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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549




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FORM 10-Q

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

|                                 |  |                               
|-------------------------------- |  | ------------------------------
|For Quarter Ended March 31, 2003 |  | Commission File Number 0-31095

DUKE ENERGY FIELD SERVICES, LLC

(Exact name of registrant as specified in its charter)


|                                                        |  |                                             
|------------------------------------------------------- |  | --------------------------------------------
|Delaware
(State or other jurisdiction of incorporation) |  | 76-0632293
(IRS Employer Identification No.)

370 17th Street, Suite 900
Denver, Colorado 80202
(Address of principal executive offices)
(Zip Code)

303-595-3331
(Registrants telephone number, including area code)

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

Indicate by check mark whether the registrant is an accelerated filer as
defined by Rule 12b-2 of the Act.
Yes [  ] No [x]



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|                                                   |                                                                                               |                                                        |  |  |  |  |  | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------------ |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                     
|                                                   | Item 1. Financial Statements                                                                 
|                                                   |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS                 
|                                                   |                                                                                               | CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|                                                   |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS                 
|                                                   |                                                                                               | CONSOLIDATED BALANCE SHEETS                           
|                                                   | CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                         
|                                                   | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                   | Item 3. Quantitative and Qualitative Disclosure about Market Risks                           
|                                                   | Item 4. Controls and Procedures                                                              
|PART II. OTHER INFORMATION                        
|                                                   | Item 1. Legal Proceedings                                                                    
|                                                   | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                        
|CERTIFICATIONS                                    
|CERTIFICATIONS                                    
|EXHIBIT INDEX                                     
|EX-10.01 364-Day Credit Facility                  
|EX-10.02 Letter Agreement for Short-Term Loan     
|EX-99.1 Certification Pursuant to 18 USC Sec. 1350
|EX-99.2 Certification Pursuant to 18 USC Sec. 1350



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DUKE ENERGY FIELD SERVICES, LLC
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2003

INDEX

|                                          |    |  |  |                                                                                       |                                                                                                           |  |    |   | 
|----------------------------------------- | -- |  |  | ------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------- |  | -- | - | 
|Item                                      |    |  |  |                                                                                       | Page                                                                                                     
|                                          |    |  |  |                                                                                       |                                                                                                          
|PART I. FINANCIAL INFORMATION (UNAUDITED) |    |  |  |                                                                                      
|                                          | 1. |  |  | Financial Statements                                                                  |                                                                                                           |  | 1  |  
|                                          |    |  |  |                                                                                       | Consolidated Statements of Operations for the Three Months Ended March 31, 2003 and 2002                  |  |    | 1 | 
|                                          |    |  |  |                                                                                       | Consolidated Statements of Comprehensive Income (Loss) for the Three Months
Ended March 31, 2003 and 2002 |  |    | 2 | 
|                                          |    |  |  |                                                                                       | Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002                  |  |    | 3 | 
|                                          |    |  |  |                                                                                       | Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002                                    |  |    | 4 | 
|                                          |    |  |  |                                                                                       | Condensed Notes to Consolidated Financial Statements                                                      |  |    | 5 | 
|                                          | 2. |  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                           |  | 16 |  
|                                          | 3. |  |  | Quantitative and Qualitative Disclosure about Market Risks                            |                                                                                                           |  | 24 |  
|                                          | 4. |  |  | Controls and Procedures                                                               |                                                                                                           |  | 27 |  
|PART II. OTHER INFORMATION                |    |  |  |                                                                                      
|                                          | 1. |  |  | Legal Proceedings                                                                     |                                                                                                           |  | 28 |  
|                                          | 6. |  |  | Exhibits and Reports on Form 8-K                                                      |                                                                                                           |  | 28 |  
|                                          |    |  |  | Signatures                                                                            |                                                                                                           |  | 29 |  
|                                          |    |  |  | Certifications                                                                        |                                                                                                           |  | 30 |  

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

Our reports, filings and other public announcements may from time to time
contain statements that do not directly or exclusively relate to historical
facts. Such statements are forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. You can typically
identify forward-looking statements by the use of forward-looking words, such
as may, will, could, project, believe, anticipate, expect,
estimate, continue, potential, plan, forecast and other similar
words.

All of such statements other than statements of historical facts,
including statements regarding our future financial position, business
strategy, budgets, projected costs and plans and objectives of management for
future operations, are forward-looking statements.

These forward-looking statements reflect our intentions, plans,
expectations, assumptions and beliefs about future events and are subject to
risks, uncertainties and other factors, many of which are outside our control.
Important factors that could cause actual results to differ materially from the
expectations expressed or implied in the forward-looking statements include
known and unknown risks. Known risks include, but are not limited to, the
following:



| |  |  | our ability to access the debt and equity markets, which will
depend on general market conditions and our credit ratings for our
debt obligations;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | our use of derivative financial instruments to hedge commodity and interest rate risks;                                                           
|
| |  |  | the level of creditworthiness of counterparties to transactions;                                                                                  
|
| |  |  | the amount of collateral required to be posted from time to time in our transactions;                                                             

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| |  |  | changes in laws and regulations, particularly with regard to taxes, safety and protection of the environment or the
increased regulation of the gathering and processing industry;                                                                                                                                                                                                                                         
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the timing and extent of changes in commodity prices, interest rates, foreign currency exchange rates and demand for
our services;                                                                                                                                                                                                                                                                                         
|
| |  |  | weather and other natural phenomena;                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  |  | industry changes, including the impact of consolidations, and changes in competition;                                                                                                                                                                                                                                                                                                                                      
|
| |  |  | our ability to obtain required approvals for construction or
modernization of gathering and processing facilities, and the timing
of production from such facilities, which are dependent on the
issuance by federal, state and municipal governments, or agencies
thereof, of building, environmental and other permits, the
availability of specialized contractors and work force and prices of
and demand for products;
|
| |  |  | the extent of success in connecting natural gas supplies to gathering and processing systems;                                                                                                                                                                                                                                                                                                                              
|
| |  |  | the effect of accounting policies issued periodically by accounting standard-setting bodies; and                                                                                                                                                                                                                                                                                                                           
|
| |  |  | general economic conditions, including any potential effects
arising from terrorist attacks, the situation in Iraq and any
consequential hostilities or other hostilities.                                                                                                                                                                                                                                                 

In light of these risks, uncertainties and assumptions, the events
described in the forward-looking statements might not occur or might occur to a
different extent or at a different time than we have described. We undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.

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PART I. FINANCIAL INFORMATION




Item 1. Financial Statements

DUKE ENERGY FIELD SERVICES, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands)




|                                                                           |                                                        |                                                            |        |                          |           |                     |           |         |         |  |           | 
|-------------------------------------------------------------------------- | ------------------------------------------------------ | ---------------------------------------------------------- | ------ | ------------------------ | --------- | ------------------- | --------- | ------- | ------- |  | --------- | 
|                                                                           |                                                        |                                                            |        |                          |           | Three Months Ended,
|                                                                           |                                                        |                                                            |        |                          |           | March 31,          
|                                                                           |                                                        |                                                            |        |                          |           |                    
|                                                                           |                                                        |                                                            |        |                          |           | 2003                |           | 2002   
|                                                                           |                                                        |                                                            |        |                          |           |                     |           |        
|OPERATING REVENUES:                                                        |                                                        |                                                            |        |                          |           |                     |           |        
|                                                                           | Sales of natural gas and petroleum products            |                                                            | $      | 1,508,381                |           |                     | $         | 631,838 |        
|                                                                           | Sales of natural gas and petroleum productsaffiliates |                                                            |        | 950,402                  |           |                     |           | 421,091 |        
|                                                                           | Transportation, storage and processing                 |                                                            |        | 82,071                   |           |                     |           | 69,577  |        
|                                                                           | Trading and marketing net margin                       |                                                            |        | (34,194                  | )         |                     |           | 7,309   |        
|                                                                           |                                                        |                                                            |        |                          |           |                     |           |        
|                                                                           |                                                        |                                                            |        | Total operating revenues |           |                     | 2,506,660 |         |         |  | 1,129,815 | 
|                                                                           |                                                        |                                                            |        |                          |           |                     |           |        
|COSTS AND EXPENSES:                                                        |                                                        |                                                            |        |                          |           |                     |           |        
|                                                                           |                                                        | Purchases of natural gas and petroleum products            |        |                          | 1,979,562 |                     |           |         | 789,367 | 
|                                                                           |                                                        | Purchases of natural gas and petroleum productsaffiliates |        |                          | 216,064   |                     |           |         | 91,844  | 
|                                                                           |                                                        | Operating and maintenance                                  |        |                          | 110,170   |                     |           |         | 107,960 | 
|                                                                           |                                                        | Depreciation and amortization                              |        |                          | 77,616    |                     |           |         | 73,759  | 
|                                                                           |                                                        | General and administrative                                 |        |                          | 39,431    |                     |           |         | 39,157  | 
|                                                                           |                                                        | Other                                                      |        |                          | (98       | )                   |           |         | 5,188   | 
|                                                                           |                                                        |                                                            |        |                          |           |                     |           |        
|                                                                           |                                                        |                                                            |        | Total costs and expenses |           |                     | 2,422,745 |         |         |  | 1,107,275 | 
|                                                                           |                                                        |                                                            |        |                          |           |                     |           |        
|OPERATING INCOME                                                           |                                                        |                                                            | 83,915 |                          |           |                     | 22,540    |        
|EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES                            |                                                        |                                                            | 12,054 |                          |           |                     | 6,070     |        
|INTEREST EXPENSE                                                           |                                                        |                                                            | 42,738 |                          |           |                     | 43,309    |        
|                                                                           |                                                        |                                                            |        |                          |           |                     |           |        
|INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE                           |                                                        |                                                            |        |                          |           |                     |           |        
|                                                                           | EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES             |                                                            |        | 53,231                   |           |                     |           | (14,699 | )      
|INCOME TAX EXPENSE                                                         |                                                        |                                                            | 1,769  |                          |           |                     | 2,301     |        
|                                                                           |                                                        |                                                            |        |                          |           |                     |           |        
|INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES |                                                        |                                                            | 51,462 |                          |           |                     | (17,000   | )      
|CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING
PRINCIPLES                      |                                                        |                                                            | 22,802 |                          |           |                     |          |        
|                                                                           |                                                        |                                                            |        |                          |           |                     |           |        
|NET INCOME (LOSS)                                                          |                                                        |                                                            | 28,660 |                          |           |                     | (17,000   | )      
|DIVIDENDS ON PREFERRED MEMBERS INTEREST                                   |                                                        |                                                            | 4,750  |                          |           |                     | 7,125     |        
|                                                                           |                                                        |                                                            |        |                          |           |                     |           |        
|EARNINGS (DEFICIT) AVAILABLE FOR MEMBERS INTEREST                         |                                                        | $                                                          | 23,910 |                          |           | $                   | (24,125   | )      
|                                                                           |                                                        |                                                            |        |                          |           |                     |           |        

See Notes to Consolidated Financial Statements.

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DUKE ENERGY FIELD SERVICES, LLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands)




|                                   |                                           |                                         |        |                     |        |      |         |         |         |  
|---------------------------------- | ----------------------------------------- | --------------------------------------- | ------ | ------------------- | ------ | ---- | ------- | ------- | ------- | -
|                                   |                                           |                                         |        | Three Months Ended,
|                                   |                                           |                                         |        | March 31,          
|                                   |                                           |                                         |        |                    
|                                   |                                           |                                         |        | 2003                |        | 2002
|                                   |                                           |                                         |        |                     |        |     
|NET INCOME (LOSS)                  |                                           | $                                       | 28,660 |                     |        | $    | (17,000 | )      
|OTHER COMPREHENSIVE INCOME (LOSS): |                                           |                                         |        |                     |        |      |         |        
|                                   | Foreign currency translation adjustment   |                                         |        | 20,128              |        |      |         | (2,344  | )      
|                                   | Net unrealized losses on cash flow hedges |                                         |        | (36,383             | )      |      |         | (57,100 | )      
|                                   | Reclassification into earnings            |                                         |        | 41,684              |        |      |         | (18,534 | )      
|                                   |                                           |                                         |        |                     |        |      |         |        
|                                   |                                           | Total other comprehensive income (loss) |        |                     | 25,429 |      |         |         | (77,978 | )
|                                   |                                           |                                         |        |                     |        |      |         |        
|TOTAL COMPREHENSIVE INCOME (LOSS)  |                                           | $                                       | 54,089 |                     |        | $    | (94,978 | )      
|                                   |                                           |                                         |        |                     |        |      |         |        

See Notes to Consolidated Financial Statements.

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DUKE ENERGY FIELD SERVICES, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)




|                                                     |                                                                        |                                                                        |        |                                           |          |                     |         |          |          |   |         |  
|---------------------------------------------------- | ---------------------------------------------------------------------- | ---------------------------------------------------------------------- | ------ | ----------------------------------------- | -------- | ------------------- | ------- | -------- | -------- | - | ------- | -
|                                                     |                                                                        |                                                                        |        |                                           |          | Three Months Ended,
|                                                     |                                                                        |                                                                        |        |                                           |          | March 31,          
|                                                     |                                                                        |                                                                        |        |                                           |          |                    
|                                                     |                                                                        |                                                                        |        |                                           |          | 2003                |         | 2002    
|                                                     |                                                                        |                                                                        |        |                                           |          |                     |         |         
|CASH FLOWS FROM OPERATING ACTIVITIES:                |                                                                        |                                                                        |        |                                           |          |                     |         |         
|                                                     | Net income (loss)                                                      |                                                                        | $      | 28,660                                    |          |                     | $       | (17,000  | )       
|                                                     | Adjustments to reconcile net income (loss) to net cash provided by     |                                                                        |        |                                           |          |                     |         |          |         
|                                                     |                                                                        | operating activities:                                                  |        |                                           |          |                     |         |          |          |  
|                                                     |                                                                        | Depreciation and amortization                                          |        |                                           | 77,616   |                     |         |          | 73,759   |  
|                                                     |                                                                        | Deferred income taxes (benefit)                                        |        |                                           | 732      |                     |         |          | (520     | )
|                                                     |                                                                        | Equity in earnings of unconsolidated affiliates                        |        |                                           | (12,054  | )                   |         |          | (6,070   | )
|                                                     |                                                                        | Cumulative effect of changes in accounting principles                  |        |                                           | 22,802   |                     |         |          |         |  
|                                                     |                                                                        | Other noncash items in net income (loss)                               |        |                                           | 9,007    |                     |         |          | 7,537    |  
|                                                     | Change in operating assets and liabilities which provided (used) cash: |                                                                        |        |                                           |          |                     |         |          |         
|                                                     |                                                                        | Accounts receivable                                                    |        |                                           | (685,905 | )                   |         |          | (26,782  | )
|                                                     |                                                                        | Accounts receivableaffiliates                                         |        |                                           | (117,780 | )                   |         |          | 194,256  |  
|                                                     |                                                                        | Inventories                                                            |        |                                           | 21,639   |                     |         |          | 10,663   |  
|                                                     |                                                                        | Net unrealized loss (gains) on mark-to-market
and hedging transactions |        |                                           | (37,162  | )                   |         |          | 53,073   |  
|                                                     |                                                                        | Other current assets                                                   |        |                                           | (18,887  | )                   |         |          | 2,852    |  
|                                                     |                                                                        | Other noncurrent assets                                                |        |                                           | (2,009   | )                   |         |          | 300      |  
|                                                     |                                                                        | Accounts payable                                                       |        |                                           | 815,244  |                     |         |          | (148,780 | )
|                                                     |                                                                        | Accounts payableaffiliates                                            |        |                                           | (7,776   | )                   |         |          | (12,244  | )
|                                                     |                                                                        | Accrued interest payable                                               |        |                                           | (32,942  | )                   |         |          | (31,757  | )
|                                                     |                                                                        | Other current liabilities                                              |        |                                           | 1,843    |                     |         |          | 1,848    |  
|                                                     |                                                                        | Other long term liabilities                                            |        |                                           | (2,001   | )                   |         |          | (1,962   | )
|                                                     |                                                                        |                                                                        |        |                                           |          |                     |         |         
|                                                     |                                                                        |                                                                        |        | Net cash provided by operating activities |          |                     | 61,027  |          |          |   | 99,173  |  
|                                                     |                                                                        |                                                                        |        |                                           |          |                     |         |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                |                                                                        |                                                                        |        |                                           |          |                     |         |         
|                                                     | Capital expenditures                                                   |                                                                        |        | (37,078                                   | )        |                     |         | (106,785 | )       
|                                                     | Investment expenditures                                                |                                                                        |        | (482                                      | )        |                     |         | (3,463   | )       
|                                                     | Investment distributions                                               |                                                                        |        | 14,331                                    |          |                     |         | 12,488   |         
|                                                     | Contributions from minority interests                                  |                                                                        |        | 1,141                                     |          |                     |         |         |         
|                                                     | Proceeds from sales of assets                                          |                                                                        |        | 4,256                                     |          |                     |         |         |         
|                                                     |                                                                        |                                                                        |        |                                           |          |                     |         |         
|                                                     |                                                                        |                                                                        |        | Net cash used in investing activities     |          |                     | (17,832 | )        |          |   | (97,760 | )
|                                                     |                                                                        |                                                                        |        |                                           |          |                     |         |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                |                                                                        |                                                                        |        |                                           |          |                     |         |         
|                                                     | Distributions to members                                               |                                                                        |        |                                          |          |                     |         | (45,672  | )       
|                                                     | Short term debtnet                                                    |                                                                        |        | (30,731                                   | )        |                     |         | 43,580   |         
|                                                     | Debt issuance costs                                                    |                                                                        |        | (1,334                                    | )        |                     |         | (890     | )       
|                                                     | Payment of debt                                                        |                                                                        |        | (170                                      | )        |                     |         |         |         
|                                                     |                                                                        |                                                                        |        |                                           |          |                     |         |         
|                                                     |                                                                        |                                                                        |        | Net cash used in financing activities     |          |                     | (32,235 | )        |          |   | (2,982  | )
|                                                     |                                                                        |                                                                        |        |                                           |          |                     |         |         
|EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH      |                                                                        |                                                                        | 426    |                                           |          |                     | (5      | )       
|                                                     |                                                                        |                                                                        |        |                                           |          |                     |         |         
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                        |                                                                        | 11,386 |                                           |          |                     | (1,574  | )       
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD       |                                                                        |                                                                        | 24,783 |                                           |          |                     | 4,906   |         
|                                                     |                                                                        |                                                                        |        |                                           |          |                     |         |         
|CASH AND CASH EQUIVALENTS, END OF PERIOD             |                                                                        | $                                                                      | 36,169 |                                           |          | $                   | 3,332   |         
|                                                     |                                                                        |                                                                        |        |                                           |          |                     |         |         
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW                 |                                                                        |                                                                        |        |                                           |          |                     |         |         
|                                                     | INFORMATION  Cash paid for interest (net of amounts capitalized)      |                                                                        | $      | 72,498                                    |          |                     | $       | 74,365   |         

See Notes to Consolidated Financial Statements.

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DUKE ENERGY FIELD SERVICES, LLC
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)

|                                                      |                                                        |                |           |                           |           |           |           |              |         |  |           | 
|----------------------------------------------------- | ------------------------------------------------------ | -------------- | --------- | ------------------------- | --------- | --------- | --------- | ------------ | ------- |  | --------- | 
|                                                      |                                                        |                |           |                           |           | March 31, |           | December 31,
|                                                      |                                                        |                |           |                           |           | 2003      |           | 2002        
|                                                      |                                                        |                |           |                           |           |           |           |             
|ASSETS                                                |                                                        |                |           |                           |           |           |           |             
|CURRENT ASSETS:                                       |                                                        |                |           |                           |           |           |           |             
|                                                      | Cash and cash equivalents                              |                | $         | 36,169                    |           |           | $         | 24,783       |        
|                                                      | Accounts receivable:                                   |                |           |                           |           |           |           |              |        
|                                                      |                                                        | Customers, net |           |                           | 1,286,291 |           |           |              | 599,116 | 
|                                                      |                                                        | Affiliates     |           |                           | 304,357   |           |           |              | 186,577 | 
|                                                      |                                                        | Other          |           |                           | 49,195    |           |           |              | 50,466  | 
|                                                      | Inventories                                            |                |           | 59,548                    |           |           |           | 86,559       |        
|                                                      | Unrealized gains on trading and hedging transactions   |                |           | 195,481                   |           |           |           | 158,891      |        
|                                                      | Other                                                  |                |           | 27,130                    |           |           |           | 6,713        |        
|                                                      |                                                        |                |           |                           |           |           |           |             
|                                                      |                                                        |                |           | Total current assets      |           |           | 1,958,171 |              |         |  | 1,113,105 | 
|                                                      |                                                        |                |           |                           |           |           |           |             
|PROPERTY, PLANT AND EQUIPMENT, NET                    |                                                        |                | 4,630,146 |                           |           |           | 4,642,204 |             
|INVESTMENT IN AFFILIATES                              |                                                        |                | 177,048   |                           |           |           | 179,684   |             
|INTANGIBLE ASSETS:                                    |                                                        |                |           |                           |           |           |           |             
|                                                      | Natural gas liquids sales and purchases contracts, net |                |           | 87,512                    |           |           |           | 84,304       |        
|                                                      | Goodwill, net                                          |                |           | 439,201                   |           |           |           | 435,115      |        
|                                                      |                                                        |                |           |                           |           |           |           |             
|                                                      |                                                        |                |           | Total intangible assets   |           |           | 526,713   |              |         |  | 519,419   | 
|                                                      |                                                        |                |           |                           |           |           |           |             
|UNREALIZED GAINS ON TRADING AND HEDGING TRANSACTIONS  |                                                        |                | 26,419    |                           |           |           | 21,685    |             
|OTHER NONCURRENT ASSETS                               |                                                        |                | 90,857    |                           |           |           | 89,504    |             
|                                                      |                                                        |                |           |                           |           |           |           |             
|TOTAL ASSETS                                          |                                                        | $              | 7,409,354 |                           |           | $         | 6,565,601 |             
|                                                      |                                                        |                |           |                           |           |           |           |             
|LIABILITIES AND MEMBERS EQUITY                       |                                                        |                |           |                           |           |           |           |             
|CURRENT LIABILITIES:                                  |                                                        |                |           |                           |           |           |           |             
|                                                      | Accounts payable:                                      |                |           |                           |           |           |           |              |        
|                                                      |                                                        | Trade          |           | $                         | 1,472,575 |           |           | $            | 656,126 | 
|                                                      |                                                        | Affiliates     |           |                           | 69,233    |           |           |              | 77,009  | 
|                                                      |                                                        | Other          |           |                           | 44,581    |           |           |              | 45,786  | 
|                                                      | Short term debt                                        |                |           | 189,444                   |           |           |           | 215,094      |        
|                                                      | Unrealized losses on trading and hedging transactions  |                |           | 239,744                   |           |           |           | 245,469      |        
|                                                      | Accrued interest payable                               |                |           | 26,352                    |           |           |           | 59,294       |        
|                                                      | Accrued taxes other than income                        |                |           | 18,975                    |           |           |           | 31,059       |        
|                                                      | Other                                                  |                |           | 101,204                   |           |           |           | 89,427       |        
|                                                      |                                                        |                |           |                           |           |           |           |             
|                                                      |                                                        |                |           | Total current liabilities |           |           | 2,162,108 |              |         |  | 1,419,264 | 
|                                                      |                                                        |                |           |                           |           |           |           |             
|DEFERRED INCOME TAXES                                 |                                                        |                | 12,472    |                           |           |           | 11,740    |             
|LONG TERM DEBT                                        |                                                        |                | 2,259,268 |                           |           |           | 2,255,508 |             
|UNREALIZED LOSSES ON TRADING AND HEDGING TRANSACTIONS |                                                        |                | 21,358    |                           |           |           | 15,336    |             
|OTHER LONG TERM LIABILITIES                           |                                                        |                | 129,074   |                           |           |           | 88,370    |             
|MINORITY INTERESTS                                    |                                                        |                | 125,172   |                           |           |           | 124,820   |             
|PREFERRED MEMBERS INTEREST                           |                                                        |                | 200,000   |                           |           |           | 200,000   |             
|COMMITMENTS AND CONTINGENT LIABILITIES                |                                                        |                |           |                           |           |           |           |             
|MEMBERS EQUITY:                                      |                                                        |                |           |                           |           |           |           |             
|                                                      | Members interest                                      |                |           | 1,709,290                 |           |           |           | 1,709,290    |        
|                                                      | Retained earnings                                      |                |           | 830,029                   |           |           |           | 806,119      |        
|                                                      | Accumulated other comprehensive income (loss)          |                |           | (39,417                   | )         |           |           | (64,846      | )      
|                                                      |                                                        |                |           |                           |           |           |           |             
|                                                      |                                                        |                |           | Total members equity     |           |           | 2,499,902 |              |         |  | 2,450,563 | 
|                                                      |                                                        |                |           |                           |           |           |           |             
|TOTAL LIABILITIES AND MEMBERS EQUITY                 |                                                        | $              | 7,409,354 |                           |           | $         | 6,565,601 |             
|                                                      |                                                        |                |           |                           |           |           |           |             

See Notes to Consolidated Financial Statements.

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DUKE ENERGY FIELD SERVICES, LLC
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. General

Duke Energy Field Services, LLC (with its consolidated subsidiaries, the
Company or Field Services LLC) operates in the two principal segments of the
midstream natural gas industry of (1) natural gas gathering, compression,
treatment, processing, transportation, marketing and trading and storage; and
(2) natural gas liquids (NGLs) fractionation, transportation, marketing and
trading. Duke Energy Corporation (Duke Energy) owns 69.7% of the Companys
outstanding member interests and ConocoPhillips owns the remaining 30.3%.

2. Accounting Policies

Consolidation
The Consolidated Financial Statements include the accounts
of the Company and all majority-owned subsidiaries, after eliminating
significant intercompany transactions and balances. Investments in 20% to 50%
owned affiliates are accounted for using the equity method. Investments greater
than 50% are consolidated unless the Company does not operate these investments
and as a result does not have the ability to exercise control.

Use of Estimates Conformity with accounting principles generally
accepted in the United States of America requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and notes. Although these estimates are based on managements best available
knowledge of current and expected future events, actual results could be
different from those estimates.

Inventories Inventories consist primarily of materials and supplies and
natural gas and NGLs held in storage for transmission, marketing and sales
commitments. Inventories are recorded at the lower of cost or market value
using the average cost method. Historically, since January 2001, natural gas
storage arbitrage inventories were marked to market. However, effective January
1, 2003, in accordance with the Financial Accounting Standard Boards (FASB)
Emerging Issues Task Forces (EITF) rescission of Issue No. 98-10,
Accounting for Contracts Involved in Energy Trading and Risk Management
Activities, all gas storage inventory is now recorded at the lower of cost or
market, (see New Accounting Standards below).

Accounting for Hedges and Commodity Trading Activities All derivatives
not qualifying for the normal purchases and sales exemption under Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities are recorded in the Consolidated Balance
Sheets at their fair value as Unrealized Gains or Unrealized Losses on Trading
and Hedging Transactions. On the date that derivative contracts are entered
into, the Company designates the derivative as either trading or non-trading;
as a hedge of a recognized asset, liability or firm commitment (fair value
hedges); as a hedge of a forecasted transaction or future cash flows (cash flow
hedges); or as a normal purchase or sale contract.

For hedge contracts, the Company formally assesses, both at the hedge
contracts inception and on an ongoing basis, whether the hedge contract is
highly effective in offsetting changes in fair values or cash flows of hedged
items. The Company currently excludes the time value of the options when
assessing hedge effectiveness.

When available, quoted market prices or prices obtained through external
sources are used to verify a contracts fair value. For contracts with a
delivery location or duration for which quoted market prices are not available,
fair value is determined based on pricing models developed primarily from
historical and expected correlations with quoted market prices.

Values are adjusted to reflect the credit risk inherent in the transaction
as well as the potential impact of liquidating the positions held in an orderly
manner over a reasonable time period under current conditions. Changes in
market price and management estimates directly affect the estimated fair value
of these contracts. Accordingly, it is reasonably possible that such estimates
may change in the near term.

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Commodity Trading  A favorable or unfavorable price movement of any
derivative contract held for trading purposes is reported as Trading and
Marketing Net Margin in the Consolidated Statements of Operations. An
offsetting amount is recorded in the Consolidated Balance Sheets as Unrealized
Gains or Unrealized Losses on Trading and Hedging Transactions. When a contract
is settled, the realized gain or loss is reclassified to a receivable or
payable account. Settlement has no revenue presentation effect on the
Consolidated Statements of Operations.

See the New Accounting Standards section below for a discussion of the
implications of EITF Issue 02-03, Issues Involved in Accounting for Derivative
Contracts Held for Trading Purposes and Contracts Involved in Energy Trading
and Risk Management Activities, on the accounting for trading activities
subsequent to October 25, 2002.

Commodity Cash Flow Hedges  The effective portion of the change in fair
value of a derivative designated and qualified as a cash flow hedge is included
in the Consolidated Balance Sheets as Accumulated Other Comprehensive Income
(Loss) (AOCI) until earnings are affected by the hedged item. Settlement
amounts of cash flow hedges are removed from AOCI and recorded in the
Consolidated Statements of Operations in the same accounts as the item being
hedged. The Company discontinues hedge accounting prospectively when it is
determined that the derivative no longer qualifies as an effective hedge, or
when it is no longer probable that the hedged transaction will occur. When
hedge accounting is discontinued because the derivative no longer qualifies as
an effective hedge, the derivative continues to be carried on the Consolidated
Balance Sheets at its fair value, with subsequent changes in its fair value
recognized in current-period earnings. Gains and losses related to discontinued
hedges that were previously accumulated in AOCI will remain in AOCI until
earnings are affected by the hedged item, unless it is no longer probable that
the hedged transaction will occur, in which case, the gains and losses that
were accumulated in AOCI will be immediately recognized in current-period
earnings.

Commodity Fair Value Hedges  Changes in the fair value of a derivative
that is designated and qualifies as a fair value hedge are included in the
Consolidated Statements of Operations as Sales of Natural Gas and Petroleum
Products and Purchases of Natural Gas and Petroleum Products, as appropriate.
Changes in the fair value of the physical portion of a fair value hedge (i.e.,
the hedged item) are recorded in the Consolidated Statements of Operations in
the same accounts as the changes in the fair value of the derivative, with
offsetting amounts in the Consolidated Balance Sheets as Other Current Assets,
Other Noncurrent Assets, Other Current Liabilities, or Other Long Term
Liabilities, as appropriate.

Interest Rate Fair Value Hedges  The Company enters into interest rate
swaps to convert some of its fixed-rate long term debt to floating-rate long
term debt. Hedged items in fair value hedges are marked to market with the
respective derivative instruments. Accordingly, the Companys hedged fixed-rate
debt is carried at fair value. The terms of the outstanding swap match those of
the associated debt which permits the assumption of no ineffectiveness, as
defined by SFAS No. 133. As such, for the life of the swap no ineffectiveness
will be recognized.

Income
Taxes The Company is required to make quarterly distributions to
Duke Energy and ConocoPhillips based on allocated taxable income. The
distributions are based on the highest taxable income allocated to either
member, with the other member receiving a proportionate amount to maintain the
ownership capital accounts at 69.7% for Duke Energy and 30.3% for
ConocoPhillips.

Stock-Based Compensation Under Duke Energys 1998 Long Term Incentive
Plan, stock options for Duke Energys common stock may be granted to the
Companys key employees. The Company accounts for stock-based compensation
using the intrinsic value recognition and measurement principles of Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and FASB Interpretation No. 44, Accounting for Certain
Transactions Involving Stock Compensation (an Interpretation of APB Opinion No.
25). Since the exercise price for all options granted under those plans was
equal to the market value of the underlying common stock on the date of grant,
no compensation cost is recognized in the accompanying Consolidated Statements
of Operations. Restricted stock grants, phantom stock awards and stock-based
performance awards are recorded over the required vesting period as
compensation cost, based on the market value on the date of grant. (See Note 7
for pro forma disclosures using the fair value accounting method.)

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Accumulated Other Comprehensive Income (Loss) The components of and
changes in accumulated other comprehensive income (loss) are as follows:

|                                                      |  |             |        |                     |  |                   |         |   |  |   |         |  
|----------------------------------------------------- |  | ----------- | ------ | ------------------- |  | ----------------- | ------- | - |  | - | ------- | -
|                                                      |  |             |        |                     |  | Net               |         |   |  |  
|Accumulated Other Comprehensive                       |  | Foreign     |        | Unrealized (Losses) |  | Accumulated Other
|Income (Loss)                                         |  | Currency    |        | Gains on Cash Flow  |  | Comprehensive    
|(in thousands)                                        |  | Adjustments |        | Hedges              |  | (Loss) Income    
|                                                      |  |             |        |                     |  |                  
|Balance as of December 31, 2002                       |  | $           | (6,728 | )                   |  | $                 | (58,118 | ) |  | $ | (64,846 | )
|Other comprehensive income changes
during the quarter |  |             | 20,128 |                     |  |                   | 5,301   |   |  |   | 25,429  |  
|                                                      |  |             |        |                     |  |                   |         |   |  |   |         |  
|Balance as of March 31, 2003                          |  | $           | 13,400 |                     |  | $                 | (52,817 | ) |  | $ | (39,417 | )
|                                                      |  |             |        |                     |  |                   |         |   |  |   |         |  

Cumulative
Effect of Changes in Accounting Principles The Company
adopted SFAS No. 143, Accounting for Asset Retirement Obligations on January
1, 2003. In accordance with the transition provisions of SFAS No. 143, the
Company recorded asset retirement liabilities and a cumulative-effect
adjustment of $17.4 million as a reduction in earnings. In addition, in
accordance with the EITFs October 2002 consensus on Issue No. 02-03, on
January 1, 2003, the Company decreased its inventories from fair value to
historical cost and recorded a $5.4 million cumulative-effect adjustment as a
reduction in earnings.

New
Accounting Standards In May
2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity. SFAS No. 150 improves the accounting for certain
financial instruments that, under previous guidance, issuers could
account for as equity. SFAS No. 150 requires that those
instruments be classified as liabilities in statements of financial
position. In addition to its requirements for the classification and
measurement of financial instruments in its scope, SFAS No. 150
also requires disclosures about alternative ways of settling the
instruments and the capital structure of entities, all of whose
shares are mandatorily redeemable. The provisions of SFAS
No. 150 are effective for all financial instruments entered into
or modified after May 31, 2003, and are otherwise effective at
the beginning of the first interim period beginning after June 15,
2003. The Company is currently assessing SFAS No. 150 but does
not anticipate that it will have a material impact on its
consolidated results of operations, cash flows or financial position.

In April 2003, the FASB issued SFAS No. 149,
Amendment of Statement 133 on Derivative Instruments and Hedging Activities
which amends and clarifies accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities under SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. SFAS No. 149 clarifies the discussion around initial net
investment, clarifies when a derivative contains a financing component, and
amends the definition of an underlying to conform it to language used in FIN
45, Guarantors Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others. In addition, SFAS
No. 149 also incorporates certain of the Derivative Implementation Group
Implementation Issues. The provisions of SFAS No. 149 are effective for
contracts entered into or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. The guidance should be applied
to hedging relationships on a prospective basis. The Company is currently
assessing SFAS No. 149 but does not anticipate that it will have a material
impact on its consolidated results of operations, cash flows or financial
position.

In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities. FIN 46 requires an entity to
consolidate a variable interest entity if it is the primary beneficiary of the
variable interest entitys activities. The primary beneficiary is the party
that absorbs a majority of the expected losses, receives a majority of the
expected residual returns, or both, from the variable interest entitys
activities. FIN 46 is applicable immediately to variable interest entities
created, or interests in variable interest entities obtained, after January 31,
2003. For those variable interest entities created, or interests in variable
interest entities obtained, on or before January 31, 2003, FIN 46 is required
to be applied in the first fiscal year or interim period beginning after June
15, 2003. FIN 46 may be applied prospectively with a cumulative-effect
adjustment as of the date it is first applied, or by restating previously
issued financial statements with a cumulative-effect adjustment as of the
beginning of the first year restated. FIN 46 also requires certain disclosures
of an entitys relationship with variable interest entities.

The Company shares ownership interests with other industry partners in a
variety of different partnership and joint venture entities in order to share
the risks and rewards of ownership in certain gas and NGL plant and pipeline
assets. The Company does not provide supplemental financial support to these
entities, other than the debt guarantees discussed in Note 9. In general,
these entities are structured such that the voting and equity interests in
these entities are consistent with the allocation of the entities profits and
losses. The Company is continuing the process of examining all of its
ownership interests to determine the necessary disclosures and procedures for
complying with FIN 46. At this point, the Company does not anticipate that
these entities will qualify as variable interest entities under FIN 46.
However, in the event that it is determined that any such entities are variable
interest

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entities, the Company believes that it would not be the primary
beneficiary of such entities and thus the consolidation provisions of FIN 46
would not apply. For all of these partnership and joint venture entities, the
Company believes that its maximum exposure to loss would be equal to its
investment in these entities plus its potential obligations under its
guarantees of unconsolidated debt. At March 31, 2003, the Companys total
investment in, plus the value of any guaranteed debt for entities that may
reasonably possibly be determined to be variable interest entities, was
approximately $169 million.

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure  an amendment of FASB
Statement No. 123. SFAS No. 148 amends SFAS No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS No. 148 amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual
and interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results.
The Company adopted the disclosure-only provisions of SFAS No. 148 as of
December 31, 2002. Adoption of the new standard had no material effect on the
Companys consolidated results of operations or financial position.

In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, which elaborates on the disclosures to
be made by a guarantor about its obligations under certain guarantees issued.
It also clarifies that a guarantor is required to recognize, at the inception
of a guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The Company adopted the initial recognition and
measurement provisions of Interpretation No. 45 effective January 1, 2003.
Adoption of the new interpretation had no material effect on the Companys
consolidated results of operations or financial position.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities, which addresses accounting for
restructuring and similar costs. SFAS No. 146 supersedes previous accounting
guidance, principally EITF No. 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring). The Company adopted the provisions
of SFAS No. 146 for restructuring activities initiated after December 31, 2002.
SFAS No. 146 requires that the liability for costs associated with an exit or
disposal activity be recognized when the liability is incurred. Under EITF No.
94-3, a liability for an exit cost was recognized at the date of the Companys
commitment to an exit plan. SFAS No. 146 also establishes that the liability
should initially be measured and recorded at fair value. Accordingly, SFAS No.
146 may affect the timing of recognizing future restructuring costs as well as
the amounts recognized.

In June 2002, the EITF reached a partial consensus on Issue No. 02-03,
Issues Involved in Accounting for Derivative Contracts Held for Trading
Purposes and Contracts Involved in Energy Trading and Risk Management
Activities. The EITF concluded that, effective for periods ending after July
15, 2002, mark-to-market gains and losses on energy trading contracts
(including those to be physically settled) must be shown on a net basis in the
Consolidated Statements of Operations. The Company had previously chosen to
report certain of its energy trading contracts on a gross basis, as sales in
operating revenues and the associated costs recorded as purchases in costs and
expenses, in accordance with prevailing industry practice.

In October 2002, the EITF, as part of their further deliberations on Issue
No. 02-03, rescinded the consensus reached in Issue No. 98-10. As a result, all
energy trading contracts that do not meet the definition of a derivative under
SFAS No. 133, and trading inventories that previously had been recorded at fair
values, must now be recorded at the lower of cost or market and are reported
on an accrual basis resulting in the recognition of earnings or losses at the
time of contract settlement or termination. New non-derivative energy trading
contracts entered into after October 25, 2002 should be accounted for under the
accrual accounting basis. Non-derivative energy trading contracts on the
Consolidated Balance Sheet as of January 1, 2003 that existed at October 25,
2002 and inventories that were recorded at fair values have been adjusted to
the lower of historical cost or market via a cumulative-effect adjustment of
$5.4 million as a reduction to 2003 earnings. In connection with the consensus
reached on Issue No. 02-03, the FASB staff observed that, effective July 1,
2002, an entity should not recognize unrealized gains or losses

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at the inception of a derivative instrument unless the fair value of that
instrument is evidenced by quoted market prices or current market transactions.

In October 2002, the EITF also reached a consensus on Issue No. 02-03
that, effective for periods beginning after December 15, 2002, all gains and
losses on all derivative instruments held for trading purposes should be shown
on a net basis in the income statement. Gains and losses on non-derivative
energy trading contracts should similarly be presented on a gross or net basis
in connection with the guidance in Issue No. 99-19, Reporting Revenue Gross as
a Principal versus Net as an Agent. Upon application of this presentation,
comparative financial statements for prior periods are required to be
reclassified to conform to the consensus other than for energy trading
contracts that were shown on a net basis under Issue No. 98-10. Accordingly,
for the quarter ended March 31, 2003, only derivative instruments that are held
for trading purposes and are accounted for under mark-to-market accounting are
included in trading and marketing net margin on the Consolidated Statements of
Operations. For the quarter ended March 31, 2002, trading and marketing net
margin also includes the net margin on non-derivative energy trading contracts
(primarily gas storage inventories and the related physical purchases and
sales) that no longer qualify for net presentation after the rescission of Issue
No. 98-10. The new gross versus net revenue presentation requirements had no
impact on operating income or net income.

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations, which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. The standard applies to legal
obligations associated with the retirement of long-lived assets that result
from the acquisition, construction, development and/or normal use of the asset.
SFAS No. 143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred, if a
reasonable estimate of fair value can be made. The fair value of the liability
is added to the carrying amount of the associated asset. This additional
carrying amount is then depreciated over the life of the asset. The liability
increases due to the passage of time based on the time value of money until the
obligation is settled. The Company adopted the provisions of SFAS No. 143 as
of January 1, 2003. In accordance with the transition provisions of SFAS No.
143, the Company recorded a cumulative-effect adjustment of $17.4 million as a
reduction in 2003 earnings.

Reclassifications Certain prior period amounts have been reclassified in
the Consolidated Financial Statements and notes thereto to conform to the
current presentation.

3.     Derivative Instruments, Hedging Activities, Credit and Risk

Commodity price risk The Companys principal operations of gathering,
processing, transportation, marketing and trading and storage of natural gas,
and the accompanying operations of fractionation, transportation, trading and
marketing of NGLs create commodity price risk exposure due to market
fluctuations in commodity prices, primarily with respect to the prices of NGLs,
natural gas and crude oil. As an owner and operator of natural gas processing
and other midstream assets, the Company has an inherent exposure to market
variables and commodity price risk. The amount and type of price risk is
dependent on the underlying natural gas contracts entered into to purchase and
process raw gas. Risk is also dependent on the types and mechanisms for sales
of natural gas and natural gas liquid products produced, processed, transported
or stored.

Energy trading (market) risk Certain of the Companys subsidiaries are
engaged in the business of trading energy related products and services
including managing purchase and sales portfolios, storage contracts and
facilities, and transportation commitments for products. These energy trading
operations are exposed to market variables and commodity price risk with
respect to these products and services, and may enter into physical contracts
and financial instruments with the objective of realizing a positive margin
from the purchase and sale of commodity-based instruments.

Corporate economic risks The Company enters into debt arrangements that
are exposed to market risks related to changes in interest rates. The Company
periodically uses interest rate lock agreements and interest rate swaps to
hedge interest rate risk associated with new debt issuances. The Companys
primary goals include (1) maintaining an appropriate ratio of fixed-rate debt
to total debt for the Companys debt rating; (2) reducing volatility

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of earnings resulting from interest rate fluctuations; and (3) locking in
attractive interest rates based on historical rates.

Counterparty risks The Company sells various commodities (i.e., natural
gas, NGLs and crude oil) to a variety of customers. The natural gas customers
include local utilities, industrial consumers, independent power producers and
merchant energy trading organizations. The NGLs customers range from large,
multi-national petrochemical and refining companies to small regional retail
propane distributors. Substantially all of the Companys NGLs sales are made at
market-based prices, including approximately 40% of NGLs production that is
committed to ConocoPhillips and Chevron Phillips Chemical LLC, under a contract
with a primary term that expires on December 31, 2014. This concentration of
credit risk may affect the Companys overall credit risk in that these
customers may be similarly affected by changes in economic, regulatory or other
factors. On transactions where the Company is exposed to credit risk, the
Company analyzes the counterparties financial condition prior to entering into
an agreement, establishes credit limits and monitors the appropriateness of
these limits on an ongoing basis. The corporate credit policy prescribes the
use of master collateral agreements to mitigate credit exposure. The collateral
agreements provide for a counterparty to post cash or letters of credit for
exposure in excess of the established threshold. The threshold amount
represents an open credit limit, determined in accordance with the corporate
credit policy. The collateral agreements also provide that the failure to post
collateral is sufficient cause to terminate a contract and liquidate all
positions.

Physical forward contracts and financial derivatives are generally cash
settled at the expiration of the contract term. These transactions are
generally subject to specific credit provisions within the contracts that would
allow the seller, at its discretion, to suspend deliveries, cancel agreements
or continue deliveries to the buyer after the buyer provides security for
payment satisfactory to the seller.

Commodity cash flow hedges The Company uses cash flow hedges, as
specifically defined by SFAS No. 133, to reduce the potential negative impact
that commodity price changes could have on the Companys earnings, and its
ability to adequately plan for cash needed for debt service, dividends, capital
expenditures and tax distributions. The Companys primary corporate hedging
goals include maintaining minimum cash flows to fund debt service, dividends,
production replacement, maintenance capital projects and tax distributions; and
retaining a high percentage of potential upside relating to price increases of
NGLs.

The Company uses natural gas, crude oil and NGL swaps and options to hedge
the impact of market fluctuations in the price of NGLs, natural gas and other
energy-related products. For the three months ended March 31, 2003, the Company
recognized a net loss of $39.5 million, of which a $2.2 million gain
represented the total ineffectiveness of all cash flow hedges and a $41.7
million loss represented the total derivative settlements. No derivative
gains or losses were reclassified from OCI to current period earnings as a
result of the discontinuance of cash flow hedges related to certain forecasted
transactions that are not probable of occurring.

Gains and losses on derivative contracts that are reclassified from
accumulated OCI to current period earnings are included in the line item in
which the hedged item is recorded. As of March 31, 2003, $51.5 million of the
deferred net losses on derivative instruments accumulated in OCI are expected
to be reclassified into earnings during the next 12 months as the hedge
transactions occur; however, due to the volatility of the commodities markets,
the corresponding value in OCI is subject to change prior to its
reclassification into earnings. The maximum term over which the Company is
hedging its exposure to the variability of future cash flows is three years.

Commodity fair value hedges The Company uses fair value hedges to hedge
exposure to changes in the fair value of an asset or a liability (or an
identified portion thereof) that is attributable to price risk. The Company
hedges producer price locks (fixed price gas purchases) and market locks (fixed
price gas sales) to reduce the Companys exposure to fixed price risk via
swapping out the fixed price risk for a floating price position (New York
Mercantile Exchange or index based).

For the three months ended March 31, 2003, the gains or losses
representing the ineffective portion of the Companys fair value hedges were
not significant. All components of each derivatives gain or loss are included
in

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the assessment of hedge effectiveness, unless otherwise noted. The Company
did not have any firm commitments that no longer qualified as fair value hedge
items and therefore, did not recognize an associated gain or loss.

Interest rate fair value hedge In October 2001, the Company entered into
an interest rate swap to convert the fixed interest rate of $250.0 million of
debt securities that were issued in August 2000 to floating rate debt. The
interest rate fair value hedge is at a floating rate based on a six-month
London Interbank Offered Rate (LIBOR), which is re-priced semiannually
through 2005. The swap meets conditions which permit the assumption of no
ineffectiveness, as defined by SFAS No. 133. As such, for the life of the swap
no ineffectiveness will be recognized. As of March 31, 2003, the fair value of
the interest rate swap of $12.8 million was included in the Consolidated
Balance Sheets as Unrealized Gains or Losses on Trading and Hedging
Transactions with an offset to the underlying debt included in Long Term Debt.

Commodity Derivatives  Trading and Marketing The trading of energy
related products and services exposes the Company to the fluctuations in the
market values of traded instruments. The Company manages its traded instrument
portfolio with strict policies which limit exposure to market risk and require
daily reporting to management of potential financial exposure. These policies
include statistical risk tolerance limits using historical price movements to
calculate a daily earnings at risk measurement.

4. Asset Retirement Obligations

SFAS No. 143,Accounting for Asset Retirement Obligations.In June 2001,
the FASB issued SFAS No. 143 which addresses financial accounting and reporting
for obligations associated with the retirement of tangible long-lived assets
and the associated asset retirement costs. The standard applies to legal
obligations associated with the retirement of long-lived assets that result
from the acquisition, construction, development and/or normal use of the asset.
The Companys asset retirement obligations relate primarily to the retirement
of certain gathering pipelines and processing facilities, obligations related
to right-of-way agreements and contractual leases for land use.

SFAS No. 143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred, if a
reasonable estimate of fair value can be made. The fair value of the liability
is added to the carrying amount of the associated asset. This additional
carrying amount is then depreciated over the life of the asset. The liability
increases due to the passage of time based on the time value of money until the
obligation is settled.

The Company identified certain assets as having an indeterminate life in
accordance with SFAS No. 143, which do not trigger a requirement to establish a
fair value for future retirement obligations associated with such assets. These
assets include certain pipelines, processing plants and distribution
facilities. A liability for these asset retirement obligations will be recorded
if and when a future retirement obligation is identified.

SFAS No. 143 was effective for fiscal years beginning after June 15, 2002,
and was adopted by the Company on January 1, 2003. At January 1, 2003, the
implementation of SFAS No. 143 resulted in a net increase in total assets of
$25.1 million, consisting of an increase in net property, plant and equipment.
Liabilities increased by $42.5 million, which represents the establishment of
an asset retirement obligation liability. A cumulative-effect of a change in
accounting principle adjustment of $17.4 million was recorded in the first
quarter of 2003, as a reduction in earnings.

The following table shows the asset retirement obligation liability as
though SFAS No. 143 had been in effect for the prior three years.

|                                      |  |                |        | 
|------------------------------------- |  | -------------- | ------ | 
|Pro forma Asset Retirement Obligation |  | (in thousands)
|                                      |  |               
|January 1, 2000                       |  | $              | 13,493 | 
|December 31, 2000                     |  |                | 31,561 | 
|December 31, 2001                     |  |                | 38,879 | 
|December 31, 2002                     |  |                | 42,549 | 
|                                      |  |                |        | 

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The asset retirement obligation is adjusted each quarter for any
liabilities incurred or settled during the period, accretion expense and any
revisions made to the estimated cash flows. The reconciliation of the asset
retirement obligation for the three months ended March 31, 2003 is shown in the
following table.

|                                              |  |                    |        | 
|--------------------------------------------- |  | ------------------ | ------ | 
|                                              |  | Three Months Ended
|                                              |  | March 31, 2003    
|Reconciliation of Asset Retirement Obligation |  | (in thousands)    
|                                              |  |                   
|Balance as of January 1, 2003                 |  | $                  | 42,549 | 
|Accretion expense                             |  |                    | 889    | 
|Other                                         |  |                    | 471    | 
|                                              |  |                    |        | 
|Balance as of March 31, 2003                  |  | $                  | 43,909 | 
|                                              |  |                    |        | 

5. Financing

Credit
Facility with Financial Institutions On March 28, 2003, the
Company entered into a new credit facility (the New Facility). The New
Facility replaces the credit facility that matured on March 28, 2003. The New
Facility is used to support the Companys commercial paper program and for
working capital and other general corporate purposes. The New Facility matures
on March 26, 2004, however; any outstanding loans under the New Facility at
maturity may, at the Companys option, be converted to a one-year term loan.
The New Facility is a $350.0 million revolving credit facility, of which $100.0
million can be used for letters of credit. The New Facility requires the
Company to maintain at all times a debt to total capitalization ratio of less
than or equal to 53%; and maintain at the end of each fiscal quarter an
interest coverage ratio (defined to be the ratio of EBITDA for the four most
recent quarters to interest expense for the same period) of at least 2.5 to 1
(see Note 8 for definition of EBITDA); and contains certain restrictions
applicable to dividends and other payments to the Companys members. The New
Facility bears interest at a rate equal to, at the Companys option and based
on the Companys current debt rating, either (1) LIBOR plus 1.25% per year or
(2) the higher of (a) the JP Morgan Chase Bank prime rate and (b) the Federal
Funds rate plus 0.50% per year. At March 31, 2003, there were no borrowings
against the New Facility.

On March 28, 2003, the Company also entered into a $100.0 million funded
short-term loan with Bank One, NA (the Short-Term Loan). The Short-Term Loan
is used for working capital and other general corporate purposes. The
Short-Term Loan matures on September 30, 2003, and may be prepaid at any time.
The Short-Term Loan has the same financial covenants as the New Facility. The
Short-Term Loan bears interest at a rate equal to, at the Companys option,
either (1) LIBOR plus 1.35% per year or (2) the higher of (a) the Bank One, NA
prime rate and (b) the Federal Funds rate plus 0.50% per year. The Companys
management believes our cash flows and the New Facility will be adequate to
meet our liquidity needs subsequent to the maturity of the Short-Term Loan. As
such, the Company does not plan to refinance the Short-Term Loan when it
matures.

6. Commitments and Contingent Liabilities

The midstream natural gas industry has seen a number of class action
lawsuits involving royalty disputes, mismeasurement and mispayment allegations.
Although the industry has seen these types of cases before, they were typically
brought by a single plaintiff or small group of plaintiffs. A number of these
cases are now being brought as class actions. The Company and its subsidiaries
are currently named as defendants in some of these cases. Management believes
the Company and its subsidiaries have meritorious defenses to these cases, and
therefore will continue to defend them vigorously. However, these class actions
can be costly and time consuming to defend. Management believes that the final
disposition of these proceedings will not have a material adverse effect on the
consolidated results of operations or financial position of the Company.

On September 18, 2001, General Gas Company, LP (GGC) filed a lawsuit
against the Company claiming damages for breach of contract under a Gas
Purchase and Processing Agreement. The Company then filed counterclaims
against GGC on related contract issues. On January 28, 2003, the Company
entered into a Compromise and Settlement Agreement whereby the Company agreed
to acquire GGC for $16.5 million, payable in equal installments over three
years, beginning on the settlement date. The Compromise and Settlement
Agreement

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settles all claims between the parties. As a result of the Compromise and
Settlement Agreement, the Company capitalized $6.2 million associated with
acquired gas supply contracts, recorded a charge to natural gas purchases of
$8.1 million and a $0.9 million charge to other current liabilities in the
first quarter of 2003.

7. Stock-Based Compensation

The Company accounts for its stock-based compensation arrangements under
the intrinsic value recognition and measurement principles of Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees and the FASB Interpretation No. 44, Accounting for Certain
Transactions Involving Stock Compensation (an Interpretation of APB Opinion No.
25). Since the exercise price for all stock options granted under those plans
was equal to the market value of the underlying common stock on the date of
grant, no compensation cost is recognized in the accompanying Consolidated
Statements of Operations. Restricted stock grants, phantom stock awards and
Company performance awards are recorded over the required vesting period as
compensation cost, based on the market value on the date of the grant. The
following disclosures reflect the provisions of SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure  an amendment of FASB
Statement No. 123.

The following table shows what earnings available for members interest
would have been if the Company had applied the fair value recognition
provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to all
stock-based compensation awards.

|                                                                                                       |  |                              |        |      |  |   |         |  
|------------------------------------------------------------------------------------------------------ |  | ---------------------------- | ------ | ---- |  | - | ------- | -
|                                                                                                       |  | Three Months Ended March 31,
|                                                                                                       |  |                             
|Pro Forma Stock-Based Compensation (in thousands)                                                      |  | 2003                         |        | 2002
|                                                                                                       |  |                              |        |     
|Earnings (deficit)
available for members
interest, as reported                                        |  | $                            | 23,909 |      |  | $ | (24,125 | )
|Add: stock-based
compensation expense
included in reported net
income                                  |  |                              | 250    |      |  |   | 301     |  
|Deduct: total stock-based
compensation expense
determined under fair
value-based method for
all awards |  |                              | (1,162 | )    |  |   | (1,640  | )
|                                                                                                       |  |                              |        |      |  |   |         |  
|Pro forma earnings
(deficit) available for
members interest                                           |  | $                            | 22,997 |      |  | $ | (25,464 | )
|                                                                                                       |  |                              |        |      |  |   |         |  

8. Business Segments

The Company operates in two principal business segments as follows: (1)
natural gas gathering, compression, treatment, processing, transportation,
marketing and trading and storage, and (2) NGL fractionation, transportation,
marketing and trading. These segments are monitored separately by management
for performance against its internal forecast and are consistent with the
Companys internal financial reporting. These segments have been identified
based on the differing products and services, regulatory environment and the
expertise required for these operations. Margin, earnings before interest,
taxes, depreciation and amortization (EBITDA) and earnings before interest
and taxes (EBIT) are the performance measures used by management to monitor
the business of each segment. The accounting policies for the segments are the
same as those described in Note 2. Foreign operations are not material and are
therefore not separately identified.

13



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The following table sets forth the Companys segment information.

|                                                                                              |                                                         |  |                                                                                                    |           |   |                |   |           |   |           |   | 
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------- | --------- | - | -------------- | - | --------- | - | --------- | - | 
|                                                                                              |                                                         |  |                                                                                                    |           |   | Three         
|                                                                                              |                                                         |  |                                                                                                    |           |   | Months Ended  
|                                                                                              |                                                         |  |                                                                                                    |           |   | March 31,     
|                                                                                              |                                                         |  |                                                                                                    |           |   |               
|                                                                                              |                                                         |  |                                                                                                    |           |   | 2003           |   | 2002     
|                                                                                              |                                                         |  |                                                                                                    |           |   |                |   |          
|                                                                                              |                                                         |  |                                                                                                    |           |   | (in thousands)
|Operating revenues:                                                                           |                                                         |  |                                                                                                    |           |   |                |   |          
|                                                                                              | Natural gas, including trading and marketing net margin |  | $                                                                                                  | 2,554,724 |   |                | $ | 1,072,278 |  
|                                                                                              | NGLs, including trading and marketing net margin        |  |                                                                                                    | 499,385   |   |                |   | 321,800   |  
|                                                                                              | Intersegment (a)                                        |  |                                                                                                    | (547,449  | ) |                |   | (264,263  | )
|                                                                                              |                                                         |  |                                                                                                    |           |   |                |   |          
|                                                                                              |                                                         |  | Total operating revenues                                                                           |           | $ | 2,506,660      |   |           | $ | 1,129,815 |  
|                                                                                              |                                                         |  |                                                                                                    |           |   |                |   |          
|Margin:                                                                                       |                                                         |  |                                                                                                    |           |   |                |   |          
|                                                                                              | Natural gas, including trading and marketing net margin |  | $                                                                                                  | 295,566   |   |                | $ | 232,549   |  
|                                                                                              | NGLs, including trading and marketing net margin        |  |                                                                                                    | 15,468    |   |                |   | 16,055    |  
|                                                                                              |                                                         |  |                                                                                                    |           |   |                |   |          
|                                                                                              |                                                         |  | Total margin                                                                                       |           | $ | 311,034        |   |           | $ | 248,604   |  
|                                                                                              |                                                         |  |                                                                                                    |           |   |                |   |          
|Other operating costs:                                                                        |                                                         |  |                                                                                                    |           |   |                |   |          
|                                                                                              | Natural gas                                             |  | $                                                                                                  | 107,561   |   |                | $ | 110,747   |  
|                                                                                              | NGLs                                                    |  |                                                                                                    | 2,411     |   |                |   | 2,401     |  
|                                                                                              | Corporate                                               |  |                                                                                                    | 39,531    |   |                |   | 39,157    |  
|                                                                                              |                                                         |  |                                                                                                    |           |   |                |   |          
|                                                                                              |                                                         |  | Total other operating costs                                                                        |           | $ | 149,503        |   |           | $ | 152,305   |  
|                                                                                              |                                                         |  |                                                                                                    |           |   |                |   |          
|Equity in earnings of unconsolidated affiliates:                                              |                                                         |  |                                                                                                    |           |   |                |   |          
|                                                                                              | Natural Gas                                             |  | $                                                                                                  | 12,820    |   |                | $ | 5,649     |  
|                                                                                              | NGLs                                                    |  |                                                                                                    | (766      | ) |                |   | 421       |  
|                                                                                              |                                                         |  |                                                                                                    |           |   |                |   |          
|                                                                                              |                                                         |  | Total equity in earnings of unconsolidated affiliates                                              |           | $ | 12,054         |   |           | $ | 6,070     |  
|                                                                                              |                                                         |  |                                                                                                    |           |   |                |   |          
|EBITDA (b):                                                                                   |                                                         |  |                                                                                                    |           |   |                |   |          
|                                                                                              | Natural gas                                             |  | $                                                                                                  | 200,825   |   |                | $ | 127,451   |  
|                                                                                              | NGLs                                                    |  |                                                                                                    | 12,291    |   |                |   | 14,075    |  
|                                                                                              | Corporate                                               |  |                                                                                                    | (39,531   | ) |                |   | (39,157   | )
|                                                                                              |                                                         |  |                                                                                                    |           |   |                |   |          
|                                                                                              |                                                         |  | Total EBITDA                                                                                       |           | $ | 173,585        |   |           | $ | 102,369   |  
|                                                                                              |                                                         |  |                                                                                                    |           |   |                |   |          
|Depreciation and amortization:                                                                |                                                         |  |                                                                                                    |           |   |                |   |          
|                                                                                              | Natural gas                                             |  | $                                                                                                  | 70,655    |   |                | $ | 69,187    |  
|                                                                                              | NGLs                                                    |  |                                                                                                    | 3,206     |   |                |   | 3,318     |  
|                                                                                              | Corporate                                               |  |                                                                                                    | 3,755     |   |                |   | 1,254     |  
|                                                                                              |                                                         |  |                                                                                                    |           |   |                |   |          
|                                                                                              |                                                         |  | Total depreciation and amortization                                                                |           | $ | 77,616         |   |           | $ | 73,759    |  
|                                                                                              |                                                         |  |                                                                                                    |           |   |                |   |          
|EBIT (b):                                                                                     |                                                         |  |                                                                                                    |           |   |                |   |          
|                                                                                              | Natural gas                                             |  | $                                                                                                  | 130,170   |   |                | $ | 58,264    |  
|                                                                                              | NGLs                                                    |  |                                                                                                    | 9,085     |   |                |   | 10,757    |  
|                                                                                              | Corporate                                               |  |                                                                                                    | (43,286   | ) |                |   | (40,411   | )
|                                                                                              |                                                         |  |                                                                                                    |           |   |                |   |          
|                                                                                              |                                                         |  | Total EBIT                                                                                         |           | $ | 95,969         |   |           | $ | 28,610    |  
|                                                                                              |                                                         |  |                                                                                                    |           |   |                |   |          
|                                                                                              |                                                         |  | Total corporate interest expense                                                                   |           | $ | 42,738         |   |           | $ | 43,309    |  
|                                                                                              |                                                         |  |                                                                                                    |           |   |                |   |          
|Income (loss) before income taxes and cumulative effects of changes in
accounting principles: |                                                         |  |                                                                                                    |           |   |                |   |          
|                                                                                              | Natural gas                                             |  | $                                                                                                  | 130,170   |   |                | $ | 58,264    |  
|                                                                                              | NGLs                                                    |  |                                                                                                    | 9,085     |   |                |   | 10,757    |  
|                                                                                              | Corporate                                               |  |                                                                                                    | (86,024   | ) |                |   | (83,720   | )
|                                                                                              |                                                         |  |                                                                                                    |           |   |                |   |          
|                                                                                              |                                                         |  | Total income (loss) before income taxes and cumulative effects
of changes in accounting principles |           | $ | 53,231         |   |           | $ | (14,699   | )
|                                                                                              |                                                         |  |                                                                                                    |           |   |                |   |          
|Capital expenditures:                                                                         |                                                         |  |                                                                                                    |           |   |                |   |          
|                                                                                              | Natural gas                                             |  | $                                                                                                  | 36,166    |   |                | $ | 103,010   |  
|                                                                                              | NGLs                                                    |  |                                                                                                    | 27        |   |                |   | 179       |  
|                                                                                              | Corporate                                               |  |                                                                                                    | 885       |   |                |   | 3,596     |  
|                                                                                              |                                                         |  |                                                                                                    |           |   |                |   |          
|                                                                                              |                                                         |  | Total capital expenditures                                                                         |           | $ | 37,078         |   |           | $ | 106,785   |  
|                                                                                              |                                                         |  |                                                                                                    |           |   |                |   |          

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|              |               |              |   |                |           |              |   |           |           | 
|------------- | ------------- | ------------ | - | -------------- | --------- | ------------ | - | --------- | --------- | 
|              |               |              |   | As of         
|              |               |              |   |               
|              |               |              |   | March 31,      |           | December 31,
|              |               |              |   | 2003           |           | 2002        
|              |               |              |   |                |           |             
|              |               |              |   | (in thousands)
|Total assets: |               |              |   |                |           |              |   |          
|              | Natural gas   |              | $ | 5,171,216      |           |              | $ | 5,190,492 |          
|              | NGLs          |              |   | 274,204        |           |              |   | 293,398   |          
|              | Corporate (c) |              |   | 1,963,934      |           |              |   | 1,081,711 |          
|              |               |              |   |                |           |              |   |          
|              |               | Total assets |   | $              | 7,409,354 |              |   | $         | 6,565,601 | 
|              |               |              |   |                |           |              |   |          



---

|(a) |  | Intersegment sales represent sales of NGLs from the Natural Gas Segment
to the NGLs Segment at either index prices or weighted-average prices of
NGLs. Both measures of intersegment sales are effectively based on current
economic market conditions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | EBIT consists of net income plus interest expense, income tax expense,
and cumulative effects of changes in accounting principles. EBITDA is
equal to EBIT plus depreciation and amortization. These measures are not a
measurement presented in accordance with generally accepted accounting
principles and should not be considered in isolation from or as a
substitute for net income or cash flow measures prepared in accordance
with generally accepted accounting principles or as a measure of the
Companys profitability or liquidity. The measures are included as a
supplemental disclosure because it may provide useful information
regarding the Companys ability to service debt and to fund capital
expenditures. However, not all EBITDA or EBIT may be available to service
debt. These measures may not be comparable to similarly titled measures
reported by other companies.
|   
|(c) |  | Includes items such as unallocated working capital, intercompany accounts
and intangible and other assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

9. Guarantors Obligations Under Guarantees

At March 31, 2003, the Company was the guarantor of approximately $97.3
million of debt associated with non-consolidated entities, of which $84.6
million is related to our 33.33% ownership interest in Discovery Producer
Services, LLC, (Discovery) and $12.7 million is related to our 50.0%
ownership interest in GPM Gas Gathering, LLC (GGG). The guaranteed debt
related to Discovery is due December 31, 2003, and is expected to be
refinanced. The guaranteed debt related to GGG is scheduled to be repaid in
full by January 31, 2004. In the event that the unconsolidated subsidiaries
default on the debt payments, the Company would be required to pay the debt.
Assets of the unconsolidated subsidiaries are pledged as collateral for the
debt. At March 31, 2003, the Company had no liability recorded for the
guarantees of the debt associated with the unconsolidated subsidiaries.

The Company periodically enters into agreements for the acquisition or
divestiture of assets. These agreements contain indemnification provisions that
may provide indemnity for environmental, tax, employment, outstanding
litigation and other liabilities related to the assets being acquired or
divested. The survival periods on these indemnification provisions generally
have terms of one to five years, although some are longer. The Company cannot
estimate the maximum potential amount of future payments under these
indemnification provisions due to the contingent nature of these liabilities.
In addition, many of these indemnification provisions do not contain any limits
on potential liability. At March 31, 2003, we had no liability recorded for
these outstanding indemnification provisions.

10. Accounting Adjustments

During 2002, the Company completed a comprehensive account reconciliation
project to review and analyze its balance sheet accounts. This account
reconciliation project identified the following five categories where account
adjustments were necessary: operating expense accruals; gas inventory
adjustments; gas imbalances; joint venture and investment account
reconciliation; and other balance sheet accounts. As a result of this account
reconciliation project, the Company recorded numerous adjustments in 2002. For
the quarter ended March 31, 2002, adjustments totaling approximately $11
million may be related to corrections of accounting errors in prior periods.
However,

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management has determined that the charges related to error corrections
are immaterial both individually and in the aggregate on both a quantitative
and qualitative basis to the trends in the financial statements for the periods
presented, the prior periods affected and to a fair presentation of the
Companys financial statements. In addition, numerous items identified in the
account reconciliation project resulted from system conversions and otherwise
unsupportable balance sheet amounts. Due to the nature of certain of these
account reconciliation adjustments, it would be impractical to determine what
periods such adjustments relate to. Accordingly, the corrections were made in
the first quarter 2002 financial statements.

11. Subsequent Events

In April and May 2003, the Company entered into purchase and sale
agreements with two buyers to sell various gathering, transmission and
processing assets, plus a minority interest in a partnership owning a gas
processing plant, for a total sales price of $91 million, plus or minus various
adjustments that will be made at closing. At March 31, 2003, the book value of
these assets was approximately $66 million. Total sales and operating income associated
with these assets for the three months ended March 31, 2003 were $93.5 million
and $3.6 million, respectively; for the three months ended March 31, 2002,
sales and operating income totaled $36.7 and $(0.1) million, respectively. The
Company anticipates closing these transactions on June 30, 2003.
One of these sales is subject to various regulatory approvals.




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

The following discussion details the material factors that affected our
historical financial condition and results of operations during the three
months ended March 31, 2003 and 2002. This discussion should be read in
conjunction with the Consolidated Financial Statements and related notes
included elsewhere in this report.

Overview

We operate in the two principal business segments of the midstream natural
gas industry:



| |  |  | natural gas gathering, processing, transportation and storage, from
which we generate revenues primarily by providing services such as
compression, gathering, treating, processing, transportation of residue
gas, storage, and trading and marketing (the Natural Gas Segment). In
the first quarter of 2003, approximately 84% of our operating revenues
prior to intersegment revenue elimination and approximately 95% of our
gross margin were derived from this segment.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | NGLs fractionation, transportation, marketing and trading, from which
we generate revenues from transportation fees, market center
fractionation and the marketing and trading of NGLs (the NGLs
Segment). In the first quarter of 2003, approximately 16% of our
operating revenues prior to intersegment revenue elimination and
approximately 5% of our gross margin were derived from this segment.                                                                        

Our limited liability company agreement limits the scope of our business
to the midstream natural gas industry in the United States and Canada, the
marketing of NGLs in Mexico and the transportation, marketing and storage of
other petroleum products, unless otherwise approved by our board of directors.
This limitation in scope is not currently expected to materially impact the
results of our operations.

Effects of Commodity Prices

We are exposed to commodity prices as a result of being paid for certain
services in the form of commodities rather than cash. For gathering services,
we receive fees or commodities from the producers to bring the raw natural gas
from the well head to the processing plant. For processing services, we either
receive fees or commodities as payment for these services, depending on the
type of contractual agreement. Based on our current contract mix, we have a
long NGL position and are sensitive to changes in NGL prices. We also have a
short gas position; however, the short gas position is less significant than
the long NGL position.

16



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We are also exposed to changes in commodity prices as a result of our NGL
and natural gas trading activities. NGL trading includes trading and storage
at the Mont Belvieu, Texas and Conway, Kansas NGL market centers to manage our
price risk and provide additional services to our customers. Natural gas
trading activities are supported by our ownership of a natural gas storage
facility and various intrastate pipelines. We undertake these activities
through the use of fixed forward sales, basis and spread trades, storage
opportunities, put/call options, term contracts and spot market trading. We
also execute natural gas and NGL proprietary trades based upon our knowledge
and expertise obtained through the operation of our assets and our position as
a leading NGL marketer.

During the first quarter of 2003, approximately 75% of our gross margin
was generated by commodity sensitive arrangements and approximately 25% of our
gross margin was generated by fee-based arrangements. We actively manage our
commodity exposure as discussed below.

The midstream natural gas industry is cyclical, with the operating results
of companies in the industry significantly affected by the prevailing price of
NGLs, which in turn has been generally correlated to the price of crude oil.
Although the prevailing price of natural gas has less short term significance
to our operating results than the price of NGLs, in the long term, the growth
of our business depends on natural gas prices being at levels sufficient to
provide incentives and capital for producers to increase natural gas
exploration and production. In the past, the prices of NGLs and natural gas
have been extremely volatile.

We generally expect NGL prices to follow changes in crude oil prices over
the long term, which we believe will in large part be determined by the level
of production from major crude oil exporting countries and the demand generated
by growth in the world economy. However, the relationship or correlation
between crude oil value and NGL prices declined significantly during 2001 and
2002. In late 2002, this relationship strengthened and remained near
historical trend levels during the first quarter of 2003.

We believe that future natural gas prices will be influenced by supply
deliverability, the severity of winter and summer weather and the level of
United States economic growth. The price increases in crude oil, NGLs and
natural gas experienced during 2000 and first half of 2001 spurred increased
natural gas drilling activity. However, a decline in commodity prices in late
2001, continuing into 2002, negatively affected drilling activity. The average
number of active rigs drilling in North America increased to 1,394 during the
first quarter of 2003 from 1,201 during the first quarter of 2002. This
increase is mainly attributable to recent significant increases in natural gas
prices which could result in sustained increases in drilling activity during
2003. However, energy market uncertainty could negatively impact North
American drilling activity in the short term. Lower drilling levels over a
sustained period would have a negative effect on natural gas volumes gathered
and processed.

To better address the risks associated with volatile commodity prices, we
employ a comprehensive commodity price risk management program. We closely
monitor the risks associated with these commodity price changes on our future
operations and, where appropriate, use various commodity instruments such as
natural gas, crude oil and NGL contracts to hedge the value of our assets and
operations from such price risks. See Item 3. Quantitative and Qualitative
Disclosure About Market Risk. Our first quarter 2003 and first quarter 2002
results of operations include a hedging loss of $39.5 million and a gain of
$7.4 million, respectively.

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Results of Operations

|                    |                                                 |                          |         |                              |           |      |         |           |           | 
|------------------- | ----------------------------------------------- | ------------------------ | ------- | ---------------------------- | --------- | ---- | ------- | --------- | --------- | 
|                    |                                                 |                          |         | Three Months Ended March 31,
|                    |                                                 |                          |         |                             
|                    |                                                 |                          |         | 2003                         |           | 2002
|                    |                                                 |                          |         |                              |           |     
|                    |                                                 |                          |         | (in thousands)              
|Operating revenues: |                                                 |                          |         |                              |           |      |         |          
|                    | Sales of natural gas and petroleum products     |                          | $       | 2,458,783                    |           |      | $       | 1,052,929 |          
|                    | Transportation, storage and processing          |                          |         | 82,071                       |           |      |         | 69,577    |          
|                    | Trading and marketing net margin                |                          |         | (34,194                      | )         |      |         | 7,309     |          
|                    |                                                 |                          |         |                              |           |      |         |          
|                    |                                                 | Total operating revenues |         |                              | 2,506,660 |      |         |           | 1,129,815 | 
|                    | Purchases of natural gas and petroleum products |                          |         | 2,195,626                    |           |      |         | 881,211   |          
|                    |                                                 |                          |         |                              |           |      |         |          
|Gross margin (1)    |                                                 | $                        | 311,034 |                              |           | $    | 248,604 |          
|                    |                                                 |                          |         |                              |           |      |         |          



---

|(1) |  | Gross margin consists of operating income before operating and
maintenance expense, depreciation and amortization expense, general
and administrative expense, and other expense. Gross margin is included as a supplemental
disclosure because it may provide useful information regarding the impact
of key drivers such as commodity prices and supply contract mix on the
Companys earnings.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Three months ended March 31, 2003 compared with three months ended March
31, 2002

Gross Margin Gross margin increased $62.4 million or 25% to $311.0
million in the first quarter of 2003 from $248.6 million in 2002. Of this
increase, approximately $137 million (net of hedging) was the result of a $.27
per gallon increase in average NGL prices. These increases were partially
offset by approximately $62 million due to a $4.27 per million British thermal
units (Btus) increase in natural gas prices. These price changes yielded
average NGL prices of $.58 per gallon and natural gas prices of $6.59 per
million Btus as compared with $.31 per gallon and $2.32 per million Btus during
the same period in 2002.

Gross margin associated with the Natural Gas Segment increased $63.1
million, or 27%, to $295.6 million from $232.5 million, mainly as a result of
higher commodity prices. Commodity sensitive processing arrangements accounted
for approximately $75 million (net of hedging) of this increase due mainly to
the $.27 per gallon increase in average NGL prices offset by the $4.27 per
million Btu increase in natural gas prices. Offsetting this increase were
decreases due to trading and marketing net margin of a negative $32.8 million
associated with derivative settlements and marked to market value of unsettled
contracts related to our gas trading and marketing activities. Natural gas
trading and marketing net margin excludes approximately $20 million realized
during the first quarter of 2003 on the Companys natural gas asset based
trading activity which, prior to January 1, 2003, was recorded in trading and
marketing net margin. As a result of the rescission of EITF 98-10, this
activity is now presented on a gross basis in gas sales and purchases (see Note
2 to Consolidated Financial Statements).

During the first quarter of 2003, the Company elected to reduce levels of
keep-whole processing activities from time to time due to less profitable
processing margins. This resulted in lower NGL production and natural gas
transported and/or processed. NGL production during the first quarter of 2003
decreased 13,400 barrels per day, or 3%, to 375,200 barrels per day from
388,600 barrels per day during the first quarter of 2002, and natural gas
transported and/or processed decreased 0.4 trillion Btus per day, or 5%, to 8.0
trillion Btus per day from 8.4 trillion Btus per day.

Gross margin associated with the NGLs Segment decreased $0.6 million, or
4% to $15.5 million in the first quarter of 2003 from $16.1 million in the same
period of 2002. Decreases of $8.7 million resulting from trading and marketing
net margin were offset by increases in northeast wholesale propane marketing
and terminals of $3.6 million, sale of inventory resulting from renegotiation
of certain pipeline operating agreements of $1.0 million and higher margins
from other NGL assets.

Costs and Expenses  Operating and maintenance expenses increased $13.2
million (excluding $11 million in first quarter 2002 accounting adjustments 
see Note 10 to Consolidated Financial Statements), or 14%, to $110.2 million in
the first quarter of 2003 from $97.0 million in the same period of 2002.
Contributing to this increase were

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increased expenditures for facility maintenance and pipeline repair of $5
million, environmental compliance of $3 million, and accretion expense
associated with SFAS No. 143 implementation (see Note 2 and Note 4 to
Consolidated Financial Statements) of $1 million. General and administrative
expenses increased $0.2 million, or 1%, to $39.4 million in the first quarter
of 2003, from $39.2 million in the same period of 2002.

Depreciation and amortization expense increased $3.8 million, or 5%, to
$77.6 million in the first quarter of 2003 from $73.8 million in the same
period of 2002. This increase was due primarily to ongoing capital expenditures
for well connections, facility maintenance and enhancements, and the
implementation of SFAS No. 143.

Other costs and expenses decreased $5.3 million to a credit of $0.1
million in the first quarter of 2003 from expense of $5.2 million in the first
quarter of 2002. This decrease is due primarily to the first quarter 2002
accounting adjustment for the recognition of a loss on the sale of assets
associated with a partnership investment (see Note 10 to Consolidated Financial
Statements).

Equity in Earnings of Unconsolidated Affiliates Equity in earnings of
unconsolidated affiliates increased $6.0 million, or 98%, to $12.1 million in
the first quarter of 2003 from $6.1 million in the first quarter of 2002. This
increase is primarily the result of increased earnings from our general
partnership interest in TEPPCO of $3.8 million and the 2002 acquisition of an
interest in the Discovery Pipeline located in offshore Gulf of Mexico of $2.8
million.

Interest Expense Interest expense decreased $0.6 million, or 1%, to
$42.7 million in the first quarter of 2003 from $43.3 million in the same
period of 2002. This decrease was primarily the result of lower outstanding
debt levels.

Income Taxes The Company is structured as a limited liability company,
which is a pass-through entity for U.S income tax purposes. First quarter 2003
income tax expenses decreased $0.5 million to $1.8 million in the first quarter
of 2003 from $2.3 million in the same period of 2002 due primarily to lower
earnings associated with tax-paying subsidiaries.

Cumulative
Effect of Changes in Accounting Principles  Cumulative effect
of changes in accounting principles increased to a loss of $22.8 million in the
first quarter of 2003 from no charge in the first quarter of 2002. Of this
amount, $17.4 million relates to the implementation of SFAS No. 143, and $5.4
million is due to the rescission of EITF 98-10 (see Note 2 to Consolidated
Financial Statements).

Net Income Net income increased $45.7 million to $28.7 million in the
first quarter of 2003 from a loss of $17.0 million in the first quarter of
2002. This increase was largely the result of higher NGL prices offset by
higher natural gas prices, hedging activity, and the cumulative effects of
changes in accounting principles.

Liquidity and Capital Resources

As of March 31, 2003, we had $36.2 million in cash and cash equivalents
compared to $24.8 million as of December 31, 2002. Our working capital was a
$203.9 million deficit as of March 31, 2003, compared to a $306.2 million
deficit as of December 31, 2002. We rely upon cash flows from operations and
borrowings to fund our liquidity and capital requirements. A material adverse
change in operations or available financing may impact our ability to fund our
current liquidity and capital resource requirements.

Operating Cash Flows

During the first quarter of 2003, funds of $61.0 million were provided by
operating activities, a decrease of $38.2 from $99.2 million in the first
quarter 2002. The decrease is primarily due to changes in working capital
balances, unrealized mark-to-market and hedging activity offset by an increase
in net income.

Price volatility in crude oil, NGLs and natural gas prices has a direct
impact on our use and generation of cash from operations.

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Investing Cash Flows

During the first quarter of 2003, funds of $17.8 million were used in
investing activities, a decrease of $80.0 million from $97.8 million in the
first quarter of 2002. Our capital expenditures consist of expenditures for
construction of additional gathering systems, processing plants, fractionators
and other facilities and infrastructure in addition to well connections and
upgrades to our existing facilities and acquisitions. For the first quarter of
2003, we spent approximately $37.1 million on capital expenditures compared to
$106.8 million in the first quarter of 2002.

Our level of capital expenditures for acquisitions and construction
depends on many factors, including industry conditions, the availability of
attractive acquisition opportunities and construction projects, the level of
commodity prices and competition. We expect to finance our capital expenditures
with our cash on hand, cash flow from operations and borrowings available under
our commercial paper program, our credit facilities or other available sources
of financing.

Investments in unconsolidated affiliates provided $14.3 million in cash
distributions to us during the first quarter of 2003.

Financing Cash Flows

On March 28, 2003, we entered into a new credit facility (the New
Facility). The New Facility replaces the credit facility that matured on March
28, 2003. The New Facility is used to support our commercial paper program and
for working capital and other general corporate purposes. The New Facility
matures on March 26, 2004, however; any outstanding loans under the New
Facility at maturity may, at our option, be converted to a one-year term loan.
The New Facility is a $350.0 million revolving credit facility, of which $100.0
million can be used for letters of credit. The New Facility requires us to
maintain at all times a debt to total capitalization ratio of less than or
equal to 53%; and maintain at the end of each fiscal quarter an interest
coverage ratio (defined to be the ratio of EBITDA for the four most recent
quarters to interest expense for the same period) of at least 2.5 to 1 (see
Note 8 for definition of EBITDA); and contains certain restrictions applicable
to dividends and other payments to our members. The New Facility bears interest
at a rate equal to, at our option and based on our current debt rating, either
(1) LIBOR plus 1.25% per year or (2) the higher of (a) the JP Morgan Chase Bank
prime rate and (b) the Federal Funds rate plus 0.50% per year. At March 31,
2003, there were no borrowings against the New Facility.

On March 28, 2003, we also entered into a $100.0 million funded short-term
loan with Bank One, NA (the Short-Term Loan). The Short-Term Loan is used for
working capital and other general corporate purposes. The Short-Term Loan
matures on September 30, 2003, and may be prepaid at any time. The Short-Term
Loan has the same financial covenants as the New Facility. The Short-Term Loan
bears interest at a rate equal to, at our option, either (1) LIBOR plus 1.35%
per year or (2) the higher of (a) the Bank One, NA prime rate and (b) the
Federal Funds rate plus 0.50% per year. We believe that our cash flows and the
existing New Facility will be adequate to meet our liquidity needs subsequent
to the maturity of the Short-Term Loan. As such, we do not plan to refinance
the Short-Term Loan when it matures.

At March 31, 2003, we had $84.4 million in outstanding commercial paper,
with maturities ranging from one day to 29 days and annual interest rates
ranging from 1.53% to 1.55%. At no time did the amount of our outstanding
commercial paper exceed the available amount under the New Facility. In the
future, our debt levels will vary depending on our liquidity needs, capital
expenditures and cash flow.

In April 2002, we filed a shelf registration statement increasing our
ability to issue securities to $500.0 million. The shelf registration statement
provides for the issuance of senior notes, subordinated notes and trust
preferred securities.

Based on current and anticipated levels of operations, we believe that our
cash on hand and cash flow from operations, combined with borrowings available
under the commercial paper program and the New Facility, will be sufficient to
enable us to meet our current and anticipated cash operating requirements and
working capital needs for

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the next year. Actual capital requirements, however, may change,
particularly as a result of any acquisitions that we may make. Our ability to
meet current and anticipated operating requirements will depend on our future
performance.

Contractual Obligations and Commercial Commitments

As part of our normal business, we are a party to various financial
guarantees, performance guarantees and other contractual commitments to extend
guarantees of credit and other assistance to various subsidiaries, investees
and other third parties. To varying degrees, these guarantees involve elements
of performance and credit risk, which are not included on the Consolidated
Balance Sheets. The possibility of us having to honor our contingencies is
largely dependent upon future operations of various subsidiaries, investees and
other third parties, or the occurrence of certain future events. We would
record a reserve if events occurred that required that one be established. See
Note 9 to the Consolidated Financial Statements for more information on
guarantee obligations.

At March 31, 2003, we were the guarantor of approximately $97.3 million of
debt associated with nonconsolidated entities, of which $84.6 million related
to our 33.33% ownership interest in Discovery Producer Services, LLC,
(Discovery) and $12.7 million is related to our 50.0% ownership interest in
GPM Gas Gathering, LLC (GGG). The guaranteed debt related to Discovery is due
December 31, 2003, and is expected to be refinanced. The guaranteed debt
related to GGG is scheduled to be repaid in full by January 31, 2004. In the
event that the unconsolidated subsidiaries default on the debt payments, we
would be required to pay the debt. Assets of the unconsolidated subsidiaries
are pledged as collateral for the debt. At March 31, 2003, we had no liability
recorded for the guarantees of the debt associated with the unconsolidated
subsidiaries.

The Company periodically enters into agreements for the acquisition or
divestiture of assets. These agreements contain indemnification provisions that
may provide indemnity for environmental, tax, employment, outstanding
litigation and other liabilities related to the assets being acquired or
divested. The survival periods on these indemnification provisions generally
have terms of one to five years, although some are longer. The Company cannot
estimate the maximum potential amount of future payments under these
indemnification provisions due to the contingent nature of these liabilities.
In addition, many of these indemnification provisions do not contain any limits
on potential liability. At March 31, 2003, we had no liability recorded for
these outstanding indemnification provisions.

New Accounting Standards

In May
2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity. SFAS No. 150 improves the accounting for certain
financial instruments that, under previous guidance, issuers could
account for as equity. SFAS No. 150 requires that those
instruments be classified as liabilities in statements of financial
position. In addition to its requirements for the classification and
measurement of financial instruments in its scope, SFAS No. 150
also requires disclosures about alternative ways of settling the
instruments and the capital structure of entities, all of whose
shares are mandatorily redeemable. The provisions of SFAS
No. 150 are effective for all financial instruments entered into
or modified after May 31, 2003, and are otherwise effective at
the beginning of the first interim period beginning after June 15,
2003. The Company is currently assessing SFAS No. 150 but does
not anticipate that it will have a material impact on its
consolidated results of operations, cash flows or financial position.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities which amends and clarifies
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 149
clarifies the discussion around initial net investment, clarifies when a
derivative contains a financing component, and amends the definition of an
underlying to conform it to language used in FIN 45. In addition, SFAS No. 149
also incorporates certain of the Derivative Implementation Group Implementation
Issues. The provisions of SFAS No. 149 are effective for contracts entered
into or modified after June 30, 2003 and for hedging relationships designated
after June 30, 2003. The guidance should be applied to hedging relationships
on a prospective basis. We are currently assessing SFAS No. 149 but do not
anticipate that it will have a material impact on our consolidated results of
operations, cash flows or financial position.

In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities. FIN 46 requires an entity to
consolidate a variable interest entity if it is the primary beneficiary of the
variable interest entitys activities. The primary beneficiary is the party
that absorbs a majority of the expected losses, receives a majority of the
expected residual returns, or both, from the variable interest entitys
activities. FIN 46 is applicable immediately to variable interest entities
created, or interests in variable interest entities obtained, after January 31,
2003. For those variable interest entities created, or interests in variable
interest entities obtained, on or before January 31, 2003, FIN 46 is required
to be applied in the first fiscal year or interim period beginning after June
15, 2003. FIN 46 may be applied prospectively with a cumulative-effect
adjustment as of the date it is first

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applied, or by restating previously issued financial statements with a
cumulative-effect adjustment as of the beginning of the first year restated.
FIN 46 also requires certain disclosures of an entitys relationship with
variable interest entities.

We share ownership interests with other industry partners in a variety of
different partnership and joint venture entities in order to share the risks
and rewards of ownership in certain gas and NGL plant and pipeline assets. We
do not provide supplemental financial support to these entities, other than the
debt guarantees discussed in Note 9. In general, these entities are structured
such that the voting and equity interests in these entities are consistent with
the allocation of the entities profits and losses. We are continuing the
process of examining all of our ownership interests to determine the necessary
disclosures and procedures for complying with FIN 46. At this point, we do not
anticipate that these entities will qualify as variable interest entities under
FIN 46. However, in the event that it is determined that any such entities are
variable interest entities, we believe that we would not be the primary
beneficiary of such entities and thus the consolidation provisions of FIN 46
would not apply. For all of these partnership and joint venture entities, we
believe that our maximum exposure to loss would be equal to our investment in
these entities plus our potential obligations under our guarantees of
unconsolidated debt. At March 31, 2003, our total investment in, plus the
value of any guaranteed debt for entities that may reasonably possibly be
determined to be variable interest entities, was approximately $169 million.

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure  an amendment of FASB
Statement No. 123. SFAS No. 148 amends SFAS No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS No. 148 amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual
and interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. We
adopted the disclosure-only provisions of SFAS No. 148 as of December 31, 2002.
Adoption of the new standard had no material effect on our consolidated results
of operations or financial position.

In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, which elaborates on the disclosures to
be made by a guarantor about its obligations under certain guarantees issued.
It also clarifies that a guarantor is required to recognize, at the inception
of a guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. We adopted the initial recognition and measurement
provisions of Interpretation No. 45 effective January 1, 2003. Adoption of the
new interpretation had no material effect on our consolidated results of
operations or financial position.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities, which addresses accounting for
restructuring and similar costs. SFAS No. 146 supersedes previous accounting
guidance, principally EITF No. 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring). We adopted the provisions of SFAS
No. 146 for restructuring activities initiated after December 31, 2002. SFAS
No. 146 requires that the liability for costs associated with an exit or
disposal activity be recognized when the liability is incurred. Under EITF No.
94-3, a liability for an exit cost was recognized at the date of our commitment
to an exit plan. SFAS No. 146 also establishes that the liability should
initially be measured and recorded at fair value. Accordingly, SFAS No. 146 may
affect the timing of recognizing future restructuring costs as well as the
amounts recognized.

In June 2002, the EITF reached a partial consensus on Issue No. 02-03,
Issues Involved in Accounting for Derivative Contracts Held for Trading
Purposes and Contracts Involved in Energy Trading and Risk Management
Activities. The EITF concluded that, effective for periods ending after July
15, 2002, mark-to-market gains and losses on energy trading contracts
(including those to be physically settled) must be shown on a net basis in the
Consolidated Statements of Operations. We had previously chosen to report
certain of its energy trading contracts on a gross basis, as sales in operating
revenues and the associated costs recorded as purchases in costs and expenses,
in accordance with prevailing industry practice. The amounts in the comparative
Consolidated Statements of Operations have been reclassified to conform to the
2003 presentation of all amounts on a net basis.

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In October 2002, the EITF, as part of their further deliberations on Issue
No. 02-03, rescinded the consensus reached in Issue No. 98-10. As a result, all
energy trading contracts that do not meet the definition of a derivative under
SFAS No. 133, and trading inventories that previously had been recorded at fair
values, must now be recorded at the lower of cost or market and are reported
on an accrual basis resulting in the recognition of earnings or losses at the
time of contract settlement or termination. New non-derivative energy trading
contracts entered into after October 25, 2002 should be accounted for under the
accrual accounting basis. Non-derivative energy trading contracts on the
Consolidated Balance Sheet as of January 1, 2003 that existed at October 25,
2002 and inventories that were recorded at fair values have been adjusted to
the lower of historical cost or market via a cumulative-effect adjustment of
$5.4 million as a reduction to 2003 earnings. In connection with the consensus
reached on Issue No. 02-03, the FASB staff observed that, effective July 1,
2002, an entity should not recognize unrealized gains or losses at the
inception of a derivative instrument unless the fair value of that instrument
is evidenced by quoted market prices or current market transactions.

In October 2002, the EITF also reached a consensus on Issue No. 02-03
that, effective for periods beginning after December 15, 2002, all gains and
losses on all derivative instruments held for trading purposes should be shown
on a net basis in the income statement. Gains and losses on non-derivative
energy trading contracts should similarly be presented on a gross or net basis
in connection with the guidance in Issue No. 99-19, Reporting Revenue Gross as
a Principal versus Net as an Agent. Upon application of this presentation,
comparative financial statements for prior periods are required to be
reclassified to conform to the consensus other than for energy trading
contracts that were shown on a net basis under Issue No. 98-10. Accordingly,
for the quarter ended March 31, 2003, only derivative instruments that are held
for trading purposes and are accounted for under mark-to-market accounting are
included in trading and marketing net margin on the Consolidated Statements of
Operations. For the quarter ended March 31, 2002, trading and marketing net
margin also includes the net margin on non-derivative energy trading contracts
(primarily gas storage inventories and the related physical purchases and
sales) that no longer qualify for net presentation after the rescission of Issue
No. 98-10. The new gross versus net revenue presentation requirements had no
impact on operating income or net income.

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations, which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. The standard applies to legal
obligations associated with the retirement of long-lived assets that result
from the acquisition, construction, development and/or normal use of the asset.
SFAS No. 143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred, if a
reasonable estimate of fair value can be made. The fair value of the liability
is added to the carrying amount of the associated asset. This additional
carrying amount is then depreciated over the life of the asset. The liability
increases due to the passage of time based on the time value of money until the
obligation is settled. We adopted the provisions of SFAS No. 143 as of January
1, 2003. In accordance with the transition provisions of SFAS No. 143, we
recorded a cumulative-effect adjustment of $17.4 million as a reduction in 2003
earnings.

Subsequent Events

In April and May 2003, we entered into purchase and sale agreements with
two buyers to sell various gathering, transmission and processing assets, plus
a minority interest in a partnership owning a gas processing plant, for a total
sales price of $91 million, plus or minus various adjustments that will be made
at closing. At March 31, 2003, the book value of these assets was approximately $66 million. Total sales and operating income associated with these assets for the
three months ended March 31, 2003 were $93.5 million and $3.6 million,
respectively; for the three months ended March 31, 2002, sales and operating
income totaled $36.7 and $(0.1) million, respectively. We anticipate closing
these transactions on June 30, 2003. One of these sales is subject to various regulatory approvals.

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Item 3. Quantitative and Qualitative Disclosure about Market Risks

Risk Policies

We are exposed to market risks associated with commodity prices, credit
exposure, interest rates, and, to a limited extent, foreign currency exchange
rates. Management has established comprehensive risk management policies to
monitor and manage these market risks. Duke Energy Field Services Risk
Management Committee is responsible for the overall approval of market risk
management policies and the delegation of approval and authorization levels.
The Risk Management Committee is composed of senior executives who receive
regular briefings on the Companys positions and exposures as well as periodic
updates from and consultations with the Duke Energy Chief Risk Officer (CRO)
and other expert resources at Duke Energy regarding market risk positions and
exposures, credit exposures and overall risk management in the context of
market activities. The Risk Management Committee is responsible for the overall
management of commodity price risk and various other risks, including
monitoring exposure limits.

Commodity Price Risk

We are exposed to the impact of market fluctuations primarily in the price
of NGLs that we own as a result of our processing activities. We employ
established policies and procedures to manage our risks associated with these
market fluctuations using various commodity derivatives, including forward
contracts, swaps and options for non-trading activity (primarily hedge
strategies). (See Notes 2 and 3 to the Consolidated Financial Statements.)

Commodity Derivatives  Trading The risk in the commodity trading
portfolio is measured and monitored on a daily basis utilizing a Value-at-Risk
model to determine the potential one-day favorable or unfavorable Daily
Earnings at Risk (DER) as described below. DER is monitored daily in
comparison to established thresholds. Other measures are also used to limit and
monitor the risk in the commodity trading portfolio (which includes all trading
contracts not designated as hedge positions) on a monthly and annual basis.
These measures include limits on the nominal size of positions and periodic
loss limits.

DER computations are based on a historical simulation, which uses price
movements over an eleven day period to simulate forward price curves in the
energy markets to estimate the potential favorable or unfavorable impact of one
days price movement on the existing portfolio. The historical simulation
emphasizes the most recent market activity, which is considered the most
relevant predictor of immediate future market movements for crude oil, NGLs,
gas and other energy-related products. DER computations use several key
assumptions, including a 95% confidence level for the resultant price movement
and the holding period specified for the calculation. The Companys DER amounts
for commodity derivatives instruments held for trading purposes are shown in
the following table.

Daily Earnings at Risk (in thousands)

|               |  |                             |       |                             |  |                     |       |                    |  |   |       |  |  |   |     | 
|-------------- |  | --------------------------- | ----- | --------------------------- |  | ------------------- | ----- | ------------------ |  | - | ----- |  |  | - | --- | 
|               |  | Estimated Average           |       | Estimated Average           |  | High One-Day Impact |       | Low One-Day Impact
|               |  | One-Day Impact on           |       | One-Day Impact on           |  | on EBIT for the     |       | on EBIT for the   
|               |  | EBIT for the three          |       | EBIT for the three          |  | three months ended  |       | three months ended
|               |  | months ended March 31, 2003 |       | months ended March 31, 2002 |  | March 31, 2003      |       | March 31, 2003    
|               |  |                             |       |                             |  |                     |       |                   
|Calculated DER |  | $                           | 1,821 |                             |  | $                   | 2,280 |                    |  | $ | 6,533 |  |  | $ | 396 | 
|               |  |                             |       |                             |  |                     |       |                    |  |   |       |  |  |   |     | 

DER is an estimate based on historical price volatility. Actual volatility
can exceed predicted results. DER also assumes a normal distribution of price
changes, thus if the actual distribution is not normal, the DER may understate
or overstate actual results. DER is used to estimate the risk of the entire
portfolio, and for locations that do not have daily trading activity, it may
not accurately estimate risk due to limited price information. Stress tests may
be employed in addition to DER to measure risk where market data information is
limited. In the current DER methodology, options are modeled in a manner
equivalent to forward contracts which may understate the risk.

Our exposure to commodity price risk is influenced by a number of factors,
including contract size, length of contract, market liquidity, location and
unique or specific contract terms. The unrealized fair value of trading and
marketing instruments outstanding at March 31, 2003 and December 31, 2002 was a
gain of $7.7 million and a loss of $28.0 million respectively.

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The fair value of these contracts is expected to be realized in future
periods, as detailed in the following table. The amount of cash ultimately
realized for these contracts will differ from the amounts shown in the
following table due to factors such as market volatility, counterparty default
and other unforeseen events that could impact the amount and/or realization of
these values. At March 31, 2003 we held cash or letters of credit of $50.6
million to secure such future performance, and had $20.7 million deposited with
counterparties.

When available, quoted market prices are used to record a contracts fair
value. However, market values for energy trading contracts may not be readily
determinable because the duration of the contracts exceeds the liquid activity
in a particular market. If no active trading market exists for a commodity or
for a contracts duration, holders of these contracts must calculate fair value
using internally developed valuation techniques or models. Key components used
in these valuation techniques include price curves, volatility, correlation,
interest rates, and tenor. Of these components, volatility and correlation are
the most subjective. Internally developed valuation techniques include the use
of interpolation, extrapolation, and fundamental analysis in the calculation of
a contracts fair value. All risk components for new and existing transactions
are valued using the same valuation technique and market data and discounted
using a LIBOR based interest rate. Valuation adjustments for performance and
market risk and administration costs are used to adjust the fair value of the
contract to the gain or loss ultimately recognized in the Consolidated
Statements of Operations.

The following table shows the fair value of our trading portfolio as of
March 31, 2003.

|                                                                    |  |                                                             |        |                  |  |                  |       |                |  |                  |      |   |  |                  |      |   |  |   |       |  
|------------------------------------------------------------------- |  | ----------------------------------------------------------- | ------ | ---------------- |  | ---------------- | ----- | -------------- |  | ---------------- | ---- | - |  | ---------------- | ---- | - |  | - | ----- | -
|                                                                    |  | Fair Value of Contracts as of March 31, 2003 (in thousands)
|                                                                    |  |                                                            
|                                                                    |  |                                                             |        |                  |  |                  |       |                |  |                  |      |   |  | Maturity in 2006 |      |   |  |  
|Sources of Fair Value                                               |  | Maturity in 2003                                            |        | Maturity in 2004 |  | Maturity in 2005 |       | and Thereafter |  | Total Fair Value
|                                                                    |  |                                                             |        |                  |  |                  |       |                |  |                 
|Prices supported by quoted
market prices and other
external sources |  | $                                                           | 7,953  |                  |  | $                | 36    |                |  | $                | 638  |   |  | $                |     |   |  | $ | 8,627 |  
|Prices based on models
and other valuation
methods                  |  |                                                             | (2,468 | )                |  |                  | 3,076 |                |  |                  | (648 | ) |  |                  | (922 | ) |  |   | (962  | )
|                                                                    |  |                                                             |        |                  |  |                  |       |                |  |                  |      |   |  |                  |      |   |  |   |       |  
|Total                                                               |  | $                                                           | 5,485  |                  |  | $                | 3,112 |                |  | $                | (10  | ) |  | $                | (922 | ) |  | $ | 7,665 |  
|                                                                    |  |                                                             |        |                  |  |                  |       |                |  |                  |      |   |  |                  |      |   |  |   |       |  

The Prices supported by quoted market prices and other external sources
category includes our New York Mercantile Exchange (NYMEX) swap positions in
natural gas and crude oil. The NYMEX has currently quoted prices for the next
32 months. In addition, this category includes our forward positions and
options in natural gas and natural gas basis swaps at points for which
over-the-counter (OTC) broker quotes are available. On average, OTC quotes
for natural gas forwards and swaps extend 22 and 32 months into the future,
respectively. OTC quotes for natural gas options extend 12 months into the
future, on average. We value these positions against internally developed
forward market price curves that are validated and recalibrated against OTC
broker quotes. This category also includes strip transactions whose prices
are obtained from external sources and then modeled to daily or monthly prices
as appropriate.

The Prices based on models and other valuation methods category includes
(i) the value of options not quoted by an exchange or OTC broker, (ii) the
value of transactions for which an internally developed price curve was
constructed as a result of the long dated nature of the transaction or the
illiquidity of the market point, and (iii) the value of structured
transactions. In certain instances structured transactions can be decomposed
and modeled by us as simple forwards and options based on prices actively
quoted. Although the valuation of the simple structures might not be different
from the valuation of contracts in other categories, the effective model price
for any given period is a combination of prices from two or more different
instruments and therefore has been included in this category due to the complex
nature of these transactions.

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Hedging Strategies We are exposed to market fluctuations in the prices
of energy commodities related to natural gas gathering, processing and
marketing activities. We closely monitor the risks associated with these
commodity price changes on our future operations and, where appropriate, use
various commodity instruments such as natural gas, crude oil and NGL contracts
to hedge the value of our assets and operations from such price risks. In
accordance with SFAS No. 133, our primary use of commodity derivatives is to
hedge the output and production of assets we physically own. Contract terms are
up to three years, however, since these contracts are designated and qualify as
effective hedge positions of future cash flows, or fair values of assets owned
by us, to the extent that the hedge relationships are effective, their market
value change impacts are not recognized in current earnings. The unrealized
gains or losses on these contracts are deferred in Other Comprehensive (Loss)
Income (OCI) for cash flow hedges or included in Other Current or Noncurrent
Assets or Liabilities on the Consolidated Balance Sheets for fair value hedges
of firm commitments, in accordance with SFAS No. 133. Amounts deferred in OCI
are realized in earnings concurrently with the transaction being hedged.
However, in instances where the hedging contract no longer qualifies for hedge
accounting, amounts included in OCI through the date of de-designation remain
in OCI until the underlying transaction actually occurs. The derivative
contract (if continued as an open position) will be marked to market currently
through earnings. Several factors influence the effectiveness of a hedge
contract, including counterparty credit risk and using contracts with different
commodities or unmatched terms. Hedge effectiveness is monitored regularly and
measured each month.

The following table shows when gains and losses deferred on the
Consolidated Balance Sheets for derivative instruments qualifying as effective
hedges of firm commitments or anticipated future transactions will be
recognized into earnings. Contracts with terms extending several years are
generally valued using models and assumptions developed internally or by
industry standards. However, as mentioned previously, the effective portion of
the gains and losses for these contracts are not recognized in earnings until
settlement at their then market price. Therefore, assumptions and valuation
techniques for these contracts have no impact on reported earnings prior to
settlement for the effective portion of these hedges.

The fair value of our qualifying hedge positions at a point in time is not
necessarily indicative of the results realized when such contracts settle.

|                                                                    |  |                                                             |         |                  |  |                  |       |                |  |                  |       |  |  |                  |   |  |  |   |         |  
|------------------------------------------------------------------- |  | ----------------------------------------------------------- | ------- | ---------------- |  | ---------------- | ----- | -------------- |  | ---------------- | ----- |  |  | ---------------- | - |  |  | - | ------- | -
|                                                                    |  | Fair Value of Contracts as of March 31, 2003 (in thousands)
|                                                                    |  |                                                            
|                                                                    |  |                                                             |         |                  |  |                  |       |                |  |                  |       |  |  | Maturity in 2006 |   |  |  |  
|Sources of Fair Value                                               |  | Maturity in 2003                                            |         | Maturity in 2004 |  | Maturity in 2005 |       | and Thereafter |  | Total Fair Value
|                                                                    |  |                                                             |         |                  |  |                  |       |                |  |                 
|Prices supported by quoted
market prices and other
external sources |  | $                                                           | (50,507 | )                |  | $                | 2,368 |                |  | $                | 2,798 |  |  | $                |  |  |  | $ | (45,341 | )
|Prices based on models
and other valuation
methods                  |  |                                                             | (1,356  | )                |  |                  | (170  | )              |  |                  |      |  |  |                  |  |  |  |   | (1,526  | )
|                                                                    |  |                                                             |         |                  |  |                  |       |                |  |                  |       |  |  |                  |   |  |  |   |         |  
|Total                                                               |  | $                                                           | (51,863 | )                |  | $                | 2,198 |                |  | $                | 2,798 |  |  | $                |  |  |  | $ | (46,867 | )
|                                                                    |  |                                                             |         |                  |  |                  |       |                |  |                  |       |  |  |                  |   |  |  |   |         |  

Based upon our portfolio of supply contracts, without giving effect to
hedging activities that would reduce the impact of commodity price decreases, a
decrease of $.01 per gallon in the price of NGLs and $.10 per million Btus in
the average price of natural gas would result in changes in annual pre-tax net
income of approximately $(25) million and $5 million, respectively.

Credit Risk

Our principle customers in the Natural Gas Segment are large, natural gas
marketing services and industrial end-users. In the NGLs segment, our
principle customers are large multi-national petrochemical and refining
companies to small regional propane distributors. Substantially all of our
natural gas and NGLs sales are made at index, market-based prices.
Approximately 40% of our NGLs production is committed to ConocoPhillips and
Chevron

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Phillips Chemical LLC, under a contract with a primary term that expires
on December 31, 2014. This concentration of credit risk may affect our overall
credit risk in that these customers may be similarly affected by changes in
economic, regulatory or other factors. Where exposed to credit risk, we
analyze the counterparties financial condition prior to entering into an
agreement, establish credit limits and monitor the appropriateness of these
limits on an ongoing basis. The corporate credit policy prescribes the use of
master collateral agreements to mitigate credit exposure. Collateral
agreements provide for a counterparty to post cash or letters of credit for
exposure in excess of the established threshold. The threshold amount
represents an open credit limit, determined in accordance with the corporate
credit policy. The collateral agreements also provide that the inability to
post collateral is sufficient cause to terminate a contract and liquidate all
positions. Substantially all other agreements contain adequate assurance
provisions, which would allow us, at our discretion, to suspend deliveries,
cancel agreements or continue deliveries to the buyer after the buyer provides
security for payment satisfactory to us.

Despite the current credit environment in the energy sector, management
believes that the credit risk management process described above is operating
effectively. As of March 31, 2003, we had cash or letters of credit of $50.6
million to secure future performance by counterparties, and had deposited with
counterparties $20.7 million of such collateral to secure our obligations to
provide future services. Collateral amounts held or posted may be fixed or may
vary depending on the value of the underlying contracts and could cover normal
purchases and sales, trading and hedging contracts. In many cases, we and our
counterparties publicly disclosed credit ratings impact the amounts of
collateral requirements.

Generally speaking, all physical and financial derivative contracts are
settled in cash at the expiration of the contract term.

Interest Rate Risk

We enter into debt arrangements that are exposed to market risks related
to changes in interest rates. We periodically utilize interest rate lock
agreements and interest rate swaps to hedge interest rate risk associated with
new debt issuances. Our primary goals include (1) maintaining an appropriate
ratio of fixed-rate debt to total debt for the Companys debt rating; (2)
reducing volatility of earnings resulting from interest rate fluctuations; and
(3) locking in attractive interest rates based on historical averages. As of
March 31, 2003, the fair value of our interest rate swap was an asset of $12.8
million.

As of March 31, 2003, we had approximately $84.4 million outstanding under
a commercial paper program. As a result, we are exposed to market risks related
to changes in interest rates. In the future, we intend to manage our interest
rate exposure using a mix of fixed and floating interest rate debt. An increase
of .5% in interest rates would result in an increase in annual interest expense
of approximately $2.2 million.

Foreign Currency Risk

Our primary foreign currency exchange rate exposure at March 31, 2003 was
the Canadian dollar. Foreign currency risk associated with this exposure was
not material.




Item 4.Controls and Procedures

Within the 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation of the Companys
management, including the Companys Chief Financial Officer and Chief Executive
Officer, of the effectiveness of the design and operation of the Companys
disclosure controls and procedures pursuant to Rule 13a-14 of the Securities
Exchange Act of 1934. Based upon that evaluation, the Chief Financial Officer
and Chief Executive Officer concluded that the Companys disclosure controls
and procedures are effective in timely alerting them to material information
relating to the Company required to be included in the Companys periodic SEC
reports. There have been no significant changes in internal controls, or in
factors that could significantly affect internal controls, subsequent to the
date the Chief Executive Officer and Chief Financial Officer completed their
evaluation.

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PART II. OTHER INFORMATION




Item 1. Legal Proceedings

For information concerning litigation and other contingencies, see Part I.
Item 1, Note 6 to the Consolidated Financial Statements, Commitments and
Contingent Liabilities, of this report and Item 3, Legal Proceedings,
included in our Form 10-K for December 31, 2002, which are incorporated herein
by reference.

Management believes that the resolution of the matters referred to above
will not have a material adverse effect on the consolidated results of
operations or financial position of the Company.




Item 6. Exhibits and Reports on Form 8-K

|    |  |                     |                                                                                                                                                                                            | 
|--- |  | ------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|(a) |  | Exhibits            |                                                                                                                                                                                            | 
|    |  |                     |                                                                                                                                                                                            | 
|    |  | 10.01               | 364-Day Credit Facility among Duke Energy Field Services,
LLC, Duke Energy Field Services Corporation, JP Morgan Chase Bank,
as Agent and the Lenders named therein, dated March 28, 2003.
|    |  |                     |                                                                                                                                                                                            | 
|    |  | 10.02               | Letter Agreement between Duke Energy Field Services, LLC and
Bank One, NA for funded short-term loan facility dated March 28,
2003.                                                       
|    |  |                     |                                                                                                                                                                                            | 
|    |  | 99.1                | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                   
|    |  |                     |                                                                                                                                                                                            | 
|    |  | 99.2                | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                   
|    |  |                     |                                                                                                                                                                                            | 
|(b) |  | Reports on Form 8-K |                                                                                                                                                                                            | 
|    |  |                     |                                                                                                                                                                                            | 
|    |  | None.               |                                                                                                                                                                                            | 

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SIGNATURES

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

|             |  |                                                                                                                                            | 
|------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------ | 
|             |  | DUKE ENERGY FIELD SERVICES, LLC                                                                                                            | 
|             |  |                                                                                                                                            | 
|May 15, 2003 |  |                                                                                                                                            | 
|             |  |                                                                                                                                            | 
|             |  | /s/ Rose M. Robeson                                                                                                                        | 
|             |  |                                                                                                                                            | 
|             |  | Rose M. Robeson
Vice President and Chief Financial Officer
(On Behalf of the Registrant and as
Principal Financial and Accounting Officer) | 

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CERTIFICATIONS

I, Rose M. Robeson certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Duke Energy Field
Services, LLC;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                   |  |                                                            | 
|------------------ |  | ---------------------------------------------------------- | 
|Date: May 15, 2003 |  |                                                            | 
|                   |  |                                                            | 
|                   |  | /s/ Rose M. Robeson                                        | 
|                   |  |                                                            | 
|                   |  | Rose M. Robeson
Vice President and Chief Financial Officer | 

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CERTIFICATIONS

I, Jim W. Mogg certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Duke Energy Field
Services, LLC;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                   |  |                                                                          | 
|------------------ |  | ------------------------------------------------------------------------ | 
|Date: May 15, 2003 |  |                                                                          | 
|                   |  |                                                                          | 
|                   |  | /s/ Jim W. Mogg                                                          | 
|                   |  |                                                                          | 
|                   |  | Jim W. Mogg
Chairman of the Board, President and
Chief Executive Officer | 

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EXHIBIT INDEX

| |  |          |  |                                                                                                                                                                                           
| |  | -------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Exhibits |  |                                                                                                                                                                                           
| |  |          |  |                                                                                                                                                                                           
| |  | 10.01    |  | 364-Day Credit Facility among Duke Energy Field Services,
LLC, Duke Energy Field Services Corporation, JP Morgan Chase Bank,
as Agent and the Lenders named therein, dated March 28, 2003.
| |  |          |  |                                                                                                                                                                                           
| |  | 10.02    |  | Letter Agreement between Duke Energy Field Services, LLC and
Bank One, NA for funded short-term loan facility dated March 28,
2003.                                                       
| |  |          |  |                                                                                                                                                                                           
| |  | 99.1     |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                   
| |  |          |  |                                                                                                                                                                                           
| |  | 99.2     |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.