In 2005, natural gas represented approximately 36% of all end-user commercial and residential energy requirements and, thus is a critical component of energy supply 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 22.2 trillion cubic feet, or Tcf, in 2005 to approximately 23.35 Tcf in 2010.

During the last three years, the United States has on average consumed approximately 22.3 Tcf per year, with average annual domestic production of approximately 18.5 Tcf during the same period. Driven by growth in natural gas demand and high natural gas prices, domestic natural gas production is projected to increase from 18.1 Tcf per year to 20.4 Tcf per year between 2005 and 2015.

The Fort Worth Basin, which includes the Barnett Shale formation, is a mature crude oil and natural gas producing basin located in north central Texas. Drilling in the Fort Worth Basin first began in 1912 with the discovery of crude oil. A new fracture technique introduced in 1997, combined with other advances in drilling and completion techniques contributed to a significant increase in production in the basin over the past 5 years.

Data provided by W.D. Von Gonten & Company indicates that natural gas production in the Fort Worth Basin grew approximately 260% from an average of 569 MMcf/d in 2001 to an average of 2,042 MMcf/d during the twelve months ended October 31, 2006. Consequently, the Fort Worth Basin contribution into the total onshore U.S. natural gas production increased rapidly from 1.3% in 2001 to approximately 3.5% by the end of 2005 and continued growing.

Natural gas production grew rapidly in the Quicksilver Counties during this period from a negligible amount in 2001 to an average of 960 MMcf/d in the twelve months ended October 31, 2006, while production in the rest of the Fort Worth Basin increased approximately 100% from 548 MMcf/d to 1,081 MMcf/d in the same period.

The Cowtown Pipeline consists of approximately 120 miles of natural gas gathering pipelines, ranging from 2 inches to 20 inches in diameter. The Cowtown Plant consists of a newly-constructed state-of-the-art 125 MMcf/d natural gas processing unit, which the Company expects to be operational in the first quarter of 2007, and an existing 75 MMcf/d natural gas processing unit which became operational in 2006.

At the Cowtown Plant, the Company processes natural gas to extract the NGLs from the natural gas stream and deliver the residue gas to third party intrastate pipelines. The Company transports the extracted NGLs via its 22-mile pipeline segment from the Cowtown Plant to an interconnecting third party pipeline where it sells the NGLs on behalf of its customers.

The Company is also currently constructing a second interconnect to another third party pipeline. The Cowtown Plant had a total average throughput of 38 MMcf/d and 50 MMcf/d of natural gas in 2006 and for the fourth quarter of 2006, respectively, and an average NGL production of approximately 4,025 Bbls/d for the fourth quarter of 2006. The residue gas is currently being delivered into the Enterprise pipeline. The NGL products are currently being delivered to Chevron via the Company’s NGL pipeline.

As of December 31, 2006, 104 wells were connected to the Company’s system. There are seven producers utilizing the system.

The primary purchaser of the NGLs on the system is currently Targa. Interconnects for the residue gas currently exist with Enterprise at the tailgate of the Cowtown Plant, and Chevron at the terminus of the NGL pipeline. Additionally, the Company is currently connecting its NGL pipeline to the Louis Dreyfus pipeline four miles east of the Cowtown Plant.

Adjusted gross margin increased $3.3 million, or 150%, to $5.5 million in in the year ended December 31, 2006 from $2.2 million in the year ended December 31, 2005.

Operations and maintenance expense increased $5.1 million, or 213%, to $7.5 million in in the year ended December 31, 2006 from $2.4 million in in the year ended December 31, 2005.

General and administrative expense increased $608,000 or 185%, to $937,000 in in the year ended December 31, 2006 from $329,000 in in the year ended December 31, 2005.

Depreciation and amortization increased $2.3 million, or 382%, to $3.0 million in in the year ended December 31, 2006 from $614,371 in in the year ended December 31, 2005.