Parallel Petroleum Corporation has announced its estimated second quarter 2007 production, work-in-progress well operations, a change in its method of recognizing proved undeveloped (PUD) reserves related to its horizontal drilling gas projects and revised proved reserves as of March 31, 2007.
Estimated Second Quarter 2007 Production
Parallel’s estimated net daily production for the second quarter ended June 30, 2007 averaged 6,035 equivalent barrels of oil per day (BOEPD), an increase of 3% when compared to an average of 5,859 BOEPD during the first quarter ended March 31, 2007. The Company’s two emerging resource gas projects increased 12%, from 2,079 to 2,326 BOEPD, due to increased drilling and completion activity. This increase was partially offset by a 7% decrease in the Company’s short-life South Texas gas properties, from 552 to 513 BOEPD, due to the divestiture of non-core assets and normal decline, and a 1% decrease in the Company’s long-life Permian Basin oil projects, from 3,228 to 3,196 BOEPD, due to normal decline on base production and limited development activity during the second quarter 2007.
During the first week of July 2007, 3 gross (1.1 net) Barnett Shale wells were turned to sales at an estimated combined initial test rate of 10,500 gross (2,900 net) Mcf of gas per day, or 483 net BOEPD, and 2 gross (1.7 net) Wolfcamp wells were turned to sales at an estimated combined initial test rate of 2,700 gross (1,800 net) Mcf of gas per day, or 300 net BOEPD. Due to the uncertainties associated with dates of first commercial production, the nature of initial test data, and the natural decline rates associated with the Company’s historical base production, management cautions investors not to combine initial test data with actual historical production for the purpose of estimating the Company’s current net daily production or place undue reliance on initial test data.
Work-in-Progress Well Operations
As of July 12, 2007, the Company had 20 gross (8.5 net) wells in progress, including 13 gross (5.3 net) wells that were shut-in awaiting pipeline, completing or awaiting completion, and 7 gross (3.2 net) wells that were drilling. Of the 13 wells that were shut-in awaiting pipeline, completing or awaiting completion, 11 gross (3.7 net) were in the Barnett Shale and 2 gross (1.6 net) were in the Wolfcamp. Of the 7 wells that were drilling, 4 gross (1.4 net) were drilling in the Barnett Shale and 3 gross (1.8 net) were drilling in the Wolfcamp.
Change in Method of Recognizing PUD Reserves Related to Horizontal Drilling Gas Projects
Parallel has changed its method of recognizing PUD reserves related to its horizontal drilling gas projects as of March 31, 2007. Under this new method, which the Company believes conforms with regulatory requirements applicable to ”horizontal well” reserve booking practices for publicly owned exploration and production companies, estimates of PUD reserves from future horizontal wells will be limited to two parallel offset wells to a productive horizontal well, unless productive continuity is demonstrated through pressure communication between wells more than an offset location away and on either side of a future horizontal well.
Revised Proved Reserves as of March 31, 2007
As of March 31, 2007, on its New Mexico Wolfcamp gas project, the Company had 40 gross (17.1 net) PDP wells and had recognized 36 gross (20.7 net) associated PUD locations. As a result of the new method discussed above, these New Mexico PUD locations have been revised from 36 gross (20.7 net) to 15 gross (8.7 net) PUD locations as of March 31, 2007. Total proved reserve volumes decreased approximately 6% as of that same date, and the effect on the Standardized Measure of Discounted Future Net Cash Flows was less than 1%. This new method had no effect on reserves in other areas including the Barnett Shale PUD reserves as of March 31, 2007.
The revised March 31, 2007 proved reserves were 49% proved developed producing (PDP), 3% proved developed non-producing (PDNP), and 48% proved undeveloped (PUD). Approximately 80% of the PUD reserves are assigned to the Company’s Permian Basin long-life oil properties and 20% are assigned to its two resource gas projects. The March 31, 2007 proved reserves by volume were 76% oil and 24% natural gas. Please refer to Table 1 below for information pertaining to total proved reserves by category as of March 31, 2007. The table shows the effect of the revisions to the PUD and total proved reserves.
The Company’s Permian Basin long-life oil projects represented approximately 85% of its proved reserves value (before income taxes), and its two resource gas projects represented approximately 12% of such value. The NYMEX price per barrel was $65.88 and the NYMEX price per Mcf of natural gas was $7.48 as of March 31, 2007. Please refer to Table 2 below for detail of proved reserves by area/property as of March 31, 2007. [Source]