<PAGE>   1

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                       SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D. C. 20549

                                   FORM 10-Q

          [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

           FOR THE TRANSITION PERIOD FROM                         TO

                         COMMISSION FILE NUMBER 1-8715

                           CRYSTAL GAS STORAGE, INC.
             (Exact name of registrant as specified in its charter)


                  LOUISIANA                                      72-0163810
       (State or other jurisdiction of                        (I.R.S. Employer
        incorporation or organization)                      Identification No.)

   229 MILAM STREET, SHREVEPORT, LOUISIANA                         71101
   (Address of principal executive offices)                      (Zip Code)


       Registrant's telephone number, including area code (318) 222-7791

                                      NONE
              (Former name, former address and former fiscal year,
                         if changed since last report)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
                              Yes [X]       No [ ]

                  Common Stock outstanding on November 9, 1999

                                   2,668,122

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<PAGE>   2

                           CRYSTAL GAS STORAGE, INC.

                                     INDEX


                                                                PAGE NO.
                                                                --------
PART I
Item 1. Financial Statements
     Consolidated Condensed Balance Sheets -- September 30,
      1999 (Unaudited)
       and December 31, 1998................................        3
     Consolidated Condensed Statements of Operations --
      Three and Nine Months Ended September 30, 1999 and
      1998 (Unaudited)......................................        4
     Consolidated Condensed Statements of Stockholders'
      Equity -- Nine Months Ended September 30, 1999 and
      1998 (Unaudited)......................................        5
     Consolidated Condensed Statements of Cash Flows -- Nine
      Months Ended
       September 30, 1999 and 1998 (Unaudited)..............        6
     Notes to Consolidated Condensed Financial Statements
      (Unaudited)...........................................        8
Item 2. Management's Discussion and Analysis of Financial
  Condition
  and Results of Operations.................................       10
Item 3. Quantitative and Qualitative Disclosures About
  Market Risk...............................................       16
PART II
Item 6. Exhibits and Reports on Form 8-K....................       17
Signatures..................................................       18


                                        2
<PAGE>   3

                           CRYSTAL GAS STORAGE, INC.

                     CONSOLIDATED CONDENSED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                SEPTEMBER 30    DECEMBER 31
                                                                    1999           1998
                                                                ------------    -----------
                                                                (UNAUDITED)         (1)
<S>                                                             <C>             <C>
                           ASSETS
CURRENT ASSETS
  Cash and cash equivalents.................................      $  6,935       $ 13,855
  Marketable securities.....................................         1,242         20,643
  Accounts receivable -- net................................         1,159          1,952
  Prepaid expenses and other current assets.................           257            129
                                                                  --------       --------
       TOTAL CURRENT ASSETS.................................         9,593         36,579
PROPERTY, PLANT AND EQUIPMENT -- NET........................       159,018        143,028
OTHER ASSETS
  Deferred tax assets.......................................        29,895         29,947
  Restricted cash and marketable securities.................         1,835          1,863
  Other.....................................................         1,042          1,366
                                                                  --------       --------
                                                                    32,772         33,176
                                                                  --------       --------
       TOTAL ASSETS.........................................      $201,383       $212,783
                                                                  ========       ========
            LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Current portion of long-term obligations..................      $  1,982       $    516
  Accounts payable..........................................         6,398          8,740
  Other accrued expenses....................................           767            650
                                                                  --------       --------
       TOTAL CURRENT LIABILITIES............................         9,147          9,906
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION...............        36,286         37,784
DEFERRED REVENUE FROM SALE OF FUTURE CONTRACT RECEIVABLES
  AND FORWARD SALES.........................................        19,879         29,131
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
  Senior preferred stock....................................            74             74
  Common stock..............................................            27             27
  Additional paid-in capital................................       116,922        116,922
  Retained earnings.........................................        19,048         18,939
                                                                  --------       --------
       TOTAL STOCKHOLDERS' EQUITY...........................       136,071        135,962
                                                                  --------       --------
       TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...........      $201,383       $212,783
                                                                  ========       ========
</TABLE>

-------------------------
(1) The balance sheet at December 31, 1998, has been taken from the audited
    financial statements at that date, and condensed.

     See accompanying notes to consolidated condensed financial statements.

                                        3
<PAGE>   4

                           CRYSTAL GAS STORAGE, INC.

                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                THREE MONTHS
                                                                   ENDED          NINE MONTHS ENDED
                                                                SEPTEMBER 30         SEPTEMBER 30
                                                              ----------------    ------------------
                                                               1999      1998      1999       1998
                                                               ----      ----      ----       ----
<S>                                                           <C>       <C>       <C>        <C>
NET REVENUES
  Gas storage fees........................................    $3,432    $3,656    $10,458    $10,547
  Crude oil and natural gas...............................     1,761     1,873      5,391      5,560
  Interest, investment and other income...................       176     1,027        898      3,996
                                                              ------    ------    -------    -------
                                                               5,369     6,556     16,747     20,103
COSTS AND EXPENSES
  Operating expense and taxes.............................     1,162     1,011      3,323      3,150
  General and administrative expense......................     1,985       791      3,447      2,094
  Interest and debt expense...............................       814       817      2,435      2,456
  Amortization of discount on sale of future contract
     receivables and forward sales........................       435     1,214      1,514      4,589
  Exploration cost........................................        --         5         --      1,305
  Depreciation, depletion and amortization................     1,980     1,805      5,859      4,903
                                                              ------    ------    -------    -------
                                                               6,376     5,643     16,578     18,497
                                                              ------    ------    -------    -------
INCOME (LOSS) BEFORE PROVISION
  (BENEFIT) FOR INCOME TAXES..............................    (1,007)      913        169      1,606
PROVISION (BENEFIT) FOR
  INCOME TAXES............................................      (448)      403         60        725
                                                              ------    ------    -------    -------
NET INCOME (LOSS).........................................    $ (559)   $  510    $   109    $   881
                                                              ======    ======    =======    =======
NET INCOME (LOSS) PER
  COMMON SHARE............................................    $ (.21)   $  .19    $   .04    $   .33
                                                              ======    ======    =======    =======
NET INCOME (LOSS) PER COMMON
  SHARE - ASSUMING DILUTION...............................    $ (.21)   $  .19    $   .04    $   .32
                                                              ======    ======    =======    =======
</TABLE>

     See accompanying notes to consolidated condensed financial statements.

                                        4
<PAGE>   5

                           CRYSTAL GAS STORAGE, INC.

           CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 NINE MONTHS ENDED
                                                                    SEPTEMBER 30
                                                                --------------------
                                                                  1999        1998
                                                                  ----        ----
<S>                                                             <C>         <C>
SENIOR PREFERRED STOCK
  Balance at beginning and end of period....................    $     74    $    148
                                                                --------    --------
COMMON STOCK
  Balance at beginning and end of period....................          27          27
                                                                --------    --------
ADDITIONAL PAID-IN CAPITAL
  Balance at beginning and end of period....................     116,922     122,020
                                                                --------    --------
RETAINED EARNINGS
  Balance at beginning of period............................      18,939      18,025
     Net income.............................................         109         881
                                                                --------    --------
  Balance at end of period..................................      19,048      18,906
                                                                --------    --------
TOTAL STOCKHOLDERS' EQUITY..................................    $136,071    $141,101
                                                                ========    ========
</TABLE>

     See accompanying notes to consolidated condensed financial statements.

                                        5
<PAGE>   6

                           CRYSTAL GAS STORAGE, INC.

                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  NINE MONTHS ENDED
                                                                    SEPTEMBER 30
                                                                ---------------------
                                                                  1999        1998
                                                                  ----        ----
<S>                                                             <C>         <C>
Cash flows from operating activities:
  Net income................................................    $    109    $     881
  Adjustments to reconcile net income to net cash provided
     by operating activities:
       Amortization of deferred financing cost..............         200          234
       Depreciation, depletion and amortization.............       5,859        4,903
       Exploration cost.....................................       --           1,305
       Deferred income tax provision........................          52          545
       Net loss on sale of property, plant and equipment....           5           83
       Net change in accrued interest income................         227        1,343
       Decrease in accounts receivable......................         793          593
       Increase in prepaid expense and other current
        assets..............................................        (128)        (660)
       Increase in other assets.............................         (28)        (669)
       Increase (decrease)in accounts payable and accrued
        expenses............................................       3,316          (48)
                                                                --------    ---------
     Net cash provided by operating activities..............      10,405        8,510
                                                                --------    ---------
Cash flows from investing activities:
  Acquisition of Fouke Property.............................      (7,827)      --
  Acquisition of Petal Gas Storage Company, net of cash
     received...............................................       --         (29,141)
  Proceeds from sale of property, plant and equipment.......          58          669
  Capital expenditures......................................     (13,060)     (10,303)
  Purchases of marketable securities........................     (15,726)    (127,674)
  Maturity of marketable securities.........................      34,900      228,841
  Investment of restricted funds............................       --          (4,478)
  Reduction of restricted funds.............................          28        4,515
                                                                --------    ---------
     Net cash provided by (used in) investing activities....      (1,627)      62,429
                                                                --------    ---------
Cash flows from financing activities:
  Reduction of long-term obligations........................         (32)        (449)
  Reduction of deferred revenue from sale of future contract
     receivables and forward sales..........................     (15,666)     (54,996)
                                                                --------    ---------
     Net cash used in financing activities..................     (15,698)     (55,445)
                                                                --------    ---------
Net increase (decrease) in cash and cash equivalents........      (6,920)      15,494
Cash and cash equivalents at beginning of period............      13,855       11,550
                                                                --------    ---------
Cash and cash equivalents at end of period..................    $  6,935    $  27,044
                                                                ========    =========
</TABLE>

     See accompanying notes to consolidated condensed financial statements.

                                        6
<PAGE>   7
                           CRYSTAL GAS STORAGE, INC.

          CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS -- CONTINUED

     Supplemental disclosures of cash flow information:

<TABLE>
<CAPTION>
                                                                  NINE MONTHS
                                                                     ENDED
                                                                  SEPTEMBER 30
                                                                ----------------
                                                                 1999      1998
                                                                 ----      ----
<S>                                                             <C>       <C>
Cash paid during the period for:
  Interest..................................................    $2,235    $2,222
                                                                ======    ======
  Amortization of discount on sale of future contract
     receivables and forward sales..........................    $1,514    $4,589
                                                                ======    ======
Income taxes................................................    $  421    $  248
                                                                ======    ======
</TABLE>

     See accompanying notes to consolidated condensed financial statements.

                                        7
<PAGE>   8

                           CRYSTAL GAS STORAGE, INC.

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                  (UNAUDITED)

NOTE 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

     The consolidated condensed balance sheet of Crystal Gas Storage, Inc.
(formerly named Crystal Oil Company) and its subsidiaries (the "Company") as of
September 30, 1999, the consolidated condensed statements of operations for the
three and nine months ended September 30, 1999 and 1998, and the consolidated
condensed statements of stockholders' equity and cash flows for the nine months
ended September 30, 1999 and 1998, have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations, and cash flows for all periods presented have been made.

     There have been no changes in the accounting policies from those set forth
in Note A of the Notes to Consolidated Financial Statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.

     In June 1998, FASB issued Statement of Financial Accounting Standards No.
133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
Activities." This statement established accounting and reporting standards for
derivative instruments and hedging activities. Effective January 1, 2001, SFAS
133 will require the Company to recognize all derivatives as either assets or
liabilities and to measure those instruments at fair value in its Consolidated
Balance Sheet. A derivative meeting certain conditions may be designated as a
hedge of a specific exposure. Accounting for changes in a derivative's fair
value will depend on the intended use of the derivative and the resulting
designation. Any transition adjustments resulting from adopting this statement
will be reported in net income or other comprehensive income, as appropriate, as
the cumulative effect of a change in accounting principle. The Company has not
yet determined the effects that SFAS 133 will have on its future consolidated
financial statements or the amount of the cumulative adjustment, if any, that
will be made upon adopting this new standard. The Company does not anticipate
the early adoption of SFAS 133.

NOTE 2. COMMITMENTS AND CONTINGENCIES

     The Company has been named as a potentially responsible party for
environmental remediation in a claim by an agency of the State of Louisiana.
Under such claim, the State of Louisiana is seeking $4.5 million from all
potentially responsible parties. The State of Louisiana filed a motion with the
First Judicial District Court, Caddo Parish, Louisiana, that included the
Company as a defendant in the state court proceedings. Based on information
known to the Company, the Company does not believe that its ultimate payment
obligations with respect to this matter will have a material adverse impact on
the Company's financial position, results of operations or liquidity.

     The Company has entered into an agreement with Southern Company Services,
Inc. ("Southern"), as agent for its affiliated operating electric utility
companies -- Mississippi Power Company, Alabama Power Company, Georgia Power
Company, Gulf Power Company and Savannah Electric and Power Company. The
agreement provides for salt cavern peaking firm storage with up to 700,000 MMBTU
per day of withdrawal capacity and up to 350,000 MMBTU per day of injection
capacity with receipt and delivery points on Transcontinental Gas Pipeline,
Southern Natural Gas Pipeline, Koch Gateway Pipeline and Destin Pipeline. The 20
year agreement is subject to certain conditions precedent including Federal
Energy Regulatory Commission approval, construction of certain facilities and
satisfactory financing for the project. The pricing for the storage service was
negotiated based on market based rates.

     The Company currently has outstanding $1.5 million in an irrevocable letter
of credit to support certain obligations with respect to the outstanding $36.5
million in Secured Guaranteed Notes Due 2005 of a subsidiary of the Company.
Such letter of credit expires on November 21, 2000.

                                        8
<PAGE>   9

NOTE 3. NET INCOME PER SHARE

     A reconciliation of the weighted-average shares outstanding for computation
of basic and diluted income per share for the three and nine month periods ended
September 30, 1999 and 1998, follows. No difference existed between net income
used in computing basic and diluted income per share for these periods.

<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED        NINE MONTHS ENDED
                                             SEPTEMBER 30              SEPTEMBER 30
                                        ----------------------    ----------------------
                                          1999         1998         1999         1998
                                          ----         ----         ----         ----
<S>                                     <C>          <C>          <C>          <C>
Basic method........................    2,668,122    2,668,122    2,668,122    2,668,122
Dilutive preferred stock............           --       33,274       16,562       33,274
Dilutive stock options..............           --       39,843       28,493       39,843
                                        ---------    ---------    ---------    ---------
Assuming dilution...................    2,668,122    2,741,239    2,713,177    2,741,239
                                        =========    =========    =========    =========
</TABLE>

NOTE 4. ACQUISITIONS

     On June 15, 1999, the Company consummated the acquisition of various proved
producing reserves in the Fouke Field in Miller County, Arkansas (the "Fouke
Property") for a total cash purchase price of approximately $7.4 million, net of
adjustments of approximately $440 thousand. At January 1, 1999, the Fouke
Property had estimated net proved reserves of approximately 10.8 billion
equivalent cubic feet of natural gas. In August 1999, the Company acquired an
additional interest in the Fouke Property for approximately $382 thousand.

NOTE 5. SEGMENT INFORMATION

     The Company has two reportable segments: the natural gas storage and
transportation segment and the exploration and production segment. The Company
evaluates the performance of the segments based on profit from operations before
income taxes (inclusive of interest and investment income, interest and debt
expense and amortization of discount on sale of future contract receivables and
forward sales attributable to each segment). The basis of segmentation and
measurement of segment profits are the same as those described in the Company's
1998 Annual Report.

<TABLE>
<CAPTION>
                                                     NATURAL GAS      EXPLORATION
                                                     STORAGE AND          AND
              SEGMENT INFORMATION                   TRANSPORTATION    PRODUCTION     CORPORATE    CONSOLIDATED
              -------------------                   --------------    -----------    ---------    ------------
                                                                          (IN THOUSANDS)
<S>                                                 <C>               <C>            <C>          <C>
Nine month period ended September 30, 1999
Segment income (loss) before income taxes.......       $  3,653         $   175       $(3,659)      $    169
Revenues from external customers................         10,458           5,391            --         15,849
          Total Assets at September 30, 1999....        132,137          64,228         5,018        201,383
Nine month period ended September 30, 1998
Segment income (loss) before income taxes.......       $  3,490         $  (395)      $(1,489)      $  1,606
Revenues from external customers................         10,547           5,560            --         16,107
Three month period ended September 30, 1999
Segment income (loss) before income taxes.......       $  1,164         $   (73)      $(2,098)      $ (1,007)
Revenues from external customers................          3,432           1,761            --          5,193
Three month period ended September 30, 1998
Segment income (loss) before income taxes.......       $  1,250         $   333       $  (670)      $    913
Revenues from external customers................          3,656           1,873            --          5,529
</TABLE>

NOTE 6. SUBSEQUENT EVENTS

     On October 15, 1999, the Company entered into a merger agreement with El
Paso Energy Corporation ("El Paso") pursuant to which the Company will merge
into a subsidiary of El Paso. Under the terms of the merger agreement, each
holder of the Company's common stock will receive $57 per share in cash. In

                                        9
<PAGE>   10

connection with the merger, the Company's outstanding preferred stock is
expected to be redeemed at $1.00 per share in accordance with the terms of such
preferred stock. Quantum Fund N.V. and its affiliates, which own approximately
64% of the Company's outstanding common stock, have committed to support the
merger transaction and have entered into a voting agreement in this regard. The
merger is subject to the approval of the Company's stockholders at a meeting, as
well as other customary conditions.

     As a result of the merger with El Paso, the Company's results for the third
quarter of 1999 included charges of approximately $.7 million relating to the
indefinite postponement of a proposed debt offering associated with the
permanent financing of the expansion of its natural gas storage facilities as
well as approximately $.5 million in expenses directly related with the merger.
These expenses have been included in general and administrative expense for the
three and nine month periods ended September 30, 1999.

     Currently, the Company is negotiating a $20 million Revolving Credit
Facility with a bank. The borrowings under the Revolving Credit Facility would
have a maturity date of March 31, 2000, and at the Company's option the maturity
date is extendable to June 30, 2000. Under the terms of the Revolving Credit
Facility, no repayments, except interest, would be required to be made by the
Company until the maturity date. The Revolving Credit Facility would be secured
by all of the assets of a wholly-owned subsidiary, Petal Gas Storage Company,
including its natural gas storage facility and storage contract with Southern.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

GENERAL

     The following is provided to assist in a further understanding of the
financial condition of Crystal Gas Storage, Inc. and its subsidiaries (the
"Company") as of September 30, 1999, as well as changes in the Company's
operating results. The notes to the Company's Consolidated Condensed Financial
Statements included in this report, as well as the Company's Annual Report on
Form 10-K for the year ended December 31, 1998, should be read in conjunction
with this discussion.

     The Company currently owns and operates through wholly-owned subsidiaries,
First Reserve Gas Company ("FRGC") and Petal Gas Storage Company ("Petal Gas"),
natural gas storage facilities located near Hattiesburg, Mississippi. The
Company also owns and operates various natural gas properties located primarily
in Arkansas and Louisiana.

     On October 15, 1999, the Company entered into a merger agreement with El
Paso Energy Corporation ("El Paso") pursuant to which the Company will merge
into a subsidiary of El Paso. Under the terms of the merger agreement, each
holder of the Company's common stock will receive $57 per share in cash. In
connection with the merger, the Company's outstanding preferred stock is
expected to be redeemed at $1.00 per share in accordance with the terms of such
preferred stock. Quantum Fund N.V. and its affiliates, which own approximately
64% of the Company's outstanding common stock, have committed to support the
merger transaction and have entered into a voting agreement in this regard. The
merger is subject to the approval of the Company's stockholders at a meeting, as
well as other customary conditions.

CORPORATE STRATEGY

     The Company's corporate strategy continues to focus on the expansion of its
natural gas storage and transportation operations with the objective of
enhancing the value of its natural gas storage properties. The Company's natural
gas storage and transportation operations consist of the ownership and operation
of two natural gas storage facilities with working gas capacity of approximately
3.5 billion cubic feet ("Bcf") (the "Hattiesburg Facility") and 3.2 Bcf (the
"Petal Facility"). The Company is currently expanding the Petal Facility through
the addition of a second natural gas storage cavern with approximately the same
capacity as the first cavern. The Company intends to capitalize on the strategic
location, pipeline access and operating flexibility of its natural gas storage
facilities.

     The Company has entered into an agreement with Southern Company Services,
Inc. ("Southern"), as agent for its affiliated operating electric utility
companies -- Mississippi Power Company, Alabama Power Company, Georgia Power
Company, Gulf Power Company and Savannah Electric and Power Company. The
                                       10
<PAGE>   11

agreement provides for salt cavern firm peaking storage with up to 700,000 MMBTU
per day of withdrawal capacity and up to 350,000 MMBTU per day of injection
capacity with receipt and delivery points on Transcontinental Gas Pipeline,
Southern Natural Gas Pipeline, Koch Gateway Pipeline and Destin Pipeline. The 20
year agreement is subject to certain conditions precedent including Federal
Energy Regulatory Commission approval, construction of certain facilities and
satisfactory financing for the project. The pricing for the storage service was
negotiated based on market based rates.

     On June 15, 1999, the Company consummated the acquisition of various proved
producing reserves in the Fouke Field in Miller County, Arkansas (the "Fouke
Property") for a total cash purchase price of approximately $7.4 million, net of
adjustments of approximately $440 thousand. At January 1, 1999, the Fouke
Property had estimated net proved reserves of approximately 10.8 billion
equivalent cubic feet of natural gas. In August 1999, the Company acquired an
additional interest in the Fouke Property for approximately $382 thousand.

     As of September 30, 1999, the Company's financial resources included
approximately $8.2 million in cash, cash equivalents and marketable securities
and the Company's debt consisted of the indebtedness directly associated with
the permanent financing for the acquisition of the Hattiesburg Facility in 1995,
with the recourse primarily limited to certain subsidiaries of the Company and
the assets and operations of the Hattiesburg Facility. In addition, the Company
is currently negotiating a $20 million committed revolving line of credit (the
"Revolving Credit Facility") with a bank. The borrowings under the Revolving
Credit Facility would have a maturity date of March 31, 2000, and at the
Company's option the maturity date is extendable to June 30, 2000. In
management's opinion, the Company's existing financial resources, expected net
cash flow from operating activities and its available credit facility will
provide sufficient funds to finance its anticipated capital expenditures during
1999, future debt service obligations and other liquidity needs associated with
the merger of the Company.

RESULTS OF OPERATIONS

  GENERAL

     The Company recorded net income of $109 thousand, or $.04 per basic share
($.04 per diluted share), for the nine month period ended September 30, 1999,
compared to net income of $881 thousand, or $.33 per basic share ($.32 per
diluted share), for the comparative period in 1998. The Company realized a net
loss of $559 thousand, or $.21 per basic share ($.21 per diluted share), for the
three months ended September 30, 1999, compared to net income of $510 thousand,
or $.19 per basic share ($.19 per diluted share), for the three months ended
September 30, 1998. As a result of the merger with El Paso, the Company's
results for the three and nine month periods ended September 30, 1999, reflected
charges of approximately $.7 million relating to the indefinite postponement of
a proposed debt offering associated with the permanent financing of the Petal
Facility expansion as well as approximately $.5 million in expenses directly
related to the merger. These expenses have been included in general and
administrative expense for the three and nine month periods ended September 30,
1999.

     In comparison to the three and nine month periods ended September 30, 1998,
the Company's results of operations reflected a reduction in revenues of
approximately $1.2 million and $3.4 million, respectively, and a decrease in
expenses of approximately $486 thousand and $3.1 million, respectively, for the
three and nine month periods ended September 30, 1999, and exclusive of charges
relating to the indefinite postponement of the proposed debt offering and merger
expenses. Such results for the three and nine month periods ended September 30,
1999, reflected decreases in interest and investment income as well as
amortization of discount on forward sales of crude oil and natural gas primarily
as a result of the utilization of existing funds to satisfy certain obligations
under the Company's forward sales that expired in 1998. The Company's operations
for the three and nine months ended September 30, 1999, also reflected decreases
in revenues from natural gas sales and natural gas storage as a result of a
decline in the net price received from its forward sales of natural gas and the
Company's decision to limit the availability of interruptible storage services
during the construction project at the Petal Facility. Operating results for the
nine month period ended September 30, 1998, included

                                       11
<PAGE>   12

a dry hole charge of $1.3 million during the second quarter of 1998 relating to
the drilling of an unsuccessful exploratory well.

  NATURAL GAS STORAGE

     The Company's natural gas storage activities for the three month and nine
month periods ended September 30, 1999, provided revenues of $3.4 million and
$10.5 million, respectively, and operating income of $2.0 million and $6.2
million, respectively. For the three month and nine month periods ended
September 30, 1998, natural gas storage activities contributed revenues of $3.7
million and $10.5 million, respectively, and operating income of $2.2 million
and $6.4 million, respectively. The aforementioned operating income is exclusive
of interest and investment income, interest and debt expense and amortization of
discount on sale of future contract receivables attributable to the natural gas
storage segment. Natural gas storage revenues derived from firm long-term
contracts were $3.3 million and $10.0 million, respectively, for the three and
nine month periods ended September 30, 1999, and $3.3 million and $9.5 million,
respectively, for the comparative periods in 1998. The remaining natural gas
storage revenues for the three and nine month periods ended September 30, 1999
and 1998, were derived from interruptible storage services, injection and
withdrawal charges and other fees relating to services provided in connection
with the storage and delivery of natural gas. The Company is currently expanding
the natural gas storage capacity of the Petal Facility through the addition of a
second natural gas storage cavern. Currently, the Company has decided to limit
interruptible storage services as a result of the construction project at the
Petal Facility.

     During the three and nine month periods ended September 30, 1999, the
Company's operating income from natural gas storage activities reflected
operational expenses of $493 thousand and $1.4 million, respectively, and
depreciation and amortization of $950 thousand and $2.8 million, respectively.
The Company's natural gas storage activities for the three and nine month
periods ended September 30, 1998, included operational expenses of $532 thousand
and $1.5 million, respectively, and depreciation and amortization of $945
thousand and $2.6 million, respectively.

  NATURAL GAS EXPLORATION AND PRODUCTION

     The Company's natural gas exploration and production segment for the three
and nine month periods ended September 30, 1999, provided revenues of $1.8
million and $5.4 million, respectively, and operating income of $201 thousand
and $1.0 million, respectively. For the three and nine month periods ended
September 30, 1998, the natural gas exploration and production segment
contributed revenues of $1.9 million and $5.6 million, respectively, and
operating income of $714 thousand and $885 thousand, respectively. The
aforementioned operating income is exclusive of interest and investment income
and amortization of discount on forward sales attributable to the natural gas
exploration and production segment. Operating results from natural gas
production reflected the acquisition of the Fouke Property late in the second
quarter of 1999 and the effect of a decrease in revenues during 1999 as a result
of natural gas production falling below the required volumes under the forward
sales due to a temporary delay in the Company's drilling program. The Company
expects increased revenues in future periods as a result of the continuation of
the drilling program of the Bethany Longstreet and Holly Fields in DeSoto
Parish, Louisiana (the "DeSoto Properties") during the fourth quarter of 1999
and the effect of the acquisition of the Fouke Property. Operating results also
reflected the effect of a dry hole charge of $1.3 million during the second
quarter of 1998.

  INTEREST AND INVESTMENT INCOME

     The Company's interest and investment income for the three and nine month
periods ended September 30, 1999, was approximately $170 thousand and $856
thousand, respectively, compared to approximately $1.0 million and $4.0 million,
respectively, for the comparative periods in 1998. The levels of interest and
investment income reflected an average investment in debt securities of $22.8
million and $98.8 million for the nine month periods ended September 30, 1999
and 1998, respectively, and the effect of the funds utilized to satisfy forward
sale obligations, capital expenditures and the acquisition of the Fouke
Property. The average interest rate received by the Company was 5.0% and 5.4%
for the nine month periods ended September 30,

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<PAGE>   13

1999 and 1998, respectively. The Company's liquid assets are primarily invested
in investment grade corporate and government obligations that are for terms of
less than two years.

  DEPRECIATION, DEPLETION AND AMORTIZATION

     Depreciation, depletion and amortization increased in the three and nine
month periods ended September 30, 1999, to $2.0 million and $5.9 million,
respectively, from $1.8 million and $4.9 million, respectively, for the
comparative periods in 1998. This increase was attributable to an increase in
the depletion rate per equivalent Mcf of natural gas and the effect of the
acquisitions of the Fouke Property late in the second quarter of 1999 and the
Petal Facility late in the first quarter of 1998.

  INTEREST AND DEBT EXPENSE

     The Company's interest and debt expense for the three and nine month
periods ended September 30, 1999, was $814 thousand and $2.4 million,
respectively, and $817 thousand and $2.5 million, respectively, for the
comparative periods in 1998. Such interest and debt expense related primarily to
the $36.5 million of long-term debt incurred to finance the acquisition of the
Hattiesburg Facility.

  AMORTIZATION OF DISCOUNT ON SALE OF FUTURE CONTRACT RECEIVABLES AND FORWARD
SALES

     For the three and nine month periods ended September 30, 1999, the
Company's amortization of discount on sale of future contract receivables and
forward sales was $435 thousand and $1.5 million, respectively, compared to $1.2
million and $4.6 million, respectively, for the comparative periods in 1998.
Such expense reflected the amortization of discount on the Company's sale in
November 1995 of the contract receivables from firm gas storage services and the
amortization of discount on forward sale transaction entered in 1997. The
amortization of discount on forward sales decreased during the interim periods
in 1999 as a result of the expiration of a forward sale transaction in 1998.

  GENERAL AND ADMINISTRATIVE EXPENSE

     The Company's general and administrative expense for the three and nine
month periods ended September 30, 1999, was approximately $2.0 million and $3.4
million, respectively, compared to approximately $791 thousand and $2.1 million,
respectively, for the comparative periods in 1998. The general and
administrative expense for the interim periods in 1999 included charges of
approximately $1.2 million relating to the indefinite postponement of a proposed
debt offering and the merger of the Company with El Paso. Exclusive of such
merger charges, the Company did not add any significant corporate overhead and
administrative expense following the acquisitions of the Petal Facility and
Fouke Property due to the consolidation of the acquired operations with the
Company's ongoing activities.

  PROVISION FOR INCOME TAXES

     The results for the three month period ended September 30, 1999, included
an income tax benefit of approximately $448 thousand and for the nine months
ended September 30, 1999, a provision for income taxes of approximately $60
thousand. The results for the three and nine month periods ended September 30,
1998, included a provision for income taxes of $403 thousand and $725 thousand,
respectively. As of September 30, 1999, the Company had a net deferred tax asset
of approximately $29.9 million. In assessing the deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Based upon
projections for future taxable income over the periods for which the deferred
tax assets are deductible, management believes it is more likely than not the
Company will realize the benefits of these deductible differences, net of the
existing valuation allowance. In connection with the proposed forward merger
with El Paso, management anticipates utilizing the majority of recognized and
unrecognized deferred tax assets to offset the anticipated taxable gain.

                                       13
<PAGE>   14

LIQUIDITY AND CAPITAL RESOURCES

     At September 30, 1999, the Company had marketable securities and cash and
cash equivalents of approximately $8.2 million compared to marketable securities
and cash and cash equivalents of $34.5 million at December 31, 1998. The
Company's liquidity position decreased primarily as a result of the utilization
of existing funds and net cash provided by operating activities for capital
expenditures, to satisfy its obligations from the sale of future contract
receivables and forward sales and the acquisition of the Fouke Property. In
addition, the Company's debt at September 30, 1999, was primarily associated
with the acquisition of the Hattiesburg Facility. Recourse on such debt is
primarily limited to the assets of certain subsidiaries of the Company with
obligations under the agreements associated with such debt.

     The Company entered into a forward sale of natural gas in 1997 and recorded
for financial accounting purposes the proceeds from the sale as "Deferred
Revenues from Forward Sales". Such proceeds are recognized as deliveries are
made by the Company based on an undiscounted reference price for the natural gas
sold. The imputed charge used in establishing the sales price of the natural gas
sold is amortized over the life of the forward sale contract as the volumes of
natural gas are delivered and such charge is recorded as amortization of
discount on forward sales. Current deliveries required under the forward sales
are 1.0 Bcf of natural gas during the remainder of 1999 and thereafter 7.8 Bcf
of natural gas through December 2002. The balance of deferred revenues from
forward sales was approximately $15.6 million as of September 30, 1999.

     The Company entered into a hedging arrangement for the purpose of hedging
against the volatility in prices of natural gas in the event that the Company
was required to purchase such volumes to satisfy its obligations with respect to
the forward sale. As a result of the expected level of natural gas production
from the DeSoto Properties, the Company agreed to terminate its commodity swap
contracts covering the volumes hedged during the remaining period of 1999
through 2002 for consideration to the Company of approximately $400 thousand.
Such gain is recognized over the scheduled delivery date of the original volumes
hedged under the commodity swap contract.

     As a part of the acquisition of the Hattiesburg Facility in 1995, the
Company sold to a trust the right to receive payment from the accounts
receivable generated by the Hattiesburg Facility's long-term contracts. The
receivables were sold without recourse to the Company or its subsidiaries, but
certain subsidiaries of the Company have agreed to be responsible in limited
circumstances for failure to collect on the accounts receivable and for certain
force majeure events. The obligations of such subsidiaries are secured by
substantially all of their assets, including the Hattiesburg Facility. The net
proceeds from the sale of future contract receivables are recognized over the
period during which the receivables are generated and the balance of deferred
revenue from such receivables was approximately $4.2 million as of September 30,
1999.

     Simultaneously with the sale of the Hattiesburg receivables, a subsidiary
of the Company issued approximately $36.5 million in 8.12% Secured Guaranteed
Notes Due 2005 (the "Notes"). The terms of the Notes provide for the payment of
interest only through June 30, 2000, at which time principal is to be amortized
over the remaining life of the Notes. The Notes, which are without recourse to
the Company, are secured by substantially all the assets of certain subsidiaries
of the Company. In addition, the Company currently has outstanding a $1.5
million irrevocable letter of credit to support certain obligations with respect
to the Notes.

     The Company generated net cash from operating activities of approximately
$10.4 million and $8.5 million during the nine month periods ended September 30,
1999 and 1998, respectively. During the nine month period ended September 30,
1999, the net cash from operating activities benefitted primarily from the
effect of the acquisition of Petal Gas late in the first quarter of 1998 and the
development drilling program of the DeSoto Properties. The Company's working
capital position decreased to approximately $.4 million at September 30, 1999,
from $26.7 million at December 31, 1998, primarily as a result of the
utilization of existing funds and net cash provided by operating activities for
capital expenditures, to satisfy its obligations from the sale of future
contract receivables and forward sales and the acquisition of the Fouke
Property.

     Currently, the Company is negotiating a $20 million Revolving Credit
Facility with a bank. The borrowings under the Revolving Credit Facility would
have a maturity date of March 31, 2000, and at the

                                       14
<PAGE>   15

Company's option the maturity date is extendable to June 30, 2000. Under the
terms of the Revolving Credit Facility, no repayments, except interest, would be
required to be made by the Company until the maturity date. The Revolving Credit
Facility would be secured by all of the assets of Petal Gas, including the Petal
Facility and its storage contract with Southern.

     Pending the redeployment of the Company's available funds, the Company is
investing its cash primarily in United States government and other investment
grade securities. The Company believes that these securities do not present any
material risks to the Company's liquidity, operations or financial position.

OTHER MATTERS

     The Company is addressing the issue of computer programs and embedded
computer chips being unable to distinguish between the year 1900 and the year
2000 and beyond ("Year 2000"). The Year 2000 issues are the result of computer
programs and other automated processes using two digits to identify a year,
rather than four digits. This issue impacts both Information Technology ("IT")
systems and also non-IT systems, including systems incorporating "embedded
processors". The Company has identified and assessed the Year 2000 compliance of
items determined to be critical to its operations. Critical systems are those
applications and systems, including embedded processor technology, which, if not
appropriately remediated, may have a significant impact on natural gas delivery,
revenue collection or the safety of personnel or facilities. After the
assessment of systems, the Year 2000 implementation includes replacing or
upgrading items that are determined not to be Year 2000 compliant, testing such
items and designing and implementing contingency and business continuation
plans. In addition, the Year 2000 compliance includes identifying and
prioritizing critical suppliers and customers and communicating with them about
their plans and progress in addressing the Year 2000 problem. The Company has
obtained upgrades of application software from its vendors and has performed the
testing phase of the hardware or system software previously remediated, upgraded
or replaced. The Company has also communicated with third parties with which it
has significant relationship to assess third party risks. The Company has
received responses from such third parties with assurance of Year 2000
compliance qualified with the usual uncertainties. In addition, existing
business continuity plans are the basis for the development of the Year 2000
contingency plans. The Company has identified critical business processes and
planned recovery strategies. The Company has documented such recovery strategies
in its contingency plan and validated their effectiveness.

     The failure to correct a critical Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations and could adversely affect the Company's results of operations,
liquidity and financial condition. Due to the general uncertainty inherent in
the Year 2000 problem, resulting in part from the uncertainty of the Year 2000
readiness of third-party suppliers and customers, the Company is unable to
determine at this time whether the consequences of Year 2000 failures will have
a material impact on the Company's results of operations, liquidity or financial
condition. The total cost associated with required modifications to become Year
2000 compliant is not expected to be material to the Company's financial
position.

     The Company is currently subject to various claims regarding environmental
matters, which will require the expenditure of funds for legal costs and could
require additional expenditure of funds for remediation if it is determined that
the Company is responsible for such remediation or otherwise agrees to
contribute to such remediation costs. It is the Company's policy to accrue for
environmental remediation costs if it is probable that a liability has been
incurred and an amount is reasonably estimable. The resolution of the known
environmental matters affecting the Company will be subject to various factors,
including the discovery of additional information with respect to the nature of
contamination at the known sites, the legal responsibility of various parties
for any cleanup obligations, the financial capability of responsible parties and
other actions by governmental agencies and private parties. As of September 30,
1999, the Company had an accrued liability of approximately $1.8 million for
defense and related costs resulting from such environmental claims against the
Company.

     In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging

                                       15
<PAGE>   16

Activities." This statement established accounting and reporting standards for
derivative instruments and hedging activities. Effective January 1, 2001, SFAS
133 will require the Company to recognize all derivatives as either assets or
liabilities and to measure those instruments at fair value in its Consolidated
Balance Sheet. A derivative meeting certain conditions may be designated as a
hedge of a specific exposure. Accounting for changes in a derivative's fair
value will depend on the intended use of the derivative and the resulting
designation. Any transition adjustments resulting from adopting this statement
will be reported in net income or other comprehensive income, as appropriate, as
the cumulative effect of a change in accounting principle. The Company has not
yet determined the effects that SFAS 133 will have on its future consolidated
financial statements or the amount of the cumulative adjustment that will be
made upon adopting this new standard.

FORWARD LOOKING STATEMENTS

     Statements in this Report other than historical facts are forward-looking
statements made in reliance upon the safe harbor of the Private Securities
Litigation Reform Act of 1995. As such, the involved risks and uncertainties are
subject to change at any time. The Company derives its forward-looking
statements from its operating budgets which are based on various assumptions,
including matters regarding crude oil and natural gas prices, demand and supply
for crude oil and natural gas, changes in the market for natural gas storage and
transportation, the ultimate recovery and realization of the estimated reserves
from the proved producing and undeveloped reserves in the DeSoto Properties and
the proved producing reserves in the Fouke Properties, success of the Company's
ability to market interruptible service at the Hattiesburg Facility and the
Petal Facility, the use of the Company's existing net operating tax loss
carryforwards, the ability to become Year 2000 compliant, the Company's
successful execution of its internal operating plans including the expansion of
its natural gas storage facilities, labor relations, regulatory uncertainties
and legal proceedings, including in particular its pending litigation with the
State of Louisiana regarding environmental matters. Although the Company
believes its assumptions are reasonable, it is impossible to predict the impact
of certain factors that could cause actual results to differ materially from
those currently anticipated.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     As a result of the Company's participation in the acquisition of energy
related assets, the Company has entered into certain acquisition financial
transactions that currently limit its level of exposure to market risks
associated with interest rates and prices of natural gas. In respect to the
market risk associated with natural gas prices, the Company has entered into a
forward sale contract for hedging purposes, effectively reducing its exposure to
price volatility in the physical markets. Accordingly, the Company's current and
expected natural gas production from the DeSoto Properties is primarily
committed for delivery through the year 2002 under a forward sale contract at a
weighted average price of $2.01.

     The Company is subject to interest rate risk from the utilization of
financial instruments such as term debt for acquisition funding. The fair market
value of long-term debt with a fixed-interest rate is subject to interest rate
risk. Generally, the fair value of fixed-interest rate debt will increase as
interest rates fall and will decrease as interest rates rise. At September 30,
1999, the estimated fair values of the Company's long-term debt, including
current maturities, was $37 million. A one percentage-point increase in
prevailing interest rates would result in a decrease in the estimated fair value
of long-term debt of $1.1 million. Initial fair values were determined using the
current rates at which the Company could enter into comparable financial
instruments with similar remaining maturities. The earnings and cash flows
impact during 1999 resulting from an increase in interest rates would be limited
to the borrowing under the proposed Revolving Credit Facility, since the
Company's debt as of September 30, 1999, carries a fixed rate through the year
2005.

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<PAGE>   17

                           PART II: OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

 *2.1    Agreement and Plan of Merger dated October 15, 1999, among
         El Paso Energy Corporation, El Paso Energy Acquisition Co.,
         and the Company.
*27      Financial Data Schedule

(b) Reports on Form 8-K

    None
-------------------------
* Filed herein

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<PAGE>   18

                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 9th day of November 1999.

                                          CRYSTAL GAS STORAGE, INC.

                                          By:     /s/ J.N. AVERETT, JR.
                                            ------------------------------------
                                                     J.N. Averett, Jr.
                                                   President and Director
                                               (Principal Executive Officer)

                                          By:        /s/ J.A. BALLEW
                                            ------------------------------------
                                                        J. A. Ballew
                                                 Executive Vice President,
                                                  Treasurer and Secretary
                                                 (Chief Financial Officer)

                                          By:      /s/ PAUL E. HOLMES
                                            ------------------------------------
                                                       Paul E. Holmes
                                                 Vice President/Controller
                                               (Principal Accounting Officer)

                                       18