Parallel Petroleum Corp., Midland, Texas, (Nasdaq: PLLL) has exercised its preferential right to purchase interests in its operated Diamond M properties in Scurry County, Texas, from Southwestern Energy Co., Houston, (NYSE: SWN) for approximately $35.5 million.

The acquisition involves an 89% working interest in the base production and reserves and a 22.3% working interest in the production and reserves above the base. As used in Parallel’s original agreement with Southwestern, the base production and reserves refers to future production and reserves defined by an established base production decline curve as of Dec.19, 2001. Prior to this acquisition, Parallel did not own an interest in the base production and reserves but owned a 65.7% working interest in the production and reserves above the base.

This acquisition increases Parallel’s current working interest ownership in the base production and reserves from zero to approximately 89% (77% net revenue interest), and in the production and reserves above the base from 65.7% working interest to 88% (76% net revenue interest).

Production is approximately 298 net barrels of oil equivalent per day. Proved reserves are approximately 3.5 million barrels of oil equivalent (46% proved developed producing).

The Diamond M project consists of the Lion Diamond M (Canyon Reef) Unit, which produces from intervals between 6,500 and 7,000 feet, and the Diamond M (Glorieta, Clearfork and Wichita Albany) shallow leases, which produce from intervals between 2,600 to 4,000 feet. The Diamond M assets are on the Pennsylvanian-age Horseshoe Atoll between Sacroc and Sharon Ridge Canyon Reef units.

Parallel president and chief executive Larry Oldham says, “We believe this acquisition significantly enhances our existing opportunities for continuing and accelerating development in our Diamond M project. This acquisition illustrates the basic tenets of our ‘acquire and exploit’ strategy: a focus on quality assets that are significant in size and opportunity; that are synergistic to existing operations; and that are, or will be, controlled by Parallel.”

The effective date is May 1. Parallel financed the deal with debt.

Parallel operates in the Permian Basin of West Texas and New Mexico, North Texas Barnett Shale, onshore Gulf Coast of South Texas, East Texas and Utah/Colorado.