--------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): August 14, 2003
PARALLEL PETROLEUM CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware 0-13305 75-1971716
(State or other jurisdiction (Commission File (IRS Employer
of Incorporation or organization) Number) Identification No.)
1004 N. Big Spring, Suite 400, Midland, Texas 79701
(Address of Principal Executive Offices) (Zip Code)
432-684-3727
(Registrant's telephone number, including area code)
1
Item 7. Financial Statements and Exhibits.
(c) Exhibits
99.1 Press Release dated August 14, 2003 announcing financial results
for the second fiscal quarter ended June 30, 2003.
Item 9. Regulation FD Disclosure.
Parallel Petroleum Corporation wishes to disclose its press release,
dated August 14, 2003, relating to its results of operations and financial
condition for the second fiscal quarter ended June 30, 2003.
In accordance with General Instruction B.2 of Form 8-K, the information
included in Exhibit 99.1 hereto is being furnished under this Item 9 and shall
not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act
of 1934, shall not be subject to the liabilities of that section and shall not
be deemed incorporated by reference in any filing under the Securities Act of
1933 or the Securities Exchange Act of 1934, except as shall be expressly set
forth by specific reference in such a filing.
Item 9. Regulation FD Disclosure (Item 12. Disclosure of Results of
Operations and Financial Condition.)
The following information is intended to be furnished under Item 12
"Results of Operations and Financial Condition," but is instead being furnished
pursuant to Item 9 in accordance with the interim guidance contained in
Securities and Exchange Commission Release No. 34-47583.
The information included in Exhibit 99.1 hereto is also being furnished
under this Item 12 and, in accordance with General Instruction B.6 of Form 8-K,
shall not be deemed "filed" for purposes of Section 18 of the Securities
Exchange Act of 1934, shall not be subject to the liabilities of that section
and shall not be deemed incorporated by reference in any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall
be expressly set forth by specific reference in such a filing.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PARALLEL PETROLEUM CORPORATION
By: /s/ Larry C. Oldham
------------------------------
Larry C. Oldham, President
Dated: August 14, 2003
3
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
99.1 Press Release dated August 14, 2003 announcing financial results
of Parallel Petroleum Corporation for the second fiscal quarter
ended June 30, 2003.
4
Exhibit 99.1
PRESS RELEASE
Parallel Petroleum Corporation
1004 N. Big Spring, Suite 400 Contact: Cindy Thomason
Midland, TX 79701 (432) 684-3727 Manager of Investor Relations
http://www.parallel-petro.com cindyt@parallel-petro.com
PARALLEL PETROLEUM ANNOUNCES
INCREASED RESERVES, PRODUCTION, EARNINGS AND CASH FLOW
MIDLAND, Texas, (BUSINESS WIRE), August 14, 2003 - Parallel Petroleum
Corporation (NASDAQ: PLLL) today announced financial and operational results for
the second quarter ended June 30, 2003.
Second Quarter Results
For the three months ended June 30, 2003, Parallel reported net income of $2.5
million, or $.11 per diluted share. Included in net income was $3.4 million of
operating income primarily due to a 118% increase in production volumes and a
39% increase in oil and gas prices, net of hedges, when comparing the second
quarter of 2003 to the second quarter of 2002. For the three months ended June
30, 2002, Parallel recorded net income of $19.5 million, or $.84 per diluted
share, which was primarily the result of a $31.1 million gain from the sale of
the assets of First Permian, LP.
For the second quarter of 2003, Parallel's sales were 159,739 Bbls of oil and
805,137 Mcf of natural gas, or 293,929 BOE. The average prices the Company
received for its oil and natural gas on an unhedged/hedged basis, respectively,
were $26.09/$24.00 per barrel and $6.10/$5.84 per Mcf, or $30.89/$29.03 per BOE.
For the same period of 2002, oil sales were 33,126 Bbls at an average price of
$22.29 per barrel and natural gas sales were 609,812 Mcf at an average price of
$3.39 per Mcf, or 134,761 BOE at $20.84 per BOE. (Refer to the tables on page 8
of this press release for detailed sales volumes and price data and hedging
information.)
Six Months Results
For the six months ended June 30, 2003, Parallel reported net income of $4.6
million, or $.20 per diluted share. Included in net income was $7.6 million of
operating income primarily due to a 119% increase in production volumes and a
62% increase in oil and gas prices, net of the hedges, when comparing the six
months ended June 30, 2003 to the same period of 2002. For the six months ended
June 30, 2002, Parallel recorded net income of $18.6 million, or $.80 per
diluted share, which included $31.1 million for the sale of the assets of First
Permian, LP.
For the six months ended June 30, 2003, Parallel's sales were 313,317 Bbls of
oil and 1,586,888 Mcf of natural gas, or 577,798 BOE. The average prices the
Company received for its oil and natural gas on an unhedged/hedged basis,
respectively, were $29.28/$27.82 per barrel and $5.96/$5.24 per Mcf, or
$32.25/$29.46 per BOE. For the same period of 2002, oil sales were 63,287 Bbls
at an average price of $21.77 per barrel and natural gas sales were 1,200,462
Mcf at an average price of $2.83 per Mcf, or 263,364 BOE at $18.15 per BOE.
(Refer to the tables on page 8 of this press release for detailed sales volumes
and price data and hedging information.)
Net cash provided by operating activities for the six-month period ended June
30, 2003, was $8.9 million, compared to $5.3 million for the same period of
2002. The increase was primarily related to the above mentioned increases in oil
and gas sales volumes and prices. Parallel's net cash provided by operating
activities adjusted for changes in components of working capital and other
liabilities [Discretionary Cash Flow (Non-GAAP) - see reconciliation on page 9
of this press release] was $10.7 million for the six months ended June 30, 2003
compared to $6.3 million for the same period of 2002.
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Parallel Petroleum Announces 2Q 2003 Results
August 14, 2003
Page 2
Balance Sheet Review
At June 30, 2003, current assets were $12.0 million, which included $6.0 million
of cash. Current liabilities were $12.9 million, including $7.8 million of
current maturities of long-term debt and $1.8 million related to derivative
obligations. Long-term debt, including current maturities, stood at $42.8
million. The Company's net capitalized costs associated with its oil and gas
properties and other equipment were $90.8 million, which included approximately
$3.2 million of leasehold and seismic costs for undeveloped prospects. Also
added to the Company's property basis during the second quarter was an asset
retirement cost of $1.2 million for the adoption of SFAS 143. Parallel's
stockholders' equity as of June 30, 2003 was $48.1 million, the largest in the
Company's history.
Unaudited SEC Reserves
Parallel's SEC PV-10% proved reserve value increased 8% to approximately $133
million as of June 30, 2003, compared to approximately $123 million as of
December 31, 2002. Parallel's reserve volumes increased 9% to 14.1 MMBOE, or
84.5 BCFE, as of June 30, 2003, compared to 12.9 MMBOE, or 77.4 BCFE, as of
December 31, 2002.
The following table shows certain information about Parallel's proved reserves
as of December 31, 2002 and June 30, 2003.
as of as of
December 31, June 30,
2002 (a) 2003 (b) Change
-------------- --------- ------
Oil - MMBbls 10.3 11.3 10%
Gas - Bcfg 15.6 16.9 8%
MMBOE 12.9 14.1 9%
BCFE 77.4 84.5 9%
Pretax PV-10 (millions) $123 (c) $133 (d) 8%
---------------------
(a) Based on independent reserve studies prepared by Williamson Petroleum
Consultants and Cawley, Gillespie & Associates.
(b) Based on independent reserve studies prepared by Cawley, Gillespie &
Associates. (c) Based on December 31, 2002 prices of $29.21 per Bbl and
$4.40 per Mcf. (d) Based on June 30, 2003 prices of $28.08 per Bbl and $5.21
per Mcf.
Capital Investment Budget for 2003
Parallel's estimated capital budget for 2003 totals approximately $12.0 million,
net to its interest. The budget will be funded from the Company's 2003 estimated
operating cash flow, which is based on anticipated commodity prices and
forecasted production volumes. The amount and timing of expenditures are subject
to change based upon market conditions, results of expenditures, new
opportunities and other factors.
Operational Update
The following is an update of Parallel's operations and related capital
expenditure budget for the Permian Basin of West Texas, East Texas, and onshore
gulf coast of South Texas. For prior related operational and capital expenditure
updates, refer to the Company's press releases dated January 17, March 25, March
26, and May 15, 2003.
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Parallel Petroleum Announces 2Q 2003 Results
August 14, 2003
Page 3
Permian Basin of West Texas
Fullerton Field, Andrews County - Parallel announced earlier this year
an anticipated budget of approximately $1.5 million, net to its
interest, for the stimulation of approximately 40 of the 128 existing
producing wells in the San Andres formation at an approximate depth of
4,400 feet. The Company is on pace with projections in terms of both
spending and well performance. A total of 19 water-frac re-stimulations
were performed during the period from mid-February through the end of
July at an average cost of $29,000 per job, net to Parallel.
Incremental oil production, 30 days after workover, continues to exceed
the forecast of 12 equivalent barrels of oil per day per well. Current
plans are to maintain a pace of four re-stimulations per month as the
Company continues to enhance and optimize the frac design. Once
Parallel is confident that it has reached an optimal design, the pace
will likely accelerate to six per month, depending on continued
satisfactory results. The property's current estimated daily production
has increased approximately 15% to an estimated 1,900 gross, or 1,320
net, barrels of oil equivalent per day, compared to approximately 1,650
gross, or 1,150 net, barrels of oil equivalent per day as of the first
of the year. This estimated 15% volume increase is significant, given
the historical 5% annual decline rate and more than 40 years reserve
life associated with this set of assets. Parallel's working interest in
these assets ranges from 25% to 85%.
Lion Diamond M Canyon Unit, Scurry County - Earlier this year, Parallel
announced its decision to move into Phase II of the Diamond M project,
based on results achieved and insight gained during Phase I of the
project. Nine months after going on line, production from the Phase I
Canyon wells continues to average a combined rate of almost 250 gross,
or 140 net, equivalent barrels of oil per day. Parallel assumed
operations of all leases in the Diamond M Project area on March 1,
2003, with the Phase II election. Since becoming operator, Parallel has
focused major field activity around infrastructure improvements that
are necessary and prerequisite to increasing production volumes
attributable to development. An extensive amount of geological,
geophysical, paleontological, and reservoir engineering effort is under
way, as exploitation plans continue to be high-graded. Well
reactivation and deepening activity is expected to begin within the
next thirty days. Approximately 5,500 acres, containing 83 existing
well bores, are available for development through deepenings,
recompletions, reactivations, infill drilling and waterflood expansion.
Diamond M Shallow Leases, Scurry County - Parallel also assumed
operations and gained development rights to the Diamond M shallow
intervals on March 1, 2003, with the Phase II election. On May 15,
2003, the Company announced the initiation of geological and
engineering evaluation and design work on a 10-acre infill waterflood
pilot project. The pilot project includes the drilling of three new
injection wells supporting six active producing wells and two currently
inactive producing wells to complete three 20-acre five-spot patterns.
Well work in the pilot area commenced during the second week of July.
Since that time, Parallel has performed three workovers to re-stimulate
the Clearfork formation and perforate and stimulate the Glorieta
formation in producing wells. While it is very early in the project,
results are encouraging, with shallow production increasing 67%, or 70
gross (40 net) barrels of oil equivalent per day, as a result of the
three completed workovers. The total cost of each job is approximately
$60,000 gross, or $50,000 net to Parallel. Two other workovers are
on-going at this time. The drilling of the three injection wells is
expected to begin within the next few weeks. Approximately 2,600 acres,
containing 102 existing well bores, are available for development
through recompletion, workovers, infill drilling and waterflood
expansion.
As was previously announced, Parallel budgeted approximately $4.5
million during 2003 for capital expenditures on a combined basis,
shallow and deep, on the Diamond M Project. Parallel owns a 66% working
interest and a 56% net revenue interest before project payout.
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Parallel Petroleum Announces 2Q 2003 Results
August 14, 2003
Page 4
East Texas
Cook Mountain Gas Project, Liberty County - Since the second quarter of
2002, Parallel has participated in 6 Cook Mountain gas wells, 4 of
which have been successful and are currently producing at a combined
rate of approximately 31,500 Mcfe, or 5,250 BOE, per day, which is
approximately 2,654 Mcfe, or 442 BOE, per day net to Parallel. The
Company has generated ten Cook Mountain exploration gas prospects,
based on 3-D seismic, and has budgeted approximately $2 million, net to
its interest, for the drilling and completion of at least five wells,
back-to-back. The second of these five wells, the Riverside General
Hospital #1, is currently drilling at a depth of 8,600 feet with a
projected total depth of 13,500 feet. The East Ames Gas Unit #l was
drilled to a total depth of 13,628 feet. It was deemed to be
non-productive and has been plugged. Parallel's working interest in the
two wells is approximately 17%.
Onshore Gulf Coast of South Texas
Yegua/Frio Gas Project, Jackson County - During the first half of 2003,
Parallel drilled 8 Frio wells, 5 of which have been completed as
producers. Two wells are currently producing approximately 2,000 Mcfe
per day, which is approximately 600 Mcfe, or 100 BOE, per day net to
Parallel. The other three wells are waiting on pipeline connections and
are expected to be on production within the next thirty days.
Parallel's average working interest in the five wells is approximately
55%. Parallel has budgeted to drill 3 more Frio wells and 1 Yegua well
in the second half of 2003.
During July, the Weaver Dugger 1A, which had been drilled and completed
in 2000 in a lower Frio zone, was recompleted in an upper Frio zone at
a depth of 8,950 feet. The well is currently producing at a gross rate
of 930 Mcfe per day, which is approximately 300 Mcfe, or 50 BOE, per
day net to Parallel. Parallel owns a 43.4% working interest in the
well. Also, the Big 12 No. 1 Yegua well, which had been drilled in 2002
and fracture stimulated in May 2003, appears to have stabilized at a
daily rate of 1,050 Mcfe per day, which is approximately 365 Mcfe, or
60 BOE, per day net to Parallel. Parallel owns a 40% working interest
in the well.
Management Comments
Larry C. Oldham, Parallel's President, commented, "During the second quarter,
our average oil and gas production reached an all time high of 3,266 BOE per
day, and operational earnings and cash flow both reached record high numbers. As
previously stated, our target is to be at a daily production rate of 4,000 BOE
by January 1, 2004. Total proved reserves as of June 30, 2003 increased 9% to a
record 14.1 million BOE, or 84.5 BCFE, compared to year end 2002."
In a final comment, Oldham stated, "Our new business plan continues to deliver
the steady growth that we expect. Since June 2002, our screening and review
process has resulted in further evaluation of approximately $600 million of
potential oil and gas property acquisitions. These evaluations resulted in
Parallel making nine separate offers for a total of approximately $270 million.
Of these nine offers, we completed three acquisitions having a combined purchase
price of approximately $50 million. We continue to review and pursue strategic
acquisition opportunities on a daily basis."
Conference Call Information
Parallel's management will host a conference call to discuss the Company's
financial and operational results for the second quarter ended June 30, 2003 on
Friday, August 15, 2003, at 10:00 a.m. Central time. To participate in the call,
dial 1-973-317-5319 at least five minutes before the scheduled start time. The
conference call will also be webcast, complete with the "Current Slide
Presentation", and can be accessed live at Parallel's web site,
www.parallel-petro.com. A replay of the conference call will be available at the
Company's web site or by calling 1-973-709-2089, Passcode I.D. 303690.
Financial statements and schedules follow
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Parallel Petroleum Announces 2Q 2003 Results
August 14, 2003
Page 5
PARALLEL PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEETS
(audited) (unaudited)
December 31, June 30,
ASSETS 2002 2003
------------ ------------
Current assets:
Cash and cash equivalents $ 11,811,704 $ 5,960,401
Accounts receivable:
Oil and gas 3,071,315 4,680,644
Others, net of allowance for doubtful account of $12,681 in 2002 and 2003 236,443 355,485
Affiliate 2,084 1,943
------------ ------------
3,309,842 5,038,072
Income tax receivable 832,590 832,590
Other assets 78,675 189,557
Fair value of derivative instruments 21,884 484
------------ ------------
Total current assets 16,054,695 12,021,104
------------ ------------
Property and equipment, at cost:
Oil and gas properties, full cost method (Note 5) 146,679,503 155,121,203
Other 1,083,282 1,375,378
------------ ------------
147,762,785 156,496,581
Less accumulated depreciation and depletion (62,074,559) (65,735,214)
------------ ------------
Net property and equipment (Note 8) 85,688,226 90,761,367
------------ ------------
Other assets, net of accumulated amortization of $78,520 in 2002 and $88,439 in 2003 608,410 688,552
------------ ------------
$102,351,331 $103,471,023
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 3,033,650 $ 3,219,709
Current maturities of long-term debt (Note 2) 4,145,833 7,837,500
Current maturity of derivative obligations 335,829 1,840,035
------------ ------------
7,515,312 12,897,244
------------ ------------
Long-term debt, excluding current maturities (Note 2) 45,604,167 34,912,500
Long-term asset retirement obligation (Note 8) - 1,777,077
Long-term maturity of derivative obligations (Note 6) 103,745 1,603,562
Deferred tax liability 3,627,963 4,181,501
Stockholders' equity:
Series A preferred stock -- par value $.10 per share (aggregate liquidation
preference of $26)
authorized 50,000 shares - -
Preferred stock -- $.60 cumulative convertible preferred
stock -- par value of $.10 per share (aggregate liquidation
preference of $10) authorized 10,000,000 shares, issued
and outstanding 974,500 in 2002 and 2003 97,450 97,450
Common stock -- par value $.01 per share, authorized 60,000,000
shares, issued and outstanding 21,143,406 in 2002 and 21,150,406 in 2003 211,434 211,504
Additional paid-in capital 34,567,866 34,288,137
Retained earnings 10,623,394 15,546,238
Other comprehensive income (loss) net of tax (Note 6) - (2,044,190)
------------ ------------
Total stockholders' equity 45,500,144 48,099,139
Commitments and contingencies (Note 10)
------------ ------------
$102,351,331 $103,471,023
============ ============
*The balance sheet as of December 31, 2002 has been derived from Parallel's
audited financial statements.
--------------------------------------------------------------------------------
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Parallel Petroleum Announces 2Q 2003 Results
August 14, 2003
Page 6
PARALLEL PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
------------------------------ ----------------------------
2002 2003 2002 2003
------------ ------------ ----------- ------------
Oil and gas revenues $ 2,808,807 $ 8,531,974 $ 4,779,998 $ 17,024,766
------------ ------------ ------------ ------------
Cost and expenses:
Lease operating expense (Note 8) 721,614 2,185,196 1,270,990 3,640,856
General and administrative, includes $1,471,000
for incentive awards in 2002 1,974,686 968,154 2,324,450 1,769,922
Depreciation, depletion and amortization 1,333,166 1,989,194 2,687,796 4,054,885
------------ ------------ ------------ ------------
Total costs and expenses 4,029,466 5,142,544 6,283,236 9,465,663
------------ ------------ ------------ ------------
Operating income (loss) (1,220,659) 3,389,430 (1,503,238) 7,559,103
------------ ------------ ------------ ------------
Other income (expense), net:
Equity in income of First Permian, L.P., includes a
$31,082,041 gain on sale of substantially all net assets 31,082,041 - 30,765,748 -
Change in fair market value of derivatives (Note 6) (54,974) 274,291 (394,832) 71,834
Interest and other income 21,066 1,336 37,441 45,992
Dividend income 163,378 - 163,378 -
Interest expense (158,207) (521,891) (311,264) (1,008,355)
Other expense (107,582) (25,466) (279,648) (46,010)
------------ ------------ ------------ ------------
Total other income (expense), net 30,945,722 (271,730) 29,980,823 (936,539)
------------ ------------ ------------ ------------
Income before income taxes 29,725,063 3,117,700 28,477,585 6,622,564
Income tax (expense), net (10,063,560) (446,610) (9,584,833) (1,638,264)
------------ ------------ ------------ ------------
Net income before cumulative effect of change in accounting principle 19,661,503 2,671,090 18,892,752 4,984,300
Cumulative effect on prior years of a change in accounting principle,
lessapplicable income taxes of $31,659 (Note 8) - - - (61,456)
------------ ------------ ------------ ------------
Net income 19,661,503 2,671,090 18,892,752 4,922,844
Cumulative preferred stock dividend (146,175) (146,175) (292,350) (292,350)
------------ ------------ ------------ ------------
Net income available to common stockholders $ 19,515,328 $ 2,524,915 $ 18,600,402 $ 4,630,494
============ ============ ============ ============
Net income per common share:
Basic - before cumulative effect of a change in accounting principal $ 0.94 $ 0.12 $ 0.90 $ 0.22
Cumulative effect of a change in accounting principle, net of tax - - - -
------------ ------------ ------------ ------------
Basic - after cumulative effect of a change in acocounting principle $ 0.94 $ 0.12 $ 0.90 $ 0.22
============ ============ ============ ============
Diluted - before cumulative effect of a change in accounting principle $ 0.84 $ 0.11 $ 0.80 $ 0.20
Cumulative effect of a change in accounting principle, net of tax - - - -
------------ ------------ ------------ ------------
Diluted - after cumulative effect of a change in accounting principle $ 0.84 $ 0.11 $ 0.80 $ 0.20
============ ============ ============ ============
Weighted average common share outstanding:
Basic 20,663,861 21,144,650 20,663,861 21,144,028
============ ============ ============ ============
Diluted 23,541,120 24,078,413 23,571,736 24,051,398
============ ============ ============ ============
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Parallel Petroleum Announces 2Q 2003 Results
August 14, 2003
Page 7
PARALLEL PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
-----------------------------------
2002 2003
---------------- -----------------
Cash flows from operating activities:
Net income $ 18,892,752 $ 4,922,844
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and depletion 2,687,796 4,054,885
Accretion expense - 68,361
Equity in income of First Permian, L.P. net of
cash distributions of $5,501,703 (25,264,046) -
Change in fair value of derivative instruments 394,832 (71,834)
Deferred income taxes 9,584,833 1,638,264
Cumulative effect on prior years of a change in accounting principle, net of tax - 61,456
Changes in assets and liabilities:
Other, net 24,424 (80,142)
Increase in accounts receivables (155,393) (1,728,230)
Increase in prepaid expenses and other assets (662,252) (110,882)
(Decrease) Increase in accounts payable and accrued liabilities (840,703) 186,059
Accrued bonus payable 1,201,172 -
Purchase of derivative instruments (530,605) -
------------ ------------
Net cash provided by operating activities 5,332,810 8,940,781
------------ ------------
Cash flows from investing activities:
Additions to property and equipment (6,781,897) (7,532,825)
Proceeds from disposition of property and equipment 572,799 20,400
------------ ------------
Net cash used in investing activities (6,209,098) (7,512,425)
------------ ------------
Cash flows from financing activities:
Borrowings from bank line of credit 865,589 3,173,625
Payments on bank line of credit (715,589) (10,173,625)
Proceeds from exercise of stock options - 12,691
Payment of preferred stock dividend (292,350) (292,350)
------------ ------------
Net cash used in financing activities (142,350) (7,279,659)
------------ ------------
Net decrease in cash and cash equivalents (1,018,638) (5,851,303)
Beginning cash and cash equivalents 3,351,044 11,811,704
------------ ------------
Ending cash and cash equivalents $ 2,332,406 $ 5,960,401
============ ============
Non-cash financing and investing activities:
Non-cash proceeds from sale of investment $ (25,580,339) $ -
Unrealized gain on investment in securities $ (93,359) $ -
Accrued asset retirement obligation related to oil and gas properties $ - $ 1,221,371
Accrued preferred stock dividend $ 24,363 $ 24,363
--------------------------------------------------------------------------------
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Parallel Petroleum Announces 2Q 2003 Results
August 14, 2003
Page 8
PARALLEL PETROLEUM CORPORATION
SALES VOLUMES AND PRICE DATA
Three Months Ended Six Months Ended
----------------------------- ---------------------------
6/30/2002 6/30/2003 6/30/2002 6/30/2003
-------------- -------------- ------------ --------------
Sales Volume:
Oil (Bbls) 33,126 159,739 63,287 313,317
Natural gas (Mcf) 609,812 805,137 1,200,462 1,586,888
Equivalent barrels of oil (BOE) 134,761 293,929 263,364 577,798
Equivalent barrels of oil (BOE) per day 1,497 3,266 1,463 3,210
Prices:
Bbls (unhedged) $ 22.29 $ 26.09 $ 21.77 $ 29.28
Bbls (hedged) $ 24.00 $ - $ 27.82
Mcf (unhedged) $ 3.39 $ 6.10 $ 2.83 $ 5.96
Mcf (hedged) $ 5.84 $ - $ 5.24
BOE (unhedged) $ 20.84 $ 30.89 $ 18.15 $ 32.25
BOE (hedged) $ 29.03 $ - $ 29.46
--------------------------------------------------------------------------------
PARALLEL PETROLEUM CORPORATION
HEDGING INFORMATION
COSTLESS COLLARS:
Houston Ship Channel
MMBTU Gas Price
-----------------------------------------
Period of Time Natural Gas Floor Cap
------------------------------------------------- ------------------- ------------------- -------------------
April 1, 2003 thru October 31, 2003 642,000 $4.25 $5.30
November 1, 2003 thru March 31, 2004 302,000 $5.70 $6.80
November 1, 2003 thru March 31, 2004 151,000 $4.90 $6.15
SWAPS: Volume Volume
Hedged Average Hedged Average
Period of Time Bbl Oil Price MMBTU Price
----------------------------------------- ----------------- ----------------- ----------------- -----------------
April 1, 2003 thru October 31, 2003 - - 214,000 $4.87
April 1, 2003 thru October 31, 2003 - - 428,000 $4.83
April 1, 2003 thru December 31, 2003 275,000 $24.58 - -
October 1, 2003 thru December 31, 2003 18,400 $30.27 - -
January 1, 2004 thru March 31, 2004 18,200 $28.51 - -
January 1, 2004 thru December 31, 2004 329,400 $23.19 - -
January 1, 2005 thru December 31, 2005 292,000 $22.77 - -
January 1, 2006 thru December 31, 2006 265,500 $23.04 - -
INTEREST RATE SWAPS: LIBOR Expected Expected
Notional Fixed Margin Fixed
Period of Time Amount (a) Interest Rates (b) Rates (c) Interest Rates (d)
------------------------------------------- ----------------- -------------------- ----------------- -----------------
March 31, 2003 thru December 31, 2003 $35,000,000 1.675% 2.750% 4.425%
December 31, 2003 thru December 31, 2004 $30,000,000 2.660% 2.500% 5.160%
December 31, 2004 thru December 31, 2005 $20,000,000 4.050% 2.250% 6.300%
December 31, 2005 thru December 20, 2006 $10,000,000 4.050% 2.250% 6.300%
(a) Based on the anticipated principal reductions under our credit facility
(b) Our swap contract with BNP Paribas
(c) Based on the anticipated borrowing base usage under our credit facility
(d) Total of the libor fixed interest rate plus the expected margin rate under our credit facility.
Our credit agreement requires the interest rate to not be below 4.50%.
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-more-
Parallel Petroleum Announces 2Q 2003 Results
August 14, 2003
Page 9
Parallel Petroleum Corporation
Discretionary Cash Flow Reconciliation (Non-GAAP)
(Unaudited)
The following chart reconciles the six months ended June 30, 2003 and 2002 net
cash provided by operating activities to discretionary cash flow. To
assesesParallel's operating results, management believes that, although not
prescribed under generally accepted accounting principles ("GAAP"),
discretionary cash flow is an appropriate measure of Parallel's ability to
satisfy capital expenditure obligations and working capital requirements.
Discretionary cash flow is a non-GAAP financial measure as defined under SEC
rules. Parallel's discretionary cash flow should not be considered in isolation
of or as a substitute for other financial measurements prepared in accordance
with GAAP or as a measure of the Company's profitability or liquidity. The
discretionary cash flow may exclude some, but not all, items that affect cash
flow and may not be comparable to similarly titled measures of other companies.
Discretionary cash flow is defined as net cash provided by (used in) operating
activities adjusted for changes in components or working capital and other
liabilities.
Six Months Ended June 30,
-----------------------------------------
2002 2003
------------------- -------------------
Net Cash Provided by (used in) operating activities $ 5,332,810 $ 8,940,781
Adjustments
Other, net (24,424) 80,142
Accounts Receivable 155,393 1,728,230
Prepaid expenses and other 662,252 110,882
Accounts Payable and accrued liabilities 840,703 (186,059)
Accrued Bonus Payable (1,201,172) -
Purchase of derivative instruments 530,605 -
------------------- -------------------
Discretionary Cash Flow (Non-GAAP) $ 6,296,167 $ 10,673,976
------------------- -------------------
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The Company
Parallel Petroleum Corporation is headquartered in Midland, Texas and is an
independent energy company primarily engaged in the acquisition, development,
exploration and production of oil and gas using enhanced oil recovery techniques
including 3-D seismic technology. Additional information on Parallel Petroleum
Corporation is available at www.parallel-petro.com.
This release contains forward-looking statements subject to various risks and
uncertainties that could cause the company's future plans, objectives and
performance 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," "subject to,"
"anticipate," "estimate," "continue," "present value," "future," "reserves",
"appears," "prospective," 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, the company's growth strategy, 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.