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
NEW BUSINESS PLAN GENERATES RECORD BREAKING QUARTER
MIDLAND, Texas, (BUSINESS WIRE), May 15, 2003 - Parallel Petroleum Corporation
(NASDAQ: PLLL) today announced financial and operational results for the first
quarter ended March 31, 2003.
First Quarter Results
For the three months ended March 31, 2003, Parallel reported net income of $2.1
million, or $.09 per diluted share. Included in net income is $4.2 million of
operating income primarily due to a 121% increase in production volumes and a
95% increase oil and gas prices when comparing the first quarter of 2003 to the
first quarter of 2002. For the three months ended March 31, 2002, Parallel
recorded a net loss of $.9 million, or $.04 per diluted share, which included
noncash items of $.6 million related to a $.3 million decrease in fair value of
derivatives and a $.3 million equity in the loss of First Permian, LP.
Net cash provided by operating activities for the three-month period ended March
31, 2003 was $3.6 million, compared to a deficit of $.2 million for the same
period of 2002. The increase was primarily related to the above mentioned
increases in oil and gas 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 8 of this press release] is $5.8 million for the period ended March 31,
2003 compared to $.8 million for the same period of 2002.
For the first quarter of 2003, Parallel's sales were 153,578 Bbls of oil and
781,751 Mcf of natural gas, or 283,870 BOE. The average prices the Company
received for its oil and natural gas on an unhedged/hedged basis, respectively,
were $32.60/$31.80 per barrel and $5.82/$4.62 per Mcf, or $33.66/$29.92 per BOE.
For the same period of 2002, oil sales were 30,161 Bbls at an average price of
$21.20 per barrel and natural gas sales were 590,650 Mcf at an average price of
$2.25 per Mcf, or 128,603 BOE at $15.33 per BOE. (Refer to the tables on page 7
of this press release for detailed production and price data and hedging
information.)
Balance Sheet Review
As of March 31, 2003, current assets were $10.0 million, which included $3.8
million of cash. Current liabilities were $9.9 million, including $5.7 million
of current maturities of long-term debt and $1.3 million related to derivative
obligations, resulting in a net working capital of $.1 million. During the first
quarter of 2003, Parallel reduced long-term debt by $7.0 million. Long-term
debt, including current maturities, stood at $42.8 million. The Company's net
capitalized costs associated with its oil and gas properties were $89.8 million,
which included approximately $2.7 million of leasehold and seismic costs for
undeveloped prospects. Also added to the Company's property basis during the
first quarter was an asset retirement cost of $1.2 million for the adoption of
SFAS 143. Parallel's stockholders' equity as of March 31, 2003 was $46.4
million, the largest in the Company's history.
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.
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Parallel Petroleum Announces 1Q 2003 Results
May 15, 2003
Page 2
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, and
March 26, 2003.
Permian Basin of West Texas
Fullerton Field, Andrews County - Parallel has budgeted approximately
$1.5 million for year 2003 for the stimulation of approximately 40 of
the 128 existing producing wells in the San Andres formation at 4,400
feet. The first four water frac stimulations were completed during the
first quarter of 2003 yielding average production increases of
approximately 13 net barrels of oil per day per well. The Company
presently anticipates fracture stimulating four to five wells per
month. Parallel's current estimated net daily production from the
Fullerton properties has increased 4% to approximately 1,200 BOE per
day, compared to approximately 1,150 BOE per day as of the first of the
year. This 4% increase is important, given the historical 5% annual
decline rate associated with this set of assets. Parallel's working
interesting in these assets ranges from 25% to 85%.
Lion Diamond M Canyon Unit, Scurry County - During 2002, Parallel and
its partners, under Phase I, drilled four wells to the base of the
Canyon Reef formation at an estimated depth of 6,500 feet on this
5,500-acre unit. As much as 280 feet of gross interval above "lowest
known oil" was penetrated. After six months of production, three of the
four wells are still producing at their initial combined rate of
approximately 300 equivalent barrels of oil per day. Two of the wells
are producing from intervals deeper than those being produced in any
other currently active well in the unit, while still containing
uncompleted pay behind pipe. The fourth well has been completed in the
shallow Clearfork formation at a depth of 3,300 feet, as discussed
below under GCW Shallow Leases, Scurry County.
Based on results to date, Parallel believes multiple opportunities
exist to increase production through well reactivations, deepenings and
recompletion operations, infill drilling on 20-acre spacing, and
waterflood enhancement. Presently, detailed geologic and engineering
work is being concentrated in the areas around these three Canyon Reef
wells and related infrastructure work has commenced. As previously
announced, Parallel plans to deepen and production test as many as 20
existing wells this year.
GCW Shallow Leases, Scurry County - Parallel took over operations of
all leases in the Diamond M Project area on March 1, 2003 with the
Phase II election. This included approximately 2,600 acres of shallow
Glorieta, Clearfork, and Wichita Albany production. At March 1, 2003,
there were 50 active wells producing approximately 150 barrels of oil
per day. In addition, there are 39 inactive well bores available for
potential utilization. The fourth well, in the Phase I Canyon program,
has been completed in the Clearfork formation at a stabilized rate of
25 barrels of oil per day. Current production rate on all shallow wells
is approximately 175 barrels of oil per day. Presently, in addition to
selected well reactivations, design work is proceeding on the initial
10-acre infill waterflood pilot. The pilot area will provide reservoir
performance data necessary for full field design.
Parallel expects to invest 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 1Q 2003 Results
May 15, 2003
Page 3
East Texas
Cook Mountain Gas Project, Liberty County - Since the second quarter of
2002, Parallel has participated in 5 Cook Mountain gas wells, of which
4 have been successful and are currently producing at a combined rate
of approximately 30,000 Mcfe, or 5,000 BOE, per day, with Parallel's
net share being approximately 2,800 Mcfe, or 475 BOE, per day. 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, during the remainder of year 2003. The first of these
five wells, the East Ames Gas Unit #l, is expected to spud within the
next 30 days. Parallel's working interest in the well is approximately
17%.
Onshore Gulf Coast of South Texas
Yegua/Frio Gas Project, Jackson County - Parallel has budgeted
approximately $1.5 million for the remainder of 2003 for the drilling
and completion of approximately 8 Frio wells and 1 Yegua well. All of
these exploratory gas prospects were generated from the Company's
proprietary 3-D seismic data base. This drilling activity has been
accelerated and is expected to start during the second quarter of 2003.
Parallel's average working interest in the project is 40% in the Yegua
and 50% in the Frio. The Big 12 No. l, a Yegua well, was recently
fracture stimulated and is currently producing at an initial daily rate
of 2,000 Mcf, plus 200 barrels of condensate, on an 11/64-inch choke
with a flowing tubing pressure of 5,600 pounds per square inch. An
additional Yegua zone will also be fracture stimulated and commingled
with the existing zone within the next 30 days. Parallel owns a 40%
working interest in the well.
Management Comments
Larry C. Oldham, Parallel's President, commented, "Results of our new business
plan really showed up during the first quarter in record proportions. Our oil
and gas production reached an all-time high of 3,150 BOE per day, earnings and
operating cash flow both reached record high numbers, and we reduced our
long-term debt by $7 million, further improving our financial position. What a
great quarter! These results are a tribute to our team of people that are second
to none in our industry. Today, for the first time in the Company's history, we
have an excellent inventory of low-risk projects, the resources to exploit them,
and the people who can and will execute our new business plan. We're excited and
look forward to the Company's continued growth and progress."
In a final comment, Oldham stated, "Parallel has hedged oil and natural gas
volumes representing approximately 50% and 30%, respectively, of expected
production from April through December 2003. These commodity hedges, along with
our interest rate hedges, assist us in forecasting cash flow within a
predictable range, so we can reasonably plan and budget our capital investments.
Please see our Hedging Table on page 7 of this press release for hedging
information."
Conference Call Information
Parallel's management will host a conference call to discuss the Company's
financial and operational results for the first quarter ended March 31, 2003 on
Friday, May 16, 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. 291880.
Financial statements and schedules follow
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Parallel Petroleum Announces 1Q 2003 Results
May 15, 2003
Page 4
PARALLEL PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEETS
<table>
(audited) (unaudited)
December 31, March 31,
ASSETS 2002 2003
------------- --------------
<s> <c> <c>
Current assets:
Cash and cash equivalents $ 11,811,704 $ 3,834,101
Accounts receivable:
Oil and gas 3,071,315 5,045,575
Others, net of allowance for doubtful account of $12,681 in 2002 and 2003 236,443 229,540
Affiliate 2,084 -
------------- ------------
3,309,842 5,275,115
Income tax receivable 832,590 832,590
Other assets 78,675 55,125
Fair value of derivative instruments 21,884 2,784
------------- ------------
Total current assets 16,054,695 9,999,715
------------- ------------
Property and equipment, at cost:
Oil and gas properties, full cost method (Note 5) 146,679,503 152,274,021
Other 1,083,282 1,246,674
------------- ------------
147,762,785 153,520,695
Less accumulated depreciation and depletion (62,074,559) (63,746,018)
------------- ------------
Net property and equipment (Note 8) 85,688,226 89,774,677
------------- ------------
Other assets, net of accumulated amortization of $78,520 in 2002 and $43,996 in 2003 608,410 585,626
------------- ------------
$102,351,331 $100,360,018
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 3,033,650 $ 2,866,239
Current maturities of long-term debt (Note 2) 4,145,833 5,700,000
Current maturity of derivative obligations 335,829 1,286,654
------------- ------------
7,515,312 9,852,893
------------- ------------
Long-term debt, excluding current maturities (Note 2) 45,604,167 37,050,000
Long-term asset retirement obligation (Note 8) - 1,727,165
Long-term maturity of derivative obligations (Note 6) 103,745 1,188,086
Deferred tax liability 3,627,963 4,158,344
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 2003 211,434 211,434
Additional paid-in capital 34,567,866 34,421,691
Retained earnings 10,623,394 12,875,148
Other comprehensive income (loss) net of tax (Note 6) - (1,222,193)
------------- ------------
Total stockholders' equity 45,500,144 46,383,530
Commitments and contingencies (Note 11)
------------- ------------
$102,351,331 $100,360,018
============= ============
</Table>
*The balance sheet as of December 31, 2002 has been derived from Parallel's
audited financial statements.
________________________________________________________________________________
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Parallel Petroleum Announces 1Q 2003 Results
May 15, 2003
Page 5
PARALLEL PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<table>
Three Months Ended March 31,
------------------------------
2002 2003
------------ -----------
<s> <c> <c>
Oil and gas revenues $ 1,971,191 $ 8,492,792
------------ -----------
Cost and expenses:
Lease operating expense (Note 8) 549,376 1,455,660
General and administrative 349,764 801,768
Depreciation, depletion and amortization 1,354,630 2,065,691
----------- -----------
Total costs and expenses 2,253,770 4,323,119
----------- -----------
Operating income (loss) (282,579) 4,169,673
----------- -----------
Other income (expense), net:
Equity in loss of First Permian, L.P. (316,293) -
Change in fair market value of derivatives (Note 6) (339,858) (202,457)
Interest and other income 16,375 44,656
Interest expense (153,057) (486,464)
Other expense (172,066) (20,544)
----------- -----------
Total other expense, net (964,899) (664,809)
----------- -----------
Income (loss) before income taxes (1,247,478) 3,504,864
Income tax (expense) benefit, net 478,727 (1,191,654)
----------- -----------
Net income (loss) before cumulative effect of change in accounting principle (768,751) 2,313,210
Cumulative effect on prior years of a change in accounting principle, less
applicable income taxes of $31,659 (Note 8) - (61,456)
----------- -----------
Net income (loss) (768,751) 2,251,754
Cumulative preferred stock dividend (146,175) (146,175)
----------- -----------
Net income (loss) available to common stockholders $ (914,926) $ 2,105,579
=========== ===========
Net income (loss) per common share:
Basic - before cumulative effect of a change in accounting principal $ (0.04) $ 0.10
Cumulative effect of a change in accounting principle, net of tax - -
----------- -----------
Basic - after cumulative effect of a change in acocounting principle $ (0.04) $ 0.10
=========== ===========
Diluted - before cumulative effect of a change in accounting principle $ (0.04) $ 0.09
Cumulative effect of a change in accounting principle, net of tax - -
----------- -----------
Diluted - after cumulative effect of a change in accounting principle $ (0.04) $ 0.09
=========== ===========
Weighted average common share outstanding:
Basic 20,663,861 21,143,406
=========== ===========
Diluted 20,663,861 24,038,049
=========== ===========
</table>
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Parallel Petroleum Announces 1Q 2003 Results
May 15, 2003
Page 6
PARALLEL PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<table>
Three Months Ended March 31,
------------------------------
2002 2003
---------- -----------
<s> <c> <c>
Cash flows from operating activities:
Net income (loss) $ (768,751) $ 2,251,754
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and depletion 1,354,630 2,065,691
Accretion expense - 33,835
Equity in loss from investments in First Permian, L.P. 316,293 -
Change in fair value of derivative instruments 339,859 202,457
Deferred income taxes (478,727) 1,191,654
Cumulative effect on prior years of a change in accounting principle, net of tax - 61,456
Changes in assets and liabilties:
Other, net (11,865) 22,784
Decrease (increase) in accounts receivables 161,584 (1,965,273)
Decrease in prepaid expenses and other 95,571 23,550
Decrease in accounts payable and accrued liabilities (864,538) (313,586)
Purchase of derivative instruments (391,105) -
---------- ------------
Net cash provided by (used in) operating activities (247,049) 3,574,322
---------- ------------
Cash flows from investing activities:
Additions to property and equipment (2,785,855) (4,572,325)
Proceeds from disposition of property and equipment 365,380 20,400
---------- ------------
Net cash used in investing activities (2,420,475) (4,551,925)
---------- ------------
Cash flows from financing activities:
Borrowings from bank line of credit 565,589 3,173,625
Payments on bank line of credit - (10,173,625)
---------- ------------
Net cash provided by (used in) financing activities 565,589 (7,000,000)
---------- ------------
Net increase (decrease) in cash and cash equivalents (2,101,935) (7,977,603)
Beginning cash and cash equivalents 3,351,044 11,811,704
---------- ------------
Ending cash and cash equivalents $1,249,109 $ 3,834,101
========== ============
Non-cash financing and investing activities:
Oil and gas properties - FASB 143 - $ 1,205,985
Accrued preferred stock dividend $ 146,175 $ 146,175
</table>
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<page>
Parallel Petroleum Announces 1Q 2003 Results
May 15, 2003
Page 7
PARALLEL PETROLEUM CORPORATION
PRODUCTION AND PRICE DATA
<table>
---------------------------------------------
12/31/2002 3/31/2002 3/31/2003
-------------- ------------- --------------
<s> <c> <c> <c>
Production and prices:
Oil (Bbls) 39,071 30,161 153,578
Natural gas (Mcf) 853,074 590,650 781,751
Equivalent barrels of oil (BOE) 181,250 128,603 283,870
Equivalent barrels of oil (BOE) per day 2,014 1,429 3,154
Prices:
Bbls (unhedged) $ 26.66 $ 21.20 $ 32.60
Bbls (hedged) $ 31.80
Mcf (unhedged) $ 4.17 $ 2.25 $ 5.82
Mcf (hedged) $ 4.62
BOE (unhedged) $ 25.47 $ 15.33 $ 33.66
BOE (hedged) $ 29.92
</table>
________________________________________________________________________________
PARALLEL PETROLEUM CORPORATION
HEDGING INFORMATION
COSTLESS COLLARS:
<table>
Houston Ship Channel
Gas Prices
----------------------------
MMBTU
Period of Time Natural Gas Floor Cap
- ------------------------------------- --------------- ------------- --------------
<s> <c> <c> <c>
2003 remainder (a) 642,000 $ 4.25 $ 5.30
</table>
SWAPS:
<table>
Volume Volume
Hedged Average Hedged Average
Period of Time Bbl Oil Price MMBTU Price
------------------- --------- --------- -------- --------
<s> <c> <c> <c> <c>
2003 remainder (a) 275,000 $ 24.58 642,000 $ 4.84
2004 329,400 $ 23.19
2005 292,000 $ 22.77
2006 265,500 $ 23.04
</table>
INTEREST RATE SWAPS:
<table>
LIBOR Expected Expected
Notional Fixed Margin Fixed
Period of Time Amount (c) Interest Rates (d) Rates (e) Interest Rates (f4)
------------------ ----------------- ------------------- ----------- ------------------
<s> <c> <c> <c> <c>
2003 remainder (a) $ 35,000,000 1.675% 2.750% 4.425%
2004 $ 30,000,000 2.660% 2.500% 5.160%
2005 $ 20,000,000 4.050% 2.250% 6.300%
2006 (b) $ 10,000,000 4.050% 2.250% 6.300%
</table>
(a) second quarter through fourth quarter
(b) through December 20, 2006
(c) Based on the anticipated principal reductions under our credit
facility.
(d) Parallel's swap contract with BNP Paribas.
(e) Based on the anticipated borrowing base usage under our credit
facility.
(f) Total of the libor fixed interest rate plus the expected margin
rate under our credit facility. Our loan agreement requires the
interest rate to not be below 4.50%.
________________________________________________________________________________
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<page>
Parallel Petroleum Announces 1Q 2003 Results
May 15, 2003
Page 8
Parallel Petroleum Corporation
Discretionary Cash Flow Reconciliation (Non-GAAP)
(Unaudited)
The following chart reconciles first quarter net cash provided by operating
activities to discretionary cash flow. To assess Parallel'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 or as a substitute for other financial
measurements prepared in accordance with 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 measure of other companies. Discretionary cash flow is defined as net
cash provided by (used in) operating activities adjusted for changes in
components of working capital and other liabilties.
<table>
Three Months Ended March 31,
----------------------------
2002 2003
--------- ----------
<s> <c> <c>
Net Cash Provided by (used in) operating activities $ (247,049) $ 3,574,322
Adjustments
Other, net 11,865 (22,784)
Accounts Receivable (161,584) 1,965,273
Prepaid expenses and other (95,571) (23,550)
Accounts Payable and accrued liabilities 864,538 313,586
Purchase of derivative instruments 391,105 -
---------- -----------
Discretionary Cash Flow (Non-GAAP) $ 763,304 $ 5,806,847
---------- -----------
</table>
_______________________________________________________________________________
The Company
Parallel Petroleum Corporation is headquartered in Midland, Texas and is an
independent energy company primarily engaged in the exploration, acquisition,
development 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.
###