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
PARALLEL PETROLEUM ANNOUNCES
2004 YEAR END RESERVES, OPERATIONS UPDATE AND 2005 CAPITAL BUDGET
MIDLAND, Texas, (BUSINESS WIRE), January 11, 2005 - Parallel Petroleum
Corporation (NASDAQ: PLLL) today announced its 2004 year end reserves,
operations update, and its $43.7 million 2005 capital investment budget. The
2005 capital investment budget reflects the Company's plans to accelerate
activities, primarily on its Permian Basin properties and Barnett Shale gas
project. Please refer to the Company's news release dated November 12, 2004 for
prior information on the Company's operations and its $25.3 million 2004 capital
investment budget.
Proved Reserves
As shown in the table below, Parallel's SEC PV-10% total proved reserve value
increased approximately 83%, to approximately $270.77 million as of December 31,
2004, compared to $147.79 million as of December 31, 2003. The net
change in present value was the result of reserve additions from enhancements,
drilling and acquisitions, reserve revisions and increased oil and natural gas
prices, partially offset by both production and reserve dispositions during
2004.
<table>
December 31, December 31, Percentage
2003 (a) 2004 (a) Change
--------------------- -------------------- ---------------------
<s> <c> <c> <c>
Total Proved Reserves:
Oil (MMBbls) 12.08 19.27 60%
Gas (Bcfg) 16.27 17.02 5%
MMBOE 14.79 22.10 49%
SEC Reserve Categories:
PDP (MMBOE) (b) 9.95 15.25 53%
PDNP (MMBOE) (c) 1.00 0.32 -68%
PUD (MMBOE) (d) 3.84 6.53 70%
-------- --------
Total Proved Reserves (MMBOE) 14.79 (e) 22.10 (f) 49%
-------- --------
Pretax PV-10% ($MM) $ 147.79 (e) $ 270.77 (f) 83%
Price of oil per Bbl $ 30.63 (e) $ 40.60 (f) 33%
Price of natural gas per Mcf $ 5.45 (e) $ 5.65 (f) 4%
</table>
- ----------------------
(a) Based on independent reserve studies prepared by Cawley, Gillespie &
Associates, Inc.
(b) PDP is proved developed producing reserves.
(c) PDNP is proved developed non-producing reserves.
(d) PUD is proved undeveloped reserves.
(e) Based on December 31, 2003 realized oil and natural gas prices.
(f) Based on December 31, 2004 realized oil and natural gas prices.
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Parallel Petroleum Announces 2004 Year End Reserves, Operations Update and
2005 Capital Budget
January 11, 2005
Page 2
Current Production and Estimated Proved Reserves by Area/Property
<table>
Estimated PDP (a) Estimated PDNP (b) Estimated PUD (c) Estimated Total Proved
Estimated ------------------ -------------------- ------------------- ----------------------- % of
Current MMBOE PV-10% MMBOE PV-10% MMBOE PV-10% MMBOE PV-10% TOTAL
AREA/PROPERTY BOEPD ($MM)(d) ($MM)(d) ($MM) (d) ($MM)(d) PV-10%
- ------------------------ --------- -------- -------- -------- -------- -------- ------- -------- --------- --------
<s> <c> <c> <c> <c> <c> <c> <c> <c> <c> <c>
Permian Basin
Fullerton San Andres 1,640 9.82 $112.30 0.06 $ 1.07 1.52 $ 15.44 11.40 $ 128.81 48%
Carm-Ann San Andres/
N. Means Queen 190 1.13 15.92 - - 1.84 19.12 2.97 35.04 13%
Diamond M Shallow 140 1.32 12.29 0.20 3.76 1.69 18.05 3.21 34.10 13%
Diamond M Canyon Reef 150 0.36 5.11 - - 0.96 17.78 1.32 22.89 8%
New Mexico Abo 10 0.03 0.52 - - - - 0.03 0.52 0%
Other Permian Basin 450 1.49 16.92 - - 0.52 5.95 2.01 22.87 8%
------- -------- -------- -------- -------- -------- ------- -------- -------- -------
Total 2,580 14.15 $163.06 0.26 $ 4.83 6.53 $ 76.34 20.94 $ 244.23 90%
------- -------- -------- -------- -------- -------- ------- -------- -------- -------
Onshore Gulf Coast of
South Texas
Yegua/Frio 870 1.00 $ 22.21 0.06 $ 1.40 - $ - 1.06 $ 23.61 9%
Cook Mountain 290 0.10 2.93 - - - - 0.10 2.93 1%
------- -------- -------- -------- -------- -------- ------- -------- -------- --------
Total 1,160 1.10 $ 25.14 0.06 $ 1.40 - $ - 1.16 $ 26.54 10%
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
GRAND TOTAL 3,740 15.25 $188.20 0.32 $ 6.23 6.53 $ 76.34 22.10 $ 270.77 100%
======= ======== ======== ======== ======== ======== ======== ======== ======== ========
</table>
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(a) PDP is proved developed producing reserves.
(b) PDNP is proved developed non-producing reserves.
(c) PUD is proved undeveloped reserves.
(d) Based on December 31, 2004 realized oil and natural gas prices.
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2005 Capital Investment Budget by Area/Property
<table>
Recompletions New Leasehold,
& Workovers Drills Seismic & Other Total % of
AREA/PROPERTY ($MM) ($MM) ($MM) ($MM) Total
- ------------------------------------- ----------------- ----------------- ------------------- --------------- -------------
<s> <c> <c> <c> <c> <c>
Permian Basin
Fullerton San Andres $ - $ 3.6 $ 0.1 $ 3.7 8.5%
Carm-Ann San Andres/N. Means Queen 0.8 2.8 0.5 4.1 9.4%
Diamond M Shallow 1.8 3.1 0.1 5.0 11.4%
Diamond M Canyon Reef 5.3 1.8 2.3 9.4 21.5%
New Mexico Abo 1.0 5.2 1.4 7.6 17.4%
Other Permian Basin - - 2.0 2.0 4.6%
--------- --------- --------- --------- ----------
Total $ 8.9 $ 16.5 $ 6.4 $ 31.8 72.8%
--------- --------- --------- --------- ----------
Onshore Gulf Coast of South Texas
Yegua/Frio $ - $ 0.9 $ - $ 0.9 2.1%
Cook Mountain - 0.9 - 0.9 2.1%
--------- --------- --------- --------- ----------
Total $ - $ 1.8 $ - $ 1.8 4.1%
--------- --------- --------- --------- ----------
North Texas
Barnett Shale $ - $ 5.6 $ 2.0 $ 7.6 17.4%
--------- --------- --------- --------- ----------
Other Projects
Utah CBM Gas $ - $ 0.5 $ 0.9 $ 1.4 3.2%
East Texas Cotton Valley Reef - 0.8 0.3 1.1 2.5%
--------- --------- --------- --------- ----------
Total $ - $ 1.3 $ 1.2 $ 2.5 5.7%
--------- --------- --------- --------- ----------
GRAND TOTAL $ 8.9 $ 25.2 $ 9.6 $ 43.7 100.0%
========= ========= ========= ========= ==========
</table>
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Parallel Petroleum Announces 2004 Year End Reserves, Operations Update and
2005 Capital Budget
January 11, 2005
Page 3
Current Operations by Area/Property
Permian Basin
The Permian Basin generates approximately 69% of Parallel's current
daily production (2,580 BOE per day) and represented approximately 90%
of its reserve value as of December 31, 2004.
Fullerton San Andres Field, Andrews County, Texas - This property
generates approximately 44% of the Company's current daily production
(1,640 BOE per day) and represented approximately 48% of its reserve
value as of December 31, 2004.
This property was acquired in December 2002 for approximately $46.1
million. During the fourth quarter of 2004, the Company acquired
additional interests in the property for approximately $20.9 million.
Development since the initial acquisition in 2002 has primarily
consisted of the re-stimulation of approximately 80 existing producing
wells and the drilling of six new producing wells. Current gross
incremental daily production is approximately 600 barrels of oil per
day above the initial extrapolated base production decline.
The Company has budgeted approximately $3.7 million to fund the
drilling and completion of 13 new infill wells in the field in 2005.
Parallel's average working interest in the Fullerton properties is
approximately 82%.
Carm-Ann San Andres Field / N. Means Queen Unit, Andrews & Gaines
Counties, Texas - These properties generate approximately 5% of the
Company's current daily production (190 BOE per day) and represented
approximately 13% of its reserve value as of December 31, 2004.
These properties were acquired during the fourth quarter of 2004, and
additional interests were acquired earlier this month. On October 14,
2004, the Company announced the acquisition of these properties, which
include interests in 25 leases covering 5,360 gross contiguous acres,
with 67 gross producing oil wells, for an investment of $13.6 million.
This acquisition established a new core operating area that is located
within 50 miles of the Company's Midland, Texas, headquarters.
The Company has budgeted approximately $4.1 million for the Carm-Ann/
N. Means Queen properties in 2005 for 22 workovers and 13 new infill
wells. Parallel's average working interest in these properties is
approximately 77%.
Diamond M Shallow Leases, Scurry County, Texas - This property
generates approximately 4% of the Company's current daily production
(140 BOE per day) and represented approximately 13% of its reserve
value as of December 31, 2004.
Development activity on this project during 2004 consisted primarily of
the drilling of 12 new producing wells and 18 new injection wells.
Current gross production is approximately 280 BOE per day above the
initial extrapolated base production decline with additional response
anticipated as reservoir pressure builds due to water injection.
The Company has budgeted a total of $5.0 million in 2005 to fund 16
workovers and well conversions in this project throughout the year and
for a 15-well development drilling program during the fourth quarter of
2005, pending satisfactory waterflood response. Parallel's average
working interest in these properties is approximately 66%.
Diamond M Canyon Reef Unit, Scurry County, Texas - This property
generates approximately 4% of the Company's current daily production
(150 BOE per day) and represented approximately 8% of its reserve value
as of December 31, 2004.
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Parallel Petroleum Announces 2004 Year End Reserves, Operations Update and
2005 Capital Budget
January 11, 2005
Page 4
The Company assumed operations of this project in March 2003. Field
activity has primarily consisted of facility upgrades, geophysical
testing, and the reactivation (workover) of two existing wells during
the fourth quarter of 2004. Current gross production is approximately
275 BOE per day above the initial extrapolated base production decline.
A total of $9.4 million has been budgeted in 2005 to fund the workover
of 24 wells, the drilling of 3 new wells, the acquisition of a new 3-D
seismic survey and associated equipment upgrades. Parallel's average
working interest in these properties is approximately 66%.
New Mexico Abo Gas Project - This project generates less than 1% of the
Company's current daily production (10 BOE per day) and represented
less than 1% of its reserve value as of December 31, 2004.
This project consists of two areas in which the primary target is the
Abo formation at a depth of approximately 5,000 feet. The Abo formation
is a known natural gas-producing reservoir but historically has been
marginally economic due to low per-well producing rates and low natural
gas prices. Parallel believes this project's reservoir can be more
efficiently exploited through the application of new horizontal
drilling and hydraulic fracture stimulation technologies.
The Company has budgeted approximately $7.6 million for the New Mexico
properties in 2005 for 3 re-entries, 6 new wells, and additional
leasehold acquisitions.
Area 1 - This project consists of approximately 50,000 gross (4,250
net) acres. Parallel's base working interest in this area is
approximately 8.5%. Since December 2003, Parallel has participated in
the drilling of six Abo horizontal gas wells operated by Perenco, LLC.
Three wells are currently producing to sales. One well, which went to
sales in June 2004, is producing approximately 1,000 gross Mcf of gas
per day, and the other two wells are each producing approximately 100
gross Mcf of gas per day. The other three wells are currently testing.
The Company believes the two lesser producing wells are performing in a
manner similar to historical vertical wells rather than efficiently
completed horizontal wells. Refinement of the completion process is
ongoing.
The Company also has, within Area 1, a 20% working interest in one well
that is operated by EOG Resources.
Area 2 - This project consists of undeveloped leasehold interests in
approximately 30,000 gross (25,500 net) acres, is contiguous to Area 1,
and will be operated by Parallel. The Company expects the commencement
of drilling operations in Area 2 to begin in early 2005 and will
utilize well completion information gained from experience in Area 1.
The Company owns an 85.0% working interest in this area.
The estimated cost to drill and complete a horizontal well is
approximately $1.6 million. Parallel expects this project to become a
multi-well, long-life gas project that will be developed over the next
three to five years.
Other Permian Basin Projects - Other Permian Basin projects generate
approximately 12% of the Company's current daily production (450 BOE
per day) and represented approximately 8% of its reserve value as of
December 31, 2004.
The Company has budgeted approximately $2.0 million for other Permian
Basin properties in 2005 primarily for lease and well equipment and
capitalized overhead.
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Parallel Petroleum Announces 2004 Year End Reserves, Operations Update and
2005 Capital Budget
January 11, 2005
Page 5
Onshore Gulf Coast of South Texas
Yegua/Frio Gas Project, Jackson and Wharton Counties, Texas - This
project generates approximately 23% of the Company's current daily
production (870 BOE per day) and represented approximately 9% of its
reserve value as of December 31, 2004.
The Company has budgeted approximately $.9 million for the Yegua/Frio
gas project in 2005 for the drilling and completion of 3 wells.
Cook Mountain Gas Project, Liberty County, Texas - This project
generates approximately 8% of the Company's current daily production
(290 BOE per day) and represented approximately 1% of its reserve value
as of December 31, 2004.
The Company has budgeted approximately $.9 million for the Cook
Mountain gas project in 2005 for the drilling and completion of 3
wells.
North Texas
Barnett Shale Gas Project, Tarrant County, Texas - The Company's
development of this project is expected to begin in the first quarter
of 2005. This project does not yet contribute to the Company's current
daily production or reserve value.
Parallel's Barnett Shale gas project is located east of downtown Ft.
Worth, in Tarrant County, Texas, between the Newark East Barnett Shale
gas field to the north in Tarrant County and the Cleburne Barnett Shale
gas field to the south in Johnson County. The Company's current
leasehold position in the project is approximately 5,000 gross (1,400
net) acres.
Having assembled pipeline right-of-way and permits necessary to
complete a gas gathering infrastructure, Parallel and Dallas based
operator, Dale Operating, LLC, anticipate drilling a horizontal well,
the Brentwood No. 1, in the first quarter of 2005, pending rig
availability. Parallel's working interest in this well is 40%.
The Company is currently participating in the Parrot #1 horizontal
well, which is operated by Four Sevens, a Ft. Worth based operator.
This well is located on leasehold contiguous to Parallel's 5,000
gross-acre leasehold position. The well is currently drilling at an
approximate vertical depth of 7,000 feet. Parallel's working interest
in this well is 20%.
The estimated cost to drill and complete a horizontal well is
approximately $2.0 million. Parallel expects this project to become a
multi-well, long-life gas project that will be developed over the next
three to five years.
The Company has budgeted approximately $7.6 million for the Barnett
Shale gas project in 2005 for the drilling and completion of 7 new
wells, pipeline construction and leasehold acquisition.
Other Projects
Utah CBM (Coal Bed Methane) Gas Project - The Company's development of
this project is expected to begin in the first half of 2005. This
project does not yet contribute to the Company's current daily
production or reserve value.
Parallel has increased its leasehold acreage position in this project
to approximately 125,000 gross acres. It is a multiple zone project
consisting of both oil and gas targets at a depth of less than 6,000
feet. Seismic and geological data evaluation on this project continues.
Parallel expects to drill a test well during the first half of 2005.
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Parallel Petroleum Announces 2004 Year End Reserves, Operations Update and
2005 Capital Budget
January 11, 2005
Page 6
The Company has budgeted approximately $1.4 million for the Utah CBM
gas project in 2005 for the drilling and completion of 1 well, seismic
and leasehold acquisition, and multiple core test holes for coal-bed
methane potential. Parallel owns and operates 100% of this project.
East Texas Cotton Valley Reef Gas Project - This project does not yet
contribute to the Company's current daily production or reserve value.
This 3-D seismic gas project is a higher risk profile than the
Company's other projects. The objective is the Cotton Valley barrier
reef facies found between the depths of 16,000 and 18,000 feet. The
project consists of approximately 5,000 gross (650 net) acres.
The first well was drilled to a total depth of 18,100 feet, during
2004, finding a non-porous Cotton Valley Reef interval. The well has
been temporarily abandoned, and the operator is evaluating shallower
zones for possible completion. The operator is also re-evaluating
seismic to help determine other drilling locations with optimal
porosity potential.
The Company has budgeted approximately $1.1 million for the Cotton
Valley Reef gas project in 2005 for the drilling of 1 well and
additional leasehold acquisition. Parallel owns an approximate 13.125%
working interest in this project.
Management Comments
Larry C. Oldham, Parallel's President, commented, "Capital allocation should
always be predicated on the technical maturity of the individual projects,
probability of success, satisfactory production performance, reasonable supply
and service costs, and acceptable commodity pricing. All these factors combine
to determine project economics. Our 2005 capital budget reflects our confidence
in the energy markets, our current project inventory, and our ability to
efficiently execute an aggressive development plan to achieve results similar to
our 49% increase in proved reserves volumes and 83% increase in proved reserves
value over the past twelve months."
In a final comment, Oldham stated, "In addition to accelerating developmental
activity on the Fullerton, Diamond M and New Mexico Abo projects, which were
active in 2004, we will initiate development on the Barnett Shale gas project
and Utah CBM project. As in the past, the budget will be funded from operating
cash flow, borrowings under our credit facility and proceeds from the sales of
securities. The actual expenditures may vary from the budgeted amounts,
depending upon the results of the Company's activities and other factors."
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.
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