##### Table of Contents


















Form 10-Q




[X]


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended September 30, 2005


OR


[  ]


TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period
from           to


Commission File Number 333-106586





El Paso Production Holding Company




|                                                                                                      |  |                                                   
|----------------------------------------------------------------------------------------------------- |  | --------------------------------------------------
|Delaware(State or Other Jurisdiction
    of Incorporation or Organization)                            |  | 76-0659544(I.R.S. Employer
    Identification No.)
|                                                                                                     
|El Paso Building
    1001 Louisiana Street
    Houston, Texas(Address of Principal Executive Offices) |  | 77002(Zip Code)                                   

(713) 420-2600


þ o


o þ


o þ






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










---










EL PASO PRODUCTION HOLDING COMPANY


TABLE OF CONTENTS


|                                             |  |                                                                                                                                    |  |      |    | 
|-------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                             |  | Caption                                                                                                                            |  | Page
|                                             |  |                                                                                                                                    |  |     
|                                             |  | PART I  Financial Information                                                                                                     |  |      |    | 
|Item 1.                                      |  | Financial Statements                                                                                                               |  |      | 1  | 
|Item 2.                                      |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                                          |  |      | 10 | 
|                                             |  | Cautionary Statements for Purposes of the
    Safe Harbor Provisions of the Private Securities
    Litigation Reform Act of 1995 |  |      | 17 | 
|Item 3.                                      |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                                     |  |      | *  | 
|Item 4.                                      |  | Controls and Procedures                                                                                                            |  |      | 18 | 
|                                             |  | PART II  Other Information                                                                                                        |  |      |    | 
|Item 1.                                      |  | Legal Proceedings                                                                                                                  |  |      | 19 | 
|Item 2.                                      |  | Unregistered Sales of Equity Securities and
    Use of Proceeds                                                                    |  |      | *  | 
|Item 3.                                      |  | Defaults Upon Senior Securities                                                                                                    |  |      | *  | 
|Item 4.                                      |  | Submission of Matters to a Vote of Security
    Holders                                                                            |  |      | *  | 
|Item 5.                                      |  | Other Information                                                                                                                  |  |      | 19 | 
|Item 6.                                      |  | Exhibits                                                                                                                           |  |      | 19 | 
|                                             |  | Signatures                                                                                                                         |  |      | 20 | 
|Certification of PEO pursuant to Section 302
|Certification of CFO pursuant to Section 302
|Certification of PEO pursuant to Section 906
|Certification of CFO pursuant to Section 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 H to Form 10-Q.



|      |  |                                                 
|----- |  | ------------------------------------------------
|/d    |  | = per day                                       
|Bbl   |  | = barrels                                       
|Bcfe  |  | = billion cubic feet of natural gas equivalents 
|MBbls |  | = thousand barrels                              
|Mcf   |  | = thousand cubic feet                           
|Mcfe  |  | = thousand cubic feet of natural gas equivalents
|MMBtu |  | = million British thermal units                 
|MMcf  |  | = million cubic feet                            
|MMcfe |  | = million cubic feet of natural gas equivalents 
|NGL   |  | = natural gas liquids                           





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PART I  FINANCIAL INFORMATION





Item 1. Financial Statements


EL PASO PRODUCTION HOLDING COMPANY


CONDENSED CONSOLIDATED STATEMENTS OF INCOME


(In millions)


(Unaudited)


|                           |                                          |               |     |             |               |   |     |      |  |   |      |     |  |   |     |     | 
|-------------------------- | ---------------------------------------- | ------------- | --- | ----------- | ------------- | - | --- | ---- |  | - | ---- | --- |  | - | --- | --- | 
|                           |                                          |               |     | Nine Months |              
|                           |                                          | Quarter Ended |     |             | Ended         |  
|                           |                                          | September 30, |     |             | September 30, |  
|                           |                                          |               |     |             |               |  
|                           |                                          | 2005          |     |             | 2004          |   |     | 2005 |  |   | 2004 |    
|                           |                                          |               |     |             |               |   |     |      |  |   |      |    
|Operating revenues         |                                          | $             | 207 |             |               | $ | 168 |      |  | $ | 563  |     |  | $ | 580 |    
|                           |                                          |               |     |             |               |   |     |      |  |   |      |    
|Operating expenses         |                                          |               |     |             |               |   |     |      |  |   |      |     |  |   |     |    
|                           | Cost of sales                            |               |     | 9           |               |   |     | 9    |  |   |      | 27  |  |   |     | 30  | 
|                           | Operation and maintenance                |               |     | 55          |               |   |     | 39   |  |   |      | 150 |  |   |     | 124 | 
|                           | Depreciation, depletion and amortization |               |     | 90          |               |   |     | 78   |  |   |      | 264 |  |   |     | 250 | 
|                           | Taxes, other than income taxes           |               |     | 15          |               |   |     | 1    |  |   |      | 34  |  |   |     | 11  | 
|                           |                                          |               |     |             |               |   |     |      |  |   |      |    
|                           |                                          |               | 169 |             |               |   | 127 |      |  |   | 475  |     |  |   | 415 |    
|                           |                                          |               |     |             |               |   |     |      |  |   |      |    
|Operating income           |                                          |               | 38  |             |               |   | 41  |      |  |   | 88   |     |  |   | 165 |    
|Other income, net          |                                          |               |    |             |               |   |    |      |  |   | 1    |     |  |   |    |    
|Affiliated interest income |                                          |               | 4   |             |               |   | 3   |      |  |   | 11   |     |  |   | 12  |    
|Interest expense           |                                          |               | (22 | )           |               |   | (20 | )    |  |   | (60  | )   |  |   | (59 | )  
|                           |                                          |               |     |             |               |   |     |      |  |   |      |    
|Income before income taxes |                                          |               | 20  |             |               |   | 24  |      |  |   | 40   |     |  |   | 118 |    
|Income taxes               |                                          |               | 4   |             |               |   | 10  |      |  |   | 12   |     |  |   | 44  |    
|                           |                                          |               |     |             |               |   |     |      |  |   |      |    
|Net income                 |                                          | $             | 16  |             |               | $ | 14  |      |  | $ | 28   |     |  | $ | 74  |    
|                           |                                          |               |     |             |               |   |     |      |  |   |      |    



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EL PASO PRODUCTION HOLDING COMPANY


CONDENSED CONSOLIDATED BALANCE SHEETS


(In millions, except share amounts)


(Unaudited)


|                                       |                                                                                   |                                              |                                            |       |              |       |       |       |       |       | 
|-------------------------------------- | --------------------------------------------------------------------------------- | -------------------------------------------- | ------------------------------------------ | ----- | ------------ | ----- | ----- | ----- | ----- | ----- | 
|                                       |                                                                                   | September 30,                                |                                            |       | December 31, |      
|                                       |                                                                                   | 2005                                         |                                            |       | 2004         |      
|                                       |                                                                                   |                                              |                                            |       |              |      
|ASSETS                                
|Current assets                         |                                                                                   |                                              |                                            |       |              |       |       |      
|                                       | Cash and cash equivalents                                                         |                                              | $                                          | 64    |              |       | $     | 124   |      
|                                       | Accounts receivable, net of allowance of $6 in 2005 and $5 in
    2004            |                                              |                                            | 286   |              |       |       | 142   |      
|                                       | Note receivable from affiliate                                                    |                                              |                                            |      |              |       |       | 145   |      
|                                       | Deferred income taxes                                                             |                                              |                                            | 264   |              |       |       | 86    |      
|                                       | Other                                                                             |                                              |                                            | 91    |              |       |       | 25    |      
|                                       |                                                                                   |                                              |                                            |       |              |      
|                                       |                                                                                   |                                              | Total current assets                       |       |              | 705   |       |       |       | 522   | 
|                                       |                                                                                   |                                              |                                            |       |              |      
|Property, plant and equipment, at cost |                                                                                   |                                              |                                            |       |              |       |       |      
|                                       | Natural gas and oil properties                                                    |                                              |                                            |       |              |       |       |       |      
|                                       |                                                                                   | Proved properties-full cost method           |                                            |       | 8,201        |       |       |       | 7,313 |      
|                                       |                                                                                   | Unevaluated costs excluded from amortization |                                            |       | 430          |       |       |       | 253   |      
|                                       | Other                                                                             |                                              |                                            | 70    |              |       |       | 86    |      
|                                       |                                                                                   |                                              |                                            |       |              |      
|                                       |                                                                                   |                                              | 8,701                                      |       |              |       | 7,652 |      
|                                       | Less accumulated depreciation, depletion and amortization                         |                                              |                                            | 5,427 |              |       |       | 5,239 |      
|                                       |                                                                                   |                                              |                                            |       |              |      
|                                       |                                                                                   |                                              | Total property, plant and equipment, net   |       |              | 3,274 |       |       |       | 2,413 | 
|                                       |                                                                                   |                                              |                                            |       |              |      
|Other assets                           |                                                                                   |                                              |                                            |       |              |       |       |      
|                                       | Note receivable from affiliate                                                    |                                              |                                            |      |              |       |       | 332   |      
|                                       | Deferred income taxes                                                             |                                              |                                            | 1     |              |       |       | 132   |      
|                                       | Investments in unconsolidated affiliates                                          |                                              |                                            | 797   |              |       |       | 6     |      
|                                       | Other                                                                             |                                              |                                            | 31    |              |       |       | 60    |      
|                                       |                                                                                   |                                              |                                            |       |              |      
|                                       |                                                                                   |                                              | 829                                        |       |              |       | 530   |      
|                                       |                                                                                   |                                              |                                            |       |              |      
|                                       |                                                                                   |                                              | Total assets                               |       | $            | 4,808 |       |       | $     | 3,465 | 
|                                       |                                                                                   |                                              |                                            |       |              |      
|                                      
|LIABILITIES AND STOCKHOLDERS EQUITY  
|Current liabilities                    |                                                                                   |                                              |                                            |       |              |       |       |      
|                                       | Accounts payable                                                                  |                                              |                                            |       |              |       |       |       |      
|                                       |                                                                                   | Trade                                        |                                            | $     | 60           |       |       | $     | 50    |      
|                                       |                                                                                   | Other                                        |                                            |       | 120          |       |       |       | 67    |      
|                                       | Liabilities from price risk management activities                                 |                                              |                                            | 756   |              |       |       | 243   |      
|                                       | Note payable to affiliate                                                         |                                              |                                            | 41    |              |       |       |      |      
|                                       | Accrued interest                                                                  |                                              |                                            | 32    |              |       |       | 8     |      
|                                       | Other                                                                             |                                              |                                            | 55    |              |       |       | 25    |      
|                                       |                                                                                   |                                              |                                            |       |              |      
|                                       |                                                                                   |                                              | Total current liabilities                  |       |              | 1,064 |       |       |       | 393   | 
|                                       |                                                                                   |                                              |                                            |       |              |      
|Long-term debt                         |                                                                                   |                                              | 1,700                                      |       |              |       | 1,200 |      
|                                       |                                                                                   |                                              |                                            |       |              |      
|Other                                  |                                                                                   |                                              |                                            |       |              |       |       |      
|                                       | Liabilities from price risk management activities                                 |                                              |                                            | 253   |              |       |       | 273   |      
|                                       | Deferred income taxes                                                             |                                              |                                            | 366   |              |       |       |      |      
|                                       | Other                                                                             |                                              |                                            | 87    |              |       |       | 102   |      
|                                       |                                                                                   |                                              |                                            |       |              |      
|                                       |                                                                                   |                                              | 706                                        |       |              |       | 375   |      
|                                       |                                                                                   |                                              |                                            |       |              |      
|Commitments and contingencies          |                                                                                   |                                              |                                            |       |              |       |       |      
|Stockholders equity                   |                                                                                   |                                              |                                            |       |              |       |       |      
|                                       | Common stock, par value $1 per share; 1,000 shares
    authorized and outstanding |                                              |                                            |      |              |       |       |      |      
|                                       | Additional paid-in capital                                                        |                                              |                                            | 1,821 |              |       |       | 1,701 |      
|                                       | Retained earnings                                                                 |                                              |                                            | 137   |              |       |       | 109   |      
|                                       | Accumulated other comprehensive loss                                              |                                              |                                            | (620  | )            |       |       | (313  | )    
|                                       |                                                                                   |                                              |                                            |       |              |      
|                                       |                                                                                   |                                              | Total stockholders equity                 |       |              | 1,338 |       |       |       | 1,497 | 
|                                       |                                                                                   |                                              |                                            |       |              |      
|                                       |                                                                                   |                                              | Total liabilities and stockholders equity |       | $            | 4,808 |       |       | $     | 3,465 | 
|                                       |                                                                                   |                                              |                                            |       |              |      



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EL PASO PRODUCTION HOLDING COMPANY


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(In millions)


(Unaudited)


|                                     |                                                                               |                                                                              |                                           |        |      |      |     |      |     |      |  
|------------------------------------ | ----------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | ----------------------------------------- | ------ | ---- | ---- | --- | ---- | --- | ---- | -
|                                     |                                                                               | Nine Months                                                                  |                                          
|                                     |                                                                               | Ended                                                                        |                                          
|                                     |                                                                               | September 30,                                                                |                                          
|                                     |                                                                               |                                                                              |                                          
|                                     |                                                                               | 2005                                                                         |                                           |        | 2004 |     
|                                     |                                                                               |                                                                              |                                           |        |      |     
|Cash flows from operating activities |                                                                               |                                                                              |                                           |        |      |      |     |     
|                                     | Net income                                                                    |                                                                              | $                                         | 28     |      |      | $   | 74   |    
|                                     | Adjustments to reconcile net income to net cash from operating
    activities |                                                                              |                                           |        |      |      |     |      |    
|                                     |                                                                               | Depreciation, depletion and amortization                                     |                                           |        | 264  |      |     |      | 250 |     
|                                     |                                                                               | Deferred income taxes                                                        |                                           |        | 41   |      |     |      | 59  |     
|                                     |                                                                               | Earnings from unconsolidated affiliates, adjusted for cash
    distributions |                                           |        | 5    |      |     |      |    |     
|                                     |                                                                               | Other non-cash income items                                                  |                                           |        |     |      |     |      | 3   |     
|                                     |                                                                               | Asset and liability changes                                                  |                                           |        | (69  | )    |     |      | (28 | )   
|                                     |                                                                               |                                                                              |                                           |        |      |     
|                                     |                                                                               |                                                                              | Net cash provided by operating activities |        |      | 269  |     |      |     | 358  |  
|                                     |                                                                               |                                                                              |                                           |        |      |     
|Cash flows from investing activities |                                                                               |                                                                              |                                           |        |      |      |     |     
|                                     | Capital expenditures                                                          |                                                                              |                                           | (435   | )    |      |     | (348 | )  
|                                     | Net proceeds from sale of assets                                              |                                                                              |                                           | 5      |      |      |     |     |    
|                                     | Cash paid for acquisitions, net of cash acquired                              |                                                                              |                                           | (1,023 | )    |      |     |     |    
|                                     | Change in note receivable from affiliate                                      |                                                                              |                                           | 477    |      |      |     | 121  |    
|                                     | Increase in restricted cash                                                   |                                                                              |                                           | (10    | )    |      |     |     |    
|                                     | Other                                                                         |                                                                              |                                           | 1      |      |      |     |     |    
|                                     |                                                                               |                                                                              |                                           |        |      |     
|                                     |                                                                               |                                                                              | Net cash used in investing activities     |        |      | (985 | )   |      |     | (227 | )
|                                     |                                                                               |                                                                              |                                           |        |      |     
|Cash flows from financing activities |                                                                               |                                                                              |                                           |        |      |      |     |     
|                                     | Net proceeds from the issuance of long-term debt                              |                                                                              |                                           | 495    |      |      |     |     |    
|                                     | Change in note payable to parent                                              |                                                                              |                                           | 41     |      |      |     |     |    
|                                     | Contribution from parent                                                      |                                                                              |                                           | 120    |      |      |     |     |    
|                                     |                                                                               |                                                                              |                                           |        |      |     
|                                     |                                                                               |                                                                              | Net cash provided by financing activities |        |      | 656  |     |      |     |     |  
|                                     |                                                                               |                                                                              |                                           |        |      |     
|Change in cash and cash equivalents  |                                                                               |                                                                              | (60                                       | )      |      |      | 131 |     
|Cash and cash equivalents            |                                                                               |                                                                              |                                           |        |      |      |     |     
|                                     | Beginning of period                                                           |                                                                              |                                           | 124    |      |      |     | 34   |    
|                                     |                                                                               |                                                                              |                                           |        |      |     
|                                     | End of period                                                                 |                                                                              | $                                         | 64     |      |      | $   | 165  |    
|                                     |                                                                               |                                                                              |                                           |        |      |     



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EL PASO PRODUCTION HOLDING COMPANY


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


(In millions)


(Unaudited)


|                                                                 |                                                                                                                                                               |                          |      |             |               |   |     |      |     |   |      |      |      |   |     |      |      |  
|---------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------ | ---- | ----------- | ------------- | - | --- | ---- | --- | - | ---- | ---- | ---- | - | --- | ---- | ---- | -
|                                                                 |                                                                                                                                                               |                          |      | Nine Months |              
|                                                                 |                                                                                                                                                               | Quarter Ended            |      |             | Ended         |  
|                                                                 |                                                                                                                                                               | September 30,            |      |             | September 30, |  
|                                                                 |                                                                                                                                                               |                          |      |             |               |  
|                                                                 |                                                                                                                                                               | 2005                     |      |             | 2004          |   |     | 2005 |     |   | 2004 |     
|                                                                 |                                                                                                                                                               |                          |      |             |               |   |     |      |     |   |      |     
|Net income                                                       |                                                                                                                                                               | $                        | 16   |             |               | $ | 14  |      |     | $ | 28   |      |      | $ | 74  |     
|                                                                 |                                                                                                                                                               |                          |      |             |               |   |     |      |     |   |      |     
|Unrealized net gains (losses) from cash flow hedging activities: |                                                                                                                                                               |                          |      |             |               |   |     |      |     |   |      |      |      |   |     |     
|                                                                 | Unrealized mark-to-market losses arising during period
    (net of income taxes of $172 and $260 in 2005 and $45 and
    $127 in 2004)                        |                          |      | (300        | )             |   |     | (78  | )   |   |      | (454 | )    |   |     | (221 | )   
|                                                                 | Reclassification adjustments for changes in initial value to the
    settlement date (net of income taxes of $36 and $84 in 2005 and
    $18 and $60 in 2004) |                          |      | 62          |               |   |     | 31   |     |   |      | 147  |      |   |     | 105  |     
|                                                                 |                                                                                                                                                               |                          |      |             |               |   |     |      |     |   |      |     
|                                                                 |                                                                                                                                                               | Other comprehensive loss |      |             | (238          | ) |     |      | (47 | ) |      |      | (307 | ) |     |      | (116 | )
|                                                                 |                                                                                                                                                               |                          |      |             |               |   |     |      |     |   |      |     
|Comprehensive loss                                               |                                                                                                                                                               | $                        | (222 | )           |               | $ | (33 | )    |     | $ | (279 | )    |      | $ | (42 | )   
|                                                                 |                                                                                                                                                               |                          |      |             |               |   |     |      |     |   |      |     



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EL PASO PRODUCTION HOLDING COMPANY


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


1. Basis of Presentation


Basis of Presentation




2. Acquisitions






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|                                                    |       |              |      |     |     |   |     |     | 
|--------------------------------------------------- | ----- | ------------ | ---- | --- | --- | - | --- | --- | 
|Allocation of fair value of assets and liabilities: |       | Medicine Bow |      |     | GMT |  
|                                                    |       |              |      |     |     |  
|Current assets                                      |       | $            | 26   |     |     | $ | 3   |    
|Natural gas and oil properties                      |       |              | 287  |     |     |   | 201 |    
|Unevaluated costs excluded from amortization        |       |              | 132  |     |     |   | 71  |    
|Investment in unconsolidated affiliates             |       |              | 796  |     |     |   |    |    
|Current liabilities                                 |       |              | (23  | )   |     |   | (4  | )  
|Asset retirement obligations                        |       |              | (2   | )   |     |   |    |    
|Deferred tax liability                              |       |              | (365 | )   |     |   | (90 | )  
|                                                    |       |              |      |     |     |  
|                                                    | Total |              | $    | 851 |     |   | $   | 181 | 
|                                                    |       |              |      |     |     |  





|                   |  |               |     |             |               |   |     |         |  |   |      |  |  |   |     | 
|------------------ |  | ------------- | --- | ----------- | ------------- | - | --- | ------- |  | - | ---- |  |  | - | --- | 
|                   |  |               |     | Nine Months |              
|                   |  | Quarter Ended |     |             | Ended         |  
|                   |  | September 30, |     |             | September 30, |  
|                   |  |               |     |             |               |  
|                   |  | 2005(1)       |     |             | 2004          |   |     | 2005(1) |  |   | 2004 | 
|                   |  |               |     |             |               |   |     |         |  |   |      | 
|                   |  | Unaudited     |    
|                   |  | (In millions) |    
|Operating revenues |  | $             | 218 |             |               | $ | 184 |         |  | $ | 609  |  |  | $ | 637 | 
|                   |  |               |     |             |               |   |     |         |  |   |      | 
|Net income         |  | $             | 16  |             |               | $ | 14  |         |  | $ | 39   |  |  | $ | 68  | 
|                   |  |               |     |             |               |   |     |         |  |   |      | 






|    |                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------
|(1) | Excludes a $13 million charge of Medicine Bow for change of
    control payments triggered as a result of the acquisition.

3. Income Taxes


|                   |  |                                 |    |   |               |   |    |      |  |   |      |   |  |   |    |  
|------------------ |  | ------------------------------- | -- | - | ------------- | - | -- | ---- |  | - | ---- | - |  | - | -- | -
|                   |  | Quarter                         |    |   | Nine Months   |  
|                   |  | Ended                           |    |   | Ended         |  
|                   |  | September 30,                   |    |   | September 30, |  
|                   |  |                                 |    |   |               |  
|                   |  | 2005                            |    |   | 2004          |   |    | 2005 |  |   | 2004 |  
|                   |  |                                 |    |   |               |   |    |      |  |   |      |  
|                   |  | (In millions, except for rates) |   
|Income taxes       |  | $                               | 4  |   |               | $ | 10 |      |  | $ | 12   |   |  | $ | 44 |  
|Effective tax rate |  |                                 | 20 | % |               |   | 42 | %    |  |   | 30   | % |  |   | 37 | %



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4. Debt and Other Credit Facilities






5. Commitments and Contingencies




| |                                        
| | ---------------------------------------
| | Legal Proceedings and Other Contingency

Grynberg. Qui Tam


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


Reserve Revisions.


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Raton.






| |                      
| | ---------------------
| | Environmental Matters







| |           
| | ----------
| | Guarantees





|   |                                                                            
|-- | ---------------------------------------------------------------------------
|6. | Investments in Unconsolidated Affiliates and Related Party
    Transactions



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

Cash Management Program.


Operating Activities with Affiliates.


|                                                           |  |               |    |  |               |   |     |      |  |   |      |  |  |   |     | 
|---------------------------------------------------------- |  | ------------- | -- |  | ------------- | - | --- | ---- |  | - | ---- |  |  | - | --- | 
|                                                           |  | Quarter       |    |  | Nine Months   |  
|                                                           |  | Ended         |    |  | Ended         |  
|                                                           |  | September 30, |    |  | September 30, |  
|                                                           |  |               |    |  |               |  
|                                                           |  | 2005          |    |  | 2004          |   |     | 2005 |  |   | 2004 | 
|                                                           |  |               |    |  |               |   |     |      |  |   |      | 
|                                                           |  | (In millions) |   
|Operating revenues                                         |  | $             | 64 |  |               | $ | 104 |      |  | $ | 276  |  |  | $ | 331 | 
|Operating expenses from affiliates                         |  |               | 29 |  |               |   | 36  |      |  |   | 83   |  |  |   | 88  | 
|Reimbursements of operating expenses charged to affiliates |  |               | 21 |  |               |   | 32  |      |  |   | 68   |  |  |   | 80  | 





Taxes.


Other.




9



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##### Table of Contents






Item 2. Managements Discussion and Analysis
of Financial Condition and Results of Operations




Overview




Significant Operational Factors Since December 31,
2004






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Higher realized prices. During the first nine months of
    2005, we continued to benefit from a strong commodity price
    environment. However, under our hedge program, approximately
    60 percent of our natural gas production for the first nine
    months of 2005 was hedged at an average price of $3.21 per
    MMBtu, significantly below the market price of natural gas.
    Accordingly, our realized natural gas prices, including hedges,
    increased only three percent compared with 2004 despite a
    21 percent increase in the market price for natural gas.
    Realized prices for oil, condensate and NGL, which were not
    hedged, increased 36 percent compared to 2004.                                                                                                                                                                   
|
| |  | Average daily production of 432 MMcfe/d (including
    8 MMcfe/d from our unconsolidated affiliate). Our
    average daily production volumes, including our proportionate
    share from our unconsolidated investment in Four Star, increased
    in the third quarter of 2005 as compared with the second quarter
    of 2005 primarily due to continued production increases in our
    onshore region as a result of our drilling program and the
    acquisitions discussed below. These increases were partially
    offset by the impact of several hurricanes in the Gulf of Mexico
    discussed below.                                                                                                                                                                                                                                                           
|
| |  | Impact of hurricanes on production volumes.During the
    third quarter of 2005, our average daily production levels in
    the Gulf of Mexico were negatively impacted by 23 MMcfe/d
    due to Hurricanes Katrina and Rita. Prior to Hurricane Rita we
    were producing about 115 MMcfe/d from our offshore region. As of
    November 2005 we have brought back on line approximately
    65 MMcfe/d of our offshore production. We will continue to
    bring Gulf of Mexico production back on line during the
    remainder of the fourth quarter but do not expect all of our
    offshore production to be back online until the first quarter of
    2006.                                                                                                                                                                                                       
|
| |  | Acquisitions and other capital expenditures.During the
    first nine months of 2005, our capital expenditures totaled
    $1.5 billion including the acquisition of Medicine Bow,
    acquisitions in east and south Texas and the purchase of the
    interest held by one of our partners under a net profits
    interest agreement. These acquisitions added properties with
    approximately 514 Bcfe of proved reserves, including our
    net interest of approximately 253 Bcfe of reserves owned by
    an unconsolidated affiliate of Medicine Bow. The Texas
    acquisitions offer additional exploration upside in two of our
    key operating areas, while the Medicine Bow acquisition
    increases our presence in the Rocky Mountains, complements our
    existing core operations, diversifies our commodity mix, and
    increases our reserve life.
|
| |  | Drilling Results. In 2005, we have announced deep shelf
    discoveries at West Cameron Block 75 and West Cameron
    Block 62 in the Gulf of Mexico. At West Cameron
    Block 75, we have a 36 percent working interest and an
    approximate 30 percent net revenue interest. We have tested
    the discovery and anticipate deliverability of approximately
    40 MMcfe/d. At West Cameron Block 62, we have a
    54 percent working interest and an approximate 45 percent
    net revenue interest. We have tested the                                                                                                                                                                                                                                                                                                                                            

10



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##### Table of Contents



| |  |                                                                                                                                                           
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | well at rates up to 15 MMcfe/d. We expect both discoveries
    to come on line during the first quarter of 2006, after the
    installation of facilities.

Outlook for remainder of 2005




Production Hedge Position






Results of Operations




11



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##### Table of Contents





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



|                           |                  |               |      |             |               |   |      |      |  |   |      |    |  |   |      |     | 
|-------------------------- | ---------------- | ------------- | ---- | ----------- | ------------- | - | ---- | ---- |  | - | ---- | -- |  | - | ---- | --- | 
|                           |                  |               |      | Nine Months |              
|                           |                  | Quarter Ended |      |             | Ended         |  
|                           |                  | September 30, |      |             | September 30, |  
|                           |                  |               |      |             |               |  
|                           |                  | 2005          |      |             | 2004          |   |      | 2005 |  |   | 2004 |   
|                           |                  |               |      |             |               |   |      |      |  |   |      |   
|                           |                  | (In millions) |     
|Operating revenues         |                  | $             | 207  |             |               | $ | 168  |      |  | $ | 563  |    |  | $ | 580  |    
|Operating expenses         |                  |               | (169 | )           |               |   | (127 | )    |  |   | (475 | )  |  |   | (415 | )  
|                           |                  |               |      |             |               |   |      |      |  |   |      |   
|                           | Operating income |               |      | 38          |               |   |      | 41   |  |   |      | 88 |  |   |      | 165 | 
|Other income, net          |                  |               |     |             |               |   |     |      |  |   | 1    |    |  |   |     |    
|                           |                  |               |      |             |               |   |      |      |  |   |      |   
|                           | EBIT             |               |      | 38          |               |   |      | 41   |  |   |      | 89 |  |   |      | 165 | 
|Affiliated interest income |                  |               | 4    |             |               |   | 3    |      |  |   | 11   |    |  |   | 12   |    
|Interest expense           |                  |               | (22  | )           |               |   | (20  | )    |  |   | (60  | )  |  |   | (59  | )  
|Income taxes               |                  |               | (4   | )           |               |   | (10  | )    |  |   | (12  | )  |  |   | (44  | )  
|                           |                  |               |      |             |               |   |      |      |  |   |      |   
|Net income                 |                  | $             | 16   |             |               | $ | 14   |      |  | $ | 28   |    |  | $ | 74   |    
|                           |                  |               |      |             |               |   |      |      |  |   |      |   

12



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|                                            |                  |                                          |                                 |    |      |      |                   |    |     |      |   |  |      |  |     |    |      |      |     |     |      |      |  
|------------------------------------------- | ---------------- | ---------------------------------------- | ------------------------------- | -- | ---- | ---- | ----------------- | -- | --- | ---- | - |  | ---- |  | --- | -- | ---- | ---- | --- | --- | ---- | ---- | -
|                                            |                  | Quarter Ended                            |                                 |    |      |      | Nine Months Ended |   
|                                            |                  | September 30,                            |                                 |    |      |      | September 30,     |   
|                                            |                  |                                          |                                 |    |      |      |                   |   
|                                            |                  | 2005                                     |                                 |    | 2004 |      |                   |    |     | 2005 |   |  | 2004 | 
|                                            |                  |                                          |                                 |    |      |      |                   |    |     |      |   |  |      | 
|                                            |                  | (In millions, except volumes and prices) |                                
|Operating Revenues:                         |                  |                                          |                                 |    |      |      |                   |    |     |      |   |  |      |  |     |    |      |      |     |    
|                                            |                  | Natural gas                              |                                 | $  | 165  |      |                   | $  | 137 |      |   |  |      |  |     | $  | 450  |      |     | $   | 477  |     
|                                            |                  | Oil, condensate and NGL                  |                                 |    | 41   |      |                   |    | 31  |      |   |  |      |  |     |    | 111  |      |     |     | 102  |     
|                                            |                  | Other                                    |                                 |    | 1    |      |                   |    |    |      |   |  |      |  |     |    | 2    |      |     |     | 1    |     
|                                            |                  |                                          |                                 |    |      |      |                   |    |     |      |   |  |      |  |    
|                                            |                  |                                          | Total operating revenues        |    |      | 207  |                   |    |     | 168  |   |  |      |  |     |    |      | 563  |     |     |      | 580  |  
|Transportation and net product
    costs(1) |                  |                                          | (9                              | )  |      |      | (9                | )  |     |      |   |  |      |  | (27 | )  |      |      | (30 | )  
|                                            |                  |                                          |                                 |    |      |      |                   |    |     |      |   |  |      |  |    
|                                            |                  | Total operating margin                   |                                 |    | 198  |      |                   |    | 159 |      |   |  |      |  |     |    | 536  |      |     |     | 550  |     
|                                            |                  | Operating Expenses:                      |                                 |    |      |      |                   |    |     |      |   |  |      |  |     |    |      |      |     |     |      |     
|                                            |                  | Depreciation, depletion and amortization |                                 |    | (90  | )    |                   |    | (78 | )    |   |  |      |  |     |    | (264 | )    |     |     | (250 | )   
|                                            |                  | Production
    costs(2)                  |                                 |    | (40  | )    |                   |    | (23 | )    |   |  |      |  |     |    | (99  | )    |     |     | (67  | )   
|                                            |                  | Restructuring charges                    |                                 |    |     |      |                   |    | (1  | )    |   |  |      |  |     |    | (2   | )    |     |     | (12  | )   
|                                            |                  | General and administrative expenses      |                                 |    | (28  | )    |                   |    | (18 | )    |   |  |      |  |     |    | (77  | )    |     |     | (55  | )   
|                                            |                  | Taxes other than production and income   |                                 |    | (2   | )    |                   |    | 2   |      |   |  |      |  |     |    | (6   | )    |     |     | (1   | )   
|                                            |                  |                                          |                                 |    |      |      |                   |    |     |      |   |  |      |  |    
|                                            |                  |                                          | Total operating
    expenses(1) |    |      | (160 | )                 |    |     | (118 | ) |  |      |  |     |    |      | (448 | )   |     |      | (385 | )
|                                            |                  |                                          |                                 |    |      |      |                   |    |     |      |   |  |      |  |    
|                                            | Operating income |                                          |                                 | 38 |      |      |                   | 41 |     |      |   |  |      |  |     | 88 |      |      |     | 165 |     
|Other income                                |                  |                                          |                                |    |      |      |                  |    |     |      |   |  |      |  | 1   |    |      |      |    |    
|                                            |                  |                                          |                                 |    |      |      |                   |    |     |      |   |  |      |  |    
|                                            | EBIT             |                                          | $                               | 38 |      |      | $                 | 41 |     |      |   |  |      |  | $   | 89 |      |      |     | 165 |     
|                                            |                  |                                          |                                 |    |      |      |                   |    |     |      |   |  |      |  |    

|                                                    |                                                            |                                                         |                              |         |                   |      |   |          |         |      |      |    |     |      |   |         |          |      |   |         |       |      |  |     |     |    |  
|--------------------------------------------------- | ---------------------------------------------------------- | ------------------------------------------------------- | ---------------------------- | ------- | ----------------- | ---- | - | -------- | ------- | ---- | ---- | -- | --- | ---- | - | ------- | -------- | ---- | - | ------- | ----- | ---- |  | --- | --- | -- | -
|                                                    |                                                            | Quarter Ended                                           |                              |         | Nine Months Ended |     
|                                                    |                                                            | September 30,                                           |                              |         | September 30,     |     
|                                                    |                                                            |                                                         |                              |         |                   |     
|                                                    |                                                            |                                                         |                              | Percent |                   |      |   |          | Percent |     
|                                                    |                                                            | 2005                                                    |                              |         | 2004              |      |   | Variance |         |      | 2005 |    |     | 2004 |   |         | Variance |     
|                                                    |                                                            |                                                         |                              |         |                   |      |   |          |         |      |      |    |     |      |   |         |          |     
|Consolidated volumes, prices and costs per unit:    |                                                            |                                                         |                              |         |                   |      |   |          |         |      |      |    |     |      |   |         |          |      |   |         |       |      |  |    
|                                                    | Natural gas
    Volumes (MMcf)                             |                                                         |                              | 34,310  |                   |      |   | 33,182   |         |      |      | 3  | %   |      |   | 100,397 |          |      |   | 109,542 |       |      |  | (8  | )% 
|                                                    |                                                            | Average realized prices including hedges
    ($/Mcf)(3) |                              | $       | 4.81              |      |   | $        | 4.13    |      |      |    | 16  | %    |   | $       | 4.48     |      |   | $       | 4.35  |      |  |     | 3   | % 
|                                                    |                                                            | Average realized prices excluding hedges
    ($/Mcf)(3) |                              | $       | 8.21              |      |   | $        | 5.66    |      |      |    | 45  | %    |   | $       | 6.99     |      |   | $       | 5.76  |      |  |     | 21  | % 
|                                                    |                                                            | Average transportation costs ($/Mcf)                    |                              | $       | 0.24              |      |   | $        | 0.24    |      |      |    |    |      |   | $       | 0.23     |      |   | $       | 0.20  |      |  |     | 15  | % 
|                                                    | Oil, condensate and NGL
    Volumes (MBbls)                |                                                         |                              | 822     |                   |      |   | 839      |         |      |      | (2 | )%  |      |   | 2,564   |          |      |   | 3,225   |       |      |  | (20 | )% 
|                                                    |                                                            | Average realized prices
    ($/Bbl)(3)(4)               |                              | $       | 49.59             |      |   | $        | 36.84   |      |      |    | 35  | %    |   | $       | 43.28    |      |   | $       | 31.74 |      |  |     | 36  | % 
|                                                    |                                                            | Average transportation costs ($/Bbl)                    |                              | $       | 0.60              |      |   | $        | 1.00    |      |      |    | (40 | )%   |   | $       | 0.72     |      |   | $       | 1.38  |      |  |     | (48 | )%
|                                                    | Total equivalent volumes (MMcfe)                           |                                                         |                              | 39,245  |                   |      |   | 38,211   |         |      |      | 3  | %   |      |   | 115,784 |          |      |   | 128,891 |       |      |  | (10 | )% 
|                                                    | Production costs ($/Mcfe)
    Average lease operating cost |                                                         | $                            | 0.69    |                   |      | $ | 0.52     |         |      |      | 33 | %   |      | $ | 0.62    |          |      | $ | 0.44    |       |      |  | 41  | %  
|                                                    |                                                            | Average production taxes                                |                              |         | 0.34              |      |   |          | 0.10    |      |      |    | 240 | %    |   |         | 0.24     |      |   |         | 0.08  |      |  |     | 200 | % 
|                                                    |                                                            |                                                         |                              |         |                   |      |   |          |         |      |      |    |     |      |   |         |          |     
|                                                    |                                                            |                                                         | Total production
    cost(2) |         | $                 | 1.03 |   |          | $       | 0.62 |      |    |     | 66   | % |         | $        | 0.86 |   |         | $     | 0.52 |  |     |     | 65 | %
|                                                    |                                                            |                                                         |                              |         |                   |      |   |          |         |      |      |    |     |      |   |         |          |     
|                                                    |                                                            | Average general and administrative cost ($/Mcfe)        |                              | $       | 0.72              |      |   | $        | 0.48    |      |      |    | 50  | %    |   | $       | 0.66     |      |   | $       | 0.43  |      |  |     | 53  | % 
|                                                    |                                                            | Unit of production depletion cost ($/Mcfe)              |                              | $       | 2.16              |      |   | $        | 1.87    |      |      |    | 16  | %    |   | $       | 2.13     |      |   | $       | 1.79  |      |  |     | 19  | % 
|Unconsolidated affiliate volumes (Four
    Star)(5) |                                                            |                                                         |                              |         |                   |      |   |          |         |      |      |    |     |      |   |         |          |      |   |         |       |      |  |    
|                                                    | Natural Gas (MMcf)                                         |                                                         |                              | 1,605   |                   |      |   |          |         |      |      |    |     |      |   | 1,605   |          |      |   |         |       |      |  |     |    
|                                                    | Oil, condensate and liquids (MBbls)                        |                                                         |                              | 92      |                   |      |   |          |         |      |      |    |     |      |   | 92      |          |      |   |         |       |      |  |     |    
|                                                    | Total equivalent volumes (MMcfe)                           |                                                         |                              | 2,156   |                   |      |   |          |         |      |      |    |     |      |   | 2,156   |          |      |   |         |       |      |  |     |    






|    |                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Transportation and net product costs are included in operating
    expenses on our consolidated statement of income.                                           
|(2) | Production costs include lease operating costs and production
    related taxes (including ad valorem and severance taxes).                                    
|(3) | Prices are stated before transportation costs.                                                                                                                 
|(4) | We do not have any hedges associated with our oil, condensate
    and NGL volumes.                                                                             
|(5) | We acquired our equity interest in Four Star in connection with
    our Medicine Bow acquisition in August 2005. Volumes
    reflected are net to our interest.

13



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##### Table of Contents



Quarter and Nine Months Ended September 30, 2005
Compared to Quarter and Nine Months Ended September 30,
2004




|                                                  |                                                 |                         |   |     |           |   |   |          |     |      |        |   |   |  |   |     |     |  
|------------------------------------------------- | ----------------------------------------------- | ----------------------- | - | --- | --------- | - | - | -------- | --- | ---- | ------ | - | - |  | - | --- | --- | -
|                                                  |                                                 | Variance                |  
|                                                  |                                                 |                         |  
|                                                  |                                                 | Operating               |   |     | Operating |   |   |          |     | EBIT |       
|                                                  |                                                 | Revenue                 |   |     | Expense   |   |   | Other(1) |     |      | Impact |  
|                                                  |                                                 |                         |   |     |           |   |   |          |     |      |        |  
|                                                  |                                                 | Favorable/(Unfavorable) |  
|                                                  |                                                 | (In millions)           |  
|Quarter Ended September 30,                       |                                                 |                         |   |     |           |   |   |          |     |      |        |   |   |  |   |    
|Natural Gas Revenue                               |                                                 |                         |   |     |           |   |   |          |     |      |        |   |   |  |   |    
|                                                  | Higher prices in 2005                           |                         | $ | 88  |           |   | $ |         |     |      | $      |  |   |  | $ | 88  |    
|                                                  | Higher volumes in 2005                          |                         |   | 6   |           |   |   |         |     |      |        |  |   |  |   | 6   |    
|                                                  | Impact from hedge program in 2005 versus 2004   |                         |   | (66 | )         |   |   |         |     |      |        |  |   |  |   | (66 | )  
|Oil, Condensate, and NGL Revenue                  |                                                 |                         |   |     |           |   |   |          |     |      |        |   |   |  |   |    
|                                                  | Higher realized prices in 2005                  |                         |   | 11  |           |   |   |         |     |      |        |  |   |  |   | 11  |    
|                                                  | Lower volumes in 2005                           |                         |   | (1  | )         |   |   |         |     |      |        |  |   |  |   | (1  | )  
|Depreciation, Depletion, and Amortization Expense |                                                 |                         |   |     |           |   |   |          |     |      |        |   |   |  |   |    
|                                                  | Higher depletion rate in 2005                   |                         |   |    |           |   |   | (11      | )   |      |        |  |   |  |   | (11 | )  
|                                                  | Higher production volumes in 2005               |                         |   |    |           |   |   | (2       | )   |      |        |  |   |  |   | (2  | )  
|Production Costs                                  |                                                 |                         |   |     |           |   |   |          |     |      |        |   |   |  |   |    
|                                                  | Higher lease operating costs in 2005            |                         |   |    |           |   |   | (7       | )   |      |        |  |   |  |   | (7  | )  
|                                                  | Higher production taxes in 2005                 |                         |   |    |           |   |   | (10      | )   |      |        |  |   |  |   | (10 | )  
|Other                                             |                                                 |                         |   |     |           |   |   |          |     |      |        |   |   |  |   |    
|                                                  | Higher general and administrative costs in 2005 |                         |   |    |           |   |   | (10      | )   |      |        |  |   |  |   | (10 | )  
|                                                  | Other                                           |                         |   | 1   |           |   |   | (2       | )   |      |        |  |   |  |   | (1  | )  
|                                                  |                                                 |                         |   |     |           |   |   |          |     |      |        |  
|                                                  |                                                 | Total Variances         |   | $   | 39        |   |   | $        | (42 | )    |        | $ |  |  |   | $   | (3  | )
|                                                  |                                                 |                         |   |     |           |   |   |          |     |      |        |  
|Nine Months Ended September 30,                   |                                                 |                         |   |     |           |   |   |          |     |      |        |   |   |  |   |    
|Natural Gas Revenue                               |                                                 |                         |   |     |           |   |   |          |     |      |        |   |   |  |   |    
|                                                  | Higher prices in 2005                           |                         | $ | 123 |           |   | $ |         |     |      | $      |  |   |  | $ | 123 |    
|                                                  | Lower volumes in 2005                           |                         |   | (53 | )         |   |   |         |     |      |        |  |   |  |   | (53 | )  
|                                                  | Impact from hedge program in 2005 versus 2004   |                         |   | (97 | )         |   |   |         |     |      |        |  |   |  |   | (97 | )  
|Oil, Condensate, and NGL Revenue                  |                                                 |                         |   |     |           |   |   |          |     |      |        |   |   |  |   |    
|                                                  | Higher realized prices in 2005                  |                         |   | 30  |           |   |   |         |     |      |        |  |   |  |   | 30  |    
|                                                  | Lower volumes in 2005                           |                         |   | (21 | )         |   |   |         |     |      |        |  |   |  |   | (21 | )  
|Depreciation, Depletion, and Amortization Expense |                                                 |                         |   |     |           |   |   |          |     |      |        |   |   |  |   |    
|                                                  | Higher depletion rate in 2005                   |                         |   |    |           |   |   | (39      | )   |      |        |  |   |  |   | (39 | )  
|                                                  | Lower production volumes in 2005                |                         |   |    |           |   |   | 24       |     |      |        |  |   |  |   | 24  |    
|Production Costs                                  |                                                 |                         |   |     |           |   |   |          |     |      |        |   |   |  |   |    
|                                                  | Higher lease operating costs in 2005            |                         |   |    |           |   |   | (14      | )   |      |        |  |   |  |   | (14 | )  
|                                                  | Higher production taxes in 2005                 |                         |   |    |           |   |   | (18      | )   |      |        |  |   |  |   | (18 | )  
|Other                                             |                                                 |                         |   |     |           |   |   |          |     |      |        |   |   |  |   |    
|                                                  | Higher general and administrative costs in 2005 |                         |   |    |           |   |   | (22      | )   |      |        |  |   |  |   | (22 | )  
|                                                  | Other                                           |                         |   | 1   |           |   |   | 6        |     |      |        | 4 |   |  |   | 11  |    
|                                                  |                                                 |                         |   |     |           |   |   |          |     |      |        |  
|                                                  |                                                 | Total Variances         |   | $   | (17       | ) |   | $        | (63 | )    |        | $ | 4 |  |   | $   | (76 | )
|                                                  |                                                 |                         |   |     |           |   |   |          |     |      |        |  






|    |                                                                            
|--- | ---------------------------------------------------------------------------
|(1) | Consists primarily of changes in transportation costs and other
    income.

Operating Revenues.


14



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##### Table of Contents





Depreciation, Depletion, and Amortization Expense.


Production Costs.


Other.


Income Taxes


|                   |  |                                 |    |   |               |   |    |      |  |   |      |   |  |   |    |  
|------------------ |  | ------------------------------- | -- | - | ------------- | - | -- | ---- |  | - | ---- | - |  | - | -- | -
|                   |  | Quarter                         |    |   | Nine Months   |  
|                   |  | Ended                           |    |   | Ended         |  
|                   |  | September 30,                   |    |   | September 30, |  
|                   |  |                                 |    |   |               |  
|                   |  | 2005                            |    |   | 2004          |   |    | 2005 |  |   | 2004 |  
|                   |  |                                 |    |   |               |   |    |      |  |   |      |  
|                   |  | (In millions, except for rates) |   
|Income taxes       |  | $                               | 4  |   |               | $ | 10 |      |  | $ | 12   |   |  | $ | 44 |  
|Effective tax rate |  |                                 | 20 | % |               |   | 42 | %    |  |   | 30   | % |  |   | 37 | %



Liquidity




15



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##### Table of Contents









Commitments and Contingencies




16



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##### Table of Contents






CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE
HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995











|        |                                                           
|------- | ----------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures About Market Risk



17



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##### Table of Contents








|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures

Material Weakness Previously Disclosed




Evaluation of Disclosure Controls and Procedures




Changes in Internal Control Over Financial Reporting






| |   |                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Implemented automated and manual controls for our primary
    financial system to monitor unauthorized password changes.                                                                             
|
| |  | Developed a segregation of duties matrix for our primary
    financial system that documents existing role assignments.                                                                              
|
| |  | Performed an in-depth analysis of the companys primary
    financial accounting system to examine all existing functional
    access to identify any potentially incompatible duties.               
|
| |  | Enhanced the segregation of duties matrix for our primary
    financial accounting system based on the in-depth analysis of
    user access.                                                         
|
| |  | Modified the primary financial accounting system to eliminate or
    modify potentially conflicting functionality.                                                                                   
|
| |  | Implemented a process to evaluate all new user access requests
    against segregation of duties matrices to ensure no new
    conflicts are created for our primary financial accounting
    system.
|
| |  | Separated security administration rights from system update
    capabilities for our primary financial accounting system.                                                                            
|
| |  | Implemented monitoring procedures to monitor activities of
    security administration roles for our primary financial
    accounting system.                                                        





| |   |                                                                                          
| | - | -----------------------------------------------------------------------------------------
| |  | Improving our procedures for managing information systems
    changes; and               
|
| |  | Enhancing the automated controls over the preparation and
    posting of journal entries.



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##### Table of Contents






PART II  OTHER INFORMATION





Item 1. Legal Proceedings







Item 2. Unregistered Sales of Equity Securities and
Use of Proceeds







Item 3. Defaults Upon Senior Securities







Item 4. Submission of Matters to a Vote of Security
Holders







Item 5. Other Information







Item 6. Exhibits






|        |      |    |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- | ---- | -- | ----------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |    |            
|Number  |      |    | Description
|        |      |    |            
|        | 10   | .A |             | Stock Purchase Agreement dated July 18, 2005 among the
    Registrant, Medicine Bow Energy Corporation and the other
    parties identified therein (Exhibit 10.A to our
    Form 8-K filed on July 19, 2005).                                                                                                                                                                                                                                                                                                     
|        | 10   | .B |             | Credit Agreement dated as of August 30, 2005, among
    El Paso Production Holding Company, El Paso Production
    Company, El Paso Energy Raton Corporation and El Paso
    Production GOM, Inc. and Fortis Capital Corp., The Royal Bank of
    Scotland plc and The Bank of Nova Scotia, and the Several
    Lenders from time to time Parties thereto (Exhibit 10.A to
    our Form 8-K filed on September 1, 2005).                                                                                           
|        | 10   | .C |             | Form of Guarantee Agreement made by the Guarantors in favor of
    Fortis Capital Corp., as agent for the Creditors (Included in
    Exhibit 10.B above).                                                                                                                                                                                                                                                                                                                                                          
|        | 10   | .D |             | Third Supplemental Indenture, dated as of August 31, 2005,
    among El Paso Production Holding Company, as Issuer,
    El Paso Production Company, El Paso Production GOM,
    Inc., El Paso Energy Raton Corporation, Medicine Bow Energy
    Corporation, Medicine Bow Operating Company and MBOW Four Star
    Corporation, as Subsidiary Guarantors, and Wilmington Trust
    Company, as Trustee (Exhibit 10.C to our Form 8-K
    filed on September 1, 2005).                                              
|        | 10   | .E |             | Amended and Restated Credit Agreement, dated as of
    October 19, 2005, among El Paso Production Holding
    Company, El Paso Production Company, El Paso Energy
    Raton Corporation and El Paso Production GOM, Inc., as
    Borrowers, and Fortis Capital Corp., The Royal Bank of Scotland
    plc, The Bank of Nova Scotia, Societe Generale and
    WESTLB AG, New York Branch and the Several Lenders
    from time to time Parties thereto. (Exhibit 10.A to our
    Form 8-K filed on October 24, 2005).
|        | 10   | .F |             | Form of Guarantee Agreement made by the Guarantors in favor of
    Fortis Capital Corp., as agent for the Creditors (included in
    Exhibit 10.E above).                                                                                                                                                                                                                                                                                                                                                          
|        | *31  | .A |             | Certification of Principal Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                        
|        | *31  | .B |             | Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                            
|        | **32 | .A |             | Certification of Principal Executive Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                        
|        | **32 | .B |             | Certification of Chief Financial Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                            





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We hereby undertake, pursuant to Regulation S-K,
    Item 601(b), paragraph (4)(iii), to furnish to the
    U.S. Securities and Exchange Commission, upon request, all
    constituent instruments defining the rights of holders of our
    long-term debt not filed herewith for the reason that the total
    amount of securities authorized under any of such instruments
    does not exceed 10 percent of our total consolidated assets.

19



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##### Table of Contents






SIGNATURES






| |                                   
| | ----------------------------------
| | EL PASO PRODUCTION HOLDING COMPANY



| |                              
| | -----------------------------
| | /s/ Lisa A. Stewart          
| |                              
| | Lisa A. Stewart              
| | President                    
| | (Principal Executive Officer)



| |                                             
| | --------------------------------------------
| | /s/ Gene T. Waguespack                      
| |                                             
| | Gene T. Waguespack                          
| | Senior Vice President,                      
| | Chief Financial Officer,                    
| | Treasurer and Controller                    
| | (Principal Financial and Accounting Officer)

20



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##### Table of Contents



EL PASO PRODUCTION HOLDING COMPANY


EXHIBIT INDEX




|        |      |    |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- | ---- | -- | ----------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |    |            
|Number  |      |    | Description
|        |      |    |            
|        | 10   | .A |             | Stock Purchase Agreement dated July 18, 2005 among the
    Registrant, Medicine Bow Energy Corporation and the other
    parties identified therein (Exhibit 10.A to our
    Form 8-K filed on July 19, 2005).                                                                                                                                                                                                                                                                                                     
|        | 10   | .B |             | Credit Agreement dated as of August 30, 2005, among
    El Paso Production Holding Company, El Paso Production
    Company, El Paso Energy Raton Corporation and El Paso
    Production GOM, Inc. and Fortis Capital Corp., The Royal Bank of
    Scotland plc and The Bank of Nova Scotia, and the Several
    Lenders from time to time Parties thereto (Exhibit 10.A to
    our Form 8-K filed on September 1, 2005).                                                                                           
|        | 10   | .C |             | Form of Guarantee Agreement made by the Guarantors in favor of
    Fortis Capital Corp., as agent for the Creditors (Included in
    Exhibit 10.B above).                                                                                                                                                                                                                                                                                                                                                          
|        | 10   | .D |             | Third Supplemental Indenture, dated as of August 31, 2005,
    among El Paso Production Holding Company, as Issuer,
    El Paso Production Company, El Paso Production GOM,
    Inc., El Paso Energy Raton Corporation, Medicine Bow Energy
    Corporation, Medicine Bow Operating Company and MBOW Four Star
    Corporation, as Subsidiary Guarantors, and Wilmington Trust
    Company, as Trustee (Exhibit 10.C to our Form 8-K
    filed on September 1, 2005).                                              
|        | 10   | .E |             | Amended and Restated Credit Agreement, dated as of
    October 19, 2005, among El Paso Production Holding
    Company, El Paso Production Company, El Paso Energy
    Raton Corporation and El Paso Production GOM, Inc., as
    Borrowers, and Fortis Capital Corp., The Royal Bank of Scotland
    plc, The Bank of Nova Scotia, Societe Generale and
    WESTLB AG, New York Branch and the Several Lenders
    from time to time Parties thereto. (Exhibit 10.A to our
    Form 8-K filed on October 24, 2005).
|        | 10   | .F |             | Form of Guarantee Agreement made by the Guarantors in favor of
    Fortis Capital Corp., as agent for the Creditors (included in
    Exhibit 10.E above).                                                                                                                                                                                                                                                                                                                                                          
|        | *31  | .A |             | Certification of Principal Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                        
|        | *31  | .B |             | Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                            
|        | **32 | .A |             | Certification of Principal Executive Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                        
|        | **32 | .B |             | Certification of Chief Financial Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.