UNITED STATES

                       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 March 31, 2003 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
         incorporation or organization)              Identification Number)

     1004 N. Big Spring, Suite 400,
         Midland, Texas                                     79701
(Address of principal executive offices)                 (Zip Code)

                                 (432) 684-3727
              (Registrant's telephone number, including area code)

                                 NOT APPLICABLE
              (Former name, former address and former fiscal year,
                          if changed since last report)

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

                                   Yes X         No
                                      ---

     Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

                                    Yes          No X
                                                   ---

     At May 6, 2002,  there were 21,143,406  shares of the  Registrant's  Common
Stock, $0.01 par value, outstanding.


<PAGE>



                                      INDEX



                         PART I. - FINANCIAL INFORMATION
                                                                          Page
                                                                           No.
                                                                          ----
ITEM 1.  FINANCIAL STATEMENTS

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

     -    Consolidated Balance Sheets as of December 31, 2002
              and March 31, 2003(unaudited)                                 1

     -    Unaudited Consolidated Statements of Operations
              for the three months ended March 31, 2002 and 2003            2

     -    Unaudited Consolidated Statements of Cash Flows
               for the three months ended March 31, 2002 and 2003           3

     -    Unaudited Consolidated Statements of Comprehensive Income (Loss)  4

     -    Notes to Consolidated Financial Statements                        5

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS                               13

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
         MARKET RISK                                                       19

ITEM 4.  CONTROLS AND PROCEDURES                                           20


                          PART II. - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS                                                 21

ITEM 6.  EXHIBIT AND REPORTS ON FORM 8-K                                   21

SIGNATURES                                                                 25

CERTIFICATIONS                                                      26 and 27

                                      (i)

<PAGE>
                              PARALLEL PETROLEUM CORPORATION
                               CONSOLIDATED BALANCE SHEETS
<table>
                                                                                                 (audited)         (unaudited)
                                                                                                December 31,          March 31,
ASSETS                                                                                              2002                2003
                                                                                                -------------     --------------

                                                                                             <c>               <c>
Current assets:
  Cash and cash equivalents                                                                      $ 11,811,704       $  3,834,101
  Accounts receivable:
    Oil and gas                                                                                     3,071,315          5,045,575
    Others, net of allowance for doubtful account of  $12,681 in 2002 and 2003                        236,443            229,540
    Affiliate                                                                                           2,084                  -
                                                                                                -------------       ------------
                                                                                                    3,309,842          5,275,115
Income tax receivable                                                                                 832,590            832,590
Other assets                                                                                           78,675             55,125
Fair value of derivative instruments                                                                   21,884              2,784
                                                                                                -------------       ------------
         Total current assets                                                                      16,054,695          9,999,715
                                                                                                -------------       ------------
Property and equipment, at cost:
  Oil and gas properties, full cost method (Note 5)                                               146,679,503        152,274,021
  Other                                                                                             1,083,282          1,246,674
                                                                                                -------------       ------------
                                                                                                  147,762,785        153,520,695
  Less accumulated depreciation and depletion                                                     (62,074,559)       (63,746,018)
                                                                                                -------------       ------------

         Net property and equipment (Note 8)                                                       85,688,226         89,774,677
                                                                                                -------------       ------------
Other assets, net of accumulated amortization of $78,520  in 2002 and $43,996 in 2003                 608,410            585,626
                                                                                                -------------       ------------
                                                                                                 $102,351,331       $100,360,018
                                                                                                =============       ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued liabilities                                                       $  3,033,650       $  2,866,239
  Current maturities of long-term debt (Note 2)                                                     4,145,833          5,700,000
  Current maturity of derivative obligations                                                          335,829          1,286,654
                                                                                                -------------       ------------
                                                                                                    7,515,312          9,852,893
                                                                                                -------------       ------------
Long-term debt, excluding current maturities (Note 2)                                              45,604,167         37,050,000
Long-term asset retirement obligation (Note 8)                                                              -          1,727,165
Long-term maturity of derivative obligations (Note 6)                                                 103,745          1,188,086
Deferred tax liability                                                                              3,627,963          4,158,344

Stockholders' equity:
  Series A preferred stock -- par value $.10 per share
    (aggregate liquidation preference of $26)
    authorized 50,000 shares                                                                                -                  -
  Preferred stock -- $.60 cumulative convertible preferred
    stock -- par value of $.10 per share (aggregate liquidation
    preference of $10) authorized 10,000,000 shares, issued
    and outstanding 974,500 in 2002 and 2003                                                           97,450             97,450
  Common stock -- par value $.01 per share, authorized 60,000,000
    shares, issued and outstanding 21,143,406 in 2002 and 2003                                        211,434            211,434
  Additional paid-in capital                                                                       34,567,866         34,421,691
  Retained earnings                                                                                10,623,394         12,875,148
  Other comprehensive income (loss) net of tax (Note 6)                                                     -         (1,222,193)
                                                                                                -------------       ------------
Total stockholders' equity                                                                         45,500,144         46,383,530

Commitments and contingencies (Note 11)
                                                                                                -------------       ------------
                                                                                                 $102,351,331       $100,360,018
                                                                                                =============       ============
</Table>

*The balance sheet as of December 31, 2002 has been derived from Parallel's
audited financial statements.
The accompanying notes are an integral part of these financials.

                                       1
<PAGE>
                            PARALLEL PETROLEUM CORPORATION
                         CONSOLIDATED STATEMENTS OF OPERATIONS
                                      (Unaudited)
<table>

                                                                                            Three Months Ended March 31,
                                                                                           ------------------------------
                                                                                               2002             2003
                                                                                            ------------     -----------

                                                                                         <c>              <c>
Oil and gas revenues                                                                        $ 1,971,191      $ 8,492,792
                                                                                            ------------     -----------

Cost and expenses:
  Lease operating expense (Note 8)                                                              549,376        1,455,660
  General and administrative                                                                    349,764          801,768
  Depreciation, depletion and amortization                                                    1,354,630        2,065,691
                                                                                            -----------      -----------
    Total costs and expenses                                                                  2,253,770        4,323,119
                                                                                            -----------      -----------
    Operating income (loss)                                                                    (282,579)       4,169,673
                                                                                            -----------      -----------

Other income (expense), net:
  Equity in loss of First Permian, L.P.                                                        (316,293)               -
  Change in fair market value of derivatives (Note 6)                                          (339,858)        (202,457)
  Interest and other income                                                                      16,375           44,656
  Interest expense                                                                             (153,057)        (486,464)
  Other expense                                                                                (172,066)         (20,544)
                                                                                            -----------      -----------
    Total other expense, net                                                                   (964,899)        (664,809)
                                                                                            -----------      -----------
Income (loss) before income taxes                                                            (1,247,478)       3,504,864
Income tax (expense) benefit, net                                                               478,727       (1,191,654)
                                                                                            -----------      -----------

Net income (loss) before cumulative effect of change in accounting principle                   (768,751)       2,313,210
Cumulative effect on prior years of a change in accounting principle, less
  applicable income taxes of $31,659 (Note 8)                                                         -          (61,456)
                                                                                            -----------      -----------
    Net income (loss)                                                                          (768,751)       2,251,754
Cumulative preferred stock dividend                                                            (146,175)        (146,175)
                                                                                            -----------      -----------
    Net income (loss) available to common stockholders                                      $  (914,926)     $ 2,105,579
                                                                                            ===========      ===========

Net income (loss) per common share:
  Basic - before cumulative effect of a change in accounting principal                      $     (0.04)          $ 0.10
  Cumulative effect of a change in accounting principle, net of tax                                   -                -
                                                                                            -----------      -----------
  Basic - after cumulative effect of a change in acocounting principle                      $     (0.04)          $ 0.10
                                                                                            ===========      ===========

  Diluted - before cumulative effect of a change in accounting principle                    $     (0.04)          $ 0.09
  Cumulative effect of a change in accounting principle, net of tax                                   -                -
                                                                                            -----------      -----------
  Diluted - after cumulative effect of a change in accounting principle                     $     (0.04)          $ 0.09
                                                                                            ===========      ===========

Weighted average common share outstanding:
  Basic                                                                                      20,663,861       21,143,406
                                                                                            ===========      ===========
  Diluted                                                                                    20,663,861       24,038,049
                                                                                            ===========      ===========
</table>

The accompanying notes are an integral part of these financials.


                                       2
<PAGE>
                             PARALLEL PETROLEUM CORPORATION

                          CONSOLIDATED STATEMENTS OF CASH FLOWS

                                       (Unaudited)
<table>
                                                                                              Three Months Ended March 31,
                                                                                             ------------------------------
                                                                                                 2002             2003
                                                                                              ----------       -----------
 
                                                                                         <c>               <c>
Cash flows from operating activities:
  Net income (loss)                                                                           $ (768,751)     $  2,251,754

Adjustments to reconcile net income (loss) to net cash
  provided by operating activities:
    Depreciation and depletion                                                                 1,354,630         2,065,691
    Accretion expense                                                                                  -            33,835
    Equity in loss from investments in First Permian, L.P.                                       316,293                 -
    Change in fair value of derivative instruments                                               339,859           202,457
    Deferred income taxes                                                                       (478,727)        1,191,654
    Cumulative effect on prior years of a change in accounting principle, net of tax                   -            61,456
Changes in assets and liabilties:
  Other, net                                                                                     (11,865)           22,784
  Decrease (increase) in accounts receivables                                                    161,584        (1,965,273)
  Decrease in prepaid expenses and other                                                          95,571            23,550
  Decrease in accounts payable and accrued liabilities                                          (864,538)         (313,586)
  Purchase of derivative instruments                                                            (391,105)                -
                                                                                              ----------      ------------
    Net cash provided by (used in) operating activities                                         (247,049)        3,574,322
                                                                                              ----------      ------------

Cash flows from investing activities:
  Additions to property and equipment                                                         (2,785,855)       (4,572,325)
  Proceeds from disposition of property and equipment                                            365,380            20,400
                                                                                              ----------      ------------
    Net cash used in investing activities                                                     (2,420,475)       (4,551,925)
                                                                                              ----------      ------------

Cash flows from financing activities:
  Borrowings from bank line of credit                                                            565,589         3,173,625
  Payments on bank line of credit                                                                      -       (10,173,625)
                                                                                              ----------      ------------
    Net cash provided by (used in) financing activities                                          565,589        (7,000,000)
                                                                                              ----------      ------------

Net increase (decrease) in cash and cash equivalents                                          (2,101,935)       (7,977,603)

Beginning cash and cash equivalents                                                            3,351,044        11,811,704
                                                                                              ----------      ------------

Ending cash and cash equivalents                                                              $1,249,109      $  3,834,101
                                                                                              ==========      ============

Non-cash financing and investing activities:
  Oil and gas properties - FASB 143                                                                    -      $  1,205,985
  Accrued preferred stock dividend                                                             $ 146,175      $    146,175

</table>

The accompany notes are an integral part of these financials.

                                       3
<PAGE>
                 PARALLEL PETROLEUM CORPORATION

                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

                          (unaudited)

<table>
                                                                         THREE MONTHS ENDED MARCH 31,
                                                                      ----------------------------------
                                                                          2002                  2003
                                                                      ------------           -----------

                                                                   <c>                    <c>
Net income (loss)                                                     $  (768,751)           $ 2,251,754

Oil and natural gas derivatives adjustments, net of tax                         -             (1,222,193)
                                                                      -----------            -----------

    Comprehensive income (loss), net of tax                           $  (768,751)           $ 1,029,561
                                                                      ===========            ===========
</table>





The accompanying notes are an integral part of these financials.

                                       4

<PAGE>

                        PARALLEL PETROLEUM CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

     The financial information included herein, except the balance sheet as of
December 31, 2002, is unaudited. However, such information includes all
adjustments (consisting solely of normal recurring adjustments), which are, in
the opinion of management, necessary for a fair statement of the results of
operations for the interim periods. The results of operations for the interim
period are not necessarily indicative of the results to be expected for an
entire year.

     Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in this Form 10-Q Report pursuant to certain
rules and regulations of the Securities and Exchange Commission. These financial
statements should be read with the financial statements and notes included in
Parallel's 2002 Form 10-K Report.

     Parallel accounts for stock-based compensation utilizing the intrinsic
value method prescribed by Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations. The following pro forma information, as required by Statement
of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" (SFAS 123") as amended by Statement of Financial Accounting
Standards No. 148 ("SFAS 148"), presents net income and earnings per share
information as if the stock options issued since May 2, 2002 were accounted for
using the fair value method. The fair value of stock options issued for each
year was estimated at the date of grant using the Black-Scholes option pricing
model. No options were granted during quarter ending March 31, 2003.

     The SFAS 123 pro forma information for the three months ended March 31,
2002 and 2003 is as follows:

<table>
                                                                    Three Months Ended
                                                                          March 31,
                                                                 --------------------------
                                                                    2002            2003
                                                                 -----------     ----------

                                                              <c>            <c>
Net income (loss), as reported                                   $  (768,751)   $ 2,251,754
Add:  Stock-based employee compensation expense
  included in net income (loss), net of tax                               -              -
Deduct:  Stock-based employee compensation expense
  determined under fair value based method (SFAS 123),
  net of tax                                                        (376,700)       (47,658)
                                                                 -----------    -----------
     Net income (loss), pro forma                                $(1,145,451)   $ 2,204,096
                                                                 ===========    ===========

Basic:
Net income (loss) per common share, as reported                  $     (0.04)   $      0.10
                                                                 ===========    ===========
Net income (loss) per common share, pro forma                    $     (0.06)   $      0.10
                                                                 ===========    ===========

Diluted:
Net income (loss) per common share, as reported                  $     (0.04)   $      0.09
                                                                 ===========    ===========
Net income (loss) per common share, pro forma                    $     (0.06)   $      0.09
                                                                 ===========    ===========
</table>

                                       5
<PAGE>


NOTE 2. LONG TERM DEBT

Long-term debt consists of the following at March 31, 2003:

<table>

                                                                             <c>
     Revolving Facility note payable to bank, at bank's base lending rate
     (4.5% at March 31, 2003)
                                                                                  $42,750,000
     Less: current maturities                                                       5,700,000
                                                                                  -----------

                                                                                  $37,050,000
                                                                                  ===========
</table>

Scheduled maturities of long-term debt at March 31, 2003 are as follows:

<table>
                        
                                                      <c>
                        2003                                                      $ 3,562,500
                        2004                                                        8,550,000
                        2005                                                        8,550,000
                        2006                                                        8,550,000
                        2007                                                        8,550,000
                        2008                                                        4,987,500
                                                                                  -----------

                                                                                  $42,750,000
                                                                                  ===========
</table>

     Revolving Credit Facility. On July 19, 2002, Parallel entered into a loan
agreement with First American Bank SSB to refinance its outstanding
indebtedness. Under the facility, Parallel may borrow the lesser of $100,000,000
or the "borrowing base" then in effect. The loan agreement was amended and
restated on December 20, 2002. The facility became syndicated with First
American Bank SSB as the Joint Lead Arranger and Administrative Agent, BNP
Paribas as Joint Lead Arranger and Syndication Agent, and Western National Bank
as a Lender. The borrowing base at March 31, 2003, was $43,000,000 which at that
date was collateralized with Parallel's oil and gas reserves. The total
outstanding principal amount of Parallel's bank indebtedness at March 31, 2003
was $42,750,000, including $250,000 reserved for our Letters of Credit thus
fully utilizing our borrowing base. Borrowings attributable to the oil and gas
reserves are subject to redetermination semi-annually, on or about May 1 and
November 1 of each year, beginning May 1, 2003. The bank may require a
redetermination of the borrowing base and monthly commitment reduction at any
time in its sole discretion. Monthly Commitment Reductions begin August 31, 2003
in an amount equal to the amount of the borrowing base on the day immediately
preceeding the date of each such Monthly Commitment Reduction divided by the
number of months then remaining prior to July 31, 2008. All indebtedness under
the new Revolving Facility matures December 20, 2006.

     The unpaid principal balance for the Revolving Facility bears interest at
the election of Parallel at a rate equal to (i) the bank's base lending rate, or
(ii) the libor rate plus a libor margin of

           2.75% per annum whenever the Borrowing Base Usage is equal to or
             greater than 75%;
           2.50% per annum whenever the Borrowing Base Usage is equal to or
             greater than 50% but less than 75%;
           2.25% per annum whenever the Borrowing Base Usage is less than 50%.


                                       6
<PAGE>

     However, the interest rate may never be less than 4.50%. Interest is due
and payable on the day which the related libor interest period ends.

     Parallel is required to pay a commitment fee of one-quarter of one percent
times the daily average of the unadvanced amount of the commitment. The
commitment fee is payable quarterly in arrears on the last day of each calendar
quarter beginning March 31, 2003.

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

          .    Maintaining certain financial requirements;
          .    Limitation on additional indebtedness;
          .    Prohibiting the payment of dividends on our common stock;
          .    Limitations on the disposition of assets;
          .    Prohibiting  liens  (other than in favor of the bank) to exist on
               any of our properties;
          .    Limitations  on  investments,   mergers,   forming  subsidiaries,
               affiliate transactions, changes in accounting methods, rental and
               lease payments and derivative transactions
          .    Limitations  on the purchase,  redemption or retirement of stock;
               and
          .    Limitations on hedging activities.

NOTE 3. PREFERRED STOCK

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

NOTE 4. INCOME TAX LIABILITY

     For the three months ended March 31, 2003, we recorded income tax expense
of $1,191,654 resulting in a net deferred tax liability of $4,158,344. The
income tax expense was largely due to Parallel generating taxable income in the
current period.

NOTE 5. FULL COST CEILING TEST

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


                                       7

<PAGE>
     At March 31, 2003 our net book value of oil and gas properties, less
related deferred income taxes, was below the calculated ceiling. As a result, we
were not required to record a reduction of our oil and gas properties under the
full cost method of accounting at that time.

     Under the full cost accounting method, all costs incurred in the
acquisition, exploration and development of oil and natural gas properties,
including a portion of our overhead, are capitalized. In the three month period
ended March 31, 2003 overhead costs capitalized were $263,607.

NOTE 6. DERIVATIVE INSTRUMENTS

     On May 24, 2002 we purchased put floors on volumes of 100,000 Mcf gas per
month for a total of 700,000 Mcf during the seven month period from April 2003
through October 2003 at a floor price of $3.00 per Mcf for a total consideration
of approximately $139,500. These derivatives are not held for trading purposes.

     A decrease in fair value of the put floors of $19,100 was recognized for
the three months ended March 31, 2003 in the Consolidated Statements of
Operations.

          The following table illustrates our put options.
<table>
                                                                                               Fair Value
                                                                 Floor                             at
             Period                 Commodity     Mcf Volume     Price     Cost of Floor     March 31, 2003
--------------------------------- ------------- --------------  -------- ----------------- --------------------

                               <c>             <c>           <c>      <c>               <c>
April 2003 thru October 2003       natural gas    700,000        $ 3.00      $ 139,500              $ 2,784


</table>

     For the year ended December 31, 2002, we used mark-to-market accounting for
our hedge contracts. As of January 1, 2003 Parallel adopted hedge accounting for
the costless collars, oil and gas swaps, and interest note swaps described
below. The purpose of the hedge is to provide a measure of stability in our oil
and gas prices and interest rate payments and to manage exposure to commodity
price risk under existing sales contracts. Parallel's objective is to lock in a
range of oil and gas prices and a fixed interest rate for certain notional
amounts. This allows Parallel to forecast cash flows within a predictable range.

     During the terms of the hedge, the quarterly change in the fair value of
the derivatives will be recorded in stockholders' equity as other comprehensive
income (loss) and then reclassified to earnings when the production is sold.
Ineffective portions of such hedges (changes in realized prices that do not
match the changes in the hedge price) are recognized in earnings as they occur.
While the hedge contract is open, the ineffective gain or loss may increase or
reverse until settlement of the contract. As of March 31, 2003 there was no
ineffective portion of the natural gas and interest rate hedges. On March 31,
2003 we recorded a charge of $183,357 to Other Income (expense) for the
ineffective portion of the crude oil hedges.

     As of the quarter ended March 31, 2003, Parallel has reversed $1,061,925
from other compensation income (loss) and charged to earnings. During the twelve
month period ended March 31, 2004, Parallel expects approximately $717,622 to be
reversed out of other comprehensive income (loss) and recorded to earnings.


                                       8

<PAGE>

     We are exposed to credit risk in the event of nonperformance by BNP Paribas
in its derivative instruments. However, we periodically assess its credit
worthiness to mitigate this credit risk.

Costless Collar

     Collars are created by purchasing puts to establish a floor price and then
selling a call which establishes a maximum amount the producer will receive for
the oil or gas hedged. Calls are sold to offset or reduce the premium paid for
buying the put. In January, 2003, we entered into a costless, seven-month
Houston ship channel gas collar. Under terms of the gas collar, we will receive
no less than $4.25 per MMBtu and no greater than $5.30 per MMBtu for the
seven-month period of April, 2003 through October, 2003. A majority of our
natural gas production is sold based on Houston ship channel prices. A recap for
the period of time, number of MMBtu's and average gas prices is as follows:

<table>
                                                         Houston Ship Channel
                                                              gas prices
                                                      ----------------------------
                                          MMBtu of
           Period of Time              Natural Gas       Floor           Cap
------------------------------------- --------------- ------------- --------------

                                   <c>             <c>           <c>
April 1, 2003 thru October 31, 2003       642,000        $ 4.25         $ 5.30

</table>

Swaps

     Generally, swaps are an agreement to buy or sell a specified commodity for
delivery in the future, but at an agreed fixed price. Swap transactions convert
a floating price into a fixed price. For any particular swap transaction, the
counterparty is required to make a payment to the hedge party if the reference
price for any settlement period is less than the swap price for such hedge, and
the hedge party is required to make a payment to the counterparty if the
reference price for any settlement period is greater than the swap price for
such hedge.

     In January and February, 2003, we entered into additional oil and gas swap
contracts with BNP Paribas. A recap for the period of time, number of MMBtu's,
number of barrels, and swap prices are as follows:

<table>

                                                                                           Houston Ship
                                             Barrels of     Nymex Oil        MMBtu of        Channel
              Period of Time                     Oil       Swap Prices     Natural Gas    Gas Swap Price
-------------------------------------------- ------------ ---------------  ------------- -----------------

                                           <c>         <c>              <c>            <c>
February 1, 2003 thru March 31, 2003            88,500       $ 33.00              -            $    -

March 1, 2003 thru March 31, 2003                    -       $     -        279,000            $ 5.45

April 1, 2003 thru October 31, 2003                  -       $     -        214,000            $ 4.87

April 1, 2003 thru October 31, 2003                  -       $     -        428,000            $ 4.83

April 1,2003 thru December 31, 2003            275,000       $ 24.58              -            $    -

January 1,2004 thru December 31, 2004          329,400       $ 23.19              -            $    -

January 1,2005 thru December 31, 2005          292,000       $ 22.77              -            $    -

January 1, 2006 thru December 20, 2006         265,500       $ 23.04              -            $    -

</table>

                                       9

<PAGE>

Interest Rate Swaps

     In January, 2003, we entered into a 45-month libor fixed interest rate swap
contract with BNP Paribas. We will receive a fixed interest rate, as noted on
the table below, for the 45-month period beginning March 31, 2003 through
December 20, 2006.

     Under our credit facility, we may elect an interest rate based upon the
agent lender's base lending rate, or the libor rate, plus a margin ranging from
2.25% to 2.75% per annum, depending on our borrowing base usage. The interest
rate we are required to pay, including the applicable margin, may never be less
than 4.50%.

     A recap for the period of time, notional amounts, libor fixed interest
rates, expected margin rates and expected fixed interest rates for the contract
are as follows:

<table>
                                                                        Libor          Expected       Expected
                                                    Notional            Fixed           Margin          Fixed
                Period of Time                    Amounts (1)     Interest Rates (2)  Rates (3)   Interest Rates (4)
----------------------------------------------- ----------------- ------------------- ----------- ------------------

                                             <c>               <c>                 <c>          <c>
March 31, 2003 thru December 31, 2003               $ 35,000,000        1.675%          2.750%         4.425%

December 31, 2003 thru December 31, 2004            $ 30,000,000        2.660%          2.500%         5.160%

December 31, 2004 thru December 31, 2005            $ 20,000,000        4.050%          2.250%         6.300%

December 31, 2005 thru December 20, 2006            $ 10,000,000        4.050%          2.250%         6.300%

</table>

          (1)  Based on the anticipated principal reductions under our credit
               facility.
          (2)  Parallel's swap contract with BNP Paribas.
          (3)  Based on the anticipated borrowing base usage under our credit
               facility.
          (4)  Total of the libor fixed interest rate plus the expected margin
               rate under our credit facility. Our loan agreement requires the
               interest rate to not be below 4.50%.


                                       10

<PAGE>


NOTE 7. NET INCOME PER COMMON SHARE

     Basic income per share is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted income per share reflects the assumed conversion of all
potentially dilutive securities.

<table>
                                                                                                   Three Months Ended
                                                                                                        March 31,
                                                                                             -------------------------------
                                                                                                 2002             2003
                                                                                             -------------    --------------

                                                                                          <c>              <c>
Basic EPS Computation:
  Numerator-
    Net income (loss) before cumulative effect of a change
      in accounting principle                                                                $   (768,751)    $   2,313,210
    Cumulative effect of a change in accounting principle, net of tax                                   -           (61,456)
                                                                                             ------------     -------------
                                                                                                 (768,751)        2,251,754
    Preferred stock dividend                                                                     (146,175)         (146,175)
                                                                                             ------------     -------------

      Net income (loss) available to common stockholders                                        $(914,926)    $   2,105,579
                                                                                             ============     =============

Denominator-
Weighted average common shares outstanding                                                     20,663,861        21,143,406
                                                                                             ============     =============

Basic EPS:
    Net income (loss) before cumulative effect of a change                                   $      (0.04)    $        0.10
      in accounting principle
    Cumulative effect of a change in accounting principle, net of tax                                   -                 -
                                                                                             ------------     -------------
       Net income (loss)                                                                     $      (0.04)    $        0.10
                                                                                             ============     =============

Diluted EPS Computation:
  Numerator-
    Net income (loss) before cumulative effect of a change                                   $   (768,751)    $   2,313,210
      in accounting principle
    Cumulative effect of a change in accounting principle, net of tax                                   -           (61,456)
                                                                                             ------------     -------------
                                                                                                 (768,751)        2,251,754
    Preferred stock dividend                                                                     (146,175)                -
                                                                                             ------------     -------------

    Net income available to common stockholders                                              $   (914,926)    $   2,251,754
                                                                                             ============     =============

Weighted average common shares outstanding                                                     20,663,861        21,143,406
Employee stock options                                                                                  -           110,399
Preferred stock                                                                                         -         2,784,244
                                                                                             ------------     -------------
  Weighted average common shares for diluted earnings (loss)
    per share assuming conversion                                                              20,663,861        24,038,049
                                                                                             ============     =============
Diluted EPS:
    Net income (loss) before cumulative effect of a change                                   $      (0.04)    $        0.09
      in accounting principle
    Cumulative effect of a change in accounting principle, net of tax                                   -                 -
                                                                                             ------------     -------------
      Net income (loss)                                                                      $      (0.04)     $       0.09
                                                                                             ============     =============
</table>

                                       11

<PAGE>


     Convertible preferred stock equivalent shares for the three-month period
ended March 31, 2002 that could potentially dilute basic earnings per share in
the future were not included in the computation of diluted earnings per share
because to do so would have been anti-dilutive.

NOTE 8: ASSET RETIREMENT OBLIGATIONS

     On January 1, 2003 Parallel adopted Statement of Financial Accounting
Standards No. 143, Accounting for Asset Retirement Obligations "SFAS 143".
Adoption of SFAS 143 is required for all companies with fiscal years beginning
after June 15, 2002. The new standard requires Parallel to recognize a liability
for the present value of all legal obligations associated with the retirement of
tangible long-lived assets and capitalize an equal amount as a cost of the asset
depreciating the additional cost through the unit-of-production method on the
life of the asset. Parallel recorded additional oil and gas property costs of
approximately $1,205,985, a reduction in accumulated depletion of $394,230, a
non current liability of $1,693,330 and an after tax charge of approximately
$61,456 for the cumulative effect on prior years for depreciation and accretion
expense on the liability related to expected abandonment costs of its oil and
natural gas properties. The accretion expense for the current quarter is
approximately $33,835 and recorded as a charge to lease operating expense with a
corresponding additional long-term liability.

     The following table summarizes Parallel's asset retirement obligation
transactions during the three months ended March 31, 2003.

<table>
                                                        Three Months Ended
                                                          March 31, 2003
                                                        -------------------

                                                  <c>
Asset retirement obligation January 1, 2003                    $ 1,693,330

Accretion expense                                                   33,835

                                                        -------------------
Ending asset retirement obligation                             $ 1,727,165
                                                        ===================

</table>

     Prior years pro forma were not shown since the change was not significant.

NOTE 9: RECENTLY ANNOUNCED ACCOUNTING PRONOUNCEMENTS

     SFAS No. 148, Accounting for Stock-Based Compensation-Transition and
Disclosure, which amends SFAS No. 123, Accounting for Stock-Based Compensation.
SFAS No. 148 provides alternative methods of transition for a voluntary change
to the fair value based method of accounting for stock-based employee
compensation. The statement also amends the disclosure requirements of SFAS No.
123 to require prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee compensation
and the effect of the method used on reported results. The statement is required
to be adopted for fiscal years ending after December 15, 2002.

     Parallel currently accounts for stock-based compensation in accordance with
APB Opinion No. 25 which allows Parallel to recognize compensation expense only
to the extent that the fair market value is greater than the option price.

                                       12
<PAGE>


     On April 22, 2003, the FASB announced its decision to require all companies
to expense the value of employee stock options. Companies will be required to
measure the cost according to the fair value of the options. The new guidelines
have not been released to measure the cost according to the fair value of the
options. Although the new guidelines have not been released, it is expected that
they will be finalized and become effective in 2004. When final rules are
announced, Parallel will assess the impact to our financial statements.

     FIN No. 45, Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others, FIN No. 45
requires that a liability be recorded in the guarantor's balance sheet upon
issuance of certain guarantees. Initial recognition and measurement of the
liability will be applied on a prospective basis to guarantees issued or
modified after December 31, 2002. FIN No. 45 also requires disclosures about
guarantees in financial statements for interim or annual periods ending after
December 15, 2002. Parallel does not expect the adoption of FIN No. 45 to have a
material impact on our consolidated financial statements.

     FIN No. 46, Consolidation of Variable Interest Entities, an Interpretation
of Accounting Research Bulletin No. 51. FIN No. 46 requires certain variable
interest entities to be consolidated by the primary beneficiary of the entity if
the equity investors in the entity do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without financial support from other parties.
Parallel does not expect the adoption of FIN No. 46 to have a material impact on
our consolidated financial statements.

NOTE 10. COMMITMENTS AND CONTINGENCIES

     At March 31, 2003, we were involved in one lawsuit incidental to our
business. In the opinion of management, the ultimate outcome of this lawsuit
will not have a material adverse effect on Parallel's financial position or
results of operations. We are not aware of any other threatened litigation. We
have not been a party to any bankruptcy, receivership, reorganization,
adjustment or similar proceeding.

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
our Financial Statements and the related notes.

OVERVIEW

Strategy

     Parallel's primary objective will be to increase the per share net asset
value of its common stock through increasing reserves, production, cash flow and
earnings. Parallel is shifting the balance of its investments from properties
having high rates of production in early years to properties with more
consistent production over a longer term. Parallel is reducing its drilling
risks by dedicating a smaller portion of its capital to high risk projects,
while reserving the majority of its available capital for exploitation and
development drilling opportunities. Obtaining positions in long-lived oil and
gas reserves will be given priority over properties that might provide more cash
flow in the early years of production, but which have shorter reserve lives.
Parallel will also reduce risk by emphasizing acquisition possibilities over
high risk exploration projects.

     During the latter part of 2002, we reduced the emphasis on high risk
exploration efforts and started focusing on established geologic trends where we
can utilize the engineering, operational, financial and technical expertise of
our entire staff. Although we anticipate participating in exploratory drilling
activities in the future, reducing financial, reservoir, drilling and geological
risks and diversifying

                                       13
<PAGE>

our property portfolio are important criteria in the execution of our business
plan. In summary, Parallel's new business plan will:

          .    focus on projects having less geological risk;
          .    entails less exploratory activity in the down dip Wilcox trend of
               our south Texas properties;
          .    emphasize exploitation and enhancement activities;
          .    focus on acquiring producing properties; and
          .    expand the scope of our operations by diversifying our
               exploratory and development efforts, both in and outside of our
               current areas of operation.

     Although the direction of Parallel's exploration and development activities
has shifted from high risk exploratory activities to lower risk development
opportunities, Parallel will continue its efforts, as it has in the past, to
maintain low general and administrative expenses relative to the size of its
overall operations, utilize advanced technologies, serve as operator in
appropriate circumstances, and reduce operating costs.

     The extent to which Parallel is able to implement and follow through with
its business plan will be influenced by:

          .    the prices it receives for the oil and gas it produces;

          .    the results of reprocessing and reinterpreting its 3-D seismic
               data;

          .    the results of its drilling activities;

          .    the costs of obtaining high quality field services;

          .    its ability to find and consummate acquisition opportunities; and

          .    its ability to negotiate and enter into work to earn
               arrangements, joint venture or other similar agreements on terms
               acceptable to Parallel.

     Significant changes in the prices Parallel receives for its oil and gas,
drilling results, or the occurrence of unanticipated events beyond Parallel's
control may cause it to defer or deviate from its business plan, including the
amounts it has budgeted for its activities.

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

                                       14

<PAGE>

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

          .    cash flow from operations,
          .    sales of our equity securities,
          .    bank borrowings, and
          .    industry joint ventures

     For the three months ended March 31, 2003, the sales price we received for
our crude oil production (excluding hedges) averaged $32.60 per barrel compared
with $26.66 per barrel for the three months ended December 31, 2002 and $21.20
per barrel for the three months ended March 31, 2002. The average sales price we
received for natural gas for the three months ended March 31, 2003 (excluding
hedges), was $5.82 per mcf compared with $4.17 per mcf for the three months
ended December 31, 2002 and $2.25 per mcf for the three months ended March 31,
2002.

     Our oil and gas producing activities are accounted for using the full cost
method of accounting. Under this method, we capitalize all costs incurred in
connection with the acquisition of oil and gas properties and the exploration
for and development of oil and gas reserves. See Note 5 to Financial Statements.
These costs include lease acquisition costs, geological and geophysical
expenditures, costs of drilling both productive and non-productive wells, and
overhead expenses directly related to land and property 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 the 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.

RESULTS OF OPERATIONS

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

          .    sources of production;
          .    product mix (oil vs. gas volumes); and
          .    the prices we receive for our oil and gas production.

                                       15

<PAGE>



     Year-to-year or other periodic comparisons of the results of our operations
can be difficult and may not accurately describe our condition. A BOE means one
barrel of oil equivalent using the ratio of six Mcf of gas to one barrel of oil.

<table>
                                                             ---------------------------------------------
                                                               12/31/2002      3/31/2002      3/31/2003
                                                              --------------  ------------- --------------

                                                           <c>             <c>            <c>
Production and prices:
  Oil (Bbls)                                                         39,071         30,161        153,578
  Natural gas (Mcf)                                                 853,074        590,650        781,751
  Equivalent barrels of oil (BOE)                                   181,250        128,603        283,870
  Equivalent barrels of oil (BOE) per day                             2,014          1,429          3,154

Prices:
  Bbls (unhedged)                                                   $ 26.66        $ 21.20        $ 32.60
  Bbls (hedged)                                                                                   $ 31.80
  Mcf (unhedged)                                                     $ 4.17         $ 2.25         $ 5.82
  Mcf (hedged)                                                                                     $ 4.62
  BOE (unhedged)                                                    $ 25.47        $ 15.33        $ 33.66
  BOE (hedged)                                                                                    $ 29.92

</table>

CRITICAL ACCOUNTING POLICIES AND PRACTICES

     Full Cost. Parallel accounts for its oil and natural gas exploration and
development activities using the full cost method of accounting. Under this
method, all costs incurred in the acquisition, exploration and development of
oil and natural gas properties are capitalized. Costs of nonproducing
properties, wells in process of being drilled and significant development
projects are excluded from depletion until such time as the related project is
developed and proved reserves are established or impairment is determined. At
the end of each quarter, the net capitalized costs of our oil and natural gas
properties is limited to the lower of unamortized cost or a ceiling.

     Provision for depletion of oil and gas properties, under the full cost
method, is calculated using the unit of production method based upon estimates
of proved oil and gas reserves with oil and gas production being converted to a
common unit of measure based upon their relative energy content. Investments in
unproved properties and major development projects are not amortized until
proved reserves associated with the projects can be determined or until
impairment occurs. The cost of any impaired property is transferred to the
balance of oil and gas properties being depleted.

     Our discounted present value of proved oil and natural gas reserves is a
major component of the ceiling calculation, and represents the component that
requires the most subjective judgments. Estimates of reserves are forecasts
based on engineering data, projected future rates of production and the timing
of future expenditures. The process of estimating oil and natural gas reserves
requires substantial judgment, resulting in imprecise determinations,
particularly for new discoveries. Different reserve engineers may make different
estimates of reserve quantities based on the same data. Our reserve estimates
are prepared by outside consultants.


                                       16

<PAGE>

     The passage of time provides more qualitative information regarding
estimates of reserves, and revisions are made to prior estimates to reflect
updated information. However, there can be no assurance that more significant
revisions will not be necessary in the future. If future significant revisions
are necessary that reduce previously estimated reserve quantities, it could
result in a full cost property write-down. In addition to the impact of these
estimates of proved reserves on calculation of the ceiling, estimates of proved
reserves are also a significant component of the calculation of depreciation,
depletion and amortization.

     While the quantities of proved reserves require substantial judgment, the
associated prices of oil and natural gas reserves that are included in the
discounted present value of the reserves do not require judgment. The ceiling
calculation dictates that prices and costs in effect as of the last day of the
period are held constant indefinitely. Because the ceiling calculation dictates
that we use prices in effect as of the last day of the applicable quarter, the
resulting value is not indicative of the true fair value of the reserves. Oil
and natural gas prices have historically been cyclical and, on any particular
day at the end of a quarter, can be either substantially higher or lower than
prices we actually receive in the long-term, which are a barometer for true fair
value.

     Impairment of Assets. Under the full cost accounting rules, the capitalized
costs of oil and gas properties may not exceed a "ceiling limit", which is based
on the present value of estimated future net revenues, net of income tax
effects, from proved reserves, discounted at 10%, plus the lower of cost or fair
market value of unproved properties. If the net capitalized costs of our oil and
natural gas properties exceed the ceiling, we are subject to a ceiling test
write-down to the extent of such excess. A ceiling test write-down is a non-cash
charge to earnings. It reduces earnings and impacts stockholders' equity in the
period of occurrence and results in lower depreciation, depletion and
amortization expense in future periods.

     The risk that we will be required to write down the carrying value of oil
and gas properties increases when oil and gas prices decline. If commodity
prices deteriorate, it is possible that we could incur an impairment in 2003.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002:

     Oil and Gas Revenues. Oil and gas revenues increased $6,521,601 or 331%, to
$8,492,792 for the three months ended March 31, 2003, from $1,971,191 for the
same period of 2002. The increase was primarily the result of a 121% increase in
oil and gas production due to the Fullerton acquisition on December 20, 2002 and
increased gas production at Cook Mountain and a 95% increase in the average
sales price per BOE including hedges.

     Lease Operating Costs. Lease operating costs increased $906,284 or 165%, to
$1,455,660 during the three months ended March 31, 2003, compared with $549,376
for the same period of 2002. The increase was primarily attributable to higher
lease operating costs associated with the Fullerton acquisition and Diamond M
operations.

     General and Administrative Expenses. General and administrative expenses
increased by $452,004, or 129%, to $801,768 for the three months ended March 31,
2003 from $349,764 for the same period of 2002. The increase was primarily due
to costs associated with additional personnel hired to implement the business
plan.

     Depreciation, Depletion and Amortization Expense. Depreciation, depletion
and amortization expense ("DD&A") increased by $711,061, or 52%, to $2,065,691
for the three months ended March 31, 2003 compared with $1,354,630 for the same
period of 2002 primarily because of a

                                       17
<PAGE>

121% increase in production volumes offset by a reduced depletion rate. The
decrease in depletion rate when compared with the same quarter a year ago is
attributable to an increase in net depletable property basis offset by an
increase in reserves due to the Fullerton acquisition.

     Interest Expense. Interest expense increased $333,407, or 218%, to $486,464
for the three months ended March 31, 2003 compared with $153,057 for the same
period of 2002 due to an increase in the bank borrowings associated with our
property acquisitions.

     Interest and Other Income. Interest and other income increased $28,281, or
173% to $44,656 for the three month period ended March 31, 2003 compared to
$16,375 for the same period of 2002 due to increased cash balances associated
with the sale of Energen stock and increased cash flow.

     Income Tax Expense. Our effective tax rate for the three months ended March
31, 2003 is 34%. For further discussion see Note 4.

     Net Income (Loss). We reported net income of $2,251,754 for the three
months ended March 31, 2003 compared to a loss of $768,751 for the same period
in 2002. The increase of $3,020,505 or 393% is primarily due to higher product
prices and increased production volumes due to the Fullerton acquisition and
Cook Mountain discoveries.

     Cash flow from operations for the three months ended March 31, 2003
increased $3,821,371 to $3,574,322 compared with a net cash flow deficiency of
$247,049 for the three months ended March 31, 2002.

LIQUIDITY AND CAPITAL RESOURCES

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

     Working capital decreased $8,392,561 as of March 31, 2003 compared with
December 31, 2002. Current assets exceeded current liabilities by $146,822 at
March 31, 2003 compared with $8,539,383 at December 31, 2002. Working capital
decreased primarily due to the payment of $7,000,000 on our bank debt
requirements, current derivative obligations and current maturities of long-term
debt.

     We incurred net property costs of $4,572,325 for the three months ended
March 31, 2003, primarily for our oil and gas property acquisition, development,
and enhancement activities. Also added to our property basis were asset
retirement costs of $1,205,985 for the adoption of SFAS 143 (see Note 8). The
property acquisition, development and enhancement activities were financed by
the utilization of cash flows provided by operations.

     Based on our projected oil and gas revenues and related expenses and
available bank borrowings, we believe that we will have sufficient capital
resources to fund normal operations, interest expense and principal reduction
payments on bank debt, if required, and preferred stock dividends. We
continually review and consider alternative methods of financing.

     The following table is a summary of significant contractual cash
obligations:

<table>
                                                                              Obligation Due in Period
                                                 -------------------------------------------------------------------------
Contractual Cash Obligations                       2003       2004      2005      2006       2007      2008       Total
------------------------------------------------ ---------- --------- --------- ---------- --------- ---------  ----------
                                                                                  (000)

                                                <c>       <c>       <c>        <c>       <c>       <c>       <c>
Revolving Credit Facility (Secured)                $ 3,563   $ 8,550   $ 8,550    $ 8,550   $ 8,550   $ 4,987    $ 42,750
Office Lease (One Marienfeld Place)                $    54   $    22   $     -    $     -   $     -   $     -    $     76
Office Lease (Dinero Plaza)                        $   102   $   102   $   102    $    68   $     -   $     -    $    374

</table>


                                       18
<PAGE>


TRENDS AND PRICES

     Changes in oil and gas prices significantly affect our revenues, cash flows
and borrowing capacity. Markets for oil and gas have historically been, and will
continue to be, volatile. Prices for oil and gas typically fluctuate in response
to relatively minor changes in supply and demand, market uncertainty, seasonal,
political and other factors beyond our control. We are unable to accurately
predict domestic or worldwide political events or the effects of other such
factors on the prices we receive for our oil and gas. Please refer to Note 6
Derivative Instruments.

     Our capital expenditure budgets are highly dependent on future oil and gas
prices and will be consistent with internally generated cash flows.

     During fiscal year 2002 the average sales price we received for our oil was
approximately $24.59 per barrel while the average sales prices we received for
natural gas was approximately $3.33 per thousand cubic feet ("Mcf"). For the
three months ended March 31, 2003, the average price we received for our oil
production was approximately $32.60 (unhedged) per Bbl, while the average price
received at that same date for our natural gas production was approximately
$5.82 per Mcf (unhedged).

FORWARD-LOOKING STATEMENTS

     In addition to historical information contained herein, this Form 10-Q
Report contains forward-looking statements subject to various risks and
uncertainties that could cause Parallel's actual results to differ materially
from those in the forward-looking statements. Forward-looking statements can be
identified by the use of forward-looking terminology such as "may", "will",
"expect," "intend," "anticipate, "estimate," "continue," "present value,"
"future," "reserves" or other variations thereof or comparable terminology.
Factors that could cause or contribute to such differences could include, but
are not limited to, those relating to the results of exploratory drilling
activity, changes in oil and natural gas prices, operating risks, availability
of drilling equipment, outstanding indebtedness, changes in interest rates,
dependence on weather conditions, seasonality, expansion and other activities of
competitors, changes in federal or state environmental laws and the
administration of such laws, and the general condition of the economy and our
effect on the securities market. While we believe our forward-looking statements
are based upon reasonable assumptions, these are factors that are difficult to
predict and that are influenced by economic and other conditions beyond our
control. Investors are directed to consider such risks and other uncertainties
discussed in documents filed by Parallel with the Securities and Exchange
Commission.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Our only financial instrument sensitive to changes in interest rates is our
bank debt. Our annual interest costs in 2003 could fluctuate based on short-term
interest rates. As the interest rate is variable and reflects current market
conditions, the carrying value approximates the fair value. The table below
shows principal cash flows and related weighted average interest rates by
expected maturity dates. Weighted average interest rates were determined using
weighted average interest paid and accrued in March, 2003.

<table>
                                       July          July         July          July         July          July
                                       2003          2004         2005          2006         2007          2008          Total
                                    ------------  ------------ ------------ ------------- ------------ -------------- -------------
                                                                   (In 000's, except interest rates)

                                 <c>            <c>         <c>          <c>            <c>         <c>
Variable rate debt:
Revolving facility (secured)            $ 3,563       $ 8,550      $ 8,550       $ 8,550      $ 8,550        $ 4,987      $ 42,750
Average interest rate                     4.50%         4.50%        4.50%         4.50%        4.50%          4.50%

</table>

                                       19

<PAGE>


     At March 31, 2003, we had bank loans in the amount of $42,750,000
outstanding at an average interest rate of 4.50%. Borrowings under our new
credit facility bear interest, at our election, at (i) the bank's base rate or
(ii) the Eurodollar rate, plus 2.75%, but in no event less than 4.50%. As a
result, our annual interest costs in 2003 could fluctuate based on short-term
interest rates. Assuming no change in the amount outstanding during 2003, the
impact on interest expense of a one-half of one percent change in the average
interest rate above the 4.50% floor would be approximately $160,313 for the
remainder of the year. As the interest rate is variable and is reflective of
current market conditions, the carrying value approximates the fair value.

     Our major market risk exposure is in the pricing applicable to our oil and
natural gas production. Market risk refers to the risk of loss from adverse
changes in oil and natural gas prices. Realized pricing is primarily driven by
the prevailing domestic price for crude oil and spot prices applicable to the
region in which we produce natural gas. Historically, prices received for oil
and gas production have been volatile and unpredictable. Pricing volatility is
expected to continue. Oil prices ranged from a low of $14.26 per barrel to a
high of $29.57 per barrel during 2002. Natural gas prices we received during
2002 ranged from a low of $1.05 per Mcf to a high of $4.94 per Mcf. During the
first quarter 2003 oil prices ranged from a low of $22.78 to a high of $35.95.
Natural gas prices we received during 2003 ranged from a low of $1.98 per Mcf to
a high of $7.92 per Mcf. A significant decline in the prices of natural gas or
oil could have a material adverse effect on our financial condition and results
of operations.

     Parallel periodically hedges a portion of its oil and natural gas and
interest rate payments to manage exposure to commodity price risk under existing
sales contracts. Our objective is to lock in a range of oil and gas prices and a
fixed interest rate for certain notional amounts. This allows us to forecast
cash flow within a predictable range. Parallel meets the objective by entering
into costless collars and swap hedge contracts. For the remainder of fiscal 2003
hedged oil and natural gas volumes represent approximately 50% and 30%
respectively of expected production from April thru December 2003.

     Additional information about Parallel's hedging activities can be found in
Note 6 on page 8 of this report.

ITEM 4. CONTROLS AND PROCEDURES

     On October 18, 2002, we supplemented our existing internal controls with
the adoption and implementation of certain disclosure controls and procedures.
The purpose of these additional disclosure controls and procedures is to help
ensure that information we are required to disclose in reports that we file with
the SEC is accumulated and communicated to our management and recorded,
processed, summarized and reported within the time periods prescribed by the
SEC. Within 90 days before filing this report, the effectiveness of these
disclosure controls and procedures was evaluated by our chief executive officer,
Thomas R. Cambridge, and our chief financial officer, Steven D. Foster. Mr.
Cambridge and Mr. Foster have concluded that our disclosure controls and
procedures are effective for their intended purposes. As part of their
evaluation, Mr. Cambridge and Mr. Foster also determined that there were no
significant changes in internal controls or other factors that could
significantly affect internal controls after the date of their evaluation.
Following the signature page of this report, you will find certifications signed
by Mr. Cambridge and Mr. Foster.

                                       20

<PAGE>
                           PART II - OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS


     At March 31, 2002, we were involved in one lawsuit incidental to our
business. In the opinion of management, the ultimate outcome of this lawsuit
will not have a material adverse effect on Parallel's financial position or
results of operations. We are not aware of any other threatened litigation. We
have not been a party to any bankruptcy, receivership, reorganization,
adjustment or similar proceeding.

ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K


(a)  Exhibits

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

        3.1     Certificate of Incorporation of Registrant (incorporated by
                reference to Exhibit 3.1 to Form 10-K of the Registrant for the
                fiscal year ended December 31, 1998.)

        3.2     Bylaws of Registrant (Incorporated by reference to Exhibit 3 to
                the Registrant's Form 8-K, dated October 9, 2000, as filed with
                the Securities and Exchange Commission on October 10, 2000.)

        4.1     Certificate of Designations, Preferences and Rights of Serial
                Preferred Stock - 6% Convertible Preferred Stock (Incorporated
                by reference to Exhibit 4.1 to Form 10-Q of the Registrant for
                the fiscal quarter ended September 30, 1998.)

        4.2     Certificate of Designation, Preferences and Rights of Series A
                Preferred Stock. (Incorporated by reference to Exhibit 4.2 of
                Form 10-K for the fiscal year ended December 31, 2000.)

        4.3     Rights Agreement, dated as of October 5, 2000, between the
                Registrant and Computershare Trust Company, Inc., as Rights
                Agent. (Incorporated by reference to Exhibit 4.3 of Form 10-K
                for the fiscal year ended December 31, 2000.)

                Executive Compensation Plans and Arrangements (Exhibit No.'s
                10.1 through 10.10):

        10.1    1983 Incentive Stock Option Plan (Incorporated by reference to
                Exhibit 10.2 to Form S-l of the Registrant (File No. 2-92397) as
                filed with the Securities and Exchange Commission on July 26,
                1984, as amended by Amendments No. 1 and 2 on October 5, 1984,
                and October 25, 1984, respectively.)

        10.2    1992 Stock Option Plan (Incorporated by reference to Exhibit
                28.1 to Form S-8 of the Registrant (File No. 33-57348) as filed
                with the Securities and Exchange Commission on January 25,
                1993.)


                                       21
<PAGE>

        10.3    Stock Option Agreement between the Registrant and Thomas R.
                Cambridge dated December 11, 1991 (Incorporated by reference to
                Exhibit 10.4 of Form 10-K of the Registrant for the fiscal year
                ended December 31, 1992.)

        10.4    Stock Option Agreement between the Registrant and Thomas R.
                Cambridge dated October 18, 1993 (Incorporated by reference to
                Exhibit 10.4(e) of Form 10-K of the Registrant for the fiscal
                year ended December 31, 1993.)

        10.5    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.)

        10.6    Non-Employee Directors Stock Option Plan (Incorporated by
                reference to Exhibit 10.6 of the Registrant's Form 10-K Report
                for the fiscal year ended December 31, 1997).

        10.7    1998 Stock Option Plan (Incorporated by reference to Exhibit
                10.7 of Form 10-K of the Registrant for the fiscal year ended
                December 31, 1998.)

        10.8    Form of Incentive Award Agreements, dated December 12, 2001,
                between the Registrant and Thomas R. Cambridge, Larry C. Oldham,
                Eric A. Bayley and John S. Rutherford granting 2,394 Unit
                Equivalent Rights to Mr. Cambridge; 9,564 Unit Equivalent Rights
                to Mr. Oldham; 2,869 Unit Equivalent Rights to Mr. Bayley; and
                7,173 Unit Equivalent Rights to Mr. Rutherford. (Incorporated by
                reference to Exhibit 10.8 of the Registrant's Form 10-K Report
                for the fiscal year ended December 31, 2001).

        10.9    Form of Change of Control Agreements, dated June 1, 2001,
                between the Registrant and Thomas R. Cambridge, Larry C. Oldham,
                Eric A. Bayley and John S. Rutherford. (Incorporated by
                reference to Exhibit 10.9 of the Registrant's Form 10-K Report
                for the fiscal year ended December 31, 2001).

        10.10   Restated Loan Agreement, dated December 27, 1999, between the
                Registrant and Bank One, Texas, N.A. (Incorporated by reference
                to Exhibit 10.8 of Form 10-K of the Registrant for the fiscal
                year ended December 31, 1999).

        10.11   Loan Agreement dated December 18, 2000, between the Registrant
                and Bank One, Texas, N.A. (Incorporated by reference to Exhibit
                10.8 of Form 10-K of the Registrant for the fiscal year ended
                December 31, 2000.)

        10.12   Letter agreement, dated March 24, 1999, between the Registrant
                and Bank One, Texas, N.A. (Incorporated by reference to Exhibit
                10.9 of Form 10-K of the Registrant for the fiscal year ended
                December 31, 1998.)

        10.13   Certificate of Formation of First Permian, L.L.C. (Incorporated
                by reference to Exhibit 10.1 of the Registrant's Form 8-K report
                dated June 30, 1999.)

        10.14   Limited Liability Company Agreement of First Permian, L.L.C.
                (Incorporated by reference to Exhibit 10.2 of the Registrant's
                Form 8-K report dated June 30, 1999.)

                                       22
<PAGE>

        10.15   Merger Agreement dated June 25, 1999. (Incorporated by reference
                to Exhibit 10.3 of the Registrant's Form 8-K report dated June
                30, 1999.)

        10.16   Agreement and Plan of Merger of First Permian, L.L.C. and Nash
                Oil Company, L.L.C. (Incorporated by reference to Exhibit 10.4
                of the Registrant's Form 8-K report dated June 30, 1999.)

        10.17   Certificate of Merger of First Permian, L.L.C. and Nash Oil
                Company, L.L.C (Incorporated by reference to Exhibit 10.5 of the
                Registrant's Form 8-K Report dated June 30, 1999.)

        10.18   Amended and Restated Limited Liability Company Agreement of
                First Permian, L.L.C. dated as of May 31, 2000. (Incorporated by
                reference to Exhibit 10.16 of Form 10-K for the fiscal year
                ended December 31, 2000.)

        10.19   Credit Agreement dated June 30, 1999, by and among First
                Permian, L.L.C., Parallel Petroleum Corporation, Baytech, Inc.,
                and Bank One, Texas, N.A. (Incorporated by reference to Exhibit
                10.6 of the Registrant's Form 8-K report dated June 30, 1999.)

        10.20   Limited Guaranty, dated June 30, 1999, by and among First
                Permian, L.L.C., Parallel Petroleum Corporation, and Bank One,
                Texas, N.A. (Incorporated by reference to Exhibit 10.7 of the
                Registrant's Form 8-K report dated June 30, 1999.)

        10.21   Intercreditor Agreement, dated as of June 30, 1999, by and among
                First Permian, L.L.C., Bank One, Texas, N.A., Tejon Exploration
                Company, and Mansefeldt Investment Corporation (Incorporated by
                reference to Exhibit 10.8 of the Registrant's Form 8-K report
                dated June 30, 1999.)

        10.22   Subordinated Promissory Note, dated June 30, 1999, in the
                original principal amount of $8.0 million made by First Permian,
                L.L.C. payable to the order of Tejon Exploration Company
                (Incorporated by reference to Exhibit 10.9 of the Registrant's
                Form 8-K report dated June 30, 1999.)

        10.23   Subordinated Promissory Note, dated June 30, 1999, in the
                original principal amount of $8.0 million made by First Permian,
                L.L.C. payable to the order of Mansefeldt Investment Corporation
                (Incorporated by reference to Exhibit 10.10 of the Registrant's
                Form 8-K report dated June 30, 1999.)

        10.24   Second Restated Credit Agreement, dated October 25, 2000, among
                First Permian, L.L.C., Bank One, Texas, N.A., and Bank One
                Capital Markets, Inc. (Incorporated by reference to Exhibit
                10.22 of Form 10-K for the fiscal year ended December 31, 2000.)

        10.25   Loan Agreement, dated January 25, 2002, between the Registrant
                and First American Bank, SSB (Incorporated by reference to
                Exhibit 10.25 of Form 10-K for the fiscal year ended December
                31, 2001.)

        10.26   Purchase and Sale Agreement, dated as of November 27, 2002,
                among JMC Exploration, Inc., Arkoma Star L.L.C., Parallel, L.P.
                and Texland Petroleum, Inc. (Incorporated by reference to
                Exhibit 10.1 of Form 8-K of the Registrant, dated December 20,
                2002)

                                     23

<PAGE>

        10.27   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)

        10.28   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)

        21      Subsidiaries (Incorporated by reference to Exhibit 21 of Form
                10-K of the Registrant for the fiscal year ended December 31,
                2002)

        *99.1   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.

        *99.2   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.

(b) Reports on Form 8-K

     During the fiscal quarter ended March 31, 2003, we filed two reports on
Form 8-K.

     In Form 8-K/A, Amendment No. 1, filed with the SEC on March 7, 2003, we
reported the acquisition of oil and gas properties located in Andrews County,
Texas in the Permian Basin of west Texas, which included statement of revenues
and direct expense of the Fullerton Properties for the years ended December 31,
2000, 2001 and 2002. This Form 8-K/A Report amended our Form 8-K Report, dated
December 20, 2002, and filed with the SEC on December 23, 2002. This initial
report on Form 8-K also reported the acquisition of oil and gas properties
located in Andrews County, Texas.

     On March 27, 2003, we filed Form 8-K, dated March 26, 2003, reporting
matters under Item 9 - Regulation FD Disclosure, and Item 12 - Disclosure of
Results of Operations and Financial Condition. This report included our March
26, 2003 press release announcing 2002 year-end financial results, fourth
quarter results, capital investments, proved reserves and capital investment
budget for the periods specified.













                                       24
<PAGE>


                                   SIGNATURES


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




                                             PARALLEL PETROLEUM CORPORATION


                                             BY: /s/ Thomas R. Cambridge
Date:  May 14, 2003                          -----------------------------------
                                             Thomas R. Cambridge
                                             Chairman of the Board of Directors
                                             and Chief Executive Officer



Date:  May 14, 2003                          BY: /s/ Steven D. Foster
                                             -----------------------------------
                                             Steven D. Foster
                                             Chief Financial Officer













                                       25
<PAGE>




                                 CERTIFICATIONS

     I, Steven D. Foster, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Parallel Petroleum
Corporation;

     2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

     3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

     4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

          a) Designed such disclosure controls and procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this quarterly report is being
     prepared;

          b) Evaluated the effectiveness of the registrant's disclosure controls
     and procedures as of a date within 90 days prior to the filing date of this
     quarterly report (the "Evaluation Date"); and

          c) Presented in this quarterly report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date:

     5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

          a) All significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

          b) Any fraud, whether or not material, that involves management or
     other employees who have a significant role in the registrant's internal
     controls; and

     6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date: May 14, 2003

                                           /s/ Steven D. Foster
                                          ------------------------------------
                                          Steven D. Foster
                                          Chief Financial Officer





                                       26
<PAGE>

                                 CERTIFICATIONS

     I, Thomas R. Cambridge, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Parallel Petroleum
Corporation;

     2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

     3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

     4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

          a) Designed such disclosure controls and procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this quarterly report is being
     prepared;

          b) Evaluated the effectiveness of the registrant's disclosure controls
     and procedures as of a date within 90 days prior to the filing date of this
     quarterly report (the "Evaluation Date"); and

          c) Presented in this quarterly report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date:

     5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

          a) All significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

          b) Any fraud, whether or not material, that involves management or
     other employees who have a significant role in the registrant's internal
     controls; and

     6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date: May 14, 2003
                                          /s/ Thomas R. Cambridge
                                          --------------------------------------
                                          Thomas R. Cambridge
                                          Chief Executive Officer


                                       27
<PAGE>



                                INDEX TO EXHIBITS


(a)  Exhibits

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

        3.1     Certificate of Incorporation of Registrant (incorporated by
                reference to Exhibit 3.1 to Form 10-K of the Registrant for the
                fiscal year ended December 31, 1998.)

        3.2     Bylaws of Registrant (Incorporated by reference to Exhibit 3 to
                the Registrant's Form 8-K, dated October 9, 2000, as filed with
                the Securities and Exchange Commission on October 10, 2000.)

        4.1     Certificate of Designations, Preferences and Rights of Serial
                Preferred Stock - 6% Convertible Preferred Stock (Incorporated
                by reference to Exhibit 4.1 to Form 10-Q of the Registrant for
                the fiscal quarter ended September 30, 1998.)

        4.2     Certificate of Designation, Preferences and Rights of Series A
                Preferred Stock. (Incorporated by reference to Exhibit 4.2 of
                Form 10-K for the fiscal year ended December 31, 2000.)

        4.3     Rights Agreement, dated as of October 5, 2000, between the
                Registrant and Computershare Trust Company, Inc., as Rights
                Agent. (Incorporated by reference to Exhibit 4.3 of Form 10-K
                for the fiscal year ended December 31, 2000.)

                Executive Compensation Plans and Arrangements (Exhibit No.'s
                10.1 through 10.10):

        10.1    1983 Incentive Stock Option Plan (Incorporated by reference to
                Exhibit 10.2 to Form S-l of the Registrant (File No. 2-92397) as
                filed with the Securities and Exchange Commission on July 26,
                1984, as amended by Amendments No. 1 and 2 on October 5, 1984,
                and October 25, 1984, respectively.)

        10.2    1992 Stock Option Plan (Incorporated by reference to Exhibit
                28.1 to Form S-8 of the Registrant (File No. 33-57348) as filed
                with the Securities and Exchange Commission on January 25,
                1993.)

        10.3    Stock Option Agreement between the Registrant and Thomas R.
                Cambridge dated December 11, 1991 (Incorporated by reference to
                Exhibit 10.4 of Form 10-K of the Registrant for the fiscal year
                ended December 31, 1992.)

        10.4    Stock Option Agreement between the Registrant and Thomas R.
                Cambridge dated October 18, 1993 (Incorporated by reference to
                Exhibit 10.4(e) of Form 10-K of the Registrant for the fiscal
                year ended December 31, 1993.)

        10.5    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.)


<PAGE>

        10.6    Non-Employee Directors Stock Option Plan (Incorporated by
                reference to Exhibit 10.6 of the Registrant's Form 10-K Report
                for the fiscal year ended December 31, 1997).

        10.7    1998 Stock Option Plan (Incorporated by reference to Exhibit
                10.7 of Form 10-K of the Registrant for the fiscal year ended
                December 31, 1998.)

        10.8    Form of Incentive Award Agreements, dated December 12, 2001,
                between the Registrant and Thomas R. Cambridge, Larry C. Oldham,
                Eric A. Bayley and John S. Rutherford granting 2,394 Unit
                Equivalent Rights to Mr. Cambridge; 9,564 Unit Equivalent Rights
                to Mr. Oldham; 2,869 Unit Equivalent Rights to Mr. Bayley; and
                7,173 Unit Equivalent Rights to Mr. Rutherford. (Incorporated by
                reference to Exhibit 10.8 of the Registrant's Form 10-K Report
                for the fiscal year ended December 31, 2001).

        10.9    Form of Change of Control Agreements, dated June 1, 2001,
                between the Registrant and Thomas R. Cambridge, Larry C. Oldham,
                Eric A. Bayley and John S. Rutherford. (Incorporated by
                reference to Exhibit 10.9 of the Registrant's Form 10-K Report
                for the fiscal year ended December 31, 2001).

        10.10   Restated Loan Agreement, dated December 27, 1999, between the
                Registrant and Bank One, Texas, N.A. (Incorporated by reference
                to Exhibit 10.8 of Form 10-K of the Registrant for the fiscal
                year ended December 31, 1999).

        10.11   Loan Agreement dated December 18, 2000, between the Registrant
                and Bank One, Texas, N.A. (Incorporated by reference to Exhibit
                10.8 of Form 10-K of the Registrant for the fiscal year ended
                December 31, 2000.)

        10.12   Letter agreement, dated March 24, 1999, between the Registrant
                and Bank One, Texas, N.A. (Incorporated by reference to Exhibit
                10.9 of Form 10-K of the Registrant for the fiscal year ended
                December 31, 1998.)

        10.13   Certificate of Formation of First Permian, L.L.C. (Incorporated
                by reference to Exhibit 10.1 of the Registrant's Form 8-K report
                dated June 30, 1999.)

        10.14   Limited Liability Company Agreement of First Permian, L.L.C.
                (Incorporated by reference to Exhibit 10.2 of the Registrant's
                Form 8-K report dated June 30, 1999.)

        10.15   Merger Agreement dated June 25, 1999. (Incorporated by reference
                to Exhibit 10.3 of the Registrant's Form 8-K report dated June
                30, 1999.)

        10.16   Agreement and Plan of Merger of First Permian, L.L.C. and Nash
                Oil Company, L.L.C. (Incorporated by reference to Exhibit 10.4
                of the Registrant's Form 8-K report dated June 30, 1999.)

        10.17   Certificate of Merger of First Permian, L.L.C. and Nash Oil
                Company, L.L.C (Incorporated by reference to Exhibit 10.5 of the
                Registrant's Form 8-K Report dated June 30, 1999.)
<PAGE>

        10.18   Amended and Restated Limited Liability Company Agreement of
                First Permian, L.L.C. dated as of May 31, 2000. (Incorporated by
                reference to Exhibit 10.16 of Form 10-K for the fiscal year
                ended December 31, 2000.)

        10.19   Credit Agreement dated June 30, 1999, by and among First
                Permian, L.L.C., Parallel Petroleum Corporation, Baytech, Inc.,
                and Bank One, Texas, N.A. (Incorporated by reference to Exhibit
                10.6 of the Registrant's Form 8-K report dated June 30, 1999.)

        10.20   Limited Guaranty, dated June 30, 1999, by and among First
                Permian, L.L.C., Parallel Petroleum Corporation, and Bank One,
                Texas, N.A. (Incorporated by reference to Exhibit 10.7 of the
                Registrant's Form 8-K report dated June 30, 1999.)

        10.21   Intercreditor Agreement, dated as of June 30, 1999, by and among
                First Permian, L.L.C., Bank One, Texas, N.A., Tejon Exploration
                Company, and Mansefeldt Investment Corporation (Incorporated by
                reference to Exhibit 10.8 of the Registrant's Form 8-K report
                dated June 30, 1999.)

        10.22   Subordinated Promissory Note, dated June 30, 1999, in the
                original principal amount of $8.0 million made by First Permian,
                L.L.C. payable to the order of Tejon Exploration Company
                (Incorporated by reference to Exhibit 10.9 of the Registrant's
                Form 8-K report dated June 30, 1999.)

        10.23   Subordinated Promissory Note, dated June 30, 1999, in the
                original principal amount of $8.0 million made by First Permian,
                L.L.C. payable to the order of Mansefeldt Investment Corporation
                (Incorporated by reference to Exhibit 10.10 of the Registrant's
                Form 8-K report dated June 30, 1999.)

        10.24   Second Restated Credit Agreement, dated October 25, 2000, among
                First Permian, L.L.C., Bank One, Texas, N.A., and Bank One
                Capital Markets, Inc. (Incorporated by reference to Exhibit
                10.22 of Form 10-K for the fiscal year ended December 31, 2000.)

        10.25   Loan Agreement, dated January 25, 2002, between the Registrant
                and First American Bank, SSB (Incorporated by reference to
                Exhibit 10.25 of Form 10-K for the fiscal year ended December
                31, 2001.)

        10.26   Purchase and Sale Agreement, dated as of November 27, 2002,
                among JMC Exploration, Inc., Arkoma Star L.L.C., Parallel, L.P.
                and Texland Petroleum, Inc. (Incorporated by reference to
                Exhibit 10.1 of Form 8-K of the Registrant, dated December 20,
                2002)

        10.27   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)

        10.28   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)

        21      Subsidiaries (Incorporated by reference to Exhibit 21 of Form
                10-K of the Registrant for the fiscal year ended December 31,
                2002)
<PAGE>

        *99.1   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.

        *99.2   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.


<PAGE>



                                                                 EXHIBIT 99.1


                                  CERTIFICATION

           (Not filed pursuant to the Securities Exchange Act of 1934)

         Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes - Oxley Act of 2002, the undersigned, Thomas R. Cambridge, the
Chairman of the Board of Directors and Chief Executive Officer of Parallel
Petroleum Corporation ("Parallel"), hereby certifies that the Quarterly Report
on Form 10Q of Parallel for the quarter ended March 31, 2003 fully complies with
the periodic reporting requirements of the Securities Exchange Act of 1934, as
amended, and the information contained in that Form 10Q Report fairly presents,
in all material respects, the financial condition and results of operations of
Parallel.

Dated: May 14, 2003

                                     /s/ Thomas R. Cambridge
                                     -------------------------------------------
                                     Thomas R. Cambridge, Chairman
                                     of the Board of Directors and Chief
                                     Executive Officer


<PAGE>


                                                                  EXHIBIT 99.2


                                  CERTIFICATION

           (Not filed pursuant to the Securities Exchange Act of 1934)

         Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes - Oxley Act of 2002, the undersigned, Steven D. Foster, the
Chief Financial Officer of Parallel Petroleum Corporation ("Parallel"), hereby
certifies that the Quarterly Report on Form 10Q of Parallel for the quarter
ended March 31, 2003 fully complies with the periodic reporting requirements of
the Securities Exchange Act of 1934, as amended, and the information contained
in that Form 10Q Report fairly presents, in all material respects, the financial
condition and results of operations of Parallel.

Dated:  May 14, 2003


                                     /s/ Steven D. Foster
                                     -----------------------------------------
                                     Steven D. Foster, Chief Financial Officer