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PARALLEL PETROLEUM CORP

Parallel Petroleum Announces Fourth Quarter and Year End 2007 Financial Results
2/20/2008

MIDLAND, Texas, Feb 20, 2008 (BUSINESS WIRE) --
Parallel Petroleum Corporation (NASDAQ: PLLL) today announced its financial results for the fourth quarter and year ended December 31, 2007, compared to the results for the same period in 2006. In a separate press release issued today, Parallel announced its production, work-in-progress, 2008 capital investment budget, 2007 reserves and field operations update. The Company's financial and field operations conference call and webcast will be held Thursday, February 21, 2008 at 2:00 p.m. Eastern time (1:00 p.m. Central time). Details for the conference call and webcast are disclosed at the end of this press release.

Fourth Quarter Financial Results

For the three months ended December 31, 2007, Parallel reported a net loss of $8.3 million, or a loss of $0.21 per diluted share. Included in the net loss was a $25.6 million pre-tax loss on derivatives, which included settlements of $6.7 million. Parallel had no derivatives classified as hedges during the fourth quarter of 2007. For the three months ended December 31, 2006, Parallel recorded net income of $11.1 million, or $0.29 per diluted share. Included in net income for the three months ended December 31, 2006 was a $2.7 million pre-tax gain on derivatives, which included settlements of $0.3 million and a gain on the sale of partnership assets in West Fork Pipeline Company of approximately $9.0 million.

For the fourth quarter of 2007, Parallel's oil and natural gas sales were 254 MBbls of oil and 2,179 MMcf of natural gas, or 617 MBOE. During this period, the average unhedged prices the Company received for its oil and natural gas were $84.77 per barrel and $6.68 per Mcf, or $58.46 per BOE. For the same period of 2006, oil sales were 289 MBbls at an average unhedged price of $53.93 per barrel and natural gas sales were 1,645 MMcf at an average unhedged price of $6.43 per Mcf, or 563 MBOE at an average unhedged price of $46.46 per BOE ($42.47 per BOE, net of the effect of hedges).

When comparing the fourth quarter of 2007 to the fourth quarter of 2006, oil and gas operating revenues increased approximately 51% to $36.1 million and total costs and expenses increased approximately 26% to $18.7 million, which increased operating income approximately 91% to $17.3 million. Total operating costs and expenses increased primarily due to increases in lease operating expense, general and administrative expense, and depreciation, depletion and amortization costs. Interest expense increased approximately 68% to $5.7 million.

Year End Financial Results

For the twelve months ended December 31, 2007, Parallel reported a net loss of $4.7 million, or a loss of $0.12 per diluted share. Included in the net loss was a $36.8 million pre-tax loss on derivatives, which included settlements of $16.6 million. Parallel had no derivatives classified as hedges during the twelve months ended December 31, 2007. The net loss also included a $0.8 million non-cash write off of previously capitalized debt issuance costs associated with the Company's Second Lien Term Loan that was retired with the proceeds of its July 2007 senior notes offering. For the twelve months ended December 31, 2006, Parallel recorded net income of $26.2 million, or $0.71 per diluted share. Included in net income for the twelve months ended December 31, 2006 was a $2.8 million pre-tax gain on derivatives, which included settlements of $3.9 million and a gain on the sale of partnership assets in West Fork Pipeline Company of approximately $9.0 million.

For the twelve months ended December 31, 2007, Parallel's oil and natural gas sales were 1,051 MBbls of oil and 7,422 MMcf of natural gas, or 2,288 MBOE. During this period, the average unhedged prices the Company received for its oil and natural gas were $65.97 per barrel and $6.29 per Mcf, or $50.72 per BOE. For the same period of 2006, oil sales were 1,137 MBbls at an average unhedged price of $59.86 per barrel and natural gas sales were 6,539 MMcf at an average unhedged price of $6.19 per Mcf, or 2,227 MBOE at an average unhedged price of $48.73 per BOE ($43.56 per BOE, net of the effect of hedges).

When comparing the twelve months ended December 31, 2007 to the twelve months ended December 31, 2006, oil and gas operating revenues increased approximately 20% to $116.0 million and total costs and expenses increased approximately 18% to $67.1 million, which increased operating income approximately 21% to $49.0 million. Total operating costs and expenses increased primarily due to increases in lease operating expense, general and administrative expense, and depreciation, depletion and amortization costs. Interest expense increased approximately 55% to $19.2 million. Cost of debt retirement of $0.8 million represents the write off of previously capitalized debt issuance costs associated with the Company's Second Lien Term Loan that was retired with the proceeds of its senior notes offering.

When comparing the twelve months ended December 31, 2007 to the twelve months ended December 31, 2006, net cash provided by operating activities increased approximately 3% to $76.6 million, net cash used in investing activities decreased approximately 17% to $167.4 million, and net cash provided by financing activities decreased approximately 26% to $92.7 million.

Balance Sheet Review

At December 31, 2007, current assets were $45.6 million, which included $7.8 million of cash and cash equivalents. Current liabilities were $78.9 million, including current derivative obligations of $30.4 million. Long-term liabilities were $249.0 million, including $205.4 million of debt and $13.2 million of derivative obligations. The borrowing base under the Company's revolving credit facility was $200.0 million as of December 31, 2007, and outstanding borrowings under the revolving credit facility at that same date were $60.0 million. In addition, the Company had $150.0 million outstanding under its senior notes. As of December 31, 2007, the Company's net capitalized costs associated with its oil and gas properties and other equipment were $506.0 million. Stockholders' equity was $235.3 million.

Management Comments

Larry C. Oldham, Parallel's President, commented, "On July 31, 2007, we completed a $150.0 million private offering of senior notes. The net proceeds of approximately $143.5 million were used first to retire our $50.0 million Second Lien Term Loan with the remainder being applied to our revolving credit facility. On December 6, 2007, we sold 3,000,000 shares of common stock in a public offering for $18.50 per share, realizing net proceeds of approximately $52.5 million. We used the net proceeds to repay borrowings under our revolving credit facility. We anticipate that the net proceeds will be available under our revolving credit facility as needed in the future to finance our exploitation, development and acquisition activities. Due to an increase in our proved developed producing (PDP) reserves, our bank lenders increased the borrowing base under our revolving credit facility to $200.0 million in December 2007. Our outstanding borrowings as of December 31, 2007 were $60.0 million."

Oldham further commented, "Our balance sheet and our liquidity were strengthened by the senior notes and equity offerings and the increase in our borrowing base. Our $140.0 million availability at December 31, 2007 under our revolving credit facility and our operating cash flow will be used to finance our $127.2 million capital investment budget in 2008 and potential producing property acquisitions."

In a final comment, Oldham stated, "Our focus in 2008 is to increase production and proved developed producing (PDP) reserves. Our 2008 production and PDP reserves growth have already begun and are expected to increase as drilling continues and take-away capacity is increased in the Barnett Shale project; development drilling continues in our New Mexico Wolfcamp project; infill development drilling advances in the Diamond M Canyon Reef project; and waterflood implementation and associated infill development drilling continue in our Carm-Ann and Harris San Andres projects."