<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 September 30, 1997

                                       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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS:
   Consolidated Balance Sheet as of September 30, 1997 (unaudited)
     and December 31, 1996  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3
   Unaudited Consolidated Statement of Operations for the
     Three and Nine Months Ended September 30, 1997 and 1996, respectively  . . . . . . . . . .   4
   Unaudited Consolidated Statement of Cash Flows for the
     Nine Months Ended September 30, 1997 and 1996  . . . . . . . . . . . . . . . . . . . . . .   5
   Consolidated Statement of Partners' Capital for the Nine Months
     Ended September 30, 1997 (unaudited)   . . . . . . . . . . . . . . . . . . . . . . . . . .   6
   Notes to Consolidated Financial Statements (unaudited)   . . . . . . . . . . . . . . . . . .   7

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
   FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . .   13
                                                                                                    

PART II.   OTHER INFORMATION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   20

   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  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   21
</TABLE>
<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>
                                                                         September 30,       December 31,
                                                                              1997               1996   
                                                                         ------------       ------------
   Assets                                                                 (unaudited)
   ------                                                                            
<S>                                                                      <C>                <C>
Current assets:
   Cash and cash equivalents                                             $      2,345       $     16,489
   Accounts receivable                                                          2,156              6,237
   Accounts receivable from affiliates                                          9,021             14,107
   Other current assets                                                           870                859
                                                                         ------------       ------------
      Total current assets                                                     14,392             37,692
                                                                         ------------       ------------

Equity investments                                                            182,493            107,838
                                                                         ------------       ------------

Property and equipment:
   Pipelines                                                                   76,140            151,253
   Platforms and facilities                                                    81,469             72,461
   Oil and gas properties, at cost, using successful efforts method           120,259            109,047
                                                                         ------------         ----------
                                                                              277,868            332,761
   Less accumulated depreciation, depletion and amortization                   90,530             46,206
                                                                         ------------         ----------
      Property and equipment, net                                             187,338            286,555
                                                                         ------------         ----------
Investment in Tatham Offshore, Inc.                                             7,500              7,500
Other noncurrent receivable                                                       --               8,531
Other noncurrent assets                                                         4,015              5,410
                                                                         ------------         ----------

      Total assets                                                       $    395,738         $  453,526
                                                                         ============         ==========

  Liabilities and Partners' Capital
  ---------------------------------

Current liabilities:
   Accounts payable and accrued liabilities                              $      7,008         $   17,769
   Accounts payable to affiliates                                               2,250              3,504
                                                                         ------------         ----------
      Total current liabilities                                                 9,258             21,273
Deferred federal income taxes                                                   1,472              1,722
Deferred revenue                                                                  --               8,913
Note payable                                                                  220,000            227,000
Other noncurrent liabilities                                                   10,353              2,490
                                                                         ------------         ----------
      Total liabilities                                                       241,083            261,398
                                                                         ------------         ----------
Minority interest                                                                (270)               105
Partners' capital                                                             154,925            192,023
                                                                         ------------         ----------

      Total liabilities and partners' capital                            $    395,738         $  453,526
                                                                         ============         ==========
</TABLE>

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


                                       3
<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 Ended                 Nine Months Ended
                                                                September 30,                     September 30,          
                                                       ------------------------------    --------------------------------
                                                            1997             1996             1997             1996      
                                                       -------------    -------------    -------------    ---------------
   <S>                                                 <C>              <C>              <C>              <C>     <C>
   Revenue:
      Oil and gas sales                                $      14,665    $      12,104    $      49,124    $        30,030
      Gathering, transportation and platform services          3,430            6,323           14,005             17,791
      Equity in earnings                                       7,379            5,787           21,599             14,591
                                                       -------------    -------------    -------------         ----------
                                                              25,474           24,214           84,728             62,412
                                                       -------------    -------------    -------------         ----------
 
   Costs and expenses:
      Operating expenses                                       2,628            2,276            8,674              6,018
      Depreciation, depletion and amortization                11,535            8,692           39,474             19,919
      Impairment, abandonment and other                          --               --            21,222              --
      General and administrative expenses and
         management fee                                        4,368            2,476           10,219              5,879
                                                       -------------    -------------    -------------         ----------
                                                              18,531           13,444           79,589             31,816
                                                       -------------    -------------    -------------         ----------
 
   Operating income                                            6,943           10,770            5,139             30,596
   Interest income and other                                     159              486            1,322              1,219
   Interest and other financing costs                         (3,886)          (1,326)         (10,350)            (1,967)
   Minority interest in income                                   (35)            (106)              34               (335)
                                                       -------------    -------------    -------------         ----------
   Income (loss) before income taxes                           3,181            9,824           (3,855)            29,513
   Income tax benefit                                            (93)            (182)            (238)              (566)
                                                       -------------    -------------    -------------         ----------
 
   Net income (loss)                                   $       3,274    $      10,006    $      (3,617)        $   30,079
                                                       =============    =============    =============         ==========

   Net income (loss) per Unit                          $        0.13    $        0.41    $       (0.15)        $     1.22
                                                       =============    =============    =============         ==========

   Weighted average number of Units outstanding               24,367           24,367           24,367             24,367
                                                       =============    =============    =============         ==========
</TABLE>





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

                                       4
<PAGE>   5



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


<TABLE>
<CAPTION>
                                                                               Nine Months Ended
                                                                                 September 30,        
                                                                        ------------------------------
                                                                             1997             1996    
                                                                        -------------    -------------
<S>                                                                     <C>              <C>
Cash flows from operating activities:
   Net (loss) income                                                    $      (3,617)    $     30,079
   Adjustments to reconcile net (loss) income to net cash
     provided by operating activities:
      Amortization of debt issue costs                                            721              618
      Depreciation, depletion and amortization                                 39,474           19,919
      Impairment, abandonment and other                                        21,222              --
      Minority interest in income                                                 (34)             335
      Equity in earnings                                                      (21,599)         (14,591)
      Distributions from equity investments                                    19,310           19,248
      Deferred income taxes                                                      (250)            (583)
      Other noncash items                                                      (3,467)          (5,494)
      Changes in operating working capital:
         Decrease (increase) in accounts receivable                             4,080           (6,154)
         Decrease (increase) in accounts receivable from affiliates             5,086           (1,637)
         Decrease in other current assets                                         465               54
         Decrease in accounts payable and accrued liabilities                 (10,761)         (11,312)
         (Decrease) increase in payable to affiliates                          (1,255)             125
                                                                        -------------     ------------
             Net cash provided by operating activities                         49,375           30,607
                                                                        -------------     ------------

Cash flows from investing activities:
   Additions to pipelines, platforms and facilities                           (12,261)         (25,095)
   Equity investments                                                             (23)         (11,245)
   Development of oil and gas properties                                      (11,212)         (49,633)
   Other                                                                          176              -- 
                                                                        -------------     ------------
             Net cash used in investing activities                            (23,320)         (85,973)
                                                                        -------------     ------------ 

Cash flows from financing activities:
   Decrease (increase) in restricted cash                                         716              (91)
   Proceeds from note payable                                                     --            75,220
   Repayments of note payable                                                  (7,000)              --
   Debt issue costs                                                               (93)          (1,718)
   Distributions to partners                                                  (33,822)         (24,338)
                                                                        -------------     ------------ 
             Net cash (used in) provided by financing activities              (40,199)          49,073
                                                                        -------------     ------------

Decrease in cash and cash equivalents                                         (14,144)          (6,293)
Cash and cash equivalents at beginning of year                                 16,489           15,506
                                                                        -------------     ------------
Cash and cash equivalents at end of period                              $       2,345     $      9,213
                                                                        =============     ============

Cash paid for interest, net of amounts capitalized                      $       9,640    $         162
Cash paid for income taxes                                              $           2    $          16
</TABLE>





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

                                       5
<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, 1996                    $196,224       $   (3,969)    $     (232)    $  192,023

Net loss for the nine months
   ended September 30, 1997
   (unaudited)                            (2,697)            (953)            33         (3,617)

Cash distributions (unaudited)           (23,046)          (8,022)        (2,413)       (33,481)
                                        --------       ----------     ----------     ---------- 

Partners' capital at
   September 30, 1997 (unaudited)       $170,481       $  (12,944)    $   (2,612)    $  154,925
                                        ========       ==========     ==========     ==========

Limited partnership Units
   outstanding at December 31, 1996
   and September 30, 1997 (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.

                                       6
<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 engaged in the gathering and transportation of
natural gas and crude oil through its pipeline systems located in the Gulf of
Mexico (the "Gulf") and in the development and production of oil and gas
reserves from its proved properties.  The Partnership, through its subsidiaries
and certain joint ventures, owns interests in (i) nine 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
operation 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.

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,
1996.  All number of Units and per Unit disclosures have been restated to
reflect a two for one Preference and Common Unit split for the Unitholders of
record as of the close of business on December 31, 1996.

Other

Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings per
Share", was issued in February 1997. SFAS No.  128 establishes new guidelines
for computing and presenting earnings per share and is effective for financial
statements for both interim and annual periods ending after December 15, 1997.
Pro forma basic net income (loss) per unit for the Partnership is equal to the
primary earnings (loss) per unit for the three and nine months ended September
30, 1997 and 1996 as presented on the accompanying consolidated statement of
operations.

During June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income", and SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information".  SFAS No. 130 requires that all
items required to be recognized under the accounting standards as components of
comprehensive income be reported in a new financial statement that is displayed
with the same prominence as other financial statements.  Comprehensive income
is the change in equity of a business during a period from transactions and
other events and circumstances from nonowner sources.  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. Both statements are effective for fiscal years beginning
after December 15, 1997.  The Partnership is currently evaluating the
disclosure requirements of these statements but does not anticipate that
adoption will have a significant impact on its consolidated financial
statements.

Note 2 - Equity Investments:

In January 1997, the Partnership and affiliates of Marathon Oil Company
("Marathon") and Shell Oil Company ("Shell") formed Nautilus Pipeline Company,
L.L.C. ("Nautilus") to construct and operate a new interstate natural gas
pipeline system.  In addition, the same parties formed Manta Ray Offshore
Gathering Company, L.L.C. ("Manta Ray Offshore") to acquire an existing
gathering system from the Partnership.  Such existing gathering system will





                                       7
<PAGE>   8
             LEVIATHAN GAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                                  (unaudited)



be extended and will deliver gas gathered by it to the system being constructed
by Nautilus.  Nautilus and Manta Ray Offshore are located to serve growing
production areas in the Green Canyon area of the Gulf and are indirectly owned
50% by Shell, 24.3% by Marathon and 25.7% by the Partnership.  Total cost for
the construction of the Nautilus interstate pipeline system and the expansion
of the Manta Ray Offshore gathering system is estimated to be approximately
$240 million.  The Nautilus system will consist of a 30-inch line downstream
from Ship Shoal Block 207 connecting to a gas processing plant, onshore
Louisiana, operated by Exxon Company USA ("Exxon"), and to certain facilities
downstream of the Exxon plant to effect deliveries into multiple interstate
pipelines.  Upstream of the Ship Shoal Block 207 terminal, the existing Manta
Ray Offshore gathering system will be extended into a broader gathering system
that will serve shelf and deepwater production areas around Ewing Bank Block
1008 to the east and Green Canyon Block 65 to the west.  The pipeline lay for
the Nautilus system was completed during the second calendar quarter of 1997.
Construction of the onshore facilities and platform connections are currently
being completed with an in service date targeted for the end of 1997.  The
pipeline lay has also been completed on Manta Ray Offshore's 47-mile expansion.
After the completion of the platform connections, the Manta Ray Offshore
expansion should also be ready for service by the end of 1997.  Affiliates of
Marathon and Shell have dedicated for transportation and gathering to each of
the Nautilus and Manta Ray Offshore systems significant deepwater acreage
positions in the area, and are providing substantially all of the capital
funding for the new construction. The Partnership has provided approximately
$11.0 million of funding in the form of a newly constructed compressor in
addition to the contribution of the Manta Ray Offshore system.

In addition, the Partnership owns interests of 50% in Viosca Knoll Gathering
System ("Viosca Knoll"), 36% in Poseidon Oil Pipeline Company, L.L.C.
("POPCO"), 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>
                                                    Nine months ended September 30, 1997
                            ---------------------------------------------------------------------------------
                                                             West                          Manta Ray
                                      Viosca               Cameron                         Offshore/
                             HIOS      Knoll     Stingray    Dehy      POPCO      UTOS      Nautilus     Total
 <S>                        <C>       <C>         <C>        <C>       <C>        <C>         <C>
 Operating revenue          $34,115   $16,171     $18,471    $1,752    $18,375    $2,836      $3,889
 Other income                   298        14         730        18        102        32         234
 Operating expenses         (11,792)   (1,402)     (9,928)     (121)    (4,573)   (1,891)     (1,299)
 Depreciation                (3,582)   (1,791)     (5,409)      (12)    (4,376)     (424)     (1,188)
 Other expenses                  --    (1,374)     (1,072)       --     (3,733)       --          --
                            -------   -------     -------    ------    -------    ------      ------   
 Net earnings                19,039    11,618       2,792     1,637      5,795       553       1,636
 Ownership percentage            40%       50%         50%       50%        36%     33.3%       25.7%
                            -------   -------     -------    ------    -------    ------      ------   
                              7,616     5,809       1,396       818      2,086       184         420
 Adjustments:
 - Depreciation (a)             634        --         718        --         --        27          --
 - Contract amortization (a)    (79)       --        (255)       --         --        --          --
 - Other                        (98)       --         (37)       --       (180)      (23)      2,563 (b)
                            -------   -------     -------    ------    -------    ------      ------   
 Equity in earnings         $ 8,073   $ 5,809     $ 1,822    $  818    $ 1,906    $  188      $2,983      $21,599
                            =======   =======     =======    ======    =======    ======      ======      =======
 Distributions (c)          $ 9,400   $ 5,825     $ 1,375    $  650    $    --    $  200      $1,860      $19,310
                            =======   =======     =======    ======    =======    ======      ======      =======
</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 the Manta Ray Offshore joint venture.
  (c) Future distributions could be restricted by the terms of the equity
      investees' respective credit agreements.



                                      8
<PAGE>   9
             LEVIATHAN GAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                                  (unaudited)

                    SUMMARIZED HISTORICAL OPERATING RESULTS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                         Nine months ended September 30, 1996
                                -----------------------------------------------------------------------------------
                                               Viosca                 West Cameron
                                  HIOS         Knoll      Stingray        Dehy       POPCO        UTOS        Total
                                                                       
<S>                            <C>           <C>          <C>           <C>         <C>          <C>          <C>
Operating revenue               $34,202       $9,344      $17,895       $1,267       $4,252       $2,709
Other income                        122           --          958           --           --           42
Operating expenses              (11,936)        (329)      (9,704)        (126)      (1,796)      (1,766)
Depreciation                     (3,581)      (1,683)      (5,258)         (12)        (729)        (420)
Other expenses                      (40)          --       (1,293)          --           --           --
                                 ------       ------       ------       ------       ------       ------      
Net earnings                     18,767        7,332        2,598        1,129        1,727          565
Ownership percentage                40%          50%          50%          50%          36%        33.3%
                                 ------       ------       ------       ------       ------       ------      
                                  7,507        3,666        1,299          564          622          189
Adjustments:
- Depreciation (a)                  683           --          776           --          (63)          25
- Contract amortization (a)         (79)          --         (255)          --           --           --
- Rate refund reserve              (220)          --           --           --           --           --
- Other                             (63)          --          (36)          --           --          (24)
                                 ------       ------       ------       ------       ------       ------      
Equity in earnings               $7,828       $3,666       $1,784       $  564         $559       $  190      $14,591
                                 ======       ======       ======       ======         ====         ====      =======

Distributions (b)                $8,600       $4,350       $1,423       $  475       $4,000       $  400      $19,248
                                 ======       ======       ======       ======       ======       ======      =======
</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.

Note 3 - Partners' Capital including Cash Distributions:

As of September 30, 1997, the Partnership had 18,075,000 Preference Units and
6,291,894 Common Units outstanding. All of the Preference Units are owned by
the public, representing a 72.7% effective limited partner interest in the
Partnership.  Leviathan, through its ownership of all of the 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.

Distributions by the Partnership of its Available Cash are 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.

In February 1997, the Partnership paid a cash distribution of $0.40 per
Preference and Common Unit for the period from October 1, 1996 through December
31, 1996 and an Incentive Distribution of $0.4 million to Leviathan, as general
partner. In May 1997, the Partnership paid a cash distribution of $0.425 per
Preference and Common Unit for the period from January 1, 1997 through March
31, 1997 and an Incentive Distribution of $0.6 million to Leviathan. In August
1997, the Partnership paid a cash distribution of $0.45 per Preference and
Common Unit for the period from April 1, 1997 through June 30, 1997 and an
Incentive Distribution of $1.2 million to Leviathan. On October 20, 1997, the
Partnership declared a cash distribution of $0.475 per Preference and Common
Unit for the period from July 1, 1997 through September 30, 1997 which will be
paid on November 14, 1997 to Unitholders of record as of October 31, 1997.
Leviathan will receive an Incentive Distribution of $1.8 million for the three
months ended September 30, 1997.


                                       9
<PAGE>   10
             LEVIATHAN GAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                                  (unaudited)



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 nine months ended September 30, 1997, the Partnership paid the three
non-employee directors of Leviathan a total of $0.2 million as a profit
participation fee.

Note 4 - Impairment, Abandonment and Other:

Pursuant to a gathering agreement (the "Ewing Bank Agreement") among DeepTech,
Tatham Offshore, Inc. ("Tatham Offshore"), an affiliate of DeepTech, and Ewing
Bank Gathering Company, L.L.C. ("Ewing Bank"), a subsidiary of the Partnership,
Tatham Offshore dedicated all natural gas and crude oil produced from eight of
its Ewing Bank leases for gathering and redelivery by the Partnership and was
obligated to pay a demand rate as well as a commodity charge equal to 4% of the
market price of production actually transported.  Pursuant to the Ewing Bank
Agreement, the Partnership constructed gathering facilities connecting Tatham
Offshore's Ewing Bank 914 #2 well to a third party platform at Ewing Bank Block
826.

The Partnership and Tatham Offshore also entered into a gathering and
processing agreement (the "Ship Shoal Agreement") pursuant to which the
Partnership constructed a gathering line from Tatham Offshore's Ship Shoal
Block 331 lease to interconnect with a third-party pipeline at the
Partnership's processing facilities located on its Ship Shoal Block 332
platform.  Pursuant to the terms of the Ship Shoal Agreement, and in
consideration for constructing the interconnect, refurbishing the platform and
providing access to the processing facilities, Tatham Offshore was required to
pay the Partnership demand charges and has dedicated all production from its
Ship Shoal Block 331 lease and eight additional surrounding leases for
gathering and processing by the Partnership for additional commodity fees.

For the years ended December 31, 1996, 1995 and 1994, Tatham Offshore paid the
Partnership demand and commodity charges of $0.3 million, $9.0 million and $7.0
million, respectively, under the Ewing Bank and Ship Shoal Agreements.
Effective February 1, 1996, the Partnership agreed to release Tatham Offshore
from all remaining demand charge payments under the Ewing Bank and Ship Shoal
Agreements, a total of $17.8 million. Tatham Offshore remained obligated to pay
all commodity charges related to production from these properties. In exchange,
the Partnership received 7,500 shares of Tatham Offshore 9% Senior Preferred
Stock, which was valued at $7.5 million, and added $7.5 million  to the Payout
Amount under the Purchase and Sale Agreement as discussed below.

Pursuant to a purchase and sale agreement (the "Purchase and Sale Agreement")
with Tatham Offshore whereby the Partnership acquired Tatham Offshore's working
interests in Viosca Knoll Block 817, Garden Banks Block 72 and Garden Banks
Block 117 (the "Assigned Properties"), the Partnership is entitled to retain
all of the revenue attributable to the Assigned Properties until 50% of the net
revenue has reduced the Payout Amount to zero whereupon Tatham Offshore is
entitled to receive a reassignment of one half of the working interests in the
Assigned Properties subject to certain conditions.  As of September 30, 1997,
the Payout Amount totaled $42.4 million.

The Ewing Bank 914 #2 well was shut-in in May 1997 as a result of a downhole
mechanical problem. Although Tatham Offshore is evaluating potential workover
or recompletion possibilities for this well, it has reserved the remaining
costs associated with the Ewing Bank 914 #2 well given its current
non-productive status.  Production related problems resulting from the
completions of the three wellbores at Ship Shoal Block 331 have resulted in
only a minimal amount of production from the property and Tatham Offshore has
decided not to pursue further recompletion operations at this time.

In addition, the Partnership has determined that given the current estimates of
commodity prices and proved reserves, the possibility that the designated
revenue from the Assigned Properties will be sufficient to satisfy the Payout
Amount is remote.  Unless the Payout Amount is reduced to zero, the Partnership
will retain 100% of the revenue from its working interests in the Assigned
Properties, will bear all abandonment obligations related to these properties
and will not realize the $7.5 million plus accrued interest that had been
recorded as a noncurrent receivable related to the settlement of the demand
charge obligations under the Ewing Bank and Ship Shoal Agreements.

Accordingly, in June 1997, the Partnership recorded as impairment, abandonment
and other expense on the accompanying consolidated statement of operations a
non-recurring charge of $21.2 million to reserve its





                                      10
<PAGE>   11
             LEVIATHAN GAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                                  (unaudited)



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
fully accrue its abandonment obligations associated with these gathering
facilities, to reserve its noncurrent receivable related to the prepayment of
the demand charge obligations under the Ewing Bank and Ship Shoal Agreements,
and to accrue certain abandonment obligations associated with its oil and gas
properties.

Note 5 - Related Party Transactions:

Management fees.  For the nine months ended September 30, 1997, Leviathan
charged the Partnership $6.0 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. In
addition, the management agreement requires a payment by Leviathan to
compensate DeepTech for certain tax liabilities resulting from, among other
things, additional taxable income allocated to Leviathan due to (i) the
issuance of additional Preference Units (including the sale of the Preference
Units by the Partnership pursuant to the public offering of additional
Preference Units) and (ii) the investment of such proceeds in additional
acquisitions or construction projects. During the nine months ended September
30, 1997, Leviathan charged the Partnership $0.5 million to compensate DeepTech
for additional taxable income allocated to Leviathan.  The management agreement
expires on June 30, 2002, and may thereafter be terminated on 90 days' notice
by either party.

Gathering and platform access agreements. Tatham Offshore is obligated to pay
commodity charges, based on the volume of oil and gas gathered or processed, to
the Partnership pursuant to certain transportation agreements. Tatham Offshore
is also obligated to pay certain platform access fees and processing fees to
the Partnership. For the nine months ended September 30, 1997, the Partnership
received $1.6 million from Tatham Offshore pursuant to these agreements.

For the nine months ended September 30, 1997, Viosca Knoll and POPCO charged
the Partnership $3.2 million and $1.5 million, respectively, for services
relating to gathering production from the Viosca Knoll Block 817 and the Garden
Banks Block 72 and 117 leases.

The Partnership charged Viosca Knoll $1.5 million for platform access fees
related to the Viosca Knoll Block 817 platform during the nine months ended
September 30, 1997.

Oil and gas sales.  The Partnership has agreed to sell all of its oil and gas
production to Offshore Gas Marketing, Inc.  ("Offshore Marketing"), an
affiliate of the Partnership, on a month to month basis. During the nine months
ended September 30, 1997, oil and gas sales to Offshore Marketing totaled $48.9
million.

Other. During the nine months ended September 30, 1997, the Partnership was
charged $3.3 million by Sedco Forex Division of Schlumberger Technology
Corporation ("Sedco Forex") for contract drilling services rendered by the
semisubmersible drilling rig, the FPS Laffit Pincay, at its Garden Banks Block
117 project. The FPS Laffit Pincay is owned by an affiliate of DeepTech and
managed by Sedco Forex.

For the nine months ended September 30, 1997, the Partnership charged $75,000
and $212,000, respectively, to Viosca Knoll and Manta Ray Offshore pursuant to
management and operations agreements with each such party.

Tatham Offshore Canada Limited ("Tatham Offshore Canada"), a wholly-owned
subsidiary of Tatham Offshore, as the Canadian representative of North Atlantic
Pipeline Partners, L.P. ("North Atlantic"), the sponsor of the proposal to
build an approximately 2,500 kilometer offshore pipeline from offshore
Newfoundland and Nova Scotia to the eastern seaboard of the United States, has
entered into a non-binding agreement with the Partnership regarding
participation in the North Atlantic pipeline project.  Such agreement is
subject to the negotiation and completion of formal definitive agreements and
contemplates that the Partnership will hold a pro rata partnership interest of
up to 20% in North Atlantic.  Under such agreement, Tatham Offshore Canada is
responsible for pre-developmental costs up to $10 million.  The Partnership
would have no financial commitment to the project until and unless an
application is filed with, and approved by, the appropriate Canadian and United
States regulatory authorities. During





                                       11
<PAGE>   12
             LEVIATHAN GAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
                                  (unaudited)



October 1997, North Atlantic filed applications with the Federal Energy
Regulatory Commission and its Canadian counterpart, the National Energy Board,
for approval of its proposed pipeline.  Action by the Canadian and United
States regulatory authorities on North Atlantic's pipeline proposal is expected
to occur by mid 1998. Tatham Offshore Canada is seeking additional participants
on the same basis as that offered to the Partnership.

POPCO entered into certain agreements with the Partnership to provide for use
by POPCO of certain pipelines and platforms owned by the Partnership for fees
which consist of a monthly rental fee of $100,000 per month for the period from
February 1996 to January 1997.

Note 6 - Commitments and Contingencies:

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 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 September 30, 1997, the Partnership had open natural gas hedges on
approximately 51,576 million British thermal units ("MMbtu") of natural gas per
day for the remaining period in 1997 at an average price of $2.35 per MMbtu.
In addition, as of September 30, 1997, the Partnership had entered into
commodity swap transactions for calendar 1998 of (i) 12,466 MMbtu of natural
gas per day at an average price of $2.33 per MMbtu and (ii) 10,000 MMbtu per
day at a fixed price to be determined at the Partnership's option equal to the
December 1997 Natural Gas Futures Contract on the NYMEX as quoted at any time
during 1997 to and including the last three trading days of the December 1997
contract minus $0.14 per MMbtu.

At September 30, 1997, the Partnership had open crude oil hedges on
approximately 1,964 barrels per day for the remaining period in 1997 at an
average price of $20.23 per barrel.  In addition, the Partnership hedged 992
barrels of oil per day at $20.43 per barrel for calendar year 1998.





                                       12
<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 elsewhere in this
quarterly report and is intended to assist in the understanding of the
Partnership's financial condition and results of operations for the three and
nine months ended September 30, 1997.  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, through its subsidiaries and certain joint ventures, owns
interests in (i) nine 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 offshore Louisiana and eastern Texas,
gather and transport natural gas for producers, marketers, pipelines and
end-users for a fee.  The Gas Pipelines include 977 miles of pipeline with a
throughput capacity of 5.9 billion cubic feet ("Bcf") of gas per day.  Each of
the Gas Pipelines interconnects with one or more long line transportation
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. ("Manta Ray"),
Green Canyon Pipe Line Company, L.L.C. ("Green Canyon") 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, through a subsidiary, owns a 36% interest in POPCO which owns
and operates the Poseidon Oil Pipeline ("Poseidon"). Poseidon is a major new
sour crude oil pipeline system that was built in response to an increased
demand for additional sour crude oil pipeline capacity in the central Gulf.
Upon completion of an expansion currently in progress, Poseidon will consist of
292 miles of 16-inch to 24-inch pipeline with a capacity of approximately
400,000 barrels per day. Initial deliveries into Poseidon occurred in April
1996.  In March 1997, POPCO began construction of an expansion of Poseidon, a
new 24-inch diameter pipeline from Calliou Island to Houma, Louisiana, which is
expected to be operational in late 1997. Poseidon is currently delivering an
average of approximately 65,000 barrels of oil per day.

The Partnership owns interests in five strategically located multi-purpose
platforms in the Gulf that have processing capabilities which complement the
Partnership's pipeline operations. The multi-purpose platforms serve as
junctions in the pipeline grid and facilitate maintenance functions on the Gas
Pipelines and Poseidon. 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 properties, which are subject to certain reversionary rights
held by Tatham Offshore, include a 75% working interest in Viosca Knoll Block
817, a 50% working interest in Garden Banks Block 72 and a 50% working interest
in Garden Banks Block 117. The Partnership has determined that given the
current estimates of commodity prices and proved reserves, the possibility that
Tatham Offshore's reversionary rights will be exercised is remote. The Viosca
Knoll Block 817 is currently producing an aggregate of approximately 70 million
cubic feet ("MMcf") of gas, 170 barrels of oil and 820 barrels of water per
day.  In addition, the Partnership has placed on production five wells on the
Garden Banks Block 72 lease and two wells on Garden Banks Block 117. The Garden
Banks Block 72 wells, which began producing in May 1996, are currently
producing an average of approximately 2,035 barrels of oil, 9.1 MMcf of gas and
1,100 barrels of water per day. The Garden Banks Block 117 wells, which began
producing in July 1996 and May 1997, are currently producing an average of
approximately 3,490 barrels of oil, 6.0 MMcf of gas and 3,390 barrels of water
per day.





                                       13
<PAGE>   14



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. In addition, the Partnership owns certain other minority
interests in oil and gas leases which are not material to the business of the
Partnership.

Results of Operations

Three Months Ended September 30, 1997 Compared With Three Months Ended
September 30, 1996

Oil and gas sales totaled $14.7 million for the three months ended September
30, 1997 as compared with $12.1 million for the same period in 1996. The
increase of $2.6 million is attributable to increased production from the
Partnership's oil and gas properties. During the three months ended September
30, 1997, the Partnership produced and sold 4,703 MMcf of gas and 197,080
barrels of oil at average prices of $2.25 per thousand cubic feet ("Mcf") and
$20.46 per barrel, respectively. During the same period in 1996, the
Partnership produced and sold 4,166 MMcf of gas and 168,766 barrels of oil at
average prices of $1.93 per Mcf and $22.25 per barrel, respectively.

Revenue from gathering, transportation and platform services totaled $3.4
million for the three months ended September 30, 1997 as compared with $6.3
million for the same period in 1996. The decrease of $2.9 million includes
decreases of $2.4 million as a result of the contribution of a significant
portion of the Manta Ray system to Manta Ray Offshore in January 1997 resulting
in revenue from these assets being included in equity in earnings for the three
months ended September 30, 1997 and $1.4 million related to the cessation of
production from the only well connected to the Ewing Bank system offset by
increases of $0.4 million in platform services revenue from the Partnership's
Viosca Knoll Block 817 platform as a result of additional oil and gas volumes
processed on the platform and $0.5 million from the Green Canyon and Tarpon
systems primarily related to increased throughput. Gathering volumes for the
Green Canyon system increased approximately 7% for the three months ended
September 30, 1997 as compared with the same period in 1996 due to increased
production from the Texaco operated Shasta field located in Green Canyon Block
6.  Gathering volumes from the Tarpon system increased approximately 114%
during the third quarter of 1997 as compared with the third quarter of 1996 as
a result of new producing fields attached to the system in June and July 1997.
Gathering volumes from the Ewing Bank system declined 100% during the third
quarter of 1997 as compared with the third quarter of 1996 due to a downhole
mechanical problem which shut-in Tatham Offshore's Ewing Bank 914 #2 well in
May 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 $7.4 million for the three months ended September 30, 1997
as compared with $5.8 million for the same period in 1996.  The increase of
$1.6 million primarily reflects increases of (i) $1.1 million from Viosca Knoll
and West Cameron Dehy as a result of increased throughput, (ii) $0.1 million
from POPCO which placed Poseidon in service in two phases, April 1996 and
December 1996, and (iii) $1.2 million from Manta Ray Offshore related to the
Manta Ray assets contributed by the Partnership offset by a decrease of $0.8
million from Stingray and HIOS as a result of decreased throughput. Total gas
throughput volumes for the Equity Investees increased approximately 6% from the
three months ended September 30, 1996 to the three months ended September 30,
1997 primarily as a result of increased throughput on the Viosca Knoll and UTOS
systems, as well as the addition of the Manta Ray Offshore system throughput as
an Equity Investee, as discussed above. Oil volumes from Poseidon totaled 5.3
million barrels and 3.7 million barrels for the three months ended September
30, 1997 and 1996, respectively.

Operating expenses for the three months ended September 30, 1997 totaled $2.6
million as compared to $2.3 million for the same period in 1996.  The increase
of $0.3 million is primarily attributable to the operation by the Partnership
of two additional oil and gas wells during the three months ended September 30,
1997 as compared with the same period in 1996.

Depreciation, depletion and amortization totaled $11.5 million for the three
months ended September 30, 1997 as compared with $8.7 million for the same
period in 1996.  The increase of $2.8 million is comprised of (i) an $5.4
million increase 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 additional production from these leases
and (ii) a $2.6 million decrease in depreciation on pipelines, platforms and
facilities.





                                       14
<PAGE>   15



General and administrative expenses, including the management fee allocated
from Leviathan, totaled $4.4 million for the three months ended September 30,
1997 as compared with $2.5 million for the same period in 1996. The increase of
$1.9 million reflects (i) a $0.6 million increase in management fees allocated
by Leviathan to the Partnership as a result of increased operational activities
and (ii) a $1.3 million increase in direct general and administrative expenses
of the Partnership primarily related to the appreciation (noncash) and
vestiture of unit appreciation rights granted to certain officers and employees
in 1995, 1996 and 1997.

Interest income and other totaled $0.2 million for the three months ended
September 30, 1997 as compared with $0.5 million for the three months ended
September 30, 1996.

Interest and other financing costs, net of capitalized interest, for the three
months ended September 30, 1997 totaled $3.9 million as compared with $1.3
million for the same period in 1996. During the three months ended September
30, 1997 and 1996, the Partnership capitalized $0.1 million and $2.6 million,
respectively, of interest costs in connection with construction projects and
drilling activities in progress during such periods.

Net income for the three months ended September 30, 1997 totaled $3.3 million,
or $0.13 per Unit, as compared with $10.0 million, or $0.41 per Unit, for the
three months ended September 30, 1996 as a result of the items discussed above.

Nine Months Ended September 30, 1997 Compared With Nine Months Ended 
September 30, 1996

Oil and gas sales totaled $49.1 million for the nine months ended September 30,
1997 as compared with $30.0 million for the same period in 1996. The increase
of $19.1 million is attributable to increased production from the Partnership's
oil and gas properties. During the nine months ended September 30, 1997, the
Partnership produced and sold 16,410 MMcf of gas and 606,405 barrels of oil at
average prices of $2.19 per Mcf and $21.20 per barrel, respectively. During the
same period in 1996, the Partnership produced and sold 10,541 MMcf of gas and
193,982 barrels of oil at average prices of $2.36 per Mcf and $22.16 per
barrel, respectively.

Revenue from gathering, transportation and platform services totaled $14.0
million for the nine months ended September 30, 1997 as compared with $17.8
million for the same period in 1996. The decrease of $3.8 million includes
decreases of $5.6 million as a result of the contribution of a significant
portion of the Manta Ray system to Manta Ray Offshore in January 1997 resulting
in revenue from these assets being included in equity in earnings for the
remainder of the nine months ended September 30, 1997 and $1.6 million related
to lower throughput on the Ewing Bank system offset by increases of $1.8
million in platform services revenue from the Partnership's Viosca Knoll Block
817 platform as a result of additional oil and gas volumes processed on the
platform and $1.6 million from the Tarpon and Green Canyon systems primarily
related to the deregulation of the Tarpon system allowing the Partnership to
recognize additional revenue during the current period related to gathering
fees collected in prior periods. Gathering volumes for the Green Canyon system
increased approximately 4% for the nine months ended September 30, 1997 as
compared with the same period in 1996 due to increased production from the
Texaco operated Shasta field located in Green Canyon Block 6. Gathering volumes
from the Manta Ray system, prior to its contribution to Manta Ray Offshore,
declined 34% as compared with 1996 as a result of temporary platform related
production problems from two of the fields connected to the Manta Ray system.
Gathering volumes from the Tarpon system increased approximately 20% during the
nine months ended September 30, 1997 as compared with the same period in 1996
as a result of new producing fields attached to the system in June and July
1997.  Gathering volumes from the Ewing Bank system declined approximately 78%
during the nine months ended September 30, 1997 as compared with the same
period in 1996 due to a downhole mechanical problem which shut-in Tatham
Offshore's Ewing Bank 914 #2 well in May 1997.

Revenue from the Equity Investees totaled $21.6 million for the nine months
ended September 30, 1997 as compared with $14.6 million for the same period in
1996.  The increase of $7.0 million primarily reflects increases of (i) $2.4
million from Viosca Knoll, Stingray and HIOS as a result of increased
throughput, (ii) $1.3 million from POPCO which placed Poseidon in service in
two-phases, April 1996 and December 1996, (iii) $0.3 million from West Cameron
Dehy and (iv) $3.0 million from Manta Ray Offshore related to the Manta Ray
assets contributed by





                                       15
<PAGE>   16



the Partnership. Total gas throughput volumes for the Equity Investees
increased approximately 10% from the nine months ended September 30, 1996 to
the nine months ended September 30, 1997 primarily as a result of increased
throughput on the Viosca Knoll and UTOS systems as well as the addition of the
Manta Ray Offshore system throughput as an Equity Investee, as discussed above.
Oil volumes from Poseidon totaled 13.3 million barrels for the nine months
ended September 30, 1997 as compared with 3.9 million barrels for the period of
inception of operations in April 1996 through September 30, 1996.

Operating expenses for the nine months ended September 30, 1997 totaled $8.7
million as compared to $6.0 million for the same period in 1996.  The increase
of $2.7 million is primarily attributable to the operation by the Partnership
of two additional oil and gas wells during the nine months ended September 30,
1997 as compared with the same period in 1996.

Depreciation, depletion and amortization totaled $39.5 million for the nine
months ended September 30, 1997 as compared with $19.9 million for the same
period in 1996.  The increase of $19.6 million is comprised of (i) a $22.5
million increase in depreciation and depletion on oil and gas wells and
facilities located on Viosca Knoll Block 817, Garden Banks Block 72 and the
Garden Banks Block 117 as a result of increased production from these leases
which initiated production in December 1995, May 1996 and July 1996,
respectively, and (ii) a $2.9 million decrease in depreciation on pipelines,
platforms and facilities.

Impairment, abandonment and other totaled $21.2 million for the nine months
ended September 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 331
property, to fully accrue the Partnership's abandonment obligations associated
with these gathering facilities, to reserve the Partnership's non-current
receivable related to the prepayment of the demand charge obligations under the
Ewing Bank and Ship Shoal Agreements and to accrue certain abandonment
obligations associated to its oil and gas properties.  See "Notes to
Consolidated Financial Statements -- Note 4 -- Impairment, Abandonment and
Other".

General and administrative expenses, including the management fee allocated
from Leviathan, totaled $10.2 million for the nine months ended September 30,
1997 as compared with $5.9 million for the same period in 1996. General and
administrative expenses for the nine months ended September 30, 1996 included a
one-time $1.4 million reimbursement from POPCO as a result of the Partnership's
management of the initial construction of Poseidon. Excluding this one-time
reimbursement by POPCO, general and administrative expenses for the nine months
ended September 30, 1997 increased $2.9 million as compared with the same
period in 1996.  This increase reflects (i) a $1.2 million increase in
management fees allocated by Leviathan to the Partnership as a result of
increased operational activities, (ii) a $2.2 million increase in direct
general and administrative expenses of the Partnership primarily related to the
appreciation (noncash) and vestiture of unit appreciation rights granted to
certain officers and employees in 1995, 1996 and 1997 and (iii) a $0.5 million
decrease in the reimbursement to DeepTech for certain tax liabilities pursuant
to the management agreement with Leviathan (See "Notes to Consolidated
Financial Statements -- Note 5 -- Related Party Transactions").

Interest income and other totaled $1.3 million for the nine months ended
September 30, 1997 as compared with $1.2 million for the nine months ended
September 30, 1996.

Interest and other financing costs, net of capitalized interest, for the nine
months ended September 30, 1997 totaled $10.4 million as compared with $2.0
million for the same period in 1996. During the nine months ended September 30,
1997 and 1996, the Partnership capitalized $1.5 million and $11.2 million,
respectively, of interest costs in connection with construction projects and
drilling activities in progress during such periods.

Net loss for the nine months ended September 30, 1997 totaled $3.6 million, or
$0.15 per Unit, as compared with net income of $30.1 million, or $1.22 per
Unit, for the nine months ended September 30, 1996 as a result of the items
discussed above.





                                       16
<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
continuing operations and borrowings under the Partnership Credit Facility
(discussed below).  Net cash provided by operating activities for the nine
months ended September 30, 1997 totaled $49.4 million.  At September 30, 1997,
the Partnership had cash and cash equivalents of $2.3 million.

Cash from continuing 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 three
producing properties. 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 from Equity Investees
during the nine months ended September 30, 1997 totaled $19.3 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 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 September 30, 1997, the Partnership had $220 million
outstanding under its credit facility bearing interest at an average floating
rate of 6.3% per annum. Currently, approximately $74 million of additional
funds are available under the Partnership Credit Facility.

In December 1995, Stingray amended an existing term loan agreement to provide
for aggregate outstanding borrowings of up to $29.0 million in principal
amount. The agreement requires the payment of principal by Stingray of $1.45
million per quarter. This term loan agreement is principally secured by current
and future gas transportation contracts between Stingray and its customers and
matures on December 31, 2000. As of September 30, 1997, Stingray had $18.9
million outstanding under its term loan agreement bearing interest at an
average floating rate of 6.3% per annum.

In April 1996, POPCO entered into a revolving credit facility (the "POPCO
Credit Facility") with a syndicate 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 September 30, 1997, POPCO
had $117.5 million outstanding under its credit facility bearing interest at an
average floating rate of 6.9% per annum. Currently, approximately $27.8 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 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 September 30, 1997, Viosca Knoll had $42.5
million outstanding under its credit facility bearing interest at an average
floating rate of 6.4% per





                                       17
<PAGE>   18



annum. Currently, approximately $34.6 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) management fees and other operating expenses, (v)
contributions to Equity Investees as required to fund capital expenditures for
new facilities and (vi) debt service on its outstanding indebtedness.

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.  At the current
distribution rate of $0.475 per Unit, the quarterly Partnership distributions
total $13.6 million in respect of the Preference Units, Common Units and
general partner interest ($54.3 million on an annual basis, including $20.0
million to Leviathan).  The Partnership believes that it will be able to
continue to pay at least the current quarterly distribution of $0.475 per
Preference and Common Unit for the foreseeable future.

Distributions by the Partnership of its Available Cash are effectively made 98%
to Unitholders and 2% to Leviathan, as general partner, subject to the payment
of Incentive Distributions to Leviathan.  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.  For the nine months
ended September 30, 1997, the Partnership paid Leviathan Incentive
Distributions totaling $2.1 million and will pay Leviathan an Incentive
Distribution of $1.8 million in November 1997.

In January 1997, the Partnership and affiliates of Marathon and Shell formed
Nautilus to construct and operate a new interstate natural gas pipeline system.
In addition, the same parties formed Manta Ray Offshore to acquire an existing
gathering system from the Partnership.  Such existing gathering system will be
extended and will deliver gas gathered by it to the system being constructed by
Nautilus.  Nautilus and Manta Ray Offshore are located to serve growing
production areas in the Green Canyon area of the Gulf and are indirectly owned
50% by Shell, 24.3% by Marathon and 25.7% by the Partnership.  Total cost for
the construction of the Nautilus interstate pipeline system and the expansion
of the Manta Ray Offshore gathering system is estimated to be approximately
$240 million.  The Nautilus system will consist of a 30- inch line downstream
from Ship Shoal Block 207 connecting to a gas processing plant, onshore
Louisiana, operated by Exxon, and to certain facilities downstream of the Exxon
plant to effect deliveries into multiple interstate pipelines.  Upstream of the
Ship Shoal Block 207 terminal, the existing Manta Ray Offshore gathering system
will be extended into a broader gathering system that will serve shelf and
deepwater production areas around Ewing Bank Block 1008 to the east and Green
Canyon Block 65 to the west. The pipeline lay for the Nautilus system was
completed during the second calendar quarter of 1997. Construction of the
onshore facilities and platform connections are currently being completed with
an in service date targeted for the end of 1997.  The pipeline lay has also
been completed on Manta Ray Offshore's 47-mile expansion.  After the completion
of the platform connections, the Manta Ray Offshore expansion should also be
ready for service by the end of calendar 1997. Affiliates of Marathon and Shell
have dedicated for transportation and gathering to each of the Nautilus and
Manta Ray Offshore systems significant deepwater acreage positions in the area,
and are providing substantially all of the capital funding for the new
construction. The Partnership has provided $11.0 million of funding in the form
of a newly constructed compressor in addition to its contribution of the Manta
Ray Offshore system.

The Partnership anticipates that its capital expenditures and equity
investments for the remaining portion of 1997 will relate to continuing
acquisition and construction activities including the construction and
installation of a new platform and processing facilities at East Cameron Block
373.  This platform, which the Partnership anticipates will be placed in
service during April 1998 at a projected cost of approximately $32 million,
will be strategically located to exploit reserves in the East Cameron and
Garden Banks area of the Gulf and will be the terminus for an extension





                                       18
<PAGE>   19



of the Stingray system. The Partnership anticipates funding such cash
requirements primarily with available cash flow and borrowings under the
Partnership Credit Facility.

As previously discussed, POPCO, in March 1997, began construction of an
expansion of Poseidon which is expected to be operational in late 1997.
Substantially all of these capital expenditures by POPCO as well as capital
expenditures by Viosca Knoll and Stingray are anticipated to be funded by
borrowings under their respective credit facilities. In addition, substantially
all of the capital requirements of Nautilus and Manta Ray Offshore are
anticipated to be funded by the equity contributions of affiliates of Shell and
Marathon.  The Partnership's cash capital expenditures and equity investments
for the nine months ended September 30, 1997 were $23.5 million, including
$11.0 million related to the Nautilus/Manta Ray Offshore project discussed
above. The Partnership contributed existing assets to the Nautilus/Manta Ray
Offshore joint ventures as partial consideration for its ownership interest
therein and may also continue to 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 $11.8 million for the nine months ended September 30, 1997.
The Partnership capitalized $1.5 million of such interest costs in connection
with construction projects and drilling activities in progress during the
period.

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.





                                       19
<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

               10.1  Fifth Amendment to the First Amended and Restated
                     Management Agreement Between DeepTech International Inc.
                     and Leviathan Gas Pipeline Company.

               27    Financial Data Schedule

         (b)   Reports on Form 8-K

               None.





                                       20
<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: November 14, 1997          By:   /s/ KEITH B. FORMAN                    
                                 -------------------------------------------
                                 Keith B. Forman
                                 Chief Financial Officer
                             
                             
                             
Date: November 14, 1997          By:   /s/ DENNIS A. KUNETKA           
                                 ------------------------------------
                                 Dennis A. Kunetka
                                 Senior Vice President - Corporate Finance
                                 (Principal Accounting Officer)





<PAGE>   22

                               INDEX TO EXHIBITS

         Exhibit
         Number              Description
         -------             -----------

           10.1      Fifth Amendment to the First Amended and Restated
                     Management Agreement Between DeepTech International Inc.
                     and Leviathan Gas Pipeline Company.

           27        Financial Data Schedule