SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-K/A
                                Amendment No. 1


          [X]       Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934


                  For the fiscal year ended December 31, 2000

          [ ]  Transition Report Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934


                For the transition period from ______ to ______.

                       Commission File Number: 0 - 13305

                         PARALLEL PETROLEUM CORPORATION

             (Exact Name of Registrant as Specified in its Charter)


       Delaware                                           75-1971716
------------------------------                         ----------------
State or Other Jurisdiction of                         (I.R.S. Employer
Incorporation or Organization)                         Identification No.)


   110 North Marienfeld Street
One Marienfeld Place, Suite 465
       Midland, Texas                                       79701
----------------------------------------               ----------------
(Address of Principal Executive Offices)                  (Zip Code)


       Registrant's Telephone Number, Including Area Code: (915) 684-3727

        Securities Registered Pursuant to Section 12(b) of the Act: None

          Securities Registered Pursuant to Section 12(g) of the Act:


                          Common Stock, $.01 par value
                         Common Stock Purchase Warrants
                  Rights to Purchase Series A Preferred Stock
                                (Title of Class)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                Yes     x                                  No

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

     The aggregate  market value of voting and non-voting  common equity held by
non-affiliates  of  the  Registrant  as of  March  15,  2001  was  approximately
$91,929,861, based on the last sale price of the common stock on the same date.

     At March 15, 2001 there were 20,428,858 shares of common stock outstanding.


<PAGE>
                                      (i)


                                   FORM 10-K/A

                         PARALLEL PETROLEUM CORPORATION

                               TABLE OF CONTENTS


 Item No.                                                                Page

                                     PART I

Item  1.    Business                                                        1
Item  2.    Properties                                                     22
Item  3.    Legal Proceedings                                              24
Item  4.    Submission of Matters to a Vote
             of Security Holders                                           24

                                     PART II

Item  5.    Market for Registrant's Common Equity and
             Related Stockholder Matters                                   25
Item  6.    Selected Financial Data                                        26
Item  7.    Management's Discussion and Analysis of
             Financial Condition and Results of Operations                 27
Item  7A.   Quantitative and Qualitative Disclosures
             About Market Risk                                             38
Item  8.    Financial Statements and Supplementary Data                    39
Item  9.    Changes in and Disagreements with
             Accountants on Accounting and Financial
             Disclosure                                                    39

                                    PART III

Item  10.   Directors and Executive Officers of the Registrant             40
Item  11.   Executive Compensation                                         42
Item  12.   Security Ownership of Certain Beneficial Owners
             and Management                                                48
Item  13.   Certain Relationships and Related Transactions                 50


                                     PART IV

Item  14.   Exhibits, Financial Statement Schedules, and Reports
             on Form 8-K                                                   51


Explantory Note:

This amendemnt corrects the description of general and  administrative  expenses
under Item 7 for the years ended December 31, 2000 and December 31, 1999.

<PAGE>
                                      (ii)

           Cautionary Statements Regarding Forward-Looking Statements


     Some  statements  contained  in our Form 10-K  report are  "forward-looking
statements".  All statements  other than statements of historical facts included
in this report,  including,  without  limitation,  statements  regarding planned
capital  expenditures,  the  availability  of capital  resources to fund capital
expenditures,  estimates of proved reserves,  our financial  position,  business
strategy   and  other  plans  and   objectives   for  future   operations,   are
forward-looking  statements.  You can identify forward-looking statements by the
use of  forward-looking  terminology such as "may," "will," "expect,"  "intend,"
"anticipate," "estimate," "continue," "present value," "future" or "reserves" or
other variations or comparable terminology.  Although we believe the assumptions
and expectations  reflected in these forward-looking  statements are reasonable,
we can't give any assurance  that our  expectations  will prove to be correct or
that we will be able to take any  actions  that are  presently  planned.  All of
these   statements   involve   assumptions   of  future  events  and  risks  and
uncertainties.   Risks  and   uncertainties   associated  with   forward-looking
statements include, but are not limited to:

     risks associated with the drilling of wells;

     competition;

     future capital requirements and availability of financing;

     fluctuations in prices of oil and gas;

     governmental regulations;

     geological concentration of our reserves; and

     general economic conditions.

     For these and other  reasons,  actual  results may differ  materially  from
those  projected or implied.  We caution you against  putting undue  reliance on
forward-looking  statements  or  projecting  any  future  results  based on such
statements.

     Before you invest in our common  stock,  you should be aware that there are
various risks  associated  with an  investment.  We have described some of these
risks in other sections of this annual report and under the section Risk Factors
beginning on page 18 of this annual report.

<PAGE>
                                       1



ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     The  following  discussion  and  analysis  are  intended  to assist  you in
understanding our financial  position and results of operations for each year in
the  three-year  period ended  December 31, 2000.  You should read the following
discussion  and analysis in  conjunction  with our financial  statements and the
related notes.

     The  following  discussion  contains  forward-looking   statements.  For  a
description  of  limitations   inherent  in  forward-looking   statements,   see
"Cautionary Statement Regarding Forward-Looking Statements" on page ii.

Basis of Presentation

     We account  for our  30.675%  interest  in First  Permian  using the equity
method of  accounting.  Under the  equity  method of  accounting,  we record our
investment in First Permian at cost on the balance  sheet.  This is increased or
reduced by our  proportionate  share of First Permian's income or loss, which is
presented as one amount in the  statement of income.  Our 30.675% share of First
Permian's  oil and gas  reserves is presented  separately  under our oil and gas
reserve information in Note 15 to the Financial Statements.

     At December 31, 2000, we had recorded a loss of $500,576 in our  investment
in First  Permian.  Our loss is recorded as a net liability in our investment to
the extent  that we had  guaranteed  $10,000,000  of the debt of First  Permian.
Effective  October 25, 2000, we were released from this guarantee and , although
we continue to utilize the equity method of accounting, our financial statements
no longer  include  First  Permian's  losses  because we are  released  from our
guarantee.  To the extent First Permian generates income in excess of losses, we
will then recognize our share of the net income on our financial statements.

General

     Our primary objectives are to build oil and gas reserves,  production, cash
flow and earnings per share by exploring for new oil and gas reserves, acquiring
oil and gas  properties  and  optimizing  production  from  existing oil and gas
properties. Management seeks to achieve these objectives by:

     using advanced technologies to conduct exploratory activities;

     acquiring  producing  properties  we believe add  incremental  value to our
     asset base;

     keeping debt levels low;

     concentrating activities in core areas to achieve economies of scale; and

     emphasizing cost controls.

     Since  1992,  our primary  focus has been  exploratory  drilling  using 3-D
seismic  technology.  Our long term business strategy is to increase our reserve
base by using this and other advanced technologies.  Additionally,  we intend to
exploit our  existing  properties  and to acquire  properties  we believe can be
exploited by developing reserves not previously produced.

<PAGE>
                                       2


     We undertake  projects  only when we believe the project has the  potential
for initial  cash flow  adequate to return the  project's  capital  expenditures
within a short period of time,  generally less than 36 months.  We also endeavor
to maximize the present value of our projects by accelerating  production of our
reserves  consistent  with prudent  reservoir  management and prevailing  energy
prices.

     Following this strategy,  we have discovered oil and gas reserves using 3-D
seismic  technology  in the  Horseshoe  Atoll  Reef  Trend of west Texas and the
Yegua/Frio/Wilcox  gas trend onshore the gulf coast of Texas.  Additionally,  we
have  acquired  producing  oil and gas  properties  in the Permian Basin of west
Texas.  Capital used to acquire these properties has been provided  primarily by
secured  bank  financing,  sales of our  equity  securities  and cash flows from
operations.

Operating Performance

     Our  operating  performance  is  influenced  by several  factors,  the most
significant  of which  are the  prices  we  receive  for our oil and gas and our
production volumes.  The world price for oil has overall influence on the prices
that we receive for our oil production. The prices received for different grades
of oil are based upon the world price for oil, which is then adjusted based upon
the particular  grade.  Typically,  light oil is sold at a premium,  while heavy
grades of crude are discounted. Gas prices we receive are influenced by:

     seasonal demand;

     weather;

     hurricane conditions in the Gulf of Mexico;

     availability of pipeline transportation to end users;

     proximity of our wells to major  transportation  pipeline  infrastructures;
     and

     to a lesser extent, world oil prices.

     Additional factors influencing our overall operating performance include:

     production expenses;

     overhead requirements; and

     costs of capital.

     Our oil and gas exploration, development and acquisition activities require
substantial and continuing capital  expenditures.  Historically,  the sources of
financing to fund our capital expenditures have included:

     cash flow from operations,

     sales of our equity securities, and

     bank borrowings.

     Our oil and gas producing  activities are accounted for using the full cost
method of  accounting.  Under this method,  we capitalize  all costs incurred in
connection  with the  acquisition of oil and gas properties and the  exploration
for and  development  of oil and gas  reserves.  (See  Note 11 to the  Financial

<PAGE>
                                       3


Statements.)  These  costs  include  lease  acquisition  costs,  geological  and
geophysical  expenditures,  costs of drilling both productive and non-productive
wells,  and  overhead   expenses   directly  related  to  land  acquisition  and
exploration and development activities. Proceeds from the disposition of oil and
gas properties are accounted for as a reduction in  capitalized  costs,  with no
gain or loss recognized  unless such  disposition  involves a material change in
reserves, in which case the gain or loss is recognized.

     Depletion of the  capitalized  costs of oil and gas  properties,  including
estimated   future   development   costs,   is  provided  using  the  equivalent
unit-of-production  method  based upon  estimates of proved oil and gas reserves
and production, which are converted to a common unit of measure based upon their
relative energy content.  Unproved oil and gas properties are not amortized, but
are individually  assessed for impairment.  The cost of any impaired property is
transferred to the balance of oil and gas properties being depleted.

     Depletion per  equivalent  unit of production EBO was $8.18 versus $8.30 in
1999 and $8.07 in 1998.  The decrease per BOE in 2000 was a result of a decrease
of $2,890,373 in the net oil and gas properties  depletable  base coupled with a
disproportionate  decrease in total  beginning  of the year  reserves of 289,156
BOEs.

Results of Operations

     Our  business  activities  are  characterized  by frequent,  and  sometimes
significant, changes in our:

     reserve base;

     sources of production;

     product mix (oil versus gas volumes); and

     the prices we receive for our oil and gas production.

     Year-to-year or other periodic comparisons of the results of our operations
can be difficult and may not fully and accurately  describe our  condition.  The
following table shows selected  operating data for each of the three years ended
December 31, 2000, 1999 and 1998.

<PAGE>
                                       4

<TABLE>

                                                            Year Ended December 31,
                                                 -------------------------------------------
                                                      2000         1999(1)         1998(2)
                                                  ----------    -----------     -----------
<S>                                               <C>            <C>            <C>

Production and prices:
    Oil (Bbls)                                       165,137        163,696        185,474
    Natural gas (Mcf)                              2,821,815      2,708,516      3,275,882
    EBO (Bbls)                                       635,440        615,115        731,454
    Oil price (per Bbl)                           $    28.88      $   17.32     $    12.49
    Gas price (per Mcf)                           $     4.38      $    2.27     $     2.04
    Ratio of oil to gas price                         6.59/1         7.63/1         6.12/1
    Increase (decrease) in production
        volumes over prior year                           3%          (16%)           (1%)

Results of operations per EBO:
    Oil and gas revenues                          $    26.96     $    14.59     $    12.31

    Costs and expenses:
        Production costs                               4.88            3.83           3.33                        -
        General and administrative                     1.88            1.31           1.17
        Provision for losses on trade receivables        -              .14            .06
        Depreciation, depletion and amortization       8.25            8.49           8.16
        Impairment of oil and gas properties             -             2.77          20.17
                                                  ---------      ----------     ----------
             Total costs and expenses                 15.01           16.54          32.89
                                                  ---------      ----------     ----------
    Operating income (loss)                           11.97           (1.95)        (20.58)

    Equity interest in earnings (loss) of
        First Permian, L.L.C.                         (0.79)           0.32            -

    Interest expense, net                             (1.76)          (2.39)       (1 .89)

    Other income, net                                   .19             .03           .46
                                                  ---------      ----------     ----------
        Pretax income (loss) per EBO              $    9.61      $    (3.99)    $   (22.01)
                                                  =========      ==========     ==========
</TABLE>

-------------------

(1)  Results include a noncash charge of $1,705,000 related to the impairment of
     oil and gas properties incurred in the fourth quarter of 1999,  primarily a
     result of a decrease in year-end reserves.

(2)  Results  include a noncash charge of $14,757,028  related to the impairment
     of oil and gas properties incurred in the fourth quarter of 1998, primarily
     a result of low oil and gas prices at year-end.

     The following  table shows the percentage of total revenues  represented by
each item reflected on our statements of operations for the periods indicated.

<PAGE>
                                       5

<TABLE>

                                                        Year Ended December 31,
                                                 -------------------------------------
                                                   2000          1999(1)       1998(2)
                                                 -------        --------       -------
<S>                                              <C>            <C>            <C>
Oil and gas revenues                              100.0%         100.0%         100.0%

Costs and expenses:
    Production costs                               18.1           26.2           27.0
    General and administrative                      6.9            8.9            9.5
    Provision for loss on trade receivables          -             1.0             .5
    Depreciation, depletion and
        amortization                               30.6           58.2           66.3
    Impairment of oil and gas properties             -            19.0          163.9

                                                -------        -------        -------
        Total costs and expenses                   55.6          113.3          267.2
                                                -------        -------        -------
        Total costs and expenses

Operating income (loss)                            44.4          (13.3)        (167.2)

Equity interest in earnings (loss) of
     First Permian, L.L.C.                         (2.9)           2.2             -

Interest expense, net                              (6.5)         (16.4)         (15.3)

Other income, net                                    .7             .2            3.8
                                                -------        -------        -------
Pretax income (loss)                               35.7          (27.3)        (178.7)

Income tax (expense) benefit                       (0.8)            -            34.4
                                                -------        -------        -------
Net income (loss)                                  34.9%         (27.3%)       (144.3%)
                                                -------        -------        -------
</TABLE>

-------------------

(1)  Results include a noncash charge of $1,705,000 related to the impairment of
     oil and gas properties incurred in the fourth quarter of 1999,  primarily a
     result of a decrease in year-end  reserves.

(2)  Results  include a noncash charge of $14,757,028  related to the impairment
     of oil and gas properties incurred in the fourth quarter of 1998, primarily
     a result of low oil and gas prices at year-end.

Years Ended December 31, 2000 and December 31, 1999

     Oil and Gas Revenues.  Parallel's  total oil and gas revenues for 2000 were
$17,134,502,  an increase of $8,160,461,  or approximately  91%, from $8,974,041
for 1999.  The increase in revenues for 2000 when  compared with 1999 is related
to a 3% increase in production  volumes and an 85% increase in the average price
per EBO we received for our oil and gas sales.

     Production.  On an  equivalent  barrel  basis,  production  volumes in 2000
totaled  635,440 EBOs  compared  with  615,115 EBOs in 1999.  The 3% increase in
production  was  primarily  due to increased  drilling  activity in 2000,  which
resulted in more wells being placed in production.

     Production Costs. The rise in production costs for 2000, when compared with
1999, was primarily the result of increased  production  taxes  associated  with
increased  revenues  and, to a lesser  degree,  a slight  increase in production
volumes.  Production  costs  increased  $745,802 or 32%, to  $3,099,534  for the
twelve months ended  December 31, 2000,  from  $2,353,732 for the same period of

<PAGE>
                                       6


1999.  Production costs as a percentage of revenues decreased  primarily because
of  higher  oil and gas  prices,  which  resulted  in higher  revenues.  Average
production  costs per EBO  increased  27% to $4.88 for the twelve  months  ended
December  31,  2000  compared  to $3.83 in the same  period  of 1999,  primarily
because of increased production taxes.

     General and Administrative  Expenses.  General and administrative  expenses
increased $385,593,  or 48%, to $1,191,527 for the year ended December 31, 2000,
from  $805,934 in 1999.  The  increase  was  primarily  related to  increases in
legal and public reporting costs.  General  and  administrative  expenses  as a
percentage  of revenues  decreased to 6.9% for the year ended  December 31, 2000
versus 8.9% for the same period in 1999.  This decrease is primarily a result of
higher oil and gas prices, which increased revenues.

     Depreciation,  Depletion and Amortization  Expense.  DD&A expenses for 2000
increased  $15,705 to $5,239,205  versus  $5,223,500 in 1999.  This increase was
primarily the result of a 3% increase in production  volumes.  DD&A expense as a
percentage  of  revenues  decreased  primarily  because  of  higher  oil and gas
revenues.

     Impairment of Oil and Gas Properties. During 2000, we did not recognize any
impairment  charge.  During the fourth  quarter of 1999, we recognized a noncash
impairment charge of $1,705,000 related to our oil and gas reserves and unproved
properties.  The  impairment  of oil and gas  assets in 1999 was  primarily  the
result of a decrease in our year-end proved reserves.

     Under full cost accounting rules, each quarter we are required to perform a
ceiling test  calculation.  The full cost pool  carrying  values cannot exceed a
company's  future net revenues from its proved  reserves,  discounted at 10% per
annum using constant current product prices,  and the lower of cost or market of
unproved properties.

     The ceiling  test was computed  using the net present  value of reserves at
December 31, 2000 based on prices of $25.00 per Bbl of oil and $10.18 per Mcf of
natural gas. The prices used to compute the ceiling test in 1999 were $24.75 per
Bbl and $2.20 per Mcf.

     Net Interest Expense.  Net interest expense decreased $349,127,  or 24%, to
$1,120,080 for the year ended December 31, 2000 compared with $1,469,207 for the
same period of 1999.  This  decrease was  principally  a result of lower average
borrowings  from our  revolving  line of  credit  facility  and an  increase  in
interest income.

     Income Tax Benefit  (Expense).  For the year ended  December 31,  2000,  we
recognized tax expense of $130,000. For the year ended December 31, 1999, we did
not recognize an income tax benefit or expense.

     Our effective tax rate for 2000 was  approximately  2.1% versus 0% in 1999.
You should read Note 5 to the  Financial  Statements  on page F-14,  included in
Item 8 - Financial  Statements and Supplementary Data, for further discussion of
our income tax provisions and benefits.

     Net Income (Loss) and Operating Cash Flow. Our net income, before preferred
stock  dividends,  was  $5,977,328 for the year ended December 31, 2000 compared
with a net loss of $2,450,457  for the year ended December 31, 1999. We realized
net income in 2000 primarily because of substantially higher oil and gas prices,
which increased revenues, and a 3% increase in production volumes. The 1999 loss
was primarily caused by a fourth quarter 1999 noncash  impairment  charge to oil
and gas properties  totaling  $1,705,000 and decreased revenues resulting from a
decline in production volumes.


<PAGE>
                                       7

     Operating cash flow for 2000 increased approximately  $7,566,877,  or 177%,
to $11,847,109 compared with $4,280,232 for the year ended December 31, 1999.

Years Ended December 31, 1999 and December 31, 1998

     Oil  and Gas  Revenues.  Our  total  oil and gas  revenues  for  1999  were
$8,974,041,  a decrease of $27,541,  or less than 1%, from  $9,001,582 for 1998.
The  decrease  in revenues  for 1999,  compared  with 1998,  is related to a 16%
decline in production volumes,  which was partially offset by higher oil and gas
prices.

     Production.  On an equivalent barrel basis, 1999 production totaled 615,115
EBOs  compared  with  731,454  EBOs in 1998.  The  decrease  in  production  was
primarily due to normal production  declines associated with producing wells and
decreased  drilling  activity in 1999, which affected our ability to replace oil
and gas produced during the year.

     Production  Costs. The decrease in production costs for 1999, when compared
with  1998,  was  primarily  the  result of a decrease  in  production  volumes.
Production costs decreased  $80,926,  or 3%, to $2,353,732 for the twelve months
ended December 31, 1999, from $2,434,658 for the same period of 1998. Production
costs as a percentage of revenues decreased  primarily because of higher oil and
gas prices.  Average  production  costs per EBO  increased  15% to $3.83 for the
twelve months ended  December 31, 1999 compared with $3.33 in the same period of
1998,  primarily  because  of  lower  production  volumes  and the  fixed  costs
associated with producing wells.

     General and Administrative  Expenses.  General and administrative  expenses
decreased $49,854, or 6%, to $805,934 for the year ended December 31, 1999, from
$855,788 for the same period of 1998. The decrease in general and administrative
expenses was  primarily  related to a decrease in property  insurance  costs and
legal expenses.  General and administrative expenses as a percentage of revenues
decreased to 8.9% for the year ended  December 31, 1999 versus 9.5% for the same
period in 1998. This decrease is primarily a result of higher oil and gas prices
and a 6% decline in general and administrative expenses.

     Depreciation,  Depletion and Amortization  Expense.  DD&A expenses for 1999
decreased  $742,721,  or 12%, to  $5,223,500  versus  $5,966,221  in 1998.  This
decrease was a result of lower production volumes.  DD&A expense as a percentage
of revenues decreased primarily because of lower production volumes.

     Impairment of Oil and Gas Properties. During the fourth quarter of 1999, we
recognized a noncash  impairment charge of $1,705,000 related to our oil and gas
reserves  and  unproved  properties.  The  impairment  of oil and gas assets was
primarily  the  result  of a  decrease  in  our  year-end  proved  reserves.  We
recognized an impairment  charge in 1998 of  $14,757,028,  or $12,269,834 net of
tax, related to our oil and gas reserves and unproved properties. The impairment
of oil and gas  assets  in 1998  was  primarily  the  result  of the  effect  of
significantly  lower oil and natural gas prices on both proved and  unproved oil
and gas properties.

     Under full cost accounting rules, each quarter we are required to perform a
ceiling test  calculation.  The full cost pool  carrying  values cannot exceed a
company's  future net revenues from its proved  reserves,  discounted at 10% per
annum using constant current product prices,  and the lower of cost or market of
unproved properties.



<PAGE>
                                       8



     The ceiling  test was computed  using the net present  value of reserves at
December  31, 1999 based on prices of $24.75 per Bbl of oil and $2.20 per Mcf of
natural gas. The prices used to compute the ceiling test in 1998 were $10.50 per
Bbl and $2.00 per Mcf.

     Net Interest  Expense.  Net interest expense increased  $90,875,  or 6%, to
$1,469,207  for the year ended December 31, 1999,  from  $1,378,332 for the same
period of 1998. This increase was principally a result of an increase in average
borrowings from our revolving line of credit facility.

     Income Tax Benefit (Expense).  For the year ended December 31, 1999, we did
not  recognize  an income tax benefit or expense  because we  generated  net tax
losses  during the year.  For the year ended  December 31, 1998, we recognized a
tax benefit of  $3,100,027.  At  December  31,  1999 and 1998,  we reviewed  our
deferred tax assets and, in light of the current economic  conditions in the oil
and gas  industry,  the outlook for future  commodity  prices,  and our expected
operational results in future periods, we believe that some of our net operating
losses may expire  unused.  Therefore,  we  established  a  valuation  allowance
against them of $4,248,480 and $2,530,196 for 1999 and 1998, respectively.

     Our effective tax rate for 1999 was  approximately  0% versus a 19% benefit
in 1998.  You  should  read Note 5 to the  Financial  Statements  on page  F-14,
included in Item 8 - Financial  Statements and  Supplementary  Data, for further
discussion of our income tax provisions and benefits.

     Net Income (Loss) and Operating Cash Flow. Our net loss,  before  preferred
stock  dividends,  was  $2,450,457 for the year ended December 31, 1999 compared
with a net loss of  $12,995,910  for the year ended  December 31, 1998. The 1999
loss was primarily caused by a fourth quarter 1999 noncash  impairment charge to
oil and gas properties  totaling  $1,705,000 as a result of a decrease in proved
reserves  and a decline  in  production  volumes.  This  compares  with a fourth
quarter  1998  noncash  impairment  charge  to oil and gas  properties  totaling
$14,757,028,  the result of  significantly  lower oil and gas prices at year-end
1998.

     Factors  contributing  to the  net  loss  were  partially  offset  by a 19%
increase in 1999 oil and gas prices,  on an EBO basis,  when  compared with 1998
prices.

     Operating cash flow for 1999 decreased  approximately  $347,000,  or 8%, to
$4,280,232  compared with $4,627,312 for the year ended December 31, 1998. Other
sources of funds  included  net  proceeds of $17,188  from the exercise of stock
options, net proceeds of $3,117,295,  excluding offering costs, from the private
placement of common stock, net proceeds from property sales totaling  $1,111,525
and bank borrowings under our credit facility.

Capital Resources and Liquidity

     Our capital  resources consist primarily of cash flows from our oil and gas
properties and bank borrowings supported by our oil and gas reserves.  Our level
of earnings and cash flows depends on many  factors,  including the price of oil
and natural gas.

     Our primary source of cash during 2000 was funds generated from operations.
Such funds were used primarily for  exploration  and  development  expenditures,
preferred stock dividend payments and the repayment of borrowings under our bank
credit facility.

     During 2000, we spent  $6,645,737 on exploration and  development,  seismic
data processing and leasehold  acquisitions.  Long term debt,  excluding current
maturities, decreased by $676,000 to $11,624,000. At December 31, 2000, Parallel
had  $2,000,826 in cash and total assets of  $46,456,437.  The

<PAGE>
                                       9

unused   borrowing  base  available  from  our  revolving  credit  facility  was
approximately $3,100,000 at December 31, 2000.

     Bank Facility

     On  December  18,  2000,  we entered  into a new loan  agreement  with Bank
United, Midland, Texas, to refinance the outstanding indebtedness under the loan
agreement with our former bank lender, and to provide funds for working capital.
The loan agreement  provides for a revolving  credit facility under which we may
borrow up to the lesser of $30.0 million or the borrowing  base amount in effect
from time to time. At December 31, 2000,  the borrowing base in effect was $15.5
million, and $12.4 million,  bearing interest at 9.5%, was outstanding under the
credit  facility.  The interest rate on amounts drawn under the revolving credit
facility is, at our election, either the bank's base rate or the eurodollar rate
plus a margin of 2.75% during the related  eurodollar  interest rate period. The
borrowing base is redetermined by the bank  semi-annually  on or about May 1 and
November 1 of each year,  or at other times as the bank  elects.  The  borrowing
base automatically  reduces by $323,000 each month beginning January 1, 2001. If
the outstanding principal amount of our loan ever exceeds the borrowing base, we
are required to either provide  additional  collateral to the bank or prepay the
principal of the note in an amount at least equal to such  excess.  Unless there
is a  borrowing  base  deficiency  and we prepay the  amount of the  deficiency,
interest only is payable  monthly.  The  revolving  credit  facility  matures on
October 1, 2003.

     Commitment  fees of .25% per annum on the difference  between the revolving
commitment and the average daily amount of the loan are due quarterly.

     Our obligations to the bank are secured by substantially all of our oil and
gas  properties.  Our bank borrowings have been incurred to finance our property
acquisition, 3-D seismic surveys, enhancement and drilling activities.

     In addition to customary affirmative covenants, the loan agreement contains
various restrictive covenants and compliance requirements, including:

     maintaining certain financial ratios;

     limitations on incurring additional indebtedness;

     prohibiting the payment of dividends on our common stock;

     limitations of the disposition of assets; and

     permitting liens (other than in favor of the lender) to exist on any of our
     properties.

     If we have  borrowing  capacity  under  our loan  agreement,  we  intend to
borrow, repay and reborrow under the revolving credit facility from time to time
as necessary, subject to borrowing base limitations, to fund:

     3-D seismic surveys;

     lease option exercises;

     drilling activities on our properties in the Yegua/Frio/Wilcox gas trend;

     developmental  drilling on our Permian Basin properties,  when economically
     feasible;

<PAGE>
                                       10


     other drilling expenditures and acquisition opportunities; and

     general corporate purposes.

     Preferred Stock

     At December 31, 2000,  we had 974,500  shares of 6%  convertible  preferred
stock outstanding. The preferred stock:

     requires us to pay  dividends of $.60 per annum,  semi-annually  on June 15
     and December 15 of each year.

     can be  converted  into  common  stock at any  time,  at the  option of the
     holder,  into 2.8751 shares of common stock at an initial  conversion price
     of $3.50 per share, subject to adjustment in certain events.

     is redeemable at our option,  in whole or in part, for $10 per share,  plus
     accrued dividends.

     has no voting  rights,  except as required by applicable  law, and,  except
     that as long as any  shares of  preferred  stock  remain  outstanding,  the
     holders of a majority of the outstanding  shares of the preferred stock may
     vote on any proposal to change any provision of the  preferred  stock which
     materially and adversely  affects the rights,  preferences or privileges of
     the preferred stock.

     is senior to the common stock with respect to dividends and on liquidation,
     dissolution or winding up of Parallel.

     has a  liquidation  value  of  $10  per  share,  plus  accrued  and  unpaid
     dividends.

Future Capital Requirements

     Our capital  expenditure  budget for 2001 is highly dependent on future oil
and gas  prices  and  the  availability  of  other  sources  of  funding.  These
expenditures will be governed by the following factors:

     internally generated cash flows;

     availability of borrowing under our current credit facility;

     additional sources of financing; and

     future drilling successes.

     In 2001,  we  intend  to drill  lower  risk  prospects  that  could  have a
meaningful  effect on our reserve base and cash flows. In selected cases, we may
elect to reduce our  interests in higher risk,  higher impact  projects.  We may
also sell  certain  non-core  producing  properties  to raise  funds for capital
expenditures.

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                                       11



Outlook

     The oil and gas industry is capital intensive. We make, and anticipate that
we will continue to make,  substantial  capital  expenditures in the exploration
for,  development  and  acquisition of oil and gas reserves.  Historically,  our
capital expenditures have been financed primarily with:

     internally generated cash from operations;

     funds provided from bank borrowings; and

     proceeds from sales of equity securities.

     The continued  availability  of these capital sources depends upon a number
of variables, including:

     our proved reserves,

     the volumes of oil and gas we produce from existing wells;

     the prices at which we sell oil and gas; and

     our ability to acquire, locate and produce new reserves.

     Each of these variables materially affects our borrowing capacity.  We may,
from time to time, seek additional financing in the form of:

     increased bank borrowings;

     sales of Parallel's securities;

     sales of non-core properties; or

     other forms of financing.

     We do not currently have agreements for any future  financing and there can
be no assurance as to the availability or terms of any such financing.

Trends and Prices

     Changes in oil and gas prices significantly affect our revenues, cash flows
and borrowing capacity. Markets for oil and gas have historically been, and will
continue to be, volatile. Prices for oil and gas typically fluctuate in response
to relatively minor changes in supply and demand, market uncertainty,  seasonal,
political  and other  factors  beyond our control.  We are unable to  accurately
predict  domestic or worldwide  political events or the effects of other factors
on the prices we receive for our oil and gas. Historically,  we have not entered
into  transactions  to hedge against  changes in oil and gas prices,  but we may
elect to enter  into  hedging  transactions  in the  future to  protect  against
fluctuations in oil and gas prices.

     During 2000, the average sales price we received for our oil production was
approximately $28.88 per Bbl, as compared with $17.32 in 1999, while the average
sales  price for our gas was  approximately  $4.38 per Mcf in 2000,  as compared
with $2.27 per Mcf in 1999. At March 15, 2001,  we were  receiving an average of
approximately  $25.25 per Bbl for our oil production and approximately $5.00 per
Mcf for our gas production.


<PAGE>
                                       12

Inflation

     Inflation  has not had a significant  impact on our financial  condition or
results of operations. We do not believe that inflation poses a material risk to
our business.

Recent Accounting Pronouncements

     In June 1998, the Financial  Accounting  Standards  Board  ("FASB")  issued
Financial  Accounting  Standards No. 133, Accounting for Derivative  Instruments
and  Hedging  Activities.   (FAS  No.  133),  which  establishes  standards  for
derivative  instruments,  including certain derivative  instruments  embedded in
other  contracts,  and for hedging  activities.  FAS No. 133  requires an entity
recognize all  derivatives  as either assets or  liabilities in the statement of
financial  position and measure those  instruments at fair value. It establishes
conditions under which a derivative may be designated as a hedge and establishes
standards  for reporting  changes in the fair value of a derivative.  We adopted
FAS No.  133,  as amended by FAS No.  138,  Accounting  for  Certain  Derivative
Instruments and Certain Hedging  Activities,  an amendment of FASB Statement No.
133, effective January 1, 2001. After assessing our contracts,  we are not aware
of any  freestanding or embedded  derivative  instruments  that would need to be
recorded as either  assets or  liabilities  in the  Financial  Statements  as of
January 1, 2001, in accordance with FAS No. 133.


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                                       S-1

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                         PARALLEL PETROLEUM CORPORATION


April 5, 2001                           By:  /s/ Thomas R. Cambridge
                                              ---------------------------------
                                              Thomas R. Cambridge, Chief
                                              Executive Officer and
                                              Chairman of the Board of Directors

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.


/s/ Thomas R. Cambridge         Chief Executive Officer         April 5, 2001
-----------------------         and Chairman of the
    Thomas R. Cambridge         Board of Directors
                                (Principal Executive
                                Officer)


/s/ Larry C. Oldham
-----------------------         President and Treasurer         April 5, 2001
Larry C. Oldham                 (Principal Financial and
                                Accounting Officer)


/s/ Dewayne E. Chitwood
-----------------------         Director                        April 5, 2001
Dewayne E.  Chitwood


s/ Ernest R. Duke
-----------------------         Director                        April 5, 2001
Ernest R. Duke


/s/ Charles R. Pannill
-----------------------         Director                        April 5, 2001
Charles R. Pannill