<PAGE>   1
===============================================================================


                       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 JUNE 30, 1998

                                       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 NO. 1-11680


                     LEVIATHAN GAS PIPELINE PARTNERS, L.P.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


        DELAWARE                                               76-0396023
(STATE OF ORGANIZATION)                                    (I.R.S. EMPLOYER
                                                           IDENTIFICATION NO.)

                                   600 TRAVIS
                                   SUITE 7200
                              HOUSTON, TEXAS 77002
          (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

                                 (713) 224-7400
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)



    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 TWELVE 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
                                             ---  ---

===============================================================================


<PAGE>   2

                     LEVIATHAN GAS PIPELINE PARTNERS, L.P.
                                AND SUBSIDIARIES

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                   Page
                                                                                                   ----
<S>                                                                                                 <C>
PART I.   FINANCIAL INFORMATION......................................................................1

ITEM 1.   CONSOLIDATED FINANCIAL STATEMENTS:
          Consolidated Balance Sheet as of June 30, 1998 (unaudited)
            and December 31, 1997....................................................................1
          Unaudited Consolidated Statement of Operations for the
            Three and Six Months Ended June 30, 1998 and 1997, respectively..........................2
          Unaudited Consolidated Statement of Cash Flows for the
            Six Months Ended June 30, 1998 and 1997..................................................3
          Consolidated Statement of Partners' Capital for the Six Months
            Ended June 30, 1998 (unaudited)..........................................................4
          Notes to Consolidated Financial Statements (unaudited).....................................5

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS..............................................11

PART II.  OTHER INFORMATION..........................................................................18

          Item 1.  Legal Proceedings
          Item 2.  Changes in Securities and Use of Proceeds
          Item 3.  Defaults Upon Senior Securities
          Item 4.  Submission of Matters to a Vote of Security Holders
          Item 5.  Other Information
          Item 6.  Exhibits and Reports on Form 8-K

SIGNATURES...........................................................................................19

</TABLE>



                                       i
<PAGE>   3
                         PART I. FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS.

             LEVIATHAN GAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                 (In thousands)

<TABLE>
<CAPTION>

                                                                               June 30,     December 31,
                                                                                 1998           1997
                                                                              ----------    ----------
    ASSETS                                                                    (unaudited)
<S>                                                                           <C>           <C>       
Current assets:
    Cash and cash equivalents                                                 $    1,142    $    6,430
    Accounts receivable                                                            1,995         1,953
    Accounts receivable from affiliates                                            3,984         6,608
    Other current assets                                                             546           653
                                                                              ----------    ----------
       Total current assets                                                        7,667        15,644
                                                                              ----------    ----------

Equity investments                                                               186,147       182,301
                                                                              ----------    ----------

Property and equipment:
    Pipelines                                                                     77,200        78,244
    Platforms and facilities                                                     111,178        97,882
    Oil and gas properties, at cost, using successful efforts method             122,837       120,296
                                                                              ----------    ----------
                                                                                 311,215       296,422
    Less accumulated depreciation, depletion, amortization and impairment        109,712        95,783
                                                                              ----------    ----------
       Property and equipment, net                                               201,503       200,639
                                                                              ----------    ----------

Investment in Tatham Offshore, Inc. (Note 2)                                       7,500         7,500
Other noncurrent assets                                                            3,270         3,758
                                                                              ----------    ----------

       Total assets                                                           $  406,087    $  409,842
                                                                              ==========    ==========

   LIABILITIES AND PARTNERS' CAPITAL

Current liabilities:
    Accounts payable and accrued liabilities                                  $   15,144    $   12,522
    Accounts payable to affiliates                                                   585         1,032
                                                                              ----------    ----------
       Total current liabilities                                                  15,729        13,554
Deferred federal income taxes                                                      1,240         1,399
Notes payable                                                                    270,000       238,000
Other noncurrent liabilities                                                       6,251        13,304
                                                                              ----------    ----------
       Total liabilities                                                         293,220       266,257
                                                                              ----------    ----------

Minority interest                                                                   (690)         (381)
                                                                              ----------    ----------

Partners' capital                                                                113,557       143,966
                                                                              ----------    ----------

       Total liabilities and partners' capital                                $  406,087    $  409,842
                                                                              ==========    ==========
</TABLE>

   The accompanying notes are an integral part of this financial statement.



                                       1

<PAGE>   4

             LEVIATHAN GAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
                 UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
                    (In thousands, except per Unit amounts)

<TABLE>
<CAPTION>

                                                                 Three Months                Six Months
                                                                Ended June 30,             Ended June 30,
                                                          ------------------------    ------------------------
                                                             1998          1997          1998          1997
                                                          ----------    ----------    ----------    ----------
<S>                                                       <C>           <C>           <C>           <C>       
Revenue:
   Oil and gas sales                                      $    6,599    $   16,359    $   15,734    $   34,459
   Gathering, transportation and platform services             4,523         4,736         7,782        10,575
   Equity in earnings                                          7,251         7,131        12,571        14,220
                                                          ----------    ----------    ----------    ----------
                                                              18,373        28,226        36,087        59,254
                                                          ----------    ----------    ----------    ----------

Costs and expenses:
   Operating expenses                                          2,708         2,943         5,546         6,046
   Depreciation, depletion and amortization                    6,978        13,994        14,845        27,938
   Impairment, abandonment and other                            --          21,222          --          21,222
   General and administrative expenses and
      management fee                                           2,554         3,377         7,503         5,851
                                                          ----------    ----------    ----------    ----------
                                                              12,240        41,536        27,894        61,057
                                                          ----------    ----------    ----------    ----------

Operating income (loss)                                        6,133       (13,310)        8,193        (1,803)
Interest income and other                                         73           469           157         1,162
Interest and other financing costs                            (4,707)       (3,352)       (8,429)       (6,464)
Minority interest in (income) loss                               (16)          158            (3)           68
                                                          ----------    ----------    ----------    ----------
Income (loss) before income taxes                              1,483       (16,035)          (82)       (7,037)
Income tax benefit                                               (27)         (180)         (168)         (146)
                                                          ----------    ----------    ----------    ----------

Net income (loss)                                         $    1,510    $  (15,855)   $       86    $   (6,891)
                                                          ==========    ==========    ==========    ==========

Weighted average number of Units outstanding                  24,367        24,367        24,367        24,367
                                                          ==========    ==========    ==========    ==========

Basic and diluted net income (loss) per Unit              $     0.05    $    (0.58)   $     0.00    $    (0.26)
                                                          ==========    ==========    ==========    ==========
</TABLE>

   The accompanying notes are an integral part of this financial statement.



                                       2

<PAGE>   5

             LEVIATHAN GAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
                 UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>

                                                                                 Six Months
                                                                               Ended June 30,
                                                                         ------------------------
                                                                            1998          1997
                                                                         ----------    ----------
<S>                                                                      <C>           <C>        
Cash flows from operating activities:
    Net income (loss)                                                    $       86    $   (6,891)
    Adjustments to reconcile net income (loss) to net cash
     provided by operating activities:
       Amortization of debt issue costs                                         479           481
       Depreciation, depletion and amortization                              14,845        27,938
       Impairment, abandonment and other                                       --          21,222
       Minority interest in losses                                                3           (68)
       Equity in earnings                                                   (12,571)      (14,220)
       Distributions from equity investments                                 13,298        12,250
       Deferred income taxes                                                   (159)         (158)
       Other noncash items                                                      186        (3,984)
       Changes in operating working capital:
         (Increase) decrease in accounts receivable                             (42)        1,862
         Decrease in accounts receivable from affiliates                      2,624         2,846
         Decrease (increase) in other current assets                            107        (1,206)
         Decrease in accounts payable and accrued liabilities                (5,525)       (8,037)
         Decrease in payable to affiliates                                     (447)       (1,976)
                                                                         ----------    ----------
              Net cash provided by operating activities                      12,884        30,059
                                                                         ----------    ----------

Cash flows from investing activities:
    Additions to pipelines, platforms and facilities                        (12,283)       (3,420)
    Equity investments                                                       (4,543)          (22)
    Acquisition and development of oil and gas properties                    (2,540)      (11,015)
    Other                                                                      --             185
                                                                         ----------    ----------
              Net cash used in investing activities                         (19,366)      (14,272)
                                                                         ----------    ----------

Cash flows from financing activities:
    Decrease in restricted cash                                                --             716
    Proceeds from notes payable                                              50,000          --
    Repayments of notes payable                                             (18,000)      (10,000)
    Debt issue costs                                                           --             (93)
    Distributions to partners                                               (30,806)      (21,465)
                                                                         ----------    ----------
              Net cash provided by (used in) financing activities             1,194       (30,842)
                                                                         ----------    ----------

Decrease in cash and cash equivalents                                        (5,288)      (15,055)
Cash and cash equivalents at beginning of year                                6,430        16,489
                                                                         ----------    ----------
Cash and cash equivalents at end of period                               $    1,142    $    1,434
                                                                         ==========    ==========

Cash paid for interest, net of amounts capitalized                       $    7,844    $    6,082
Cash paid for income taxes                                               $     --      $        2

</TABLE>

   The accompanying notes are an integral part of this financial statement.



                                       3

<PAGE>   6
             LEVIATHAN GAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
                                 (In thousands)


<TABLE>
<CAPTION>

                                           Preference        Common        General
                                          Unitholders      Unitholder      Partner          Total
                                          -----------     -----------    -----------    -----------
<S>                                      <C>             <C>            <C>            <C>        
Partners' capital at
    December 31, 1997                     $   163,426     $   (15,400)   $    (4,060)   $   143,966

Net income for the six months
    ended June 30, 1998 (unaudited)                51              18             17             86

Cash distributions (unaudited)                (18,527)         (6,449)        (5,519)       (30,495)
                                          -----------     -----------    -----------    -----------

Partners' capital at
    June 30, 1998 (unaudited)             $   144,950     $   (21,831)   $    (9,562)   $   113,557
                                          ===========     ===========    ===========    ===========

Limited partnership Units
    outstanding at December 31, 1997
    and June 30, 1998 (unaudited)              18,075           6,292            -- (a)      24,367
                                          ===========     ===========    ===========    ===========
</TABLE>


------------------
(a)  Leviathan Gas Pipeline Company owns a 1% general partner interest in
     Leviathan Gas Pipeline Partners, L.P.


   The accompanying notes are an integral part of this financial statement.



                                       4

<PAGE>   7
             LEVIATHAN GAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION:

Leviathan Gas Pipeline Partners, L.P. (the "Partnership"), a publicly held
Delaware limited partnership, is primarily engaged in the gathering and
transportation of natural gas and crude oil through pipeline systems located in
the Gulf of Mexico (the "Gulf") and in the development and production of oil
and gas reserves. The Partnership's assets include interests in (i) eight
natural gas pipelines, (ii) a crude oil pipeline system, (iii) five
strategically located multi-purpose platforms, (iv) three producing oil and gas
properties and (v) a dehydration facility.

Leviathan Gas Pipeline Company ("Leviathan"), a Delaware corporation and
wholly-owned subsidiary of Leviathan Holdings Company ("Leviathan Holdings"),
an 85%-owned subsidiary of DeepTech International Inc. ("DeepTech"), is the
general partner of the Partnership, and as such, performs all management and
operational functions of the Partnership and its subsidiaries. The remaining
15% of Leviathan Holdings is principally owned by members of the management of
DeepTech. DeepTech also owns and controls several other operating subsidiaries
which are engaged in various oil and gas related activities.

As of June 30, 1998, the Partnership had 1,016,006 Preference Units and
23,350,888 Common Units outstanding. Preference Units and Common Units totaling
18,075,000 are owned by the public, representing a 72.7% effective limited
partner interest in the Partnership. Leviathan, through its ownership of
6,291,894 Common Units, its 1% general partner interest in the Partnership and
its approximate 1% nonmanaging interest in certain of the Partnership's
subsidiaries, owns a 27.3% effective interest in the Partnership (23.2%
effective interest net to DeepTech's interest). See Note 4 for a discussion of
the conversion of Preference Units into Common Units.

The accompanying consolidated financial statements have been prepared without
audit pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, the statements reflect all normal recurring
adjustments which are, in the opinion of management, necessary for a fair
statement of the results of operations for the period covered by such
statements. These interim financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto contained
in the Partnership's Annual Report on Form 10-K for the year ended December 31,
1997.

Effective January 1, 1998, the Partnership adopted Statement of Financial
Accounting Standard ("SFAS") No. 131, "Disclosures About Segments of an
Enterprise and Related Information". SFAS No. 131 establishes standards for the
method public entities report information about operating segments in both
interim and annual financial statements issued to shareholders and requires
related disclosures about products and services, geographic areas and major
customers. The Partnership is currently evaluating the disclosure requirements
of this statement as this statement does not apply to interim financial
statements in the initial year of its adoption. However, comparative financial
information for interim periods in the initial year of application must be
reported in financial statements for interim periods in the second year of
application.

NOTE 2 - RECENT EVENTS:

Impending Merger

On February 27, 1998, DeepTech entered into an Agreement and Plan of Merger
(the "Merger Agreement") with El Paso Natural Gas Company ("El Paso") and El
Paso Acquisition Company ("El Paso Acquisition"), a wholly-owned subsidiary of
El Paso, pursuant to which DeepTech would merge (the "Merger") with El Paso, or
under certain circumstances, with El Paso Acquisition. Subsequently, DeepTech,
El Paso and El Paso Acquisition executed Amendment No. 1 to the Merger
Agreement (the "Amended Merger Agreement") with El Paso Energy Corporation ("El
Paso Corporation") to allow El Paso to reorganize its corporate structure. The
holders of a majority of DeepTech's common stock approved the Amended Merger
Agreement on July 19, 1998. Pursuant to the Amended Merger Agreement, upon the
closing of the Merger, DeepTech will merge with El Paso Corporation, or under
certain circumstances, with El Paso Acquisition.



                                       5

<PAGE>   8
             LEVIATHAN GAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                  (UNAUDITED)

The material terms of the Merger and the transactions contemplated by the
Amended Merger Agreement and other agreements as these agreements relate to the
Partnership are as follow:

    (a)  El Paso will acquire the minority interests of Leviathan Holdings and
         two other subsidiaries of DeepTech primarily held by DeepTech
         management for an aggregate of $55.0 million. As a result, El Paso
         will own 100% of Leviathan's general partner interest in the
         Partnership and an overall 27.3% effective interest in the
         Partnership.

    (b)  Pursuant to the Amended Merger Agreement, employees of DeepTech or the
         Partnership who are terminated upon the closing of the Merger or
         during the six months thereafter, will receive certain severance
         payments from DeepTech or El Paso.

    (c)  Tatham Offshore, Inc. ("Tatham Offshore"), an affiliate of the
         Partnership, will transfer certain of its assets located in the Gulf
         to the Partnership in consideration of the redemption by Tatham
         Offshore of its 7,500 shares of Series B 9% Senior Convertible
         Preferred Stock (the "Senior Preferred Stock") currently owned by the
         Partnership (the "Redemption Agreement"). Specifically, under the
         terms of the Redemption Agreement and subject to the satisfaction of
         certain conditions at closing, the Partnership has agreed to exchange
         the Senior Preferred Stock and all related accrued and unpaid
         dividends due to the Partnership as of the date of the exchange for
         100% of Tatham Offshore's right, title and interest in and to Viosca
         Knoll Blocks 772, 773, 774, 817, 818 and 861 (subject to an existing
         production payment obligation), West Delta Block 35, Ewing Bank Blocks
         871, 914, 915 and 916 and the platform located at Ship Shoal Block
         331. At the closing, the Partnership will receive from/pay to Tatham
         Offshore an amount equal to the net cash generated from/required by
         such properties from January 1, 1998 through the closing date. In
         addition, the Partnership has agreed to assume all abandonment and
         restoration obligations associated with the platform and leases. As of
         June 30, 1998, the Partnership has incurred $2.5 million of
         abandonment costs related to the Ewing Bank leases. This transaction
         is expected to close contemporaneous with DeepTech's merger with El
         Paso.

    (d)  In June 1998, Tatham Offshore canceled its reversionary interests in
         certain oil and gas properties owned by the Partnership.

Both the Merger and the transactions contemplated by the Redemption Agreement
are subject to customary regulatory approvals, the satisfaction of certain
conditions and the consummation of certain related transactions and are
anticipated to be completed in mid August 1998.

Mr. Grant E. Sims and Mr. James H. Lytal, the Chief Executive Officer and the
President, respectively, of the Partnership have entered into employment
agreements with El Paso effective as of the closing of the Merger. After the
Merger, Messrs. Sims and Lytal will continue to serve as the Chief Executive
Officer and the President, respectively, of the Partnership for a term of five
years commencing on the effective date of the Merger. However, pursuant to the
terms of their respective employment agreements, Messrs. Sims and Lytal have
the right to terminate upon thirty days notice and El Paso has the right to
terminate under certain circumstances.

Recent Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
requires that an entity recognize all derivative investments as either assets or
liabilities on the balance sheet and measure those instruments at fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, the type of hedge
transaction. For fair-value hedge transactions in which the Partnership is
hedging changes in an asset's, liability's or firm commitment's fair value,
changes in the fair value of the derivative instrument will generally be offset
in the income statement by changes in the hedged item's fair value. For
cash-flow hedge transactions, in which the Partnership is hedging the
variability of cash flows related to a variable-rate asset, liability, or a
forecasted transaction, changes in the fair value of the derivative instrument
will be reported in other 



                                       6
<PAGE>   9
             LEVIATHAN GAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                  (UNAUDITED)


comprehensive income. The gains and losses on the derivative instrument that
are reported in other comprehensive income will be reclassified as earnings in
the periods in which earnings are impacted by the variability of the cash flows
of the hedged item. The ineffective portion of all hedges will be recognized in
current-period earnings. This statement is effective for fiscal years beginning
after June 15, 1999. The Partnership has not yet determined the impact that the
adoption of SFAS No. 133 will have on its earnings or statement of financial
position.

NOTE 3 - EQUITY INVESTMENTS:

The Partnership owns interests of 50% in Viosca Knoll Gathering Company
("Viosca Knoll"), 36% in Poseidon Oil Pipeline Company, L.L.C. ("POPCO"), 25.7%
in Nautilus Pipeline Company, L.L.C. ("Nautilus"), 25.7% in Manta Ray Offshore
Gathering Company, L.L.C. ("Manta Ray Offshore"), 50% in Stingray Pipeline
Company ("Stingray"), 40% in High Island Offshore System ("HIOS"), 33 1/3% in
U-T Offshore System ("UTOS") and 50% in West Cameron Dehydration Company,
L.L.C. ("West Cameron Dehy"). The summarized financial information for these
investments, which are accounted for using the equity method, is as follows:

                    SUMMARIZED HISTORICAL OPERATING RESULTS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                           Six Months Ended June 30, 1998
                             ------------------------------------------------------------------------------------------------------
                                                               West
                                        Viosca                Cameron                           Manta Ray
                               HIOS      Knoll    Stingray     Dehy        POPCO       UTOS     Offshore    Nautilus        Total

<S>                          <C>        <C>        <C>        <C>        <C>          <C>        <C>        <C>     
Operating revenue            $21,730    $14,746    $11,620    $1,191     $ 19,517     $2,384     $5,234     $  1,289
Other income                     134         23        434         2          145         57        184           17
Operating expenses            (8,632)    (1,263)    (7,611)      (84)      (1,960)    (1,260)    (1,533)        (678)
Depreciation                  (2,384)    (1,893)    (3,489)       (7)      (4,392)      (279)    (2,129)      (2,890)
Other expenses                    --     (1,989)    (1,069)       --       (4,396)        --         --          (12)
                             -------    -------    -------    ------     --------     ------     ------     --------
Net earnings (loss)           10,848      9,624       (115)    1,102        8,914        902      1,756       (2,274)
Ownership percentage              40%        50%        50%       50%          36%      33.3%      25.7%        25.7%
                             -------    -------    -------    ------     --------     ------     ------     --------
                               4,339      4,812        (58)      551        3,209        301        451         (584)

Adjustments:
- Depreciation(a)                379         --        406        --           --         16       (174)          --
- Contract amortization(a)       (53)        --       (122)       --           --         --         --           --
- Other                          (69)        --        (24)       --          (60)        16         --         (765)(c)
                             -------    -------    -------     -----     --------     ------     ------     --------
Equity in earnings (loss)     $4,596     $4,812     $  202     $ 551     $  3,149     $  333     $  277     $ (1,349)      $ 12,571
                              ======     ======     ======     =====     ========     ======     ======     ========       ========
Distributions(b)              $5,240     $5,800     $1,000     $ 425     $     --     $  333     $  500     $     --       $ 13,298
                              ======     ======     ======     =====     ========     ======     ======     ========       ========
</TABLE>

----------------
    
    (a)  Adjustments result from purchase price adjustments made in accordance
         with Accounting Principles Board Opinion No. 16, "Business
         Combinations."
   
    (b)  Future distributions could be restricted by the terms of the equity
         investees' respective credit agreements.

    (c)  Primarily relates to a revision of the allowance for funds used during
         construction ("AFUDC") which represents the estimated costs, during
         the construction period, of funds used for construction purposes.



                                       7

<PAGE>   10
             LEVIATHAN GAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                  (UNAUDITED)

                    SUMMARIZED HISTORICAL OPERATING RESULTS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                         Six Months Ended June 30, 1997
                             -------------------------------------------------------------------------------------------------
                                           Viosca                West Cameron                           Manta Ray
                               HIOS        Knoll       Stingray      Dehy        POPCO        UTOS       Offshore      Total

<S>                          <C>          <C>          <C>          <C>         <C>          <C>         <C>    
Operating revenue            $ 23,146     $ 10,156     $ 12,316     $ 1,299     $ 10,955     $ 1,875     $ 2,554
Other income                      202           --          500          --           70          16         109
Operating expenses             (7,874)        (924)      (6,046)        (80)      (2,139)     (1,297)       (838)
Depreciation                   (2,388)      (1,173)      (3,604)         (8)      (2,730)       (283)       (768)
Other expenses                     --         (911)        (732)         --       (2,451)         --          --
                             --------     --------     --------     -------     --------     -------     -------
Net earnings                   13,086        7,148        2,434       1,211        3,705         311       1,057
Ownership percentage               40%          50%          50%         50%          36%       33.3%       25.7%
                             --------     --------     --------     -------     --------     -------     -------
                                5,234        3,574        1,217         606        1,334         104         272
Adjustments:
- Depreciation(a)                 423           --          477          --           --          18          --
- Contract amortization(a)        (53)          --         (170)         --           --          --          --
- Other                           (68)          --          (24)         --         (180)        (16)      1,472(b)
                             --------     --------     --------     -------     --------     -------     -------
Equity in earnings           $  5,536     $  3,574     $  1,500     $   606     $  1,154     $   106     $ 1,744       $14,220
                             ========     ========     ========     =======     ========     =======     =======       =======
Distributions(c)             $  6,400     $  3,950     $  1,100     $   400     $     --     $    --     $   400       $12,250
                             ========     ========     ========     =======     ========     =======     =======       =======
</TABLE>

-------------------
   
    (a)  Adjustments result from purchase price adjustments made in accordance
         with Accounting Principles Board Opinion No. 16, "Business
         Combinations."
 
    (b)  Represents additional net earnings specifically allocated to the
         Partnership related to the assets contributed by the Partnership to
         Manta Ray Offshore. Pursuant to the terms of the arrangement, the
         Partnership managed the operations of the assets contributed to Manta
         Ray Offshore and was permitted to retain approximately 100% of the net
         earnings from such assets during the construction phase of the
         expansion to the Manta Ray Offshore system (January 17, 1997 through
         December 31, 1997). Effective January 1, 1998, Manta Ray Offshore
         began allocating all net earnings in accordance with ownership
         percentages.

    (c)  Future distributions could be restricted by the terms of the equity
         investees' respective credit agreements.

NOTE 4 - PARTNERS' CAPITAL INCLUDING CASH DISTRIBUTIONS:

Cash distributions

During the Preference Period (as defined in the Partnership Agreement),
distributions by the Partnership of its Available Cash were effectively made
98% to Unitholders and 2% to Leviathan, subject to the payment of incentive
distributions to Leviathan if certain target levels of cash distributions to
Unitholders are achieved (the "Incentive Distributions"). As an incentive, the
general partner's interest in the portion of quarterly cash distributions in
excess of $0.325 per Unit and less than or equal to $0.375 per Unit is
increased to 15%. For quarterly cash distributions over $0.375 per Unit but
less than or equal to $0.425 per Unit, the general partner receives 25% of such
incremental amount and for all quarterly cash distributions in excess of $0.425
per Unit, the general partner receives 50% of the incremental amount. During
and after the Preference Period, the Preference Units are entitled to receive
from Available Cash (as defined in the Partnership Agreement) a minimum
quarterly distribution for each quarter of $0.275 per Preference Unit, plus any
arrearage in the payment of the minimum quarterly distribution for prior
quarters, before any distribution of Available Cash is made to holders of
Common Units for such quarter. After the Preference Period, the Preference
Units will not be entitled to receive any more than the minimum quarterly
distribution per quarter.

In February 1998, the Partnership paid a cash distribution of $0.50 per
Preference and Common Unit for the period from October 1, 1997 through December
31, 1997 and an Incentive Distribution of $2.4 million to Leviathan, as general
partner. In May 1998, the Partnership paid a cash distribution of $0.525 per
Preference and Common Unit for the period from January 1, 1998 through March
31, 1998 and an Incentive Distribution of $3.0 million to Leviathan. On July
20, 1998, the Partnership declared a cash distribution of $0.525 per Preference
and Common Unit for the period from April 1, 1998 through June 30, 1998 which
will be paid on August 14, 1998 to Unitholders of record as of July 31, 1998.
Leviathan will receive an Incentive Distribution of $3.0 million for the three
months ended June 30, 1998.



                                       8

<PAGE>   11
             LEVIATHAN GAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                  (UNAUDITED)

Conversion of Preference Units into Common Units

On May 7, 1998, the Partnership notified the holders of its Preference Units of
their right to convert their Preference Units into an equal number of Common
Units within a 90 day period. If the Common Units, after the conversion, met
the listing standards of the New York Stock Exchange ("NYSE"), then the
Preference Period would end.

On August 5, 1998, the conversion period expired and holders of 17,058,994
Preference Units, representing 94.4% of the Preference Units then outstanding,
had elected to convert to Common Units. As a result, the Preference Period has
ended and the Common Units have become the primary listed security on the NYSE
under the symbol "LEV". 1,016,006 Preference Units remain outstanding and now
trade as the Partnership's secondary listed security on the NYSE under the
symbol "LEV.P".

The remaining Preference Units retain their distribution preferences over the
Common Units; that is, Preference Units will be paid up to the minimum
quarterly distribution of $0.275 per Unit before any quarterly distributions
are made to the Common Units or Leviathan, as general partner. However,
Preference Units will not receive any distributions in excess of the minimum
quarterly distribution of $0.275 per Unit. Only Common Units and Leviathan, as
general partner, will be eligible to receive such excess distributions.

In accordance with the Partnership Agreement, holders of the remaining
Preference Units will not have another opportunity to convert their Preference
Units into Common Units until May 1999 and again in May 2000. Thereafter, any
remaining Preference Units may, under certain circumstances, be subject to
redemption.

NOTE 5 - RELATED PARTY TRANSACTIONS:

Management fees. For the six months ended June 30, 1998, Leviathan charged the
Partnership $4.6 million pursuant to the Partnership Agreement which provides
for reimbursement of expenses Leviathan incurs as general partner of the
Partnership, including reimbursement of expenses incurred by DeepTech in
providing management services to Leviathan and the Partnership.

Other. Pursuant to the Leviathan non-employee director compensation
arrangements, the Partnership is obligated to pay each non-employee director 2
1/2% of the general partner's Incentive Distribution as a profit participation
fee. During the six months ended June 30, 1998, the Partnership paid the three
non-employee directors of Leviathan a total of $0.4 million as a profit
participation fee.

In March 1998, Tatham Offshore eliminated its 7,500 shares of 9% Senior
Convertible Preferred Stock issued to the Partnership and replaced this stock
with its Senior Preferred Stock (discussed in Note 2). The Partnership, at any
time, may convert the shares of Senior Preferred Stock into shares of Tatham
Offshore Series A 12% Convertible Exchangeable Preferred Stock ("Series A
Preferred Stock") using a conversion ratio equal to (i) the liquidation
preference amount plus accumulated and unpaid dividends divided by (ii)
$0.9375, the closing price of the Tatham Offshore Series A Preferred Stock on
February 27, 1998. In connection with the Redemption Agreement discussed in
Note 2, the Senior Preferred Stock and all related unpaid dividends will be
redeemed in full.

NOTE 6 - COMMITMENTS AND CONTINGENCIES:

Hedging Activities

The Partnership hedges a portion of its oil and natural gas production to
reduce the Partnership's exposure to fluctuations in market prices of oil and
natural gas and to meet certain requirements of the Partnership Credit Facility
(as defined herein). The Partnership uses various financial instruments whereby
monthly settlements are based on differences between the prices specified in
the instruments and the settlement prices of certain futures contracts quoted
on the New York Mercantile Exchange ("NYMEX") or certain other indices. The
Partnership settles the instruments by paying the negative difference or
receiving the positive difference between the applicable settlement price and
the price specified in the contract. The instruments utilized by the
Partnership differ from futures contracts in that there is 



                                       9
<PAGE>   12
             LEVIATHAN GAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                  (UNAUDITED)

no contractual obligation which requires or allows for the future delivery of
the product. Gains or losses on hedging activities are recognized as oil and
gas sales in the period in which the hedged production is sold.

At June 30, 1998, the Partnership had open sales hedges on approximately 25,000
million British thermal units ("MMbtu") of natural gas per day for the
remaining period in 1998 at an average price of $2.375 per MMbtu and open
purchase hedges of approximately 25,000 MMbtu of natural gas per day for the
remaining period in 1998 at an average price of $2.24 per MMbtu. In addition,
the Partnership had entered into commodity swap transactions for calendar 1999
of (i) 5,000 MMbtu per day at a fixed price to be determined at the
Partnership's option equal to the January 1999 Natural Gas Futures Contract on
NYMEX as quoted at any time during 1998 to and including the last three trading
days of the January 1999 contract minus $0.25 per MMbtu and (ii) 5,000 MMbtu
per day at a fixed price to be determined at the Partnership's option equal to
the January 1999 Natural Gas Futures Contract on NYMEX as quoted at any time
during 1998 to and including the last three trading days of the January 1999
contract minus $0.28 per MMbtu.

At June 30, 1998, the Partnership had open sales hedges on approximately 992
barrels of oil per day for the remaining period in 1998 at an average price of
$20.43 per barrel and open purchase hedges of approximately 1,000 barrels of
oil per day for the remaining period in 1998 at an average price of $17.68 per
barrel.

Other

In 1995, the Partnership adopted the Unit Rights Appreciation Plan (the "Plan")
to provide the Partnership with the ability of making awards of Unit Rights, as
hereinafter defined, to certain officers and employees of the Partnership or
its affiliates as an incentive for these individuals to continue in the service
of the Partnership or its affiliates. Under the Plan, the Partnership has
granted to certain officers and employees of the Partnership or its affiliates
the right to purchase, or realize the appreciation of, a Preference Unit or
Common Unit (see Note 4) (a "Unit Right"), pursuant to the provisions of the
Plan. As of June 30, 1998, a total of 1,200,000 Unit Rights had been granted
under the Plan. The exercise prices covered by the Unit Rights granted pursuant
to the Plan range from $15.6875 to $21.50, the closing prices of the Preference
Units as reported on the New York Stock Exchange on the date the Unit Rights
were granted. As of June 30, 1998, the Partnership had accrued $5.2 million
related to the appreciation and vesting of the outstanding Unit Rights.
However, as a result of the "change of control" occurring upon the closing of
the Merger discussed in Note 2, the Unit Rights will fully vest at which time
the Partnership will be obligated to pay the holders of the Unit Rights an
amount equal to the difference between the grant price of the Units and the
closing price of the Units on the date of the Merger, or a date to be otherwise
specified. Using the closing price of the Common Units on August 7, 1998 of $26
3/4 per Unit, the Partnership would be obligated to pay the holders of the Unit
Rights an aggregate of $8.4 million upon the exercise of the Unit Rights.



                                      10
<PAGE>   13

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

The following discussion should be read in conjunction with the Partnership's
consolidated financial statements and notes thereto included in Item 1.
"Consolidated Financial Statements" and is intended to assist in the
understanding of the Partnership's financial condition and results of operations
for the three and six months ended June 30, 1998. Unless the context otherwise
requires, all references herein to the Partnership with respect to the
operations and ownership of the Partnership's assets are also references to its
subsidiaries.

OVERVIEW

The Partnership's assets include interests in (i) eight natural gas pipelines
(the "Gas Pipelines"), (ii) a crude oil pipeline system, (iii) five
strategically located multi-purpose platforms, (iv) three producing oil and gas
properties and (v) a dehydration facility.

The Gas Pipelines, strategically located primarily offshore Louisiana and
eastern Texas, gather and transport natural gas for producers, marketers,
pipelines and end-users for a fee. The Gas Pipelines include approximately 1,167
miles of pipeline with a throughput capacity of 6.5 billion cubic feet of gas
per day. Each of the Gas Pipelines interconnects with one or more long line
transmission pipelines that provide access to multiple markets in the eastern
half of the United States. The Partnership's interest in the Gas Pipelines
consists of: a 100% interest in each of Manta Ray Gathering Company, L.L.C.,
Green Canyon Pipe Line Company, L.L.C. and Tarpon Transmission Company
("Tarpon"); a 50% partnership interest in each of Stingray and Viosca Knoll; a
40% partnership interest in HIOS; a 33 1/3% partnership interest in UTOS; and an
effective 25.7% interest in each of Manta Ray Offshore and Nautilus.

The Partnership owns a 36% interest in POPCO which owns and operates the
Poseidon Oil Pipeline ("Poseidon"). Poseidon, a major new sour crude oil
pipeline system built in response to an increased demand for additional sour
crude oil pipeline capacity in the central Gulf, consists of 297 miles of
16-inch to 24-inch pipeline with a capacity of approximately 400,000 barrels
per day and is currently delivering an average of approximately 87,000 barrels
of oil per day. POPCO placed a third phase of Poseidon in service in December
1997.

The Partnership operates and owns interests in five strategically located
multi-purpose platforms in the Gulf that have processing capabilities which
complement the Partnership's pipeline operations and play a key role in the
development of oil and gas reserves. The platforms are used to interconnect the
offshore pipeline network and to provide an efficient means to perform pipeline
maintenance and to operate compression, separation, processing and other
facilities. In addition, the multi-purpose platforms serve as landing sites for
deeper water production and as sites for the location of gas compression
facilities and drilling operations.

The Partnership owns an interest in and is operator of three producing leases
in the Gulf. The Viosca Knoll Block 817 wells (75% working interest currently
owned by the Partnership) are currently producing a gross aggregate average of
approximately 45 million cubic feet ("MMcf") of gas per day. Pursuant to the
Redemption Agreement, the Partnership has agreed to acquire the remaining 25%
working interest in Viosca Knoll Block 817. The Garden Banks Block 72 wells
(50% working interest owned by the Partnership) are currently producing a gross
aggregate average of approximately 1,870 barrels of oil and 6.7 MMcf of gas per
day. The Garden Banks Block 117 wells (50% working interest owned by the
Partnership) are currently producing a gross aggregate average of approximately
1,715 barrels of oil and 3.4 MMcf of gas per day.

The Partnership owns a 50% interest in West Cameron Dehy, which owns certain
dehydration facilities located at the northern terminus of the Stingray system,
onshore Louisiana.



                                      11

<PAGE>   14

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 1998 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1997

Oil and gas sales totaled $6.6 million for the three months ended June 30, 1998
as compared with $16.4 million for the same period in 1997. The decrease is
attributable to normal production declines from the Partnership's oil and gas
properties, substantially lower realized oil and gas prices and the lack of
acceptable markets downstream of the Viosca Knoll system. The production
decline attributable to the capacity constraints of the downstream transporter
is anticipated to be alleviated during the second half of 1998. During the
three months ended June 30, 1998, the Partnership produced and sold 2,085 MMcf
of gas and 138,000 barrels of oil at average prices of $2.11 per thousand cubic
feet ("Mcf") and $15.64 per barrel, respectively. During the same period in
1997, the Partnership produced and sold 5,516 MMcf of gas and 206,000 barrels
of oil at average prices of $2.18 per Mcf and $20.61 per barrel, respectively.

Revenue from gathering, transportation and platform services totaled $4.5
million for the three months ended June 30, 1998 as compared with $4.7 million
for the same period in 1997. The change primarily reflects a decrease of $1.6
million in gathering services revenue primarily related to the cessation of
production in May 1997 from the only well connected to the Ewing Bank system
offset by an increase of $1.4 million in platform services revenue from the
Partnership's East Cameron Block 373 platform which was placed in service in
April 1998. Throughput volumes for the Partnership's gathering systems
increased approximately 18% during the second quarter of 1998 as compared with
the second quarter of 1997 primarily as a result of new producing fields
attached to the Tarpon system in June and July 1997.

Revenue from the Partnership's equity interests in Stingray, HIOS, UTOS, Viosca
Knoll, POPCO, Manta Ray Offshore, Nautilus and West Cameron Dehy (the "Equity
Investees") totaled $7.3 million for the three months ended June 30, 1998 as
compared with $7.1 million for the same period in 1997. The increase primarily
reflects an increase of $2.4 million from POPCO and Viosca Knoll as a result of
increased throughput offset by a decrease of $2.2 million from other Equity
Investees comprised of (i) $1.2 million related to Stingray and HIOS as a
result of increased maintenance costs and decreased throughput and (ii) $1.0
million related to nonrecurring start-up costs, prior period adjustments and a
change in equity ownership of Nautilus and Manta Ray Offshore. Total gas
throughput volumes for the Equity Investees increased approximately 23% from
the three months ended June 30, 1997 to the three months ended June 30, 1998
primarily as a result of increased throughput on the Viosca Knoll, Nautilus and
Manta Ray Offshore systems. Oil volumes from Poseidon totaled 9.0 million
barrels and 4.3 million barrels for the three months ended June 30, 1998 and
1997, respectively.

Operating expenses for the three months ended June 30, 1998 totaled $2.7
million as compared to $2.9 million for the same period in 1997. The decrease
is primarily attributable to lower operating and transportation costs
associated with the Partnership's oil and gas properties during the three
months ended June 30, 1998.

Depreciation, depletion and amortization totaled $7.0 million for the three
months ended June 30, 1998 as compared with $14.0 million for the same period
in 1997. The decrease of $7.0 million reflects decreases of (i) $5.7 million in
depreciation and depletion on oil and gas wells and facilities located on the
Viosca Knoll Block 817, Garden Banks Block 72 and the Garden Banks Block 117 as
a result of decreased production from these leases and (ii) $1.3 million in
depreciation on pipelines, platforms and facilities as a result of the
Partnership fully depreciating its investment in the Ewing Bank and Ship Shoal
systems in June 1997.

Impairment, abandonment and other totaled $21.2 million for the three months
ended June 30, 1997 and consisted of a non-recurring charge to reserve the
Partnership's investment in certain gathering facilities and other assets
associated with Tatham Offshore's Ewing Bank 914 #2 well and Ship Shoal Block
331 property, to accrue the Partnership's abandonment obligations associated
with the gathering facilities serving these properties, to reserve the
Partnership's noncurrent receivable related to the prepayment of the demand
charge obligations under certain agreements related to the Ewing Bank and Ship
Shoal leases and to accrue certain abandonment obligations associated with its
oil and gas properties. No impairment, abandonment and other charges were
recorded during the three months ended June 30, 1998.



                                      12

<PAGE>   15

General and administrative expenses, including the management fee allocated
from Leviathan, totaled $2.6 million for the three months ended June 30, 1998
as compared with $3.4 million for the same period in 1997. The decrease of $0.8
million reflects a decrease of $1.1 million in direct general and
administrative expenses of the Partnership primarily related to the reduction
in value of vested Unit Rights granted to certain officers and employees in
1995, 1996 and 1997 offset by increases of (i) $0.2 million in incentive
payments to Leviathan's three non-employee directors pursuant to compensation
arrangements and (ii) $0.1 million in management fees allocated by Leviathan to
the Partnership. See Item 1. "Consolidated Financial Statements -- Notes to 
Consolidated Financial Statements -- Note 6 -- Commitments and Contingencies -- 
Other" and "-- Note 5 -- Related Party Transactions."

Interest income and other totaled $0.1 million for the three months ended 
June 30, 1998 as compared with $0.5 million for the three months ended June 30,
1997.

Interest and other financing costs, net of capitalized interest, for the three
months ended June 30, 1998 totaled $4.7 million as compared with $3.4 million
for the same period in 1997. During the three months ended June 30, 1998 and
1997, the Partnership capitalized $0.1 million and $0.6 million, respectively,
of interest costs in connection with construction projects and drilling
activities in progress during such periods. During the three months ended June
30, 1998 and 1997, the Partnership had outstanding indebtedness averaging
approximately $260.5 million and $218.0 million, respectively.

Net income for the three months ended June 30, 1998 totaled $1.5 million, or
$0.05 per Unit, as compared with a net loss of $15.9 million, or $0.58 per
Unit, for the three months ended June 30, 1997 as a result of the items
discussed above.

SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1997

Oil and gas sales totaled $15.7 million for the six months ended June 30, 1998
as compared with $34.5 million for the same period in 1997. The decrease is
attributable to normal production declines from the Partnership's oil and gas
properties, substantially lower realized oil prices and the lack of acceptable
markets downstream of the Viosca Knoll system. The production decline
attributable to the capacity constraints of the downstream transporter is
anticipated to be alleviated during the second half of 1998. During the six
months ended June 30, 1998, the Partnership produced and sold 4,874 MMcf of gas
and 308,000 barrels of oil at average prices of $2.16 per Mcf and $16.53 per
barrel, respectively. During the same period in 1997, the Partnership produced
and sold 11,707 MMcf of gas and 409,000 barrels of oil at average prices of
$2.16 per Mcf and $21.56 per barrel, respectively.

Revenue from gathering, transportation and platform services totaled $7.8
million for the six months ended June 30, 1998 as compared with $10.6 million
for the same period in 1997. The decrease primarily reflects decreases of (i)
$2.8 million related to the cessation of production in May 1997 from the only
well connected to the Ewing Bank system, (ii) $0.7 million as a result of the
contribution of a significant portion of the Manta Ray system to Manta Ray
Offshore on January 17, 1997 resulting in revenue from these assets being
included in equity in earnings for all of the six months in the period ended
June 30, 1998 as compared with a portion of the six months ended June 30, 1997
and (iii) $0.5 million in platform revenue services from the Partnership's
Viosca Knoll Block 817 platform as a result of lower oil and gas volumes
processed on the platform due to capacity constraints of the downstream
transporter which should be alleviated during the second half of 1998, offset
by an increase of $1.4 million in platform services revenue from the
Partnership's East Cameron Block 373 platform which was placed in service in
April 1998. Throughput volumes for the Partnership's gathering systems
increased approximately 15% from the first six months of 1998 as compared with
the same period in 1997 primarily as a result of new producing fields attached
to the Tarpon system in June and July 1997.

Revenue from the Partnership's Equity Investees totaled $12.6 million for the
six months ended June 30, 1998 as compared with $14.2 million for the same
period in 1997. The decrease of $1.6 million primarily reflects decreases of
(i) $2.3 million related to Stingray and HIOS as a result of increased
maintenance costs and decreased throughput and (ii) $2.8 million related to
nonrecurring start-up costs, prior period adjustments and a change in equity



                                      13
<PAGE>   16

ownership of Nautilus and Manta Ray Offshore offset by an increase of $3.5
million from POPCO and Viosca Knoll as a result of increased throughput. Total
gas throughput volumes for the Equity Investees increased approximately 17%
from the six months ended June 30, 1997 to the same period in 1998 primarily as
a result of increased throughput on the Viosca Knoll, Nautilus and Manta Ray
Offshore systems. Oil volumes from Poseidon totaled 15.7 million barrels and
8.0 million barrels for the six months ended June 30, 1998 and 1997,
respectively.

Operating expenses for the six months ended June 30, 1998 totaled $5.5 million
as compared to $6.0 million for the same period in 1997. The decrease is
primarily attributable to lower operating and transportation costs associated
with the Partnership's oil and gas properties during the six months ended June
30, 1998.

Depreciation, depletion and amortization totaled $14.8 million for the six
months ended June 30, 1998 as compared with $27.9 million for the same period
in 1997. The decrease of $13.1 million reflects decreases of (i) $9.9 million
in depreciation and depletion on oil and gas wells and facilities located on
the Viosca Knoll Block 817, Garden Banks Block 72 and the Garden Banks Block
117 as a result of decreased production from these leases and (ii) $3.2 million
in depreciation on pipelines, platforms and facilities as a result of the
Partnership fully depreciating its investment in the Ewing Bank and Ship Shoal
systems in June 1997.

Impairment, abandonment and other totaled $21.2 million for the six months
ended June 30, 1997 and consisted of a non-recurring charge to reserve the
Partnership's investment in certain gathering facilities and other assets
associated with Tatham Offshore's Ewing Bank 914 #2 well and Ship Shoal Block
331 property, to accrue the Partnership's abandonment obligations associated
with the gathering facilities serving these properties, to reserve the
Partnership's noncurrent receivable related to the prepayment of the demand
charge obligations under certain agreements related to the Ewing Bank and Ship
Shoal leases and to accrue certain abandonment obligations associated with its
oil and gas properties. No impairment, abandonment and other charges were
recorded during the six months ended June 30, 1998.

General and administrative expenses, including the management fee allocated from
Leviathan, totaled $7.5 million for the six months ended June 30, 1998 as
compared with $5.9 million for the same period in 1997. The increase of $1.6
million reflects increases of (i) $0.8 million in management fees allocated by
Leviathan to the Partnership and (ii) $0.8 million in direct general and
administrative expenses of the Partnership primarily related to (x) the
appreciation and vesting of Unit Rights granted to certain officers and
employees in 1995, 1996 and 1997 and (y) incentive payments to Leviathan's three
non-employee directors pursuant to compensation arrangements. See Item 1.
"Consolidated Financial Statements -- Notes to Consolidated Financial Statements
-- Note 5 -- Related Party Transactions" and "-- Note 6 -- Commitments and
Contingencies -- Other."

Interest income and other totaled $0.2 million for the six months ended June
30, 1998 as compared with $1.2 million for the six months ended June 30, 1997.

Interest and other financing costs, net of capitalized interest, for the six
months ended June 30, 1998 totaled $8.4 million as compared with $6.5 million
for the same period in 1997. During the six months ended June 30, 1998 and
1997, the Partnership capitalized $0.5 million and $1.4 million, respectively,
of interest costs in connection with construction projects and drilling
activities in progress during such periods. During the six months ended June
30, 1998 and 1997, the Partnership had outstanding indebtedness averaging
approximately $254.0 million and $222.0 million, respectively.

Net income for the six months ended June 30, 1998 totaled $0.1 million, or
$0.00 per Unit, as compared with a net loss of $6.9 million, or $0.26 per Unit,
for the six months ended June 30, 1997 as a result of the items discussed
above.



                                      14

<PAGE>   17

LIQUIDITY AND CAPITAL RESOURCES

Sources of Cash. The Partnership intends to satisfy its capital requirements and
other working capital needs primarily from cash on hand, cash from operations
and borrowings under the Partnership Credit Facility (discussed below). Net cash
provided by operating activities for the six months ended June 30, 1998 totaled
$10.4 million. At June 30, 1998, the Partnership had cash and cash equivalents
of $1.1 million.

Cash from operations is derived from (i) payments for gathering gas through the
Partnership's 100% owned pipelines, (ii) platform access and processing fees,
(iii) cash distributions from Equity Investees and (iv) the sale of oil and gas
attributable to the Partnership's interest in its producing properties. Oil and
gas properties are depleting assets and will produce reduced volumes of oil and
gas in the future unless additional wells are drilled or recompletions of
existing wells are successful. See "-- Overview" for current production rates
from these properties.

The Partnership's cash flows from operations will be affected by the ability of
each Equity Investee to make distributions. Distributions from such entities
are subject to the discretion of their respective management committees.
Further, each of Stingray, POPCO and Viosca Knoll is party to a credit
agreement under which it has outstanding obligations that may restrict the
payments of distributions to its owners. Distributions to the Partnership from
Equity Investees during the six months ended June 30, 1998 totaled $13.3
million.

The Partnership Credit Facility is a revolving credit facility providing for up
to $300 million of available credit subject to customary terms and conditions,
including certain debt incurrence limitations. Proceeds from the Partnership
Credit Facility are available to the Partnership for general partnership
purposes, including financing of capital expenditures, for working capital, and
subject to certain limitations, for paying distributions to the Unitholders.
The Partnership Credit Facility can also be utilized to issue letters of credit
as may be required from time to time; however, no letters of credit are
currently outstanding. The Partnership Credit Facility matures in December
1999; is guaranteed by Leviathan and each of the Partnership's subsidiaries;
and is secured by the management agreement with Leviathan, substantially all of
the assets of the Partnership and Leviathan's 1% general partner interest in
the Partnership and approximate 1% interest in certain subsidiaries of the
Partnership. As of June 30, 1998, the Partnership had $270.0 million
outstanding under its credit facility bearing interest at an average floating
rate of 6.9% per annum. In April 1998, the Partnership Credit Facility was
amended to allow for the Merger of DeepTech and El Paso, the acquisition of
certain assets from Tatham Offshore pursuant to the Redemption Agreement and
certain other transactions. Currently, approximately $9.0 million of
additional funds are available under the Partnership Credit Facility.

In March 1998, Stingray amended an existing term loan agreement to provide for
additional borrowings of $11.1 million and to extend the maturity date of the
loan from December 31, 2000 to March 31, 2003. The amended agreement requires
Stingray to make 18 quarterly principal payments of $1.6 million commencing on
December 31, 1998. The term loan agreement is principally secured by current
and future gas transportation contracts between Stingray and its customers. As
of June 30, 1998, Stingray had $28.5 million outstanding under its term loan
agreement bearing interest at an average floating rate of 6.5% per annum.

In April 1996, POPCO entered into a revolving credit facility (the "POPCO
Credit Facility") with a group of commercial banks to provide up to $150
million for the construction and expansion of Poseidon and for other working
capital needs of POPCO. POPCO's ability to borrow money under the facility is
subject to certain customary terms and conditions, including borrowing base
limitations. The POPCO Credit Facility is secured by a substantial portion of
POPCO's assets and matures on April 30, 2001. As of June 30, 1998, POPCO had
$118.5 million outstanding under its credit facility bearing interest at an
average floating rate of 6.9% per annum. Currently, approximately $31.5 million
of additional funds are available under the POPCO Credit Facility.

In December 1996, Viosca Knoll entered into a revolving credit facility (the
"Viosca Knoll Credit Facility") with a syndicate of commercial banks to provide
up to $100 million for the addition of compression to the Viosca Knoll system
and for other working capital needs of Viosca Knoll, including funds for a
one-time distribution of $25 million to its partners. Viosca Knoll's ability to
borrow money under the facility is subject to certain customary 



                                      15
<PAGE>   18

terms and conditions, including borrowing base limitations. The Viosca Knoll
Credit Facility is secured by a substantial portion of Viosca Knoll's assets
and matures on December 20, 2001. As of June 30, 1998, Viosca Knoll had $64.0
million outstanding under its credit facility bearing interest at an average
floating rate of 6.7% per annum. Currently, approximately $28.5 million of
additional funds are available under the Viosca Knoll Credit Facility.

Uses of Cash. The Partnership's capital requirements consist primarily of (i)
quarterly distributions to holders of Preference Units and Common Units and to
Leviathan as general partner, including Incentive Distributions, as applicable,
(ii) expenditures for the maintenance of its pipelines and related
infrastructure and the acquisition and construction of additional pipelines and
related facilities for the gathering, transportation and processing of oil and
gas in the Gulf, (iii) expenditures related to its producing oil and gas
properties, (iv) expenditures relating to the abandonment of its Ewing Bank
flowlines, (v) management fees and other operating expenses, (vi) contributions
to Equity Investees as required to fund capital expenditures for new
facilities, (vii) debt service on its outstanding indebtedness and (viii) the
payment of the accelerated appreciation of Unit Rights discussed in Item 1.
"Consolidated Financial Statements -- Notes to Consolidated Financial
Statements -- Note 6 -- Commitments and Contingencies -- Other."

For every full quarter since its inception, the Partnership has declared and
subsequently paid a cash distribution to holders of Preference Units and Common
Units an amount equal to or exceeding the Minimum Quarterly Distribution (as
described in the Partnership Agreement) per Unit per quarter. On July 20, 1998,
the Partnership declared a cash distribution of $0.525 per Preference and
Common Unit for the period from April 1, 1998 through June 30, 1998 which will
be paid on August 14, 1998 to Unitholders of record as of July 31, 1998. This
quarterly cash distribution payment will total $16.0 million in respect to the
Preference Units, Common Units and the general partner interest. See Item 1.
"Consolidated Financial Statements -- Notes to Consolidated Financial
Statements -- Note 4 -- Partners' Capital -- Cash Distributions" and " --
Conversion of Preference Units into Common Units."

During the Preference Period, distributions by the Partnership of its Available
Cash were effectively made 98% to Unitholders and 2% to Leviathan, as general
partner, subject to the payment of Incentive Distributions to Leviathan. For
the six months ended June 30, 1998, the Partnership paid Leviathan Incentive
Distributions totaling $5.3 million and will pay Leviathan an Incentive
Distribution of $3.0 million in August 1998. The Partnership believes that it
will be able to continue to pay at least the current quarterly cash
distributions of $0.275 per Preference Unit and $0.525 per Common Unit for the
foreseeable future. At these distribution rates, the quarterly Partnership
distributions total $15.6 million in respect to the Preference Units, Common
Units and the general partner interests ($62.5 million on an annual basis,
including $25.6 million to Leviathan).

In April 1998, the Partnership completed the construction and installation of a
new platform and processing facilities at East Cameron Block 373. This
platform, which cost approximately $30.0 million, is strategically located to
exploit reserves in the East Cameron and Garden Banks area of the Gulf and is
the terminus for an extension of the Stingray system. The Partnership funded
the cost of the platform and facilities with borrowings under the Partnership
Credit Facility.

The Partnership anticipates that its capital expenditures and equity
investments for the remaining portion of 1998 will relate to continuing
acquisition and construction activities. The Partnership anticipates funding
such cash requirements primarily with available cash flow and borrowings under
the Partnership Credit Facility.

Any substantial capital expenditures by Stingray, POPCO and Viosca Knoll are
anticipated to be funded by borrowings under their respective credit
facilities. The Partnership's cash capital expenditures and equity investments
for the six months ended June 30, 1998 were $16.9 million. The Partnership may
in the future contribute existing assets to new joint ventures as partial
consideration for its ownership interest therein.

Interest costs incurred by the Partnership related to the Partnership Credit
Facility totaled $8.4 million for the six months ended June 30, 1998. The
Partnership capitalized $0.5 million of such interest costs in connection with
construction projects in progress during the period.



                                      16

<PAGE>   19
YEAR 2000

The "Year 2000" issue is the result of computer programs that were written using
two digits rather than four to define the year. The Partnership has reviewed its
costs related to the "Year 2000" issue and anticipates that these costs will not
materially affect its future results of operations or internal operations.
Although the Partnership intends to interact only with those third parties that
have "Year 2000" compliant computer systems, it is impossible for the
Partnership to monitor all such systems. The Partnership has received
preliminary information concerning the "Year 2000" compliance status from its
partners, customers and vendors which, to date, indicates that costs related to
the "Year 2000" issue will not have a material adverse impact on the
Partnership's business and operations. However, there can be no assurances that
implementations to such systems will be successful and will not have a material
adverse impact on the Partnership's operations.

UNCERTAINTY OF FORWARD LOOKING STATEMENTS AND INFORMATION

This quarterly report contains certain forward looking statements and
information that are based on management's beliefs as well as assumptions made
by and information currently available to management. Such statements are
typically punctuated by words or phrases such as "anticipate," "estimate,"
"project," "should," "may," "management believes," and words or phrases of
similar import. Although management believes that such statements and
expressions are reasonable and made in good faith, it can give no assurance
that such expectations will prove to have been correct. Such statements are
subject to certain risks, uncertainties and assumptions. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those anticipated,
estimated or projected. Among the key factors that may have a direct bearing on
the Partnership's results of operations and financial condition are: (i)
competitive practices in the industry in which the Partnership competes, (ii)
the impact of current and future laws and government regulations affecting the
industry in general and the Partnership's operations in particular, (iii)
environmental liabilities to which the Partnership may become subject in the
future that are not covered by an indemnity or insurance, (iv) the throughput
levels achieved by the Gas Pipelines, Poseidon and any future pipelines in
which the Partnership owns an interest, (v) the ability to access additional
reserves to offset the natural decline in production from existing wells
connected to the Gas Pipelines and Poseidon, (vi) changes in gathering,
transportation, processing, handling and other rates due to changes in
governmental regulation and/or competitive factors, (vii) the impact of oil and
natural gas price fluctuations, (viii) the production rates and reserve
estimates associated with the Partnership's producing oil and gas properties,
(ix) significant changes from expectations of capital expenditures and
operating expenses and unanticipated project delays and (x) the ability of the
Equity Investees to make distributions to the Partnership. The Partnership
disclaims any obligation to update any forward-looking statements to reflect
events or circumstances after the date hereof.



                                      17

<PAGE>   20

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         None.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.

ITEM 5.  OTHER INFORMATION

         None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)    Exhibits

                None.

         (b)    Reports on Form 8-K

                None.



                                      18

<PAGE>   21

                                   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 and thereunto duly authorized.



                                         LEVIATHAN GAS PIPELINE
                                         PARTNERS, L.P.
                                         (Registrant)

                                         By: LEVIATHAN GAS PIPELINE
                                         COMPANY, its General Partner



    Date:  August 13, 1998               By: /s/ KEITH B. FORMAN
                                            -----------------------------------
                                         Keith B. Forman
                                         Chief Financial Officer
                                         (Principal Accounting Officer)



                                      19


<PAGE>   22

                               INDEX TO EXHIBITS

EXHIBIT
NUMBER                   DESCRIPTION
-------                  -----------

27                       Financial Data Schedule