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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 16, 2004
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)
Registrant's telephone number, including area code: (432) 684-3727
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Item 7. Financial Statements and Exhibits.
(c) Exhibits.
99.1 Press Release dated August 16, 2004 announcing financial
results for the second fiscal quarter ended June 30, 2004.
Item 12. Results of Operations and Financial Condition.
Parallel Petroleum Corporation wishes to disclose its press release,
dated August 16, 2004, relating to its results of operations and financial
condition for the second fiscal quarter ended June 30, 2004, furnished herewith
as Exhibit 99.1.
The information included in this report is being furnished 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.
-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
and Chief Executive Officer
Dated: August 16, 2004
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EXHIBIT INDEX
Exhibit No. Description
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99.1 Press Release dated August 16, 2004 announcing
financial results of Parallel Petroleum Corporation
for the second fiscal quarter ended June 30, 2004.
<page>
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.plll.com cindyt@plll.com
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PARALLEL PETROLEUM ANNOUNCES
SECOND QUARTER 2004 FINANCIAL RESULTS
MIDLAND, Texas, (BUSINESS WIRE), August 16, 2004 - Parallel Petroleum
Corporation (NASDAQ: PLLL) today announced its financial results for the second
quarter ended June 30, 2004. In a separate press release dated August 13, 2004,
Parallel announced its operations update.
Second Quarter Results
For the three months ended June 30, 2004, Parallel reported net income of $1.0
million, or $.04 per diluted share. Included in net income was $2.2 million of
operating income, after oil and gas hedge payments of $1.8 million. For the
three months ended June 30, 2003, Parallel recorded net income of $2.6 million,
or $.11 per diluted share, which included $3.4 million of operating income,
after oil and gas hedge payments of $0.5 million.
For the second quarter of 2004, Parallel's sales were 166 MBbls of oil and 644
MMcf of natural gas, or 273 MBOE. The average prices the Company received for
its oil and natural gas on an unhedged/hedged basis, respectively, were
$35.70/$26.54 per barrel and $5.94/$5.45 per Mcf, or $35.72/$29.00 per BOE. For
the same period of 2003, oil sales were 160 MBbls at an average unhedged/hedged
price of $26.09/$24.00 per barrel and natural gas sales were 805 MMcf at an
average price of $6.10/$5.84 per Mcf, or 294 MBOE at $30.89/$29.03 per BOE.
Six Months Results
For the six months ended June 30, 2004, Parallel reported net income of $2.5
million, or $.09 per diluted share. Included in net income was $4.9 million of
operating income, after oil and gas hedge payments of $2.9 million. For the six
months ended June 30, 2003, Parallel recorded net income of $5.0 million, or
$.20 per diluted share, which included $7.6 million of operating income, after
oil and gas hedge payments of $1.6 million.
For the six months ended June 30, 2004, Parallel's sales were 327 MBbls of oil
and 1,376 MMcf of natural gas, or 556 MBOE. The average prices the Company
received for its oil and natural gas on an unhedged/hedged basis, respectively,
were $34.31/$26.21 per barrel and $5.55/$5.34 per Mcf, or $33.92/$28.63 per BOE.
For the same period of 2003, oil sales were 313 MBbls at an average
unhedged/hedged price of $29.28/$27.82 per barrel and natural gas sales were
1,587 MMcf at an average price of $5.96/$5.24 per Mcf, or 578 MBOE at
$32.25/$29.46 per BOE.
Net cash provided by operating activities for the six-month period ended June
30, 2004, was $8.6 million, compared to $8.9 million for the same period of
2003. The decrease was primarily related to decreased gas sales volumes,
decreased gas prices, and oil hedge payments partially offset by increased oil
sales volumes and prices.
Balance Sheet Review
At June 30, 2004, current assets were $12.7 million, which included $4.9 million
of cash. Current liabilities were $11.2 million, including current derivative
obligations of $6.2 million, and long-term debt was $34.0 million. The Company's
net capitalized costs associated with its oil and gas properties and other
equipment were $105.2 million. Parallel's stockholders' equity as of June 30,
2004 was $60.4 million, which includes $7.0 of accumulated comprehensive loss
that is related to the Company's oil and gas hedges.
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Parallel Petroleum Announces 2Q 2004 Results
August 16, 2004
Page 2
Non-Strategic Asset Divestiture
Parallel divested interests in 41 non-core, short-lived assets in the July 2004
Oil and Gas Asset Clearinghouse auction. Net daily production and net reserves
attributable to the assets sold were approximately 78 BOE per day and 114 MBOE,
respectively. Gross proceeds from the sale were $1.87 million, yielding
approximately $16.45 per BOE of reserves and approximately $24,000 per net daily
BOE sold. These assets represented less than 3% of net daily production and less
than 1% of reserves as of June 30, 2004. Parallel will continue to evaluate all
portfolio assets for economic viability and strategic fit.
Management Comments
Larry C. Oldham, Parallel's President, commented, "Second quarter 2004 was a
transition quarter for the Company. Overall production volumes were down 3%
compared to the first quarter of 2004. As expected, gulf coast volumes continued
to decline by approximately 10%. Permian Basin volumes increased 2% in response
to early stage development. The Permian Basin now represents approximately 65%
of our total production, compared to approximately 61% during the first quarter
of 2004. As we continue to develop our longer-life assets, we expect production
volumes to consistently grow through time."
Oldham further commented, "During the six months ended June 30, 2004, our oil
hedge payments were $2.6 million. The majority of these oil hedge payments are
the result of hedges required by our bank lenders when we acquired the Fullerton
property in December 2002. These oil hedges decrease in both volume and price
through December 2006, when the last contract expires."
In a final comment, Oldham stated, "As we announced on August 4, 2004, our
proved developed producing reserves increased 2.02 million BOE, which
represented approximately 360% of our production for the six months ended June
30, 2004. The majority of this increase was on our longer-life assets. We are
confident in our ability to grow production, reserves, and shareholder value
with this set of assets and our `acquire and exploit' business strategy."
Conference Call and Webcast Information
The Company's management will host a conference call to discuss its financial
and operational results for the second quarter ended June 30, 2004, on Monday,
August 16, 2004, at 1:00 p.m. Central time. To participate in the call, dial
1-800-295-4740 or 1-617-614-3925, Participant Passcode 57954752, 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.plll.com. A replay of the conference call will
be available at the Company's web site or by calling 1-888-286-8010 or
1-617-801-6888, Passcode 66990827.
Financial statements and schedules folloW
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Parallel Petroleum Announces 2Q 2004 Results
August 16, 2004
Page 3
<table>
PARALLEL PETROLEUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(dollars in millions)
June 30, December 31,
2004 2003
------------------- -------------------
(unaudited)
<s> <c> <c>
ASSETS
Current assets $ 12.7 $ 23.6
Net property and equipment 105.2 94.0
Other assets, net 0.9 0.7
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Total $ 118.8 $ 118.3
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 11.2 $ 7.2
Long-term debt, net 34.0 39.8
Deferred tax 6.5 5.8
Derivative obligations 4.7 2.7
Other liabilities 2.0 1.6
Stockholders' equity 60.4 61.2
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Total $ 118.8 $ 118.3
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</table>
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<table>
PARALLEL PETROLEUM CORPORATION
CONDENSED CONSOLIDATED INCOME STATEMENT DATA
(Unaudited)
(in millions, except per share data)
Three Months Ended June 30, Six Months Ended June 30,
----------------------------------- --------------------------------
2004 2003 2004 2003
----------------- ----------------- ----------------- --------------
<s> <c> <c> <c> <c>
Oil and gas revenues $ 7.9 $ 8.5 $ 15.9 $ 17.0
Total costs and expenses 5.7 5.1 11.0 9.4
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Operating income 2.2 3.4 4.9 7.6
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Total other expense, net (0.5) (0.3) (0.9) (0.9)
----------- ----------- ---------- -----------
Income before income taxes 1.7 3.1 4.0 6.7
Income tax expense, deferred (0.7) (0.5) (1.5) (1.7)
----------- ----------- ---------- -----------
Income before cumulative effect
of change in accounting principle 1.0 2.6 2.5 5.0
Cumulative effect on prior years
of a change in accounting principle, net of tax - - - (0.1)
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Net income 1.0 2.6 2.5 4.9
Cumulative preferred stock dividend (0.1) (0.1) (0.2) (0.2)
----------- ----------- ---------- -----------
Net income available to common stockholders $ 0.9 $ 2.5 $ 2.3 $ 4.7
=========== =========== ========== ===========
Net income per common share:
Basic - after accounting change $ 0.04 $ 0.12 $ 0.09 $ 0.22
Diluted - after accounting change $ 0.04 $ 0.11 $ 0.09 $ 0.20
Weighted average common shares outstanding (millions):
Basic 25.2 21.1 25.2 21.1
Diluted 28.3 24.0 28.3 24.0
</table>
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<page>
Parallel Petroleum Announces 2Q 2004 Results
August 16, 2004
Page 4
PARALLEL PETROLEUM CORPORATION
SALES VOLUMES AND PRICE DATA
<table>
Three Months Ended Six Months Ended
---------------------------------- ----------------------------------
6/30/2004 6/30/2003 6/30/2004 6/30/2003
---------------- ----------------- ---------------- ----------------
<s> <c> <c> <c> <c>
Sales Volumes:
Oil (MBbls) 166 160 327 313
Natural gas (MMcf) 644 805 1,376 1,587
Equivalent barrels of oil (MBOE) (a) 273 294 556 578
Equivalent barrels of oil (BOE) per day 3,006 3,230 3,057 3,192
Average Sales Prices:
per Bbl (unhedged) (b) $ 35.70 $ 26.09 $ 34.31 $ 29.28
per Bbl (hedged) (c) $ 26.54 $ 24.00 $ 26.21 $ 27.82
per Mcf (unhedged) (b) $ 5.94 $ 6.10 $ 5.55 $ 5.96
per Mcf (hedged) (c) $ 5.45 $ 5.84 $ 5.34 $ 5.24
per BOE (unhedged) (b) $ 35.72 $ 30.89 $ 33.92 $ 32.25
per BOE (hedged) (c) $ 29.00 $ 29.03 $ 28.63 $ 29.46
</table>
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(a) A BOE means one barrel of oil equivalent using the ratio of six Mcf of gas
to one barrel of oil. "MBOE" means one thousand BOE.
(b) Unhedged price is the actual price received at the wellhead for our oil and
natural gas.
(c) Hedged price is the actual price received at the wellhead for our oil and
natural gas plus or minus the settlements on our derivatives.
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PARALLEL PETROLEUM CORPORATION
HEDGING INFORMATION
<table>
COSTLESS COLLARS: Houston Ship Channel
Gas Price
MMBTU --------------------------------------
Period of Time Natural Gas Floor Cap
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<s> <c> <c> <c>
2004 remainder (a) 123,000 $4.40 $5.50
2005 428,000 $5.00 $7.26
</table>
<table>
SWAPS: Volume Volume
Hedged Average Hedged Average
Period of Time Bbl Oil Price MMBTU Price
- -------------------------------- ------------------- ------------------ ------------------- -------------------
<s> <c> <c> <c> <c>
2004 remainder (a) 220,800 $24.27 491,000 $4.694
2005 365,000 $23.35 180,000 $4.705
2006 265,500 $23.04
</table>
<table>
INTEREST RATE SWAPS: LIBOR Expected Expected
Notional Fixed Margin Fixed
Period of Time Amount (c) Interest Rates (d) Rates (e) Interest Rates (f)
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<s> <c> <c> <c> <c>
2004 remainder (a) $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>
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(a) Third 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 required the interest rate to
not be below 4.50%.
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<page>
Parallel Petroleum Announces 2Q 2004 Results
August 16, 2004
Page 5
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
and 3-D seismic technology. Additional information on Parallel Petroleum
Corporation is available at www.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 "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.
###