##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2008 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 000-13305
 PARALLEL PETROLEUM CORPORATION
  Delaware
    
    75-1971716State of other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)1004 N. Big Spring, Suite 400, 
Midland, Texas
    
    79701(Address of Principal Executive Offices)
    
    (Zip Code)
 (432) 684-3727
 Not Applicable
  þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ




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##### 



Page No.PART I FINANCIAL INFORMATIONITEM 1.
    
    FINANCIAL STATEMENTSReference is made to the succeeding pages for the following consolidated financial statements:   Consolidated Balance Sheets as of March 31, 2008 (unaudited) and December 31, 2007
    
    1   Unaudited Consolidated Statements of Operations for the three months ended March 31, 2008 and 2007
    
    2   Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007
    
    3   Notes to Consolidated Financial Statements
    
    4ITEM 2.
    
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    17ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    32ITEM 4.
    
    CONTROLS AND PROCEDURES
    
    35PART II OTHER INFORMATIONITEM 1.
    
    LEGAL PROCEEDINGS
    
    35ITEM 1A.
    
    RISK FACTORS
    
    37ITEM 6.
    
    EXHIBITS
    
    37SIGNATURESCertification of Principal Executive Officer Pursuant to Section 302Certification of Principal Financial Officer Pursuant to Section 302Certification of Principal Executive Officer Pursuant to Section 906Certification of Principal Financial Officer Pursuant to Section 906
  (i)




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##### Table of Contents



PART I.  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENT
 PARALLEL PETROLEUM CORPORATION
 
 Consolidated Balance Sheets  (dollars

in thousands)
 March 31,
    
    
    December 31,2008
    
    
    2007(unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    7,757
    
    
    $
    7,816Accounts receivable:Oil and natural gas sales
    
    
    28,149
    
    
    
    20,499Joint interest owners and other, net of allowance
for doubtful account of $50
    
    
    3,351
    
    
    
    2,460Affiliates and joint ventures
    
    
    3,401
    
    
    
    3,97034,901
    
    
    
    26,929Other current assets
    
    
    167
    
    
    
    600Deferred tax asset
    
    
    12,209
    
    
    
    10,293Total current assets
    
    
    55,034
    
    
    
    45,638Property and equipment, at cost:Oil and natural gas properties, full cost method (including
$101,746 and $86,402 not
subject to depletion)
    
    
    688,976
    
    
    
    648,576Other
    
    
    2,929
    
    
    
    2,877691,905
    
    
    
    651,453Less accumulated depreciation, depletion and amortization
    
    
    (154,752
    )
    
    
    (145,482
    )Net property and equipment
    
    
    537,153
    
    
    
    505,971Restricted cash
    
    
    79
    
    
    
    78Investment in pipelines and gathering system ventures
    
    
    8,701
    
    
    
    8,638Other assets, net of accumulated amortization of $1,565 and $1,425
    
    
    2,652
    
    
    
    2,768$
    603,619
    
    
    $
    563,093Liabilities and Stockholders EquityCurrent liabilities:Accounts payable and accrued liabilities
    
    $
    53,661
    
    
    $
    47,848Asset retirement obligations
    
    
    661
    
    
    
    598Derivative obligations
    
    
    35,912
    
    
    
    30,424Total current liabilities
    
    
    90,234
    
    
    
    78,870Revolving credit facility
    
    
    82,000
    
    
    
    60,000Senior notes (principal amount $150,000)
    
    
    145,505
    
    
    
    145,383Asset retirement obligations
    
    
    5,141
    
    
    
    4,339Derivative obligations
    
    
    21,159
    
    
    
    13,194Deferred tax liability
    
    
    26,163
    
    
    
    26,045Total long-term liabilities
    
    
    279,968
    
    
    
    248,961Commitments and contingenciesStockholders equity:Series A preferred stock  par value $0.10 per share, authorized
50,000 shares
    
    
    
    
    
    
    Common stock  par value $0.01 per share, authorized
60,000,000 shares,
issued and outstanding 41,320,215 and 41,252,644
    
    
    413
    
    
    
    412Additional paid-in capital
    
    
    197,351
    
    
    
    196,457Retained earnings
    
    
    35,653
    
    
    
    38,393Total stockholders equity
    
    
    233,417
    
    
    
    235,262$
    603,619
    
    
    $
    563,093
  (1)




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##### Table of Contents



PARALLEL PETROLEUM CORPORATION
 
 Consolidated Statements of Operations
 For three months ended March 31, 2008 and 2007
 (unaudited)
 (dollars in thousands, except per share data)
 2008
    
    
    2007Oil and natural gas revenues:Oil and natural gas sales
    
    $
    43,941
    
    
    $
    23,116Cost and expenses:Lease operating expense
    
    
    6,979
    
    
    
    4,399Production taxes
    
    
    2,289
    
    
    
    1,054General and administrative
    
    
    2,568
    
    
    
    2,665Depreciation, depletion and amortization
    
    
    9,352
    
    
    
    6,709Total costs and expenses
    
    
    21,188
    
    
    
    14,827Operating income
    
    
    22,753
    
    
    
    8,289Other income (expense), net:Loss on derivatives not classified as hedges
    
    
    (21,886
    )
    
    
    (4,435
    )Interest and other income
    
    
    33
    
    
    
    52Interest expense
    
    
    (5,518
    )
    
    
    (3,708
    )Other expense
    
    
    
    
    
    
    (36
    )Equity in gain (loss) of pipelines and gathering system ventures
    
    
    217
    
    
    
    (305
    )Total other income (expense), net
    
    
    (27,154
    )
    
    
    (8,432
    )Loss before income taxes
    
    
    (4,401
    )
    
    
    (143
    )Income tax benefit, deferred
    
    
    1,661
    
    
    
    47Net loss
    
    $
    (2,740
    )
    
    $
    (96
    )Net loss per common share:Basic
    
    $
    (0.07
    )
    
    $
    Diluted
    
    $
    (0.07
    )
    
    $
    Weighted
average common shares outstanding:Basic
    
    
    41,273
    
    
    
    37,547Diluted
    
    
    41,273
    
    
    
    37,547
  (2)




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PARALLEL PETROLEUM CORPORATION
 
 Consolidated Statements of Cash Flows
 Three Months Ended March 31, 2008 and 2007
 (unaudited)
 ( dollars in thousands)
 2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (2,740
    )
    
    $
    (96
    )Adjustments to reconcile net loss to net cash
provided by operating activities:Depreciation, depletion and amortization
    
    
    9,352
    
    
    
    6,709Accretion of asset retirement obligation
    
    
    83
    
    
    
    84Accretion of senior notes discount
    
    
    122
    
    
    
    Deferred income tax benefit
    
    
    (1,661
    )
    
    
    (47
    )Loss on derivatives not classified as hedges
    
    
    21,886
    
    
    
    4,435Stock option expense
    
    
    82
    
    
    
    92Equity in (gain) loss in pipelines and gathering system ventures
    
    
    (217
    )
    
    
    305Changes in assets and liabilities:Other assets, net
    
    
    116
    
    
    
    (12
    )Restricted cash
    
    
    (1
    )
    
    
    274Accounts receivable
    
    
    (7,972
    )
    
    
    4,537Other current assets
    
    
    282
    
    
    
    292Accounts payable and accrued liabilities
    
    
    6,194
    
    
    
    1,219Net cash provided by operating activities
    
    
    25,526
    
    
    
    17,792Cash flows from investing activities:Additions to oil and natural gas properties
    
    
    (39,718
    )
    
    
    (44,584
    )Proceeds from disposition of oil and natural gas properties
    
    
    100
    
    
    
    152Additions to other property and equipment
    
    
    (134
    )
    
    
    (32
    )Settlements of derivative instruments
    
    
    (8,282
    )
    
    
    (2,479
    )Net investment in pipelines and gathering system ventures
    
    
    154
    
    
    
    (1,659
    )Net cash used in investing activities
    
    
    (47,880
    )
    
    
    (48,602
    )Cash flows from financing activities:Borrowings from bank line of credit
    
    
    22,000
    
    
    
    39,000Deferred financing costs
    
    
    
    
    
    
    (175
    )Proceeds from exercise of stock options
    
    
    295
    
    
    
    Net cash provided by financing activities
    
    
    22,295
    
    
    
    38,825Net increase (decrease) in cash and cash equivalents
    
    
    (59
    )
    
    
    8,015Cash and cash equivalents at beginning of period
    
    
    7,816
    
    
    
    5,910Cash and cash equivalents at end of period
    
    $
    7,757
    
    
    $
    13,925Non-cash financing and investing activities:Oil and natural gas properties asset retirement obligation
    
    $
    782
    
    
    $
    (113
    )Non-cash exchange of oil and natural gas properties:Properties received in exchange
    
    $
    
    
    
    $
    6,463Properties delivered in exchange
    
    $
    
    
    
    $
    (5,495
    )Other transactions:Interest paid
    
    $
    9,076
    
    
    $
    3,875
  (3)




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PARALLEL PETROLEUM CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1. DESCRIPTION OF BUSINESS  NATURE OF OPERATIONS AND BASIS OF
PRESENTATION
   
    
    Permian Basin of west Texas and New Mexico;
    
    Fort Worth Basin of north Texas; and
    NOTE 2. STOCKHOLDERS EQUITY
 Options
 Share-Based Payment
  (4)




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($ in thousands)Second quarter 2008
    
    $
    57Third quarter 2008
    
    
    50Fourth quarter 2008
    
    
    392009
    
    
    932010
    
    
    29Total
    
    $
    268
   2007
    
    2005
    
    2001Expected volatility
    
    
    52.52
    %
    
    
    54.20
    %
    
    
    57.95
    %Expected dividends
    
    
    0.00
    
    
    
    0.00
    
    
    
    0.00Expected term (in years)
    
    
    6
    
    
    
    7
    
    
    
    8Risk-free rate
    
    
    4.89
    %
    
    
    4.20
    %
    
    
    5.05
    %
  WeightedAverageWeighted
    
    
    RemainingAverage
    
    
    Contractual
    
    
    AggregateOptions
    
    
    Exercise Price
    
    
    Term
    
    
    Intrinsic Value(in thousands)
    
    
    
    
    
    (years)
    
    
    (in thousands)Outstanding December 31, 2007
    
    
    558
    
    
    $
    7.03Granted
    
    
    
    
    
    $
    Exercised
    
    
    (68
    )
    
    $
    4.36Surrendered
    
    
    
    
    
    $
    Outstanding March 31, 2008
    
    
    490
    
    
    $
    7.40
    
    
    
    5.2
    
    
    $
    5,963Exercisable at March 31, 2008
    
    
    369
    
    
    $
    5.99
    
    
    
    1.1
    
    
    $
    5,007
 (5)




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##### Table of Contents



(in thousands)Intrinsic Value of Options Exercised Three Months Ended March 31, 2008
    
    $
    1,028Intrinsic Value of Options Exercised Three Months Ended March 31, 2007
    
    $
    Fair Market Value of Options Granted Three Months Ended March 31, 2008
    
    $
    Fair Market Value of Options Granted Three Months Ended March 31, 2007
    
    $
    218
  NOTE 3. CREDIT FACILITIES
  Revolving Credit Facility
    (6)




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##### Table of Contents



Senior Notes
   (7)




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##### Table of Contents



Interest Accrued
  NOTE 4. PROPERTY EXCHANGE
  NOTE 5. FULL COST METHOD OF ACCOUNTING
   NOTE 6. DERIVATIVE INSTRUMENTS
 General
    (8)




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##### Table of Contents



Adoption of SFAS No. 157
  Level 1:
    
    Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or liabilities. We consider
active markets as those in which transactions for the assets or liabilities occur in
sufficient frequency and volume to provide pricing information on an ongoing basis.Level 2:
    
    Quoted prices in markets that are not active, or inputs which are
observable, either directly or indirectly, for substantially the full term of the
asset or liability. This category includes those derivative instruments that we value
using observable market data. Substantially all of these inputs are observable in the
marketplace throughout the full term of the derivative instrument, can be derived
from observable data, or supported by observable levels at which transactions are
executed in the marketplace. Instruments in this category include non-exchange traded
derivatives such as over-the-counter commodity price swaps and interest rate swaps.Level 3:
    
    Measured based on prices or valuation models that require inputs that
are both significant to the fair value measurement and less observable from objective
sources (i.e., supported by little or no market activity). Our valuation models are
primarily industry-standard models that consider various inputs including: (a) quoted
forward prices for commodities, (b) time value, (c) volatility factors and (d)
current market and contractual prices for the underlying instruments, as well as
other relevant economic measures. Level 3 instruments primarily include derivative
instruments, such as commodity price collars. Although we review our counterpartys
valuation and assess the reasonableness of our prices and valuation techniques, we do
not have sufficient corroborating market evidence to support classifying these assets
and liabilities as Level 2.
  (9)




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##### Table of Contents



Quoted Prices inActive Marketsfor Identical
    
    
    Other Observable
    
    
    Unobservable
    
    
    Fair Value atAssets (Level 1)
    
    
    Inputs (Level 2)
    
    
    Inputs (Level 3)
    
    
    March 31, 2008Interest Swaps
    
    $
    
    
    
    $
    (4,076
    )
    
    $
    
    
    
    $
    (4,076
    )Oil Swaps
    
    $
    
    
    
    $
    (21,606
    )
    
    $
    
    
    
    $
    (21,606
    )Oil & Gas Collars
    
    $
    
    
    
    $
    
    
    
    $
    (31,389
    )
    
    $
    (31,389
    )$
    
    
    
    $
    (25,682
    )
    
    $
    (31,389
    )
    
    $
    (57,071
    )
   Derivative CollarsBalance as of January 1, 2008
    
    $
    (15,852
    )Total gains or (losses)
    
    $
    (16,746
    )Purchases, issuances and settlements
    
    $
    1,209Transfers in and/or out of level 3
    
    $
    Balance as of March 31, 2008
    
    $
    (31,389
    )Change in
unrealized gains (losses) included in earnings relating to derivativess still held as of March 31, 2008(1)
    
    $
    (15,537
    )
 
 (1)
    
    Gains and losses (realized and unrealized) included in earnings for the
three months ending March 31, 2008 are reported in Other Income on the
Consolidated Statement of Operations. Interest Rate Sensitivity
  (10)




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##### Table of Contents



Notional
    
    
    Weighted Average
    
    
    EstimatedPeriod of Time
    
    Amounts
    
    
    Fixed Interest Rates
    
    
    Fair Market Value($ in millions)
    
    
    
    
    
    
    ($ in thousands)April 1, 2008 thru December 31, 2008
    
    $
    100
    
    
    
    4.86
    %
    
    $
    (1,932
    )January 1, 2009 thru December 31, 2009
    
    $
    50
    
    
    
    5.06
    %
    
    
    (1,331
    )January 1, 2010 thru October 31, 2010
    
    $
    50
    
    
    
    5.15
    %
    
    
    (813
    )Total Fair Market Value
    
    
    
    
    
    
    
    
    
    $
    (4,076
    )
 Commodity Price Sensitivity
  Collars.
  EstimatedBarrles of
    
    NYMEX Oil Prices
    
    Fair MarketPeriod of Time
    
    Oil
    
    Floor
    
    Cap
    
    Value($ in thousands)April 1, 2008 thru December 31, 2008
    
    
    261,250
    
    
    $
    63.42
    
    
    $
    83.86
    
    
    
    
    $  (5,003)January 1, 2009 thru December 31, 2009
    
    
    620,500
    
    
    $
    63.53
    
    
    $
    80.21
    
    
    
    
    (12,808)January 1, 2010 thru October 31, 2010
    
    
    486,400
    
    
    $
    63.44
    
    
    $
    78.26
    
    
    
    
    (9,155)
 MMBtu of
    
    
    WAHA Gas PricesNatural Gas
    
    
    Floor
    
    
    CapApril 1, 2008 thru December 31, 2008
    
    
    2,750,000
    
    
    $
    7.38
    
    
    $
    9.28
    
    
    
    (2,622
    )January 1, 2009 thr December 31, 2009
    
    
    3,285,000
    
    
    $
    7.06
    
    
    $
    9.93
    
    
    
    (1,801
    )Total Fair Market Value
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (31,389
    )
 Commodity
Swaps.
 (11)




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##### Table of Contents



EstimatedNYMEX Oil
    
    
    Fair MarketPeriod of Time
    
    Barrels of Oil
    
    
    Swap Price
    
    
    Value($ in thousands)April 1, 2008 thru December 31, 2008
    
    
    330,000
    
    
    $
    33.37
    
    
    $
    (21,606
    )Total fair market value
    
    
    
    
    
    
    
    
    
    $
    (21,606
    )
 NOTE 7. NET LOSS PER COMMON SHARE
   Three Months Ended March 31,2008
    
    
    2007(in thousands, except per share data)Basic EPS Computation:Numerator-Net loss
    
    $
    (2,740
    )
    
    $
    (96
    )Denominator-Weighted average common shares outstanding
    
    
    41,273
    
    
    
    37,547Basic EPS:Net loss per share
    
    $
    (0.07
    )
    
    $
    Diluted EPS Computation:Numerator-Net loss
    
    $
    (2,740
    )
    
    $
    (96
    )Denominator -Weighted average common shares outstanding
    
    
    41,273
    
    
    
    37,547Employee stock options
    
    
    
    
    
    
    Warrants
    
    
    
    
    
    
    Weighted average common shares for diluted earnings
per share assuming conversion
    
    
    41,273
    
    
    
    37,547Diluted EPS:Net loss per share
    
    $
    (0.07
    )
    
    $
    
  (12)




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##### Table of Contents



NOTE 8. ASSET RETIREMENT OBLIGATIONS
  Three Months Ended March 31,2008
    
    
    2007($ in thousands)Beginning asset retirement obligation
    
    $
    4,93
    
    
    $
    5,063Additions related to new properties
    
    
    152
    
    
    
    18Revisions in estimated cash flows
    
    
    642
    
    
    
    (112
    )Deletions related to property disposals
    
    
    (12
    )
    
    
    (19
    )Accretion expense
    
    
    83
    
    
    
    84Ending asset retirement obligation
    
    $
    5,802
    
    
    $
    5,034
 NOTE 9. RECENTLY ANNOUNCED ACCOUNTING PRONOUNCEMENTS
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities, Including an Amendment of FASB Statement No. 115,
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statementsan amendment of ARB No. 51
 (13)




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##### Table of Contents



NOTE 10. INVESTMENT IN GAS GATHERING SYSTEM
     West Fork Pipeline Company II, L.P.
    
    
    23.25848
    %Hagerman Gas Gathering System
    
    
    76.50000
    %
   March 31,
    
    
    December 31,2008
    
    
    2007($ in thousands)West Fork Pipeline Company II, L.P.
    
    $
    318
    
    
    $
    312Hagerman Gas Gathering System
    
    
    8,383
    
    
    
    8,326$
    8,701
    
    
    $
    8,638
 (14)




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##### Table of Contents



Three Months Ended March 31,2008
    
    
    2007($ in thousands)West Fork Pipeline Company II, L.P.
    
    $
    (2
    )
    
    $
    3Hagerman Gas Gathering System
    
    
    219
    
    
    
    (308
    )$
    217
    
    
    $
    (305
    )
  March 31,
    
    
    December 31,2008
    
    
    2007($ in thousands)Balance
SheetCurrent assets
    
    $
    79
    
    
    $
    62Account receivables  affiliates
    
    
    703
    
    
    
    696Total current assets
    
    
    782
    
    
    
    758Plant and pipeline costs
    
    
    10,905
    
    
    
    10,917Total assets
    
    $
    11,687
    
    
    $
    11,675Current liabilities
    
    $
    50
    
    
    $
    50Accounts payable  affiliates
    
    
    449
    
    
    
    523Total current liabilities
    
    
    499
    
    
    
    573Partner capital
    
    
    11,188
    
    
    
    11,102Owners equity
    
    $
    11,687
    
    
    $
    11,675
 Three Months Ended March 31,2008
    
    
    2007($ in thousands)Income StatementRevenues
    
    $
    611
    
    
    $
    41Costs and expenses
    
    
    (320
    )
    
    
    (430
    )Net income (loss)
    
    $
    291
    
    
    $
    (389
    )
  (15)




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##### Table of Contents



NOTE 11. COMMITMENTS AND CONTINGENCIES
    th
    (16)




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##### Table of Contents



NOTE 12. SUBSEQUENT EVENTS
   
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
  OVERVIEW
 Strategy
 Conduct Exploitation Activities on Our Existing Assets.
 (17)




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##### Table of Contents



Accelerate Horizontal Drilling and Fracture Stimulation Activities in Gas Resource Plays.
 Use Advanced Technologies and Production Techniques.
 Acquire Long-Lived Properties with Enhancement Opportunities.
 Conduct Exploratory Activities.
  
    
    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
ventures or other similar arrangements on terms acceptable to us.
  (18)




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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;
    
    costs of capital; and
    
    effects of derivative contracts.
  
    
    cash flow from
operations;
    
    sales of our equity
and debt securities;
    
    bank borrowings;
and
    
    industry joint
ventures.
   (19)




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##### Table of Contents



Results of Operations
  
    
    reserve base;
    
    sources of production;
    
    product mix (gas versus oil volumes); and
    
    the prices we receive for our oil and natural gas production.
  Three Months Ended3/31/2008
    
    
    12/31/2007
    
    
    3/31/2007(in thousands, except
per unit sales price data)Production
Volumes:Oil (Bbls)
    
    
    247
    
    
    
    254
    
    
    
    273Natural gas (Mcf)
    
    
    2,662
    
    
    
    2,179
    
    
    
    1,521BOE (1)
    
    
    691
    
    
    
    617
    
    
    
    527BOE per day
    
    
    7.6
    
    
    
    6.7
    
    
    
    5.9Sales
Prices:Oil (per Bbl)
    
    $
    93.74
    
    
    $
    84.77
    
    
    $
    51.93Natural gas (per Mcf)
    
    $
    7.80
    
    
    $
    6.68
    
    
    $
    5.86BOE price
    
    $
    63.60
    
    
    $
    58.46
    
    
    $
    43.85Operating Revenues:Oil
    
    $
    23,169
    
    
    $
    21,529
    
    
    $
    14,211Natural gas
    
    
    20,772
    
    
    
    14,545
    
    
    
    8,905$
    43,941
    
    
    $
    36,074
    
    
    $
    23,116Operating Expenses:Lease operating expense
    
    $
    6,979
    
    
    $
    5,781
    
    
    $
    4,399Production taxes
    
    
    2,289
    
    
    
    1,848
    
    
    
    1,054General and administrative
    
    
    2,568
    
    
    
    2,678
    
    
    
    2,665Depreciation, depletion and amortization
    
    
    9,352
    
    
    
    8,435
    
    
    
    6,709$
    21,188
    
    
    $
    18,742
    
    
    $
    14,827Operating income
    
    $
    22,753
    
    
    $
    17,332
    
    
    $
    8,289
 
 (1)
    
    A BOE means one barrel of oil equivalent using the ratio of six Mcf of gas to one
barrel of oil. (20)




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##### Table of Contents



RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007:
  Oil and Gas Revenues
 Revenues
    
    
    Production2008
    
    
    2007
    
    
    2008
    
    
    2007Oil (Bbls)
    
    
    53
    %
    
    
    61
    %
    
    
    36
    %
    
    
    52
    %Natural gas (Mcf)
    
    
    47
    %
    
    
    39
    %
    
    
    64
    %
    
    
    48
    %Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
  Three Months Ended March 31,
    
    
    Increase
    
    
    % Increase2008
    
    
    2007
    
    
    (Decrease)
    
    
    (Decrease)(in thousands, except
per unit sales price data)Production
VolumesOil (Bbls)
    
    
    247
    
    
    
    273
    
    
    
    (26
    )
    
    
    (10
    )%Natural gas (Mcf)
    
    
    2,662
    
    
    
    1,521
    
    
    
    1,141
    
    
    
    75
    %BOE
    
    
    691
    
    
    
    527
    
    
    
    164
    
    
    
    31
    %Sales
PriceOil (per Bbl)
    
    $
    93.74
    
    
    $
    51.93
    
    
    $
    41.81
    
    
    
    81
    %Natural gas (per Mcf)
    
    $
    7.80
    
    
    $
    5.86
    
    
    $
    1.94
    
    
    
    33
    %BOE price
    
    $
    63.60
    
    
    $
    43.85
    
    
    $
    19.75
    
    
    
    45
    %Operating
RevenuesOil
    
    $
    23,169
    
    
    $
    14,211
    
    
    $
    8,958
    
    
    
    63
    %Natural gas
    
    
    20,772
    
    
    
    8,905
    
    
    
    11,867
    
    
    
    133
    %Total
    
    $
    43,941
    
    
    $
    23,116
    
    
    $
    20,825
    
    
    
    90
    %
 Oil revenues
  (21)




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##### Table of Contents



Natural gas revenues
  Cost and Expenses
 Three months ended March 31,
    
    
    Increase
    
    
    % Increase2008
    
    
    2007
    
    
    (Decrease)
    
    
    (Decrease)($ in thousands)Lease operating expense
    
    $
    6,979
    
    
    $
    4,399
    
    
    $
    2,580
    
    
    
    59
    %Production taxes
    
    
    2,289
    
    
    
    1,054
    
    
    
    1,235
    
    
    
    117
    %General and administrative
    
    
    2,568
    
    
    
    2,665
    
    
    
    (97
    )
    
    
    (4
    )%Depreciation, depletion and amortization
    
    
    9,352
    
    
    
    6,709
    
    
    
    2,643
    
    
    
    39
    %Total
    
    $
    21,188
    
    
    $
    14,827
    
    
    $
    6,361
    
    
    
    43
    %
 Lease operating expense
  Production taxes
  General and administrative
  (22)




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##### Table of Contents



Depreciation, depletion and amortization
  Other
income (expense)
 Three months ended March 31,
    
    
    Increase
    
    
    % Increase2008
    
    
    2007
    
    
    (Decrease)
    
    
    (Decrease)($ in thousands)Loss on derivatives not classified as hedges
    
    $
    (21,886
    )
    
    $
    (4,435
    )
    
    $
    (17,451
    )
    
    
    393
    %Interest and other income
    
    
    33
    
    
    
    52
    
    
    
    (19
    )
    
    
    (37
    )%Interest expense
    
    
    (5,518
    )
    
    
    (3,708
    )
    
    
    (1,810
    )
    
    
    49
    %Other expense
    
    
    
    
    
    
    (36
    )
    
    
    36
    
    
    
    (100
    )%Equity in gain (loss) of pipelines and
gathering system ventures
    
    
    217
    
    
    
    (305
    )
    
    
    522
    
    
    
    (171
    )%Total
    
    $
    (27,154
    )
    
    $
    (8,432
    )
    
    $
    (18,722
    )
    
    
    222
    %
 Loss on derivatives not classified as hedges
  Interest expense
  Equity in gain (loss) of pipelines and gathering system ventures
  (23)




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##### Table of Contents



Income taxes
  Basic and diluted net loss
  LIQUIDITY AND CAPITAL RESOURCES
       (24)




---



##### Table of Contents



Bank Borrowings
  Revolving Credit Facility
       (25)




---



##### Table of Contents



Senior Notes
   Interest Accrued
  Commodity Price Risk Management Transactions and Effects of Derivative Instruments
  (26)




---



##### Table of Contents



Contractual Obligations, Commitments and Off-Balance Sheet Arrangements
   Obligation Due in PeriodNine MonthsendingDecember 31,
    
    
    Years ended December 31,
    
    
    AfterContractual Cash Obligations
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    5 years
    
    
    Total($ in thousands)Revolving Credit Facility
(secured)(1)
    
    $
    3,951
    
    
    $
    5,258
    
    
    $
    86,379
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    95,588Senior Notes (unsecured)(2)
    
    
    7,688
    
    
    
    15,375
    
    
    
    15,375
    
    
    
    15,375
    
    
    
    15,375
    
    
    
    180,750
    
    
    
    249,938Office Lease (Dinero Plaza)
    
    
    150
    
    
    
    200
    
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    383Snyder Field Office(3)
    
    
    11
    
    
    
    14
    
    
    
    14
    
    
    
    14
    
    
    
    14
    
    
    
    521
    
    
    
    588Asset retirement obligations(4)
    
    
    58
    
    
    
    683
    
    
    
    130
    
    
    
    138
    
    
    
    4,793
    
    
    
    
    
    
    
    5,802Derivative Obligations
    
    
    31,163
    
    
    
    15,940
    
    
    
    9,968
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,071Total
    
    $
    43,021
    
    
    $
    37,470
    
    
    $
    111,899
    
    
    $
    15,527
    
    
    $
    20,182
    
    
    $
    181,271
    
    
    $
    409,370
 
 (1)
    
    Outstanding principal of $82.0 million due October 31, 2010 and estimated interest
obligation calculated using a weighted average interest rate at March 31, 2008 of 6.41%(2)
    
    Outstanding principal of $150.0 million due August 1, 2013 and the interest
obligation calculated at an interest rate of 10.25% (27)




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##### Table of Contents



(3)
    
    The Snyder office lease expires upon the cessation of production from the Diamond
M area wells. The lease cost for this office facility is billed to nonaffiliated third party
working interest owners under our joint operating agreements with these third parties.(4)
    
    Asset 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 and debt securities.
  
    
    our proved reserves;
    
    the volumes of oil and natural gas we produce from existing wells;
    
    the prices at which we sell oil and natural gas; and
    
    our ability to acquire, locate and produce new reserves.
  
    
    increased bank borrowings;
    
    additional sales of our debt or equity securities;
    
    sales of non-core properties;
    
    other forms of financing; or
    
    a combination of the above.
  Inflation
  Oil and Natural Gas Price Trends
  (28)




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##### Table of Contents



Production Trends
    Lease Operating Expense Trends
  Interest Expense Trends
  (29)




---



##### Table of Contents



Recent Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities, Including an Amendment of FASB Statement No. 115,
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statementsan amendment of ARB No. 51
  (30)




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##### Table of Contents



Critical Accounting Policies
  FORWARD-LOOKING STATEMENTS
 Cautionary Statement Regarding Forward-Looking Statements
  
    
    our future financial and operating performance and results;
    
    our drilling plans and ability to secure drilling rigs to effectuate our plans;
    
    production volumes;
    
    our business strategy;
    
    market prices;
    
    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.
   (31)




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##### Table of Contents




    
    fluctuations in prices of oil and natural gas;
    
    dependent on key personnel;
    
    reliance on technological development and technology development programs;
    
    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;
    
    general economic conditions;
    
    governmental regulations and liability for environmental matters;
    
    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 March 31, 2008
  (32)




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##### Table of Contents



2012 and2008
    
    2009
    
    2010
    
    2011
    
    after
    
    Total($ in thousands, except interest rates)Revolving Credit Facility (secured)
    
    $
    
    
    
    $
    
    
    
    $
    82,000
    
    
    $
    
    
    
    $
    
    
    
    $
    82,000Weighted average interest rate
    
    
    6.41
    %
    
    
    6.41
    %
    
    
    6.41
    %
    
    
    
    
    
    
    Senior notes
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    150,000
    
    
    $
    150,000Average interest rate
    
    
    10.25
    %
    
    
    10.25
    %
    
    
    10.25
    %
    
    
    10.25
    %
    
    
    10.25
    %
     Notional
    
    
    Weighted Average
    
    
    EstimatedPeriod of Time
    
    Amounts
    
    
    Fixed Interest Rates
    
    
    Fair Market Value($ in millions)
    
    
    
    
    
    
    ($ in thousands)April 1, 2008 thru December 31, 2008
    
    $
    100
    
    
    
    4.86
    %
    
    $
    (1,932
    )January 1, 2009 thru December 31, 2009
    
    $
    50
    
    
    
    5.06
    %
    
    
    (1,331
    )January 1, 2010 thru October 31, 2010
    
    $
    50
    
    
    
    5.15
    %
    
    
    (813
    )Total Fair Market Value
    
    
    
    
    
    
    
    
    
    $
    (4,076
    )
 Commodity Price Sensitivity as of March 31, 2008
  (33)




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##### Table of Contents



Collars.
  EstimatedBarrles of
    
    NYMEX Oil Prices
    
    Fair MarketPeriod of Time
    
    Oil
    
    Floor
    
    Cap
    
    Value($ in thousands)April 1, 2008 thru December 31, 2008
    
    
    261,250
    
    
    $
    63.42
    
    
    $
    83.86
    
    
    $
    (5,003
    )January 1, 2009 thru December 31, 2009
    
    
    620,500
    
    
    $
    63.53
    
    
    $
    80.21
    
    
    
    (12,808
    )January 1, 2010 thru October 31, 2010
    
    
    486,400
    
    
    $
    63.44
    
    
    $
    78.26
    
    
    
    (9,155
    )
 MMBtu of
    
    
    WAHA Gas PricesNatural Gas
    
    
    Floor
    
    
    CapApril 1, 2008 thru December 31, 2008
    
    
    2,750,000
    
    
    $
    7.38
    
    
    $
    9.28
    
    
    
    (2,622
    )January
1, 2009 thru December 31, 2009
    
    
    3,285,000
    
    
    $
    7.06
    
    
    $
    9.93
    
    
    
    (1,801
    )Total Fair Market Value
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (31,389
    )
 (34)




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##### Table of Contents



Commodity Swaps.
  EstimatedNYMEX Oil
    
    
    Fair MarketPeriod of Time
    
    Barrels of Oil
    
    
    Swap Price
    
    
    Value($ in thousands)April 1, 2008 thru December 31, 2008
    
    
    330,000
    
    
    $
    33.37
    
    
    $
    (21,606
    )Total fair market value
    
    
    
    
    
    
    
    
    
    $
    (21,606
    )
 
 ITEM 4. CONTROLS AND PROCEDURES
   
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
   (35)




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##### Table of Contents



th
    (36)




---



##### Table of Contents



ITEM 1A. RISK FACTORS
  
 ITEM 6. EXHIBITS
 (a)
    
    ExhibitsThe following exhibits are filed herewith or incorporated by reference, as indicated:
 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 10.1 of the Registrants Current
Report on Form 8-K filed on November 30, 2007)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 Designations, 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 1 of Form 8-A of the
Registrant filed with the Securities and Exchange Commission on October 10, 2000)
 (37)




---



##### Table of Contents



No.
    
    Description of Exhibit4.4
    
    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)4.5
    
    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)4.6
    
    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)4.7
    
    Purchase Warrant Agreement, dated as of October 1, 1980, between the Registrant and American
Stock Transfer, Inc. (Incorporated by reference to Exhibit 4.7 of Form 10-K of the Registrant
for the fiscal year ended December 31, 2006)4.8
    
    First Amendment to Warrant Agreement, dated as of February 22, 2007, among the Registrant,
Computershare Shareholder Services, Inc. and Computershare Trust Company, N.A. (Incorporated
by reference to Exhibit 4.8 of Form 10-K of the Registrant for the fiscal year ended December
31, 2006)4.9
    
    Form of Rule 144A 101/4% Senior Note due 2014 (Incorporated by reference to Exhibit 4.2 to the
Registrants Current Report on Form 8-K filed on August 1, 2007)4.10
    
    Form of IAI 101/4% Senior Note due 2014 (Incorporated by reference to Exhibit 4.3 to the
Registrants Current Report on Form 8-K filed on August 1, 2007)4.11
    
    Form of Regulation S 101/4% Senior Note due 2014 (Incorporated by reference to Exhibit 4.4 to
the Registrants Current Report on Form 8-K filed on August 1, 2007)4.12
    
    Indenture, dated as of July 31, 2007, among the Registrant as Issuer and Wells Fargo Bank,
National Association as Trustee (Incorporated by reference to Exhibit 4.1 to the Registrants
Current Report on Form 8-K filed on August 1, 2007)4.13
    
    Registration Rights Agreement, dated as of July 31, 2007, by and among the Registrant,
Jefferies & Company, Inc., Merrill Lynch, Pierce, Fenner and Smith Incorporated and BNP
Paribas Securities Corp. (Incorporated by reference to Exhibit 10.2 to the Registrants
Current Report on Form 8-K filed on August 1, 2007)4.14
    
    Purchase Agreement, dated as of July 26, 2007, by and among the Registrant, Jefferies &
Company, Inc., Merrill Lynch, Pierce, Fenner and Smith Incorporated and BNP Paribas Securities
Corp. (Incorporated by reference to Exhibit 4.2 to the Registrants Current Report on Form 8-K
filed on August 1, 2007)4.15
    
    Form of 101/4% Unrestricted Senior Note due 2014 (Incorporated by reference to Exhibit 4.13 of
Form S-4 of the Registrant, Registration No. 333-148465)Executive Compensation Plans and Arrangements (Exhibit No.s 10.1 through 10.7):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)
 (38)




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##### Table of Contents



No.
    
    Description of Exhibit10.2
    
    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 Plan (Incorporated by reference to Exhibit 10.3 of the
Registrants Form 10-Q of the Registrant for the fiscal quarter ended June 30, 2005)10.4
    
    1998 Stock Option Plan (Incorporated by reference to Exhibit 10.4 of Form 10-K of the
Registrant for the fiscal year ended December 31, 2006)10.5
    
    2001 Non-Employee Directors Stock Option Plan (Incorporated by reference to Exhibit 10.7 of
the Registrants Form 10-Q Report for the fiscal quarter ended March 31, 2004)10.6
    
    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)10.7
    
    Incentive and Retention Plan (Incorporated by reference to Exhibit 10.7 of Form 10-K of the
Registrant for the fiscal year ended December 31, 2006)10.8
    
    2008 Long-Term Incentive Plan
(Incorporated by reference to Exhibit 10.1 of the
Registrants Form 8-K Report dated March 27, 2008)10.9
    
    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)10.10
    
    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)10.11
    
    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)10.12
    
    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)10.13
    
    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)10.14
    
    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)
 (39)




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##### Table of Contents



No.
    
    Description of Exhibit10.15
    
    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)10.16
    
    Third Amendment to Second Amended and Restated Credit Agreement (Incorporated by reference
to Exhibit 10.1 of the Registrants Form 8-K Report dated October 4, 2005 and filed with the
Securities and Exchange Commission on October 20, 2005)10.17
    
    Purchase and Sale Agreement, dated as of October 14, 2005, among Parallel, L.P., Lynx
Production Company, Inc., Elton Resources, Inc., Cascade Energy Corporation, Chelsea Energy,
Inc., William P. Sutter, Trustee, William P. Sutter Trust, J. Leroy Bell, E. L. Brahaney,
Brent Beck, Cavic Interests, LLC and Stanley Talbott (Incorporated by reference to Exhibit
10.2 of the Registrants Form 8-K Report dated October 14, 2005 and filed with the Securities
and Exchange Commission on October 20, 2005)10.18
    
    Ancillary Agreement to Purchase and Sale Agreement, dated October 14, 2005, between
Parallel, L.P. and Lynx Production Company, Inc. (Incorporated by reference to Exhibit 10.3 of
the Registrants Form 8-K Report dated October 14, 2005 and filed with the Securities and
Exchange Commission on October 20, 2005)10.19
    
    Guarantee of Parallel, L.P., dated October 13, 2004 (Incorporated by reference to Exhibit
10.4 of the Registrants Form 8-K Report dated October 14, 2005 and filed with the Securities
and Exchange Commission on October 20, 2005)10.20
    
    ISDA Master Agreement, dated as of October 13, 2005, between Parallel, L.P. and Citibank,
N.A. (Incorporated by reference to Exhibit 10.5 of the Registrants Form 8-K Report dated
October 14, 2005 and filed with the Securities and Exchange Commission on October 20, 2005)10.21
    
    Third Amended and Restated Credit Agreement, dated as of December 23, 2005, among Parallel
Petroleum Corporation, Parallel, L.P., Parallel, L.L.C. and Citibank Texas, N.A., BNP Paribas,
CitiBank F.S.B., Western National Bank, Compass Bank, Comerica Bank, Bank of Scotland and
Fortis Capital Corp. (Incorporated by reference to Exhibit No. 10.1 of the Registrants Form
8-K Report, dated December 23, 2005, as filed with the Securities and Exchange Commission on
December 30, 2005)10.22
    
    Second Lien Term Loan Agreement, dated November 15, 2005, among Parallel Petroleum
Corporation, Parallel, L.P., BNP Paribas and Citibank Texas, N.A. (Incorporated by reference
to Exhibit No. 10.4 of the Registrants Form 8-K Report, dated November 15, 2005, as filed
with the Securities and Exchange Commission on November 21, 2005)10.23
    
    Intercreditor and Subordination Agreement, dated November 15, 2005, among Citibank Texas,
N.A., BNP Paribas, Parallel Petroleum Corporation, Parallel, L.P. and Parallel, L.L.C.
(Incorporated by reference to Exhibit No. 10.5 of the Registrants Form 8-K Report, dated
November 15, 2005, as filed with the Securities and Exchange Commission on November 21, 2005)
 (40)




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##### Table of Contents



No.
    
    Description of Exhibit10.24
    
    Guaranty, dated as of December 23, 2005, made by Parallel, L.L.C. to and in favor of
Citibank Texas, N.A. (Incorporated by reference to Exhibit 10.23 of Form 10-K of the
Registrant for the fiscal year ended December 31, 2006)10.25
    
    Third Amended and Restated Pledge Agreement, dated as of December 23, 2005, between
Parallel, L.L.C. and Citibank Texas, N.A. (Incorporated by reference to Exhibit 10.24 of Form
10-K of the Registrant for the fiscal year ended December 31, 2006)10.26
    
    Second Lien Guarantee and Collateral Agreement, dated as of November 15, 2005, made by
Parallel Petroleum Corporation and Parallel, L.P. to and in favor of BNP Paribas (Incorporated
by reference to Exhibit 10.25 of Form 10-K of the Registrant for the fiscal year ended
December 31, 2006)10.27
    
    Third Amendment to Third Amended and Restated Credit Agreement, dated as of July 31, 2007,
among the Registrant, Citibank, N.A., BNP Paribas, Western National Bank, Compass Bank,
Comerica Bank, Bank of Scotland, and Fortis Capital Corp. (Incorporated by reference to
Exhibit 10.3 of the Registrants Current Report on Form 8-K filed on August 1, 2007)10.28
    
    Fourth Amendment to Third Amended and Restated Credit Agreement, dated as of November 30,
2007, among the Registrant, Citibank, N.A., BNP Paribas, Western National Bank, Compass Bank,
Comerica Bank, Bank of Scotland, and Fortis Capital Corp. (Incorporated by reference to
Exhibit 10.27 of Form S-4 of the Registrant, Registration No. 333-148465)10.29
    
    Hagerman Gas Gathering System Joint Venture Agreement, dated as of January 16, 2007, among
the Registrant, Feagan Gathering Company and Capstone Oil and Gas
Company, L.P. (Incorporated by reference to Exhibit 10.28 of Form 10-K of the Registrant for the fiscal year ended December 31, 2007)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)*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. (41)




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##### Table of Contents



PARALLEL PETROLEUM CORPORATIONBY:   /s/ Larry C. OldhamDate: May 5, 2008
    Larry C. OldhamPresident and Chief Executive OfficerDate: May 5, 2008
    BY:  /s/ Steven D. FosterSteven D. Foster,Chief Financial Officer




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##### Table of Contents



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 10.1 of the
Registrants Current Report on Form 8-K filed on November 30, 2007)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 Designations, 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 1 of Form 8-A of the Registrant filed with the Securities and
Exchange Commission on October 10, 2000)4.4
    
    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)4.5
    
    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)4.6
    
    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)4.7
    
    Purchase Warrant Agreement, dated as of October 1, 1980, between the Registrant
and American Stock Transfer, Inc. (Incorporated by reference to Exhibit 4.7 of
Form 10-K of the Registrant for the fiscal year ended December 31, 2006)




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##### Table of Contents



No.
    
    Description of Exhibit4.8
    
    First Amendment to Warrant Agreement, dated as of February 22, 2007, among the
Registrant, Computershare Shareholder Services, Inc. and Computershare Trust
Company, N.A. (Incorporated by reference to Exhibit 4.8 of Form 10-K of the
Registrant for the fiscal year ended December 31, 2006)4.9
    
    Form of Rule 144A 101/4% Senior Note due 2014 (Incorporated by reference to
Exhibit 4.2 to the Registrants Current Report on Form 8-K filed on August 1,
2007)4.10
    
    Form of IAI 101/4% Senior Note due 2014 (Incorporated by reference to Exhibit 4.3
to the Registrants Current Report on Form 8-K filed on August 1, 2007)4.11
    
    Form of Regulation S 101/4% Senior Note due 2014 (Incorporated by reference to
Exhibit 4.4 to the Registrants Current Report on Form 8-K filed on August 1,
2007)4.12
    
    Indenture, dated as of July 31, 2007, among the Registrant as Issuer and Wells
Fargo Bank, National Association as Trustee (Incorporated by reference to
Exhibit 4.1 to the Registrants Current Report on Form 8-K filed on August 1,
2007)4.13
    
    Registration Rights Agreement, dated as of July 31, 2007, by and among the
Registrant, Jefferies & Company, Inc., Merrill Lynch, Pierce, Fenner and Smith
Incorporated and BNP Paribas Securities Corp. (Incorporated by reference to
Exhibit 10.2 to the Registrants Current Report on Form 8-K filed on August 1,
2007)4.14
    
    Purchase Agreement, dated as of July 26, 2007, by and among the Registrant,
Jefferies & Company, Inc., Merrill Lynch, Pierce, Fenner and Smith Incorporated
and BNP Paribas Securities Corp. (Incorporated by reference to Exhibit 4.2 to
the Registrants Current Report on Form 8-K filed on August 1, 2007)4.15
    
    Form of 101/4% Unrestricted Senior Note due 2014 (Incorporated by reference to
Exhibit 4.13 of Form S-4 of the Registrant, Registration No. 333-148465)Executive Compensation Plans and Arrangements (Exhibit No.s 10.1 through 10.7):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 Plan (Incorporated by reference to Exhibit
10.3 of the Registrants Form 10-Q of the Registrant for the fiscal quarter
ended June 30, 2005)10.4
    
    1998 Stock Option Plan (Incorporated by reference to Exhibit 10.4 of Form 10-K
of the Registrant for the fiscal year ended December 31, 2006)10.5
    
    2001 Non-Employee Directors Stock Option Plan (Incorporated by reference to
Exhibit 10.7 of the Registrants Form 10-Q Report for the fiscal quarter ended
March 31, 2004)10.6
    
    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)




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##### Table of Contents



No.
    
    Description of Exhibit10.7
    
    Incentive and Retention Plan (Incorporated by reference to Exhibit 10.7 of Form
10-K of the Registrant for the fiscal year ended December 31, 2006)10.8
    
    2008 Long-Term Incentive Plan
(Incorporated by reference to Exhibit 10.1 of the
Registrants Form 8-K Report dated March 27, 2008)10.9
    
    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)10.10
    
    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)10.11
    
    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)10.12
    
    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)10.13
    
    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)10.14
    
    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)10.15
    
    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)10.16
    
    Third Amendment to Second Amended and Restated Credit Agreement (Incorporated
by reference to Exhibit 10.1 of the Registrants Form 8-K Report dated October
4, 2005 and filed with the Securities and Exchange Commission on October 20,
2005)10.17
    
    Purchase and Sale Agreement, dated as of October 14, 2005, among Parallel,
L.P., Lynx Production Company, Inc., Elton Resources, Inc., Cascade Energy
Corporation, Chelsea Energy, Inc., William P. Sutter, Trustee, William P.
Sutter Trust, J. Leroy Bell, E. L. Brahaney, Brent Beck, Cavic Interests, LLC
and Stanley Talbott (Incorporated by reference to Exhibit 10.2 of the
Registrants Form 8-K Report dated October 14, 2005 and filed with the
Securities and Exchange Commission on October 20, 2005)




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##### Table of Contents



No.
    
    Description of Exhibit10.18
    
    Ancillary Agreement to Purchase and Sale Agreement, dated October 14, 2005,
between Parallel, L.P. and Lynx Production Company, Inc. (Incorporated by
reference to Exhibit 10.3 of the Registrants Form 8-K Report dated October 14,
2005 and filed with the Securities and Exchange Commission on October 20, 2005)10.19
    
    Guarantee of Parallel, L.P., dated October 13, 2004 (Incorporated by reference
to Exhibit 10.4 of the Registrants Form 8-K Report dated October 14, 2005 and
filed with the Securities and Exchange Commission on October 20, 2005)10.20
    
    ISDA Master Agreement, dated as of October 13, 2005, between Parallel, L.P. and
Citibank, N.A. (Incorporated by reference to Exhibit 10.5 of the Registrants
Form 8-K Report dated October 14, 2005 and filed with the Securities and
Exchange Commission on October 20, 2005)10.21
    
    Third Amended and Restated Credit Agreement, dated as of December 23, 2005,
among Parallel Petroleum Corporation, Parallel, L.P., Parallel, L.L.C. and
Citibank Texas, N.A., BNP Paribas, CitiBank F.S.B., Western National Bank,
Compass Bank, Comerica Bank, Bank of Scotland and Fortis Capital Corp.
(Incorporated by reference to Exhibit No. 10.1 of the Registrants Form 8-K
Report, dated December 23, 2005, as filed with the Securities and Exchange
Commission on December 30, 2005)10.22
    
    Second Lien Term Loan Agreement, dated November 15, 2005, among Parallel
Petroleum Corporation, Parallel, L.P., BNP Paribas and Citibank Texas, N.A.
(Incorporated by reference to Exhibit No. 10.4 of the Registrants Form 8-K
Report, dated November 15, 2005, as filed with the Securities and Exchange
Commission on November 21, 2005)10.23
    
    Intercreditor and Subordination Agreement, dated November 15, 2005, among
Citibank Texas, N.A., BNP Paribas, Parallel Petroleum Corporation, Parallel,
L.P. and Parallel, L.L.C. (Incorporated by reference to Exhibit No. 10.5 of the
Registrants Form 8-K Report, dated November 15, 2005, as filed with the
Securities and Exchange Commission on November 21, 2005)10.24
    
    Guaranty, dated as of December 23, 2005, made by Parallel, L.L.C. to and in
favor of Citibank Texas, N.A. (Incorporated by reference to Exhibit 10.23 of
Form 10-K of the Registrant for the fiscal year ended December 31, 2006)10.25
    
    Third Amended and Restated Pledge Agreement, dated as of December 23, 2005,
between Parallel, L.L.C. and Citibank Texas, N.A. (Incorporated by reference to
Exhibit 10.24 of Form 10-K of the Registrant for the fiscal year ended December
31, 2006)10.26
    
    Second Lien Guarantee and Collateral Agreement, dated as of November 15, 2005,
made by Parallel Petroleum Corporation and Parallel, L.P. to and in favor of
BNP Paribas (Incorporated by reference to Exhibit 10.25 of Form 10-K of the
Registrant for the fiscal year ended December 31, 2006)10.27
    
    Third Amendment to Third Amended and Restated Credit Agreement, dated as of
July 31, 2007, among the Registrant, Citibank, N.A., BNP Paribas, Western
National Bank, Compass Bank, Comerica Bank, Bank of Scotland, and Fortis
Capital Corp. (Incorporated by reference to Exhibit 10.3 of the Registrants
Current Report on Form 8-K filed on August 1, 2007)10.28
    
    Fourth Amendment to Third Amended and Restated Credit Agreement, dated as of
November 30, 2007, among the Registrant, Citibank, N.A., BNP Paribas, Western
National Bank, Compass Bank, Comerica Bank, Bank of Scotland, and Fortis
Capital Corp. (Incorporated by reference to Exhibit 10.27 of Form S-4 of the
Registrant, Registration No. 333-148465)




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##### Table of Contents



No.
    
    Description of Exhibit10.29
    
    Hagerman Gas Gathering System Joint Venture Agreement, dated as of January 16,
2007, among the Registrant, Feagan Gathering Company and Capstone Oil and Gas
Company, L.P. (Incorporated by reference to Exhibit 10.28 of Form 10-K of the Registrant for the fiscal year ended December 31, 2007)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)*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.