Parallel Petroleum Announces Operations Update

    Business Editors/Energy Editors

    MIDLAND, Texas--(BUSINESS WIRE)--March 15, 2005--Parallel Petroleum Corporation (NASDAQ:PLLL) today announced its operations update. In a prior press release dated January 11, 2005, the Company announced its 2004 year end reserves, operations update, and its $43.7 million 2005 capital investment budget. The 2005 capital investment budget reflects the Company's plans to accelerate activities, primarily on its Permian Basin properties and Barnett Shale gas project. Please refer to the Company's news release dated November 12, 2004 for prior information on the Company's operations and its $25.3 million 2004 capital investment budget.

    Proved Reserves

    As shown in the table below, Parallel's SEC PV-10% total proved reserve value increased approximately 80%, to approximately $266.2 million as of December 31, 2004, compared to $147.8 million as of December 31, 2003. The net change in present value was the result of reserve additions from enhancements, drilling and acquisitions, reserve revisions and increased oil and natural gas prices, partially offset by both production and reserve dispositions during 2004.

December 31, December 31, Percentage 2003(a) 2004(a) Change -------------- ------------- ------------ Total Proved Reserves: Oil (MMBbls) 12.08 18.92 57% Gas (Bcfg) 16.27 16.82 3% MMBOE 14.79 21.72 47%

SEC Reserve Categories: PDP (MMBOE)(b) 9.95 15.09 52% PDNP (MMBOE)(c) 1.00 0.32 -68% PUD (MMBOE)(d) 3.84 6.31 64% ------- ------- Total Proved Reserves (MMBOE) 14.79(e) 21.72(f) 47% ------- ------- Pretax PV-10% ($MM) $147.8(e) $266.2(f) 80%

Price of oil per Bbl $30.63(e) $40.59(f) 33% Price of natural gas per Mcf $5.45(e) $5.65(f) 4% -----------------------------

(a) Based on independent reserve studies prepared by Cawley, Gillespie & Associates, Inc., our independent petroleum engineers. (b) PDP is proved developed producing reserves. (c) PDNP is proved developed non-producing reserves. (d) PUD is proved undeveloped reserves. (e) Based on December 31, 2003 realized oil and natural gas prices. (f) Based on December 31, 2004 realized oil and natural gas prices.

Fourth Quarter 2004 Production and Estimated Proved Reserves by Area/Property as of December 31, 2004

Estimated PDP Estimated (a) PDNP(b) 4Q -------------- ------------ 2004 Actual PV-10% PV-10% AREA/PROPERTY BOEPD MMBOE ($MM)(d) MMBOE ($MM)(d) ------------------------------ ------ ------ -------- ----- ------- Permian Basin Fullerton San Andres 1,731 9.82 $112.3 0.06 $1.1 Carm-Ann San Andres / N. Means Queen 204 0.97 13.7 -- -- Diamond M Shallow 155 1.32 12.3 0.20 3.7 Diamond M Canyon Reef 163 0.36 5.1 -- -- New Mexico Abo 24 0.03 0.5 -- -- Other Permian Basin 415 1.49 16.9 -- -- ------ ------ ------- ----- ------- Total 2,692 13.99 $160.8 0.26 $4.8 ------ ------ ------- ----- ------- Onshore Gulf Coast of South Texas Yegua/Frio 853 1.00 $22.2 0.06 $1.4 Cook Mountain 246 0.10 2.9 -- -- ------ ------ ------- ----- ------- Total 1,099 1.10 $25.1 0.06 $1.4 ------ ------ ------- ----- ------- GRAND TOTAL 3,791 15.09 $185.9 0.32 $6.2 ====== ====== ======= ===== =======

Estimated Estimated Total PUD(c) Proved ------------- --------------- AREA/PROPERTY % of PV-10% PV-10% TOTAL MMBOE ($MM)(d) MMBOE ($MM)(d) PV-10% -------------------------- ------ ------- ----- --------- ------- Permian Basin Fullerton San Andres 1.52 $15.4 11.40 $128.8 48% Carm-Ann San Andres / N. Means Queen 1.62 16.8 2.59 30.5 11% Diamond M Shallow 1.69 18.1 3.21 34.1 13% Diamond M Canyon Reef 0.96 17.8 1.32 22.9 9% New Mexico Abo -- -- 0.03 0.5 0% Other Permian Basin 0.52 6.0 2.01 22.9 9% ------ ------- ----- --------- ------- Total 6.31 $74.1 20.56 $239.7 90% ------ ------- ----- --------- ------- Onshore Gulf Coast of South Texas Yegua/Frio -- $-- 1.06 $23.6 9% Cook Mountain -- -- 0.10 2.9 1% ----- ------- ----- --------- ------- Total -- $-- 1.16 $26.5 10% ----- ------- ----- --------- ------- GRAND TOTAL 6.31 $74.1 21.72 $266.2 100% ===== ======= ===== ========= =======

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(a) PDP is proved developed producing reserves. (b) PDNP is proved developed non-producing reserves. (c) PUD is proved undeveloped reserves. (d) Based on December 31, 2004 realized oil and natural gas prices.

2005 Capital Investment Budget by Area/Property

Recompletions New Leasehold, & Workovers Drills Seismic & AREA/PROPERTY ($MM) ($MM) Other ($MM) ----------------------------------- ------------- ------- ----------- Permian Basin Fullerton San Andres $-- $3.6 $0.1 Carm-Ann San Andres / N. Means Queen 0.8 2.8 0.5 Diamond M Shallow 1.8 3.1 0.1 Diamond M Canyon Reef 5.3 1.8 2.3 New Mexico Abo 1.0 5.2 1.4 Other Permian Basin -- -- 2.0 ----- ------ ----- Total $8.9 $16.5 $6.4 ----- ------ ----- Onshore Gulf Coast of South Texas Yegua/Frio $-- $0.9 $-- Cook Mountain -- 0.9 -- ----- ------ ----- Total $-- $1.8 $-- ----- ------ ----- North Texas Barnett Shale $-- $5.6 $2.0 ----- ------ ----- Other Projects Utah / Colorado CBM Gas / Conventional Oil & Gas $-- $0.5 $0.9 East Texas Cotton Valley Reef -- 0.8 0.3 ----- ------ ----- Total $-- $1.3 $1.2 ----- ------ ----- GRAND TOTAL $8.9 $25.2 $9.6 ===== ====== =====

Total % of AREA/PROPERTY ($MM) Total ------------------------------------ ------------- ------------- Permian Basin Fullerton San Andres $3.7 8.5% Carm-Ann San Andres / N. Means Queen 4.1 9.4% Diamond M Shallow 5.0 11.4% Diamond M Canyon Reef 9.4 21.5% New Mexico Abo 7.6 17.4% Other Permian Basin 2.0 4.6% ------------- ------------ Total $31.8 72.8% ------------- ------------ Onshore Gulf Coast of South Texas Yegua/Frio $0.9 2.1% Cook Mountain 0.9 2.1% ------------- ------------ Total $1.8 4.1% ------------- ------------ North Texas Barnett Shale $7.6 17.4% ------------- ------------ Other Projects Utah / Colorado CBM Gas / Conventional Oil & Gas $1.4 3.2% East Texas Cotton Valley Reef 1.1 2.5% ------------- ------------ Total $2.5 5.7% ------------- ------------ GRAND TOTAL $43.7 100.0% ============= ============
    Current Operations by Area/Property

    Permian Basin

The Permian Basin generated approximately 71% of Parallel's fourth quarter 2004 daily production (2,692 BOE per day) and represented approximately 90% of its reserve value as of December 31, 2004.

Fullerton San Andres Field, Andrews County, Texas - This property generated approximately 46% of the Company's fourth quarter 2004 daily production (1,731 BOE per day) and represented approximately 48% of its reserve value as of December 31, 2004.

This property was acquired in December 2002 for approximately $46.1 million. During the fourth quarter of 2004, the Company acquired additional interests in the property for approximately $20.9 million. Development since the initial acquisition in 2002 has primarily consisted of the re-stimulation of approximately 80 existing producing wells and the drilling of six new producing wells.

The Company has budgeted approximately $3.7 million to fund the drilling and completion of 13 new infill wells in the field in 2005. The program is currently scheduled to commence late in the second quarter of 2005. Parallel's average working interest in the Fullerton properties is approximately 82%.

Carm-Ann San Andres Field/N. Means Queen Unit, Andrews & Gaines Counties, Texas - These properties generated approximately 5% of the Company's fourth quarter 2004 daily production (204 BOE per day) and represented approximately 11% of its reserve value as of December 31, 2004.

These properties were acquired during the fourth quarter of 2004, and additional interests were acquired in 2005. On October 14, 2004, the Company announced the acquisition of these properties, which include interests in 25 leases covering 5,360 gross contiguous acres, with 67 gross producing oil wells, for an investment of $13.6 million. This acquisition established a new core operating area that is located within 50 miles of the Company's Midland, Texas, headquarters.

The Company originally budgeted approximately $4.1 million for the Carm-Ann/N. Means Queen properties in 2005 for 22 workovers and 13 new infill wells. The drilling portion of the capital development program has now been expanded to a total of 16 San Andres in-fill wells, of which eight will be drilled on producing well locations, and eight will be drilled on injection well locations. One Queen formation producing well location is also planned. Presently, the company is drilling the second well of this 17-well program. Parallel's average working interest in these properties is approximately 77%.

Diamond M Shallow Leases, Scurry County, Texas - This property generated approximately 4% of the Company's fourth quarter 2004 daily production (155 BOE per day) and represented approximately 13% of its reserve value as of December 31, 2004.

The company completed a 30-well in-fill development program during 2004, with one third of the wells drilled on producing well locations and two-thirds of the wells drilled on injection well locations. All but 2 of the injection wells were initially equipped and allowed to produce prior to their conversion to water injectors for purposes of formation conditioning. At present, eight wells remain to be placed on injection service. The second round of development drilling is scheduled to start late in the year, once the initial waterflood response is evaluated.

The Company has budgeted a total of $5.0 million in 2005 to fund 16 workovers and well conversions in this project throughout the year and for a 15-well development drilling program during the fourth quarter of 2005, pending satisfactory waterflood response. Parallel's average working interest in these properties is approximately 66%.

Diamond M Canyon Reef Unit, Scurry County, Texas - This property generated approximately 4% of the Company's fourth quarter 2004 daily production (163 BOE per day) and represented approximately 9% of its reserve value as of December 31, 2004.

The Company assumed operations of this project in March 2003. Field activity has primarily consisted of facility upgrades, geophysical testing, and the reactivation (workover) of two existing wells during the fourth quarter of 2004. Reactivation and deepening activities are continuing as the company is currently moving into the completion phases of the first two such workovers of the year.

A total of $9.4 million has been budgeted in 2005 to fund the workover of 24 wells, the drilling of 3 new wells, associated equipment upgrades, and the acquisition of a new 3-D seismic survey. Parallel's average working interest in these properties is approximately 66%.

New Mexico Abo Gas Project - This project generated less than 1% of the Company's fourth quarter 2004 daily production (24 BOE per day) and represented less than 1% of its reserve value as of December 31, 2004.

This project consists of two areas in which the primary target is the Abo formation at a depth of approximately 5,000 feet. The Abo formation is a known natural gas-producing reservoir but historically has been marginally economic due to low per-well producing rates and low natural gas prices. Parallel believes this project's reservoir can be more efficiently exploited through the application of new horizontal drilling and hydraulic fracture stimulation technologies.

The Company has budgeted approximately $7.6 million for the New Mexico properties in 2005 for 3 re-entries, 6 new wells, and additional leasehold acquisitions.

Area 1 - This project consists of approximately 60,000 gross (4,800 net) acres. Parallel's base working interest in this area is approximately 8.5%. Since December 2003, Parallel has participated in the drilling of six Abo horizontal gas wells operated by Perenco, LLC. Four wells are currently producing to sales. The Thames No. 1, which went to sales in June 2004, is still producing approximately 1,000 gross Mcf of gas per day, and two of the other wells are each producing approximately 100 gross Mcf of gas per day. The most recent well to go to sales is producing at approximately 200 Mcfpd. The other two wells are awaiting pipeline installation.

The Company also has, within Area 1, an approximate 20% working interest in one well that is operated by EOG Resources. The well was drilled horizontally with a lateral of approximately 4,000 feet. The well was multi-stage fracture stimulated and placed on sales during the last week of February. Though it is very early in the productive history of this well, the Company is encouraged by the performance to date.

Area 2 - This project consists of undeveloped leasehold interests in approximately 61,000 gross (25,500 net) acres, is contiguous to Area 1, and will be operated by Parallel. The Company expects to initiate well operations in the second quarter of 2005 with the re-entry of an old well, for the purpose of data collection. Additional re-entries and horizontal drilling are expected to follow. Techniques and procedures utilized will continue to be refined, based on all available information derived from both Area 1 and Area 2. The Company owns an 85.0% working interest in this area. Based upon the results of the initial wells drilled, Parallel believes this project has the potential to become a multi-well, long-life gas project that will be developed over the next three to five years.

Other Permian Basin Projects - Other Permian Basin projects generated approximately 11% of the Company's fourth quarter 2004 daily production (415 BOE per day) and represented approximately 9% of its reserve value as of December 31, 2004.

The Company has budgeted approximately $2.0 million for other Permian Basin properties in 2005 primarily for lease and well equipment and capitalized overhead.

Non-Strategic Asset Divestiture

In January 2005, Parallel divested interests in 6 Permian Basin assets located in Howard County, Texas, to an unaffiliated third party. Net proceeds from the sale were approximately $2.5 million and resulted in a net reduction in the Company's production of approximately 60 BOE per day. These properties represented less than 0.2% of the Company's total proved reserves as of December 31, 2004. Parallel will continue to evaluate all portfolio assets for economic viability and strategic fit.
    Onshore Gulf Coast of South Texas

Yegua/Frio Gas Project, Jackson and Wharton Counties, Texas - This project generated approximately 23% of the Company's fourth quarter 2004 daily production (853 BOE per day) and represented approximately 9% of its reserve value as of December 31, 2004.

The Company has budgeted approximately $.9 million for the Yegua/Frio gas project in 2005 for the drilling and completion of 3 wells. Two wells are currently drilling. Parallel owns a 10% working interest in one well and a 2.5% working interest in the second well.

Through an acreage contribution, Parallel has participated in the drilling of a 12,000 foot Wilcox well in Jackson County, Texas. The well is currently waiting on completion. Parallel's working interest in the well is approximately 15.9%.

Cook Mountain Gas Project, Liberty County, Texas - This project generated approximately 6% of the Company's fourth quarter 2004 daily production (246 BOE per day) and represented approximately 1% of its reserve value as of December 31, 2004.

The Company has budgeted approximately $.9 million for the Cook Mountain gas project in 2005 for the drilling and completion of 3 wells. One well has been drilled and is waiting on completion. Parallel owns a 5% working interest in the well.
    North Texas

Barnett Shale Gas Project, Tarrant County, Texas - This project does not yet contribute to the Company's current daily production or reserve value.

Parallel's Barnett Shale gas project is located east of downtown Ft. Worth, in Tarrant County, Texas, between the Newark East Barnett Shale gas field to the north in Tarrant County and the Cleburne Barnett Shale gas field to the south in Johnson County. The Company's current leasehold position in the project is approximately 5,000 gross (1,400 net) acres.

The partner group, which is led by Dallas based, Dale Operating, LLC and Parallel, is currently completing the first phase of a pipeline system which will form the central point of the field gathering system, linking the initial well pad and a major transmission line. The first Dale operated horizontal well, the Brentwood No. 1, was spudded on March 9th. Parallel's working interest in the Brentwood No. 1 is 40%. Two subsequent wells are contracted to be drilled from the same surface location, with completion operations being performed sequentially on the three wells once the drilling rig has been moved to a fourth location to complete its final horizontal well in the 4-well contract.

The Company has also participated, through an acreage contribution, in the drilling and completion of the Parrot #1 horizontal well, which is operated by Four Sevens, a Ft. Worth based operator. Openhole logs, stimulation response and flow back results are encouraging. The well is currently waiting on pipeline. This well is located on leasehold contiguous to Parallel's 5,000 gross-acre leasehold position. Parallel's working interest in this well is 20%.

The estimated cost to drill and complete a horizontal well is approximately $2.0 million. Based upon the results of the initial wells drilled, Parallel believes this project has the potential to become a multi-well, long-life gas project that will be developed over the next three to five years.

The Company has budgeted approximately $7.6 million for the Barnett Shale gas project in 2005 for the drilling and completion of 7 new wells, pipeline construction and leasehold acquisition.
    Other Projects

Utah/Colorado CBM (Coal Bed Methane) Gas/Conventional Oil & Gas Projects - The Company's development of this project is expected to begin in the first half of 2005. This project does not yet contribute to the Company's current daily production or reserve value.

Parallel has increased its leasehold acreage position in this project to approximately 138,000 gross acres. It is a multiple zone project consisting of both oil and gas targets at a depth of less than 6,000 feet. Seismic and geological data evaluation on this project continues. Parallel expects to drill a test well during the first half of 2005.

The Company has budgeted approximately $1.4 million for this project in 2005 for the drilling and completion of 1 well, seismic and leasehold acquisition, and multiple core test holes for coal-bed methane potential. Parallel owns and operates 100% of this project.

East Texas Cotton Valley Reef Gas Project - This project does not yet contribute to the Company's current daily production or reserve value.

This 3-D seismic gas project is a higher risk profile than the Company's other projects. The objective is the Cotton Valley barrier reef facies found between the depths of 16,000 and 18,000 feet. The project consists of approximately 5,000 gross (650 net) acres.

The first well was drilled to a total depth of 18,100 feet, during 2004, finding a non-porous Cotton Valley Reef interval. A completion attempt is being made in the Cotton Valley Sands, which are above the Cotton Valley Reef. A large frac treatment has been performed on the zone and it is currently being tested.

The operator is also re-evaluating seismic to help determine other drilling locations with optimal porosity potential from all potential pay zones.

The Company has budgeted approximately $1.1 million for the Cotton Valley Reef gas project in 2005 for the drilling of 1 well and additional leasehold acquisition. Parallel owns an approximate 13.125% working interest in this project.

Management Comments

Larry C. Oldham, Parallel's President, commented, "On February 9, 2005, Parallel sold 5.75 million shares of its common stock in a public offering for $5.27 per share with net proceeds of approximately $28.0 million, which were applied to the Company's line of credit, pending use with respect to our capital investment budget. Our $43.7 million 2005 capital investment budget will be funded from operating cash flow and borrowings under our credit facility."

In a final comment, Oldham stated, "As I stated in our January 11, 2005 press release, our 2005 capital investment budget reflects our confidence in the energy markets, our current project inventory, and our ability to efficiently execute an aggressive development plan to achieve results similar to our 47% increase in proved reserves volumes and 80% increase in proved reserves value during 2004. We are accelerating developmental activity on the Fullerton, Diamond M and New Mexico Abo projects, which were active in 2004, and we have initiated development on the Barnett Shale gas project."

Earnings Release, Conference Call and Webcast Information

Parallel's announcement of its financial results for the third quarter ended December 31, 2004, is expected to be released on Wednesday morning, March 16, 2005, prior to the conference call. The Company's management will host a conference call to discuss its financial and operational results for the fourth quarter and year ended December 31, 2004, on Wednesday, March 16, 2005, at 2:00 p.m. Eastern time (1:00 p.m. Central time). To participate in the call, dial 1-800-591-6923 or 1-617-614-4907, Participant Passcode 81315445, at least five minutes before the scheduled start time. The conference call will also be webcast with slides, and can be accessed live at Parallel's web site, http://www.plll.com. A replay of the conference call will be available at the Company's web site or by calling 1-888-286-8010 or 1-617-801-6888, Passcode 49322722. A written transcript of the conference call, and the supporting slide presentation, will be available on the Company's web site Presentation page at http://phx.corporate-ir.net/phoenix.zhtml?c=79538&p=irol- presentations

The Company

Parallel Petroleum Corporation is headquartered in Midland, Texas and is an independent energy company primarily engaged in the acquisition, development, exploration and production of oil and gas using enhanced oil recovery techniques and 3-D seismic technology. Additional information on Parallel Petroleum Corporation is available at http://www.plll.com.
    This release contains forward-looking statements subject to various risks and uncertainties that could cause the company's future plans, objectives and performance 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," "subject to," "anticipate," "estimate," "continue," "present value," "future," "reserves," "appears," "prospective," 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, the company's growth strategy, 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 its 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 the company with the Securities and Exchange Commission.

--30--CSD/sa*

CONTACT: Parallel Petroleum Corporation, Midland Cindy Thomason, 432-684-3727 http://www.plll.com cindyt@plll.com

KEYWORD: TEXAS INDUSTRY KEYWORD: OIL/GAS BANKING ENERGY PRODUCT SOURCE: Parallel Petroleum Corporation

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