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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D. C. 20549
 FORM 10-Q/A
 (Amendment No. 1 to Form 10-Q filed August 3, 2005)
 (Mark One)
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended June 30, 2005 or
 o
    
    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
(State of other jurisdiction
of incorporation or organization)
    
    75-1971716
(I.R.S. Employer Identification
Number)1004 N. Big Spring, Suite 400
Midland, Texas
(Address of principal executive offices)
    
    79701
(Zip Code)
 (432) 684-3727
(Registrants telephone number, including area code)
 Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
 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.
 þ o
  o þ o
 o þ
 At August 1, 2005, 34,025,168 shares of the Registrants Common Stock, $0.01 par value, were
outstanding.




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Accounting for Derivative Instruments and Hedging Activities ITEM 1. Notes to Consolidated Financial Statements ITEM 2. MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ITEM 4. CONTROLS AND
PROCEDURES.
  (i)




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Page No.ITEM 1. FINANCIAL STATEMENTSReference is made to the succeeding pages for the following consolidated financial statements:- Consolidated Balance Sheets as of June 30, 2005 (unaudited) and December 31, 2004
    
    
    1- Unaudited Consolidated Statements of Operations for the three months and six months
Ended June 30, 2005 and 2004
    
    
    2-
Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004
    
    
    3- Unaudited Consolidated Statements of Comprehensive Loss for the three months
and six months ended June 30, 2005 and 2004
    
    
    4- Notes to Consolidated Financial Statements
    
    
    5ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    16ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    32ITEM 4. CONTROLS AND PROCEDURES
    
    
    34PART II.  OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    
    35ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    35ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    36ITEM 6. EXHIBITS
    
    
    37SIGNATURESNon-Employee Directors Stock Option PlanCertification of Principal Executive Officer Pursuant to Section 302Certification of Principal Financial Officer Pursuant to Section 302Certification of Chief Executive Officer Pursuant to Section 906Certification of Chief Financial Officer Pursuant to Section 906
 (ii)




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PARALLEL PETROLEUM CORPORATION
 
 Consolidated Balance Sheets  (dollars in thousands)
 June 30,
    
    
    December 31,2005
    
    
    2004(unaudited)(restated)
    
    
    (restated)AssetsCurrent assets:Cash and cash equivalents
    
    $
    3,756
    
    
    $
    4,781Accounts receivable:Oil and gas
    
    
    7,866
    
    
    
    6,642Other, net of allowance for doubtful account of $9
    
    
    1,256
    
    
    
    389Affiliates
    
    
    7
    
    
    
    79,129
    
    
    
    7,038Other current assets
    
    
    190
    
    
    
    179Deferred income tax asset
    
    
    4,997
    
    
    
    2,531Total current assets
    
    
    18,072
    
    
    
    14,529Property and equipment, at cost:Oil and gas properties, full cost method (including $14,115 and $9,526 not
subject to depletion)
    
    
    251,913
    
    
    
    229,245Other
    
    
    2,361
    
    
    
    2,062254,274
    
    
    
    231,307Less accumulated depreciation, depletion and amortization
    
    
    (83,837
    )
    
    
    (78,782
    )Net property and equipment
    
    
    170,437
    
    
    
    152,525Restricted cash
    
    
    149
    
    
    
    2,287Investment in Westfork Pipeline Company LP
    
    
    1,572
    
    
    
    595Other assets, net of accumulated amortization of $724 and $581
    
    
    774
    
    
    
    735$
    191,004
    
    
    $
    170,671Liabilities and Stockholders EquityCurrent liabilities:Accounts payable and accrued liabilities
    
    $
    7,368
    
    
    $
    5,568Asset retirement obligations
    
    
    133
    
    
    
    150Derivative obligations
    
    
    16,449
    
    
    
    7,965Total current liabilities
    
    
    23,950
    
    
    
    13,683Revolving credit facility
    
    
    62,000
    
    
    
    79,000Asset retirement obligations
    
    
    2,118
    
    
    
    1,982Derivative obligations
    
    
    27,209
    
    
    
    9,525Deferred income tax liability
    
    
    1,780
    
    
    
    6,487Total long-term liabilities
    
    
    93,107
    
    
    
    96,994Commitments and contingenciesStockholders 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,
issued and outstanding 950,000, converted to common stock June, 2005
    
    
    
    
    
    
    95Common stock  par value $0.01 per share, authorized 60,000,000 shares,
issued and outstanding 34,013,572 and 25,439,292
    
    
    340
    
    
    
    254Additional paid-in capital
    
    
    76,528
    
    
    
    48,328Retained earnings
    
    
    6,538
    
    
    
    18,759Accumulated other comprehensive loss
    
    
    (9,459
    )
    
    
    (7,442
    )Total stockholders equity
    
    
    73,947
    
    
    
    59,994$
    191,004
    
    
    $
    170,671
  (1)




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PARALLEL PETROLEUM CORPORATION
 
 Consolidated Statements of Operations  (unaudited)
(in thousands, except per share data)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(restated)
    
    
    
    
    
    
    (restated)Oil and natural gas revenues:Oil and natural gas sales
    
    $
    15,004
    
    
    $
    9,752
    
    
    $
    27,973
    
    
    $
    18,858Loss on hedging and derivatives
    
    
    (2,741
    )
    
    
    (1,835
    )
    
    
    (5,296
    )
    
    
    (2,940
    )Total revenues
    
    
    12,263
    
    
    
    7,917
    
    
    
    22,677
    
    
    
    15,918Cost and expenses:Lease operating expense
    
    
    2,178
    
    
    
    2,014
    
    
    
    4,736
    
    
    
    3,543Production taxes
    
    
    701
    
    
    
    471
    
    
    
    1,281
    
    
    
    949General and administrative
    
    
    1,408
    
    
    
    1,221
    
    
    
    3,036
    
    
    
    2,443Depreciation, depletion and amortization
    
    
    2,773
    
    
    
    1,969
    
    
    
    5,055
    
    
    
    4,046Total costs and expenses
    
    
    7,060
    
    
    
    5,675
    
    
    
    14,108
    
    
    
    10,981Operating income
    
    
    5,203
    
    
    
    2,242
    
    
    
    8,569
    
    
    
    4,937Other income (expense), net:Change in fair market value of derivative
instruments
    
    
    (6,065
    )
    
    
    
    
    
    
    (23,698
    )
    
    
    Gain (loss) on ineffective portion of hedges
    
    
    (150
    )
    
    
    17
    
    
    
    (860
    )
    
    
    7Interest and other income
    
    
    22
    
    
    
    18
    
    
    
    41
    
    
    
    158Interest expense
    
    
    (868
    )
    
    
    (487
    )
    
    
    (2,041
    )
    
    
    (955
    )Other expense
    
    
    (1
    )
    
    
    (59
    )
    
    
    (2
    )
    
    
    (85
    )Equity in loss of Westfork Pipeline Company LP
    
    
    (15
    )
    
    
    
    
    
    
    (94
    )
    
    
    Total other expense, net
    
    
    (7,077
    )
    
    
    (511
    )
    
    
    (26,654
    )
    
    
    (875
    )Income (loss) before income taxes
    
    
    (1,874
    )
    
    
    1,731
    
    
    
    (18,085
    )
    
    
    4,062Income tax benefit (expense), deferred
    
    
    628
    
    
    
    (628
    )
    
    
    6,135
    
    
    
    (1,477
    )Net income (loss)
    
    
    (1,246
    )
    
    
    1,103
    
    
    
    (11,950
    )
    
    
    2,585Cumulative preferred stock dividend
    
    
    (128
    )
    
    
    (144
    )
    
    
    (271
    )
    
    
    (287
    )Net income (loss) available to common
stockholders
    
    $
    (1,374
    )
    
    $
    959
    
    
    $
    (12,221
    )
    
    $
    2,298Net income (loss) per common share:Basic
    
    $
    (0.04
    )
    
    $
    0.04
    
    
    $
    (0.40
    )
    
    $
    0.09Diluted
    
    $
    (0.04
    )
    
    $
    0.04
    
    
    $
    (0.40
    )
    
    $
    0.09Weighted average common share outstanding:Basic
    
    
    31,967
    
    
    
    25,246
    
    
    
    30,341
    
    
    
    25,235Diluted
    
    
    31,967
    
    
    
    28,330
    
    
    
    30,341
    
    
    
    28,296
  (2)




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PARALLEL PETROLEUM CORPORATION
 
 Consolidated Statements of Cash Flows
Six Months Ended June 30, 2005 and 2004  (unaudited)
(dollars in thousands)
 2005
    
    
    2004(restated)Cash flows from operating activities:Net income (loss)
    
    $
    (11,950
    )
    
    $
    2,585Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation, depletion and amortization
    
    
    5,055
    
    
    
    4,046Accretion of asset retirement obligation
    
    
    54
    
    
    
    53Deferred income tax
    
    
    (6,135
    )
    
    
    1,477Change in fair value of derivatives instruments
    
    
    23,696
    
    
    
    Gain (loss) on ineffective portion of hedges
    
    
    860
    
    
    
    (7
    )Stock option expense
    
    
    70
    
    
    
    84Equity in loss of Westfork Pipeline Company, LP
    
    
    94
    
    
    
    Changes in assets and liabilities:Other assets, net
    
    
    123
    
    
    
    (141
    )Restricted cash
    
    
    (149
    )
    
    
    Increase in accounts receivable
    
    
    (2,091
    )
    
    
    (507
    )Increase in other current assets
    
    
    (11
    )
    
    
    (87
    )Increase in accounts payable and accrued liabilities
    
    
    1,800
    
    
    
    1,084Net cash provided by operating activities
    
    
    11,416
    
    
    
    8,587Cash flows from investing activities:Additions to oil and gas properties
    
    
    (25,431
    )
    
    
    (14,590
    )Use of restricted cash for acquisition of oil and gas properties
    
    
    2,287
    
    
    
    Proceeds from disposition of oil and gas properties
    
    
    2,828
    
    
    
    25Additions to other property and equipment
    
    
    (299
    )
    
    
    (516
    )Settlements on derivatives
    
    
    (1,570
    )
    
    
    Purchase of derivative instruments
    
    
    (35
    )
    
    
    Investment in Westfork Pipeline Company LP
    
    
    (1,071
    )
    
    
    Net cash used in investing activities
    
    
    (23,291
    )
    
    
    (15,081
    )Cash flows from financing activities:Net borrowings (payments) on revolving credit facility
    
    
    (17,000
    )
    
    
    (5,750
    )Proceeds (net) from common stock issued
    
    
    27,743
    
    
    
    Proceeds from exercise of stock options
    
    
    378
    
    
    
    103Deferred stock offering costs
    
    
    
    
    
    
    (7
    )Payment of preferred stock dividend
    
    
    (271
    )
    
    
    (287
    )Net cash provided by (used in) financing activities
    
    
    10,850
    
    
    
    (5,941
    )Net decrease in cash and cash equivalents
    
    
    (1,025
    )
    
    
    (12,435
    )Cash and cash equivalents at beginning of period
    
    
    4,781
    
    
    
    17,378Cash and cash equivalents at end of period
    
    $
    3,756
    
    
    $
    4,943Non-cash financing and investing activities:Oil and gas properties asset retirement obligations, net
    
    $
    65
    
    
    $
    189Conversion of preferred stock
    
    $
    95
    
    
    $
    Other Transactions:Interest paid
    
    $
    2,403
    
    
    $
    933
  (3)




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PARALLEL PETROLEUM CORPORATION
 
 Consolidated Statements of Comprehensive Loss  (unaudited)
(dollars in thousands)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(restated)
    
    
    
    
    
    
    (restated)Net income (loss)
    
    $
    (1,246
    )
    
    $
    1,103
    
    
    $
    (11,950
    )
    
    $
    2,585Other comprehensive loss:Unrealized losses on derivatives
    
    
    (1,060
    )
    
    
    (3,782
    )
    
    
    (8,473
    )
    
    
    (8,125
    )Reclassification adjustments for losses
on derivatives included in net income (loss)
    
    
    2,788
    
    
    
    1,952
    
    
    
    5,418
    
    
    
    3,171Change in fair value of derivatives
    
    
    1,728
    
    
    
    (1,830
    )
    
    
    (3,055
    )
    
    
    (4,954
    )Income tax benefit (expense)
    
    
    (588
    )
    
    
    624
    
    
    
    1,038
    
    
    
    1,685Total other comprehensive income (loss)
    
    
    1,140
    
    
    
    (1,206
    )
    
    
    (2,017
    )
    
    
    (3,269
    )Total comprehensive loss
    
    $
    (106
    )
    
    $
    (103
    )
    
    $
    (13,967
    )
    
    $
    (684
    )
  (4)




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PARALLEL PETROLEUM CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1.
DESCRIPTION OF BUSINESS  NATURE OF OPERATIONS AND BASIS OF PRESENTATION
      NOTE 2. STOCKHOLDERS EQUITY
 Options
 Accounting for Stock-Based Compensation  Transition and Disclosure,
   (5)




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(dollars in thousands, except per share data)(restated)
    
    
    
    
    
    
    (restated)Net income, as reported
    
    $
    (1,246
    )
    
    $
    1,103
    
    
    $
    (11,950
    )
    
    $
    2,585Add:Expense recorded in 2005 and 2004
    
    
    28
    
    
    
    42
    
    
    
    70
    
    
    
    84Deduct:Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of tax effects
    
    
    (23
    )
    
    
    (48
    )
    
    
    (71
    )
    
    
    (95
    )Pro forma net income (loss)
    
    $
    (1,241
    )
    
    $
    1,097
    
    
    $
    (11,951
    )
    
    $
    2,574Earnings (loss) per share:Basic  as reported
    
    $
    (0.04
    )
    
    $
    0.04
    
    
    $
    (0.40
    )
    
    $
    0.09Basic  pro forma
    
    $
    (0.04
    )
    
    $
    0.04
    
    
    $
    (0.40
    )
    
    $
    0.09Diluted  as reported
    
    $
    (0.04
    )
    
    $
    0.04
    
    
    $
    (0.40
    )
    
    $
    0.09Diluted  pro forma
    
    $
    (0.04
    )
    
    $
    0.04
    
    
    $
    (0.40
    )
    
    $
    0.09
 Sale of Equity Securities
  Preferred Stock
  NOTE 3. REVOLVING CREDIT FACILITY
  (6)




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##### Table of Contents




    
    at the end of each quarter, a current ratio (as defined in the credit agreement) of at least 1.1 to 1.0;
    
    for each period (as calculated in the Credit Agreement) ending on December 31, March
31, June 30 and September 30, a funded debt ratio (as defined in the Credit Agreement)
of not more than 3.70, 3.60 and 3.50, respectively, for December 31, 2005, 2006 and
2007; and
    
    at all times, adjusted consolidated net worth (as defined in the Credit Agreement) of
at least (a) $50.0 million, plus (b) seventy-five percent (75%) of the net proceeds from
any equity securities issued by Parallel, plus (c) fifty percent (50%) of consolidated
net income for each fiscal quarter, if positive, and zero percent (0%) if negative.
    
    
    interpretation and processing seismic survey data;
    
    lease acquisitions and drilling activities;
    
    acquisitions of producing properties or companies owning producing properties; and,
 (7)




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##### Table of Contents




    
    general corporate purposes.
  NOTE 4. ACQUISITIONS
    Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,Pro Forma
    
    
    
    
    
    Pro Forma2005
    
    2004
    
    2005
    
    2004(in thousands, except per share data)(restated)
    
    
    
    
    
    (restated)Oil and gas
revenue, net of hedge losses
    
    $
    12,263
    
    
    $
    10,135
    
    
    $
    22,677
    
    
    $
    20,098Operating income
    
    $
    5,203
    
    
    $
    3,347
    
    
    $
    8,569
    
    
    $
    6,504Net income (loss) available to common stockholders
    
    $
    (1,374
    )
    
    $
    1,395
    
    
    $
    (12,221
    )
    
    $
    2,746Net income (loss) per common share:Basic
    
    $
    (0.04
    )
    
    $
    0.06
    
    
    $
    (0.40
    )
    
    $
    0.11Diluted
    
    $
    (0.04
    )
    
    $
    0.06
    
    
    $
    (0.40
    )
    
    $
    0.11
 NOTE 5. FULL COST CEILING TEST
    (8)




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NOTE 6. DERIVATIVE INSTRUMENTS
 General
      Interest Rate Sensitivity
   (9)




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##### Table of Contents



Notional
    
    
    
    
    
    
    FairPeriod of Time
    
    Amounts
    
    
    Fixed Interest Rates
    
    
    Market Value($ in millions)
    
    
    
    
    
    
    ($ in thousands)July 1, 2005 thru December 31, 2005(1)
    
    $
    20
    
    
    
    4.05
    %
    
    $
    (33
    )July 1, 2005 thru December 31, 2005
    
    $
    30
    
    
    
    2.89
    %
    
    $
    124January 1, 2006 thru December 31, 2006(1)
    
    $
    10
    
    
    
    4.05
    %
    
    $
    6January 1, 2006 thru December 31, 2006
    
    $
    40
    
    
    
    3.76
    %
    
    $
    136January 1, 2007 thru December 31, 2007
    
    $
    50
    
    
    
    4.30
    %
    
    $
    (83
    )January 1, 2008 thru December 30, 2008
    
    $
    50
    
    
    
    4.74
    %
    
    $
    (246
    )Total Fair Market Value
    
    
    
    
    
    
    
    
    
    $
    (96
    )
 
 (1)
    
    Designated as cash flow hedge. Commodity Price Sensitivity
  Put Options.
 Collars.
  HoustonNyMex
    
    
    
    
    
    
    Ship ChannelBarrels
    
    
    Oil Prices
    
    
    M M Btu of
    
    
    Gas PricesPeriod of Time
    
    of Oil
    
    
    Floor
    
    
    Cap
    
    
    Natural Gas
    
    
    Floor
    
    
    Cap
    
    
    Fair Market Value($ in thousands)July 1, 2005 thru October 31, 2005
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    246,000
    
    
    $
    5.00
    
    
    $
    7.26
    
    
    $
    (52
    )July 1, 2005 thru December 31, 2005
    
    
    36,800
    
    
    $
    36.00
    
    
    $
    49.60
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    (322
    )January 1, 2006 thru December 31, 2006
    
    
    70,800
    
    
    $
    35.00
    
    
    $
    44.00
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    (1,023
    )Total Fair Market Value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (1,397
    )
 Commodity Swaps.
 (10)




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##### Table of Contents



Nymex Oil
    
    
    Fair MarketPeriod of Time
    
    Barrles of Oil
    
    
    Swap Price
    
    
    Value($ in thousands)July 1, 2005 thru December 31, 2005(1)
    
    
    184,000
    
    
    $
    23.31
    
    
    $
    (6,410
    )July 1, 2005 thru December 31, 2005
    
    
    128,800
    
    
    $
    39.96
    
    
    $
    (2,360
    )January 1, 2006 thru December 20, 2006(1)
    
    
    265,500
    
    
    $
    23.04
    
    
    
    (9,241
    )January 1, 2006 thru December 20, 2006
    
    
    182,500
    
    
    $
    36.36
    
    
    
    (3,988
    )January 1, 2007 thru December 31, 2007
    
    
    474,500
    
    
    $
    34.36
    
    
    
    (10,511
    )January 1, 2008 thru December 31, 2008
    
    
    439,200
    
    
    $
    33.37
    
    
    
    (9,528
    )Total fair market value
    
    
    
    
    
    
    
    
    
    $
    (42,038
    )
 
 (1)
    
    Designated as cash flow hedges. NOTE 7. NET INCOME PER COMMON SHARE
  (11)




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(dollars in thousands, except per share data)(restated)
    
    
    
    
    
    
    (restated)Basic EPS Computation:Numerator-Income (loss)
    
    $
    (1,246
    )
    
    $
    1,103
    
    
    $
    (11,950
    )
    
    $
    2,585Preferred stock dividend
    
    
    (128
    )
    
    
    (144
    )
    
    
    (271
    )
    
    
    (287
    )Income (loss) available to common stockholders
    
    $
    (1,374
    )
    
    $
    959
    
    
    $
    (12,221
    )
    
    $
    2,298Denominator-Weighted average common shares outstanding
    
    
    31,967
    
    
    
    25,246
    
    
    
    30,341
    
    
    
    25,235Basic EPS:Income (loss) per share
    
    $
    (0.04
    )
    
    $
    0.04
    
    
    $
    (0.40
    )
    
    $
    0.09Diluted EPS Computation:Numerator-Income (loss)
    
    $
    (1,246
    )
    
    $
    1,103
    
    
    $
    (11,950
    )
    
    $
    2,585Preferred stock dividend
    
    
    (128
    )
    
    
    
    
    
    
    (271
    )
    
    
    Income (loss) available to common stockholders
    
    $
    (1,374
    )
    
    $
    1,103
    
    
    $
    (12,221
    )
    
    $
    2,585Denominator -Weighted average common shares outstanding
    
    
    31,967
    
    
    
    25,246
    
    
    
    30,341
    
    
    
    25,235Employee stock options
    
    
    
    
    
    
    285
    
    
    
    
    
    
    
    268Warrants
    
    
    
    
    
    
    65
    
    
    
    
    
    
    
    59Preferred stock
    
    
    
    
    
    
    2,734
    
    
    
    
    
    
    
    2,734Weighted average common shares for diluted
earnings per share assuming conversion
    
    
    31,967
    
    
    
    28,330
    
    
    
    30,341
    
    
    
    28,296Diluted EPS:Income (loss)
    
    $
    (0.04
    )
    
    $
    0.04
    
    
    $
    (0.40
    )
    
    $
    0.09
 NOTE 8: ASSET RETIREMENT OBLIGATIONS
  (12)




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(in thousands)Beginning asset retirement obligation
    
    $
    2,112
    
    
    $
    1,864
    
    
    $
    2,132
    
    
    $
    1,701Additions related to new properties
    
    
    113
    
    
    
    59
    
    
    
    130
    
    
    
    231Deletions related to property disposals
    
    
    (2
    )
    
    
    
    
    
    
    (65
    )
    
    
    (42
    )Accretion expense
    
    
    28
    
    
    
    20
    
    
    
    54
    
    
    
    53Ending asset retirement obligation
    
    $
    2,251
    
    
    $
    1,943
    
    
    $
    2,251
    
    
    $
    1,943
 NOTE 9. RECENTLY ANNOUNCED ACCOUNTING PRONOUNCEMENTS
 Statement of
Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment
 NOTE 10. COMMITMENTS AND CONTINGENCIES
   NOTE 11. RESTATEMENT
   (13)




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##### Table of Contents



Effects of the Restatement
  As of June 30, 2005
    
    As of December 31, 2004As previously
    
    
    
    
    
    As previouslyreported
    
    As restated
    
    reported
    
    As restated(in thousands)(unaudited)Condensed Consolidated Balance Sheet data:Other current assets
    
    $
    225
    
    
    $
    190
    
    
    $
    179
    
    
    $
    179Total current assets
    
    
    18,107
    
    
    
    18,072
    
    
    
    14,529
    
    
    
    14,529Other assets, net of accumulated
amortization of $724 and $581
    
    
    612
    
    
    
    774
    
    
    
    735
    
    
    
    735Total assets
    
    
    190,877
    
    
    
    191,004
    
    
    
    170,671
    
    
    
    170,671Derivative obligation  current
    
    
    16,322
    
    
    
    16,449
    
    
    
    7,965
    
    
    
    7,965Total current liabilities
    
    
    23,823
    
    
    
    23,950
    
    
    
    13,683
    
    
    
    13,683Derivative obligation  long term
    
    
    27,209
    
    
    
    27,209
    
    
    
    9,525
    
    
    
    9,525Total long-term liabilities
    
    
    93,107
    
    
    
    93,107
    
    
    
    96,994
    
    
    
    96,994Retained earnings
    
    
    22,705
    
    
    
    6,538
    
    
    
    22,073
    
    
    
    18,759Accumulated other comprehensive loss
    
    
    (25,626
    )
    
    
    (9,459
    )
    
    
    (10,756
    )
    
    
    (7,442
    )Total liabilities and stockholders equity
    
    
    190,877
    
    
    
    191,004
    
    
    
    170,671
    
    
    
    170,671
  Three Months Ended
    
    
    Six Months EndedJune 30, 2005
    
    
    June 30, 2005As previously
    
    
    
    
    
    
    As previouslyreported
    
    
    As restated
    
    
    reported
    
    
    As restated(in thousands)
    
    
    (in thousands)(unaudited)
    
    
    (unaudited)Consolidated Statement of Operations data:Loss on hedging and derivatives
    
    $
    (3,645
    )
    
    $
    (2,741
    )
    
    $
    (6,857
    )
    
    $
    (5,296
    )Total revenues
    
    
    11,359
    
    
    
    12,263
    
    
    
    21,116
    
    
    
    22,677Operating income
    
    
    4,241
    
    
    
    5,203
    
    
    
    6,890
    
    
    
    8,569Change in fair market value of derivatives
    
    
    
    
    
    
    (6,065
    )
    
    
    
    
    
    
    (23,698
    )Loss on ineffective portion of hedges
    
    
    (1,235
    )
    
    
    (150
    )
    
    
    (3,511
    )
    
    
    (860
    )Interest expense
    
    
    (796
    )
    
    
    (868
    )
    
    
    (1,934
    )
    
    
    (2,041
    )Total other expense, net
    
    
    (2,025
    )
    
    
    (7,077
    )
    
    
    (5,500
    )
    
    
    (26,654
    )Net income (loss) before income taxes
    
    
    2,216
    
    
    
    (1,874
    )
    
    
    1,390
    
    
    
    (18,085
    )Income tax benefit (expense), deferred
    
    
    (763
    )
    
    
    628
    
    
    
    (487
    )
    
    
    6,135Net income (loss)
    
    
    1,453
    
    
    
    (1,246
    )
    
    
    903
    
    
    
    (11,950
    )Net income (loss) available to common stockholders
    
    
    1,325
    
    
    
    (1,374
    )
    
    
    632
    
    
    
    (12,221
    )Net income (loss) per common share:Basic
    
    $
    0.04
    
    
    $
    (0.04
    )
    
    $
    0.02
    
    
    $
    (0.40
    )Diluted
    
    $
    0.04
    
    
    $
    (0.04
    )
    
    $
    0.03
    
    
    $
    (0.40
    )
 (14)




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##### Table of Contents



Six Months EndedJune 30, 2005As previouslyreported
    
    As restated(in thousands)(unaudited)Condensed Consolidated Statement of Cash Flows data:Net income (loss)
    
    $
    903
    
    
    $
    (11,950
    )Deferred income tax expense (benefit)
    
    
    487
    
    
    
    (6,135
    )Change in fair value of derivative instruments
    
    
    
    
    
    
    23,696Loss on ineffective portion of hedges
    
    
    3,511
    
    
    
    860Other assets, net
    
    
    123
    
    
    
    123Increase in other current assets
    
    
    (46
    )
    
    
    (11
    )Net cash provided by operating activities
    
    
    9,811
    
    
    
    11,416Settlements on derivatives
    
    
    
    
    
    
    (1,570
    )Purchase of derivative instruments
    
    
    
    
    
    
    (35
    )Net cash used in investing activities
    
    
    (21,686
    )
    
    
    (23,291
    )
  Three Months Ended
    
    
    Six Months EndedJune 30, 2005
    
    
    June 30, 2005As previously
    
    
    
    
    
    
    As previouslyreported
    
    
    As restated
    
    
    reported
    
    
    As restated(in thousands)
    
    
    (in thousands)(unaudited)
    
    
    (unaudited)Net loss
    
    $
    1,453
    
    
    $
    (1,246
    )
    
    $
    903
    
    
    $
    (11,950
    )Other comprehensive loss:Unrealized losses on derivatives
    
    
    (6,038
    )
    
    
    (1,060
    )
    
    
    (29,518
    )
    
    
    (8,473
    )Reclassification adjustments for losses
on derivatives included in net income (loss)
    
    
    3,676
    
    
    
    2,788
    
    
    
    6,988
    
    
    
    5,418Change in fair value of derivatives
    
    
    (2,362
    )
    
    
    1,728
    
    
    
    (22,530
    )
    
    
    (3,055
    )Income tax benefit (expense)
    
    
    803
    
    
    
    (588
    )
    
    
    7,660
    
    
    
    1,038Total other comprehensive loss
    
    
    (1,559
    )
    
    
    1,140
    
    
    
    (14,870
    )
    
    
    (2,017
    )Total comprehensive loss
    
    $
    (106
    )
    
    $
    (106
    )
    
    $
    (13,967
    )
    
    $
    (13,967
    )
  (15)




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
  OVERVIEW
 Strategy
   
    
    focuses on projects having less geological risk;
    
    emphasizes exploitation and enhancement activities;
    
    focuses on acquiring producing properties; and
    
    expands the scope of operations by diversifying our exploratory and
development efforts, both in and outside of our current areas of operation.
   
    
    the prices we receive for the oil and natural gas we produce;
    
    the results of reprocessing and reinterpreting our 3-D seismic data;
    
    the results of our drilling activities;
    
    the costs of obtaining high quality field services;
    
    our ability to find and consummate acquisition opportunities; and
    
    our ability to negotiate and enter into work to earn arrangements, joint venture or
other similar agreements on terms acceptable to us.
  (16)




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##### Table of Contents



Operating Performance
  
    
    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.
  
    
    production expenses;
    
    overhead requirements; and
    
    costs of capital.
  
    
    cash flow from operations;
    
    sales of our equity securities;
    
    bank borrowings; and
    
    industry joint ventures.
   (17)




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##### Table of Contents



Results of Operations
  
    
    reserve base;
    
    sources of production;
    
    product mix (gas versus oil volumes);
    
    the prices we receive for our oil and gas production;
 (18)




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##### Table of Contents



Three Months Ended
    
    
    Six Months Ended6/30/2005
    
    
    6/30/2004
    
    
    6/30/2005
    
    
    6/30/2004(in thousands, except per unit data)(restated)
    
    
    
    
    
    
    (restated)Production Volumes:Oil (Bbls)
    
    
    218
    
    
    
    166
    
    
    
    425
    
    
    
    327Natural gas (Mcf)
    
    
    700
    
    
    
    644
    
    
    
    1,302
    
    
    
    1,376BOE(1)
    
    
    335
    
    
    
    273
    
    
    
    642
    
    
    
    556BOE per day
    
    
    3.7
    
    
    
    3.0
    
    
    
    3.5
    
    
    
    3.1Sales Prices:Oil (per Bbl)(2)
    
    $
    46.97
    
    
    $
    35.70
    
    
    $
    46.15
    
    
    $
    34.31Natural gas (per Mcf)(2)
    
    $
    6.78
    
    
    $
    5.94
    
    
    $
    6.42
    
    
    $
    5.55BOE price (2)
    
    $
    44.77
    
    
    $
    35.72
    
    
    $
    43.57
    
    
    $
    33.92BOE price(3)
    
    $
    36.60
    
    
    $
    29.00
    
    
    $
    35.32
    
    
    $
    28.63Operating RevenuesOil
    
    $
    10,259
    
    
    $
    5,928
    
    
    $
    19,618
    
    
    $
    11,218Oil hedge
    
    
    (2,741
    )
    
    
    (1,522
    )
    
    
    (5,095
    )
    
    
    (2,646
    )Natural gas
    
    
    4,745
    
    
    
    3,824
    
    
    
    8,355
    
    
    
    7,640Natural gas hedge
    
    
    
    
    
    
    (313
    )
    
    
    (201
    )
    
    
    (294
    )$
    12,263
    
    
    $
    7,917
    
    
    $
    22,677
    
    
    $
    15,918Operating Expenses:Lease operating expense
    
    $
    2,178
    
    
    $
    2,014
    
    
    $
    4,736
    
    
    $
    3,543Production taxes
    
    
    701
    
    
    
    471
    
    
    
    1,281
    
    
    
    949General and administrative:General and administrative
    
    
    859
    
    
    
    806
    
    
    
    1,828
    
    
    
    1,540Public reporting
    
    
    549
    
    
    
    415
    
    
    
    1,208
    
    
    
    903Depreciation, depletion and amortization
    
    
    2,773
    
    
    
    1,969
    
    
    
    5,055
    
    
    
    4,046$
    7,060
    
    
    $
    5,675
    
    
    $
    14,108
    
    
    $
    10,981Operating income
    
    $
    5,203
    
    
    $
    2,242
    
    
    $
    8,569
    
    
    $
    4,937
 
 (1)
    
    A BOE means one barrel of oil equivalent using the ratio of six Mcf of gas to one barrel of oil.(2)
    
    Unhedged price is the actual price received at the wellhead for our oil and natural gas.(3)
    
    Hedged price is the actual price received at the wellhead for our oil and natural gas plus or minus the settlements on our derivatives. (19)




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##### Table of Contents



RESULTS
OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2005 (AS RESTATED) AND 2004 :
  Oil
and Gas RevenuesRevenues (1)
    
    
    Production2005
    
    
    2004
    
    
    2005
    
    
    2004(restated)Oil (Bbls)
    
    
    61
    %
    
    
    56
    %
    
    
    65
    %
    
    
    61
    %Natural gas (Mcf)
    
    
    39
    %
    
    
    44
    %
    
    
    35
    %
    
    
    39
    %Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 
 (1)
    
    Includes hedge transactions  Three Months Ended June 30,
    
    
    Increase
    
    
    % Increase2005
    
    
    2004
    
    
    (Decrease)
    
    
    (Decrease)(in thousands except per unit data)(restated)Production VolumesOil (Bbls)
    
    
    218
    
    
    
    166
    
    
    
    52
    
    
    
    31
    %Natural gas (Mcf)
    
    
    700
    
    
    
    644
    
    
    
    56
    
    
    
    9
    %BOE
    
    
    335
    
    
    
    273
    
    
    
    62
    
    
    
    23
    %BOE/Day
    
    
    3.7
    
    
    
    3.0
    
    
    
    0.7
    
    
    
    23
    %Sales PriceOil (per Bbl)(1)
    
    $
    46.97
    
    
    $
    35.70
    
    
    $
    11.27
    
    
    
    32
    %Natural gas (per Mcf)(1)
    
    $
    6.78
    
    
    $
    5.94
    
    
    $
    0.84
    
    
    
    14
    %BOE price(1)
    
    $
    44.77
    
    
    $
    35.72
    
    
    $
    9.05
    
    
    
    25
    %BOE price(2)
    
    $
    36.60
    
    
    $
    29.00
    
    
    $
    7.60
    
    
    
    26
    %Operating RevenuesOil
    
    $
    10,259
    
    
    $
    5,928
    
    
    $
    4,331
    
    
    
    73
    %Oil hedges
    
    $
    (2,741
    )
    
    $
    (1,522
    )
    
    $
    1,219
    
    
    
    80
    %Natural gas
    
    $
    4,745
    
    
    $
    3,824
    
    
    $
    921
    
    
    
    24
    %Natural gas hedges
    
    $
    
    
    
    $
    (313
    )
    
    $
    313
    
    
    
    100
    %Total
    
    $
    12,263
    
    
    $
    7,917
    
    
    $
    4,346
    
    
    
    55
    %
 
 (1)
    
    Excludes hedge transactions.(2)
    
    Includes hedge transactions.  (20)




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##### Table of Contents



Cost and
ExpensesThree months ended June 30,
    
    
    Increase
    
    
    % Increase2005
    
    
    2004
    
    
    (Decrease)
    
    
    (Decrease)(dollars in thousands)Lease operating expense
    
    $
    2,178
    
    
    $
    2,014
    
    
    $
    164
    
    
    
    8
    %Production taxes
    
    
    701
    
    
    
    471
    
    
    
    230
    
    
    
    49
    %General and administrative:General and administrative
    
    
    859
    
    
    
    806
    
    
    
    53
    
    
    
    7
    %Public reporting
    
    
    549
    
    
    
    415
    
    
    
    134
    
    
    
    32
    %Total general and administrative
    
    
    1,408
    
    
    
    1,221
    
    
    
    187
    
    
    
    15
    %Depreciation, depletion and amortization
    
    
    2,773
    
    
    
    1,969
    
    
    
    804
    
    
    
    41
    %Total
    
    $
    7,060
    
    
    $
    5,675
    
    
    $
    1,385
    
    
    
    24
    %
    (21)




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##### Table of Contents



Other income (expense)Three months ended June 30,
    
    
    Increase
    
    
    % Increase2005
    
    
    2004
    
    
    (Decrease)
    
    
    (Decrease)(dollars in thousands)(restated)Change in fair market value of derivatives
    
    $
    (6,065
    )
    
    $
    
    
    
    $
    (6,065
    )
    
    
    Loss on ineffective portion of hedges
    
    
    (150
    )
    
    
    17
    
    
    
    (167
    )
    
    
    (982
    )%Interest and other income
    
    
    22
    
    
    
    18
    
    
    
    4
    
    
    
    22
    %Interest expense, net
    
    
    (868
    )
    
    
    (487
    )
    
    
    381
    
    
    
    78
    %Other expense
    
    
    (1
    )
    
    
    (59
    )
    
    
    (58
    )
    
    
    (98
    )%Equity loss in Westfork Pipeline Company LP
    
    
    (15
    )
    
    
    
    
    
    
    15
    
    
    
    Total
    
    $
    (7,077
    )
    
    $
    (511
    )
    
    $
    6,566
    
    
    
    1285
    %
    (22)




---



##### Table of Contents



RESULTS
OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2005 (AS RESTATED) AND 2004 :
  Oil and
Gas RevenuesRevenues(1)
    
    
    Production2005
    
    
    2004
    
    
    2005
    
    
    2004(restated)Oil (Bbls)
    
    
    64
    %
    
    
    54
    %
    
    
    66
    %
    
    
    59
    %Natural gas (Mcf)
    
    
    36
    %
    
    
    46
    %
    
    
    34
    %
    
    
    41
    %Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 
 (1)
    
    Includes hedge transactions  Six Months Ended June 30,
    
    
    Increase
    
    
    % Increase2005
    
    
    2004
    
    
    (Decrease)
    
    
    (Decrease)(in thousands except per unit data)(restated)Production VolumesOil (Bbls)
    
    
    425
    
    
    
    327
    
    
    
    98
    
    
    
    30
    %Natural gas (Mcf)
    
    
    1,302
    
    
    
    1,376
    
    
    
    (74
    )
    
    
    (5
    )%BOE
    
    
    642
    
    
    
    556
    
    
    
    86
    
    
    
    15
    %BOE/Day
    
    
    3.5
    
    
    
    3.1
    
    
    
    0.4
    
    
    
    13
    %Sales PriceOil (per Bbl)(1)
    
    $
    46.15
    
    
    $
    34.31
    
    
    $
    11.84
    
    
    
    35
    %Natural gas (per Mcf) (1)
    
    $
    6.42
    
    
    $
    5.55
    
    
    $
    0.87
    
    
    
    16
    %BOE price(1)
    
    $
    43.57
    
    
    $
    33.92
    
    
    $
    9.65
    
    
    
    28
    %BOE price(2)
    
    $
    35.32
    
    
    $
    28.63
    
    
    $
    6.69
    
    
    
    23
    %Operating RevenuesOil
    
    $
    19,618
    
    
    $
    11,218
    
    
    
    8,400
    
    
    
    75
    %Oil hedges
    
    $
    (5,095
    )
    
    $
    (2,646
    )
    
    
    2,449
    
    
    
    93
    %Natural gas
    
    $
    8,355
    
    
    $
    7,640
    
    
    
    715
    
    
    
    9
    %Natural gas hedges
    
    $
    (201
    )
    
    $
    (294
    )
    
    
    (93
    )
    
    
    (32
    )%Total
    
    $
    22,677
    
    
    $
    15,918
    
    
    
    6,759
    
    
    
    42
    %
 
 (1)
    
    Excludes hedge transactions.(2)
    
    Includes hedge transactions.  (23)




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##### Table of Contents



Cost and ExpensesSix months ended June 30,
    
    
    Increase
    
    
    % Increase2005
    
    
    2004
    
    
    (Decrease)
    
    
    (Decrease)(dollars in thousands)Lease operating expense
    
    $
    4,736
    
    
    $
    3,543
    
    
    $
    1,193
    
    
    
    34
    %Production taxes
    
    
    1,281
    
    
    
    949
    
    
    
    332
    
    
    
    35
    %General and administrative:General and administrative
    
    
    1,828
    
    
    
    1,540
    
    
    
    288
    
    
    
    19
    %Public reporting
    
    
    1,208
    
    
    
    903
    
    
    
    305
    
    
    
    34
    %Total general and administrative
    
    
    3,036
    
    
    
    2,443
    
    
    
    593
    
    
    
    24
    %Depreciation, depletion and amortization
    
    
    5,055
    
    
    
    4,046
    
    
    
    1,009
    
    
    
    25
    %Total
    
    $
    14,108
    
    
    $
    10,981
    
    
    $
    3,127
    
    
    
    28
    %
    (24)




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##### Table of Contents



Other
income (expense)Six months ended June 30,
    
    
    Increase
    
    
    % Increase2005
    
    
    2004
    
    
    (Decrease)
    
    
    (Decrease)(restated)
    
    
    (dollars in thousands)Change in fair market value of derivatives
    
    $
    (23,698
    )
    
    $
    
    
    
    $
    (23,698
    )
    
    
    Gain (loss) on ineffective portion of hedges
    
    
    (860
    )
    
    
    7
    
    
    
    (867
    )
    
    
    (12386
    )%Interest and other income
    
    
    41
    
    
    
    158
    
    
    
    (117
    )
    
    
    (74
    )%Interest expense, net
    
    
    (2,041
    )
    
    
    (955
    )
    
    
    1,086
    
    
    
    114
    %Other expense
    
    
    (2
    )
    
    
    (85
    )
    
    
    (83
    )
    
    
    (98
    )%Equity loss in Westfork Pipeline Company LP
    
    
    (94
    )
    
    
    
    
    
    
    94
    
    
    
    Total
    
    $
    (26,654
    )
    
    $
    (875
    )
    
    $
    25,779
    
    
    
    2946
    %
    LIQUIDITY AND CAPITAL RESOURCES
    (25)




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##### Table of Contents



Bank Borrowings
        (26)




---



##### Table of Contents




    
    at the end of each quarter, a current ratio (as defined in the credit agreement) of at least 1.1 to 1.0;
    
    for each period (as calculated in the Credit Agreement) ending on December 31, March
31, June 30 and September 30, a funded debt ratio (as defined in the Credit Agreement)
of not more than 3.70, 3.60 and 3.50, respectively, for December 31, 2005, 2006 and
2007; and
    
    at all times, adjusted consolidated net worth (as defined in the Credit Agreement)
of at least (a) $50.0 million, plus (b) seventy-five percent (75%) of the net proceeds
from any equity securities issued by Parallel, plus (c) fifty percent (50%) of
consolidated net income for each fiscal quarter, if positive, and zero percent (0%) if
negative.
    
    
    interpretation and processing of 3-D seismic survey data;
    
    lease acquisitions and drilling activities;
    
    acquisitions of producing properties or companies owning producing properties; and,
    
    general corporate purposes.
  Sale of Equity Securities
  Preferred Stock
  (27)




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##### Table of Contents



Commodity Price Risk Management Transactions
      Contractual Obligations, Commitments and Off-Balance Sheet Arrangements
  (28)




---



##### Table of Contents



Obligation Due in PeriodSix monthsendingDecember 31,
    
    
    Year ended December 31,AfterContractual Cash Obligations
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    5 years
    
    
    Total(in thousands)Revolving Credit Facility (secured)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    62,000
    
    
    $
    
    
    
    $
    
    
    
    $
    62,000Office Lease (Dinero Plaza)
    
    
    78
    
    
    
    105
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    183Andrews and Snyder Field Offices(1)
    
    
    12
    
    
    
    23
    
    
    
    23
    
    
    
    14
    
    
    
    14
    
    
    
    
    
    
    
    86Asset retirement obligations(2)
    
    
    105
    
    
    
    38
    
    
    
    229
    
    
    
    19
    
    
    
    150
    
    
    
    1,710
    
    
    
    2,251Derivative Obligations
    
    
    9,110
    
    
    
    14,181
    
    
    
    10,593
    
    
    
    9,774
    
    
    
    
    
    
    
    
    
    
    
    43,658Drilling contract
    
    
    292
    
    
    
    964
    
    
    
    613
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,869Total
    
    $
    9,597
    
    
    $
    15,311
    
    
    $
    11,458
    
    
    $
    71,807
    
    
    $
    164
    
    
    $
    1,710
    
    
    $
    110,047
 
 (1)

The Snyder field office lease remains in effect until
the termination of our trade agreement with a third party working
interest owner in the Diamond M project. The Andrews
field lease expires in December 2007. The lease cost for these two
office facilities are billed to nonaffiliated third party working
interest owners under our joint operating agreements with these third
parties.(2)

Assets  retirement obligations of oil and natural gas assets,
excluding salvage value and accretion.
 Outlook
  
    
    internally generated cash from operations;
    
    proceeds from bank borrowings; and
    
    proceeds from sales of equity securities.
  
    
    our proved reserves;
    
    the volumes of oil and natural 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.
  
    
    increased bank borrowings;
    
    sales of Parallels securities;
    
    sales of non-core properties; or
    
    other forms of financing.
 (29)




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##### Table of Contents



Inflation
  Critical Accounting Policies
  Share-Based Payment
 Restatement
 Accounting for Derivative Instruments and Hedging Activities ITEM 1. Notes to Consolidated Financial Statements ITEM 2. MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ITEM 4. CONTROLS AND PROCEDURES.
 (30)




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##### Table of Contents



TRENDS AND PRICES
    FORWARD-LOOKING STATEMENTS
 Cautionary Statement Regarding Forward-Looking Statements
  
    
    our future financial and operating performance and results;
    
    our business strategy;
    
    changes in prices and demand for oil and natural gas;
    
    sources of funds necessary to conduct operations and complete acquisitions;
    
    development costs;
    
    number and location of planned wells;
    
    our future commodity price risk management activities; and
    
    our plans and forecasts.
   
    
    fluctuations in prices of oil and natural gas;
    
    demand for oil and natural gas;
    
    losses due to potential or future litigation;
    
    future capital requirements and availability of financing;
    
    geological concentration of our reserves;
    
    risks associated with drilling and operating wells;
    
    competition;
 (31)




---



##### Table of Contents




    
    general economic conditions;
    
    governmental regulations;
    
    receipt of amounts owed to us by purchasers of our production and counterparties to
our hedging contracts;
    
    hedging decisions, including whether or not to hedge;
    
    events similar to 911;
    
    actions of third party co-owners of interests in properties in which we also own an interest; and
    
    fluctuations in interest rates and availability of capital.
   
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Sensitivity as of June 30, 2005
  2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    Total($ in thousands)Variable rate debt:Revolving facility (secured)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    62,000
    
    
    $
    
    
    
    $
    62,000Weighted average interest rate
    
    
    5.73
    %
    
    
    5.73
    %
    
    
    5.73
    %
    
    
    5.73
    %
    
    
    
   (32)




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##### Table of Contents



Notional
    
    
    
    FairPeriod of Time
    
    Amounts
    
    Fixed Interest Rates
    
    Market Value($ in millions)
    
    
    
    ($ in thousand)July 1, 2005 thru December 31, 2005(1)
    
    $20
    
    4.05%
    
    $
    (33
    )July 1, 2005 thru December 31, 2005
    
    $30
    
    2.89%
    
    $
    124January 1, 2006 thru December 31, 2006(1)
    
    $10
    
    4.05%
    
    $
    6January 1, 2006 thru December 31, 2006
    
    $40
    
    3.76%
    
    $
    136January 1, 2007 thru December 31, 2007
    
    $50
    
    4.30%
    
    $
    (83
    )January 1, 2008 thru December 30, 2008
    
    $50
    
    4.74%
    
    $
    (246
    )Total Fair Market Value
    
    
    
    
    
    $
    (96
    )
 
 (1)
    
    Designated as cash flow hedge. Commodity Price Sensitivity as of June 30, 2005
     (33)




---



##### Table of Contents



Collars.
  HoustonNyMex
    
    
    
    
    
    
    Ship ChannelBarrels
    
    
    Oil Prices
    
    
    M M Btu of
    
    
    Gas PricesPeriod of Time
    
    of Oil
    
    
    Floor
    
    
    Cap
    
    
    Natural Gas
    
    
    Floor
    
    
    Cap
    
    
    Fair Market Value($ in thousands)July 1, 2005 thru October 31, 2005
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    246,000
    
    
    $
    5.00
    
    
    $
    7.26
    
    
    $
    (52
    )July 1, 2005 thru December 31, 2005
    
    
    36,800
    
    
    $
    36.00
    
    
    $
    49.60
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    (322
    )January 1, 2006 thru December 31,
2006
    
    
    70,800
    
    
    $
    35.00
    
    
    $
    44.00
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    (1,023
    )Total Fair Market Value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (1,397
    )
 Commodity Swaps.
  Nymex Oil
    
    Fair MarketPeriod of Time
    
    Barrles of Oil
    
    Swap Price
    
    Value($ in thousands)July 1, 2005 thru December 31, 2005(1)
    
    184,000
    
    $23.31
    
    $
    (6,410
    )July 1, 2005 thru December 31, 2005
    
    128,800
    
    $39.96
    
    $
    (2,360
    )January 1, 2006 thru December 20, 2006(1)
    
    265,500
    
    $23.04
    
    
    (9,241
    )January 1, 2006 thru December 20, 2006
    
    182,500
    
    $36.36
    
    
    (3,988
    )January 1, 2007 thru December 31, 2007
    
    474,500
    
    $34.36
    
    
    (10,511
    )January 1, 2008 thru December 31, 2008
    
    439,200
    
    $33.37
    
    
    (9,528
    )Total fair market value
    
    
    
    
    
    $
    (42,038
    )
 
 (1)
    
    Designated as cash flow hedges. 
 ITEM 4. CONTROLS AND PROCEDURES
  (34)




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##### Table of Contents



Accounting for Derivative Instruments and Hedging Activities
   
 PART II.  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Sale of Unregistered Securities
  (35)




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##### Table of Contents



Repurchase of Equity Securities
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  BROKERNAME
    
    VOTES CAST FOR
    
    VOTES WITHHELD
    
    NON-VOTESThomas R. Cambridge
    
    27,880,052
    
    771,543
    
    
    Dewayne E. Chitwood
    
    28,399,953
    
    251,642
    
    
    Larry C. Oldham
    
    28,403,085
    
    248,510
    
    
    Martin B. Oring
    
    28,498,133
    
    153,462
    
    
    Ray M. Poage
    
    28,499,963
    
    151,632
    
    
    Jeffrey G. Shrader
    
    27,976,600
    
    674,995
    
    
    
  VOTES FOR
    
    VOTES AGAINST
    
    ABSTENTIONS28,607,389
    
    18,188
    
    26,018
 (36)




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##### Table of Contents



ITEM 6. EXHIBITS
 (a)
    
    Exhibits
  No.
    
    Description of Exhibit3.1
    
    
    Certificate of Incorporation of Registrant (Incorporated by reference
to Exhibit 3.1 to Form 10-Q of the Registrant for the fiscal quarter
ended June 30, 2004)3.2
    
    
    Bylaws of Registrant (Incorporated by reference to Exhibit 3 of the
Registrants Form 8-K, dated October 9, 2000, as filed with the
Securities and Exchange Commission on October 10, 2000)3.3
    
    
    Certificate of Formation of Parallel, L.L.C. (Incorporated by
reference to Exhibit No. 3.3 of the Registrants Registration
Statement on Form S-3, No. 333-119725 filed on October 13, 2004)3.4
    
    
    Limited Liability Company Agreement of Parallel, L.L.C. (Incorporated
by reference to Exhibit No. 3.4 of the Registrants Statement on Form
S-3, No. 333-119725 filed on October 13, 2004)3.5
    
    
    Certificate of Limited Partnership of Parallel, L.P. (Incorporated by
reference to Exhibit No. 3.5 of the Registrants Registration
Statement on Form S-3, No. 333-119725 filed on October 13, 2004)3.6
    
    
    Agreement of Limited Partnership of Parallel, L.P. (Incorporated by
reference to Exhibit No. 3.6 of the Registrants Registration
Statement on Form S-3, No. 333-119725 filed on October 13, 2004)4.1
    
    
    Certificate of Designations, Preferences and Rights of Serial
Preferred Stock  6% Convertible Preferred Stock (Incorporated by
reference to Exhibit 4.1 of Form 10-Q of the Registrant for the fiscal
quarter ended June 30, 2004)4.2
    
    
    Certificate of Designation, Preferences and Rights of Series A
Preferred Stock (Incorporated by reference to Exhibit 4.2 of Form 10-K
of the Registrant for the fiscal year ended December 31, 2000)4.3
    
    
    Rights Agreement, dated as of October 5, 2000, between the Registrant
and Computershare Trust Company, Inc., as Rights Agent (Incorporated
by reference to Exhibit 4.3 of Form 10-K of the Registrant for the
fiscal year ended December 31, 2000)4.4
    
    
    Form of Indenture relating to senior debt securities of the Registrant
(Incorporated by reference to Exhibit No. 4.4 of the Registrants
Statement on Form S-3, No. 333-119725 filed on October 13, 2004)4.5
    
    
    Form of Indenture relating to subordinated debt securities of the
Registrant (Incorporated by reference to Exhibit No. 4.5 of the
Registrants Registration Statement on Form S-3, No. 333-119725 filed
on October 13, 2004)4.6
    
    
    Form of common stock certificate of the Registrant (Incorporated by
reference to Exhibit No. 4.6 of the Registrants Registration
Statement on Form S-3, No. 333-119725 filed on October 13, 2004)4.7
    
    
    Warrant Purchase Agreement, dated November 20, 2001, between the
Registrant and Stonington Corporation (Incorporated by reference to
Exhibit 4.7 of Form 10-K of the Registrant for the fiscal year ended
December 31, 2004)
 (37)




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##### Table of Contents



4.8
    
    Warrant Purchase Agreement, dated December 23, 2003, between the Registrant and
Stonington Corporation (Incorporated by reference to Exhibit 4.8 of Form 10-K of the
Registrant for the fiscal year ended December 31, 2004)Executive Compensation Plans and Arrangements (Exhibit No.s 10.1 through 10.8):10.1
    
    1992 Stock Option Plan (Incorporated by reference to Exhibit 10.1 of Form 10-K of
the Registrant for the fiscal year ended December 31, 2004)10.2
    
    Merrill Lynch, Pierce, Fenner & Smith Incorporated Prototype Simplified Employee
Pension Plan (Incorporated by reference to Exhibit 10.6 of the Registrants Form
10-K for the fiscal year ended December 31, 1995)*10.3
    
    Non-Employee Directors Stock Option Plan10.4
    
    1998 Stock Option Plan (Incorporated by reference to Exhibit 10.7 of Form 10-K of
the Registrant for the fiscal year ended December 31, 1998)10.5
    
    Form of Incentive Award Agreements, dated December 12, 2001, between the Registrant
and Thomas R. Cambridge, Larry C. Oldham, Eric A. Bayley and John S. Rutherford
granting 2,394 Unit Equivalent Rights to Mr. Cambridge; 9,564 Unit Equivalent Rights
to Mr. Oldham; 2,869 Unit Equivalent Rights to Mr. Bayley; and 7,173 Unit Equivalent
Rights to Mr. Rutherford (Incorporated by reference to Exhibit 10.8 of Form 10-K of
the Registrant for the fiscal year ended December 31, 2001)10.6
    
    2001 Non-Employee Directors Stock Option Plan (Incorporated by reference to Exhibit
10.7 of the Registrants Form 10-Q Report for the first fiscal quarter ended March
31, 2004)10.7
    
    2004 Non-Employee Director Stock Grant Plan (Incorporated by reference to Exhibit
10.1 of the Registrants Form 8-K Report dated September 22, 2004)10.8
    
    Incentive and Retention Plan (Incorporated by reference to Exhibit 10.1 of the
Registrants Form 8-K Report dated September 23, 2004 and filed with the Securities
and Exchange Commission on September 29, 2004)10.9
    
    Certificate of Formation of First Permian, L.L.C. (Incorporated by reference to
Exhibit 10.1 of the Registrants Form 8-K Report dated June 30, 1999)10.10
    
    Limited Liability Company Agreement of First Permian, L.L.C. (Incorporated by
reference to Exhibit 10.2 of the Registrants Form 8-K Report dated June 30, 1999)10.11
    
    Amended and Restated Limited Liability Company Agreement of First Permian, L.L.C.
dated as of May 31, 2000 (Incorporated by reference to Exhibit 10.16 of Form 10-K of
the Registrant for the fiscal year ended December 31, 2000)10.12
    
    Credit Agreement, dated June 30, 1999, by and among First Permian, L.L.C., Parallel
Petroleum Corporation, Baytech, Inc., and Bank One, Texas, N.A. (Incorporated by
reference to Exhibit 10.6 of the Registrants Form 8-K Report dated June 30, 1999)10.13
    
    Limited Guaranty, dated June 30, 1999, by and among First Permian, L.L.C., Parallel
Petroleum Corporation and Bank One, Texas, N.A. (Incorporated by reference to
Exhibit 10.7 of the Registrants Form 8-K Report dated June 30, 1999)
 (38)




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##### Table of Contents



10.14
    
    Second Restated Credit Agreement, dated October 25, 2000, among
First Permian, L.L.C., Bank One, Texas, N.A., and Bank One Capital
Markets, Inc. (Incorporated by reference to Exhibit 10.22 of Form
10-K of the Registrant for the fiscal year ended December 31, 2000)10.15
    
    Loan Agreement, dated as of January 25, 2002, between the Registrant
and First American Bank, SSB (Incorporated by reference to Exhibit
10.25 of Form 10-K of the Registrant for the fiscal year ended
December 31, 2001)10.16
    
    Purchase and Sale Agreement, dated as of November 27, 2002, among
JMC Exploration, Inc., Arkoma Star L.L.C., Parallel, L.P. and
Texland Petroleum, Inc. (Incorporated by reference to Exhibit 10.1
of Form 8-K of the Registrant, dated December 20, 2002)10.17
    
    First Amended and Restated Credit Agreement, dated December 20,
2002, by and among Parallel Petroleum Corporation, Parallel, L.P.,
Parallel, L.L.C., First American Bank, SSB, Western National Bank
and BNP Paribas (Incorporated by reference to Exhibit 10.2 of Form
8-K of the Registrant, dated December 20, 2002)10.18
    
    Guaranty dated December 20, 2002, between Parallel, L.L.C. and First
American Bank, SSB, as Agent (Incorporated by reference to Exhibit
10.3 of Form 8-K of the Registrant, dated December 20, 2002)10.19
    
    First Amendment to First Amended and Restated Credit Agreement,
dated as of September 12, 2003, by and among Parallel Petroleum
Corporation, Parallel, L.P., Parallel, L.L.C., First American Bank,
SSB, Western National Bank, and BNP Paribas (Incorporated by
reference to Exhibit 10.29 of Form 10-Q of the Registrant for the
quarter ended September 30, 2003)10.20
    
    Second Amended and Restated Credit Agreement, dated September 27,
2004, by and among Parallel Petroleum Corporation, Parallel, L.P.,
Parallel, L.L.C., First American Bank, SSB, BNP Paribas, Citibank,
F.S.B. and Western National Bank (Incorporated by reference to
Exhibit 10.1 of the Registrants Form 8-K Report dated September 27,
2004 and filed with the Securities and Exchange Commission on
October 1, 2004)10.21
    
    Agreement of Limited Partnership of West Fork Pipeline Company LP
(Incorporated by reference to Exhibit 10.21 of Form 10-K of the
Registrant for the fiscal year ended December 31, 2004)10.22
    
    First Amendment to Second Amended and Restated Credit Agreement,
dated as of December 27, 2004, by and among Parallel Petroleum
Corporation, Parallel, L.P., Parallel, L.L.C., First American Bank,
SSB, BNP Paribas, Citibank, F.S.B. and Western National Bank
(Incorporated by reference to Exhibit 10.1 of the Registrants Form
8-K Report dated December 30, 2004 and filed with the Securities and
Exchange Commission on December 30, 2004)10.23
    
    Second Amendment to Second Amended and Restated Credit Agreement,
dated as of April 1, 2005, by and among Parallel Petroleum
Corporation, Parallel, L.P., Parallel, L.L.C., First American Bank,
SSB, BNP Paribas, Citibank, F.S.B. and Western National Bank
(Incorporated by reference to Exhibit 10.1 of the Registrants Form
8-K Report dated April 4, 2005 and filed with the Securities and
Exchange Commission on April 8, 2005)14
    
    Code of Ethics (Incorporated by reference to Exhibit No. 14 of the
Registrants Form 10-K Report for the fiscal year ended December 31,
2003 and filed with the Securities and Exchange Commission on March
22, 2004)
 (39)




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21
    
    Subsidiaries (Incorporated by reference to Exhibit No. 21 of the
Registrants Form 10-K Report for the fiscal year ended December 31,
2003 and filed with the Securities and Exchange Commission on March
22, 2004)*31.1
    
    Certification of Principal Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 302 of the Sarbanes 
Oxley Act of 2002*31.2
    
    Certification of Principal Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 302 of the Sarbanes 
Oxley Act of 2002*32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes -
Oxley Act of 2002.*32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes -
Oxley Act of 2002.
 
 *
    
    Filed herewith. (40)




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##### Table of Contents



SIGNATURES
  PARALLEL PETROLEUM CORPORATIONDate:
May 9, 2006
    
    BY: /s/ Larry C. OldhamLarry C. OldhamPresident and Chief Executive OfficerDate: May 9, 2006
    
    BY: /s/ Steven D. FosterSteven D. Foster,Chief Financial Officer




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INDEX TO EXHIBITS
 No
    
    Description of Exhibit3.1
    
    Certificate of Incorporation of Registrant (Incorporated by reference
to Exhibit 3.1 to Form 10-Q of the Registrant for the fiscal quarter
ended June 30, 2004)3.2
    
    Bylaws of Registrant (Incorporated by reference to Exhibit 3 of the
Registrants Form 8-K, dated October 9, 2000, as filed with the
Securities and Exchange Commission on October 10, 2000)3.3
    
    Certificate of Formation of Parallel, L.L.C. (Incorporated by
reference to Exhibit No. 3.3 of the Registrants Registration
Statement on Form S-3, No. 333-119725 filed on October 13, 2004)3.4
    
    Limited Liability Company Agreement of Parallel, L.L.C. (Incorporated
by reference to Exhibit No. 3.4 of the Registrants Statement on Form
S-3, No. 333-119725 filed on October 13, 2004)3.5
    
    Certificate of Limited Partnership of Parallel, L.P. (Incorporated by
reference to Exhibit No. 3.5 of the Registrants Registration
Statement on Form S-3, No. 333-119725 filed on October 13, 2004)3.6
    
    Agreement of Limited Partnership of Parallel, L.P. (Incorporated by
reference to Exhibit No. 3.6 of the Registrants Registration
Statement on Form S-3, No. 333-119725 filed on October 13, 2004)4.1
    
    Certificate of Designations, Preferences and Rights of Serial
Preferred Stock  6% Convertible Preferred Stock (Incorporated by
reference to Exhibit 4.1 of Form 10-Q of the Registrant for the fiscal
quarter ended June 30, 2004)4.2
    
    Certificate of Designation, Preferences and Rights of Series A
Preferred Stock (Incorporated by reference to Exhibit 4.2 of Form 10-K
of the Registrant for the fiscal year ended December 31, 2000)4.3
    
    Rights Agreement, dated as of October 5, 2000, between the Registrant
and Computershare Trust Company, Inc., as Rights Agent (Incorporated
by reference to Exhibit 4.3 of Form 10-K of the Registrant for the
fiscal year ended December 31, 2000)4.4
    
    Form of Indenture relating to senior debt securities of the Registrant
(Incorporated by reference to Exhibit No. 4.4 of the Registrants
Statement on Form S-3, No. 333-119725 filed on October 13, 2004)4.5
    
    Form of Indenture relating to subordinated debt securities of the
Registrant (Incorporated by reference to Exhibit No. 4.5 of the
Registrants Registration Statement on Form S-3, No. 333-119725 filed
on October 13, 2004)4.6
    
    Form of common stock certificate of the Registrant (Incorporated by
reference to Exhibit No. 4.6 of the Registrants Registration
Statement on Form S-3, No. 333-119725 filed on October 13, 2004)4.7
    
    Warrant Purchase Agreement, dated November 20, 2001, between the
Registrant and Stonington Corporation (Incorporated by reference to
Exhibit 4.7 of Form 10-K of the Registrant for the fiscal year ended
December 31, 2004)




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##### Table of Contents



4.8
    
    Warrant Purchase Agreement, dated December 23, 2003, between the Registrant and
Stonington Corporation (Incorporated by reference to Exhibit 4.8 of Form 10-K
of the Registrant for the fiscal year ended December 31, 2004)Executive Compensation Plans and Arrangements (Exhibit No.s 10.1 through 10.8):10.1
    
    1992 Stock Option Plan (Incorporated by reference to Exhibit 10.1 of Form 10-K
of the Registrant for the fiscal year ended December 31, 2004)10.2
    
    Merrill Lynch, Pierce, Fenner & Smith Incorporated Prototype Simplified
Employee Pension Plan (Incorporated by reference to Exhibit 10.6 of the
Registrants Form 10-K for the fiscal year ended December 31, 1995)*10.3
    
    Non-Employee Directors Stock Option Plan10.4
    
    1998 Stock Option Plan (Incorporated by reference to Exhibit 10.7 of Form 10-K
of the Registrant for the fiscal year ended December 31, 1998)10.5
    
    Form of Incentive Award Agreements, dated December 12, 2001, between the
Registrant and Thomas R. Cambridge, Larry C. Oldham, Eric A. Bayley and John S.
Rutherford granting 2,394 Unit Equivalent Rights to Mr. Cambridge; 9,564 Unit
Equivalent Rights to Mr. Oldham; 2,869 Unit Equivalent Rights to Mr. Bayley;
and 7,173 Unit Equivalent Rights to Mr. Rutherford (Incorporated by reference
to Exhibit 10.8 of Form 10-K of the Registrant for the fiscal year ended
December 31, 2001)10.6
    
    2001 Non-Employee Directors Stock Option Plan (Incorporated by reference to
Exhibit 10.7 of the Registrants Form 10-Q Report for the first fiscal quarter
ended March 31, 2004)10.7
    
    2004 Non-Employee Director Stock Grant Plan (Incorporated by reference to
Exhibit 10.1 of the Registrants Form 8-K Report dated September 22, 2004)10.8
    
    Incentive and Retention Plan (Incorporated by reference to Exhibit 10.1 of the
Registrants Form 8-K Report dated September 23, 2004 and filed with the
Securities and Exchange Commission on September 29, 2004)10.9
    
    Certificate of Formation of First Permian, L.L.C. (Incorporated by reference to
Exhibit 10.1 of the Registrants Form 8-K Report dated June 30, 1999)10.10
    
    Limited Liability Company Agreement of First Permian, L.L.C. (Incorporated by
reference to Exhibit 10.2 of the Registrants Form 8-K Report dated June 30,
1999)10.11
    
    Amended and Restated Limited Liability Company Agreement of First Permian,
L.L.C. dated as of May 31, 2000 (Incorporated by reference to Exhibit 10.16 of
Form 10-K of the Registrant for the fiscal year ended December 31, 2000)10.12
    
    Credit Agreement, dated June 30, 1999, by and among First Permian, L.L.C.,
Parallel Petroleum Corporation, Baytech, Inc., and Bank One, Texas, N.A.
(Incorporated by reference to Exhibit 10.6 of the Registrants Form 8-K Report
dated June 30, 1999)




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##### Table of Contents



10.13
    
    Limited Guaranty, dated June 30, 1999, by and among First Permian,
L.L.C., Parallel Petroleum Corporation and Bank One, Texas, N.A.
(Incorporated by reference to Exhibit 10.7 of the Registrants Form
8-K Report dated June 30, 1999)10.14
    
    Second Restated Credit Agreement, dated October 25, 2000, among
First Permian, L.L.C., Bank One, Texas, N.A., and Bank One Capital
Markets, Inc. (Incorporated by reference to Exhibit 10.22 of Form
10-K of the Registrant for the fiscal year ended December 31, 2000)10.15
    
    Loan Agreement, dated as of January 25, 2002, between the Registrant
and First American Bank, SSB (Incorporated by reference to Exhibit
10.25 of Form 10-K of the Registrant for the fiscal year ended
December 31, 2001)10.16
    
    Purchase and Sale Agreement, dated as of November 27, 2002, among
JMC Exploration, Inc., Arkoma Star L.L.C., Parallel, L.P. and
Texland Petroleum, Inc. (Incorporated by reference to Exhibit 10.1
of Form 8-K of the Registrant, dated December 20, 2002)10.17
    
    First Amended and Restated Credit Agreement, dated December 20,
2002, by and among Parallel Petroleum Corporation, Parallel, L.P.,
Parallel, L.L.C., First American Bank, SSB, Western National Bank
and BNP Paribas (Incorporated by reference to Exhibit 10.2 of Form
8-K of the Registrant, dated December 20, 2002)10.18
    
    Guaranty dated December 20, 2002, between Parallel, L.L.C. and First
American Bank, SSB, as Agent (Incorporated by reference to Exhibit
10.3 of Form 8-K of the Registrant, dated December 20, 2002)10.19
    
    First Amendment to First Amended and Restated Credit Agreement,
dated as of September 12, 2003, by and among Parallel Petroleum
Corporation, Parallel, L.P., Parallel, L.L.C., First American Bank,
SSB, Western National Bank, and BNP Paribas (Incorporated by
reference to Exhibit 10.29 of Form 10-Q of the Registrant for the
quarter ended September 30, 2003)10.20
    
    Second Amended and Restated Credit Agreement, dated September 27,
2004, by and among Parallel Petroleum Corporation, Parallel, L.P.,
Parallel, L.L.C., First American Bank, SSB, BNP Paribas, Citibank,
F.S.B. and Western National Bank (Incorporated by reference to
Exhibit 10.1 of the Registrants Form 8-K Report dated September 27,
2004 and filed with the Securities and Exchange Commission on
October 1, 2004)10.21
    
    Agreement of Limited Partnership of West Fork Pipeline Company LP
(Incorporated by reference to Exhibit 10.21 of Form 10-K of the
Registrant for the fiscal year ended December 31, 2004)10.22
    
    First Amendment to Second Amended and Restated Credit Agreement,
dated as of December 27, 2004, by and among Parallel Petroleum
Corporation, Parallel, L.P., Parallel, L.L.C., First American Bank,
SSB, BNP Paribas, Citibank, F.S.B. and Western National Bank
(Incorporated by reference to Exhibit 10.1 of the Registrants Form
8-K Report dated December 30, 2004 and filed with the Securities and
Exchange Commission on December 30, 2004)10.23
    
    Second Amendment to Second Amended and Restated Credit Agreement,
dated as of April 1, 2005, by and among Parallel Petroleum
Corporation, Parallel, L.P., Parallel, L.L.C., First American Bank,
SSB, BNP Paribas, Citibank, F.S.B. and Western National Bank
(Incorporated by reference to Exhibit 10.1 of the Registrants Form
8-K Report dated April 4, 2005 and filed with the Securities and
Exchange Commission on April 8, 2005)




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14
    
    Code of Ethics (Incorporated by reference to Exhibit No. 14 of the
Registrants Form 10-K Report for the fiscal year ended December 31,
2003 and filed with the Securities and Exchange Commission on March
22, 2004)21
    
    Subsidiaries (Incorporated by reference to Exhibit No. 21 of the
Registrants Form 10-K Report for the fiscal year ended December 31,
2003 and filed with the Securities and Exchange Commission on March
22, 2004)*31.1
    
    Certification of Principal Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 302 of the Sarbanes 
Oxley Act of 2002*31.2
    
    Certification of Principal Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 302 of the Sarbanes 
Oxley Act of 2002*32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes -
Oxley Act of 2002.*32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes -
Oxley Act of 2002.
 
 *
    
    Filed herewith