Parallel Petroleum Announces 3Q05 Results

Parallel Petroleum (NASDAQ: PLLL) reports that for the three months ended September 30, 2005, a net income of $8.6 million, or $.25 per diluted share. Operating income was $11.0 million, after oil and gas hedge payments of $5.6 million. For the three months ended September 30, 2004, Parallel recorded net income of $1.0 million, or $.04 per diluted share, which included $2.0 million of operating income, after oil and gas hedge payments of $2.5 million.

For the third quarter of 2005, Parallel's sales were 247 MBbls of oil and 1,109 MMcf of natural gas, or 432 MBOE, a 59% increase when compared to the third quarter of 2004. During this period, the average prices the Company received for its oil and natural gas on an unhedged basis were $58.95 per barrel and $9.88 per Mcf, or $59.09 per BOE ($46.19 per BOE, hedged). For the same period of 2004, oil sales were 168 MBbls at an average unhedged price of $41.30 per barrel and natural gas sales were 619 MMcf at an average unhedged price of $5.24 per Mcf, or 272 MBOE at an average unhedged price of $37.56 per BOE ($28.49 per BOE, hedged).

Net cash provided by operating activities for the three-month period ended September 30, 2005, was $9.3 million, compared to $6.0 million for the three-month period ended June 30, 2005. The increase was primarily related to increased oil and gas prices and production volumes.

Nine Months Results

For the nine months ended September 30, 2005, Parallel reported net income of $9.5 million, or $.28 per diluted share. Included in net income was $17.9 million of operating income, after oil and gas hedge payments of $12.4 million. For the nine months ended September 30, 2004, Parallel recorded net income of $3.6 million, or $.13 per diluted share, which included $6.9 million of operating income, after oil and gas hedge payments of $5.4 million.

For the nine months ended September 30, 2005, Parallel's sales were 672 MBbls of oil and 2,411 MMcf of natural gas, or 1,074 MBOE, a 30% increase when compared to the nine months ended September 30, 2004. During this period, the average prices the Company received for its oil and natural gas on an unhedged basis were $50.86 per barrel and $8.01 per Mcf, or $49.81 per BOE ($38.24 per BOE, hedged). For the same period of 2004, oil sales were 495 MBbls at an average unhedged price of $36.69 per barrel and natural gas sales were 1,995 MMcf at an average unhedged price of $5.45 per Mcf, or 828 MBOE at an average unhedged price of $35.10 per BOE ($28.58 per BOE, hedged).

Net cash provided by operating activities for the nine-month period ended September 30, 2005, was $19.1 million, compared to $11.7 million for the same period of 2004. The increase was primarily related to increased oil and gas prices and production volumes.

Balance Sheet Review

At September 30, 2005, current assets were $28.0 million, which included $6.1 million of cash. Current liabilities were $28.5 million, including current derivative obligations of $18.8 million, and long-term debt was $68.0 million. The Company's credit facility as of November 1, 2005 had a borrowing base of $100.0 million. As of September 30, 2005, the Company's net capitalized costs associated with its oil and gas properties and other equipment were $179.7 million. Its stockholders' equity was $76.2 million, which includes $32.2 million of accumulated other comprehensive loss that is related to the Company's hedging activities.

Third Quarter 2005 Pre-tax, Non-cash Gain on "Ineffective Portion of Oil Hedges"

The Company recorded a pre-tax, non-cash gain of approximately $2.9 million, or 22% of Income before income taxes, on "ineffective portion of oil hedges" during the third quarter of 2005. As described in the "Hedging Information" table within this press release, the Company currently has approximately 1.8 million barrels of oil hedged for the next 39 months (through 2008) at NYMEX prices ranging from $28.46 to $86.50 per barrel. The Company's composite average differential between the hedged NYMEX price and the realized wellhead price was approximately $4.24 for the third quarter 2005. The Company's differential was $6.20 and $4.52 for the second and first quarters of 2005, respectively. Parallel is experiencing an increased demand for West Texas Sour crude oil. The majority of the Company's crude oil is West Texas Sour.

Management Comments

Larry C. Oldham, Parallel's President, commented, "We are pleased with the Company's $.25 per-share net earnings of $8.6 million and net cash provided by operating activities of $9.3 million for the three months ended September 30, 2005. These results reflect our 59% increase in production volumes and a 62% increase in realized commodity prices, compared to the third quarter of 2004."

Oldham further commented, "Production volumes increased 29% and realized commodity prices increased 36%, when comparing third quarter 2005 to second quarter 2005. Net earnings increased 548% and net cash provided by operating activities increased 54%, when comparing third quarter 2005 to second quarter 2005."

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Brent Crude Oil : $48.06/BBL 2.51%
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