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 annual domestic consumption of natural gas is expected to increase from approximately 20.4 trillion cubic feet, or Tcf, (55.9 Bcf/d) in 2005 to approximately 21.6 Tcf (59.3 Bcf/d) in 2010, representing an average annual growth rate of over 1.2% per year. By 2010, natural gas is expected to represent approximately 22% of all end-user domestic energy requirements. From 2001 to 2005, the United States has on average consumed approximately 22.4 Tcf per year (61.5 Bcf/d) with average annual domestic production of approximately 18.9 Tcf (51.9 Bcf/d) during the same period.

The Company’s\\\\\\\' midstream operations consist of gathering and compressing natural gas to facilitate its transportation to Hiland Partners\\\\\\\' processing plants, third party pipelines, utilities and other consumers; dehydrating natural gas to ensure that the natural gas stream meets pipeline quality specifications; treating natural gas to remove or reduce impurities such as carbon dioxide, hydrogen sulfide and other contaminants to ensure that the natural gas meets pipeline quality specifications; processing natural gas to extract NGLs and selling the resulting residue natural gas and, in most cases, the NGLs; and fractionating a portion of the extracted NGLs into a mix of NGL products, including ethane, propane and a mixture of butane and natural gasoline, and selling these NGL products to third parties. The Company’s midstream assets include: Eagle Chief, Bakken, Worland, Badlands, Matli, and Kinta Area Gathering Systems. The Company also owns three natural gas gathering systems located in Texas, Mississippi and Oklahoma.

The Eagle Chief gathering system is a 557-mile gas gathering system located in northwest Oklahoma that gathers, compresses, dehydrates and processes natural gas. The system includes the Eagle Chief processing plant and four compressor stations, which are comprised of ten units with approximately 9,800 horsepower. The Bakken gathering system is a 273-mile gas gathering system located in Richland County, Montana that gathers, compresses, dehydrates and processes natural gas. This system includes the Bakken processing plant, two compressor stations, which are comprised of four units with approximately 6,565 horsepower and one fractionation facility.

The Worland gathering system is a 151-mile gas gathering system located in central Wyoming that gathers, compresses, dehydrates, treats and processes natural gas, and fractionates NGLs. The system includes the Worland processing plant, four compressor stations, one treating facility and one fractionation facility. The Badlands gathering system is a 108-mile gas gathering system located in southwest North Dakota that gathers, compresses, dehydrates, treats and processes natural gas, and fractionates NGLs. The system includes the Badlands processing plant, four compressor stations, one treating facility and one fractionation facility.

Midstream purchases were $41.5 million for the three months ended March 31, 2006 compared to $20.2 million for the three months ended March 31, 2005, an increase of $21.3 million, or 105.6%.

Operations and maintenance expense totaled $2.6 million for the three months ended March 31, 2006 compared with $1.6 million for the three months ended March 31, 2005, an increase of $1.0 million, or 63.2%.

Depreciation, amortization and accretion expense totaled $4.1 million for the three months ended March 31, 2006 compared with $1.7 million for the three months ended March 31, 2005, an increase of $2.5 million, or 146.7%.