Each one in plain English, with the numbers worked through for a shareholder.
2 July 2008asset acquisition disposition▲ GoodMajor
On June 26, 2008 Parallel used its preferential right to buy Southwestern Energy subsidiary Diamond M Production's interests in the Diamond M properties in Scurry County, Texas, for about $35.5 million (effective May 1, 2008). This lifts its working interest in the base production from zero to about 89% and in production above the base from 65.7% to 88%, adding about 298 net BOE per day and about 3.5 million BOE of proved reserves. It was paid entirely with borrowings under the new May 2008 credit agreement, and the properties become additional collateral.
On May 16, 2008 Parallel signed a Fourth Amended and Restated Credit Agreement with Citibank, BNP Paribas and five other banks. It replaces the Third Amended agreement (Fourth Amendment of Nov 2007) with a borrowing base of $230.0 million (up from $200 million), a cap of $600.0 million, $100 million drawn at May 21, 2008, and a maturity of December 31, 2013. Interest is LIBOR plus 2.00%-2.50% with a 4.75% floor, a $638,041.85 facility fee was paid, and covenants include a maximum debt-to-EBITDA ratio of 4.00 to 1.00.
On January 4, 2008 Parallel filed to swap its $150 million of 10 1/4% Senior Notes due 2014, issued July 31, 2007, for identical notes registered with the SEC; the terms are substantially the same apart from transfer restrictions. Parallel gets no cash from the swap. The filing also says the borrowing base on the bank revolver was raised from $150 million to $200 million under a Fourth Amendment to the Third Amended and Restated Credit Agreement signed November 30, 2007, and states proved reserves of about 37.4 MMBoe at June 30, 2007.
On December 3, 2007 Parallel agreed to sell 3,000,000 common shares to Jefferies & Company at an initial public offering price of $18.50, expected to close December 6, 2007, under an existing shelf registration. This increases the number of shares outstanding; the filing does not say how the proceeds will be used.
Parallel Petroleum sold $150 million of seven-year unsecured notes at a 10.25% coupon. That rate is what the bond market charged a small West Texas producer for money that could not be called back by a bank.
Fourth-quarter 2006 production averaged 6,124 barrels of oil equivalent a day - 26% above the year before but 8% below the September quarter, as declines in the Barnett Shale and south Texas gas outweighed a gain in the New Mexico Wolfcamp. Growth by acquisition and drilling was starting to be offset by decline in the existing base.
Chesapeake Energy took over as operator of Parallel's West Fork Barnett Shale project after buying the roughly 61% working interest previously held by Dale Gas Partners. Parallel keeps its stake but the drilling pace is now set by a company many times its size.
On August 10, 2006 Parallel agreed to sell 2,500,000 new common shares through Jefferies & Company at $24.20 per share to the underwriter, with an initial public price of $25.25, under an existing shelf registration. This adds shares for existing holders to share the company with; the filing does not state what the proceeds will be used for. It follows the 5,000,000 shares sold in February 2005 at $5.27.
On April 5, 2006 Parallel bought a further small interest in the same Barnett Shale wells from one more seller, Razorback II, LP, for about $573,000 cash drawn on the revolver, lifting its working interest in the sixteen wells from about 36.4% to about 37.3%. It also has an option to pay up to $2,115,837.49 of future costs for half of the seller's undeveloped leasehold. This continues the March 29 purchase on the same terms.
On March 29, 2006 Parallel bought extra interests in its Barnett Shale gas project in Tarrant County, Texas from five unaffiliated sellers for about $5.5 million cash, drawn on its senior revolver. Its working interest in sixteen drilled wells rose from about 28.0% to about 36.4%. It also has an option, not an obligation, to pay up to $20.4 million of future drilling costs for the sellers to earn half of their undeveloped leasehold; the properties are pledged to both lenders.
On March 8, 2006 Parallel concluded that its 2004 annual and several 2004-2005 quarterly financial statements should not be relied on, because its paperwork for treating certain oil, gas and interest rate hedges as cash flow hedges was insufficient for deals made after June 30, 2004. Restated net income is lower: 2004 falls from $5.585 million to $2.271 million, and the March 2005 quarter becomes a $10.704 million loss versus a $550,000 loss reported earlier; retained earnings at September 30, 2005 fall by about $22.8 million. Parallel says covenants will not be breached but has asked lenders for waivers, and a default would occur if the required financial statements are not given to lenders by March 31, 2006 or a waiver is obtained. This is a new problem for the credit facilities set up in late 2005.
18 Jan 2006asset acquisition disposition▲ GoodMajor
On January 12, 2006 Parallel closed the second and final part of the Lynx purchase for $23.4 million, covering about 3.5 million barrels of oil equivalent of proved reserves; the first part closed November 15, 2005 for $20.8 million. Parallel now operates the properties with a 90.0% working interest and 67.5% net revenue interest, funded from its senior revolving credit facility, and the properties are pledged as collateral for both the senior and second-lien loans. This completes the Lynx deal signed in October 2005 and ahead of the January 31, 2006 date that would otherwise have cut the borrowing base by $5.6 million (inference).
Wellington Management Company, LLP reported a PARALLEL PETROLEUM CORP shareholding of 1,544,100 shares (4.52% of votes) in a periodic institutional filing.
On December 23, 2005 Parallel replaced its credit agreement with a Third Amended and Restated one adding four lenders (Compass, Comerica, Bank of Scotland, Fortis). It allows borrowing up to the lesser of $350 million or the borrowing base, now $125 million after the Lynx purchase, and $50 million was outstanding at December 30. The borrowing base drops by $5.6 million if the remaining Lynx properties are not acquired by January 31, 2006. The facility matures October 31, 2010 with margins of 2.00%-2.50% over LIBOR, a 5.00% minimum all-in rate and a $187,500 facility fee, and defaults on the second-lien loan trigger defaults here. This lifts the October 2005 borrowing base of $100 million and supports the Lynx acquisition.
