(unaudited)
(unaudited) Pro forma
March 31, Pro forma March 31,
2002 Adjustments 2002
------------ --------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,249,109 5,501,703 (a) $ 6,750,812
Accounts receivable:
Oil and gas 1,265,973 1,265,973
Others, net of allowance for doubtful
account of $0 in 2001 and 2002 242,546 242,546
Affiliate 31,262 31,262
------------ ----------- -----------
1,539,781 1,539,781
Fair value of derivative instruments 51,246 51,246
Other assets 111,549 111,549
------------ ----------- -----------
Total current assets 2,951,685 5,501,703 8,453,388
------------ ----------- -----------
Property and equipment, at cost:
Oil and gas properties, full cost method 87,538,232 87,538,232
Other 566,807 566,807
------------ ----------- -----------
88,105,039 88,105,039
Less accumulated depreciation and depletion (57,209,008) (57,209,008)
------------ ----------- -----------
Net property and equipment 30,896,031 30,896,031
------------ ----------- -----------
Net deferred tax asset 6,616,397 (6,616,397)(c) -
Investment in First Permian 157,471 (157,471)(b) -
Marketable securities, available for sale - 25,580,339 (a) 25,580,339
Other assets, net of accumulated amortization
of $55,984 in 2001 and $65,097 in 2002 70,619 70,619
------------ ----------- -----------
$40,692,203 $24,308,174 $65,000,377
============ =========== ===========
F-3
(unaudited) Pro forma
March 31, Pro forma March 31,
2002 Adjustments 2002
------------- -------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 3,300,000 $ 3,300,000
Accounts payable and accrued liabilities:
Trade 2,728,007 1,481,515(d) 4,209,522
------------- ------------ ------------
6,028,007 1,481,515 7,509,522
------------- ------------ ------------
Long-term debt, excluding current maturities 9,265,589 9,265,589
Deferred taxes payable - 3,688,673(c) 3,688,673
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 2001 and 2002 97,450 97,450
Common stock -- par value $.01 per share, authorized 60,000,000
shares, issued and outstanding 20,663,861 in 2001 and 2002 206,639 206,639
Additional paid-in capital 33,941,323 33,941,323
Retained earnings (deficit) (8,846,805) 19,137,986 10,291,181
------------- ------------ ------------
Total stockholders' equity 25,398,607 19,137,986 44,536,593
Commitments and contingencies
------------- ------------ ------------
$40,692,203 $ 24,308,174 $65,000,377
============= ============ ============
*The balance sheet as of December 31, 2001 has been derived from Parallel's
audited financial statements.
____________________
(a) To record proceeds from the sale of oil and gas properties by First
Permian, L.P. As of the date of this report, Parallel has not determined
the use of the cash proceeds from the sale of First Permian's properties,
but expects such proceeds will be used for working capital purposes,
capital expenditures, the reduction of outstanding bank debt or a
combination of any of the foregoing.
(b) To remove remaining investment in First Permian, net of Parallel's share of
first quarter net loss and adjust gain from the sale.
(c) To remove tax asset related to carryforwards utilized and record taxes due
as a result of the estimated taxable gain on the sale of Parallel's equity
interest in First Permian.
(d) To record incentive awards payable to employees as a result of the sale of
First Permian.
F-4
Year Ended
December 31, Pro forma Pro forma
2001 Adjustments Amount
---------------- ------------- ---------------
Oil and gas revenues $ 17,840,024 $17,840,024
---------------- ------------- ---------------
Cost and expenses:
Lease operating expense 3,920,840 3,920,840
General and administrative 1,346,454 1,481,515 (d) 2,827,969
Depreciation, depletion and amortization 6,318,105 6,318,105
Impairment of oil and gas properties 16,819,813 16,819,813
---------------- ------------- ---------------
28,405,212 1,481,515 29,886,727
---------------- ------------- ---------------
Operating income (loss) (10,565,188) (1,481,515) (12,046,703)
---------------- ------------- ---------------
Other income (expense), net:
Equity in income loss of First Permian, LLC 840,529 (840,529)(b) -
Gain on Sale of Equity Investment 31,082,042 (a)
366,765 (b) 31,448,807
Change in fair value of derivatives - -
Interest income 142,948 142,948
Other income 93,922 93,922
Interest expense (802,017) (802,017)
Other expense (529,317) (529,317)
---------------- ------------- --------------
Total other expense, net (253,935) 30,608,278 30,354,343
---------------- ------------- ---------------
Income (loss) before income taxes (10,819,123) 29,126,763 18,307,640
Income tax expense (benefit), net (6,111,548) 11,007,082 (c) 17,118,630
---------------- ------------- --------------
Net income (loss) $ (4,707,575) $ 40,133,845 $35,426,270
Cumulative preferred stock dividend (609,063) (609,063)
---------------- ------------- --------------
Net income (loss) available to common stockholders $ (5,316,638) $ 40,133,845 $34,817,207
================ ============= ==============
Net income (loss) per common share:
Basic $ (0.26) $ 1.94 $ 1.68
================ ============= ==============
Diluted $ (0.26) $ 1.94 $ 1.68
================ ============= ==============
Weighted average common share outstanding
Basic 20,663,861 20,663,861 20,663,861
================ ============= ==============
Diluted 20,663,861 20,663,861 20,663,861
================ ============= ==============
*The balance sheet as of December 31, 2001 has been derived from Parallel's
audited financial statements.
________________________
(a) To record proceeds from the sale of oil and gas properties by First
Permian, L.P. As of the date of this report, Parallel has not determined
the use of the cash proceeds from the sale of First Permian's properties,
but expects such proceeds will be used for working capital purposes,
capital expenditures, the reduction of outstanding bank debt or a
combination of any of the foregoing.
(b) To remove remaining investment in First Permian, net of Parallel's share of
first quarter net loss and adjust gain from the sale.
(c) To remove tax asset related to carryforwards utilized and record taxes due
as a result of the estimated taxable gain on the sale of Parallel's equity
interest in First Permian.
(d) To record incentive awards payable to employees as a result of the sale of
First Permian.
F-5
Three Months
Ended
March 31,
------------ Pro forma Pro forma
2002 Adjustments Amount
------------ ----------- ------------
Oil and gas revenues $ 1,971,191 $ 1,971,191
----------- ------------ ------------
Cost and expenses:
Lease operating expense 549,376 549,376
General and administrative 349,764 1,481,515 (d) 1,831,279
Depreciation, depletion and amortization 1,354,630 1,354,630
Impairment of oil and gas properties
----------- ------------ ------------
2,253,770 1,481,515 3,735,285
----------- ------------ ------------
Operating income (loss) (282,579) (1,481,515) (1,764,094)
----------- ------------ ------------
Other income (expense), net:
Equity in income loss of First Permian, LLC (316,293) 316,293 (b) -
Gain on Sale of Equity Investment 31,082,042 (a)
(473,764)(b) 30,608,278
Change in fair value of derivatives (339,858) (339,858)
Interest income 10,378 10,378
Other income 5,997 5,997
Interest expense (153,057) (153,057)
Other expense (172,066) (172,066)
----------- ------------ ------------
Total other expense, net (964,899) 30,924,571 29,959,672
----------- ------------ ------------
Income (loss) before income taxes (1,247,478) 29,443,056 28,195,578
Income tax expense (benefit), net (478,727) 10,712,897 (c) 10,234,170
----------- ------------ ------------
Net income (loss) $ (768,751) $ 18,730,159 $ 17,961,408
Cumulative preferred stock dividend (146,175) (146,175)
----------- ------------ ------------
Net income (loss) available to
common stockholders $l(914,926) $ 18,730,159 $ 17,815,233
=========== ============ ============
Net income (loss) per common share:
Basic $ (0.04) $ 0.90 $ 0.86
=========== =========== ============
Diluted $ (0.04) $ 0.90 $ 0.86
=========== =========== ============
Weighted average common share outstanding
Basic 20,663,861 20,663,861 20,663,861
=========== =========== ============
Diluted 20,663,861 20,663,861 20,663,861
=========== =========== ============
______________
(a) To record proceeds from the sale of oil and gas properties by First
Permian, L.P. As of the date of this report, Parallel has not determined
the use of the cash proceeds from the sale of First Permian's properties,
but expects such proceeds will be used for working capital purposes,
capital expenditures, the reduction of outstanding bank debt or a
combination of any of the foregoing.
(b) To remove remaining investment in First Permian, net of Parallel's share of
first quarter net loss and adjust gain from the sale.
(c) To remove tax asset related to carryforwards utilized and record taxes due
as a result of the estimated taxable gain on the sale of Parallel's equity
interest in First Permian.
(d) To record incentive awards payable to employees as a result of the sale of
First Permian.
F-6