The midstream natural gas industry is the link between the exploration and production of natural gas and the delivery of its components to end-use markets and consists of natural gas gathering, compression, dehydration, treating, processing, fractionation and transportation. The midstream industry is generally characterized by regional competition based on the proximity of gathering systems and processing plants to natural gas producing wells.

Natural gas continues to be a critical component of energy consumption in the United States. According to the Energy Information Administration, or the EIA, total domestic consumption of natural gas is expected to increase by over 2.5% per annum, on average, to 25.6 trillion cubic feet, or Tcf, by 2010, from an estimated 22.1 Tcf consumed in 2004, representing approximately 23.8% of all total end-user energy requirements by 2010. During the last three years, the United States has on average consumed approximately 22.4 Tcf per year, with average domestic production of approximately 19.0 Tcf per year during the same period.

The industrial and electricity generation sectors are the largest users of natural gas in the United States. During the last three years, these sectors accounted for approximately 56% of the total natural gas consumption in the United States. According to the EIA, consumption in the industrial and electricity generation sectors is expected to increase by over 3.1% per annum, on average, to 14.8 Tcf in 2010 from an estimated 12.3 Tcf in 2004.

The Eagle Chief gathering system is located in northwest Oklahoma and consists of approximately 524 miles of natural gas gathering pipelines, ranging from two inches to 16 inches in diameter, and the Eagle Chief processing plant. The gathering system has a capacity of approximately 30,000 Mcf/d and average throughput was approximately 20,020 Mcf/d for the nine months ended September 30, 2004. There are four gas compressor stations located within the gathering system, comprised of nine units with an aggregate of approximately 7,875 horsepower.

The Worland gathering system is located in central Wyoming and consists of approximately 151 miles of natural gas gathering pipelines, ranging from two inches to eight inches in diameter, the Worland processing plant, a natural gas treating facility and a fractionation facility. The gathering system has a capacity of approximately 8,000 Mcf/d and average throughput was approximately 4,050 Mcf/d for the nine months ended September 30, 2004. There are four gas compressor stations located within the gathering system, comprised of six units with an aggregate of approximately 2,200 horsepower.

The Badlands gathering system is located in southwestern North Dakota and consists of approximately 108 miles of natural gas gathering pipelines, ranging from two inches to eight inches in diameter, the Badlands processing plant, a natural gas treating facility and a fractionation facility. The gathering system has a capacity of approximately 5,000 Mcf/d and average throughput was approximately 3,230 Mcf/d for the nine months ended September 30, 2004.

Midstream purchases were $59.8 million for the nine months ended September 30, 2004 compared to $46.0 million for the nine months ended September 30, 2003, an increase of $13.9 million, or 30.2%.

Operations and maintenance expenses totaled $3.6 million for the nine months ended September 30, 2004 compared with $2.6 million for the nine months ended September 30, 2003, an increase of $1.0 million, or 40.4%.

Depreciation and amortization totaled $3.0 million for the nine months ended September 30, 2004 compared with $2.2 million for the nine months ended September 30, 2003, an increase of $0.8 million, or 36.2%.