##### Table of Contents









UNITED STATES


SECURITIES AND EXCHANGE COMMISSION










Form 10-K/A








(Amendment No. 1)





(Mark One)


x


ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF


THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 2004


or


o


TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF


THE SECURITIES EXCHANGE ACT OF 1934


For the transition period
from        to


Commission File Number 1-7176


El Paso CGP Company




|                                                                                                      |  |                                                   
|----------------------------------------------------------------------------------------------------- |  | --------------------------------------------------
|Delaware(State or Other Jurisdiction of
    Incorporation or Organization)                            |  | 74-1734212(I.R.S. Employer
    Identification No.)
|El Paso Building
    1001 Louisiana Street
    Houston, Texas(Address of Principal Executive Offices) |  | 77002(Zip Code)                                   

Telephone Number: (713) 420-2600


Securities registered pursuant to Section 12(b) of the
Act: None


Securities registered pursuant to Section 12(g) of the
Act: None


þ o


þ


o þ


State the aggregate market value of the voting and non-voting
common equity held by non-affiliates of the
registrant: None


Indicate the number of shares outstanding of each of the
registrants classes of common stock, as of the latest
practicable date.




EL PASO CGP COMPANY MEETS THE CONDITIONS OF GENERAL
INSTRUCTION I(1)(a) AND (b) TO FORM 10-K AND IS, THEREFORE,
FILING THIS REPORT WITH A REDUCED DISCLOSURE FORMAT AS PERMITTED
BY SUCH INSTRUCTION.


Documents Incorporated by Reference: None










---










EL PASO CGP COMPANY


TABLE OF CONTENTS





|                                          |  |                                                                                                                                                    |  |      |     | 
|----------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                          |  |                                                                                                                                                    |  | Page |    
|                                          |  | Caption                                                                                                                                            |  |      |    
|PART I                                   
|Item 1.                                   |  | Business                                                                                                                                           |  |      | 1   | 
|Item 2.                                   |  | Properties                                                                                                                                         |  |      | 15  | 
|Item 3.                                   |  | Legal Proceedings                                                                                                                                  |  |      | 15  | 
|Item 4.                                   |  | Submission of Matters to a Vote of Security Holders                                                                                                |  |      | *   | 
|PART II                                  
|Item 5.                                   |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities                               |  |      | 16  | 
|Item 6.                                   |  | Selected Financial Data                                                                                                                            |  |      | *   | 
|Item 7.                                   |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                                                          |  |      | 17  | 
|                                          |  | Risk Factors and Cautionary Statement for
    Purposes of the Safe Harbor Provisions of the
    Private Securities Litigation Reform Act of 1995 |  |      | 32  | 
|Item 7A.                                  |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                                                     |  |      | 42  | 
|Item 8.                                   |  | Financial Statements and Supplementary
    Data                                                                                                    |  |      | 44  | 
|Item 9.                                   |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                                                           |  |      | 107 | 
|Item 9A.                                  |  | Controls and Procedures                                                                                                                            |  |      | 107 | 
|Item 9B.                                  |  | Other Information                                                                                                                                  |  |      | 108 | 
|PART III                                 
|Item 10.                                  |  | Directors and Executive Officers of the Registrant                                                                                                 |  |      | *   | 
|Item 11.                                  |  | Executive Compensation                                                                                                                             |  |      | *   | 
|Item 12.                                  |  | Security Ownership of Certain Beneficial Owners and Management
    and Related Stockholder Matters                                                 |  |      | *   | 
|Item 13.                                  |  | Certain Relationships and Related Transactions                                                                                                     |  |      | *   | 
|Item 14.                                  |  | Principal Accountant Fees and Services                                                                                                             |  |      | 108 | 
|PART IV                                  
|Item 15.                                  |  | Exhibits, Financial Statement Schedules,
    and Reports on Form 8-K                                                                               |  |      | 109 | 
|                                          |  | Signatures                                                                                                                                         |  |      | 152 | 
|Certification of CEO pursuant to Sec. 302
|Certification of CFO pursuant to Sec. 302
|Certification of CEO pursuant to Sec. 906
|Certification of CFO pursuant to Sec. 906











|  |                                                                                                                                                                                               
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | We have not included a response to this item in this document
    since no response is required pursuant to the reduced disclosure
    format permitted by General Instruction I to Form 10-K.



|      |  |                                                 
|----- |  | ------------------------------------------------
|/d    |  | = per day                                       
|Bbl   |  | = barrels                                       
|BBtu  |  | = billion British thermal units                 
|BBtue |  | = billion British thermal unit equivalents      
|Bcf   |  | = billion cubic feet                            
|Bcfe  |  | = billion cubic feet of natural gas equivalents 
|MBbls |  | = thousand barrels                              
|Mcf   |  | = thousand cubic feet                           
|Mcfe  |  | = thousand cubic feet of natural gas equivalents
|MDth  |  | = thousand dekatherms                           
|Mgal  |  | = thousand gallons                              
|MMBtu |  | = million British thermal units                 
|MMcf  |  | = million cubic feet                            
|MMcfe |  | = million cubic feet of natural gas equivalents 
|MW    |  | = megawatt                                      
|TBtu  |  | = trillion British thermal units                





i



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##### Table of Contents






EXPLANATORY NOTE





































ii



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PART I





ITEM 1. BUSINESS


General




Business Segments






|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|---------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Regulated OperationsPipelines      |  | We own or have interests in approximately 17,600 miles of
    pipeline and approximately 270 Bcf of storage capacity. We
    provide customers with interstate natural gas transmission and
    storage services from a diverse group of supply regions to major
    markets in the Midwest and western United States.                                                                                                                                          
|                                  
|Non-regulated OperationsProduction |  | We have interests in approximately 1.4 million net
    developed and undeveloped acres and had approximately
    800 Bcfe of proved natural gas and oil reserves worldwide
    at the end of 2004. During 2004, our production averaged
    approximately 334 MMcfe/d.                                                                                                                                                                                          
|                                  
|Power                              |  | Our power business owns, manages or has an interest in
    approximately 3,700 MW of gross generating capacity in
    eight countries. Our plants serve customers under long-term
    and market-based contracts or sell to the open market in spot
    market transactions. We have completed the sale of substantially
    all of our domestic power operations and are evaluating
    potential opportunities to sell many of our remaining power
    assets.
|                                  
|Field Services                     |  | Our midstream or field services business provides processing and
    gathering services, primarily in south Louisiana. We currently
    expect to sell many of these assets.                                                                                                                                                                                                                                                                                    





Regulated Business  Pipelines Segment




1



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##### Table of Contents







| |                                             
| | --------------------------------------------
| | Wholly Owned Interstate Transmission Systems

|                                           |  |                                                                                                                                                                                                                                                                                         |  |                         |        |          |                       |  |       |          |  |  |      |  |  |      |       |  |      |  |       |  |  |  |       | 
|------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | -------- | --------------------- |  | ----- | -------- |  |  | ---- |  |  | ---- | ----- |  | ---- |  | ----- |  |  |  | ----- | 
|                                           |  |                                                                                                                                                                                                                                                                                         |  | As of December 31, 2004 |        |          |                      
|                                           |  |                                                                                                                                                                                                                                                                                         |  |                         |        |          | Average Throughput(1) | 
|Transmission                               |  | Supply and                                                                                                                                                                                                                                                                              |  | Miles of                |        |          | Design                |  |       | Storage  |  |  |      | 
|System                                     |  | Market Region                                                                                                                                                                                                                                                                           |  | Pipeline                |        |          | Capacity              |  |       | Capacity |  |  | 2004 |  |  | 2003 |       |  | 2002 | 
|                                           |  |                                                                                                                                                                                                                                                                                         |  |                         |        |          |                       |  |       |          |  |  |      |  |  |      |       |  |      | 
|                                           |  |                                                                                                                                                                                                                                                                                         |  |                         |        | (MMcf/d) |                       |  | (Bcf) |          |  | 
|                                           |  |                                                                                                                                                                                                                                                                                         |  |                         |        |          |                       |  |       | (BBtu/d) | 
|ANR Pipeline
    (ANR)                     |  | Extends from Louisiana, Oklahoma, Texas
    and the Gulf of Mexico to the midwestern and northern regions of
    the U.S., including the metropolitan areas of Detroit, Chicago
    and Milwaukee.                                                                                      |  |                         | 10,500 |          |                       |  | 6,620 |          |  |  | 192  |  |  |      | 4,067 |  |      |  | 4,232 |  |  |  | 4,130 | 
|Colorado Interstate Gas
    (CIG)          |  | Extends from most production areas in the Rocky Mountain region
    and the Anadarko Basin to the front range of the Rocky Mountains
    and multiple interconnects with pipeline systems transporting
    gas to the Midwest, the Southwest, California and the Pacific
    Northwest. |  |                         | 4,000  |          |                       |  | 3,000 |          |  |  | 29   |  |  |      | 1,744 |  |      |  | 1,685 |  |  |  | 1,687 | 
|Wyoming Interstate
    (WIC)               |  | Extends from western Wyoming and the Powder River Basin to
    various pipeline interconnections near Cheyenne, Wyoming.                                                                                                                                                                |  |                         | 600    |          |                       |  | 1,997 |          |  |  |     |  |  |      | 1,201 |  |      |  | 1,213 |  |  |  | 1,194 | 
|Cheyenne Plains
    Gas Pipeline
    (CPG) |  | Extends from the Cheyenne hub in Colorado to various pipeline
    interconnects near Greensburg, Kansas.                                                                                                                                                                                |  |                         | 400    |          |                       |  | 396   | (2)      |  |  |     |  |  |      | 89    |  |      |  |      |  |  |  |      | 




|    |                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes throughput transported on behalf of affiliates.                                                                                                                            
|(2) | This capacity was placed in service on December 1, 2004.
    Compression was added and placed in service on January 31,
    2005, which increased the design capacity to 576 MMcf/d.



|             |     |  |         |                              |  |          |     |  |             |                                                                                                                                                                                                                                                                                             |                 |  |               |  |  | 
|------------ | --- |  | ------- | ---------------------------- |  | -------- | --- |  | ----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------- |  | ------------- |  |  | 
|Transmission |     |  |         |                              |  |          |     |  | Anticipated |                                                                                                                                                                                                                                                                                            
|System       |     |  | Project |                              |  | Capacity |     |  | Description |                                                                                                                                                                                                                                                                                             | Completion Date | 
|             |     |  |         |                              |  |          |     |  |             |                                                                                                                                                                                                                                                                                             |                 | 
|             |     |  |         | (MMcf/d)                     |  |          |     |  |            
|             | ANR |  |         | EastLeg Wisconsin expansion  |  |          | 142 |  |             | To replace 4.7 miles of an existing 14-inch natural gas
    pipeline with a 30-inch line in Washington County, add
    3.5 miles of 8-inch
    looping(1)on the Denmark Lateral in Brown County, and modify
    ANRs existing Mountain Compressor Station in Oconto
    County, Wisconsin. |                 |  | November 2005 | 
|             |     |  |         | NorthLeg Wisconsin expansion |  |          | 110 |  |             | To add 6,000 horsepower of electric powered compression at
    ANRs Weyauwega Compressor station in Waupaca County,
    Wisconsin.                                                                                                                                                         |                 |  | November 2005 | 
|             | CPG |  |         | Cheyenne Plainsexpansion     |  |          | 179 |  |             | To add approximately 10,300 horsepower of compression and
    an additional treatment facility to the Cheyenne Plains project.                                                                                                                                                              |                 |  | December 2005 | 




|    |                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Looping is the installation of a pipeline, parallel to an
    existing pipeline, with tie-ins at several points along the
    existing pipeline. Looping increases a transmission
    systems capacity.

2



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##### Table of Contents





| |                                               
| | ----------------------------------------------
| | Partially Owned Interstate Transmission System

|                                    |  |                                                                                                       |  |                         |    |  |                       |  |          |             |  |  |       |  |  |      |       |  |      |  |       |  |  |  |       | 
|----------------------------------- |  | ----------------------------------------------------------------------------------------------------- |  | ----------------------- | -- |  | --------------------- |  | -------- | ----------- |  |  | ----- |  |  | ---- | ----- |  | ---- |  | ----- |  |  |  | ----- | 
|                                    |  |                                                                                                       |  | As of December 31, 2004 |    |  |                      
|                                    |  |                                                                                                       |  |                         |    |  | Average Throughput(2) | 
|Transmission                        |  | Supply and                                                                                            |  | Ownership               |    |  | Miles of              |  |          | Design      |  |  |       | 
|System                              |  | Market Region                                                                                         |  | Interest                |    |  | Pipeline(2)           |  |          | Capacity(2) |  |  | 2004  |  |  | 2003 |       |  | 2002 | 
|                                    |  |                                                                                                       |  |                         |    |  |                       |  |          |             |  |  |       |  |  |      |       |  |      | 
|                                    |  |                                                                                                       |  | (Percent)               |    |  |                       |  | (MMcf/d) |             |  | 
|                                    |  |                                                                                                       |  |                         |    |  |                       |  |          | (BBtu/d)    | 
|Great Lakes Gas
    Transmission(1) |  | Extends from the Manitoba-Minnesota border to the
    Michigan-Ontario border at St. Clair, Michigan. |  |                         | 50 |  |                       |  | 2,115    |             |  |  | 2,895 |  |  |      | 2,200 |  |      |  | 2,366 |  |  |  | 2,378 | 




|    |                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------
|(1) | This system is accounted for as an equity investment.                                                                       
|(2) | Miles, volumes and average throughput represent the
    systems totals and are not adjusted for our ownership
    interest.





| |                                         
| | ----------------------------------------
| | Underground Natural Gas Storage Entities



|                                |  |                         |     |  |             |  |    |          |  |  |          | 
|------------------------------- |  | ----------------------- | --- |  | ----------- |  | -- | -------- |  |  | -------- | 
|                                |  | As of December 31, 2004 |     |  |            
|                                |  |                         |     |  |            
|                                |  | Ownership               |     |  | Storage     |  |    |         
|Storage Entity                  |  | Interest                |     |  | Capacity(1) |  |    | Location | 
|                                |  |                         |     |  |             |  |    |          | 
|                                |  | (Percent)               |     |  | (Bcf)       |  |    |         
|ANR Storage                     |  |                         | 100 |  |             |  | 56 |          |  |  | Michigan | 
|Blue Lake Gas Storage           |  |                         | 75  |  |             |  | 47 |          |  |  | Michigan | 
|Eaton Rapids Gas
    Storage(2) |  |                         | 50  |  |             |  | 13 |          |  |  | Michigan | 
|Young Gas
    Storage(2)        |  |                         | 48  |  |             |  | 6  |          |  |  | Colorado | 




|    |                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes a total of 75 Bcf contracted to affiliates.
    Storage capacity is under long-term contracts and is not
    adjusted for our ownership interest.
|(2) | These systems were accounted for as equity investments as of
    December 31, 2004.                                                                       



| |                       
| | ----------------------
| | Regulatory Environment





| |   |                                                                                    
| | - | -----------------------------------------------------------------------------------
| |  | rates and charges for natural gas transportation, storage and
    related services;



















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Markets and Competition










4



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|             |  |                                                                                                                                                                        |  |                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Transmission |  |                                                                                                                                                                        |  |                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|System       |  | Customer Information                                                                                                                                                   |  | Contract Information                                                                                                                                                                                                         |  | Competition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|             |  |                                                                                                                                                                        |  |                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|ANR          |  | Approximately 259 firm and   interruptible
    customers
    Major Customer:  We
    Energies    (909 BBtu/d)                                                          |  | Approximately 570 firm contracts
    Weighted average remaining contract term of approximately
    three years.
    Contract terms expire in 2005-2010.                                                                      |  | In the Midwest, ANR competes with other interstate and
    intrastate pipeline companies and local distribution companies
    in the transportation and storage of natural gas. In the
    Northeast, ANR competes with other interstate pipelines serving
    electric generation and local distribution companies. ANR also
    competes directly with other interstate pipelines, including
    Guardian Pipeline, for markets in Wisconsin. We Energies owns an
    interest in Guardian, which is currently serving a portion of
    its firm transportation requirements.
    ANR also competes directly with numerous pipelines and gathering
    systems for access to new supply sources. ANRs principal
    supply sources are the Rockies and mid-continent production
    accessed in Kansas and Oklahoma, western Canadian production
    delivered to the Chicago area and Gulf of Mexico sources,
    including deepwater production and LNG imports.
|            
|            
|CIG          |  | Approximately 112 firm and  interruptible
    customers
    Major Customer:  Public Service Company
    of    Colorado    (970 BBtu/d)    (261 BBtu/d)    (187 BBtu/d) |  | Approximately 191 firm contracts
    Weighted average remaining contract term of approximately
    five years.
    Contract term expires in 2007.
    Contract term expires in 2009-2014.
    Contract terms expire in 2006. |  | CIG serves two major markets. Its on-system market
    consists of utilities and other customers located along the
    front range of the Rocky Mountains in Colorado and Wyoming. Its
    off- system market consists of the transportation of
    Rocky Mountain production from multiple supply basins to
    interconnections with other pipelines bound for the Midwest, the
    Southwest, California and the Pacific Northwest. Competition for
    its on-system market consists of local production from the
    Denver-Julesburg basin, an intrastate pipeline, and long-haul
    shippers who elect to sell into this market rather than the
    off-system market. Competition for its off-system market
    consists of other interstate pipelines that are directly
    connected to its supply sources.                                                                                                                                           
|            

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##### Table of Contents



|             |  |                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Transmission |  |                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|System       |  | Customer Information                                                                                                                                                                                                                                                          |  | Contract Information                                                                                                                                                                                                                                                         |  | Competition                                                                                                                                                                                                                                                                                                                                                                                                                                    
|             |  |                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|WIC          |  | Approximately 49 firm and   interruptible
    customers
    Major Customers:  Williams Power
    Company    (303 BBtu/d)  Colorado
    Interstate
    Gas     Company    (247 BBtu/d)  Western
    Gas
    Resources    (235 BBtu/d)  Cantera
    Gas Company    (226 BBtu/d) |  | Approximately 47 firm contracts
    Weighted average remaining contract term of approximately
    six years.
    Contract terms expire in 2008-2013.
    Contract terms expire in 2005-2016.
    Contract terms expire in 2007-2013.
    Contract terms expire in 2012-2013. |  | WIC competes with eight interstate pipelines and one intrastate
    pipeline for its mainline supply from several producing basins.
    WICs one Bcf/d Medicine Bow lateral is the primary source
    of transportation for increasing volumes of Powder River Basin
    supply and can readily be expanded as supply increases.
    Currently, there are two other interstate pipelines that
    transport limited volumes out of this basin.
|            
|            
|CPG          |  | Approximately 15 firm and  interruptible
    customers.
    Major Customers: Oneok Energy
    Services    Company
    L.P.    (195 BBtu/d) Anadarko
    Energy
    Service    Company    (100
    BBtu/d) Kerr McGee    (83
    BBtu/d)                                       |  | Approximately 14 firm contracts
    Weighted average remaining
    contract term of approximately 10 years.
    Contract term expires in 2015.
    Contract term expires in 2015.
    Contract term expires in 2015.                                                         |  | Cheyenne Plains competes directly with other interstate
    pipelines serving the Mid-continent region. Indirectly, Cheyenne
    Plains competes with other interstate pipelines that transport
    Rocky Mountain gas to other markets.                                                                                                                                                                                                       
|            

Non-Regulated Business  Production Segment








|              |                  |                                          |                                     
|------------- | ---------------- | ---------------------------------------- | ------------------------------------
|Area          |                  | Operating Regions                       
|              |                  |                                         
|United States |                  |                                         
|              | Onshore          |                                          | Rocky Mountains (primarily in Utah) 
|              | Texas Gulf Coast |                                          | South Texas                         
|              | Offshore         |                                          | Gulf of Mexico (Texas and Louisiana)
|Brazil        |                  | Camamu, Santos and Espirito Santo Basins

6



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##### Table of Contents



Natural Gas, Oil and Condensate and Natural Gas Liquids (NGL)
Reserves




|              |                     |                        |         |         |                |      |        |         |  |  |         |       |  |            |         |         |         |  |     |    |  |  |         |         | 
|------------- | ------------------- | ---------------------- | ------- | ------- | -------------- | ---- | ------ | ------- |  |  | ------- | ----- |  | ---------- | ------- | ------- | ------- |  | --- | -- |  |  | ------- | ------- | 
|              |                     | Net Proved Reserves(1) |         |         |               
|              |                     |                        |         |         |               
|              |                     |                        |         |         |                | 2004 |       
|              |                     | Natural Gas            |         |         | Oil/Condensate |      |        | NGL     |  |  | Total   |       |  | Production |        
|              |                     |                        |         |         |                |      |        |         |  |  |         |       |  |            |        
|              |                     | (MMcf)                 |         |         | (MBbls)        |      |        | (MBbls) |  |  | (MMcfe) |       |  | (Percent)  |         |         | (MMcfe) | 
|United States |                     |                        |         |         |                |      |        |         |  |  |         |       |  |            |         |         |         |  |     |    |  |  |         |        
|              | Onshore             |                        |         | 35,260  |                |      |        | 12,749  |  |  |         |      |  |            |         | 111,758 |         |  |     | 14 |  |  |         | 5,860   | 
|              | Texas Gulf Coast    |                        |         | 376,517 |                |      |        | 2,780   |  |  |         | 8,369 |  |            |         | 443,405 |         |  |     | 55 |  |  |         | 85,810  | 
|              | Offshore            |                        |         | 99,757  |                |      |        | 3,830   |  |  |         | 230   |  |            |         | 124,122 |         |  |     | 15 |  |  |         | 30,426  | 
|              |                     |                        |         |         |                |      |        |         |  |  |         |       |  |            |         |         |         | 
|              | Total United States |                        |         | 511,534 |                |      |        | 19,359  |  |  |         | 8,599 |  |            |         | 679,285 |         |  |     | 84 |  |  |         | 122,096 | 
|Brazil        |                     |                        |        |         |                |      | 20,795 |         |  |  |        |       |  |            | 124,772 |         |         |  | 16  |    |  |  |        |        
|              |                     |                        |         |         |                |      |        |         |  |  |         |       |  |            |         |         |         | 
|Total         |                     |                        | 511,534 |         |                |      | 40,154 |         |  |  | 8,599   |       |  |            | 804,057 |         |         |  | 100 |    |  |  | 122,096 |        
|              |                     |                        |         |         |                |      |        |         |  |  |         |       |  |            |         |         |         | 




|    |                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Net proved reserves exclude royalties and interests owned by
    others and reflect contractual arrangements and royalty
    obligations in effect at the time of the estimate.



|                     |               |                        |   |         |                |  |        |         |        |  |         |       |       |           |         |         |         |  |     |    |     | 
|-------------------- | ------------- | ---------------------- | - | ------- | -------------- |  | ------ | ------- | ------ |  | ------- | ----- | ----- | --------- | ------- | ------- | ------- |  | --- | -- | --- | 
|                     |               | Net Proved Reserves(1) |  
|                     |               |                        |  
|                     |               | Natural Gas            |   |         | Oil/Condensate |  |        | NGL     |        |  | Total   |      
|                     |               |                        |   |         |                |  |        |         |        |  |         |      
|                     |               | (MMcf)                 |   |         | (MBbls)        |  |        | (MBbls) |        |  | (MMcfe) |       |       | (Percent) |        
|United States        |               |                        |   |         |                |  |        |         |        |  |         |       |       |           |         |         |         |  |     |   
|                     | Producing     |                        |   | 326,723 |                |  |        | 8,612   |        |  |         | 7,310 |       |           |         | 422,256 |         |  |     | 62 |    
|                     | Non-Producing |                        |   | 92,197  |                |  |        | 5,360   |        |  |         | 374   |       |           |         | 126,603 |         |  |     | 19 |    
|                     | Undeveloped   |                        |   | 92,614  |                |  |        | 5,387   |        |  |         | 915   |       |           |         | 130,426 |         |  |     | 19 |    
|                     |               |                        |   |         |                |  |        |         |        |  |         |       |       |           |        
|                     |               | Total proved           |   |         | 511,534        |  |        |         | 19,359 |  |         |       | 8,599 |           |         |         | 679,285 |  |     |    | 100 | 
|                     |               |                        |   |         |                |  |        |         |        |  |         |       |       |           |        
|Brazil  undeveloped |               |                        |  |         |                |  | 20,795 |         |        |  |        |       |       |           | 124,772 |         |         |  | 100 |   
|                     |               |                        |   |         |                |  |        |         |        |  |         |       |       |           |        
|Worldwide            |               |                        |   |         |                |  |        |         |        |  |         |       |       |           |         |         |         |  |     |   
|                     | Producing     |                        |   | 326,723 |                |  |        | 8,612   |        |  |         | 7,310 |       |           |         | 422,256 |         |  |     | 52 |    
|                     | Non-Producing |                        |   | 92,197  |                |  |        | 5,360   |        |  |         | 374   |       |           |         | 126,603 |         |  |     | 16 |    
|                     | Undeveloped   |                        |   | 92,614  |                |  |        | 26,182  |        |  |         | 915   |       |           |         | 255,198 |         |  |     | 32 |    
|                     |               |                        |   |         |                |  |        |         |        |  |         |       |       |           |        
|                     |               | Total proved           |   |         | 511,534        |  |        |         | 40,154 |  |         |       | 8,599 |           |         |         | 804,057 |  |     |    | 100 | 
|                     |               |                        |   |         |                |  |        |         |        |  |         |       |       |           |        




|    |                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Net proved reserves exclude royalties and interests owned by
    others and reflect contractual arrangements and royalty
    obligations in effect at the time of the estimate.



7



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##### Table of Contents







| |                  
| | -----------------
| | Acreage and Wells



|              |                     |           |   |         |             |  |   |          |  |  |           |           |  |          |         |         |        |  |           |           |  |  |         |           | 
|------------- | ------------------- | --------- | - | ------- | ----------- |  | - | -------- |  |  | --------- | --------- |  | -------- | ------- | ------- | ------ |  | --------- | --------- |  |  | ------- | --------- | 
|              |                     | Developed |   |         | Undeveloped |  |   | Total    | 
|              |                     |           |   |         |             |  |   |          | 
|              |                     | Gross(1)  |   |         | Net(2)      |  |   | Gross(1) |  |  | Net(2)    |           |  | Gross(1) |         |         | Net(2) | 
|              |                     |           |   |         |             |  |   |          |  |  |           |           |  |          |         |         |        | 
|United States |                     |           |   |         |             |  |   |          |  |  |           |           |  |          |         |         |        |  |           |           |  |  |         |          
|              | Onshore             |           |   | 190,779 |             |  |   | 138,732  |  |  |           | 396,024   |  |          |         | 288,965 |        |  |           | 586,803   |  |  |         | 427,697   | 
|              | Texas Gulf Coast    |           |   | 115,876 |             |  |   | 76,193   |  |  |           | 220,806   |  |          |         | 163,236 |        |  |           | 336,682   |  |  |         | 239,429   | 
|              | Offshore            |           |   | 296,879 |             |  |   | 196,640  |  |  |           | 95,437    |  |          |         | 86,961  |        |  |           | 392,316   |  |  |         | 283,601   | 
|              |                     |           |   |         |             |  |   |          |  |  |           |           |  |          |         |         |        | 
|              | Total United States |           |   | 603,534 |             |  |   | 411,565  |  |  |           | 712,267   |  |          |         | 539,162 |        |  |           | 1,315,801 |  |  |         | 950,727   | 
|Brazil        |                     |           |  |         |             |  |  |          |  |  | 1,346,919 |           |  |          | 452,552 |         |        |  | 1,346,919 |           |  |  | 452,552 |          
|              |                     |           |   |         |             |  |   |          |  |  |           |           |  |          |         |         |        | 
|              | Total               |           |   | 603,534 |             |  |   | 411,565  |  |  |           | 2,059,186 |  |          |         | 991,714 |        |  |           | 2,662,720 |  |  |         | 1,403,279 | 
|              |                     |           |   |         |             |  |   |          |  |  |           |           |  |          |         |         |        | 






|    |                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------
|(1) | Gross interest reflects the total acreage we participated in,
    regardless of our ownership interests in the acreage.
|(2) | Net interest is the aggregate of the fractional working interest
    that we have in our gross acreage.                



8



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##### Table of Contents





|                 |       |             |     |     |              |  |     |                  |           |  |             |     |  |          |     |     |        |  |     |          |  |  |        |     |  |  |   |   |  |  |   |   | 
|---------------- | ----- | ----------- | --- | --- | ------------ |  | --- | ---------------- | --------- |  | ----------- | --- |  | -------- | --- | --- | ------ |  | --- | -------- |  |  | ------ | --- |  |  | - | - |  |  | - | - | 
|                 |       | Productive  |     |     |              |  |     |                  | Number of | 
|                 |       | Natural Gas |     |     | Productive   |  |     | Total            |           |  | Wells Being |    
|                 |       | Wells       |     |     | Oil Wells(3) |  |     | Productive Wells |           |  | Drilled     |    
|                 |       |             |     |     |              |  |     |                  |           |  |             |    
|                 |       | Gross(1)    |     |     | Net(2)       |  |     | Gross(1)         |           |  | Net(2)      |     |  | Gross(1) |     |     | Net(2) |  |     | Gross(1) |  |  | Net(2) |    
|                 |       |             |     |     |              |  |     |                  |           |  |             |     |  |          |     |     |        |  |     |          |  |  |        |    
|Onshore          |       |             | 35  |     |              |  | 6   |                  |           |  | 287         |     |  |          | 217 |     |        |  | 322 |          |  |  | 223    |     |  |  |  |   |  |  |  |  
|Texas Gulf Coast |       |             | 711 |     |              |  | 580 |                  |           |  | 2           |     |  |          | 1   |     |        |  | 713 |          |  |  | 581    |     |  |  | 5 |   |  |  | 4 |  
|Offshore         |       |             | 155 |     |              |  | 120 |                  |           |  | 34          |     |  |          | 27  |     |        |  | 189 |          |  |  | 147    |     |  |  | 2 |   |  |  |  |  
|                 |       |             |     |     |              |  |     |                  |           |  |             |     |  |          |     |     |        |  |     |          |  |  |        |    
|                 | Total |             |     | 901 |              |  |     | 706              |           |  |             | 323 |  |          |     | 245 |        |  |     | 1,224    |  |  |        | 951 |  |  |   | 7 |  |  |   | 4 | 
|                 |       |             |     |     |              |  |     |                  |           |  |             |     |  |          |     |     |        |  |     |          |  |  |        |    






|    |                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------
|(1) | Gross interest reflects the total number of wells we
    participated in, regardless of our ownership interests in the
    wells.
|(2) | Net interest is the aggregate of the fractional working interest
    that we have in our gross wells.                            
|(3) | Excludes two wells in Brazil that are not currently producing
    due primarily to regional infrastructure constraints.          





|              |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |    |      |  |  |    |    |  |  |     |     | 
|------------- | ---------- | ---------------- |  | -- | ---------------- |  |  | ---- | -- |  | ---- | -- | -- | ---- |  | -- | ---- |  |  | -- | -- |  |  | --- | --- | 
|              |            | Net Exploratory  |  |    | Net Development  | 
|              |            | Wells Drilled(1) |  |    | Wells Drilled(1) | 
|              |            |                  |  |    |                  | 
|              |            | 2004             |  |    | 2003             |  |  | 2002 |    |  | 2004 |    |    | 2003 |  |    | 2002 | 
|              |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |    |      | 
|United States |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |    |      |  |  |    |    |  |  |    
|              | Productive |                  |  | 12 |                  |  |  | 19   |    |  |      | 18 |    |      |  | 10 |      |  |  | 53 |    |  |  | 166 |    
|              | Dry        |                  |  | 3  |                  |  |  | 9    |    |  |      | 8  |    |      |  | 1  |      |  |  | 1  |    |  |  | 1   |    
|              |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |    |      | 
|              |            | Total            |  |    | 15               |  |  |      | 28 |  |      |    | 26 |      |  |    | 11   |  |  |    | 54 |  |  |     | 167 | 
|              |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |    |      | 
|Brazil        |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |    |      |  |  |    |    |  |  |    
|              | Productive |                  |  |   |                  |  |  | 2    |    |  |      |   |    |      |  |   |      |  |  |   |    |  |  |    |    
|              | Dry        |                  |  | 1  |                  |  |  | 4    |    |  |      |   |    |      |  |   |      |  |  |   |    |  |  |    |    
|              |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |    |      | 
|              |            | Total            |  |    | 1                |  |  |      | 6  |  |      |    |   |      |  |    |     |  |  |    |   |  |  |     |    | 
|              |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |    |      | 
|Worldwide     |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |    |      |  |  |    |    |  |  |    
|              | Productive |                  |  | 12 |                  |  |  | 21   |    |  |      | 18 |    |      |  | 10 |      |  |  | 53 |    |  |  | 166 |    
|              | Dry        |                  |  | 4  |                  |  |  | 13   |    |  |      | 8  |    |      |  | 1  |      |  |  | 1  |    |  |  | 1   |    
|              |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |    |      | 
|              |            | Total            |  |    | 16               |  |  |      | 34 |  |      |    | 26 |      |  |    | 11   |  |  |    | 54 |  |  |     | 167 | 
|              |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |    |      | 






|    |                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------
|(1) | Net interest is the aggregate of the fractional working interest
    that we have in our gross wells drilled.



Net Production, Sales Prices, Transportation and Production
Costs




|                                                        |                                 |               |  |        |         |  |  |         |         |  |  |         |         | 
|------------------------------------------------------- | ------------------------------- | ------------- |  | ------ | ------- |  |  | ------- | ------- |  |  | ------- | ------- | 
|                                                        |                                 | 2004          |  |        | 2003    |  |  | 2002    |        
|                                                        |                                 |               |  |        |         |  |  |         |        
|Net Production Volumes                                  |                                 |               |  |        |         |  |  |         |         |  |  |        
|                                                        | Natural gas (MMcf)              |               |  | 95,641 |         |  |  | 141,024 |         |  |  | 246,908 |        
|                                                        | Oil, condensate and NGL (MBbls) |               |  | 4,410  |         |  |  | 5,972   |         |  |  | 6,929   |        
|                                                        |                                 | Total (MMcfe) |  |        | 122,096 |  |  |         | 176,854 |  |  |         | 288,481 | 
|Natural Gas Average Realized Sales Price
    ($/Mcf)(1) |                                 |               |  |        |         |  |  |         |         |  |  |        

9



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|                                                                     |                                 |                       |   |       |      |  |   |       |      |  |   |       |      | 
|-------------------------------------------------------------------- | ------------------------------- | --------------------- | - | ----- | ---- |  | - | ----- | ---- |  | - | ----- | ---- | 
|                                                                     |                                 | 2004                  |   |       | 2003 |  |   | 2002  |     
|                                                                     |                                 |                       |   |       |      |  |   |       |     
|                                                                     | Price, excluding hedges         |                       | $ | 6.02  |      |  | $ | 5.43  |      |  | $ | 3.15  |     
|                                                                     | Price, including
    hedges(2)  |                       | $ | 5.57  |      |  | $ | 4.72  |      |  | $ | 4.22  |     
|Oil, Condensate, and NGL Average Realized Sales Price
    ($/Bbl)(1) |                                 |                       |   |       |      |  |   |       |      |  |   |      
|                                                                     | Price, excluding hedges         |                       | $ | 35.24 |      |  | $ | 25.25 |      |  | $ | 20.08 |     
|                                                                     | Price, including
    hedges(2)  |                       | $ | 35.24 |      |  | $ | 25.25 |      |  | $ | 20.12 |     
|Average Transportation Cost                                          |                                 |                       |   |       |      |  |   |       |      |  |   |      
|                                                                     | Natural gas ($/Mcf)             |                       | $ | 0.11  |      |  | $ | 0.15  |      |  | $ | 0.15  |     
|                                                                     | Oil, condensate and NGL ($/Bbl) |                       | $ | 1.07  |      |  | $ | 0.89  |      |  | $ | 0.66  |     
|Average Production Cost
    ($/Mcfe)(3)                              |                                 |                       |   |       |      |  |   |       |      |  |   |      
|                                                                     | Average lease operating cost    |                       | $ | 0.75  |      |  | $ | 0.47  |      |  | $ | 0.49  |     
|                                                                     | Average production taxes        |                       |   | 0.12  |      |  |   | 0.17  |      |  |   | 0.08  |     
|                                                                     |                                 |                       |   |       |      |  |   |       |     
|                                                                     |                                 | Total production cost |   | $     | 0.87 |  |   | $     | 0.64 |  |   | $     | 0.57 | 
|                                                                     |                                 |                       |   |       |      |  |   |       |     






|    |                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------
|(1) | Prices are stated before transportation costs.                                                                             
|(2) | Our hedging activities are conducted with our affiliate, El Paso
    Marketing.                                            
|(3) | Production costs include lease operating costs and production
    related taxes (including ad valorem and severance taxes).

Acquisition, Development and Exploration Expenditures




|              |                                     |                                      |                                   |                            |      |    |    |      |     |    |     |     |     |    |    | 
|------------- | ----------------------------------- | ------------------------------------ | --------------------------------- | -------------------------- | ---- | -- | -- | ---- | --- | -- | --- | --- | --- | -- | -- | 
|              |                                     | 2004                                 |                                   |                            | 2003 |    |    | 2002 |    
|              |                                     |                                      |                                   |                            |      |    |    |      |    
|              |                                     | (In millions)                        |                                  
|United States |                                     |                                      |                                   |                            |      |    |    |      |     |    |     |    
|              | Acquisition Costs:                  |                                      |                                   |                            |      |    |    |      |     |    |     |     |    
|              |                                     | Proved                               |                                   | $                          | 6    |    |    | $    |    |    |     | $   | 23  |   
|              |                                     | Unproved                             |                                   |                            | 4    |    |    |      | 9   |    |     |     | 12  |   
|              | Development Costs                   |                                      |                                   | 150                        |      |    |    | 270  |     |    |     | 569 |    
|              | Exploration Costs:                  |                                      |                                   |                            |      |    |    |      |     |    |     |     |    
|              |                                     | Delay Rentals                        |                                   |                            | 3    |    |    |      | 4   |    |     |     | 4   |   
|              |                                     | Seismic Acquisition and Reprocessing |                                   |                            |     |    |    |      | 1   |    |     |     | 2   |   
|              |                                     | Drilling                             |                                   |                            | 84   |    |    |      | 211 |    |     |     | 191 |   
|              | Asset Retirement
    Obligations(1) |                                      |                                   | 11                         |      |    |    | 77   |     |    |     |    |    
|              |                                     |                                      |                                   |                            |      |    |    |      |    
|              |                                     | Total full cost pool expenditures    |                                   |                            | 258  |    |    |      | 572 |    |     |     | 801 |   
|              |                                     | Non-full cost pool expenditures      |                                   |                            | 3    |    |    |      | 4   |    |     |     | 18  |   
|              |                                     |                                      |                                   |                            |      |    |    |      |    
|              |                                     | Total capital expenditures           |                                   | $                          | 261  |    |    | $    | 576 |    |     | $   | 819 |   
|              |                                     |                                      |                                   |                            |      |    |    |      |    
|Brazil        |                                     |                                      |                                   |                            |      |    |    |      |     |    |     |    
|              | Acquisition Costs:                  |                                      |                                   |                            |      |    |    |      |     |    |     |     |    
|              |                                     | Unproved                             |                                   | $                          | 3    |    |    | $    | 4   |    |     | $   | 9   |   
|              | Development Costs                   |                                      |                                   | 1                          |      |    |    |     |     |    |     |    |    
|              | Exploration Costs:                  |                                      |                                   |                            |      |    |    |      |     |    |     |     |    
|              |                                     | Seismic Acquisition and Reprocessing |                                   |                            | 14   |    |    |      | 11  |    |     |     | 32  |   
|              |                                     | Drilling                             |                                   |                            | 10   |    |    |      | 84  |    |     |     | 13  |   
|              |                                     |                                      |                                   |                            |      |    |    |      |    
|              |                                     |                                      | Total full cost pool expenditures |                            |      | 28 |    |      |     | 99 |     |     |     | 54 |   
|              |                                     |                                      | Non-full cost pool expenditures   |                            |      | 2  |    |      |     | 1  |     |     |     | 2  |   
|              |                                     |                                      |                                   |                            |      |    |    |      |    
|              |                                     |                                      |                                   | Total capital expenditures |      | $  | 30 |      |     | $  | 100 |     |     | $  | 56 | 
|              |                                     |                                      |                                   |                            |      |    |    |      |    

10



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|          |                    |                                      |                                   |                            |      |     |     |      |     |     |     |     |     |     |     | 
|--------- | ------------------ | ------------------------------------ | --------------------------------- | -------------------------- | ---- | --- | --- | ---- | --- | --- | --- | --- | --- | --- | --- | 
|          |                    | 2004                                 |                                   |                            | 2003 |     |     | 2002 |    
|          |                    |                                      |                                   |                            |      |     |     |      |    
|          |                    | (In millions)                        |                                  
|Worldwide |                    |                                      |                                   |                            |      |     |     |      |     |     |     |    
|          | Acquisition Costs: |                                      |                                   |                            |      |     |     |      |     |     |     |     |    
|          |                    | Proved                               |                                   | $                          | 6    |     |     | $    |    |     |     | $   | 23  |    
|          |                    | Unproved                             |                                   |                            | 7    |     |     |      | 13  |     |     |     | 21  |    
|          | Development Costs  |                                      |                                   | 151                        |      |     |     | 270  |     |     |     | 569 |    
|          | Exploration Costs: |                                      |                                   |                            |      |     |     |      |     |     |     |     |    
|          |                    | Delay Rentals                        |                                   |                            | 3    |     |     |      | 4   |     |     |     | 4   |    
|          |                    | Seismic Acquisition and Reprocessing |                                   |                            | 14   |     |     |      | 12  |     |     |     | 34  |    
|          |                    | Drilling                             |                                   |                            | 94   |     |     |      | 295 |     |     |     | 204 |    
|          |                    | Asset Retirement
    Obligations(1)  |                                   |                            | 11   |     |     |      | 77  |     |     |     |    |    
|          |                    |                                      |                                   |                            |      |     |     |      |    
|          |                    |                                      | Total full cost pool expenditures |                            |      | 286 |     |      |     | 671 |     |     |     | 855 |    
|          |                    |                                      | Non-full cost pool expenditures   |                            |      | 5   |     |      |     | 5   |     |     |     | 20  |    
|          |                    |                                      |                                   |                            |      |     |     |      |    
|          |                    |                                      |                                   | Total capital expenditures |      | $   | 291 |      |     | $   | 676 |     |     | $   | 875 | 
|          |                    |                                      |                                   |                            |      |     |     |      |    






|    |                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes an increase to our property, plant and equipment of
    approximately $71 million in 2003 associated with our
    adoption of Statement of Financial Accounting Standards
    No. 143.



Regulatory and Operating Environment








Markets and Competition






11



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##### Table of Contents





Non-regulated Business  Power Segment




International Power.


|                |            |         |                    |             |             |    |       |          |  |            |                 |               |  |                    |  |                           |           |      |  |            |  |          |  |               | 
|--------------- | ---------- | ------- | ------------------ | ----------- | ----------- | -- | ----- | -------- |  | ---------- | --------------- | ------------- |  | ------------------ |  | ------------------------- | --------- | ---- |  | ---------- |  | -------- |  | ------------- | 
|                |            |         |                    |             |             |    |       |          |  | Expiration |                 |               | 
|                |            |         |                    | Ownership   |             |    | Gross |          |  |            |                 | Year of Power |  |                    | 
|Project         |            | Country |                    |             | Interest(1) |    |       | Capacity |  |            | Power Purchaser |               |  | Sales Contracts    |  |                           | Fuel Type |     
|                |            |         |                    |             |             |    |       |          |  |            |                 |               |  |                    |  |                           |           |     
|                |            |         |                    | (Percent)   |             |    | (MW)  |          |  |            |                 |               |  |                   
|Asia            |            |         |                    |             |             |    |       |          |  |            |                 |               |  |                    |  |                           |           |      |  |            |  |          |  |              
|                | Habibullah |         |                    | Pakistan    |             |    |       | 50       |  |            |                 | 136           |  |                    |  | Pakistan Water and Power  |           |      |  | 2029       |  |          |  | Natural Gas   | 
|                | Khulna     |         |                    | Bangladesh  |             |    |       | 74       |  |            |                 | 113           |  |                    |  | Bangladesh Power          |           |      |  | 2013       |  |          |  | Oil           | 
|                | Nanjing    |         |                    | China       |             |    |       | 80       |  |            |                 | 75            |  |                    |  | Jiangsu Power             |           |      |  | 2017       |  |          |  | Diesel        | 
|                | Saba       |         |                    | Pakistan    |             |    |       | 94       |  |            |                 | 128           |  |                    |  | Pakistan Water and Power  |           |      |  | 2029       |  |          |  | Oil           | 
|                | Suzhou     |         |                    | China       |             |    |       | 60       |  |            |                 | 109           |  |                    |  | Jiangsu Power             |           |      |  | 2016       |  |          |  | Natural Gas   | 
|                | Wuxi       |         |                    | China       |             |    |       | 60       |  |            |                 | 39            |  |                    |  | Jiangsu Power             |           |      |  | 2010       |  |          |  | Natural Gas   | 
|Central America |            |         |                    |             |             |    |       |          |  |            |                 |               |  |                    |  |                           |           |      |  |           
|                | CEPP       |         | Dominican Republic |             |             | 48 |       |          |  | 67         |                 |               |  | CDEEE, Spot Market |  |                           |           | 2014 |  |            |  | Oil      | 
|                | Fortuna    |         |                    | Panama      |             |    |       | 25       |  |            |                 | 300           |  |                    |  | Union Fenosa              |           |      |  | 2005, 2008 |  |          |  | Hydroelectric | 
|                | GEOSA      |         |                    | Nicaragua   |             |    |       | 26       |  |            |                 | 115           |  |                    |  | Union Fenosa, Spot Market |           |      |  | 2005, 2008 |  |          |  | Oil           | 
|                | Itabo      |         | Dominican Republic |             |             | 25 |       |          |  | 416        |                 |               |  | CDEEE and AES      |  |                           |           | 2016 |  |            |  | Oil/Coal | 
|                | Nejapa(1)  |         |                    | El Salvador |             |    |       | 87       |  |            |                 | 144           |  |                    |  | AES and PPL               |           |      |  | 2005       |  |          |  | Oil           | 
|                | Pedregal   |         |                    | Panama      |             |    |       | 21       |  |            |                 | 50            |  |                    |  | Union Fenosa              |           |      |  | 2005       |  |          |  | Oil           | 
|                | Tipitapa   |         |                    | Nicaragua   |             |    |       | 60       |  |            |                 | 51            |  |                    |  | Union Fenosa              |           |      |  | 2014       |  |          |  | Oil           | 




|    |                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Our Nejapa power facility is consolidated in our financial
    statements. Our interests in all other international power
    facilities are reflected as investments in unconsolidated
    affiliates in our financial statements.

Domestic Power Plants.


|                        |  |       |    |           |          |  |       |          |  |  |                 |               |  |                 |                      |  |           |  |      |  |  |  |             | 
|----------------------- |  | ----- | -- | --------- | -------- |  | ----- | -------- |  |  | --------------- | ------------- |  | --------------- | -------------------- |  | --------- |  | ---- |  |  |  | ----------- | 
|                        |  |       |    | El Paso   |          |  |       |          |  |  | Expiration      |               |  |                
|                        |  |       |    | Ownership |          |  | Gross |          |  |  |                 | Year of Power |  |                 |                     
|Project                 |  | State |    |           | Interest |  |       | Capacity |  |  | Power Purchaser |               |  | Sales Contracts |                      |  | Fuel Type | 
|                        |  |       |    |           |          |  |       |          |  |  |                 |               |  |                 |                      |  |           | 
|                        |  |       |    | (Percent) |          |  | (MW)  |          |  |  |                 |               |  |                
|Midland Cogeneration(1) |  |       | MI |           |          |  | 44    |          |  |  | 1,575           |               |  |                 | Consumers Power, Dow |  |           |  | 2025 |  |  |  | Natural Gas | 
|CDECCA(3)               |  |       | CT |           |          |  | 50    |          |  |  | 62              |               |  |                 | (2)                 |  |           |  | (2) |  |  |  | Natural Gas | 
|Eagle
    Point(4)      |  |       | NJ |           |          |  | 84    |          |  |  | 233             |               |  |                 | (2)                 |  |           |  | (2) |  |  |  | Natural Gas | 
|Rensselaer(4)           |  |       | NY |           |          |  | 100   |          |  |  | 86              |               |  |                 | (2)                 |  |           |  | (2) |  |  |  | Natural Gas | 






|    |                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | This power facility is reflected as an investment in
    unconsolidated affiliates in our financial statements.                                                                                                                                      
|(2) | These power facilities (referred to as merchant plants) do not
    have long-term power purchase agreements with third parties. El
    Paso Marketing sells the power that a majority of these
    facilities generate to the wholesale power market.
|(3) | This plant has Board approval for sale and is targeted to be
    sold in the first half of 2005.                                                                                                                                                     
|(4) | These plants were sold in the first quarter of 2005.                                                                                                                                                                                                 

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Regulatory Environment & Markets and Competition


International.




Domestic.


Non-regulated Business  Field Services Segment




Gathering and Processing Assets.


|                  |       |                   |       |       |                      |  |       |               |  |  |       |       |  |      |       |       |      |  |       |       |  |  |       |       |  |  |       |       | 
|----------------- | ----- | ----------------- | ----- | ----- | -------------------- |  | ----- | ------------- |  |  | ----- | ----- |  | ---- | ----- | ----- | ---- |  | ----- | ----- |  |  | ----- | ----- |  |  | ----- | ----- | 
|                  |       | Inlet Capacity    |       |       | Average Inlet Volume |  |       | Average Sales | 
|                  |       |                   |       |       |                      |  |       |               | 
|Processing Plants |       | December 31, 2004 |       |       | 2004                 |  |       | 2003          |  |  | 2002  |       |  | 2004 |       |       | 2003 |  |       | 2002  | 
|                  |       |                   |       |       |                      |  |       |               |  |  |       |       |  |      |       |       |      |  |       |       | 
|                  |       | (MMcfe/d)         |       |       | (BBtue/d)            |  |       | (Mgal/d)      | 
|South Louisiana   |       |                   | 2,550 |       |                      |  | 1,600 |               |  |  | 1,627 |       |  |      | 1,407 |       |      |  | 1,631 |       |  |  | 1,726 |       |  |  | 1,604 |      
|Other areas       |       |                   | 49    |       |                      |  | 18    |               |  |  | 60    |       |  |      | 347   |       |      |  | 38    |       |  |  | 139   |       |  |  | 739   |      
|                  |       |                   |       |       |                      |  |       |               |  |  |       |       |  |      |       |       |      |  |       |       | 
|                  | Total |                   |       | 2,599 |                      |  |       | 1,618         |  |  |       | 1,687 |  |      |       | 1,754 |      |  |       | 1,669 |  |  |       | 1,865 |  |  |       | 2,343 | 
|                  |       |                   |       |       |                      |  |       |               |  |  |       |       |  |      |       |       |      |  |       |       | 

Regulatory Environment.




Markets and Competition.


Other Operations and Assets




13



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| |                     
| | --------------------
| | Corporate Activities





| |                        
| | -----------------------
| | Discontinued Operations



Environmental




Employees




14



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ITEM 2. PROPERTIES









ITEM 3. LEGAL PROCEEDINGS




Corpus Christi Refinery Air Violations.


Coastal Eagle Point Air Issues.


St. Helens.


Natural Buttes.







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



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PART II







|        |                                                                                                                 
|------- | ----------------------------------------------------------------------------------------------------------------
|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
    STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES






ITEM 6. SELECTED FINANCIAL DATA




16



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS









Liquidity and Capital Resources










Results of Operations


Overview






17



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|                                                                  |                                          |               |      |      |               |  |        |        |  
|----------------------------------------------------------------- | ---------------------------------------- | ------------- | ---- | ---- | ------------- |  | ------ | ------ | -
|                                                                  |                                          | 2004          |      |      | 2003          | 
|                                                                  |                                          | (Restated)(1) |      |      | (Restated)(1) | 
|                                                                  |                                          |               |      |      |               | 
|                                                                  |                                          | (In millions) |     
|Regulated Business                                                |                                          |               |      |      |               |  |        |       
|                                                                  | Pipelines                                |               | $    | 434  |               |  | $      | 500    |  
|Non-regulated Businesses                                          |                                          |               |      |      |               |  |        |       
|                                                                  | Production                               |               |      | 171  |               |  |        | 219    |  
|                                                                  | Power                                    |               |      | (349 | )             |  |        | 39     |  
|                                                                  | Field Services                           |               |      | 55   |               |  |        | (52    | )
|                                                                  |                                          |               |      |      |               | 
|                                                                  | Segment EBIT                             |               |      | 311  |               |  |        | 706    |  
|Corporate                                                         |                                          |               | 1    |      |               |  | 1      |       
|                                                                  |                                          |               |      |      |               | 
|                                                                  | Consolidated EBIT                        |               |      | 312  |               |  |        | 707    |  
|Interest and debt expense                                         |                                          |               | (341 | )    |               |  | (407   | )     
|Affiliated interest expense, net                                  |                                          |               |     |      |               |  | (41    | )     
|Distributions on preferred interests of consolidated subsidiaries |                                          |               |     |      |               |  | (17    | )     
|Income taxes                                                      |                                          |               | (12  | )    |               |  | (43    | )     
|                                                                  |                                          |               |      |      |               | 
|                                                                  | Income (loss) from continuing operations |               |      | (41  | )             |  |        | 199    |  
|Discontinued operations, net of income taxes                      |                                          |               | (115 | )    |               |  | (1,286 | )     
|Cumulative effect of accounting changes, net of income taxes      |                                          |               |     |      |               |  | (12    | )     
|                                                                  |                                          |               |      |      |               | 
|                                                                  | Net loss                                 |               | $    | (156 | )             |  | $      | (1,099 | )
|                                                                  |                                          |               |      |      |               | 












|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | See Part II, Item 8, Financial Statements and
    Supplementary Data, Note 1 for a discussion of the
    restatements of our 2004 and 2003 financial statements. The
    restatement of our 2004 financial statements affected the amount
    of losses in, and recorded on, our discontinued operations. The
    restatement of our 2003 financial statements affected the amount
    of income taxes recorded in discontinued operations related to
    our Canadian exploration and production operations.




Individual Segment Results


Regulated Business  Pipelines Segment








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|                |  |        |       |                  |                     |  |    | 
|--------------- |  | ------ | ----- | ---------------- | ------------------- |  | -- | 
|                |  |        |       | Percent of Total |                    
|                |  | MDth/d |       |                  | Contracted Capacity | 
|                |  |        |       |                  |                     | 
|2005            |  |        | 1,912 |                  |                     |  | 14 | 
|2006            |  |        | 2,581 |                  |                     |  | 19 | 
|2007            |  |        | 2,133 |                  |                     |  | 16 | 
|2008 and beyond |  |        | 7,016 |                  |                     |  | 51 | 

Operating Results




|                                   |                  |                      |       |     |      |   |       |     | 
|---------------------------------- | ---------------- | -------------------- | ----- | --- | ---- | - | ----- | --- | 
|Pipelines Segment Results          |                  | 2004                 |       |     | 2003 |  
|                                   |                  |                      |       |     |      |  
|                                   |                  | (In millions, except |      
|                                   |                  | volume amounts)      |      
|Operating revenues                 |                  | $                    | 858   |     |      | $ | 918   |    
|Operating expenses                 |                  |                      | (508  | )   |      |   | (521  | )  
|                                   |                  |                      |       |     |      |  
|                                   | Operating income |                      |       | 350 |      |   |       | 397 | 
|Other income                       |                  |                      | 84    |     |      |   | 103   |    
|                                   |                  |                      |       |     |      |  
|                                   | EBIT             |                      | $     | 434 |      |   | $     | 500 | 
|                                   |                  |                      |       |     |      |  
|Throughput volumes
    (BBtu/d)(1) |                  |                      | 7,962 |     |      |   | 8,158 |    
|                                   |                  |                      |       |     |      |  






|    |                                                        
|--- | -------------------------------------------------------
|(1) | Throughput volumes exclude
    intrasegment activities.

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|                                                                                |                      |                         |     |     |         |   |     |       |  |   |        |     |   |   |     |     |  
|------------------------------------------------------------------------------- | -------------------- | ----------------------- | --- | --- | ------- | - | --- | ----- |  | - | ------ | --- | - | - | --- | --- | -
|                                                                                |                      |                         |     |     |         |   |     | EBIT  | 
|                                                                                |                      | Revenue                 |     |     | Expense |   |     | Other |  |   | Impact |    
|                                                                                |                      |                         |     |     |         |   |     |       |  |   |        |    
|                                                                                |                      | Favorable/(Unfavorable) |    
|                                                                                |                      | (In millions)           |    
|Contract modifications/terminations                                             |                      | $                       | (68 | )   |         | $ | 37  |       |  | $ |       |     |   | $ | (31 | )  
|Gas not used in operations, processing revenues and other
    natural gas sales |                      |                         | 26  |     |         |   | (14 | )     |  |   |       |     |   |   | 12  |    
|Other regulatory matters                                                        |                      |                         |    |     |         |   | (9  | )     |  |   | (19    | )   |   |   | (28 | )  
|Equity earnings from Great Lakes                                                |                      |                         |    |     |         |   |    |       |  |   | 8      |     |   |   | 8   |    
|Other(1)                                                                        |                      |                         | (18 | )   |         |   | (1  | )     |  |   | (8     | )   |   |   | (27 | )  
|                                                                                |                      |                         |     |     |         |   |     |       |  |   |        |    
|                                                                                | Total impact on EBIT |                         | $   | (60 | )       |   | $   | 13    |  |   | $      | (19 | ) |   | $   | (66 | )
|                                                                                |                      |                         |     |     |         |   |     |       |  |   |        |    






|    |                                                                                         
|--- | ----------------------------------------------------------------------------------------
|(1) | Consists of individually
    insignificant items across several of our pipeline systems.



Contract Modifications/Terminations.




Gas not used in Operations, Processing Revenues and Other Gas
Sales.


Expansions.




20



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##### Table of Contents







| |                                                                                                                                                                                                                                                                                                                     | 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
| | Rocky Mountain expansions. In order to provide an outlet
    for the growing supply of Rocky Mountain natural gas to markets
    in the Midwest region of the United States, we have several
    expansion projects that will increase our transportation
    capacity, subject to regulatory approval, as follows: | 



| |   |                                                                                                                                                                                                                                                                                                                            | 
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
| |  | Cheyenne Plains Gas Pipeline commenced free-flow operations in
    December 2004 and as of January 31, 2005 is fully
    in-service. Approval has already been received for Cheyenne
    Plains Phase II which will add an additional
    179 MMcf/d of capacity that is scheduled to be available by
    the end of 2005. | 
|
| |  | CIGs Raton Basin 2005 Expansion will add 104 MMcf/d
    of capacity that is scheduled to be available by the end of 2005.                                                                                                                                                                                                 | 
|
| |  | WIC expects to complete its Piceance lateral with capacity of
    333 MMcf/d by the end of 2005.                                                                                                                                                                                                                           | 



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
| | Other expansions. On our ANR system we continue to
    experience intense competition along its mainline corridors;
    however, it is well-positioned to provide transportation service
    from discoveries in the deepwater Gulf of Mexico and LNG supply
    growth along the Gulf Coast. These new supplies are expected to
    offset the continued decline of production from the Gulf of
    Mexico shelf. Additionally, ANR is proceeding with its Eastleg
    and Northleg expansions in its Wisconsin market area. | 

Other Regulatory Matters.


Accounting for the Effects
of Certain Types of Regulation




Non-regulated Businesses  Production Segment




21



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Reserves, Production and Costs












| |                          
| | -------------------------
| | Production Hedge Position





22



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Operational Factors Affecting the Year Ended
December 31, 2004






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Higher realized prices. Realized natural gas prices,
    which include the impact of our hedges, increased
    18 percent and oil, condensate and NGL prices increased
    40 percent compared to 2003.                                                                                                                                                                                                                                                                            
|
| |  | Average daily production. During 2004, our average daily
    production was 334 MMcfe/d (excluding discontinued Canadian
    and other international operations of 15 MMcfe/d).                                                                                                                                                                                                                                                                                                    
|
| |  | Capital expenditures of $291 million (excluding
    discontinued Canadian and other international expenditures of
    $29 million). During the first quarter of 2004, we
    experienced disappointing drilling results. As a result, we
    significantly reduced our drilling activities and instituted a
    new, more rigorous, risk analysis program, with an emphasis on
    strict capital discipline. During 2004, we drilled 27 wells
    with an 81 percent success rate.
|
| |  | Sale of Canadian and other international operations.
    These operations were sold in order to focus our operations in
    the United States and Brazil.                                                                                                                                                                                                                                                                                                                          



| |                  
| | -----------------
| | Operating Results



|                                              |                         |                                 |      |     |      |   |      |     |      |  
|--------------------------------------------- | ----------------------- | ------------------------------- | ---- | --- | ---- | - | ---- | --- | ---- | -
|Production Segment Results                    |                         | 2004                            |      |     | 2003 |  
|                                              |                         |                                 |      |     |      |  
|                                              |                         | (In millions)                   |     
|Operating revenues:                           |                         |                                 |      |     |      |   |      |    
|                                              | Natural gas             |                                 | $    | 533 |      |   | $    | 666 |     
|                                              | Oil, condensate and NGL |                                 |      | 155 |      |   |      | 151 |     
|                                              | Other                   |                                 |      | 2   |      |   |      | 5   |     
|                                              |                         |                                 |      |     |      |  
|                                              |                         | Total operating revenues        |      |     | 690  |   |      |     | 822  |  
|Transportation and net product costs          |                         |                                 | (15  | )   |      |   | (30  | )  
|                                              |                         |                                 |      |     |      |  
|                                              |                         | Total operating margin          |      |     | 675  |   |      |     | 792  |  
|                                              |                         |                                 |      |     |      |  
|Depreciation, depletion and amortization      |                         |                                 | (315 | )   |      |   | (347 | )  
|Production
    costs(1)                       |                         |                                 | (107 | )   |      |   | (114 | )  
|Ceiling test and other
    charges(2)         |                         |                                 |     |     |      |   | (44  | )  
|General and administrative expenses           |                         |                                 | (80  | )   |      |   | (80  | )  
|Taxes, other than production and income taxes |                         |                                 | 1    |     |      |   |     |    
|                                              |                         |                                 |      |     |      |  
|                                              |                         | Total operating
    expenses(3) |      |     | (501 | ) |      |     | (585 | )
|                                              |                         |                                 |      |     |      |  
|                                              | Operating income        |                                 |      | 174 |      |   |      | 207 |     
|Other income (expense)                        |                         |                                 | (3   | )   |      |   | 12   |    
|                                              |                         |                                 |      |     |      |  
|                                              | EBIT                    |                                 | $    | 171 |      |   | $    | 219 |     
|                                              |                         |                                 |      |     |      |  

23



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|                                                     |                                  |                                                         |                              |         |          |      |    |      |     |    |      |         |         |      | 
|---------------------------------------------------- | -------------------------------- | ------------------------------------------------------- | ---------------------------- | ------- | -------- | ---- | -- | ---- | --- | -- | ---- | ------- | ------- | ---- | 
|                                                     |                                  |                                                         |                              | Percent |          |      |   
|                                                     |                                  | 2004                                                    |                              |         | Variance |      |    | 2003 |    
|                                                     |                                  |                                                         |                              |         |          |      |    |      |    
|Volumes, prices and cost per unit:                   |                                  |                                                         |                              |         |          |      |    |      |     |    |      |        
|                                                     | Natural gas                      |                                                         |                              |         |          |      |    |      |     |    |      |         |        
|                                                     |                                  | Volumes (MMcf)                                          |                              |         | 95,641   |      |    |      | (32 | )% |      |         | 141,024 |     
|                                                     |                                  |                                                         |                              |         |          |      |    |      |    
|                                                     |                                  | Average realized prices including hedges
    ($/Mcf)(4) |                              | $       | 5.57     |      |    |      | 18  | %  |      | $       | 4.72    |     
|                                                     |                                  |                                                         |                              |         |          |      |    |      |    
|                                                     |                                  | Average realized prices excluding hedges
    ($/Mcf)(4) |                              | $       | 6.02     |      |    |      | 11  | %  |      | $       | 5.43    |     
|                                                     |                                  |                                                         |                              |         |          |      |    |      |    
|                                                     |                                  | Average transportation costs ($/Mcf)                    |                              | $       | 0.11     |      |    |      | (27 | )% |      | $       | 0.15    |     
|                                                     |                                  |                                                         |                              |         |          |      |    |      |    
|                                                     | Oil, condensate and NGL          |                                                         |                              |         |          |      |    |      |     |    |      |         |        
|                                                     |                                  | Volumes (MBbls)                                         |                              |         | 4,410    |      |    |      | (26 | )% |      |         | 5,972   |     
|                                                     |                                  |                                                         |                              |         |          |      |    |      |    
|                                                     |                                  | Average realized prices including hedges
    ($/Bbl)(4) |                              | $       | 35.24    |      |    |      | 40  | %  |      | $       | 25.25   |     
|                                                     |                                  |                                                         |                              |         |          |      |    |      |    
|                                                     |                                  | Average realized prices excluding hedges
    ($/Bbl)(4) |                              | $       | 35.24    |      |    |      | 40  | %  |      | $       | 25.25   |     
|                                                     |                                  |                                                         |                              |         |          |      |    |      |    
|                                                     |                                  | Average transportation costs ($/Bbl)                    |                              | $       | 1.07     |      |    |      | 20  | %  |      | $       | 0.89    |     
|                                                     |                                  |                                                         |                              |         |          |      |    |      |    
|                                                     | Total equivalent volumes (MMcfe) |                                                         |                              | 122,096 |          |      |    | (31  | )%  |    |      | 176,854 |        
|                                                     |                                  |                                                         |                              |         |          |      |    |      |    
|                                                     | Production cost ($/Mcfe)         |                                                         |                              |         |          |      |    |      |     |    |      |         |        
|                                                     |                                  | Average lease operating cost                            |                              | $       | 0.75     |      |    |      | 60  | %  |      | $       | 0.47    |     
|                                                     |                                  | Average production taxes                                |                              |         | 0.12     |      |    |      | (29 | )% |      |         | 0.17    |     
|                                                     |                                  |                                                         |                              |         |          |      |    |      |    
|                                                     |                                  |                                                         | Total production
    cost(1) |         | $        | 0.87 |    |      |     | 36 | %    |         | $       | 0.64 | 
|                                                     |                                  |                                                         |                              |         |          |      |    |      |    
|Average general and administrative expenses ($/Mcfe) |                                  | $                                                       | 0.65                         |         |          |      | 44 | %    |     | $  | 0.45 |        
|                                                     |                                  |                                                         |                              |         |          |      |    |      |    
|Unit of production depletion cost ($/Mcfe)           |                                  | $                                                       | 2.42                         |         |          |      | 32 | %    |     | $  | 1.84 |        
|                                                     |                                  |                                                         |                              |         |          |      |    |      |    




|    |                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------
|(1) | Production costs include lease operating costs and production
    related taxes (including ad valorem and severance taxes).
|(2) | Includes ceiling test charges, asset impairments and gains on
    asset sales.                                             
|(3) | Transportation costs are included in operating expenses on our
    consolidated statements of income.                      
|(4) | Prices are stated before transportation costs.                                                                             

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| |                                                                          
| | -------------------------------------------------------------------------
| | Year Ended December 31, 2004 Compared to Year Ended
    December 31, 2003



|                                                  |                                               |                             |   |      |           |   |   |        |    |  |   |      |     |  
|------------------------------------------------- | --------------------------------------------- | --------------------------- | - | ---- | --------- | - | - | ------ | -- |  | - | ---- | --- | -
|                                                  |                                               | Variance                    |  
|                                                  |                                               |                             |  
|                                                  |                                               | Operating                   |   |      | Operating |   |   | EBIT   |   
|                                                  |                                               | Revenue                     |   |      | Expense   |   |   | Impact |   
|                                                  |                                               |                             |   |      |           |   |   |        |   
|                                                  |                                               | Favorable/(Unfavorable)     |  
|                                                  |                                               | (In millions)               |  
|Natural Gas Revenue                               |                                               |                             |   |      |           |   |   |        |    |  |   |     
|                                                  | Higher prices in 2004                         |                             | $ | 56   |           |   | $ |       |    |  | $ | 56   |    
|                                                  | Lower production volumes in 2004              |                             |   | (247 | )         |   |   |       |    |  |   | (247 | )  
|                                                  | Impact from hedge program in 2004 versus 2003 |                             |   | 58   |           |   |   |       |    |  |   | 58   |    
|Oil, Condensate, and NGL Revenue                  |                                               |                             |   |      |           |   |   |        |    |  |   |     
|                                                  | Higher realized prices in 2004                |                             |   | 44   |           |   |   |       |    |  |   | 44   |    
|                                                  | Lower production volumes in 2004              |                             |   | (40  | )         |   |   |       |    |  |   | (40  | )  
|Depreciation, Depletion, and Amortization Expense |                                               |                             |   |      |           |   |   |        |    |  |   |     
|                                                  | Higher depletion rate in 2004                 |                             |   |     |           |   |   | (71    | )  |  |   | (71  | )  
|                                                  | Lower production volumes in 2004              |                             |   |     |           |   |   | 101    |    |  |   | 101  |    
|Production Costs                                  |                                               |                             |   |      |           |   |   |        |    |  |   |     
|                                                  | Higher lease operating costs in 2004          |                             |   |     |           |   |   | (9     | )  |  |   | (9   | )  
|                                                  | Lower production taxes in 2004                |                             |   |     |           |   |   | 16     |    |  |   | 16   |    
|Other                                             |                                               |                             |   |      |           |   |   |        |    |  |   |     
|                                                  | Ceiling test and other charges in 2003        |                             |   |     |           |   |   | 44     |    |  |   | 44   |    
|                                                  | Other                                         |                             |   | (3   | )         |   |   | 3      |    |  |   |     |    
|                                                  |                                               |                             |   |      |           |   |   |        |   
|                                                  |                                               | Total variance 2004 to 2003 |   | $    | (132      | ) |   | $      | 84 |  |   | $    | (48 | )
|                                                  |                                               |                             |   |      |           |   |   |        |   

Operating Revenues.


Depreciation, depletion, and amortization expense.


Production costs.


Other.


25



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Non-regulated Business  Power Segment




Asia.


MCV.


Domestic Power Contract Restructuring Business.


26



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##### Table of Contents



Operating Results




|                                    |                                                  |                                                                |   |     |      |   |   |     |      |  
|----------------------------------- | ------------------------------------------------ | -------------------------------------------------------------- | - | --- | ---- | - | - | --- | ---- | -
|                                    |                                                  | 2004                                                           |   |     | 2003 |  
|                                    |                                                  |                                                                |   |     |      |  
|                                    |                                                  | (In millions)                                                  |  
|Overall EBIT:                       |                                                  |                                                                |   |     |      |   |   |    
|                                    | Gross
    margin(1)                              |                                                                | $ | 100 |      |   | $ | 174 |     
|                                    | Operating expenses                               |                                                                |   |     |      |   |   |     |     
|                                    |                                                  | Loss on long lived assets                                      |   |     | (102 | ) |   |     | (28  | )
|                                    |                                                  | Other operating expenses                                       |   |     | (95  | ) |   |     | (124 | )
|                                    |                                                  |                                                                |   |     |      |  
|                                    |                                                  | Operating income (loss)                                        |   |     | (97  | ) |   |     | 22   |  
|                                    | Earnings from unconsolidated affiliates          |                                                                |   |     |      |   |   |     |     
|                                    |                                                  | Impairments, net of gains on sale                              |   |     | (288 | ) |   |     | (43  | )
|                                    |                                                  | Equity in earnings                                             |   |     | 15   |   |   |     | 37   |  
|                                    | Other income                                     |                                                                |   | 21  |      |   |   | 23  |     
|                                    |                                                  |                                                                |   |     |      |  
|                                    |                                                  | EBIT                                                           |   | $   | (349 | ) |   | $   | 39   |  
|                                    |                                                  |                                                                |   |     |      |  
|Significant factors impacting EBIT: |                                                  |                                                                |   |     |      |   |   |    
|                                    | Asia                                             |                                                                |   |     |      |   |   |     |     
|                                    |                                                  | Earnings from plant operations                                 |   | $   | 13   |   |   | $   | 2    |  
|                                    |                                                  | Impairment and write-off                                       |   |     | (131 | ) |   |     |     |  
|                                    | MCV                                              |                                                                |   |     |      |   |   |     |     
|                                    |                                                  | Earnings from plant operations                                 |   |     | (10  | ) |   |     | 29   |  
|                                    |                                                  | Impairment                                                     |   |     | (161 | ) |   |     |     |  
|                                    | Domestic power contract restructuring activities |                                                                |   |     |      |   |   |     |     
|                                    |                                                  | Increase in fair values                                        |   |     | 36   |   |   |     | 65   |  
|                                    |                                                  | Impairments and gains (losses) on sale                         |   |     | (88  | ) |   |     | 7    |  
|                                    | Other power assets                               |                                                                |   |     |      |   |   |     |     
|                                    |                                                  | Earnings from consolidated and unconsolidated plant operations |   |     | 2    |   |   |     | 14   |  
|                                    |                                                  | Impairment and gain on sale of Bastrop equity investment       |   |     | 3    |   |   |     | (43  | )
|                                    |                                                  | Other impairments, net of gains on sale                        |   |     | (13  | ) |   |     | (35  | )
|                                    |                                                  |                                                                |   |     |      |  
|                                    |                                                  | EBIT                                                           |   | $   | (349 | ) |   | $   | 39   |  
|                                    |                                                  |                                                                |   |     |      |  






|    |                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Gross margin for our Power segment consists of revenues from our
    power plants and revenues, cost of electricity purchases and
    changes in fair value of restructured power contracts. The cost
    of fuel used in the power generation process is included in
    operating expenses.

Asia.




MCV.


27



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Domestic Power Contract Restructuring Activities.


Other Power Assets.




Non-regulated Businesses  Field Services
Segment






|                                              |                                                                         |                        |    |     |       |   |    |     |       | 
|--------------------------------------------- | ----------------------------------------------------------------------- | ---------------------- | -- | --- | ----- | - | -- | --- | ----- | 
|Field Services Segment Results                |                                                                         | 2004                   |    |     | 2003  |  
|                                              |                                                                         |                        |    |     |       |  
|                                              |                                                                         | (In millions, except   |   
|                                              |                                                                         | volumes and prices)    |   
|Gathering and processing gross
    margins(1) |                                                                         | $                      | 86 |     |       | $ | 59 |    
|Operating expenses                            |                                                                         |                        |    |     |       |   |    |    
|                                              | Gain (loss) on long-lived assets                                        |                        |    | (5  | )     |   |    | 13  |      
|                                              | Other operating expenses                                                |                        |    | (35 | )     |   |    | (31 | )    
|                                              |                                                                         |                        |    |     |       |  
|                                              | Operating income                                                        |                        |    | 46  |       |   |    | 41  |      
|Other income (expense)                        |                                                                         |                        |    |     |       |   |    |    
|                                              | Impairments and gains (losses) on sale of unconsolidated
    affiliates |                        |    | (4  | )     |   |    | (85 | )    
|                                              | Other                                                                   |                        |    | 13  |       |   |    | (8  | )    
|                                              |                                                                         |                        |    |     |       |  
|                                              | EBIT                                                                    |                        | $  | 55  |       |   | $  | (52 | )    
|                                              |                                                                         |                        |    |     |       |  
|Volumes and Prices:                           |                                                                         |                        |    |     |       |   |    |    
|                                              | Gathering                                                               |                        |    |     |       |   |    |     |      
|                                              |                                                                         | Volumes (BBtu/d)       |    |     | 19    |   |    |     | 101   | 
|                                              |                                                                         |                        |    |     |       |  
|                                              |                                                                         | Prices ($/MMBtu)       |    | $   | 0.07  |   |    | $   | 0.14  | 
|                                              |                                                                         |                        |    |     |       |  
|                                              | Processing                                                              |                        |    |     |       |   |    |     |      
|                                              |                                                                         | Volumes (inlet BBtu/d) |    |     | 1,618 |   |    |     | 1,687 | 
|                                              |                                                                         |                        |    |     |       |  
|                                              |                                                                         | Prices ($/MMBtu)       |    | $   | 0.14  |   |    | $   | 0.11  | 
|                                              |                                                                         |                        |    |     |       |  






|    |                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Gross margins consist of operating revenues less cost of
    products sold. We believe this measurement is more meaningful
    for understanding and analyzing our Field Services
    segments operating results because commodity costs play
    such a significant role in the determination of profit from our
    midstream activities.

28



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|                                              |                           |             |     |   |      |   |     |     |  
|--------------------------------------------- | ------------------------- | ----------- | --- | - | ---- | - | --- | --- | -
|                                              |                           | EBIT Impact |    
|                                              |                           |             |    
|                                              |                           | 2004        |     |   | 2003 |  
|                                              |                           |             |     |   |      |  
|Gathering and processing margins              |                           | $           | 86  |   |      | $ | 59  |    
|Operating expenses                            |                           |             | (35 | ) |      |   | (31 | )  
|Equity earnings (losses)                      |                           |             | 14  |   |      |   | (7  | )  
|Asset impairments and gains (losses) on sales |                           |             |     |   |      |   |     |    
|                                              | Mid-Continent             |             |     |  |      |   |     | 19  |  
|                                              | Dauphin Island/Mobile Bay |             |     |  |      |   |     | (86 | )
|Other                                         |                           |             | (10 | ) |      |   | (6  | )  
|                                              |                           |             |     |   |      |  
|EBIT                                          |                           | $           | 55  |   |      | $ | (52 | )  
|                                              |                           |             |     |   |      |  

Gathering and Processing Activities.


Asset Sales.




| |   |                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 2003  Sale of our Wyoming gathering assets and
    Mid-Continent gathering and processing assets. In addition, we
    recorded an impairment of our investments in Dauphin Island and
    Mobile Bay based on the pending sale.
|
| |  | 2004  Sale of our investments in Dauphin Island
    and Mobile Bay.                                                                                                                                                            

Interest and Debt Expense




|                                             |                                 |      |     |     |      |   |     |     | 
|-------------------------------------------- | ------------------------------- | ---- | --- | --- | ---- | - | --- | --- | 
|                                             |                                 | 2004 |     |     | 2003 |  
|                                             |                                 |      |     |     |      |  
|Long-term debt, including current maturities |                                 | $    | 353 |     |      | $ | 412 |    
|Other interest                               |                                 |      | 2   |     |      |   | 6   |    
|Capitalized interest                         |                                 |      | (14 | )   |      |   | (11 | )  
|                                             |                                 |      |     |     |      |  
|                                             | Total interest and debt expense |      | $   | 341 |      |   | $   | 407 | 
|                                             |                                 |      |     |     |      |  



Affiliated Interest Expense, Net




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Distributions on Preferred Interests of Consolidated
Subsidiaries






Income Taxes












| |   |                                                      
| | - | -----------------------------------------------------
| |  | state income taxes, net of federal income tax effect;
|
| |  | foreign income/loss taxed at different rates;        
|
| |  | abandonments and sales of foreign investments;       
|
| |  | valuation allowances;                                
|
| |  | non-taxable stock dividends; and                     
|
| |  | dispositions of domestic assets.                     









30



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Discontinued Operations


















Commitments and Contingencies




New Accounting Pronouncements Issued But Not Yet Adopted


New Accounting Pronouncements Issued But
Not Yet Adopted


31



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RISK FACTORS AND CAUTIONARY STATEMENT FOR PURPOSES OF THE
SAFE HARBOR


PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995






Risks Related to Our Business




| |                                                                           
| | --------------------------------------------------------------------------
| | Our operations are subject to operational hazards and
    uninsured risks.







| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | The success of our pipeline business depends, in part, on
    factors beyond our control.





| |   |                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | service area competition;                                                                                                                  
|
| |  | expiration and/or turn back of significant contracts;                                                                                      
|
| |  | changes in regulation and action of regulatory bodies;                                                                                     
|
| |  | future weather conditions;                                                                                                                 
|
| |  | price competition;                                                                                                                         
|
| |  | drilling activity and supply availability of natural gas;                                                                                  
|
| |  | decreased availability of conventional gas supply sources and
    the availability and timing of other gas supply sources, such as
    LNG;
|
| |  | increased availability or popularity of alternative energy
    sources such as hydroelectric power;                                        

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| |   |                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------
| |  | increased cost of capital;                                                                         
|
| |  | opposition to energy infrastructure development, especially in
    environmentally sensitive areas;
|
| |  | adverse general economic conditions;                                                               
|
| |  | unfavorable movements in natural gas and liquids prices.                                           



| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | The revenues of our pipeline businesses are generated
    under contracts that must be renegotiated periodically.







| |   |                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | competition by other pipelines, including the proposed
    construction by other companies of additional pipeline capacity
    or LNG terminals in markets served by our interstate pipelines;
|
| |  | changes in state regulation of local distribution companies,
    which may cause them to negotiate short-term contracts or turn
    back their capacity when their contracts expire;          
|
| |  | reduced demand and market conditions in the areas we serve;                                                                                                                                   
|
| |  | the availability of alternative energy sources or gas supply
    points; and                                                                                                                  
|
| |  | regulatory actions.                                                                                                                                                                           





| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Fluctuations in energy commodity prices could adversely
    affect our pipeline businesses.





| |   |                                                        
| | - | -------------------------------------------------------
| |  | regional, domestic and international supply and demand;
|
| |  | availability and adequacy of transportation facilities;
|
| |  | energy legislation;                                    

33



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| |   |                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------
| |  | federal and state taxes, if any, on the sale or transportation
    of natural gas and natural gas liquids;
|
| |  | abundance of supplies of alternative energy sources; and                                                  
|
| |  | political unrest among oil producing countries.                                                           



| |                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Natural gas and oil prices are volatile. A substantial
    decrease in natural gas and oil prices could adversely affect
    the financial results of our exploration and production
    business.





| |   |                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the level of consumer demand for, and the supply of, natural gas
    and oil;                                                                                                                     
|
| |  | commodity processing, gathering and transportation availability;                                                                                                                                  
|
| |  | the level of imports of, and the price of, foreign natural gas
    and oil;                                                                                                                       
|
| |  | the ability of the members of the Organization of Petroleum
    Exporting Countries to agree to and maintain oil price and
    production controls;                                               
|
| |  | domestic governmental regulations and taxes;                                                                                                                                                      
|
| |  | the price and availability of alternative fuel sources;                                                                                                                                           
|
| |  | the availability of pipeline capacity;                                                                                                                                                            
|
| |  | weather conditions;                                                                                                                                                                               
|
| |  | market uncertainty;                                                                                                                                                                               
|
| |  | political conditions or hostilities in natural gas and oil
    producing regions;                                                                                                                 
|
| |  | worldwide economic conditions; and                                                                                                                                                                
|
| |  | decreased demand for the use of natural gas and oil because of
    market concerns about global warming or changes in governmental
    policies and regulations due to climate change initiatives.





| |                                                                                                        
| | -------------------------------------------------------------------------------------------------------
| | Our use of hedging arrangements may adversely affect our
    future results of operations or liquidity.





| |   |                                                                                         
| | - | ----------------------------------------------------------------------------------------
| |  | expected production is less than the amount hedged;                                     
|
| |  | the counterparty to the hedging contract defaults on its
    contractual obligations; or

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| |   |                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------
| |  | there is a change in the expected differential between the
    underlying price in the hedging agreement and actual prices
    received.





| |                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | The success of our natural gas and oil exploration and
    production businesses is dependent, in part, on factors that are
    beyond our control.





| |   |                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the results of future drilling activity;                                                                                                                                                                                                                          
|
| |  | our ability to identify and precisely locate prospective
    geologic structures and to drill and successfully complete wells
    in those structures in a timely manner;                                                                                         
|
| |  | our ability to expand our leased land positions in desirable
    areas, which often are subject to intensely competitive
    conditions;                                                                                                                          
|
| |  | increased competition in the search for and acquisition of
    reserves;                                                                                                                                                                                          
|
| |  | future drilling, production and development costs, including
    drilling rig rates and oil field services costs;                                                                                                                                                 
|
| |  | future tax policies, rates, and drilling or production
    incentives by state, federal, or foreign governments;                                                                                                                                                  
|
| |  | increased federal or state regulations, including environmental
    regulations, or adverse court decisions that limit or restrict
    the ability to drill natural gas or oil wells, reduce
    operational flexibility, or increase capital and operating costs;
|
| |  | decreased demand for the use of natural gas and oil because of
    market concerns about global warming or changes in governmental
    policies and regulations due to climate change initiatives;                                                                
|
| |  | declines in production volumes, including those from the Gulf of
    Mexico; and                                                                                                                                                                                  
|
| |  | continued access to sufficient capital to fund drilling programs
    to develop and replace a reserve base with rapid depletion
    characteristics.                                                                                                              







| |                                                                                                            
| | -----------------------------------------------------------------------------------------------------------
| | Our natural gas and oil drilling and producing operations
    involve many risks and may not be profitable.



35



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##### Table of Contents









| |                                                                               
| | ------------------------------------------------------------------------------
| | Estimating our reserves, production and future net cash
    flow is difficult.









| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | The success of our power activities depends, in part, on
    many factors beyond our control.





| |   |                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | alternative sources and supplies of energy becoming available
    due to new technologies and interest in self generation and
    cogeneration;                                                                                        
|
| |  | increases in the costs of generation, including increases in
    fuel costs;                                                                                                                                                           
|
| |  | uncertain regulatory conditions resulting from the ongoing
    deregulation of the electric industry in the United States and
    in foreign jurisdictions;                                                                            
|
| |  | our ability to negotiate successfully and enter into,
    advantageous power purchase and supply agreements;                                                                                                                           
|
| |  | the possibility of a reduction in the projected rate of growth
    in electricity usage as a result of factors such as regional
    economic conditions, excessive reserve margins and the
    implementation of conservation programs;
|
| |  | risks incidental to the operation and maintenance of power
    generation facilities;                                                                                                                                                  
|
| |  | the inability of customers to pay amounts owed under power
    purchase agreements;                                                                                                                                                    

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| |   |                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------
| |  | the increasing price volatility due to deregulation and changes
    in commodity trading practices; and      
|
| |  | over-capacity of generation in markets served by the power
    plants we own or in which we have an interest.



| |                                                                                      
| | -------------------------------------------------------------------------------------
| | Our businesses are subject to the risk of payment defaults
    by our counterparties.





| |                                                                  
| | -----------------------------------------------------------------
| | Our foreign operations and investments involve special
    risks.





| |   |                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | loss of revenue, property and equipment as a result of hazards
    such as expropriation, nationalization, wars, insurrection and
    other political risks;
|
| |  | the effects of currency fluctuations and exchange controls, such
    as devaluation of foreign currencies and other economic
    problems; and              
|
| |  | changes in laws, regulations and policies of foreign
    governments, including those associated with changes in the
    governing parties.                 



| |                                                                                                  
| | -------------------------------------------------------------------------------------------------
| | Retained liabilities associated with businesses that we
    have sold could exceed our estimates.



Risks Related to Legal and Regulatory Matters




| |                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Ongoing litigation and investigations related to the
    restatement of our financial statements associated with our
    reserve estimates could significantly adversely affect our
    business.



37



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| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | The agencies that regulate our pipeline businesses and
    their customers affect our profitability.









| |                                                                                               
| | ----------------------------------------------------------------------------------------------
| | Costs of environmental liabilities, regulations and
    litigation could exceed our estimates.







| |   |                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the uncertainties in estimating pollution control and clean up
    costs;                                                                                
|
| |  | the discovery of new sites or information;                                                                                                               
|
| |  | the uncertainty in quantifying liability under environmental
    laws that impose joint and several liability on all potentially
    responsible parties;
|
| |  | the nature of environmental laws and regulations; and                                                                                                    
|
| |  | potential changes in environmental laws and regulations,
    including changes in the interpretation and enforcement thereof.                            



Costs
of litigation and other contingencies could exceed our
estimates.




38



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Risks Related to Our Liquidity




| |                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------
| | We have significant debt, which impacted and will continue
    to impact our financial condition, results of operations and
    liquidity.





| |                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A breach of the covenants applicable to our debt and other
    financing obligations could affect our ability to borrow funds
    and could accelerate our debt and other financing obligations
    and those of our subsidiaries.





| |                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are a wholly owned direct subsidiary of El Paso and its
    financial condition and business strategy subjects us to
    potential risks that are beyond our control.





| |   |                                                                
| | - | ---------------------------------------------------------------
| |  | our payment of dividends;                                      
|
| |  | decisions on our financings and our capital raising activities;
|
| |  | mergers or other business combinations;                        
|
| |  | our acquisitions or dispositions of assets; and                
|
| |  | our participation in El Pasos cash management program.        









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| |                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our system of internal controls are designed to ensure the
    accuracy and completeness of our disclosures and a loss of
    public confidence in the quality of our internal controls or
    disclosures could have a negative impact on us.







| |                                                                              
| | -----------------------------------------------------------------------------
| | Some of our assets are collateral for El Pasos
    Western Energy Settlement





| |                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------
| | Some of our assets are collateral for El Pasos
    $3 billion credit agreement and other financing
    transactions.



40



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##### Table of Contents





| |                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------
| | We could be substantively consolidated with El Paso
    if El Paso were forced to seek protection from its
    creditors in bankruptcy.



41



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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK






| |   |                     
| | - | --------------------
| |  | Commodity Price Risk



| |   |                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Natural gas prices change, impacting the forecasted sale of
    natural gas in our Production segment;                                                          
|
| |  | Price spreads between natural gas and natural gas liquids
    change, making the natural gas liquids we produce in our Field
    Services segment less valuable;
|
| |  | Electricity and natural gas prices change, affecting the value
    of our power contracts held in our Power segment.                                            



| |   |                   
| | - | ------------------
| |  | Interest Rate Risk



| |   |                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Changes in interest rates affect the interest expense we incur
    on our variable-rate debt and the fair value of our fixed rate
    debt; and                                        
|
| |  | Changes in interest rates used in the estimation of the fair
    value of our derivative positions can result in increases or
    decreases in the unrealized value of those positions.



Commodity Price Risk




|                                                                              |                   |               |   |                     |            |  |                     |            |   |  |            |     |   |          |   |      |   |  |   |    | 
|----------------------------------------------------------------------------- | ----------------- | ------------- | - | ------------------- | ---------- |  | ------------------- | ---------- | - |  | ---------- | --- | - | -------- | - | ---- | - |  | - | -- | 
|                                                                              |                   |               |   | 10 Percent Increase |            |  | 10 Percent Decrease |           
|                                                                              |                   |               |   |                     |            |  |                     |           
|                                                                              |                   | Fair Value    |   |                     | Fair Value |  |                     | (Decrease) |   |  | Fair Value |     |   | Increase |  
|                                                                              |                   |               |   |                     |            |  |                     |            |   |  |            |     |   |          |  
|                                                                              |                   | (In millions) |  
|Impact of changes in commodity prices on derivative commodity
    instruments |                   |               |   |                     |            |  |                     |            |   |  |            |     |   |          |   |      |   |  |   |   
|                                                                              | December 31, 2004 |               | $ | (148                | )          |  | $                   | (177       | ) |  | $          | (29 | ) |          | $ | (119 | ) |  | $ | 29 | 
|                                                                              | December 31, 2003 |               | $ | (124                | )          |  | $                   | (148       | ) |  | $          | (24 | ) |          | $ | (100 | ) |  | $ | 24 | 



Interest Rate Risk




| |     
| | ----
| | Debt



42



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|                                                                                           |                       |                                                      |     |                   |          |   |     |      |   |   |      |     |   |      |     |     |            |   |     |       |   |   |            |     |   |         |       |  |       |   |       |  |  |   |       |  |  |   |       |  | 
|------------------------------------------------------------------------------------------ | --------------------- | ---------------------------------------------------- | --- | ----------------- | -------- | - | --- | ---- | - | - | ---- | --- | - | ---- | --- | --- | ---------- | - | --- | ----- | - | - | ---------- | --- | - | ------- | ----- |  | ----- | - | ----- |  |  | - | ----- |  |  | - | ----- |  | 
|                                                                                           |                       | December 31, 2004                                    |     |                   |          |   |    
|                                                                                           |                       |                                                      |     |                   |         
|                                                                                           |                       |                                                      |     | December 31, 2003 |         
|                                                                                           |                       | Expected Fiscal Year of Maturity of Carrying Amounts |     |                   |          |  
|                                                                                           |                       |                                                      |     |                   | Carrying |   |     | Fair |  
|                                                                                           |                       | 2005                                                 |     |                   | 2006     |   |     | 2007 |   |   | 2008 |     |   | 2009 |     |     | Thereafter |   |     | Total |   |   | Fair Value |     |   | Amounts |       |  | Value |  
|                                                                                           |                       |                                                      |     |                   |          |   |     |      |   |   |      |     |   |      |     |     |            |   |     |       |   |   |            |     |   |         |       |  |       |  
|                                                                                           |                       | (Dollars in millions)                                |     |                   |          |   |    
|Liabilities:                                                                               |                       |                                                      |     |                   |          |   |     |      |   |   |      |     |   |      |     |     |            |   |     |       |   |   |            |     |   |         |       |  |       |   |       |  |  |   |       |  |  |   |       | 
|Long-term debt and other financing obligations, including
    current portion  fixed rate |                       | $                                                    | 293 |                   |          | $ | 316 |      |   | $ |     |     |   | $    | 415 |     |            | $ | 200 |       |   | $ | 2,495      |     |   | $       | 3,719 |  |       | $ | 3,893 |  |  | $ | 5,080 |  |  | $ | 4,992 | 
|                                                                                           | Average interest rate |                                                      |     | 8.6               | %        |   |     | 8.7  | % |   |      |    |   |      |     | 7.1 | %          |   |     | 6.4   | % |   |            | 8.2 | % |         |       |  |       |   |       |  |  |   |       |  |  |   |       |  | 
|Long-term debt, including current portion  variable
    rate                              |                       | $                                                    | 17  |                   |          | $ | 14  |      |   | $ | 7    |     |   | $    |    |     |            | $ |    |       |   | $ |           |     |   | $       | 38    |  |       | $ | 38    |  |  | $ | 241   |  |  | $ | 241   | 
|                                                                                           | Average interest rate |                                                      |     | 5.8               | %        |   |     | 3.7  | % |   |      | 2.3 | % |      |     |    |            |   |     |      |   |   |            |    |   |         |       |  |       |   |       |  |  |   |       |  |  |   |       |  | 

Derivatives from Power Contract
Restructuring Activities






Foreign Currency Exchange Rate Risk




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##### Table of Contents






ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA


Index to Financial Statements







|                                                                      |                                                                                                                |      |     |    | 
|--------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | ---- | --- | -- | 
|                                                                      |                                                                                                                | Page |    
|                                                                      |                                                                                                                |      |    
|Consolidated Statements of Income                                     |                                                                                                                |      | 45  |   
|Consolidated Balance Sheets                                           |                                                                                                                |      | 46  |   
|Consolidated Statements of Cash Flows                                 |                                                                                                                |      | 48  |   
|Consolidated Statements of
    Stockholders Equity                   |                                                                                                                |      | 50  |   
|Consolidated Statements of Comprehensive
    Income                   |                                                                                                                |      | 51  |   
|Notes to Consolidated Financial
    Statements                        |                                                                                                                |      | 52  |   
|                                                                      | 1.   Significant Accounting
    Policies                                                                       |      |     | 52 | 
|                                                                      | 2.   Divestitures                                                                                              |      |     | 62 | 
|                                                                      | 3.   Loss (Gain) on
    Long-Lived Assets                                                                      |      |     | 66 | 
|                                                                      | 4.   Ceiling Test Charges                                                                                      |      |     | 66 | 
|                                                                      | 5.   Other Income and Other
    Expenses                                                                       |      |     | 67 | 
|                                                                      | 6.   Income Taxes                                                                                              |      |     | 67 | 
|                                                                      | 7.   Fair Value of Financial
    Instruments                                                                   |      |     | 70 | 
|                                                                      | 8.   Price Risk Management
    Activities                                                                      |      |     | 71 | 
|                                                                      | 9.   Inventory                                                                                                 |      |     | 73 | 
|                                                                      | 10.  Regulatory Assets and
    Liabilities                                                                     |      |     | 74 | 
|                                                                      | 11.  Property, Plant and
    Equipment                                                                         |      |     | 74 | 
|                                                                      | 12.  Debt, Other Financing
    Obligations and Other Credit Facilities                                         |      |     | 75 | 
|                                                                      | 13.  Commitments and
    Contingencies                                                                         |      |     | 77 | 
|                                                                      | 14.  Retirement Benefits                                                                                       |      |     | 82 | 
|                                                                      | 15.  Business Segment
    Information                                                                          |      |     | 85 | 
|                                                                      | 16.  Investments in, Earnings
    from and Transactions with Unconsolidated Affiliates and Related
    Parties |      |     | 90 | 
|Report of Independent Registered Public
    Accounting Firm           |                                                                                                                |      | 94  |   
|Supplemental Financial Information                                    |                                                                                                                |      |     |   
|Supplemental
    Selected Quarterly Financial Information (Unaudited) |                                                                                                                |      | 95  |   
|Supplemental
    Natural Gas and Oil Operations (Unaudited)           |                                                                                                                |      | 96  |   
|Schedule II 
    Valuation and Qualifying Accounts                   |                                                                                                                |      | 106 |   




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EL PASO CGP COMPANY





CONSOLIDATED STATEMENTS OF INCOME


(In millions)





|                                                                  |                                          |                         |       |     |            |   |        |      |   |   |       |       |  
|----------------------------------------------------------------- | ---------------------------------------- | ----------------------- | ----- | --- | ---------- | - | ------ | ---- | - | - | ----- | ----- | -
|                                                                  |                                          | Year Ended December 31, |      
|                                                                  |                                          |                         |      
|                                                                  |                                          | 2004                    |       |     | 2003       |   |        |     
|                                                                  |                                          | (Restated)              |       |     | (Restated) |   |        | 2002 |  
|                                                                  |                                          |                         |       |     |            |   |        |      |  
|Operating revenues                                                |                                          |                         |       |     |            |   |        |      |   |   |       |      
|                                                                  | Pipelines                                |                         | $     | 858 |            |   | $      | 918  |   |   | $     | 934   |  
|                                                                  | Production                               |                         |       | 690 |            |   |        | 822  |   |   |       | 1,187 |  
|                                                                  | Power                                    |                         |       | 149 |            |   |        | 252  |   |   |       | 1,216 |  
|                                                                  | Field Services                           |                         |       | 482 |            |   |        | 356  |   |   |       | 460   |  
|                                                                  | Corporate and eliminations               |                         |       | (2  | )          |   |        | (17  | ) |   |       | (15   | )
|                                                                  |                                          |                         |       |     |            |   |        |      |  
|                                                                  |                                          |                         | 2,177 |     |            |   | 2,331  |      |   |   | 3,782 |      
|                                                                  |                                          |                         |       |     |            |   |        |      |  
|Operating expenses                                                |                                          |                         |       |     |            |   |        |      |   |   |       |      
|                                                                  | Cost of products and services            |                         |       | 537 |            |   |        | 540  |   |   |       | 1,087 |  
|                                                                  | Operation and maintenance                |                         |       | 530 |            |   |        | 528  |   |   |       | 755   |  
|                                                                  | Depreciation, depletion and amortization |                         |       | 467 |            |   |        | 487  |   |   |       | 609   |  
|                                                                  | Ceiling test charges                     |                         |       |    |            |   |        | 39   |   |   |       | 422   |  
|                                                                  | Loss (gain) on long-lived assets         |                         |       | 106 |            |   |        | 8    |   |   |       | (12   | )
|                                                                  | Taxes, other than income taxes           |                         |       | 62  |            |   |        | 81   |   |   |       | 76    |  
|                                                                  |                                          |                         |       |     |            |   |        |      |  
|                                                                  |                                          |                         | 1,702 |     |            |   | 1,683  |      |   |   | 2,937 |      
|                                                                  |                                          |                         |       |     |            |   |        |      |  
|Operating income                                                  |                                          |                         | 475   |     |            |   | 648    |      |   |   | 845   |      
|Earnings (losses) from unconsolidated affiliates                  |                                          |                         | (193  | )   |            |   | (12    | )    |   |   | 113   |      
|Other income                                                      |                                          |                         | 44    |     |            |   | 66     |      |   |   | 70    |      
|Other expenses                                                    |                                          |                         | (14   | )   |            |   | 5      |      |   |   | (70   | )    
|Interest and debt expense                                         |                                          |                         | (341  | )   |            |   | (407   | )    |   |   | (425  | )    
|Affiliated interest expense, net                                  |                                          |                         |      |     |            |   | (41    | )    |   |   | (9    | )    
|Distributions on preferred interests of consolidated subsidiaries |                                          |                         |      |     |            |   | (17    | )    |   |   | (35   | )    
|                                                                  |                                          |                         |       |     |            |   |        |      |  
|Income (loss) before income taxes                                 |                                          |                         | (29   | )   |            |   | 242    |      |   |   | 489   |      
|Income taxes                                                      |                                          |                         | 12    |     |            |   | 43     |      |   |   | 143   |      
|                                                                  |                                          |                         |       |     |            |   |        |      |  
|Income (loss) from continuing operations                          |                                          |                         | (41   | )   |            |   | 199    |      |   |   | 346   |      
|Discontinued operations, net of income taxes                      |                                          |                         | (115  | )   |            |   | (1,286 | )    |   |   | (395  | )    
|Cumulative effect of accounting changes, net of income taxes      |                                          |                         |      |     |            |   | (12    | )    |   |   | 14    |      
|                                                                  |                                          |                         |       |     |            |   |        |      |  
|Net loss                                                          |                                          | $                       | (156  | )   |            | $ | (1,099 | )    |   | $ | (35   | )    
|                                                                  |                                          |                         |       |     |            |   |        |      |  






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EL PASO CGP COMPANY





CONSOLIDATED BALANCE SHEETS


(In millions, except share amounts)





|                                       |                                                           |                                                           |                                          |       |            |       |        |       |     |        | 
|-------------------------------------- | --------------------------------------------------------- | --------------------------------------------------------- | ---------------------------------------- | ----- | ---------- | ----- | ------ | ----- | --- | ------ | 
|                                       |                                                           | December 31,                                              |                                         
|                                       |                                                           |                                                           |                                         
|                                       |                                                           | 2004                                                      |                                          |       | 2003       |      
|                                       |                                                           | (Restated)                                                |                                          |       | (Restated) |      
|                                       |                                                           |                                                           |                                          |       |            |      
|ASSETS                                
|Current assets                         |                                                           |                                                           |                                          |       |            |       |        |      
|                                       | Cash and cash equivalents                                 |                                                           | $                                        | 80    |            |       | $      | 150   |    
|                                       | Accounts and notes receivable                             |                                                           |                                          |       |            |       |        |       |    
|                                       |                                                           | Customer, net of allowance of $29 in 2004 and $37 in 2003 |                                          |       | 281        |       |        |       | 291 |       
|                                       |                                                           | Affiliates                                                |                                          |       | 264        |       |        |       | 442 |       
|                                       |                                                           | Other                                                     |                                          |       | 93         |       |        |       | 86  |       
|                                       | Inventory                                                 |                                                           |                                          | 58    |            |       |        | 55    |    
|                                       | Assets from price risk management activities              |                                                           |                                          |      |            |       |        | 97    |    
|                                       | Assets held for sale and from discontinued operations     |                                                           |                                          | 106   |            |       |        | 1,406 |    
|                                       | Deferred income taxes                                     |                                                           |                                          | 87    |            |       |        | 31    |    
|                                       | Other                                                     |                                                           |                                          | 49    |            |       |        | 93    |    
|                                       |                                                           |                                                           |                                          |       |            |      
|                                       |                                                           |                                                           | Total current assets                     |       |            | 1,018 |        |       |     | 2,651  | 
|                                       |                                                           |                                                           |                                          |       |            |      
|Property, plant and equipment, at cost |                                                           |                                                           |                                          |       |            |       |        |      
|                                       | Natural gas and oil properties, at full cost              |                                                           |                                          | 7,153 |            |       |        | 7,230 |    
|                                       | Pipelines                                                 |                                                           |                                          | 7,040 |            |       |        | 6,478 |    
|                                       | Power facilities                                          |                                                           |                                          | 373   |            |       |        | 372   |    
|                                       | Gathering and processing systems                          |                                                           |                                          | 141   |            |       |        | 151   |    
|                                       | Other                                                     |                                                           |                                          | 89    |            |       |        | 119   |    
|                                       |                                                           |                                                           |                                          |       |            |      
|                                       |                                                           |                                                           | 14,796                                   |       |            |       | 14,350 |      
|                                      
|                                       | Less accumulated depreciation, depletion and amortization |                                                           |                                          | 7,997 |            |       |        | 8,003 |    
|                                       |                                                           |                                                           |                                          |       |            |      
|                                       |                                                           |                                                           | Total property, plant and equipment, net |       |            | 6,799 |        |       |     | 6,347  | 
|                                       |                                                           |                                                           |                                          |       |            |      
|Other assets                           |                                                           |                                                           |                                          |       |            |       |        |      
|                                       | Investments in unconsolidated affiliates                  |                                                           |                                          | 894   |            |       |        | 1,312 |    
|                                       | Assets from price risk management activities              |                                                           |                                          |      |            |       |        | 845   |    
|                                       | Goodwill and other intangible assets, net                 |                                                           |                                          | 426   |            |       |        | 415   |    
|                                       | Other                                                     |                                                           |                                          | 207   |            |       |        | 840   |    
|                                       |                                                           |                                                           |                                          |       |            |      
|                                       |                                                           |                                                           | 1,527                                    |       |            |       | 3,412  |      
|                                       |                                                           |                                                           |                                          |       |            |      
|                                       |                                                           |                                                           | Total assets                             |       | $          | 9,344 |        |       | $   | 12,410 | 
|                                       |                                                           |                                                           |                                          |       |            |      






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EL PASO CGP COMPANY


CONSOLIDATED BALANCE SHEETS  (Continued)


(In millions, except share amounts)





|                                                         |                                                                              |              |                                            |       |            |       |       |       |     |        | 
|-------------------------------------------------------- | ---------------------------------------------------------------------------- | ------------ | ------------------------------------------ | ----- | ---------- | ----- | ----- | ----- | --- | ------ | 
|                                                         |                                                                              | December 31, |                                           
|                                                         |                                                                              |              |                                           
|                                                         |                                                                              | 2004         |                                            |       | 2003       |      
|                                                         |                                                                              | (Restated)   |                                            |       | (Restated) |      
|                                                         |                                                                              |              |                                            |       |            |      
|LIABILITIES AND STOCKHOLDERS EQUITY                    
|                                                        
|Current liabilities                                      |                                                                              |              |                                            |       |            |       |       |      
|                                                         | Accounts payable                                                             |              |                                            |       |            |       |       |       |    
|                                                         |                                                                              | Trade        |                                            | $     | 234        |       |       | $     | 196 |       
|                                                         |                                                                              | Affiliates   |                                            |       | 61         |       |       |       | 67  |       
|                                                         |                                                                              | Other        |                                            |       | 214        |       |       |       | 201 |       
|                                                         | Current maturities of long-term debt                                         |              |                                            | 310   |            |       |       | 310   |    
|                                                         | Notes payable to affiliates                                                  |              |                                            | 211   |            |       |       | 949   |    
|                                                         | Liabilities from price risk management activities                            |              |                                            | 148   |            |       |       | 43    |    
|                                                         | Liabilities related to discontinued operations                               |              |                                            | 11    |            |       |       | 696   |    
|                                                         | Other                                                                        |              |                                            | 279   |            |       |       | 320   |    
|                                                         |                                                                              |              |                                            |       |            |      
|                                                         |                                                                              |              | Total current liabilities                  |       |            | 1,468 |       |       |     | 2,782  | 
|                                                         |                                                                              |              |                                            |       |            |      
|Long-term financing obligations, less current maturities |                                                                              |              | 3,447                                      |       |            |       | 5,011 |      
|                                                         |                                                                              |              |                                            |       |            |      
|Other                                                    |                                                                              |              |                                            |       |            |       |       |      
|                                                         | Liabilities from price risk management activities                            |              |                                            |      |            |       |       | 81    |    
|                                                         | Deferred income taxes                                                        |              |                                            | 692   |            |       |       | 734   |    
|                                                         | Other                                                                        |              |                                            | 388   |            |       |       | 351   |    
|                                                         |                                                                              |              |                                            |       |            |      
|                                                         |                                                                              |              | 1,080                                      |       |            |       | 1,166 |      
|                                                         |                                                                              |              |                                            |       |            |      
|Commitments and contingencies                            |                                                                              |              |                                            |       |            |       |       |      
|Securities of subsidiaries                               |                                                                              |              | 158                                        |       |            |       | 107   |      
|                                                         |                                                                              |              |                                            |       |            |      
|Stockholders equity                                     |                                                                              |              |                                            |       |            |       |       |      
|                                                         | Common stock, par value $1 per share; authorized and issued
    1,000 shares |              |                                            |      |            |       |       |      |    
|                                                         | Additional paid-in capital                                                   |              |                                            | 3,181 |            |       |       | 3,136 |    
|                                                         | Retained earnings                                                            |              |                                            | 103   |            |       |       | 259   |    
|                                                         | Accumulated other comprehensive loss                                         |              |                                            | (93   | )          |       |       | (51   | )  
|                                                         |                                                                              |              |                                            |       |            |      
|                                                         |                                                                              |              | Total stockholders equity                 |       |            | 3,191 |       |       |     | 3,344  | 
|                                                         |                                                                              |              |                                            |       |            |      
|                                                         |                                                                              |              | Total liabilities and stockholders equity |       | $          | 9,344 |       |       | $   | 12,410 | 
|                                                         |                                                                              |              |                                            |       |            |      






47



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EL PASO CGP COMPANY





CONSOLIDATED STATEMENTS OF CASH FLOWS


(In millions)





|                                                                                                                                                                                                                                                                                                  |                                                                            |                                                             |                                                     |      |               |       |        |        |      |       |     |        |      |      |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------- | ----------------------------------------------------------- | --------------------------------------------------- | ---- | ------------- | ----- | ------ | ------ | ---- | ----- | --- | ------ | ---- | ---- | -
|                                                                                                                                                                                                                                                                                                  |                                                                            | Year Ended December 31,                                     |                                                    
|                                                                                                                                                                                                                                                                                                  |                                                                            |                                                             |                                                    
|                                                                                                                                                                                                                                                                                                  |                                                                            | 2004                                                        |                                                     |      | 2003          |       |        |       
|                                                                                                                                                                                                                                                                                                  |                                                                            | (Restated)(1)                                               |                                                     |      | (Restated)(1) |       |        | 2002   |     
|                                                                                                                                                                                                                                                                                                  |                                                                            |                                                             |                                                     |      |               |       |        |        |     
|Cash flows from operating activities                                                                                                                                                                                                                                                              |                                                                            |                                                             |                                                     |      |               |       |        |        |      |       |     |       
|Net loss                                                                                                                                                                                                                                                                                          |                                                                            | $                                                           | (156                                                | )    |               | $     | (1,099 | )      |      | $     | (35 | )     
|                                                                                                                                                                                                                                                                                                  | Less loss from discontinued operations, net of tax                         |                                                             |                                                     | (115 | )             |       |        | (1,286 | )    |       |     | (395   | )   
|                                                                                                                                                                                                                                                                                                  |                                                                            |                                                             |                                                     |      |               |       |        |        |     
|Net income (loss) before discontinued operations                                                                                                                                                                                                                                                  |                                                                            |                                                             | (41                                                 | )    |               |       | 187    |        |      |       | 360 |       
|Adjustment to reconcile net income (loss) to net cash from
    operating activities                                                                                                                                                                                                               |                                                                            |                                                             |                                                     |      |               |       |        |        |      |       |     |       
|                                                                                                                                                                                                                                                                                                  | Depreciation, depletion, and amortization                                  |                                                             |                                                     | 467  |               |       |        | 487    |      |       |     | 609    |     
|                                                                                                                                                                                                                                                                                                  | Ceiling test charges                                                       |                                                             |                                                     |     |               |       |        | 39     |      |       |     | 422    |     
|                                                                                                                                                                                                                                                                                                  | Deferred income tax expense (benefit)                                      |                                                             |                                                     | (43  | )             |       |        | (39    | )    |       |     | 171    |     
|                                                                                                                                                                                                                                                                                                  | Loss (gain) on long-lived assets                                           |                                                             |                                                     | 106  |               |       |        | 8      |      |       |     | (12    | )   
|                                                                                                                                                                                                                                                                                                  | Losses from unconsolidated affiliates, adjusted for cash
    distributions |                                                             |                                                     | 299  |               |       |        | 103    |      |       |     | 28     |     
|                                                                                                                                                                                                                                                                                                  | Other non-cash items                                                       |                                                             |                                                     | 12   |               |       |        | 6      |      |       |     | 34     |     
|                                                                                                                                                                                                                                                                                                  | Asset and liability changes                                                |                                                             |                                                     |      |               |       |        |        |      |       |     |        |     
|                                                                                                                                                                                                                                                                                                  |                                                                            | Accounts and notes receivable                               |                                                     |      | 39            |       |        |        | 442  |       |     |        | (472 | )   
|                                                                                                                                                                                                                                                                                                  |                                                                            | Inventory                                                   |                                                     |      | (3            | )     |        |        | 2    |       |     |        | 53   |     
|                                                                                                                                                                                                                                                                                                  |                                                                            | Change in non-hedging price risk management activities, net |                                                     |      | 6             |       |        |        | 22   |       |     |        | (480 | )   
|                                                                                                                                                                                                                                                                                                  |                                                                            | Accounts payable                                            |                                                     |      | 35            |       |        |        | (91  | )     |     |        | (312 | )   
|                                                                                                                                                                                                                                                                                                  |                                                                            | Other asset and liability changes                           |                                                     |      |               |       |        |        |      |       |     |        |      |     
|                                                                                                                                                                                                                                                                                                  |                                                                            |                                                             | Assets                                              |      |               | (37   | )      |        |      | 43    |     |        |      | 219  |  
|                                                                                                                                                                                                                                                                                                  |                                                                            |                                                             | Liabilities                                         |      |               | (50   | )      |        |      | 13    |     |        |      | (124 | )
|                                                                                                                                                                                                                                                                                                  |                                                                            |                                                             |                                                     |      |               |       |        |        |     
|                                                                                                                                                                                                                                                                                                  | Cash provided by continuing operations                                     |                                                             |                                                     | 790  |               |       |        | 1,222  |      |       |     | 496    |     
|                                                                                                                                                                                                                                                                                                  | Cash provided by (used in) discontinued operations                         |                                                             |                                                     | 220  |               |       |        | (78    | )    |       |     | (241   | )   
|                                                                                                                                                                                                                                                                                                  |                                                                            |                                                             |                                                     |      |               |       |        |        |     
|                                                                                                                                                                                                                                                                                                  |                                                                            |                                                             | Net cash provided by operating activities           |      |               | 1,010 |        |        |      | 1,144 |     |        |      | 255  |  
|                                                                                                                                                                                                                                                                                                  |                                                                            |                                                             |                                                     |      |               |       |        |        |     
|Cash flows from investing activities                                                                                                                                                                                                                                                              |                                                                            |                                                             |                                                     |      |               |       |        |        |      |       |     |       
|                                                                                                                                                                                                                                                                                                  | Additions to property, plant, and equipment                                |                                                             |                                                     | (816 | )             |       |        | (862   | )    |       |     | (1,219 | )   
|                                                                                                                                                                                                                                                                                                  | Purchases of interests in equity investments                               |                                                             |                                                     | (12  | )             |       |        | (4     | )    |       |     | (45    | )   
|                                                                                                                                                                                                                                                                                                  | Net proceeds from the sale of assets and investments                       |                                                             |                                                     | 87   |               |       |        | 313    |      |       |     | 1,638  |     
|                                                                                                                                                                                                                                                                                                  | Net change in restricted cash                                              |                                                             |                                                     | 21   |               |       |        | (18    | )    |       |     | (59    | )   
|                                                                                                                                                                                                                                                                                                  | Net change in notes receivable from affiliates                             |                                                             |                                                     | 171  |               |       |        | (109   | )    |       |     | (102   | )   
|                                                                                                                                                                                                                                                                                                  | Other                                                                      |                                                             |                                                     | 48   |               |       |        | (35    | )    |       |     | (19    | )   
|                                                                                                                                                                                                                                                                                                  |                                                                            |                                                             |                                                     |      |               |       |        |        |     
|                                                                                                                                                                                                                                                                                                  |                                                                            | Cash provided by (used in) continuing operations            |                                                     |      | (501          | )     |        |        | (715 | )     |     |        | 194  |     
|                                                                                                                                                                                                                                                                                                  |                                                                            | Cash provided by (used in) discontinued operations          |                                                     |      | 1,142         |       |        |        | 471  |       |     |        | (291 | )   
|                                                                                                                                                                                                                                                                                                  |                                                                            |                                                             |                                                     |      |               |       |        |        |     
|                                                                                                                                                                                                                                                                                                  |                                                                            |                                                             | Net cash provided by (used in) investing activities |      |               | 641   |        |        |      | (244  | )   |        |      | (97  | )
|                                                                                                                                                                                                                                                                                                  |                                                                            |                                                             |                                                     |      |               |       |        |        |     
|                                                                                                                                                                                                                                                                                                 
|(1) Only
    individual line items within cash flows from operating
    activities have been restated. Total cash flows from continuing
    operating activities, investing activities, and financing
    activities, as well as discontinued operations were unaffected
    by our restatements.
|See accompanying notes.                                                                                                                                                                                                                                                                          




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EL PASO CGP COMPANY


CONSOLIDATED STATEMENTS OF CASH
FLOWS  (Continued)


(In millions)





|                                                                                                                                                                                                                                                                                                  |                                                                                      |                                                    |                                       |      |               |        |    |        |      |      |    |        |      |      |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | -------------------------------------------------- | ------------------------------------- | ---- | ------------- | ------ | -- | ------ | ---- | ---- | -- | ------ | ---- | ---- | -
|                                                                                                                                                                                                                                                                                                  |                                                                                      | Year Ended December 31,                            |                                      
|                                                                                                                                                                                                                                                                                                  |                                                                                      |                                                    |                                      
|                                                                                                                                                                                                                                                                                                  |                                                                                      | 2004                                               |                                       |      | 2003          |        |    |       
|                                                                                                                                                                                                                                                                                                  |                                                                                      | (Restated)(1)                                      |                                       |      | (Restated)(1) |        |    | 2002   |     
|                                                                                                                                                                                                                                                                                                  |                                                                                      |                                                    |                                       |      |               |        |    |        |     
|Cash flow from financing activities                                                                                                                                                                                                                                                               |                                                                                      |                                                    |                                       |      |               |        |    |        |      |      |    |       
|                                                                                                                                                                                                                                                                                                  | Net repayments under commercial paper and short-term credit
    facilities           |                                                    |                                       |     |               |        |    |       |      |      |    | (30    | )   
|                                                                                                                                                                                                                                                                                                  | Capital contribution from parent company                                             |                                                    |                                       |     |               |        |    | 1,500  |      |      |    |       |     
|                                                                                                                                                                                                                                                                                                  | Net proceeds from the issuance of long-term debt and other
    financing obligations |                                                    |                                       |     |               |        |    | 288    |      |      |    | 882    |     
|                                                                                                                                                                                                                                                                                                  | Payments to retire long-term debt and other financing obligations                    |                                                    |                                       | (692 | )             |        |    | (638   | )    |      |    | (1,240 | )   
|                                                                                                                                                                                                                                                                                                  | Payments to minority interest holders and preferred interests
    holders            |                                                    |                                       |     |               |        |    | (100   | )    |      |    | (510   | )   
|                                                                                                                                                                                                                                                                                                  | Net change in notes payable to unconsolidated affiliates                             |                                                    |                                       |     |               |        |    | (7     | )    |      |    | (56    | )   
|                                                                                                                                                                                                                                                                                                  | Net change in affiliated advances payable                                            |                                                    |                                       | (738 | )             |        |    | (1,404 | )    |      |    | 1,317  |     
|                                                                                                                                                                                                                                                                                                  | Dividends paid                                                                       |                                                    |                                       |     |               |        |    | (517   | )    |      |    |       |     
|                                                                                                                                                                                                                                                                                                  | Proceeds from issuance of securities of subsidiaries                                 |                                                    |                                       | 75   |               |        |    |       |      |      |    | 33     |     
|                                                                                                                                                                                                                                                                                                  | Other                                                                                |                                                    |                                       | (2   | )             |        |    |       |      |      |    | (6     | )   
|                                                                                                                                                                                                                                                                                                  | Contributions from (distributions to) discontinued operations                        |                                                    |                                       | 998  |               |        |    | 393    |      |      |    | (1,093 | )   
|                                                                                                                                                                                                                                                                                                  |                                                                                      |                                                    |                                       |      |               |        |    |        |     
|                                                                                                                                                                                                                                                                                                  |                                                                                      | Cash used in continuing operations                 |                                       |      | (359          | )      |    |        | (485 | )    |    |        | (703 | )   
|                                                                                                                                                                                                                                                                                                  |                                                                                      | Cash provided by (used in) discontinued operations |                                       |      | (1,362        | )      |    |        | (393 | )    |    |        | 542  |     
|                                                                                                                                                                                                                                                                                                  |                                                                                      |                                                    |                                       |      |               |        |    |        |     
|                                                                                                                                                                                                                                                                                                  |                                                                                      |                                                    | Net cash used in financing activities |      |               | (1,721 | )  |        |      | (878 | )  |        |      | (161 | )
|                                                                                                                                                                                                                                                                                                  |                                                                                      |                                                    |                                       |      |               |        |    |        |     
|Change in cash and cash equivalents                                                                                                                                                                                                                                                               |                                                                                      |                                                    | (70                                   | )    |               |        | 22 |        |      |      | (3 | )     
|                                                                                                                                                                                                                                                                                                  | Less change in cash and cash equivalents related to discontinued
    operations      |                                                    |                                       |     |               |        |    |       |      |      |    | 10     |     
|                                                                                                                                                                                                                                                                                                  |                                                                                      |                                                    |                                       |      |               |        |    |        |     
|                                                                                                                                                                                                                                                                                                  | Change in cash and cash equivalents from continuing operations                       |                                                    |                                       | (70  | )             |        |    | 22     |      |      |    | (13    | )   
|Cash and cash equivalents                                                                                                                                                                                                                                                                         |                                                                                      |                                                    |                                       |      |               |        |    |        |      |      |    |       
|                                                                                                                                                                                                                                                                                                  | Beginning of period                                                                  |                                                    |                                       | 150  |               |        |    | 128    |      |      |    | 141    |     
|                                                                                                                                                                                                                                                                                                  |                                                                                      |                                                    |                                       |      |               |        |    |        |     
|                                                                                                                                                                                                                                                                                                  | End of period                                                                        |                                                    | $                                     | 80   |               |        | $  | 150    |      |      | $  | 128    |     
|                                                                                                                                                                                                                                                                                                  |                                                                                      |                                                    |                                       |      |               |        |    |        |     
|Supplemental Cash Flow Information:                                                                                                                                                                                                                                                               |                                                                                      |                                                    |                                       |      |               |        |    |        |      |      |    |       
|                                                                                                                                                                                                                                                                                                  | Interest paid, net of amounts capitalized                                            |                                                    | $                                     | 369  |               |        | $  | 473    |      |      | $  | 438    |     
|                                                                                                                                                                                                                                                                                                  | Income tax payments (refunds)                                                        |                                                    |                                       | 50   |               |        |    | 92     |      |      |    | (23    | )   
|                                                                                                                                                                                                                                                                                                 
|(1) Only
    individual line items within cash flows from operating
    activities have been restated. Total cash flows from continuing
    operating activities, investing activities, and financing
    activities, as well as discontinued operations were unaffected
    by our restatements.






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EL PASO CGP COMPANY





CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


(In millions except share amounts)





|                                                                  |                                   |                                  |  |       |            |   |       |        |   |  |        |       |  |        |       |        |        |  |  |       |  |   |       |       |  
|----------------------------------------------------------------- | --------------------------------- | -------------------------------- |  | ----- | ---------- | - | ----- | ------ | - |  | ------ | ----- |  | ------ | ----- | ------ | ------ |  |  | ----- |  | - | ----- | ----- | -
|                                                                  |                                   | For the Years Ended December 31, | 
|                                                                  |                                   |                                  | 
|                                                                  |                                   | 2004                             |  |       | 2003       |   |       |       
|                                                                  |                                   | (Restated)                       |  |       | (Restated) |   |       | 2002   |  
|                                                                  |                                   |                                  |  |       |            |   |       |        |  
|                                                                  |                                   | Shares                           |  |       | Amount     |   |       | Shares |   |  | Amount |       |  | Shares |       |        | Amount | 
|                                                                  |                                   |                                  |  |       |            |   |       |        |   |  |        |       |  |        |       |        |        | 
|Common stock, par value $1 per share, authorized
    1,000 shares |                                   |                                  |  |       |            |   |       |        |   |  |        |       |  |        |       |        |        |  |  |       |  |   |       |      
|                                                                  | Balance at beginning of year      |                                  |  | 1,000 |            |   | $     |       |   |  |        | 1,000 |  |        | $     |       |        |  |  | 1,000 |  |   | $     |      |  
|                                                                  |                                   |                                  |  |       |            |   |       |        |   |  |        |       |  |        |       |        |        | 
|                                                                  | Balance at end of year            |                                  |  | 1,000 |            |   |       |       |   |  |        | 1,000 |  |        |       |       |        |  |  | 1,000 |  |   |       |      |  
|                                                                  |                                   |                                  |  |       |            |   |       |        |   |  |        |       |  |        |       |        |        | 
|Additional paid-in capital                                        |                                   |                                  |  |       |            |   |       |        |   |  |        |       |  |        |       |        |        |  |  |       |  |   |       |      
|                                                                  | Balance at beginning of year      |                                  |  |       |            |   |       | 3,136  |   |  |        |       |  |        |       | 1,616  |        |  |  |       |  |   |       | 1,305 |  
|                                                                  | Capital contribution from El Paso |                                  |  |       |            |   |       | 45     |   |  |        |       |  |        |       | 1,524  |        |  |  |       |  |   |       | 309   |  
|                                                                  | Other                             |                                  |  |       |            |   |       |       |   |  |        |       |  |        |       | (4     | )      |  |  |       |  |   |       | 2     |  
|                                                                  |                                   |                                  |  |       |            |   |       |        |   |  |        |       |  |        |       |        |        | 
|                                                                  | Balance at end of year            |                                  |  |       |            |   |       | 3,181  |   |  |        |       |  |        |       | 3,136  |        |  |  |       |  |   |       | 1,616 |  
|                                                                  |                                   |                                  |  |       |            |   |       |        |   |  |        |       |  |        |       |        |        | 
|Retained earnings                                                 |                                   |                                  |  |       |            |   |       |        |   |  |        |       |  |        |       |        |        |  |  |       |  |   |       |      
|                                                                  | Balance at beginning of year      |                                  |  |       |            |   |       | 259    |   |  |        |       |  |        |       | 1,875  |        |  |  |       |  |   |       | 1,910 |  
|                                                                  | Net loss                          |                                  |  |       |            |   |       | (156   | ) |  |        |       |  |        |       | (1,099 | )      |  |  |       |  |   |       | (35   | )
|                                                                  | Dividends to parent               |                                  |  |       |            |   |       |       |   |  |        |       |  |        |       | (517   | )      |  |  |       |  |   |       |      |  
|                                                                  |                                   |                                  |  |       |            |   |       |        |   |  |        |       |  |        |       |        |        | 
|                                                                  | Balance at end of year            |                                  |  |       |            |   |       | 103    |   |  |        |       |  |        |       | 259    |        |  |  |       |  |   |       | 1,875 |  
|                                                                  |                                   |                                  |  |       |            |   |       |        |   |  |        |       |  |        |       |        |        | 
|Accumulated other comprehensive income (loss)                     |                                   |                                  |  |       |            |   |       |        |   |  |        |       |  |        |       |        |        |  |  |       |  |   |       |      
|                                                                  | Balance at beginning of year      |                                  |  |       |            |   |       | (51    | ) |  |        |       |  |        |       | (139   | )      |  |  |       |  |   |       | 283   |  
|                                                                  | Other comprehensive income (loss) |                                  |  |       |            |   |       | (42    | ) |  |        |       |  |        |       | 88     |        |  |  |       |  |   |       | (422  | )
|                                                                  |                                   |                                  |  |       |            |   |       |        |   |  |        |       |  |        |       |        |        | 
|                                                                  | Balance at end of year            |                                  |  |       |            |   |       | (93    | ) |  |        |       |  |        |       | (51    | )      |  |  |       |  |   |       | (139  | )
|                                                                  |                                   |                                  |  |       |            |   |       |        |   |  |        |       |  |        |       |        |        | 
|Total stockholders equity                                        |                                   |                                  |  |       |            | $ | 3,191 |        |   |  |        |       |  | $      | 3,344 |        |        |  |  |       |  | $ | 3,352 |      
|                                                                  |                                   |                                  |  |       |            |   |       |        |   |  |        |       |  |        |       |        |        | 






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EL PASO CGP COMPANY





CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


(In millions)





|                   |                                                                                                                               |                                                                                                                                                      |                                   |     |            |     |        |      |     |    |      |     |      |      |  
|------------------ | ----------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------- | --- | ---------- | --- | ------ | ---- | --- | -- | ---- | --- | ---- | ---- | -
|                   |                                                                                                                               | Year Ended December 31,                                                                                                                              |                                  
|                   |                                                                                                                               |                                                                                                                                                      |                                  
|                   |                                                                                                                               | 2004                                                                                                                                                 |                                   |     | 2003       |     |        |     
|                   |                                                                                                                               | (Restated)                                                                                                                                           |                                   |     | (Restated) |     |        | 2002 |    
|                   |                                                                                                                               |                                                                                                                                                      |                                   |     |            |     |        |      |    
|Net loss           |                                                                                                                               | $                                                                                                                                                    | (156                              | )   |            | $   | (1,099 | )    |     | $  | (35  | )  
|                   |                                                                                                                               |                                                                                                                                                      |                                   |     |            |     |        |      |    
|                   | Foreign currency translation adjustments (net of income tax
    benefit of $36 in 2004 and income tax expense of $36 in 2003) |                                                                                                                                                      |                                   | (33 | )          |     |        | 76   |     |    |      | (14 | )   
|                   | Minimum pension liability accrual (net of income tax of $2 in
    2004, $1 in 2003 and $7 in 2002)                            |                                                                                                                                                      |                                   | (3  | )          |     |        | (5   | )   |    |      | (12 | )   
|                   | Net gains (losses) from cash flow hedging activities:                                                                         |                                                                                                                                                      |                                   |     |            |     |        |      |     |    |      |     |     
|                   |                                                                                                                               | Unrealized mark-to-market losses arising during period (net of
    income tax of $15 in 2004, $24 in 2003 and $140 in 2002)                          |                                   |     | (26        | )   |        |      | (42 | )  |      |     | (240 | )   
|                   |                                                                                                                               | Reclassification adjustments for changes in initial value to
    settlement date (net of income tax of $12 in 2004, $34 in 2003
    and $87 in 2002) |                                   |     | 20         |     |        |      | 59  |    |      |     | (156 | )   
|                   |                                                                                                                               |                                                                                                                                                      |                                   |     |            |     |        |      |    
|                   |                                                                                                                               |                                                                                                                                                      | Other comprehensive income (loss) |     |            | (42 | )      |      |     | 88 |      |     |      | (422 | )
|                   |                                                                                                                               |                                                                                                                                                      |                                   |     |            |     |        |      |    
|Comprehensive loss |                                                                                                                               | $                                                                                                                                                    | (198                              | )   |            | $   | (1,011 | )    |     | $  | (457 | )  
|                   |                                                                                                                               |                                                                                                                                                      |                                   |     |            |     |        |      |    






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EL PASO CGP COMPANY





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





1.     Significant Accounting
Policies


Basis of Presentation







Restatement








Cumulative Foreign Currency Translation Adjustments
(CTA).
































|                                  |                                              |                                 |   |      |             |  |   |             |   |  |             |        |   |  |   |        |  
|--------------------------------- | -------------------------------------------- | ------------------------------- | - | ---- | ----------- |  | - | ----------- | - |  | ----------- | ------ | - |  | - | ------ | -
|                                  |                                              | For the Year Ended December 31, |  
|                                  |                                              |                                 |  
|                                  |                                              | 2004                            |   |      | 2003        | 
|                                  |                                              |                                 |   |      |             | 
|                                  |                                              | As Reported                     |   |      | As Restated |  |   | As Reported |   |  | As Restated |       
|                                  |                                              |                                 |   |      |             |  |   |             |   |  |             |       
|                                  |                                              | (In millions)                   |  
|Income Statement:                 |                                              |                                 |   |      |             |  |   |             |   |  |             |        |   |  |   |       
|                                  | Discontinued operations, net of income taxes |                                 | $ | (147 | )           |  | $ | (115        | ) |  | $           | (1,321 | ) |  | $ | (1,286 | )
|                                  | Net loss                                     |                                 |   | (188 | )           |  |   | (156        | ) |  |             | (1,134 | ) |  |   | (1,099 | )
|Statement of Comprehensive Income |                                              |                                 |   |      |             |  |   |             |   |  |             |        |   |  |   |       
|                                  | Foreign currency translation adjustment      |                                 | $ | (1   | )           |  | $ | (33         | ) |  | $           | 112    |   |  | $ | 76     |  
|                                  | Other comprehensive income (loss)            |                                 |   | (10  | )           |  |   | (42         | ) |  |             | 124    |   |  |   | 88     |  




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|               |                                              |                    |   |       |             |  |   |             |   |  |             |       |   |  |   |       |  
|-------------- | -------------------------------------------- | ------------------ | - | ----- | ----------- |  | - | ----------- | - |  | ----------- | ----- | - |  | - | ----- | -
|               |                                              | As of December 31, |  
|               |                                              |                    |  
|               |                                              | 2004               |   |       | 2003        | 
|               |                                              |                    |   |       |             | 
|               |                                              | As Reported        |   |       | As Restated |  |   | As Reported |   |  | As Restated |      
|               |                                              |                    |   |       |             |  |   |             |   |  |             |      
|               |                                              | (In millions)      |  
|Balance Sheet: |                                              |                    |   |       |             |  |   |             |   |  |             |       |   |  |   |      
|               | Deferred income tax assets, current          |                    | $ | 87    |             |  | $ | 87          |   |  | $           | 30    |   |  | $ | 31    |  
|               | Deferred income tax liabilities, non-current |                    |   | 691   |             |  |   | 692         |   |  |             | 732   |   |  |   | 734   |  
|               | Retained earnings                            |                    |   | 36    |             |  |   | 103         |   |  |             | 224   |   |  |   | 259   |  
|               | Accumulated other comprehensive loss         |                    |   | (25   | )           |  |   | (93         | ) |  |             | (15   | ) |  |   | (51   | )
|               | Total stockholders equity                   |                    |   | 3,192 |             |  |   | 3,191       |   |  |             | 3,345 |   |  |   | 3,344 |  




Principles of Consolidation




Use of Estimates






| |                                    
| | -----------------------------------
| | Accounting for Regulated Operations

Accounting
for the Effects of Certain Types of Regulation




Cash and Cash Equivalents






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Allowance for Doubtful Accounts




Inventory




Property, Plant and Equipment




|                             |                                     |        |                   |                   |  |       | 
|---------------------------- | ----------------------------------- | ------ | ----------------- | ----------------- |  | ----- | 
|Type                         |                                     | Method |                   | Depreciable Lives | 
|                             |                                     |        |                   |                   | 
|                             |                                     |        |                   | (In years)        | 
|Regulated interstate systems |                                     |        |                   |                   |  |      
|                             | SFAS No. 71                         |        | Composite
    (1) |                   |  | 1-51  | 
|                             | Non-SFAS No. 71                     |        | Composite
    (1) |                   |  | 1-64  | 
|                            
|Non-regulated systems        |                                     |        |                   |                   |  |      
|                             | Transmission and storage facilities |        | Straight-line     |                   |  | 35    | 
|                             | Power facilities                    |        | Straight-line     |                   |  | 3-22  | 
|                             | Gathering and processing systems    |        | Straight-line     |                   |  | 3-33  | 
|                             | Buildings and improvements          |        | Straight-line     |                   |  | 15-40 | 
|                             | Office and miscellaneous equipment  |        | Straight-line     |                   |  | 3-10  | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For our regulated interstate systems, we use the composite
    (group) method to depreciate property, plant and equipment.
    Under this method, assets with similar useful lives and other
    characteristics are grouped and depreciated as one asset. We
    apply the depreciation rate approved in our rate settlements to
    the total cost of the group until its net book value equals its
    salvage value. We re-evaluate depreciation rates each time we
    redevelop our transportation rates when we file with the FERC
    for an increase or decrease in rates.





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Asset and Investment Impairments


Accounting for
the Impairment or Disposal of Long-Lived Assets, The
Equity Method of Accounting for Investments in Common Stock,


Natural Gas and Oil Properties




Accounting for Asset
Retirement Obligations






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Goodwill and Other Intangible Assets


Business Combinations Goodwill and Other Intangible Assets,






Pension and Other
Postretirement Benefits






Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug,
Improvement and Modernization Act of 2003.


Revenue Recognition




Pipelines revenues.


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Production revenues.


Power revenues. Price Risk Management Activities.


Field Services revenues.


Environmental Costs and
Other Contingencies








| |                                 
| | --------------------------------
| | Price Risk Management Activities



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Accounting for Derivative Instruments and
Hedging Activities.






Scope Exceptions: Applying the
Normal Purchases and Sales Exception to Contracts that Combine a
Forward Contract and Purchased Option Contract


Income Taxes






Foreign Currency Transactions
and Translation




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| |                                            
| | -------------------------------------------
| | Accounting for Asset Retirement Obligations





|                                              |  |                   |     |   |      |   |      |  
|--------------------------------------------- |  | ----------------- | --- | - | ---- | - | ---- | -
|                                              |  | 2004              |     |   | 2003 |  
|                                              |  |                   |     |   |      |  
|                                              |  | (In millions,     |    
|                                              |  | except for rates) |    
|Current asset retirement liability            |  | $                 | 25  |   |      | $ | 17   |  
|Non-current asset retirement
    liability(1) |  | $                 | 140 |   |      | $ | 122  |  
|Discount rates                                |  |                   | 6-8 | % |      |   | 8-10 | %
|Inflation rates                               |  |                   | 2.5 | % |      |   | 2.5  | %






|    |                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We estimate that approximately 64% of our non-current asset
    retirement liability as of December 31, 2004 will be
    settled in the next five years.





|                                            |                                               |               |     |     |      |   |     |     | 
|------------------------------------------- | --------------------------------------------- | ------------- | --- | --- | ---- | - | --- | --- | 
|                                            |                                               | 2004          |     |     | 2003 |  
|                                            |                                               |               |     |     |      |  
|                                            |                                               | (In millions) |    
|Net asset retirement liability at January 1 |                                               | $             | 139 |     |      | $ | 130 |    
|Liabilities settled                         |                                               |               | (19 | )   |      |   | (22 | )  
|Accretion expense                           |                                               |               | 15  |     |      |   | 17  |    
|Liabilities incurred                        |                                               |               | 18  |     |      |   | 7   |    
|Changes in estimate                         |                                               |               | 12  |     |      |   | 7   |    
|                                            |                                               |               |     |     |      |  
|                                            | Net asset retirement liability at December 31 |               | $   | 165 |      |   | $   | 139 | 
|                                            |                                               |               |     |     |      |  



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| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | Accounting for Certain Financial Instruments with
    Characteristics of both Liabilities and Equity

Accounting for Certain
Financial Instruments with Characteristics of both Liabilities
and Equity.


Accounting for Variable Interest
Entities


Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51.








New Accounting Pronouncements Issued But
Not Yet Adopted




Accounting for Deferred Taxes on Foreign Earnings. Accounting and Disclosure Guidance for the
Foreign Earnings Repatriation


60



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Provision within the American Jobs Creation Act of 2004.


Accounting for Asset Retirement Obligations. Accounting for Conditional Asset
Retirement Obligations


61



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2. Divestitures


Sales of Assets and Investments




|                        |                |               |       |    |      |   |       |      |  |   |       |       | 
|----------------------- | -------------- | ------------- | ----- | -- | ---- | - | ----- | ---- |  | - | ----- | ----- | 
|                        |                | 2004          |       |    | 2003 |   |       | 2002 | 
|                        |                |               |       |    |      |   |       |      | 
|                        |                | (In millions) |      
|Regulated               |                |               |       |    |      |   |       |      |  |   |       |      
|                        | Pipelines      |               | $     |   |      |   | $     | 89   |  |   | $     | 303   | 
|Non-regulated           |                |               |       |    |      |   |       |      |  |   |       |      
|                        | Production     |               |       | 24 |      |   |       | 137  |  |   |       | 1,248 | 
|                        | Power          |               |       | 92 |      |   |       | 11   |  |   |       |      | 
|                        | Field Services |               |       | 3  |      |   |       | 94   |  |   |       | 120   | 
|Other                   |                |               |       |    |      |   |       |      |  |   |       |      
|                        | Corporate      |               |       |   |      |   |       | 17   |  |   |       |      | 
|                        |                |               |       |    |      |   |       |      | 
|Total
    continuing(1) |                |               | 119   |    |      |   | 348   |      |  |   | 1,671 |      
|Discontinued            |                |               | 1,291 |    |      |   | 803   |      |  |   | 177   |      
|                        |                |               |       |    |      |   |       |      | 
|Total                   |                | $             | 1,410 |    |      | $ | 1,151 |      |  | $ | 1,848 |      
|                        |                |               |       |    |      |   |       |      | 






|    |                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Proceeds exclude returns of invested capital and cash
    transferred with the assets sold and include costs incurred in
    preparing assets for disposal. These items decreased our sales
    proceeds by $32 million, $35 million, and
    $33 million for the years ended December 31, 2004,
    2003 and 2002, respectively.



|               |  |                                                                                                                                                                           |  |                                                                                                                                                                                    |  |                                                                                                                                                   
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|               |  | 2004                                                                                                                                                                      |  | 2003                                                                                                                                                                               |  | 2002                                                                                                                                              
|               |  |                                                                                                                                                                           |  |                                                                                                                                                                                    |  |                                                                                                                                                   
|Pipelines      |  |  None                                                                                                                                                                    |  |  TX panhandle gathering system
     2.1% interest in Alliance pipeline
     Sulfur extraction facility
     Horsham pipeline in Australia                                      |  |  Natural gas and oil properties located in TX,
    KS, and OK
     12.3% equity interest in Alliance pipeline
     Typhoon natural gas pipeline
|              
|Production     |  |  Brazilian exploration and production acreage                                                                                                                            |  |  Natural gas and oil properties in NM and the Gulf of
    Mexico
     Drilling rigs                                                                                              |  |  Natural gas and oil properties located in TX,
    CO and Utah                                                                                   
|              
|Power          |  |  Utility Contract Funding
     Mohawk River Funding IV
     Interest in Bastrop Company                                                                                |  |  Mohawk River Funding I                                                                                                                                                           |  |  None                                                                                                                                            
|              
|Field Services |  |  Dauphin Island and Mobile Bay equity investments                                                                                                                        |  |  Gathering systems located in WY
     Midstream assets in the Mid-Continent regions                                                                                              |  |  Dragon Trail gas processing plant
     Gathering facilities in Utah                                                                            
|              
|Corporate      |  |  None                                                                                                                                                                    |  |  Aircraft                                                                                                                                                                         |  |  None                                                                                                                                            
|              
|Discontinued   |  |  Natural gas and oil production properties in Canada
    and other international production assets
     Aruba and Eagle Point refineries and other petroleum
    assets |  |  Corpus Christi refinery
     Florida petroleum terminals
     Louisiana lease crude
     Coal reserves
     Canadian natural gas and oil properties
     Asphalt facilities |  |  Coal reserves and properties and petroleum assets
     Natural gas and oil properties located in Western
    Canada                            







| |   |                                                           
| | - | ----------------------------------------------------------
| |  | Interest in paraxylene plant for $74 million;             
|
| |  | MTBE processing facility for $5 million;                  
|
| |  | Eagle Point power facility for $3 million; and            
|
| |  | Interest in Rensselaer power facility and its obligations.

Accounting for the Impairment
or Disposal of Long-Lived Assets


62



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| |                        
| | -----------------------
| | Discontinued Operations




International Natural Gas and Oil Production Operations.





Petroleum Markets.




Coal Mining.


63



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|                                                                |  |               |        |               |            |   |      |        |  |   |       |   |  |   |        |  
|--------------------------------------------------------------- |  | ------------- | ------ | ------------- | ---------- | - | ---- | ------ |  | - | ----- | - |  | - | ------ | -
|                                                                |  |               |        | International |            |   |      |        | 
|                                                                |  |               |        | Natural Gas   |            |   |      |        | 
|                                                                |  |               |        | and Oil       |            |   |      |        | 
|                                                                |  | Petroleum     |        |               | Production |   |      | Coal   |  |   |      
|                                                                |  | Markets       |        |               | Operations |   |      | Mining |  |   | Total |  
|                                                                |  |               |        |               |            |   |      |        |  |   |       |  
|                                                                |  | (In millions) |       
|Operating Results Data                                          |  |               |        |               |            |   |      |        |  |   |       |   |  |   |        |  
|                                                               
|Year Ended December 31, 2004
    (Restated)(1)                  |  |               |        |               |            |   |      |        |  |   |       |   |  |   |        |  
|Revenues                                                        |  | $             | 787    |               |            | $ | 31   |        |  | $ |      |   |  | $ | 818    |  
|Costs and expenses                                              |  |               | (839   | )             |            |   | (52  | )      |  |   |      |   |  |   | (891   | )
|Loss on long-lived assets                                       |  |               | (36    | )             |            |   | (22  | )      |  |   |      |   |  |   | (58    | )
|Other income                                                    |  |               | 13     |               |            |   |     |        |  |   |      |   |  |   | 13     |  
|Interest and debt expense                                       |  |               | (2     | )             |            |   | 1    |        |  |   |      |   |  |   | (1     | )
|                                                                |  |               |        |               |            |   |      |        |  |   |       |  
|Loss before income taxes                                        |  |               | (77    | )             |            |   | (42  | )      |  |   |      |   |  |   | (119   | )
|Income taxes                                                    |  |               | 2      |               |            |   | (6   | )      |  |   |      |   |  |   | (4     | )
|                                                                |  |               |        |               |            |   |      |        |  |   |       |  
|Loss from discontinued operations, net of income taxes          |  | $             | (79    | )             |            | $ | (36  | )      |  | $ |      |   |  | $ | (115   | )
|                                                                |  |               |        |               |            |   |      |        |  |   |       |  
|Year Ended December 31, 2003
    (Restated)(1)                  |  |               |        |               |            |   |      |        |  |   |       |   |  |   |        |  
|Revenues                                                        |  | $             | 5,652  |               |            | $ | 88   |        |  | $ | 27    |   |  | $ | 5,767  |  
|Costs and expenses                                              |  |               | (5,794 | )             |            |   | (127 | )      |  |   | (13   | ) |  |   | (5,934 | )
|Loss on long-lived assets                                       |  |               | (1,404 | )             |            |   | (89  | )      |  |   | (9    | ) |  |   | (1,502 | )
|Other income (expenses)                                         |  |               | (4     | )             |            |   |     |        |  |   | 1     |   |  |   | (3     | )
|Interest and debt expense                                       |  |               | (11    | )             |            |   | 4    |        |  |   |      |   |  |   | (7     | )
|                                                                |  |               |        |               |            |   |      |        |  |   |       |  
|Income (loss) before income taxes                               |  |               | (1,561 | )             |            |   | (124 | )      |  |   | 6     |   |  |   | (1,679 | )
|Income taxes                                                    |  |               | (263   | )             |            |   | (135 | )      |  |   | 5     |   |  |   | (393   | )
|                                                                |  |               |        |               |            |   |      |        |  |   |       |  
|Income (loss) from discontinued operations, net of income taxes |  | $             | (1,298 | )             |            | $ | 11   |        |  | $ | 1     |   |  | $ | (1,286 | )
|                                                                |  |               |        |               |            |   |      |        |  |   |       |  
|Year Ended December 31, 2002                                    |  |               |        |               |            |   |      |        |  |   |       |   |  |   |        |  
|Revenues                                                        |  | $             | 4,788  |               |            | $ | 71   |        |  | $ | 309   |   |  | $ | 5,168  |  
|Costs and expenses                                              |  |               | (4,916 | )             |            |   | (148 | )      |  |   | (327  | ) |  |   | (5,391 | )
|Loss on long-lived assets                                       |  |               | (97    | )             |            |   | (4   | )      |  |   | (184  | ) |  |   | (285   | )
|Other income                                                    |  |               | 20     |               |            |   |     |        |  |   | 5     |   |  |   | 25     |  
|Interest and debt expense                                       |  |               | (12    | )             |            |   | 4    |        |  |   |      |   |  |   | (8     | )
|                                                                |  |               |        |               |            |   |      |        |  |   |       |  
|Loss before income taxes                                        |  |               | (217   | )             |            |   | (77  | )      |  |   | (197  | ) |  |   | (491   | )
|Income taxes                                                    |  |               | 16     |               |            |   | (39  | )      |  |   | (73   | ) |  |   | (96    | )
|                                                                |  |               |        |               |            |   |      |        |  |   |       |  
|Loss from discontinued operations, net of income taxes          |  | $             | (233   | )             |            | $ | (38  | )      |  | $ | (124  | ) |  | $ | (395   | )
|                                                                |  |               |        |               |            |   |      |        |  |   |       |  












|    |                                                                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For 2004, amounts related to Petroleum Markets and International
    Natural Gas and Oil Production Operations were restated. For
    2003, amounts related to International Natural Gas and Oil
    Production Operations were restated. See Note 1 to the
    consolidated financial statements for a further discussion of
    the restatements.




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|                                       |                                    |                                         |   |               |            |  |   |       |     |  |   |     |       | 
|-------------------------------------- | ---------------------------------- | --------------------------------------- | - | ------------- | ---------- |  | - | ----- | --- |  | - | --- | ----- | 
|                                       |                                    |                                         |   | International |            |  |  
|                                       |                                    |                                         |   | Natural Gas   |            |  |  
|                                       |                                    |                                         |   | and Oil       |            |  |  
|                                       |                                    | Petroleum                               |   |               | Production |  |   |      
|                                       |                                    | Markets                                 |   |               | Operations |  |   | Total |    
|                                       |                                    |                                         |   |               |            |  |   |       |    
|                                       |                                    | (In millions)                           |  
|Financial Position Data                |                                    |                                         |   |               |            |  |   |       |     |  |   |    
|                                      
|December 31, 2004                      |                                    |                                         |   |               |            |  |   |       |     |  |   |    
|Assets of discontinued operations      |                                    |                                         |   |               |            |  |   |       |     |  |   |    
|                                       | Accounts and notes receivables     |                                         | $ | 39            |            |  | $ | 2     |     |  | $ | 41  |      
|                                       | Inventory                          |                                         |   | 8             |            |  |   |      |     |  |   | 8   |      
|                                       | Other current assets               |                                         |   | 3             |            |  |   | 1     |     |  |   | 4   |      
|                                       | Property, plant and equipment, net |                                         |   | 14            |            |  |   | 6     |     |  |   | 20  |      
|                                       | Other non-current assets           |                                         |   | 33            |            |  |   |      |     |  |   | 33  |      
|                                       |                                    |                                         |   |               |            |  |   |       |    
|                                       |                                    | Total assets of discontinued operations |   | $             | 97         |  |   | $     | 9   |  |   | $   | 106   | 
|                                       |                                    |                                         |   |               |            |  |   |       |    
|Liabilities of discontinued operations |                                    |                                         |   |               |            |  |   |       |     |  |   |    
|                                       | Accounts payable                   |                                         | $ | 5             |            |  | $ |      |     |  | $ | 5   |      
|                                       | Other current liabilities          |                                         |   | 3             |            |  |   |      |     |  |   | 3   |      
|                                       | Other non-current liabilities      |                                         |   | 3             |            |  |   |      |     |  |   | 3   |      
|                                       |                                    |                                         |   |               |            |  |   |       |    
|                                       |                                    | Total liabilities                       |   | $             | 11         |  |   | $     |    |  |   | $   | 11    | 
|                                       |                                    |                                         |   |               |            |  |   |       |    
|                                      
|December 31, 2003                      |                                    |                                         |   |               |            |  |   |       |     |  |   |    
|Assets of discontinued operations      |                                    |                                         |   |               |            |  |   |       |     |  |   |    
|                                       | Accounts and notes receivables     |                                         | $ | 259           |            |  | $ | 22    |     |  | $ | 281 |      
|                                       | Inventory                          |                                         |   | 385           |            |  |   | 3     |     |  |   | 388 |      
|                                       | Other current assets               |                                         |   | 131           |            |  |   | 8     |     |  |   | 139 |      
|                                       | Property, plant and equipment, net |                                         |   | 521           |            |  |   | 399   |     |  |   | 920 |      
|                                       | Intangible assets, net             |                                         |   |              |            |  |   | 6     |     |  |   | 6   |      
|                                       | Other non-current assets           |                                         |   | 70            |            |  |   |      |     |  |   | 70  |      
|                                       |                                    |                                         |   |               |            |  |   |       |    
|                                       |                                    | Total assets of discontinued operations |   | $             | 1,366      |  |   | $     | 438 |  |   | $   | 1,804 | 
|                                       |                                    |                                         |   |               |            |  |   |       |    
|Liabilities of discontinued operations |                                    |                                         |   |               |            |  |   |       |     |  |   |    
|                                       | Accounts payable                   |                                         | $ | 172           |            |  | $ | 38    |     |  | $ | 210 |      
|                                       | Other current liabilities          |                                         |   | 86            |            |  |   |      |     |  |   | 86  |      
|                                       | Long-term debt                     |                                         |   | 374           |            |  |   |      |     |  |   | 374 |      
|                                       | Other non-current liabilities      |                                         |   | 26            |            |  |   | 3     |     |  |   | 29  |      
|                                       |                                    |                                         |   |               |            |  |   |       |    
|                                       |                                    | Total liabilities                       |   | $             | 658        |  |   | $     | 41  |  |   | $   | 699   | 
|                                       |                                    |                                         |   |               |            |  |   |       |    

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3. Loss (Gain) on Long-Lived Assets




|                  |                                                         |                         |    |     |      |   |     |      |    |   |     |     |    | 
|----------------- | ------------------------------------------------------- | ----------------------- | -- | --- | ---- | - | --- | ---- | -- | - | --- | --- | -- | 
|                  |                                                         | 2004                    |    |     | 2003 |   |     | 2002 |   
|                  |                                                         |                         |    |     |      |   |     |      |   
|                  |                                                         | (In millions)           |   
|Net realized gain |                                                         | $                       | (2 | )   |      | $ | (35 | )    |    | $ | (44 | )  
|                  |                                                         |                         |    |     |      |   |     |      |   
|Asset impairments |                                                         |                         |    |     |      |   |     |      |    |   |     |    
|                  | Power                                                   |                         |    | 103 |      |   |     | 28   |    |   |     | 18  |   
|                  | Production                                              |                         |    |    |      |   |     | 10   |    |   |     |    |   
|                  | Field Services                                          |                         |    | 5   |      |   |     | 4    |    |   |     | 14  |   
|                  | Corporate                                               |                         |    |    |      |   |     | 1    |    |   |     |    |   
|                  |                                                         |                         |    |     |      |   |     |      |   
|                  |                                                         | Total asset impairments |    |     | 108  |   |     |      | 43 |   |     |     | 32 | 
|                  |                                                         |                         |    |     |      |   |     |      |   
|                  | Loss (gain) on long-lived assets                        |                         |    | 106 |      |   |     | 8    |    |   |     | (12 | ) 
|                  | Loss on investments in unconsolidated
    affiliates(1) |                         |    | 292 |      |   |     | 128  |    |   |     | 47  |   
|                  |                                                         |                         |    |     |      |   |     |      |   
|                  | Loss on assets and investments                          |                         | $  | 398 |      |   | $   | 136  |    |   | $   | 35  |   
|                  |                                                         |                         |    |     |      |   |     |      |   






|    |                                                                   
|--- | ------------------------------------------------------------------
|(1) | See Note 16 for further description of these gains and
    losses.

Net Realized Gain








Asset Impairments









4. Ceiling Test Charges




|                               |       |               |    |    |      |   |     |     | 
|------------------------------ | ----- | ------------- | -- | -- | ---- | - | --- | --- | 
|                               |       | 2003          |    |    | 2002 |  
|                               |       |               |    |    |      |  
|                               |       | (In millions) |   
|U.S.                           |       | $             | 34 |    |      | $ | 417 |    
|Brazil and Other International |       |               | 5  |    |      |   | 5   |    
|                               |       |               |    |    |      |  
|                               | Total |               | $  | 39 |      |   | $   | 422 | 
|                               |       |               |    |    |      |  

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|   |                                
|-- | -------------------------------
|5. | Other Income and Other Expenses



|               |                                                                                                |               |   |    |      |  |   |      |    |   |   |    |    | 
|-------------- | ---------------------------------------------------------------------------------------------- | ------------- | - | -- | ---- |  | - | ---- | -- | - | - | -- | -- | 
|               |                                                                                                | 2004          |   |    | 2003 |  |   | 2002 |   
|               |                                                                                                |               |   |    |      |  |   |      |   
|               |                                                                                                | (In millions) |  
|Other Income   |                                                                                                |               |   |    |      |  |   |      |    |   |   |   
|               | Interest income                                                                                |               | $ | 13 |      |  | $ | 17   |    |   | $ | 13 |   
|               | Development, management and administrative services fees
    on power projects from affiliates |               |   | 12 |      |  |   | 11   |    |   |   | 11 |   
|               | Allowance for funds used during construction                                                   |               |   | 7  |      |  |   |     |    |   |   |   |   
|               | Re-application of SFAS No. 71 (CIG and WIC)                                                    |               |   |   |      |  |   | 18   |    |   |   |   |   
|               | Favorable resolution of non-operating contingent obligations                                   |               |   |   |      |  |   | 8    |    |   |   | 31 |   
|               | Other                                                                                          |               |   | 12 |      |  |   | 12   |    |   |   | 15 |   
|               |                                                                                                |               |   |    |      |  |   |      |   
|               |                                                                                                | Total         |   | $  | 44   |  |   | $    | 66 |   |   | $  | 70 | 
|               |                                                                                                |               |   |    |      |  |   |      |   
|Other Expenses |                                                                                                |               |   |    |      |  |   |      |    |   |   |   
|               | Loss on early extinguishment of debt                                                           |               | $ | 10 |      |  | $ |     |    |   | $ |   |   
|               | Minority interest in consolidated subsidiaries                                                 |               |   | 1  |      |  |   | (12  | )  |   |   | 52 |   
|               | Other                                                                                          |               |   | 3  |      |  |   | 7    |    |   |   | 18 |   
|               |                                                                                                |               |   |    |      |  |   |      |   
|               |                                                                                                | Total         |   | $  | 14   |  |   | $    | (5 | ) |   | $  | 70 | 
|               |                                                                                                |               |   |    |      |  |   |      |   




6. Income Taxes










|        |  |               |     |   |      |   |     |      |  |   |     | 
|------- |  | ------------- | --- | - | ---- | - | --- | ---- |  | - | --- | 
|        |  | 2004          |     |   | 2003 |   |     | 2002 | 
|        |  |               |     |   |      |   |     |      | 
|        |  | (In millions) |    
|U.S.    |  | $             | 51  |   |      | $ | 244 |      |  | $ | 350 | 
|Foreign |  |               | (80 | ) |      |   | (2  | )    |  |   | 139 | 
|        |  |               |     |   |      |   |     |      | 
|        |  | $             | (29 | ) |      | $ | 242 |      |  | $ | 489 | 
|        |  |               |     |   |      |   |     |      | 

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|         |         |                    |     |               |      |  |     |      |    |  |     |     |     | 
|-------- | ------- | ------------------ | --- | ------------- | ---- |  | --- | ---- | -- |  | --- | --- | --- | 
|         |         | 2004               |     |               | 2003 |  |     | 2002 |   
|         |         |                    |     |               |      |  |     |      |   
|         |         |                    |     | (In millions) |      |  |    
|Current  |         |                    |     |               |      |  |     |      |    |  |     |    
|         | Federal |                    | $   | 11            |      |  | $   | 68   |    |  | $   | (35 | )  
|         | State   |                    |     | 44            |      |  |     | 14   |    |  |     | 2   |    
|         | Foreign |                    |     |              |      |  |     |     |    |  |     | 5   |    
|         |         |                    |     |               |      |  |     |      |   
|         |         |                    | 55  |               |      |  | 82  |      |    |  | (28 | )  
|Deferred |         |                    |     |               |      |  |     |      |    |  |     |    
|         | Federal |                    |     | 6             |      |  |     | (13  | )  |  |     | 137 |    
|         | State   |                    |     | (46           | )    |  |     | (10  | )  |  |     | 33  |    
|         | Foreign |                    |     | (3            | )    |  |     | (16  | )  |  |     | 1   |    
|         |         |                    |     |               |      |  |     |      |   
|         |         |                    | (43 | )             |      |  | (39 | )    |    |  | 171 |    
|         |         |                    |     |               |      |  |     |      |   
|         |         | Total income taxes |     | $             | 12   |  |     | $    | 43 |  |     | $   | 143 | 
|         |         |                    |     |               |      |  |     |      |   



|                                                  |                                                      |                             |     |    |      |   |    |      |   |   |     |     |  
|------------------------------------------------- | ---------------------------------------------------- | --------------------------- | --- | -- | ---- | - | -- | ---- | - | - | --- | --- | -
|                                                  |                                                      | 2004                        |     |    | 2003 |   |    | 2002 |  
|                                                  |                                                      |                             |     |    |      |   |    |      |  
|                                                  |                                                      | (In millions, except rates) |    
|Income taxes at the statutory federal rate of 35% |                                                      | $                           | (10 | )  |      | $ | 85 |      |   | $ | 171 |    
|Increase (decrease)                               |                                                      |                             |     |    |      |   |    |      |   |   |     |    
|                                                  | State income taxes, net of federal income tax effect |                             |     | (2 | )    |   |    | 3    |   |   |     | 23  |  
|                                                  | Foreign (income) loss taxed at different rates       |                             |     | 36 |      |   |    | 8    |   |   |     | (55 | )
|                                                  | Non-taxable stock dividends                          |                             |     |   |      |   |    | (5   | ) |   |     | (5  | )
|                                                  | Abandonments and sales of foreign investments        |                             |     | (7 | )    |   |    | (25  | ) |   |     |    |  
|                                                  | Valuation allowances                                 |                             |     |   |      |   |    | (21  | ) |   |     | (3  | )
|                                                  | Dispositions of domestic assets                      |                             |     | (7 | )    |   |    |     |   |   |     |    |  
|                                                  | Other                                                |                             |     | 2  |      |   |    | (2   | ) |   |     | 12  |  
|                                                  |                                                      |                             |     |    |      |   |    |      |  
|Income taxes                                      |                                                      | $                           | 12  |    |      | $ | 43 |      |   | $ | 143 |    
|                                                  |                                                      |                             |     |    |      |   |    |      |  
|Effective tax rate                                |                                                      |                             | (41 | )% |      |   | 18 | %    |   |   | 29  | %  
|                                                  |                                                      |                             |     |    |      |   |    |      |  

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|                           |                                               |               |                              |       |            |       |     |     |     |       | 
|-------------------------- | --------------------------------------------- | ------------- | ---------------------------- | ----- | ---------- | ----- | --- | --- | --- | ----- | 
|                           |                                               | 2004          |                              |       | 2003       |      
|                           |                                               |               |                              |       |            |      
|                           |                                               | (Restated)    |                              |       | (Restated) |      
|                           |                                               | (In millions) |                             
|Deferred tax liabilities   |                                               |               |                              |       |            |       |     |    
|                           | Property, plant and equipment                 |               | $                            | 1,200 |            |       | $   | 856 |    
|                           | Investments in unconsolidated affiliates      |               |                              | 103   |            |       |     | 302 |    
|                           | Regulatory and other assets                   |               |                              | 54    |            |       |     | 80  |    
|                           |                                               |               |                              |       |            |      
|                           |                                               |               | Total deferred tax liability |       |            | 1,357 |     |     |     | 1,238 | 
|                           |                                               |               |                              |       |            |      
|Deferred tax assets        |                                               |               |                              |       |            |       |     |    
|                           | Net operating loss and tax credit carryovers: |               |                              |       |            |       |     |     |    
|                           |                                               | U.S. federal  |                              |       | 375        |       |     |     | 267 |      
|                           |                                               | State         |                              |       | 45         |       |     |     | 37  |      
|                           |                                               | Foreign       |                              |       | 29         |       |     |     | 7   |      
|                           | Environmental liability                       |               |                              | 54    |            |       |     | 59  |    
|                           | Price risk management activities              |               |                              | 56    |            |       |     | 55  |    
|                           | Allocated merger costs                        |               |                              | 106   |            |       |     | 107 |    
|                           | Lease liabilities                             |               |                              | 30    |            |       |     | 2   |    
|                           | Other                                         |               |                              | 82    |            |       |     | 59  |    
|                           | Valuation allowance                           |               |                              | (25   | )          |       |     | (1  | )  
|                           |                                               |               |                              |       |            |      
|                           |                                               |               | Total deferred tax asset     |       |            | 752   |     |     |     | 592   | 
|                           |                                               |               |                              |       |            |      
|Net deferred tax liability |                                               | $             | 605                          |       |            | $     | 646 |    
|                           |                                               |               |                              |       |            |      












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|                                |  |                  |   |  |           |   |     |            |  |   |           |  |  |       |     |  |  |   |     | 
|------------------------------- |  | ---------------- | - |  | --------- | - | --- | ---------- |  | - | --------- |  |  | ----- | --- |  |  | - | --- | 
|                                |  | Carryover Period |  
|                                |  |                  |  
|                                |  | 2005             |   |  | 2006-2010 |   |     | 2011-2015  |  |   | 2016-2024 |  |  | Total |    
|                                |  |                  |   |  |           |   |     |            |  |   |           |  |  |       |    
|                                |  |                  |   |  |           |   |     | (Restated) |  |   |          
|                                |  | (In millions)    |  
|U.S. federal net operating loss |  | $                |  |  |           | $ |    |            |  | $ |          |  |  | $     | 440 |  |  | $ | 440 | 
|State net operating loss        |  |                  | 3 |  |           |   | 287 |            |  |   | 31        |  |  |       | 229 |  |  |   | 550 | 













|   |                                    
|-- | -----------------------------------
|7. | Fair Value of Financial Instruments



|                                                              |  |               |       |   |            |   |          |        |  |   |            |  |  |   |       | 
|------------------------------------------------------------- |  | ------------- | ----- | - | ---------- | - | -------- | ------ |  | - | ---------- |  |  | - | ----- | 
|                                                              |  | 2004          |       |   | 2003       |  
|                                                              |  |               |       |   |            |  
|                                                              |  | Carrying      |       |   |            |   | Carrying |        |  |  
|                                                              |  | Amount        |       |   | Fair Value |   |          | Amount |  |   | Fair Value | 
|                                                              |  |               |       |   |            |   |          |        |  |   |            | 
|                                                              |  | (In millions) |      
|Long-term financing obligations, including current maturities |  | $             | 3,757 |   |            | $ | 3,931    |        |  | $ | 5,321      |  |  | $ | 5,233 | 
|Commodity-based price risk management derivatives             |  |               | (148  | ) |            |   | (148     | )      |  |   | 818        |  |  |   | 818   | 



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8. Price Risk Management Activities




|                         |                                                                  |                                                                       |   |      |      |   |   |      |     | 
|------------------------ | ---------------------------------------------------------------- | --------------------------------------------------------------------- | - | ---- | ---- | - | - | ---- | --- | 
|                         |                                                                  | 2004                                                                  |   |      | 2003 |  
|                         |                                                                  |                                                                       |   |      |      |  
|                         |                                                                  | (In millions)                                                         |  
|Net assets (liabilities) |                                                                  |                                                                       |   |      |      |   |   |     
|                         | Derivatives designated as hedges                                 |                                                                       | $ | (148 | )    |   | $ | (124 | )  
|                         | Derivatives from power contract restructuring activities
    (1) |                                                                       |   |     |      |   |   | 942  |    
|                         |                                                                  |                                                                       |   |      |      |  
|                         |                                                                  | Net assets (liabilities) from price risk management
    activities(2) |   | $    | (148 | ) |   | $    | 818 | 
|                         |                                                                  |                                                                       |   |      |      |  




|    |                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------
|(1) | In 2004, we sold our subsidiaries that own these derivative
    contracts. See Note 2 for additional information on these
    sales.
|(2) | Included in both current and non-current assets and liabilities
    on the balance sheet.                                           









| |                                 
| | --------------------------------
| | Derivatives Designated as Hedges





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|                                  |  |               |      |   |                  |   |     |             |  |   |      |   |  |  |      | 
|--------------------------------- |  | ------------- | ---- | - | ---------------- | - | --- | ----------- |  | - | ---- | - |  |  | ---- | 
|                                  |  | Accumulated   |      |   |                  |   |    
|                                  |  | Other         |      |   |                  |   |    
|                                  |  | Comprehensive |      |   | Estimated        |   |     |            
|                                  |  | Income (Loss) |      |   | Income (Loss)    |   |     | Final       | 
|                                  |  |               |      |   | Reclassification |   |     | Termination | 
|                                  |  | 2004          |      |   | 2003             |   |     | in 2005(1)  |  |   | Date |  
|                                  |  |               |      |   |                  |   |     |             |  |   |      |  
|                                  |  | (In millions) |      |   |                 
|Held by consolidated entities     |  | $             | 28   |   |                  | $ | (49 | )           |  | $ | 28   |   |  |  | 2005 | 
|Held by unconsolidated affiliates |  |               | 18   |   |                  |   | 13  |             |  |   | 9    |   |  |  | 2006 | 
|Undesignated(2)                   |  |               | (113 | ) |                  |   | (25 | )           |  |   | (113 | ) |  |  | 2005 | 
|                                  |  |               |      |   |                  |   |     |             |  |   |      |  
|Total(3)                          |  | $             | (67  | ) |                  | $ | (61 | )           |  | $ | (76  | ) |  |  |      | 
|                                  |  |               |      |   |                  |   |     |             |  |   |      |  






|    |                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Reclassifications occur upon the physical delivery of the hedge
    commodity and the corresponding expiration of the hedge.                                                                                                                                                           
|(2) | In December 2004 and May 2002, we removed the hedging
    designation on these derivatives.                                                                                                                                                                                            
|   
|(3) | Accumulated other comprehensive income (loss) also includes
    $(6) million and $27 million of currency translation
    adjustments as of December 31, 2004 and 2003, as well as
    $(20) million and $(17) million of additional minimum
    pension liability, net of income taxes.
|   



Power Contract
Restructuring Activities










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|                                                                |  |               |     |  |                  |           |     |               |  |   |           |   |  |           |            |   |             |   |     |  |  |   |      |  
|--------------------------------------------------------------- |  | ------------- | --- |  | ---------------- | --------- | --- | ------------- |  | - | --------- | - |  | --------- | ---------- | - | ----------- | - | --- |  |  | - | ---- | -
|                                                                |  |               |     |  |                  | Property, |     |               |  |   |           |   | 
|                                                                |  | Assets from   |     |  | Liabilities from |           |     | Plant and     |  |   |           |   |  |           | Increase   |  
|                                                                |  | Price Risk    |     |  | Price Risk       |           |     | Equipment and |  |   |           |   |  |           | (Decrease) |  
|                                                                |  | Management    |     |  | Management       |           |     | Intangible    |  |   | Operating |   |  | Operating |            |   | in Minority |  
|                                                                |  | Activities    |     |  | Activities       |           |     | Assets        |  |   | Revenues  |   |  | Expenses  |            |   | Interest(1) |  
|                                                                |  |               |     |  |                  |           |     |               |  |   |           |   |  |           |            |   |             |  
|                                                                |  | (In millions) |    
|Initial gain on restructured contracts                          |  | $             | 978 |  |                  | $         | 80  |               |  | $ |          |   |  | $         | 988        |   |             |   |    |  |  | $ | 172  |  
|Write-down of power plants and intangibles and other fees       |  |               |    |  |                  |           |    |               |  |   | (328      | ) |  |           |           |   |             |   | 489 |  |  |   | (109 | )
|Change in value of restructured contracts during 2002           |  |               | 8   |  |                  |           |    |               |  |   |          |   |  |           | (96        | ) |             |   |    |  |  |   | (20  | )
|Change in value of third-party wholesale power supply contracts |  |               |    |  |                  |           | (62 | )             |  |   |          |   |  |           | 62         |   |             |   |    |  |  |   | (3   | )
|Purchase of power under power supply contracts                  |  |               |    |  |                  |           |    |               |  |   |          |   |  |           |           |   |             |   | 47  |  |  |   | (11  | )
|Sale of power under restructured contracts                      |  |               |    |  |                  |           |    |               |  |   |          |   |  |           | 111        |   |             |   |    |  |  |   | 28   |  
|                                                                |  |               |     |  |                  |           |     |               |  |   |           |   |  |           |            |   |             |  
|Total                                                           |  | $             | 986 |  |                  | $         | 18  |               |  | $ | (328      | ) |  | $         | 1,065      |   |             | $ | 536 |  |  | $ | 57   |  
|                                                                |  |               |     |  |                  |           |     |               |  |   |           |   |  |           |            |   |             |  






|    |                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In our restructuring activities, third-party owners also held
    ownership interests in the plants and were allocated a portion
    of the income or loss.








|   |          
|-- | ---------
|9. | Inventory



|                                 |                 |               |    |    |      |   |    |    | 
|-------------------------------- | --------------- | ------------- | -- | -- | ---- | - | -- | -- | 
|                                 |                 | 2004          |    |    | 2003 |  
|                                 |                 |               |    |    |      |  
|                                 |                 | (In millions) |   
|Materials and supplies and other |                 | $             | 40 |    |      | $ | 52 |   
|Natural gas and NGL in storage   |                 |               | 18 |    |      |   | 3  |   
|                                 |                 |               |    |    |      |  
|                                 | Total inventory |               | $  | 58 |      |   | $  | 55 | 
|                                 |                 |               |    |    |      |  

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|    |                                  
|--- | ---------------------------------
|10. | Regulatory Assets and Liabilities



|                                   |                                                                                |                                          |   |    |      |  |   |    |    | 
|---------------------------------- | ------------------------------------------------------------------------------ | ---------------------------------------- | - | -- | ---- |  | - | -- | -- | 
|                                   |                                                                                | 2004                                     |   |    | 2003 | 
|                                   |                                                                                |                                          |   |    |      | 
|                                   |                                                                                | (In millions)                            |  
|Non-current regulatory assets      |                                                                                |                                          |   |    |      |  |   |   
|                                   | Grossed-up deferred taxes on capitalized funds used during
    construction(1) |                                          | $ | 15 |      |  | $ | 12 |   
|                                   | Postretirement
    benefits(1)                                                 |                                          |   | 6  |      |  |   | 6  |   
|                                   | Under-collected federal income
    taxes(1)                                    |                                          |   | 2  |      |  |   | 2  |   
|                                   |                                                                                |                                          |   |    |      | 
|                                   |                                                                                | Total regulatory assets                  |   | $  | 23   |  |   | $  | 20 | 
|                                   |                                                                                |                                          |   |    |      | 
|Current regulatory liabilities     |                                                                                |                                          |   |    |      |  |   |   
|                                   | Postretirement
    benefits(1)                                                 |                                          | $ |   |      |  | $ | 1  |   
|                                   |                                                                                |                                          |   |    |      | 
|Non-current regulatory liabilities |                                                                                |                                          |   |    |      |  |   |   
|                                   | Excess deferred federal income taxes                                           |                                          |   | 6  |      |  |   | 4  |   
|                                   | Over-collected fuel obligation                                                 |                                          |   | 11 |      |  |   | 5  |   
|                                   |                                                                                |                                          |   |    |      | 
|                                   |                                                                                | Total non-current regulatory liabilities |   |    | 17   |  |   |    | 9  | 
|                                   |                                                                                |                                          |   |    |      | 
|                                   |                                                                                | Total regulatory liabilities             |   | $  | 17   |  |   | $  | 10 | 
|                                   |                                                                                |                                          |   |    |      | 






|    |                                                                                               
|--- | ----------------------------------------------------------------------------------------------
|(1) | Some of these amounts are not included in our rate base on which
    we earn a current return.






|    |                              
|--- | -----------------------------
|11. | Property, Plant and Equipment





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|    |                                                                  
|--- | -----------------------------------------------------------------
|12. | Debt, Other Financing Obligations and Other Credit
    Facilities



|                            |                            |                                                                             |                                                                |       |       |       |  |       |       |       | 
|--------------------------- | -------------------------- | --------------------------------------------------------------------------- | -------------------------------------------------------------- | ----- | ----- | ----- |  | ----- | ----- | ----- | 
|                            |                            | 2004                                                                        |                                                                |       | 2003  |      
|                            |                            |                                                                             |                                                                |       |       |      
|                            |                            | (In millions)                                                               |                                                               
|Long-term debt              |                            |                                                                             |                                                                |       |       |       |  |      
|                            | El Paso CGP Company        |                                                                             |                                                                |       |       |       |  |       |      
|                            |                            | Senior notes, 6.2% through 7.75%, due 2004 through 2010                     |                                                                | $     | 930   |       |  | $     | 1,305 |      
|                            |                            | Senior debentures, 6.375% through 10.75%, due 2004 through 2037             |                                                                |       | 1,357 |       |  |       | 1,395 |      
|                            | Power                      |                                                                             |                                                                |       |       |       |  |       |      
|                            |                            | Non-recourse senior notes, 7.75% and 7.944%, due 2008 and 2016              |                                                                |       |      |       |  |       | 904   |      
|                            |                            | Recourse notes 8.5%, due 2005                                               |                                                                |       | 37    |       |  |       | 81    |      
|                            | El Paso Production Company |                                                                             |                                                                |       |       |       |  |       |      
|                            |                            | Floating rate notes, due 2005 and 2006                                      |                                                                |       |      |       |  |       | 200   |      
|                            | ANR Pipeline               |                                                                             |                                                                |       |       |       |  |       |      
|                            |                            | Debentures and senior notes, 7.0% through 9.625%, due 2010
    through 2025 |                                                                |       | 800   |       |  |       | 800   |      
|                            |                            | Notes, 13.75% due 2010                                                      |                                                                |       | 12    |       |  |       | 13    |      
|                            | Colorado Interstate Gas    |                                                                             |                                                                |       |       |       |  |       |      
|                            |                            | Debentures, 6.85% and 10.0%, due 2037 and 2005                              |                                                                |       | 280   |       |  |       | 280   |      
|                            | Other                      |                                                                             |                                                                | 48    |       |       |  | 51    |      
|                            |                            |                                                                             |                                                                |       |       |      
|                            |                            |                                                                             | Subtotal                                                       |       |       | 3,464 |  |       |       | 5,029 | 
|                            |                            |                                                                             |                                                                |       |       |      
|Other financing obligations |                            |                                                                             |                                                                |       |       |       |  |      
|                            | Coastal Finance I          |                                                                             |                                                                | 300   |       |       |  | 300   |      
|                            |                            |                                                                             |                                                                |       |       |      
|                            |                            |                                                                             |                                                                | 3,764 |       |       |  | 5,329 |      
|                            | Less:                      |                                                                             |                                                                |       |       |       |  |       |      
|                            |                            | Unamortized discount on long-term debt                                      |                                                                |       | 7     |       |  |       | 8     |      
|                            |                            | Current maturities of long-term debt                                        |                                                                |       | 310   |       |  |       | 310   |      
|                            |                            |                                                                             |                                                                |       |       |      
|                            |                            |                                                                             | Total long-term financing obligations, less current maturities |       | $     | 3,447 |  |       | $     | 5,011 | 
|                            |                            |                                                                             |                                                                |       |       |      

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|                                              |                                 |      |                                     |               |   |              |           |  |   |          |  |  |  |      | 
|--------------------------------------------- | ------------------------------- | ---- | ----------------------------------- | ------------- | - | ------------ | --------- |  | - | -------- |  |  |  | ---- | 
|                                              |                                 |      |                                     | Interest      |   |              |           |  |  
|Company                                       |                                 | Type |                                     | Rate          |   |              | Principal |  |   | Due Date | 
|                                              |                                 |      |                                     |               |   |              |           |  |   |          | 
|                                              |                                 |      |                                     | (In millions) |  
|Issuances and other increases                 |                                 |      |                                     |               |   |              |           |  |   |          |  |  |  |     
|                                              | Blue Lake Gas
    Storage(1)    |      | Non-recourse term loan              |               |   | LIBOR + 1.2% |           |  | $ | 14       |  |  |  | 2006 | 
|                                              |                                 |      |                                     |               |   |              |           |  |   |          | 
|                                              |                                 |      | Increase through December 31, 2004  |               |   | 14           |           |  |   |          | 
|                                              | Colorado Interstate Gas Company |      | Senior Notes                        |               |   | 5.95%        |           |  |   | 200      |  |  |  | 2015 | 
|                                              |                                 |      |                                     |               |   |              |           |  |   |          | 
|                                              |                                 |      | Increase through date of filing     |               | $ | 214          |           |  |   |          | 
|                                              |                                 |      |                                     |               |   |              |           |  |   |          | 
|Repayments, repurchases and other retirements |                                 |      |                                     |               |   |              |           |  |   |          |  | 
|                                              | El Paso CGP                     |      | Note                                |               |   | LIBOR + 3.5% |           |  | $ | 200      |  |  |  |      | 
|                                              | El Paso CGP                     |      | Note                                |               |   | 6.2%         |           |  |   | 190      |  |  |  |      | 
|                                              | Mohawk River Funding
    IV(2)  |      | Non-recourse note                   |               |   | 7.75%        |           |  |   | 72       |  |  |  |      | 
|                                              | UCF(2)                          |      | Non-recourse senior notes           |               |   | 7.944%       |           |  |   | 815      |  |  |  |      | 
|                                              | El Paso CGP                     |      | Notes                               |               |   | Various      |           |  |   | 185      |  |  |  |      | 
|                                              | El Paso CGP                     |      | Senior Debentures                   |               |   | 10.25%       |           |  |   | 38       |  |  |  |      | 
|                                              | Other                           |      | Long-term debt                      |               |   | Various      |           |  |   | 79       |  |  |  |      | 
|                                              |                                 |      |                                     |               |   |              |           |  |   |          | 
|                                              |                                 |      | Decreases through December 31, 2004 |               |   | 1,579        |           |  |   |          | 
|                                              | Other                           |      | Long-term debt                      |               |   | Various      |           |  |   | 42       |  |  |  |      | 
|                                              |                                 |      |                                     |               |   |              |           |  |   |          | 
|                                              |                                 |      | Decreases through date of filing    |               | $ | 1,621        |           |  |   |          | 
|                                              |                                 |      |                                     |               |   |              |           |  |   |          | 






|    |                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------
|(1) | This debt was consolidated as a result of adopting
    FIN No. 46 (see Note 1).                                                      
|(2) | The remaining balance of these debt obligations was eliminated
    when we sold our interests in Mohawk River Funding IV and
    UCF.



|           |                                                                         |   |       |       | 
|---------- | ----------------------------------------------------------------------- | - | ----- | ----- | 
|2005       |                                                                         | $ | 310   |      
|2006       |                                                                         |   | 330   |      
|2007       |                                                                         |   | 8     |      
|2008       |                                                                         |   | 416   |      
|2009       |                                                                         |   | 201   |      
|Thereafter |                                                                         |   | 2,499 |      
|           |                                                                         |   |      
|           | Total long-term financing obligations, including current
    maturities |   | $     | 3,764 | 
|           |                                                                         |   |      



Credit Facilities






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Restrictive Covenants








Other Financing Arrangements


Coastal Finance I.


Non-Recourse Project Financings.







|    |                              
|--- | -----------------------------
|13. | Commitments and Contingencies

Legal Proceedings


Grynberg.


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In re: Natural Gas Royalties Qui Tam Litigation


Will Price (formerly Quinque). Will Price,
et al. v. Gas Pipelines and Their Predecessors,
et al.


MTBE.


Reserves. GlickenHaus &
Co. et. al. v. El Paso Corporation, El Paso
CGP Company, et. al. Oscar S. Wyatt et. al.
v. El Paso Corporation et. al.


Governmental Investigations


Governmental and Other Reviews.


Reserve Revisions.


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Storage Reporting.


Iraq Oil Sales.






Environmental Matters






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|              |       |                   |    |     |      |   |     |     | 
|------------- | ----- | ----------------- | -- | --- | ---- | - | --- | --- | 
|              |       | December 31, 2004 |   
|              |       |                   |   
|Sites         |       | Expected          |    |     | High |  
|              |       |                   |    |     |      |  
|              |       | (In millions)     |   
|Operating     |       | $                 | 44 |     |      | $ | 49  |    
|Non-operating |       |                   | 80 |     |      |   | 141 |    
|Superfund     |       |                   | 4  |     |      |   | 9   |    
|              |       |                   |    |     |      |  
|              | Total |                   | $  | 128 |      |   | $   | 199 | 
|              |       |                   |    |     |      |  



|                                                 |  |   |     |  
|------------------------------------------------ |  | - | --- | -
|Balance as of January 1, 2004                    |  | $ | 131 |  
|Additions/adjustments for remediation activities |  |   | 9   |  
|Payments for remediation activities              |  |   | (18 | )
|Other changes, net                               |  |   | 6   |  
|                                                 |  |   |    
|Balance as of December 31, 2004                  |  | $ | 128 |  
|                                                 |  |   |    



CERCLA Matters.




Rates and Regulatory
Matters


Pipeline Integrity Costs.


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Inquiry Regarding Income Tax Allowances.


Selective Discounting Notice of Inquiry.


Commitments and Purchase
Obligations


Operating Leases.


|             |       |                     |    |     | 
|------------ | ----- | ------------------- | -- | --- | 
|Year Ending  |       |                    
|December 31, |       | Operating Leases(1) |   
|             |       |                     |   
|             |       | (In millions)       |   
|2005         |       | $                   | 30 |    
|2006         |       |                     | 18 |    
|2007         |       |                     | 15 |    
|2008         |       |                     | 14 |    
|2009         |       |                     | 14 |    
|Thereafter   |       |                     | 57 |    
|             |       |                     |   
|             | Total |                     | $  | 148 | 
|             |       |                     |   






|    |                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | These amounts exclude our proportional share of minimum annual
    rental commitments paid by El Paso, which are allocated to
    us through an overhead allocation.



Guarantees.


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Other Commercial Commitments.







|    |                    
|--- | -------------------
|14. | Retirement Benefits

Pension and Retirement Benefits














|                              |                                                     |               |   |       |                |  |   |      |   |  |      |     |   |  |   |     |  
|----------------------------- | --------------------------------------------------- | ------------- | - | ----- | -------------- |  | - | ---- | - |  | ---- | --- | - |  | - | --- | -
|                              |                                                     |               |   | Other |               
|                              |                                                     | Pension       |   |       | Postretirement | 
|                              |                                                     | Benefits      |   |       | Benefits       | 
|                              |                                                     |               |   |       |                | 
|                              |                                                     | 2004          |   |       | 2003           |  |   | 2004 |   |  | 2003 |    
|                              |                                                     |               |   |       |                |  |   |      |   |  |      |    
|                              |                                                     | (In millions) |  
|Change in benefit obligation: |                                                     |               |   |       |                |  |   |      |   |  |      |     |   |  |   |    
|                              | Projected benefit obligation at beginning of period |               | $ | 81    |                |  | $ | 79   |   |  | $    | 100 |   |  | $ | 102 |  
|                              | Service cost                                        |               |   |      |                |  |   | 2    |   |  |      |    |   |  |   |    |  
|                              | Interest cost                                       |               |   | 5     |                |  |   | 4    |   |  |      | 6   |   |  |   | 6   |  
|                              | Participant contributions                           |               |   |      |                |  |   |     |   |  |      | 5   |   |  |   | 5   |  
|                              | Curtailment and special termination benefit         |               |   |      |                |  |   | (8   | ) |  |      |    |   |  |   | (6  | )
|                              | Actuarial loss (gain)                               |               |   | 7     |                |  |   | 7    |   |  |      | (1  | ) |  |   | 10  |  
|                              | Projected benefits paid                             |               |   | (4    | )              |  |   | (3   | ) |  |      | (15 | ) |  |   | (17 | )
|                              |                                                     |               |   |       |                |  |   |      |   |  |      |    
|                              | Projected benefit obligation at end of period       |               | $ | 89    |                |  | $ | 81   |   |  | $    | 95  |   |  | $ | 100 |  
|                              |                                                     |               |   |       |                |  |   |      |   |  |      |    

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|                                 |                                                     |               |   |       |                |  |   |      |   |  |      |     |   |  |   |     |  
|-------------------------------- | --------------------------------------------------- | ------------- | - | ----- | -------------- |  | - | ---- | - |  | ---- | --- | - |  | - | --- | -
|                                 |                                                     |               |   | Other |               
|                                 |                                                     | Pension       |   |       | Postretirement | 
|                                 |                                                     | Benefits      |   |       | Benefits       | 
|                                 |                                                     |               |   |       |                | 
|                                 |                                                     | 2004          |   |       | 2003           |  |   | 2004 |   |  | 2003 |    
|                                 |                                                     |               |   |       |                |  |   |      |   |  |      |    
|                                 |                                                     | (In millions) |  
|Change in plan assets:           |                                                     |               |   |       |                |  |   |      |   |  |      |     |   |  |   |    
|                                 | Fair value of plan assets at beginning of period    |               | $ | 63    |                |  | $ | 59   |   |  | $    | 59  |   |  | $ | 46  |  
|                                 | Actual return on plan assets                        |               |   | 7     |                |  |   | 7    |   |  |      | 5   |   |  |   | 8   |  
|                                 | Employer contributions                              |               |   |      |                |  |   |     |   |  |      | 17  |   |  |   | 17  |  
|                                 | Participant contributions                           |               |   |      |                |  |   |     |   |  |      | 5   |   |  |   | 5   |  
|                                 | Projected benefits paid                             |               |   | (4    | )              |  |   | (3   | ) |  |      | (15 | ) |  |   | (17 | )
|                                 |                                                     |               |   |       |                |  |   |      |   |  |      |    
|                                 | Fair value of plan assets at end of period          |               | $ | 66    |                |  | $ | 63   |   |  | $    | 71  |   |  | $ | 59  |  
|                                 |                                                     |               |   |       |                |  |   |      |   |  |      |    
|Reconciliation of funded status: |                                                     |               |   |       |                |  |   |      |   |  |      |     |   |  |   |    
|                                 | Fair value of plan assets at September 30           |               | $ | 66    |                |  | $ | 63   |   |  | $    | 71  |   |  | $ | 59  |  
|                                 | Less: Projected benefit obligation at end of period |               |   | 89    |                |  |   | 81   |   |  |      | 95  |   |  |   | 100 |  
|                                 |                                                     |               |   |       |                |  |   |      |   |  |      |    
|                                 | Funded status at September 30                       |               |   | (23   | )              |  |   | (18  | ) |  |      | (24 | ) |  |   | (41 | )
|                                 | Fourth quarter contributions and income             |               |   |      |                |  |   |     |   |  |      | 3   |   |  |   | 4   |  
|                                 | Unrecognized net actuarial loss (gain)              |               |   | 30    |                |  |   | 25   |   |  |      | (27 | ) |  |   | (24 | )
|                                 |                                                     |               |   |       |                |  |   |      |   |  |      |    
|                                 | Prepaid (accrued) benefit cost at December 31,      |               | $ | 7     |                |  | $ | 7    |   |  | $    | (48 | ) |  | $ | (61 | )
|                                 |                                                     |               |   |       |                |  |   |      |   |  |      |    

|                                                                          |                                      |               |   |     |      |  |   |     |  
|------------------------------------------------------------------------- | ------------------------------------ | ------------- | - | --- | ---- |  | - | --- | -
|                                                                          |                                      | Pension       |  
|                                                                          |                                      | Benefits      |  
|                                                                          |                                      |               |  
|                                                                          |                                      | 2004          |   |     | 2003 | 
|                                                                          |                                      |               |   |     |      | 
|                                                                          |                                      | (In millions) |  
|Amounts recognized in the statement of financial position
    consist of: |                                      |               |   |     |      |  |   |    
|                                                                          | Accrued benefit liability            |               | $ | (23 | )    |  | $ | (18 | )
|                                                                          | Accumulated other comprehensive loss |               |   | 30  |      |  |   | 25  |  
|                                                                          |                                      |               |   |     |      | 
|                                                                          | Net amount recognized at year-end    |               | $ | 7   |      |  | $ | 7   |  
|                                                                          |                                      |               |   |     |      | 



|                               |  |               |    |  |      |   |    | 
|------------------------------ |  | ------------- | -- |  | ---- | - | -- | 
|                               |  | 2004          |    |  | 2003 |  
|                               |  |               |    |  |      |  
|                               |  | (In millions) |   
|Projected benefit obligation   |  | $             | 89 |  |      | $ | 81 | 
|Accumulated benefit obligation |  |               | 89 |  |      |   | 81 | 
|Fair value of plan assets      |  |               | 66 |  |      |   | 63 | 

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|             |       |                  |    |                      |             |   |    |    | 
|------------ | ----- | ---------------- | -- | -------------------- | ----------- | - | -- | -- | 
|Year Ending  |       |                  |    | Other Postretirement |            
|December 31, |       | Pension Benefits |    |                      | Benefits(1) |  
|             |       |                  |    |                      |             |  
|             |       | (In millions)    |   
|2005         |       | $                | 4  |                      |             | $ | 10 |   
|2006         |       |                  | 4  |                      |             |   | 9  |   
|2007         |       |                  | 4  |                      |             |   | 9  |   
|2008         |       |                  | 4  |                      |             |   | 9  |   
|2009         |       |                  | 4  |                      |             |   | 8  |   
|2010-2014    |       |                  | 24 |                      |             |   | 40 |   
|             |       |                  |    |                      |             |  
|             | Total |                  | $  | 44                   |             |   | $  | 85 | 
|             |       |                  |    |                      |             |  






|    |                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes a reduction of less than $1 million in each year
    for an expected subsidy related to the Medicare Prescription
    Drug, Improvement, and Modernization Act of 2003.



|                                             |                           |                         |    |       |                         |   |    |      |  |   |      |   |  |      |    |   |      |   |    |    |   |   |    |   | 
|-------------------------------------------- | ------------------------- | ----------------------- | -- | ----- | ----------------------- | - | -- | ---- |  | - | ---- | - |  | ---- | -- | - | ---- | - | -- | -- | - | - | -- | - | 
|                                             |                           |                         |    | Other |                        
|                                             |                           | Pension Benefits        |    |       | Postretirement Benefits |  
|                                             |                           |                         |    |       |                         |  
|                                             |                           | Year Ended December 31, |   
|                                             |                           |                         |   
|                                             |                           | 2004                    |    |       | 2003                    |   |    | 2002 |  |   | 2004 |   |  | 2003 |    |   | 2002 |  
|                                             |                           |                         |    |       |                         |   |    |      |  |   |      |   |  |      |    |   |      |  
|                                             |                           | (In millions)           |   
|Service cost                                 |                           | $                       |   |       |                         | $ | 2  |      |  | $ | 3    |   |  | $    |   |   |      | $ |   |    |   | $ | 1  |  
|Interest cost                                |                           |                         | 5  |       |                         |   | 5  |      |  |   | 5    |   |  |      | 6  |   |      |   | 6  |    |   |   | 8  |  
|Expected return on plan assets               |                           |                         | (5 | )     |                         |   | (6 | )    |  |   | (7   | ) |  |      | (3 | ) |      |   | (2 | )  |   |   | (2 | )
|Amortization of net actuarial loss           |                           |                         |   |       |                         |   |   |      |  |   |     |   |  |      | (1 | ) |      |   | (1 | )  |   |   | (1 | )
|Curtailment and special termination benefits |                           |                         |   |       |                         |   | 1  |      |  |   |     |   |  |      |   |   |      |   | (6 | )  |   |   |   |  
|                                             |                           |                         |    |       |                         |   |    |      |  |   |      |   |  |      |    |   |      |  
|                                             | Net benefit cost (income) |                         | $  |      |                         |   | $  | 2    |  |   | $    | 1 |  |      | $  | 2 |      |   | $  | (3 | ) |   | $  | 6 | 
|                                             |                           |                         |    |       |                         |   |    |      |  |   |      |   |  |      |    |   |      |  





|                                                                         |                                       |                  |  |      |                               |  |  |      |  |  |      |      |  |      |  |      |      |  |  |      |  |  |  |      | 
|------------------------------------------------------------------------ | ------------------------------------- | ---------------- |  | ---- | ----------------------------- |  |  | ---- |  |  | ---- | ---- |  | ---- |  | ---- | ---- |  |  | ---- |  |  |  | ---- | 
|                                                                         |                                       | Pension Benefits |  |      | Other Postretirement Benefits | 
|                                                                         |                                       |                  |  |      |                               | 
|                                                                         |                                       | 2004             |  |      | 2003                          |  |  | 2002 |  |  | 2004 |      |  | 2003 |  |      | 2002 | 
|                                                                         |                                       |                  |  |      |                               |  |  |      |  |  |      |      |  |      |  |      |      | 
|                                                                         |                                       | (Percent)        |  |      | (Percent)                     | 
|Assumptions related to benefit obligations at September 30:              |                                       |                  |  |      |                               |  |  |      |  |  |      |      |  |      |  |      |      |  |  |      |  |  |  |     
|                                                                         | Discount rate                         |                  |  | 5.75 |                               |  |  | 6.00 |  |  |      |      |  |      |  | 5.75 |      |  |  | 6.00 |  |  |  |      | 
|Assumptions related to benefit costs for the year ended December
    31: |                                       |                  |  |      |                               |  |  |      |  |  |      |      |  |      |  |      |      |  |  |      |  |  |  |     
|                                                                         | Discount rate                         |                  |  | 6.00 |                               |  |  | 6.75 |  |  |      | 7.25 |  |      |  | 6.00 |      |  |  | 6.75 |  |  |  | 7.25 | 
|                                                                         | Expected return on plan
    assets(1) |                  |  | 8.50 |                               |  |  | 8.80 |  |  |      | 8.80 |  |      |  | 7.50 |      |  |  | 7.50 |  |  |  | 7.50 | 
|                                                                         | Rate of compensation increase         |                  |  |     | (2)                           |  |  | 4.00 |  |  |      | 4.00 |  |      |  |      |      |  |  |      |  |  |  |      | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The expected return on plan assets is a pre-tax rate (before a
    tax rate ranging from 35 percent to 39 percent on
    other postretirement benefits) that is primarily based on an
    expected risk-free investment return, adjusted for historical
    risk premiums and specific risk adjustments associated with our
    debt and equity securities. These expected returns were then
    weighted based on our target asset allocations of our investment
    portfolio. For 2005, the assumed expected return on assets for
    pension benefits will be reduced to 8 percent.
|(2) | In 2003, our pension plan was closed to new participants and, as
    a result, it provides benefits solely to former employees.                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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Plan Assets




|                         |       |               |    |     |                            |  |    |             |  |  |        |     |  |             |    |     |             |  |    |     |  |  |    |     | 
|------------------------ | ----- | ------------- | -- | --- | -------------------------- |  | -- | ----------- |  |  | ------ | --- |  | ----------- | -- | --- | ----------- |  | -- | --- |  |  | -- | --- | 
|                         |       | Pension Plans |    |     | Other Postretirement Plans | 
|                         |       |               |    |     |                            | 
|Asset Category           |       | Target        |    |     | Actual 2004                |  |    | Actual 2003 |  |  | Target |     |  | Actual 2004 |    |     | Actual 2003 | 
|                         |       |               |    |     |                            |  |    |             |  |  |        |     |  |             |    |     |             | 
|                         |       | (Percent)     |    |     | (Percent)                  | 
|Equity
    securities(1) |       |               | 60 |     |                            |  | 62 |             |  |  | 70     |     |  |             | 65 |     |             |  | 58 |     |  |  | 28 |    
|Debt securities          |       |               | 40 |     |                            |  | 37 |             |  |  | 29     |     |  |             | 35 |     |             |  | 32 |     |  |  | 58 |    
|Other                    |       |               |   |     |                            |  | 1  |             |  |  | 1      |     |  |             |   |     |             |  | 10 |     |  |  | 14 |    
|                         |       |               |    |     |                            |  |    |             |  |  |        |     |  |             |    |     |             | 
|                         | Total |               |    | 100 |                            |  |    | 100         |  |  |        | 100 |  |             |    | 100 |             |  |    | 100 |  |  |    | 100 | 
|                         |       |               |    |     |                            |  |    |             |  |  |        |     |  |             |    |     |             | 






|    |                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Actuals for our pension plans include $2 million
    (3 percent of total assets) and $1 million
    (2.1 percent of total assets) of El Pasos common
    stock at September 30, 2004 and September 30, 2003.










|    |                             
|--- | ----------------------------
|15. | Business Segment Information





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|                                                                  |                                          |               |      |     |      |   |      |      |  |   |      |     | 
|----------------------------------------------------------------- | ---------------------------------------- | ------------- | ---- | --- | ---- | - | ---- | ---- |  | - | ---- | --- | 
|                                                                  |                                          | 2004          |      |     | 2003 |   |      | 2002 | 
|                                                                  |                                          |               |      |     |      |   |      |      | 
|                                                                  |                                          | (In millions) |     
|Total EBIT                                                        |                                          | $             | 312  |     |      | $ | 707  |      |  | $ | 958  |    
|Interest and debt expense                                         |                                          |               | (341 | )   |      |   | (407 | )    |  |   | (425 | )  
|Affiliated interest expense, net                                  |                                          |               |     |     |      |   | (41  | )    |  |   | (9   | )  
|Distributions on preferred interests of consolidated subsidiaries |                                          |               |     |     |      |   | (17  | )    |  |   | (35  | )  
|Income taxes                                                      |                                          |               | (12  | )   |      |   | (43  | )    |  |   | (143 | )  
|                                                                  |                                          |               |      |     |      |   |      |      | 
|                                                                  | Income (loss) from continuing operations |               | $    | (41 | )    |   | $    | 199  |  |   | $    | 346 | 
|                                                                  |                                          |               |      |     |      |   |      |      | 

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|                                                                                                  |            |                                               |     |       |               |       |     |       |     |   |          |     |  |              |    |     |       |   |     |     |  |   |      |       | 
|------------------------------------------------------------------------------------------------- | ---------- | --------------------------------------------- | --- | ----- | ------------- | ----- | --- | ----- | --- | - | -------- | --- |  | ------------ | -- | --- | ----- | - | --- | --- |  | - | ---- | ----- | 
|                                                                                                  |            | Segments                                      |    
|                                                                                                  |            | As of or for the Year Ended December 31, 2004 |    
|                                                                                                  |            |                                               |    
|                                                                                                  |            | Regulated                                     |     |       | Non-regulated |       |     |      
|                                                                                                  |            |                                               |     |       |               |       |     |      
|                                                                                                  |            |                                               |     |       |               | Field |     |       |    
|                                                                                                  |            | Pipelines                                     |     |       | Production    |       |     | Power |     |   | Services |     |  | Corporate(1) |    |     | Total |  
|                                                                                                  |            |                                               |     |       |               |       |     |       |     |   |          |     |  |              |    |     |       |  
|                                                                                                  |            | (In millions)                                 |    
|Revenues from external customers                                                                  |            |                                               |     |       |               |       |     |       |     |   |          |     |  |              |    |     |       |   |     |     |  |   |      |      
|                                                                                                  | Domestic   |                                               | $   | 848   |               |       | $   | 646   | (2) |   | $        | 59  |  |              | $  | 481 |       |   | $   | 53  |  |   | $    | 2,087 | 
|                                                                                                  | Foreign    |                                               |     |      |               |       |     |      |     |   |          | 90  |  |              |    |    |       |   |     |    |  |   |      | 90    | 
|Intersegment revenue                                                                              |            |                                               | 10  |       |               |       | 44  |       |     |   |         |     |  |              | 1  |     |       |   | (55 | )   |  |   |     |      
|Operation and maintenance                                                                         |            |                                               | 252 |       |               |       | 173 |       |     |   | 83       |     |  |              | 26 |     |       |   | (4  | )   |  |   | 530  |      
|Depreciation, depletion and amortization                                                          |            |                                               | 123 |       |               |       | 315 |       |     |   | 11       |     |  |              | 6  |     |       |   | 12  |     |  |   | 467  |      
|Loss (gain) on long-lived assets                                                                  |            |                                               | (1  | )     |               |       |    |       |     |   | 102      |     |  |              | 5  |     |       |   |    |     |  |   | 106  |      
|Operating income (loss)                                                                           |            | $                                             | 350 |       |               | $     | 174 |       |     | $ | (97      | )   |  | $            | 46 |     |       | $ | 2   |     |  | $ | 475  |      
|Earnings (losses) from unconsolidated affiliates                                                  |            |                                               | 72  |       |               |       | (3  | )     |     |   | (273     | )   |  |              | 11 |     |       |   |    |     |  |   | (193 | )    
|Other income                                                                                      |            |                                               | 17  |       |               |       |    |       |     |   | 15       |     |  |              |   |     |       |   | 12  |     |  |   | 44   |      
|Other expense                                                                                     |            |                                               | (5  | )     |               |       |    |       |     |   | 6        |     |  |              | (2 | )   |       |   | (13 | )   |  |   | (14  | )    
|                                                                                                  |            |                                               |     |       |               |       |     |       |     |   |          |     |  |              |    |     |       |  
|EBIT                                                                                              |            | $                                             | 434 |       |               | $     | 171 |       |     | $ | (349     | )   |  | $            | 55 |     |       | $ | 1   |     |  | $ | 312  |      
|                                                                                                  |            |                                               |     |       |               |       |     |       |     |   |          |     |  |              |    |     |       |  
|Discontinued operations, net of income taxes
    (Restated)(6)                                    |            | $                                             |    |       |               | $     | (36 | )     |     | $ |         |     |  | $            |   |     |       | $ | (79 | )   |  | $ | (115 | )    
|Assets of continuing
    operations(3)                                                            |            |                                               |     |       |               |       |     |       |     |   |          |     |  |              |    |     |       |   |     |     |  |   |      |      
|                                                                                                  | Domestic   |                                               |     | 5,717 |               |       |     | 1,769 |     |   |          | 223 |  |              |    | 312 |       |   |     | 425 |  |   |      | 8,446 | 
|                                                                                                  | Foreign(4) |                                               |     |      |               |       |     | 231   |     |   |          | 493 |  |              |    |    |       |   |     | 68  |  |   |      | 792   | 
|Capital expenditures and investments in and advances to
    unconsolidated affiliates,
    net(5) |            |                                               | 527 |       |               |       | 276 |       |     |   | (1       | )   |  |              | 9  |     |       |   | 1   |     |  |   | 812  |      
|Total investments in unconsolidated affiliates                                                    |            |                                               | 362 |       |               |       |    |       |     |   | 478      |     |  |              | 48 |     |       |   | 6   |     |  |   | 894  |      









|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes eliminations of intercompany transactions. Our
    intersegment revenues, along with our intersegment operating
    expenses, were incurred in the normal course of business between
    our operating segments. We recorded an intersegment revenue
    elimination of $55 million and an operation and maintenance
    elimination of less than $1 million, which is included in
    the Corporate column, to remove intersegment
    transactions.
|(2) | Revenues from external customers include gains and losses
    related to our hedging of price risk associated with our natural
    gas and oil production.                                                                                                                                                                                                                                                                                                      
|(3) | Excludes assets of discontinued operations of $106 million
    (see Note 2).                                                                                                                                                                                                                                                                                                                                                                                    
|(4) | Of total foreign assets, approximately $352 million relates
    to property, plant, and equipment and approximately
    $360 million relates to investments in and advances to
    unconsolidated affiliates.                                                                                                                                                                                                                                                   
|(5) | Amounts are net of third party reimbursements of our capital
    expenditures and returns of invested capital.                                                                                                                                                                                                                                                                                                                                                  
|   
|(6) | See Note 1 to the consolidated financial statements for a
    discussion of the restatement of these amounts.                                                                                                                                                                                                                                                                                                                                                   
|   

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|                                                                                                  |                            |                                               |     |       |               |       |     |       |     |   |          |       |  |              |     |     |       |   |        |     |  |   |        |       | 
|------------------------------------------------------------------------------------------------- | -------------------------- | --------------------------------------------- | --- | ----- | ------------- | ----- | --- | ----- | --- | - | -------- | ----- |  | ------------ | --- | --- | ----- | - | ------ | --- |  | - | ------ | ----- | 
|                                                                                                  |                            | Segments                                      |    
|                                                                                                  |                            | As of or for the Year Ended December 31, 2003 |    
|                                                                                                  |                            |                                               |    
|                                                                                                  |                            | Regulated                                     |     |       | Non-regulated |       |     |      
|                                                                                                  |                            |                                               |     |       |               |       |     |      
|                                                                                                  |                            |                                               |     |       |               | Field |     |       |    
|                                                                                                  |                            | Pipelines                                     |     |       | Production    |       |     | Power |     |   | Services |       |  | Corporate(1) |     |     | Total |  
|                                                                                                  |                            |                                               |     |       |               |       |     |       |     |   |          |       |  |              |     |     |       |  
|                                                                                                  |                            | (In millions)                                 |    
|Revenues from external customers                                                                  |                            |                                               |     |       |               |       |     |       |     |   |          |       |  |              |     |     |       |   |        |     |  |   |        |      
|                                                                                                  | Domestic                   |                                               | $   | 915   |               |       | $   | 710   | (2) |   | $        | 175   |  |              | $   | 328 |       |   | $      | 38  |  |   | $      | 2,166 | 
|                                                                                                  | Foreign                    |                                               |     | 2     |               |       |     |      |     |   |          | 77    |  |              |     | 2   |       |   |        |    |  |   |        | 81    | 
|Intersegment revenue                                                                              |                            |                                               | 1   |       |               |       | 112 |       |     |   |         |       |  |              | 26  |     |       |   | (55    | )   |  |   | 84     | (3)  
|Operation and maintenance                                                                         |                            |                                               | 246 |       |               |       | 164 |       |     |   | 105      |       |  |              | 20  |     |       |   | (7     | )   |  |   | 528    |      
|Depreciation, depletion and amortization                                                          |                            |                                               | 108 |       |               |       | 347 |       |     |   | 14       |       |  |              | 7   |     |       |   | 11     |     |  |   | 487    |      
|Ceiling test charges                                                                              |                            |                                               |    |       |               |       | 39  |       |     |   |         |       |  |              |    |     |       |   |       |     |  |   | 39     |      
|Loss (gain) on long-lived assets                                                                  |                            |                                               | (11 | )     |               |       | 5   |       |     |   | 28       |       |  |              | (13 | )   |       |   | (1     | )   |  |   | 8      |      
|Operating income (loss)                                                                           |                            | $                                             | 397 |       |               | $     | 207 |       |     | $ | 22       |       |  | $            | 41  |     |       | $ | (19    | )   |  | $ | 648    |      
|Earnings (losses) from unconsolidated affiliates                                                  |                            |                                               | 75  |       |               |       | 10  |       |     |   | (6       | )     |  |              | (93 | )   |       |   | 2      |     |  |   | (12    | )    
|Other income                                                                                      |                            |                                               | 32  |       |               |       | 2   |       |     |   | 13       |       |  |              |    |     |       |   | 19     |     |  |   | 66     |      
|Other expense                                                                                     |                            |                                               | (4  | )     |               |       |    |       |     |   | 10       |       |  |              |    |     |       |   | (1     | )   |  |   | 5      |      
|                                                                                                  |                            |                                               |     |       |               |       |     |       |     |   |          |       |  |              |     |     |       |  
|EBIT                                                                                              |                            | $                                             | 500 |       |               | $     | 219 |       |     | $ | 39       |       |  | $            | (52 | )   |       | $ | 1      |     |  | $ | 707    |      
|                                                                                                  |                            |                                               |     |       |               |       |     |       |     |   |          |       |  |              |     |     |       |  
|Discontinued operations, net of income taxes
    (Restated)(6)                                    |                            | $                                             |    |       |               | $     | 11  |       |     | $ |         |       |  | $            |    |     |       | $ | (1,297 | )   |  | $ | (1,286 | )    
|Cumulative effect of accounting changes, net of income taxes                                      |                            |                                               | (4  | )     |               |       | (6  | )     |     |   |         |       |  |              | (2  | )   |       |   |       |     |  |   | (12    | )    
|Assets of continuing
    operations(4)                                                            |                            |                                               |     |       |               |       |     |       |     |   |          |       |  |              |     |     |       |   |        |     |  |   |        |      
|                                                                                                  | Domestic
    (Restated)(6) |                                               |     | 5,271 |               |       |     | 1,950 |     |   |          | 1,533 |  |              |     | 224 |       |   |        | 695 |  |   |        | 9,673 | 
|                                                                                                  | Foreign                    |                                               |     |      |               |       |     | 233   |     |   |          | 601   |  |              |     |    |       |   |        | 99  |  |   |        | 933   | 
|Capital expenditures and investments in and advances to
    unconsolidated affiliates,
    net(5) |                            |                                               | 192 |       |               |       | 600 |       |     |   | (4       | )     |  |              | 14  |     |       |   | (19    | )   |  |   | 783    |      
|Total investments in unconsolidated affiliates                                                    |                            |                                               | 397 |       |               |       | 52  |       |     |   | 804      |       |  |              | 54  |     |       |   | 5      |     |  |   | 1,312  |      







|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes eliminations of intercompany transactions. Our
    intersegment revenues, along with our intersegment operating
    expenses, were incurred in the normal course of business between
    our operating segments. We recorded an intersegment revenue
    elimination of $48 million and an operation and maintenance
    expense elimination of $1 million which is included in the
    Corporate column, to remove intersegment
    transactions.
|(2) | Revenues from external customers include gains and losses
    related to our hedging of price risk associated with our natural
    gas and oil production.                                                                                                                                                                                                                                                                                                   
|(3) | Relates to intercompany activities between our continuing
    operating segments and our discontinued petroleum markets
    operations.                                                                                                                                                                                                                                                                                                                      
|(4) | Excludes assets of discontinued operations of $1.8 billion
    (see Note 2).                                                                                                                                                                                                                                                                                                                                                                                 
|(5) | Amounts are net of third party reimbursements of our capital
    expenditures and returns of invested capital.                                                                                                                                                                                                                                                                                                                                               
|   
|(6) | See Note 1 to the consolidated financial statements for a
    discussion of the restatement of these amounts.                                                                                                                                                                                                                                                                                                                                                
|   

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|                                                                                                  |          |                                               |     |       |               |       |     |       |     |   |          |       |  |              |     |     |       |   |      |     |  |   |       |        | 
|------------------------------------------------------------------------------------------------- | -------- | --------------------------------------------- | --- | ----- | ------------- | ----- | --- | ----- | --- | - | -------- | ----- |  | ------------ | --- | --- | ----- | - | ---- | --- |  | - | ----- | ------ | 
|                                                                                                  |          | Segments                                      |    
|                                                                                                  |          | As of or for the Year Ended December 31, 2002 |    
|                                                                                                  |          |                                               |    
|                                                                                                  |          | Regulated                                     |     |       | Non-regulated |       |     |      
|                                                                                                  |          |                                               |     |       |               |       |     |      
|                                                                                                  |          |                                               |     |       |               | Field |     |       |    
|                                                                                                  |          | Pipelines                                     |     |       | Production    |       |     | Power |     |   | Services |       |  | Corporate(1) |     |     | Total |  
|                                                                                                  |          |                                               |     |       |               |       |     |       |     |   |          |       |  |              |     |     |       |  
|                                                                                                  |          | (In millions)                                 |    
|Revenues from external customers                                                                  |          |                                               |     |       |               |       |     |       |     |   |          |       |  |              |     |     |       |   |      |     |  |   |       |       
|                                                                                                  | Domestic |                                               | $   | 901   |               |       | $   | 1,092 | (2) |   | $        | 1,051 |  |              | $   | 404 |       |   | $    | 48  |  |   | $     | 3,496  | 
|                                                                                                  | Foreign  |                                               |     | 3     |               |       |     |      |     |   |          | 154   |  |              |     | 3   |       |   |      |    |  |   |       | 160    | 
|Intersegment revenue                                                                              |          |                                               | 30  |       |               |       | 95  |       |     |   | 11       |       |  |              | 53  |     |       |   | (63  | )   |  |   | 126   | (3)   
|Operation and maintenance expenses                                                                |          |                                               | 235 |       |               |       | 219 |       |     |   | 239      |       |  |              | 45  |     |       |   | 17   |     |  |   | 755   |       
|Depreciation, depletion and amortization                                                          |          |                                               | 116 |       |               |       | 447 |       |     |   | 19       |       |  |              | 14  |     |       |   | 13   |     |  |   | 609   |       
|Ceiling test charges                                                                              |          |                                               |    |       |               |       | 422 |       |     |   |         |       |  |              |    |     |       |   |     |     |  |   | 422   |       
|Loss (gain) on long-lived assets                                                                  |          |                                               | (12 | )     |               |       | 1   |       |     |   | 18       |       |  |              | (21 | )   |       |   | 2    |     |  |   | (12   | )     
|Operating income (loss)                                                                           |          | $                                             | 419 |       |               | $     | 24  |       |     | $ | 397      |       |  | $            | 68  |     |       | $ | (63  | )   |  | $ | 845   |       
|Earnings (losses) from unconsolidated affiliates                                                  |          |                                               | 105 |       |               |       | 4   |       |     |   | 57       |       |  |              | (53 | )   |       |   |     |     |  |   | 113   |       
|Other income                                                                                      |          |                                               | 16  |       |               |       | 1   |       |     |   | 19       |       |  |              |    |     |       |   | 34   |     |  |   | 70    |       
|Other expense                                                                                     |          |                                               | (3  | )     |               |       |    |       |     |   | (57      | )     |  |              |    |     |       |   | (10  | )   |  |   | (70   | )     
|                                                                                                  |          |                                               |     |       |               |       |     |       |     |   |          |       |  |              |     |     |       |  
|EBIT                                                                                              |          | $                                             | 537 |       |               | $     | 29  |       |     | $ | 416      |       |  | $            | 15  |     |       | $ | (39  | )   |  | $ | 958   |       
|                                                                                                  |          |                                               |     |       |               |       |     |       |     |   |          |       |  |              |     |     |       |  
|Discontinued operations, net of income taxes                                                      |          | $                                             |    |       |               | $     | (38 | )     |     | $ |         |       |  | $            |    |     |       | $ | (357 | )   |  | $ | (395  | )     
|Cumulative effect of accounting changes, net of income taxes                                      |          |                                               |    |       |               |       |    |       |     |   | 14       |       |  |              |    |     |       |   |     |     |  |   | 14    |       
|Assets of continuing
    operations(4)                                                            |          |                                               |     |       |               |       |     |       |     |   |          |       |  |              |     |     |       |   |      |     |  |   |       |       
|                                                                                                  | Domestic |                                               |     | 5,128 |               |       |     | 2,203 |     |   |          | 1,698 |  |              |     | 451 |       |   |      | 583 |  |   |       | 10,063 | 
|                                                                                                  | Foreign  |                                               |     | 47    |               |       |     | 131   |     |   |          | 623   |  |              |     | 14  |       |   |      | 170 |  |   |       | 985    | 
|Capital expenditures and investments in and advances to
    unconsolidated affiliates,
    net(5) |          |                                               | 252 |       |               |       | 949 |       |     |   | (26      | )     |  |              | 20  |     |       |   | 99   |     |  |   | 1,294 |       
|Total investments in unconsolidated affiliates                                                    |          |                                               | 404 |       |               |       | 90  |       |     |   | 851      |       |  |              | 143 |     |       |   | 17   |     |  |   | 1,505 |       




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes eliminations of intercompany transactions. Our
    intersegment revenues, along with our intersegment operating
    expenses, were incurred in the normal course of business between
    our operating segments. We recorded an intersegment revenue
    elimination of $30 million and an operation and maintenance
    expense elimination of $5 million, which is included in the
    Corporate column, to remove intersegment
    transactions.
|(2) | Revenues from external customers include gains and losses
    related to our hedging of price risk associated with our natural
    gas and oil production.                                                                                                                                                                                                                                                                                                    
|(3) | Relates to intercompany activities between our continuing
    operating segments and our discontinued petroleum markets
    operations.                                                                                                                                                                                                                                                                                                                       
|(4) | Excludes assets of discontinued operations of $4.5 billion
    (see Note 2).                                                                                                                                                                                                                                                                                                                                                                                  
|(5) | Amounts are net of third party reimbursements of our capital
    expenditures and returns of invested capital.                                                                                                                                                                                                                                                                                                                                                

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|    |                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------
|16. | Investments in, Earnings from and Transactions with
    Unconsolidated Affiliates and Related Parties



|          |                                                        |                |  |         |               |  |               |                           |  |  |      |     |     |      |   |       |      |  |   |      |      |   |   |     |     |   |   |     |    | 
|--------- | ------------------------------------------------------ | -------------- |  | ------- | ------------- |  | ------------- | ------------------------- |  |  | ---- | --- | --- | ---- | - | ----- | ---- |  | - | ---- | ---- | - | - | --- | --- | - | - | --- | -- | 
|          |                                                        | Net Ownership  |  |         |               |  | Earnings from |                          
|          |                                                        | Interest       |  |         | Investment    |  |               | Unconsolidated Affiliates | 
|          |                                                        |                |  |         |               |  |               |                           | 
|          |                                                        | 2004           |  |         | 2003          |  |               | 2004                      |  |  | 2003 |     |     | 2004 |   |       | 2003 |  |   | 2002 |     
|          |                                                        |                |  |         |               |  |               |                           |  |  |      |     |     |      |   |       |      |  |   |      |     
|          |                                                        | (Percent)      |  |         | (In millions) |  |               | (In millions)             | 
|Domestic: |                                                        |                |  |         |               |  |               |                           |  |  |      |     |     |      |   |       |      |  |   |      |      |   |   |     |     |   |   |    
|          | Great Lakes Gas
    Transmission(1)                    |                |  | 50      |               |  |               | 50                        |  |  | $    | 316 |     |      | $ | 325   |      |  | $ | 65   |      |   | $ | 57  |     |   | $ | 63  |   
|          | Midland Cogeneration
    Venture(2)                    |                |  | 44      |               |  |               | 44                        |  |  |      | 191 |     |      |   | 348   |      |  |   | (171 | )    |   |   | 29  |     |   |   | 28  |   
|          | Javelina                                               |                |  | 40      |               |  |               | 40                        |  |  |      | 45  |     |      |   | 40    |      |  |   | 15   |      |   |   | (2  | )   |   |   |    |   
|          | Wyco Development                                       |                |  | 50      |               |  |               | 50                        |  |  |      | 26  |     |      |   | 24    |      |  |   | 2    |      |   |   | 2   |     |   |   | 2   |   
|          | Bastrop
    Company(3)                                 |                |  |        |               |  |               | 50                        |  |  |      |    |     |      |   | 73    |      |  |   | (1   | )    |   |   | (48 | )   |   |   | (5  | ) 
|          | Mobile Bay
    Processing(3)                           |                |  |        |               |  |               | 42                        |  |  |      |    |     |      |   | 11    |      |  |   |     |      |   |   | (48 | )   |   |   | (2  | ) 
|          | Blue Lake Gas
    Storage(4)                           |                |  |        |               |  |               | 75                        |  |  |      |    |     |      |   | 30    |      |  |   |     |      |   |   | 9   |     |   |   | 8   |   
|          | Dauphin
    Island(3)                                  |                |  |        |               |  |               | 15                        |  |  |      |    |     |      |   |      |      |  |   |     |      |   |   | (40 | )   |   |   | (1  | ) 
|          | Alliance Pipeline Limited
    Partnership(5)           |                |  |        |               |  |               |                          |  |  |      |    |     |      |   |      |      |  |   |     |      |   |   |    |     |   |   | 25  |   
|          | Aux Sable
    NGL(5)                                   |                |  |        |               |  |               |                          |  |  |      |    |     |      |   |      |      |  |   |     |      |   |   |    |     |   |   | (50 | ) 
|          | Other Domestic Investments                             |                |  | various |               |  |               | various                   |  |  |      | 29  |     |      |   | 77    |      |  |   | (3   | )    |   |   | 27  |     |   |   | 11  |   
|          |                                                        |                |  |         |               |  |               |                           |  |  |      |     |     |      |   |       |      |  |   |      |     
|          |                                                        | Total domestic |  |         |               |  |               |                           |  |  |      |     | 607 |      |   |       | 928  |  |   |      | (93  | ) |   |     | (14 | ) |   |     | 79 | 
|          |                                                        |                |  |         |               |  |               |                           |  |  |      |     |     |      |   |       |      |  |   |      |     
|Foreign:  |                                                        |                |  |         |               |  |               |                           |  |  |      |     |     |      |   |       |      |  |   |      |      |   |   |     |     |   |   |    
|          | EGE Itabo                                              |                |  | 25      |               |  |               | 25                        |  |  |      | 88  |     |      |   | 87    |      |  |   | 1    |      |   |   | 1   |     |   |   | (2  | ) 
|          | EGE Fortuna                                            |                |  | 25      |               |  |               | 25                        |  |  |      | 65  |     |      |   | 59    |      |  |   | 6    |      |   |   | 3   |     |   |   | 5   |   
|          | Khulna Power Company                                   |                |  | 74      |               |  |               | 74                        |  |  |      | 21  |     |      |   | 40    |      |  |   | (18  | )    |   |   | 1   |     |   |   | 1   |   
|          | Habibullah
    Power(6)                                |                |  | 50      |               |  |               | 50                        |  |  |      | 20  |     |      |   | 48    |      |  |   | (46  | )    |   |   | (3  | )   |   |   | 10  |   
|          | Saba Power Company                                     |                |  | 94      |               |  |               | 94                        |  |  |      | 7   |     |      |   | 59    |      |  |   | (51  | )    |   |   | 4   |     |   |   | 7   |   
|          | Other Foreign
    Investments(6)                       |                |  | various |               |  |               | various                   |  |  |      | 86  |     |      |   | 91    |      |  |   | 8    |      |   |   | (4  | )   |   |   | 13  |   
|          |                                                        |                |  |         |               |  |               |                           |  |  |      |     |     |      |   |       |      |  |   |      |     
|          |                                                        | Total foreign  |  |         |               |  |               |                           |  |  |      |     | 287 |      |   |       | 384  |  |   |      | (100 | ) |   |     | 2   |   |   |     | 34 | 
|          |                                                        |                |  |         |               |  |               |                           |  |  |      |     |     |      |   |       |      |  |   |      |     
|          | Total investments in unconsolidated affiliates         |                |  |         |               |  |               |                           |  |  | $    | 894 |     |      | $ | 1,312 |      |  |   |      |      |   |   |     |     |   |   |     |   
|          |                                                        |                |  |         |               |  |               |                           |  |  |      |     |     |      |   |       |      |  |   |      |     
|          | Total earnings (losses) from unconsolidated affiliates |                |  |         |               |  |               |                           |  |  |      |     |     |      |   |       |      |  | $ | (193 | )    |   | $ | (12 | )   |   | $ | 113 |   
|          |                                                        |                |  |         |               |  |               |                           |  |  |      |     |     |      |   |       |      |  |   |      |     






|    |                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes a 47 percent general partner interest in Great
    Lakes Gas Transmission Limited Partnership and a 3 percent
    limited partner interest through our ownership in Great Lakes
    Gas Transmission Company.                                                                                          
|(2) | Our ownership interest consists of a 38.1 percent general
    partner interest and 5.4 percent limited partner interest.                                                                                                                                                                                        
|(3) | In 2004, we completed the sale of our interest in this
    investment.                                                                                                                                                                                                                                          
|(4) | Consolidated in 2004.                                                                                                                                                                                                                                                                                           
|(5) | In 2003 we completed the sale of our interest in this investment.                                                                                                                                                                                                                                               
|(6) | As of December 31, 2004 and 2003, we also had outstanding
    advances of $64 million and $90 million related to our
    investment in Habibullah Power. We also had other outstanding
    advances of $9 million and $13 million related to our
    other foreign investments as of December 31, 2004 and 2003.

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|                                               |  |               |      |   |                      |                                                                                             
|---------------------------------------------- |  | ------------- | ---- | - | -------------------- | --------------------------------------------------------------------------------------------
|                                               |  | Pre-tax       |      |   | Cause of Impairments
|Investment                                     |  | Gain (Loss)   |      |   | or Gain (Loss)      
|                                               |  |               |      |   |                     
|                                               |  | (In millions) |      |   |                     
|2004                                           |  |               |      |   |                      |                                                                                             
|Asian assets                                   |  | $             | (131 | ) |                      | Anticipated sales of investments                                                            
|Midland Cogeneration Venture                   |  |               | (161 | ) |                      | Decline in investments fair value based on increased fuel
    costs                        
|                                               |  |               |      |   |                     
|                                               |  | $             | (292 | ) |                      |                                                                                             
|                                               |  |               |      |   |                     
|2003                                           |  |               |      |   |                      |                                                                                             
|Bastrop Company                                |  | $             | (43  | ) |                      | Decision to sell investment                                                                 
|Dauphin Island Gathering/Mobile Bay Processing |  |               | (86  | ) |                      | Decline in the investments fair value based on the
    devaluation of the underlying assets
|Other investments                              |  |               | 1    |   |                      |                                                                                             
|                                               |  |               |      |   |                     
|                                               |  | $             | (128 | ) |                      |                                                                                             
|                                               |  |               |      |   |                     
|2002                                           |  |               |      |   |                      |                                                                                             
|Aux Sable NGL                                  |  | $             | (47  | ) |                      | Sale of investment                                                                          
|                                               |  |               |      |   |                     



|                        |                                   |                         |   |     |      |  |   |      |  |  |   |     | 
|----------------------- | --------------------------------- | ----------------------- | - | --- | ---- |  | - | ---- |  |  | - | --- | 
|                        |                                   | Year Ended December 31, |  
|                        |                                   |                         |  
|                        |                                   | 2004                    |   |     | 2003 |  |   | 2002 | 
|                        |                                   |                         |   |     |      |  |   |      | 
|                        |                                   | (Unaudited)             |  
|                        |                                   | (In millions)           |  
|Operating results data: |                                   |                         |   |     |      |  |   |      |  |  |   |    
|                        | Operating revenues                |                         | $ | 830 |      |  | $ | 807  |  |  | $ | 799 | 
|                        | Operating expenses                |                         |   | 630 |      |  |   | 590  |  |  |   | 542 | 
|                        | Income from continuing operations |                         |   | 83  |      |  |   | 90   |  |  |   | 125 | 
|                        | Net income                        |                         |   | 83  |      |  |   | 90   |  |  |   | 148 | 

|                         |                               |               |   |       |      |  |   |       | 
|------------------------ | ----------------------------- | ------------- | - | ----- | ---- |  | - | ----- | 
|                         |                               | December 31,  |  
|                         |                               |               |  
|                         |                               | 2004          |   |       | 2003 | 
|                         |                               |               |   |       |      | 
|                         |                               | (Unaudited)   |  
|                         |                               | (In millions) |  
|Financial position data: |                               |               |   |       |      |  |   |      
|                         | Current assets                |               | $ | 517   |      |  | $ | 468   | 
|                         | Non-current assets            |               |   | 2,013 |      |  |   | 2,386 | 
|                         | Short-term debt               |               |   | 158   |      |  |   | 99    | 
|                         | Other current liabilities     |               |   | 183   |      |  |   | 249   | 
|                         | Long-term debt                |               |   | 813   |      |  |   | 905   | 
|                         | Other non-current liabilities |               |   | 194   |      |  |   | 181   | 
|                         | Minority interest             |               |   | 71    |      |  |   | 71    | 
|                         | Equity in net assets          |               |   | 1,111 |      |  |   | 1,349 | 

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Contingent Matters that Could Impact Our
Investments


Economic Conditions in the Dominican Republic.




| |                           
| | --------------------------
| | Related Party Transactions



|                                     |  |               |     |  |      |   |       |      |  |   |       | 
|------------------------------------ |  | ------------- | --- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                                     |  | 2004          |     |  | 2003 |   |       | 2002 | 
|                                     |  |               |     |  |      |   |       |      | 
|                                     |  | (In millions) |    
|Revenues                             |  | $             | 750 |  |      | $ | 1,091 |      |  | $ | 1,619 | 
|Cost of sales                        |  |               | 114 |  |      |   | 88    |      |  |   | 177   | 
|Reimbursement for operating expenses |  |               | 3   |  |      |   | 4     |      |  |   | 3     | 
|Charges from affiliates              |  |               | 209 |  |      |   | 282   |      |  |   | 275   | 
|Other income                         |  |               | 14  |  |      |   | 15    |      |  |   | 9     | 

Revenues and Expenses.




Cash Management Program and Affiliate
Receivables/Payables.


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Affiliate income taxes.


Contributions from Parent.


Acquisitions and Divestitures.






Other.


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Report of Independent Registered Public Accounting Firm











Consolidation of Variable Interest Entities Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of
2003 Accounting for Asset
Retirement Obligations Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity Goodwill
and Other Intangible Assets Accounting for the Impairment or Disposal of Long-Lived
Assets Scope Exceptions: Applying the Normal Purchases and Sales
Exception to Contracts that Combine a Forward Contract and
Purchased Option Contract Accounting for Contracts Involved in
Energy Trading and Risk Management Activities, Consensus 2
















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Supplemental Selected Quarterly Financial Information
(Unaudited)







|     |                                                     |                |   |     |         |  |   |              |   |  |             |     |   |       |   |      |   |  |   |       |  
|---- | --------------------------------------------------- | -------------- | - | --- | ------- |  | - | ------------ | - |  | ----------- | --- | - | ----- | - | ---- | - |  | - | ----- | -
|     |                                                     | Quarters Ended |   |     |        
|     |                                                     |                |   |     |        
|     |                                                     | March 31       |   |     | June 30 |  |   | September 30 |   |  | December 31 |     |   | Total |  
|     |                                                     |                |   |     |         |  |   |              |   |  |             |     |   |       |  
|     |                                                     | (Restated)(2)  |   |     |         |  |   |              |   |  |            
|     |                                                     | (In millions)  |  
|2004 |                                                     |                |   |     |         |  |   |              |   |  |             |     |   |       |   |      |   |  |   |      
|     | Operating revenues                                  |                | $ | 537 |         |  | $ | 505          |   |  | $           | 518 |   |       | $ | 617  |   |  | $ | 2,177 |  
|     | Loss (gain) on long-lived assets                    |                |   | 88  |         |  |   |             |   |  |             | 6   |   |       |   | 12   |   |  |   | 106   |  
|     | Operating income                                    |                |   | 89  |         |  |   | 148          |   |  |             | 91  |   |       |   | 147  |   |  |   | 475   |  
|     | Income (loss) from continuing operations            |                | $ | 10  |         |  | $ | 61           |   |  | $           | 38  |   |       | $ | (150 | ) |  | $ | (41   | )
|     | Discontinued operations, net of income
    taxes(1) |                |   | (96 | )       |  |   | (11          | ) |  |             | (12 | ) |       |   | 4    |   |  |   | (115  | )
|     |                                                     |                |   |     |         |  |   |              |   |  |             |     |   |       |  
|     | Net income (loss)                                   |                | $ | (86 | )       |  | $ | 50           |   |  | $           | 26  |   |       | $ | (146 | ) |  | $ | (156  | )
|     |                                                     |                |   |     |         |  |   |              |   |  |             |     |   |       |  







|     |                                                              |                |   |      |         |  |   |               |   |  |             |     |   |       |   |     |   |  |   |        |  
|---- | ------------------------------------------------------------ | -------------- | - | ---- | ------- |  | - | ------------- | - |  | ----------- | --- | - | ----- | - | --- | - |  | - | ------ | -
|     |                                                              | Quarters Ended |   |      |        
|     |                                                              |                |   |      |        
|     |                                                              | March 31       |   |      | June 30 |  |   | September 30  |   |  | December 31 |     |   | Total |  
|     |                                                              |                |   |      |         |  |   |               |   |  |             |     |   |       |  
|     |                                                              |                |   |      |         |  |   | (Restated)(2) |   |  |            
|     |                                                              | (In millions)  |  
|2003 |                                                              |                |   |      |         |  |   |               |   |  |             |     |   |       |   |     |   |  |   |       
|     | Operating revenues                                           |                | $ | 723  |         |  | $ | 604           |   |  | $           | 496 |   |       | $ | 508 |   |  | $ | 2,331  |  
|     | Ceiling test charges                                         |                |   |     |         |  |   |              |   |  |             | 39  |   |       |   |    |   |  |   | 39     |  
|     | Loss (gain) on long-lived assets                             |                |   |     |         |  |   | (30           | ) |  |             | 6   |   |       |   | 32  |   |  |   | 8      |  
|     | Operating income                                             |                |   | 272  |         |  |   | 228           |   |  |             | 79  |   |       |   | 69  |   |  |   | 648    |  
|     | Income (loss) from continuing operations                     |                | $ | 134  |         |  | $ | 47            |   |  | $           |    |   |       | $ | 18  |   |  | $ | 199    |  
|     | Discontinued operations, net of income
    taxes(1)          |                |   | (220 | )       |  |   | (931          | ) |  |             | (69 | ) |       |   | (66 | ) |  |   | (1,286 | )
|     | Cumulative effect of accounting changes, net of income taxes |                |   | (12  | )       |  |   |              |   |  |             |    |   |       |   |    |   |  |   | (12    | )
|     |                                                              |                |   |      |         |  |   |               |   |  |             |     |   |       |  
|     | Net loss                                                     |                | $ | (98  | )       |  | $ | (884          | ) |  | $           | (69 | ) |       | $ | (48 | ) |  | $ | (1,099 | )
|     |                                                              |                |   |      |         |  |   |               |   |  |             |     |   |       |  







|    |                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Our petroleum markets, our Canadian and certain other
    international natural gas and oil production operations and our
    coal mining operations are classified as discontinued
    operations. (See Note 2 for further discussion).
|   
|(2) | Listed below are the amounts we originally reported in our
    Form 10-K for the quarters ended:                                                                                                                                        
|   




|                                             |  |                |      |   |                   |   |      |  
|-------------------------------------------- |  | -------------- | ---- | - | ----------------- | - | ---- | -
|                                             |  | Quarters Ended |     
|                                             |  |                |     
|                                             |  | March 31, 2004 |      |   | December 31, 2003 |  
|                                             |  |                |      |   |                   |  
|Discontinued operations, net of income taxes |  | $              | (128 | ) |                   | $ | (101 | )
|Net income (loss)                            |  |                | (118 | ) |                   |   | (83  | )




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Supplemental Natural Gas and Oil Operations (Unaudited)






|                                                          |                                 |                                      |       |   |        |   |     |           |     |   |       |   |       | 
|--------------------------------------------------------- | ------------------------------- | ------------------------------------ | ----- | - | ------ | - | --- | --------- | --- | - | ----- | - | ----- | 
|                                                          |                                 | United                               |       |   |        |   |    
|                                                          |                                 | States                               |       |   | Brazil |   |     | Worldwide |    
|                                                          |                                 |                                      |       |   |        |   |     |           |    
|                                                          |                                 | (In millions)                        |      
|2004                                                      |                                 |                                      |       |   |        |   |     |           |     |   |       |  
|                                                          | Natural gas and oil properties: |                                      |       |   |        |   |     |           |     |   |       |   |      
|                                                          |                                 | Costs subject to
    amortization(1) |       | $ | 6,805  |   |     | $         | 207 |   |       | $ | 7,012 | 
|                                                          |                                 | Costs not subject to amortization    |       |   | 55     |   |     |           | 86  |   |       |   | 141   | 
|                                                          |                                 |                                      |       |   |        |   |     |           |    
|                                                          |                                 |                                      | 6,860 |   |        |   | 293 |           |     |   | 7,153 |  
|Less accumulated depreciation, depletion and amortization |                                 |                                      | 5,235 |   |        |   | 82  |           |     |   | 5,317 |  
|                                                          |                                 |                                      |       |   |        |   |     |           |    
|Net capitalized costs                                     |                                 | $                                    | 1,625 |   |        | $ | 211 |           |     | $ | 1,836 |  
|                                                          |                                 |                                      |       |   |        |   |     |           |    
|SFAS No. 143 abandonment liability                        |                                 | $                                    | 149   |   |        | $ |    |           |     | $ | 149   |  
|                                                          |                                 |                                      |       |   |        |   |     |           |    
|2003                                                      |                                 |                                      |       |   |        |   |     |           |     |   |       |  
|                                                          | Natural gas and oil properties: |                                      |       |   |        |   |     |           |     |   |       |   |      
|                                                          |                                 | Costs subject to
    amortization(1) |       | $ | 6,847  |   |     | $         | 146 |   |       | $ | 6,993 | 
|                                                          |                                 | Costs not subject to amortization    |       |   | 119    |   |     |           | 117 |   |       |   | 236   | 
|                                                          |                                 |                                      |       |   |        |   |     |           |    
|                                                          |                                 |                                      | 6,966 |   |        |   | 263 |           |     |   | 7,229 |  
|Less accumulated depreciation, depletion and amortization |                                 |                                      | 5,307 |   |        |   | 58  |           |     |   | 5,365 |  
|                                                          |                                 |                                      |       |   |        |   |     |           |    
|Net capitalized costs                                     |                                 | $                                    | 1,659 |   |        | $ | 205 |           |     | $ | 1,864 |  
|                                                          |                                 |                                      |       |   |        |   |     |           |    
|SFAS No. 143 abandonment liability                        |                                 | $                                    | 131   |   |        | $ |    |           |     | $ | 131   |  
|                                                          |                                 |                                      |       |   |        |   |     |           |    




|    |                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In January 1, 2003, we adopted SFAS No. 143 which is
    further discussed in Note 1. Included in our costs subject
    to amortization at December 31, 2004 and 2003 are SFAS
    No. 143 asset values of $88 million and
    $77 million primarily for the United States.

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|     |                                          |                     |                      |     |        |     |  |           |    |    |  |     |     |     | 
|---- | ---------------------------------------- | ------------------- | -------------------- | --- | ------ | --- |  | --------- | -- | -- |  | --- | --- | --- | 
|     |                                          | United              |                      |     |        |     | 
|     |                                          | States              |                      |     | Brazil |     |  | Worldwide |   
|     |                                          |                     |                      |     |        |     |  |           |   
|     |                                          | (In millions)       |                     
|2004 |                                          |                     |                      |     |        |     |  |           |    |    |  |    
|     | Property acquisition costs               |                     |                      |     |        |     |  |           |    |    |  |     |    
|     |                                          | Proved properties   |                      | $   | 6      |     |  | $         |   |    |  | $   | 6   |    
|     |                                          | Unproved properties |                      |     | 4      |     |  |           | 3  |    |  |     | 7   |    
|     | Exploration
    costs(1)                 |                     |                      | 87  |        |     |  | 24        |    |    |  | 111 |    
|     | Development
    costs(1)                 |                     |                      | 150 |        |     |  | 1         |    |    |  | 151 |    
|     |                                          |                     |                      |     |        |     |  |           |   
|     |                                          | Costs expended      |                      |     | 247    |     |  |           | 28 |    |  |     | 275 |    
|     | Asset retirement obligation costs        |                     |                      | 11  |        |     |  |          |    |    |  | 11  |    
|     |                                          |                     |                      |     |        |     |  |           |   
|     |                                          |                     | Total costs incurred |     | $      | 258 |  |           | $  | 28 |  |     | $   | 286 | 
|     |                                          |                     |                      |     |        |     |  |           |   
|2003 |                                          |                     |                      |     |        |     |  |           |    |    |  |    
|     | Property acquisition costs               |                     |                      |     |        |     |  |           |    |    |  |     |    
|     |                                          | Unproved properties |                      | $   | 9      |     |  | $         | 4  |    |  | $   | 13  |    
|     | Exploration
    costs(1)                 |                     |                      | 216 |        |     |  | 95        |    |    |  | 311 |    
|     | Development
    costs(1)                 |                     |                      | 270 |        |     |  |          |    |    |  | 270 |    
|     |                                          |                     |                      |     |        |     |  |           |   
|     |                                          | Costs expended      |                      |     | 495    |     |  |           | 99 |    |  |     | 594 |    
|     | Asset retirement obligation
    costs(2) |                     |                      | 77  |        |     |  |          |    |    |  | 77  |    
|     |                                          |                     |                      |     |        |     |  |           |   
|     |                                          |                     | Total costs incurred |     | $      | 572 |  |           | $  | 99 |  |     | $   | 671 | 
|     |                                          |                     |                      |     |        |     |  |           |   
|2002 |                                          |                     |                      |     |        |     |  |           |    |    |  |    
|     | Property acquisition costs               |                     |                      |     |        |     |  |           |    |    |  |     |    
|     |                                          | Proved properties   |                      | $   | 23     |     |  | $         |   |    |  | $   | 23  |    
|     |                                          | Unproved properties |                      |     | 12     |     |  |           | 9  |    |  |     | 21  |    
|     | Exploration costs                        |                     |                      | 197 |        |     |  | 45        |    |    |  | 242 |    
|     | Development costs                        |                     |                      | 569 |        |     |  |          |    |    |  | 569 |    
|     |                                          |                     |                      |     |        |     |  |           |   
|     |                                          |                     | Total costs incurred |     | $      | 801 |  |           | $  | 54 |  |     | $   | 855 | 
|     |                                          |                     |                      |     |        |     |  |           |   




|    |                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | Excludes approximately $32 million and $57 million
    that was paid in 2004 and 2003 by third parties under net
    profits interest agreements described beginning on page 102.
|   
|(2) | In January 2003, we adopted SFAS No. 143, which is further
    discussed in Note 1. The cumulative effect of adopting SFAS
    No. 143 was $6 million.                           





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|                |             |               |     |                    |              |   |    |              |  |   |      |    |  |      |    |    |  |   |    |    | 
|--------------- | ----------- | ------------- | --- | ------------------ | ------------ | - | -- | ------------ |  | - | ---- | -- |  | ---- | -- | -- |  | - | -- | -- | 
|                |             |               |     | Costs Excluded for |              |   |   
|                |             | Cumulative    |     |                    | Years Ended  |   |    | Cumulative   | 
|                |             | Balance       |     |                    | December 31, |   |    | Balance      | 
|                |             | December 31,  |     |                    |              |   |    | December 31, | 
|                |             | 2004          |     |                    | 2004         |   |    | 2003         |  |   | 2002 |    |  | 2001 |   
|                |             |               |     |                    |              |   |    |              |  |   |      |    |  |      |   
|                |             | (In millions) |    
|Worldwide(1)(2) |             |               |     |                    |              |   |    |              |  |   |      |    |  |      |    |    |  |   |    |   
|                | Acquisition |               | $   | 57                 |              |   | $  | 13           |  |   | $    | 17 |  |      | $  | 15 |  |   | $  | 12 | 
|                | Exploration |               |     | 81                 |              |   |    | 28           |  |   |      | 46 |  |      |    | 6  |  |   |    | 1  | 
|                | Development |               |     | 3                  |              |   |    | 1            |  |   |      |   |  |      |    |   |  |   |    | 2  | 
|                |             |               |     |                    |              |   |    |              |  |   |      |    |  |      |   
|                |             | $             | 141 |                    |              | $ | 42 |              |  | $ | 63   |    |  | $    | 21 |    |  | $ | 15 |   
|                |             |               |     |                    |              |   |    |              |  |   |      |    |  |      |   






|    |                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes operations in the United States and Brazil.                                                                                            
|(2) | Includes capitalized interest of $4 million,
    $2 million, and less than $1 million for the years
    ended December 31, 2004, 2003, and 2002.





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|                                                     |                   |                                   |  |       |        |   |  |           |   |  |  |       |      |  
|---------------------------------------------------- | ----------------- | --------------------------------- |  | ----- | ------ | - |  | --------- | - |  |  | ----- | ---- | -
|                                                     |                   | Natural Gas (Bcf)                 | 
|                                                     |                   |                                   | 
|                                                     |                   | United States                     |  |       | Brazil |   |  | Worldwide |  
|                                                     |                   |                                   |  |       |        |   |  |           |  
|Net proved developed and undeveloped
    reserves(1) |                   |                                   |  |       |        |   |  |           |   |  |  |      
|                                                     | January 1, 2002   |                                   |  | 1,475 |        |   |  |          |   |  |  | 1,475 |     
|                                                     |                   | Revisions of previous estimates   |  |       | (164   | ) |  |           |  |  |  |       | (164 | )
|                                                     |                   | Extensions, discoveries and other |  |       | 279    |   |  |           |  |  |  |       | 279  |  
|                                                     |                   | Purchases of reserves in place    |  |       |       |   |  |           |  |  |  |       |     |  
|                                                     |                   | Sales of reserves in place        |  |       | (504   | ) |  |           |  |  |  |       | (504 | )
|                                                     |                   | Production                        |  |       | (247   | ) |  |           |  |  |  |       | (247 | )
|                                                     |                   |                                   |  |       |        |   |  |           |  
|                                                     | December 31, 2002 |                                   |  | 839   |        |   |  |          |   |  |  | 839   |     
|                                                     |                   | Revisions of previous estimates   |  |       | (30    | ) |  |           |  |  |  |       | (30  | )
|                                                     |                   | Extensions, discoveries and other |  |       | 91     |   |  |           |  |  |  |       | 91   |  
|                                                     |                   | Purchases of reserves in place    |  |       | 3      |   |  |           |  |  |  |       | 3    |  
|                                                     |                   | Sales of reserves in
    place(2) |  |       | (136   | ) |  |           |  |  |  |       | (136 | )
|                                                     |                   | Production                        |  |       | (142   | ) |  |           |  |  |  |       | (142 | )
|                                                     |                   |                                   |  |       |        |   |  |           |  
|                                                     | December 31, 2003 |                                   |  | 625   |        |   |  |          |   |  |  | 625   |     
|                                                     |                   | Revisions of previous estimates   |  |       | (40    | ) |  |           |  |  |  |       | (40  | )
|                                                     |                   | Extensions, discoveries and other |  |       | 26     |   |  |           |  |  |  |       | 26   |  
|                                                     |                   | Purchases of reserves in place    |  |       |       |   |  |           |  |  |  |       |     |  
|                                                     |                   | Sales of reserves in
    place(2) |  |       | (3     | ) |  |           |  |  |  |       | (3   | )
|                                                     |                   | Production                        |  |       | (96    | ) |  |           |  |  |  |       | (96  | )
|                                                     |                   |                                   |  |       |        |   |  |           |  
|                                                     | December 31, 2004 |                                   |  | 512   |        |   |  |          |   |  |  | 512   |     
|                                                     |                   |                                   |  |       |        |   |  |           |  
|Proved developed reserves                            |                   |                                   |  |       |        |   |  |           |   |  |  |      
|                                                     | December 31, 2002 |                                   |  | 633   |        |   |  |          |   |  |  | 633   |     
|                                                     | December 31, 2003 |                                   |  | 502   |        |   |  |          |   |  |  | 502   |     
|                                                     | December 31, 2004 |                                   |  | 419   |        |   |  |          |   |  |  | 419   |     




|    |                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Net proved reserves exclude royalties and interests owned by
    others and reflect contractual arrangements and royalty
    obligations in effect at the time of the estimate.
|(2) | Sales of reserves in place include 3,434 MMcf and
    11,416 MMcf of natural gas conveyed to third parties under
    net profits interest agreements in 2004 and 2003.         

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|                                                     |                   |                                       |  |        |        |   |  |           |        |  |  |        |        |  
|---------------------------------------------------- | ----------------- | ------------------------------------- |  | ------ | ------ | - |  | --------- | ------ |  |  | ------ | ------ | -
|                                                     |                   | Oil and Condensate (MBbls)            | 
|                                                     |                   |                                       | 
|                                                     |                   | United States                         |  |        | Brazil |   |  | Worldwide |       
|                                                     |                   |                                       |  |        |        |   |  |           |       
|Net proved developed and undeveloped
    reserves(1) |                   |                                       |  |        |        |   |  |           |        |  |  |       
|                                                     | January 1, 2002   |                                       |  | 23,846 |        |   |  |          |        |  |  | 23,846 |       
|                                                     |                   | Revisions of previous estimates       |  |        | 1,294  |   |  |           |       |  |  |        | 1,294  |  
|                                                     |                   | Extensions, discoveries and other     |  |        | 3,125  |   |  |           |       |  |  |        | 3,125  |  
|                                                     |                   | Purchases of reserves in place        |  |        |       |   |  |           |       |  |  |        |       |  
|                                                     |                   | Sales of reserves in place            |  |        | (2,083 | ) |  |           |       |  |  |        | (2,083 | )
|                                                     |                   | Production                            |  |        | (5,136 | ) |  |           |       |  |  |        | (5,136 | )
|                                                     |                   |                                       |  |        |        |   |  |           |       
|                                                     | December 31, 2002 |                                       |  | 21,046 |        |   |  |          |        |  |  | 21,046 |       
|                                                     |                   | Revisions of previous estimates       |  |        | 784    |   |  |           |       |  |  |        | 784    |  
|                                                     |                   | Extensions, discoveries and other     |  |        | 2,332  |   |  |           | 20,543 |  |  |        | 22,875 |  
|                                                     |                   | Purchases of reserves in place        |  |        | 5      |   |  |           |       |  |  |        | 5      |  
|                                                     |                   | Sales of reserves in
    place(2)     |  |        | (534   | ) |  |           |       |  |  |        | (534   | )
|                                                     |                   | Production                            |  |        | (3,871 | ) |  |           |       |  |  |        | (3,871 | )
|                                                     |                   |                                       |  |        |        |   |  |           |       
|                                                     | December 31, 2003 |                                       |  | 19,762 |        |   |  | 20,543    |        |  |  | 40,305 |       
|                                                     |                   | Revisions of previous estimates       |  |        | 319    |   |  |           | 252    |  |  |        | 571    |  
|                                                     |                   | Extensions, discoveries and other     |  |        | 1,889  |   |  |           |       |  |  |        | 1,889  |  
|                                                     |                   | Purchases of reserves in
    place(2) |  |        |       |   |  |           |       |  |  |        |       |  
|                                                     |                   | Sales of reserves in place            |  |        | (8     | ) |  |           |       |  |  |        | (8     | )
|                                                     |                   | Production                            |  |        | (2,603 | ) |  |           |       |  |  |        | (2,603 | )
|                                                     |                   |                                       |  |        |        |   |  |           |       
|                                                     | December 31, 2004 |                                       |  | 19,359 |        |   |  | 20,795    |        |  |  | 40,154 |       
|                                                     |                   |                                       |  |        |        |   |  |           |       
|Proved developed reserves                            |                   |                                       |  |        |        |   |  |           |        |  |  |       
|                                                     | December 31, 2002 |                                       |  | 15,290 |        |   |  |          |        |  |  | 15,290 |       
|                                                     | December 31, 2003 |                                       |  | 13,577 |        |   |  |          |        |  |  | 13,577 |       
|                                                     | December 31, 2004 |                                       |  | 13,972 |        |   |  |          |        |  |  | 13,972 |       






|    |                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Net proved reserves exclude royalties and interests owned by
    others and reflects contractual arrangements and royalty
    obligations in effect at the time of the estimate.
|(2) | Sales of reserves in place include 8 MBbl and 428 MBbl
    of oil and condensate conveyed to third parties under net
    profits agreements in 2004 and 2003.                   

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|                                                     |                   |                                   |  |        |        |   |  |           |   |  |  |        |        |  
|---------------------------------------------------- | ----------------- | --------------------------------- |  | ------ | ------ | - |  | --------- | - |  |  | ------ | ------ | -
|                                                     |                   | Natural Gas Liquids               | 
|                                                     |                   | (MBbls)                           | 
|                                                     |                   |                                   | 
|                                                     |                   | United                            |  |        |       
|                                                     |                   | States                            |  |        | Brazil |   |  | Worldwide |  
|                                                     |                   |                                   |  |        |        |   |  |           |  
|Net proved developed and undeveloped
    reserves(1) |                   |                                   |  |        |        |   |  |           |   |  |  |       
|                                                     | January 1, 2002   |                                   |  | 25,680 |        |   |  |          |   |  |  | 25,680 |       
|                                                     |                   | Revisions of previous estimates   |  |        | (3,240 | ) |  |           |  |  |  |        | (3,240 | )
|                                                     |                   | Extensions, discoveries and other |  |        | 3,989  |   |  |           |  |  |  |        | 3,989  |  
|                                                     |                   | Purchases of reserves in place    |  |        |       |   |  |           |  |  |  |        |       |  
|                                                     |                   | Sales of reserves in place        |  |        | (9,200 | ) |  |           |  |  |  |        | (9,200 | )
|                                                     |                   | Production                        |  |        | (1,792 | ) |  |           |  |  |  |        | (1,792 | )
|                                                     |                   |                                   |  |        |        |   |  |           |  
|                                                     | December 31, 2002 |                                   |  | 15,437 |        |   |  |          |   |  |  | 15,437 |       
|                                                     |                   | Revisions of previous estimates   |  |        | (3,048 | ) |  |           |  |  |  |        | (3,048 | )
|                                                     |                   | Extensions, discoveries and other |  |        | 1,323  |   |  |           |  |  |  |        | 1,323  |  
|                                                     |                   | Purchases of reserves in place    |  |        | 38     |   |  |           |  |  |  |        | 38     |  
|                                                     |                   | Sales of reserves in
    place(2) |  |        | (485   | ) |  |           |  |  |  |        | (485   | )
|                                                     |                   | Production                        |  |        | (2,107 | ) |  |           |  |  |  |        | (2,107 | )
|                                                     |                   |                                   |  |        |        |   |  |           |  
|                                                     | December 31, 2003 |                                   |  | 11,158 |        |   |  |          |   |  |  | 11,158 |       
|                                                     |                   | Revisions of previous estimates   |  |        | (758   | ) |  |           |  |  |  |        | (758   | )
|                                                     |                   | Extensions, discoveries and other |  |        | 53     |   |  |           |  |  |  |        | 53     |  
|                                                     |                   | Purchases of reserves in place    |  |        |       |   |  |           |  |  |  |        |       |  
|                                                     |                   | Sales of reserves in
    place(2) |  |        | (47    | ) |  |           |  |  |  |        | (47    | )
|                                                     |                   | Production                        |  |        | (1,807 | ) |  |           |  |  |  |        | (1,807 | )
|                                                     |                   |                                   |  |        |        |   |  |           |  
|                                                     | December 31, 2004 |                                   |  | 8,599  |        |   |  |          |   |  |  | 8,599  |       
|                                                     |                   |                                   |  |        |        |   |  |           |  
|Proved developed reserves                            |                   |                                   |  |        |        |   |  |           |   |  |  |       
|                                                     | December 31, 2002 |                                   |  | 13,175 |        |   |  |          |   |  |  | 13,175 |       
|                                                     | December 31, 2003 |                                   |  | 9,559  |        |   |  |          |   |  |  | 9,559  |       
|                                                     | December 31, 2004 |                                   |  | 7,684  |        |   |  |          |   |  |  | 7,684  |       






|    |                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Net proved reserves exclude royalties and interests owned by
    others and reflect contractual arrangements and royalty
    obligations in effect at the time of the estimate.
|(2) | Sales of reserves in place include 47 MBbl and 85 MBbl of
    NGL conveyed to third parties under net profits agreements in
    2004 and 2003.                                 



Onshore.


Texas Gulf Coast.


Offshore.




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|                                                |                             |               |      |       |        |   |    |           |   |   |      |       |       | 
|----------------------------------------------- | --------------------------- | ------------- | ---- | ----- | ------ | - | -- | --------- | - | - | ---- | ----- | ----- | 
|                                                |                             | United States |      |       | Brazil |   |    | Worldwide |  
|                                                |                             |               |      |       |        |   |    |           |  
|                                                |                             | (In millions) |     
|2004                                            |                             |               |      |       |        |   |    |           |   |   |      |      
|Net Revenues                                    |                             |               |      |       |        |   |    |           |   |   |      |      
|                                                | Sales to external customers |               | $    | 183   |        |   | $  |          |   |   | $    | 183   |      
|                                                | Intersegment sales          |               |      | 492   |        |   |    |          |   |   |      | 492   |      
|                                                |                             |               |      |       |        |   |    |           |  
|                                                |                             | Total         |      |       | 675    |   |    |           |  |   |      |       | 675   | 
|Production
    costs(1)                         |                             |               | (107 | )     |        |   |   |           |   |   | (107 | )    
|Depreciation, depletion and
    amortization(2) |                             |               | (315 | )     |        |   |   |           |   |   | (315 | )    
|                                                |                             |               |      |       |        |   |    |           |  
|                                                |                             |               | 253  |       |        |   |   |           |   |   | 253  |      
|Income tax expense                              |                             |               | (92  | )     |        |   |   |           |   |   | (92  | )    
|                                                |                             |               |      |       |        |   |    |           |  
|Results of operations from producing activities |                             | $             | 161  |       |        | $ |   |           |   | $ | 161  |      
|                                                |                             |               |      |       |        |   |    |           |  
|2003                                            |                             |               |      |       |        |   |    |           |   |   |      |      
|Net Revenues                                    |                             |               |      |       |        |   |    |           |   |   |      |      
|                                                | Sales to external customers |               | $    | 683   |        |   | $  |          |   |   | $    | 683   |      
|                                                | Intersegment sales          |               |      | 109   |        |   |    |          |   |   |      | 109   |      
|                                                |                             |               |      |       |        |   |    |           |  
|                                                |                             | Total         |      |       | 792    |   |    |           |  |   |      |       | 792   | 
|Production
    costs(1)                         |                             |               | (114 | )     |        |   |   |           |   |   | (114 | )    
|Depreciation, depletion and
    amortization(2) |                             |               | (347 | )     |        |   |   |           |   |   | (347 | )    
|Ceiling test and other charges                  |                             |               | (34  | )     |        |   | (5 | )         |   |   | (39  | )    
|                                                |                             |               |      |       |        |   |    |           |  
|                                                |                             |               | 297  |       |        |   | (5 | )         |   |   | 292  |      
|Income tax expense                              |                             |               | (106 | )     |        |   | 2  |           |   |   | (104 | )    
|                                                |                             |               |      |       |        |   |    |           |  
|Results of operations from producing activities |                             | $             | 191  |       |        | $ | (3 | )         |   | $ | 188  |      
|                                                |                             |               |      |       |        |   |    |           |  
|2002                                            |                             |               |      |       |        |   |    |           |   |   |      |      
|Net Revenues                                    |                             |               |      |       |        |   |    |           |   |   |      |      
|                                                | Sales to external customers |               | $    | 1,021 |        |   | $  |          |   |   | $    | 1,021 |      
|                                                | Intersegment sales          |               |      | 106   |        |   |    |          |   |   |      | 106   |      
|                                                |                             |               |      |       |        |   |    |           |  
|                                                |                             | Total         |      |       | 1,127  |   |    |           |  |   |      |       | 1,127 | 
|Production
    costs(1)                         |                             |               | (162 | )     |        |   |   |           |   |   | (162 | )    
|Depreciation, depletion and amortization        |                             |               | (446 | )     |        |   |   |           |   |   | (446 | )    
|Ceiling test and other charges                  |                             |               | (417 | )     |        |   |   |           |   |   | (417 | )    
|                                                |                             |               |      |       |        |   |    |           |  
|                                                |                             |               | 102  |       |        |   |   |           |   |   | 102  |      
|Income tax expense                              |                             |               | (35  | )     |        |   |   |           |   |   | (35  | )    
|                                                |                             |               |      |       |        |   |    |           |  
|Results of operations from producing activities |                             | $             | 67   |       |        | $ |   |           |   | $ | 67   |      
|                                                |                             |               |      |       |        |   |    |           |  






|    |                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Production costs include lease operating costs and production
    related taxes (including ad valorem and severance taxes).                                                                                                                                                                              
|(2) | In January 2003 we adopted SFAS No. 143, which is
    further discussed in Note 1. Our depreciation, depletion
    and amortization includes accretion expense for SFAS
    No. 143 asset retirement obligations of $14 million
    and $16 million primarily for the United States in
    2004 and 2003.

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|                                                                                                        |  |               |        |   |        |   |      |           |  |   |        |  
|------------------------------------------------------------------------------------------------------- |  | ------------- | ------ | - | ------ | - | ---- | --------- |  | - | ------ | -
|                                                                                                        |  | United States |        |   | Brazil |   |      | Worldwide | 
|                                                                                                        |  |               |        |   |        |   |      |           | 
|                                                                                                        |  | (In millions) |       
|2004                                                                                                    |  |               |        |   |        |   |      |           |  |   |        |  
|Future cash
    inflows(1)                                                                              |  | $             | 4,059  |   |        | $ | 810  |           |  | $ | 4,869  |  
|Future production costs                                                                                 |  |               | (1,087 | ) |        |   | (76  | )         |  |   | (1,163 | )
|Future development costs                                                                                |  |               | (544   | ) |        |   | (236 | )         |  |   | (780   | )
|Future income tax expenses                                                                              |  |               | (272   | ) |        |   | (111 | )         |  |   | (383   | )
|                                                                                                        |  |               |        |   |        |   |      |           | 
|Future net cash flows                                                                                   |  |               | 2,156  |   |        |   | 387  |           |  |   | 2,543  |  
|10% annual discount for estimated timing of cash flows                                                  |  |               | (655   | ) |        |   | (183 | )         |  |   | (838   | )
|                                                                                                        |  |               |        |   |        |   |      |           | 
|Standardized measure of discounted future net cash flows                                                |  | $             | 1,501  |   |        | $ | 204  |           |  | $ | 1,705  |  
|                                                                                                        |  |               |        |   |        |   |      |           | 
|Standardized measure of discounted future net cash flows,
    including effects of hedging activities   |  | $             | 1,388  |   |        | $ | 204  |           |  | $ | 1,592  |  
|                                                                                                        |  |               |        |   |        |   |      |           | 
|2003                                                                                                    |  |               |        |   |        |   |      |           |  |   |        |  
|Future cash
    inflows(1)                                                                              |  | $             | 4,445  |   |        | $ | 588  |           |  | $ | 5,033  |  
|Future production costs                                                                                 |  |               | (967   | ) |        |   | (65  | )         |  |   | (1,032 | )
|Future development costs                                                                                |  |               | (564   | ) |        |   | (236 | )         |  |   | (800   | )
|Future income tax expenses                                                                              |  |               | (362   | ) |        |   | (75  | )         |  |   | (437   | )
|                                                                                                        |  |               |        |   |        |   |      |           | 
|Future net cash flows                                                                                   |  |               | 2,552  |   |        |   | 212  |           |  |   | 2,764  |  
|10% annual discount for estimated timing of cash flows                                                  |  |               | (735   | ) |        |   | (128 | )         |  |   | (863   | )
|                                                                                                        |  |               |        |   |        |   |      |           | 
|Standardized measure of discounted future net cash flows                                                |  | $             | 1,817  |   |        | $ | 84   |           |  | $ | 1,901  |  
|                                                                                                        |  |               |        |   |        |   |      |           | 
|Standardized measure of discounted future net cash flows,
    including effects of hedging activities   |  | $             | 1,729  |   |        | $ | 84   |           |  | $ | 1,813  |  
|                                                                                                        |  |               |        |   |        |   |      |           | 
|2002                                                                                                    |  |               |        |   |        |   |      |           |  |   |        |  
|Future cash
    inflows(1)                                                                              |  | $             | 4,632  |   |        | $ |     |           |  | $ | 4,632  |  
|Future production costs                                                                                 |  |               | (1,071 | ) |        |   |     |           |  |   | (1,071 | )
|Future development costs                                                                                |  |               | (623   | ) |        |   |     |           |  |   | (623   | )
|Future income tax expenses                                                                              |  |               | (465   | ) |        |   |     |           |  |   | (465   | )
|                                                                                                        |  |               |        |   |        |   |      |           | 
|Future net cash flows                                                                                   |  |               | 2,473  |   |        |   |     |           |  |   | 2,473  |  
|10% annual discount for estimated timing of cash flows                                                  |  |               | (738   | ) |        |   |     |           |  |   | (738   | )
|                                                                                                        |  |               |        |   |        |   |      |           | 
|Standardized measure of discounted future net cash flows                                                |  | $             | 1,735  |   |        | $ |     |           |  | $ | 1,735  |  
|                                                                                                        |  |               |        |   |        |   |      |           | 
|Standardized measure of discontinued future net cash flows,
    including effects of hedging activities |  | $             | 1,671  |   |        | $ |     |           |  | $ | 1,671  |  
|                                                                                                        |  |               |        |   |        |   |      |           | 






|    |                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | United States excludes $148 million, $139 million and
    $111 million of future net cash outflows attributable to
    hedging activities during 2004, 2003 and 2002.





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|                                                                                |            |                    |      |      |      |   |      |      |  |   |        |     | 
|------------------------------------------------------------------------------- | ---------- | ------------------ | ---- | ---- | ---- | - | ---- | ---- |  | - | ------ | --- | 
|                                                                                |            | Years Ended        |     
|                                                                                |            | December 31,(1)(2) |     
|                                                                                |            |                    |     
|                                                                                |            | 2004               |      |      | 2003 |   |      | 2002 | 
|                                                                                |            |                    |      |      |      |   |      |      | 
|                                                                                |            | (In millions)      |     
|Sales and transfers of natural gas and oil produced net of
    production costs |            | $                  | (567 | )    |      | $ | (677 | )    |  | $ | (964   | )  
|Net changes in prices and production costs                                      |            |                    | 159  |      |      |   | 598  |      |  |   | 1,888  |    
|Extensions, discoveries and improved recovery, less related costs               |            |                    | 90   |      |      |   | 399  |      |  |   | 568    |    
|Changes in estimated future development costs                                   |            |                    | 26   |      |      |   | (24  | )    |  |   | 38     |    
|Previously estimated development costs incurred during the period               |            |                    | 11   |      |      |   | 50   |      |  |   | 88     |    
|Revisions of previous quantity estimates                                        |            |                    | (122 | )    |      |   | (118 | )    |  |   | (367   | )  
|Accretion of discount                                                           |            |                    | 210  |      |      |   | 195  |      |  |   | 135    |    
|Net change in income taxes                                                      |            |                    | 31   |      |      |   | 19   |      |  |   | (215   | )  
|Purchases of reserves in place                                                  |            |                    |     |      |      |   | 7    |      |  |   |       |    
|Sales of reserves in place                                                      |            |                    | (11  | )    |      |   | (336 | )    |  |   | (1,122 | )  
|Changes in production rates, timing and other                                   |            |                    | (23  | )    |      |   | 53   |      |  |   | 332    |    
|                                                                                |            |                    |      |      |      |   |      |      | 
|                                                                                | Net change |                    | $    | (196 | )    |   | $    | 166  |  |   | $      | 381 | 
|                                                                                |            |                    |      |      |      |   |      |      | 






|    |                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------
|(1) | This disclosure reflects changes in the standardized measure
    calculation excluding the effects of hedging activities.
|(2) | Includes operations in the United States and Brazil.                                                                     

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SCHEDULE II


EL PASO CGP COMPANY AND SUBSIDIARIES


VALUATION AND QUALIFYING ACCOUNTS


Years Ended December 31, 2004, 2003 and 2002


(In millions)


|            |                                            |            |   |     |            |  |   |            |      |            |                |         |        |           |   |     |      |  |   |     | 
|----------- | ------------------------------------------ | ---------- | - | --- | ---------- |  | - | ---------- | ---- | ---------- | -------------- | ------- | ------ | --------- | - | --- | ---- |  | - | --- | 
|            |                                            | Balance at |   |     | Charged to |  |   |            |      |            |                | Balance |       
|            |                                            | Beginning  |   |     | Costs and  |  |   |            |      | Charged to |                |         | at End |          
|Description |                                            | of Period  |   |     | Expenses   |  |   | Deductions |      |            | Other Accounts |         |        | of Period |  
|            |                                            |            |   |     |            |  |   |            |      |            |                |         |        |           |  
|2004        |                                            |            |   |     |            |  |   |            |      |            |                |         |        |           |   |     |      |  |   |    
|            | Allowance for doubtful accounts            |            | $ | 37  |            |  | $ | (8         | )    |            | $              | (8      | )(3)   |           | $ | 8   |      |  | $ | 29  | 
|            | Valuation allowance on deferred tax assets |            |   | 1   |            |  |   | 24         | (1)  |            |                |        |        |           |   |    |      |  |   | 25  | 
|            | Legal reserves                             |            |   | 27  |            |  |   | 7          | (7)  |            |                |        |        |           |   | 2   |      |  |   | 36  | 
|            | Environmental reserves                     |            |   | 131 |            |  |   | 9          |      |            |                | (18     | )(4)   |           |   | 6   |      |  |   | 128 | 
|            | Regulatory reserves                        |            |   |    |            |  |   |           |      |            |                |        |        |           |   |    |      |  |   |    | 
|2003        |                                            |            |   |     |            |  |   |            |      |            |                |         |        |           |   |     |      |  |   |    
|            | Allowance for doubtful accounts            |            | $ | 21  |            |  | $ | (1         | )    |            | $              |        |        |           | $ | 17  |      |  | $ | 37  | 
|            | Valuation allowance on deferred tax assets |            |   | 27  |            |  |   | (26        | )(1) |            |                |        |        |           |   |    |      |  |   | 1   | 
|            | Legal reserves                             |            |   | 49  |            |  |   | (3         | )    |            |                | (16     | )(4)   |           |   | (3  | )    |  |   | 27  | 
|            | Environmental reserves                     |            |   | 62  |            |  |   | 12         |      |            |                | (10     | )(4)   |           |   | 67  | (2)  |  |   | 131 | 
|            | Regulatory reserves                        |            |   | 4   |            |  |   | (3         | )    |            |                | (1      | )(4)   |           |   |    |      |  |   |    | 
|2002        |                                            |            |   |     |            |  |   |            |      |            |                |         |        |           |   |     |      |  |   |    
|            | Allowance for doubtful accounts            |            | $ | 23  |            |  | $ | 1          |      |            | $              | (7      | )(3)   |           | $ | 4   |      |  | $ | 21  | 
|            | Valuation allowance on deferred tax assets |            |   | 24  |            |  |   | 3          |      |            |                |        |        |           |   |    |      |  |   | 27  | 
|            | Legal reserves                             |            |   | 51  |            |  |   | 11         |      |            |                | (26     | )(4)   |           |   | 13  | (5)  |  |   | 49  | 
|            | Environmental reserves                     |            |   | 163 |            |  |   | 9          |      |            |                | (16     | )(4)   |           |   | (94 | )(6) |  |   | 62  | 
|            | Regulatory reserves                        |            |   | 5   |            |  |   | 7          |      |            |                | (8      | )(4)   |           |   |    |      |  |   | 4   | 




|    |                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Relates primarily to foreign impairments and ceiling test
    charges and net operating loss carryovers.                                                                                            
|(2) | Relates primarily to retained liabilities previously classified
    in our petroleum discontinued operations.                                                                                       
|(3) | Relates primarily to accounts written off.                                                                                                                                                          
|(4) | Relates primarily to payments for various litigation reserves,
    environmental remediation reserves and rate settlement reserves.                                                                 
|(5) | Relates to legal reserves previously embedded in environmental
    reserves.                                                                                                                        
|(6) | In November 2002, we sold Coastal Mart, Inc. to an
    affiliate of El Paso which included environmental reserves
    of $95 million.                                                               
|(7) | These amounts primarily relate to additional liabilities
    recorded in connection with changes in our estimates of these
    liabilities. See Note 13 for a further discussion of this
    change.

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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
    AND FINANCIAL DISCLOSURE.








|         |                        
|-------- | -----------------------
|ITEM 9A. | CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures






Internal Control Over Financial Reporting




Access to Financial Application Programs and Data.


Account Reconciliations.


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Identification, Capture and Communication of Financial Data
Used in Accounting for Non-Routine Transactions or
Activities.





Changes in Internal Control over Financial Reporting


Changes in the Fourth Quarter 2004.


Changes in 2005.





ITEM 9B. OTHER INFORMATION







PART III







ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES


Audit Fees




All Other Fees




Policy for Approval of Audit and Non-Audit Fees




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PART IV





ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K.


(a) The following documents are filed as part of this
report:









|                                                                                             |                                                             |      |     |     | 
|-------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | ---- | --- | --- | 
|                                                                                             |                                                             | Page |    
|                                                                                             |                                                             |      |    
|Consolidated Statements of Income                                                            |                                                             |      | 45  |    
|Consolidated Balance Sheets                                                                  |                                                             |      | 46  |    
|Consolidated Statements of Cash Flows                                                        |                                                             |      | 48  |    
|Consolidated Statements of
    Stockholders Equity                                          |                                                             |      | 50  |    
|Consolidated Statements of Comprehensive
    Income                                          |                                                             |      | 51  |    
|Notes to Consolidated Financial
    Statements                                               |                                                             |      | 52  |    
|Report of Independent Registered Public
    Accounting Firm                                  |                                                             |      | 94  |    
|                                                                                            
|2. Financial statement schedules and supplementary
    information required to be submitted.
|                                                                                            
|Schedule II  Valuation
    and Qualifying Accounts                                          |                                                             |      | 106 |    
|Midland Cogeneration Venture Limited Partnership                                             |                                                             |      |     |    
|                                                                                             | Report of Independent Registered Public
    Accounting Firm |      |     | 110 | 
|                                                                                             | Consolidated Balance Sheets                                 |      |     | 112 | 
|                                                                                             | Consolidated Statements of Operations                       |      |     | 113 | 
|                                                                                             | Consolidated Statements of Partners
    Equity             |      |     | 114 | 
|                                                                                             | Consolidated Statements of Cash Flows                       |      |     | 115 | 
|                                                                                             | Notes to Consolidated Financial
    Statements              |      |     | 116 | 
|Javelina Company                                                                             |                                                             |      |     |    
|                                                                                             | Report of Independent Registered Public
    Accounting Firm |      |     | 132 | 
|                                                                                             | Consolidated Balance Sheets                                 |      |     | 133 | 
|                                                                                             | Consolidated Statements of Operations                       |      |     | 134 | 
|                                                                                             | Consolidated Statements of Partners
    Equity             |      |     | 135 | 
|                                                                                             | Consolidated Statements of Cash Flows                       |      |     | 136 | 
|                                                                                             | Notes to Consolidated Financial
    Statements              |      |     | 137 | 
|Great Lakes Gas Transmission Limited Partnership                                             |                                                             |      |     |    
|                                                                                             | Report of Independent Registered Public
    Accounting Firm |      |     | 142 | 
|                                                                                             | Consolidated Statements of Income and
    Partners Capital |      |     | 143 | 
|                                                                                             | Consolidated Balance Sheets                                 |      |     | 144 | 
|                                                                                             | Consolidated Statements of Cash Flows                       |      |     | 145 | 
|                                                                                             | Notes to Consolidated Financial
    Statements              |      |     | 146 | 
|                                                                                            
|Schedules other than those listed above are omitted because they
    are not applicable.    
|                                                                                            
|3. Exhibit list                                                                              |                                                             |      | 150 |    




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PRICEWATERHOUSECOOPERS LLP













Consolidated financial statements






Internal control over financial reporting


Internal Control  Integrated Framework Internal Control 
Integrated Framework


110



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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP





CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31,


(In Thousands)


|                                              |                                                                                                    |                                     |           |            |           |   |           |           |           | 
|--------------------------------------------- | -------------------------------------------------------------------------------------------------- | ----------------------------------- | --------- | ---------- | --------- | - | --------- | --------- | --------- | 
|                                              |                                                                                                    | 2004                                |           |            | 2003      |  
|                                              |                                                                                                    |                                     |           |            |           |  
|ASSETS                                       
|CURRENT ASSETS:                               |                                                                                                    |                                     |           |            |           |   |           |          
|                                              | Cash and cash equivalents                                                                          |                                     | $         | 125,781    |           |   | $         | 173,651   |          
|                                              | Accounts and notes receivable  related parties                                                    |                                     |           | 54,368     |           |   |           | 43,805    |          
|                                              | Accounts receivable                                                                                |                                     |           | 42,984     |           |   |           | 38,333    |          
|                                              | Gas inventory                                                                                      |                                     |           | 17,509     |           |   |           | 20,298    |          
|                                              | Unamortized property taxes                                                                         |                                     |           | 18,060     |           |   |           | 17,672    |          
|                                              | Derivative assets                                                                                  |                                     |           | 94,977     |           |   |           | 86,825    |          
|                                              | Broker margin accounts, and prepaid gas costs and expenses                                         |                                     |           | 13,147     |           |   |           | 8,101     |          
|                                              |                                                                                                    |                                     |           |            |           |  
|                                              |                                                                                                    | Total current assets                |           |            | 366,826   |   |           |           | 388,685   | 
|                                              |                                                                                                    |                                     |           |            |           |  
|PROPERTY, PLANT AND EQUIPMENT:                |                                                                                                    |                                     |           |            |           |   |           |          
|                                              | Property, plant and equipment                                                                      |                                     |           | 2,466,944  |           |   |           | 2,463,931 |          
|                                              | Pipeline                                                                                           |                                     |           | 21,432     |           |   |           | 21,432    |          
|                                              |                                                                                                    |                                     |           |            |           |  
|                                              |                                                                                                    | Total property, plant and equipment |           |            | 2,488,376 |   |           |           | 2,485,363 | 
|                                              | Accumulated depreciation                                                                           |                                     |           | (1,062,821 | )         |   |           | (991,556  | )        
|                                              |                                                                                                    |                                     |           |            |           |  
|                                              |                                                                                                    | Net property, plant and equipment   |           |            | 1,425,555 |   |           |           | 1,493,807 | 
|                                              |                                                                                                    |                                     |           |            |           |  
|OTHER ASSETS:                                 |                                                                                                    |                                     |           |            |           |   |           |          
|                                              | Restricted investment securities held-to-maturity                                                  |                                     |           | 139,410    |           |   |           | 139,755   |          
|                                              | Derivative assets non-current                                                                      |                                     |           | 24,337     |           |   |           | 18,100    |          
|                                              | Deferred financing costs, net of accumulated amortization of
    $18,498 and $17,285, respectively |                                     |           | 6,467      |           |   |           | 7,680     |          
|                                              | Prepaid gas costs, spare parts deposit, materials and supplies                                     |                                     |           | 17,782     |           |   |           | 21,623    |          
|                                              |                                                                                                    |                                     |           |            |           |  
|                                              |                                                                                                    | Total other assets                  |           |            | 187,996   |   |           |           | 187,158   | 
|                                              |                                                                                                    |                                     |           |            |           |  
|TOTAL ASSETS                                  |                                                                                                    | $                                   | 1,980,377 |            |           | $ | 2,069,650 |          
|                                              |                                                                                                    |                                     |           |            |           |  
|                                             
|LIABILITIES AND PARTNERS EQUITY             
|CURRENT LIABILITIES:                          |                                                                                                    |                                     |           |            |           |   |           |          
|                                              | Accounts payable and accrued liabilities                                                           |                                     | $         | 82,693     |           |   | $         | 57,368    |          
|                                              | Gas supplier funds on deposit                                                                      |                                     |           | 19,613     |           |   |           | 4,517     |          
|                                              | Interest payable                                                                                   |                                     |           | 47,738     |           |   |           | 53,009    |          
|                                              | Current portion of long-term debt                                                                  |                                     |           | 76,548     |           |   |           | 134,576   |          
|                                              |                                                                                                    |                                     |           |            |           |  
|                                              |                                                                                                    | Total current liabilities           |           |            | 226,592   |   |           |           | 249,470   | 
|                                              |                                                                                                    |                                     |           |            |           |  
|NON-CURRENT LIABILITIES:                      |                                                                                                    |                                     |           |            |           |   |           |          
|                                              | Long-term debt                                                                                     |                                     |           | 942,097    |           |   |           | 1,018,645 |          
|                                              | Other                                                                                              |                                     |           | 1,712      |           |   |           | 2,459     |          
|                                              |                                                                                                    |                                     |           |            |           |  
|                                              |                                                                                                    | Total non-current liabilities       |           |            | 943,809   |   |           |           | 1,021,104 | 
|                                              |                                                                                                    |                                     |           |            |           |  
|COMMITMENTS AND CONTINGENCIES (Notes 7 and 8) |                                                                                                    |                                     |           |            |           |   |           |          
|TOTAL LIABILITIES                             |                                                                                                    |                                     | 1,170,401 |            |           |   | 1,270,574 |          
|                                              |                                                                                                    |                                     |           |            |           |  
|PARTNERS EQUITY                              |                                                                                                    |                                     | 809,976   |            |           |   | 799,076   |          
|                                              |                                                                                                    |                                     |           |            |           |  
|TOTAL LIABILITIES AND PARTNERS EQUITY        |                                                                                                    | $                                   | 1,980,377 |            |           | $ | 2,069,650 |          
|                                              |                                                                                                    |                                     |           |            |           |  



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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP





CONSOLIDATED STATEMENTS OF OPERATIONS


FOR THE YEARS ENDED DECEMBER 31,


(In Thousands)


|                                                                                                                    |                                     |                                   |         |          |         |   |         |          |          |   |         |          |          |  
|------------------------------------------------------------------------------------------------------------------- | ----------------------------------- | --------------------------------- | ------- | -------- | ------- | - | ------- | -------- | -------- | - | ------- | -------- | -------- | -
|                                                                                                                    |                                     | 2004                              |         |          | 2003    |   |         | 2002     |         
|                                                                                                                    |                                     |                                   |         |          |         |   |         |          |         
|OPERATING REVENUES:                                                                                                 |                                     |                                   |         |          |         |   |         |          |          |   |         |         
|                                                                                                                    | Capacity                            |                                   | $       | 405,415  |         |   | $       | 404,681  |          |   | $       | 404,713  |         
|                                                                                                                    | Electric                            |                                   |         | 225,154  |         |   |         | 162,093  |          |   |         | 177,569  |         
|                                                                                                                    | Steam                               |                                   |         | 19,090   |         |   |         | 17,638   |          |   |         | 14,537   |         
|                                                                                                                    |                                     |                                   |         |          |         |   |         |          |         
|                                                                                                                    |                                     | Total operating revenues          |         |          | 649,659 |   |         |          | 584,412  |   |         |          | 596,819  |  
|                                                                                                                    |                                     |                                   |         |          |         |   |         |          |         
|OPERATING EXPENSES:                                                                                                 |                                     |                                   |         |          |         |   |         |          |          |   |         |         
|                                                                                                                    | Fuel costs                          |                                   |         | 413,061  |         |   |         | 254,988  |          |   |         | 255,142  |         
|                                                                                                                    | Depreciation                        |                                   |         | 88,712   |         |   |         | 89,437   |          |   |         | 88,963   |         
|                                                                                                                    | Operations                          |                                   |         | 18,769   |         |   |         | 16,943   |          |   |         | 16,642   |         
|                                                                                                                    | Maintenance                         |                                   |         | 13,508   |         |   |         | 15,107   |          |   |         | 12,666   |         
|                                                                                                                    | Property and single business taxes  |                                   |         | 28,834   |         |   |         | 30,040   |          |   |         | 27,087   |         
|                                                                                                                    | Administrative, selling and general |                                   |         | 11,236   |         |   |         | 9,959    |          |   |         | 8,195    |         
|                                                                                                                    |                                     |                                   |         |          |         |   |         |          |         
|                                                                                                                    |                                     | Total operating expenses          |         |          | 574,120 |   |         |          | 416,474  |   |         |          | 408,695  |  
|                                                                                                                    |                                     |                                   |         |          |         |   |         |          |         
|OPERATING INCOME                                                                                                    |                                     |                                   | 75,539  |          |         |   | 167,938 |          |          |   | 188,124 |         
|                                                                                                                    |                                     |                                   |         |          |         |   |         |          |         
|OTHER INCOME (EXPENSE):                                                                                             |                                     |                                   |         |          |         |   |         |          |          |   |         |         
|                                                                                                                    | Interest and other income           |                                   |         | 5,460    |         |   |         | 5,100    |          |   |         | 5,555    |         
|                                                                                                                    | Interest expense                    |                                   |         | (104,618 | )       |   |         | (113,247 | )        |   |         | (119,783 | )       
|                                                                                                                    |                                     |                                   |         |          |         |   |         |          |         
|                                                                                                                    |                                     | Total other income (expense), net |         |          | (99,158 | ) |         |          | (108,147 | ) |         |          | (114,228 | )
|                                                                                                                    |                                     |                                   |         |          |         |   |         |          |         
|NET INCOME (LOSS) BEFORE CUMULATIVE
    EFFECT OF ACCOUNTING CHANGE                                                 |                                     |                                   | (23,619 | )        |         |   | 59,791  |          |          |   | 73,896  |         
|Cumulative effect of change in method of accounting for
    derivative option contracts (to April 1, 2002) (Note 2) |                                     |                                   |        |          |         |   |        |          |          |   | 58,131  |         
|                                                                                                                    |                                     |                                   |         |          |         |   |         |          |         
|NET INCOME (LOSS)                                                                                                   |                                     | $                                 | (23,619 | )        |         | $ | 59,791  |          |          | $ | 132,027 |         
|                                                                                                                    |                                     |                                   |         |          |         |   |         |          |         



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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP





CONSOLIDATED STATEMENTS OF PARTNERS EQUITY


FOR THE YEARS ENDED DECEMBER 31,


(In Thousands)


|                           |                            |                                                                 |         |         |          |   |         |        |        |   |         |         |         |  
|-------------------------- | -------------------------- | --------------------------------------------------------------- | ------- | ------- | -------- | - | ------- | ------ | ------ | - | ------- | ------- | ------- | -
|                           |                            | General                                                         |         |         | Limited  |   |         |       
|                           |                            | Partners                                                        |         |         | Partners |   |         | Total  |       
|                           |                            |                                                                 |         |         |          |   |         |        |       
|BALANCE, DECEMBER 31, 2001 |                            | $                                                               | 468,972 |         |          | $ | 82,740  |        |        | $ | 551,712 |        
|Comprehensive Income       |                            |                                                                 |         |         |          |   |         |        |        |   |         |        
|                           | Net Income                 |                                                                 |         | 114,947 |          |   |         | 17,080 |        |   |         | 132,027 |        
|                           | Other Comprehensive Income |                                                                 |         |         |          |   |         |        |        |   |         |         |        
|                           |                            | Unrealized gain on hedging activities since beginning of period |         |         | 33,311   |   |         |        | 4,950  |   |         |         | 38,261  |  
|                           |                            | Reclassification adjustments recognized in net income above     |         |         | 10,717   |   |         |        | 1,593  |   |         |         | 12,310  |  
|                           |                            |                                                                 |         |         |          |   |         |        |       
|                           |                            | Total other comprehensive income                                |         |         | 44,028   |   |         |        | 6,543  |   |         |         | 50,571  |  
|                           |                            |                                                                 |         |         |          |   |         |        |       
|                           | Total Comprehensive Income |                                                                 |         | 158,975 |          |   |         | 23,623 |        |   |         | 182,598 |        
|                           |                            |                                                                 |         |         |          |   |         |        |       
|BALANCE, DECEMBER 31, 2002 |                            | $                                                               | 627,947 |         |          | $ | 106,363 |        |        | $ | 734,310 |        
|Comprehensive Income       |                            |                                                                 |         |         |          |   |         |        |        |   |         |        
|                           | Net Income                 |                                                                 |         | 52,056  |          |   |         | 7,735  |        |   |         | 59,791  |        
|                           | Other Comprehensive Income |                                                                 |         |         |          |   |         |        |        |   |         |         |        
|                           |                            | Unrealized gain on hedging activities since beginning of period |         |         | 34,484   |   |         |        | 5,125  |   |         |         | 39,609  |  
|                           |                            | Reclassification adjustments recognized in net income above     |         |         | (30,153  | ) |         |        | (4,481 | ) |         |         | (34,634 | )
|                           |                            |                                                                 |         |         |          |   |         |        |       
|                           |                            | Total other comprehensive income                                |         |         | 4,331    |   |         |        | 644    |   |         |         | 4,975   |  
|                           |                            |                                                                 |         |         |          |   |         |        |       
|                           | Total Comprehensive Income |                                                                 |         | 56,387  |          |   |         | 8,379  |        |   |         | 64,766  |        
|                           |                            |                                                                 |         |         |          |   |         |        |       
|BALANCE, DECEMBER 31, 2003 |                            | $                                                               | 684,334 |         |          | $ | 114,742 |        |        | $ | 799,076 |        
|Comprehensive Income       |                            |                                                                 |         |         |          |   |         |        |        |   |         |        
|                           | Net Loss                   |                                                                 |         | (20,563 | )        |   |         | (3,056 | )      |   |         | (23,619 | )      
|                           | Other Comprehensive Income |                                                                 |         |         |          |   |         |        |        |   |         |         |        
|                           |                            | Unrealized gain on hedging activities since beginning of period |         |         | 62,292   |   |         |        | 9,256  |   |         |         | 71,548  |  
|                           |                            | Reclassification adjustments recognized in net income above     |         |         | (32,239  | ) |         |        | (4,790 | ) |         |         | (37,029 | )
|                           |                            |                                                                 |         |         |          |   |         |        |       
|                           |                            | Total other comprehensive income                                |         |         | 30,053   |   |         |        | 4,466  |   |         |         | 34,519  |  
|                           |                            |                                                                 |         |         |          |   |         |        |       
|                           | Total Comprehensive Income |                                                                 |         | 9,490   |          |   |         | 1,410  |        |   |         | 10,900  |        
|                           |                            |                                                                 |         |         |          |   |         |        |       
|BALANCE, DECEMBER 31, 2004 |                            | $                                                               | 693,824 |         |          | $ | 116,152 |        |        | $ | 809,976 |        
|                           |                            |                                                                 |         |         |          |   |         |        |       



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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP





CONSOLIDATED STATEMENTS OF CASH FLOWS


FOR THE YEARS ENDED DECEMBER 31,


(In Thousands)


|                                                     |                                                                                      |                                           |         |          |          |   |         |          |         |   |         |          |          |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------ | ----------------------------------------- | ------- | -------- | -------- | - | ------- | -------- | ------- | - | ------- | -------- | -------- | -
|                                                     |                                                                                      | 2004                                      |         |          | 2003     |   |         | 2002     |        
|                                                     |                                                                                      |                                           |         |          |          |   |         |          |        
|CASH FLOWS FROM OPERATING ACTIVITIES:                |                                                                                      |                                           |         |          |          |   |         |          |         |   |         |         
|                                                     | Net income (loss)                                                                    |                                           | $       | (23,619  | )        |   | $       | 59,791   |         |   | $       | 132,027  |         
|                                                     | Adjustments to reconcile net income to net cash provided by
    operating activities |                                           |         |          |          |   |         |          |         |   |         |          |         
|                                                     | Depreciation and amortization                                                        |                                           |         | 89,925   |          |   |         | 90,792   |         |   |         | 90,430   |         
|                                                     | Cumulative effect of change in accounting principle                                  |                                           |         |         |          |   |         |         |         |   |         | (58,131  | )       
|                                                     | (Increase) decrease in accounts receivable                                           |                                           |         | (15,214  | )        |   |         | (1,211   | )       |   |         | 48,343   |         
|                                                     | (Increase) decrease in gas inventory                                                 |                                           |         | 2,789    |          |   |         | (732     | )       |   |         | 133      |         
|                                                     | (Increase) decrease in unamortized property taxes                                    |                                           |         | (388     | )        |   |         | 683      |         |   |         | (1,730   | )       
|                                                     | (Increase) decrease in broker margin accounts and prepaid
    expenses               |                                           |         | (5,046   | )        |   |         | (4,778   | )       |   |         | 31,049   |         
|                                                     | (Increase) decrease in derivative assets                                             |                                           |         | 20,130   |          |   |         | 4,906    |         |   |         | (20,444  | )       
|                                                     | (Increase) decrease in prepaid gas costs, materials and supplies                     |                                           |         | 3,841    |          |   |         | (8,704   | )       |   |         | 1,376    |         
|                                                     | Increase (decrease) in accounts payable and accrued liabilities                      |                                           |         | 25,775   |          |   |         | (712     | )       |   |         | 8,774    |         
|                                                     | Increase in gas supplier funds on deposit                                            |                                           |         | 15,096   |          |   |         | 4,517    |         |   |         |         |         
|                                                     | Decrease in interest payable                                                         |                                           |         | (5,271   | )        |   |         | (3,377   | )       |   |         | (3,948   | )       
|                                                     | Increase (decrease) in other non-current liabilities                                 |                                           |         | (1,197   | )        |   |         | 311      |         |   |         | (24      | )       
|                                                     |                                                                                      |                                           |         |          |          |   |         |          |        
|                                                     |                                                                                      | Net cash provided by operating activities |         |          | 106,821  |   |         |          | 141,486 |   |         |          | 227,855  |  
|                                                     |                                                                                      |                                           |         |          |          |   |         |          |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                |                                                                                      |                                           |         |          |          |   |         |          |         |   |         |         
|                                                     | Plant modifications and purchases of plant equipment                                 |                                           |         | (20,460  | )        |   |         | (33,278  | )       |   |         | (29,529  | )       
|                                                     | Maturity of restricted investment securities held-to-maturity                        |                                           |         | 674,553  |          |   |         | 601,225  |         |   |         | 377,192  |         
|                                                     | Purchase of restricted investment securities held-to-maturity                        |                                           |         | (674,208 | )        |   |         | (602,279 | )       |   |         | (374,426 | )       
|                                                     |                                                                                      |                                           |         |          |          |   |         |          |        
|                                                     |                                                                                      | Net cash used in investing activities     |         |          | (20,115  | ) |         |          | (34,332 | ) |         |          | (26,763  | )
|                                                     |                                                                                      |                                           |         |          |          |   |         |          |        
|CASH FLOWS FROM FINANCING ACTIVITIES:                |                                                                                      |                                           |         |          |          |   |         |          |         |   |         |         
|                                                     | Repayment of financing obligation                                                    |                                           |         | (134,576 | )        |   |         | (93,928  | )       |   |         | (182,084 | )       
|                                                     |                                                                                      |                                           |         |          |          |   |         |          |        
|                                                     |                                                                                      | Net cash used in financing activities     |         |          | (134,576 | ) |         |          | (93,928 | ) |         |          | (182,084 | )
|                                                     |                                                                                      |                                           |         |          |          |   |         |          |        
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                                      |                                           | (47,870 | )        |          |   | 13,226  |          |         |   | 19,008  |         
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     |                                                                                      |                                           | 173,651 |          |          |   | 160,425 |          |         |   | 141,417 |         
|                                                     |                                                                                      |                                           |         |          |          |   |         |          |        
|CASH AND EQUIVALENTS AT END OF PERIOD                |                                                                                      | $                                         | 125,781 |          |          | $ | 173,651 |          |         | $ | 160,425 |         
|                                                     |                                                                                      |                                           |         |          |          |   |         |          |        



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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|    |                                     
|--- | ------------------------------------
|(1) | The Partnership and Associated Risks













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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












|    |                                
|--- | -------------------------------
|(2) | Significant Accounting Policies



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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                            
| | ---------------------------
| | Principles of Consolidation





| |                    
| | -------------------
| | Revenue Recognition





| |           
| | ----------
| | Fuel Costs







| |                    
| | -------------------
| | Accounts Receivable



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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |          
| | ---------
| | Inventory





| |                       
| | ----------------------
| | Materials and Supplies





| |             
| | ------------
| | Depreciation





| |                   
| | ------------------
| | Federal Income Tax





| |                        
| | -----------------------
| | Statement of Cash Flows





| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments





| |                                                                 
| | ----------------------------------------------------------------
| | Accounting for Derivative Instruments and Hedging
    Activities



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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                          
| | -------------------------
| | Electric Sales Agreements





| |                             
| | ----------------------------
| | Natural Gas Supply Contracts







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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                       
| | --------------------------------------
| | Natural Gas Supply Futures and Options











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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                        
| | -----------------------
| | New Accounting Standard





|    |                                                  
|--- | -------------------------------------------------
|(3) | Restricted Investment Securities Held-to-Maturity



|                                                                                   |  |      |         |  |      |   |         | 
|---------------------------------------------------------------------------------- |  | ---- | ------- |  | ---- | - | ------- | 
|                                                                                   |  | 2004 |         |  | 2003 |  
|                                                                                   |  |      |         |  |      |  
|Funds restricted for rental payments pursuant to the Overall
    Lease Transaction |  | $    | 138,150 |  |      | $ | 137,296 | 
|Funds restricted for management non-qualified plans                                |  |      | 1,260   |  |      |   | 2,459   | 
|                                                                                   |  |      |         |  |      |  
|Total                                                                              |  | $    | 139,410 |  |      | $ | 139,755 | 
|                                                                                   |  |      |         |  |      |  



|    |                                         
|--- | ----------------------------------------
|(4) | Accounts Payable and Accrued Liabilities



|                                   |                 |      |        |        |      |   |        |        | 
|---------------------------------- | --------------- | ---- | ------ | ------ | ---- | - | ------ | ------ | 
|                                   |                 | 2004 |        |        | 2003 |  
|                                   |                 |      |        |        |      |  
|Accounts payable                   |                 |      |        |        |      |   |        |       
|                                   | Related parties |      | $      | 12,772 |      |   | $      | 7,386  | 
|                                   | Trade creditors |      |        | 53,476 |      |   |        | 34,786 | 
|Property and single business taxes |                 |      | 11,833 |        |      |   | 12,548 |       
|Other                              |                 |      | 4,612  |        |      |   | 2,648  |       
|                                   |                 |      |        |        |      |  
|Total                              |                 | $    | 82,693 |        |      | $ | 57,368 |       
|                                   |                 |      |        |        |      |  



|    |                              
|--- | -----------------------------
|(5) | Gas Supplier Funds on Deposit



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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |               
|--- | --------------
|(6) | Long-Term Debt



|                                                                                                                                                                    |  |      |           |   |      |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                                                                                                                                    |  | 2004 |           |   | 2003 |  
|                                                                                                                                                                    |  |      |           |   |      |  
|Financing obligation, maturing through 2015, payable in
    semi-annual installments of principal and interest,
    collateralized by property, plant and equipment |  | $    | 1,018,645 |   |      | $ | 1,153,221 |  
|Less current portion                                                                                                                                                |  |      | (76,548   | ) |      |   | (134,576  | )
|                                                                                                                                                                    |  |      |           |   |      |  
|Total long-term debt                                                                                                                                                |  | $    | 942,097   |   |      | $ | 1,018,645 |  
|                                                                                                                                                                    |  |      |           |   |      |  



| |                     
| | --------------------
| | Financing Obligation











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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|     |  |           |         |  |          |   |         |       |  |   |         | 
|---- |  | --------- | ------- |  | -------- | - | ------- | ----- |  | - | ------- | 
|     |  | Principal |         |  | Interest |   |         | Total | 
|     |  |           |         |  |          |   |         |       | 
|2005 |  | $         | 76,548  |  |          | $ | 97,835  |       |  | $ | 174,383 | 
|2006 |  |           | 63,459  |  |          |   | 92,515  |       |  |   | 155,974 | 
|2007 |  |           | 62,916  |  |          |   | 87,988  |       |  |   | 150,904 | 
|2008 |  |           | 67,753  |  |          |   | 83,163  |       |  |   | 150,916 | 
|2009 |  |           | 70,335  |  |          |   | 76,755  |       |  |   | 147,090 | 
|     |  |           |         |  |          |   |         |       | 
|     |  | $         | 341,011 |  |          | $ | 438,256 |       |  | $ | 779,267 | 
|     |  |           |         |  |          |   |         |       | 

Revolving Credit Agreement




Intercreditor Agreement




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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                 
|--- | --------------------------------
|(7) | Commitments and Other Agreements



Power Purchase Agreement




Steam and Electric Power
Agreement






Steam Purchase Agreement


1 3


Gas Supply Agreements




Gas Transportation
Agreements




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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Gas Turbine Service
Agreements




Steam Turbine Service
Agreement




Site Lease






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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |              
|--- | -------------
|(8) | Contingencies



| |               
| | --------------
| | Property Taxes





| |               
| | --------------
| | NOx Allowances





| |                     
| | --------------------
| | Environmental Issues





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##### Table of Contents



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                            
|--- | ---------------------------
|(9) | Voluntary Severance Program





|     |                    
|---- | -------------------
|(10) | Retirement Benefits



| |                                 
| | --------------------------------
| | Postretirement Health Care Plans





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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                               |  |      |          |   |      |   |         |  
|---------------------------------------------- |  | ---- | -------- | - | ---- | - | ------- | -
|                                               |  | 2004 |          |   | 2003 |  
|                                               |  |      |          |   |      |  
|Change in benefit obligation:                  |  |      |          |   |      |   |         |  
|Benefit obligation at beginning of year        |  | $    | 3,276.0  |   |      | $ | 2,741.9 |  
|Service cost                                   |  |      | 232.1    |   |      |   | 212.5   |  
|Interest cost                                  |  |      | 174.8    |   |      |   | 178.2   |  
|Actuarial gain (loss)                          |  |      | 1,298.0  |   |      |   | 147.4   |  
|Benefits paid during year                      |  |      | (8.3     | ) |      |   | (4.0    | )
|                                               |  |      |          |   |      |  
|Benefit obligation at end of year              |  |      | 4,972.6  |   |      |   | 3,276.0 |  
|                                               |  |      |          |   |      |  
|Change in Plan assets:                         |  |      |          |   |      |   |         |  
|Fair value of Plan assets at beginning of year |  |      | 2,826.8  |   |      |   | 2,045.8 |  
|Actual return on Plan assets                   |  |      | 292.7    |   |      |   | 527.5   |  
|Employer contribution                          |  |      | 206.5    |   |      |   | 257.5   |  
|Benefits paid during year                      |  |      | (8.3     | ) |      |   | (4.0    | )
|                                               |  |      |          |   |      |  
|Fair value of Plan assets at end of year       |  |      | 3,317.7  |   |      |   | 2,826.8 |  
|                                               |  |      |          |   |      |  
|Unfunded (funded) status                       |  |      | 1,654.9  |   |      |   | 449.2   |  
|Unrecognized prior service cost                |  |      | (155.9   | ) |      |   | (170.3  | )
|Unrecognized net gain (loss)                   |  |      | (1,499.0 | ) |      |   | (278.9  | )
|                                               |  |      |          |   |      |  
|Accrued benefit cost                           |  | $    |         |   |      | $ |        |  
|                                               |  |      |          |   |      |  



|                                                |  |      |        |   |      |   |        |      |  |   |        |  
|----------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                |  | 2004 |        |   | 2003 |   |        | 2002 | 
|                                                |  |      |        |   |      |   |        |      | 
|Components of net periodic benefit cost:        |  |      |        |   |      |   |        |      |  |   |        |  
|Service cost                                    |  | $    | 232.1  |   |      | $ | 212.5  |      |  | $ | 197.3  |  
|Interest cost                                   |  |      | 174.8  |   |      |   | 178.2  |      |  |   | 188.7  |  
|Expected return on Plan assets                  |  |      | (216.1 | ) |      |   | (163.7 | )    |  |   | (167.0 | )
|Amortization of unrecognized net (gain) or loss |  |      | 15.7   |   |      |   | 30.5   |      |  |   | 14.3   |  
|                                                |  |      |        |   |      |   |        |      | 
|Net periodic benefit cost                       |  | $    | 206.5  |   |      | $ | 257.5  |      |  | $ | 233.3  |  
|                                                |  |      |        |   |      |   |        |      | 



|                                                        |  |               |       |  |              |   |       | 
|------------------------------------------------------- |  | ------------- | ----- |  | ------------ | - | ----- | 
|                                                        |  | 1-Percentage- |       |  | 1-Percentage |  
|                                                        |  | Point         |       |  | Point        |  
|                                                        |  | Increase      |       |  | Decrease     |  
|                                                        |  |               |       |  |              |  
|Effect on total of service and interest cost components |  | $             | 51.6  |  |              | $ | 44.7  | 
|Effect on postretirement benefit obligation             |  | $             | 514.8 |  |              | $ | 447.1 | 

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##### Table of Contents



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                        |                      |      |       |       |      |  |       |       |  |  |       |       | 
|--------------------------------------- | -------------------- | ---- | ----- | ----- | ---- |  | ----- | ----- |  |  | ----- | ----- | 
|                                        |                      | 2004 |       |       | 2003 |  |       | 2002  | 
|                                        |                      |      |       |       |      |  |       |       | 
|Discount rate                           |                      |      | 5.75% |       |      |  | 6.00% |       |  |  | 6.75% |      
|Long-term rate of return on Plan assets |                      |      | 8.00% |       |      |  | 8.00% |       |  |  | 8.00% |      
|Inflation benefit amount                |                      |      |       |       |      |  |       |       |  |  |       |      
|                                        | 1998 through 2004    |      |       | 0.00% |      |  |       | 0.00% |  |  |       | 0.00% | 
|                                        | 2005 and later years |      |       | 5.00% |      |  |       | 4.00% |  |  |       | 4.00% | 



Plan Assets.






|                          |       |      |    |     |      |  |    |     |  
|------------------------- | ----- | ---- | -- | --- | ---- |  | -- | --- | -
|                          |       | 2004 |    |     | 2003 | 
|                          |       |      |    |     |      | 
|Asset Category:           |       |      |    |     |      |  |    |    
|Cash and cash equivalents |       |      | 1  | %   |      |  | 11 | %  
|Fixed income              |       |      | 19 | %   |      |  | 17 | %  
|Equity securities         |       |      | 80 | %   |      |  | 72 | %  
|                          |       |      |    |     |      | 
|                          | Total |      |    | 100 | %    |  |    | 100 | %
|                          |       |      |    |     |      | 

Contributions.


Retirement and Savings Plans




Supplemental Retirement
Benefits






|     |                                                
|---- | -----------------------------------------------
|(11) | Partners Equity and Related Party Transactions



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##### Table of Contents



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      |                                         |                                        |   |         |        |  |      |         |        |  |   |         |        |  | 
|------------------------------------------- | ------------------------------------------------------------------------------------------------------------- | ---------------------------- | ------- | --- | -------- |  | ------ | ----------------------------------------- | ---- | --------------------------------------- | -------------------------------------- | - | ------- | ------ |  | ---- | ------- | ------ |  | - | ------- | ------ |  | 
|Beneficial Owner, Equity Partner,           |                                                                                                               | Equity                       |         |     |          |  |        |                                           |      |                                         |                                        |   |        
|Type of Partner and Nature of Related Party |                                                                                                               | Interest                     |         |     | Interest |  |        | Related Party Transactions and Agreements |      | 2004                                    |                                        |   | 2003    |        |  | 2002 |        
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      |                                         |                                        |   |         |        |  |      |        
|CMS Energy Company                          |                                                                                                               |                              |         |     |          |  |        |                                           |      |                                         |                                        |   |         |        |  |      |         |        |  |   |         |       
|CMS Midland, Inc.                           |                                                                                                               | $                            | 396,888 |     |          |  | 49.0   | %                                         |      | Power purchase agreements               |                                        | $ | 601,535 |        |  | $    | 513,774 |        |  | $ | 557,149 |       
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      |                                         |                                        |   |         |        |  |      |        
|                                            | General Partner; wholly-owned                                                                                 |                              |         |     |          |  |        |                                           |      |                                         | Purchases under gas transportation     |   |         |        |  |      |         |        |  |   |         |        | 
|                                            | subsidiary of Consumers Energy                                                                                |                              |         |     |          |  |        |                                           |      |                                         | agreements                             |   |         | 9,349  |  |      |         | 14,294 |  |   |         | 23,552 | 
|                                            | Company                                                                                                       |                              |         |     |          |  |        |                                           |      |                                         | Purchases under spot gas agreements    |   |         |       |  |      |         | 663    |  |   |         | 3,631  | 
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      |                                         | Purchases under gas supply agreements  |   |         |       |  |      |         | 2,330  |  |   |         | 11,306 | 
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      | Gas storage agreement                   |                                        |   | 2,563   |        |  |      | 2,563   |        |  |   | 2,563   |       
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      | Land lease/easement agreements          |                                        |   | 600     |        |  |      | 600     |        |  |   | 600     |       
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      | Accounts receivable                     |                                        |   | 50,364  |        |  |      | 40,373  |        |  |   | 44,289  |       
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      | Accounts payable                        |                                        |   | 1,031   |        |  |      | 1,025   |        |  |   | 3,502   |       
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      | Sales under spot gas agreements         |                                        |   |        |        |  |      | 3,260   |        |  |   | 1,084   |       
|El Paso Corporation                         |                                                                                                               | $                            | 141,397 |     |          |  | 18.1   | %                                         |      |                                         |                                        |   |         |        |  |      |         |        |  |   |         |       
|Source Midland Limited Partnership          |                                                                                                               |                              |         |     |          |  |        |                                           |      | Purchase under gas transportation       |                                        |   |         |        |  |      |         |        |  |   |         |       
|                                            | (SMLP)                                                                                                      |                              |         |     |          |  |        |                                           |      |                                         | agreements                             |   |         | 12,334 |  |      |         | 13,023 |  |   |         | 12,463 | 
|                                            | General Partner; owned by                                                                                     |                              |         |     |          |  |        |                                           |      |                                         | Purchases under spot gas agreement     |   |         |       |  |      |         | 610    |  |   |         | 15,655 | 
|                                            | subsidiaries of El Paso Corporation                                                                           |                              |         |     |          |  |        |                                           |      |                                         | Purchases under gas supply agreement   |   |         | 70,000 |  |      |         | 54,308 |  |   |         | 47,136 | 
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      | Gas agency agreement                    |                                        |   | 264     |        |  |      | 238     |        |  |   | 365     |       
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      | Deferred reservation charges under gas  |                                        |   |         |        |  |      |         |        |  |   |         |       
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      | purchase agreement                      |                                        |   | 3,152   |        |  |      | 4,728   |        |  |   |        |       
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      | Accounts receivable                     |                                        |   |        |        |  |      |        |        |  |   | 523     |       
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      | Accounts payable                        |                                        |   | 10,997  |        |  |      | 5,751   |        |  |   | 7,706   |       
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      | Sales under spot gas agreements         |                                        |   |        |        |  |      | 3,474   |        |  |   | 14,007  |       
|El Paso Midland, Inc. (El Paso Midland)   |                                                                                                               |                              | 84,838  |     |          |  | 10.9   |                                           |      | See related party activity listed under |                                        |   |         |        |  |      |         |        |  |   |         |       
|                                            | General Partner; wholly-owned subsidiary of El Paso
    Corporation                                           |                              |         |     |          |  |        |                                           |      |                                         | SMLP.                                  |   |         |        |  |      |         |        |  |   |         |        | 
|MEI Limited Partnership (MEI)             |                                                                                                               |                              |         |     |          |  |        |                                           |      | See related party activity listed under |                                        |   |         |        |  |      |         |        |  |   |         |       
|                                            | A General and Limited Partner; 50% interest owned by
    El Paso Midland, Inc. and 50% interest owned by SMLP |                              |         |     |          |  |        |                                           |      |                                         | SMLP.                                  |   |         |        |  |      |         |        |  |   |         |        | 
|                                            |                                                                                                               | General Partnership Interest |         |     | 70,701   |  |        |                                           | 9.1  |                                         |                                        |   |         |        |  |      |         |        |  |   |         |        |  | 
|                                            |                                                                                                               | Limited Partnership Interest |         |     | 7,068    |  |        |                                           | .9   |                                         |                                        |   |         |        |  |      |         |        |  |   |         |        |  | 
|Micogen Limited Partnership (MLP)         |                                                                                                               |                              | 35,348  |     |          |  | 4.5    |                                           |      | See related party activity listed under |                                        |   |         |        |  |      |         |        |  |   |         |       
|                                            | Limited Partner, owned subsidiaries of El Paso Corporation                                                    |                              |         |     |          |  |        |                                           |      |                                         | SMLP.                                  |   |         |        |  |      |         |        |  |   |         |        | 
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      |                                         |                                        |   |         |        |  |      |        
|                                            |                                                                                                               | Total El Paso Corporation    |         | $   | 339,352  |  |        |                                           | 43.5 | %                                       |                                        |   |         |        |  |      |         |        |  |   |         |        |  | 
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      |                                         |                                        |   |         |        |  |      |        
|The Dow Chemical Company                    |                                                                                                               |                              |         |     |          |  |        |                                           |      |                                         |                                        |   |         |        |  |      |         |        |  |   |         |       
|The Dow Chemical Company                    |                                                                                                               | $                            | 73,735  |     |          |  | 7.5    | %                                         |      | Steam and electric power agreement      |                                        |   | 39,055  |        |  |      | 36,207  |        |  |   | 29,385  |       
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      |                                         |                                        |   |         |        |  |      |        
|                                            | Limited Partner                                                                                               |                              |         |     |          |  |        |                                           |      |                                         | Steam purchase agreement  Dow Corning |   |         |        |  |      |         |        |  |   |         |        | 
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      |                                         | Corp (affiliate)                       |   |         | 4,289  |  |      |         | 4,017  |  |   |         | 3,746  | 
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      | Purchases under demineralized water     |                                        |   |         |        |  |      |         |        |  |   |         |       
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      | supply agreement                        |                                        |   | 8,142   |        |  |      | 6,396   |        |  |   | 6,605   |       
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      | Accounts receivable                     |                                        |   | 4,003   |        |  |      | 3,431   |        |  |   | 3,635   |       
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      | Accounts payable                        |                                        |   | 744     |        |  |      | 610     |        |  |   | 1,016   |       
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      | Standby and backup fees                 |                                        |   | 766     |        |  |      | 731     |        |  |   | 734     |       
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      | Sales of gas under tolling agreement    |                                        |   |        |        |  |      |        |        |  |   | 6,442   |       
|Alanna Corporation                          |                                                                                                               |                              |         |     |          |  |        |                                           |      |                                         |                                        |   |         |        |  |      |         |        |  |   |         |       
|Alanna Corporation                          |                                                                                                               | $                            | 1       | (1) |          |  | .00001 | %                                         |      | Note receivable                         |                                        |   | 1       |        |  |      | 1       |        |  |   | 1       |       
|                                            |                                                                                                               |                              |         |     |          |  |        |                                           |      |                                         |                                        |   |         |        |  |      |        
|                                            | Limited Partner; wholly-owned subsidiary of Alanna Holdings
    Corporation                                   |                              |         |     |          |  |        |                                           |      |                                         |                                        |   |         |        |  |      |         |        |  |   |         |        | 

Footnotes to Partners Equity and Related Party
Transactions







|    |                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------
|(1) | Alannas capital stock is pledged to secure MCVs
    obligation under the lease and other overall lease transaction
    documents.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM










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JAVELINA COMPANY





BALANCE SHEETS


|                                       |                                  |                           |                                          |          |        |         |        |          |        |         | 
|-------------------------------------- | -------------------------------- | ------------------------- | ---------------------------------------- | -------- | ------ | ------- | ------ | -------- | ------ | ------- | 
|                                       |                                  | December 31,              |                                         
|                                       |                                  |                           |                                         
|                                       |                                  | 2004                      |                                          |          | 2003   |        
|                                       |                                  |                           |                                          |          |        |        
|                                       |                                  | (In Thousands of Dollars) |                                         
|ASSETS                                
|Current assets                         |                                  |                           |                                          |          |        |         |        |         
|                                       | Cash and cash equivalents        |                           | $                                        | 20,435   |        |         | $      | 8,038    |       
|                                       | Accounts receivable, net         |                           |                                          |          |        |         |        |          |       
|                                       |                                  | Trade                     |                                          |          | 30,778 |         |        |          | 10,613 |        
|                                       |                                  | Affiliates                |                                          |          | 3,281  |         |        |          | 6,770  |        
|                                       | Product inventory                |                           |                                          | 941      |        |         |        |         |       
|                                       | Materials and supplies inventory |                           |                                          | 1,959    |        |         |        | 1,885    |       
|                                       | Prepaid expense                  |                           |                                          | 15       |        |         |        | 15       |       
|                                       |                                  |                           |                                          |          |        |        
|                                       |                                  |                           | Total current assets                     |          |        | 57,409  |        |          |        | 27,321  | 
|                                       |                                  |                           |                                          |          |        |        
|Property, plant and equipment, at cost |                                  |                           |                                          |          |        |         |        |         
|                                       | Land                             |                           |                                          | 4,203    |        |         |        | 4,203    |       
|                                       | Liquids extraction plant         |                           |                                          | 199,425  |        |         |        | 198,316  |       
|                                       | Accumulated depreciation         |                           |                                          | (125,347 | )      |         |        | (116,655 | )     
|                                       |                                  |                           |                                          |          |        |        
|                                       |                                  |                           | Total property, plant and equipment, net |          |        | 78,281  |        |          |        | 85,864  | 
|                                       |                                  |                           |                                          |          |        |        
|                                       |                                  |                           | Total assets                             |          | $      | 135,690 |        |          | $      | 113,185 | 
|                                       |                                  |                           |                                          |          |        |        
|                                      
|LIABILITIES AND PARTNERS CAPITAL     
|Current liabilities                    |                                  |                           |                                          |          |        |         |        |         
|                                       | Accounts payable                 |                           |                                          |          |        |         |        |          |       
|                                       |                                  | Trade                     |                                          | $        | 12,681 |         |        | $        | 7,663  |        
|                                       |                                  | Affiliates                |                                          |          | 12,563 |         |        |          | 9,470  |        
|                                       | Ad valorem taxes payable         |                           |                                          | 1,445    |        |         |        | 1,491    |       
|                                       | Accrued expenses                 |                           |                                          | 1,257    |        |         |        | 1,182    |       
|                                       |                                  |                           |                                          |          |        |        
|                                       |                                  |                           | Total current liabilities                |          |        | 27,946  |        |          |        | 19,806  | 
|Commitments and contingencies          |                                  |                           |                                          |          |        |         |        |         
|Partners capital                      |                                  |                           | 107,744                                  |          |        |         | 93,379 |         
|                                       |                                  |                           |                                          |          |        |        
|                                       |                                  |                           | Total liabilities and partners capital  |          | $      | 135,690 |        |          | $      | 113,185 | 
|                                       |                                  |                           |                                          |          |        |        

The accompanying notes are an integral part of these
financial statements.


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JAVELINA COMPANY





STATEMENTS OF OPERATIONS


|                   |                            |                           |         |         |        |  |         |         |         |   |         |         |     | 
|------------------ | -------------------------- | ------------------------- | ------- | ------- | ------ |  | ------- | ------- | ------- | - | ------- | ------- | --- | 
|                   |                            | Years Ended December 31,  |        
|                   |                            |                           |        
|                   |                            | 2004                      |         |         | 2003   |  |         | 2002    |        
|                   |                            |                           |         |         |        |  |         |         |        
|                   |                            | (In Thousands of Dollars) |        
|Operating revenue  |                            |                           |         |         |        |  |         |         |         |   |         |        
|                   | Product revenue            |                           | $       | 284,049 |        |  | $       | 181,318 |         |   | $       | 135,720 |    
|Other revenue      |                            |                           |         |         |        |  |         |         |         |   |         |        
|                   | Interest income and other  |                           |         | 142     |        |  |         | 105     |         |   |         | 331     |    
|                   |                            |                           |         |         |        |  |         |         |        
|                   |                            |                           | 284,191 |         |        |  | 181,423 |         |         |   | 136,051 |        
|Operating Expenses |                            |                           |         |         |        |  |         |         |         |   |         |        
|                   | Cost of product            |                           |         | 171,913 |        |  |         | 137,726 |         |   |         | 86,675  |    
|                   | Plant operating expenses   |                           |         | 66,792  |        |  |         | 47,239  |         |   |         | 38,039  |    
|                   | General and administrative |                           |         | 484     |        |  |         | 327     |         |   |         | 429     |    
|                   | Depreciation               |                           |         | 8,692   |        |  |         | 8,268   |         |   |         | 8,360   |    
|                   | Ad valorem taxes           |                           |         | 1,445   |        |  |         | 1,491   |         |   |         | 1,511   |    
|                   | Bad debt expense           |                           |         |        |        |  |         |        |         |   |         | 197     |    
|                   |                            |                           |         |         |        |  |         |         |        
|                   |                            |                           | 249,326 |         |        |  | 195,051 |         |         |   | 135,211 |        
|                   |                            |                           |         |         |        |  |         |         |        
|                   |                            | Net income (loss)         |         | $       | 34,865 |  |         | $       | (13,628 | ) |         | $       | 840 | 
|                   |                            |                           |         |         |        |  |         |         |        

The accompanying notes are an integral part of these
financial statements.


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JAVELINA COMPANY





STATEMENTS OF PARTNERS CAPITAL


Years Ended December 31, 2004, 2003 and 2002


|                                                                                      |  |                           |         |         |            |   |        |                |  |        |           |   |  |       |             |               |        |   |         |   |  |   |      |  
|------------------------------------------------------------------------------------- |  | ------------------------- | ------- | ------- | ---------- | - | ------ | -------------- |  | ------ | --------- | - |  | ----- | ----------- | ------------- | ------ | - | ------- | - |  | - | ---- | -
|                                                                                      |  |                           |         | El Paso |            |   |        |                |  |        |           |   | 
|                                                                                      |  | El Paso                   |         |         | Field      |   |        |                |  | Valero |           |   |  |       | Accumulated |              
|                                                                                      |  | Javelina,                 |         |         | Operations |   |        | K-M            |  |        | Javelina, |   |  |       |             | Other         |       
|                                                                                      |  | L.P.                      |         |         | Company    |   |        | Javelina, L.P. |  |        | L.P.      |   |  |       |             | Comprehensive |       
|                                                                                      |  | (40%)                     |         |         | (40%)      |   |        | (40%)          |  |        | (20%)     |   |  | Total |             |               | Income |  
|                                                                                      |  |                           |         |         |            |   |        |                |  |        |           |   |  |       |             |               |        |  
|                                                                                      |  | (In Thousands of Dollars) |        
|Balances at January 1, 2002                                                           |  | $                         | 44,747  |         |            | $ |       |                |  | $      | 44,747    |   |  | $     | 22,375      |               |        | $ | 111,869 |   |  | $ | 702  |  
|Net income                                                                            |  |                           | 336     |         |            |   |       |                |  |        | 336       |   |  |       | 168         |               |        |   | 840     |   |  |   |     |  
|Distributions                                                                         |  |                           | (2,000  | )       |            |   |       |                |  |        | (2,000    | ) |  |       | (1,000      | )             |        |   | (5,000  | ) |  |   |     |  
|Other comprehensive income  realized gain on cash
    flow hedges                    |  |                           | (281    | )       |            |   |       |                |  |        | (281      | ) |  |       | (140        | )             |        |   | (702    | ) |  |   | (702 | )
|                                                                                      |  |                           |         |         |            |   |        |                |  |        |           |   |  |       |             |               |        |  
|Balances at December 31, 2002                                                         |  |                           | 42,802  |         |            |   |       |                |  |        | 42,802    |   |  |       | 21,403      |               |        |   | 107,007 |   |  |   |     |  
|Net loss                                                                              |  |                           | (9,876  | )       |            |   | 4,425  |                |  |        | (5,451    | ) |  |       | (2,726      | )             |        |   | (13,628 | ) |  |   |     |  
|Sale of interests from El Paso Javelina, L.P. to
    El Paso Field Operations Company |  |                           | (32,926 | )       |            |   | 32,926 |                |  |        |          |   |  |       |            |               |        |   |        |   |  |   |     |  
|                                                                                      |  |                           |         |         |            |   |        |                |  |        |           |   |  |       |             |               |        |  
|Balances at December 31, 2003                                                         |  |                           |        |         |            |   | 37,351 |                |  |        | 37,351    |   |  |       | 18,677      |               |        |   | 93,379  |   |  |   |     |  
|Net income                                                                            |  |                           |        |         |            |   | 13,946 |                |  |        | 13,946    |   |  |       | 6,973       |               |        |   | 34,865  |   |  |   |     |  
|Distributions                                                                         |  |                           |        |         |            |   | (8,200 | )              |  |        | (8,200    | ) |  |       | (4,100      | )             |        |   | (20,500 | ) |  |   |     |  
|                                                                                      |  |                           |         |         |            |   |        |                |  |        |           |   |  |       |             |               |        |  
|Balances at December 31, 2004                                                         |  | $                         |        |         |            | $ | 43,097 |                |  | $      | 43,097    |   |  | $     | 21,550      |               |        | $ | 107,744 |   |  | $ |     |  
|                                                                                      |  |                           |         |         |            |   |        |                |  |        |           |   |  |       |             |               |        |  

The accompanying notes are an integral part of these
financial statements.


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JAVELINA COMPANY





STATEMENTS OF CASH FLOWS


|                                                                                                      |                                                    |                                  |                                                     |       |         |         |         |       |        |        |        |       |        |        |  
|----------------------------------------------------------------------------------------------------- | -------------------------------------------------- | -------------------------------- | --------------------------------------------------- | ----- | ------- | ------- | ------- | ----- | ------ | ------ | ------ | ----- | ------ | ------ | -
|                                                                                                      |                                                    | Years Ended December 31,         |                                                    
|                                                                                                      |                                                    |                                  |                                                    
|                                                                                                      |                                                    | 2004                             |                                                     |       | 2003    |         |         | 2002  |       
|                                                                                                      |                                                    |                                  |                                                     |       |         |         |         |       |       
|                                                                                                      |                                                    | (In Thousands of Dollars)        |                                                    
|Cash flows from operating activities                                                                  |                                                    |                                  |                                                     |       |         |         |         |       |        |        |        |      
|Net income (loss)                                                                                     |                                                    | $                                | 34,865                                              |       |         | $       | (13,628 | )     |        | $      | 840    |      
|Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities |                                                    |                                  |                                                     |       |         |         |         |       |        |        |        |      
|                                                                                                      | Depreciation                                       |                                  |                                                     | 8,692 |         |         |         | 8,268 |        |        |        | 8,360 |       
|                                                                                                      | Gain from sales of property, plant and equipment   |                                  |                                                     |      |         |         |         |      |        |        |        | (2    | )     
|                                                                                                      | Market value adjustment for derivative instruments |                                  |                                                     |      |         |         |         |      |        |        |        | (539  | )     
|                                                                                                      | Changes in operating assets and liabilities        |                                  |                                                     |       |         |         |         |       |        |        |        |       |       
|                                                                                                      |                                                    | Accounts receivable              |                                                     |       | (16,676 | )       |         |       | (2,105 | )      |        |       | (3,148 | )     
|                                                                                                      |                                                    | Product inventory                |                                                     |       | (941    | )       |         |       |       |        |        |       | 3,112  |       
|                                                                                                      |                                                    | Materials and supplies inventory |                                                     |       | (74     | )       |         |       | 10     |        |        |       | 38     |       
|                                                                                                      |                                                    | Accounts payable                 |                                                     |       | 8,111   |         |         |       | 3,802  |        |        |       | (2,466 | )     
|                                                                                                      |                                                    | Ad valorem taxes payable         |                                                     |       | (46     | )       |         |       | (20    | )      |        |       | 1,511  |       
|                                                                                                      |                                                    | Accrued expenses                 |                                                     |       | 75      |         |         |       | (678   | )      |        |       | 184    |       
|                                                                                                      |                                                    |                                  |                                                     |       |         |         |         |       |       
|                                                                                                      |                                                    |                                  | Net cash provided by (used in) operating activities |       |         | 34,006  |         |       |        | (4,351 | )      |       |        | 7,890  |  
|                                                                                                      |                                                    |                                  |                                                     |       |         |         |         |       |       
|Cash flows from investing activities                                                                  |                                                    |                                  |                                                     |       |         |         |         |       |        |        |        |      
|Purchases of property, plant and equipment                                                            |                                                    |                                  | (1,109                                              | )     |         |         | (1,911  | )     |        |        | (616   | )    
|Proceeds from sale of property, plant and equipment                                                   |                                                    |                                  |                                                    |       |         |         |        |       |        |        | 2      |      
|                                                                                                      |                                                    |                                  |                                                     |       |         |         |         |       |       
|                                                                                                      |                                                    |                                  | Net cash used in investing activities               |       |         | (1,109  | )       |       |        | (1,911 | )      |       |        | (614   | )
|                                                                                                      |                                                    |                                  |                                                     |       |         |         |         |       |       
|Cash flows from financing activities                                                                  |                                                    |                                  |                                                     |       |         |         |         |       |        |        |        |      
|Distributions to partners                                                                             |                                                    |                                  | (20,500                                             | )     |         |         |        |       |        |        | (5,000 | )    
|                                                                                                      |                                                    |                                  |                                                     |       |         |         |         |       |       
|                                                                                                      |                                                    |                                  | Net cash used in financing activities               |       |         | (20,500 | )       |       |        |       |        |       |        | (5,000 | )
|                                                                                                      |                                                    |                                  |                                                     |       |         |         |         |       |       
|Change in cash and cash equivalents                                                                   |                                                    |                                  | 12,397                                              |       |         |         | (6,262  | )     |        |        | 2,276  |      
|Cash and cash equivalents at beginning of year                                                        |                                                    |                                  | 8,038                                               |       |         |         | 14,300  |       |        |        | 12,024 |      
|                                                                                                      |                                                    |                                  |                                                     |       |         |         |         |       |       
|Cash and cash equivalents at end of year                                                              |                                                    | $                                | 20,435                                              |       |         | $       | 8,038   |       |        | $      | 14,300 |      
|                                                                                                      |                                                    |                                  |                                                     |       |         |         |         |       |       

The accompanying notes are an integral part of these
financial statements.


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JAVELINA COMPANY





NOTES TO FINANCIAL STATEMENTS




|   |                                    
|-- | -----------------------------------
|1. | Organization and Nature of Business





|   |                                
|-- | -------------------------------
|2. | Significant Accounting Policies

Basis of Presentation




Use of Estimates




Cash and Cash Equivalents




Accounts Receivable




Gas Imbalances




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Inventories




Property, Plant and Equipment




Impairment and Disposal of Long-lived Assets




Fair Value of Financial Instruments




Revenue Recognition


Accounting for Nonmonetary Transactions,


Repair and Maintenance Costs




Federal Income Taxes




Income Allocation and Distributions




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Derivative Instruments and Hedging Activities


Accounting for Derivative
Instruments and Hedging Activities,




|   |                             
|-- | ----------------------------
|3. | Transactions With Affiliates









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|                                                                                          |                                                                                                             |                           |        |        |      |   |        |        |   |   |        |        |  
|----------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | ------------------------- | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                                                                                          |                                                                                                             | (In Thousands of Dollars) |       
|                                                                                          |                                                                                                             |                           |       
|                                                                                          |                                                                                                             | 2004                      |        |        | 2003 |   |        | 2002   |  
|                                                                                          |                                                                                                             |                           |        |        |      |   |        |        |  
|Product revenue:                                                                          |                                                                                                             |                           |        |        |      |   |        |        |   |   |        |       
|El Paso Corporation                                                                       |                                                                                                             |                           |        |        |      |   |        |        |   |   |        |       
|                                                                                          | Sales to El Paso NGL Marketing Company, L.P., a wholly
    owned indirect subsidiary of El Paso Corporation |                           | $      | 42,494 |      |   | $      | 41,726 |   |   | $      | 29,046 |  
|                                                                                          | Sales to El Paso Merchant Energy  Petroleum
    Company                                                    |                           |        |       |      |   |        | 237    |   |   |        | 6,891  |  
|Valero Energy Corporation                                                                 |                                                                                                             |                           |        |        |      |   |        |        |   |   |        |       
|                                                                                          | Sales to Valero Refining Company                                                                            |                           |        | 35,002 |      |   |        | 25,304 |   |   |        | 20,492 |  
|                                                                                          |                                                                                                             |                           |        |        |      |   |        |        |  
|                                                                                          |                                                                                                             | $                         | 77,496 |        |      | $ | 67,267 |        |   | $ | 56,429 |       
|                                                                                          |                                                                                                             |                           |        |        |      |   |        |        |  
|Cost of product:                                                                          |                                                                                                             |                           |        |        |      |   |        |        |   |   |        |       
|El Paso Corporation                                                                       |                                                                                                             |                           |        |        |      |   |        |        |   |   |        |       
|                                                                                          | Gas purchases from El Paso Industrial Energy, a wholly
    owned indirect subsidiary of El Paso Corporation |                           | $      | 65,912 |      |   | $      | 37,154 |   |   | $      | 6,542  |  
|Valero Energy Corporation                                                                 |                                                                                                             |                           |        |        |      |   |        |        |   |   |        |       
|                                                                                          | Gas imbalance settlements paid to Valero Refining Company                                                   |                           |        | 2,819  |      |   |        | 4,883  |   |   |        | 2,416  |  
|                                                                                          | Gas imbalance settlements paid to (received from) Valero
    Refining and Marketing Company                 |                           |        | 8,336  |      |   |        | (2,161 | ) |   |        | (43    | )
|                                                                                          |                                                                                                             |                           |        |        |      |   |        |        |  
|                                                                                          |                                                                                                             | $                         | 77,067 |        |      | $ | 39,876 |        |   | $ | 8,915  |       
|                                                                                          |                                                                                                             |                           |        |        |      |   |        |        |  
|Plant operating expenses:                                                                 |                                                                                                             |                           |        |        |      |   |        |        |   |   |        |       
|El Paso Corporation                                                                       |                                                                                                             |                           |        |        |      |   |        |        |   |   |        |       
|                                                                                          | Management fees paid to El Paso Field on qualifying expenses                                                |                           | $      | 1,347  |      |   | $      | 1,333  |   |   | $      | 1,302  |  
|                                                                                          | Transportation fees paid to Javelina Pipeline Company                                                       |                           |        | 1,852  |      |   |        | 1,672  |   |   |        | 1,656  |  
|                                                                                          | Surface rentals paid to El Paso Merchant Energy-Petroleum
    Company                                       |                           |        | 78     |      |   |        | 75     |   |   |        | 84     |  
|Valero Energy Corporation                                                                 |                                                                                                             |                           |        |        |      |   |        |        |   |   |        |       
|                                                                                          | Processing fees paid to Valero Refining Company                                                             |                           |        | 1,588  |      |   |        | 586    |   |   |        | 316    |  
|                                                                                          | Processing fees paid to Valero Refining and Marketing Company                                               |                           |        | 3,900  |      |   |        | 185    |   |   |        | 164    |  
|                                                                                          |                                                                                                             |                           |        |        |      |   |        |        |  
|                                                                                          |                                                                                                             | $                         | 8,765  |        |      | $ | 3,851  |        |   | $ | 3,522  |       
|                                                                                          |                                                                                                             |                           |        |        |      |   |        |        |  
|Accounts receivable  affiliates:                                                         |                                                                                                             |                           |        |        |      |   |        |        |   |   |        |       
|El Paso Corporation                                                                       |                                                                                                             |                           |        |        |      |   |        |        |   |   |        |       
|                                                                                          | Accounts receivable due from El Paso NGL Marketing Company,
    L.P.                                        |                           | $      |       |      |   | $      | 4,308  |   |   |        |        |  
|Valero Energy Corporation                                                                 |                                                                                                             |                           |        |        |      |   |        |        |   |   |        |       
|                                                                                          | Accounts receivable due from Valero Refining Company                                                        |                           |        | 3,281  |      |   |        | 2,462  |   |   |        |        |  
|                                                                                          |                                                                                                             |                           |        |        |      |   |        |        |  
|                                                                                          |                                                                                                             | $                         | 3,281  |        |      | $ | 6,770  |        |   |   |        |       
|                                                                                          |                                                                                                             |                           |        |        |      |   |        |        |  
|Property, plant and equipment:                                                            |                                                                                                             |                           |        |        |      |   |        |        |   |   |        |       
|Capitalized management fees paid to El Paso Field on plant
    and equipment expenditures |                                                                                                             | $                         | 59     |        |      | $ | 74     |        |   |   |        |       
|                                                                                          |                                                                                                             |                           |        |        |      |   |        |        |  

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|                               |                                                                                                 |                           |        |       |      |   |       |       |  |  |  |  | 
|------------------------------ | ----------------------------------------------------------------------------------------------- | ------------------------- | ------ | ----- | ---- | - | ----- | ----- |  |  |  |  | 
|                               |                                                                                                 | (In Thousands of Dollars) |       
|                               |                                                                                                 |                           |       
|                               |                                                                                                 | 2004                      |        |       | 2003 |   |       | 2002  | 
|                               |                                                                                                 |                           |        |       |      |   |       |       | 
|Accounts payable  affiliates: |                                                                                                 |                           |        |       |      |   |       |       |  |  |  | 
|El Paso Corporation            |                                                                                                 |                           |        |       |      |   |       |       |  |  |  | 
|                               | Accounts payable due to El Paso Industrial Energy for gas
    purchases                         |                           | $      | 5,394 |      |   | $     | 4,608 |  |  |  |  | 
|                               | Accounts payable due to El Paso Field for reimbursable
    items and management fees            |                           |        | 4,574 |      |   |       | 4,155 |  |  |  |  | 
|                               | Accounts payable due to Javelina Pipeline Company for
    transportation fees                   |                           |        | 310   |      |   |       | 255   |  |  |  |  | 
|Valero Energy Corporation      |                                                                                                 |                           |        |       |      |   |       |       |  |  |  | 
|                               | Accounts payable due to Valero Refining Company for gas
    imbalance settlements               |                           |        | 331   |      |   |       | 361   |  |  |  |  | 
|                               | Accounts payable due to Valero Refining and Marketing Company
    for gas imbalance settlements |                           |        | 1,064 |      |   |       | 91    |  |  |  |  | 
|                               | Accounts payable due to Valero Refining and Marketing Company
    for processing fees           |                           |        | 890   |      |   |       |      |  |  |  |  | 
|                               |                                                                                                 |                           |        |       |      |   |       |       | 
|                               |                                                                                                 | $                         | 12,563 |       |      | $ | 9,470 |       |  |  |  | 
|                               |                                                                                                 |                           |        |       |      |   |       |       | 



|   |                                
|-- | -------------------------------
|4. | Sales and Processing Agreements







|   |                              
|-- | -----------------------------
|5. | Commitments and Contingencies





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Report of Independent Registered Public Accounting Firm
















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GREAT LAKES GAS TRANSMISSION LIMITED PARTNERSHIP





CONSOLIDATED STATEMENTS OF


INCOME AND PARTNERS CAPITAL


|                        |                                                              |                         |         |          |      |   |         |          |   |   |         |          |  
|----------------------- | ------------------------------------------------------------ | ----------------------- | ------- | -------- | ---- | - | ------- | -------- | - | - | ------- | -------- | -
|                        |                                                              | Years Ended December 31 |        
|                        |                                                              |                         |        
|                        |                                                              | 2004                    |         |          | 2003 |   |         | 2002     |  
|                        |                                                              |                         |         |          |      |   |         |          |  
|                        |                                                              | (Thousands of Dollars)  |        
|Transportation Revenues |                                                              | $                       | 284,327 |          |      | $ | 279,208 |          |   | $ | 277,515 |         
|Operating Expenses      |                                                              |                         |         |          |      |   |         |          |   |   |         |         
|                        | Operation and Maintenance                                    |                         |         | 34,723   |      |   |         | 43,052   |   |   |         | 37,075   |  
|                        | Depreciation                                                 |                         |         | 57,756   |      |   |         | 57,238   |   |   |         | 56,916   |  
|                        | Income Taxes Payable by Partners                             |                         |         | 47,058   |      |   |         | 40,530   |   |   |         | 45,400   |  
|                        | Property and Other Taxes                                     |                         |         | 23,265   |      |   |         | 24,929   |   |   |         | 14,393   |  
|                        |                                                              |                         |         |          |      |   |         |          |  
|                        |                                                              |                         | 162,802 |          |      |   | 165,749 |          |   |   | 153,784 |         
|                        |                                                              |                         |         |          |      |   |         |          |  
|Operating Income        |                                                              |                         | 121,525 |          |      |   | 113,459 |          |   |   | 123,731 |         
|Other Income (Expense)  |                                                              |                         |         |          |      |   |         |          |   |   |         |         
|                        | Interest on Long Term Debt                                   |                         |         | (37,718  | )    |   |         | (40,239  | ) |   |         | (44,539  | )
|                        | Other, Net                                                   |                         |         | 1,373    |      |   |         | 1,102    |   |   |         | 3,850    |  
|                        |                                                              |                         |         |          |      |   |         |          |  
|                        |                                                              |                         | (36,345 | )        |      |   | (39,137 | )        |   |   | (40,689 | )       
|                        |                                                              |                         |         |          |      |   |         |          |  
|Net Income              |                                                              | $                       | 85,180  |          |      | $ | 74,322  |          |   | $ | 83,042  |         
|                        |                                                              |                         |         |          |      |   |         |          |  
|Partners Capital       |                                                              |                         |         |          |      |   |         |          |   |   |         |         
|                        | Balance at Beginning of Year                                 |                         | $       | 452,007  |      |   |         | 445,512  |   |   |         | 443,640  |  
|                        | Contributions by General Partners                            |                         |         | 29,398   |      |   |         | 22,459   |   |   |         | 25,432   |  
|                        | Net Income                                                   |                         |         | 85,180   |      |   |         | 74,322   |   |   |         | 83,042   |  
|                        | Current Income Taxes Payable by Partners Charged to Earnings |                         |         | 31,536   |      |   |         | 24,238   |   |   |         | 27,801   |  
|                        | Distributions to Partners                                    |                         |         | (177,620 | )    |   |         | (114,524 | ) |   |         | (134,403 | )
|                        |                                                              |                         |         |          |      |   |         |          |  
|                        | Balance at End of Year                                       |                         | $       | 420,501  |      |   | $       | 452,007  |   |   | $       | 445,512  |  
|                        |                                                              |                         |         |          |      |   |         |          |  

The accompanying notes are an integral part of these
statements.


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GREAT LAKES GAS TRANSMISSION LIMITED PARTNERSHIP





CONSOLIDATED BALANCE SHEETS


|                                |                                             |                        |           |           |      |   |           |           | 
|------------------------------- | ------------------------------------------- | ---------------------- | --------- | --------- | ---- | - | --------- | --------- | 
|                                |                                             | As of December 31      |          
|                                |                                             |                        |          
|                                |                                             | 2004                   |           |           | 2003 |  
|                                |                                             |                        |           |           |      |  
|                                |                                             | (Thousands of Dollars) |          
|ASSETS                         
|Current Assets                  |                                             |                        |           |           |      |   |           |          
|                                | Cash and Cash Equivalents                   |                        | $         | 59,034    |      |   | $         | 40,156    | 
|                                | Accounts Receivable                         |                        |           | 44,137    |      |   |           | 34,747    | 
|                                | Materials and Supplies, at Average Cost     |                        |           | 10,043    |      |   |           | 10,020    | 
|                                | Prepayments and Other                       |                        |           | 5,146     |      |   |           | 3,511     | 
|                                |                                             |                        |           |           |      |  
|                                |                                             |                        | 118,360   |           |      |   | 88,434    |          
|Gas Utility Plant               |                                             |                        |           |           |      |   |           |          
|                                | Property, Plant and Equipment               |                        |           | 2,015,202 |      |   |           | 2,011,279 | 
|                                | Less Accumulated Depreciation               |                        |           | 919,287   |      |   |           | 870,356   | 
|                                |                                             |                        |           |           |      |  
|                                |                                             |                        | 1,095,915 |           |      |   | 1,140,923 |          
|                                |                                             |                        |           |           |      |  
|                                |                                             | $                      | 1,214,275 |           |      | $ | 1,229,357 |          
|                                |                                             |                        |           |           |      |  
|LIABILITIES & PARTNERS CAPITAL
|Current Liabilities             |                                             |                        |           |           |      |   |           |          
|                                | Current Maturities of Long Term Debt        |                        | $         | 10,000    |      |   | $         | 10,000    | 
|                                | Accounts Payable                            |                        |           | 27,984    |      |   |           | 14,850    | 
|                                | Property and Other Taxes                    |                        |           | 24,107    |      |   |           | 25,077    | 
|                                | Accrued Interest and Other                  |                        |           | 13,580    |      |   |           | 14,025    | 
|                                |                                             |                        |           |           |      |  
|                                |                                             |                        | 75,671    |           |      |   | 63,952    |          
|Long Term Debt                  |                                             |                        | 460,000   |           |      |   | 470,000   |          
|Other Liabilities               |                                             |                        |           |           |      |   |           |          
|                                | Amounts Equivalent to Deferred Income Taxes |                        |           | 256,959   |      |   |           | 241,281   | 
|                                | Other                                       |                        |           | 1,144     |      |   |           | 2,117     | 
|                                |                                             |                        |           |           |      |  
|                                |                                             |                        | 258,103   |           |      |   | 243,398   |          
|                                |                                             |                        |           |           |      |  
|Partners Capital               |                                             |                        | 420,501   |           |      |   | 452,007   |          
|                                |                                             |                        |           |           |      |  
|                                |                                             | $                      | 1,214,275 |           |      | $ | 1,229,357 |          
|                                |                                             |                        |           |           |      |  

The accompanying notes are an integral part of these
statements.


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GREAT LAKES GAS TRANSMISSION LIMITED PARTNERSHIP





CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                            |                                                              |                                                                  |                          |          |        |        |          |          |        |        |          |          |        |        |  
|------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | ---------------------------------------------------------------- | ------------------------ | -------- | ------ | ------ | -------- | -------- | ------ | ------ | -------- | -------- | ------ | ------ | -
|                                                                                            |                                                              | Years Ended December 31                                          |                         
|                                                                                            |                                                              |                                                                  |                         
|                                                                                            |                                                              | 2004                                                             |                          |          | 2003   |        |          | 2002     |       
|                                                                                            |                                                              |                                                                  |                          |          |        |        |          |          |       
|                                                                                            |                                                              | (Thousands of Dollars)                                           |                         
|Cash Flow Increase (Decrease) from:                                                         |                                                              |                                                                  |                          |          |        |        |          |          |        |        |          |         
|Operating Activities                                                                        |                                                              |                                                                  |                          |          |        |        |          |          |        |        |          |         
|                                                                                            | Net Income                                                   |                                                                  | $                        | 85,180   |        |        | $        | 74,322   |        |        | $        | 83,042   |       
|                                                                                            | Adjustments to Reconcile Net Income to Operating Cash Flows: |                                                                  |                          |          |        |        |          |          |        |        |          |          |       
|                                                                                            |                                                              | Depreciation                                                     |                          |          | 57,756 |        |          |          | 57,238 |        |          |          | 56,916 |       
|                                                                                            |                                                              | Amounts Equivalent to Deferred Income Taxes                      |                          |          | 15,678 |        |          |          | 16,983 |        |          |          | 18,241 |       
|                                                                                            |                                                              | Allowance for Funds Used During Construction                     |                          |          | (157   | )      |          |          | (398   | )      |          |          | (500   | )     
|                                                                                            |                                                              | Changes in Current Assets and Liabilities:                       |                          |          |        |        |          |          |        |        |          |          |        |       
|                                                                                            |                                                              |                                                                  | Accounts Receivable      |          |        | (9,390 | )        |          |        | 1,529  |          |          |        | (6,250 | )
|                                                                                            |                                                              |                                                                  | Accounts Payable         |          |        | 13,134 |          |          |        | (1,642 | )        |          |        | 2,148  |  
|                                                                                            |                                                              |                                                                  | Property and Other Taxes |          |        | (970   | )        |          |        | (1,687 | )        |          |        | (1,131 | )
|                                                                                            |                                                              |                                                                  | Other                    |          |        | (3,076 | )        |          |        | (337   | )        |          |        | 678    |  
|                                                                                            |                                                              |                                                                  |                          |          |        |        |          |          |       
|                                                                                            |                                                              |                                                                  | 158,155                  |          |        |        | 146,008  |          |        |        | 153,144  |         
|Investment in Utility Plant                                                                 |                                                              |                                                                  | (12,591                  | )        |        |        | (27,277  | )        |        |        | (34,292  | )       
|Financing Activities                                                                        |                                                              |                                                                  |                          |          |        |        |          |          |        |        |          |         
|                                                                                            | Repayment of Long Term Debt                                  |                                                                  |                          | (10,000  | )      |        |          | (41,500  | )      |        |          | (47,250  | )     
|                                                                                            | Contributions by General Partners                            |                                                                  |                          | 29,398   |        |        |          | 22,459   |        |        |          | 25,432   |       
|                                                                                            | Current Income Taxes Payable by Partners Charged to Earnings |                                                                  |                          | 31,536   |        |        |          | 24,238   |        |        |          | 27,801   |       
|                                                                                            | Distribution to Partners                                     |                                                                  |                          | (177,620 | )      |        |          | (114,524 | )      |        |          | (134,403 | )     
|                                                                                            |                                                              |                                                                  |                          |          |        |        |          |          |       
|                                                                                            |                                                              |                                                                  | (126,686                 | )        |        |        | (109,327 | )        |        |        | (128,420 | )       
|Change in Cash and Cash Equivalents                                                         |                                                              |                                                                  | 18,878                   |          |        |        | 9,404    |          |        |        | (9,568   | )       
|Cash and Cash Equivalents:                                                                  |                                                              |                                                                  |                          |          |        |        |          |          |        |        |          |         
|                                                                                            | Beginning of Year                                            |                                                                  |                          | 40,156   |        |        |          | 30,752   |        |        |          | 40,320   |       
|                                                                                            |                                                              |                                                                  |                          |          |        |        |          |          |       
|                                                                                            | End of Year                                                  |                                                                  | $                        | 59,034   |        |        | $        | 40,156   |        |        | $        | 30,752   |       
|                                                                                            |                                                              |                                                                  |                          |          |        |        |          |          |       
|Supplemental Disclosure of Cash Flow Information
    Cash Paid During the Year for Interest |                                                              |                                                                  |                          |          |        |        |          |          |        |        |          |         
|                                                                                            |                                                              | (Net of Amounts Capitalized of $48, $150 and $214, Respectively) |                          | $        | 37,903 |        |          | $        | 40,576 |        |          | $        | 45,004 |       
|                                                                                            |                                                              |                                                                  |                          |          |        |        |          |          |       

The accompanying notes are an integral part of these
statements.


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GREAT LAKES GAS TRANSMISSION LIMITED PARTNERSHIP





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|  |                            
|- | ---------------------------
|1 | Organization and Management





|                         |                                                                                               |             |  |       |      |  |  |       | 
|------------------------ | --------------------------------------------------------------------------------------------- | ----------- |  | ----- | ---- |  |  | ----- | 
|                         |                                                                                               | Ownership % | 
|                         |                                                                                               |             | 
|Partner (Parent Company) |                                                                                               | 2004        |  |       | 2003 | 
|                         |                                                                                               |             |  |       |      | 
|General Partners:        |                                                                                               |             |  |       |      |  |  |      
|                         | El Paso Great Lakes, Inc. (El Paso Corporation)                                               |             |  | 46.61 |      |  |  | 46.33 | 
|                         | TransCanada GL, Inc. (TransCanada PipeLines Ltd.)                                             |             |  | 46.61 |      |  |  | 46.33 | 
|Limited Partner:         |                                                                                               |             |  |       |      |  |  |      
|                         | Great Lakes Gas Transmission Company (TransCanada PipeLines Ltd.
    and El Paso Corporation) |             |  | 6.78  |      |  |  | 7.34  | 



2     Summary of Significant
Accounting Policies


Principles of Consolidation and Basis of Presentation










Regulation


Accounting for the Effects of
Certain Types of Regulation


Accounts Receivable




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Gas Utility Plant and Depreciation






Asset Retirement Obligations




Income Taxes






3     Affiliated Company
Transactions




|                         |                                           |                |        |         |      |  |        |         |  |  |        |         | 
|------------------------ | ----------------------------------------- | -------------- | ------ | ------- | ---- |  | ------ | ------- |  |  | ------ | ------- | 
|                         |                                           | (In Thousands) |       
|                         |                                           |                |       
|                         |                                           | 2004           |        |         | 2003 |  |        | 2002    | 
|                         |                                           |                |        |         |      |  |        |         | 
|Accounts receivable      |                                           | $              | 12,827 |         |      |  | 16,062 |         |  |  | 15,989 |        
|Accounts payable         |                                           |                | 1,845  |         |      |  | 1,135  |         |  |  | 622    |        
|Transportation revenues: |                                           |                |        |         |      |  |        |         |  |  |        |        
|                         | TransCanada PipeLines Ltd. and affiliates |                |        | 164,810 |      |  |        | 166,578 |  |  |        | 163,442 | 
|                         | El Paso Corporation and affiliates        |                |        | 20,581  |      |  |        | 23,877  |  |  |        | 24,875  | 





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|                |  |                |          |   |      |  |            |      |  |  |            |  
|--------------- |  | -------------- | -------- | - | ---- |  | ---------- | ---- |  |  | ---------- | -
|                |  | (In Thousands) |         
|                |  |                |         
|                |  | 2004           |          |   | 2003 |  |            | 2002 | 
|                |  |                |          |   |      |  |            |      | 
|Pension         |  | $              | (743,000 | ) |      |  | (2,600,000 | )    |  |  | (5,400,000 | )
|Post-Retirement |  |                | 202,000  |   |      |  | 204,000    |      |  |  | 236,000    |  



|  |     
|- | ----
|4 | Debt

|                                                                                  |                                              |                |         |         |      |  |         |         | 
|--------------------------------------------------------------------------------- | -------------------------------------------- | -------------- | ------- | ------- | ---- |  | ------- | ------- | 
|                                                                                  |                                              | (In Thousands) |        
|                                                                                  |                                              |                |        
|                                                                                  |                                              | 2004           |         |         | 2003 | 
|                                                                                  |                                              |                |         |         |      | 
|Senior Notes, unsecured, interest due semiannually, principal
    due as follows: |                                              |                |         |         |      |  |         |        
|                                                                                  | 8.74% series, due 2003 to 2011               |                | $       | 70,000  |      |  |         | 80,000  | 
|                                                                                  | 9.09% series, due 2012 to 2021               |                |         | 100,000 |      |  |         | 100,000 | 
|                                                                                  | 6.73% series, due 2009 to 2018               |                |         | 90,000  |      |  |         | 90,000  | 
|                                                                                  | 6.95% series, due 2019 to 2028               |                |         | 110,000 |      |  |         | 110,000 | 
|                                                                                  | 8.08% series, due 2021 to 2030               |                |         | 100,000 |      |  |         | 100,000 | 
|                                                                                  |                                              |                |         |         |      | 
|                                                                                  |                                              |                | 470,000 |         |      |  | 480,000 |        
|                                                                                  | Less current maturities                      |                |         | 10,000  |      |  |         | 10,000  | 
|                                                                                  |                                              |                |         |         |      | 
|                                                                                  | Total long term debt less current maturities |                | $       | 460,000 |      |  |         | 470,000 | 
|                                                                                  |                                              |                |         |         |      | 







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|  |                                 
|- | --------------------------------
|5 | Income Taxes Payable by Partners



|         |         |                |        |        |      |  |        |        |  |  |        |        | 
|-------- | ------- | -------------- | ------ | ------ | ---- |  | ------ | ------ |  |  | ------ | ------ | 
|         |         | (In Thousands) |       
|         |         |                |       
|         |         | 2004           |        |        | 2003 |  |        | 2002   | 
|         |         |                |        |        |      |  |        |        | 
|Current  |         |                |        |        |      |  |        |        |  |  |        |       
|         | Federal |                | $      | 30,187 |      |  |        | 23,201 |  |  |        | 26,612 | 
|         | State   |                |        | 1,349  |      |  |        | 1,037  |  |  |        | 1,189  | 
|         |         |                |        |        |      |  |        |        | 
|         |         |                | 31,536 |        |      |  | 24,238 |        |  |  | 27,801 |       
|         |         |                |        |        |      |  |        |        | 
|Deferred |         |                |        |        |      |  |        |        |  |  |        |       
|         | Federal |                |        | 14,833 |      |  |        | 15,556 |  |  |        | 16,808 | 
|         | State   |                |        | 689    |      |  |        | 736    |  |  |        | 791    | 
|         |         |                |        |        |      |  |        |        | 
|         |         |                | 15,522 |        |      |  | 16,292 |        |  |  | 17,599 |       
|         |         |                |        |        |      |  |        |        | 
|         |         | $              | 47,058 |        |      |  | 40,530 |        |  |  | 45,400 |       
|         |         |                |        |        |      |  |        |        | 





|                                         |  |                |          |   |      |  |          |  
|---------------------------------------- |  | -------------- | -------- | - | ---- |  | -------- | -
|                                         |  | (In Thousands) |         
|                                         |  |                |         
|                                         |  | 2004           |          |   | 2003 | 
|                                         |  |                |          |   |      | 
|Deferred tax assets  other              |  | $              | 4,889    |   |      |  | 5,168    |  
|Deferred tax liabilities  utility plant |  |                | (245,786 | ) |      |  | (230,614 | )
|Deferred tax liabilities  other         |  |                | (16,062  | ) |      |  | (15,835  | )
|                                         |  |                |          |   |      | 
|Net deferred tax liability               |  | $              | (256,959 | ) |      |  | (241,281 | )
|                                         |  |                |          |   |      | 



|  |                
|- | ---------------
|6 | Severance Costs





|  |                
|- | ---------------
|7 | Use Tax Refunds



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EXHIBIT LIST


December 31, 2004




|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- | -- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 3  | .A          |  | Amended and Restated Certificate of Incorporation dated
    March 7, 2002 (Exhibit 3.A to our 2001 Form 10-K).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 3  | .B          |  | By-laws dated June 24, 2002 (Exhibit 3.B to our 2002
    Form 10-K).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | 4  | .A          |  | Indenture dated as of February 15, 1994 and First
    Supplemental Indenture dated as of February 15, 1994.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 4  | .B          |  | Indenture dated as of March 5, 2003 between ANR Pipeline
    Company and The Bank of New York Trust Company, N.A.,
    successor to The Bank of New York, as Trustee (Exhibit 4.1
    to our Form 8-K filed March 5, 2003).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 10 | .A          |  | Amended and Restated Credit Agreement dated as of
    November 23, 2004, among El Paso Corporation, ANR
    Pipeline Company, Colorado Interstate Gas Company, El Paso
    Natural Gas Company, Tennessee Gas Pipeline Company, the several
    banks and other financial institutions from time to time parties
    thereto and JPMorgan Chase Bank, N.A., as administrative agent
    and as collateral agent (Exhibit 10.A to our Form 8-K
    filed November 29, 2004).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 10 | .B          |  | Amended and Restated Security Agreement dated as of
    November 23, 2004, made by among El Paso Corporation, ANR
    Pipeline Company, Colorado Interstate Gas Company, El Paso
    Natural Gas Company, Tennessee Gas Pipeline Company, the
    Subsidiary Grantors and certain other credit parties thereto and
    JPMorgan Chase Bank, N.A., not in its individual capacity, but
    solely as collateral agent for the Secured Parties and as the
    depository bank (Exhibit 10.B to our Form 8-K filed
    November 29, 2004).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 10 | .C          |  | $3,000,000,000 Revolving Credit Agreement dated as of
    April 16, 2003 among El Paso Corporation, El Paso Natural
    Gas Company, Tennessee Gas Pipeline Company and ANR Pipeline
    Company, as Borrowers, the Lenders Party thereto, and JPMorgan
    Chase Bank, as Administrative Agent, ABN Amro Bank N.V. and
    Citicorp North America, Inc., as Co-Document Agents, Bank of
    America, N.A. and Credit Suisse First Boston, as Co-Syndication
    Agents, J.P. Morgan Securities Inc. and Citigroup Global Markets
    Inc., as Joint Bookrunners and Co-Lead Arrangers.
    (Exhibit 99.1 to El Paso Corporations Form 8-K
    filed April 18, 2003); First Amendment to the
    $3,000,000,000 Revolving Credit Agreement and Waiver dated
    as of March 15, 2004 among El Paso Corporation, El Paso
    Natural Gas Company, Tennessee Gas Pipeline Company, ANR
    Pipeline Company and Colorado Interstate Gas Company, as
    Borrowers, the Lenders party thereto and JPMorgan Chase Bank, as
    Administrative Agent, ABN AMRO Bank N.V. and Citicorp North
    America, Inc., as Co-Documentation Agents, Bank of America, N.A.
    and Credit Suisse First Boston, as Co-Syndication Agents
    (Exhibit 10.A.1 to our 2003 First Quarter Form 10-Q);
    Second Waiver to the $3,000,000,000 Revolving Credit
    Agreement dated as of June 15, 2004 among El Paso
    Corporation, El Paso Natural Gas Company, Tennessee Gas Pipeline
    Company, ANR Pipeline Company and Colorado Interstate Gas
    Company, as Borrowers, the Lenders party thereto and JPMorgan
    Chase Bank, as Administrative Agent, ABN AMRO Bank N.V. and
    Citicorp North America, Inc., as Co-Documentation Agents, Bank
    of America, N.A. and Credit Suisse First Boston, as

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|        |     |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------- | --- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |            
|Number  |     | Description
|        |     |            
|        |     |             |  | Co-Syndication Agents (Exhibit 10.A.2 to our 2003 Second
    Quarter Form 10-Q); Second Amendment to the
    $3,000,000,000 Revolving Credit Agreement and Third Waiver
    dated as of August 6, 2004 among El Paso Corporation,
    El Paso Natural Gas Company, Tennessee Gas Pipeline
    Company, ANR Pipeline Company and Colorado Interstate Gas
    Company, as Borrowers, the Lenders party thereto and JPMorgan
    Chase Bank, as Administrative Agent, ABN AMRO Bank N.V. and
    Citicorp North America, Inc., as Co-Documentation Agents, Bank
    of America, N.A. and Credit Suisse First Boston, as
    Co-Syndication Agents. (Exhibit 99.B to our Form 8-K
    filed August 10, 2004).
|        | 21  |             |  | Omitted pursuant to the reduced disclosure format permitted by
    General Instruction I to Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | *31 | .A          |  | Certification of Chief Executive Officer pursuant to
    sec. 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | *31 | .B          |  | Certification of Chief Financial Officer pursuant to
    sec. 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | *32 | .A          |  | Certification of Chief Executive Officer pursuant to
    18 U.S.C. sec. 1350 as adopted pursuant to
    sec. 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | *32 | .B          |  | Certification of Chief Financial Officer pursuant to
    18 U.S.C. sec. 1350 as adopted pursuant to
    sec. 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

Undertaking




151



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##### Table of Contents






SIGNATURES












| |                                      
| | -------------------------------------
| | EL PASO CGP COMPANY                  
| | Registrant                           
|
| | /s/ Douglas L. Foshee                
| |                                      
| | Douglas L. Foshee                    
| | President and Chief Executive Officer






|                                             |  |                                                                                                              |  |              
|-------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------ |  | -------------
|Signature                                    |  | Title                                                                                                        |  | Date         
|                                             |  |                                                                                                              |  |              
|                                            
|/s/ Douglas L. Foshee(Douglas
    L. Foshee) |  | President, Chief Executive Officer, Chairman of the Board and
    Director
    (Principal Executive Officer) |  | June 20, 2005
|                                            
|/s/ D. Dwight Scott(D.
    Dwight Scott)     |  | Executive Vice President, Chief Financial Officer and
    Director
    (Principal Financial Officer)         |  | June 20, 2005
|                                            
|/s/ Robert W. Baker(Robert
    W. Baker)     |  | Executive Vice President, General Counsel and Director                                                       |  | June 20, 2005
|                                            
|/s/ Jeffrey I. Beason(Jeffrey
    I. Beason) |  | Senior Vice President and Controller
    (Principal Accounting Officer)                                      |  | June 20, 2005




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##### Table of Contents



EXHIBIT INDEX


December 31, 2004




|        |    |      |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- | -- | ---- | ----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |      |            
|Number  |    |      | Description
|        |    |      |            
|        | 10 | .A   |             | Amended and Restated Credit Agreement dated as of
    November 23, 2004, among El Paso Corporation, ANR
    Pipeline Company, Colorado Interstate Gas Company, El Paso
    Natural Gas Company, Tennessee Gas Pipeline Company, the several
    banks and other financial institutions from time to time parties
    thereto and JPMorgan Chase Bank, N.A., as administrative agent
    and as collateral agent (Exhibit 99.B to our Form 8-K filed
    November 29, 2004).                                                                                                                                                                                          
|       
|        | 10 | .A.2 |             | Amended and Restated Security Agreement dated as of
    November 23, 2004, among El Paso Corporation, ANR
    Pipeline Company, Colorado Interstate Gas Company, El Paso
    Natural Gas Company, Tennessee Gas Pipeline Company, the
    Subsidiary Grantors and certain other credit parties thereto and
    JPMorgan Chase Bank, N.A., not in its individual capacity, but
    solely as collateral agent for the Secured Parties and as the
    depository bank (Exhibit 99.C to our Form 8-K filed
    November 29, 2004).                                                                                                                                      
|       
|        | 10 | .A.3 |             | Amended and Restated Subsidiary Guarantee Agreement dated as of
    November 23, 2004, made by each of the Subsidiary
    Guarantors, as defined therein, in favor of JPMorgan Chase Bank,
    N.A., as collateral agent (Exhibit 99.D to our Form 8-K
    filed November 29, 2004).                                                                                                                                                                                                                                                                                                                                                                                 
|       
|        | 10 | .B   |             | $3,000,000,00 Revolving Credit Agreement dated as of
    April 16, 2003 among El Paso Corporation, El Paso
    Natural Gas Company, Tennessee Gas Pipeline Company and ANR
    Pipeline Company, as Borrowers, the Lenders Party thereto, and
    JPMorgan Chase Bank, as Administrative Agent, ABN AMRO Bank N.V.
    and Citicorp North America, Inc., as Co-Document Agents, Bank of
    America, N.A. and Credit Suisse First Boston, as Co-Syndication
    Agents, J.P. Morgan Securities Inc. and Citigroup Global
    Markets Inc., as Joint Bookrunners and Co-Lead Arrangers.
    (Exhibit 99.1 to El Paso Corporations Form 8-K
    filed April 18, 2003).
|       
|        | 10 | .B.1 |             | First Amendment to the $3,000,000,000 Revolving Credit Agreement
    and Waiver dated as of March 15, 2004 among El Paso
    Corporation, El Paso Natural Gas Company, Tennessee Gas
    Pipeline Company, ANR Pipeline Company and Colorado Interstate
    Gas Company, as Borrowers, the Lender and JPMorgan Chase Bank,
    as Administrative Agent, ABN AMRO Bank N.V. and Citicorp North
    America, Inc., as Co-Documentation Agents, Bank of America, N.A.
    and Credit Suisse First Boston, as Co-Syndication Agents
    (Exhibit 10.A.1 to our Form 2003 Form 10-K).                                                                                     
|       
|        | 10 | .B.2 |             | Second Waiver to the $3,000,000,000 Revolving Credit Agreement
    dated as of June 15, 2004 among El Paso Corporation,
    El Paso Natural Gas Company, Tennessee Gas Pipeline
    Company, ANR Pipeline Company and Colorado Interstate Gas
    Company, as Borrowers, the Lenders party thereto and JPMorgan
    Chase Bank, as Administrative Agent, ABN AMRO Bank N.V. and
    Citicorp North America, Inc., as Co-Documentation Agents, Bank
    of America, N.A. and Credit Suisse First Boston, as
    Co-Syndication Agents (Exhibit 10.A.2 to our Form 2003 Form
    10-K).                                                                                
|       
|        | 10 | .B.3 |             | Second Amendment to the $3,000,000,000 Revolving Credit
    Agreement and Third Waiver dated as of August 6, 2004 among
    El Paso Corporation, El Paso Natural Gas Company,
    Tennessee Gas Pipeline Company, ANR Pipeline Company and
    Colorado Interstate Gas Company, as Borrowers, the Lenders party
    thereto and JPMorgan Chase Bank, as Administrative Agent, ABN
    AMRO Bank N.V. and Citicorp North America, Inc., as
    Co-Documentation Agents, Bank of America, N.A. and Credit Suisse
    First Boston, as Co-Syndication Agents (Exhibit 99.B to our
    Form 8-K filed August 10, 2004).                                                  



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##### Table of Contents



|        |     |    |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | --- | -- | ----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |    |            
|Number  |     |    | Description
|        |     |    |            
|       
|        | 10  | .C |             | Master Settlement Agreement dated as of June 24, 2003, by
    and between, on the one hand, El Paso Corporation,
    El Paso Natural Gas Company, and El Paso Merchant
    Energy, L.P.; and, on the other hand, the Attorney General of
    the State of California, the Governor of the State of
    California, the California Public Utilities Commission, the
    California Department of Water Resources, the California Energy
    Oversight Board, the Attorney General of the State of
    Washington, the Attorney General of the State of Oregon, the
    Attorney General of the State of Nevada, Pacific Gas &
    Electric Company, Southern California Edison Company, the City
    of Los Angeles, the City of Long Beach, and classes consisting
    of all individuals and entities in California that purchased
    natural gas and/or electricity for use and not for resale or
    generation of electricity for the purpose of resale, between
    September 1, 1996 and March 20, 2003, inclusive,
    represented by class representatives Continental Forge Company,
    Andrew Berg, Andrea Berg, Gerald J. Marcil, United Church
    Retirement Homes of Long Beach, Inc., doing business as Plymouth
    West, Long Beach Brethren Manor, Robert Lamond, Douglas Welch,
    Valerie Welch, William Patrick Bower, Thomas L. French, Frank
    Stella, Kathleen Stella, John Clement Molony, SierraPine, Ltd.,
    John Frazee and Jennifer Frazee, John W.H.K. Phillip, and Cruz
    Bustamante (Exhibit 10.HH to El Paso
    Corporations 2003 Second Quarter Form 10-Q).
|       
|        | 10  | .D |             | Agreement With Respect to Collateral dated as of June 11,
    2004, by and among El Paso Production Oil &Gas
    USA, L.P., a Delaware limited partnership, Bank of America,
    N.A., acting solely in its capacity as Collateral Agent under
    the Collateral Agency Agreement, and The Office of the Attorney
    General of the State of California, acting solely in its
    capacity as the Designated Representative under the Designated
    Representative Agreement (Exhibit 10.C to our Form 2003
    Form 10-K).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       
|        | 21  |    |             | Omitted pursuant to the reduced disclosure format permitted by
    General Instruction I to Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       
|        | *31 | .A |             | Certification of Chief Executive Officer pursuant to sec. 302 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       
|        | *31 | .B |             | Certification of Chief Financial Officer pursuant to sec. 302 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       
|        | *32 | .A |             | Certification of Chief Executive Officer pursuant to
    18 U.S.C. sec. 1350 as adopted pursuant to sec. 906 of the
    Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       
|        | *32 | .B |             | Certification of Chief Financial Officer pursuant to
    18 U.S.C. sec. 1350 as adopted pursuant to sec. 906 of the
    Sarbanes-Oxley Act of 2002.