The midstream natural gas industry is the link between exploration and production of raw natural gas and the delivery of its components to end-use markets. The midstream natural gas industry in North America includes approximately 574 processing plants that process approximately 47 Bcf of natural gas per day and produce approximately 77 million gallons per day of natural gas liquids, or NGLs. The midstream industry is generally characterized by regional competition based on the proximity of gathering systems and processing plants to natural gas wells.

Natural gas continues to be a critical component of energy consumption in the United States. According to the Energy Information Administration, or EIA, total annual domestic consumption of natural gas is expected to increase from approximately 22.1 trillion cubic feet, or Tcf, in 2004 to approximately 25.4 Tcf in 2010, representing an annual growth rate of over 2.3%. During the five years ending December 31, 2004.

During 2004 and the six months ended June 30, 2005, overall portfolio of processing contracts reflected a net short position in natural gas and a net long position in NGLs. As a result, during these periods gross margins were positively impacted to the extent the price of NGLs increased in relation to the price of natural gas and were adversely impacted to the extent the price of NGLs declined in relation to the price of natural gas. In keeping with strategy of reducing commodity price exposure, however, adjusted contract portfolio, which will result in a shift of its overall natural gas position to a slightly long position going forward, while retaining a long physical NGL position.

The Company continuously seeks new sources of raw natural gas supply to increase throughput volume on its systems and through its plants. The Company connected 44 new wells in 2004 and 61 new wells during the first six months of 2005, including connections of central delivery points which may have multiple wells behind them.

The Company’s natural gas gathering and processing assets consist primarily of five large natural gas gathering systems and four active cryogenic gas processing plants which are located in north Louisiana, West Texas and the mid-continent region of the United States.

The Company’s north Louisiana system includes the Dubach and Lisbon processing plants and the Dubach/ Calhoun/ Lisbon gathering system, which is a large integrated natural gas gathering and processing system located primarily in four parishes of north Louisiana and includes over 800 miles of gathering pipelines. The Company offers producers wellhead to market services, including natural gas gathering, compression, processing, marketing and transportation.

The Dubach processing plant is a cryogenic natural gas processing plant that processes raw natural gas gathered on the Dubach and Calhoun gathering systems and natural gas transported on the Company’s Intrastate Pipeline system.

The Company’s west Texas gathering system (Waha) is a large integrated natural gas gathering and processing system in west Texas. The Waha gathering system consists of 750 miles of natural gas gathering pipelines and the Waha processing plant. The system covers four Texas counties surrounding the Waha Hub, one of Texas’ major natural gas market areas. Through its Waha gathering system, the Company offers producers wellhead to market services.

The Company’s mid-continent gathering assets are extensive systems that gather, compress and dehydrate low-pressure gas from approximately 1,500 wells. These systems are geographically concentrated, with each central facility located within 90 miles of the others. The Company operates its mid-continent gathering systems at low pressures to increase the total throughput from the connected wells. Wellhead pressures are therefore adequate to access the gathering lines without the cost of wellhead compression. In addition, the Company processes natural gas from the Mocane-Laverne gathering system at its Mocane processing plant.

Gross margin for the six months ended June 30, 2005 decreased to $25.6 million from $30.0 million for the same period in 2004.

General and administrative expense increased to $5.9 million in the six months ended June 30, 2005 from $3.2 million for the same period in 2004.

Depreciation and amortization increased to $10.4 million in the six months ended June 30, 2005 from $5.2 million in the same period in 2004.

Interest expense increased $4.4 million or 116% in the six months ended June 30, 2005 compared to the same period in 2004.