<PAGE>
                                       1



                 SECURITIES AND EXCHANGE COMMISSION

                       WASHINGTON, D. C. 20549

                            FORM 10-Q/A
                           Amendment No. 1

                    ----------------------------
(Mark One)

/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
    Exchange Act of 1934

        For the quarterly period ended September 30, 1999 or

/ / 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 of other jurisdiction of                 (I.R.S. Employer Identification
  incorporation or organization)                              Number)

      One Marienfeld Place, Suite 465,
           Midland, Texas                                        79701
   (Address of principal executive offices)                    (Zip Code)

                                 (915) 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.

                 Yes  'X'                        No

     At  November  1, 1999,  there were  18,331,858  shares of the  Registrant's
Common Stock, $0.01 par value, outstanding.


===============================================================================
<PAGE>
                                       2




                              INDEX



                   PART I. - FINANCIAL INFORMATION
                                                                 Page No.


ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

          Reference is made to the succeeding pages for
     the following financial statements:

     -    Consolidated  Balance Sheet as of December 31,
          1998 and September 30, 1999 (unaudited)                    4

     -    Unaudited  Consolidated  Statements of  Operations
          for the three months  ended  September  30, 1998
          and 1999 and nine months ended September 30, 1998
          and 1999                                                   6

     -    Unaudited Consolidated Statements of Cash Flows
          for the nine months ended September 30, 1998 and 1999      7

     - Notes to Consolidated Financial Statements                    8


<PAGE>
                                       3

                         EXPLANATORY NOTE



     This amendment  reflects the unaudited pro forma results of operations that
include Parallel's acquired interest in First Permian, LLC, as described in Note
3. The pro forma  results for the nine months ended  September 30, 1999 and 1998
give effect to the  acquisition as if it had occurred at the beginning of fiscal
1998.

<PAGE>
                                       4


                         PARALLEL PETROLEUM CORPORATION


                           CONSOLIDATED BALANCE SHEETS


<TABLE>

                                                  December 31, September 30, 1999
ASSETS                                                 1998*       (Unaudited)
-------------                                     ------------ ------------------
<S>                                               <C>          <C>

Current assets:
 Cash and cash equivalents                          $ 1,178,819  $ 1,175,419
 Accounts receivable:
   Oil and gas                                        1,432,659    2,002,115
   Others, net of allowance for doubtful accounts
      of $71,358 in 1998 and 1999                       247,740      587,989
   Affiliate                                             11,844          608
                                                   ------------ ------------
                                                      1,692,243    2,590,712
 Other assets                                            61,504       22,248
 Assets held for sale (Note 2)                                     3,825,000
                                                   ------------ ------------
   Total current assets                               2,932,566    7,613,379
                                                   ------------ ------------
Property and equipment, at cost:
 Oil and gas properties, full cost method            65,565,466   84,281,470
 Other                                                  287,586      316,821
                                                   ------------ ------------
                                                     65,853,052   84,598,291
 Less accumulated depreciation and depletion         22,279,355   25,208,704
                                                   ------------ ------------
   Net property and equipment                        43,573,697   59,389,587
                                                   ------------ ------------
Other assets, net of accumulated amortization of
   $86,917 in 1998 and $117,623 in 1999                  58,519      345,356
                                                   ------------ ------------
                                                   $ 46,564,782 $ 67,348,322
                                                   ============ ============

</TABLE>

<PAGE>
                                       5


                         PARALLEL PETROLEUM CORPORATION

                           CONSOLIDATED BALANCE SHEETS
                                   (Continued)


<TABLE>
                                                  December 31, September 30, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY                 1998*        (Unaudited)
------------------------------------              ------------  ------------------
<S>                                               <C>           <C>

Current liabilities:
 Accounts payable and accrued liabilities:
   Current portion of affiliate's long-term
     debt (Note 5)                                 $         --    $ 675,000
    Subordinated notes payable (Note 6)                      --    3,600,000
   Trade                                              2,803,539    2,359,833
   Affiliate                                                214        1,242
   Preferred stock dividend                                  --      170,537
                                                   ------------ ------------
   Total current liabilities                          2,803,753    6,806,612
                                                   ------------ ------------
  Long-term debt:
   Bank credit facility (Note 5)                     18,035,889   18,815,889
   Proportionate share of affiliate's long-
     term debt, net of current portion(Note 5)               --   15,975,000
                                                   ------------ ------------
   Total long-term debt                              18,035,889   34,790,889

 Deferred income taxes                                       --           --

Stockholders' equity:

  Preferred stock   6% convertible preferred stock
   par value $.10 per share(aggregate liquidation
   preference of $10) authorized 10,000,000 shares,
   issued and outstanding 974,500 in 1998 and 1999       97,450       97,450
 Common stock - par value $.01 per share, authorized
   60,000,000 shares, issued and outstanding
   18,306,858 in 1998 and 18,331,858 in 1999            183,069      183,319
  Additional paid-in surplus                         32,341,971   31,896,022
 Retained deficit                                    (6,897,350)  (6,425,970)

                                                   ------------ ------------
   Total stockholders' equity                        25,725,140   25,750,821

Contingencies
                                                   ------------ ------------
                                                   $ 46,564,782 $ 67,348,322
                                                   ============ ============
</TABLE>



*The balance  sheet as of December  31, 1998 has been  derived  from  Parallel's
audited  financial  statements.  The accompanying  notes are an integral part of
these financial statements.

<PAGE>
                                       6


                         PARALLEL PETROLEUM CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (Unaudited)


<TABLE>
                                         Three Months Ended        Nine months Ended
                                            September 30,             September 30,
                                      ----------------------   ----------------------
                                         1998         1999        1998        1999
                                      ----------   ---------   ----------  ----------
<S>                                   <C>          <C>         <C>         <C>

Oil and gas revenues                  $2,540,809   $3,792,755  $7,106,512  $7,747,572
                                      ----------   ----------  ----------  ----------
Cost and expenses:
  Lease operating expense                622,205    1,065,158   1,792,895   2,130,123
  General and administrative             227,865      301,761     647,371     725,908
  Depreciation, depletion
     and amortization                  1,114,438    1,067,700   3,108,721   2,928,494
                                      ----------   ----------  ----------  ----------
                                       1,964,508    2,434,619   5,548,987   5,784,525
                                      ----------   ----------  ----------  ----------
          Operating income               576,301    1,358,136   1,557,525   1,963,047
                                      ----------   ----------  ----------  ----------
Other income (expense), net:
   Interest income                           403       10,761         873      37,732
   Other income                            8,226      116,621      59,337     129,850
   Interest expense                     (396,682)    (883,321) (1,042,777) (1,630,449)
   Other expense                          (2,687)     (26,290)    (11,264)    (28,800)
                                      ----------   ----------  ----------  ----------
          Total other expense, net      (390,740)    (782,229)   (993,831) (1,491,667)
                                      ----------   ----------  ----------  ----------
Income before income taxes               185,561      575,907     563,694     471,380

Income tax expense   deferred             61,269           --     185,964          --
                                      ----------   ----------  ----------  ----------
Net income                            $  124,292   $  575,907  $  377,730  $  471,380
                                      ==========   ==========  ==========  ==========
Cumulative preferred stock dividend   $   90,000   $  146,175  $  173,000  $  462,887
                                      ==========   ==========  ==========  ==========
    Net income available
      to common stockholders          $   34,292   $  429,732  $  204,730  $    8,493
                                      ==========   ==========  ==========  ==========
Net income per common share
    Basic                             $     .002   $     .023  $     .011  $    .0005
                                      ==========   ==========  ==========  ==========
    Diluted                           $     .002   $     .023  $     .011  $    .0005
                                      ==========   ==========  ==========  ==========
Weighted average common shares
    Outstanding   basic               18,381,967   18,331,858  18,207,852  18,329,759
                                      ==========   ==========  ==========  ==========
    Outstanding - diluted             18,756,045   18,505,647  18,751,500  18,468,642
                                      ==========   ==========  ==========  ==========

</TABLE>

The accompanying notes are an integral part of these financial statements.

<PAGE>
                                       7



                         PARALLEL PETROLEUM CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (Unaudited)

                         Nine months Ended September 30,



<TABLE>
                                                            1998        1999
                                                         ----------   ----------

<S>                                                      <C>          <C>
Cash flows from operating activities:

   Net income                                             $ 377,730    $ 471,380
   Adjustments to reconcile net income to net cash
     Provided by (used in) operating activities:
        Depreciation, depletion and amortization          3,108,721    2,928,494
                Incomes taxes                               185,964           --
   Other, net                                                (4,531)    (286,837)

   Changes in assets and liabilities:
     Decrease (increase) in trade receivables                16,622     (898,469)
     (Increase) decrease in prepaid expenses and other      (61,201)      39,256
     Increase (decrease) in accounts payable and accrued
                liabilities                                 612,545     (272,141)
     Increase in current portion of affiliate
        long-term debt                                           --      675,000
     Increase in subordinated notes payable                      --    3,600,000
                                                        -----------  -----------
     Net cash provided by operating activities            4,235,850    6,256,683
                                                        -----------  -----------
Cash flows from investing activities:

   Additions to property and equipment                  (17,353,375) (23,004,615)
   Proceeds from disposition of property and equipment      883,144      435,231
                                                        -----------  -----------
     Net cash used in investing activities              (16,470,231) (22,569,384)
                                                        -----------  -----------
Cash flows from financing activities:

   Proceeds from the issuance of long-term debt          14,307,390   16,755,000
          Payment of long-term debt                      (8,584,000)          --
          Proceeds from exercise of options and warrants     70,625       17,188
      Stock offering costs                                  (80,851)          --
          Proceeds from common stock issuance                    --           --
          Proceeds from preferred stock issuance          6,000,000           --
   Payment of preferred stock dividend                      (68,000)    (462,887)
                                                        -----------  -----------
     Net cash provided by financing activities           11,645,164   16,309,301
                                                        -----------  -----------
     Net increase (decrease) in cash
          and cash equivalents                             (589,217)      (3,400)
Beginning cash and cash equivalents                         597,149    1,178,819
                                                        -----------  -----------
Ending cash and cash equivalents                        $     7,932  $ 1,175,419
                                                        ===========  ===========
Non-cash financing activities:
   Accrued preferred stock dividend                    $        --   $   170,537
                                                       ===========   ===========

</TABLE>

The accompanying notes are an integral part of these financials.



<PAGE>
                                       8

                         PARALLEL PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

     Parallel's  proportionate  share of the assets,  liabilities,  revenues and
expenses  of an  affiliated  limited  liability  company  are  included  in  the
accompanying  consolidated financial statements. On June 25, 1999, we acquired a
22.5%  interest in First Permian,  LLC, a Delaware  limited  liability  company.
Subsequently,  on June 30,  1999,  First  Permian  merged  with a  wholly  owned
subsidiary  of Fina Oil and  Chemical  Company.  The  assets  acquired  by First
Permian in the merger consisted primarily of producing oil and gas properties in
the Permian  Basin of west  Texas.  The  transaction  was  accounted  for by the
purchase  method of  accounting  for  business  combinations.  Accordingly,  the
accompanying  consolidated  financial  statements  before  July  1,  1999 do not
include any  revenues or expenses  associated  with our 22.5%  interest in First
Permian. See Note 3 to Consolidated Financial Statements.

     The  financial  information  included  herein,  with the  exception  of the
balance sheet as of December 31, 1998, is unaudited.  However,  such information
includes all adjustments  (consisting  solely of normal  recurring  adjustments)
which are, in the opinion of  management,  necessary for a fair statement of the
results of operations for the interim periods. The results of operations for the
interim period are not necessarily  indicative of the results to be expected for
an entire year.

     Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting  principles
have been  condensed  or omitted in this Form 10-Q  Report  pursuant  to certain
rules  and  regulations  of  the  Securities  and  Exchange  Commission.   These
consolidated  financial  statements  should  be read  in  conjunction  with  the
financial  statements  and notes  included in Parallel's  1998 Annual Report and
1998 Form 10-K.

NOTE 2. ASSETS HELD FOR SALE

     In the normal course of business,  we review opportunities for the possible
sale of certain non-core oil and gas properties. If the bids or offers submitted
are acceptable and consistent with our growth strategy, we may elect to sell the
property to raise additional capital.  Likewise, we review opportunities for the
possible  acquisition  of  oil  and  gas  reserves.  When  possible  acquisition
opportunities  are consistent  with our growth  strategy,  we may submit bids or
offers in amounts  and with terms  consistent  with our  growth  strategy.  Such
acquisitions would require additional financing.

     Because of the protracted  period of low prices and the resultant  negative
effect on cash flows and our line of credit,  a part of our longer term business
strategy is to sell certain non-core assets, which may include producing oil and
gas  properties,  undeveloped  leasehold  acreage  and  other  assets,  to raise
additional capital and reduce debt. Accordingly, we have classified the basis in
these assets as assets held for sale within the balance sheet.

NOTE 3. RECENT EVENTS

     On November  12, 1999,  we  terminated  the  offering  period for a private
placement  of  2,000,000  shares  of common  stock.  Stock  Purchase  Agreements
covering a total of 2,000,000 shares were received from 22 accredited  investors
and eight unaccredited investors.  The offering price of the stock was $1.60 per
share. After deducting estimated expenses in the amount of $27,000 payable by us
and sales commissions in the amount of $26,000 payable to Netherland Securities,
Inc. and $4,000 payable to Everen  Securities,  Inc., net proceeds are estimated
to be  $3,143,000,  of which  approximately  $1,500,000  million will be used to
reduce  bank  debt  and the  remaining  amount  will  be  used  to fund  capital
expenditures and for general corporate purposes.  Upon issuance of the 2,000,000
shares  of  common  stock,  we will  have  20,338,858  shares  of  common  stock
outstanding.  The private  placement was made in reliance on the exemptions from
registration under the Securities Act of 1933 pursuant to Section 4 (2) and Rule
506 of Regulation D under the Securities Act.

     On June 30, 1999, First Permian,  LLC and a wholly owned subsidiary of Fina
Oil and  Chemical  Company  consummated  a cash  merger.  First  Permian was the

<PAGE>
                                       9



surviving  entity.  The transaction was accounted for as a purchase.  The assets
acquired consisted  primarily of producing oil and gas properties located in the
Permian Basin of west Texas.  After giving effect to purchase price adjustments,
First Permian paid to Fina cash in the aggregate amount of  approximately  $92.0
million.

     First  Permian  is owned by  Parallel,  Baytech,  Inc.,  Tejon  Exploration
Company and Mansefeldt Investment Corporation. Baytech, Tejon and Mansefeldt are
privately held oil and gas  companies.  Parallel and Baytech are the managers of
First Permian and each owns a 22.5% membership  interest.  Tejon Exploration and
Mansefeldt  Investment  each own a 27.5% interest in First  Permian.  If certain
conditions are met regarding the prepayment of $16.0 million aggregate principal
amount of  subordinated  unsecured  notes made by First  Permian  and payable to
Tejon and  Mansefeldt,  the  proceeds  of which  were used to help  finance  the
acquisition,  Parallel's interest in First Permian could increase to 37.5% for a
nominal fee per membership unit.

     The  purchase was  financed,  in part,  with the proceeds of the  revolving
credit facility provided by Bank One, Texas, N.A. to First Permian.  On June 30,
1999, Parallel and Baytech entered into a credit agreement with Bank One, Texas,
N.A.  providing for a $110.0 million  revolving credit  facility.  The principal
amount  of the  initial  loan  from  Bank  One  was  $74.0  million.  Parallel's
obligation is limited to a guaranty of $10.0 million of the bank borrowings. See
Note 5 to Consolidated Financial Statements for further discussion of the credit
facility.

     Additional  financing for the cash merger was obtained through subordinated
debt  borrowings,  which  included an $8.0 million  loan from Tejon  Exploration
Company and an  additional  $8.0 million loan from  Mansefeldt  Investment.  The
terms of the  subordinated  debt and the effect on Parallel's  balance sheet are
discussed in Note 6 to Consolidated Financial Statements.

     The following unaudited pro forma results of operations for the nine months
ended  September  30,  1999 and 1998  give  effect to the  acquisition  of First
Permian as if it had occurred at the beginning of fiscal 1998.



<TABLE>

                                              Nine Months Ended September 30,
                                              -------------------------------
                                                   1999             1998
                                                   ----             ----
       <S>                                    <C>                  <C>

       Oil and gas revenues                   $ 10,040,474      $ 10,864,715

       Income (loss) before income taxes          (271,489)           63,470

       Net income (loss)                          (179,183)           41,890

       Net loss available to common shareholders  (495,896)         (131,110)

       Net loss per common share

             Basic                               $   (.027)      $   (.007)

             Diluted                             $   (.027)      $   (.007)

</TABLE>


NOTE 4. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

     Although  Parallel  has not  entered  into any  derivative  instruments  or
hedging  arrangements,  First Permian uses swap  agreements and other  financial
instruments in an attempt to reduce the risk of  fluctuating  oil and gas prices
and interest  rates.  Effective  July 1, 1999, a portion of the future crude oil
production  associated  with our  proportionate  interest  in First  Permian was
hedged  against price risks through the use of swap  contracts.  Settlements  on
price swap contracts are realized  monthly,  generally based upon the difference
between the contract price and the average  closing NYMEX price and are reported
as a component of oil and gas revenues  and  operating  cash flows in the period
realized.

     Effective  August  6,  1999,  approximately  54%  of  the  long  term  debt
associated with our proportionate  share in First Permian was hedged against the
impact of interest  rate changes  through an interest rate swap  agreement.  The
principal amount of the swap agreement is $40 million,  or $9 million net to our
interest.  The agreement  terminates on July 1, 2002. The terms of the agreement
provide for quarterly  payments  either to or from First Permian,  determined by

<PAGE>
                                       10




whether the  quarterly  London  Interbank  Offered Rate (LIBOR) in effect at the
beginning of each  quarterly  calculation  period is greater or less than 6.52%.
The calculation periods begin on the first day of each January,  April, July and
October of each year during the term of the agreement,  commencing on October 1,
1999. If, on the date of the beginning of the  calculation  period,  the monthly
LIBOR exceeds 6.52%,  Bank One, Texas,  N.A. (the Lendor) will owe First Permian
the quarterly  amount of the excess rate applied to $40 million.  Alternatively,
if the monthly  LIBOR rate on the  applicable  monthly  date is less than 6.52%,
First  Permian will owe the Lender.  The swap  agreement  is accounted  for as a
hedge,  with the amount which is either due to or from First Permian recorded as
a reduction or increase in interest expense.

NOTE 5. LONG TERM DEBT

        Our long term debt at September 30, 1999 consisted of the following:

        Revolving credit facility note payable to
          bank at the bank's base lending rate plus
          .25% (8.5% at September 30, 1999)                       $18,815,889

        Affiliate debt: Parallel's proportionate share
          (22.5%) of the First Permian, LLC
          revolving credit facility note payable to bank
          at bank's base lending rate plus 1.5% (9.75% at
          September 30, 1999)                                      16,650,000
                                                                  -----------
                                                                  $35,465,889
        Less: Parallel's proportionate share of current
          maturities of affiliate debt                                675,000
                                                                  -----------
        Total long term debt                                      $34,790,889
                                                                  ===========
        Scheduled maturities of Parallel's debt and our
          proportionate share of affiliate's
          debt at September 30, 1999 are as follows:


                    2000                                          $   675,000
                    2001                                           19,490,889
                    2002                                           15,300,000
                                                                  -----------
                                                                  $35,465,889
                                                                  ===========

     Revolving Credit Facility. At September 30, 1999, Parallel was a party to a
loan agreement with Bank One, Texas,  N.A. which provides for a revolving credit
facility (the "Revolving  Facility")  under which we may borrow up to the lesser
of  $30,000,000 or the  "borrowing  base" then in effect.  The borrowing base in
effect at September 30, 1999 was $18,815,889.  The borrowing base was subject to
reduction by a monthly  commitment  reduction of  $380,000.  However,  effective
March 23, 1999, the monthly commitment reduction was suspended by the bank until
May 1, 1999 at which time the borrowing  base and monthly  commitment  reduction
were  scheduled  for   redetermination.   The  loan  agreement  provides  for  a
redetermination of the borrowing base and monthly commitment reduction every six
months on April 1 and  October 1 of each year or at such other times as the bank
elects.  As of the date of this Form 10-Q Report,  we had not received  from the
bank the redetermined  borrowing base or monthly  reduction amount. At September
30, 1999, we had borrowed all the funds currently  available under the Revolving
Facility.  All indebtedness  under the Revolving  Facility matures July 1, 2001.
The  loan is  secured  by  substantially  all of our  oil  and  gas  properties.
Commitment  fees of .25% per annum on the difference  between the commitment and
the average daily amount outstanding are due quarterly.

     The unpaid  principal  balance of the Revolving  Facility bears interest at
our  election at a rate equal to (i) the bank's base  lending  rate plus .25% or
(ii) the  bank's  Eurodollar  rate  plus a margin  of 2.5%.  Interest  under the
Revolving  Facility is due and payable  monthly.  At  September  30,  1999,  the
interest rate was the bank's base rate plus .25% or 8.5%.

     The loan agreement  contains various  restrictive  covenants and compliance
requirements,  which include (1) maintenance of certain  financial  ratios,  (2)
limiting the incurrence of additional  indebtedness,  (3) prohibiting payment of
dividends  on common  stock,  and (4)  prohibiting  the payment of  dividends on
preferred  stock  when an event  of  default  under  the  loan  agreement  is in
existence.

     Long Term Debt of Affiliate. On June 30, 1999, Parallel,  Baytech and First
Permian  entered into a credit  agreement,  dated as of June 30, 1999, with Bank
One, Texas,  N.A. that established a $110.0 million revolving credit facility to
finance,  in part,  the merger of a subsidiary of Fina Oil and Chemical  Company

<PAGE>
                                       11




with and into First Permian.  The principal amount of the initial loan from Bank
One was $74.0  million.  Under  terms of the credit  agreement,  as  restated on
August 16, 1999, the principal  amount  outstanding  under the revolving  credit
facility bears interest,  at First Permian's  election,  at Bank One's base rate
plus 1.50% or the Eurodollar  rate plus 3.25% until such time that  subordinated
debt in the principal  amount of $16.0 million has been paid in full. When these
subordinated  unsecured loans have been paid in full, amounts  outstanding under
the revolving  credit facility will bear interest at Bank One's base rate plus a
margin  ranging  from .25% to .75%,  depending  upon the  principal  amount then
outstanding,  or the Eurodollar  rate plus a margin ranging from 2.00% to 2.50%,
depending upon the principal amount then outstanding.

     The credit  facility  provides for  revolving  loans subject to a borrowing
base and a monthly  commitment  reduction.  The initial  borrowing base is $74.0
million and the initial monthly  commitment  reduction  amount is $250,000.  The
monthly commitment  reduction  commenced on October 1, 1999 and continues with a
like reduction on the first day of each following  month. The borrowing base and
the  monthly  commitment  reduction  amount may be  redetermined  by the bank on
January 1 and July 1 of each year or at other times  requested by First Permian.
All outstanding principal under the revolving credit facility is due and payable
on July 1, 2002.  Interest is payable on the last day of each month. The loan is
secured  by  substantially  all of the  oil  and gas  properties  First  Permian
acquired  from  Fina  Oil  and  Chemical  Company.  Parallel  and  Baytech  each
guaranteed $10.0 million of the loans from Bank One. Our proportionate  share of
First Permian's long term debt is $16,650,000.

NOTE 6. AFFILIATE SUBORDINATED UNSECURED LOANS

     In addition to the $74.0 million loan from Bank One, First Permian borrowed
$8.0 million  from Tejon  Exploration  Company and $8.0 million from  Mansefeldt
Investment Corporation to help finance the acquisition of oil and gas properties
from Fina Oil and Chemical Company.  Under terms of an Intercreditor  Agreement,
dated June 30, 1999,  the loans made by Tejon and  Mansefeldt  are unsecured and
subordinate in all respects to the senior loans made by Bank One.

     Each  subordinated  loan  requires a principal  payment of $2.5  million on
December 31, 1999 and $5.5 million on September 30, 2000.  Principal payments on
the subordinated loans can only be made with proceeds from the issuance of First
Permian's  equity  securities;  advances under First Permian's  revolving credit
facility (if the borrowing  base is greater than $74.0  million);  proceeds from
the sale of First  Permian's  assets with the prior consent of Bank One; and any
other source of payment with Bank One's prior consent.  Our proportionate  share
of the  subordinated  debt is $3.6 million and is reflected in our September 30,
1999 consolidated balance sheet as subordinated notes payable.

NOTE 7. PREFERRED STOCK

     We have outstanding 974,500 shares of 6% Convertible Preferred Stock, $0.10
par value per share.  Cumulative annual dividends of $0.60 per share are payable
semi-annually  on June 15 and December 15 of each year.  Each share of Preferred
Stock may be  converted,  at the option of the  holder,  into  2.8571  shares of
common  stock at an  initial  conversion  price of $3.50 per  share,  subject to
adjustment in certain events.  The preferred stock has a liquidation  preference
of $10 per share and has no voting  rights,  except as  required  by law. We may
redeem the preferred stock, in whole or part, for $10 per share plus accrued and
unpaid dividends.

NOTE 8. FULL COST CEILING TEST

     We use the  full  cost  method  to  account  for our oil and gas  producing
activities.  Under the full cost method of accounting, the net book value of oil
and gas  properties,  less  related  deferred  income  taxes,  may not  exceed a
calculated  "ceiling."  The  ceiling  limitation  is  the  discounted  estimated
after-tax future net revenues from proved oil and gas properties. In calculating
future net  revenues,  current  prices  and costs are  generally  held  constant
indefinitely.  The net book  value,  less  related  deferred  income  taxes,  is
compared to the ceiling on a quarterly and annual  basis.  Any excess of the net
book value,  less related deferred income taxes, is generally  written off as an
expense. Under rules and regulations of the SEC, the excess above the ceiling is
not  written off if,  subsequent  to the end of the quarter or year but prior to
the release of the financial results, prices increased sufficiently such that an
excess  above the ceiling  would not have existed if the  increased  prices were
used in the calculations.

     During the fourth  quarter of 1998,  we  recognized  a non-cash  impairment
charge of $15.0 million, or $12.0 million net of tax, related to our oil and gas
reserves  and  unproved  properties.  The  impairment  of oil and gas assets was

<PAGE>
                                       12



primarily  the result of the effect of  significantly  lower oil and natural gas
prices on both proved and unproved  oil and gas  properties.  At  September  30,
1999, our net book value of oil and gas, less related deferred income taxes, was
below the  calculated  ceiling.  As a result,  we were not  required to record a
reduction  of our  oil  and  gas  properties  under  the  full  cost  method  of
accounting.

NOTE 9. NET INCOME PER COMMON SHARE

     In 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards No. 128,  "Earnings per Share" ("FAS 128"). FAS
128 replaced the  calculation  of primary and fully  diluted  earnings per share
with basic and diluted  earnings per share.  Unlike primary  earnings per share,
basic earnings per share excludes any dilutive effects of options,  warrants and
convertible  securities and is computed by dividing  income  available to common
stockholders by the weighted average number of common shares outstanding for the
period.  Diluted  earnings  per share is computed  similarly  to the  previously
reported fully diluted earnings per share and reflects the assumed conversion of
all potentially dilutive securities.

<TABLE>
                                                   Three Months Ended       Nine Months Ended
                                                      September 30,           September 30,
                                                      1998       1999        1998       1999
                                                   ---------- ----------  ----------  --------
<S>                                                <C>        <C>         <C>         <C>

Basic EPS Computation:
     Numerator
     Net income                                   $  124,292  $  575,907  $  377,730  $  471,380
     Preferred stock dividends                       (90,000)   (146,175)   (173,000)   (462,887)
                                                  ----------  ----------  ----------  ----------
     Net income available to common Stockholders      34,292     429,732     204,730       8,493
                                                  ==========  ==========  ==========  ==========
   Denominator -
     Weighted average common shares outstanding   18,381,967  18,331,858  18,207,852  18,329,759
                                                  ----------  ----------  ----------  ----------
Basic EPS                                         $    0.002  $     .023  $    0.011  $    .0005
                                                  ==========  ==========  ==========  ==========
</TABLE>

<TABLE>

                                                  Three Months Ended       Nine Months Ended
                                                      September 30,           September 30,
                                                      1998       1999        1998       1999
                                                   ---------- ----------  ----------  --------
<S>                                                <C>        <C>         <C>         <C>

Diluted EPS Computation:
     Numerator
     Net income                                   $  124,292 $   575,907  $  377,730  $  471,380
     Preferred stock dividends                       (90,000)   (146,175)   (173,000)   (462,887)
                                                  ----------  ----------  ----------  ----------
     Net income available to common stockholders      34,292     429,732     204,730       8,493
                                                  ==========  ==========  ==========  ==========
   Denominator -
     Weighted average common shares outstanding   18,381,967  18,331,858  18,207,852  18,329,759
                Employee                             370,530     173,789     537,307     138,883
                Warrants                               3,548          --       6,341          --
                                                  ----------  ----------  ----------  ----------
                                                  18,756,045  18,505,647  18,751,500  18,468,642
                                                  ==========  ==========  ==========  ==========
Diluted EPS                                       $    0.002  $     .023  $    0.011  $    .0005
                                                  ==========  ==========  ==========  ==========
</TABLE>


     Convertible  preferred  stock  equivalents of 974,500 shares for the three-
and nine-month  periods ended September 30, 1999, that could potentially  dilute
basic earnings per share in the future,  was not included in the  computation of
diluted earnings per share for the periods presented because to do so would have
been antidilutive.

NOTE 10: RECENTLY ANNOUNCED ACCOUNTING PRONOUNCEMENTS

     In June 1998,  the FASB  issued  SFAS No. 133  "Accounting  for  Derivative
Instruments and Hedging  Activities" which establishes  standards for derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts, and for hedging activities.  It requires that an entity recognize all
derivatives  as either  assets or  liabilities  in the  statement  of  financial




<PAGE>
                                       13


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.  SFAS No.  133 is
required to be implemented  for the first quarter of the fiscal year ended 2000.
Early  adoption is permitted.  Recently,  the FASB  deferred the  implementation
requirements  of SFAS No. 133 for one year. We have not evaluated the effects of
implementing SFAS No. 133.



<PAGE>
                                       14


                                   SIGNATURES



     Pursuant to the  requirements  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


                                       BY:  /s/ THOMAS R. CAMBRIDGE
Date:  January 19, 2000                ----------------------------------------
                                       Thomas R. Cambridge
                                       Chairman of the Board of Directors
                                       and Chief Executive Officer



Date:   January 19, 2000               BY:  /s/ LARRY C. OLDHAM
                                       ----------------------------------------
                                       Larry C. Oldham,
                                       President ( Principal Financial Officer)