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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                    FORM 10-Q

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

FOR QUARTER ENDED MARCH 31, 2001                  COMMISSION FILE NUMBER 0-31095

                         DUKE ENERGY FIELD SERVICES, LLC
             (Exact name of registrant as specified in its charter)

                  DELAWARE                                76-0632293
(State or other jurisdiction of incorporation) (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 [ ]

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                         DUKE ENERGY FIELD SERVICES, LLC
                 FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2001

                                      INDEX

<TABLE>
<CAPTION>
ITEM                                                                                                           PAGE

<S>                                                                                                               <C>
                                      PART I. FINANCIAL INFORMATION (UNAUDITED)

1.     Financial Statements...................................................................................    1
         Consolidated Statements of Income for the Three Months Ended March 31, 2001 and 2000.................    1
         Consolidated Statements of Comprehensive Income for the Three Months
             Ended March 31, 2001 and 2000....................................................................    2
         Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2001 and 2000.............    3
         Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000...............................    4
         Condensed Notes to Consolidated Financial Statements.................................................    5
2.     Management's Discussion and Analysis of Financial Condition and Results of Operations..................   12
3.     Quantitative and Qualitative Disclosure about Market Risks.............................................   16

                                             PART II. OTHER INFORMATION

1.     Legal Proceedings......................................................................................   17
6.     Exhibits and Reports on Form 8-K.......................................................................   17
       Signatures.............................................................................................   18
</TABLE>

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,"
"could," "project," "believe," "anticipate," "expect," "estimate," "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:

     o    our ability to access the debt and equity markets, which will depend
          on general market conditions and our credit ratings for our debt
          obligations;

     o    Our use of derivative financial instruments to hedge commodity and
          interest rate risks;

     o    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;

     o    the timing and extent of changes in commodity prices, interest rates
          and demand for our services;

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<PAGE>   3

     o    weather and other natural phenomena;

     o    industry changes, including the impact of consolidations, and changes
          in competition;

     o    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; and

     o    the effect of accounting policies issued periodically by accounting
          standard-setting bodies.

     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.

                                       ii
<PAGE>   4

                          PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                         DUKE ENERGY FIELD SERVICES, LLC
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED,
                                                                             MARCH 31,
                                                                    ----------------------------
                                                                       2001             2000
                                                                    -----------      -----------

<S>                                                                 <C>              <C>
OPERATING REVENUES:
   Sales of natural gas and petroleum products ................     $ 2,381,883      $ 1,251,098
   Sales of natural gas and petroleum products--affiliates ....         940,299          164,367
   Transportation, storage and processing .....................          57,890           35,073
   Transportation, storage and processing--affiliates .........              --              673
                                                                    -----------      -----------
         Total operating revenues .............................       3,380,072        1,451,211
                                                                    -----------      -----------
COSTS AND EXPENSES:
   Natural gas and petroleum products .........................       2,699,236        1,252,769
   Natural gas and petroleum
      products--affiliates ....................................         313,263           25,742
   Operating and maintenance ..................................          89,491           49,039
   Depreciation and amortization ..............................          66,856           38,094
   General and administrative .................................          28,217           19,811
   General and administrative--affiliates .....................           4,189            9,890
   Net (gain) loss on sale of assets ..........................            (868)             239
                                                                    -----------      -----------
         Total costs and expenses .............................       3,200,384        1,395,584
                                                                    -----------      -----------
OPERATING INCOME ..............................................         179,688           55,627
EQUITY IN EARNINGS OF
   UNCONSOLIDATED AFFILIATES ..................................           5,176            6,759
INTEREST EXPENSE:
   Interest expense (income) ..................................          42,017               (8)
   Interest expense--affiliates ...............................              --           14,485
                                                                    -----------      -----------
         Total interest expense ...............................          42,017           14,477
                                                                    -----------      -----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT
   OF ACCOUNTING CHANGE .......................................         142,847           47,909
INCOME TAX EXPENSE (BENEFIT) ..................................              58         (313,991)
                                                                    -----------      -----------
NET INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING
   CHANGE .....................................................         142,789          361,900
CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX ............             411               --
                                                                    -----------      -----------
NET INCOME ....................................................         142,378          361,900
DIVIDENDS ON PREFERRED MEMBERS' INTEREST ......................           7,125               --
                                                                    -----------      -----------
EARNINGS AVAILABLE FOR MEMBERS' INTEREST ......................     $   135,253      $   361,900
                                                                    ===========      ===========
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                       1
<PAGE>   5

                         DUKE ENERGY FIELD SERVICES, LLC

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED,
                                                                           MARCH 31,
                                                                     ------------------------
                                                                       2001           2000
                                                                     ---------      ---------

<S>                                                                  <C>            <C>
NET INCOME .....................................................     $ 142,378      $ 361,900

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
   Cumulative effect of change in accounting principle .........         6,626             --
   Foreign currency translation adjustment .....................          (912)          (284)
   Net unrealized gains (losses) on cash flow hedges ...........       (18,202)            --
   Reclassification adjustment .................................        16,994             --
                                                                     ---------      ---------
        Total other comprehensive income (loss), net of tax ....         4,506           (284)
                                                                     ---------      ---------

TOTAL COMPREHENSIVE INCOME .....................................     $ 146,884      $ 361,616
                                                                     =========      =========
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                       2
<PAGE>   6

                         DUKE ENERGY FIELD SERVICES, LLC
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                          THREE MONTHS ENDED,
                                                                                               MARCH 31,
                                                                                        ------------------------
                                                                                          2001           2000
                                                                                        ---------      ---------

<S>                                                                                     <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income .....................................................................     $ 142,378      $ 361,900
   Adjustments to reconcile net income to net cash provided by
      operating activities:
      Depreciation and amortization ...............................................        66,856         38,094
      Deferred income taxes .......................................................            --       (308,230)
      Change in derivative fair value .............................................       (11,197)            --
      Equity in earnings of unconsolidated affiliates .............................        (5,176)        (6,759)
      Loss (gain) on sale of assets ...............................................          (868)           239
   Change in operating assets and liabilities (net of effects of acquisitions)
      which provided (used) cash:
      Accounts receivable .........................................................        89,884         96,427
      Accounts receivable--affiliates .............................................       (97,851)       (15,897)
      Inventories .................................................................        46,695        (13,843)
      Unrealized loss (gain) on mark-to-market transactions .......................        19,019        (65,876)
      Other current assets ........................................................         1,836        114,328
      Other noncurrent assets .....................................................       (11,057)         3,016
      Accounts payable ............................................................       108,781        (60,725)
      Accounts payable--affiliates ................................................       (10,170)        12,882
      Accrued interest payable ....................................................       (30,230)            --
      Unrealized losses on mark-to-market transactions ............................       (21,268)        58,809
      Other current liabilities ...................................................       (26,310)       (10,132)
      Other long term liabilities .................................................        (5,589)       (19,436)
                                                                                        ---------      ---------
         Net cash from operating activities .......................................       255,733        184,797
                                                                                        ---------      ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisitions and other capital expenditures ....................................       (63,118)      (129,591)
   Investment expenditures ........................................................        (1,114)          (521)
   Investment distributions .......................................................        16,024          5,662
   Proceeds from sales of assets ..................................................        18,551         13,031
                                                                                        ---------      ---------
         Net cash from investing activities .......................................       (29,657)      (111,419)
                                                                                        ---------      ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Net decrease in advances--parents ..............................................          (723)       (73,998)
   Distributions to parents .......................................................      (127,561)            --
   Proceeds from issuing debt .....................................................       250,000             --
   Short term debt--net ...........................................................      (346,410)            --
                                                                                        ---------      ---------
         Net cash from financing activities .......................................      (224,694)       (73,998)
                                                                                        ---------      ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS ...........................................         1,382           (620)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ....................................         1,553            792
                                                                                        ---------      ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ..........................................     $   2,935      $     172
                                                                                        =========      =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION - Cash paid for interest (net of amounts capitalized) ..............     $  16,602      $      --
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                       3
<PAGE>   7


                         DUKE ENERGY FIELD SERVICES, LLC
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                         MARCH 31,      DECEMBER 31,
                                                                                           2001            2000
                                                                                        -----------     ------------

<S>                                                                                     <C>             <C>
                                                       ASSETS
CURRENT ASSETS:
   Cash and cash equivalents ......................................................     $     2,935     $     1,553
   Accounts receivable:
      Customers, net ..............................................................         597,221         725,379
      Affiliates ..................................................................         351,128         253,277
      Other .......................................................................         105,954          67,316
   Inventories ....................................................................          36,630          83,325
   Unrealized gains on trading and hedging transactions ...........................          51,716          46,185
   Other ..........................................................................          11,489          14,275
                                                                                        -----------     -----------
         Total current assets .....................................................       1,157,073       1,191,310
                                                                                        -----------     -----------
PROPERTY, PLANT AND EQUIPMENT, NET ................................................       4,153,723       4,152,480
INVESTMENT IN AFFILIATES ..........................................................         250,575         261,551
INTANGIBLE ASSETS:
   Natural gas liquids sales contracts, net .......................................          95,479          97,956
   Goodwill, net ..................................................................         374,703         376,195
                                                                                        -----------     -----------
         Total intangible assets ..................................................         470,182         474,151
                                                                                        -----------     -----------
OTHER NONCURRENT ASSETS ...........................................................          87,365          90,606
                                                                                        -----------     -----------
         TOTAL ASSETS .............................................................     $ 6,118,918     $ 6,170,098
                                                                                        ===========     ===========

                                           LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable:
      Trade .......................................................................     $ 1,010,024     $   915,130
      Affiliates ..................................................................          51,294          61,464
      Other .......................................................................          58,502          41,322
   Short term debt ................................................................              --         346,410
   Unrealized losses on trading and hedging transactions ..........................          43,264          51,179
   Accrued interest payable .......................................................          19,411          49,641
   Accrued taxes other than income ................................................          13,794          21,717
   Distributions payable to members ...............................................           2,126         127,561
   Other ..........................................................................          98,283         114,408
                                                                                        -----------     -----------
         Total current liabilities ................................................       1,296,698       1,728,832
                                                                                        -----------     -----------
LONG TERM DEBT ....................................................................       1,936,884       1,688,157
OTHER LONG TERM LIABILITIES .......................................................          26,866          32,274
PREFERRED MEMBERS' INTEREST .......................................................         300,000         300,000
COMMITMENTS AND CONTINGENT LIABILITIES
MEMBERS' EQUITY:
   Members' interest ..............................................................       1,709,476       1,709,290
   Retained earnings ..............................................................         846,917         713,974
   Accumulated other comprehensive income (loss) ..................................           2,077          (2,429)
                                                                                        -----------     -----------
         Total  members' equity ...................................................       2,558,470       2,420,835
                                                                                        -----------     -----------
TOTAL LIABILITIES AND MEMBERS' EQUITY .............................................     $ 6,118,918     $ 6,170,098
                                                                                        ===========     ===========
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                       4
<PAGE>   8

                         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 midstream natural gas
gathering, marketing and natural gas liquids industries. The Company operates in
the two principal segments of the midstream natural gas industry of (1) natural
gas gathering, processing, transportation, marketing and storage; and (2)
natural gas liquids (NGLs) fractionation, transportation, marketing and trading.

2. ACCOUNTING POLICIES

     Consolidation - The Consolidated Financial Statements include the accounts
of all majority-owned subsidiaries after the elimination of significant
intercompany transactions and balances. These Consolidated Financial Statements
reflect all normal recurring adjustments that are, in the opinion of management,
necessary to present fairly the financial position and results of operations for
the respective periods.

     Accounting for Hedges and Commodity Trading Activities - All derivatives
are recognized in the Consolidated Balance Sheets at their fair value as
Unrealized gains or losses on trading and hedging transactions, as appropriate.
On the date the swap, futures or option contracts are entered into, the Company
designates the derivative as held for trading (trading instruments), a hedge of
the fair value of a recognized asset or liability or of an unrecognized firm
commitment (fair value hedges), or a hedge of a forecasted transaction or future
cash flows (cash flow hedges).

     The Company also formally assesses, both at the hedge's inception and on an
ongoing basis, whether the derivatives that are used in hedging transactions are
highly effective in offsetting changes in fair values or cash flows of hedged
items. The Company currently excludes the extrinsic value of the options when
assessing hedge effectiveness.

     Commodity Trading - Prior to the settlement of any derivative contract held
for trading purposes, favorable or unfavorable price movement is reported as
Natural gas and petroleum products purchases in the Consolidated Statements of
Income. An offsetting amount is recorded gross in the Consolidated Balance
Sheets as Unrealized gains or losses on trading and hedging transactions. When a
contract to sell energy is physically settled, the fair value entries are
reversed and the gross amount invoiced to the customer is included as Sales of
natural gas and petroleum products in the Consolidated Statements of Income.
Similarly, when a contract to purchase energy is physically settled, the
purchase price is included as Natural gas and petroleum products purchases in
the Consolidated Statements of Income. If a contract is not physically settled,
the unrealized gain or loss on the balance sheet is reversed and reclassified to
a receivable or payable account. For income statement purposes, the contract is
treated as a pure financial instrument, so there is no effect on the
Consolidated Statements of Income.

     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 Income as Sales of natural gas and petroleum products and Natural
gas and petroleum products purchases, as appropriate. An offsetting amount is
recorded gross in the Consolidated Balance Sheets as Unrealized gains or losses
on trading and hedging transactions and the physical portion of a fair value
hedge of a firm commitment is included in the Consolidated Balance Sheets as
Accounts receivable - Customers, net or Accounts payable - Trade.

     Cash Flow Hedges - The fair value of a derivative that is designated and
qualifies as a cash flow hedge is included in the Consolidated Balance Sheets as
Unrealized gains or losses on trading and hedging transactions. The effective
portion of the cash flow derivative is included in Other comprehensive income
(OCI) until earnings are affected by the hedged item. Hedge results are removed
from OCI and recorded in the Consolidated Statements of

                                       5
<PAGE>   9

Income 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, the
derivative will continue to be carried on the balance sheet 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 accumulated in OCI
will remain in OCI until earnings are effected by the hedged item, unless it is
no longer probable that the hedged transaction will occur. Under these
circumstances, gains and losses that were accumulated in OCI will be recognized
immediately in earnings.

     Cumulative Effect of Change in Accounting Principle - The Company adopted
Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for
Derivative Instruments and Hedging Activities," on January 1, 2001. In
accordance with the transition provisions of SFAS 133, the Company recorded a
cumulative-effect adjustment of $0.4 million as a reduction in earnings and a
cumulative-effect adjustment increasing OCI and member's equity by $6.6 million.
For the three months ended March 31, 2001, the Company reclassified to earnings
a $17.0 million loss from OCI for derivatives included in the transition
adjustment for hedge transactions that occurred.

     Currently, there are ongoing discussions surrounding the implementation and
interpretation of SFAS 133 by the Financial Accounting Standards Board's
Derivative Implementation Group. If the definition of derivative instruments is
altered, this may result in another transition adjustment and impact subsequent
operating results.

     Income Taxes - At March 31, 2000, the Company converted to a limited
liability company which is a pass-through entity for income tax purposes. As a
result, income taxes on a go forward basis will consist primarily of
miscellaneous state, local and foreign taxes.

     The Company is required to make quarterly distributions to Duke Energy
Corporation (Duke Energy) and Phillips Petroleum Company (Phillips) based on
allocated taxable income. The distribution is 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 Phillips.

     Reclassifications - Certain prior period amounts have been reclassified in
the Consolidated Financial Statements to conform to the current presentation.

3. DERIVATIVE INSTRUMENTS, HEDGING ACTIVITIES AND CREDIT RISK

     Commodity price risk - The Company's principal operations of gathering,
processing, and storage of natural gas, and the accompanying operations of
processing, fractionation, transportation, and marketing of natural gas liquids
create commodity price risk exposure due to market fluctuations in commodity
prices, primarily with respect to the prices of natural gas liquids. 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
acquisition contracts entered into to purchase and process natural gas
feedstock. 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 such products and services, and may enter into physical contracts and
financial instruments with the objective of achieving profits through realizing
a positive margin from the purchase and sales of commodity-based instruments.

     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

                                       6
<PAGE>   10

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.

     Corporate economic risks - From time to time, the Company will enter into
debt arrangements that may have interest rate risk from market risks related to
changes in interest rates. The Company periodically utilizes 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 of earnings resulting from interest rate
fluctuations; and (3) locking in attractive interest rates based on historical
averages. For the three months ended March 31, 2001, the Company's existing
interest rate derivative instruments were not material to its results of
operations, cash flows or financial position.

     Counterparty risks - The Company has credit risk from its extension of
credit for sales of energy products and services, and will have credit risk with
its counterparties in terms of settlement risk and performance risk. On all
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.

     Fair-value hedges - The Company utilizes 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 (NYMEX or index
based).

     For the three months ended March 31, 2001, the Company's fair-value hedges
were effective. As such, the Company did not recognize a gain or loss
representing the ineffective portion of all fair-value hedges. All components of
each derivative's gain or loss are included in 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 a gain or loss.

     Cash-flow hedges - The Company uses cash flow hedging, as specifically
defined by SFAS 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, and capital
expenditures. The Company's primary corporate hedging goals include (1)
maintaining minimum cash flows to fund debt service, dividends, production
replacement and maintenance capital projects; (2) avoiding disruption of the
Company's growth capital and value creation process; and (3) retaining a high
percentage of potential upside relating to price increases of natural gas
liquids.

     The Company utilizes natural gas, crude oil and NGL futures,
over-the-counter swap agreements and options to hedge the impact of market
fluctuations in the price of natural gas liquids and other energy-related
products. For the three months ended March 31, 2001, the Company recognized a
net loss of $12.9 million of which a $4.1 million gain represented the total
ineffectiveness of all cash-flow hedges and a $17.0 million loss represented the
total derivative settlements. The extrinsic value of the options, $1.4 million
for the period ended March 31, 2001, was excluded in the assessment of hedge
effectiveness. 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 probable of not 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 hedge item is recorded. As of March 31, 2001, $5.4 million of the
deferred net gains on derivative instruments accumulated in OCI are expected to
be reclassified as earnings during the next twelve months as the hedge
transactions occur. The maximum term over which the Company is hedging its
exposure to the variability of future cash-flows is 24 months.

                                       7
<PAGE>   11

     Other - The Company periodically utilizes foreign-exchange contracts to
manage currency risk related to an anticipated acquisition. For the period ended
March 31, 2001, the Company recognized a $0.9 million net loss in current-period
earnings for the mark-to-market adjustment of foreign-exchange contracts.

4. FINANCING

     Credit Facility with Financial Institutions - On March 30, 2001, the
Company entered into a new credit facility (the "New Facility"). The New
Facility replaces the credit facility that matured on March 30, 2001. 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 29, 2002, 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 $675.0 million revolving credit facility, of which $150.0
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%. 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 0.75% per year or (2) the higher of (a) the Bank of America prime
rate and (b) the Federal Funds rate plus 0.50% per year. At March 31, 2001,
there were no borrowings against the New Facility.

     On February 2, 2001, the Company issued $250 million in debt securities.
The notes mature and become due and payable on February 1, 2011, and are not
subject to any sinking fund provisions. The notes bear interest at 6 7/8%,
payable semiannually. The notes are redeemable at the option of the Company. The
Company used the proceeds from the issuance of the notes to repay short term
debt.

5. COMMITMENTS AND CONTINGENT LIABILITIES

     Litigation - The midstream natural gas industry has seen an increase in the
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. Many of these cases are now being brought as class actions. The
Company and its subsidiaries are currently named as defendants in certain 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.

     A judgement has been entered in the case of Chevron U.S.A., Inc. versus GPM
Gas Corporation (GPM), a wholly owned subsidiary of Field Services LLC,
upholding and construing most favored nations clauses in three 1961 West Texas
gas purchase contracts. Although a U.S. District Court for the Western District
of Texas, Midland Division decided in September 1999 that GPM owes Chevron
damages in the amount of $13.8 million through July 31, 1998, plus 6% interest
from that date and attorneys' fees in the amount of $0.3 million, GPM has
appealed the judgement to the U.S. Court of Appeals for the Fifth Circuit.

     Management believes that the final deposition of these proceedings will not
have a material adverse effect on the consolidated results of operations, cash
flows or financial position of the Company.

     Environmental - On June 17, 1999, the EPA published in the Federal Register
a final Maximum Available Control Technology ("MACT") standard under Section 112
of the Clean Air Act to limit emissions of Hazardous Air Pollutants ("HAPs")
from oil and natural gas production as well as from natural gas transmission and
storage facilities. The MACT standard requires that affected facilities reduce
their emissions of HAPs by 95%, and this will affect the Company's various large
dehydration units and potentially some of the Company's storage vessels. This
new standard will require that the Company achieve this reduction by either
process modifications or installing new emissions control technology. The MACT
standard will affect the Company and its competitors in varying degrees. The
rule allows most affected sources until at least June 2002 to comply with the
requirements. While additional capital costs are likely to result from this rule
or other potential air regulations, management believes that these changes will
not have a material adverse effect on the Company's business, financial position
or results of operations.

                                       8
<PAGE>   12

     The Company has various ongoing remedial matters related to historical
operations similar to others in the industry, based primarily on state
authorities generally described above. These are typically managed in
conjunction with the relevant state or federal agencies to address specific
conditions, and in some cases are the responsibility of other entities based
upon contractual obligations related to the assets. On March 31, 1999, the
Company acquired the midstream natural gas gathering and processing assets of
Union Pacific Resources located in several states, which include 18 natural gas
plants and 365 gathering facility sites. In connection with pre-April 1999 soil
and ground water conditions identified as part of this transaction, the Company
has entered into an agreement with a third party environmental/insurance
partnership for a one-time premium payment subject to certain deductibles. With
respect to these identified environmental conditions, the environmental partner
has assumed liability and management responsibility for environmental
remediation, and the insurance partner is providing financial management,
program oversight, remediation cost cap insurance coverage for a 30 year term,
and pollution legal liability coverage for a 20 year term. While the Company
could face liability in the event of default, management believes this
innovative approach can promote pro-active site cleanup and closure, reduce
internal resource needs for managing remediation, and may improve the
marketability of assets based on transferability of this insurance coverage.
Also, in August 1996, the Company acquired certain gas gathering and processing
assets in three states from Mobil Corporation. Under the terms of the asset
purchase agreement, Mobil has retained the liabilities and costs related to
various pre-August 1996 environmental conditions that were identified with
respect to those assets. Mobil has formulated or is in the process of developing
plans to address certain of these conditions, which the Company will review and
monitor as clean-up activities proceed.

     The Company is presently resolving non-compliance issues with the Texas
Natural Resources Conservation Commission associated with the timing of air
permit annual compliance certifications submitted to the agency in 1999 and
1998. This matter, a large portion of which was voluntarily self-disclosed to
the agency, involves approximately 115 of the Company's facilities that did not
meet specific administrative filing deadlines for required air permit paperwork.
In addition, at this time the Company is actively resolving with the New Mexico
Environment Department alleged non-compliance with various air permit
requirements at four of the Company's New Mexico facilities. These matters, the
majority of which were also voluntarily self-disclosed to the agency, generally
involve document preparation and submittal as required by permits, compliance
testing requirements at two facilities, and compliance with permit emissions
limits at one facility. Management believes that these apparent non-compliance
issues being addressed with the Texas and New Mexico agencies under relevant air
programs will result in total penalty assessments of less than $500,000.

     The Company has been in discussions with the Colorado Air Pollution Control
Division regarding various asserted non-compliance issues arising from agency
inspections of our Colorado facilities in 2000 and 1999, and arising from
compliance issues disclosed to the agency pursuant to permit requirements or
voluntarily disclosed to the agency in 2000. These items relate to various
specific and detailed terms of the Title V Operating Permits at seven gas plants
and two compressor stations in Colorado, including, for example, record keeping
requirements, parametric monitoring requirements, delayed filings, and
operations inconsistent with throughput limits on particular pieces of
equipment. As a result of these discussions, the Company received from the
agency in March 2001 a comprehensive proposed settlement agreement to resolve
all of these various items related to air permit compliance at the nine
facilities. Although the Company is still discussing the appropriate resolution
of these apparent instances of non-compliance with the Division, management
believes that the comprehensive resolution for all nine facilities will result
in a total penalty assessment of less than $575,000.

6. BUSINESS SEGMENTS

     The Company operates in two principal business segments as follows: (1)
natural gas gathering, processing, transportation, marketing 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

                                       9
<PAGE>   13

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 utilized 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.

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

<TABLE>
<CAPTION>
                                                                              FOR THE THREE
                                                                               MONTHS ENDED
                                                                                MARCH 31,
                                                                        ----------------------------
                                                                           2001             2000
                                                                        -----------      -----------
                                                                              (IN THOUSANDS)

<S>                                                                     <C>              <C>
Operating revenues:
   Natural gas ....................................................     $ 2,743,413      $   899,214
   NGLs ...........................................................       1,227,830          798,816
   Intersegment(a) ................................................        (591,171)        (246,819)
                                                                        -----------      -----------
         Total operating revenues .................................     $ 3,380,072      $ 1,451,211
                                                                        ===========      ===========
Margin:
   Natural gas ....................................................     $   355,757      $   147,856
   NGLs ...........................................................          11,816           24,844
                                                                        -----------      -----------
         Total margin .............................................     $   367,573      $   172,700
                                                                        ===========      ===========
Other operating costs:
   Natural gas ....................................................     $    88,237      $    48,729
   NGLs ...........................................................             386              549
   Corporate ......................................................          32,406           29,701
                                                                        -----------      -----------
         Total other operating costs ..............................     $   121,029      $    78,979
                                                                        ===========      ===========
Equity in earnings of unconsolidated affiliates:
   Natural Gas ....................................................     $     4,688      $     6,514
   NGLs ...........................................................             488              245
                                                                        -----------      -----------
         Total equity in earnings of unconsolidated affiliates ....     $     5,176      $     6,759
                                                                        ===========      ===========
EBITDA(b):
   Natural gas ....................................................     $   272,208      $   105,641
   NGLs ...........................................................          11,918           24,540
   Corporate ......................................................         (32,406)         (29,701)
                                                                        -----------      -----------
         Total EBITDA .............................................     $   251,720      $   100,480
                                                                        ===========      ===========
Depreciation and amortization:
   Natural gas ....................................................     $    63,481      $    34,225
   NGLs ...........................................................           2,295            3,027
   Corporate ......................................................           1,080              842
                                                                        -----------      -----------
         Total depreciation and amortization ......................     $    66,856      $    38,094
                                                                        ===========      ===========
</TABLE>

                                       10
<PAGE>   14

<TABLE>
<CAPTION>
                                                        FOR THE THREE
                                                         MONTHS ENDED
                                                          MARCH 31,
                                                   ------------------------
                                                     2001           2000
                                                   ---------      ---------
                                                        (IN THOUSANDS)

<S>                                                <C>            <C>
EBIT(b):
   Natural gas ...............................     $ 208,727      $  71,416
   NGLs ......................................         9,623         21,513
   Corporate .................................       (33,486)       (30,543)
                                                   ---------      ---------
         Total EBIT ..........................     $ 184,864      $  62,386
                                                   =========      =========

Corporate interest expense ...................     $  42,017      $  14,477
                                                   =========      =========
Income before income taxes:
   Natural gas ...............................     $ 208,727      $  71,416
   NGLs ......................................         9,623         21,513
   Corporate .................................       (75,503)       (45,020)
                                                   ---------      ---------
         Total income before income taxes ....     $ 142,847      $  47,909
                                                   =========      =========
Capital Expenditures:
   Natural gas ...............................     $  60,885      $ 121,795
   NGLs ......................................           540          5,762
   Corporate .................................         1,693          2,034
                                                   ---------      ---------
         Total capital expenditures ..........     $  63,118      $ 129,591
                                                   =========      =========
</TABLE>

<TABLE>
<CAPTION>
                                                            AS OF
                                                   --------------------------
                                                   MARCH 31,     DECEMBER 31,
                                                     2001            2000
                                                   ----------    ------------
                                                        (IN THOUSANDS)

<S>                                                <C>            <C>
Total assets:
   Natural gas ...............................     $4,808,539     $4,896,542
   NGLs ......................................        220,949        219,282
   Corporate(c) ..............................      1,089,430      1,054,274
                                                   ----------     ----------
         Total assets ........................     $6,118,918     $6,170,098
                                                   ==========     ==========
</TABLE>

(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)  EBITDA consists of income from continuing operations before interest
     expense, income tax expense, and depreciation and amortization expense.
     EBIT is EBITDA less 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.

(c)  Includes items such as unallocated working capital, intercompany accounts
     and other assets.

                                       11
<PAGE>   15

7. PRO FORMA DISCLOSURES

     The Company holds the combined North American midstream natural gas
gathering, processing, marketing and natural gas liquids businesses of Duke
Energy and Phillips. The Combination occurred March 31, 2000 and was accounted
for as a purchase. Phillips' revenues and expenses have not been included in the
first quarter of 2000. Revenues for the period ended March 31, 2000, on a pro
forma basis would have increased $542.4 million, and net income for the period
ended March 31, 2000 would have increased by $65.7 million, if the Combination
had occurred on January 1, 2000.

8. SUBSEQUENT EVENTS

     On May 1, 2001, the Company completed the acquisition of the outstanding
shares of Canadian Midstream Services, Ltd. (CMSL). In the transaction, the
Company acquired all the outstanding shares and assumed the debt for
approximately $161.0 million.

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, 2001 and 2000. This discussion should be read in conjunction
with the Consolidated Financial Statements and related notes included elsewhere
in this report.

     Duke Energy Field Services, LLC holds the combined North American midstream
natural gas gathering, processing, marketing and natural gas liquids business of
Duke Energy Corporation (Duke Energy) and Phillips Petroleum Company (Phillips).
The transaction in which those businesses were combined on March 31, 2000 is
referred to as the "Combination." In this report, the terms "the Company," "we,"
"us" and "our" refer to Duke Energy Field Services, LLC and our subsidiaries
giving effect to the Combination and related transactions.

     From a financial reporting perspective, we are the successor to Duke
Energy's North American midstream natural gas business. The subsidiaries of Duke
Energy that conducted this business were contributed to us immediately prior to
the Combination. For periods prior to the Combination, Duke Energy Field
Services and these subsidiaries of Duke Energy are collectively referred to
herein as the "Predecessor Company." The historical financial statements and
discussion of our business contained in this section for periods ending on or
prior to March 31, 2000 relates solely to the Predecessor Company on an
historical basis and does not give effect to the Combination, the transfer to
our company of additional midstream natural gas assets acquired by Duke Energy
or Phillips prior to consummation of the Combination or the transfer to our
company of the general partner of TEPPCO Partners, L.P.(TEPPCO) from Duke
Energy.

OVERVIEW

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

     o    natural gas gathering, processing, transportation and storage, from
          which we generate revenues primarily by providing services such as
          compression, treating and gathering, processing, local fractionation,
          transportation of residue gas, storage and marketing;

     o    natural gas liquids (NGLs) fractionation, transportation, marketing
          and trading, from which we generate revenues from transportation fees,
          market center fractionation and the marketing and trading of NGLs.

     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

                                       12
<PAGE>   16

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

     During the three months ended March 31, 2001, the weighted average NGL
price (based on index prices from the Mont Belvieu and Conway market hubs that
are weighted by our component and location mix) was approximately $0.60 per
gallon. Historically, NGL prices have generally followed changes in crude oil
prices. However, during the first quarter of 2001, NGL prices departed from this
trend and followed the sharp increase in natural gas prices. Despite the impact
of the natural gas price spike experienced during the first quarter, we expect
that NGL prices will generally follow changes in crude oil prices, 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. We also believe that should the recent rise in natural gas prices be
sustained, certain NGL component prices will generally remain higher than
historical levels. In contrast, we believe that future natural gas prices will
be influenced by supply deliverability, the severity of winter weather and the
level of U.S. economic growth. We believe that weather will be the strongest
determinant of near-term natural gas prices. Price increases in crude oil, NGLs
and natural gas have continued to spur increased natural gas drilling activity.
For example, the number of active drilling rigs in North America has increased
by approximately 38% from approximately 1,164 in March 2000 to approximately
1,609 in March 2001. This drilling activity increase is expected to have a
positive effect on natural gas volumes gathered and processed in the near term.

RESULTS OF OPERATIONS

     The following is a discussion of our historical results of operations. The
discussion for periods ending on or prior to March 31, 2000 relates solely to
the Predecessor Company and does not give effect to the Combination, the
transfer to our company of additional midstream natural gas assets acquired by
Duke Energy or Phillips prior to consummation of the Combination or the transfer
to our company of the general partner interest of TEPPCO from Duke Energy.

THREE MONTHS ENDED MARCH 31, 2001 COMPARED WITH THREE MONTHS ENDED MARCH 31,
2000

     Operating Revenues. Operating revenues increased $1,928.9 million, or 133%,
from $1,451.2 million to $3,380.1 million. Operating revenues from the sale of
natural gas and petroleum products accounted for $3,322.2 million of the total
and $1,906.7 million of the increase. Of this increase, approximately $1,064.1
million was related to the addition of the Phillips' midstream natural gas
business to our operations in the Combination on March 31, 2000. NGL production
during the 2001 first quarter increased 139,900 barrels per day, or 61%, from
231,200 barrels per day in 2000 to 371,100 barrels per day in 2001. The primary
cause of this increase was the addition of Phillips' midstream natural gas
business, offset by reduced recoveries at certain facilities resulting from
tightened fractionation spreads driven by high natural gas prices.

     Commodity prices also contributed to higher revenues. Weighted average NGL
prices, based on our component product mix, were approximately $.10 per gallon
higher and natural gas prices were approximately $4.57 per million British
thermal units (Btus) higher for the first quarter of 2001. These price increases
yielded average prices of $.60 per gallon and $7.09 per million Btus,
respectively, as compared with $.50 per gallon and $2.52 per million Btus for
the first quarter of 2000. Revenues associated with gathering, transportation,
storage, processing fees and other increased $22.1 million, or 62%, from $35.8
million to $57.9 million, mainly as a result of the Combination. A $14.6 million
hedging loss in the first quarter of 2001 partially offset operating revenue
increases. See "--Quantitative and Qualitative Disclosure About Market Risks."

     Costs and Expenses. Costs of natural gas and petroleum products increased
$1,734.0 million, or 136%, from $1,278.5 million to $3,012.5 million. This
increase was due to the addition of the Phillips' midstream natural gas business
in the Combination (approximately $881.4) and the interaction of our natural gas
and NGL purchase contracts with higher commodity prices.

                                       13
<PAGE>   17

     Operating and maintenance expenses increased $40.5 million, or 82%, from
$49.0 million to $89.5 million. Of this increase, approximately $35.6 million
was related to the addition of the Phillips' midstream natural gas business.
General and administrative expenses increased $2.7 million, or 9%, from $29.7
million to $32.4 million. This increase was primarily the result of increased
activity resulting from the addition of the Phillips' midstream natural gas
business in the Combination offset by decreased centralized service charges from
our parents.

     Depreciation and amortization increased $28.8 million, or 76%, from $38.1
million to $66.9 million. Of this increase, $21.8 million was due to the
addition of the Phillips' midstream natural gas business in the Combination. The
remainder was due to ongoing capital expenditures for well connections, facility
maintenance/enhancements and acquisitions.

     Equity Earnings. Equity earnings of unconsolidated affiliates decreased
$1.6 million, or 24%, from $6.8 million to $5.2 million. This decrease was due
to the combination of the divestiture of certain joint venture (JV) interests in
the Conoco/Mitchell transaction, divestiture of the Westana JV and reduced
earnings from keep whole supply contracts in South Texas and offshore processing
partnerships. These decreases were partially offset by the acquisition of the
general partnership interest in TEPPCO as of March 31, 2000.

     Interest. Interest expense increased $27.5 million, or 190%, from $14.5
million to $42.0 million. This increase was primarily the result of issuance of
commercial paper and the subsequent third quarter 2000 and first quarter 2001
debt offerings.

     Income Taxes. At March 31, 2000, the Predecessor Company converted to a
limited liability company which is a pass-through entity for income tax
purposes. As a result, substantially all of the Predecessor Company's existing
net deferred tax liability of $327.0 million was eliminated and a corresponding
income tax benefit was recorded. Ongoing tax expenses relate to various state,
local and foreign taxes that are not significant.

     Net Income. Net income decreased $219.5 million from $361.9 million to
$142.4 million. This decrease was the result of the elimination of the
predecessor Company's net deferred tax liability of $327.0 million in 2000,
offset by a $107.5 million increase resulting from the addition of the Phillips'
midstream natural gas business in the Combination, increased commodity prices,
and other acquisitions.

     EBITDA. In addition to the generally accepted accounting principles (GAAP)
measures described above, we also use the non-GAAP measure of EBITDA. EBITDA
consists of income from continuing operations before interest expense, income
tax expense, and depreciation and amortization expense. EBITDA is a measure used
to provide information regarding our ability to cover fixed charges such as
interest, taxes, dividends and capital expenditures. In addition, EBITDA
provides a comparable measure to evaluate our performance relative to that of
our competitors by eliminating the capitalization structure and depreciation
charges, which may vary significantly within our industry. Although the GAAP
financial statement measure of net income or loss, in total and by segment, is
indicative of our profitability, net income does not necessarily reflect our
ability to fund our fixed charges on a periodic basis. We therefore use GAAP and
non-GAAP measures in evaluating our overall performance as well as that of our
related segments. In addition, we use both types of measures to evaluate our
performance relative to other companies within our industry.

     EBITDA for the natural gas gathering, processing, transportation and
storage segment increased $166.6 million from $105.6 million to $272.2 million.
Of this increase, approximately $152.3 million was due to the addition of the
Phillips' midstream natural gas business in the Combination, and approximately
$37.5 million was due to a $.10 per gallon increase in average NGL prices.
Additional increases were attributable to the Conoco/Mitchell transaction and
the acquisition of the general partnership interest in TEPPCO as of March 31,
2000. These benefits were offset by increased general and administrative costs
associated with the Combination and approximately $57.7 million due to a $4.57
per million Btu increase in natural gas prices.

                                       14
<PAGE>   18

     EBITDA for the NGL's fractionation, transportation, marketing and trading
segment decreased $12.6 million from $24.5 million in 2000 to $11.9 million in
2001 due primarily to lower margins associated with NGL trading and the
disposition of two NGL pipelines effective January 1, 2001.

LIQUIDITY AND CAPITAL RESOURCES

     CREDIT FACILITY WITH FINANCIAL INSTITUTIONS

     On March 30, 2001, we entered into a new credit facility (the "New
Facility"). The New Facility replaces the credit facility that matured on March
30, 2001. 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 29, 2002, 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 $675.0 million revolving credit facility, of
which $150.0 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%. 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 0.75% per year or (2) the higher of (a) the Bank
of America prime rate and (b) the Federal Funds rate plus 0.50% per year. At
March 31, 2001, there were no borrowings against the New Facility.

     On February 2, 2001, the Company issued $250 million in debt securities.
The notes mature and become due and payable on February 1, 2011, and are not
subject to any sinking fund provisions. The notes bear interest at 6 7/8%,
payable semiannually. The notes are redeemable at the option of the Company. The
Company used the proceeds from the issuance of the notes to repay short term
debt.

     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 credit facility, will be sufficient to
enable us to meet our current and anticipated cash operating requirements and
working capital needs for 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.

     CAPITAL EXPENDITURES

     Our capital expenditures consist of expenditures for acquisitions and
construction of additional gathering systems, processing plants, fractionators
and other facilities and infrastructure in addition to well connections and
refurbishment of our existing facilities. For the three months ended March 31,
2001, we spent approximately $63.1 million on capital expenditures. On May 1,
2001, the Company completed the acquisition of the outstanding shares of
Canadian Midstream Services, Ltd. (CMSL). In the transaction, the Company
acquired all the outstanding shares and assumed the debt for approximately
$161.0 million.

     Our level of capital expenditures for acquisitions and construction depends
on many factors, including industry conditions, the availability of attractive
acquisition candidates 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.

                                       15
<PAGE>   19

     CASH FLOWS

     Net cash from operating activities for the three months ended March 31,
2001 improved to $255.7 million, from net cash from operating activities of
$184.8 million for the same period in 2000, primarily due to higher commodity
prices and acquisitions. Net cash used in investing activities was $29.7 million
for the three months ended March 31, 2001 compared to $111.4 million for the
same period in 2000. Acquisition of the Conoco and Mitchell Energy assets in
2000 and ongoing system development and maintenance in 2001 were the primary
uses of the invested cash. The net cash used in investing activities was
financed through operating activities and proceeds from the issuance of short
term debt. Net cash used in financing activities was $224.7 million for the
three months ended March 31, 2001 compared to $74.0 million for the same period
in 2000. Tax related distributions to parents and repayment of the Company's
remaining short term debt were the primary uses of this cash, offset by issuance
of $250 million of 6 7/8% Senior Unsecured Notes due 2011 in February 2001.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

     We are exposed to market risks associated with interest rates, commodity
prices, and equity prices. Management has established comprehensive risk
management policies to monitor and manage these market risks. The Company's 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 comprised of management personnel who receive
periodic updates from standing personnel in the Company's marketing and trading
operations, corporate hedging operations, mid-office function, and back office
control group on commodity price risks and energy marketing and trading
operations. The Company's treasury department manages the Company's credit
risks. There have been no material changes in the Company's market risk since
December 31, 2000.

     COMMODITY PRICE RISK

     We are subject to significant risks due to fluctuations in commodity
prices, primarily with respect to the prices of NGLs that we own as a result of
our processing activities. Based upon the Company's 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 $(26.0) million
and $3.0 million, respectively. After considering the affects of commodity hedge
positions in place at March 31, 2001, it is estimated that if NGL prices average
$.01 per gallon less in the next twelve months pre-tax net income would decrease
$19.5 million. Conversely, it is estimated that if NGL prices average $.01 per
gallon more in the next twelve months pre-tax net income would increase $19.5
million.

     INTEREST RATE RISK

     As of March 31, 2001, we had no outstanding commercial paper or bank
borrowings. As a result, we are not 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.

     FOREIGN CURRENCY RISK

     Our primary foreign currency exchange rate exposure at March 31, 2001 was
the Canadian dollar. Foreign currency risk associated with this exposure was not
material.

                                       16
<PAGE>   20

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     For information concerning litigation and other contingencies, see Part I.
Item 1, Note 5 to the Consolidated Financial Statements, "Commitments and
Contingent Liabilities," which is incorporated herein by reference.

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

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     10.1 Second Amendment to Employment Agreement dated March 15, 2001 between
          Duke Energy Field Services, LP and Michael J. Panatier.

(b)  A current report on Form 8-K was filed on February 1, 2001 and contained
     disclosure under Item 5, Other Events and under Item 7, Financial
     Statements and Disclosures.

                                       17
<PAGE>   21

                                   SIGNATURES

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

                                DUKE ENERGY FIELD SERVICES, LLC

May 14, 2001
    --

                                /s/ JOHN E. JACKSON
                                -------------------------------------------
                                John E. Jackson
                                Vice President and Chief Financial Officer
                                (On Behalf of the Registrant and as
                                Principal Financial and Accounting Officer)

                                       18
<PAGE>   22

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER         DESCRIPTION
-------        -----------

<S>            <C>
 10.1          Second Amendment to Employment Agreement dated March 15, 2001
               between Duke Energy Field Services, LP and Michael J. Panatier.
</TABLE>