Parallel Petroleum Announces First Quarter 2006 Financial Results.MIDLAND, Texas Midland is the county seat of Midland CountyGR6 located on the Southern Plains of the western area of the U.S. State of Texas. As of the 2006 U.S. Census estimate, the city had a total population of 102,073. -- Parallel Petroleum Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :PLLL) today announced its financial results for the first quarter ended March 31, 2006, compared to the results for the same period in 2005. In a separate press release issued today, Parallel announced its operations update and first quarter 2006 production and proved reserves proved reserves The quantity of minerals expected to be recoverable under current economic and operating conditions. The amount of proved reserves is important in valuing the stock of a company with significant holdings in natural resources. . First Quarter Financial Results For the three months ended March 31, 2006, Parallel reported net income of $1.6 million, or $.05 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. Included in net income was a $4.6 million pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta , non-cash loss related to the change in fair market value of derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. and ineffective portion of hedges. For the three months ended March 31, 2005, Parallel recorded a net loss of $10.7 million, or a loss of $.38 per diluted share. Included in the net loss for the three months ended March 31, 2005 was an $18.3 million pre-tax, non-cash loss related to the change in fair market value of derivative instruments and ineffective portion of hedges. For the first quarter of 2006, Parallel's oil and natural gas sales were 268 MBbls of oil and 1,167 MMcf of natural gas, or 463 MBOE MBOE Thousands of Barrels of Oil Equivalent MBOE Milford Board of Education , a 51% increase when compared to the first quarter of 2005. During this period, the average prices the Company received for its oil and natural gas on an unhedged basis were $57.66 per barrel barrel: see English units of measurement. and $6.68 per Mcf, or $50.27 per BOE BOE Based on Experience BOE Board of Education BOE Boletín Oficial del Estado (Spanish) BOE Bank of England BOE Board of Equalization BOE Board of Elections BOE Barrel of Oil Equivalent BOE Bind on Equip ($44.37 per BOE, hedged hedge n. 1. A row of closely planted shrubs or low-growing trees forming a fence or boundary. 2. A line of people or objects forming a barrier: a hedge of spectators along the sidewalk. ). For the same period of 2005, oil sales were 207 MBbls at an average unhedged price of $45.29 per barrel and natural gas sales were 602 MMcf at an average unhedged price of $6.00 per Mcf, or 307 MBOE at an average unhedged price of $42.25 per BOE ($33.93 per BOE, hedged). Net cash provided by operating activities for the three-month period ended March 31, 2006, was $14.2 million, compared to $4.5 million for the three month period ended March 31, 2005. The 216% increase was primarily related to increased production volumes and increased oil and gas prices. Balance Sheet Review At March 31, 2006, current assets Current Assets Appearing on a company's balance sheet, it represents cash, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that can be converted to cash within one year. were $27.6 million, which included $4.9 million of cash. Current liabilities Current Liabilities Usually appearing on a company's balance sheet, it represents the amount owed for interest, accounts payable, short-term loans, expenses incurred but unpaid, and other debts due within one year. were $31.5 million, including current derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. obligations of $18.7 million. Long-term liabilities Long-Term Liabilities Recorded on the balance sheet, a company's liabilities for leases, bond repayments and other items due in more than one year. Notes: A company's long-term liabilities are accounted for by its debt obligations to other parties which last longer than were $181.4 million, including $141.5 million of debt and $26.3 million of derivative obligations. The Company's revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility had a borrowing base of $125.0 million as of March 31, 2006, and its outstanding borrowings under the revolving credit facility as of that same date were $91.5 million. In addition, the Company had $50.0 million outstanding under its second lien A Second lien financing is a form of financing secured on a second ranking basis by (more or less) the same security, which secures the first ranking financing. The first lien lenders and the second lien lenders agree that, in the event of a security enforcement or bankruptcy, the term loan facility. As of March 31, 2006, the Company's net capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. costs associated with its oil and gas properties and other equipment were $269.3 million. Its stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. was $92.9 million, which included $5.5 million of accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. other comprehensive loss that is related to the Company's hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. activities. Management Comments Larry Lar´ry n. 1. Same as Lorry, or Lorrie. C. Oldham Oldham, city (1991 pop. 107,095) and metropolitan district, NW England, located in the Manchester metropolitan area. The city's industries include papermaking, tanning, food processing, and mail-order distribution. , Parallel's President, commented, "We are pleased with the Company's net earnings of $1.6 million and net cash provided by operating activities of $14.2 million for the three months ended March 31, 2006. These results reflect our 51% increase in production volumes and a 31% increase in realized commodity prices, compared to the first quarter of 2005. In addition, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. increased 180% to $9.4 million in the first quarter of 2006, compared to $3.4 million in the first quarter of 2005. Direct lifting costs per BOE decreased 7% to $7.72 in the first quarter of 2006, compared to $8.33 per BOE in the first quarter of 2005. Accordingly, operating income as a percentage of operating revenues operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. was 46% during the first quarter of 2006, compared to 32% in the first quarter of 2005, yielding a 44% increase in operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: ." In a final comment, Oldham stated, "As we announced in our operations update press release today, since the beginning of this year, we have had activity on 71 of the 147 total well operations budgeted for 2006. First quarter 2006 proved reserve volumes increased approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 19% over December December: see month. 31, 2005, and we replaced 1120% of our first quarter 2006 production. We are excited about the results to date, and believe that we are off to a good start in 2006." Conference Call and Webcast Information The Company's management will host a conference call to discuss current operations, production, reserves and financial results for the first quarter ended March 31, 2006. In addition to this press release, please refer to the Company's operations update press release also dated May 10, 2006 and its Form 10-Q Form 10-Q See 10-Q. for the quarterly period ended March 31, 2006 that was filed with the Securities and Exchange Commission on May 10, 2006. The conference call will be held on Thursday Thursday: see week. , May 11, 2006, at 2:00 p.m. Eastern time (1:00 p.m. Central time). To participate in the call, dial 866-203-2528 or 617-213-8847, Participant Participant A party of a funding. It usually refers to the lowest rank or smallest level of funding. Passcode 39669401, 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, http://www.plll.com. A replay of the conference call will be available at the Company's web site or by calling 888-286-8010 or 617-801-6888, Passcode 97071845. FINANCIAL STATEMENTS AND SCHEDULES FOLLOW
PARALLEL PETROLEUM CORPORATION
Consolidated Balance Sheets
(dollars in thousands, except per share amounts)
March 31, December 31,
Assets 2006 2005
----------- -----------
(unaudited)
Current assets:
Cash and cash equivalents $ 4,895 $ 6,418
Accounts receivable:
Oil and natural gas 11,481 13,183
Other, net of allowance for doubtful
account of $9 2,155 877
Affiliates 9 12
----------- -----------
13,645 14,072
Other current assets 3,467 2,364
Deferred tax asset 5,592 5,241
----------- -----------
Total current assets 27,599 28,095
----------- -----------
Property and equipment, at cost:
Oil and natural gas properties, full cost
method (including $22,953 and $19,869 not
subject to depletion) 360,565 303,819
Other 3,865 2,404
----------- -----------
364,430 306,223
Less accumulated depreciation, depletion
and amortization (95,114) (90,826)
----------- -----------
Net property and equipment 269,316 215,397
Restricted cash 274 2,640
Investment in Westfork Pipeline Companies 5,331 3,326
Other assets, net of accumulated
amortization of $1,026 and $901 3,252 3,550
----------- -----------
$ 305,772 $ 253,008
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 12,512 $ 10,841
Asset retirement obligations 332 214
Derivative obligations 18,655 16,607
----------- -----------
Total current liabilities 31,499 27,662
----------- -----------
Revolving credit facility 91,500 50,000
Term Loan 50,000 50,000
Asset retirement obligations 3,947 2,281
Derivative obligations 26,304 25,527
Deferred tax liability 9,667 8,036
----------- -----------
Total long-term liabilities 181,418 135,844
----------- -----------
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, - -
Common stock -- par value $0.01 per
share, authorized 60,000,000 shares,
issued and outstanding 34,891,545 and
34,748,916 348 347
Additional paid-in capital 79,502 78,699
Retained earnings 18,510 16,899
Accumulated other comprehensive loss (5,505) (6,443)
----------- -----------
Total stockholders' equity 92,855 89,502
----------- -----------
$ 305,772 $ 253,008
=========== ===========
PARALLEL PETROLEUM CORPORATION
Consolidated Statements of Operations
For three months ended March 31, 2006 and 2005
(unaudited)
(dollars in thousands, except per share data)
2006 2005
--------- ---------
Oil and natural gas revenues:
Oil and natural gas sales $ 23,276 $ 12,969
Loss on hedging (2,733) (2,555)
--------- ---------
Total revenues 20,543 10,414
--------- ---------
Cost and expenses:
Lease operating expense 3,575 2,558
Production taxes 1,110 580
General and administrative 2,129 1,628
Depreciation, depletion and amortization 4,288 2,282
--------- ---------
Total costs and expenses 11,102 7,048
--------- ---------
Operating income 9,441 3,366
--------- ---------
Other income (expense), net:
Change in fair market value of derivative
instruments (4,714) (17,633)
Gain (loss) on ineffective portion of hedges 143 (710)
Interest and other income 68 19
Interest expense (2,441) (1,173)
Other expense (29) (1)
Equity in loss of Westfork Pipeline Companies (19) (79)
--------- ---------
Total other income (expense), net (6,992) (19,577)
--------- ---------
Income (loss) before income taxes 2,449 (16,211)
Income tax benefit (expense), deferred (838) 5,507
--------- ---------
Net income (loss) 1,611 (10,704)
Cumulative preferred stock dividend - (143)
--------- ---------
Net income (loss) available to common
stockholders $ 1,611 $ (10,847)
========= =========
Net income (loss) per common share:
Basic $ 0.05 $ (0.38)
========= =========
Diluted $ 0.05 $ (0.38)
========= =========
Weighted average common share outstanding:
Basic 34,850 28,698
========= =========
Diluted 35,547 28,698
========= =========
PARALLEL PETROLEUM CORPORATION
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2006 and 2005
(unaudited)
(dollars in thousands)
2006 2005
-------- --------
Cash flows from operating activities:
Net income (loss) $ 1,611 $(10,704)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation, depletion and amortization 4,288 2,282
Accretion of asset retirement obligation 31 26
Deferred income tax 838 (5,507)
Change in fair value of derivative instruments 4,714 17,633
(Gain) loss on ineffective portion of hedges (143) 710
Stock option expense 388 42
Equity in loss of Westfork Pipeline Companies 19 79
Changes in assets and liabilities:
Other assets, net 311 48
Decrease (increase) in accounts receivable 427 (504)
Decrease in other current assets 107 75
Increase in accounts payable and accrued
liabilities 1,671 277
Federal tax deposit (40) -
-------- --------
Net cash provided by operating activities 14,222 4,457
-------- --------
Cash flows from investing activities:
Additions to oil and natural gas properties (55,035) (8,596)
Use of restricted cash for acquisition of oil
and natural gas properties 2,366 2,287
Proceeds from disposition of oil and natural
gas properties 41 2,539
Additions to other property and equipment (1,461) (383)
Settlements on derivative instruments (1,548) (682)
Investment in Westfork Pipeline Companies (2,024) (245)
-------- --------
Net cash used in investing activities (57,661) (5,080)
-------- --------
Cash flows from financing activities:
Net borrowing (payments) on revolving line of
credit 41,500 (29,000)
Proceeds (net) from common stock issued - 27,994
Proceeds from exercise of stock options 416 -
-------- --------
Net cash provided by (used in) financing
activities 41,916 (1,006)
-------- --------
Net decrease in cash and cash equivalents (1,523) (1,629)
Cash and cash equivalents at beginning of period 6,418 4,781
-------- --------
Cash and cash equivalents at end of period $ 4,895 $ 3,152
======== ========
Non-cash financing and investing activities:
Oil and natural gas properties asset retirement
obligation $ 1,752 $ (46)
Accrued preferred stock dividend $ - $ 143
Other transactions:
Interest paid $ 2,082 $ 1,589
PARALLEL PETROLEUM CORPORATION
SELECTED OPERATING AND FINANCIAL DATA
Three Months Ended
------------------------------------
3/31/2006 12/31/2005 3/31/2005
----------- ----------- -----------
(in thousands, except per unit data)
Production Volumes:
-------------------
Oil (Bbls) 268 251 207
Natural gas (Mcf) 1,167 1,181 602
BOE (1) 463 448 307
BOE per day 5.1 4.9 3.4
Sales Prices:
-------------
Oil (per Bbl) (2) $ 57.66 $ 54.31 $ 45.29
Natural gas (per Mcf) (2) $ 6.68 $ 9.64 $ 6.00
BOE price (2) $ 50.27 $ 55.86 $ 42.25
BOE price (3) $ 44.37 $ 48.31 $ 33.93
Operating Revenues:
-------------------
Oil $ 15,482 $ 13,632 $ 9,359
Oil hedge (2,733) (3,380) (2,354)
Natural gas 7,794 11,384 3,610
Natural gas hedge - - (201)
----------- ----------- -----------
$ 20,543 $ 21,636 $ 10,414
----------- ----------- -----------
Operating Expenses and Income:
------------------------------
Lease operating expense $ 3,575 $ 2,548 $ 2,558
Production taxes 1,110 1,487 580
General and administrative:
General and administrative 1,134 1,348 969
Public reporting 995 593 659
Depreciation, depletion and
amortization 4,288 3,885 2,282
----------- ----------- -----------
$ 11,102 $ 9,861 $ 7,048
----------- ----------- -----------
Operating income $ 9,441 $ 11,775 $ 3,366
----------- ----------- -----------
Total other income
(expense), net (6,992) 58 (19,577)
----------- ----------- -----------
Income (loss) before income
taxes 2,449 11,833 (16,211)
Income tax benefit (expense),
deferred (838) (3,461) 5,507
----------- ----------- -----------
Net income (loss) 1,611 8,372 (10,704)
Cumulative preferred stock
dividend - - (143)
----------- ----------- -----------
Net income (loss) available
to common stockholders $ 1,611 $ 8,372 $ (10,847)
=========== =========== ===========
Net income (loss) per common
share:
Basic $ 0.05 $ 0.24 $ (0.38)
Diluted $ 0.05 $ 0.24 $ (0.38)
Weighted average common
shares outstanding:
Basic 34,850 34,237 28,698
Diluted 35,547 34,950 28,698
------------------------------
(1) A BOE means one barrel of oil equivalent using the ratio of six
Mcf of gas to one barrel of oil.
(2) Excludes hedge transactions.
(3) Includes hedge transactions.
PARALLEL PETROLEUM CORPORATION
HEDGING INFORMATION (1)
PUTS: Houston Ship
----- Channel
Gas Price
MMBTU of -------------- Fair Market
Period of Time Natural Gas Floor Value
----------------------- ----------- -------------- -----------------
($ in thousands)
Apr 1, 2006 thru
Oct 31, 2006 642,000 $ 7.17 $ 514
COSTLESS COLLARS:
----------------- NYMEX
Oil Prices MMBTU of
Barrels of ------------------ Natural
Period of Time Oil Floor Cap Gas
------------------------------ ---------- -------- --------- ---------
Apr 1, 2006 thru Dec 31, 2006 217,800 $ 48.26 $ 75.91 -
Apr 1, 2006 thru Oct 31, 2006 - $ - $ - 428,000
Apr 1, 2006 thru Oct 31, 2006 - $ - $ - 214,000
Jan 1, 2007 thru Dec 31, 2007 219,000 $ 52.50 $ 83.00 -
Apr 1, 2007 thru Oct 31, 2007 - $ - $ - 214,000
Jan 1, 2008 thru Dec 31, 2008 109,800 $ 55.00 $ 76.50 -
Jan 1, 2009 thru Dec 31, 2009 91,250 $ 55.00 $ 73.00 -
Jan 1, 2010 thru Dec 31, 2010 76,000 $ 55.00 $ 71.00 -
Total Fair Market Value
COSTLESS COLLARS: Houston
----------------- Ship Channel WAHA
Gas Prices Gas Prices
---------------- ---------------- Fair Market
Period of Time Floor Cap Floor Cap Value
------------------- ------- -------- ------- -------- ----------------
($ in thousands)
Apr 1, 2006 thru
Dec 31, 2006 $ - $ - $ - $ - $ (1,342)
Apr 1, 2006 thru
Oct 31, 2006 $ 7.50 $ 13.90 $ - $ - 442
Apr 1, 2006 thru
Oct 31, 2006 $ - $ - $ 9.00 $ 14.55 546
Jan 1, 2007 thru
Dec 31, 2007 $ - $ - $ - $ - (276)
Apr 1, 2007 thru
Oct 31, 2007 $ 6.00 $ 11.05 $ - $ - (100)
Jan 1, 2008 thru
Dec 31, 2008 $ - $ - $ - $ - (196)
Jan 1, 2009 thru
Dec 31, 2009 $ - $ - $ - $ - (207)
Jan 1, 2010 thru
Dec 31, 2010 $ - $ - $ - $ - (176)
---------------
Total Fair Market
Value $ (1,309)
===============
SWAPS:
------ Volume NYMEX
Hedged Oil Fair Market
Period of Time Bbl Oil Swap Price Value
--------------------------------- ------------- ---------- -----------
($ in
thousands)
Apr 1, 2006 thru Dec 20, 2006 (2) 198,000 $ 23.04 $ (8,903)
Apr 1, 2006 thru Dec 31, 2006 137,500 $ 36.35 (4,391)
Jan 1, 2007 thru Dec 31, 2007 474,500 $ 34.36 (15,645)
Jan 1, 2008 thru Dec 31, 2008 439,200 $ 33.37 (13,723)
----------
Total Fair Market Value $ (42,662)
==========
INTEREST RATE SWAPS:
-------------------- Fixed
Notional Interest Fair Market
Period of Time Amount Rates Value
--------------------------------- --------------- -------- -----------
($ in millions) ($ in
thousands)
Apr 1, 2006 thru Dec 31, 2006 (2) $ 10 4.05% $ 78
Apr 1, 2006 thru Dec 31, 2006 $ 90 4.41% 480
Jan 1, 2007 thru Dec 31, 2007 $ 100 4.62% 534
Jan 1, 2008 thru Dec 30, 2008 $ 100 4.86% 264
Jan 1, 2009 thru Dec 31, 2009 $ 50 5.06% 64
Jan 1, 2010 thru Oct 31, 2010 $ 50 5.15% 38
----------
Total Fair Market Value $ 1,458
==========
(1) BNP Paribas and Citibank, NA are the counterparties in Parallel's
derivative instruments.
(2) Designated as cash flow hedge.
The Company Parallel Petroleum is an independent energy company headquartered in Midland, Texas, engaged in the acquisition, exploration, development and production of oil and gas using 3-D seismic technology and advanced drilling, completion and recovery techniques. Parallel's primary areas of operation are the Permian Basin The Permian Basin is a sedimentary basin largely contained in the western part of the U.S. state of Texas. It reaches from just south of Lubbock, Texas, to just south of Midland & Odessa, extending westward into the southeastern part of the adjacent state of New Mexico. of West Texas and New Mexico New Mexico, state in the SW United States. At its northwestern corner are the so-called Four Corners, where Colorado, New Mexico, Arizona, and Utah meet at right angles; New Mexico is also bordered by Oklahoma (NE), Texas (E, S), and Mexico (S). , North Texas Barnett Shale The Barnett Shale is a geological formation of economic significance. It consists of sedimentary rocks of Mississippian age in the U.S. State of Texas. The formation is estimated to stretch from the city of Dallas to west of the city of Fort Worth and south, covering 5,000 square , Onshore on·shore adj. 1. Moving or directed toward the shore: an onshore wind. 2. Located on the shore: an onshore beacon; an onshore patrol. adv. Gulf Coast of South Texas, East Texas and Utah/Colorado. Additional information on Parallel Petroleum Corporation is available at http://www.plll.com. This release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. terminology The terminology used in the computer and telecommunications field adds tremendous confusion not only for the lay person, but for the technicians themselves. What many do not realize is that terms are made up by anybody and everybody in a nonchalant, casual manner without any regard or such as "may," "will," "expect," "intend," "plan," "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 relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the results of exploratory drilling activity, the Company's growth strategy, changes in oil and natural gas prices, operating risks Operating risk The inherent or fundamental risk of a firm, without regard to financial risk. The risk that is created by operating leverage. Also called business risk. , availability of drilling equipment, outstanding indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. , weaknesses in the Company's internal controls, the inherent variability in early production tests, changes in interest rates, dependence on weather conditions, seasonality, expansion and other activities of competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. , 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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