Parallel Energy Trust declared its fourth quarter production and provided an update on its operating plans for 2012.

The Trust estimates that its average production for the fourth quarter of 2011 was approximately 3,800 boe/day, consisting of 2546 barrels of condensate and natural gas liquids ("NGLs") (67% of total production) and the balance consisting of natural gas. Production during the quarter was a ten percent increase since Parallel acquired the asset in April 2011, and a four percent increase over average production for the third quarter of 2011. During the fourth quarter, production increased to a peak of 4,100 boe/day in early November but subsequently fell from that level as a result of the impact of several isolated operational issues resulting from inclement weather and lower than anticipated results from wells drilled in November and December.

Parallel benefited from a material improvement in condensate yields during the fourth quarter of 2011. Fourth quarter production was comprised of approximately 25% condensate and 42% natural gas liquids ("NGLs"), with the remaining 33% as natural gas, as compared with 20%, 45% and 35%, respectively, in the third quarter. The improved condensate yield and lower natural gas volumes as a percentage of total production materially improved the value of production as condensate receives approximately 80% of WTI pricing. Parallel's condensate production is also collected at the field level, eliminating processing fees, which are between 8% and 10% of production for natural gas and NGLs. The improved condensate yield was due both to ongoing recovery improvement efforts in the field and colder weather, which results in more condensate falling out of the gas stream.

"Our fourth quarter production was impacted by a number of factors that occurred simultaneously, brought on in part by the impact of unusually inclement weather. Taken individually, and spread out over the course of a full operating year, the impact on each quarter would have been much less visible," said Dennis Feuchuk, President and CEO of Parallel Energy Trust. "Our focus remains on preserving the stability of our distributions. We believe strongly that our solid exposure to condensate and NGL prices, disciplined hedging approach and extensive planned drilling program for 2012 have us well positioned to comfortably maintain distributions."

Production

Based on field data, production capacity relating to Parallel's 59% interest in the Panhandle field at year-end 2011 was approximately 4,000 boe/day and production is currently running at these levels. Parallel had forecasted an exit rate at December 31, 2011 of approximately 4,350 boe/day; however, production was impacted by below-forecast results from some of the dual lateral wells drilled and the abandonment of one well bore. This will not impact distributions. Unusually cold weather and large amounts of snow encountered in northern Texas in late 2011 resulted in unscheduled downtime at third party plants that process Parallel's production, caused wells to freeze up and severely limited access to the field. Parallel has encountered difficulties with extreme weather and unscheduled processing plant outages a number of times in 2011, all of which have impacted production. Planning is currently underway to minimize the effects of weather on production in the future and to address plant reliability issues.

With respect to drilling results, Parallel had originally forecasted that nine gross dual lateral wells would be completed in the fourth quarter. Ultimately, eight gross dual lateral wells were drilled during the quarter of which seven were completed. On average, the dual laterals drilled during the quarter did not meet expectations of initial production of 85 boe/day gross, although they continue to provide economic returns with a return on drilling costs of greater than 30%. Three of the last four gross wells drilled in the fourth quarter produced an average of 25 boe/day gross per well. In addition, a well that spud in early December was abandoned in late December due to downhole problems that rendered the wellbore unusable. The rig has since been moved 15 metres and it is expected the new well will be completed in January 2012.

Drilling Plans

Parallel anticipates that during its 189 well drilling program, it will from time to time produce results that both exceed and fall short of its targets, but that on average, results will remain within the expected range, and that the Trust will continue to meet its targets on an overall basis. In particular, the results of three of the last four wells completed in 2011 are not representative of results achieved on average in 2011 and Parallel does not believe that these results reflect the results that will be achieved on an average basis going forward.

Production results have indicated, however, that dual lateral wells, while still economic, may not provide competitive returns to single laterals or lateral sidetracks. Dual laterals have not resulted in production materially above comparable single laterals and the longer time to completion for dual laterals results in less frequent production additions. Parallel therefore plans to prioritize single laterals ahead of dual laterals, thus shifting its drilling focus to predominantly single laterals and lateral sidetracks for 2012. This decision is intended to allocate capital to the highest return projects first, since, as noted, these wells continue to provide economic returns.

Based on the original reserve report, there are 189 gross drilling locations on Parallel's property, of which to date 23 have been drilled and completed, representing 12% of total drilling inventory. There remain more than 165 gross drilling locations in Parallel's current inventory and drilling and completion methods are continuing to be evaluated to maximize the economic return from all capital spending.

Parallel believes that overall, its 2012 drilling program will generate production levels and returns consistent with those obtained in the second and third quarters of 2011.

2012 Production Forecast

Due to the operational issues and drilling results achieved in the fourth quarter and the resulting exit rate, Parallel has revised its expected production levels for 2012. Parallel is now anticipating production net to Parallel to average between 4,200 and 4,500 boe/day (as compared to its original forecast of 4,600 to 4,800 boe/day) with 2012 exit production rate forecasted to be between 4,500 to 4,700 boe/day net to Parallel. The main assumptions underlying this forecast are as follows:

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