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): November 15, 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)
432-684-3727
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
<page>
Item 2.02. Results of Operations and Financial Condition.
On November 15, 2004, Parallel Petroleum Corporation issued a news
release announcing the registrant's results of operations for its third fiscal
quarter and nine months ended September 30, 2004. The news release issued on
November 15, 2004 is furnished as Exhibit No. 99 to this Current Report on Form
8-K. Parallel Petroleum Corporation's Annual Report to Shareholders and its
reports on Forms 10-K, 10-Q and 8-K and other publicly available information
should be consulted for other important information about the registrant.
The information in this Current Report on Form 8-K, including Exhibit
No. 99 hereto, shall not be deemed "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to liability
of that section. The information in this Current Report shall not be
incorporated by reference into any filing or other document pursuant to the
Securities Act of 1933, as amended, except as shall be expressly set forth by
specific reference in such filing or document.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits
The Exhibit listed below is furnished as an Exhibit to this Current
Report on Form 8-K.
Exhibit No. Description of Exhibit
99 News release issued November 15, 2004
(furnished pursuant to Item 2.02)
2
<page>
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: November 15, 2004
3
EXHIBIT INDEX
Exhibit No. Description
99 News release issued November 15, 2004
(furnished pursuant to Item 2.02)
Exhibit 99
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
- -------------------------------------------------------------------------------
PARALLEL PETROLEUM ANNOUNCES
THIRD QUARTER 2004 FINANCIAL RESULTS
MIDLAND, Texas, (BUSINESS WIRE), November 15, 2004 - Parallel Petroleum
Corporation (NASDAQ: PLLL) today announced its financial results for the third
quarter ended September 30, 2004. In a separate press release dated November 12,
2004, Parallel announced its operations update.
Third Quarter Results
For the three months ended September 30, 2004, Parallel reported net income of
$1.0 million, or $.04 per diluted share. Included in net income was $2.0 million
of operating income, after oil and gas hedge payments of $2.5 million. For the
three months ended September 30, 2003, Parallel recorded net income of $1.6
million, or $.07 per diluted share, which included $3.4 million of operating
income, after oil and gas hedge payments of $0.5 million.
For the third quarter of 2004, Parallel's sales were 168 MBbls of oil and 619
MMcf of natural gas, or 272 MBOE. During this period, the average prices the
Company received for its oil and natural gas on an unhedged/hedged basis,
respectively, were $41.30/$28.50 per barrel and $5.24/$4.75 per Mcf, or
$37.56/$28.49 per BOE. For the same period of 2003, oil sales were 159 MBbls at
an average unhedged/hedged price of $31.00/$27.68 per barrel and natural gas
sales were 895 MMcf at an average price of $4.78/$4.86 per Mcf, or 308 MBOE at
$29.87/$28.39 per BOE.
Nine Months Results
For the nine months ended September 30, 2004, Parallel reported net income of
$3.6 million, or $.13 per diluted share. Included in net income was $6.9 million
of operating income, after oil and gas hedge payments of $5.4 million. For the
nine months ended September 30, 2003, Parallel recorded net income of $6.7
million, or $.27 per diluted share, which included $11.0 million of operating
income, after oil and gas hedge payments of $2.1 million.
For the nine months ended September 30, 2004, Parallel's sales were 495 MBbls of
oil and 1,995 MMcf of natural gas, or 828 MBOE. During this period, the average
prices the Company received for its oil and natural gas on an unhedged/hedged
basis, respectively, were $36.69/$27.00 per barrel and $5.45/$5.15 per Mcf, or
$35.10/$28.58 per BOE. For the same period of 2003, oil sales were 472 MBbls at
an average unhedged/hedged price of $29.86/$27.78 per barrel and natural gas
sales were 2,482 MMcf at an average price of $5.53/$5.10 per Mcf, or 886 MBOE at
$31.42/$29.09 per BOE.
Net cash provided by operating activities for the nine-month period ended
September 30, 2004, was $11.7 million, compared to $14.3 million for the same
period of 2003. The decrease was primarily related to increases in oil hedge
payments, lease operating expenses and general and administrative expenses.
Balance Sheet Review
At September 30, 2004, current assets were $13.7 million, which included $3.7
million of cash. Current liabilities were $16.7 million, including current
derivative obligations of $10.8 million, and long-term debt was $55.0 million.
The Company's net capitalized costs associated with its oil and gas properties
and other equipment were $129.0 million. Parallel's stockholders' equity as of
September 30, 2004 was $55.7 million, which includes $13.2 million of
accumulated comprehensive loss that is related to the Company's oil and gas
hedges.
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Parallel Petroleum Announces 3Q 2004 Results
November 15, 2004
Page 2
Management Comments
Larry C. Oldham, Parallel's President, commented, "As I commented in our
Operations Update that was released on November 12, 2004, our third quarter
production volumes continue to reflect the shift in the character and make-up of
our composite production base and were flat compared to the second quarter 2004.
However, we expect that our fourth quarter 2004 average daily production volumes
will increase approximately 25% over third quarter 2004 volumes to an estimated
3,700 BOE per day. This estimated 750 BOE per day increase will come from our
recent acquisitions, new gas wells and property exploitation."
Oldham further commented, "Our shallow decline rate Permian Basin properties are
expected to represent approximately 67% of our fourth quarter 2004 production
volumes compared to 56% in the fourth quarter 2003. Conversely, our high decline
rate gulf coast properties are expected to represent approximately 33% of our
fourth quarter 2004 volumes compared to 44% in the fourth quarter 2003."
In a final comment, Oldham stated, "These expected increases reflect our
execution of the `acquire and exploit' business model that we implemented in
June 2002. We believe our commitment to this model will yield consistent growth
in production and reserves over time."
Conference Call and Webcast Information
The Company's management will host a conference call to discuss its financial
and operational results for the third quarter ended September 30, 2004, on
Monday, November 15, 2004, at 1:00 p.m. Central time. To participate in the
call, dial 1-800-265-0241 or 1-617-847-8704, Participant Passcode 92226148, at
least five 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 1-888-286-8010 or 1-617-801-6888, Passcode 36960097.
FINANCIAL STATEMENTS AND SCHEDULES FOLLOW
PARALLEL PETROLEUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(dollars in millions)
September 30, December 31,
2004 2003
------------------- -------------------
<s> <c> <c>
(unaudited)
ASSETS
Current assets $ 13.7 $ 23.6
Net property and equipment 129.0 94.0
Other assets, net 1.2 0.7
----------- ----------
Total $ 143.9 $ 118.3
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 16.7 $ 7.2
Long-term debt, net 55.0 39.8
Deferred tax 5.4 5.8
Derivative obligations 9.3 2.7
Asset retirement obligations 1.8 1.6
Stockholders' equity 55.7 61.2
----------- ----------
Total $ 143.9 $ 118.3
=========== ==========
</table>
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Parallel Petroleum Announces 3Q 2004 Results
November 15, 2004
Page 3
<table>
PARALLEL PETROLEUM CORPORATION
CONDENSED CONSOLIDATED INCOME STATEMENT DATA
(Unaudited)
(in millions, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------- ------------------------------
2004 2003 2004 2003
----------------- ----------------- ---------------- -------------
<s> <c> <c> <c> <c>
Oil and gas revenues $ 7.8 $ 8.7 $ 23.7 $ 25.8
Total costs and expenses 5.8 5.3 16.8 14.8
----------- ----------- ---------- -----------
Operating income 2.0 3.4 6.9 11.0
----------- ----------- ---------- -----------
Total other expense, net (0.5) (0.5) (1.3) (1.4)
----------- ----------- ---------- -----------
Income before income taxes 1.5 2.9 5.6 9.6
Income tax expense, deferred (0.5) (1.3) (2.0) (2.9)
----------- ----------- ---------- -----------
Net income before cumulative effect 1.0 1.6 3.6 6.7
of change in accounting principle
Cumulative effect on prior years - - - (0.1)
of a change in accounting principle, net of tax
----------- ----------- ---------- -----------
Net income 1.0 1.6 3.6 6.6
Cumulative preferred stock dividend (0.1) (0.1) (0.4) (0.4)
----------- ----------- ---------- -----------
Net income available to common stockholders $ 0.9 $ 1.5 $ 3.2 $ 6.2
=========== =========== ========== ===========
Net income per common share:
Basic - after accounting change $ 0.04 $ 0.07 $ 0.13 $ 0.29
Diluted - after accounting change $ 0.04 $ 0.07 $ 0.13 $ 0.27
Weighted average common shares outstanding:
Basic 25.4 21.2 25.3 21.1
Diluted 28.5 24.2 28.3 24.1
- -----------------------------------------------------------------------------------------------------------------------------------
</table>
<table>
PARALLEL PETROLEUM CORPORATION
SALES VOLUMES AND PRICE DATA
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------------------------------------------
2004 2003 2004 2003
---------------- ----------------- ---------------- ----------------
<s> <c> <c> <c> <c>
Sales Volumes:
Oil (MBbls) 168 159 495 472
Natural gas (MMcf) 619 895 1,995 2,482
Equivalent barrels of oil (MBOE) (a) 272 308 828 886
Equivalent barrels of oil (BOE) per day 2,954 3,417 3,022 3,279
Average Sales Prices:
per Bbl (unhedged) (b) $ 41.30 $ 31.00 $ 36.69 $ 29.86
per Bbl (hedged) (c) $ 28.50 $ 27.68 $ 27.00 $ 27.78
per Mcf (unhedged) (b) $ 5.24 $ 4.78 $ 5.45 $ 5.53
per Mcf (hedged) (c) $ 4.75 $ 4.86 $ 5.15 $ 5.10
per BOE (unhedged) (b) $ 37.56 $ 29.87 $ 35.10 $ 31.42
per BOE (hedged) (c) $ 28.49 $ 28.39 $ 28.58 $ 29.09
</table>
- --------------------------------------------------
(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 Announces 3Q 2004 Results
November 15, 2004
Page 4
PARALLEL PETROLEUM CORPORATION
HEDGING INFORMATION
<table>
COSTLESS COLLARS: NYMEX Houston Ship Channel
Oil Prices Gas Prices
Barrels of -------------------------------- MMBTU of --------------------------
Period of Time Oil Floor Cap Natural Gas Floor Cap
- ------------------------------- ------------------ ---------------- --------------- --------------- ------------ ------------
<s> <c> <c> <c> <c> <c> <c>
2004 remainder (a) - - - 31,000 $4.40 $5.50
2005 (b) - - - 428,000 $5.00 $7.26
2005 73,000 $36.00 $49.50 - - -
2006 70,800 $35.00 $44.00 - - -
</table>
<table>
SWAPS: Volume NYMEX Volume Houston Ship Channel
Hedged Oil Hedged Gas
Period of Time Bbl Oil Swap Price MMBTU Swap Price
- ------------------------------- ------------------ ------------------- ------------------ ----------------------
<s> <c> <c> <c> <c>
2004 remainder (a) 110,400 $24.23 215,000 $4.699
2005 620,500 $30.19 - -
2005 (c) - - 180,000 $4.705
2006 448,000 $28.46 - -
2007 474,500 $34.36 - -
2008 439,200 $33.37 - -
</table>
<table>
INTEREST RATE SWAPS: LIBOR
Notional Fixed
Period of Time Amount Interest Rates (i)
- ------------------------------- ------------------ -------------------
<s> <c> <c>
2004 remainder (a) $30,000,000 2.660%
2005 $20,000,000 4.050%
2005 (d) $30,000,000 2.890%
2006 (e) $10,000,000 4.050%
2006 (f) $40,000,000 3.760%
2007 (g) $50,000,000 4.300%
2008 (h) $50,000,000 4.740%
</table>
- ---------------------------------------------------
(a) Third quarter thru fourth quarter 2004.
(b) April 1, 2005 thru October 31, 2005
(c) January 1, 2005 thru March 31, 2005
(d) December 31, 2004 thru December 30, 2005
(e) Through December 20, 2006.
(f) December 31, 2005 thru December 30, 2006
(g) December 31, 2006 thru December 30, 2007
(h) December 31, 2007 thru December 30, 2008
(i) Parallel's swap contract with BNP Paribas.
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Parallel Petroleum Announces 3Q 2004 Results
November 15, 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 Exc
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