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): May 10, 2005
PARALLEL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-13305 75-1971716
(Commission file number) (IRS employer identification number)
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))
Item 2.02. Results of Operations and Financial Condition.
On May 10, 2005, Parallel Petroleum Corporation issued a press release
announcing its results of operations for the first quarter ended March 31, 2005.
The press release issued on May 10, 2005 is furnished as Exhibit No. 99 to this
Current Report on Form 8-K. Parallel's reports on Forms 10-K, 10-Q and 8-K and
other publicly available information should be consulted for other important
information about Parallel.
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 Press release issued May 10, 2005
(furnished pursuant to Item 2.02)
-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: May 10, 2005
-3-
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
*99 Press release issued May 10, 2005
(furnished pursuant to Item 2.02)
- -------------------
*Filed herewith.
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
FIRST QUARTER 2005 FINANCIAL RESULTS
MIDLAND, Texas, (BUSINESS WIRE), May 10, 2005 - Parallel Petroleum Corporation
(NASDAQ: PLLL) today announced its financial results for the first quarter ended
March 31, 2005. In a separate press release dated May 9, 2005, Parallel
announced its operations update.
First Quarter Results
For the three months ended March 31, 2005, Parallel reported a net loss of $0.6
million, or $.02 per diluted share. Operating income was $2.6 million, after oil
and gas hedge payments of $3.2 million. For the three months ended March 31,
2004, Parallel recorded net income of $1.5 million, or $.05 per diluted share,
which included $2.7 million of operating income, after oil and gas hedge
payments of $1.1 million.
For the first quarter of 2005, Parallel's sales were 207 MBbls of oil and 602
MMcf of natural gas, or 307 MBOE. During this period, the average prices the
Company received for its oil and natural gas on an unhedged/hedged basis,
respectively, were $45.29/$30.72 per barrel and $6.00/$5.66 per Mcf, or
$42.25/$31.78 per BOE. For the same period of 2004, oil sales were 161 MBbls at
an average unhedged/hedged price of $32.93/$25.93 per barrel and natural gas
sales were 732 MMcf at an average price of $5.21/$5.24 per Mcf, or 283 MBOE at
$32.21/$28.30 per BOE.
Net cash provided by operating activities for the three-month period ended March
31, 2005, was $3.8 million, compared to $4.0 million for the same period of
2004. The decrease was primarily related to increases in oil hedge payments,
lease operating expenses, interest expense and general and administrative
expenses. The largest increase in general and administrative expenses was in
public reporting costs associated with Sarbanes-Oxley 404 compliance.
Balance Sheet Review
At March 31, 2005, current assets were $15.7 million, which included $3.2
million of cash. Current liabilities were $22.0 million, including current
derivative obligations of $15.8 million, and long-term debt was $50.0 million.
The Company's net capitalized costs associated with its oil and gas properties
and other equipment were $156.6 million. Parallel's stockholders' equity as of
March 31, 2005 was $74.0 million, which includes $24.1 million of accumulated
comprehensive loss that is related to the Company's oil and gas hedges.
Equity Offering
Parallel announced on February 9, 2005, that it sold 5,750,000 shares of its
common stock pursuant to a public offering at a price of $5.27 per share,
resulting in net proceeds of approximately $28.0 million. The common shares were
issued under Parallel's universal shelf registration statement on Form S-3. The
Company applied the $28.0 million to its line of credit, reducing long-term debt
to approximately $50.0 million.
Non-Strategic Asset Divestiture
In January 2005, Parallel divested interests in 6 Permian Basin assets, located
in Howard County, Texas, to an unaffiliated third party. Net proceeds from the
sale were approximately $2.5 million and resulted in a net reduction in the
Company's production of approximately 60 BOE per day. These properties
represented less than 0.2% of the Company's total proved reserves as of December
31, 2004. Parallel will continue to evaluate all portfolio assets for economic
viability and strategic fit.
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Parallel Petroleum Announces 1Q 2005 Financial Results
May 10, 2005
Page 2
First Quarter 2005 Pre-tax, Non-cash Loss on "Ineffective Portion of Oil Hedges"
The Company recorded a pre-tax, non-cash loss of approximately $2.3 million on
"ineffective portion of oil hedges" during the first quarter of 2005. As
described in the "Hedging Information" table within this press release, the
Company currently has approximately 1.96 million barrels of oil hedged for the
next 45 months (through 2008) at NYMEX prices ranging from $28.46 to $49.60 per
barrel. These hedges are directly related to the Fullerton acquisitions in
December 2002 and September 2004, and the Carm-Ann acquisition in September
2004. The Company's composite average differential between the hedged NYMEX
price and the realized wellhead price has historically been approximately $2.50
per barrel; however, the differential has recently increased to approximately
$4.34 per barrel, because U. S. refineries are currently paying a premium for
West Texas Intermediate, which is the NYMEX benchmark. The majority of the
Company's oil is West Texas Sour.
Redemption of 6% Convertible Preferred Stock
As the Company announced on May 3, 2005, it gave notice on May 4, 2005, that it
will redeem for cash on June 6, 2005, 950,000 shares of its privately held 6%
Convertible preferred stock at a redemption price of $10.00 per share. In lieu
of redemption, holders of the preferred stock may convert all or any portion of
their shares of preferred stock into shares of Parallel common stock at a rate
of $10.00 divided by $3.50 (the conversion price), or approximately 2.8571
shares of common stock for each share of preferred stock. For additional
information, see the Company's May 3, 2005 press release.
The preferred stock was issued by Parallel in a private placement in October
1998, when the Company's common stock was trading at a price of approximately
$2.50 per share.
Management Comments
Larry C. Oldham, Parallel's President, commented, "Although we are disappointed
in the financial results of the first quarter of 2005, the Company's
year-over-year daily production volumes increased 10%. We invested only $4.4
million, or 10%, of our $43.7 million capital investment budget late in the
first quarter of 2005, which had minimal effect on total first quarter daily
production volumes. We expect the financial results to improve in future
quarters as our accelerated capital investments achieve the results we expect in
terms of increases in both production and reserves."
Today's Earnings Conference Call and Webcast Information
The Company's management will host a conference call to discuss its financial
and operational results for the first quarter ended March 31, 2005, this
afternoon, Tuesday, May 10, 2005, at 2:00 p.m. Eastern time (1:00 p.m. Central
time). To participate in the call, dial 1-800-573-4752 or 1-617-224-4324,
Participant Passcode 69800317, 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 38645555. A written transcript of the conference call,
and the supporting slide presentation, will be available on the Company's web
site Presentation page at
http://phx.corporate-ir.net/phoenix.zhtml?c=79538&p=irol-presentations.
FINANCIAL STATEMENTS AND SCHEDULES FOLLOW
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Parallel Petroleum Announces 1Q 2005 Financial Results
May 10, 2005
Page 3
PARALLEL PETROLEUM CORPORATION
Consolidated Balance Sheets
(dollars in thousands)
<table>
March 31, December 31,
Assets 2005 2004
-------------- ---------------
(unaudited)
<s> <c> <c>
Current assets:
Cash and cash equivalents $ 3,152 $ 4,781
Accounts receivable:
Oil and gas 6,747 6,642
Other, net of allowance for doubtful account of $9 790 389
Affiliates 5 7
--------- ---------
7,542 7,038
Other current assets 104 179
Deferred tax asset 4,941 2,531
--------- ---------
Total current assets 15,739 14,529
--------- ---------
Property and equipment, at cost:
Oil and gas properties, full cost method 235,256 229,245
Other 2,445 2,062
--------- ---------
237,701 231,307
Less accumulated depreciation, depletion and amortization (81,064) (78,782)
--------- ---------
Net property and equipment 156,637 152,525
Restricted cash - 2,287
Investment in Westfork Pipeline Company LP 761 595
Other assets, net of accumulated amortization of $662 and $581 687 735
--------- ---------
$ 173,824 $ 170,671
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 5,988 $ 5,568
Asset retirement obligations 135 150
Derivative obligations 15,827 7,965
--------- ---------
Total current liabilities 21,950 13,683
--------- ---------
Revolving credit facility 50,000 79,000
Asset retirement obligations 1,977 1,982
Derivative obligations 24,107 9,525
Deferred tax liability 1,764 6,487
--------- ---------
Total long-term liabilities 77,848 96,994
--------- ---------
Commitments and contingencies
Stockholders' equity:
Series A preferred stock -- par value $0.10 per share, authorized 50,000 shares - -
Preferred stock -- 6% convertible preferred stock -- par value of $0.10 per share
(liquidation preference of $10 per share), authorized 10,000,000 shares,
issued and outstanding 950,000 95 95
Common stock -- par value $0.01 per share, authorized 60,000,000 shares,
issued and outstanding 31,189,292 and 25,439,292 312 254
Additional paid-in capital 76,163 48,328
Retained earnings 21,523 22,073
Accumulated other comprehensive loss (24,067) (10,756)
--------- ---------
Total stockholders' equity 74,026 59,994
--------- ---------
$ 173,824 $ 170,671
========= =========
</table>
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Parallel Petroleum Announces 1Q 2005 Financial Results
May 10, 2005
Page 4
PARALLEL PETROLEUM CORPORATION
Consolidated Statements of Operations
For three months ended March 31, 2005 and 2004
(unaudited)
(dollars in thousands, except per share data)
<table>
2005 2004
----------- ------------
<s> <c> <c>
Oil and Natural Gas Revenues:
Oil and natural gas sales $ 12,969 $ 9,106
Loss on hedging and derivatives (3,212) (1,105)
-------- ---------
Total revenues 9,757 8,001
-------- ---------
Cost and expenses:
Lease operating expense 2,558 1,529
Production taxes 580 478
General and administrative 1,688 1,222
Depreciation, depletion and amortization 2,282 2,077
--------- ---------
Total costs and expenses 7,108 5,306
--------- ---------
Operating income 2,649 2,695
--------- ---------
Other income (expense), net:
Loss on ineffective portion of hedges (2,276) (10)
Interest and other income 19 140
Interest expense (1,138) (468)
Other expense (1) (26)
Equity loss in Westfork Pipeline Company LP (79) -
--------- ---------
Total other expense, net (3,475) (364)
--------- ---------
Income (loss) before income taxes (826) 2,331
Income tax benefit (expense), deferred 276 (849)
--------- ---------
Net income (loss) (550) 1,482
Cumulative preferred stock dividend (143) (143)
--------- ---------
Net income (loss) available to common stockholders $ (693) $ 1,339
========= =========
Net income (loss) per common share:
Basic $ (0.02) $ 0.05
========= =========
Diluted $ (0.02) $ 0.05
========= =========
Weighted average common share outstanding:
Basic 28,698 25,223
========= =========
Diluted 28,698 28,267
========= =========
</table>
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Parallel Petroleum Announces 1Q 2005 Financial Results
May 10, 2005
Page 5
PARALLEL PETROLEUM CORPORATION
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2005 and 2004
(unaudited)
(dollars in thousands)
<table>
2005 2004
--------- ---------
<s> <c> <c>
Cash flows from operating activities:
Net income (loss) $ (550) $ 1,482
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation, depletion and amortization 2,282 2,077
Accretion of asset retirement obligation 26 33
Deferred income tax (276) 849
Loss on ineffective portion of hedges 2,276 10
Stock option expense 42 41
Equity loss in Westfork Pipeline Company LP 79 -
Changes in assets and liabilities:
Other, net 48 (67)
Increase in accounts receivable (504) (144)
Decrease (increase) in other current assets 75 (11)
Increase (decrease) in accounts payable and accrued liabilities 277 (298)
---------- ---------
Net cash provided by operating activities 3,775 3,972
---------- ---------
Cash flows from investing activities:
Additions to oil and gas property (8,596) (7,626)
Use of restricted cash for acquisition of oil and gas properties 2,287 -
Proceeds from disposition of oil and gas properties 2,539 25
Additions to other property and equipment (383) (360)
Investment in Westfork Pipeline Company LP (245) -
---------- ---------
Net cash used in investing activities (4,398) (7,961)
---------- ---------
Cash flows from financing activities:
Net borrowing (payments) on revolving line of credit (29,000) (9,750)
Proceeds (net) from common stock issued 27,994 -
Deferred stock offering costs - (7)
---------- ---------
Net cash used in financing activities (1,006) (9,757)
---------- ---------
Net decrease in cash and cash equivalents (1,629) (13,746)
Cash and cash equivalents at beginning of period 4,781 17,378
---------- ---------
Cash and cash equivalents at end of period $ 3,152 $ 3,632
========== =========
Non-cash financing and investing activities:
Oil and gas properties asset retirement obligation $ (46) $ 130
Accrued preferred stock dividend $ 143 $ 143
</table>
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<page>
Parallel Petroleum Announces 1Q 2005 Financial Results
May 10, 2005
Page 6
PARALLEL PETROLEUM CORPORATION
PRODUCTION VOLUMES AND PRICE DATA
<table>
Three Months Ended
---------------------------------------------------
3/31/2005 12/31/2004 3/31/2004
---------------- ----------------- ----------------
<s>
Production Volumes:
Oil (MBbls) 207 234 161
Natural gas (MMcf) 602 695 732
Equivalent barrels of oil (MBOE) (a) 307 349 283
Equivalent barrels of oil (MBOE) per day 3.4 3.8 3.1
Sales Prices:
per Bbl (unhedged) (b) $ 45.29 $ 44.07 $ 32.93
per Bbl (hedged) (c) $ 30.72 $ 32.68 $ 25.93
per Mcf (unhedged) (b) $ 6.00 $ 6.99 $ 5.21
per Mcf (hedged) (c) $ 5.66 $ 6.56 $ 5.24
per BOE (unhedged) (b) $ 42.25 $ 43.36 $ 32.21
per BOE (hedged) (c) $ 31.78 $ 34.90 $ 28.30
</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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<page>
Parallel Petroleum Announces 1Q 2005 Financial Results
May 10, 2005
Page 7
PARALLEL PETROLEUM CORPORATION
HEDGING INFORMATION (a)
<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>
Apr 1, 2005 thru Oct 31, 2005 - - - 428,000 $5.00 $7.26
Apr 1, 2005 thru Dec 31, 2005 55,000 $36.00 $49.60 - - -
Jan 1, 2006 thru Dec 31, 2006 70,800 $35.00 $44.00 - - -
</table>
<table>
SWAPS: Volume NYMEX
Hedged Oil
Period of Time Bbl Oil Swap Price
- ----------------------------------- ------------- -------------
<s> <c> <c>
Apr 1, 2005 thru Dec 31, 2005 467,500 $30.18
Jan 1, 2006 thru Dec 20, 2006 448,000 $28.46
Jan 1, 2007 thru Dec 31, 2007 474,500 $34.36
Jan 1, 2008 thru Dec 31, 2008 439,200 $33.37
</table>
<table>
INTEREST RATE SWAPS: Notional Fixed
Amount Interest
Period of Time $MM Rates
- ----------------------------------- ------------- -------------
<s> <c> <c>
Apr 1, 2005 thru Dec 31, 2005 $50 3.36%
Jan 1, 2006 thru Dec 31, 2006 $50 3.82%
Jan 1, 2007 thru Dec 31, 2007 $50 4.30%
Jan 1, 2008 thru Dec 30, 2008 $50 4.74%
</table>
- -----------------------------------
(a) BNP Paribas is the counterparty in Parallel's derivative instruments.
- ------------------------------------------------------------------------------
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<page>
Parallel Petroleum Announces 1Q 2005 Financial Results
May 10, 2005
Page 8
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.
The foregoing statements regarding Parallel's intentions with respect to the
contemplated redemption and other transactions described above are
forward-looking statements under the Private Securities Litigation Reform Act of
1995, and actual results could vary materially from the statements made.
Parallel's ability to complete the redemption and other transactions described
above successfully is subject to various risks, many of which are outside of its
control, including prevailing conditions in the capital markets and other risks
and uncertainties as detailed from time to time in the reports filed by Parallel
with the Securities and Exchange Commission.
###