5
PARALLEL PETROLEUM CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
---------------------------------- ----------------------------------
2000 2001 2000 2001
------------ ------------ ------------- -------------
Oil and gas revenues $ 4,162,667 $ 3,811,963 $ 10,133,872 $ 15,891,228
------------ ------------ ------------- -------------
Cost and expenses:
Lease operating expense 738,929 856,472 1,971,315 3,023,065
General and administrative 182,250 363,758 640,209 965,847
Depreciation, depletion and amortization 1,299,187 1,527,252 3,581,798 4,822,819
Impairment of oil and gas properties - 2,177,128 - 2,177,128
----------- ----------- ------------ ------------
2,220,366 4,924,610 6,193,322 10,988,859
----------- ----------- ------------ ------------
Operating income (loss) 1,942,301 (1,112,647) 3,940,550 4,902,369
----------- ----------- ------------ ------------
Other income (expense), net:
Equity in earnings (loss) of First Permian, LLC (4,493) 442,032 (500,576) 442,032
Interest income 62,779 31,803 94,024 114,591
Other income 38,522 19,140 86,959 69,553
Interest expense (337,519) (167,064) (1,029,266) (641,575)
Other expense (2,891) 590 (4,872) (132,020)
----------- ----------- ------------ ------------
Total other income (expense), net (243,602) 326,501 (1,353,731) (147,419)
----------- ----------- ------------ ------------
Income (loss) before income taxes 1,698,699 (786,146) 2,586,819 4,754,950
Income tax benefit, net - (294,321) - (603,820)
----------- ----------- ------------ ------------
Net income (loss) $ 1,698,699 $ (491,825) $ 2,586,819 $ 5,358,770
=========== =========== ============ ============
Cumulative preferred stock dividend $ 146,174 $ 170,537 $ 462,887 $ 462,887
=========== =========== ============ ============
Net income (loss) available to common stockholders $ 1,552,525 $ (662,362) $ 2,123,932 $ 4,895,883
=========== =========== ============ ============
Net income per common share:
Basic $ 0.075 $ (0.030) $ 0.105 $ 0.242
=========== =========== ============ ============
Diluted $ 0.072 $ (0.030) $ 0.103 $ 0.226
=========== =========== ============ ============
Weighted average common share outstanding
Diluted 23,511,753 20,453,902 20,635,568 23,722,688
=========== =========== ============ ============
The accompany notes are an integral part of these financial statements.
6
PARALLEL PETROLEUM CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30
----------------------------------------------
2000 2001
------------------- ---------------------
Cash flows from operating activities:
Net income $ 2,586,819 $ 5,358,770
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and depletion 3,581,798 4,822,819
Impairment of oil and gas properties - 2,177,128
Equity in loss (income) from investments in First Permian, LLC 500,576 (442,032)
Deferred income taxes - (603,820)
Other, net (163) (223,924)
Changes in assets and liabilties:
Decrease (increase) in accounts receivables (773,839) 2,012,075
Decrease (increase) in prepaid expenses and other 28,507 (199,331)
Increase in accounts payable and accrued liabilities 932,824 461,472
------------ ------------
Net cash provided by operating activities 6,856,522 13,363,157
------------ ------------
Cash flows from investing activities:
Additions to property and equipment (4,797,991) (10,627,368)
Proceeds from disposition of property and equipment 3,002,155 1,472,363
Distribution from First Permian, LLC 67,500 -
------------ ------------
Net cash used in investing activities (1,728,336) (9,155,005)
------------ ------------
Cash flows from financing activities:
Payments on bank line of credit (2,865,889) (2,427,531)
Proceeds from exercise of options and warrants - 145,410
Payment of preferred stock dividend (462,887) (414,162)
------------ ------------
Net cash used in financing activities (3,328,776) (2,696,283)
------------ ------------
Net increase in cash and cash equivalents 1,799,410 1,511,869
Beginning cash and cash equivalents 1,276,417 2,000,826
------------ ------------
Ending cash and cash equivalents $ 3,075,827 $ 3,512,695
============ ============
Non-cash financing activities:
Accrued preferred stock dividend $ 170,537 $ 170,537
============ ============
Transfer of assets held for sale to oil and gas property $ 2,127,734 -
============ ============
The accompany notes are an integral part of these financials.
7
PARALLEL PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial information included herein, except the balance sheet as of
December 31, 2000, is unaudited. However, such information includes all
adjustments (consisting solely of normal recurring adjustments), which are, in
the opinion of management, necessary for a fair statement of the results of
operations for the interim periods. The results of operations for the interim
period are not necessarily indicative of the results to be expected for an
entire year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in this Form 10-Q Report pursuant to certain
rules and regulations of the Securities and Exchange Commission. These financial
statements should be read with the financial statements and notes included in
Parallel's 2000 Form 10-K.
We account for our 30.675% interest in First Permian using the equity
method of accounting. Under the equity method of accounting, we record our
investment in First Permian at cost on the balance sheet. This is increased or
reduced by our proportionate share of First Permian's income or loss, which is
presented as one amount in the statements of operations.
NOTE 2. LONG TERM DEBT
Long-term debt consists of the following at September 30, 2001:
Revolving Facility note payable to bank, at bank's base
lending rate (6.0% at September 30, 2001) $10,000,000
Less: current maturities 1,283,000
-----------
$ 8,717,000
===========
Scheduled maturities of long-term debt at September 30, 2001 are as follows:
September 30, 2002 $ 1,283,000
September 30, 2003 3,876,000
October 1,2003 4,841,000
-----------
$10,000,000
===========
Revolving Credit Facility. On December 18, 2000, we entered into a loan
agreement with Bank United ("Revolving Facility"). Pursuant to the loan
agreement, we may borrow up to the lesser of $30,000,000 or the "borrowing base"
then in effect. The borrowing base at December 31, 2000 was $15,500,000 and at
September 30, 2001, our borrowing base was $12,593,000. The borrowing base is
reduced by a monthly commitment reduction of $323,000 beginning January 1, 2001.
The total outstanding principal amount of our bank indebtedness was $12,427,531
at December 31, 2000 and $10,000,000 at September 30, 2001.
8
The borrowing base and monthly commitment reduction are subject to
redetermination semi-annually, on or about May 1 and November 1 of each year,
beginning May 1, 2001. The bank is currently reviewing our borrowing base. The
lender may require a redetermination of the borrowing base and monthly automatic
borrowing base reduction at any time in its sole discretion. Indebtedness under
the Revolving Facility matures October 1, 2003. The loan is secured by
substantially all of our oil and gas properties. Commitment fees of .25% per
annum on the difference between the revolving commitment and the average daily
amount are due quarterly. The unpaid principal balance for the Revolving
Facility bears interest at our election at a rate equal to (i) the bank's base
lending rate, or (ii) the applicable adjusted eurodollar rate plus a margin of
2.75% during the related eurodollar interest period. Interest is due and payable
on the day which the related eurodollar interest period ends. The Revolving
Facility contains various restrictive covenants and compliance requirements,
which include (1) maintenance of certain financial ratios, (2) limiting the
incurrence of additional indebtedness, and (3) restrictions on payment of
dividends on our common stock.
NOTE 3. PREFERRED STOCK
We have outstanding 974,500 shares of 6% Convertible Preferred Stock, $0.10
par value per share. Cumulative annual dividends of $0.60 per share are payable
semi-annually on June 15 and December 15 of each year. Each share of Preferred
Stock may be converted, at the option of the holder, into 2.8571 shares of
common stock at an initial conversion price of $3.50 per share, subject to
adjustment in certain events. The preferred stock has a liquidation preference
of $10 per share and has no voting rights, except as required by law. We may
redeem the preferred stock, in whole or part, for $10 per share plus accrued and
unpaid dividends.
NOTE 4. INCOME TAX BENEFIT
It is the opinion of management that it is more likely than not that we
will utilize all the available net operating loss carryforwards prior to their
ultimate expiration. As such, the valuation allowance of $2,062,954, established
as of December 31, 2000, was reversed in the first quarter. The income tax
benefit of $603,820 reflected in the statement of operations is a result of the
reversal of our $2,062,954 valuation allowance, net of $1,646,618 income tax
expense, and $245,000 of excess statutory depletion.
NOTE 5. FULL COST CEILING TEST
We use the full cost method to account for our oil and gas producing
activities. Under the full cost method of accounting, the net book value of oil
and gas properties, less related deferred income taxes, may not exceed a
calculated "ceiling". The ceiling limitation is the discounted estimated
after-tax future net revenues from proved oil and gas properties. In calculating
future net revenues, current prices and costs are generally held constant
indefinitely. The net book value, less related deferred income taxes, is
compared to the ceiling on a quarterly and annual basis. Any excess of the net
book value, less related deferred income taxes, is generally written off as an
expense. Under rules and regulations of the SEC, the excess above the ceiling is
not written off if, subsequent to the end of the quarter or year but prior to
the release of the financial results, prices increased sufficiently such that an
excess above the ceiling would not have existed if the increased prices were
used in the calculations.
As a result of a ceiling test calculation for the quarter ending September
30, 2001, net of related deferred tax liability, we recognized a non-cash
impairment charge of approximately $2,177,000 related to its oil and gas
reserves and unproved properties. The impairment of oil and gas assets was
primarily the result of significantly lower oil and natural gas prices on proved
oil and gas properties.
9
NOTE 6. INVESTMENT IN FIRST PERMIAN, L.L.C.
At December 31, 2000, we had recorded cumulative losses of $366,765 in our
investment liability in First Permian because we had guaranteed $10,000,000 of
the debt of First Permian, L.L.C. We were released from this guaranty on October
25, 2000 and had discontinued the equity method of accounting for our share of
losses in First Permian from that date. First Permian generated net income of
$2,895,036 during the three months ended September 30, 2001. Therefore, we have
resumed the application of the equity method of accounting. Our share of First
Permian's net income of $888,000 exceeded the share of net losses not recognized
during the period the equity method was suspended by $442,032.
The following is summarized financial information for First Permian, L.L.C.:
Three Months Ended Nine Months Ended
September 30 September 30
--------------------------------- ------------------------------
2000 2001 2000 2001
------------ ------------ -------------- --------------
Total Revenues $ 5,558,000 $10,176,000 $14,848,000 $24,039,000
Total Costs and Expenses 3,765,000 5,184,000 9,855,000 14,069,000
------------ - ------------ ----------- -----------
Operating Income 1,793,000 4,992,000 4,993,000 9,970,000
Other Income and Expense, net (1,505,000) (1,760,000) (5,222,000) (7,018,000)
------------ ----------- ----------- -----------
Net Income 288,000 3,232,000 (229,000) 2,952,000
Extraordinary Loss from
Debt Restructuring
- - 961,000 -
------------- ------------ ----------- -----------
Net Income before Preferred Dividends 288,000 3,232,000 (1,190,000) 2,952,000
Preferred Dividends
304,000 337,000 405,000 979,000
------------- ----------- ----------- -----------
Net Income Available to Common Units $ (16,000) $ 2,895,000 $(1,595,000) $ 1,973,000
============= =========== =========== ===========
Commodity Hedges. First Permian uses various swap contracts and other
financial instruments to hedge the effect of prices changes on future oil
production.
The following table sets forth First Permian's outstanding oil hedge
contracts at September 30, 2001:
Type Volume/Month Term Price Commodity
---- ------------ ---- ----- ---------
Collar 40,000 barrels 7/01 - 12/02 $18.00-$28.75 WTI NYMEX
Collar 40,000 barrels 7/01 - 12/02 $19.00-$24.80 WTI NYMEX
At June 30, 2001, a crude oil swap for 91,000 barrels per month from
January 1, 2001 thru June 30, 2001 expired. The swap price was $17.70 per
barrel.
Interest Rate Swap Agreements. These instruments are used to reduce the
potential impact of increases in interest rates on floating-rate long-term debt.
At September 30, 2001, First Permian was party to one interest rate swap
agreement to provide it with a fixed interest rate of 6.52% on $40,000,000 of
its revolving line of credit through July 1, 2002.
Pursuant to FAS 133, First Permian recorded a net transition adjustment
loss of $6,105,108 in accumulated other comprehensive income on January 1, 2001.
First Permian did not elect to apply hedge
10
accounting in accordance with FAS 133 but elected to mark-to-market their
liability each quarter. On June 30, 2001 First Permian's crude oil swap of
91,000 barrels expired resulting in a decrease in First Permian
's net loss due
to hedging activity to $647,502 for the three months ended September 30, 2001.
This is compared to the hedging losses recorded in the second quarter ended June
30, 2001 and first quarter ended March 31, 2001 of $1,875,770 and $4,872,687
respectively. First Permian's net loss, due to hedging activity, for the nine
months ended September 30, 2001 is $7,395,959.
NOTE 7. NET INCOME PER COMMON SHARE
Basic income per share is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted income per share reflects the assumed conversion of all
potentially dilutive securities.
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- ----------------------------
2000 2001 2000 2001
---------------- -------------- ------------- -------------
Basic EPS Computation:
Numerator-
Net income $ 1,698,699 $ (491,825) $ 2,586,819 $ 5,358,770
Preferred stock dividend (170,537) (121,812) (462,887) (414,162)
---------------- -------------- ------------- -------------
Net income available to common
stockholders $ 1,528,162 $ (613,637) $ 2,123,932 $ 4,944,608
================ ============== ============= =============
Denominator-
Weighted average common shares
outstanding 20,331,858 20,453,902 20,331,858 20,436,461
================ ============== ============= =============
Basic earnings per share $ 0.075 $ (0.030) $ 0.105 $ 0.242
================ ============== ============= =============
Diluted EPS Computation:
Numerator-
Net income $ 1,698,699 $ (491,825) $ 2,586,819 $ 5,358,770
Preferred stock dividend - (121,812) (462,887) -
---------------- -------------- ------------- -------------
Net income available to common
stockholders $ 1,698,699 $ (613,637) $ 2,123,932 $ 5,358,770
================ ============== ============= =============
Denominator-
Weighted average common shares
outstanding 20,331,858 20,453,902 20,331,858 20,436,461
Employee stock options 393,359 - 303,710 500,559
Warrants 2,292 - - 1,424
Preferred stock 2,784,244 - - 2,784,244
---------------- -------------- ------------- -------------
23,511,753 20,453,902 20,635,568 23,722,688
================ ============== ============= =============
Diluted earnings per share $ 0.072 $ (0.030) $ 0.103 $ 0.226
================ ============== ============= =============
Convertible preferred stock equivalent shares for the three-month and nine
month periods ended September 30, 2001 that could potentially dilute basic
earnings per share in the future were not included in the computation of diluted
earnings per share because to do so would have been anti-dilutive.
11
NOTE 8: RECENTLY ANNOUNCED ACCOUNTING PRONOUNCEMENTS
In September 1998, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("FAS No. 133"), which establishes standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. FAS No. 133 requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. It establishes
conditions under which a derivative may be designated as a hedge and establishes
standards for reporting changes in the fair value of a derivative. We adopted
FAS No. 133, as amended by FAS No. 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities, an amendment of FASB Statement No.
133, effective January 1, 2001. After assessing our contracts, we are not aware
of any freestanding or embedded derivative instruments that would need to be
accounted for in accordance with FAS No. 133 as of January 1, 2001 or during the
period ending September 30, 2001.
In July 2001 the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141 "Business Combinations" and
No. 142 "Goodwill and Other Intangible Assets." Statement 141 requires that all
business combinations initiated after September 30, 2001 be accounted for under
the purchased method and Statement 142 requires that goodwill no longer be
amortized to earnings, but instead be reviewed for impairment. As of September
30, 2001 there is no impact to the Company's financial statements as we have not
entered into any business combination and have not acquired goodwill.
Also, the FASB had voted to issue Statement No. 143 "Accounting for Asset
Retirement Obligations" which establishes requirements for the accounting of
removal-type costs associated with asset retirements. The standard is effective
for fiscal years beginning after September 15, 2002, with earlier application
encouraged. The Company is currently assessing the impact on its financial
statements.
On October 3, 2001, the FASB issued Statement No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets". This pronouncement supercedes FAS
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" and eliminates the requirement of Statement 121 to
allocate goodwill to long-lived assets to be tested for impairment Statement 144
also describes a probability-weighted cash flow estimation approach to deal with
situations in which alternative courses of action to recover the carrying amount
of long-lived asset are under consideration or a range is estimated for the
amount of possible future cash flows. The statement also establishes a
"primary-asset" approach to determine the cash flow estimation period for a
group of assets and liabilities that represents the unit of accounting for a
long-lived asset to be held and used. The provisions of this Statement are
effective for financial statements issued for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal years, with early
adoption encouraged. The Company is currently assessing the impact to its
financial statements.
NOTE 9. LEGAL PROCEEDINGS
At September 30, 2001, we were involved in one lawsuit incidental to our
business. In the opinion of management, the ultimate outcome of this lawsuit
will not have a material adverse effect on Parallel's financial position or
results of operations. We are not aware of any other threatened litigation. We
have not been a party to any bankruptcy, receivership, reorganization,
adjustment or similar proceeding.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis should be read in conjunction with
our Financial Statements and the related notes.
OVERVIEW
Strategy
Our primary objectives are to build oil and gas reserves, production, cash
flow and earnings per share by exploring for new oil and gas reserves, acquiring
oil and gas properties and optimizing production from existing oil and gas
properties. Management seeks to achieve these objectives by:
. using advanced technologies to conduct exploratory and development
activities;
. acquiring producing properties we believe add incremental value to our
asset base;
. keeping debt levels low;
. concentrating activities in core areas to achieve economies of scale;
and
. emphasizing cost controls.
Following this strategy, we have discovered oil and gas reserves using 3-D
seismic technology in the Horseshoe Atoll Reef Trend of west Texas and in the
Yegua/Frio/Wilcox gas trend onshore the gulf coast of Texas. Additionally, we
have acquired oil and gas producing properties in the Permian Basin of west
Texas. Capital utilized to acquire these properties has been provided primarily
by secured bank financing, sales of our equity securities and cash flow from
operations.
Investment in First Permian. In June 1999, we joined with three privately
held oil and gas companies to acquire oil and gas properties from Fina Oil and
Chemical Company. The acquisition was effected through the formation of First
Permian, which entered into a cash merger with a wholly owned subsidiary of Fina
Oil and Chemical Company. The primary assets acquired by First Permian in the
merger are oil and gas reserves and associated assets in producing fields
located in the Permian Basin of west Texas. After giving effect to purchase
price adjustments, First Permian paid to Fina Oil and Chemical Company cash in
the aggregate amount of approximately $92.0 million.
First Permian is owned by Parallel and other privately held oil and gas
companies and individuals. As of September 30, 2001, Parallel owned a 30.675%
common membership interest in First Permian. We account for our interest in
First Permian using the equity method of accounting, under this accounting
method, our investment is increased or decreased by our proportionate share of
First Permian's net income or loss. See Note 6 to our financial statements for
more discussion about the continuance of the equity method of accounting for our
investment.
The purchase was financed, in part, with the proceeds of a $110.0 million
revolving credit facility provided by Bank One, Texas, N.A. to First Permian.
The principal amount of the initial loan was $74.0 million. First Permian also
borrowed $8.0 million from Tejon Exploration Company and $8.0 million from
Mansefeldt Investment Corporation to help finance the purchase.
Operating Performance. Our operating performance is influenced by several
factors, the most significant of which are the prices we receive for our oil and
gas and production. The world price for oil has overall influence on the prices
we receive for our oil production. The prices received for different grades of
oil are based upon the world price for oil, which is then adjusted based upon
the particular grade. Typically, light oil is sold at a premium, while heavy
grades of crude are discounted. Gas prices we receive are primarily influenced
by seasonal demand, weather, hurricane conditions in the Gulf of Mexico,
availability of pipeline transportation to end users and proximity of our wells
to major transportation pipeline infrastructure and, to a lesser extent, world
oil prices. Additional factors influencing our operating performance include
production expenses, overhead requirements, and cost of capital.
13
Our oil and gas exploration, development and acquisition activities require
substantial and continuing capital expenditures. Historically, the sources of
financing to fund our capital expenditures have included:
. cash flow from operations,
. sales of our equity securities, and
. bank borrowings.
For the three months ended September 30, 2001, the average sales price we
received for our crude oil production averaged $23.91 per barrel compared with
$26.50 per barrel for the three months ended June 30, 2001 and $27.81 per barrel
for the three months ended March 31, 2001. The average sales price we received
for natural gas during this same period was $4.02 per Mcf compared with $4.02
per Mcf for the three months ended June 30, 2001 and $6.25 per Mcf for the three
months ended March 31, 2001. For the three months ended September 30, 2000, the
average sales price we received for our crude oil averaged $29.53 and for our
natural gas averaged $3.97 per Mcf.
Our oil and gas producing activities are accounted for using the full cost
method of accounting. Under this method, we capitalize all costs incurred in
connection with the acquisition of oil and gas properties and the exploration
for and development of oil and gas reserves. See Note 5 to Financial Statements.
These costs include lease acquisition costs, geological and geophysical
expenditures, costs of drilling both productive and non-productive wells, and
overhead expenses directly related to land acquisition and exploration and
development activities. Proceeds from the disposition of oil and gas properties
are accounted for as a reduction in capitalized costs, with no gain or loss
recognized unless the disposition involves a material change in reserves, in
which case the gain or loss is recognized.
Depletion of the capitalized costs of oil and gas properties, including
estimated future development costs, is provided using the equivalent
unit-of-production method based upon estimates of proved oil and gas reserves
and production, which are converted to a common unit of measure based upon their
relative energy content. Unproved oil and gas properties are not amortized, but
are individually assessed for impairment. The cost of any impaired property is
transferred to the balance of oil and gas properties being depleted.
Our production and results of operations vary from quarter to quarter. We
expect 2001 production volumes to increase when compared to our production
volumes in the prior year as a result of increased drilling activities.
RESULTS OF OPERATIONS
Our business activities are characterized by frequent, and sometimes
significant, changes in our:
. sources of production;
. product mix (oil vs. gas volumes); and
. the prices we receive for our oil and gas production.
Year-to-year or other periodic comparisons of the results of our operations
can be difficult and may not accurately describe our condition. The following
table compares the results of operations on the basis of equivalent barrels of
oil ("EBO") for the period indicated. An EBO means one barrel of oil equivalent
using the ratio of six Mcf of gas to one barrel of oil.
14
Three Months Ended Three Months Ended
------------------------------ ------------------
3-31-01 6-30-01 9-30-01 9-30-00 9-30-01
-------- - -------- ---------- ------------------
Production and prices:
Oil (Bbls) 34,914 39,098 36,211 42,317 36,211
Natural gas (Mcf) 1,009,532 934,951 732,604 733,621 732,604
Equivalent barrels of oil (EBO) 203,169 194,923 158,312 164,587 158,312
Oil price (per Bbl) $ 27.81 $ 26.50 $ 23.91 $ 29.53 $ 23.91
Gas price (per Mcf) $ 6.25 $ 4.02 $ 4.02 $ 3.97 $ 4.02
Price per EBO $ 35.87 $ 24.58 $ 24.08 $ 25.29 $ 24.08
Results of operations per EBO:
Oil and gas revenues $ 35.87 $ 24.58 $ 24.08 $ 25.29 $ 24.08
Costs and expenses:
Lease operating expense 5.51 5.37 5.41 4.49 5.41
General and administrative 1.47 1.56 2.30 1.11 2.30
Depreciation and depletion 8.26 8.30 9.65 7.89 9.65
Impairment of oil and gas properties - - 13.75 13.75
------- ------- -------- ------- -------
Total costs and expense 15.24 15.23 31.11 13.49 31.11
------- ------- -------- ------- -------
Operating income (loss) 20.63 9.35 (7.03) 11.80 (7.03)
------- ------- -------- ------- -------
Interest expense, net (1.02) (0.94) (0.85) (1.67) (0.85)
Other income, net (0.15) (0.27) 0.12 0.22 0.12
------- ------- -------- ------- -------
(1.17) (1.21) (0.73) (1.45) (0.73)
Equity in earnings (loss) of First Permian, LLC - 2.79 (0.03) 2.79
------- ------- -------- ------- -------
Pretax income (loss) per EBO 19.46 8.14 (4.97) 10.32 (4.97)
Income tax expense (benefit) (3.35) 1.90 (1.86) - (1.86)
------- ------- -------- ------- -------
Net income (loss) per EBO $ 22.81 $ 6.24 $ (3.11) $ 10.32 $ (3.11)
======= ======= ======== ======= =======
Net operating cash flow before
working capital adjustments $ 27.72 $ 16.44 $ 15.64 $ 18.24 $ 15.64
======= ======= ======== ======= =======
15
Nine Months Ended
------------------------------
9-30-99 9-30-00 9-30-01
--------- --------- ----------
Production and prices:
Oil (Bbls) 122,518 126,353 110,222
Natural gas (Mcf) 2,092,750 1,961,164 2,677,087
Equivalent barrels of oil (EBO) 471,310 453,214 556,403
Oil price (per Bbl) $ 15.09 $ 27.80 $ 26.07
Gas price (per Mcf) $ 2.10 $ 3.37 $ 4.86
Price per EBO $ 13.25 $ 22.36 $ 28.56
Results of operations per EBO:
Oil and gas revenues $ 13.25 $ 22.36 $ 28.56
Costs and expenses:
Lease operating expense 3.53 4.35 5.43
General and administrative 1.36 1.41 1.74
Depreciation and depletion 6.96 7.90 8.67
Impairment of oil and gas properties - - 3.91
-------- ------- -------
Total costs and expense 11.85 13.66 19.75
-------- ------- -------
Operating income 1.40 8.70 8.81
-------- ------- -------
Interest expense, net (2.35) (2.06) (0.95)
Other income, net 0.03 0.18 (0.11)
-------- ------- -------
(2.32) (1.88) (1.06)
Equity in earnings (loss) of First Permian, LLC 0.38 (1.10) 0.79
-------- ------- -------
Pretax income (loss) per EBO (0.54) 5.72 8.54
Income tax benefit - - (1.09)
-------- ------- -------
Net income (loss) per EBO $ (0.54) $ 5.72 $ 9.63
======== ======= =======
Net operating cash flow before
working capital adjustments $ 6.04 $ 14.72 $ 20.33
======== ======= =======
16
The following table shows for the periods indicated the percentage of total
revenues represented by each item reflected on our statements of operations.
Three Months Ended Nine Months Ended
------------------------------------ -------------------------
3-31-01 6-30-01 9-30-01 9-30-00 9-30-01
------------ ----------- ----------- ------------ ------------
Oil and gas revenues 100.0 100.0 100.0 100.0 100.0
Costs and expenses:
Lease operating expense 15.4 21.9 22.5 19.5 19.0
General and administrative 4.1 6.3 9.5 6.3 6.1
Depreciation and depletion 23.0 33.8 40.1 35.3 30.4
Impairment of oil and gas properties - - 57.1 - 13.7
----- ----- ----- ----- -----
Total costs and expenses 42.5 62.0 129.2 61.1 69.2
----- ----- ----- ----- -----
Operating income 57.5 38.0 (29.2) 38.9 30.8
----- ----- ----- ----- -----
Interest expense, net (2.9) (3.8) (3.5) (9.2) (3.3)
Other income (loss), net (0.4) (1.1) 0.5 0.8 (0.4)
----- ----- ----- ----- -----
(3.3) (4.9) (3.0) (8.4) (3.7)
Equity in earnings (loss) of First Permian, LLC - - 11.6 (4.9) 2.8
----- ----- ----- ----- -----
(3.3) (4.9) 8.6 (13.3) (0.9)
----- ----- ----- ----- -----
Pretax income (loss) 54.2 33.1 (20.6) 25.6 29.9
Income tax expense (benefit) (9.4) 7.7 (7.7) - (3.8)
----- ----- ----- ----- -----
Net income (loss) 63.6 25.4 (12.9) 25.6 33.7
===== ===== ===== ===== =====
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001:
Oil and Gas Revenues. Oil and gas revenues decreased, $350,704 or 8%, to
$3,811,963 for the three months ended September 30, 2001, from $4,162,667 for
the same period of 2000. The decrease was primarily the result of a 4% decrease
in oil and gas production and a 5% decrease in the average sales price per EBO.
We received $24.08 per EBO in the three months ended September 30, 2001 compared
with $25.29 per EBO for the same period of 2000.
Production Costs. Production costs increased $117,543 or 16%, to $856,472
during the three months ended September 30, 2001, compared with $738,929 for the
same period of 2000. The increase was primarily attributable to higher lease
operating costs. Average production costs per EBO increased 20% to $5.41 for the
three months ended September 30, 2001 compared with $4.49 for the same period in
2000.
General and Administrative Expenses. General and administrative expenses
increased by $181,508, or 100%, to $363,758 for the three months ended September
30, 2001 from $182,250 for the same period of 2000. The increase was primarily
due to higher legal and public reporting costs, franchise taxes and increased
staffing requirements. General and administrative expenses were $2.30 per EBO
for the three months ended September 30, 2001, compared to $1.11 per EBO for the
same period of 2000.
17
Depreciation, Depletion and Amortization Expense. Depreciation, depletion
and amortization expense ("DD&A") increased by $228,065, or 18%, to
$1,527,252 for the three months ended September 30, 2001 compared with
$1,299,187 for the same period of 2000 primarily because of a 4% decrease in
production volumes. As a percentage of revenues, DD&A increased to 51%
compared to 31% last year, a result of a decrease in the average sales price per
EBO we received in the third quarter of 2001. The DD&A rate per EBO
increased to $9.65 for the third quarter of 2001 compared with $7.89 per EBO for
the third quarter of 2000. The increase in the DD&A rate per EBO, when
compared with the same quarter a year ago, is attributable to an increase in net
depletable property basis and a decrease in reserves as of fiscal year-end 2000.
Historically, we have reviewed our estimates of proven reserve quantities
on an annual basis. However, due to the potential volatility of oil and gas
prices, we conduct internal reviews of our estimated proven reserves on a more
frequent basis and make necessary adjustments to our DD&A rate accordingly.
We believe periodic reviews and adjustments, if necessary, will result in a more
accurate reflection of the DD&A rate during the year and minimize possible
year-end adjustments.
As a result of a ceiling test calculation for the quarter ending September
30, 2001, net of related deferred tax liability, we recognized a non-cash
impairment charge of $2,177,128 related to its oil and gas reserves and unproved
properties. The impairment of oil and gas assets was primarily the result of
significantly lower oil and natural gas prices on proved oil and gas properties.
Equity in Earnings (Loss) of First Permian, L.L.C. At December 31, 2000, we
had recorded cumulative losses of $366,765 in our investment liability in First
Permian, L.L.C. because we had guaranteed $10,000,000 of the debt of First
Permian, L.L.C. We were released from this guaranty on October 25, 2000 and
discontinued the equity method of accounting for our share of net income
associated with our 30.675% interest in First Permian, L.L.C.. For the three
months ended September 30, 2001, First Permian had net income of $2,895,036.
Therefore, we have resumed the application of the equity method of accounting.
Our share of the net income for the three months ended September 30, 2001 of
$888,000 exceeded the share of net losses not recognized during the period the
equity method was suspended by $442,032.
Net Interest Expense. Interest expense decreased $139,479, or 51%, to
$135,261 for the three months ended September 30, 2001 compared with $274,740
for the same period of 2000 due principally to decreased bank borrowings and a
decrease in the bank's prime rate.
Income Tax Benefit. Our effective tax rate for the three months ended
September 30, 2001 is 37%. For further discussion see Note 4.
Net Income and Operating Cash Flow. We reported a net loss of $662,362 for
the three months ended September 30, 2001 compared with net income of $1,552,525
for the three months ended September 30, 2000. Operating cash flow (defined as
net income before taxes, adjusted for equity in loss or gain of First Permian,
impairment of oil and gas properties and depreciation, depletion and
amortization) decreased $526,177 or 18%, to $2,476,202 for the three months
ended September 30, 2001 compared with $3,002,379 for the three months ended
September 30, 2000. The decrease in net income and operating cash flow resulted
from a 8% decrease in oil and gas revenues, a 5% decrease in the average sales
price we received per EBO, a 4% decrease in production volumes and a 16%
increase in production costs offset by a 51% decrease in net interest expense.
18
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001:
Oil and Gas Revenues. Oil and gas revenues increased $5,757,356, or 57%, to
$15,891,228 for the nine months ended September 30, 2001, from $10,133,872 for
the same period of 2000. The increase was primarily the result of a 28% increase
in the average sales price per EBO and a 23% increase in production. We received
$28.56 per EBO in the nine months ended September 30, 2001 compared with $22.36
per EBO for the same period of 2000.
Production Costs. Production costs increased $1,051,750 or 53%, to
$3,023,065 during the first nine months of 2001, compared with $1,971,315 for
the same period of 2000. Average production costs per EBO increased 25%, to
$5.43, for the first nine months in 2001 compared to $4.35 for the same period
in 2000, primarily a result of increased severance taxes due to a 28% increase
in the average sale price per EBO and a 23% increase in production volumes.
General and Administrative Expenses. General and administrative expenses
increased by $325,638, or 51%, to $965,847 for the first nine months of 2001,
from $640,209 for the same period of 2000. The increase was primarily due to an
increase in audit, legal, public reporting, reservoir engineering and payroll
related expenses. General and administrative expenses were $1.74 per EBO in the
first nine months of 2001 compared to $1.41 per EBO in the first nine months of
2000. Future general and administrative costs are expected to remain fairly
stable with no material increases expected in any particular category.
Depreciation, Depletion and Amortization Expense. Depreciation, depletion
and amortization expense ("DD&A") increased by $1,241,021, or 35%, to
$4,822,819 for the first nine months of 2001 compared with $3,581,798 for the
same period of 2000. As a percentage of revenues, the DD&A decreased to 33%
when compared to 35% for the prior year nine months, a result of an increase in
the average sales price per EBO we received in the first nine months of 2001.
The DD&A rate per EBO increased to $8.67 for the first nine months of 2001
compared with $7.90 per EBO for the first nine months of 2000. The increase in
the DD&A rate per EBO is attributable to a decrease in proved reserves as of
fiscal year-end 2000.
Historically, we have reviewed our estimates of proven reserve quantities
on an annual basis. However, due to the recent volatility of oil and gas prices,
we conduct internal reviews of our estimated proven reserves on a more frequent
basis and make necessary adjustments to our DD&A rate accordingly. We
believe periodic reviews and adjustments, if necessary, will result in a more
accurate reflection of its DD&A rate during the year and minimize possible
year-end adjustments.
As a result of a ceiling test calculation for the quarter ending September
30, 2001, net of related deferred tax liability, we recognized a non-cash
impairment charge of $2,177,128 related to its oil and gas reserves and unproved
properties. The impairment of oil and gas assets was primarily the result of
significantly lower oil and natural gas prices on proved oil and gas properties.
Equity in Earnings (Loss) of First Permian, L.L.C. At December 31, 2000, we
had recorded cumulative losses of $366,765 in our investment liability in First
Permian, L.L.C. because we had guaranteed $10,000,000 of the debt of First
Permian, L.L.C. We were released from this guaranty on October 25, 2000 and have
discontinued the equity method of accounting for our share of losses in First
Permian from that date. For the nine months ended September 30, 2001, First
Permian, L.L.C. incurred a net income of $1,972,765, which includes the $922,271
loss for six months ending June 30, 2001 primarily associated with its oil
hedge. Therefore, we have resumed the application of the equity method
19
of accounting. Our share of net income associated with our 30.675% interest in
First Permian, L.L.C. of $888,000 exceeded the share of net losses not
recognized during the period the equity method was suspended by $442,032.
Net Interest Expense. Net interest expense decreased $408,258, or 44%, to
$526,984 for the nine months ended September 30, 2001 compared with $935,242 for
the same period of 2000; due principally to decreased bank borrowings.
Income Tax Benefit. For the nine months ended September 30, 2001 we
recorded a tax benefit of $603,820. For further discussion see Note 4.
Net Income and Operating Cash Flow. We reported net income of $4,895,883
for the nine months ended September 30, 2001 compared to $2,123,932 for the nine
months ended September 30, 2000. Operating cash flow (defined as net income
before taxes, adjusted for equity in loss or gain of First Permian, Impairment
of oil and gas properties and depreciation, depletion and amortization)
increased $4,643,672 or 70%, to $11,312,865 for the nine months ended September
30, 2001 compared to $6,669,193 for the nine months ended September 30, 2000.
The increase in net income and operating cash flow resulted from a 57% increase
in oil and gas revenues due to a 23% increase in production volumes sold, a 28%
increase in the average sales price per EBO and a 44% decrease in interest
expense.
LIQUIDITY AND CAPITAL RESOURCES
Our capital resources consist primarily of cash flows from our oil and gas
properties and bank borrowings supported by our oil and gas reserves. Our level
of earnings and cash flows depends on many factors, including the prices we
receive for oil and natural gas we produce.
Working capital decreased $271,232 as of September 30, 2001 compared with
December 31, 2000. Current assets exceeded current liabilities by $2,489,605 at
September 30, 2001 compared with $2,760,837 at December 31, 2000. Working
capital decreased primarily due to an increase in trade payables and current
maturities of long-term debt.
We incurred net property costs of $9,155,005 for the nine months ended
September 30, 2001, primarily for our oil and gas property acquisition,
development, and enhancement activities. Such costs were financed by the
utilization of cash flows provided by operations.
Based on our projected oil and gas revenues and related expenses, we
believe that our internally generated cash flows will be sufficient to fund
normal operations, interest expense and principal reduction payments on bank
debt, if required, and preferred stock dividends. We continually review and
consider alternative methods of financing.
TRENDS AND PRICES
Changes in oil and gas prices significantly affect our revenues, cash flows
and borrowing capacity. Markets for oil and gas have historically been, and will
continue to be, volatile. Prices for oil and gas typically fluctuate in response
to relatively minor changes in supply and demand, market uncertainty, seasonal,
political and other factors beyond our control. We are unable to accurately
predict domestic or worldwide political events or the effects of other such
factors on the prices we receive for our oil and gas. Historically, we have not
entered into transactions to hedge against changes in oil and gas prices, but we
may elect to enter into hedging transactions in the future to protect against
fluctuations in oil and gas prices.
Our capital expenditure budgets are highly dependent on future oil and gas
prices and will be consistent with internally generated cash flows.
20
During fiscal year 2000 the average sales price we received for our oil was
approximately $28.88 per barrel while the average sales prices we received for
natural gas was approximately $4.38 per thousand cubic feet ("Mcf"). For the
three months ended September 30, 2001, the average price we received for our oil
production was approximately $23.91 per Bbl, while the average price received at
that same date for our natural gas production was approximately $4.02 per Mcf.
FORWARD-LOOKING STATEMENTS
In addition to historical information contained herein, this Form 10-Q
Report contains forward-looking statements subject to various risks and
uncertainties that could cause the company's actual results to differ materially
from those in the forward-looking statements. Forward-looking statements can be
identified by the use of forward-looking terminology such as "may", "will",
"expect," "intend," "anticipate, "estimate," "continue," "present value,"
"future," "reserves" or other variations thereof or comparable terminology.
Factors that could cause or contribute to such differences could include, but
are not limited to, those relating to the results of exploratory drilling
activity, changes in oil and natural gas prices, operating risks, availability
of drilling equipment, outstanding indebtedness, changes in interest rates,
dependence on weather conditions, seasonality, expansion and other activities of
competitors, changes in federal or state environmental laws and the
administration of such laws, and the general condition of the economy and its
effect on the securities market. While we believe our forward-looking statements
are based upon reasonable assumptions, these are factors that are difficult to
predict and that are influenced by economic and other conditions beyond our
control. Investors are directed to consider such risks and other uncertainties
discussed in documents filed by the company with the Securities and Exchange
Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not trade in derivative financial instruments and do not have firmly
committed sales transactions. We have not entered into hedging arrangements and
do not have any delivery commitments. While hedging arrangements reduce exposure
to losses as a result of unfavorable price changes, they also limit our ability
to benefit from favorable market price changes.
Our major market risk exposure is in the pricing applicable to our oil and
natural gas production. Realized pricing is primarily driven by the prevailing
domestic price for crude oil and spot prices applicable to the region in which
we produce natural gas. Historically, prices received for oil and gas production
have been volatile and unpredictable. Pricing volatility is expected to
continue. Oil prices ranged from a monthly low of $17.91 per barrel to a monthly
high of $27.92 per barrel during third quarter 2001. The natural gas prices we
received during third quarter 2001 ranged from a monthly low of $2.24 per Mcf to
a monthly high of $8.73 per Mcf. A significant decline in the prices of oil and
natural gas could have a material adverse effect on our financial condition and
results of operations.
Our only financial instrument sensitive to changes in interest rates is
bank debt. Our annual interest costs in 2001 will fluctuate based on short-term
interest rates. As the interest rate is variable and reflects current market
conditions, the carrying value approximates the fair value. The table below
shows principal cash flows and related weighted average interest rates by
expected maturity dates. Weighted average interest rates were determined using
weighted average interest paid and accrued in September 2001.
21
September September October Fair
2002 2003 2003 Total Value
--------- --------- ------- ----- ------
(In 000's, except interest rates)
Variable rate debt:
Revolving facility (secured) $ 1,283 $ 3,876 $ 4,841 $10,000 $10,000
Average interest rate 6.0% 6.0% 6.0%
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
At September 30, 2001, we were involved in one lawsuit incidental to our
business. In the opinion of management, the ultimate outcome of this lawsuit
will not have a material adverse effect on Parallel's financial position or
results of operations. We are not aware of any other threatened litigation. We
have not been a party to any bankruptcy, receivership, reorganization,
adjustment or similar proceeding.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description of Exhibit
3.1 Certificate of Incorporation of Registrant (incorporated by reference
to Exhibit 3.1 to Form 10-K of the Registrant for the fiscal year
ended December 31, 1998.)
4.1 Certificate of Designations, Preferences and Rights of Serial
Preferred Stock - 6% Convertible Preferred Stock (Incorporated by
reference to Exhibit 4.1 to Form 10-Q of the Registrant for the fiscal
quarter ended September 30, 1998.)
4.2 Certificate of Designation, Preferences and Rights of Series A
Preferred Stock. (Incorporated by reference to Exhibit 4.2 of Form
10-K for the fiscal year ended December 31, 2000.)
4.3 Rights Agreement, dated as of October 5, 2000, between the Registrant
and Computershare Trust Company, Inc., as Rights Agent. (Incorporated
by reference to Exhibit 4.3 of Form 10-K for the fiscal year ended
December 31, 2000.) Executive Compensation Plans and Arrangements
22
(Exhibit No.'s 10.1 through 10.10):
10.1 1983 Incentive Stock Option Plan(Incorporated by reference to Exhibit
10.2 to Form S-l of the Registrant (File No. 2-92397) as filed with
the Securities and Exchange Commission on July 26, 1984,as amended by
Amendments No. 1 and 2 on October 5, 1984, and October 25, 1984,
respectively.)
10.2 1992 Stock Option Plan (Incorporated by reference to Exhibit 28.1 to
Form S-8 of the Registrant (File No. 33-57348) as filed with the
Securities and Exchange Commission on January 25, 1993.)
10.3 Stock Option Agreement between the Registrant and Thomas R. Cambridge
dated December 11, 1991 (Incorporated by reference to Exhibit 10.4 of
Form 10-K of the Registrant for the fiscal year ended December 31,
1992.)
10.4 Stock Option Agreement between the Registrant and Thomas R. Cambridge
dated October 18, 1993 (Incorporated by reference to Exhibit 10.4(e)
of Form 10-K of the Registrant for the fiscal year ended December 31,
1993.)
10.5 Merrill Lynch, Pierce, Fenner & Smith Incorporated Prototype
Simplified Employee Pension Plan(Incorporated by reference to Exhibit
10.6 of the Registrant's Form 10-K for the fiscal year ended December
31, 1995.)
10.6 Non-Employee Directors Stock Option Plan(Incorporated by reference to
Exhibit 10.6 of the Registrant's Form 10-K Report for the fiscal year
ended December 31, 1997).
10.7 1998 Stock Option Plan (Incorporated by reference to Exhibit 10.7 of
Form 10-K of the Registrant for the fiscal year ended December 31,
1998.)
10.8 2001 Non-Employee Directors Stock Option Plan (Incorporated by
referance to Exhibit 10.8 of Form 10-Q of the Registrant for the
second quarter ended June 30, 2001).
*10.9 Parallel Petroleum Corporation Employee Stock Option Plan.
*10.10 Form of Parallel Petroleum Corporation Change of Control Agreement,
dated June 1, 2001, executed separately by the registrant and each of
Thomas R. Cambridge, Chairman of the Board of Directors; Larry C.
Oldham, Director and President; John S. Rutherford, Vice President of
Land; and Eric A. Bayley, Vice President of Engineering.
10.11 Restated Loan Agreement dated December 27, 1999, between the
Registrant and Bank One, Texas, N.A. (Incorporated by reference to
Exhibit 10.8 of Form 10-K of the Registrant for the fiscal year ended
December 31, 1999.)
10.12 Loan Agreement dated December 18, 2000 between the Registrant and
Bank United. (Incorporated by reference to Exhibit 10.9 of Form 10-K
for the fiscal year ended December 31, 2000.)
23
10.13 Certificate of Formation of First Permian, L.L.C. (Incorporated by
reference to Exhibit 10.1 of the Registrant's Form 8-K report dated
June 30, 1999.)
10.14 Limited Liability Company Agreement of First Permian, L.L.C.
(Incorporated by reference to Exhibit 10.2 of the Registrant's Form
8-K report dated June 30, 1999.)
10.15 Merger Agreement dated June 25, 1999. (Incorporated by reference to
Exhibit 10.3 of the Registrant's Form 8-K report dated June 30,1999.)
10.16 Agreement and Plan of Merger of First Permian, L.L.C. and Nash Oil
Company, L.L.C. (Incorporated by reference to Exhibit 10.4 of the
Registrant's Form 8-K report dated June 30, 1999.)
10.17 Certificate of Merger of First Permian, L.L.C. and Nash Oil Company,
L.L.C (Incorporated by reference to Exhibit 10.5 of the Registrant's
Form 8-K Report dated June 30, 1999.)
10.18 Amended and Restated Limited Liability Company Agreement of First
Permian, L.L.C. dated as of May 31, 2000. (Incorporated by reference
to Exhibit 10.16 of Form 10-K for the fiscal year ended December 31,
2000.)
10.19 Credit Agreement dated June 30, 1999, by and among First Permian,
L.L.C., Parallel Petroleum Corporation, Baytech, Inc., and Bank One,
Texas, N.A. (Incorporated by reference to Exhibit 10.6 of the
Registrant's Form 8-K report dated June 30, 1999.)
10.20 Limited Guaranty, dated June 30, 1999, by and among First Permian,
L.L.C., Parallel Petroleum Corporation, and Bank One, Texas, N.A.
(Incorporated by reference to Exhibit 10.7 of the Registrant's Form
8-K report dated June 30, 1999.)
10.21 Intercreditor Agreement, dated as of June 30, 1999, by and among
First Permian, L.L.C., Bank One, Texas, N.A., Tejon Exploration
Company, and Mansefeldt Investment Corporation (Incorporated by
reference to Exhibit 10.8 of the Registrant's Form 8-K report dated
June 30, 1999.)
10.22 Subordinated Promissory Note, dated June 30, 1999, in the original
principal amount of $8.0 million made by First Permian,L.L.C. payable
to the order of Tejon Exploration Company (Incorporated by reference
to Exhibit 10.9 of the Registrant's Form 8-K report dated June 30,
1999.)
10.23 Subordinated Promissory Note, dated June 30, 1999, in the original
principal amount of $8.0 million made by First Permian,L.L.C. payable
to the order of Mansefeldt Investment Corporation (Incorporated by
reference to Exhibit 10.10 of the Registrant's Form 8-K report dated
June 30, 1999.)
10.24 Second Restated Credit Agreement, dated October 25, 2000, among First
Permian, L.L.C., Bank One, Texas, N.A., and Bank One Capital Markets,
Inc. (Incorporated by reference to Exhibit 10.22 of Form 10-K for the
fiscal year ended December 31, 2000.)
---------------------
*Filed herewith.
(2) Reports on Form 8-K No reports were filed on form 8-K during the
quarter ended September 30, 2001.
24
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PARALLEL PETROLEUM CORPORATION
BY: /s/ Thomas R. Cambridge
Date: November 14, 2001 -----------------------------
Thomas R. Cambridge
Chairman of the Board of Directors
and Chief Executive Officer
Date: November 14, 2001 BY: /s/ Larry C. Oldham
-----------------------------
Larry C. Oldham,
President and Principal
Financial Officer