<PAGE>   1

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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 JUNE 30, 2000                   COMMISSION FILE NUMBER O-31095

                        DUKE ENERGY FIELD SERVICES, LLC
             (Exact name of Registrant as Specified in its Charter)

<TABLE>
<S>                                            <C>
                   DELAWARE                                      76-0632293
(State or Other Jurisdiction of Incorporation)       (IRS Employer Identification No.)
</TABLE>

                           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          No    X
                       -------     -------
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<PAGE>   2

                        DUKE ENERGY FIELD SERVICES, LLC
                 FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2000

                                     INDEX

<TABLE>
<CAPTION>
ITEM                                                                 PAGE
----                                                                 ----
<C>    <S>                                                           <C>
                      PART I. FINANCIAL INFORMATION
1.     Financial Statements........................................    1
          Consolidated Statements of Income and Comprehensive
          Income for the Three and Six Months Ended June 30, 1999
          and 2000.................................................    1
          Consolidated Statements of Cash Flows for the Six Months
          Ended June 30, 1999 and 2000.............................    2
          Consolidated Balance Sheets as of December 31, 1999 and
          June 30, 2000............................................    3
          Notes to Consolidated Financial Statements...............    4
       Management's Discussion and Analysis of Financial Condition
2.     and Results of Operations...................................   11
       Quantitative and Qualitative Disclosure about Market
3.     Risks.......................................................   19

                       PART II. OTHER INFORMATION
1.     Legal Proceedings...........................................   19
2.     Changes in Securities and Use of Proceeds...................   21
6.     Exhibits and Reports on Form 8-K............................   21
       Signatures..................................................   22
</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:

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

     - 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 and demand for our
       services;

     - weather and other natural phenomena;

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

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

                                        i
<PAGE>   3

     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 update or revise our forward-looking statements, whether as a
result of new information, future events or otherwise.

                                       ii
<PAGE>   4

                         PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

                        DUKE ENERGY FIELD SERVICES, LLC

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

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED        SIX MONTHS ENDED
                                                          JUNE 30,                 JUNE 30,
                                                    ---------------------   -----------------------
                                                      1999        2000         1999         2000
                                                    --------   ----------   ----------   ----------
<S>                                                 <C>        <C>          <C>          <C>
OPERATING REVENUES:
  Sales of natural gas and petroleum products.....  $562,264   $1,766,745   $  758,671   $3,017,843
  Sales of natural gas and petroleum products --
     affiliates...................................   165,464      360,613      274,209      524,980
  Transportation, storage and processing..........    43,644       44,397       71,015       79,470
  Transportation, storage and
     processing -- affiliates.....................     2,475          605        4,949        1,278
                                                    --------   ----------   ----------   ----------
          Total operating revenues................   773,847    2,172,360    1,108,844    3,623,571
                                                    --------   ----------   ----------   ----------
COSTS AND EXPENSES:
  Natural gas and petroleum products..............   616,323    1,743,096      873,071    2,995,865
  Natural gas and petroleum
     products -- affiliates.......................    27,457       93,430       43,239      119,172
  Operating and maintenance.......................    49,649       91,315       78,745      140,354
  Depreciation and amortization...................    35,977       67,265       56,006      105,359
  General and administrative......................    10,625       32,709       20,748       50,143
  General and administrative -- affiliates........     4,022        7,566       10,011       19,833
  Net (gain) loss on sale of assets...............        33           98           (9)         337
                                                    --------   ----------   ----------   ----------
          Total costs and expenses................   744,086    2,035,479    1,081,811    3,431,063
                                                    --------   ----------   ----------   ----------
OPERATING INCOME..................................    29,761      136,881       27,033      192,508
EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES...     6,989        7,948       10,275       14,707
                                                    --------   ----------   ----------   ----------
EARNINGS BEFORE INTEREST AND TAXES................    36,750      144,829       37,308      207,215
INTEREST EXPENSE:
  Interest expense (revenue)......................      (448)      45,374         (881)      45,366
  Interest expense (revenue) -- affiliates........    13,538           --       26,416       14,485
                                                    --------   ----------   ----------   ----------
          Total interest expense..................    13,090       45,374       25,535       59,851
                                                    --------   ----------   ----------   ----------
INCOME BEFORE INCOME TAXES........................    23,660       99,455       11,773      147,364
INCOME TAX EXPENSE (BENEFIT)......................     8,984        7,226        5,618     (306,765)
                                                    --------   ----------   ----------   ----------
NET INCOME........................................    14,676       92,229        6,155      454,129
OTHER COMPREHENSIVE INCOME, NET OF TAX............
  Foreign currency translation adjustment.........        62         (284)          61       (1,405)
                                                    --------   ----------   ----------   ----------
TOTAL COMPREHENSIVE INCOME                          $ 14,738   $   91,945   $    6,216   $  452,724
                                                    ========   ==========   ==========   ==========
</TABLE>

                See Notes to Consolidated Financial Statements.

                                        1
<PAGE>   5

                        DUKE ENERGY FIELD SERVICES, LLC

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                  SIX MONTHS ENDED,
                                                                       JUNE 30
                                                              --------------------------
                                                                 1999           2000
                                                              -----------    -----------
<S>                                                           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income................................................  $     6,155    $   454,129
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Depreciation and amortization..........................       56,006        105,359
     Deferred income tax expense (benefit)..................       24,311       (308,230)
     Equity in earnings of unconsolidated affiliates........      (10,275)       (14,707)
     Loss (gain) on sale of assets..........................           (9)           337
  Net change in operating assets and liabilities net of
     effect of acquisitions:
     Accounts receivable....................................       (2,980)      (236,018)
     Inventories............................................        1,556        (39,532)
     Other current assets...................................       (1,482)        43,583
     Other non-current assets...............................        3,774         (2,232)
     Accounts payable.......................................       64,729        343,424
     Other current liabilities..............................       (8,612)        (7,155)
     Other long term liabilities............................       (2,018)       (14,215)
                                                              -----------    -----------
          Net cash provided by operating activities.........      131,155        324,743
                                                              -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisitions and other capital expenditures...............   (1,519,053)      (214,269)
  Investment expenditures...................................      (34,187)        (1,327)
  Investment distributions..................................        9,939         12,093
  Proceeds from sales of assets.............................          225         14,220
                                                              -----------    -----------
          Net cash used in investing activities.............   (1,543,076)      (189,283)
                                                              -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net increase in advances -- parents.......................    1,369,761         25,370
  Distributions to parents..................................           --     (2,744,319)
  Proceeds from issuing debt................................       47,857      2,790,900
  Payment of debt...........................................       (5,488)      (205,610)
                                                              -----------    -----------
          Net cash provided by (used in) financing
             activities.....................................    1,412,130       (133,659)
                                                              -----------    -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS:..................          209          1,801
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..............          168            792
                                                              -----------    -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD....................  $       377    $     2,593
                                                              ===========    ===========
</TABLE>

                See Notes to Consolidated Financial Statements.

                                        2
<PAGE>   6

                        DUKE ENERGY FIELD SERVICES, LLC

                          CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                              DECEMBER 31,     JUNE 30,
                                                                  1999           2000
                                                              ------------    ----------
<S>                                                           <C>             <C>
                                         ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................   $      792     $    2,593
  Accounts receivable:
     Customers, net.........................................      370,139        722,451
     Affiliates.............................................       63,927        157,606
     Other..................................................       30,067         41,448
  Inventories...............................................       38,701         52,566
  Notes receivable..........................................       13,050          6,502
  Other.....................................................        1,580          3,111
                                                               ----------     ----------
          Total current assets..............................      518,256        986,277
                                                               ----------     ----------
PROPERTY, PLANT AND EQUIPMENT, NET..........................    2,409,385      4,441,160
INVESTMENT IN AFFILIATES....................................      343,835        276,443
INTANGIBLE ASSETS:
  Natural gas liquids sales contracts, net..................      102,382        101,970
  Goodwill, net.............................................       85,846         84,735
                                                               ----------     ----------
          Total intangible assets...........................      188,228        186,705
                                                               ----------     ----------
OTHER NONCURRENT ASSETS                                            12,131         85,202
                                                               ----------     ----------
          TOTAL ASSETS......................................   $3,471,835     $5,975,787
                                                               ==========     ==========

                                 LIABILITIES AND EQUITY
CURRENT LIABILITIES:
  Accounts payable:
     Trade..................................................   $  353,977     $  790,865
     Affiliates.............................................       62,370         68,423
     Other..................................................       33,858         40,599
  Short-term debt...........................................           --        597,726
  Accrued taxes other than income...........................       15,653         17,693
  Advances, net.............................................    1,579,475         80,879
  Notes payable -- affiliates...............................      588,880             --
  Other.....................................................        6,372         31,904
                                                               ----------     ----------
          Total current liabilities.........................    2,640,585      1,628,089
                                                               ----------     ----------
DEFERRED INCOME TAXES.......................................      308,308             --
NOTE PAYABLE TO PARENT......................................      101,600             --
LONG-TERM DEBT..............................................           --      1,987,564
OTHER LONG TERM LIABILITIES.................................       34,871         38,923
COMMITMENTS AND CONTINGENT LIABILITIES
EQUITY:
  Common stock..............................................            1             --
  Paid-in capital...........................................      213,091             --
  Members' interest.........................................           --      1,695,108
  Retained earnings.........................................      173,091        627,220
  Other comprehensive income (loss).........................          288         (1,117)
                                                               ----------     ----------
          Total equity......................................      386,471      2,321,211
                                                               ----------     ----------
TOTAL LIABILITIES AND EQUITY................................   $3,471,835     $5,975,787
                                                               ==========     ==========
</TABLE>

                See Notes to Consolidated Financial Statements.

                                        3
<PAGE>   7

                        DUKE ENERGY FIELD SERVICES, LLC

                   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.

     Effective March 31, 2000, and in connection with the Combination (see Note
2), Duke Energy Field Services, Inc. (DEFS Inc.) was converted to a limited
liability company and contributed to the Company as a wholly-owned subsidiary by
Duke Energy Corporation (Duke Energy). Also on March 31, 2000, Duke Energy
contributed Duke Energy Field Services Canada, Ltd. (DEFSCL) to Field Services
LLC. As a result of these contributions to the Company, the June 30, 2000
financial statements are reflected as consolidated.

     The interim consolidated financial statements presented herein include the
accounts of all majority owned Subsidiaries and should be read in conjunction
with the 1999 combined financial statements and notes thereto of Duke Energy
Field Services, LLC and Affiliates. In the opinion of management, all
adjustments necessary for a fair presentation of the results for the unaudited
interim periods have been made. Except as explicitly noted, these adjustments
consist solely of normal recurring accruals.

2. COMBINATION

     On March 31, 2000, the natural gas gathering, processing and NGL assets,
operations, and subsidiaries of Duke Energy were contributed to Field Services
LLC. In connection with the contribution of assets and subsidiaries at March 31,
2000, notes and advances payable to Duke Energy were eliminated and contributed
to equity. Also on March 31, 2000, Phillips Petroleum Company (Phillips)
contributed its midstream natural gas gathering, processing and NGL operations
to Field Services LLC. This contribution and Duke Energy's contribution to Field
Services LLC are referred to as the "Combination." In connection with the
Combination, the Company made one-time distributions to Phillips of $1,219.8
million and to Duke Energy of $1,524.5 million. In exchange for the
contributions, and after the one-time distributions, Duke Energy received a
69.7% member interest in Field Services LLC, with Phillips holding the remaining
30.3% member interest.

     The Combination has been accounted for as a purchase business combination
in accordance with Accounting Principles Board Opinion (APB) No. 16 "Accounting
for Business Combinations". The Phillips assets, net of liabilities, have been
valued at $1,919.8 million. Following is a summary of the preliminary allocation
of purchase price (in millions):

<TABLE>
<S>                                                           <C>
Property, plant and equipment...............................  $1,878.4
Other assets, net...........................................      41.4
                                                              --------
          Total purchase price..............................  $1,919.8
                                                              ========
</TABLE>

     The purchase price has not yet been fully allocated to the individual
assets and liabilities acquired. No goodwill has been recorded as a result of
the preliminary allocation.

     Working Capital Adjustments -- In connection with the Combination, Duke
Energy and Phillips each were to make contributions to Field Services LLC, or
receive distributions from Field Services LLC so that each of Duke Energy and
Phillips would have contributed to Field Services LLC net working capital
positions equal to zero as of March 31, 2000. As of June 30, 2000, Field
Services LLC had advances

                                        4
<PAGE>   8
                        DUKE ENERGY FIELD SERVICES, LLC

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

payable to Duke Energy and Phillips of $80.9 million representing distributions
payable to net the working capital positions as of March 31, 2000.

     Pro Forma Disclosures -- Revenues for the six months ended June 30, 1999
and 2000, on a pro forma basis would have increased $618.0 million and $542.4
million, respectively, and net income for the six months ended June 30, 1999 and
2000, on a pro forma basis would have decreased by $15.6 million and increased
by $65.7 million, respectively, if the acquisition of the Phillips midstream
business had occurred at the beginning of the period presented.

     TEPPCO General Partner Interest -- On March 31, 2000, and in connection
with the Combination, Duke Energy contributed the general partner interest of
TEPPCO Partners L.P. (TEPPCO) to Field Services LLC. In connection with the
contribution of the general partner interest in TEPPCO, the Company recorded an
investment in TEPPCO of $1.4 million and increased stockholders' equity by $1.4
million.

     TEPPCO is a publicly traded limited partnership that owns and operates a
network of pipelines for refined products and crude oil. The general partner is
responsible for the management and operations of TEPPCO. Through the ownership
of the general partner of TEPPCO, Field Services LLC has the right to receive
from TEPPCO incentive cash distributions in addition to a 2% share of
distributions based on the general partner interest. At TEPPCO's 1999 per unit
distribution level, the general partner received approximately 14% of the cash
distributed by TEPPCO to its partners. Due to the general partner's share of
unit distributions and control exercised through its management of the
partnership, the Company's investment in TEPPCO is accounted for under the
equity method.

3. 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,
substantially all of the existing net deferred tax liability of $327 million was
eliminated with a corresponding income tax benefit recorded. Income taxes on a
go forward basis will consist primarily of miscellaneous state, local and
foreign taxes.

4. ACQUISITIONS

     Union Pacific Fuels, Inc. -- On March 31, 1999, the Company acquired the
assets and assumed certain liabilities of Union Pacific Fuels, Inc. (UP Fuels),
a wholly-owned subsidiary of Union Pacific Resources Corporation, for a total
purchase price of $1,359 million. The acquisition was accounted for under the
purchase method of accounting, and the assets and liabilities and results of
operations of UP Fuels have been consolidated in the Company's financial
statements since the date of purchase. Revenues and net income for the six
months ended June 30, 1999 on a pro forma basis would have increased $298
million and $3.4 million respectively, if the acquisition of UP Fuels had
occurred on January 1, 1999. In connection with the acquisition $77.6 million of
goodwill was recorded and is being amortized over twenty years, its useful life.

     Conoco and Mitchell Assets -- On March 31, 2000, Field Services LLC
acquired gathering and processing facilities located in central Oklahoma from
Conoco, Inc. and Mitchell Energy & Development Corp. Field Services LLC paid
cash of $99.5 million, and exchanged its interests in certain gathering and
marketing joint ventures located in southeast Texas having a total fair value of
$42.0 million as consideration for these facilities. A $3.9 million gain was
recorded in connection with the exchange.

                                        5
<PAGE>   9
                        DUKE ENERGY FIELD SERVICES, LLC

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

5. AGREEMENTS AND TRANSACTIONS WITH DUKE ENERGY

     Services Agreement with Duke Energy -- Effective with the Combination, the
Company entered into a services agreement with Duke Energy ("the Duke Energy
Services Agreement"). Under the Duke Energy Services Agreement, Duke Energy will
provide the Company with various staff and support services, including
information technology products and services, payroll, employee benefits,
corporate insurance, cash management, ad valorem taxes, treasury and legal
functions and shareholder services. These services will be priced on the basis
of a monthly charge approximating market prices. The Duke Energy Services
Agreement expires on December 31, 2000, but is expected to be renewed for 2001.

     Transactions between Duke Energy and the Company -- Through June 30, 2000,
the Company has conducted a series of transactions with Duke Energy. The Company
has sold a portion of its residue gas and NGLs to, purchased raw natural gas and
other petroleum products from, and provided gathering and transportation
services to Duke Energy and its subsidiaries at contractual prices that have
approximated market prices in the ordinary course of the Company's business. The
Company anticipates continuing to purchase and sell these commodities and
provide these services to Duke Energy in the ordinary course of business.

6. AGREEMENTS AND TRANSACTIONS WITH PHILLIPS

     Services Agreement with Phillips -- Effective with the Combination, the
Company entered into a services agreement with Phillips ("the Phillips Services
Agreement"). Under the Phillips Services Agreement, Phillips will provide the
Company with various staff and support services, including information
technology products and services, cash management, real estate and property tax
services. These services will be priced on a basis of a monthly charge equal to
Phillips' fully-burdened cost of providing the services. The Phillips Services
Agreement expires on December 31, 2000, but is expected to be extended through
March 31, 2001.

     Long-Term NGLs Purchases Contract with Phillips -- In connection with the
Combination, the Company has agreed to maintain the NGL Output Purchase and Sale
Agreement ("Phillips NGL Agreement") between Phillips and the midstream natural
gas assets that were contributed by Phillips to the Company in the Combination.
Under the Phillips NGL Agreement, Phillips 66 Company, a wholly-owned subsidiary
of Phillips, has the right to purchase at index-based prices substantially all
NGLs produced by the processing plants which were acquired by Field Services LLC
from Phillips in the Combination. The Phillips NGL Agreement also grants
Phillips 66 Company the right to purchase at index-based prices certain
quantities of NGLs produced at processing plants that are acquired and/or
constructed by the Company in the future in various counties in the
Mid-Continent and Permian Basin regions, and the Austin Chalk area. The primary
term of the agreement is effective until December 31, 2014.

     Transactions between Phillips and the Midstream Business Acquired from
Phillips -- Through March 31, 2000, the Phillips' businesses (the "Phillips
Combined Subsidiaries") that owned the midstream natural gas assets that were
contributed to the Company in the Combination had conducted a series of
transactions with Phillips in which the Phillips Combined Subsidiaries sold a
portion of their residue gas and other by-products to Phillips at contractual
prices that approximated market prices. In addition, Phillips Combined
Subsidiaries purchased raw natural gas from Phillips at contractual prices that
have approximated market prices. The Company is continuing these transactions in
the ordinary course of business.

                                        6
<PAGE>   10
                        DUKE ENERGY FIELD SERVICES, LLC

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

7. FINANCING

     Credit Facility with Financial Institutions -- In March 2000, Field
Services LLC entered into a $2,800 million credit facility with several
financial institutions. The credit facility is used to support a commercial
paper program for short-term financing requirements. In April 2000, Field
Services LLC borrowed $2,790.9 million in the commercial paper market to fund
one-time cash distributions of $1,524.5 million to Duke Energy, and $1,219.8
million to Phillips, and to meet working capital requirements. The credit
facility matures on March 30, 2001, and bears interest at a rate equal to, at
Field Services LLC's option, either (1) the London Interbank Offered Rate
(LIBOR) plus .50% per year for the first 90 days following March 31, 2000 and
LIBOR plus .625% per year thereafter, or (2) the higher of (a) the Bank of
America prime rate and (b) the Federal Funds rate plus .50% per year. The
Company reduced the size of the facility to $2,500 million effective August 10,
2000 and to 1,000 million effective August 17, 2000, due to the August 2000
issuance of preferred members' interest and debt securities.

     Debt Securities -- In August 2000, the Company registered and issued the
following series of unsecured debt securities:

<TABLE>
<CAPTION>
PRINCIPAL   INTEREST
 ($000S)      RATE        DUE DATE
---------   --------      --------
<S>         <C>        <C>
$600,000    7 1/2%     August 16, 2005
$800,000    7 7/8%     August 16, 2010
$300,000    8 1/8%     August 16, 2030
</TABLE>

     The notes mature and become due and payable on the respective due dates,
and are not subject to any sinking fund provisions. Interest will be payable
semiannually. The notes are redeemable at the option of the Company. The Company
used the proceeds from the issuance of the debt securities to repay short-term
debt.

     Preferred Financing -- In August 2000, the Company issued $300 million of
preferred member interests to affiliates of Duke Energy and Phillips. The
proceeds from this financing were used to repay a portion of our outstanding
commercial paper. The preferred member interests are entitled to cumulative
preferential distributions of 9.5% per annum payable, unless deferred,
semi-annually. The Company has the right to defer payments of preferential
distributions on the preferred member interests, other than certain tax
distributions, at any time and from time to time, for up to 10 consecutive
semi-annual periods. Deferred preferred distributions will accrue additional
amounts based on the preferential distribution rate (plus 0.5% per annum) to the
date of payment. The preferred member interests, together with all accrued and
unpaid preferential distributions, must be redeemed and paid on the earlier of
the thirtieth anniversary date of issuance and consummation of an initial public
offering of equity securities.

8. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

     Historically, the Company's commodity price risk management program had
been directed by Duke Energy under its centralized program for controlling,
managing and coordinating its management of risks. During the six months ended
June 30, 1999, and the three months ended March 31, 2000, the Company recorded a
hedging gain of $4.4 million and a hedging loss of $46.7 million, respectively,
under Duke Energy's centralized program. As of March 31, 2000, the commodity
positions then held under the Duke Energy centralized program were transferred
to Duke Energy.

     Effective April 1, 2000, the Company began directing its risk management
activities, including commodity price risk for market fluctuations in the price
of NGLs, independently of Duke Energy. The Company uses commodity-based
derivative contracts to reduce the risk in the Company's overall earnings and
cash flow with the primary goals of: (1) maintaining minimum cash flow to fund
debt service,

                                        7
<PAGE>   11
                        DUKE ENERGY FIELD SERVICES, LLC

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

dividends and maintenance type capital projects; and (2) avoiding disruption of
the Company's growth capital and value creation process. The Company has
implemented a risk management policy that provides guidelines for entering into
contractual arrangements to manage commodity price exposure. Swaps and options
are used to manage and hedge prices related to these market exposures. During
the three months ended June 30, 2000, the Company recorded a hedging loss of
$12.5 million under the Company's self-directed risk management program.

     Interest Rate Derivatives -- In the second and third quarter of 2000, the
Company entered into treasury rate locks and interest rate swaps to reduce the
Company's exposure to market fluctuations in the interest rates related to the
debt securities that were issued in August 2000. The Company's interest rate
exposure resulted from changes in interest rates between the date that the
Company decided to sell debt securities and the date the debt securities were
actually sold.

     The net settlement loss of $13.4 million related to these interest rate
derivatives is being recognized over the estimated life of the debt securities.
At June 30, 2000, the absolute notional contract quantity of interest rate
derivatives held for purposes of hedging the effective interest rates of the
long-term financing was $1,150.0 million.

9. COMMITMENTS AND CONTINGENT LIABILITIES

     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 judgment 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 federal district court decided that GPM owes
Chevron damages in the amount of $13.2 million through July 31, 1998, plus 6
percent interest from that date and attorneys' fees in the amount of $.3
million, GPM has appealed the judgment to the U.S. Court of Appeals for the
Fifth Circuit.

     Where appropriate, the Company has made accruals in accordance with
Statement of Accounting Standards No. 5, "Accounting for Contingencies," to
provide for such matters. Management believes that the final deposition of these
proceedings will not have a material adverse effect on the consolidated results
of operations or financial position.

10. STOCK-BASED COMPENSATION, PENSION AND OTHER BENEFITS

     Effective March 31, 2000, participation by the Company's employees in Duke
Energy's non-contributory trustee pension plan and employee savings plan were
terminated. Effective April 1, 2000, the Company's employees began participation
in the Company's employee savings plan, in which the Company contributes 4% of
each eligible employee's qualified wages. Additionally, the Company matches
employees' contributions to the plan up to 6% of qualified wages.

                                        8
<PAGE>   12
                        DUKE ENERGY FIELD SERVICES, LLC

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

11. 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 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 1. 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 MONTH        FOR THE SIX MONTH
                                                    PERIODS ENDED             PERIODS ENDED
                                                      JUNE 30,                  JUNE 30,
                                               -----------------------   -----------------------
                                                  1999         2000         1999         2000
                                               ----------   ----------   ----------   ----------
                                                                (IN THOUSANDS)
<S>                                            <C>          <C>          <C>          <C>
Operating revenues:
  Natural gas................................  $  539,456   $1,675,793   $  847,782   $2,575,007
  NGLs.......................................     323,460      820,051      396,042    1,618,867
  Intersegment(a)............................     (89,069)    (323,484)    (134,980)    (570,303)
                                               ----------   ----------   ----------   ----------
          Total operating revenues...........     773,847    2,172,360    1,108,844    3,623,571
                                               ----------   ----------   ----------   ----------
Margin:
  Natural gas................................     122,654      323,225      184,365      471,081
  NGLs.......................................       7,413       12,609        8,169       37,453
                                               ----------   ----------   ----------   ----------
          Total margin.......................     130,067      335,834      192,534      508,534
                                               ----------   ----------   ----------   ----------
Other operating costs:
  Natural gas................................      49,136       90,787       78,176      139,516
  NGLs.......................................         546          626          560        1,175
  Corporate..................................      14,647       40,275       30,759       69,976
                                               ----------   ----------   ----------   ----------
          Total other operating costs........      64,329      131,688      109,495      210,667
                                               ----------   ----------   ----------   ----------
Equity in earnings of unconsolidated
  affiliates:
  Natural Gas................................       6,989        7,374       10,275       13,888
  NGLs.......................................                      574                       819
                                               ----------   ----------   ----------   ----------
          Total equity in earnings of
            unconsolidated affiliates........       6,989        7,948       10,275       14,707
                                               ----------   ----------   ----------   ----------
EBITDA(b):
  Natural gas................................      80,507      239,812      116,464      345,453
  NGLs.......................................       6,867       12,557        7,609       37,097
  Corporate..................................     (14,647)     (40,275)     (30,759)     (69,976)
                                               ----------   ----------   ----------   ----------
          Total EBITDA.......................      72,727      212,094       93,314      312,574
                                               ----------   ----------   ----------   ----------
</TABLE>

                                        9
<PAGE>   13
                        DUKE ENERGY FIELD SERVICES, LLC

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                 FOR THE THREE MONTH        FOR THE SIX MONTH
                                                    PERIODS ENDED             PERIODS ENDED
                                                      JUNE 30,                  JUNE 30,
                                               -----------------------   -----------------------
                                                  1999         2000         1999         2000
                                               ----------   ----------   ----------   ----------
                                                                (IN THOUSANDS)
<S>                                            <C>          <C>          <C>          <C>
Depreciation and amortization:
  Natural gas................................      34,156       63,442       53,612       97,667
  NGLs.......................................       1,249        3,085        1,249        6,112
  Corporate..................................         572          738        1,145        1,580
                                               ----------   ----------   ----------   ----------
          Total depreciation and
            amortization.....................      35,977       67,265       56,006      105,359
                                               ----------   ----------   ----------   ----------
EBIT(b):
  Natural gas................................      46,351      176,370       62,852      247,786
  NGLs.......................................       5,618        9,472        6,360       30,985
  Corporate..................................     (15,219)     (41,013)     (31,904)     (71,556)
                                               ----------   ----------   ----------   ----------
          Total EBIT.........................      36,750      144,829       37,308      207,215
                                               ----------   ----------   ----------   ----------

Corporate interest expense...................      13,090       45,374       25,535       59,851
                                               ----------   ----------   ----------   ----------
Income before income taxes:
  Natural gas................................      46,351      187,355       62,852      258,771
  NGLs.......................................       5,618       (1,513)       6,360       20,000
  Corporate..................................     (28,309)     (86,387)     (57,439)    (131,407)
                                               ----------   ----------   ----------   ----------
          Total income before income taxes...  $   23,660   $   99,455   $   11,773   $  147,364
                                               ==========   ==========   ==========   ==========
</TABLE>

<TABLE>
<CAPTION>
                                                                        AS OF
                                                              -------------------------
                                                              DECEMBER 31,    JUNE 30,
                                                                  1999          2000
                                                              ------------   ----------
                                                                   (IN THOUSANDS)
<S>                                                           <C>            <C>
Total assets:
  Natural gas...............................................   $2,754,447    $4,833,083
  NGLs......................................................      225,702       197,624
  Corporate(c)..............................................      491,686       945,080
                                                               ----------    ----------
          Total assets......................................   $$3,471,835   $5,975,787
                                                               ==========    ==========
</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, less
    interest income. EBIT is EBITDA less depreciation and amortization. These
    measures are not a measurement presented in accordance with generally
    accepted accounting principles. You should not consider them 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
    our profitability or liquidity. The measures are included as a supplemental
    disclosure because it may provide useful information regarding our 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 intangible and other assets.

                                       10
<PAGE>   14

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 and pro forma financial condition and results of operations during
the three months and six months ended June 30, 2000 and 1999. 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 was recently formed to hold the combined
North American midstream natural gas gathering, processing, marketing and
natural gas liquids business of Duke Energy Corporation and Phillips Petroleum
Company. The transaction in which those businesses were combined on March 31,
2000 is referred to as the "Combination." In this report, the terms "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. from Duke Energy.

OVERVIEW

     The Company operates 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,
       treating and gathering, processing, local fractionation, transportation
       of residue gas, storage and marketing.

     - 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.

     The Company's 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 the Company's board of
directors. This limitation in scope is not currently expected to materially
impact the results of the Company's operations.

     EFFECTS OF COMMODITY PRICES

     During the three months and six months ended June 30, 2000, 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 $.50
and $.49 per gallon, respectively. In the near-term, we expect NGL prices to
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. 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. Recent price increases in crude oil, NGLs and natural gas
have spurred increased natural gas drilling activity. For example, the number of
actively drilling rigs in North America has increased by approximately 57% from
approximately 745 in June 1999 to more than 1,165 in June 2000. This drilling
activity increase is expected to have a positive effect on natural gas volumes
gathered and processed in the near term.
                                       11
<PAGE>   15

THE COMBINATION

     On March 31, 2000, we combined the gas gathering, processing, marketing and
NGLs businesses of Duke Energy and Phillips (the "Combination"). In connection
with the Combination, Duke Energy and Phillips transferred all of their
respective interests in their subsidiaries that conducted their midstream
natural gas business to us. In connection with the Combination, Duke Energy and
Phillips also transferred to us additional midstream natural gas assets acquired
by Duke Energy or Phillips prior to consummation of the Combination, including
Mid-Continent gathering and processing assets of Conoco, Inc. and Mitchell
Energy & Development Corp. The acquisition of the Conoco/Mitchell assets is
significant in that the assets acquired lie adjacent to and between our current
assets, providing future integration opportunities. In addition, concurrently
with the Combination, we obtained by transfer from Duke Energy the general
partner interest of TEPPCO. In exchange for their asset contribution, Phillips
received 30.3% of the member interests in our company, with Duke Energy holding
the remaining 69.7% of the outstanding member interests in our company. In
connection with the closing of the Combination, we borrowed approximately $2.8
billion in the commercial paper market and made one-time cash distributions
(including reimbursements for acquisitions) of approximately $1.5 billion to
Duke Energy and approximately $1.2 billion to Phillips. The Combination was
accounted for as a purchase of the Phillips midstream natural gas business.

     The Combination was accounted for as a purchase business combination in
accordance with Accounting Principles Board Opinion (APB) No. 16, "Accounting
for Business Combinations." The Predecessor Company was the acquiror of
Phillips' midstream natural gas business in the Combination. The purchase price
allocation associated with the Phillips assets is preliminary. The effect of any
purchase price adjustments is not expected to have a material effect on our
operating results, liquidity or financial condition.

HISTORICAL 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 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 JUNE 30, 2000 COMPARED WITH THREE MONTHS ENDED JUNE 30,
  1999

     Operating Revenues. Operating revenues increased $1,398.6 million, or 181%,
from $773.8 million to $2,172.4 million. Operating revenues from the sale of
natural gas and petroleum products accounted for $2,127.4 million of the total
and $1,399.6 million of the increase. Of this increase, approximately $600.1
million is 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 second quarter increased 189,000 barrels per day, or 88%, from
214,000 barrels per day to 403,000 barrels per day. The primary cause of this
addition is the Phillips' midstream natural gas business.

     Commodity prices also contributed to higher revenues. Weighted average NGL
prices, based on our component product mix, were approximately $.17 per gallon
higher and natural gas prices were approximately $1.31 per million Btus higher
for the second quarter. These price increases yielded average prices of $.47 per
gallon and $3.46 per million Btus, respectively, as compared with $.30 per
gallon and $2.15 per million Btus for the second quarter of 1999. Revenues
associated with gathering, transportation, storage, processing fees and other
decreased $1.1 million, or 2%, from $46.1 million to $45.1 million, mainly as a
result of the Union Pacific Fuels acquisition. A $12.5 million hedging loss in
the second quarter of 2000 partially offset operating revenue increases. See
"-- Quantitative and Qualitative Disclosure About Market Risks."

     Costs and Expenses. Costs of natural gas and petroleum products increased
$1,192.7 million, or 185%, from $643.8 million to $1,836.5 million. This
increase was due to the addition of the Phillips'

                                       12
<PAGE>   16

midstream natural gas business in the Combination (approximately $450.4), the
interaction of our natural gas and NGL purchase contracts with higher commodity
prices and increased trading and marketing activity.

     Operating and maintenance expenses increased $41.7 million, or 84%, from
$49.6 million to $91.3 million. Of this increase, approximately $41 million is
related to the addition of the Phillips' midstream natural gas business. General
and administrative expenses increased $25.7 million, or 176%, from $14.6 million
to $40.3 million. Of this increase, $7.2 million was due to increased allocated
corporate overhead from Duke Energy as a result of our company's growth. The
remainder was associated with increased activity resulting from the addition of
the Phillips' midstream natural gas business in the Combination and increased
fiscal year 2000 incentive compensation accruals.

     Depreciation and amortization increased $31.3 million, or 87%, from $36.0
million to $67.3 million. Of this increase, $26.1 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 increased $.9
million, or 13%, from $7.0 million to $7.9 million. This increase was largely
due to the acquisition of the general partnership interest in TEPPCO as of March
31, 2000, partially offset by the divestiture of certain joint venture interests
in the Conoco/Mitchell transaction.

     Interest. Interest expense increased $32.3 million, or 247%, from $13.1
million to $45.4 million. This increase is primarily the result of issuance of
commercial paper to fund the distribution paid to Duke Energy and Phillips in
the Combination.

     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 $327 million was eliminated and a corresponding
income tax benefit was recorded.

     Net Income. Net income increased $77.5 million from $14.7 million to $92.2
million. This increase was largely the result of tax benefit recognition
discussed above, the addition of the Phillips' midstream natural gas business in
the Combination and higher average NGL prices. The benefit of higher NGL prices
was partially offset by higher natural gas prices. A $12.5 million pre-tax loss
from hedging activities experienced during the second quarter of 2000 partially
offset the increase.

     EBITDA. In addition to the generally accepted accounting principles (GAAP)
measures described above, we also use the non-GAAP measure of EBITDA. 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 $170.3 million from $80.5 million to $250.8 million.
Of this increase, approximately $113.6 million was due to the addition of the
Phillips' midstream natural gas business in the Combination, approximately $67.5
million was due to a $.18 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 a $12.9 million decrease from hedging

                                       13
<PAGE>   17

activities ($12.5 million loss in second quarter 2000 compared to a $.4 million
gain in the comparable period of 1999) and approximately $10 million due to a
$1.31 million Btu increase in natural gas prices.

  SIX MONTHS ENDED JUNE 30, 2000 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1999

     Operating Revenues. Operating revenues increased $2,514.8 million, or 227%
from $1,108.8 million to $3,623.6 million. Operating revenues from the sale of
natural gas and petroleum products accounted for $3,542.8 million of the total
and $2,509.9 million of the increase. Of this increase, approximately $600.1
million is related to the addition of the Phillips' midstream natural gas
business to our operations in the Combination on March 31, 2000, and
approximately $425 million is related to the March 31, 1999 acquisition of Union
Pacific Fuels. Increased NGL trading and marketing activity also contributed to
the increase. NGL production during the six months ended June 30, 2000 increased
155,200 barrels per day, or 96%, from 161,100 barrels per day to 316,300 barrels
per day, and natural gas transported and/or processed increased 2.6 trillion
Btus per day, or 59%, from 4.4 trillion Btus per day to 7.0 trillion Btus. Of
the 155,200 barrels per day increase, the addition of the Phillips' midstream
natural gas business in the Combination contributed approximately 82,900 barrels
per day, and the Union Pacific Fuels acquisition contributed approximately
50,300 barrels per day. The combination of our Wilcox plant expansion,
completion of our Mobile Bay Plant and the acquisition of Koch's South Texas
assets accounted for the remainder of the increase. Of the 2.6 trillion Btus per
day increase, the addition of the Phillips' midstream natural gas business in
the Combination contributed approximately 1.0 trillion Btus per day, and the
Union Pacific Fuels acquisition contributed approximately 1.0 trillion Btus per
day. The combination of other acquisitions, plant expansions and completions
accounted for the balance of the increase.

     Commodity prices significantly contributed to higher revenues. Weighted
average NGL prices, based on our component product mix, were approximately $.20
per gallon higher and natural gas prices were approximately $1.04 per million
Btus higher for the first six months of 2000. These price increases yielded
average prices of $.49 per gallon of NGLs and $2.99 per million Btus of natural
gas, respectively, as compared with $.29 per gallon and $1.95 per million Btus
for the first six months of 1999. Revenues associated with gathering,
transportation, storage, processing fees and other increased $4.7 million, or
6%, from $76.0 million to $80.7 million, mainly as a result of the Union Pacific
Fuels acquisition. A $59.2 million hedging loss in the first six months of 2000
partially offset total operating revenue increases. See "Item 3. -- Quantitative
and Qualitative Disclosure About Market Risks."

     Costs and Expenses. Costs of natural gas and petroleum products increased
$2,198.7 million, or 240%, from $916.3 million to $3,115 million. This increase
was due to the addition of the Phillips' midstream natural gas business in the
Combination (approximately $450.4 million), the Union Pacific Fuels acquisition
(approximately $340 million), and the interaction of our natural gas and NGL
purchase contracts with higher commodity prices and increased trading and
marketing activity.

     Operating and maintenance expenses increased $61.7 million, or 78%, from
$78.7 million to $140.4 million. Of this increase, approximately $41 million is
related to the addition of the Phillips' midstream natural gas business in the
Combination and approximately $13 million is related to the Union Pacific Fuels
acquisition. General and administrative expenses increased $39.2 million, or
127%, from $30.8 million to $70 million. Of this increase, $12.3 million was due
to increased allocated corporate overhead from Duke Energy as a result of our
company's growth. The remainder was associated with increased activity resulting
from the addition of the Phillips' midstream natural gas business in the
Combination, the Union Pacific Fuels acquisition and increased fiscal year 2000
incentive compensation accruals.

     Depreciation and amortization increased $49.4 million, or 88%, from $56.0
million to $105.4 million. Of this increase, $26.1 million was due to the
addition of the Phillips' midstream natural gas business in the Combination and
$15.4 million was due to the Union Pacific Fuels acquisition. The remainder was
due to ongoing capital expenditures for well connections, facility
maintenance/enhancements and acquisitions.

     Equity Earnings. Equity earning of unconsolidated affiliates increased $4.4
million, or 43%, from $10.3 million to $14.7 million. This increase was largely
due to interests in joint ventures and partnerships
                                       14
<PAGE>   18

acquired from Union Pacific Fuels and the acquisition of the general partnership
interest in TEPPCO as of March 31, 2000.

     Interest. Interest expense increased $34.4 million, or 135%, from $25.5
million to $59.9 million. This increase is primarily the result of the issuance
of commercial paper to fund the distribution paid to Duke Energy and Phillips in
the Combination.

     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 ($327 million) was eliminated and a corresponding
income tax benefit was recorded.

     Net Income. Net income increased $447.9 million from $6.2 million to $454.1
million. This increase was largely the result of the tax benefit recognition
discussed above, the addition of the Phillip's midstream natural gas business in
the Combination and the Union Pacific Fuels acquisition. Higher NGL prices
contributed significantly to this increase and were partially offset by higher
natural gas prices. A $59.2 million pre-tax loss from hedging activities
experienced during the first six months of 2000 partially offset the increase.

     EBITDA for the natural gas gathering, processing, transportation and
storage segment increased $239.9 million, or 206%, from $116.5 million to $356.4
million. Of this increase, approximately $113.6 was due to the addition of the
Phillips' midstream natural gas business in the Combination, approximately $56
million was due to the acquisition of Union Pacific Fuels, and approximately $90
million due to a $.20 per gallon increase in average NGL prices. Additional
increases were attributable to the combination of our Wilcox plant expansion,
completion of our Mobile Bay plant, the acquisition of Koch's South Texas
assets, and the acquisition of the general partnership interest in TEPPCO. These
benefits were offset by a $63.6 million decrease from hedging activities ($59.2
million loss in the first six months of 2000 compared to a $4.4 million gain in
the comparable period of 1999) and approximately $16 million due to a $1.04 per
million Btu increase in natural gas prices.

     EBITDA for the NGLs fractionation, transportation, marketing and trading
segment increased $18.5 million from $7.6 million to $26.1 million due primarily
to NGL trading and marketing activity and the acquisition of Union Pacific
Fuels.

LIQUIDITY AND CAPITAL RESOURCES

     LIQUIDITY PRIOR TO THE COMBINATION

     The Predecessor Company's capital investments and acquisitions were
financed by cash flow from operations and non-interest bearing advances from
Duke Energy or its subsidiaries under various arrangements. Under Duke Energy's
centralized cash management system, Duke Energy deposited sufficient funds in
our bank accounts for us to meet our daily obligations and withdrew excess funds
from those accounts. Advances were offset by cash provided by operations to
yield net advances from Duke Energy which were included in the historical
consolidated balance sheets and statements of cash flows of the Predecessor
Company. The Predecessor Company had notes to and advances from Duke Energy
which were terminated in connection with the Combination.

     FINANCING TRANSACTIONS IN CONNECTION WITH THE COMBINATION

     In connection with the Combination, all advances from Duke Energy were
capitalized to equity.

     On March 31, 2000, we entered into a $2.8 billion credit facility with
several financial institutions. The credit facility is used as the liquidity
backstop to support a commercial paper program. On April 3, 2000 we borrowed
approximately $2.8 billion in the commercial paper market to fund the one-time
cash distributions (including reimbursements for acquisitions) of approximately
$1.5 billion to Duke Energy and approximately $1.2 billion to Phillips and to
cover working capital requirements. The credit facility matures on March 30,
2001 and borrowings bear interest at a rate equal to, at our option, either (1)
LIBOR plus

                                       15
<PAGE>   19

 .50% per year for the first 90 days following the closing of the credit facility
and LIBOR plus .625% per year thereafter or (2) the higher of (a) the Bank of
America prime rate and (b) the Federal Funds rate plus .50% per year.

     The amount available under the bank credit facility and corresponding
commercial paper program was reduced to $1.0 billion, as a result of the paydown
of commercial paper from the proceeds from preferred financing and debt
securities discussed below. At August 31, 2000 we had $.6 billion in outstanding
commercial paper, with maturities ranging from one day to 60 days and annual
interest rates ranging from 6.71% and 7.2%. At no time will the amount of our
outstanding commercial paper exceed the available amount under the credit
facility. In the future, our debt levels will vary depending on our liquidity
needs, capital expenditures and cash flow.

     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.

     PREFERRED FINANCING

     In August 2000, we issued $300 million of preferred member interests to
affiliates of Duke Energy and Phillips. The proceeds from this financing were
used to repay a portion of our outstanding commercial paper. The preferred
member interests are entitled to cumulative preferential distributions of 9.5%
per annum payable, unless deferred, semi-annually. We have the right to defer
payments of preferential distributions on the preferred member interests, other
than certain tax distributions, at any time and from time to time, for up to 10
consecutive semi-annual periods. Deferred preferred distributions will accrue
additional amounts based on the preferential distribution rate (plus 0.5% per
annum) to the date of payment. The preferred member interests, together with all
accrued and unpaid preferential distributions, must be redeemed and paid on the
earlier of the thirtieth anniversary date of issuance and consummation of an
initial public offering of equity securities.

     DEBT SECURITIES

     In August 2000, we registered and issued the following series of unsecured
debt securities:

<TABLE>
<CAPTION>
PRINCIPAL   INTEREST
 ($000S)      RATE        DUE DATE
---------   --------      --------
<S>         <C>        <C>
$600,000    7 1/2%     August 16, 2005
$800,000    7 7/8%     August 16, 2010
$300,000    8 1/8%     August 16, 2030
</TABLE>

     The notes mature and become due and payable on the respective due dates,
and are not subject to any sinking fund provisions. Interest will be payable
semiannually. The notes are redeemable at our option. The proceeds from the
issuance of debt securities was used to repay a portion of our outstanding
commercial paper.

     EQUITY SECURITIES

     Duke Energy Field Services Corporation, the parent of the Company, plans to
offer a portion of its common stock to the public in late 2000 or 2001 in an
initial public offering. The proceeds of the offering will be used to reduce the
preferred members' interest. Such an offering is contingent upon favorable
market conditions. After the offering, the ownership of Duke Energy and Phillips
will be reduced, accordingly.

                                       16
<PAGE>   20

     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
repairs and maintenance of our existing facilities. Our capital expenditure
budget for well connections and repair and maintenance of our existing
facilities in 2000 is approximately $175 million, of which approximately $74
million was spent in the six months ended June 30, 2000.

     On March 31, 2000, we acquired gathering and processing assets located in
central Oklahoma from Conoco and Mitchell Energy. We paid cash of $99.5 million
and exchanged our interest in certain gathering and marketing joint ventures
located in southeast Texas having a total fair value of approximately $42
million as consideration for these assets.

     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.

     CASH FLOWS

     Net cash provided by operating activities for the six months ended June 30,
2000 improved to $324.7 million, from $131.2 million for the same period in
1999, primarily due to higher commodity prices and acquisitions. Net cash used
in investing activities was $189.3 million for the six months ended June 30,
2000 compared to $1,543.1 million for the same period in 1999. Acquisitions of
the Conoco and Mitchell Energy assets in 2000 and the Union Pacific Fuels assets
in 1999 were the primary uses of the invested cash. The net cash used in
investing activities was financed through operating activities, advances from
Duke Energy and proceeds from the issuance of short-term debt.

  Accounting Pronouncements

     We are required to adopt SFAS 133 on January 1, 2001. We have not completed
the process of evaluating the impact that will result from adopting SFAS 133.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

     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 $(24 million)
and $1 million, respectively. After considering the affects of commodity hedge
positions in place at June 30, 2000, it is estimated that if NGL prices average
$.01 per gallon less in the next twelve months pre-tax net income would decrease
$13.6 million.

     Commodity derivatives such as futures and swaps are available to reduce
such exposure to fluctuations in commodity prices. Gains and losses related to
commodity derivatives are recognized in income when the underlying hedged
physical transaction closes, and such gains and losses are included in sales of
natural gas and petroleum products in our statement of income.

     Natural gas and crude oil futures, which are used to hedge NGLs prices,
involve the buying and selling of natural gas and crude oil for future delivery
at a fixed price. Over-the-counter swap agreements require us to receive or make
payments on the difference between a specified price and the actual price of
natural gas or crude oil.

                                       17
<PAGE>   21

     An active forward market for hedging of NGL products is not normally
available for hedging a significant amount of our NGL production beyond a one to
three month time horizon. With an anticipated hedging horizon of up to 12
months, crude oil derivatives, which historically have had a high correlation
with NGL prices, will typically be the mechanism used for longer-term price risk
management.

     INTEREST RATE RISK

     Prior to the Combination, we had no material interest rate risk associated
with debt used to finance our operations due to limited third party borrowings.
As of August 31, 2000, we had approximately $.6 billion 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 $3 million.

     FOREIGN CURRENCY RISK

     Currently we have no material foreign currency exposure.

                                       18
<PAGE>   22

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     For additional information concerning litigation and other contingencies,
see Note 9 to the Consolidated Financial Statements, "Commitments and Contingent
Liabilities."

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

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     On August 16, 2000, the Company completed the sale of an aggregate of $1.7
billion of debt securities in an underwritten public offering pursuant to a
Registration Statement on Form S-3 (Registration No. 333-41854). The
Registration Statement was declared effective on August 2, 2000. The
Registration Statement provides for the sale of up to $2.0 billion of the
Company's debt securities from time to time in accordance with Rule 415.

     The debt securities sold on August 16, 2000 were issued in three tranches:
$600 million of 7 1/2% Notes due August 16, 2005; $800 million of 7 7/8% Notes
due August 16, 2010; and $300 million of 8 1/8% Notes due August 16, 2030
(together, the notes). Interest on each series of the notes is payable
semiannually on February 16 and August 16 of each year, beginning February 16,
2001. The notes of each series are redeemable at any time, in whole or in part,
at the option of the Company. Lead underwriters for the offering were Merrill
Lynch & Co. and J.P. Morgan & Co.

     The Company realized net proceeds from the sale of the notes estimated to
be $1,683.6 million, after deducting discounts to the underwriters of $11.4
million and expenses of the offering payable by the Company estimated to be $5.0
million, resulting in aggregate expenses estimated to be $16.4 million. Proceeds
from the offering were used to repay a portion of the Company's outstanding
commercial paper. The proceeds from the Company's commercial paper issuance were
used in April 2000 to make one-time cash distributions to the Company's members
aggregating $2.745 billion and for working capital requirements. None of the
expenses or net proceeds were paid to directors, officers, general partners, 10%
owners or affiliates of the Company.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits

     (27) Financial Data Schedule (included in electronic filing only)

                                       19
<PAGE>   23

                                   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

September 18, 2000                              /s/ DAVID D. FREDERICK
                                          --------------------------------------
                                          David D. Frederick
                                          Senior Vice President and
                                          Chief Financial Officer
                                          (On Behalf of the Registrant and as
                                          Principal Financial and Accounting
                                          Officer)

                                       20
<PAGE>   24

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO.                                DESCRIPTION
-----------                                -----------
<C>                <S>
    27             Financial Data Schedule
</TABLE>