Exhibit 99.1
PARALLEL PETROLEUM ANNOUNCES FOURTH QUARTER AND YEAR END 2008
FINANCIAL RESULTS AND CONFERENCE CALL AND WEBCAST
MIDLAND, Texas, (BUSINESS WIRE), February 23, 2009– Parallel Petroleum Corporation (NASDAQ: PLLL) today announced its financial results for the three and twelve months ended December 31, 2008, compared to the results for the same periods in 2007. In a separate press release issued today, Parallel announced its production, year-end 2008 proved reserves and a field operations update. The Company’s financial and field operations conference call and webcast will be held Tuesday, February 24, 2009 at 2:00 p.m. Eastern time (1:00 p.m. Central time). Details for the conference call and webcast are disclosed in this press release.
Fourth Quarter Financial Results
For the three months ended December 31, 2008, Parallel reported a net loss of $158.6 million, or a loss of $3.81 per diluted share. Included in the net loss was a $300.5 million pre-tax, non-cash impairment to the Company’s oil and natural gas properties. Also included in the net loss was a $59.9 million pre-tax gain on derivatives. The Company received in cash a net payment of $0.4 million in derivative contracts during the period. For the three months ended December 31, 2007, Parallel reported a net loss of $8.3 million, or a loss of $0.21 per diluted share. Included in the net loss for the three months ended December 31, 2007 was a $25.6 million pre-tax loss on derivatives. The Company settled in cash a net payment of $6.7 million in derivative contracts during the period. Parallel had no derivatives classified as hedges during the fourth quarters of 2008 or 2007.
For the fourth quarter of 2008, Parallel’s oil and natural gas sales were 269 MBbls of oil and 2,606 MMcf of natural gas, or 703 MBOE. During this period, the average prices the Company received for its oil and natural gas were $54.96 per barrel and $4.43 per Mcf, or $37.41 per BOE. For the same period of 2007, oil sales were 254 MBbls at an average price of $84.77 per barrel and natural gas sales were 2,179 MMcf at an average price of $6.68 per Mcf, or 617 MBOE at an average price of $58.46 per BOE.
When comparing the fourth quarter ended December 31, 2008 to the fourth quarter ended December 31, 2007, oil and gas operating revenues decreased from $36.1 million to $26.3 million, total costs and expenses increased from $18.7 million to $322.5 million, and operating income decreased from $17.3 million to an operating loss of $296.2 million. Total operating costs and expenses increased primarily due to the impairment charge and increases in lease operating expense, general and administrative expense, and depreciation, depletion and amortization costs. Interest expense increased from $5.7 million to $6.7 million.
When comparing the fourth quarter ended December 31, 2008 to the fourth quarter ended December 31, 2007, net cash provided by operating activities decreased from $22.6 million to $12.6 million, net cash used in investing activities increased from $43.5 million to $49.0 million, and net cash provided by financing activities increased from $23.5 million to $62.0 million.
Twelve Months Financial Results
For the twelve months ended December 31, 2008, Parallel reported a net loss of $131.9 million, or a loss of $3.18 per diluted share. Included in the net loss was a $300.5 million pre-tax, non-cash impairment to the Company’s oil and natural gas properties. Also included in the net loss was a $32.0 million pre-tax gain on derivatives. The Company settled in cash a net payment of $35.9 million in derivative contracts during 2008. For the twelve months ended December 31, 2007, Parallel reported a net loss of $4.7 million, or a loss of $0.12 per diluted share. Included in the net loss was a $36.8 million pre-tax loss on derivatives. The Company settled in cash a net payment of $16.6 million in derivative contracts during 2007. Parallel had no derivatives classified as hedges during the twelve months ended December 31, 2008 or 2007.
For the twelve months ended December 31, 2008, Parallel’s oil and natural gas sales were 1,027 MBbls of oil and 10,944 MMcf of natural gas, or 2,851 MBOE. During this period, the average prices the Company received for its oil and natural gas were $95.25 per barrel and $7.74 per Mcf, or $64.02 per BOE. For the same period of 2007, oil sales were 1,051 MBbls at an average price of $65.97 per barrel and natural gas sales were 7,422 MMcf at an average price of $6.29 per Mcf, or 2,288 MBOE at an average price of $50.72 per BOE.
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Parallel Petroleum Announces
4Q and Year End 2008 Financial Results and Conference Call & Webcast
February 23, 2009
Page 2
When comparing the twelve months ended December 31, 2008 to the twelve months ended December 31, 2007, oil and gas operating revenues increased from $116.0 million to $182.5 million, total costs and expenses increased from $67.1 million to $392.8 million, and operating income decreased from $49.0 million to an operating loss of $210.2 million. Total operating costs and expenses increased primarily due to the impairment charge and increases in lease operating expense, production taxes, general and administrative expense, and depreciation, depletion and amortization costs. Interest expense increased from $19.2 million to $23.8 million.
When comparing the twelve months ended December 31, 2008 to the twelve months ended December 31, 2007, net cash provided by operating activities increased from $74.1 million to $121.0 million, net cash used in investing activities increased from $164.9 million to $258.3 million, and net cash provided by financing activities increased from $92.7 million to $165.7 million.
Balance Sheet Review
At December 31, 2008, current assets were $80.6 million, which included $41.3 million of cash, cash equivalents and short-term investments and $22.7 million of current derivatives assets. Current liabilities were $52.1 million, including current derivative and put premium obligations of $3.6 million. Long-term liabilities were $391.4 million, including $370.9 million of debt and $8.8 million of derivative and put premium obligations. The borrowing base under the Company’s revolving credit facility was $230.0 million as of December 31, 2008, and outstanding borrowings under the revolving credit facility at that same date were $225.0 million. In addition, the Company had $150.0 million outstanding under its 101/4% senior notes. As of December 31, 2008, the Company’s net capitalized costs associated with its oil and gas properties and other equipment were $391.3 million. Stockholders’ equity was $107.0 million.
Non-GAAP Financial Measures
Operating cash flow, defined as net cash provided by operating activities adjusted for changes in assets and liabilities, was $12.0 million for the fourth quarter of 2008, down from fourth quarter 2007 comparable operating cash flow of $20.7 million. Operating cash flow was $114.7 million for the twelve months ended December 31, 2008, up from twelve-month 2007 comparable operating cash flow of $61.6 million.
Adjusted EBITDA for the fourth quarter of 2008 was $19.2 million, down from fourth quarter 2007 comparable adjusted EBITDA of $19.4 million. Adjusted EBITDA for the twelve months ended December 31, 2008 was $102.6 million, up from twelve-month 2007 comparable adjusted EBITDA of $63.8 million. EBITDA is defined as net income (loss) adjusted for income tax benefit, interest expense, cost of debt retirement, and depreciation, depletion and amortization expense. Adjusted EBITDA is defined as EBITDA adjusted for unrealized gains and losses on oil and natural gas derivatives, equity gains and losses on pipelines and gathering system ventures, impairment of oil and natural gas properties, other non-cash items, and hedge settlements.
NOTE: Operating cash flow, EBITDA and adjusted EBITDA are non-GAAP financial measures. Please see the end of this press release, or go to the Company’s web site atwww.plll.com, for further explanation and reconciliation of these non-GAAP financial measures.
Management Comments
Larry C. Oldham, Parallel’s President, commented, “These are challenging times in the oil and gas industry, primarily due to the dramatic decreases in oil and natural gas prices since the second quarter of 2008. Many oil and gas projects industry-wide have become marginal or uneconomic at today’s prices.”
Oldham further commented, “As we announced on February 12, 2009, we have reduced our 2009 CAPEX budget for all projects 76%, from $118.8 million to $29.1 million. We anticipate increasing liquidity while we fund this revised CAPEX budget out of operating cash flow. For 2009 and 2010, we have approximately 2,400 and 2,100 barrels of oil per day, respectively, hedged at an average floor of approximately $70.00 per barrel (NYMEX). For 2009, we have approximately 9,000 MMBTU per day of natural gas costless collars with an average floor of approximately $7.06 and an average ceiling of approximately $9.93 per MMBTU (WAHA). For 2010, we have recently added 10,000 MMBTU per day of natural gas costless collars with a floor of $4.75 and a ceiling of $5.90 per MMBTU (WAHA).”
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Parallel Petroleum Announces
4Q and Year End 2008 Financial Results and Conference Call & Webcast
February 23, 2009
Page 3
In a final comment, Oldham stated, “We will continue to monitor commodity markets, service costs, economic conditions and other factors and may further adjust our $29.1 million 2009 CAPEX budget. We would like to see product prices increase and stabilize and service costs adjust accordingly. In the meantime, these measures will help us through these challenging times.”
Conference Call and Webcast Information
Parallel’s management will host a conference call to discuss fourth quarter and year-end 2008 financial results, production, year-end 2008 proved reserves, work-in-progress, revised 2009 CAPEX budget, and field operations. In addition to this press release, please refer to Parallel’s Form 10-K Report for the twelve months ended December 31, 2008 that was filed with the Securities and Exchange Commission on February 23, 2009 and its field operations press release dated February 23, 2009.
The conference call will be held on Tuesday, February 24, 2009, at 2:00 p.m. Eastern time (1:00 p.m. Central time). To participate in the call, dial888-680-0860 or617-213-4852, Participant Passcode60995119, at least ten minutes before the scheduled start time. The conference call will also be webcast with slides, and can be accessed live at Parallel’s web site,www.plll.com. A replay of the conference call will be available at the Company’s web site or by calling 888-286-8010 or 617-801-6888, Passcode88707132.
Participants may pre-register for the call at Parallel’s web site on the Event Details page for the webcast or at https://www.theconferencingservice.com/prereg/key.process?key=PBBWHVXVH. Pre-registrants will be issued a pin number to use when dialing into the live call which will provide quick access to the conference by bypassing the operator upon connection.
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Parallel Petroleum Announces
4Q and Year End 2008 Financial Results and Conference Call & Webcast
February 23, 2009
Page 4
PARALLEL PETROLEUM CORPORATION
Consolidated Balance Sheets
($ in thousands)
| | | | | | | | | |
| | | December 31, | |
| | | 2008 | | | 2007 | |
Assets | | | | | | | | |
| Current assets: | | | | | | | | |
| Cash and cash equivalents | | $ | 36,303 | | | $ | 7,816 | |
| Short-term investments | | | 5,002 | | | | — | |
| |
| Accounts receivable: | | | | | | | | |
| Oil and natural gas sales | | | 13,399 | | | | 20,499 | |
| Joint interest owners and other, net of allowance for doubtful accounts of $50 | | | 2,805 | | | | 2,460 | |
| Affiliates and joint ventures | | | 12 | | | | 3,970 | |
| | | | | | | |
| | | | 16,216 | | | | 26,929 | |
| Other current assets | | | 430 | | | | 449 | |
| Derivatives | | | 22,665 | | | | 151 | |
| Deferred tax asset | | | — | | | | 10,293 | |
| | | | | | | |
| Total current assets | | | 80,616 | | | | 45,638 | |
| | | | | | | |
| | | | | | | | | |
| Property and equipment, at cost: | | | | | | | | |
| Oil and natural gas properties, full cost method (including $137,202 and $86,402 not subject to depletion) | | | 878,722 | | | | 648,576 | |
| Other | | | 3,172 | | | | 2,877 | |
| | | | | | | |
| | | | 881,894 | | | | 651,453 | |
| Less accumulated depreciation, depletion and amortization | | | (490,566 | ) | | | (145,482 | ) |
| | | | | | | |
| Net property and equipment | | | 391,328 | | | | 505,971 | |
| |
| Restricted cash | | | 81 | | | | 78 | |
| Investment in pipelines and gathering system ventures | | | 337 | | | | 8,638 | |
| Other assets, net of accumulated amortization of $1,443 and $1,193 | | | 3,566 | | | | 2,768 | |
| Deferred tax asset | | | 60,567 | | | | — | |
| Derivatives | | | 14,081 | | | | — | |
| | | | | | | |
| | | $ | 550,576 | | | $ | 563,093 | |
| | | | | | | |
| | | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable trade | | $ | 13,560 | | | $ | 12,264 | |
| Accrued liabilities | | | 21,742 | | | | 29,135 | |
| Accrued interest on senior notes | | | 6,407 | | | | 6,449 | |
| Asset retirement obligations | | | 158 | | | | 598 | |
| Derivative obligations | | | 3,004 | | | | 30,424 | |
| Put premium obligations | | | 628 | | | | — | |
| Deferred tax liability | | | 6,597 | | | | — | |
| | | | | | | |
| Total current liabilities | | | 52,096 | | | | 78,870 | |
| | | | | | | |
| | | | | | | | | |
| Revolving credit facility | | | 225,000 | | | | 60,000 | |
| Senior notes (principal amount $150,000) | | | 145,890 | | | | 145,383 | |
| Asset retirement obligations | | | 11,221 | | | | 4,339 | |
| Derivative obligations | | | 5,136 | | | | 13,194 | |
| Put premium obligations | | | 3,655 | | | | — | |
| Deferred tax liability | | | — | | | | 26,045 | |
| Termination obligation | | | 532 | | | | — | |
| | | | | | | |
| Total long-term liabilities | | | 391,434 | | | | 248,961 | |
| | | | | | | |
| Commitments and contingencies | | | | | | | | |
| | | | | | | | | |
| Stockholders’ equity: | | | | | | | | |
| Series A preferred stock — par value $0.10 per share, authorized 50,000 shares | | | — | | | | — | |
| Common stock — par value $0.01 per share, authorized 60,000,000 shares, issued and outstanding 41,597,161 and 41,252,644 | | | 415 | | | | 412 | |
| Additional paid-in capital | | | 200,132 | | | | 196,457 | |
| Retained earnings (deficit) | | | (93,501 | ) | | | 38,393 | |
| | | | | | | |
| Total stockholders’ equity | | | 107,046 | | | | 235,262 | |
| | | | | | | |
| | | $ | 550,576 | | | $ | 563,093 | |
| | | | | | | |
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Parallel Petroleum Announces
4Q and Year End 2008 Financial Results and Conference Call & Webcast
February 23, 2009
Page 5
PARALLEL PETROLEUM CORPORATION
Consolidated Statements of Operations
($ in thousands, except per share data)
| | | | | | | | | | | | | |
| | | Years Ended December 31, | |
| | | 2008 | | | 2007 | | | 2006 | |
| Oil and natural gas revenues: | | | | | | | | | | | | |
| Oil and natural gas sales | | $ | 182,515 | | | $ | 116,031 | | | $ | 97,025 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Costs and expenses: | | | | | | | | | | | | |
| Lease operating expense | | | 28,454 | | | | 22,200 | | | | 16,819 | |
| Production taxes | | | 9,135 | | | | 5,545 | | | | 5,577 | |
| Production tax refund | | | (1,958 | ) | | | (1,209 | ) | | | — | |
| General and administrative | | | 11,907 | | | | 10,415 | | | | 9,523 | |
| Depreciation, depletion and amortization | | | 44,691 | | | | 30,115 | | | | 24,687 | |
| Impairment of oil and natural gas properties | | | 300,532 | | | | — | | | | — | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Total costs and expenses | | | 392,761 | | | | 67,066 | | | | 56,606 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Operating income (loss) | | | (210,246 | ) | | | 48,965 | | | | 40,419 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Other income (expense), net: | | | | | | | | | | | | |
| Gain (loss) on derivatives not classified as hedges | | | 32,018 | | | | (36,776 | ) | | | 2,802 | |
| Gain on ineffective portion of hedges | | | — | | | | — | | | | 626 | |
| Interest and other income | | | 278 | | | | 197 | | | | 158 | |
| Interest expense, net of capitalized interest | | | (23,750 | ) | | | (19,177 | ) | | | (12,360 | ) |
| Cost of debt retirement | | | (286 | ) | | | (760 | ) | | | — | |
| Other expense | | | (12 | ) | | | (118 | ) | | | (189 | ) |
| Equity in gain (loss) of pipelines and gathering system ventures | | | 380 | | | | (311 | ) | | | 8,593 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Total other income (expense), net | | | 8,628 | | | | (56,945 | ) | | | (370 | ) |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Income (loss) before income taxes | | | (201,618 | ) | | | (7,980 | ) | | | 40,049 | |
| | | | | | | | | | | | | |
| Income tax benefit (expense) | | | 69,724 | | | | 3,319 | | | | (13,894 | ) |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Net income (loss) | | $ | (131,894 | ) | | $ | (4,661 | ) | | $ | 26,155 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Net income (loss) per common share: | | | | | | | | | | | | |
| Basic | | $ | (3.18 | ) | | $ | (0.12 | ) | | $ | 0.73 | |
| | | | | | | | | | |
| Diluted | | $ | (3.18 | ) | | $ | (0.12 | ) | | $ | 0.71 | |
| | | | | | | | | | |
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Parallel Petroleum Announces
4Q and Year End 2008 Financial Results and Conference Call & Webcast
February 23, 2009
Page 6
PARALLEL PETROLEUM CORPORATION
Consolidated Statements of Cash Flows
($ in thousands)
| | | | | | | | | | | | | |
| | | Years Ended December 31, | |
| | | 2008 | | | 2007 | | | 2006 | |
| Cash flows from operating activities: | | | | | | | | | | | | |
| Net income (loss) | | $ | (131,894 | ) | | $ | (4,661 | ) | | $ | 26,155 | |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | | | | | | | | |
| Depreciation, depletion and amortization | | | 44,691 | | | | 30,115 | | | | 24,687 | |
| Impairment of oil and natural gas properties | | | 300,532 | | | | — | | | | — | |
| Gain on sale of automobiles | | | — | | | | (30 | ) | | | — | |
| Accretion of asset retirement obligation | | | 401 | | | | 324 | | | | 248 | |
| Accretion of senior notes discount | | | 507 | | | | 197 | | | | — | |
| Deferred income tax (benefit) expense | | | (69,724 | ) | | | (3,319 | ) | | | 13,894 | |
| (Gain) loss on derivatives not classified as hedges | | | (32,018 | ) | | | 36,776 | | | | (2,802 | ) |
| (Gain) loss on ineffective portion of hedges | | | — | | | | — | | | | (626 | ) |
| Amortization of deferred financing costs | | | 567 | | | | 493 | | | | 492 | |
| Cost of debt retirement | | | 286 | | | | 760 | | | | — | |
| Accretion of interest on put obligations | | | 97 | | | | — | | | | — | |
| Common stock issued in lieu of cash for directors fees | | | 358 | | | | 96 | | | | 118 | |
| Stock option expense | | | 1,321 | | | | 247 | | | | 531 | |
| Equity in (gain) loss in pipelines and gathering system ventures | | | (380 | ) | | | 311 | | | | (8,593 | ) |
| Return on investment in pipelines and gathering system ventures | | | — | | | | 287 | | | | 9,000 | |
| Bad debt expense | | | — | | | | (30 | ) | | | 71 | |
| |
| Changes in assets and liabilities: | | | | | | | | | | | | |
| Other assets, net | | | (861 | ) | | | (114 | ) | | | 1,075 | |
| Restricted cash | | | (3 | ) | | | 247 | | | | (50 | ) |
| Accounts receivable | | | 10,713 | | | | 2,253 | | | | (15,151 | ) |
| Other current assets | | | 19 | | | | 1,070 | | | | (153 | ) |
| Accounts payable and accrued liabilities | | | (3,571 | ) | | | 9,097 | | | | 19,290 | |
| | | | | | | | | | |
| Net cash provided by operating activities | | | 121,041 | | | | 74,119 | | | | 68,186 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | | | | | |
| Additions to oil and natural gas properties | | | (217,393 | ) | | | (146,798 | ) | | | (189,396 | ) |
| Use of restricted cash for acquisition of oil and natural gas properties | | | — | | | | — | | | | 2,366 | |
| Proceeds from disposition of oil and natural gas properties and other property and equipment | | | 427 | | | | 1,677 | | | | 130 | |
| Additions to other property and equipment | | | (434 | ) | | | (379 | ) | | | (210 | ) |
| Settlements of derivative instruments | | | (35,869 | ) | | | (16,615 | ) | | | (3,902 | ) |
| Short-term investments | | | (5,002 | ) | | | — | | | | — | |
| Net investment in pipelines and gathering system ventures | | | (26 | ) | | | (2,782 | ) | | | (11,260 | ) |
| Return of investment in pipelines and gathering system ventures | | | — | | | | — | | | | 7,724 | |
| | | | | | | | | | |
| Net cash used in investing activities | | | (258,297 | ) | | | (164,897 | ) | | | (194,548 | ) |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | | | | | |
| Borrowings from bank line of credit | | | 165,000 | | | | 92,000 | | | | 117,000 | |
| Payments on bank line of credit | | | — | | | | (147,000 | ) | | | (52,000 | ) |
| Payment on term loan | | | — | | | | (50,000 | ) | | | — | |
| Senior notes (principal amount $150,000 in 2008 and 2007) | | | — | | | | 145,186 | | | | — | |
| Deferred financing costs | | | (788 | ) | | | (813 | ) | | | (179 | ) |
| Deferred debt offering | | | — | | | | (1,671 | ) | | | — | |
| Proceeds from exercise of stock options and warrants | | | 1,531 | | | | 2,460 | | | | 766 | |
| Proceeds (net) from common stock issued | | | — | | | | 52,522 | | | | 60,267 | |
| | | | | | | | | | |
| Net cash provided by financing activities | | | 165,743 | | | | 92,684 | | | | 125,854 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | | 28,487 | | | | 1,906 | | | | (508 | ) |
| | | | | | | | | | | | | |
| Cash and cash equivalents at beginning of year | | | 7,816 | | | | 5,910 | | | | 6,418 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Cash and cash equivalents at end of year | | $ | 36,303 | | | $ | 7,816 | | | $ | 5,910 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Non-cash financing and investing activities: | | | | | | | | | | | | |
| Deferred purchase of derivative puts | | $ | 4,186 | | | $ | — | | | $ | — | |
| Oil and natural gas properties asset retirement obligation | | $ | 6,041 | | | $ | (450 | ) | | $ | 2,320 | |
| Additions to oil and natural gas properties accrued | | $ | (2,100 | ) | | $ | 2,500 | | | $ | 6,000 | |
| Termination obligation capitalized to oil and natural gas properties | | $ | 532 | | | $ | — | | | $ | — | |
| Transfer to oil and natural gas properties | | $ | 8,707 | | | $ | — | | | $ | — | |
| Transfer from equity investment | | $ | (8,707 | ) | | $ | — | | | $ | — | |
| Non-cash exchange of oil and natural gas properties: | | | | | | | | | | | | |
| Properties received in exchange | | $ | — | | | $ | 6,463 | | | $ | — | |
| Properties delivered in exchange | | $ | — | | | $ | (5,495 | ) | | $ | — | |
| Other transactions: | | | | | | | | | | | | |
| Interest paid | | $ | 22,609 | | | $ | 13,096 | | | $ | 12,255 | |
| Taxes paid | | $ | 40 | | | $ | — | | | $ | 40 | |
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Parallel Petroleum Announces
4Q and Year End 2008 Financial Results and Conference Call & Webcast
February 23, 2009
Page 7
PARALLEL PETROLEUM CORPORATION
SELECTED OPERATING AND FINANCIAL DATA
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | 12/31/2008 | | | 12/31/2007 | | | 12/31/2008 | | | 12/31/2007 | |
| | | (in thousands, except per unit data) | | | (in thousands, except per unit data) | |
Production Volumes: | | | | | | | | | | | | | | | | |
| Oil (Bbls) | | | 269 | | | | 254 | | | | 1,027 | | | | 1,051 | |
| Natural gas (Mcf) | | | 2,606 | | | | 2,179 | | | | 10,944 | | | | 7,422 | |
BOE(1) | | | 703 | | | | 617 | | | | 2,851 | | | | 2,288 | |
| BOE per day | | | 7.6 | | | | 6.7 | | | | 7.8 | | | | 6.3 | |
| | | | | | | | | | | | | | | | | |
Sales Prices: | | | | | | | | | | | | | | | | |
| Oil (per Bbl) | | $ | 54.96 | | | $ | 84.77 | | | $ | 95.25 | | | $ | 65.97 | |
| Natural gas (per Mcf) | | $ | 4.43 | | | $ | 6.68 | | | $ | 7.74 | | | $ | 6.29 | |
| BOE price | | $ | 37.41 | | | $ | 58.46 | | | $ | 64.02 | | | $ | 50.72 | |
| | | | | | | | | | | | | | | | | |
Operating Revenues: | | | | | | | | | | | | | | | | |
| Oil | | $ | 14,756 | | | $ | 21,529 | | | $ | 97,799 | | | $ | 69,315 | |
| Effect of oil hedges | | | — | | | | — | | | | — | | | | — | |
| Natural gas | | | 11,542 | | | | 14,545 | | | | 84,716 | | | | 46,716 | |
| | | | | | | | | | | | | |
| | | $ | 26,298 | | | $ | 36,074 | | | $ | 182,515 | | | $ | 116,031 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Operating Expenses and Income: | | | | | | | | | | | | | | | | |
| Lease operating expense | | $ | 6,682 | | | $ | 5,781 | | | $ | 28,454 | | | $ | 22,200 | |
| Production taxes | | | 1,014 | | | | 1,848 | | | | 9,135 | | | | 5,545 | |
| Production tax refund | | | (1,958 | ) | | | — | | | | (1,958 | ) | | | (1,209 | ) |
| General and administrative | | | 2,949 | | | | 2,678 | | | | 11,907 | | | | 10,415 | |
| Depreciation, depletion and amortization | | | 13,305 | | | | 8,435 | | | | 44,691 | | | | 30,115 | |
| Impairment of oil and natural gas properties | | | 300,532 | | | | — | | | | 300,532 | | | | — | |
| | | | | | | | | | | | | |
| Total costs and expenses | | | 322,524 | | | | 18,742 | | | | 392,761 | | | | 67,066 | |
| | | | | | | | | | | | | |
| Operating income (loss) | | | (296,226 | ) | | | 17,332 | | | | (210,246 | ) | | | 48,965 | |
| | | | | | | | | | | | | |
| Other income (expense), net | | | | | | | | | | | | | | | | |
| Gain (loss) on derivatives not classified as hedges | | | 59,852 | | | | (25,615 | ) | | | 32,018 | | | | (36,776 | ) |
| Gain on ineffective portion of hedges | | | — | | | | — | | | | — | | | | — | |
| Interest and other income | | | 193 | | | | 34 | | | | 278 | | | | 197 | |
| Interest expense, net of capitalized interest | | | (6,725 | ) | | | (5,728 | ) | | | (23,750 | ) | | | (19,177 | ) |
| Cost of debt retirement | | | (184 | ) | | | — | | | | (286 | ) | | | (760 | ) |
| Other expense | | | — | | | | (27 | ) | | | (12 | ) | | | (118 | ) |
| Equity in gain (loss) of pipelines and gathering system ventures | | | — | | | | 352 | | | | 380 | | | | (311 | ) |
| | | | | | | | | | | | | |
| Total other income (expense), net | | | 53,136 | | | | (30,984 | ) | | | 8,628 | | | | (56,945 | ) |
| | | | | | | | | | | | | |
| Income (loss) before income taxes | | | (243,090 | ) | | | (13,652 | ) | | | (201,618 | ) | | | (7,980 | ) |
| Income tax benefit (expense) | | | 84,464 | | | | 5,330 | | | | 69,724 | | | | 3,319 | |
| | | | | | | | | | | | | |
| Net income (loss) | | $ | (158,626 | ) | | $ | (8,322 | ) | | $ | (131,894 | ) | | $ | (4,661 | ) |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Net income (loss) per common share: | | | | | | | | | | | | | | | | |
| Basic | | $ | (3.81 | ) | | $ | (0.21 | ) | | $ | (3.18 | ) | | $ | (0.12 | ) |
| Diluted | | $ | (3.81 | ) | | $ | (0.21 | ) | | $ | (3.18 | ) | | $ | (0.12 | ) |
| | | | | | | | | | | | | | | | | |
| Weighted average common shares outstanding: | | | | | | | | | | | | | | | | |
| Basic | | | 41.6 | | | | 39.1 | | | | 41.5 | | | | 38.1 | |
| Diluted | | | 41.6 | | | | 39.1 | | | | 41.5 | | | | 38.1 | |
| | | |
| (1) | | A BOE means one barrel of oil equivalent using the ratio of six Mcf of gas to one barrel of oil. |
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Parallel Petroleum Announces
4Q and Year End 2008 Financial Results and Conference Call & Webcast
February 23, 2009
Page 8
PARALLEL PETROLEUM CORPORATION
DERIVATIVES INFORMATION AS OF DECEMBER 31, 2008(1)
PUT OPTIONS:
| | | | | | | | | | | | | |
| | | | | | | | | | | Estimated | |
| | | | | | | | | | | Fair Market | |
| Period of Time | | Barrels of Oil | | | Floor | | | Value | |
| | | | | | | | | | | ($ in thousands) | |
| Jan 1, 2009 thru Dec 31, 2009 | | | 109,500 | | | $ | 100.00 | | | $ | 5,112 | |
| Jan 1, 2010 thru Dec 31, 2010 | | | 280,100 | | | $ | 84.36 | | | | 6,405 | |
| Jan 1, 2011 thru Dec 31, 2011 | | | 146,000 | | | $ | 100.00 | | | | 5,139 | |
| | | | | | | | | | | | |
| Total Fair Market Value | | | | | | | | | | $ | 16,656 | |
| | | | | | | | | | | | |
COLLARS:(2)
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Estimated | |
| | | | | | | NYMEX Oil Prices | | | Fair Market | |
| Period of Time | | Barrels of Oil | | | Floor | | | Ceiling | | | Value | |
| | | | | | | | | | | | | | | ($ in thousands) | |
| Jan 1, 2009 thru Dec 31, 2009 | | | 766,500 | | | $ | 65.71 | | | $ | 82.93 | | | $ | 10,942 | |
| Jan 1, 2010 thru Oct 31, 2010 | | | 486,400 | | | $ | 63.44 | | | $ | 78.26 | | | | 2,449 | |
| | | | | | | | | | | | | | | | | |
| | | MMBTU of | | WAHA Gas Prices | | | | | |
Period of Time | | Natural Gas | | Floor | | Ceiling | | | | |
| Jan 1, 2009 thru Dec 31, 2009 | | | 3,285,000 | | | $ | 7.06 | | | $ | 9.93 | | | | 6,611 | |
| | | | | | | | | | | | | | | | |
| Total Fair Market Value | | | | | | | | | | | | | | $ | 20,002 | |
| | | | | | | | | | | | | | | | |
INTEREST RATE SWAPS:
| | | | | | | | | | | | | |
| | | | | | | Weighted Avg | | | Estimated | |
| | | Notional | | | Fixed | | | Fair Market | |
| Period of Time | | Amounts | | | Interest Rates | | | Value | |
| | | ($ in millions) | | | | | | | ($ in thousands) | |
| Jan 1, 2009 thru Dec 31, 2009 | | $ | 100 | | | | 4.22 | % | | $ | (3,004 | ) |
| Jan 1, 2010 thru Oct 31, 2010 | | $ | 100 | | | | 4.71 | % | | | (2,517 | ) |
| Nov 1, 2010 thru Dec 31, 2010 | | $ | 50 | | | | 4.26 | % | | | (216 | ) |
| Jan 1, 2011 thru Dec 31, 2011 | | $ | 100 | | | | 4.67 | % | | | (2,315 | ) |
| | | | | | | | | | | | |
| Total Fair Market Value | | | | | | | | | | $ | (8,052 | ) |
| | | | | | | | | | | | |
| | | |
| (1) | | BNP Paribas and Citibank, N.A. are the counterparties in Parallel’s derivative instruments. |
| |
| (2) | | Subsequent Event:On February 18, 2009, the Company executed a trade for 10,000 MMBTU/day natural gas (WAHA) for calendar 2010 costless collars with a floor of $4.75 and a ceiling of $5.90 with a total volume of 3,650,000 MMBTU. |
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Parallel Petroleum Announces
4Q and Year End 2008 Financial Results and Conference Call & Webcast
February 23, 2009
Page 9
PARALLEL PETROLEUM CORPORATION
RECONCILIATION OF OPERATING CASH FLOW
($ in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | December 31, | | | December 31, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
NET CASH PROVIDED BY OPERATING ACTIVITIES | | $ | 12,616 | | | $ | 22,590 | | | $ | 121,041 | | | $ | 74,119 | |
| Adjustments: | | | | | | | | | | | | | | | | |
| Changes in assets and liabilities | | | (597 | ) | | | (1,891 | ) | | | (6,297 | ) | | | (12,553 | ) |
| | | | | | | | | | | | | |
| |
OPERATING CASH FLOW(1) | | $ | 12,019 | | | $ | 20,699 | | | $ | 114,744 | | | $ | 61,566 | |
| | | | | | | | | | | | | |
| | | |
| (1) | | Operating cash flow represents net cash provided by operating activities adjusted for changes in assets and liabilities. Operating cash flow is presented because management believes it is a useful adjunct to net cash provided by operating activities under accounting principles generally accepted in the United States (GAAP). Operating cash flow is widely accepted as a financial indicator of an oil and natural gas company’s ability to generate cash which is used to internally fund exploration and development activities and to service debt. This measure is widely used by investors and rating agencies in the valuation, comparison, rating and investment recommendations of companies within the oil and natural gas exploration and production industry. Operating cash flow is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities as an indicator of cash flows, or as a measure of liquidity. |
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Parallel Petroleum Announces
4Q and Year End 2008 Financial Results and Conference Call & Webcast
February 23, 2009
Page 10
PARALLEL PETROLEUM CORPORATION
RECONCILIATION OF EBITDA
($ in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | December 31, | | | December 31, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
NET INCOME (LOSS) | | $ | (158,626 | ) | | $ | (8,322 | ) | | $ | (131,894 | ) | | $ | (4,661 | ) |
| Income tax benefit | | | (84,464 | ) | | | (5,330 | ) | | | (69,724 | ) | | | (3,319 | ) |
| Interest expense, net of capitalized interest | | | 6,725 | | | | 5,728 | | | | 23,750 | | | | 19,177 | |
| Cost of debt retirement | | | 184 | | | | — | | | | 286 | | | | 760 | |
| Depreciation, depletion and amortization | | | 13,305 | | | | 8,435 | | | | 44,691 | | | | 30,115 | |
| | | | | | | | | | | | | |
| |
EBITDA(1) | | $ | (222,876 | ) | | $ | 511 | | | $ | (132,891 | ) | | $ | 42,072 | |
| | | | | | | | | | | | | |
| | | |
| (1) | | EBITDA represents net income (loss) adjusted for income tax benefit, interest expense, cost of debt retirement, and depreciation, depletion and amortization expense. EBITDA is presented as a supplemental financial measurement in the evaluation of our business. We believe that it provides additional information regarding our ability to meet our future debt service, capital expendi- tures and working capital requirements. This measure is widely used by investors and rating agencies in the valuation, comparison, rating and investment recommendations of companies. EBITDA is also a financial measurement that, with certain negotiated adjustments, is reported to our lenders pursuant to our bank credit agreement and is used in the financial covenants in our bank credit agreement. EBITDA is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net income, income from operations, or cash flow provided by operating activities prepared in accordance with GAAP. EBITDA is reconciled to net cash provided by operating activities as follows: |
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | December 31, | | | December 31, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
NET CASH PROVIDED BY OPERATING ACTIVITIES | | $ | 12,616 | | | $ | 22,590 | | | $ | 121,041 | | | $ | 74,119 | |
| Changes in assets and liabilities | | | (597 | ) | | | (1,891 | ) | | | (6,297 | ) | | | (12,553 | ) |
| Interest expense, net of capitalized interest | | | 6,725 | | | | 5,728 | | | | 23,750 | | | | 19,177 | |
| Equity in (gain) loss of pipelines and gathering system ventures | | | — | | | | 352 | | | | 380 | | | | (311 | ) |
| Return on investment in pipelines and gathering system ventures | | | — | | | | (287 | ) | | | — | | | | (287 | ) |
| Impairment of oil and natural gas properties | | | (300,532 | ) | | | — | | | | (300,532 | ) | | | — | |
| Gain (loss) on derivatives not classified as hedges | | | 59,852 | | | | (25,615 | ) | | | 32,018 | | | | (36,776 | ) |
| | | | | | | | | | | | | | | | | |
| Other non-cash items: | | | | | | | | | | | | | | | | |
| Gain on sale of automobiles | | | — | | | | 5 | | | | — | | | | 30 | |
| Accretion of asset retirement obligation | | | (126 | ) | | | (81 | ) | | | (401 | ) | | | (324 | ) |
| Accretion of senior notes | | | (132 | ) | | | (83 | ) | | | (507 | ) | | | (197 | ) |
| Accretion of interest on put obligations | | | (52 | ) | | | — | | | | (97 | ) | | | — | |
| Amortization of deferred financing cost | | | (58 | ) | | | (121 | ) | | | (567 | ) | | | (493 | ) |
| Common stock issued in lieu of cash for directors fees | | | (23 | ) | | | — | | | | (358 | ) | | | (96 | ) |
| Stock option expense | | | (549 | ) | | | (86 | ) | | | (1,321 | ) | | | (247 | ) |
| Bad debt expense | | | — | | | | — | | | | — | | | | 30 | |
| | | | | | | | | | | | | |
| Sub-total other non-cash items | | | (940 | ) | | | (366 | ) | | | (3,251 | ) | | | (1,297 | ) |
| | | | | | | | | | | | | |
| |
EBITDA | | $ | (222,876 | ) | | $ | 511 | | | $ | (132,891 | ) | | $ | 42,072 | |
| | | | | | | | | | | | | |
PARALLEL PETROLEUM CORPORATION
RECONCILIATION OF ADJUSTED EBITDA
($ in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | December 31, | | | December 31, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
EBITDA | | $ | (222,876 | ) | | $ | 511 | | | $ | (132,891 | ) | | $ | 42,072 | |
| |
| Adjustments, before tax: | | | | | | | | | | | | | | | | |
| Unrealized (gains) losses on oil and natural gas derivatives | | | (59,852 | ) | | | 25,615 | | | | (32,018 | ) | | | 36,776 | |
| Equity in (gain) loss of pipelines and gathering system ventures | | | — | | | | (352 | ) | | | (380 | ) | | | 311 | |
| Impairment of oil and natural gas properties | | | 300,532 | | | | — | | | | 300,532 | | | | — | |
| Other non-cash items | | | 940 | | | | 366 | | | | 3,251 | | | | 1,297 | |
| Hedge (payments) receipts | | | 437 | | | | (6,740 | ) | | | (35,869 | ) | | | (16,615 | ) |
| | | | | | | | | | | | | |
| |
Adjusted EBITDA(1) | | $ | 19,181 | | | $ | 19,400 | | | $ | 102,625 | | | $ | 63,841 | |
| | | | | | | | | | | | | |
| (1) | | Adjusted EBITDA excludes certain items that management believes affect the comparability of operating results. The Company discloses this non-GAAP financial measure because: |
| | (a) | | management uses it to evaluate the Company’s operational trends and performance relative to other oil and natural gas producing companies; and |
| |
| | (b) | | adjusted EBITDA is more comparable to estimates provided to our lenders. |
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Parallel Petroleum Announces
4Q and Year End 2008 Financial Results & Conference Call & Webcast
February 23, 2009
Page 11
The Company
Parallel Petroleum is an independent energy company headquartered in Midland, Texas, engaged in the exploitation, development, acquisition and production of oil and gas using 3-D seismic technology and advanced drilling, completion and recovery techniques. Parallel’s primary areas of operation are the Permian Basin of West Texas and New Mexico, North Texas Barnett Shale, Onshore Gulf Coast of South Texas, East Texas and Utah/Colorado. Additional information on Parallel is available via the internet atwww.plll.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 “initial daily test rates,” “may,” “will,” “expect,” “intend,” “plan,” “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; |
| | • | | availability of drilling equipment; |
| | • | | outstanding indebtedness; |
| | • | | weaknesses in our internal controls; |
| | • | | the inherent variability in early production tests; |
| | • | | uncertainties inherent in estimating production rates; |
| | • | | the availability and capacity of natural gas gathering and transportation facilities; |
| | • | | the period of time that our oil and natural gas wells have been producing; |
| | • | | changes in interest rates; |
| | • | | dependence on weather conditions; |
| | • | | 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.
###
