<PAGE> 1

                      SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D. C. 20549                           
 
                                   FORM 10-Q

                          ----------------------------
(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, 1997  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  ___

    The number of outstanding shares of  the issuer's common stock, $.01 par
value, was 17,824,358 shares as of October 1, 1997.

<PAGE> 2
                               TABLE OF CONTENTS                           

                        PART I. - FINANCIAL INFORMATION



ITEM 1.  FINANCIAL STATEMENTS

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

        -  Balance Sheets as of December 31, 1996 and September 30, 1997

        -  Statements of Operations for the three months ended September 30,
           1996 and 1997 and nine months ended September 30, 1996 and 1997

        -  Statements of Cash Flows for the nine months ended September 30,
           1996 and 1997

        -  Notes to Financial Statements

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

                         PART II. - OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

        /a/  Exhibits

             27.  Financial Data Schedule

	/b/  Reports on Form 8-K

             No reports were filed on Form 8-K during the quarterly period
             ended September 30, 1997.

<PAGE> 3

                        PARALLEL PETROLEUM CORPORATION

                                 BALANCE SHEET

<TABLE>
                                                                         September 30,
                                                        December 31,         1997                                                
ASSETS                                                      1996          (Unaudited)
------                                                  ------------      -----------
<S>                                                     <C>               <C>
Current assets:
   Cash and cash equivalents                             $    41,569      $    20,331   
   Accounts receivable:
     Oil and gas                                           2,888,400        1,799,994
     Other, net of allowance for doubtful accounts
       of $28,130 in 1996 and 1997                           127,837          348,732 
     Affiliate                                                24,991            4,992
                                                         -----------      -----------
                                                           3,041,228        2,153,718    
Other assets                                                   7,540          123,168
                                                         -----------      -----------

     Total current assets                                  3,090,337        2,297,217
                                                         -----------      -----------

Property and equipment, at cost:
   Oil and gas properties, full cost method               47,130,874       55,019,184
   Other                                                     380,207          428,159
                                                         -----------      -----------
                                                          47,511,081       55,447,343
Less accumulated depreciation and depletion               12,576,560       15,162,849
                                                         -----------      -----------
     Net property and equipment                           34,934,521       40,284,494
                                                         -----------      -----------
Other assets, net of accumulated amortization of 
   $33,263 in 1996 and $52,558 in 1997                        73,311           71,429
                                                         -----------      -----------
                                                         $38,098,169      $42,653,140
                                                         ===========      ===========
</TABLE>

<PAGE> 4

<TABLE>                                                                   September 30,
                                                        December 31,         1997
                                                            1996          (Unaudited)
                                                       --------------    --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S>                                                     <C>               <C>                                  
Current liabilities:
   Accounts payable and accrued liabilities:
     Trade                                               $ 2,735,639      $ 2,239,769       
     Affiliates                                                3,181            5,722                                   
                                                         -----------      -----------
     Total current liabilities                             2,738,820        2,245,491             
                                                         -----------      -----------
Long-term debt                                             8,521,391        8,302,610       
Deferred income taxes                                      2,119,823        3,349,138        

Stockholders' equity:
   Preferred stock - par value of $.10 per share, 
     authorized 40,000,000 shares, none issued                    --               --
   Common stock - par value of $.01 per share, 
     authorized 100,000,000 shares, issued and 
     outstanding 17,406,358 in 1996 and 17,824,358 
     in 1997                                                 174,063          178,242          
   Additional paid-in surplus                             21,189,442       22,727,146                          
   Retained earnings                                       3,354,630        5,850,513
                                                         -----------      -----------
    Total stockholders' equity                            24,718,135       28,755,901

Contingencies
                                                          -----------     -----------
                                                          $38,098,169     $42,653,140
                                                          ===========     ===========

</TABLE>


*  The balance sheet as of December 31, 1996 has been derived from the 
Company's audited financial statements.  The accompanying notes are an 
integral part of these financial statements.

<PAGE> 5

                        PARALLEL PETROLEUM CORPORATION

                           STATEMENTS OF OPERATIONS

                Three Months Ended September 30, 1996 and 1997
                Nine months Ended September 30, 1996 and 1997

                                  (Unaudited)

<TABLE>                                            
                                                 Three Months          Nine months
                                               1996       1997       1996      1997 
                                           ---------- ---------- ---------- ----------
<S>                                        <C>        <C>        <C>        <C>    
Oil and gas revenues                       $3,974,208 $2,878,040 $9,693,448 $9,573,421
                                           ---------- ---------- ---------- ----------

Cost and expenses:
  Lease Operating expense                     803,503    713,319  1,902,193  2,253,102
  General and administrative                   74,506     74,375    204,822    217,546
  Public reporting, auditing and legal         54,603     48,750    181,350    203,492
  Depreciation, depletion and amortization  1,186,728    793,416  2,618,525  2,608,024
                                           ---------- ---------- ---------- ----------
                                            2,119,340  1,629,860  4,906,890  5,282,164
                                           ---------- ---------- ---------- ----------
     Operating income                       1,854,868  1,248,180  4,786,558  4,291,257
                                           ---------- ---------- ---------- ----------
Other income (expense), net:
  Interest income                                 733      3,629      1,208      8,232
  Other income                                  9,764      8,031     57,250     24,996
  Interest expense                           (338,763)  (216,041)  (932,437)  (592,958)
  Other expense                                  (243)    (1,545)      (613)    (6,329)
                                           ---------- ---------- ---------- ----------

     Total other expense, net                (328,509)  (205,926)  (874,592)  (566,059)
                                           ---------- ---------- ---------- ----------
Income before income taxes                  1,526,359  1,042,254  3,911,966  3,725,198

Income tax expense - deferred                 519,068    343,943  1,330,068  1,229,315
                                           ---------- ---------- ---------- ----------
     Net income                             1,007,291    698,311  2,581,898  2,495,883
                                           ========== ========== ========== ==========

Net income per common share                $      .06 $      .04 $      .17 $      .14
                                           ========== ========== ========== ==========    

Weighted average common share and common
  stock equivalents outstanding            15,695,106 18,367,957 15,579,175 18,480,817
                                           ========== ========== ========== ==========

</TABLE>

The accompanying notes are an integral part of these financial statements

<PAGE> 6
                                 
                        PARALLEL PETROLEUM CORPORATION

                           STATEMENTS OF CASH FLOWS                     

                 Nine months Ended September 30, 1996 and 1997   

                                  (Unaudited)

<TABLE>                                      
                                                            1996         1997  
                                                         -----------  -----------
<S>                                                      <C>          <C>
Cash flows from operating activities:
   Net income                                             $2,581,898  $2,495,883
   Adjustments to reconcile net income to net cash
     provided (used in) by operating activities:
        Depreciation, depletion and amortization           2,618,525   2,608,024
        Deferred income taxes                             1,330,068   1,229,315
        (Increase) decrease in other, net                    (48,628)      1,882

   Changes in assets and liabilities:
     Decrease (increase) in accounts receivable           (2,102,723)    887,510
     (Increase) decrease in prepaid expenses and other         4,763    (115,628) 
     (Decrease) increase in accounts payable and accrued   
        liabilities                                          161,900    (493,329) 
                                                          ----------   ---------- 
     Net cash provided (used in) by operating activities   4,545,803    6,613,657
                                                          ----------   ---------- 
Cash flows from investing activities:
   Additions of property and equipment                    (9,855,055) (13,620,405) 
   Proceeds from disposition of property and equipment       606,610    5,662,408
                                                          ----------   ---------- 
      Net cash used in investing activities               (9,248,445)  (7,957,997) 
                                                          ----------   ---------- 
Cash flows from financing activities:
   Proceeds from the issuance of long-term debt           19,607,261   11,215,000
   Payment of long-term debt                             (15,068,621) (11,433,781) 
   Proceeds from exercise of options and warrants             21,438       71,968
   Proceeds from common stock issuance - net                      --    1,469,915  
                                                          ----------   ---------- 
      Net cash provided by financing activities            4,560,078    1,323,102 
                                                          ----------   ---------- 
                 
Net increase (decrease) in cash and cash equivalents        (142,564)     (21,238)
Beginning cash and cash equivalents                          558,748       41,569 
                                                          ----------   ---------- 
Ending cash and cash equivalents                             416,184       20,331
                                                          ==========   ==========
  
</TABLE>


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

<PAGE> 7

                        PARALLEL PETROLEUM CORPORATION
                        NOTES TO FINANCIAL STATEMENTS


NOTE 1.  OPINION OF MANAGEMENT

     The financial information included herein 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.

    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 pursuant to the rules and
regulations of the Securities and Exchange Commission.  These financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Company's 1996 Annual Report and Form 10-K.

NOTE 2.  LONG TERM DEBT

    On July 1, 1996, the Company entered into a loan agreement with a bank to
refinance the outstanding indebtedness with its former lender and to provide
funds for working capital.  The loan agreement provides for a revolving
credit facility in the maximum amount of $30,000,000 with a current borrowing
base of $17,000,000 reduced by a monthly commitment reduction of $282,250
until April 1, 1998.  The borrowing base and the monthly commitment reduction
are subject to  redetermination every six months on April 1 and October 1 of
each year, or at such other times as the bank elects.  The loan agreement,
which matures in July 2001, is secured by substantially all of the Company's
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 on the note bears interest at the election
of the Company at a rate equal to (i) the bank's base lending rate or (ii)
the bank's Eurodollar rate plus a margin of  2.5%.  On September 30, 1997,
the interest rate in effect was the bank's base lending rate of 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, and (3) prohibiting
the payment of dividends.

NOTE 3.  COMMON STOCK OFFERING

    On December 18, 1996, the Company closed a public offering of 2,500,000
shares of its common stock at a price of $4.25 per share.  Proceeds received,
net of related expenses, were approximately $9,421,000.  In connection with
the common stock offering the underwriters were granted an over-allotment
option to purchase an additional  375,000 shares of common stock.  In
January 1997, the over-allotment option was exercised and an additional
375,000 shares of common stock were sold at a price of $4.25 per share.
Proceeds received by the Company, net of related expenses, were approximately
$1,470,000.  The net proceeds from the sale of the 2,875,000 shares of common
stock were used to reduce the indebtedness outstanding under the Company's
loan agreement.

<PAGE> 8

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS.

    The following discussion and analysis should be read in conjunction with
the Company's Financial Statements and the related notes thereto.

OVERVIEW

    The Company's long-term business strategy is to increase the Company's
reserve base by utilizing 3-D seismic technology to obtain exploratory
drilling returns on capital invested with developmental drilling risks.

    The Company intends to exploit its existing properties and acquire those
properties which it believes can be exploited by developing reserves not
previously produced. The Company undertakes projects only when it believes
the project has the potential for initial cash flow adequate to return the
project's capital expenditures within a short period of time, generally less
than 36 months. The Company also endeavors to maximize the present value of
its projects by accelerating production of its reserves consistent with
prudent reservoir management.

    As part of this business strategy, the Company has made acquisitions of
oil and gas producing properties in the Permian Basin of West Texas and has
discovered oil and gas reserves through the use of 3-D seismic technology in
the Horseshoe Atoll Reef Trend of West Texas and the Yegua/Frio Gas Trend
onshore the Gulf Coast of Texas. Capital utilized to acquire such reserves
has been provided primarily by secured bank financing, sales of the Company's
equity securities and cash flow from operations.

    The Company's operating performance is influenced by several factors, the
most significant of which are the prices received for its oil and gas and the
Company's production volumes. The world price for oil has overall influence
on the prices that the Company receives for its oil production. The prices
received for different grades of oil are based upon the world price for oil,
which is then adjusted based upon the particular grade. Typically, light oil
is sold at a premium, while heavy grades of crude are discounted. Gas prices
the Company receives are primarily influenced by seasonal demand, weather,
hurricane conditions in the Gulf of Mexico, availability of pipeline
transportation to end users and proximity of the Company's wells to major
transportation pipeline infrastructure and, to a lesser extent, world oil
prices. Additional factors influencing operating performance include
production expenses, overhead requirements, and cost of capital.

    The Company's oil and gas producing activities are accounted for using
the full cost method of accounting. Accordingly, the Company capitalizes all
costs incurred in connection with the acquisition of oil and gas properties
and the exploration for and development of oil and gas reserves. These costs
include lease acquisition costs, geological and geophysical expenditures,
costs of drilling both productive and non-productive wells, and overhead
expenses directly related to land acquisition and exploration and development
activities. Proceeds from the disposition of oil and gas properties are
accounted for as a reduction in capitalized costs, with no gain or loss
recognized unless such disposition involves a material change in reserves,
in which case the gain or loss is recognized.

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

    The Company's quarterly production and results of operations have varied
from quarter to quarter. Based on its scheduled drilling activities, the
Company does not currently anticipate that its production volumes in the
fourth quarter of 1997 will increase significantly compared to its production
volumes in the prior year, prior quarters, and normal operating considerations
and other factors could result in decreased production volumes in subsequent
quarters.
          
<PAGE> 9

RESULTS OF OPERATIONS

    Because of the Company's ever-changing reserve base and sources of
production, year to year or quarter to quarter comparisons of the Company's
results of operations can be difficult.  This situation is further complicated
by significant changes in product mix (oil vs. gas volumes) and related price
fluctuations for both oil and gas.  For these reasons, the table below
compares the Results of Operations on the basis of equivalent barrels of oil
("EBO") for the period indicated.  An EBO means one barrel of oil equivalent
using the ratio of six Mcf of gas to one barrel of oil.

<TABLE>
                                        THREE MONTHS ENDED         THREE MONTHS ENDED
                                  -----------------------------   ----------------------- 
                                   3-31-97   6-30-97   9-30-97     9-30-96       9-30-97
                                  --------- --------- ---------   ---------     --------- 
<S>                               <C>       <C>       <C>         <C>           <C>
Production and Prices:
  Oil (Bbls)                        50,554    48,154    35,217      61,203        35,217       
  Natural Gas (Mcf)                976,555   862,245   793,660   1,063,521       793,660 
  Equivalent Barrels of Oil (EBO)  213,313   191,861   167,494     238,457       167,494

  Oil Price (per Bbl)               $21.01    $19.03    $21.57      $21.34        $21.57
  Gas Price (per Mcf)               $ 3.05    $ 2.02     $2.67       $2.51          2.67
  Price per EBO                     $18.94    $13.84    $17.18      $16.67        $17.18
	
Results of Operations per EBO
                                       
Oil and gas revenues                $18.94    $13.84    $17.18      $16.67        $17.18
Costs and expenses:
  Lease operating expense             4.19      3.37      4.26        3.37          4.26
  General and administrative           .39       .31       .44         .31           .44
  Public reporting, auditing
     and legal                         .27       .51       .29         .23           .29
  Depreciation and depletion          4.50      4.45      4.74        4.98          4.74
                                    ------    ------    ------      ------        ------
Total costs and expenses              9.35      8.64      9.73        8.89          9.73
                                    ------    ------    ------      ------        ------
Operating income                      9.59      5.20      7.45        7.78          7.45
 
Interest expense, net                  .77      1.08      1.27        1.42          1.27
Other expense (income)                (.03)     (.03)     (.04)       (.04)         (.04)
                                    ------    ------    ------      ------        ------
Pretax income                         8.85      4.15      6.22        6.40          6.22
Income tax expense                    2.92      1.37      2.05        2.18          2.05
                                    ------    ------    ------      ------        ------

Net income                            5.93      2.78      4.17        4.22          4.17
                                    ------    ------    ------      ------       ------- 
Cash flow before working
   capital adjustments              $13.35    $ 8.60    $10.96      $11.38        $10.96
                                    ======    ======    ======      ======        ======
</TABLE>

                                                NINE MONTHS ENDED
                                       9-30-95      9-30-96      9-30-97
                                       -------      -------      -------
[S]                                    [C]          [C]          [C]
Production and Prices:
  Oil (Bbls)                           102,207      163,303      133,924
  Natural Gas (Mcf)                  1,137,857    2,672,242    2,632,460
  Equivalent Barrels of Oil (EBO)      291,850      608,677      572,667

  Oil Price (per Bbl)                   $17.17       $21.00       $20.45
  Gas Price (per Mcf)                    $1.46        $2.34        $2.60
  Price per EBO                         $11.72       $15.93       $16.72


<PAGE> 10
<TABLE>
                                                NINE MONTHS ENDED
                                       9-30-95      9-30-96      9-30-97
                                       -------      -------      -------
<S>                                     <C>         <C>          <C>  
Results of Operations per EBO

Oil and gas revenues                    $11.72       $15.93       $16.72
Costs and expenses:
  Lease operating expense                 3.65         3.13         3.93
  General and administrative               .56          .34          .38
  Public reporting, auditing
    and legal                              .52          .30          .36
  Depreciation and depletion              3.75         4.30         4.55
                                        ------       ------       ------
Total costs and expenses                  8.48         8.07         9.22
                                        ------       ------       ------
Operating income                          3.24         7.86         7.50
                                        ------       ------       ------
Interest expense, net                     2.65         1.53         1.03
Other expense (income)                    (.12)        (.09)        (.03)
                                        ------       ------       ------
Pretax income                              .71         6.42         6.50
Income tax expense                         .24         2.18         2.15
                                        ------       ------       ------
Net income                                 .47         4.24         4.35
                                        ------       ------       ------
Net cash flow before working
    capital                             $ 4.46       $10.72       $11.05
                                        ======       ======       ======
</TABLE>
                                                   
The following table sets forth for the periods indicated the percentage of
total revenues represented by each item reflected on the Company's statements
of operations.

<TABLE>
                                THREE MONTHS ENDED           NINE MONTHS ENDED
                           ------------------------------   --------------------
                             3-31-97   6-30-97   9-30-97      9-30-96    9-30-97
                           ---------- --------- ---------    ---------  ---------
<S>                         <C>        <C>       <C>          <C>        <C>
Oil and gas revenues          100.0%    100.0%    100.0%       100.0%     100.0%
Costs and expenses:
  Production costs             22.1      24.4      24.8         19.6       23.5
  General and administrative    2.1       2.2       2.6          2.1        2.2
  Public reporting, auditing
     and legal                  1.4       3.7       1.7          1.9        2.2
  Depreciation, depletion and
     amortization              23.8      32.1      27.6         27.0       27.2
                             ------    ------    ------       ------     ------
Total costs and expense        49.4      62.4      56.7         50.6       55.1
                             ------    ------    ------       ------     ------
Operating income               50.6      37.6      43.3         49.4       44.9
                             ------    ------    ------       ------     ------
Interest expense, net           4.1       7.8       7.4          9.6        6.2
Other expense (income)          (.2)      (.2)      (.3)         (.6)       (.2)
                             ------    ------    ------       ------     ------
Pretax income                  46.7      30.0      36.2         40.4       38.9
Income tax expense             15.4       9.9      11.9         13.7       12.8
                             ------    ------    ------       ------     ------
Net income                     31.3%     20.1%     24.3%        26.7%      26.1%
                             ======    ======    ======       ======     ======

</TABLE>

<PAGE> 11

THREE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996:

    Oil and Gas Revenues.  Oil and gas revenues decreased $1,096,168, or 28%,
to $2,878,040 for  the three months ended September  30, 1997, from $3,974,208
for the same period of 1996.  The decrease was primarily the result of a
70,963 EBO, or 30%, decrease to 167,494 EBO in the Company's oil and gas
production, offset by a slight increase of 3% in the average sales price per
EBO from $16.67 in the three months ended September 30, 1996 to $17.18 for
the same period of 1997.  Of the $1,096,168 decrease in revenues,
approximately 90% was attributable to decreased oil and gas production
volume offset by approximately a 10% increase in average sales prices.
Production volumes decreased 30% primarily due to normal decline associated
with new wells drilled during the first nine months of 1996 and wells
temporarily off production pending remedial work during the third quarter
1997.  Also, as a result of severe weather in the first half of fiscal 1997
the Company's drilling activities were curtailed which resulted in very
little new production volumes being added.

    Production Costs.  Production costs decreased $90,184, or 11%, to
$713,319 during the third three months  of 1997, from $803,503 for the same
period of 1996.  The 30% decrease in production of 70,963 EBO was primarily
responsible for the increase in production costs per EBO.   Average
production costs per EBO increased $.89, or 26%,  to $4.26 for the third
three months in 1997 compared to $3.37 for the same period in 1996.

    General and Administrative Expenses.  General and administrative expenses
decreased slightly to $74,375 for the third three months of 1997, from
$74,506 for the same period of 1996 primarily due to a decrease in general
corporate expense.  General and Administrative expenses were $.44 per EBO
sold in the third three months of 1997 compared to $.31 per EBO sold in the
third three months of 1996.  General and administrative costs are expected
to remain fairly stable with no material increases expected in any particular
category.

    Public Reporting, Auditing and Legal Expenses.  Public reporting,
auditing and legal expense decreased $5,853, or 11%, to $48,750 for the third
three months of 1997, from $54,603 for the same period of 1996.  Such
decrease is primarily due to decreased legal expense and shareholder
communication costs.

    Depreciation, Depletion and Amortization Expense.  Depreciation,
depletion and amortization expense decreased $393,312, or 33%, to $793,416
for the third three months of 1997, from $1,186,728 for the same period of
1996.  The decrease in depreciation, depletion and amortization as a
percentage of revenues is primarily a result of the slight increase in
prices realized per EBO and the aforementioned 30% decrease in EBO's sold in
1997 compared to 1996.

    Net Interest Expense.  Interest expense decreased $125,618, or 37%, to
$212,412 for the three months ended September 30, 1997, from $338,030 for
the same period of 1996, due principally to the decrease in the Company's
revolving line of credit. Such decrease resulted from the repayment of the
loan with the proceeds of the December 1996 stock offering and the Company's
cash management system, whereby it maintains minimum cash balances with any
excess cash applied against the line of credit.

    Income Tax Expense.  The Company had an effective tax rate of 33% for the
three months ended September 30, 1997.

    Net Income and Operating Cash Flow.  Net income decreased $308,980, or
31%, to $698,311 for the three months ended September 30, 1997, compared to
$1,007,291 for the three months ended September 30, 1996.  Operating cash
flow decreased $877,417, or 32%, to $1,835,670 for the three months ended
September 30, 1997 compared to $2,713,087 for the three months ended
September 30, 1996.  The net income and operating cash flow decreases are
primarily due to the 28% decrease in oil and gas revenues.

	
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996:

    Oil and Gas Revenues.  Oil and gas revenues decreased $120,027, or 1%, to
$9,573,421 for the nine months ended September 30, 1997, from $9,693,448 for
the same period of 1996.  The decrease was primarily the result of 36,010
EBO, or 6%, decrease to 572,667 EBO in the Company's oil and gas production,
and an increase of 5% in the average sales price per EBO from $15.93 in the
nine months ended September 30, 1996 to $16.72 for the same period of 1997.
Of the $120,027 decrease in revenues, approximately 55% was attributable to
decreased oil and gas production volume offset by approximately

<PAGE> 12

45% increase in average sales prices.  Production volumes decreased 6%
primarily due to normal decline associated with new wells drilled during the
first nine months of 1996 and wells temporarily off production pending
remedial work during the third quarter 1997.  Also, as a result of severe
weather in the first half of fiscal 1997 the Company's drilling activities
were curtailed which resulted in very little new production volumes being
added.

    Production Costs.  Production costs increased $350,909, or 18%, to
$2,253,102 for the first nine months of 1997, from $1,902,193 for the same
period of 1996.  The 6% decrease in production of 36,010 EBO was primarily
responsible for the increase in production costs per EBO.  The average
production costs per EBO increased $.80, or 26%,  to $3.93 for the first
nine months in 1997 compared to $3.13 for the same period in 1996 as a
result of increased day to day operating costs associated with production
from the Company's Yegua/Frio wells.

    General and Administrative Expenses.  General and administrative expenses
increased $12,724, or 6%, to $217,546 for the first nine months of 1997,
from $204,822 for the same period of 1996.  As a result of the Company's low
administrative cost structure and the decrease in revenues, the Company's
general and administrative expenses as a percentage of revenues increased
slightly from 2.1% for the nine months ended September 30, 1996 to 2.2% for
the same period in 1997.   General and administrative costs are expected to
remain fairly stable with no material increases expected in any particular
category.

    Public Reporting, Auditing and Legal Expenses.  Public reporting,
auditing and legal expense increased $22,142, or 12%, to $203,492 for the
first nine months of 1997, from $181,350 for the same period of 1996.  Such
increase is primarily due to increased legal expense, shareholder
communication costs and the costs associated with one new employee.

    Depreciation, Depletion and Amortization Expense.  Depreciation,
depletion and amortization expense decreased $10,501, or .4%, to $2,608,024
for the first nine months of 1997, from $2,618,525 for the same period of
1996.  The slight increase in depreciation, depletion and amortization as a
percentage of revenues is primarily a result of an increase in the DD&A Rate
to $4.55 in the nine months ended September 30, 1997 from $4.30 in 1996.
The increase in the DD&A Rate is attributable to increased exploration and
drilling activities.

    Net Interest Expense.  Interest expense decreased $346,503, or 37%, to
$584,726 for the nine months ended September 30, 1997, from $931,229 for the
same period of 1996, due principally to the decrease in the Company's
revolving line of credit.  Such decrease resulted from the repayment of the
loan with the proceeds of the December 1996 stock offering and the Company's
cash management system, whereby it maintains minimum cash balances with any
excess cash applied against the line of credit.

    Income Tax Expense.  The Company had an effective tax rate of 33% for
the nine months ended September 30, 1997.

    Net Income and Operating Cash Flow.  Net income decreased $86,015, or 3%,
to $2,495,883 for the nine months ended September 30, 1997, compared to
$2,581,898 for the nine months ended September 30, 1996.  Operating cash
flow decreased approximately $197,269, or 3%, to $6,333,222 for the nine
months ended September 30, 1997 compared to $6,530,491 for the nine months
ended September 30, 1996.  The net income and operating cash flow decreases
are primarily due to the 18% increase in production costs offset by the 37%
decrease in interest expense.

LIQUIDITY AND CAPITAL RESOURCES

    Working capital decreased $299,791 as of September 30, 1997 compared to
December 31, 1996.  Current assets exceeded current liabilities by $51,726 at
September 30, 1997 compared to $351,517 at December 31, 1996.  Current assets
decreased primarily due to a decrease of  $887,510 in accounts receivable
offset by an increase of $115,628 in prepaid expenses and a decrease in cash
of $21,238 .  The decrease in cash was primarily due to the Company's
investments in oil and gas drilling activities, payment of trade payables
and the Company's cash management system, whereby it maintains minimum cash
balances with any excess cash applied against its bank line of credit.  The
Company continues to employ 3-D seismic technology in conjunction with its
drilling activities, which are concentrated on certain gas prospects located
onshore the Texas Gulf Coast.

<PAGE> 13

    The Company incurred net property costs of $7,957,997 primarily for its
oil and gas property acquisition, development, and enhancement activities for
the nine months ended September 30, 1997.  Such costs were financed by the
utilization of the Company's cash provided by operations, proceeds from the
sale of certain properties, net cash provided by its line of credit and
proceeds from the issuance of common stock.

    Based on the Company's projected oil and gas revenues and related
expenses,  management believes that its internally generated cash flow,
coupled with proceeds from borrowings under the Company's lending facility,
will be sufficient to fund its current operations.  The Company continually
reviews and considers alternative methods of financing.

TREND AND PRICES

changes in oil and gas prices.  The markets for oil and gas have historically
been, and will continue to be, volatile.  Prices for oil and gas typically
fluctuate in response to relatively minor changes in supply and demand,
market uncertainty, seasonal, political and other factors beyond the control
of the Company.  The Company is unable to accurately predict domestic or
worldwide political events or the effects of such other factors on the prices
received by the Company for its oil and gas.  The Company historically has
not entered into transactions to hedge against changes in oil and gas prices,
but may elect to enter into hedging transactions in the future to protect
against fluctuations in oil and gas prices.

    During 1996, the average sales price received by the Company for its oil
was approximately $21.83 per barrel ("Bbl"), as compared to $17.26 in 1995,
while the average sales prices for the Company's gas was approximately $2.55
per thousand cubic feet ("Mcf") in 1996, as compared to $1.50 per Mcf in 1995.
At September 30, 1997, the average price received by the Company for its oil
production was approximately $20.45 per Bbl, while the average price received
by the Company, at that same date, for its gas production was approximately
$2.60 per Mcf.

<PAGE> 14

                          PART II - OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

        (a)  Exhibits

             27.  Financial Data Schedule

        (b)  Reports on Form 8-K

             No reports were filed on Form 8-K during the quarter ended
             September 30, 1997.

<PAGE> 15
                                  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



Date:  November 14, 1997                      /s/ THOMAS R. CAMBRIDGE
                                              ------------------------------    
                                              THOMAS R. CAMBRIDGE
                                              CHIEF EXECUTIVE OFFICER


Date:  November 14, 1997                      /s/ LARRY C. OLDHAM
                                              ------------------------------
                                              LARRY C. OLDHAM, 
                                              PRESIDENT AND
                                              PRINCIPAL FINANCIAL OFFICER
<PAGE> 16

                               INDEX TO EXHIBITS

Exhibit		
 No.                                          Description of Exhibit
------                                        --------------------------

*27                                           Financial Data Schedule




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

* Filed herewith