##### Table of Contents


















Form 10-Q




[X]


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended March 31, 2005


OR


[  ]


TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period
from           to


Commission File Number 1-7176





El Paso CGP Company




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

(713) 420-2600




þ o


o þ
















---










EL PASO CGP COMPANY


TABLE OF CONTENTS


|                                             |  |                                                                                                                                    |  |      |    | 
|-------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                             |  | Caption                                                                                                                            |  | Page
|                                             |  |                                                                                                                                    |  |     
|                                             |  | PART I  Financial Information                                                                                                     |  |      |    | 
|Item 1.                                      |  | Financial Statements                                                                                                               |  |      | 1  | 
|Item 2.                                      |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                                          |  |      | 19 | 
|                                             |  | Cautionary Statements for Purposes of the
    Safe Harbor Provisions of the Private Securities
    Litigation Reform Act of 1995 |  |      | 29 | 
|Item 3.                                      |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                                     |  |      | *  | 
|Item 4.                                      |  | Controls and Procedures                                                                                                            |  |      | 30 | 
|                                             |  | PART II  Other Information                                                                                                        |  |      |    | 
|Item 1.                                      |  | Legal Proceedings                                                                                                                  |  |      | 31 | 
|Item 2.                                      |  | Unregistered Sales of Equity Securities and
    Use of Proceeds                                                                    |  |      | *  | 
|Item 3.                                      |  | Defaults Upon Senior Securities                                                                                                    |  |      | *  | 
|Item 4.                                      |  | Submission of Matters to a Vote of Security
    Holders                                                                            |  |      | *  | 
|Item 5.                                      |  | Other Information                                                                                                                  |  |      | 31 | 
|Item 6.                                      |  | Exhibits                                                                                                                           |  |      | 31 | 
|                                             |  | Signatures                                                                                                                         |  |      | 32 | 
|Certification of CEO pursuant to Section 302
|Certification of CFO pursuant to Section 302
|Certification of CEO pursuant to Section 906
|Certification of CFO pursuant to Section 906








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



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





i



---



##### Table of Contents






PART I  FINANCIAL INFORMATION





Item 1. Financial Statements


EL PASO CGP COMPANY


CONDENSED CONSOLIDATED STATEMENTS OF INCOME


(In millions)


(Unaudited)


|                                                 |                                          |               |     |     |      |   |      |     | 
|------------------------------------------------ | ---------------------------------------- | ------------- | --- | --- | ---- | - | ---- | --- | 
|                                                 |                                          | Quarter Ended |    
|                                                 |                                          | March 31,     |    
|                                                 |                                          |               |    
|                                                 |                                          | 2005          |     |     | 2004 |  
|                                                 |                                          |               |     |     |      |  
|Operating revenues                               |                                          | $             | 580 |     |      | $ | 537  |    
|                                                 |                                          |               |     |     |      |  
|Operating expenses                               |                                          |               |     |     |      |   |      |    
|                                                 | Cost of products and services            |               |     | 128 |      |   |      | 108 | 
|                                                 | Operation and maintenance                |               |     | 129 |      |   |      | 127 | 
|                                                 | Depreciation, depletion and amortization |               |     | 120 |      |   |      | 113 | 
|                                                 | (Gain) loss on long-lived assets         |               |     | (1  | )    |   |      | 88  | 
|                                                 | Taxes, other than income taxes           |               |     | 22  |      |   |      | 12  | 
|                                                 |                                          |               |     |     |      |  
|                                                 |                                          |               | 398 |     |      |   | 448  |    
|                                                 |                                          |               |     |     |      |  
|Operating income                                 |                                          |               | 182 |     |      |   | 89   |    
|Earnings (losses) from unconsolidated affiliates |                                          |               | (14 | )   |      |   | 35   |    
|Other income, net                                |                                          |               | 7   |     |      |   | 6    |    
|Interest and debt expense                        |                                          |               | (73 | )   |      |   | (101 | )  
|Affiliated interest income (expense), net        |                                          |               | 2   |     |      |   | (14  | )  
|                                                 |                                          |               |     |     |      |  
|Income before income taxes                       |                                          |               | 104 |     |      |   | 15   |    
|Income taxes                                     |                                          |               | 44  |     |      |   | 5    |    
|                                                 |                                          |               |     |     |      |  
|Income from continuing operations                |                                          |               | 60  |     |      |   | 10   |    
|Discontinued operations, net of income taxes     |                                          |               | (2  | )   |      |   | (128 | )  
|                                                 |                                          |               |     |     |      |  
|Net income (loss)                                |                                          | $             | 58  |     |      | $ | (118 | )  
|                                                 |                                          |               |     |     |      |  



1



---



##### Table of Contents



EL PASO CGP COMPANY


CONDENSED CONSOLIDATED BALANCE SHEETS


(In millions, except share amounts)


(Unaudited)


|                                       |                                                           |                                                            |                                          |       |              |       |        |       |     |       | 
|-------------------------------------- | --------------------------------------------------------- | ---------------------------------------------------------- | ---------------------------------------- | ----- | ------------ | ----- | ------ | ----- | --- | ----- | 
|                                       |                                                           | March 31,                                                  |                                          |       | December 31, |      
|                                       |                                                           | 2005                                                       |                                          |       | 2004         |      
|                                       |                                                           |                                                            |                                          |       |              |      
|ASSETS                                
|Current assets                         |                                                           |                                                            |                                          |       |              |       |        |      
|                                       | Cash and cash equivalents                                 |                                                            | $                                        | 265   |              |       | $      | 80    |    
|                                       | Accounts and notes receivable                             |                                                            |                                          |       |              |       |        |       |    
|                                       |                                                           | Customers, net of allowance of $26 in 2005 and $29 in 2004 |                                          |       | 285          |       |        |       | 281 |      
|                                       |                                                           | Affiliates                                                 |                                          |       | 149          |       |        |       | 264 |      
|                                       |                                                           | Other                                                      |                                          |       | 94           |       |        |       | 93  |      
|                                       | Inventory                                                 |                                                            |                                          | 47    |              |       |        | 58    |    
|                                       | Assets from discontinued operations                       |                                                            |                                          | 25    |              |       |        | 106   |    
|                                       | Deferred income taxes                                     |                                                            |                                          | 100   |              |       |        | 87    |    
|                                       | Other                                                     |                                                            |                                          | 48    |              |       |        | 49    |    
|                                       |                                                           |                                                            |                                          |       |              |      
|                                       |                                                           |                                                            | Total current assets                     |       |              | 1,013 |        |       |     | 1,018 | 
|                                       |                                                           |                                                            |                                          |       |              |      
|Property, plant and equipment, at cost |                                                           |                                                            |                                          |       |              |       |        |      
|                                       | Natural gas and oil properties, at full cost              |                                                            |                                          | 7,227 |              |       |        | 7,153 |    
|                                       | Pipelines                                                 |                                                            |                                          | 7,029 |              |       |        | 7,040 |    
|                                       | Power facilities                                          |                                                            |                                          | 177   |              |       |        | 373   |    
|                                       | Gathering and processing systems                          |                                                            |                                          | 139   |              |       |        | 141   |    
|                                       | Other                                                     |                                                            |                                          | 90    |              |       |        | 89    |    
|                                       |                                                           |                                                            |                                          |       |              |      
|                                       |                                                           |                                                            | 14,662                                   |       |              |       | 14,796 |      
|                                       | Less accumulated depreciation, depletion and amortization |                                                            |                                          | 7,881 |              |       |        | 7,997 |    
|                                       |                                                           |                                                            |                                          |       |              |      
|                                       |                                                           |                                                            | Total property, plant and equipment, net |       |              | 6,781 |        |       |     | 6,799 | 
|                                       |                                                           |                                                            |                                          |       |              |      
|Other assets                           |                                                           |                                                            |                                          |       |              |       |        |      
|                                       | Investments in unconsolidated affiliates                  |                                                            |                                          | 858   |              |       |        | 894   |    
|                                       | Goodwill and other intangible assets, net                 |                                                            |                                          | 427   |              |       |        | 426   |    
|                                       | Other                                                     |                                                            |                                          | 305   |              |       |        | 207   |    
|                                       |                                                           |                                                            |                                          |       |              |      
|                                       |                                                           |                                                            | 1,590                                    |       |              |       | 1,527  |      
|                                       |                                                           |                                                            |                                          |       |              |      
|                                       |                                                           |                                                            | Total assets                             |       | $            | 9,384 |        |       | $   | 9,344 | 
|                                       |                                                           |                                                            |                                          |       |              |      



2



---



##### Table of Contents



EL PASO CGP COMPANY


CONDENSED CONSOLIDATED BALANCE SHEETS 
(Continued)


(In millions, except share amounts)


(Unaudited)


|                                                         |                                                                              |            |                                            |       |              |       |       |       |     |       | 
|-------------------------------------------------------- | ---------------------------------------------------------------------------- | ---------- | ------------------------------------------ | ----- | ------------ | ----- | ----- | ----- | --- | ----- | 
|                                                         |                                                                              | March 31,  |                                            |       | December 31, |      
|                                                         |                                                                              | 2005       |                                            |       | 2004         |      
|                                                         |                                                                              |            |                                            |       |              |      
|Current liabilities                                      |                                                                              |            |                                            |       |              |       |       |      
|                                                         | Accounts payable                                                             |            |                                            |       |              |       |       |       |    
|                                                         |                                                                              | Trade      |                                            | $     | 145          |       |       | $     | 234 |      
|                                                         |                                                                              | Affiliates |                                            |       | 118          |       |       |       | 61  |      
|                                                         |                                                                              | Other      |                                            |       | 213          |       |       |       | 214 |      
|                                                         | Current maturities of long-term debt                                         |            |                                            | 273   |              |       |       | 310   |    
|                                                         | Notes payable to affiliates                                                  |            |                                            | 46    |              |       |       | 211   |    
|                                                         | Liabilities from price risk management activities                            |            |                                            | 173   |              |       |       | 148   |    
|                                                         | Accrued interest                                                             |            |                                            | 68    |              |       |       | 59    |    
|                                                         | Other                                                                        |            |                                            | 194   |              |       |       | 231   |    
|                                                         |                                                                              |            |                                            |       |              |      
|                                                         |                                                                              |            | Total current liabilities                  |       |              | 1,230 |       |       |     | 1,468 | 
|                                                         |                                                                              |            |                                            |       |              |      
|Long-term financing obligations, less current maturities |                                                                              |            | 3,642                                      |       |              |       | 3,447 |      
|                                                         |                                                                              |            |                                            |       |              |      
|Other                                                    |                                                                              |            |                                            |       |              |       |       |      
|                                                         | Deferred income taxes                                                        |            |                                            | 736   |              |       |       | 691   |    
|                                                         | Other                                                                        |            |                                            | 376   |              |       |       | 388   |    
|                                                         |                                                                              |            |                                            |       |              |      
|                                                         |                                                                              |            | 1,112                                      |       |              |       | 1,079 |      
|                                                         |                                                                              |            |                                            |       |              |      
|Commitments and contingencies                            |                                                                              |            |                                            |       |              |       |       |      
|Securities of subsidiaries                               |                                                                              |            | 157                                        |       |              |       | 158   |      
|                                                         |                                                                              |            |                                            |       |              |      
|Stockholders equity                                     |                                                                              |            |                                            |       |              |       |       |      
|                                                         | Common stock, par value $1 per share; authorized and issued
    1,000 shares |            |                                            |      |              |       |       |      |    
|                                                         | Additional paid-in capital                                                   |            |                                            | 3,181 |              |       |       | 3,181 |    
|                                                         | Retained earnings                                                            |            |                                            | 94    |              |       |       | 36    |    
|                                                         | Accumulated other comprehensive loss                                         |            |                                            | (32   | )            |       |       | (25   | )  
|                                                         |                                                                              |            |                                            |       |              |      
|                                                         |                                                                              |            | Total stockholders equity                 |       |              | 3,243 |       |       |     | 3,192 | 
|                                                         |                                                                              |            |                                            |       |              |      
|                                                         |                                                                              |            | Total liabilities and stockholders equity |       | $            | 9,384 |       |       | $   | 9,344 | 
|                                                         |                                                                              |            |                                            |       |              |      



3



---



##### Table of Contents



EL PASO CGP COMPANY


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(In millions)


(Unaudited)


|                                     |                                                                                      |                                                                                       |                                                     |      |      |     |    |      |        |        |  
|------------------------------------ | ------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------- | --------------------------------------------------- | ---- | ---- | --- | -- | ---- | ------ | ------ | -
|                                     |                                                                                      | Quarter Ended                                                                         |                                                    
|                                     |                                                                                      | March 31,                                                                             |                                                    
|                                     |                                                                                      |                                                                                       |                                                    
|                                     |                                                                                      | 2005                                                                                  |                                                     |      | 2004 |    
|                                     |                                                                                      |                                                                                       |                                                     |      |      |    
|Cash flows from operating activities |                                                                                      |                                                                                       |                                                     |      |      |     |    |     
|                                     | Net income (loss)                                                                    |                                                                                       | $                                                   | 58   |      |     | $  | (118 | )     
|                                     |                                                                                      | Less loss from discontinued operations, net of income taxes                           |                                                     |      | (2   | )   |    |      | (128   | )     
|                                     |                                                                                      |                                                                                       |                                                     |      |      |    
|                                     | Net income before discontinued operations                                            |                                                                                       |                                                     | 60   |      |     |    | 10   |       
|                                     | Adjustments to reconcile net income to net cash from operating
    activities        |                                                                                       |                                                     |      |      |     |    |      |       
|                                     |                                                                                      | Depreciation, depletion and amortization                                              |                                                     |      | 120  |     |    |      | 113    |       
|                                     |                                                                                      | (Gain) loss on long-lived assets                                                      |                                                     |      | (1   | )   |    |      | 88     |       
|                                     |                                                                                      | Earnings (losses) from unconsolidated affiliates, adjusted for
    cash distributions |                                                     |      | 60   |     |    |      | (16    | )     
|                                     |                                                                                      | Deferred income tax expense                                                           |                                                     |      | 31   |     |    |      | 9      |       
|                                     |                                                                                      | Other non-cash items                                                                  |                                                     |      | (8   | )   |    |      | 2      |       
|                                     |                                                                                      | Asset and liability changes                                                           |                                                     |      | 43   |     |    |      | 158    |       
|                                     |                                                                                      |                                                                                       |                                                     |      |      |    
|                                     |                                                                                      | Cash provided by continuing operations                                                |                                                     |      | 305  |     |    |      | 364    |       
|                                     |                                                                                      | Cash provided by (used in) discontinued operations                                    |                                                     |      | (13  | )   |    |      | 142    |       
|                                     |                                                                                      |                                                                                       |                                                     |      |      |    
|                                     |                                                                                      |                                                                                       | Net cash provided by operating activities           |      |      | 292 |    |      |        | 506    |  
|                                     |                                                                                      |                                                                                       |                                                     |      |      |    
|Cash flows from investing activities |                                                                                      |                                                                                       |                                                     |      |      |     |    |     
|                                     | Additions to property, plant and equipment                                           |                                                                                       |                                                     | (125 | )    |     |    | (131 | )     
|                                     | Purchases of interests in equity investments                                         |                                                                                       |                                                     | (1   | )    |     |    | (8   | )     
|                                     | Net proceeds from the sale of assets and investments                                 |                                                                                       |                                                     | 3    |      |     |    | 3    |       
|                                     | Net change in restricted cash                                                        |                                                                                       |                                                     | 13   |      |     |    | (72  | )     
|                                     | Net change in notes receivable from affiliates                                       |                                                                                       |                                                     | (67  | )    |     |    | 7    |       
|                                     | Increase in notes from unconsolidated affiliates                                     |                                                                                       |                                                     | 6    |      |     |    | 6    |       
|                                     | Other                                                                                |                                                                                       |                                                     | 3    |      |     |    | 2    |       
|                                     |                                                                                      |                                                                                       |                                                     |      |      |    
|                                     |                                                                                      | Cash used in continuing operations                                                    |                                                     |      | (168 | )   |    |      | (193   | )     
|                                     |                                                                                      | Cash provided by discontinued operations                                              |                                                     |      | 74   |     |    |      | 1,057  |       
|                                     |                                                                                      |                                                                                       |                                                     |      |      |    
|                                     |                                                                                      |                                                                                       | Net cash provided by (used in) investing activities |      |      | (94 | )  |      |        | 864    |  
|                                     |                                                                                      |                                                                                       |                                                     |      |      |    
|Cash flows from financing activities |                                                                                      |                                                                                       |                                                     |      |      |     |    |     
|                                     | Payments to retire long-term debt and other financing obligations                    |                                                                                       |                                                     | (42  | )    |     |    | (252 | )     
|                                     | Net proceeds from the issuance of long-term debt and other
    financing obligations |                                                                                       |                                                     | 197  |      |     |    |     |       
|                                     | Decrease in notes payable to unconsolidated affiliates                               |                                                                                       |                                                     | (166 | )    |     |    | (800 | )     
|                                     | Proceeds from issuance of securities of subsidiaries                                 |                                                                                       |                                                     | 1    |      |     |    | 73   |       
|                                     | Contributions from discontinued operations                                           |                                                                                       |                                                     | 61   |      |     |    | 834  |       
|                                     | Other                                                                                |                                                                                       |                                                     | (3   | )    |     |    |     |       
|                                     |                                                                                      |                                                                                       |                                                     |      |      |    
|                                     |                                                                                      | Cash provided by (used in) continuing operations                                      |                                                     |      | 48   |     |    |      | (145   | )     
|                                     |                                                                                      | Cash used in discontinued operations                                                  |                                                     |      | (61  | )   |    |      | (1,199 | )     
|                                     |                                                                                      |                                                                                       |                                                     |      |      |    
|                                     |                                                                                      |                                                                                       | Net cash used in financing activities               |      |      | (13 | )  |      |        | (1,344 | )
|                                     |                                                                                      |                                                                                       |                                                     |      |      |    
|Change in cash and cash equivalents  |                                                                                      |                                                                                       | 185                                                 |      |      |     | 26 |     
|Cash and cash equivalents            |                                                                                      |                                                                                       |                                                     |      |      |     |    |     
|                                     | Beginning of period                                                                  |                                                                                       |                                                     | 80   |      |     |    | 150  |       
|                                     |                                                                                      |                                                                                       |                                                     |      |      |    
|                                     | End of period                                                                        |                                                                                       | $                                                   | 265  |      |     | $  | 176  |       
|                                     |                                                                                      |                                                                                       |                                                     |      |      |    



4



---



##### Table of Contents



EL PASO CGP COMPANY


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


(In millions)


(Unaudited)


|                                                              |                                                                                                                                             |                          |    |     |      |   |      |     |    |  
|------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------ | -- | --- | ---- | - | ---- | --- | -- | -
|                                                              |                                                                                                                                             | Quarter Ended            |   
|                                                              |                                                                                                                                             | March 31,                |   
|                                                              |                                                                                                                                             |                          |   
|                                                              |                                                                                                                                             | 2005                     |    |     | 2004 |  
|                                                              |                                                                                                                                             |                          |    |     |      |  
|Net income (loss)                                             |                                                                                                                                             | $                        | 58 |     |      | $ | (118 | )  
|                                                              |                                                                                                                                             |                          |    |     |      |  
|Foreign currency translation adjustments                      |                                                                                                                                             |                          | 3  |     |      |   |     |    
|Unrealized net gains (losses) from cash flow hedging activity |                                                                                                                                             |                          |    |     |      |   |      |    
|                                                              | Unrealized mark-to-market losses arising during period (net of
    income taxes of $15 in 2005 and $8 in 2004)                              |                          |    | (25 | )    |   |      | (14 | ) 
|                                                              | Reclassification adjustments for changes in initial value to the
    settlement date (net of income taxes of $9 in 2005 and $4 in
    2004) |                          |    | 15  |      |   |      | 7   |   
|                                                              |                                                                                                                                             |                          |    |     |      |  
|                                                              |                                                                                                                                             | Other comprehensive loss |    |     | (7   | ) |      |     | (7 | )
|                                                              |                                                                                                                                             |                          |    |     |      |  
|Comprehensive income (loss)                                   |                                                                                                                                             | $                        | 51 |     |      | $ | (125 | )  
|                                                              |                                                                                                                                             |                          |    |     |      |  



5



---



##### Table of Contents



EL PASO CGP COMPANY


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


1. Basis of Presentation and Significant Accounting
Policies


Basis of Presentation




Significant Accounting
Policies




New Accounting Pronouncements
Issued But Not Yet Adopted




Accounting for Deferred Taxes on Foreign Earnings. Accounting and Disclosure Guidance for the Foreign Earnings
Repatriation Provision within the American Jobs Creation Act of
2004.


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


6



---



##### Table of Contents



2. Divestitures




| |                                
| | -------------------------------
| | Sales of Assets and Investments





|             |  |                                                                  |  |                                                                                                  |  | 
|------------ |  | ---------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------ |  | 
|             |  | 2005                                                             |  | 2004                                                                                             |  | 
|             |  |                                                                  |  |                                                                                                  |  | 
|Power        |  |  Eagle Point power facility                                     |  |  Mohawk River Funding IV                                                                        |  | 
|             |  |  Rensselaer power facility                                      |  |                                                                                                  |  | 
|            
|Discontinued |  |  Interest in Paraxylene facility
     MTBE processing facility |  |  Natural gas and oil production
    properties in Canada
     Aruba and Eagle Point refineries |  | 



Accounting for the Impairment or
Disposal of Long-Lived Assets




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

International Natural Gas and Oil Production Operations.


Petroleum Markets.


7



---



##### Table of Contents





|                                                                |  |               |      |               |            |   |      |       |  |   |      |  
|--------------------------------------------------------------- |  | ------------- | ---- | ------------- | ---------- | - | ---- | ----- |  | - | ---- | -
|                                                                |  |               |      | International |            |   |     
|                                                                |  |               |      | Natural Gas   |            |   |     
|                                                                |  |               |      | and Oil       |            |   |     
|                                                                |  | Petroleum     |      |               | Production |   |      |      
|                                                                |  | Markets       |      |               | Operations |   |      | Total | 
|                                                                |  |               |      |               |            |   |      |       | 
|                                                                |  | (In millions) |     
|Operating Results Data                                          |  |               |      |              
|                                                               
|Quarter Ended March 31, 2005                                    |  |               |      |               |            |   |      |       |  |   |      |  
|Revenues                                                        |  | $             | 44   |               |            | $ | 2    |       |  | $ | 46   |  
|Costs and expenses                                              |  |               | (53  | )             |            |   | (1   | )     |  |   | (54  | )
|Gain (loss) on long-lived assets                                |  |               | 3    |               |            |   | (1   | )     |  |   | 2    |  
|Other income                                                    |  |               | 15   |               |            |   |     |       |  |   | 15   |  
|                                                                |  |               |      |               |            |   |      |       | 
|Income before income taxes                                      |  |               | 9    |               |            |   |     |       |  |   | 9    |  
|Income taxes                                                    |  |               | 12   |               |            |   | (1   | )     |  |   | 11   |  
|                                                                |  |               |      |               |            |   |      |       | 
|Income (loss) from discontinued operations, net of income taxes |  | $             | (3   | )             |            | $ | 1    |       |  | $ | (2   | )
|                                                                |  |               |      |               |            |   |      |       | 
|Quarter Ended March 31, 2004                                    |  |               |      |               |            |   |      |       |  |   |      |  
|Revenues                                                        |  | $             | 639  |               |            | $ | 27   |       |  | $ | 666  |  
|Costs and expenses                                              |  |               | (653 | )             |            |   | (44  | )     |  |   | (697 | )
|Loss on long-lived assets                                       |  |               | (42  | )             |            |   | (93  | )     |  |   | (135 | )
|Other expense                                                   |  |               | (2   | )             |            |   |     |       |  |   | (2   | )
|Interest and debt expense                                       |  |               | (3   | )             |            |   | 1    |       |  |   | (2   | )
|                                                                |  |               |      |               |            |   |      |       | 
|Loss before income taxes                                        |  |               | (61  | )             |            |   | (109 | )     |  |   | (170 | )
|Income taxes                                                    |  |               | (6   | )             |            |   | (36  | )     |  |   | (42  | )
|                                                                |  |               |      |               |            |   |      |       | 
|Loss from discontinued operations, net of income taxes          |  | $             | (55  | )             |            | $ | (73  | )     |  | $ | (128 | )
|                                                                |  |               |      |               |            |   |      |       | 

8



---



##### Table of Contents



|                        |                                        |                                    |                   |               |            |    |  |       |   |   |  |   |    |     | 
|----------------------- | -------------------------------------- | ---------------------------------- | ----------------- | ------------- | ---------- | -- |  | ----- | - | - |  | - | -- | --- | 
|                        |                                        |                                    |                   | International |            |    | 
|                        |                                        |                                    |                   | Natural Gas   |            |    | 
|                        |                                        |                                    |                   | and Oil       |            |    | 
|                        |                                        | Petroleum                          |                   |               | Production |    |  |      
|                        |                                        | Markets                            |                   |               | Operations |    |  | Total |  
|                        |                                        |                                    |                   |               |            |    |  |       |  
|                        |                                        | (In millions)                      |                  
|Financial Position Data |                                        |                                    |                   |               |            |    |  |       |   |   |  |  
|                        | March 31, 2005                         |                                    |                   |               |            |    |  |       |   |   |  |   |   
|                        | Assets of discontinued operations      |                                    |                   |               |            |    |  |       |   |   |  |   |   
|                        |                                        | Accounts and notes receivable      |                   | $             |           |    |  | $     | 1 |   |  | $ | 1  |    
|                        |                                        | Inventory                          |                   |               | 2          |    |  |       |  |   |  |   | 2  |    
|                        |                                        | Other current assets               |                   |               | 1          |    |  |       | 1 |   |  |   | 2  |    
|                        |                                        | Property, plant and equipment, net |                   |               | 12         |    |  |       | 5 |   |  |   | 17 |    
|                        |                                        | Other non-current assets           |                   |               | 3          |    |  |       |  |   |  |   | 3  |    
|                        |                                        |                                    |                   |               |            |    |  |       |  
|                        |                                        |                                    | Total assets      |               | $          | 18 |  |       | $ | 7 |  |   | $  | 25  | 
|                        |                                        |                                    |                   |               |            |    |  |       |  
|                        | Liabilities of discontinued operations |                                    |                   |               |            |    |  |       |   |   |  |   |   
|                        |                                        | Accounts payable                   |                   | $             | 2          |    |  | $     |  |   |  | $ | 2  |    
|                        |                                        | Other current liabilities          |                   |               | 2          |    |  |       |  |   |  |   | 2  |    
|                        |                                        | Other non-current liabilities      |                   |               | 3          |    |  |       |  |   |  |   | 3  |    
|                        |                                        |                                    |                   |               |            |    |  |       |  
|                        |                                        |                                    | Total liabilities |               | $          | 7  |  |       | $ |  |  |   | $  | 7   | 
|                        |                                        |                                    |                   |               |            |    |  |       |  
|                        | December 31, 2004                      |                                    |                   |               |            |    |  |       |   |   |  |   |   
|                        | Assets of discontinued operations      |                                    |                   |               |            |    |  |       |   |   |  |   |   
|                        |                                        | Accounts and notes receivable      |                   | $             | 39         |    |  | $     | 2 |   |  | $ | 41 |    
|                        |                                        | Inventory                          |                   |               | 8          |    |  |       |  |   |  |   | 8  |    
|                        |                                        | Other current assets               |                   |               | 3          |    |  |       | 1 |   |  |   | 4  |    
|                        |                                        | Property, plant and equipment, net |                   |               | 14         |    |  |       | 6 |   |  |   | 20 |    
|                        |                                        | Other non-current assets           |                   |               | 33         |    |  |       |  |   |  |   | 33 |    
|                        |                                        |                                    |                   |               |            |    |  |       |  
|                        |                                        |                                    | Total assets      |               | $          | 97 |  |       | $ | 9 |  |   | $  | 106 | 
|                        |                                        |                                    |                   |               |            |    |  |       |  
|                        | Liabilities of discontinued operations |                                    |                   |               |            |    |  |       |   |   |  |   |   
|                        |                                        | Accounts payable                   |                   | $             | 5          |    |  | $     |  |   |  | $ | 5  |    
|                        |                                        | Other current liabilities          |                   |               | 3          |    |  |       |  |   |  |   | 3  |    
|                        |                                        | Other non-current liabilities      |                   |               | 3          |    |  |       |  |   |  |   | 3  |    
|                        |                                        |                                    |                   |               |            |    |  |       |  
|                        |                                        |                                    | Total liabilities |               | $          | 11 |  |       | $ |  |  |   | $  | 11  | 
|                        |                                        |                                    |                   |               |            |    |  |       |  

3. (Gain) Loss on Long-Lived Assets




|                                                        |  |               |    |   |      |   |    |  
|------------------------------------------------------- |  | ------------- | -- | - | ---- | - | -- | -
|                                                        |  | 2005          |    |   | 2004 |  
|                                                        |  |               |    |   |      |  
|                                                        |  | (In millions) |   
|Net realized gain                                       |  | $             | (2 | ) |      | $ | (1 | )
|Asset impairments                                       |  |               | 1  |   |      |   | 89 |  
|                                                        |  |               |    |   |      |  
|(Gain) loss on long-lived assets                        |  |               | (1 | ) |      |   | 88 |  
|Loss on investments in unconsolidated
    affiliates(1) |  |               | 44 |   |      |   |   |  
|                                                        |  |               |    |   |      |  
|Loss on long-lived assets and investments               |  | $             | 43 |   |      | $ | 88 |  
|                                                        |  |               |    |   |      |  






|    |                                                      
|--- | -----------------------------------------------------
|(1) | See Note 9 for a further description of these losses.

9



---



##### Table of Contents





4. Inventory




|                                 |                 |               |    |    |              |   |    |    | 
|-------------------------------- | --------------- | ------------- | -- | -- | ------------ | - | -- | -- | 
|                                 |                 | March 31,     |    |    | December 31, |  
|                                 |                 | 2005          |    |    | 2004         |  
|                                 |                 |               |    |    |              |  
|                                 |                 | (In millions) |   
|Materials and supplies and other |                 | $             | 42 |    |              | $ | 40 |   
|Natural gas liquids              |                 |               | 5  |    |              |   | 18 |   
|                                 |                 |               |    |    |              |  
|                                 | Total inventory |               | $  | 47 |              |   | $  | 58 | 
|                                 |                 |               |    |    |              |  

5. Debt, Other Financing Obligations and Other Credit
Facilities




|                                     |  |               |       |  |              |   |       | 
|------------------------------------ |  | ------------- | ----- |  | ------------ | - | ----- | 
|                                     |  | March 31,     |       |  | December 31, |  
|                                     |  | 2005          |       |  | 2004         |  
|                                     |  |               |       |  |              |  
|                                     |  | (In millions) |      
|Current maturities of long-term debt |  | $             | 273   |  |              | $ | 310   | 
|Long-term financing obligations      |  |               | 3,642 |  |              |   | 3,447 | 
|                                     |  |               |       |  |              |  
|Total                                |  | $             | 3,915 |  |              | $ | 3,757 | 
|                                     |  |               |       |  |              |  



| |                                
| | -------------------------------
| | Long-Term Financing Obligations



|                                               |                                           |      |                                 |               |  |               |            |                |   |      |  |  |   |     | 
|---------------------------------------------- | ----------------------------------------- | ---- | ------------------------------- | ------------- |  | ------------- | ---------- | -------------- | - | ---- |  |  | - | --- | 
|                                               |                                           |      |                                 |               |  |               |            | Cash Received/ |  
|Company                                        |                                           | Type |                                 | Interest Rate |  |               | Book Value |                |   | Paid | 
|                                               |                                           |      |                                 |               |  |               |            |                |   |      | 
|                                               |                                           |      |                                 |               |  | (In millions) |           
|Issuances and other increases                  |                                           |      |                                 |               |  |               |            |                |   |      |  |  |   |    
|                                               | Colorado Interstate Gas
    Company (CIG) |      | Senior notes due 2015           |               |  | 5.95%         |            |                | $ | 200  |  |  | $ | 197 | 
|                                               |                                           |      |                                 |               |  |               |            |                |   |      | 
|Increases
    through March 31, 2005           |                                           |      | 200                             |               |  |               | 197        |               
|                                               | Cheyenne Plains Gas Pipeline Company      |      | Non-recourse term loan due 2015 |               |  | Variable      | (1)        |                |   | 266  |  |  |   | 261 | 
|                                               |                                           |      |                                 |               |  |               |            |                |   |      | 
|Increases
    through filing date              |                                           | $    | 466                             |               |  | $             | 458        |               
|                                               |                                           |      |                                 |               |  |              
|Repayments, repurchases, retirements and other |                                           |      |                                 |               |  |               |            |                |   |      |  |  |   |    
|                                               | Other                                     |      | Long-term debt                  |               |  | Various       |            |                | $ | 42   |  |  | $ | 42  | 
|                                               |                                           |      |                                 |               |  |               |            |                |   |      | 
|Decreases
    through March 31, 2005           |                                           |      | 42                              |               |  |               | 42         |               
|                                               | Other                                     |      | Long-term debt                  |               |  | Various       |            |                |   | 2    |  |  |   | 2   | 
|                                               |                                           |      |                                 |               |  |               |            |                |   |      | 
|Decreases
    through filing date              |                                           | $    | 44                              |               |  | $             | 44         |               
|                                               |                                           |      |                                 |               |  |              






|    |                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In addition to the borrowing, we have an associated letter of
    credit facility for $12 million, under which we issued
    $6 million of letters of credit in May 2005. We also
    concurrently entered into swaps in May 2005 to convert the
    variable interest rate on approximately $213 million of
    this debt to a current fixed rate of 5.94 percent.



| |                  
| | -----------------
| | Credit Facilities



10



---



##### Table of Contents





6. Commitments and Contingencies




| |                  
| | -----------------
| | Legal Proceedings

Grynberg. In re: Natural
Gas Royalties Qui Tam Litigation,


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


MTBE.


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


11



---



##### Table of Contents



Government Investigations


Power Restructuring.


Reserve Revisions.


Iraq Oil Sales.




Rates and Regulatory Matters


Accounting for Pipeline Integrity Costs.


Selective Discounting Notice of Inquiry.




12



---



##### Table of Contents





Environmental Matters






|              |       |                |    |     |      |   |     |     | 
|------------- | ----- | -------------- | -- | --- | ---- | - | --- | --- | 
|              |       | March 31, 2005 |   
|              |       |                |   
|Sites         |       | Expected       |    |     | High |  
|              |       |                |    |     |      |  
|              |       | (In millions)  |   
|Operating     |       | $              | 43 |     |      | $ | 49  |    
|Non-operating |       |                | 81 |     |      |   | 142 |    
|Superfund     |       |                | 4  |     |      |   | 8   |    
|              |       |                |    |     |      |  
|              | Total |                | $  | 128 |      |   | $   | 199 | 
|              |       |                |    |     |      |  



|                                                 |  |   |     |  
|------------------------------------------------ |  | - | --- | -
|Balance as of January 1, 2005                    |  | $ | 128 |  
|Additions/adjustments for remediation activities |  |   | 6   |  
|Payments for remediation activities              |  |   | (7  | )
|Other changes, net                               |  |   | 1   |  
|                                                 |  |   |    
|Balance as of March 31, 2005                     |  | $ | 128 |  
|                                                 |  |   |    



CERCLA Matters.


13



---



##### Table of Contents







Guarantees




7. Retirement Benefits




|                               |                  |                  |    |                |          |       |    |      |  |   |      |   |  |   |    |   | 
|------------------------------ | ---------------- | ---------------- | -- | -------------- | -------- | ----- | -- | ---- |  | - | ---- | - |  | - | -- | - | 
|                               |                  |                  |    |                |          | Other |   
|                               |                  |                  |    | Postretirement |         
|                               |                  | Pension Benefits |    |                | Benefits |      
|                               |                  |                  |    |                |          |      
|                               |                  | 2005             |    |                | 2004     |       |    | 2005 |  |   | 2004 |  
|                               |                  |                  |    |                |          |       |    |      |  |   |      |  
|                               |                  | (In millions)    |   
|Interest cost                  |                  | $                | 1  |                |          | $     | 1  |      |  | $ | 1    |   |  | $ | 1  |  
|Expected return on plan assets |                  |                  | (1 | )              |          |       | (1 | )    |  |   | (1   | ) |  |   | (1 | )
|                               |                  |                  |    |                |          |       |    |      |  |   |      |  
|                               | Net benefit cost |                  | $  |               |          |       | $  |     |  |   | $    |  |  |   | $  |  | 
|                               |                  |                  |    |                |          |       |    |      |  |   |      |  

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




8. Business Segment Information




14



---



##### Table of Contents





|                                          |                                   |               |     |    |      |   |      |    | 
|----------------------------------------- | --------------------------------- | ------------- | --- | -- | ---- | - | ---- | -- | 
|                                          |                                   | 2005          |     |    | 2004 |  
|                                          |                                   |               |     |    |      |  
|                                          |                                   | (In millions) |    
|Total EBIT                                |                                   | $             | 175 |    |      | $ | 130  |   
|Interest and debt expense                 |                                   |               | (73 | )  |      |   | (101 | ) 
|Affiliated interest income (expense), net |                                   |               | 2   |    |      |   | (14  | ) 
|Income taxes                              |                                   |               | (44 | )  |      |   | (5   | ) 
|                                          |                                   |               |     |    |      |  
|                                          | Income from continuing operations |               | $   | 60 |      |   | $    | 10 | 
|                                          |                                   |               |     |    |      |  



|                                                 |  |               |     |  |               |       |     |       |  |   |          |   |  |              |     |   |       |   |     |   |  |   |     |  
|------------------------------------------------ |  | ------------- | --- |  | ------------- | ----- | --- | ----- |  | - | -------- | - |  | ------------ | --- | - | ----- | - | --- | - |  | - | --- | -
|                                                 |  | Regulated     |     |  | Non-regulated |       |     |       |  |  
|                                                 |  |               |     |  |               |       |     |       |  |  
|                                                 |  |               |     |  |               | Field |     |       |  |   |         
|                                                 |  | Pipelines     |     |  | Production    |       |     | Power |  |   | Services |   |  | Corporate(1) |     |   | Total |  
|                                                 |  |               |     |  |               |       |     |       |  |   |          |   |  |              |     |   |       |  
|                                                 |  | (In millions) |    
|2005                                             |  |               |     |  |               |       |     |       |  |   |          |   |  |              |     |   |       |   |     |   |  |   |     |  
|Revenues from external customers                 |  | $             | 305 |  |               | $     | 110 | (2)   |  | $ | 22       |   |  | $            | 135 |   |       | $ | 8   |   |  | $ | 580 |  
|Intersegment revenues                            |  |               | 8   |  |               |       | 20  |       |  |   |         |   |  |              |    |   |       |   | (28 | ) |  |   |    |  
|Operation and maintenance                        |  |               | 67  |  |               |       | 39  |       |  |   | 19       |   |  |              | 5   |   |       |   | (1  | ) |  |   | 129 |  
|Depreciation, depletion and amortization         |  |               | 38  |  |               |       | 77  |       |  |   | 2        |   |  |              | 2   |   |       |   | 1   |   |  |   | 120 |  
|Gain on long-lived assets                        |  |               |    |  |               |       |    |       |  |   | (1       | ) |  |              |    |   |       |   |    |   |  |   | (1  | )
|                                                
|Operating income (loss)                          |  | $             | 164 |  |               | $     | 4   |       |  | $ | (3       | ) |  | $            | 13  |   |       | $ | 4   |   |  | $ | 182 |  
|Earnings (losses) from unconsolidated affiliates |  |               | 19  |  |               |       |    |       |  |   | (31      | ) |  |              | (2  | ) |       |   |    |   |  |   | (14 | )
|Other income, net                                |  |               | 1   |  |               |       | 2   |       |  |   | 3        |   |  |              |    |   |       |   | 1   |   |  |   | 7   |  
|                                                 |  |               |     |  |               |       |     |       |  |   |          |   |  |              |     |   |       |  
|EBIT                                             |  | $             | 184 |  |               | $     | 6   |       |  | $ | (31      | ) |  | $            | 11  |   |       | $ | 5   |   |  | $ | 175 |  
|                                                 |  |               |     |  |               |       |     |       |  |   |          |   |  |              |     |   |       |  
|                                                
|2004                                             |  |               |     |  |               |       |     |       |  |   |          |   |  |              |     |   |       |   |     |   |  |   |     |  
|Revenues from external customers                 |  | $             | 237 |  |               | $     | 151 | (2)   |  | $ | 54       |   |  | $            | 79  |   |       | $ | 16  |   |  | $ | 537 |  
|Intersegment revenues                            |  |               |    |  |               |       | 12  |       |  |   |         |   |  |              |    |   |       |   | (12 | ) |  |   |    |  
|Operation and maintenance                        |  |               | 59  |  |               |       | 39  |       |  |   | 23       |   |  |              | 6   |   |       |   |    |   |  |   | 127 |  
|Depreciation, depletion and amortization         |  |               | 30  |  |               |       | 76  |       |  |   | 4        |   |  |              | 1   |   |       |   | 2   |   |  |   | 113 |  
|Loss on long-lived assets                        |  |               |    |  |               |       |    |       |  |   | 88       |   |  |              |    |   |       |   |    |   |  |   | 88  |  
|                                                
|Operating income (loss)                          |  | $             | 110 |  |               | $     | 45  |       |  | $ | (80      | ) |  | $            | 11  |   |       | $ | 3   |   |  | $ | 89  |  
|Earnings (losses) from unconsolidated affiliates |  |               | 22  |  |               |       | (2  | )     |  |   | 12       |   |  |              | 3   |   |       |   |    |   |  |   | 35  |  
|Other income, net                                |  |               |    |  |               |       |    |       |  |   | 5        |   |  |              |    |   |       |   | 1   |   |  |   | 6   |  
|                                                 |  |               |     |  |               |       |     |       |  |   |          |   |  |              |     |   |       |  
|EBIT                                             |  | $             | 132 |  |               | $     | 43  |       |  | $ | (63      | ) |  | $            | 14  |   |       | $ | 4   |   |  | $ | 130 |  
|                                                 |  |               |     |  |               |       |     |       |  |   |          |   |  |              |     |   |       |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes eliminations of intercompany transactions. Our
    intersegment revenues, along with our intersegment operating
    expenses, were incurred in the normal course of business between
    our operating segments. For the quarters ended March 31,
    2005 and 2004, we recorded an intersegment revenue elimination
    of $28 million and $12 million, which is included in
    the Corporate column, to remove intersegment
    transactions.
|   
|(2) | Revenues from external customers include gains and losses
    related to our hedging of price risk with our affiliate
    associated with our natural gas and oil production.                                                                                                                                                                                                                                                                              

15



---



##### Table of Contents





|                        |                |                           |     |       |              |  |     |       |       | 
|----------------------- | -------------- | ------------------------- | --- | ----- | ------------ |  | --- | ----- | ----- | 
|                        |                | March 31,                 |     |       | December 31, | 
|                        |                | 2005                      |     |       | 2004         | 
|                        |                |                           |     |       |              | 
|                        |                | (In millions)             |    
|Regulated               |                |                           |     |       |              |  |     |      
|                        | Pipelines      |                           | $   | 5,865 |              |  | $   | 5,717 |      
|Non-regulated           |                |                           |     |       |              |  |     |      
|                        | Production     |                           |     | 1,954 |              |  |     | 2,000 |      
|                        | Power          |                           |     | 691   |              |  |     | 716   |      
|                        | Field Services |                           |     | 289   |              |  |     | 312   |      
|                        |                |                           |     |       |              | 
|                        |                | Total segment assets      |     |       | 8,799        |  |     |       | 8,745 | 
|Corporate               |                |                           | 560 |       |              |  | 493 |      
|Discontinued operations |                |                           | 25  |       |              |  | 106 |      
|                        |                |                           |     |       |              | 
|                        |                | Total consolidated assets |     | $     | 9,384        |  |     | $     | 9,344 | 
|                        |                |                           |     |       |              | 



|   |                                                                            
|-- | ---------------------------------------------------------------------------
|9. | Investments in Unconsolidated Affiliates and Related Party
    Transactions



|                                                       |                                                           |                |  |               |                |   |     |      |     |   |    |    |    | 
|------------------------------------------------------ | --------------------------------------------------------- | -------------- |  | ------------- | -------------- | - | --- | ---- | --- | - | -- | -- | -- | 
|                                                       |                                                           |                |  | Earnings      |               
|                                                       |                                                           |                |  | (Losses) from |               
|                                                       |                                                           | Net            |  |               | Unconsolidated |  
|                                                       |                                                           | Ownership      |  |               | Affiliates     |  
|                                                       |                                                           | Interest       |  |               | Quarter Ended  |  
|                                                       |                                                           |                |  |               | March 31,      |  
|                                                       |                                                           | March 31,      |  |               |                |  
|                                                       |                                                           | 2005           |  |               | 2005           |   |     | 2004 |    
|                                                       |                                                           |                |  |               |                |   |     |      |    
|                                                       |                                                           | (Percent)      |  |               |               
|                                                       |                                                           |                |  | (In millions) |               
|Domestic:                                              |                                                           |                |  |               |                |   |     |      |     |   |    |   
|                                                       | Great Lakes Gas Transmission LP and Company (Great Lakes) |                |  | 50            |                |   | $   | 17   |     |   | $  | 20 |   
|                                                       | Midland Cogeneration Venture
    (MCV)(1)                 |                |  | 44            |                |   |     | 1    |     |   |    | 5  |   
|                                                       | Javelina                                                  |                |  | 40            |                |   |     | 1    |     |   |    | 3  |   
|                                                       | Other Domestic Investments                                |                |  | various       |                |   |     | (1   | )   |   |    | (3 | ) 
|                                                       |                                                           |                |  |               |                |   |     |      |    
|                                                       |                                                           | Total domestic |  |               |                |   |     |      | 18  |   |    |    | 25 | 
|                                                       |                                                           |                |  |               |                |   |     |      |    
|Foreign:                                               |                                                           |                |  |               |                |   |     |      |     |   |    |   
|                                                       | Asia
    Investments(2)                                   |                |  | various       |                |   |     | (39  | )   |   |    | 7  |   
|                                                       | Other Foreign Investments                                 |                |  | various       |                |   |     | 7    |     |   |    | 3  |   
|                                                       |                                                           |                |  |               |                |   |     |      |    
|                                                       |                                                           | Total foreign  |  |               |                |   |     |      | (32 | ) |    |    | 10 | 
|                                                       |                                                           |                |  |               |                |   |     |      |    
|Total earnings (losses) from unconsolidated affiliates |                                                           |                |  |               |                | $ | (14 | )    |     | $ | 35 |   
|                                                       |                                                           |                |  |               |                |   |     |      |    






|    |                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Our proportionate share of earnings reported by MCV was
    $92 million for the quarter ended March 31, 2005,
    largely due to changes in accounting for derivative contracts.
    We decreased our proportionate share of equity earnings for MCV
    by $91 million to reflect the amount of earnings that we
    believe will be realized.                                                                         
|   
|(2) | Consists of our investments in six power plants, including
    Habibullah Power and Saba Power Company. Our proportionate share
    of earnings reported by our Asia investments was $6 million
    for the quarter ended March 31, 2005. We decreased our
    proportionate share of equity earnings for our Asia investments
    by $4 million to reflect the amount of earnings that we
    believe will be realized.



16



---



##### Table of Contents





|                       |                                   |               |   |       |       |  |       |             |  |  |       |    |  |  |   |     | 
|---------------------- | --------------------------------- | ------------- | - | ----- | ----- |  | ----- | ----------- |  |  | ----- | -- |  |  | - | --- | 
|                       |                                   |               |   | Great |       |  | Other |             |  | 
|                       |                                   | MCV           |   |       | Lakes |  |       | Investments |  |  | Total |   
|                       |                                   |               |   |       |       |  |       |             |  |  |       |   
|                       |                                   | (In millions) |  
|2005                   |                                   |               |   |       |       |  |       |             |  |  |       |    |  |  |   |    
|Operating results data |                                   |               |   |       |       |  |       |             |  |  |       |    |  |  |   |    
|                       | Revenues                          |               | $ | 65    |       |  | $     | 35          |  |  | $     | 64 |  |  | $ | 164 | 
|                       | Operating expenses                |               |   | (35   | )     |  |       | 15          |  |  |       | 42 |  |  |   | 22  | 
|                       | Income from continuing operations |               |   | 92    |       |  |       | 11          |  |  |       | 14 |  |  |   | 117 | 
|                       | Net
    income(1)                 |               |   | 92    |       |  |       | 11          |  |  |       | 14 |  |  |   | 117 | 
|2004                   |                                   |               |   |       |       |  |       |             |  |  |       |    |  |  |   |    
|Operating results data |                                   |               |   |       |       |  |       |             |  |  |       |    |  |  |   |    
|                       | Revenues                          |               | $ | 70    |       |  | $     | 36          |  |  | $     | 64 |  |  | $ | 170 | 
|                       | Operating expenses                |               |   | 53    |       |  |       | 13          |  |  |       | 50 |  |  |   | 116 | 
|                       | Income from continuing operations |               |   | 5     |       |  |       | 13          |  |  |       | 12 |  |  |   | 30  | 
|                       | Net
    income(1)                 |               |   | 5     |       |  |       | 13          |  |  |       | 12 |  |  |   | 30  | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes net income of $7 million and $8 million for
    the quarters ended March 31, 2005 and 2004, related to our
    proportionate share of affiliates in which we hold a greater
    than 50 percent interest. Our proportionate share of Great
    Lakes net income includes our share of taxes recorded by
    Great Lakes. Our earnings from unconsolidated affiliates
    recognized in our income statements are presented before these
    taxes.



Related Party
Transactions




|                                     |  |               |    |  |      |   |     | 
|------------------------------------ |  | ------------- | -- |  | ---- | - | --- | 
|                                     |  | 2005          |    |  | 2004 |  
|                                     |  |               |    |  |      |  
|                                     |  | (In millions) |   
|Operating revenue                    |  | $             | 94 |  |      | $ | 200 | 
|Cost of sales                        |  |               | 18 |  |      |   | 17  | 
|Reimbursement for operating expenses |  |               | 1  |  |      |   | 1   | 
|Charges from affiliates              |  |               | 46 |  |      |   | 51  | 
|Other income                         |  |               | 4  |  |      |   | 4   | 

Revenues and Expenses.


Cash Management Program and Affiliate
Receivables/Payables.


17



---



##### Table of Contents







Affiliate income taxes.


Other.


Guarantees.


Contingent Matters that Could Impact Our
Investments


Economic Conditions in the Dominican Republic.


18



---



##### Table of Contents






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




Liquidity




Segment Results






19



---



##### Table of Contents





|                                             |                                   |                                              |     |     |      |  |      |      |     | 
|-------------------------------------------- | --------------------------------- | -------------------------------------------- | --- | --- | ---- |  | ---- | ---- | --- | 
|                                             |                                   | 2005                                         |     |     | 2004 | 
|                                             |                                   |                                              |     |     |      | 
|                                             |                                   | (In millions)                                |    
|Regulated Business                           |                                   |                                              |     |     |      |  |      |     
|                                             | Pipelines                         |                                              | $   | 184 |      |  | $    | 132  |    
|Non-regulated Businesses                     |                                   |                                              |     |     |      |  |      |     
|                                             | Production                        |                                              |     | 6   |      |  |      | 43   |    
|                                             | Power                             |                                              |     | (31 | )    |  |      | (63  | )  
|                                             | Field Services                    |                                              |     | 11  |      |  |      | 14   |    
|                                             |                                   |                                              |     |     |      | 
|                                             |                                   | Segment EBIT                                 |     |     | 170  |  |      |      | 126 | 
|Corporate                                    |                                   |                                              | 5   |     |      |  | 4    |     
|                                             |                                   |                                              |     |     |      | 
|                                             |                                   | Consolidated EBIT from continuing operations |     |     | 175  |  |      |      | 130 | 
|Interest and debt expense                    |                                   |                                              | (73 | )   |      |  | (101 | )   
|Affiliated interest income (expense), net    |                                   |                                              | 2   |     |      |  | (14  | )   
|Income taxes                                 |                                   |                                              | (44 | )   |      |  | (5   | )   
|                                             |                                   |                                              |     |     |      | 
|                                             | Income from continuing operations |                                              |     | 60  |      |  |      | 10   |    
|Discontinued operations, net of income taxes |                                   |                                              | (2  | )   |      |  | (128 | )   
|                                             |                                   |                                              |     |     |      | 
|                                             | Net income (loss)                 |                                              | $   | 58  |      |  | $    | (118 | )  
|                                             |                                   |                                              |     |     |      | 

Individual Segment Results


Regulated Business  Pipelines Segment




Operating Results




|                            |                  |                      |       |     |      |   |       |     | 
|--------------------------- | ---------------- | -------------------- | ----- | --- | ---- | - | ----- | --- | 
|                            |                  | 2005                 |       |     | 2004 |  
|                            |                  |                      |       |     |      |  
|                            |                  | (In millions, except |      
|                            |                  | volume amounts)      |      
|Operating revenues          |                  | $                    | 313   |     |      | $ | 237   |    
|Operating expenses          |                  |                      | (149  | )   |      |   | (127  | )  
|                            |                  |                      |       |     |      |  
|                            | Operating income |                      |       | 164 |      |   |       | 110 | 
|Other income, net           |                  |                      | 20    |     |      |   | 22    |    
|                            |                  |                      |       |     |      |  
|                            | EBIT             |                      | $     | 184 |      |   | $     | 132 | 
|                            |                  |                      |       |     |      |  
|Throughput volumes (BBtu/d) |                  |                      | 9,576 |     |      |   | 8,901 |    
|                            |                  |                      |       |     |      |  

20



---



##### Table of Contents





|                                                                                |                      |                         |    |    |         |   |     |       |   |   |      |    |   |   |    |    | 
|------------------------------------------------------------------------------- | -------------------- | ----------------------- | -- | -- | ------- | - | --- | ----- | - | - | ---- | -- | - | - | -- | -- | 
|                                                                                |                      | Revenue                 |    |    | Expense |   |     | Other |   |   | EBIT |   
|                                                                                |                      |                         |    |    |         |   |     |       |   |   |      |   
|                                                                                |                      | Favorable/(Unfavorable) |   
|                                                                                |                      | (In millions)           |   
|Contract modifications/terminations                                             |                      | $                       | 29 |    |         | $ |    |       |   | $ |     |    |   | $ | 29 |   
|Gas not used in operations, processing revenues and other
    natural gas sales |                      |                         | 35 |    |         |   | (10 | )     |   |   |     |    |   |   | 25 |   
|Mainline expansions                                                             |                      |                         | 11 |    |         |   | (7  | )     |   |   | 1    |    |   |   | 5  |   
|Equity earnings from our investment in Great Lakes                              |                      |                         |   |    |         |   |    |       |   |   | (3   | )  |   |   | (3 | ) 
|Other(1)                                                                        |                      |                         | 1  |    |         |   | (5  | )     |   |   |     |    |   |   | (4 | ) 
|                                                                                |                      |                         |    |    |         |   |     |       |   |   |      |   
|                                                                                | Total impact on EBIT |                         | $  | 76 |         |   | $   | (22   | ) |   | $    | (2 | ) |   | $  | 52 | 
|                                                                                |                      |                         |    |    |         |   |     |       |   |   |      |   






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



Contract Modifications/Terminations.


Gas Not Used in Operations, Processing Revenues and Other
Natural Gas Sales.


Expansions.


Regulatory and Other Matters.




21



---



##### Table of Contents





Non-regulated Business  Production Segment




| |         
| | --------
| | Overview





| |                                                                   
| | ------------------------------------------------------------------
| | Operational Factors Affecting the Quarter Ended
    March 31, 2005





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Change in realized prices. Realized natural gas prices,
    which include the impact of our hedges, decreased
    18 percent while oil, condensate and NGL increased
    32 percent compared to 2004.                                                                                                                                                                                                                                                                                                              
|
| |  | Average daily production of 302 MMcfe/d (excluding
    discontinued operations of 5 MMcfe/d). Our first quarter
    2005 total equivalent production declined 5 Bcfe, or
    15 percent, compared to the first quarter of 2004 due to
    normal production declines and lower capital spending programs
    over the last several years.                                                                                                                                                                          
|
| |  | Capital expenditures of $82 million.Our first
    quarter capital expenditures include the acquisition of the
    interest held by one of our partners under a net profits
    interest agreement and a small offshore acquisition for a total
    of $25 million. These acquisitions added properties with
    approximately 9 Bcfe of proved reserves and 4 MMcfe/d
    of current production. We have integrated these acquisitions
    into our operations with minimal additional administrative
    expenses.



| |                              
| | -----------------------------
| | Outlook for Remainder of 2005





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





22



---



##### Table of Contents







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



|                                         |                         |                                 |     |    |      |   |     |     |      |  
|---------------------------------------- | ----------------------- | ------------------------------- | --- | -- | ---- | - | --- | --- | ---- | -
|                                         |                         | 2005                            |     |    | 2004 |  
|                                         |                         |                                 |     |    |      |  
|                                         |                         | (In millions)                   |    
|Operating Revenues:                      |                         |                                 |     |    |      |   |     |    
|                                         | Natural gas             |                                 | $   | 86 |      |   | $   | 125 |     
|                                         | Oil, condensate and NGL |                                 |     | 44 |      |   |     | 37  |     
|                                         | Other                   |                                 |     |   |      |   |     | 1   |     
|                                         |                         |                                 |     |    |      |  
|                                         |                         | Total operating revenues        |     |    | 130  |   |     |     | 163  |  
|Transportation and net product costs     |                         |                                 | (4  | )  |      |   | (5  | )  
|                                         |                         |                                 |     |    |      |  
|                                         |                         | Total operating margin          |     |    | 126  |   |     |     | 158  |  
|                                        
|Depreciation, depletion and amortization |                         |                                 | (77 | )  |      |   | (76 | )  
|Production
    costs(1)                  |                         |                                 | (29 | )  |      |   | (21 | )  
|General and administrative expenses      |                         |                                 | (16 | )  |      |   | (16 | )  
|                                         |                         |                                 |     |    |      |  
|                                         |                         | Total operating
    expenses(2) |     |    | (122 | ) |     |     | (113 | )
|                                         |                         |                                 |     |    |      |  
|                                         | Operating income        |                                 |     | 4  |      |   |     | 45  |     
|Other income (loss)                      |                         |                                 | 2   |    |      |   | (2  | )  
|                                         |                         |                                 |     |    |      |  
|                                         | EBIT                    |                                 | $   | 6  |      |   | $   | 43  |     
|                                         |                         |                                 |     |    |      |  

|                                      |                                                      |                                                          |                              |         |          |      |  |      |     |    |   |        |        |      | 
|------------------------------------- | ---------------------------------------------------- | -------------------------------------------------------- | ---------------------------- | ------- | -------- | ---- |  | ---- | --- | -- | - | ------ | ------ | ---- | 
|                                      |                                                      |                                                          |                              | Percent |          |      | 
|                                      |                                                      | 2005                                                     |                              |         | Variance |      |  | 2004 |    
|                                      |                                                      |                                                          |                              |         |          |      |  |      |    
|Volumes, prices and costs (per unit): |                                                      |                                                          |                              |         |          |      |  |      |     |    |   |       
|                                      | Natural gas                                          |                                                          |                              |         |          |      |  |      |     |    |   |        |       
|                                      |                                                      | Volumes (MMcf)                                           |                              |         | 20,638   |      |  |      | (17 | )% |   |        | 24,775 |     
|                                      |                                                      | Average realized prices, including hedges
    ($/Mcf)(3) |                              | $       | 4.16     |      |  |      | (18 | )% |   | $      | 5.07   |     
|                                      |                                                      | Average realized prices, excluding hedges
    ($/Mcf)(3) |                              | $       | 6.00     |      |  |      | 6   | %  |   | $      | 5.66   |     
|                                      |                                                      | Average transportation costs($/Mcf)                      |                              | $       | 0.14     |      |  |      |    | %  |   | $      | 0.14   |     
|                                      | Oil, condensate and NGL                              |                                                          |                              |         |          |      |  |      |     |    |   |        |       
|                                      |                                                      | Volumes (MBbls)                                          |                              |         | 1,087    |      |  |      | (9  | )% |   |        | 1,198  |     
|                                      |                                                      | Average realized prices, including hedges
    ($/Bbl)(3) |                              | $       | 40.42    |      |  |      | 32  | %  |   | $      | 30.61  |     
|                                      |                                                      | Average realized prices, excluding hedges
    ($/Bbl)(3) |                              | $       | 40.42    |      |  |      | 32  | %  |   | $      | 30.61  |     
|                                      |                                                      | Average transportation costs ($/Bbl)                     |                              | $       | 0.74     |      |  |      | (33 | )% |   | $      | 1.10   |     
|                                      | Total equivalent volumes (MMcfe)                     |                                                          |                              | 27,161  |          |      |  | (15  | )%  |    |   | 31,966 |       
|                                      | Production costs ($/Mcfe)                            |                                                          |                              |         |          |      |  |      |     |    |   |        |       
|                                      |                                                      | Average lease operating costs                            |                              | $       | 0.86     |      |  |      | 28  | %  |   | $      | 0.67   |     
|                                      |                                                      | Average production taxes                                 |                              |         | 0.23     |      |  |      | 675 | %  |   |        | (0.04  | )   
|                                      |                                                      |                                                          |                              |         |          |      |  |      |    
|                                      |                                                      |                                                          | Total production
    cost(1) |         | $        | 1.09 |  |      |     | 73 | % |        | $      | 0.63 | 
|                                      |                                                      |                                                          |                              |         |          |      |  |      |    
|                                      | Average general and administrative expenses ($/Mcfe) |                                                          | $                            | 0.58    |          |      |  | 12   | %   |    | $ | 0.52   |       
|                                      | Unit of production depletion cost ($/Mcfe)           |                                                          | $                            | 2.73    |          |      |  | 21   | %   |    | $ | 2.26   |       






|    |                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------
|(1) | Production costs include lease operating costs and production
    related taxes (including ad valorem and severance taxes).
|   
|(2) | Transportation costs are included in operating expenses on our
    consolidated statements of income.                      
|   
|(3) | Prices are stated before transportation costs.                                                                             

23



---



##### Table of Contents





| |                                                                          
| | -------------------------------------------------------------------------
| | Quarter Ended March 31, 2005 Compared to Quarter Ended
    March 31, 2004



|                                                  |                                               |                         |    |     |           |   |   |          |    |      |        |   |   |  |   |     |     |  
|------------------------------------------------- | --------------------------------------------- | ----------------------- | -- | --- | --------- | - | - | -------- | -- | ---- | ------ | - | - |  | - | --- | --- | -
|                                                  |                                               | Variance                |   
|                                                  |                                               |                         |   
|                                                  |                                               | Operating               |    |     | Operating |   |   |          |    | EBIT |       
|                                                  |                                               | Revenue                 |    |     | Expense   |   |   | Other(1) |    |      | Impact |  
|                                                  |                                               |                         |    |     |           |   |   |          |    |      |        |  
|                                                  |                                               | Favorable/(Unfavorable) |   
|                                                  |                                               | (In millions)           |   
|Natural Gas Revenue                               |                                               |                         |    |     |           |   |   |          |    |      |        |   |   |  |   |    
|                                                  | Higher prices in 2005                         |                         | $  | 7   |           |   | $ |         |    |      | $      |  |   |  | $ | 7   |    
|                                                  | Lower volumes in 2005                         |                         |    | (23 | )         |   |   |         |    |      |        |  |   |  |   | (23 | )  
|                                                  | Impact from hedge program in 2005 versus 2004 |                         |    | (23 | )         |   |   |         |    |      |        |  |   |  |   | (23 | )  
|Oil, Condensate, and NGL Revenue                  |                                               |                         |    |     |           |   |   |          |    |      |        |   |   |  |   |    
|                                                  | Higher prices in 2005                         |                         |    | 11  |           |   |   |         |    |      |        |  |   |  |   | 11  |    
|                                                  | Lower volumes in 2005                         |                         |    | (4  | )         |   |   |         |    |      |        |  |   |  |   | (4  | )  
|Depreciation, Depletion, and Amortization Expense |                                               |                         |    |     |           |   |   |          |    |      |        |   |   |  |   |    
|                                                  | Higher depletion rate in 2005                 |                         |    |    |           |   |   | (13      | )  |      |        |  |   |  |   | (13 | )  
|                                                  | Lower production volumes in 2005              |                         |    |    |           |   |   | 11       |    |      |        |  |   |  |   | 11  |    
|Production Costs                                  |                                               |                         |    |     |           |   |   |          |    |      |        |   |   |  |   |    
|                                                  | Higher lease operating costs in 2005          |                         |    |    |           |   |   | (1       | )  |      |        |  |   |  |   | (1  | )  
|                                                  | Higher production taxes in 2005               |                         |    |    |           |   |   | (7       | )  |      |        |  |   |  |   | (7  | )  
|Other                                             |                                               |                         | (1 | )   |           |   | 1 |          |    |      | 5      |   |   |  | 5 |    
|                                                  |                                               |                         |    |     |           |   |   |          |    |      |        |  
|                                                  |                                               | Total variances         |    | $   | (33       | ) |   | $        | (9 | )    |        | $ | 5 |  |   | $   | (37 | )
|                                                  |                                               |                         |    |     |           |   |   |          |    |      |        |  






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

Operating Revenues.


Depreciation, depletion, and amortization expense.


Production costs.


Other.


24



---



##### Table of Contents



Non-regulated Business  Power Segment








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



|              |                                                  |                                  |                |    |      |    |   |    |     |     |  
|------------- | ------------------------------------------------ | -------------------------------- | -------------- | -- | ---- | -- | - | -- | --- | --- | -
|              |                                                  | 2005                             |                |    | 2004 |   
|              |                                                  |                                  |                |    |      |   
|              |                                                  | (In                              |               
|              |                                                  | millions)                        |               
|Overall EBIT: |                                                  |                                  |                |    |      |    |   |   
|              | Gross
    margin(1)                              |                                  | $              | 17 |      |    | $ | 35 |    
|              | Operating expenses                               |                                  |                |    |      |    |   |    |    
|              |                                                  | Gain (loss) on long-lived assets |                |    | 1    |    |   |    | (88 | )  
|              |                                                  | Other operating expenses         |                |    | (21  | )  |   |    | (27 | )  
|              |                                                  |                                  |                |    |      |   
|              |                                                  |                                  | Operating loss |    |      | (3 | ) |    |     | (80 | )
|              | Earnings (losses) from unconsolidated affiliates |                                  |                |    |      |    |   |    |    
|              |                                                  | Impairments                      |                |    | (41  | )  |   |    |    |    
|              |                                                  | Equity in earnings               |                |    | 10   |    |   |    | 12  |    
|              | Other income                                     |                                  |                | 3  |      |    |   | 5  |    
|              |                                                  |                                  |                |    |      |   
|              |                                                  | EBIT                             |                | $  | (31  | )  |   | $  | (63 | )  
|              |                                                  |                                  |                |    |      |   






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

25



---



##### Table of Contents





|                                       |                                                                             |               |     |     |      |   |     |     |  
|-------------------------------------- | --------------------------------------------------------------------------- | ------------- | --- | --- | ---- | - | --- | --- | -
|                                       |                                                                             | 2005          |     |     | 2004 |  
|                                       |                                                                             |               |     |     |      |  
|                                       |                                                                             | (In millions) |    
|EBIT by Area:                          |                                                                             |               |     |     |      |   |     |    
|Asia                                   |                                                                             |               |     |     |      |   |     |    
|                                       | Earnings from plant operations                                              |               | $   | 1   |      |   | $   | 6   |  
|                                       | Impairments                                                                 |               |     | (41 | )    |   |     |    |  
|MCV                                    |                                                                             |               |     |     |      |   |     |    
|                                       | Earnings from plant operations                                              |               |     | 1   |      |   |     | 5   |  
|Domestic Power Contract Restructurings |                                                                             |               |     |     |      |   |     |    
|                                       | Impairments and losses on sales                                             |               |     |    |      |   |     | (88 | )
|                                       | Change in fair value                                                        |               |     |    |      |   |     | 17  |  
|Other Power Assets                     |                                                                             |               |     |     |      |   |     |    
|                                       | Earnings (losses) from consolidated and unconsolidated plant
    operations |               |     | 8   |      |   |     | (3  | )
|                                       |                                                                             |               |     |     |      |  
|EBIT                                   |                                                                             | $             | (31 | )   |      | $ | (63 | )  
|                                       |                                                                             |               |     |     |      |  

Asia.


MCV.


Domestic Power Contract Restructurings.


Other Power Assets.


Non-regulated Business  Field Services Segment




26



---



##### Table of Contents





|                                        |            |                      |    |    |       |   |    |    |       | 
|--------------------------------------- | ---------- | -------------------- | -- | -- | ----- | - | -- | -- | ----- | 
|                                        |            | 2005                 |    |    | 2004  |  
|                                        |            |                      |    |    |       |  
|                                        |            | (In millions, except |   
|                                        |            | volumes and prices)  |   
|Gathering and processing
    margins(1) |            | $                    | 21 |    |       | $ | 20 |   
|Operating expenses                      |            |                      | (8 | )  |       |   | (9 | ) 
|                                        |            |                      |    |    |       |  
|                                        |            | Operating income     |    |    | 13    |   |    |    | 11    | 
|Equity earnings in Javelina             |            |                      | 1  |    |       |   | 3  |   
|Equity investment impairments           |            |                      | (3 | )  |       |   |   |   
|                                        |            |                      |    |    |       |  
|                                        | EBIT       |                      | $  | 11 |       |   | $  | 14 |      
|                                        |            |                      |    |    |       |  
|Volumes and Prices:                     |            |                      |    |    |       |   |    |   
|                                        | Processing |                      |    |    |       |   |    |    |      
|                                        |            | Volumes (BBtu/d)     |    |    | 1,577 |   |    |    | 1,688 | 
|                                        |            |                      |    |    |       |  
|                                        |            | Prices ($/MMBtu)     |    | $  | 0.13  |   |    | $  | 0.12  | 
|                                        |            |                      |    |    |       |  
|                                        | Gathering  |                      |    |    |       |   |    |    |      
|                                        |            | Volumes (BBtu/d)     |    |    |      |   |    |    | 19    | 
|                                        |            |                      |    |    |       |  
|                                        |            | Prices ($/MMBtu)     |    | $  |      |   |    | $  | 0.04  | 
|                                        |            |                      |    |    |       |  






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



| |                                                                          
| | -------------------------------------------------------------------------
| | Quarter Ended March 31, 2005 Compared to Quarter Ended
    March 31, 2004



Interest and Debt Expense




Affiliated Interest Expense, Net




27



---



##### Table of Contents



Income Taxes




|                   |  |                   |    |   |      |   |    |  
|------------------ |  | ----------------- | -- | - | ---- | - | -- | -
|                   |  | 2005              |    |   | 2004 |  
|                   |  |                   |    |   |      |  
|                   |  | (In millions,     |   
|                   |  | except for rates) |   
|Income taxes       |  | $                 | 44 |   |      | $ | 5  |  
|Effective tax rate |  |                   | 42 | % |      |   | 33 | %









Commitments and Contingencies




28



---



##### Table of Contents






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






| |   |                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------
| |  | capital and other expenditures;                                                                     
|
| |  | dividends;                                                                                          
|
| |  | financing plans;                                                                                    
|
| |  | capital structure;                                                                                  
|
| |  | liquidity and cash flow;                                                                            
|
| |  | pending legal proceedings, claims and governmental proceedings,
    including environmental matters;
|
| |  | future economic performance;                                                                        
|
| |  | operating income;                                                                                   
|
| |  | managements plans; and                                                                             
|
| |  | goals and objectives for future operations.                                                         



29



---



##### Table of Contents








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








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

Material Weaknesses Previously Disclosed




Evaluation of Disclosure Controls and Procedures






Changes in Internal Control Over Financial Reporting






| |   |                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Implemented automated and manual controls for our primary
    information technology financial system to monitor unauthorized
    password changes;                                                                                       
|
| |  | Developed a segregation of duties matrix for our primary
    information technology financial system that documents existing
    role assignments;                                                                                        
|
| |  | Formalized and issued a company-wide account reconciliation
    policy;                                                                                                                                                                   
|
| |  | Implemented an account reconciliation monitoring tool that
    allows for aggregation of unreconciled amounts;                                                                                                                            
|
| |  | Provided additional training regarding the company-wide account
    reconciliation policy and appropriate use of the account
    reconciliation monitoring tool;                                                                          
|
| |  | Developed a process to improve communication between commercial
    and accounting personnel to allow for complete and timely
    communication of information to record non-routine transactions
    related to divestiture activity; and
|
| |  | Implemented an accounting policy that requires a higher level of
    review of non-routine transactions.                                                                                                                                  



30



---



##### Table of Contents








PART II  OTHER INFORMATION





Item 1. Legal Proceedings







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







Item 3. Defaults Upon Senior Securities







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







Item 5. Other Information







Item 6. Exhibits




|        |      |    |             |                                                                                                        
|------- | ---- | -- | ----------- | -------------------------------------------------------------------------------------------------------
|Exhibit |      |    |            
|Number  |      |    | Description
|        |      |    |            
|        | *31  | .A |             | Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.
|        | *31  | .B |             | Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.
|        | **32 | .A |             | Certification of Chief Executive Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.
|        | **32 | .B |             | Certification of Chief Financial Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.





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

31



---



##### Table of Contents






SIGNATURES






| |  |                    
| |  | -------------------
| |  | EL PASO CGP COMPANY



| |                              
| | -----------------------------
| | /s/ D. Dwight Scott          
| |                              
| | D. Dwight Scott              
| | Executive Vice President and 
| | Chief Financial Officer      
| | (Principal Financial Officer)



| |                                     
| | ------------------------------------
| | /s/ Jeffrey I. Beason               
| |                                     
| | Jeffrey I. Beason                   
| | Senior Vice President and Controller
| | (Principal Accounting Officer)      

32



---



##### Table of Contents



EXHIBIT INDEX




|        |      |    |             |                                                                                                        
|------- | ---- | -- | ----------- | -------------------------------------------------------------------------------------------------------
|Exhibit |      |    |            
|Number  |      |    | Description
|        |      |    |            
|        | *31  | .A |             | Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.
|        | *31  | .B |             | Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.
|        | **32 | .A |             | Certification of Chief Executive Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.
|        | **32 | .B |             | Certification of Chief Financial Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.