Parallel Petroleum Announces Operations Update.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 an operations update. Please refer to the Company's recent news releases dated March 16, 2004, April 14, 2004, May 12, 2004, and August 13, 2004, for prior information on the Company's operations and its $25.3 million 2004 capital investment budget, which excludes acquisitions. Recent Acquisitions Since September 28, 2004, Parallel has completed three unrelated acquisitions of 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. properties for a total investment of approximately $34.5 million. As shown in the table below, these acquisitions have an SEC PV-10% total proved reserve value of $66.7 million based on September 30, 2004 realized oil and natural gas prices. In total, these acquisitions represent approximately 4.45 million 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 of proved oil and gas reserves at an average acquisition price of $7.75 per BOE, with current production of approximately 560 BOE per day, net to Parallel. The Company expects these acquisitions to be accretive to earnings and operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. beginning in the fourth quarter 2004. 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. As shown in the table below, Parallel's SEC PV-10% total proved reserve value increased approximately 114%, from $147.79 million as of December 31, 2003, to an estimated combined $316.25 million. The change in present value of total proved reserves was due to reserve additions and increased oil and natural gas prices as of September 30, 2004, and recent acquisitions.
December 31, September 30, Recent
2003(a) 2004(b) Acquisitions(c)
------------ ------------- ---------------
Oil (MMBbls) 12.08 13.40 4.30
Gas (Bcfg) 16.27 16.93 .90
MMBOE 14.79 16.22 4.45
SEC Reserve Categories:
PDP (MMBOE)(d) 9.95 11.92 2.69
PDNP (MMBOE)(e) 1.00 0.46 0.00
PUD (MMBOE)(f) 3.84 3.84 1.76
------ ------ ------
Total proved reserves
(MMBOE) 14.79 16.22 4.45
------ ------ ------
Pretax PV-10% ($MM) $147.79(g) $249.55(h) $66.70(h)
Price of oil per Bbl $30.63 $47.82 $47.82
Price of natural gas per
Mcf $5.45 $6.46 $6.46
Estimated Percentage
Combined Change
--------- ----------
Oil (MMBbls) 17.70 46%
Gas (Bcfg) 17.83 10%
MMBOE 20.67 40%
SEC Reserve Categories:
PDP (MMBOE)(d) 14.61 47%
PDNP (MMBOE)(e) 0.46 (54)%
PUD (MMBOE)(f) 5.60 47%
Total proved reserves (MMBOE) 20.67 40%
-------
Pretax PV-10% ($MM) $316.25(h) 114%
Price of oil per Bbl $47.82 56%
Price of natural gas per Mcf $6.46 19%
----------------------------
(a) Based on independent reserve studies prepared by Cawley, Gillespie
& Associates.
(b) Based on internal reserve studies, net of non-strategic asset
divestitures during the third quarter of 2004.
(c) Based on internal reserve studies.
(d) PDP is proved developed producing reserves.
(e) PDNP is proved developed non-producing reserves.
(f) PUD is proved undeveloped reserves.
(g) Based on December 31, 2003, realized oil and natural gas prices.
(h) Based on September 30, 2004, realized oil and natural gas prices.
Non-Strategic Asset Divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). As Parallel announced in its August 13, 2004, operations update, the Company divested interests in 41 non-core, short-lived assets in the July 2004 Oil and Gas Asset Clearinghouse clearinghouse Institution established by firms engaged in similar activities to enable them to offset transactions with one another in order to limit payment settlements to net balances. auction. Net daily production and net reserves attributable to the assets sold were approximately 78 BOE per day and 114 MBOE MBOE Thousands of Barrels of Oil Equivalent MBOE Milford Board of Education , respectively. Gross proceeds from the sale were $1.87 million, yielding approximately $16.45 per BOE of reserves and approximately $24,000 per net daily BOE sold. These assets represented less than 3% of net daily production and less than 1% of reserves as of September 30, 2004. Parallel will continue to evaluate all portfolio assets for economic viability and strategic fit. Current Operations by Area Permian Basin of West Texas The Permian Basin of West Texas generated approximately 66% of Parallel's third quarter 2004 production and represented approximately 86% of its reserve value as of September 30, 2004. Fullerton Field, Andrews County - This property was acquired in December 2002 and represented approximately 44% of the Company's third quarter 2004 production and approximately 53% of its reserve value as of September 30, 2004. The water-frac program initiated in February of 2003 was virtually completed during the third quarter with a total of three jobs being performed during the quarter. Since inception of the program, a total of 79 wells out of the 103 active producing wells have been water frac'd at an average gross cost of just over $30,000 per job. Current gross incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. daily production is approximately 575 barrels of oil per day above the extrapolated base production trend. Most of the 24 wells which have not been water-frac'd are not considered to be viable candidates due to either mechanical conditions or proximity to active injection wells. The six-well infill in·fill n. 1. The use of vacant land and property within a built-up area for further construction or development, especially as part of a neighborhood preservation or limited growth program. 2. drilling program announced earlier this year has been completed. The current combined incremental gross production attributable to these wells is 247 gross (184 net) barrels of oil per day, with individual producing rates ranging from 22 to 79 barrels of oil per day per well. The Company will continue to monitor the performance of these wells, with additional drilling anticipated during 2005, pending continued satisfactory results. In press releases dated September 28th and October 8th of this year, the company announced its combined investment of approximately $20.9 million in two unrelated acquisitions of additional interest in previously acquired producing assets in the Fullerton Field. Parallel's exercise of its preferential pref·er·en·tial adj. 1. Of, relating to, or giving advantage or preference: preferential treatment. 2. right to purchase Chevron-Texaco's 25% working interest and 25% net revenue interest (unleased mineral interest) in the Logsdon B, C, D and E leases increases its total ownership and improves its net revenue interest ratio in assets which can be characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. by shallow base production declines, attractive profit margins and additional exploitation opportunities. The acquisition of the Kaiser-Francis interest in the Grogan and Lineberry leases provides these same investment attributes with the added advantages associated with operational consolidation. Initial production volumes from both acquisitions will be reflected in the fourth quarter 2004. Including the additional interests recently acquired, Parallel's working interest in the Fullerton properties ranges from 76% to 89%. The Company has budgeted approximately $3.2 million for this project in 2004, which excludes the acquisitions. Means Queen Unit and Carm-Ann San Andres Fields, Andrews & Gaines Counties - These properties were acquired on October 14, 2004 and were not included in Parallel's third quarter 2004 production or its September 30, 2004 reserve value. On October 14, 2004, the Company announced the acquisition of controlling and operating interest in 25 leases covering 5,360 gross (3,109 net) contiguous Adjacent or touching. Contrast with fragmentation. See contiguous file. acres, with 67 gross (39 net) producing oil wells, from Caprock Oil and Gas, L.P., for a total investment of $13.6 million. This acquisition establishes a new core operating area that is located within 50 miles of the Company's Midland, Texas, headquarters. The effective date of the acquisition was October 1, 2004; therefore, initial production volumes will be reflected in the fourth quarter 2004. The Company took over operations immediately upon closing and has begun comprehensive geologic ge·ol·o·gy n. pl. ge·ol·o·gies 1. The scientific study of the origin, history, and structure of the earth. 2. The structure of a specific region of the earth's crust. 3. A book on geology. and engineering reviews to high grade exploitation opportunities as they relate to immediate production improvement. Specifically, these opportunities will consist of well workovers and reactivations and the facility improvements necessary to support incremental production volumes. Longer range exploitation activities are expected to begin during the first quarter of 2005 and will include additional workovers and facility expansion along with infill drilling and waterflood implementation. Diamond M Shallow Leases, Scurry County - This property represented approximately 4% of Parallel's third quarter 2004 production and approximately 13% of its reserve value as of September 30, 2004. Drilling operations on the 30-well (18 injector locations and 12 producer locations) infill drilling program initially announced in January were completed in mid-September with all initial completion operations being completed prior to the end of October. In addition to the 12 producing well locations, 16 of the injector locations were placed on production to recover flush To empty the contents of a memory buffer. See buffer. Flush Elizabeth Barrett Browning’s spaniel, subject of a biography. [Br. Lit.: Woolf Flush in Barnhart, 446] See : Dogs (data) flush production and condition the well bores prior to initiation of water injection. On average, the new wells have shown initial production rates in excess of the anticipated 20 barrels of oil per day with a production decline typical of a pressure depleted de·plete tr.v. de·plet·ed, de·plet·ing, de·pletes To decrease the fullness of; use up or empty out. [Latin d reservoir. To date, three wells situated in injector locations have been converted from production to injection service. Over the next few months Parallel anticipates converting the remaining 15 injection wells to water injection service. Incremental daily production is currently approximately 275 gross (155 net) barrels of oil per day above the extrapolated base decline. The Company will monitor injection response, relative to performance expectations and presently anticipates the initiation of an additional 60-well infill program prior to the end of 2005. Capital expenditures on this project, net to the Company's 66% working interest, are budgeted at $7.2 million for 2004. Lion Diamond M Canyon Unit, Scurry County - This property generated approximately 4% of Parallel's third quarter 2004 production and represented approximately 3% of its reserve value as of September 30, 2004. The fluid capacity expansion project initiated earlier this year, which includes a new 12,000 barrel per day water injection pump An Injection Pump is the device that pumps fuel into the cylinders of a diesel engine or less typically, a gasoline engine. Traditionally, the pump is driven indirectly from the crankshaft by gears, chains or a toothed belt (often the timing belt) that also drives the camshaft on and the installation of a new and larger water distribution system, with initial line capacity of approximately 40,000 barrels per day Barrels per day (abbreviated BPD, bbl/d, bpd, bd or b/d) is a measurement used to describe the amount of crude oil (measured in barrels) produced or consumed by an entity in one day. , went on line on September 1, 2004. In addition to increased capacity, these installations will reduce downtime The time during which a computer is not functioning due to hardware, operating system or application program failure. and per barrel operating and maintenance expenses and will provide flexibility for future volume expansions. The completion of the fluid handling project has allowed Parallel to commence what it expects to be an extensive well workover and reactivation reactivation to become active after a period of quiescence or, as in bacterial and viral infections, latency. cross reactivation program. Previously, the Company announced the identification of at least 40 mechanically viable deepening deep·en tr. & intr.v. deep·ened, deep·en·ing, deep·ens To make or become deep or deeper. Noun 1. deepening - a process of becoming deeper and more profound candidates. The Company anticipates systematically working though this inventory on a high-graded basis through the remainder of this year and 2005. The first of these workovers, LDMU LDMU Law of Diminishing Marginal Utility (economics) L-4 has been completed, and placed on production at an initial rate of approximately 66 gross (38 net) equivalent barrels of oil per day. The Company's net investment in this workover was approximately $278,000. Based on current oil and gas prices and the current producing rate, this workover is expected to pay out in approximately six months. Activity on the second well, LDMU E11A, is currently in progress. Parallel anticipates that it will spend on this project, net to its 66% working interest, $1.9 million in 2004. However, this program and its expenditures could be accelerated if future deepenings exceed the Company's current economic model. Other Permian Basin Projects - The Company has also budgeted approximately $1.5 million in 2004, which it plans to spend on its other existing projects in the Permian Basin of West Texas. 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 Yegua/Frio Gas Project, Jackson and Wharton Counties - This project contributed approximately 21% of Parallel's production during the third quarter 2004 and represented approximately 11% of its reserve value as of September 30, 2004. As the Company announced on November 11, 2004, the Thunderbird thunderbird In North American Indian mythology, a powerful spirit in the form of a bird that watered the earth and made vegetation grow. Lightning was believed to flash from its eyes or beak, and the beating of its wings was thought to represent rolling thunder. No. 1 Yegua well was drilled to a total depth of 12,600 feet and is producing from a Yegua sand at approximately 12,000 feet. The well is currently flowing to sales at an average rate of approximately 5.4 million cubic feet of gas per day, plus 180 barrels of condensate condensate, matter in the form of a gas of atoms, molecules, or elementary particles that have been so chilled that their motion is virtually halted and as a consequence they lose their separate identities and merge into a single entity. per day, or 1,080 gross BOE per day (approximately 300 BOE per day net to Parallel), on a 14/64-inch choke (jargon) choke - To fail to process input or, more generally, to fail at any endeavor. E.g. "NULs make System V's "lpr(1)" choke." See barf, gag. with flowing tubing pressure of 5,500 pounds per square inch Noun 1. pounds per square inch - a unit of pressure psi pressure unit - a unit measuring force per unit area . Parallel owns a 38% working interest (28% net revenue interest) in the well. Privately held Allegro (operating system) Allegro - The code name for the major Mac OS release due in mid-1998. http://devworld.apple.com/mkt/informed/appledirections/mar97/roadmap.html. Investments, Inc., the operator, and other private investors own the remaining interests. The Company is continuing to evaluate additional seismic prospects in this area. The Company has budgeted approximately $2.2 million, net to its interest, for the Yegua/Frio gas project in 2004. East Texas Cook Mountain Gas Project, Liberty County - This project contributed approximately 11% of Parallel's third quarter 2004 production and represented approximately 1.6% of its reserve value as of September 30, 2004. During 2004, the Company has participated in the drilling of 7 Cook Mountain wells with working interests ranging from 2.0% to 8.6%. One well was a dry hole and 6 wells are on production making a combined rate of approximately 47,175 gross (1,860 net) Mcfe per day, or 310 net BOE per day. The Company has budgeted approximately $0.5 million, net to its interest, for this project in 2004. New Projects All four of the following new projects have been acquired since June 2002. Developmental Projects: 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 Gas Project, Tarrant County - Parallel's Barnett Shale gas project is located in Tarrant County, Texas Tarrant County is a county located in the U.S. state of Texas. As of 2000, the population was 1,446,219. Its county seat is Fort Worth6. Tarrant County is the second most populous county in the Dallas/Fort Worth Metroplex and contains its second largest principal city. , 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 Johnson County is the name of several counties in the United States:
leasehold n. on the project is approximately 5,000 gross (1,400 net) acres. Having assembled as·sem·ble v. as·sem·bled, as·sem·bling, as·sem·bles v.tr. 1. To bring or call together into a group or whole: assembled the jury. 2. pipeline right-of-way and permits necessary to complete a gas gathering infrastructure, Parallel and Dallas based operator, Dale Operating, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control , will soon commence the drilling of their first horizontal well, the Brentwood No. 1. Location has been built and the well is expected to spud prior to year-end, pending rig availability. Parallel's working interest in this initial well is 40%. The estimated cost to drill and complete a horizontal well is approximately $2.0 million and industry reserve estimates are in the range of 1 to 3 Bcfg per well. Parallel expects this project to become a multi-well, long-life gas project that will be developed over the next three years. The Company has budgeted approximately $2.0 million, net to its interest, for this project in 2004. 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). Gas Project - 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 a drilling machine having a horizontal drill spindle. See also: Horizontal and hydraulic fracture fracture, breaking of a bone. A simple fracture is one in which there is no contact of the broken bone with the outer air, i.e., the overlying tissues are intact. In a comminuted fracture the bone is splintered. stimulation technologies. 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 1,500 gross (100 net) Mcf of gas per day, and the other two wells are each producing approximately 100 gross Mcf of gas per day. Two wells are currently testing and one well is drilling. 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 will also participate, for a 20% working interest, in a proposed well that will be operated by EOG Resources EOG Resources NYSE: EOG is a Fortune 600 company based in Houston, Texas. This company is one of the largest independent oil and natural gas companies in the United States. History 1999
Area 2 - This project consists of 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. Parallel has budgeted approximately $3.6 million for Area 2 leasehold acquisition in 2004. The Company owns an 85.0% working interest in this area. Exploratory Projects: Cotton Valley Reef Gas Project - Parallel owns an approximate 13.125% working interest in this 3-D seismic gas project which can be characterized by a higher risk profile than the Company's other current projects. The objective is the Cotton Valley barrier reef barrier reef n. A long, narrow ridge of coral or rock parallel to and relatively near a coastline, separated from the coastline by a lagoon too deep for coral growth. facies facies /fa·ci·es/ (fa´she-ez) pl. fa´cies [L.] 1. the face. 2. surface; the outer aspect of a body part or organ. 3. expression (1). found between the depths of 16,000 and 18,000 feet on the flank flank (flank) the side of the body between ribs and ilium. flank n. 1. The side of the body between the pelvis or hip and the last rib; the side. 2. of the East Texas Basin as it existed in the Jurassic time. The project consists of approximately 5,000 gross (650 net) acres. The first well was drilled to a total depth of 18,100 feet and found non-porous Cotton Valley Reef formation. The well has been temporarily abandoned and the operator is evaluating potential side track drilling opportunities. The Company budgeted approximately $1.4 million in 2004, net to its working interest, for the drilling of this prospect. Utah Oil and Gas Project - Parallel has increased its 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 ge·ol·o·gy n. pl. ge·ol·o·gies 1. The scientific study of the origin, history, and structure of the earth. 2. The structure of a specific region of the earth's crust. 3. A book on geology. data evaluation on this project continues. Parallel expects to drill a test well during the first half of 2005. Parallel owns and operates 100% of this project and estimates that the cost to drill a well to casing point will be approximately $300,000. The Company's 2004 budget on this project is approximately $1.0 million for leasehold and seismic. Management Comments Larry C. Oldham, Parallel's President, commented, "Parallel's property portfolio continues to evolve. While the Company moves ahead aggressively to acquire additional Permian Basin assets, we continue to balance our exploitation efforts with prudent investments in primarily shallow, high-potential drilling opportunities that can be replicated based upon success." Oldham further commented, "Our third quarter production volumes continue to reflect the shift in the character and make-up Make-up The amount of deficiency when a cash flow or capital item is deficient. For example, an interest make-up relates to the interest amount above a ceiling percentage. of our composite production base and were flat compared to the second quarter 2004. However, we expect that our fourth quarter 2004 average daily production volumes will increase approximately 25% over third quarter 2004 volumes to an estimated 3,700 BOE per day. This estimated 750 BOE per day increase will come from our recent acquisitions, new gas wells and ongoing exploitation projects. Earnings Release, Conference Call and Webcast Information Parallel's announcement of its financial results for the third quarter ended September 30, 2004, is expected to be released on Monday morning, November 15, 2004, prior to the conference call. The Company's management will host a conference call to discuss its financial and operational results for the third quarter ended September 30, 2004, on Monday, November 15, 2004, at 1:00 p.m. Central time. To participate in the call, dial 1-800-265-0241 or 1-617-847-8704, Participant Passcode 92226148, 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 36960097. 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 Enhanced Oil Recovery (EOR) is a generic term for techniques for increasing the amount of oil that can be extracted from an oil field. Using EOR, 30-60 %, or more, of the reservoir's original oil can be extracted [1] compared with 20-40% [2] techniques and 3-D seismic technology. Additional information on Parallel Petroleum Corporation is available at 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 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 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. , 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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