Inside Look at Processing Trends

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1 In This Issue Vol 25, Issue 44 November 07, 2007 Talisman Energy s New CEO Suspends Plans to Sell Midstream Assets CEO: Plains All American Pipeline, L.P. Positioned to Finance Organic Growth or Acquisitions Atlas Pipeline Partners, Citing Q3 acquisitions, Says Record Quarter is Just the Beginning Margin in mmbtus for NGL Fractionation Exceeds $10 Copano Energy Reports Q3 NGL Growth Penn Virginia GP Holdings Raises Distribution ONEOK Partners Cites Increased Prices and Volumes of NGL for Higher Earnings Guidance Williams Partners, LP Plans to Acquire Wamsutter System from Williams Normal Butanes Inventory Analysis INVESTING IN ENERGY MASTER LIMITED PARTNERSHIPS: Risk management Investor requirements Tax Planning No End to Liquids Price Gains as Crude Approaches $100/bbl Inside Look at Processing Trends Gateway Energy: Madisonville Gas Treatment Expansion Completed Gateway Energy says expansion of the natural gas treatment plant at the Madisonville Project located in East Texas is completed. The additional facilities are designed to be capable of treating 50 million cfd, which combined with the capacity of the current in-service treating facilities will represent a total designed treating capacity of 68 million cfd. Gateway operates a 10-inch pipeline system that delivers processed gas from the plant to the sales points. There are currently six wells drilled in the area near the Madisonville Project, of which four wells are completed and connected to the treatment plant. In the near future, the other two wells are expected to be completed and connected to the plant and additional drilling is anticipated in the Madisonville area. Robert Panico, President and Chief Executive Officer of Gateway, stated, "The initial production from the expanded MGP treatment plant associated with the four existing wells is expected to more than double revenue generated from our Madisonville pipeline system. Gateway's existing pipeline system has available capacity to accommodate the total treating capacity of 68 million cfd, at no additional capital expenditure or operating cost. Our current management team began developing Gateway's business plan in 2005, which included the following key objectives: (1) change the direction of the company to a midstream focus, (2) optimize existing assets, and (3) implement a midstream energy growth strategy. The Madisonville Project, which we renegotiated in 2005, represents an example of our successful efforts to optimize the value of our existing assets." Gateway Energy is a midstream energy company with natural gas gathering, transmission and processing facilities in Texas, Galveston Bay and the Gulf of Mexico. Atlas Pipeline Partners to Connect Elk City/Sweetwater and Chaney Dell Systems with Adjoining Processing Plant Atlas Pipeline Partners, L.P. is constructing a pipeline connecting its Elk City/Sweetwater system with its recently acquired Chaney Dell natural gas gathering system and processing plants located in Oklahoma. It also will construct a 120 million cfd processing plant about half way between the two systems in western Dewey County. Copyright Hart Energy Publishing, LP.

2 November 07, 2007 Gas Processors Report Page 2 Bob Firth, president of Mid-Continent for Atlas Pipeline Partners, made the announcement about the processing plant Friday during the partnership s third quarter earnings call. In an interview after the call, Brian Begley, vice president of investor relations, provided Gas Processors Report with more details. The 16-inch pipeline will be about 100 miles long. Construction of the pipeline has begun and is scheduled to be completed during the second quarter of Construction on the processing plant, meanwhile, has not yet started, but is scheduled to be completed before the end of The estimated cost of the pipeline and processing plant is something north of $100 million, Begley said. The 120 million cfd processing plant is the same size as the Elk City/Sweetwater plant, although that facility is being expanded by another 60 million cfd. Atlas Pipeline acquired the Chaney Dell system in July from Anadarko Petroleum. The Chaney Dell System includes 3,470 miles of gathering pipeline and three processing plants. Average gross natural gas processed volume for the Chaney Dell system is 250 million cfd. The Elk City/Sweet system s average gross natural gas processed volume is about 230 million cfd. Talisman Energy s New CEO Suspends Plans to Sell Midstream Assets Citing uncertainty concerning probable raises in Alberta s royalty rates and a desire to take some time to evaluate the company s assets, Calgary-based Talisman Energy s new CEO has indefinitely suspended earlier announced plans to sell its midstream assets. The market is just too uncertain at the moment, in light of the royalty changes, said John Manzoni, making his first call as the company s new president and CEO. Manzoni took over the job on Sept. 1, upon the retirement of long-time Talisman boss Jim Buckee. Until joining Talisman in September 2002, Manzoni served as CEO of BP s refining and marketing group. Buckee had told analysts in August that the company was looking to sell, dispose, or spin off its midstream assets. Those gas pipeline and gas-processing assets are valued at approximately C$1.7 billion. But Manzoni said the company needs to reassess the potential of the midstream business as part of a longer-term review of growth options. We are looking carefully at our spending plans in North America next year while we work through the implications of the new Alberta royalty regime particularly given the uncertain outlook for North American natural gas prices. With royalty rates sensitive to depth, volumes and price on a well by well basis, it will take some time to determine the impact of these changes, Manzoni said, in explaining a need for companywide review of its assets. Talisman s midstream operations average a throughput of about 500 million cfd. They consist of gathering lines of more than 572 miles, 24 compressors, and four gas plants. The company said its third quarter midstream operations transported and processed 598 million cfd. The expansion of the Cutbank Complex is expected in the fourth quarter and should result in an additional 75 millon cfd of processing capacity. Talisman s 100% Central Foothills Gas Gathering Systems, Columbia Minehead Gas Gathering System and Palliser Gas Gathering System among other midstream pipeline and processing assets ranging from 45% to 100% ownership support the company s exploration and development programs in the Alberta Foothills, Edson and Deep Basin areas. Talisman spent C$174 million in 2006 to expand and optimize midstream assets. Talisman says capital spending for 2007 for midstream will be approximately C$190 million. Monzoni also told analysts that the company will be more conservative and cautious in future projections and announcing timetables, acknowledging that the company has failed to live up to its production and financial targets in the past, and will take steps to address what has become a credibility problem. Going forward, the company will be more certain about new projects before it starts discussing their timing publicly and incorporating them into production expectations, Manzoni said.

3 November 07, 2007 Gas Processors Report Page 3 He also told analysts to expect to expect less share buyback going forward, now that the company has completed $C1.6 billion in buybacks over the past two years, using funds generated from assets sales. Monzoni said his preference would be to use cash to invest in oil and gas development activities. Talisman, an integrated company, reported third quarter net income of C$352 million or C$0.35 per share, compared to C$524 million or C$0.48 per share in the earlier year quarter. Quarterly total revenue decreased to C$1.99 billion from C$5.86 billion in the year-ago quarter. Monzoni said the quarter s results should be the company s low point, saying that a heavy capital program and a number of project delays had adversely impacted the results. FULL STORY: Plains All American Positioned to Finance Organic Growth or Acquisitions Plains All American Pipeline, L.P. is well positioned to finance its ongoing organic growth activities on attractive acquisition opportunities, says Greg Armstrong, chairman and CEO. While the partnership invested approximately $460 million on expansion projects and acquisitions during the first nine months of the year, long-term debt remained unchanged. Additionally, as a result of our recent equity offering and the liquidation of a portion of our contango inventory, short-term debt has decreased more than $500 million since the beginning of the year, Armstrong said Thursday in a statement accompanying the partnership s third quarter earnings report. The partnership ended the quarter with a strong balance sheet and excellent liquidity, Armstrong said. Plains profit for the quarter was 3% higher that the same period a year ago. Its quarterly profit was $98.4, or 66 per share, compared to $95.4 million in the year-ago same period. For the first nine months of 2007, the partnership reported net income of $287.9 million, or $2.05 per diluted limited partner unit, compared to net income of $239.1 million, or $2.43 per diluted limited partner unit, for the first nine months of The partnership reported EBITDA for the third quarter of 2007 of $183.3 million, an increase of 32% compared with EBITDA of $138.8 million for the third quarter of During an analyst call Friday, Armstrong said the partnership is well on its way to achieving its 2007 goals: delivering operating and financial performance in line with guidance; successfully integrating the 2006 acquisition of Pacific Energy Partners, L.P. and realizing targeted synergies; executing planned slate of internal growth projects; pursuing an average of $200 million to $300 million of strategic and accretive acquisitions; and increasing total distributions paid to unitholders by at least 14% over 2006 distributions. During the first three quarters, the partnership exceeded the high end of guidance and increased the midpoint of original guidance by about $97 million. Its integration of the Pacific acquisition has achieved its milestones with synergies on target, Armstrong said. Plains $540 million capital program is on track. The partnership during 2007, thus far, has closed four acquisitions totaling $123 million. With November s increase in annualized distribution to $3.36 per unit, the partnership will have paid $3.28 per unit for 2007, a 14.4% increase over 2006, Armstrong said. It also represents the 14th consecutive increase in quarterly distributions for the partnership and the 21st increase in the last 27 quarters. The partnership also provided an update on its 2007 expansion capital projects. It said Cheyenne Pipeline project was completed at the end of the third quarter and expected volumes are between 35,000 and 40,000 barrels per day. Martinez Tankage is the midst of a 850,000 barrel expansion, with 250,000 barrels in service. Another 300,000 barrels should come online in stages in the fourth quarter of 2007, with the remaining 300,000 barrels completed by the first quarter of Cushing Phase VI Expansion calls for the addition of 3.4 million barrels, of which 2.3 million barrels are expected to be online by the end of 2007, and the remaining 1.1 million in early St. James, a 2.7 million Phase II project, is to come online in stages beginning in early 2008.

4 November 07, 2007 Gas Processors Report Page 4 Salt Lake City Expansion, a 95-mile fee-based pipeline, is to be completed in early Patoka, Ill., a 2.6 million barrel project, is expected to be completed during the second half of Plains subsidiary, Plains LPG Services, L.P., in October closed the acquisition of the Tirzah LPG cavern storage facility in York County, S.C. The acquisition was from Suburban, L.P. and Suburban Pipeline LLC for a cost of approximately $54 million. Plains All American Pipeline, L.P., headquartered in Houston, is a publicly traded master limited partnership, is engaged in the transportation, storage, terminalling and marketing of crude oil, refined products and liquefied petroleum gas and other natural gas related petroleum products. Through its 50% ownership in PAA/Vulcan Gas Storage LLC, the partnership is also engaged in the development and operation of natural gas storage facilities. On average, Plains handles more than 3 million b/d of crude oil, refined products and LPG through its extensive network of assets located in key North American producing basins and transportation gateways. FULL STORY: Atlas Pipeline Partners, Citing Q3 acquisitions, Says Record Quarter is Just the Beginning Atlas Pipeline Partners, L.P. s record third quarter earnings are just the beginning, the company said, as things should get better following acquisitions made early in the third quarter. The partnership reported quarter EBITDA of $66.4 million, compared to $20.6 million for the prior year third quarter. The quarter-over-quarter results were favorably impacted by contributions from the Chaney Dell and Midkiff/Benedum systems, which the partnership acquired in July 2007, and higher volumes on its other systems. System-wide volumes were approximately 1.2 billion cf/d for the third quarter 2007 compared with 0.6 bcf/d for the prior year comparable quarter, an increase of approximately 83%. Distributable cash flow totaled $45.7 million for the third quarter 2007, compared to distributable cash flow of $14.6 million for the comparable prior year quarter. The record results this quarter are truly gratifying, but I m extremely hopeful that in this case the past is only prologue, stated Edward E. Cohen, Chairman and Chief Executive Officer of Atlas Pipeline. When we next report, we will have the advantage of a full quarter incorporating our new acquisition and the further advantage, we expect, of a full integration of these operations into our system. The partnership paid approximately $1.9 billon to acquire control of Anadarko Petroleum Corp. s 100% interest in the Chaney Dell natural gas gathering system and processing plants located in Oklahoma and its 72.8% undivided joint interest in the Midkiff/Benedum natural gas gathering system and processing plants located in Texas. The Chaney Dell System includes 3,470 miles of gathering pipeline and three processing plants, and the Midkiff/Benedum System includes 2,500 miles of gathering pipeline and two processing plants. The partnership said that, excluding the effect of a $11.5 million derivative expense, the Mid-Continent segment had total revenue of $244.6 million for the third quarter 2007, an increase of $134.9 million from the prior year comparable quarter. This increase principally reflects the contribution from the acquisition of the Chaney Dell and Midkiff Benedum systems of $135.0 million and higher system volumes, Cohen said. Average gross natural gas processed volume from July 27, 2007, the date of acquisition, through September 30, 2007 was million cf/d for the Chaney Dell system and million for the Midkiff/Benedum system. There were 81 new wells connected to the Chaney Dell system during the third quarter 2007 and there were 59 new wells connected to the Midkiff/Benedum system for the same period. The partnership reached an agreement with Pioneer Natural Resources Co., which held a right of first refusal to purchase the Midkiff/Benedum system. Pioneer provides approximately 50% of the natural gas processed by the Midkiff/Benedum system under its obligation to connect its wells within a certain distance of the Midkiff/Benedum system.

5 November 07, 2007 Gas Processors Report Page 5 Under this new agreement, Pioneer waived its right of first refusal and extended its obligation to the Midkiff/Benedum system an additional 10 years through The partnership granted to Pioneer, which currently holds a 27.2% interest in the Midkiff/Benedum system, an option to buy up to an additional 14.6% interest in the Midkiff/Benedum system one year after the closing of the partnership's acquisition of Anadarko's interest, and up to an additional 7.5% interest two years after the closing of the Partnership s acquisition of Anadarko s interest. If the options are fully exercised, Pioneer would increase its interest in the system to approximately 49.2%. Pioneer would pay approximately $230 million, subject to certain adjustments, for the additional 22% interest if fully exercised. The partnership will manage and control the Midkiff/Benedum system regardless of whether Pioneer exercises the purchase options. The partnership funded the purchase price of the acquisition in part from a private placement of 25.6 million common limited partner units, generating gross proceeds of $1.125 billion. Atlas Pipeline Holdings, L.P., the parent of the partnership's general partner, purchased 3.8 million of the 25.6 million common limited partner units issued by the partnership. The partnership funded the remaining purchase price with an $830 million senior secured term loan which matures in July 2014 and a partial advance against a new $300 million senior secured revolving credit facility which matures in July Atlas Holdings, which owns all of the incentive distribution rights in the partnership, has agreed to allocate a portion of its future incentive distribution rights back to the partnership in connection with the Anadarko acquisition, namely, up to $5 million of incentive distribution rights per quarter to the partnership through the quarter ended June 30, 2009, and up to $3.75 million per quarter thereafter. Also in the Mid-Continent, for the Elk City/Sweetwater system, average gross natural gas processed volume for the third quarter 2007 was million cfd, a 69.8% increase from the third quarter The partnership connected 18 new wells to the Elk City/Sweetwater system during the third quarter 2007 compared with 13 new wells for the prior year comparable quarter. For the NOARK system, average Ozark Gas Transmission throughput volume was million cf/d during the third quarter 2007, a 43.5% increase from the third quarter The Velma system's average processed natural gas volume of 62.0 million for the third quarter 2007 represented a 6.3% increase over the prior year comparable quarter. The partnership connected 13 new wells to its Velma system during the third quarter Total revenue for the Appalachia system was $9.1 million for the third quarter 2007 compared with $7.1 million for the third quarter 2006, an increase of $2.0 million due principally to higher throughput volume and higher realized transportation rates. Throughput volume increased to 71.9 million for the third quarter 2007 compared with 63.9 million for the third quarter 2006 resulting from the connection of new wells to the Appalachia gathering system. The Appalachia system's average transportation rate per mcf was $1.32 for the third quarter 2007, a 10.9% increase from $1.19 per mcf for the prior year third quarter. During the third quarter 2007, 189 new wells were connected to the Appalachia gathering system, compared with 149 new wells for the prior year comparable quarter, representing a 27% increase. Additionally, 252 wells were added to the Appalachia system during the third quarter 2007 due to the acquisition of a natural gas gathering and processing system in August 2007, which has a processing capacity of 10.0 million and was acquired for $6.1 million. The partnership declared a record quarterly cash distribution for the third quarter of $0.91 per common limited partner unit, an increase of $0.06 per unit or 7.1% from the comparable prior year period. Total distributions declared for the third quarter 2007 of $39.7 million represent a 162% increase from the prior year comparable quarter. The partnership established distribution guidance at a range of $1.78 to $1.85 per common limited partner unit for the second half of 2007 and $3.80 to $4.00 per common limited partner unit for Atlas Pipeline Holdings, L.P. is a limited partnership which owns and operates the general partner of Atlas Pipeline Partners, L.P., through which it owns a 2% general partner interest, all the incentive distribution

6 November 07, 2007 Gas Processors Report Page 6 rights and approximately 5.5 million common units of Atlas Pipeline Partners. Atlas America, Inc. owns an approximately 65% limited interest in Atlas Pipeline Holdings, L.P. Fractionation Spread Natural gas prices slipped again last week, and with the rise in crude, the profit in fractionating an entire barrel now exceeds $10/mmBtu. For individual liquids in cents per gallon, margins on the frac are comparable at both Conway and Mont Belvieu. GPR is looking at around 59 /gal for ethane, 97 for propane, $1.19 for normal butane and isobutane, $1.28 for pentanes-plus. The margin on the entire barrel is a blended value between the two locations of around $39.45, 64% of its entire value. While we can t forecast crude, our natural gas indicators suggest solid industry profitability based on a normal weather for the heating season. On Oct. 26, gas storage was 2% ahead of last year at 3.5 trillion cf. Twenty years ago, the storage market was only 3 trillion cf. In that period, heating and power generation demand for the fuel has soared while feedstock demand was destroyed in many sectors. The NYMEX forward curve is showing $7.70/mmBtu gas for December and $8 for January and February. Earnings growth for midstream companies may not be in the cards through the first quarter of 2008, but a solid performance probably is. Current Frac Spread (Cents/Gal) Date: November 6, 2007 Conway Change from last week Mont Belvieu Change from last week Ethane Shrink Margin % % Propane Shrink Margin % % Normal Butane Shrink Margin % % Iso-Butane Shrink Margin % % Pentane Shrink Margin % % NGL $/Bbl % % Shrink Margin % % Gas ($/mmbtu) % % NGL Value in $/mmbtu Ethane % % Propane % % Normal Butane % % Iso-Butane % % Pentane % % Total Barrel Value in % % $/mmbtu Margin % % Price, Shrink of 42-gal NGL barrel based on following: Ethane, 36.5%; Propane, 31.8%; Normal Butane, 11.2%; Isobutane, 6.2%; Pentane+, 14.3%, Fuel, frac, transport costs not included. Conway gas based on NGPL Midcontinent zone, Mont Belvieu based on Houston Ship Channel. Shrink is defined as Btus that are removed from natural gas through the gathering and processing operation.

7 November 07, 2007 Gas Processors Report Page 7 Midstream News Copano Energy Reports Q3 NGL Growth Propelled by its acquisition of the Cimmarron Gathering system, Copano Energy reported third quarter growth in its NGL operations. In its Midcontinent operations, Q3 gross margin for the segment totaled $31.2 million, including $2.9 million attributable to Cimmarron Gathering (which was acquired on May 1, 2007), up 12% from the prior year. The increase in gross margin resulted primarily from a 26% increase in NGLs produced, a 26% increase in plant inlet throughput and a 23% increase in pipeline throughput in the third quarter of The acquisition of Cimmarron Gathering accounted for 53% of the increase in NGLs produced, 61% of the increase in plant inlet throughput and 54% of the increase in pipeline throughput for this segment. NGLs produced at the Paden processing plant increased 21% during the third quarter of 2007 as compared to the same period in Midcontinent operations gathered or transported an average of 227,099 million Btu/d of natural gas on its pipelines (including an average of 23,121 million Btu/d of natural gas per day on Cimmarron's pipelines). This segment processed an average of 166,175 million Btu/d of natural gas and produced an average of 16,058 barrels per day of NGLs at its plants and third-party plants during the third quarter of 2007, the company said. Gross margin for the Texas Gulf Coast Processing segment in the third quarter of 2007 increased approximately 15% to $19.4 million compared to $16.9 million in the third quarter The increase primarily resulted from a 12% increase in plant NGL production in the third quarter of 2007 as compared to the third quarter of 2006, the company said. During the third quarter of 2007, the Texas Gulf Coast Processing segment processed an average of 520,341 million Btu/d of natural gas compared with 531,069 million Btu/d during the third quarter of Volumes originating from the Texas Gulf Coast Pipelines segment and delivered to the plant were up approximately 8% from the third quarter of last year and natural gas delivered to the plant and originated from sources other than the Texas Gulf Coast Pipelines segment decreased approximately 10% from the third quarter of The Houston Central Processing Plant produced an average of 16,402 bpd of NGLs during the third quarter of 2007 compared to an average of 14,673 bpd produced during the third quarter of Penn Virginia GP Holdings Raises Distribution Penn Virginia GP Holdings, L.P. (PVG) reported distributable cash of $11.7 million, net income of $8.9 million and adjusted net income of $12.8 million for the three months ended September 30. PVG, which completed its IPO in late 2006, will pay a quarterly cash distribution covering the period July 1 through September 30, in the amount of $0.30 per unit, or an annualized rate of $1.20 per unit. Revenues from the gas midstream sector for the quarter were $100.4 million and throughput was 17,844 million cf. A. James Dearlove, PVG s CEO, told analysts Thursday: Penn Virginia Resources (PVR s) operations, which generate our cash flows, produced record operating income and distributable cash flow during the quarter that allowed for the recent 7% distribution increase. We remain focused on continuing to grow cash distributions as PVR executes its growth strategy. He added that the partnership continues to evaluate possible acquisitions, including the natural gas midstream sector, as well as organic growth. The acquisition market in the midstream sector, however, is currently tough and no large acquisitions are largely in the near-term, even as the partnership seeks to make smaller, or bolt-on midstream acquisitions, the partnership said.

8 November 07, 2007 Gas Processors Report Page 8 PVG owns the general partner, including the incentive distribution rights, and is the largest limited partner unitholder of PVR and reports its financial results on a consolidated basis with the financial results of PVR. PVG, essentially a pass-through vehicle, currently has no separate operating activities apart from those conducted by PVR, and derives its cash flow solely from cash distributions received from PVR. Headquartered in Radnor, Pa., PVG is a publicly traded limited partnership formed to own the general partner interest, all of the incentive distribution rights and approximately 42% of the limited partner interests in PVR, a manager of coal and natural resource properties and related assets, including timber, and the operator of a midstream natural gas gathering and processing business. Its midstream operations include three natural gas gathering and processing systems and one standalone natural gas gathering system, including: the Beaver/Perryton gathering and processing facilities in the Texas/Oklahoma panhandle area, the Crescent gathering and processing facilities in central Oklahoma, the Hamlin gathering and processing facilities in west-central Texas, and the Arkoma gathering system in eastern Oklahoma. These systems include approximately 3,450 miles of natural gas gathering pipelines and three natural gas processing facilities, which have 160 million cfd of total capacity. The Beaver/Perryton System is a natural gas gathering system stretching over 10 counties in the Anadarko Basin of the panhandle of Texas and Oklahoma. The system consists of approximately 1,180 miles of natural gas gathering pipelines, ranging in size from two to 16 inches in diameter, and the Beaver natural gas processing plant. Included in the system is an 11-mile, 10-inch diameter, FERC-jurisdictional residue line. The Crescent System is a natural gas gathering system stretching over seven counties within central Oklahoma s Sooner Trend. The system consists of approximately 1,675 miles of natural gas gathering pipelines, ranging in size from two to 10 inches in diameter, and the Crescent gas processing plant located in Logan County, Okla. The Hamlin System is a natural gas gathering system stretching over eight counties in West Central Texas. The system consists of approximately 517 miles of natural gas gathering pipelines, ranging in size from two to 12 inches in diameter and with current capacity of approximately 20 million cf/d, and the Hamlin natural gas processing plant located in Fisher County, Texas. The Arkoma System is a stand-alone gathering operation in southeastern Oklahoma s Arkoma Basin and is comprised of three separate gathering systems, two of which are 100% owned with the third system being 49% owned. PVR operates and maintains all three systems. The Arkoma System consists of a total of approximately 78 miles of natural gas gathering pipelines, ranging in size from three to 12 inches in diameter. ONEOK Partners Cites Increased Prices and Volumes of NGL for Higher Earnings Guidance ONEOK Partners, L.P. reported a 16% increase in revenues for the third quarter, but a dip in profit of 2.3%. Nonetheless, the partnership raised its earnings guidance. Revenue increased to $1.41 billion from $1.22 billion, but earnings dipped to $95.9 million, or 98 per unit, from $98.2 million, or $1.04 per unit. Earnings guidance for the year was increased to a range of $3.90-$4 per unit from a previous projection of $3.65-$3.85. The increase reflects anticipated stronger performance due to stronger NGL prices and continued benefit from increased volumes in the NGL gathering and fractionation segment. Operating income for the third quarter 2007 was $105.1 million, compared with $107.7 million for the third quarter The natural gas liquids businesses benefited from new supply connections in the Mid- Continent region, which increased volumes gathered, transported, fractionated and sold. These increases were offset by reduced margins in the natural gas gathering and processing segment due to lower volumes processed, primarily related to contract terminations in late During the third quarter, both of the partnership s natural gas liquids segments continued to benefit from increased NGL volumes due primarily to new supply connections in the Mid-Continent region, said

9 November 07, 2007 Gas Processors Report Page 9 John W. Gibson, chairman, president and chief executive officer of ONEOK Partners, during a analysts call on Thursday. Lower natural gas volumes processed, as a result of contract terminations that occurred late last year, reduced operating income in the natural gas gathering and processing segment. Gibson added: In addition to our internally generated growth projects, the recently completed acquisition of an interstate NGL and refined petroleum products pipeline system positions us well for future growth, Gibson added. This newly acquired pipeline system links our existing Mid-Continent NGL assets to markets in the upper Midwest where there are additional opportunities to expand. The partnership has announced that it will invest more than $1.6 billion in internally generated growth projects through The partnership on Oct. 8 completed the purchase of an interstate NGL and refined petroleum products pipeline system from a subsidiary of Kinder Morgan Energy Partners, L.P. for approximately $300 million. The system extends from Bushton and Conway, Kan., to Chicago and transports, stores and delivers a full range of NGL and refined products. These assets further expand ONEOK Partners' footprint by directly linking its existing Mid-Continent NGL assets to markets in the upper Midwest. The acquisition is accretive and will be reported in the natural gas liquids pipelines segment. ONEOK Partners now operates the FERC-regulated NGL pipeline system spanning more than 1,600 miles, with a capacity to transport up to 125,000 b/d. The pipeline transports NGL purity products and various refined products, including unleaded gasoline and diesel fuel. More than 90% of the revenues associated with this system are fee based, primarily generated from transportation tariffs. The transaction includes operation of approximately 950,000 barrels of storage capacity -- both belowground caverns and above-ground tanks -- and eight NGL terminals. Also included in the purchase is 50% ownership of the Heartland Pipeline Company, which consists of three refined products terminals. ConocoPhillips owns the other 50%. Gibson also provided an update on what it called growth activities. Natural gas liquids projects include the $535 million, 760-mile Overland Pass Pipeline, which will transport raw NGLs from Opal, Wyo., to Conway, Kan. In early October the pipeline received permitting approval and began construction. The project's construction costs have increased, primarily because of higher labor and construction equipment costs and anticipated higher costs associated with constructing the pipeline during the winter months. FULL STORY: Williams Partners, LP Plans to Acquire Wamsutter System from Williams Williams Partners, L.P. plans to pay $750 million to acquire from Williams, its general partner, a membership interest in the limited liability company that owns the Wamsutter System. That system includes the Echo Springs cryogenic processing plant and related natural gas gathering system near Wamsutter, Wyo. The Echo Springs plant has a processing capacity of nearly 400 million cfd. The letter of intent provides for Williams Partners to receive cash from the existing Wamsutter business and share with Williams the increase in cash flow resulting from the growth of the business. Williams Partners plans to finance its payment of the purchase price through a combination of equity, debt, cash on hand and/or equity issued directly to Williams. The addition of an interest in the Wamsutter System to our growing portfolio of assets should provide the partnership with additional scale and increased diversity in its cash flow, said Alan Armstrong, COO of the general partner of Williams Partners. Once the deal is complete, Williams Partners will own assets serving several stable and high-growth potential basins. Steve Malcolm, chairman, president and CEO of Williams, said the transaction demonstrates Williams commitment to execute its value-creation strategy. In addition to providing Williams with access to low-cost capital for Williams to invest in high-growth potential areas such as the Piceance Basin and deepwater Gulf of

10 November 07, 2007 Gas Processors Report Page 10 Mexico, additional dropdown transactions put us into a higher returns position as the general partner of Williams Partners, Malcolm said. Williams Partners is a publicly traded master limited partnership that owns natural gas gathering, transportation, processing and treating assets serving regions where producers require large scale and reliable services, including the Gulf of Mexico and the San Juan Basin in New Mexico and Colorado. The partnership also serves the NGL market, through its NGL fractionating and storage assets. Williams Partners said its third quarter net income was $29.4 million, or 62, per common unit. Net income for the same quarter a year ago was $45.4 million and 58 per common unit. The third quarter and year-to-date results were lower than the restated 2006 results due primarily to interest expense associated with the Four Corners acquisition. No interest expense had been allocated to those assets when they were held by Williams. Conversely, the increase in distribution cash flow for the quarter is due to the growth of the partnership through its 2006 acquisition of Four Corners and the partnership s steady financial performance, Williams Partners said. Our growing portfolio of assets continues to deliver steady performance, Armstrong said. We ve increased cash distributions to unitholders for seven consecutive quarters, distributable cash flow per unit is up nearly 30% year to date, and our distribution coverage ratio continues to be strong. Gathering volumes at Four Corners are responding positively to our well-connect program, Discovery continues to capture new business and Conway s storage revenues and distributable cash flow continues to increase. The partnership s profit for the gathering and processing segment, which includes Four Corners, was $43.2 million for the quarter, compared with $47.7 million for the same quarter a year ago. The decline in recurring segment profit was primarily the result of higher net product imbalance losses at Four Corners, the partnership said. NGL services segment profit improved significantly for the quarter. That profit of $4 million, compared favorably to $2.2 million for the third quarter last year. Lower operating costs, including $1 million lower losses on cavern empties, and increased storage and product upgrade revenue at Conway drove the quarterly improvement. Equity earnings for the partnership s 60% interest in Discovery were $1.8 million higher in the third quarter, due primarily to higher NGL sales volumes. Year-to-date, through Sept. 30, NGL services reported recurring segment profit of $11.1 million, compared with $6.2 million for the same period in The segment benefited from lower operating costs and higher storage revenue, due to higher demand at Conway. These gains were partially offset by lower fractionation revenues, the partnership said. Normal Butanes Inventory Analysis U.S. Energy Information Administration defines normal butanes as "a normally gaseous straight-chain hydrocarbon. It is a colorless paraffinic gas that boils at a temperature of 31.1º F. It is extracted from natural gas or refinery gas streams." Normal butane average stock levels in August 2007 were just 2,000 bbls greater than August 2006 average levels. Summer month average for normal butanes (May-August) was 1.3 million bbls in 2007, 14% greater than the same period last year.

11 November 07, 2007 Gas Processors Report Page 11 INVESTING IN ENERGY MASTER LIMITED PARTNERSHIPS: Risk management Investor requirements Tax Planning A conference by Financial Research Associates, to be held January 28 th - 29 th, 2008 at the Flatotel, in New York City, gives you the details on the benefits of energy master limited partnerships such as excellent growth prospects, mouth watering dividends, minimal commodity risk, inelastic demand for energy and great possibilities to reduce taxes MLPs are definitely among the most attractive investment opportunities of our times! But make sure to understand the essentials of the MLP business model and know what to watch out for before deciding to invest in any particular MLP. Join our experienced Investment bankers /advisors and MLP-representatives as well as numerous investors who already invest in MLPs. They will tell you on which indicators you should have an eye on and how you can make sure to choose the best-performing MLP. For more information, visit NGL Price Boxscore No End to Liquids Price Gains as Crude Approaches $100/bbl NGL prices continued their rise alongside crude. While ethane is the year s biggest percentage gainer, its price increases have not kept pace with the other liquids in recent weeks as worldwide ethylene demand reportedly sags. For the five days ending Nov. 6, ethane was up 1% at Conway and 3% at Mont Belvieu. However, since the first week of January, it has gained 93% and 86%, respectively, at those hubs. At both Conway and Mont Belvieu, propane is up 5% and iso-butane 4% on the week Normal butane was up 8% at Mont Belvieu, and its price now exceeds that of iso-butane. Pentanes-plus exceeded the $2 mark there, and the price of that liquid was up 3% on the week. Pentanes-plus were up 6% at Conway. By GPR s reckoning, spot propane at both hubs is up 80% this year. The Energy Information Administration figures wholesale propane is up 65% nationwide compared to the start of November 2006, while retail prices are up 20%. Nationwide, propane inventories are down 14%. Mont Belvieu Eth Pro Norm Iso Pen+ NGL Bbl Oct Nov. 6, ' $63.44 Oct , ' $60.75 Oct , ' $59.72 Oct , ' $58.09 October ' $57.87 September ' $ rd Qtr ' $ nd Qtr ' $ st Qtr ' $ th Qtr ' $38.52 Oct Nov. 6, ' $36.74

12 November 07, 2007 Gas Processors Report Page 12 Conway, Group 140 Eth Pro Norm Iso Pen+ NGL Bbl Oct Nov. 6, ' $61.72 Oct , ' $59.38 Oct , ' $58.98 Oct , ' $56.35 October ' $57.19 September ' $ rd Qtr ' $ nd Qtr ' $ st Qtr ' $ th Qtr ' $37.17 Oct Nov. 6, ' $36.58 Data Provided by Intercontinental Exchange. Individual product prices in cents per gallon. NGL barrel in $/42 gallons NAME 1 year/50 issues $1,195 TITLE Group Publisher David Givens Production Jennifer Burtchette ORGANIZATION ADDRESS CITY STATE ZIP (REQUIRED) Payment Enclosed Please Bill My: Mastercard Visa AMEX Discover Marketing Karen Wilson Circulation Ari Roman Executive Vice President, Hart Energy Publishing, LP Frederick L. Potter President and CEO, Hart Energy Publishing, LP Richard A. Eichler CARD NO. SIGNATURE EXPIRATION DATE Subscription Services custserv@hartenergy.com FOR FASTEST SERVICE: Call: Fax: newsletters@hartenergy.com Web: Mail: Hart Energy Publishing, LP 1616 S Voss, Suite 1000 Houston, Texas Gas Processors Report is published weekly by Hart Energy Publishing, LP. Subscriptions: $1,195 per year. Copyright All rights reserved. Reproduction of this newsletter, in whole or in part, without prior written consent of Hart Energy Publishing, LP is prohibited. Federal copyright law prohibits unauthorized reproduction by any means and imposes fines up to $100,000 for violations. Permission to photocopy for internal or personal use is granted by Hart Energy Publishing, LP provided that the appropriate fee is paid directly to Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA Phone: ; Fax ; info@copyright.com.