxies specifying “withheld” authority will have the same effect as a vote “against” the nominees, while a broker non-vote will have no effect.

If sufficient shares are not present to provide a quorum on May 22nd, the Annual Meeting, after the lapse of at least half an hour, will be adjourned by those present or represented and entitled to vote. Those stockholders entitled to receive notice of and to vote at the Annual Meeting will be sent written notice of an adjournment meeting to be held with a quorum of those present in person or by proxy at such meeting. Under the Restated Bylaws of the Company, any number of stockholders, in person or by proxy, will constitute a quorum at the adjournment meeting.

1

 
A list of the stockholders entitled to vote at the Annual Meeting will be available for inspection during ordinary business hours at the offices of the Company for a period of ten (10) days preceding the Annual Meeting and at the Annual Meeting for purposes relating to the Annual Meeting.
 
You can ensure that your shares are voted at the Annual Meeting by submitting your instructions by completing, signing, dating and returning the enclosed Proxy Card in the envelope provided. Submitting your instructions by Proxy Card will not affect your right to attend the Annual Meeting and vote. A stockholder who gives a proxy may revoke it at any time before it is exercised by voting in person at the Annual Meeting, by delivering a subsequent proxy, or by notifying James L. Tyler, the Inspector of Election, in writing of such revocation.
 
A stockholder of record on the Record Date may vote in one of the following ways:
 
 
·
by completing and mailing the Proxy Card; or
 
 
·
by written ballot at the Annual Meeting.
 
Your shares will be voted as you indicate on your Proxy Card. If you return your Proxy Card, but you do not indicate your voting preferences, the proxies will vote your shares FOR the nominees for Directors and in their discretion for such other matters as may come before the Annual Meeting.
 
If your shares are held in a brokerage account in your broker’s name (this is called street name), you should follow the voting directions provided by your broker or nominee. You may complete and mail a voting instruction card to your broker or nominee. Your shares should be voted by your broker or nominee as you have directed.
 
The Company will pass out written ballots to anyone who wants to vote at the Annual Meeting.
 
For additional information concerning the manner of proxy solicitation and voting, please see “Additional Information” beginning on page 12 of this Proxy Statement.
 
INFORMATION RELATING TO DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
Directors and Director Nominees
 
The nine (9) persons named below are nominees for election as Directors of the Company to serve until the next annual meeting of stockholders and until their respective successors are elected and qualified. If any nominee is unable to serve, which the Company has no reason to expect, the persons named in the accompanying Proxy Card intend to vote for the balance of those named and, if they deem it advisable, for a substitute nominee. Each nominee is currently a Director and each has served continuously as a Director since the date of his first election or appointment to the Board. The Board had determined that the following Directors are independent, as independence is defined in Rule 4200(a)(15) of the NASDAQ listing standards: Jerry Crow, Marvin E. Harris, William M. (Bill) Smith and Doug Fuller.


2


The Board recommends a vote FOR each nominee for Director set forth below.

The following information and the information set forth in “Executive Officers” pertains to each person’s (i) age as of April 16, 2007, (ii) principal occupations for at least the past five years, and (iii) directorships in other companies.

             
Position Held
 
 
  
 
  
Position/Office Held
 
Continuously
 
Name
  
Age
  
With Company
  
Since
(1)
Mason McLain
  
80
  
President
  
May 3, 1955
(1)
Robert T. McLain
  
77
  
1st Vice President
  
May 2, 1972
 
Robert L. Savage
  
59
  
None
  
May 6, 1975
(1)
Jerry L. Crow
  
70
  
None (Retired
 
May 4, 1982
   
 
  
December 31, 2003)
  
 
 
Marvin E. Harris, Jr.
  
55
  
None
  
May 7, 1991
 
William M. (Bill) Smith
  
48
  
None
  
May 5, 1998
 
Doug Fuller
  
49
  
None
  
May 2, 2000
 
Cameron R. McLain
  
48
  
Exploration Manager
  
May 9, 1982
 
Kyle L. McLain
  
52
  
Production Manager
  
May 12, 1984

(1) Member of Executive Committee
 
Executive Officers
 
The persons named below are the executive officers of the Company and at the next Board meeting to be held on May 22, 2007, all are expected to be chosen to serve another term of office in the same capacity as they are now serving:
           
Office Held
       
Position/Office Held
  
Continuously
Name
  
Age
  
With Company
  
Since
Mason McLain
  
80
  
President
  
May 6, 1969
Robert T. McLain
  
77
  
1st Vice President
  
May 4, 1976
James L. Tyler
  
59
  
2nd Vice President,
  
January 1, 2004
       
Secretary/Treasurer
    
 
Mason McLain, Director and President, and Robert T. McLain, Director and Vice President, are brothers. Cameron R. McLain, Director and Exploration Manager, and Kyle L. McLain, Director and Production Manager, are sons of Mason McLain.

Mason McLain became President of the Company on May 6, 1969. He had previously served as 1st Vice President since May 3, 1966, and as 2nd Vice President since May 6, 1958. Mr. McLain devotes substantially all of his time to the affairs of the Company, although he is permitted to and does devote part of his time and efforts to the activities of affiliated and family organizations. These organizations are Mesquite Minerals, Inc. (formerly Royalty Pooling Company), Mid-American Oil Company, Lochbuie Holding Company and Lochbuie Limited Partnership, all of which are engaged in varying aspects of the oil and gas industry. Mr. McLain holds a Bachelors degree in Petroleum Engineering from the University of Oklahoma. Mr. McLain is also a director of Webber Investment Company, Mid-American Oil Company, Mesquite Minerals, Inc. and Lochbuie Holding Company.

3


Robert T. McLain has served as 1st Vice President of the Company since May 4, 1976. Prior to that date, he was Secretary-Treasurer of the Company from May 2, 1972. He is Chairman of the Board of the Mull Corporation. He had previously served as Chairman and Chief Executive Officer of Bunte¢ Candies, Inc. from 1972 to 1991. He devotes only a small portion of his time to the affairs of the Company. Mr. McLain holds a Bachelor of Science degree in Business Administration and a Bachelor of Law degree from the University of Oklahoma. Mr. McLain is also a director of Mid-American Oil Company, Mesquite Minerals, Inc. and Lochbuie Holding Company.

Robert L. Savage is President of Leonard Securities, Inc., a NASD Broker Dealer, which he formed. He is also President of Leonard Agency, Inc. and Leonard Investment Advisors, Inc. He was Vice President with Century Investment Group, Inc., from May, 1994 to October, 1997. He was previously employed as an Account Executive with Park Avenue Securities, Inc. from January, 1989 to May 1994. Mr. Savage has a Bachelors degree in Business Administration from Trinity University, San Antonio, Texas, and a Master of Business Administration degree from Southern Methodist University, Dallas, Texas.

Jerry L. Crow was employed by the Company from April 7, 1976, until he retired December 31, 2003. He served as Secretary-Treasurer and 2nd Vice President during his employment. Mr. Crow holds a Bachelors and Masters degree in Business Administration from West Texas A&M University and is a Certified Public Accountant in both Texas and Oklahoma. Mr. Crow is also a director of Mid-American Oil Company and Mesquite Minerals, Inc.

Marvin E. Harris, Jr. is President of Tetron Software, a computer software company which he formed on January 3, 1994. Until that date he had been employed as President of RDA Services, Inc., a computer software company, since April 15, 1991. He was previously employed by Intel Corporation from 1984 until his resignation in 1991. Mr. Harris holds a Bachelor of Science degree from the University of Alabama, a Master of Science degree from the University of Alabama in Birmingham and a Master of Business Administration degree from Southern Methodist University.

William M. (Bill) Smith has served as Manager of Geology at Bracken Operating, LLC since 1994, and is also a part owner. He joined Bracken Exploration Co. as an Exploration Geologist in 1981, and became Vice President of Geology until 1986. In 1986, he assisted in forming Bracken Energy Company, for whom he is an employee and a part owner. Mr. Smith earned a Bachelor of Science degree in Geology from the University of Oklahoma in 1980 and was employed by Samedan Oil Corporation from 1980 through 1981.

Doug Fuller has been Sr. Vice President, Director of Business Banking for Western Oklahoma, with the Bank of Oklahoma since 1992. Before that, he was Executive Vice President, Manager of Commercial Lending, Private Banking and Special Assets with Founders Bank. Mr. Fuller has a Bachelor of Business Administration degree in Finance from the University of Oklahoma and a Masters of Business Administration degree from Oklahoma City University.

Cameron R. McLain was employed by the Company on May 9, 1982 as Exploration Manager and has served in that capacity continuously since his employment. Mr. McLain devotes substantially all of his time to Company affairs; however, he devotes a part of his time and efforts to the activities of affiliated organizations. Mr. McLain was previously employed from May, 1980 to May 1982 as a Southern Oklahoma exploration geologist for Cities Service Oil and Gas Company. Mr. McLain has a Bachelor of Science degree in Geology from the University of Oklahoma and a Master of Business Administration degree from Oklahoma City University. Mr. McLain is a director of Mid-American Oil Company and an advisory director of Mesquite Minerals, Inc.

4


Kyle McLain was employed as Production Manager for the Company on May 12, 1984 and continues to serve in that capacity. Mr. McLain devotes substantially all of his time to the affairs of the Company, although he spends a part of his time and efforts on the activities of affiliated organizations. Mr. McLain was previously employed as a reservoir engineer for Gulf Oil Corporation from May, 1980 to May, 1984. Mr. McLain has a Bachelor of Science degree in Petroleum Engineering from the University of Oklahoma. Mr. McLain is a director of Mesquite Minerals, Inc. and an advisory director of Mid-American Oil Company.

James L. Tyler was employed by the Company on August 1, 2003, and was elected 2nd Vice President and Secretary-Treasurer effective January 1, 2004 to replace Jerry L. Crow. Mr. Tyler devotes substantially all of his time to the affairs of the Company, although he devotes a part of his time and efforts to the activities of the affiliated organizations. Mr. Tyler was previously employed as Vice-President, Controller for Grace Petroleum Corporation from May, 1979 to May, 1994 and Controller for MCNIC Oil & Gas, Inc. from June, 1994 to April, 1999. From May, 1999 until March, 2003, he was employed as Controller for Express Ranches and Accounting Manager for Bison Drilling Company. Mr. Tyler holds a Bachelor of Science degree in Accounting from the University of Central Oklahoma, Edmond, Oklahoma and is a Certified Public Accountant in Oklahoma.

Involvement in Certain Legal Proceedings
 
On August 16, 2005, Robert L. Savage executed NASD Letter of Acceptance, Waiver and Consent No. E052004004203 (the “AWC”) for the purpose of settling alleged violations of NASD Conduct Rules by Mr. Savage and by Leonard Securities, Inc. (“Leonard Securities”), of which he is President. Without admitting or denying the allegations or findings, Mr. Savage and Leonard Securities accepted and consented to the entry of the following findings by the NASD: (i) that during the period on or about April 11, 2002, through on or about January 9, 2003, Leonard Securities, acting through its president, Mr. Savage, failed to establish, maintain, and enforce a system of supervision reasonably designed to ensure compliance with NASD Conduct Rule 2310; (ii) that Leonard Securities had no system, other than review of daily order tickets and monthly customer statements, designed to detect mutual fund switching and short-trading of mutual funds; (iii) that reviews of daily order tickets were inadequate because mutual fund sale and purchase transactions were often entered on different days; (iv) that reviews of monthly customer statements were inadequate because the statements did not disclose commission charges or the mutual fund purchase date; and (v) that such acts, practices, and conduct constitute separate and distinct violations of NASD Conduct Rules 3010(a) and 2110 by Leonard Securities and Mr. Savage. The NASD imposed the following sanctions: (a) a monetary fine in the amount of $10,000 was assessed against Mr. Savage and Leonard Securities, jointly and severally; (b) a 10 business-day suspension of Mr. Savage from association with any NASD member in any principal capacity was imposed; and (c) Leonard Securities and Mr. Savage, jointly and severally, were required to pay restitution in the total amount of $14,259.00, which represented the excess commissions paid by the customers of Leonard Securities in the purchase of mutual funds, plus accrued interest. Mr. Savage and Leonard Securities have fully complied with the terms and conditions of the AWC. As set forth in the AWC, Mr. Savage has not previously been the subject of a formal disciplinary action by any regulatory body.

5

Certain Relationships and Related Transactions
 
The Company is affiliated by common management and ownership with Mesquite Minerals, Inc., (“Mesquite”), Mid-American Oil Company (“Mid-American”), Lochbuie Limited Partnership (“LLTD”) and Lochbuie Holding Company (“LHC”). The Company also owns interests in certain producing and non-producing oil and gas properties as tenants in common with Mesquite, Mid-American and LLTD. Mason McLain and Robert T. McLain, Directors and officers of the Company, are directors and officers of Mesquite and Mid-American. Jerry Crow, a Director of the Company, is a director of Mesquite and Mid-American. Kyle McLain and Cameron R. McLain are sons of Mason McLain, who is a more than 5% owner of the Company, and are Directors and employees of the Company. Kyle McLain is a director and employee of Mesquite and an advisory director and employee of Mid-American. Cameron R. McLain is a director and employee of Mid-American and an advisory director and employee of Mesquite. Mason McLain and Robert T. McLain, who are brothers, each own an approximate 32% limited partner interest in LLTD and a 33.33% ownership in LHC, Mason McLain is president of LHC, the general partner of LLTD. Robert T. McLain is not an employee of any of the above entities, and devotes only a small amount of time conducting their business.

The above named officers, Directors and employees as a group beneficially own approximately 30% of the common stock of the Company, approximately 32% of the common stock of Mesquite, and approximately 17% of the common stock of Mid-American. These three corporations each have only one class of stock outstanding. Item 7, “Notes to Financial Statements,” Note 12 to the Company’s Form 10-KSB for the fiscal year ended December 31, 2006 includes additional disclosures regarding these relationships. See “Additional Information”.
 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
Security Ownership of Certain Beneficial Owners
 
The following table sets forth information regarding the only persons known by the Company to be beneficial owners of more than 5% of the Company’s common stock as of April 16, 2007:

Name and Address
  
Amount & Nature
  
Percent
of
  
of Beneficial
  
of
Beneficial Owner
  
Ownership
  
Class (3)
         
Mason McLain (1) (2)
  
17,005 (4)
  
10.44
6801 N. Broadway, Suite 300
  
 
    
Oklahoma City, OK 73116-9092
        
   
 
    
Robert T. McLain (1) (2)
  
12,149 (5)
  
7.46
6403 N. Grand, #203
  
 
    
Oklahoma City OK 73116
  
 
    
         
Norma Moe (1) (2)
  
11,949 (6)
  
7.34
3100 Brush Creek Road
  
 
    
Oklahoma City OK 73120
        
         
 

6
 
        
(1)
Mason McLain, Robert T. McLain and Norma Moe are siblings.
 
(2)
Lochbuie Holding Company (LHC) is an “S” Corporation and owns 2,352 shares of common stock. Each sibling owns one-third of LHC.
 
(3)
Calculations of percent of class are based on the number of shares of common stock outstanding as of April 16, 2007, excluding shares held by or for the Company.
 
(4)
16,221 owned directly; 784 shares owned indirectly by LHC.
 
(5)
8,032 owned directly; 3,333 owned by wife; 784 shares owned indirectly by LHC.
 
(6)
11,165 owned directly; 784 shares owned indirectly by LHC.
     
Security Ownership of Management
 
The following table sets forth information regarding the Company’s common stock beneficially owned by its executive officers and Directors as of April 16, 2007: 
 
               
Name
  
Title of
Class
  
Amount & Nature of
Beneficial Ownership
  
Percent
of Class
               
Mason McLain
  
Common
  
17,005
 (1)
  
10.44
   
 
        
 
Robert T. McLain
  
Common
  
12,149
 (2)
  
7.46
   
 
        
 
Robert L. Savage
  
Common
  
1,269
 Owned Directly
 
 .78
   
 
        
 
Jerry L. Crow
  
Common
  
5,379
 Owned Directly
 
3.30
   
 
        
 
Cameron R. McLain
  
Common
  
6,440
 Owned Directly
  
3.95
   
 
        
 
Kyle L. McLain
  
Common
  
6,440
 Owned Directly
  
3.95
             
 
All Directors
      
48,682
   
29.88
             
 
All Directors and Executive Officers
      
48,682
    
29.88
as a Group (10 persons)
              
 
(1)
16,221 owned directly; 784 shares owned indirectly by LHC
 
(2)
8,032 owned directly; 3,333 owned by wife; 784 shares owned indirectly by LHC.
 
INFORMATION RELATED TO THE BOARD OF DIRECTORS AND COMMITTEES
 
Meetings
 
The Board held three meetings during the Company’s fiscal year ended December 31, 2006. All Directors were present at all meetings, except May 23, 2006 when Bill Smith was absent. It is the Board’s policy that Directors should attend the Company’s annual meeting of stockholders. Last year, all Directors attended the annual meeting of stockholders with the exception of Bill Smith.

Committees
 
In General. The Company does not have standing audit and compensation committees of the Board, or committees performing similar functions. The Company is a small business issuer whose securities are not quoted on NASDAQ or listed on any exchange. The Company’s stock is traded by private transactions or over the counter. Over the counter bid information is quoted in the Pink Sheet Electronics Quotation Service, in the Pink Sheets OTC Market Report, and in the OTC Bulletin Board under the symbol “RSRV”.

7


Audit Committee. The Company does not have a separately-designated standing Audit Committee. The entire Board acts as the Company’s Audit Committee. The Board has determined that Mr. Crow is an “audit committee financial expert” as that term is defined in Item 401(e)(2) of Regulation S-B. Since December 31, 2006, Mr. Crow is considered “independent” as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act.

Nominating Committee. The Board has adopted the Company’s Statement of Governance Principles and Nominating Committee Charter. Minimum qualifications for Director nominees are detailed in the Statement of Governance Principles along with procedures for stockholders to recommend Director candidates for consideration by the Nominating Committee. These two documents can be viewed on the SEC website as Appendix A and B to the Company’s 2006 Proxy Statement. See “Additional Information”. The Company will provide a copy of these documents to any person without charge, upon written request addressed to the Company’s Secretary.

The Board has designated a Nominating Committee which consists of Mason McLain, Doug Fuller and Bill Smith. Both Mr. Fuller and Mr. Smith are “independent” as defined in Rule 4200(a)(15) of the NASDAQ listing standards. The Nominating Committee makes recommendations to the Board regarding individuals for nomination as Director and, in addition, may consider other matters relating to corporate governance. The Nominating Committee met once in March, 2007 and recommended that the current Directors be nominated to serve another one year term on the Board.
 
The Nominating Committee evaluates qualified nominees for Director using the same process regardless of whether the nominee is recommended by an officer, Director or stockholder.

Director Compensation
 
Directors are compensated on a per meeting basis and only for those Board meetings attended. The amount of compensation is set by a vote of the Directors at each Board meeting. In the year ended December 31, 2006, the Directors were compensated in the amount of $1,000 for each of the meetings attended. All committee meetings are held just prior to the Board meetings or by telephone conference and Directors or officers of the Company who are also Directors receive no additional compensation for committee meetings.

The Company provides no stock or stock option awards compensation, non-equity incentive compensation or deferred compensation to any of our Directors

The following table provides information relating to total compensation amounts paid to non-employee Directors:
 
Director Compensation Table
 
 
 
 
Fees Earned or
 
 
 
Name
 
Year
 
Paid in Cash (1)
 
Total
  
Bill Smith
    
2006
  
$
2,000
  
$
2,000
  
Each other director (2)
    
2006
  
$
3,000
  
$
3,000
  

8

 
(1)
Amounts represent fees for attending Board meetings during the year at $1,000 per meeting.
 
(2)
Robert T. McLain, Robert Savage, Jerry Crow, Marvin E. Harris and Doug Fuller.
 
EXECUTIVE COMPENSATION
 
Overview

As indicated earlier, the Company does not have a standing compensation committee of the Board or a committee performing a similar function. We are a small business issuer whose securities are not quoted on NASDAQ or listed on any exchange. The Company has a total of only eight employees, two of whom are classified as executive officers and two who are classified as “Significant Employees,” as defined in Reg. S-B. Item 401(b), and make significant contributions to the business. The third executive officer in not an employee and receives no compensation other than Director’s fees for the Board meetings he attends. Non-employee Directors’ compensation was discussed in the previous section.

Compensation Philosophy and Objectives

Because we are so small, our compensation philosophy and objectives are to provide compensation that is fair and reasonable for all employees at a competitive level that will allow us to attract and retain qualified personnel necessary to operate the Company at the most efficient level possible. At the same time, we strive to comply with all the operational and financial rules and regulations required of any public company and specifically those relating to the oil and gas exploration and production (E&P) industry. In addition, we try to maintain compensation at a level that is competitive with other companies in this industry. Our philosophy and objectives for compensation of executive officers are no different from the other employees.

Compensation levels for all employees, including executive officers, are reviewed annually in early November by the President, Exploration Manager and Production Manager. This review process includes reviews of salary and wage surveys primarily for the oil and gas E&P industry and informal performance evaluations provided by supervisors. Compensation levels for the next fiscal year are determined during this review process and presented to the entire Board for approval at its meeting on the third Tuesday in November each year.

Elements of Compensation

Elements of our executive compensation and benefits package are as follows:
 
· a base salary
· a bonus equal to one month’s base salary, paid in early December each year, and
· Company sponsored employee benefits, such as life and health insurance benefits and a qualified savings plan (401k)

These elements are no different than those provided to all employees.


9

The Company provides no incentive bonus compensation, stock or stock option awards compensation, non-equity incentive compensation or deferred compensation to the executive officers or to any of our other employees.

The following table sets forth summary information regarding the compensation paid to Mason McLain, our President and Chief Executive Officer. Information as to the compensation of the other executive officer is not presented because that person’s combined annual salary and bonus did not exceed $100,000 during the year ended December 31, 2006.

Summary Compensation Table
Name and
      
 
      
All Other
      
Principal Position
  
Year
  
Salary (1)
  
Bonus
  
Compensation
  
Total
  
Mason McLain
    
2006
  
$
60,480
  
$
5,040
  
$
6,629 (2)
$
72,149
  
President and Chief
                                
Executive Officer
                                
        
 
(1)
Includes amounts earned but deferred at the election of Mr. McLain pursuant to our 401(k) employee savings plan.

(2)
Includes Director Fees of $3,000 paid in 2006 and matching contributions made under our 401(k) employee savings plan in the amount of $3,629.
 
CODE OF ETHICS FOR SENIOR OFFICERS
 
The Company has adopted a Code of Ethics for Senior Officers (the “Code of Ethics”) that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions meeting the criteria set forth in Item 406 of Regulation S-B. The Company will provide to any person without charge, upon written request addressed to the Company’s Secretary, a copy of the Code of Ethics. This document can also be viewed at the SEC website as Exhibit 14 to the Company’s 2005 Form 10-KSB. See “Additional Information”.
 
INFORMATION REGARDING COMMUNICATIONS WITH AUDITORS
 
As required by the Securities and Exchange Commission Regulation S-B, Item 306, the Board has:

 
1.
Reviewed and discussed the audited financial statements of the Company for the year ended December 31, 2006 with management.

 
2.
Discussed with the Company’s independent auditors, Murrell, Hall, McIntosh, & Co., the matters required to be discussed by Auditing Standards Board’s Statement on Auditing Standards Number 61, “Communication with Audit Committees”, as modified or supplemented.

10


 
3.
Received the written disclosures and letter from Murrell, Hall, McIntosh, & Co required by Independence Standards Board Standard Number 1, “Independence Discussions with Audit Committees”, as modified or supplemented, and discussed with the independent accountant the independent accountant’s independence.

Based on the above noted review and discussions, the Board approved the inclusion of the Company’s audited financial statements, for and as of the fiscal year ended December 31, 2006, in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006, for filing with the Securities and Exchange Commission.

The  Members of the Board are Mason McLain, Robert T. McLain, Robert L. Savage, Jerry L. Crow, Marvin E. Harris, Jr., William M. Smith, Doug Fuller, Cameron McLain and Kyle McLain.
 
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
Section 16(a) of the Securities Exchange Act of 1934 requires executive officers, directors and persons beneficially owning more than 10% of the Company’s stock to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission and with the Company. Based solely on a review of the Forms 3 and 4 and any amendments thereto furnished to the Company and written representations from the executive officers and Directors, the Company believes that all of these persons complied with their Section 16(a) filing obligations.
 
INDEPENDENT PUBLIC ACCOUNTANTS

In General

Effective October 14, 2005, the Company dismissed Grant Thornton LLP as the Company’s independent accountants. Upon the recommendation and approval of its Board, the Company appointed Murrell, Hall, McIntosh & Co., PLLP as the Company’s independent accountants, effective October 14, 2005.

Grant Thornton LLP’s reports on the Company’s 2003 and 2004 consolidated financial statements contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles.

There were no disagreements with Grant Thornton LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure that disagreements, if not resolved to the satisfaction of Grant Thornton LLP would have caused it to make reference to the subject matter of the disagreements in connection with its reports.

There were no reportable events with respect to the Company as described at Item 304 of Regulation S-B.


11

On October 14, 2005, the Company engaged Murrell, Hall, McIntosh & Co., PLLP as its certifying accountant to audit the Company’s consolidated financial statements. The Company has not previously consulted with Murrell, Hall, McIntosh & Co., PLLP on items concerning (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, or (ii) any subject matter of a disagreement or reportable event with Grant Thornton LLP.

The Company submitted a letter from Grant Thornton LLP addressed to the Securities and Exchange Commission (SEC) stating that Grant Thornton LLP agreed with the above statements as they relate to Grant Thornton LLP.

For the year 2007 the executive officers will recommend to the Board that it approve Murrell, Hall, McIntosh, & Co., PLLP as the Company’s independent accountants. Murrell, Hall, McIntosh, & Co., PLLP served in that capacity for the year ended December 31, 2006 as discussed above.

Representatives of Murrell, Hall, McIntosh, & Co., PLLP are not expected to be at the Annual Meeting; however, if questions arise which require their comments, arrangements have been made to solicit their response.

Audit Fees 
 
The aggregate fees billed for professional services rendered for the audit of the Company’s annual financial statements by Murrell, Hall, McIntosh, & Co., PLLP for the fiscal years ended December 31, 2005 and 2006, and the reviews of the financial statements included in the Company’s Form 10-QSB for those years totaled $45,000 for 2006 and $32,513 for 2005. Grant Thornton LLP’s fees billed for the reviews of the financial statements included in the Company’s Form 10-QSB for the first two quarters of 2005 totaled $12,938.

Audit - Related Fees
 
Grant Thornton LLP billed $1,593 in 2005 for fees to provide the letter addressed to the SEC discussed above. No fees were billed for audit related services rendered by Murrell, Hall, McIntosh & Co., PLLP for either 2006 or 2005.
 
Tax Fees
 
The aggregate fees billed for tax services rendered by Grant Thornton LLP were $8,315 for 2005. The aggregate fees billed for tax services rendered by Murrell, Hall, McIntosh & Co., PLLP were $8,500 for 2006. All such fees were for Federal and state income tax return preparation.

All Other Fees

None
 
ADDITIONAL INFORMATION
 
Communications Between Stockholders and the Board

The Board has designated Mr. Harris to be the independent Director to receive communications from stockholders seeking to communicate directly with the Company’s independent Directors. Anyone who has a concern about the Company’s conduct, or about the Company’s accounting, internal accounting controls or auditing matters, may communicate that concern directly to the Company’s Secretary. Those communications may be confidential or anonymous. All such concerns will be forwarded to Mr. Harris for review. The Board is committed to good governance practices.


12

Deadline for Stockholders for Inclusion in Next Year’s Proxy Statement
 
Stockholder proposals intended to be presented at the 2008 Annual Meeting of Stockholders, which is scheduled for May 20, 2008, and included in the Company’s proxy statement and form of proxy relating to that meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 must be received in writing by the Company at the Company’s principal executive offices by Friday, December 31, 2007. Proposals should be addressed to James L. Tyler, Secretary, The Reserve Petroleum Company, 6801 N. Broadway, Suite 300, Oklahoma City, Oklahoma 73116-9092.
 
Other Stockholder Proposals for Presentation at Next Year’s Annual Meeting
 
For any stockholder proposal that is not submitted to the Company for inclusion in next year’s proxy statement, but is instead sought to be presented by the stockholder directly at the 2008 Annual Meeting, Rule 14a-4(c) under the Securities Exchange Act of 1934 permits management to vote proxies in its discretion if the Company: (1) receives written notice of the proposal before the close of business on Thursday, March 6, 2008, and advises stockholders in the 2008 Proxy Statement about the nature of the matter and how management intends to vote on the matter, or (2) does not receive written notice of the proposal before the close of business on Thursday, March 6, 2008. Notices of intention to present proposals at the 2008 Annual Meeting should be addressed to James L. Tyler, Secretary, The Reserve Petroleum Company, 6801 N. Broadway, Suite 300, Oklahoma City, Oklahoma 73116-9092.
 
Voting Securities
 
Stockholders of record at the close of business on April 16, 2007, will be eligible to vote at the Annual Meeting. The voting securities of the Company consist of its $0.50 par value common stock, of which 162,868.64 shares were outstanding on April 16, 2007. Each share outstanding on the Record Date will be entitled to one vote. Treasury shares are not voted. Individual votes of stockholders are kept private, except as appropriate to meet legal requirements. Access to proxies and other individual stockholder voting records is limited to the Inspector of Election and certain employees of the Company and its agents who must acknowledge in writing their responsibility to comply with this policy of confidentiality.
 
Vote Required for Approval
 
The election of a nominee to the Board requires the affirmative vote of a majority of the shares of common stock represented at the Annual Meeting in person or by proxy. All other matters also require the affirmative vote of a majority of the shares of common stock voted at the Annual Meeting in person or by proxy. Abstentions, if any, will not be counted as votes cast. Therefore, they will have no effect on the outcome of the other matters to be voted on at the Annual Meeting. A broker non-vote occurs when a nominee holding shares for a beneficial holder does not have discretionary voting power and does not receive voting instructions from the beneficial owner. Broker non-votes will not be treated as shares present and entitled to vote on a voting matter and will have no effect on the outcome of the vote.
 

13

 
Manner for Voting Proxies
 
The shares represented by all valid proxies received by mail will be voted in the manner specified. Where specific choices are not indicated, the shares represented by all valid proxies received will be voted for the nominees for Director named in this Proxy Statement. Should any matter not described above be properly presented at the Annual Meeting, the person or persons named in the Proxy Card will vote in accordance with their judgment.
 
Other Matters to be Presented
 
The Board knows of no other matters which may be presented at the Annual Meeting. If any other matters properly come before the Annual Meeting, including any adjournment or adjournments thereof, proxies received in response to this solicitation will be voted upon such matters in the discretion of the person or persons named in the Proxy Card.
 
Electronic Access to Proxy Statement and Annual Report

A copy of the Company’s 2006 Annual Report on Form 10-KSB will be furnished without charge to stockholders beneficially or of record at the close of business on April 16, 2007, on request to James L. Tyler, Secretary, at (405) 848-7551 Ext. 303. This Proxy Statement and the Company’s 2006 Annual Report on Form 10-KSB are also available on the SEC’s website www.sec.gov under the “Filings & Forms (EDGAR)” heading.


14

THE RESERVE PETROLEUM COMPANY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
May 22, 2007
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
   
KNOW ALL MEN BY THESE PRESENTS:
 
That the undersigned holder(s) of common stock of The Reserve Petroleum Company, a Delaware corporation, does hereby constitute and appoint Mason McLain and Robert T. McLain as true and lawful attorneys and proxies for the undersigned, each with full power of substitution and revocation, to vote for and in the name, place and stead of the undersigned at the 2007 Annual Meeting of Stockholders of the Company to be held at 6801 N. Broadway, Suite 300, Oklahoma City, Oklahoma, on Tuesday, May 22, 2007, at 3:00 p.m., local time, and any adjournment thereof, all of the stock of the Company which the undersigned would be entitled to vote if then personally present, hereby revoking any Proxy heretofore given.

This Proxy will confer discretionary authority to vote upon matters incidental to the conduct of the Annual Meeting, matters not known to management prior to the date of the Proxy Statement which are presented to the Annual Meeting.

Election of Directors 
  
WITHHOLD
  
VOTE FOR
AUTHORITY TO VOTE
NOMINEE
( )
( )
Mason McLain
( )
( )
Robert T. McLain
( )
( )
Jerry L. Crow
( )
( )
Robert L. Savage
( )
( )
Marvin E. Harris, Jr.
( )
( )
William M. (Bill) Smith
( )
( )
Doug Fuller
( )
( )
Cameron R. McLain
( )
( )
Kyle McLain
 
(Continued and to be signed on other side)

(Continued from other side)
 
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE NOMINEES.

This Proxy may be revoked at any time before the authority granted therein is exercised; otherwise, it shall remain in full force and effect.

IN WITNESS WHEREOF the undersigned has executed this Proxy on the ______day of _______________2007.
 
     
   
Signature
     
     
   
Signature if held jointly
     
     
   
Address
 
Please sign your name(s) exactly as it appears on your stock certificate and return this Proxy Card promptly to save the Company additional mailing expense. Executors, administrators, trustees, guardians and others signing in a representative capacity please give their full titles. When shares are held by joint tenants both should sign. If a corporation, please sign full corporate name by the President or other authorized officer. If a partnership, please sign in partnership name by authorized person. Must arrive in this office by May 21, 2007 to be counted.