Parallel Acquires Additional Stake in Permiam Basin Acreage

Parallel Petroleum's wholly owned subsidiary, Parallel, L.P., acquired an additional 13.2% average working interest and 10.0% average net revenue interest associated with its producing properties in the Means Queen Unit and Carm-Ann San Andres Fields. These additional interests were purchased from 17 unaffiliated parties for a combined purchase price of approximately $2.85 million, after closing adjustments. An additional $285,000 will be paid in January 2005, subject to certain title exceptions being cured. These acquisitions represent the closing of 17 of the 27 Purchase and Sale Agreements that the Company announced on December 1, 2004. On December 15, 2004, the Company entered into the twenty-eighth Purchase and Sale Agreement with another unaffiliated party which also covers interests in the same properties. The remaining 11 transactions are scheduled to close on or before January 31, 2005, for a combined purchase price of approximately $2.0 million, after anticipated closing adjustments. The 17 purchases, that were closed yesterday and today, represent a combined estimated 500,000 BOE of proved oil and gas reserves, with current production of approximately 50 BOE per day net to Parallel. Parallel financed the acquisition using a portion of its revolving credit facility provided by First American Bank SSB, BNP Paribas, Citibank, F.S.B. and Western National Bank.

Property information

The properties are located in Andrews and Gaines Counties in the Permian Basin of west Texas, produce from the Queen and San Andres formations at depths of approximately 4,200 to 4,900 feet, and consist of 25 leases covering approximately 5,360 gross contiguous acres, with 67 gross producing oil wells. Upon closing of yesterday's and today's transactions, Parallel's average working interest in these properties increased from approximately 56.6% to approximately 69.8%, and its average net revenue interest increased from approximately 43.8% to approximately 53.8%.

Management Comments

Larry C. Oldham, Parallel's President and CEO, commented, "As I commented in our December 1st press release, we are pleased to have the opportunity to acquire the additional interest in our Means Queen Unit and Carm-Ann San Andres Fields because it will further increase and streamline our operational control over more than 5,000 acres of underexploited producing leasehold in the Central Basin Platform of the Permian Basin."

In a final comment, Oldham said, "As we announced in our operations update on November 12, 2004, the Company took over operations immediately upon closing of its October 14, 2004 acquisition of these properties and has begun comprehensive geologic and engineering reviews to high grade exploitation opportunities, as they relate to production improvement, including well stimulations, infill drilling, waterflood implementation and operational enhancements."