##### 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 June 30, 2005


OR


[  ]


TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period
from           to


Commission File Number 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




o þ


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                                          |  |      | 24 | 
|                                             |  | Cautionary Statements for Purposes of the
    Safe Harbor Provisions of the Private Securities
    Litigation Reform Act of 1995 |  |      | 35 | 
|Item 3.                                      |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                                     |  |      | *  | 
|Item 4.                                      |  | Controls and Procedures                                                                                                            |  |      | 36 | 
|                                             |  | PART II  Other Information                                                                                                        |  |      |    | 
|Item 1.                                      |  | Legal Proceedings                                                                                                                  |  |      | 38 | 
|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                                                                                                                  |  |      | 38 | 
|Item 6.                                      |  | Exhibits                                                                                                                           |  |      | 38 | 
|                                             |  | Signatures                                                                                                                         |  |      | 39 | 
|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                 
|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                                      
|NGL   |  | = natural gas liquids                           





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##### Table of Contents






PART I  FINANCIAL INFORMATION





Item 1. Financial Statements


EL PASO CGP COMPANY


CONDENSED CONSOLIDATED STATEMENTS OF INCOME


(In millions)


(Unaudited)


|                                                 |                                          |               |     |                  |          |   |      |      |  |   |            |     |  |   |      |     | 
|------------------------------------------------ | ---------------------------------------- | ------------- | --- | ---------------- | -------- | - | ---- | ---- |  | - | ---------- | --- |  | - | ---- | --- | 
|                                                 |                                          |               |     | Six Months Ended |         
|                                                 |                                          | Quarter Ended |     |                  | June 30, |  
|                                                 |                                          | June 30,      |     |                  |          |  
|                                                 |                                          |               |     |                  |          |   | 2004 |     
|                                                 |                                          | 2005          |     |                  | 2004     |   |      | 2005 |  |   | (Restated) |    
|                                                 |                                          |               |     |                  |          |   |      |      |  |   |            |    
|Operating revenues                               |                                          | $             | 419 |                  |          | $ | 449  |      |  | $ | 929        |     |  | $ | 924  |    
|                                                 |                                          |               |     |                  |          |   |      |      |  |   |            |    
|Operating expenses                               |                                          |               |     |                  |          |   |      |      |  |   |            |     |  |   |      |    
|                                                 | Cost of products and services            |               |     | 42               |          |   |      | 64   |  |   |            | 117 |  |   |      | 126 | 
|                                                 | Operation and maintenance                |               |     | 131              |          |   |      | 114  |  |   |            | 255 |  |   |      | 236 | 
|                                                 | Depreciation, depletion and amortization |               |     | 122              |          |   |      | 115  |  |   |            | 241 |  |   |      | 227 | 
|                                                 | Loss on long-lived assets                |               |     | 65               |          |   |      |     |  |   |            | 64  |  |   |      | 88  | 
|                                                 | Taxes, other than income taxes           |               |     | 12               |          |   |      | 17   |  |   |            | 33  |  |   |      | 28  | 
|                                                 |                                          |               |     |                  |          |   |      |      |  |   |            |    
|                                                 |                                          |               | 372 |                  |          |   | 310  |      |  |   | 710        |     |  |   | 705  |    
|                                                 |                                          |               |     |                  |          |   |      |      |  |   |            |    
|Operating income                                 |                                          |               | 47  |                  |          |   | 139  |      |  |   | 219        |     |  |   | 219  |    
|Earnings (losses) from unconsolidated affiliates |                                          |               | (71 | )                |          |   | 24   |      |  |   | (85        | )   |  |   | 59   |    
|Other income, net                                |                                          |               | 14  |                  |          |   | 7    |      |  |   | 21         |     |  |   | 13   |    
|Interest and debt expense                        |                                          |               | (77 | )                |          |   | (91  | )    |  |   | (150       | )   |  |   | (192 | )  
|Affiliated interest income (expense), net        |                                          |               | 4   |                  |          |   | 5    |      |  |   | 6          |     |  |   | (9   | )  
|                                                 |                                          |               |     |                  |          |   |      |      |  |   |            |    
|Income (loss) before income taxes                |                                          |               | (83 | )                |          |   | 84   |      |  |   | 11         |     |  |   | 90   |    
|Income taxes                                     |                                          |               | (15 | )                |          |   | 29   |      |  |   | 25         |     |  |   | 31   |    
|                                                 |                                          |               |     |                  |          |   |      |      |  |   |            |    
|Income (loss) from continuing operations         |                                          |               | (68 | )                |          |   | 55   |      |  |   | (14        | )   |  |   | 59   |    
|Discontinued operations, net of income taxes     |                                          |               | (4  | )                |          |   | (5   | )    |  |   |           |     |  |   | (95  | )  
|                                                 |                                          |               |     |                  |          |   |      |      |  |   |            |    
|Net income (loss)                                |                                          | $             | (72 | )                |          | $ | 50   |      |  | $ | (14        | )   |  | $ | (36  | )  
|                                                 |                                          |               |     |                  |          |   |      |      |  |   |            |    



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EL PASO CGP COMPANY


CONDENSED CONSOLIDATED BALANCE SHEETS


(In millions, except share amounts)


(Unaudited)


|                                       |                                                           |                                                            |                                          |       |              |       |        |       |     |       | 
|-------------------------------------- | --------------------------------------------------------- | ---------------------------------------------------------- | ---------------------------------------- | ----- | ------------ | ----- | ------ | ----- | --- | ----- | 
|                                       |                                                           | June 30,                                                   |                                          |       | December 31, |      
|                                       |                                                           | 2005                                                       |                                          |       | 2004         |      
|                                       |                                                           |                                                            |                                          |       |              |      
|ASSETS                                
|Current assets                         |                                                           |                                                            |                                          |       |              |       |        |      
|                                       | Cash and cash equivalents                                 |                                                            | $                                        | 63    |              |       | $      | 80    |    
|                                       | Accounts and notes receivable                             |                                                            |                                          |       |              |       |        |       |    
|                                       |                                                           | Customers, net of allowance of $19 in 2005 and $27 in 2004 |                                          |       | 153          |       |        |       | 217 |      
|                                       |                                                           | Affiliates                                                 |                                          |       | 279          |       |        |       | 263 |      
|                                       |                                                           | Other                                                      |                                          |       | 71           |       |        |       | 93  |      
|                                       | Inventory                                                 |                                                            |                                          | 43    |              |       |        | 52    |    
|                                       | Assets from discontinued operations                       |                                                            |                                          | 193   |              |       |        | 185   |    
|                                       | Deferred income taxes                                     |                                                            |                                          | 67    |              |       |        | 87    |    
|                                       | Other                                                     |                                                            |                                          | 57    |              |       |        | 41    |    
|                                       |                                                           |                                                            |                                          |       |              |      
|                                       |                                                           |                                                            | Total current assets                     |       |              | 926   |        |       |     | 1,018 | 
|                                       |                                                           |                                                            |                                          |       |              |      
|Property, plant and equipment, at cost |                                                           |                                                            |                                          |       |              |       |        |      
|                                       | Natural gas and oil properties, at full cost              |                                                            |                                          | 7,304 |              |       |        | 7,153 |    
|                                       | Pipelines                                                 |                                                            |                                          | 7,083 |              |       |        | 7,040 |    
|                                       | Power facilities                                          |                                                            |                                          | 177   |              |       |        | 373   |    
|                                       | Gathering and processing systems                          |                                                            |                                          | 36    |              |       |        | 44    |    
|                                       | Other                                                     |                                                            |                                          | 134   |              |       |        | 89    |    
|                                       |                                                           |                                                            |                                          |       |              |      
|                                       |                                                           |                                                            | 14,734                                   |       |              |       | 14,699 |      
|                                       | Less accumulated depreciation, depletion and amortization |                                                            |                                          | 8,057 |              |       |        | 7,981 |    
|                                       |                                                           |                                                            |                                          |       |              |      
|                                       |                                                           |                                                            | Total property, plant and equipment, net |       |              | 6,677 |        |       |     | 6,718 | 
|                                       |                                                           |                                                            |                                          |       |              |      
|Other assets                           |                                                           |                                                            |                                          |       |              |       |        |      
|                                       | Investments in unconsolidated affiliates                  |                                                            |                                          | 764   |              |       |        | 894   |    
|                                       | Goodwill and other intangible assets, net                 |                                                            |                                          | 420   |              |       |        | 419   |    
|                                       | Other                                                     |                                                            |                                          | 489   |              |       |        | 295   |    
|                                       |                                                           |                                                            |                                          |       |              |      
|                                       |                                                           |                                                            | 1,673                                    |       |              |       | 1,608  |      
|                                       |                                                           |                                                            |                                          |       |              |      
|                                       |                                                           |                                                            | Total assets                             |       | $            | 9,276 |        |       | $   | 9,344 | 
|                                       |                                                           |                                                            |                                          |       |              |      



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EL PASO CGP COMPANY


CONDENSED CONSOLIDATED BALANCE SHEETS 
(Continued)


(In millions, except share amounts)


(Unaudited)


|                                                         |                                                                              |            |                                            |       |              |       |       |       |     |       | 
|-------------------------------------------------------- | ---------------------------------------------------------------------------- | ---------- | ------------------------------------------ | ----- | ------------ | ----- | ----- | ----- | --- | ----- | 
|                                                         |                                                                              | June 30,   |                                            |       | December 31, |      
|                                                         |                                                                              | 2005       |                                            |       | 2004         |      
|                                                         |                                                                              |            |                                            |       |              |      
|LIABILITIES AND STOCKHOLDERS EQUITY                    
|Current liabilities                                      |                                                                              |            |                                            |       |              |       |       |      
|                                                         | Accounts payable                                                             |            |                                            |       |              |       |       |       |    
|                                                         |                                                                              | Trade      |                                            | $     | 121          |       |       | $     | 153 |      
|                                                         |                                                                              | Affiliates |                                            |       | 40           |       |       |       | 61  |      
|                                                         |                                                                              | Other      |                                            |       | 183          |       |       |       | 211 |      
|                                                         | Current maturities of long-term debt                                         |            |                                            | 135   |              |       |       | 310   |    
|                                                         | Notes payable to affiliates                                                  |            |                                            | 61    |              |       |       | 211   |    
|                                                         | Liabilities from price risk management activities                            |            |                                            | 104   |              |       |       | 148   |    
|                                                         | Accrued interest                                                             |            |                                            | 58    |              |       |       | 59    |    
|                                                         | Liabilities from discontinued operations                                     |            |                                            | 121   |              |       |       | 104   |    
|                                                         | Other                                                                        |            |                                            | 269   |              |       |       | 211   |    
|                                                         |                                                                              |            |                                            |       |              |      
|                                                         |                                                                              |            | Total current liabilities                  |       |              | 1,092 |       |       |     | 1,468 | 
|                                                         |                                                                              |            |                                            |       |              |      
|Long-term financing obligations, less current maturities |                                                                              |            | 3,794                                      |       |              |       | 3,447 |      
|                                                         |                                                                              |            |                                            |       |              |      
|Other                                                    |                                                                              |            |                                            |       |              |       |       |      
|                                                         | Deferred income taxes                                                        |            |                                            | 711   |              |       |       | 692   |    
|                                                         | Other                                                                        |            |                                            | 307   |              |       |       | 388   |    
|                                                         |                                                                              |            |                                            |       |              |      
|                                                         |                                                                              |            | 1,018                                      |       |              |       | 1,080 |      
|                                                         |                                                                              |            |                                            |       |              |      
|Commitments and contingencies                            |                                                                              |            |                                            |       |              |       |       |      
|Securities of subsidiaries                               |                                                                              |            | 151                                        |       |              |       | 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                                                            |            |                                            | 89    |              |       |       | 103   |    
|                                                         | Accumulated other comprehensive loss                                         |            |                                            | (49   | )            |       |       | (93   | )  
|                                                         |                                                                              |            |                                            |       |              |      
|                                                         |                                                                              |            | Total stockholders equity                 |       |              | 3,221 |       |       |     | 3,191 | 
|                                                         |                                                                              |            |                                            |       |              |      
|                                                         |                                                                              |            | Total liabilities and stockholders equity |       | $            | 9,276 |       |       | $   | 9,344 | 
|                                                         |                                                                              |            |                                            |       |              |      



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EL PASO CGP COMPANY


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(In millions)


(Unaudited)


|                                     |                                                                                      |                                                                              |                                                     |      |               |      |     |      |        |        |  
|------------------------------------ | ------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------- | --------------------------------------------------- | ---- | ------------- | ---- | --- | ---- | ------ | ------ | -
|                                     |                                                                                      | Six Months Ended                                                             |                                                    
|                                     |                                                                                      | June 30,                                                                     |                                                    
|                                     |                                                                                      |                                                                              |                                                    
|                                     |                                                                                      |                                                                              |                                                     | 2004 |              
|                                     |                                                                                      | 2005                                                                         |                                                     |      | (Restated)(1) |     
|                                     |                                                                                      |                                                                              |                                                     |      |               |     
|Cash flows from operating activities |                                                                                      |                                                                              |                                                     |      |               |      |     |     
|                                     | Net loss                                                                             |                                                                              | $                                                   | (14  | )             |      | $   | (36  | )     
|                                     |                                                                                      | Less loss from discontinued operations, net of income taxes                  |                                                     |      |              |      |     |      | (95    | )     
|                                     |                                                                                      |                                                                              |                                                     |      |               |     
|                                     | Net income (loss) from continuing operations                                         |                                                                              |                                                     | (14  | )             |      |     | 59   |       
|                                     | Adjustments to reconcile net income (loss) to net cash from
    operating activities |                                                                              |                                                     |      |               |      |     |      |       
|                                     |                                                                                      | Depreciation, depletion and amortization                                     |                                                     |      | 241           |      |     |      | 227    |       
|                                     |                                                                                      | Loss on long-lived assets                                                    |                                                     |      | 64            |      |     |      | 88     |       
|                                     |                                                                                      | Earnings from unconsolidated affiliates, adjusted for cash
    distributions |                                                     |      | 155           |      |     |      | (12    | )     
|                                     |                                                                                      | Deferred income taxes                                                        |                                                     |      | (4            | )    |     |      | 26     |       
|                                     |                                                                                      | Other non-cash items                                                         |                                                     |      | (13           | )    |     |      | 11     |       
|                                     |                                                                                      | Asset and liability changes                                                  |                                                     |      | (45           | )    |     |      | 46     |       
|                                     |                                                                                      |                                                                              |                                                     |      |               |     
|                                     |                                                                                      | Cash provided by continuing operations                                       |                                                     |      | 384           |      |     |      | 445    |       
|                                     |                                                                                      | Cash provided by (used in) discontinued operations                           |                                                     |      | (17           | )    |     |      | 166    |       
|                                     |                                                                                      |                                                                              |                                                     |      |               |     
|                                     |                                                                                      |                                                                              | Net cash provided by operating activities           |      |               | 367  |     |      |        | 611    |  
|                                     |                                                                                      |                                                                              |                                                     |      |               |     
|Cash flows from investing activities |                                                                                      |                                                                              |                                                     |      |               |      |     |     
|                                     | Additions to property, plant and equipment                                           |                                                                              |                                                     | (268 | )             |      |     | (295 | )     
|                                     | Purchases of interests in equity investments                                         |                                                                              |                                                     | (7   | )             |      |     | (12  | )     
|                                     | Net proceeds from the sale of assets and investments                                 |                                                                              |                                                     | 14   |               |      |     | 81   |       
|                                     | Net change in restricted cash                                                        |                                                                              |                                                     | (11  | )             |      |     | 34   |       
|                                     | Net change in notes receivable from affiliates                                       |                                                                              |                                                     | (251 | )             |      |     |     |       
|                                     | Increase in notes from unconsolidated affiliates                                     |                                                                              |                                                     | 6    |               |      |     | 20   |       
|                                     | Other                                                                                |                                                                              |                                                     | 54   |               |      |     | 31   |       
|                                     |                                                                                      |                                                                              |                                                     |      |               |     
|                                     |                                                                                      | Cash used in continuing operations                                           |                                                     |      | (463          | )    |     |      | (141   | )     
|                                     |                                                                                      | Cash provided by discontinued operations                                     |                                                     |      | 70            |      |     |      | 1,112  |       
|                                     |                                                                                      |                                                                              |                                                     |      |               |     
|                                     |                                                                                      |                                                                              | Net cash provided by (used in) investing activities |      |               | (393 | )   |      |        | 971    |  
|                                     |                                                                                      |                                                                              |                                                     |      |               |     
|Cash flows from financing activities |                                                                                      |                                                                              |                                                     |      |               |      |     |     
|                                     | Payments to retire long-term debt and other financing obligations                    |                                                                              |                                                     | (294 | )             |      |     | (460 | )     
|                                     | Net change in affiliated notes payable                                               |                                                                              |                                                     | (150 | )             |      |     | (896 | )     
|                                     | Net proceeds from the issuance of long-term debt and other
    financing obligations |                                                                              |                                                     | 458  |               |      |     |     |       
|                                     | Proceeds from issuance of securities of subsidiaries                                 |                                                                              |                                                     |     |               |      |     | 74   |       
|                                     | Contributions from discontinued operations                                           |                                                                              |                                                     | 53   |               |      |     | 913  |       
|                                     | Other                                                                                |                                                                              |                                                     | (5   | )             |      |     | 1    |       
|                                     |                                                                                      |                                                                              |                                                     |      |               |     
|                                     |                                                                                      | Cash provided by (used in) continuing operations                             |                                                     |      | 62            |      |     |      | (368   | )     
|                                     |                                                                                      | Cash used in discontinued operations                                         |                                                     |      | (53           | )    |     |      | (1,278 | )     
|                                     |                                                                                      |                                                                              |                                                     |      |               |     
|                                     |                                                                                      |                                                                              | Net cash provided by (used in) financing activities |      |               | 9    |     |      |        | (1,646 | )
|                                     |                                                                                      |                                                                              |                                                     |      |               |     
|Change in cash and cash equivalents  |                                                                                      |                                                                              | (17                                                 | )    |               |      | (64 | )   
|Cash and cash equivalents            |                                                                                      |                                                                              |                                                     |      |               |      |     |     
|                                     | Beginning of period                                                                  |                                                                              |                                                     | 80   |               |      |     | 150  |       
|                                     |                                                                                      |                                                                              |                                                     |      |               |     
|                                     | End of period                                                                        |                                                                              | $                                                   | 63   |               |      | $   | 86   |       
|                                     |                                                                                      |                                                                              |                                                     |      |               |     






|    |                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Only individual line items within cash flows from operating
    activities have been restated. Total cash flows from operating
    activities, investing activities, and financing activities, as
    well as discontinued operations were unaffected by our
    restatements.



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##### Table of Contents



EL PASO CGP COMPANY


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


(In millions)


(Unaudited)


|                                                                                                                            |                                                                                                                                                             |                                   |     |                  |          |   |      |      |     |   |            |    |    |   |     |     |     |  
|--------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------- | --- | ---------------- | -------- | - | ---- | ---- | --- | - | ---------- | -- | -- | - | --- | --- | --- | -
|                                                                                                                            |                                                                                                                                                             |                                   |     | Six Months Ended |         
|                                                                                                                            |                                                                                                                                                             | Quarter Ended                     |     |                  | June 30, |  
|                                                                                                                            |                                                                                                                                                             | June 30,                          |     |                  |          |  
|                                                                                                                            |                                                                                                                                                             |                                   |     |                  |          |   | 2004 |     
|                                                                                                                            |                                                                                                                                                             | 2005                              |     |                  | 2004     |   |      | 2005 |     |   | (Restated) |   
|                                                                                                                            |                                                                                                                                                             |                                   |     |                  |          |   |      |      |     |   |            |   
|Net income (loss)                                                                                                           |                                                                                                                                                             | $                                 | (72 | )                |          | $ | 50   |      |     | $ | (14        | )  |    | $ | (36 | )  
|                                                                                                                            |                                                                                                                                                             |                                   |     |                  |          |   |      |      |     |   |            |   
|Foreign currency translation adjustments (net of income taxes of
    less than $1 in 2005 and less than $1 and $36 in 2004) |                                                                                                                                                             |                                   | 3   |                  |          |   | (1   | )    |     |   | 6          |    |    |   | (33 | )  
|Unrealized net gains (losses) from cash flow hedging activity                                                               |                                                                                                                                                             |                                   |     |                  |          |   |      |      |     |   |            |    |    |   |     |    
|                                                                                                                            | Unrealized mark-to-market gains (losses) arising during period
    (net of income taxes of $12 and $3 in 2005 and $7
    and $15 in 2004)                   |                                   |     | 21               |          |   |      | (12  | )   |   |            | (4 | )  |   |     | (26 | )  
|                                                                                                                            | Reclassification adjustments for changes in initial value to the
    settlement date (net of income taxes of $15 and $24 in 2005 and
    $2 and $6 in 2004) |                                   |     | 27               |          |   |      | 2    |     |   |            | 42 |    |   |     | 9   |    
|                                                                                                                            |                                                                                                                                                             |                                   |     |                  |          |   |      |      |     |   |            |   
|                                                                                                                            |                                                                                                                                                             | Other comprehensive income (loss) |     |                  | 51       |   |      |      | (11 | ) |            |    | 44 |   |     |     | (50 | )
|                                                                                                                            |                                                                                                                                                             |                                   |     |                  |          |   |      |      |     |   |            |   
|Comprehensive income (loss)                                                                                                 |                                                                                                                                                             | $                                 | (21 | )                |          | $ | 39   |      |     | $ | 30         |    |    | $ | (86 | )  
|                                                                                                                            |                                                                                                                                                             |                                   |     |                  |          |   |      |      |     |   |            |   



5



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##### 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




Restatement


Cumulative Foreign Currency Translation Adjustments
(CTA).








|                                  |                                              |                                        |   |      |             |  |   |     |  
|--------------------------------- | -------------------------------------------- | -------------------------------------- | - | ---- | ----------- |  | - | --- | -
|                                  |                                              | For the Six Months Ended June 30, 2004 |  
|                                  |                                              |                                        |  
|                                  |                                              | As Reported(1)                         |   |      | As Restated | 
|                                  |                                              |                                        |   |      |             | 
|                                  |                                              | (In millions)                          |  
|Income Statement:                 |                                              |                                        |   |      |             |  |   |    
|                                  | Discontinued operations, net of income taxes |                                        | $ | (127 | )           |  | $ | (95 | )
|                                  | Net loss                                     |                                        |   | (68  | )           |  |   | (36 | )
|Statement of Comprehensive Income |                                              |                                        |   |      |             |  |   |    
|                                  | Foreign currency translation adjustments     |                                        | $ | (1   | )           |  | $ | (33 | )
|                                  | Other comprehensive loss                     |                                        |   | (18  | )           |  |   | (50 | )






|    |                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------
|(1) | Includes the impact of the reclassification of our south
    Louisiana assets as discontinued operations.

6



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##### Table of Contents



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 Accounting for Asset Retirement Obligations


Accounting for Pipeline Integrity Costs.


7



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##### Table of Contents



2. Divestitures




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





|             |  |                                                                  |  |                                                                   |  | 
|------------ |  | ---------------------------------------------------------------- |  | ----------------------------------------------------------------- |  | 
|             |  | 2005                                                             |  | 2004                                                              |  | 
|             |  |                                                                  |  |                                                                   |  | 
|Power        |  |  Eagle Point power facility                                     |  |  Mohawk River Funding IV                                         |  | 
|             |  |  Rensselaer power facility                                      |  |  Utility Contract Funding (UCF)                                  |  | 
|             |  |  Power turbine                                                  |  |  Bastrop Company equity investment                               |  | 
|            
|Discontinued |  |  Interest in Paraxylene facility
     MTBE processing facility |  |  Natural gas and oil production
    properties in Canada         |  | 
|             |  |  International natural gas and oil production
    properties    |  |  Aruba and Eagle Point refineries and other petroleum
    assets |  | 



Accounting for the Impairment or
Disposal of Long-Lived Assets




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

South Louisiana Gathering and Processing Operations.


International Natural Gas and Oil Production Operations.


Petroleum Markets.




8



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##### Table of Contents





|                                                                |  |               |      |               |            |       |           |            |  |   |       |   |  |   |      |  
|--------------------------------------------------------------- |  | ------------- | ---- | ------------- | ---------- | ----- | --------- | ---------- |  | - | ----- | - |  | - | ---- | -
|                                                                |  |               |      |               |            | South |           |            | 
|                                                                |  |               |      | International |            |       | Louisiana |            |  |  
|                                                                |  |               |      | Natural Gas   |            |       | Gathering |            |  |  
|                                                                |  |               |      | and Oil       |            |       | and       |            |  |  
|                                                                |  | Petroleum     |      |               | Production |       |           | Processing |  |   |      
|                                                                |  | Markets       |      |               | Operations |       |           | Operations |  |   | Total |  
|                                                                |  |               |      |               |            |       |           |            |  |   |       |  
|                                                                |  | (In millions) |     
|Operating Results Data                                          |  |               |      |               |            |       |           |           
|                                                               
|Quarter Ended June 30, 2005                                     |  |               |      |               |            |       |           |            |  |   |       |   |  |   |      |  
|Revenues                                                        |  | $             | 30   |               |            | $     |          |            |  | $ | 90    |   |  | $ | 120  |  
|Costs and expenses                                              |  |               | (33  | )             |            |       | (1        | )          |  |   | (76   | ) |  |   | (110 | )
|Loss on long-lived assets                                       |  |               |     |               |            |       | (4        | )          |  |   |      |   |  |   | (4   | )
|Other expense                                                   |  |               | (4   | )             |            |       |          |            |  |   | (1    | ) |  |   | (5   | )
|                                                                |  |               |      |               |            |       |           |            |  |   |       |  
|Income (loss) before income taxes                               |  |               | (7   | )             |            |       | (5        | )          |  |   | 13    |   |  |   | 1    |  
|Income taxes                                                    |  |               | 1    |               |            |       | (2        | )          |  |   | 6     |   |  |   | 5    |  
|                                                                |  |               |      |               |            |       |           |            |  |   |       |  
|Income (loss) from discontinued operations, net of income taxes |  | $             | (8   | )             |            | $     | (3        | )          |  | $ | 7     |   |  | $ | (4   | )
|                                                                |  |               |      |               |            |       |           |            |  |   |       |  
|                                                               
|Quarter Ended June 30, 2004                                     |  |               |      |               |            |       |           |            |  |   |       |   |  |   |      |  
|Revenues                                                        |  | $             | 54   |               |            | $     | 1         |            |  | $ | 65    |   |  | $ | 120  |  
|Costs and expenses                                              |  |               | (76  | )             |            |       | (3        | )          |  |   | (56   | ) |  |   | (135 | )
|Gain on long-lived assets                                       |  |               | 4    |               |            |       |          |            |  |   |      |   |  |   | 4    |  
|                                                                |  |               |      |               |            |       |           |            |  |   |       |  
|Income (loss) before income taxes                               |  |               | (18  | )             |            |       | (2        | )          |  |   | 9     |   |  |   | (11  | )
|Income taxes                                                    |  |               | (3   | )             |            |       | (6        | )          |  |   | 3     |   |  |   | (6   | )
|                                                                |  |               |      |               |            |       |           |            |  |   |       |  
|Income (loss) from discontinued operations, net of income taxes |  | $             | (15  | )             |            | $     | 4         |            |  | $ | 6     |   |  | $ | (5   | )
|                                                                |  |               |      |               |            |       |           |            |  |   |       |  
|                                                               
|Six Months Ended June 30, 2005                                  |  |               |      |               |            |       |           |            |  |   |       |   |  |   |      |  
|Revenues                                                        |  | $             | 74   |               |            | $     | 2         |            |  | $ | 177   |   |  | $ | 253  |  
|Costs and expenses                                              |  |               | (86  | )             |            |       | (2        | )          |  |   | (154  | ) |  |   | (242 | )
|Gain (loss) on long-lived assets                                |  |               | 3    |               |            |       | (5        | )          |  |   |      |   |  |   | (2   | )
|Other income                                                    |  |               | 11   |               |            |       |          |            |  |   | (1    | ) |  |   | 10   |  
|                                                                |  |               |      |               |            |       |           |            |  |   |       |  
|Income (loss) before income taxes                               |  |               | 2    |               |            |       | (5        | )          |  |   | 22    |   |  |   | 19   |  
|Income taxes                                                    |  |               | 13   |               |            |       | (3        | )          |  |   | 9     |   |  |   | 19   |  
|                                                                |  |               |      |               |            |       |           |            |  |   |       |  
|Income (loss) from discontinued operations, net of income taxes |  | $             | (11  | )             |            | $     | (2        | )          |  | $ | 13    |   |  | $ |     |  
|                                                                |  |               |      |               |            |       |           |            |  |   |       |  
|                                                               
|Six Months Ended June 30, 2004                                  |  |               |      |               |            |       |           |            |  |   |       |   |  |   |      |  
|Revenues                                                        |  | $             | 693  |               |            | $     | 28        |            |  | $ | 139   |   |  | $ | 860  |  
|Costs and expenses                                              |  |               | (729 | )             |            |       | (47       | )          |  |   | (121  | ) |  |   | (897 | )
|Loss on long-lived assets                                       |  |               | (38  | )             |            |       | (16       | )          |  |   |      |   |  |   | (54  | )
|Other expense                                                   |  |               | (10  | )             |            |       |          |            |  |   |      |   |  |   | (10  | )
|Interest and debt expense                                       |  |               | (3   | )             |            |       | 1         |            |  |   |      |   |  |   | (2   | )
|                                                                |  |               |      |               |            |       |           |            |  |   |       |  
|Income (loss) before income taxes                               |  |               | (87  | )             |            |       | (34       | )          |  |   | 18    |   |  |   | (103 | )
|Income taxes                                                    |  |               | (9   | )             |            |       | (5        | )          |  |   | 6     |   |  |   | (8   | )
|                                                                |  |               |      |               |            |       |           |            |  |   |       |  
|Income (loss) from discontinued operations, net of income taxes |  | $             | (78  | )             |            | $     | (29       | )          |  | $ | 12    |   |  | $ | (95  | )
|                                                                |  |               |      |               |            |       |           |            |  |   |       |  

9



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|                                       |                                    |                   |   |               |            |       |           |            |   |  |       |    |     |  |   |     |     | 
|-------------------------------------- | ---------------------------------- | ----------------- | - | ------------- | ---------- | ----- | --------- | ---------- | - |  | ----- | -- | --- |  | - | --- | --- | 
|                                       |                                    |                   |   |               |            | South |           |            |  
|                                       |                                    |                   |   | International |            |       | Louisiana |            |   | 
|                                       |                                    |                   |   | Natural Gas   |            |       | Gathering |            |   | 
|                                       |                                    |                   |   | and Oil       |            |       | and       |            |   | 
|                                       |                                    | Petroleum         |   |               | Production |       |           | Processing |   |  |      
|                                       |                                    | Markets           |   |               | Operations |       |           | Operations |   |  | Total |   
|                                       |                                    |                   |   |               |            |       |           |            |   |  |       |   
|Financial Position Data                |                                    |                   |   |               |            |       |           |            |   |  |       |    |     |  |   |    
|June 30, 2005                          |                                    |                   |   |               |            |       |           |            |   |  |       |    |     |  |   |    
|Assets of discontinued operations      |                                    |                   |   |               |            |       |           |            |   |  |       |    |     |  |   |    
|                                       | Accounts and notes receivables     |                   | $ | 3             |            |       | $         |           |   |  | $     | 64 |     |  | $ | 67  |    
|                                       | Inventory                          |                   |   | 3             |            |       |           |           |   |  |       | 6  |     |  |   | 9   |    
|                                       | Other current assets               |                   |   |              |            |       |           |           |   |  |       | 20 |     |  |   | 20  |    
|                                       | Property, plant and equipment, net |                   |   | 1             |            |       |           |           |   |  |       | 89 |     |  |   | 90  |    
|                                       | Other non-current assets           |                   |   |              |            |       |           |           |   |  |       | 7  |     |  |   | 7   |    
|                                       |                                    |                   |   |               |            |       |           |            |   |  |       |   
|                                       |                                    | Total assets      |   | $             | 7          |       |           | $          |  |  |       | $  | 186 |  |   | $   | 193 | 
|                                       |                                    |                   |   |               |            |       |           |            |   |  |       |   
|Liabilities of discontinued operations |                                    |                   |   |               |            |       |           |            |   |  |       |    |     |  |   |    
|                                       | Accounts payable                   |                   | $ |              |            |       | $         |           |   |  | $     | 85 |     |  | $ | 85  |    
|                                       | Other current liabilities          |                   |   | 1             |            |       |           |           |   |  |       | 6  |     |  |   | 7   |    
|                                       | Other non-current liabilities      |                   |   |              |            |       |           |           |   |  |       | 29 |     |  |   | 29  |    
|                                       |                                    |                   |   |               |            |       |           |            |   |  |       |   
|                                       |                                    | Total liabilities |   | $             | 1          |       |           | $          |  |  |       | $  | 120 |  |   | $   | 121 | 
|                                       |                                    |                   |   |               |            |       |           |            |   |  |       |   
|December 31, 2004                      |                                    |                   |   |               |            |       |           |            |   |  |       |    |     |  |   |    
|Assets of discontinued operations      |                                    |                   |   |               |            |       |           |            |   |  |       |    |     |  |   |    
|                                       | Accounts and notes receivables     |                   | $ | 39            |            |       | $         | 2          |   |  | $     | 65 |     |  | $ | 106 |    
|                                       | Inventory                          |                   |   | 8             |            |       |           |           |   |  |       | 6  |     |  |   | 14  |    
|                                       | Other current assets               |                   |   | 3             |            |       |           | 1          |   |  |       | 8  |     |  |   | 12  |    
|                                       | Property, plant and equipment, net |                   |   | 14            |            |       |           | 6          |   |  |       | 81 |     |  |   | 101 |    
|                                       | Other non-current assets           |                   |   | 33            |            |       |           |           |   |  |       | 8  |     |  |   | 41  |    
|                                       |                                    |                   |   |               |            |       |           |            |   |  |       |   
|                                       |                                    | Total assets      |   | $             | 97         |       |           | $          | 9 |  |       | $  | 168 |  |   | $   | 274 | 
|                                       |                                    |                   |   |               |            |       |           |            |   |  |       |   
|Liabilities of discontinued operations |                                    |                   |   |               |            |       |           |            |   |  |       |    |     |  |   |    
|                                       | Accounts payable                   |                   | $ | 5             |            |       | $         |           |   |  | $     | 84 |     |  | $ | 89  |    
|                                       | Other current liabilities          |                   |   | 3             |            |       |           |           |   |  |       | 9  |     |  |   | 12  |    
|                                       | Other non-current liabilities      |                   |   | 3             |            |       |           |           |   |  |       | 31 |     |  |   | 34  |    
|                                       |                                    |                   |   |               |            |       |           |            |   |  |       |   
|                                       |                                    | Total liabilities |   | $             | 11         |       |           | $          |  |  |       | $  | 124 |  |   | $   | 135 | 
|                                       |                                    |                   |   |               |            |       |           |            |   |  |       |   

10



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##### Table of Contents



3. (Gain) Loss on Long-Lived Assets




|                                                               |  |               |     |  |                  |   |    |      |  |   |      |   |  |   |    |  
|-------------------------------------------------------------- |  | ------------- | --- |  | ---------------- | - | -- | ---- |  | - | ---- | - |  | - | -- | -
|                                                               |  | Quarter Ended |     |  | Six Months Ended |  
|                                                               |  | June 30,      |     |  | June 30,         |  
|                                                               |  |               |     |  |                  |  
|                                                               |  | 2005          |     |  | 2004             |   |    | 2005 |  |   | 2004 |  
|                                                               |  |               |     |  |                  |   |    |      |  |   |      |  
|                                                               |  | (In millions) |    
|Net realized gain                                              |  | $             |    |  |                  | $ | (2 | )    |  | $ | (2   | ) |  | $ | (3 | )
|Asset impairments                                              |  |               | 65  |  |                  |   | 2  |      |  |   | 66   |   |  |   | 91 |  
|                                                               |  |               |     |  |                  |   |    |      |  |   |      |  
|Loss on long-lived assets                                      |  |               | 65  |  |                  |   |   |      |  |   | 64   |   |  |   | 88 |  
|(Gain) loss on investments in unconsolidated
    affiliates(1) |  |               | 92  |  |                  |   | (3 | )    |  |   | 136  |   |  |   | (3 | )
|                                                               |  |               |     |  |                  |   |    |      |  |   |      |  
|(Gain) loss on long-lived assets and investments               |  | $             | 157 |  |                  | $ | (3 | )    |  | $ | 200  |   |  | $ | 85 |  
|                                                               |  |               |     |  |                  |   |    |      |  |   |      |  






|    |                                                                     
|--- | --------------------------------------------------------------------
|(1) | See Note 10 for a further description of these gains and
    losses.





4. Income Taxes




|                   |  |                             |     |            |          |   |    |      |  |   |      |   |  |   |    |  
|------------------ |  | --------------------------- | --- | ---------- | -------- | - | -- | ---- |  | - | ---- | - |  | - | -- | -
|                   |  |                             |     | Six Months |         
|                   |  | Quarter Ended               |     |            | Ended    |  
|                   |  | June 30,                    |     |            | June 30, |  
|                   |  |                             |     |            |          |  
|                   |  | 2005                        |     |            | 2004     |   |    | 2005 |  |   | 2004 |  
|                   |  |                             |     |            |          |   |    |      |  |   |      |  
|                   |  | (In millions, except rates) |    
|Income taxes       |  | $                           | (15 | )          |          | $ | 29 |      |  | $ | 25   |   |  | $ | 31 |  
|Effective tax rate |  |                             | 18  | %          |          |   | 35 | %    |  |   | 227  | % |  |   | 34 | %







11



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##### Table of Contents





5. Inventory




|                                 |                 |               |    |    |              |   |    |    | 
|-------------------------------- | --------------- | ------------- | -- | -- | ------------ | - | -- | -- | 
|                                 |                 | June 30,      |    |    | December 31, |  
|                                 |                 | 2005          |    |    | 2004         |  
|                                 |                 |               |    |    |              |  
|                                 |                 | (In millions) |   
|Materials and supplies and other |                 | $             | 41 |    |              | $ | 40 |   
|Natural gas liquids              |                 |               | 2  |    |              |   | 12 |   
|                                 |                 |               |    |    |              |  
|                                 | Total inventory |               | $  | 43 |              |   | $  | 52 | 
|                                 |                 |               |    |    |              |  

6. Debt, Other Financing Obligations and Other Credit
Facilities




|                                     |  |               |       |  |              |   |       | 
|------------------------------------ |  | ------------- | ----- |  | ------------ | - | ----- | 
|                                     |  | June 30,      |       |  | December 31, |  
|                                     |  | 2005          |       |  | 2004         |  
|                                     |  |               |       |  |              |  
|                                     |  | (In millions) |      
|Current maturities of long-term debt |  | $             | 135   |  |              | $ | 310   | 
|Long-term financing obligations      |  |               | 3,794 |  |              |   | 3,447 | 
|                                     |  |               |       |  |              |  
|Total                                |  | $             | 3,929 |  |              | $ | 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 | 
|                                               | Cheyenne Plains Gas Pipeline
    Company(1) |      | Non-recourse term loan due 2015 |               |  | Variable      |            |                |   | 266  |  |  |   | 261 | 
|                                               |                                             |      |                                 |               |  |               |            |                |   |      | 
|Increases
    through June 30, 2005            |                                             | $    | 466                             |               |  | $             | 458        |               
|                                               |                                             |      |                                 |               |  |              
|Repayments, repurchases, retirements and other |                                             |      |                                 |               |  |               |            |                |   |      |  |  |   |    
|                                               | CIG                                         |      | Debentures                      |               |  | 10%           |            |                | $ | 180  |  |  | $ | 180 | 
|                                               | ANR Pipeline Company (ANR)
    (2)          |      | Debentures                      |               |  | 7%            |            |                |   | 68   |  |  |   | 68  | 
|                                               | Other                                       |      | Long-term debt                  |               |  | Various       |            |                |   | 46   |  |  |   | 46  | 
|                                               |                                             |      |                                 |               |  |               |            |                |   |      | 
|Decreases
    through June 30, 2005            |                                             |      | 294                             |               |  |               | 294        |               
|                                               | Other                                       |      | Long-term debt                  |               |  | Various       |            |                |   | 2    |  |  |   | 2   | 
|                                               |                                             |      |                                 |               |  |               |            |                |   |      | 
|Decreases
    through filing date              |                                             | $    | 296                             |               |  | $             | 296        |               
|                                               |                                             |      |                                 |               |  |              






|    |                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 to convert the variable interest
    rate on approximately $213 million of this debt to a
    current fixed rate of 5.94 percent.
|   
|(2) | Holders of the $75 million 7% debentures due 2025 redeemed
    approximately $68 million in June 2005.                                                                                                                                                                                                                                                 

12



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



7. Commitments and Contingencies




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

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


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


MTBE.


13



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##### Table of Contents





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.


Government Investigations


Power Restructuring.


Reserve Revisions.


Iraq Oil Sales.




Rates and Regulatory Matters


Selective Discounting Notice of Inquiry (NOI).


14



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##### Table of Contents





Environmental Matters






|              |       |               |    |     |      |   |     |     | 
|------------- | ----- | ------------- | -- | --- | ---- | - | --- | --- | 
|              |       | June 30, 2005 |   
|              |       |               |   
|Sites         |       | Expected      |    |     | High |  
|              |       |               |    |     |      |  
|              |       | (In millions) |   
|Operating     |       | $             | 41 |     |      | $ | 47  |    
|Non-operating |       |               | 77 |     |      |   | 136 |    
|Superfund     |       |               | 3  |     |      |   | 8   |    
|              |       |               |    |     |      |  
|              | Total |               | $  | 121 |      |   | $   | 191 | 
|              |       |               |    |     |      |  



|                                                 |  |   |     |  
|------------------------------------------------ |  | - | --- | -
|Balance as of January 1, 2005                    |  | $ | 128 |  
|Additions/adjustments for remediation activities |  |   | 6   |  
|Payments for remediation activities              |  |   | (14 | )
|Other changes, net                               |  |   | 1   |  
|                                                 |  |   |    
|Balance as of June 30, 2005                      |  | $ | 121 |  
|                                                 |  |   |    



CERCLA Matters.


15



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Guarantees




8. Retirement Benefits




|                               |                  |                        |   |       |                           |   |    |          |       |   |                |   |  |      |   |   |      |   |    |      |  |   |      |   |  |   |    |   |  |   |    |   | 
|------------------------------ | ---------------- | ---------------------- | - | ----- | ------------------------- | - | -- | -------- | ----- | - | -------------- | - |  | ---- | - | - | ---- | - | -- | ---- |  | - | ---- | - |  | - | -- | - |  | - | -- | - | 
|                               |                  | Quarter Ended June 30, |   |       | Six Months Ended June 30, |  
|                               |                  |                        |   |       |                           |  
|                               |                  |                        |   | Other |                           |   |    |          | Other |  
|                               |                  | Pension                |   |       | Postretirement            |   |    | Pension  |       |   | Postretirement |  
|                               |                  | Benefits               |   |       | Benefits                  |   |    | Benefits |       |   | Benefits       |  
|                               |                  |                        |   |       |                           |   |    |          |       |   |                |  
|                               |                  | 2005                   |   |       | 2004                      |   |    | 2005     |       |   | 2004           |   |  | 2005 |   |   | 2004 |   |    | 2005 |  |   | 2004 |  
|                               |                  |                        |   |       |                           |   |    |          |       |   |                |   |  |      |   |   |      |   |    |      |  |   |      |  
|                               |                  | (In millions)          |  
|Interest cost                  |                  | $                      | 1 |       |                           | $ | 1  |          |       | $ | 1              |   |  | $    | 1 |   |      | $ | 2  |      |  | $ | 2    |   |  | $ | 2  |   |  | $ | 2  |  
|Expected return on plan assets |                  |                        |  |       |                           |   | (1 | )        |       |   | (1             | ) |  |      |  |   |      |   | (1 | )    |  |   | (2   | ) |  |   | (2 | ) |  |   | (1 | )
|                               |                  |                        |   |       |                           |   |    |          |       |   |                |   |  |      |   |   |      |   |    |      |  |   |      |  
|                               | Net benefit cost |                        | $ | 1     |                           |   | $  |         |       |   | $              |  |  |      | $ | 1 |      |   | $  | 1    |  |   | $    |  |  |   | $  |  |  |   | $  | 1 | 
|                               |                  |                        |   |       |                           |   |    |          |       |   |                |   |  |      |   |   |      |   |    |      |  |   |      |  

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




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9. Business Segment Information






|                                          |                                          |                |     |     |                  |   |     |      |  |   |      |     |   |   |      |    | 
|----------------------------------------- | ---------------------------------------- | -------------- | --- | --- | ---------------- | - | --- | ---- |  | - | ---- | --- | - | - | ---- | -- | 
|                                          |                                          | Quarters Ended |     |     | Six Months Ended |  
|                                          |                                          | June 30,       |     |     | June 30,         |  
|                                          |                                          |                |     |     |                  |  
|                                          |                                          | 2005           |     |     | 2004             |   |     | 2005 |  |   | 2004 |    
|                                          |                                          |                |     |     |                  |   |     |      |  |   |      |    
|                                          |                                          | (In millions)  |    
|Total EBIT                                |                                          | $              | (10 | )   |                  | $ | 170 |      |  | $ | 155  |     |   | $ | 291  |   
|Interest and debt expense                 |                                          |                | (77 | )   |                  |   | (91 | )    |  |   | (150 | )   |   |   | (192 | ) 
|Affiliated interest income (expense), net |                                          |                | 4   |     |                  |   | 5   |      |  |   | 6    |     |   |   | (9   | ) 
|Income taxes                              |                                          |                | 15  |     |                  |   | (29 | )    |  |   | (25  | )   |   |   | (31  | ) 
|                                          |                                          |                |     |     |                  |   |     |      |  |   |      |    
|                                          | Income (loss) from continuing operations |                | $   | (68 | )                |   | $   | 55   |  |   | $    | (14 | ) |   | $    | 59 | 
|                                          |                                          |                |     |     |                  |   |     |      |  |   |      |    

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|                                                 |  |               |     |  |               |       |     |       |  |   |          |   |  |              |    |   |       |   |    |   |  |   |     |    
|------------------------------------------------ |  | ------------- | --- |  | ------------- | ----- | --- | ----- |  | - | -------- | - |  | ------------ | -- | - | ----- | - | -- | - |  | - | --- | ---
|                                                 |  | Regulated     |     |  | Non-Regulated |       |     |       |  |  
|                                                 |  |               |     |  |               |       |     |       |  |  
|                                                 |  |               |     |  |               | Field |     |       |  |   |         
|Quarters Ended June 30,                          |  | Pipelines     |     |  | Production    |       |     | Power |  |   | Services |   |  | Corporate(1) |    |   | Total |  
|                                                 |  |               |     |  |               |       |     |       |  |   |          |   |  |              |    |   |       |  
|                                                 |  | (In millions) |     |  |              
|2005                                             |  |               |     |  |               |       |     |       |  |   |          |   |  |              |    |   |       |   |    |   |  |   |     |    
|Revenues from external customers                 |  | $             | 229 |  |               | $     | 116 | (2)   |  | $ | 27       |   |  | $            | 24 |   |       | $ | 6  |   |  | $ | 402 |    
|Intersegment revenues                            |  |               | 7   |  |               |       | 19  |       |  |   |         |   |  |              |   |   |       |   | (9 | ) |  |   | 17  | (3)
|Operation and maintenance                        |  |               | 70  |  |               |       | 41  |       |  |   | 20       |   |  |              | (1 | ) |       |   | 1  |   |  |   | 131 |    
|Depreciation, depletion and amortization         |  |               | 37  |  |               |       | 79  |       |  |   | 3        |   |  |              |   |   |       |   | 3  |   |  |   | 122 |    
|Loss on long-lived assets                        |  |               |    |  |               |       |    |       |  |   | 61       |   |  |              | 4  |   |       |   |   |   |  |   | 65  |    
|                                                
|Operating income (loss)                          |  | $             | 97  |  |               | $     | 14  |       |  | $ | (63      | ) |  | $            | 2  |   |       | $ | (3 | ) |  | $ | 47  |    
|Earnings (losses) from unconsolidated affiliates |  |               | 16  |  |               |       |    |       |  |   | (88      | ) |  |              | 1  |   |       |   |   |   |  |   | (71 | )  
|Other income (expense), net                      |  |               | 3   |  |               |       |    |       |  |   | 10       |   |  |              |   |   |       |   | 1  |   |  |   | 14  |    
|                                                 |  |               |     |  |               |       |     |       |  |   |          |   |  |              |    |   |       |  
|EBIT                                             |  | $             | 116 |  |               | $     | 14  |       |  | $ | (141     | ) |  | $            | 3  |   |       | $ | (2 | ) |  | $ | (10 | )  
|                                                 |  |               |     |  |               |       |     |       |  |   |          |   |  |              |    |   |       |  
|                                                
|2004                                             |  |               |     |  |               |       |     |       |  |   |          |   |  |              |    |   |       |   |    |   |  |   |     |    
|Revenues from external customers                 |  | $             | 189 |  |               | $     | 174 | (2)   |  | $ | 45       |   |  | $            | 18 |   |       | $ | 14 |   |  | $ | 440 |    
|Intersegment revenues                            |  |               |    |  |               |       | 9   |       |  |   |         |   |  |              |   |   |       |   |   |   |  |   | 9   | (3)
|Operation and maintenance                        |  |               | 54  |  |               |       | 38  |       |  |   | 22       |   |  |              |   |   |       |   |   |   |  |   | 114 |    
|Depreciation, depletion and amortization         |  |               | 30  |  |               |       | 80  |       |  |   | 2        |   |  |              | 1  |   |       |   | 2  |   |  |   | 115 |    
|(Gain) loss on long-lived assets                 |  |               |    |  |               |       |    |       |  |   | (1       | ) |  |              | 1  |   |       |   |   |   |  |   |    |    
|                                                
|Operating income                                 |  | $             | 71  |  |               | $     | 59  |       |  | $ | 6        |   |  | $            | 1  |   |       | $ | 2  |   |  | $ | 139 |    
|Earnings from unconsolidated affiliates          |  |               | 17  |  |               |       |    |       |  |   | 6        |   |  |              | 1  |   |       |   |   |   |  |   | 24  |    
|Other income, net                                |  |               | 1   |  |               |       |    |       |  |   | 4        |   |  |              |   |   |       |   | 2  |   |  |   | 7   |    
|                                                 |  |               |     |  |               |       |     |       |  |   |          |   |  |              |    |   |       |  
|EBIT                                             |  | $             | 89  |  |               | $     | 59  |       |  | $ | 16       |   |  | $            | 2  |   |       | $ | 4  |   |  | $ | 170 |    
|                                                 |  |               |     |  |               |       |     |       |  |   |          |   |  |              |    |   |       |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 June 30,
    2005 and 2004, we recorded an intersegment revenue elimination
    of $9 million and less than one 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.                                                                                                                                                                                                                                                                                      
|   
|(3) | Relates to intercompany activity between our continuing
    operations and our discontinued operations.                                                                                                                                                                                                                                                                                                                                                            

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|                                                 |  |               |     |  |               |       |     |       |  |   |          |   |  |              |    |   |       |   |     |   |  |   |     |    
|------------------------------------------------ |  | ------------- | --- |  | ------------- | ----- | --- | ----- |  | - | -------- | - |  | ------------ | -- | - | ----- | - | --- | - |  | - | --- | ---
|                                                 |  | Regulated     |     |  | Non-Regulated |       |     |       |  |  
|                                                 |  |               |     |  |               |       |     |       |  |  
|                                                 |  |               |     |  |               | Field |     |       |  |   |         
|Six Months Ended June 30,                        |  | Pipelines     |     |  | Production    |       |     | Power |  |   | Services |   |  | Corporate(1) |    |   | Total |  
|                                                 |  |               |     |  |               |       |     |       |  |   |          |   |  |              |    |   |       |  
|                                                 |  | (In millions) |     |  |              
|2005                                             |  |               |     |  |               |       |     |       |  |   |          |   |  |              |    |   |       |   |     |   |  |   |     |    
|Revenues from external customers                 |  | $             | 534 |  |               | $     | 226 | (2)   |  | $ | 49       |   |  | $            | 71 |   |       | $ | 14  |   |  | $ | 894 |    
|Intersegment revenues                            |  |               | 15  |  |               |       | 39  |       |  |   |         |   |  |              | 1  |   |       |   | (20 | ) |  |   | 35  | (3)
|Operation and maintenance                        |  |               | 137 |  |               |       | 80  |       |  |   | 39       |   |  |              | (1 | ) |       |   |    |   |  |   | 255 |    
|Depreciation, depletion and amortization         |  |               | 75  |  |               |       | 156 |       |  |   | 5        |   |  |              | 1  |   |       |   | 4   |   |  |   | 241 |    
|Loss on long-lived assets                        |  |               |    |  |               |       |    |       |  |   | 60       |   |  |              | 4  |   |       |   |    |   |  |   | 64  |    
|                                                
|Operating income (loss)                          |  | $             | 261 |  |               | $     | 18  |       |  | $ | (66      | ) |  | $            | 5  |   |       | $ | 1   |   |  | $ | 219 |    
|Earnings (losses) from unconsolidated affiliates |  |               | 35  |  |               |       |    |       |  |   | (119     | ) |  |              | (1 | ) |       |   |    |   |  |   | (85 | )  
|Other income, net                                |  |               | 4   |  |               |       | 2   |       |  |   | 13       |   |  |              |   |   |       |   | 2   |   |  |   | 21  |    
|                                                 |  |               |     |  |               |       |     |       |  |   |          |   |  |              |    |   |       |  
|EBIT                                             |  | $             | 300 |  |               | $     | 20  |       |  | $ | (172     | ) |  | $            | 4  |   |       | $ | 3   |   |  | $ | 155 |    
|                                                 |  |               |     |  |               |       |     |       |  |   |          |   |  |              |    |   |       |  
|                                                
|2004                                             |  |               |     |  |               |       |     |       |  |   |          |   |  |              |    |   |       |   |     |   |  |   |     |    
|Revenues from external customers                 |  | $             | 426 |  |               | $     | 325 | (2)   |  | $ | 99       |   |  | $            | 23 |   |       | $ | 30  |   |  | $ | 903 |    
|Intersegment revenues                            |  |               |    |  |               |       | 21  |       |  |   |         |   |  |              |   |   |       |   |    |   |  |   | 21  | (3)
|Operation and maintenance                        |  |               | 113 |  |               |       | 77  |       |  |   | 45       |   |  |              | 1  |   |       |   |    |   |  |   | 236 |    
|Depreciation, depletion and amortization         |  |               | 60  |  |               |       | 156 |       |  |   | 6        |   |  |              | 1  |   |       |   | 4   |   |  |   | 227 |    
|Loss on long-lived assets                        |  |               |    |  |               |       |    |       |  |   | 87       |   |  |              | 1  |   |       |   |    |   |  |   | 88  |    
|                                                
|Operating income (loss)                          |  | $             | 181 |  |               | $     | 104 |       |  | $ | (74      | ) |  | $            | 3  |   |       | $ | 5   |   |  | $ | 219 |    
|Earnings (losses) from unconsolidated affiliates |  |               | 39  |  |               |       | (2  | )     |  |   | 18       |   |  |              | 4  |   |       |   |    |   |  |   | 59  |    
|Other income, net                                |  |               | 1   |  |               |       |    |       |  |   | 9        |   |  |              |   |   |       |   | 3   |   |  |   | 13  |    
|                                                 |  |               |     |  |               |       |     |       |  |   |          |   |  |              |    |   |       |  
|EBIT                                             |  | $             | 221 |  |               | $     | 102 |       |  | $ | (47      | ) |  | $            | 7  |   |       | $ | 8   |   |  | $ | 291 |    
|                                                 |  |               |     |  |               |       |     |       |  |   |          |   |  |              |    |   |       |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 six months ended June 30,
    2005 and 2004, we recorded an intersegment revenue elimination
    of $20 million and less than one 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 associated with our natural
    gas and oil production.                                                                                                                                                                                                                                                                                                            
|   
|(3) | Relates to intercompany activity between our continuing
    operations and our discontinued operations.                                                                                                                                                                                                                                                                                                                                                               



|                        |                |                           |     |       |              |  |     |       |       | 
|----------------------- | -------------- | ------------------------- | --- | ----- | ------------ |  | --- | ----- | ----- | 
|                        |                | June 30,                  |     |       | December 31, | 
|                        |                | 2005                      |     |       | 2004         | 
|                        |                |                           |     |       |              | 
|                        |                | (In millions)             |    
|Regulated               |                |                           |     |       |              |  |     |      
|                        | Pipelines      |                           | $   | 5,712 |              |  | $   | 5,717 |      
|Non-regulated           |                |                           |     |       |              |  |     |      
|                        | Production     |                           |     | 2,048 |              |  |     | 2,000 |      
|                        | Power          |                           |     | 522   |              |  |     | 716   |      
|                        | Field Services |                           |     | 108   |              |  |     | 144   |      
|                        |                |                           |     |       |              | 
|                        |                | Total segment assets      |     |       | 8,390        |  |     |       | 8,577 | 
|Corporate               |                |                           | 693 |       |              |  | 493 |      
|Discontinued operations |                |                           | 193 |       |              |  | 274 |      
|                        |                |                           |     |       |              | 
|                        |                | Total consolidated assets |     | $     | 9,276        |  |     | $     | 9,344 | 
|                        |                |                           |     |       |              | 



|    |                                                                            
|--- | ---------------------------------------------------------------------------
|10. | Investments in Unconsolidated Affiliates and Related Party
    Transactions



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|                                                       |                                                           |                |  |                |               |   |                |                |     |   |      |    |    |      |     |     |      |   |    |    |    | 
|------------------------------------------------------ | --------------------------------------------------------- | -------------- |  | -------------- | ------------- | - | -------------- | -------------- | --- | - | ---- | -- | -- | ---- | --- | --- | ---- | - | -- | -- | -- | 
|                                                       |                                                           |                |  | Earnings       |               |   | Earnings       |               
|                                                       |                                                           |                |  | (Losses) from  |               |   | (Losses) from  |               
|                                                       |                                                           |                |  | Unconsolidated |               |   | Unconsolidated |               
|                                                       |                                                           |                |  | Affiliates     |               |   | Affiliates     |               
|                                                       |                                                           | Net            |  |                |               |   |                |                |    
|                                                       |                                                           | Ownership      |  |                |               |   |               
|                                                       |                                                           | Interest       |  |                | Quarter Ended |   |                | Six Months     |    
|                                                       |                                                           |                |  |                | June 30,      |   |                | Ended June 30, |    
|                                                       |                                                           | June 30,       |  |                |               |   |                |                |    
|                                                       |                                                           | 2005           |  |                | 2005          |   |                | 2004           |     |   | 2005 |    |    | 2004 |    
|                                                       |                                                           |                |  |                |               |   |                |                |     |   |      |    |    |      |    
|                                                       |                                                           | (Percent)      |  |                |              
|                                                       |                                                           |                |  | (In millions)  |              
|Domestic:                                              |                                                           |                |  |                |               |   |                |                |     |   |      |    |    |      |     |     |      |   |    |   
|                                                       | Great Lakes Gas Transmission LP and Company (Great Lakes) |                |  | 50             |               |   | $              | 14             |     |   | $    | 16 |    |      | $   | 31  |      |   | $  | 36 |   
|                                                       | Midland Cogeneration Venture
    (MCV)(1)                 |                |  | 44             |               |   |                | (4             | )   |   |      | (2 | )  |      |     | (3  | )    |   |    | 3  |   
|                                                       | Javelina                                                  |                |  | 40             |               |   |                | 1              |     |   |      | 2  |    |      |     | 2   |      |   |    | 5  |   
|                                                       | Other Domestic Investments                                |                |  | various        |               |   |                | 2              |     |   |      | 2  |    |      |     | 1   |      |   |    | (1 | ) 
|                                                       |                                                           |                |  |                |               |   |                |                |     |   |      |    |    |      |    
|                                                       |                                                           | Total domestic |  |                |               |   |                |                | 13  |   |      |    | 18 |      |     |     | 31   |   |    |    | 43 | 
|                                                       |                                                           |                |  |                |               |   |                |                |     |   |      |    |    |      |    
|Foreign:                                               |                                                           |                |  |                |               |   |                |                |     |   |      |    |    |      |     |     |      |   |    |   
|                                                       | Asia
    Investments(2)                                   |                |  | various        |               |   |                | (28            | )   |   |      | 6  |    |      |     | (67 | )    |   |    | 13 |   
|                                                       | Central American
    Investments(3)                       |                |  | various        |               |   |                | (55            | )   |   |      |   |    |      |     | (49 | )    |   |    | 3  |   
|                                                       | Other Foreign Investments                                 |                |  | various        |               |   |                | (1             | )   |   |      |   |    |      |     |    |      |   |    |   |   
|                                                       |                                                           |                |  |                |               |   |                |                |     |   |      |    |    |      |    
|                                                       |                                                           | Total foreign  |  |                |               |   |                |                | (84 | ) |      |    | 6  |      |     |     | (116 | ) |    |    | 16 | 
|                                                       |                                                           |                |  |                |               |   |                |                |     |   |      |    |    |      |    
|Total earnings (losses) from unconsolidated affiliates |                                                           |                |  |                |               | $ | (71            | )              |     | $ | 24   |    |    | $    | (85 | )   |      | $ | 59 |   
|                                                       |                                                           |                |  |                |               |   |                |                |     |   |      |    |    |      |    






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Our proportionate share of MCVs losses was
    $17 million during the second quarter of 2005. We did not
    record our proportionate share of MCVs losses as these
    losses resulted primarily from changes in the fair value of
    their derivative contracts, which we believe did not affect the
    value of our investment and would not be realized. We did not
    recognize substantially all of our proportionate share of
    MCVs earnings of approximately $75 million during the
    six months ended June 30, 2005 for the same reason.
|   
|(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 $5 million
    and $11 million for the quarter and six months ended
    June 30, 2005. We decreased our proportionate share of
    equity earnings for our Asia investments by $1 million and
    $5 million for the quarter and six months ended
    June 30, 2005 to reflect the amount of earnings that we
    believe will be realized.                            
|   
|(3) | Consists of our investments in 6 power plants. Our
    proportionate share of earnings reported by our Central American
    investments was $2 million and $8 million for the
    quarter and six months ended June 30, 2005.                                                                                                                                                                                                                                                                                                                               



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|                        |                                          |                        |   |       |                           |  |       |             |  |  |       |     |  |       |   |     |       |  |   |             |  |  |       |    |  |  |   |     |  |  |   |     | 
|----------------------- | ---------------------------------------- | ---------------------- | - | ----- | ------------------------- |  | ----- | ----------- |  |  | ----- | --- |  | ----- | - | --- | ----- |  | - | ----------- |  |  | ----- | -- |  |  | - | --- |  |  | - | --- | 
|                        |                                          | Quarter Ended June 30, |   |       | Six Months Ended June 30, | 
|                        |                                          |                        |   |       |                           | 
|                        |                                          |                        |   | Great |                           |  | Other |             |  |  |       |     |  | Great |   |     | Other |  |   |            
|                        |                                          | MCV                    |   |       | Lakes                     |  |       | Investments |  |  | Total |     |  | MCV   |   |     | Lakes |  |   | Investments |  |  | Total |   
|                        |                                          |                        |   |       |                           |  |       |             |  |  |       |     |  |       |   |     |       |  |   |             |  |  |       |   
|                        |                                          | (In millions)          |  
|2005                    |                                          |                        |   |       |                           |  |       |             |  |  |       |     |  |       |   |     |       |  |   |             |  |  |       |    |  |  |   |     |  |  |   |    
|Operating results data: |                                          |                        |   |       |                           |  |       |             |  |  |       |     |  |       |   |     |       |  |   |             |  |  |       |    |  |  |   |     |  |  |   |    
|                        | Operating revenues                       |                        | $ | 62    |                           |  | $     | 31          |  |  | $     | 102 |  |       | $ | 195 |       |  | $ | 127         |  |  | $     | 66 |  |  | $ | 166 |  |  | $ | 359 | 
|                        | Operating expenses                       |                        |   | 69    |                           |  |       | 13          |  |  |       | 68  |  |       |   | 150 |       |  |   | 34          |  |  |       | 28 |  |  |   | 110 |  |  |   | 172 | 
|                        | Income (loss) from continuing operations |                        |   | (17   | )                         |  |       | 10          |  |  |       | 8   |  |       |   | 1   |       |  |   | 75          |  |  |       | 21 |  |  |   | 22  |  |  |   | 118 | 
|                        | Net income
    (loss)(1)                 |                        |   | (17   | )                         |  |       | 10          |  |  |       | 8   |  |       |   | 1   |       |  |   | 75          |  |  |       | 21 |  |  |   | 22  |  |  |   | 118 | 
|2004                    |                                          |                        |   |       |                           |  |       |             |  |  |       |     |  |       |   |     |       |  |   |             |  |  |       |    |  |  |   |     |  |  |   |    
|Operating results data: |                                          |                        |   |       |                           |  |       |             |  |  |       |     |  |       |   |     |       |  |   |             |  |  |       |    |  |  |   |     |  |  |   |    
|                        | Operating revenues                       |                        | $ | 69    |                           |  | $     | 32          |  |  | $     | 115 |  |       | $ | 216 |       |  | $ | 139         |  |  | $     | 68 |  |  | $ | 179 |  |  | $ | 386 | 
|                        | Operating expenses                       |                        |   | 60    |                           |  |       | 13          |  |  |       | 96  |  |       |   | 169 |       |  |   | 113         |  |  |       | 26 |  |  |   | 146 |  |  |   | 285 | 
|                        | Income (loss) from continuing operations |                        |   | (2    | )                         |  |       | 11          |  |  |       | 7   |  |       |   | 16  |       |  |   | 3           |  |  |       | 24 |  |  |   | 19  |  |  |   | 46  | 
|                        | Net income
    (loss)(1)                 |                        |   | (2    | )                         |  |       | 11          |  |  |       | 7   |  |       |   | 16  |       |  |   | 3           |  |  |       | 24 |  |  |   | 19  |  |  |   | 46  | 






|    |                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes net income of $5 million and $7 million for
    the quarters ended June 30, 2005, and 2004, and
    $12 million and $15 million for the six months ended
    June 30, 2005 and 2004, related to our proportionate share
    of affiliates in which we hold a greater than 50 percent
    interest.



Related Party
Transactions




|                                     |  |               |    |  |                  |   |     |      |  |   |      |  |  |   |     | 
|------------------------------------ |  | ------------- | -- |  | ---------------- | - | --- | ---- |  | - | ---- |  |  | - | --- | 
|                                     |  | Quarter Ended |    |  | Six Months Ended |  
|                                     |  | June 30,      |    |  | June 30,         |  
|                                     |  |               |    |  |                  |  
|                                     |  | 2005          |    |  | 2004             |   |     | 2005 |  |   | 2004 | 
|                                     |  |               |    |  |                  |   |     |      |  |   |      | 
|                                     |  | (In millions) |   
|Operating revenue                    |  | $             | 65 |  |                  | $ | 136 |      |  | $ | 159  |  |  | $ | 264 | 
|Cost of sales                        |  |               | 7  |  |                  |   | 6   |      |  |   | 23   |  |  |   | 13  | 
|Reimbursement for operating expenses |  |               |   |  |                  |   |    |      |  |   | 1    |  |  |   | 1   | 
|Charges from affiliates              |  |               | 67 |  |                  |   | 55  |      |  |   | 119  |  |  |   | 106 | 
|Other income                         |  |               | 3  |  |                  |   | 3   |      |  |   | 7    |  |  |   | 7   | 

Revenues and Expenses.


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|                         |                                                 |                                            |   |     |              |  |   |     |     | 
|------------------------ | ----------------------------------------------- | ------------------------------------------ | - | --- | ------------ |  | - | --- | --- | 
|                         |                                                 | June 30,                                   |   |     | December 31, | 
|                         |                                                 | 2005                                       |   |     | 2004         | 
|                         |                                                 |                                            |   |     |              | 
|                         |                                                 | (In millions)                              |  
|Current assets           |                                                 |                                            |   |     |              |  |   |    
|                         | Note receivable from
    affiliates(1)          |                                            | $ | 124 |              |  | $ | 176 |    
|                         | Accounts and notes receivable from affiliates   |                                            |   | 123 |              |  |   | 76  |    
|                         | Receivables from unconsolidated affiliates      |                                            |   | 32  |              |  |   | 11  |    
|                         |                                                 |                                            |   |     |              | 
|                         |                                                 | Accounts and notes receivable  Affiliates |   | $   | 279          |  |   | $   | 263 | 
|Other non-current assets |                                                 |                                            |   |     |              |  |   |    
|                         | Notes receivable from
    affiliates(2)         |                                            | $ | 303 |              |  | $ |    |    
|                         | Notes receivable from unconsolidated affiliates |                                            |   | 48  |              |  |   | 69  |    
|Current liabilities      |                                                 |                                            |   |     |              |  |   |    
|                         | Accounts payable  Affiliates                   |                                            | $ | 40  |              |  | $ | 61  |    
|                         | Notes payable to related parties                |                                            | $ | 61  |              |  | $ | 45  |    
|                         | Notes payable to
    affiliates(2)              |                                            |   |    |              |  |   | 166 |    
|                         |                                                 |                                            |   |     |              | 
|                         |                                                 | Notes payable to affiliates                |   | $   | 61           |  |   | $   | 211 | 




|    |                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Note receivable from affiliates at June 30, 2004 and
    December 31, 2004 were at an interest rate of 3.7% and 2.7%.                                                             
|   
|(2) | Noncurrent notes receivable from affiliates at June 30,
    2005 were at an interest rate of 4.3% and notes payable to
    affiliates at December 31, 2004 were at a rate of 2.0%.

Cash Management Program and Affiliate
Receivables/Payables.


Affiliate income taxes.


Other.


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Guarantees.


Contingent Matters that Could Impact Our
Investments


Economic Conditions in the Dominican Republic.


23



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






Liquidity




Segment Results






24



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|                                             |                                   |                                              |     |            |          |   |     |      |     |  |      |      |     |  |      |     |     | 
|-------------------------------------------- | --------------------------------- | -------------------------------------------- | --- | ---------- | -------- | - | --- | ---- | --- |  | ---- | ---- | --- |  | ---- | --- | --- | 
|                                             |                                   |                                              |     | Six Months |         
|                                             |                                   | Quarter Ended                                |     |            | Ended    |  
|                                             |                                   | June 30,                                     |     |            | June 30, |  
|                                             |                                   |                                              |     |            |          |  
|                                             |                                   | 2005                                         |     |            | 2004     |   |     | 2005 |     |  | 2004 |     
|                                             |                                   |                                              |     |            |          |   |     |      |     |  |      |     
|                                             |                                   | (In millions)                                |    
|Regulated Business                           |                                   |                                              |     |            |          |   |     |      |     |  |      |      |     |  |      |    
|                                             | Pipelines                         |                                              | $   | 116        |          |   | $   | 89   |     |  | $    | 300  |     |  | $    | 221 |    
|Non-regulated Businesses                     |                                   |                                              |     |            |          |   |     |      |     |  |      |      |     |  |      |    
|                                             | Production                        |                                              |     | 14         |          |   |     | 59   |     |  |      | 20   |     |  |      | 102 |    
|                                             | Power                             |                                              |     | (141       | )        |   |     | 16   |     |  |      | (172 | )   |  |      | (47 | )  
|                                             | Field Services                    |                                              |     | 3          |          |   |     | 2    |     |  |      | 4    |     |  |      | 7   |    
|                                             |                                   |                                              |     |            |          |   |     |      |     |  |      |     
|                                             |                                   | Segment EBIT                                 |     |            | (8       | ) |     |      | 166 |  |      |      | 152 |  |      |     | 283 | 
|Corporate                                    |                                   |                                              | (2  | )          |          |   | 4   |      |     |  | 3    |      |     |  | 8    |    
|                                             |                                   |                                              |     |            |          |   |     |      |     |  |      |     
|                                             |                                   | Consolidated EBIT from continuing operations |     |            | (10      | ) |     |      | 170 |  |      |      | 155 |  |      |     | 291 | 
|Interest and debt expense                    |                                   |                                              | (77 | )          |          |   | (91 | )    |     |  | (150 | )    |     |  | (192 | )  
|Affiliated interest income (expense), net    |                                   |                                              | 4   |            |          |   | 5   |      |     |  | 6    |      |     |  | (9   | )  
|Income taxes                                 |                                   |                                              | 15  |            |          |   | (29 | )    |     |  | (25  | )    |     |  | (31  | )  
|                                             |                                   |                                              |     |            |          |   |     |      |     |  |      |     
|                                             | Income from continuing operations |                                              |     | (68        | )        |   |     | 55   |     |  |      | (14  | )   |  |      | 59  |    
|Discontinued operations, net of income taxes |                                   |                                              | (4  | )          |          |   | (5  | )    |     |  |     |      |     |  | (95  | )  
|                                             |                                   |                                              |     |            |          |   |     |      |     |  |      |     
|                                             | Net income (loss)                 |                                              | $   | (72        | )        |   | $   | 50   |     |  | $    | (14  | )   |  | $    | (36 | )  
|                                             |                                   |                                              |     |            |          |   |     |      |     |  |      |     

Individual Segment Results


Regulated Business  Pipelines Segment




Operating Results




|                            |                  |                                      |       |     |                  |   |       |      |  |   |       |     |  |   |       |     | 
|--------------------------- | ---------------- | ------------------------------------ | ----- | --- | ---------------- | - | ----- | ---- |  | - | ----- | --- |  | - | ----- | --- | 
|                            |                  | Quarter Ended                        |       |     | Six Months Ended |  
|                            |                  | June 30,                             |       |     | June 30,         |  
|                            |                  |                                      |       |     |                  |  
|                            |                  | 2005                                 |       |     | 2004             |   |       | 2005 |  |   | 2004  |    
|                            |                  |                                      |       |     |                  |   |       |      |  |   |       |    
|                            |                  | (In millions, except volume amounts) |      
|Operating revenues          |                  | $                                    | 236   |     |                  | $ | 189   |      |  | $ | 549   |     |  | $ | 426   |    
|Operating expenses          |                  |                                      | (139  | )   |                  |   | (118  | )    |  |   | (288  | )   |  |   | (245  | )  
|                            |                  |                                      |       |     |                  |   |       |      |  |   |       |    
|                            | Operating income |                                      |       | 97  |                  |   |       | 71   |  |   |       | 261 |  |   |       | 181 | 
|Other income, net           |                  |                                      | 19    |     |                  |   | 18    |      |  |   | 39    |     |  |   | 40    |    
|                            |                  |                                      |       |     |                  |   |       |      |  |   |       |    
|                            | EBIT             |                                      | $     | 116 |                  |   | $     | 89   |  |   | $     | 300 |  |   | $     | 221 | 
|                            |                  |                                      |       |     |                  |   |       |      |  |   |       |    
|Throughput volumes (BBtu/d) |                  |                                      | 8,479 |     |                  |   | 7,654 |      |  |   | 9,024 |     |  |   | 8,278 |    
|                            |                  |                                      |       |     |                  |   |       |      |  |   |       |    

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|                                                                                |                      |                         |    |      |                           |   |    |       |      |   |        |   |  |         |    |    |         |   |    |       |  |   |        |     |   |   |    |    |   |   |     |    | 
|------------------------------------------------------------------------------- | -------------------- | ----------------------- | -- | ---- | ------------------------- | - | -- | ----- | ---- | - | ------ | - |  | ------- | -- | -- | ------- | - | -- | ----- |  | - | ------ | --- | - | - | -- | -- | - | - | --- | -- | 
|                                                                                |                      | Quarter Ended June 30,  |    |      | Six Months Ended June 30, |  
|                                                                                |                      |                         |    |      |                           |  
|                                                                                |                      |                         |    | EBIT |                           |   |    |       | EBIT |  
|                                                                                |                      | Revenue                 |    |      | Expense                   |   |    | Other |      |   | Impact |   |  | Revenue |    |    | Expense |   |    | Other |  |   | Impact |    
|                                                                                |                      |                         |    |      |                           |   |    |       |      |   |        |   |  |         |    |    |         |   |    |       |  |   |        |    
|                                                                                |                      | Favorable/(Unfavorable) |    |      | Favorable/(Unfavorable)   |  
|                                                                                |                      | (In millions)           |    |      | (In millions)             |  
|Contract modifications/
    terminations/settlements                            |                      | $                       | 12 |      |                           | $ |   |       |      | $ | 1      |   |  | $       | 13 |    |         | $ | 41 |       |  | $ |       |     |   | $ | 1  |    |   | $ | 42  |   
|Gas not used in operations, processing revenues and other
    natural gas sales |                      |                         | 12 |      |                           |   | (5 | )     |      |   |       |   |  |         | 7  |    |         |   | 48 |       |  |   | (16    | )   |   |   |   |    |   |   | 32  |   
|Pipeline expansions                                                             |                      |                         | 18 |      |                           |   | (7 | )     |      |   | (2     | ) |  |         | 9  |    |         |   | 29 |       |  |   | (14    | )   |   |   | (1 | )  |   |   | 14  |   
|Higher allocated costs                                                          |                      |                         |   |      |                           |   | (8 | )     |      |   |       |   |  |         | (8 | )  |         |   |   |       |  |   | (14    | )   |   |   |   |    |   |   | (14 | ) 
|Equity earnings from our investment in Great Lakes                              |                      |                         |   |      |                           |   |   |       |      |   | (1     | ) |  |         | (1 | )  |         |   |   |       |  |   |       |     |   |   | (4 | )  |   |   | (4  | ) 
|Other(1)                                                                        |                      |                         | 5  |      |                           |   | (1 | )     |      |   | 3      |   |  |         | 7  |    |         |   | 5  |       |  |   | 1      |     |   |   | 3  |    |   |   | 9   |   
|                                                                                |                      |                         |    |      |                           |   |    |       |      |   |        |   |  |         |    |    |         |   |    |       |  |   |        |    
|                                                                                | Total impact on EBIT |                         | $  | 47   |                           |   | $  | (21   | )    |   | $      | 1 |  |         | $  | 27 |         |   | $  | 123   |  |   | $      | (43 | ) |   | $  | (1 | ) |   | $   | 79 | 
|                                                                                |                      |                         |    |      |                           |   |    |       |      |   |        |   |  |         |    |    |         |   |    |       |  |   |        |    






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



Contract Modifications/Terminations/Settlements.


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


Expansions.




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Allocated Costs.


Accounting for Pipeline Integrity Costs.




| |                             
| | ----------------------------
| | Regulatory and Other Matters



Non-regulated Business  Production Segment




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





| |                                                            
| | -----------------------------------------------------------
| | Significant Operational Factors Since December 31,
    2004





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Change in realized prices. Realized natural gas prices,
    excluding hedges, increased eight percent compared to 2004.
    However, under our hedge program, approximately 65 percent
    of our natural gas production for the first six months of 2005
    was hedged at an average price of $3.31 per MMBtu,
    significantly below the market price of natural gas.
    Accordingly, we realized natural gas prices, including hedges,
    that were 23 percent lower than in 2004. Realized prices
    for oil, condensate, and NGL prices, which are not hedged,
    increased 31 percent compared to 2004.
|
| |  | Average daily production of 298 MMcfe/d (excluding
    discontinued operations of 3 MMcfe/d). Our average
    daily production in the second quarter of 2005 declined slightly
    from the fourth quarter of 2004 and first quarter of 2005.                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | Capital expenditures of $163 million.Our capital
    expenditures for the six months ended June 30, 2005 include
    the acquisition of the interest held by one of our partners
    under a net profits interest agreement and other offshore
    acquisitions for a total of $44 million. These acquisitions
    added properties with approximately 18 Bcfe of proved
    reserves and 7 MMcfe/d of current production at the                                                                                                                                                                                   

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| |  |                                                                                                                                    
| |  | -----------------------------------------------------------------------------------------------------------------------------------
| |  | date of acquisition. We have integrated these acquisitions into
    our operations with minimal additional administrative expenses.



| |                                    
| | -----------------------------------
| | Outlook for last six months of 2005





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







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



|                                            |                                               |                                 |    |     |                  |   |    |      |      |   |      |      |      |   |    |      |      |  
|------------------------------------------- | --------------------------------------------- | ------------------------------- | -- | --- | ---------------- | - | -- | ---- | ---- | - | ---- | ---- | ---- | - | -- | ---- | ---- | -
|                                            |                                               | Quarter Ended                   |    |     | Six Months Ended |  
|                                            |                                               | June 30,                        |    |     | June 30,         |  
|                                            |                                               |                                 |    |     |                  |  
|Production Segment Results                  |                                               | 2005                            |    |     | 2004             |   |    | 2005 |      |   | 2004 |     
|                                            |                                               |                                 |    |     |                  |   |    |      |      |   |      |     
|                                            |                                               | (In millions)                   |   
|Operating revenues:                         |                                               |                                 |    |     |                  |   |    |      |      |   |      |      |      |   |    |     
|                                            | Natural gas                                   |                                 | $  | 80  |                  |   | $  | 148  |      |   | $    | 166  |      |   | $  | 273  |     
|                                            | Oil, condensate and NGL                       |                                 |    | 54  |                  |   |    | 35   |      |   |      | 98   |      |   |    | 72   |     
|                                            | Other                                         |                                 |    | 1   |                  |   |    |     |      |   |      | 1    |      |   |    | 1    |     
|                                            |                                               |                                 |    |     |                  |   |    |      |      |   |      |     
|                                            |                                               | Total operating revenues        |    |     | 135              |   |    |      | 183  |   |      |      | 265  |   |    |      | 346  |  
|Transportation and net product
    costs(1) |                                               |                                 | (2 | )   |                  |   | (2 | )    |      |   | (6   | )    |      |   | (7 | )   
|                                            |                                               |                                 |    |     |                  |   |    |      |      |   |      |     
|                                            |                                               | Total operating margin          |    |     | 133              |   |    |      | 181  |   |      |      | 259  |   |    |      | 339  |  
|Operating expenses:                         |                                               |                                 |    |     |                  |   |    |      |      |   |      |      |      |   |    |     
|                                            | Depreciation, depletion and amortization      |                                 |    | (79 | )                |   |    | (80  | )    |   |      | (156 | )    |   |    | (156 | )   
|                                            | Production
    costs(2)                       |                                 |    | (21 | )                |   |    | (22  | )    |   |      | (50  | )    |   |    | (43  | )   
|                                            | General and administrative expenses           |                                 |    | (16 | )                |   |    | (20  | )    |   |      | (32  | )    |   |    | (36  | )   
|                                            | Taxes, other than production and income taxes |                                 |    | (3  | )                |   |    |     |      |   |      | (3   | )    |   |    |     |     
|                                            |                                               |                                 |    |     |                  |   |    |      |      |   |      |     
|                                            |                                               | Total operating
    expenses(1) |    |     | (119             | ) |    |      | (122 | ) |      |      | (241 | ) |    |      | (235 | )
|                                            |                                               |                                 |    |     |                  |   |    |      |      |   |      |     
|                                            | Operating income                              |                                 |    | 14  |                  |   |    | 59   |      |   |      | 18   |      |   |    | 104  |     
|Other income (expense)                      |                                               |                                 |   |     |                  |   |   |      |      |   | 2    |      |      |   | (2 | )   
|                                            |                                               |                                 |    |     |                  |   |    |      |      |   |      |     
|                                            | EBIT                                          |                                 | $  | 14  |                  |   | $  | 59   |      |   | $    | 20   |      |   | $  | 102  |     
|                                            |                                               |                                 |    |     |                  |   |    |      |      |   |      |     

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|                                                     |                               |                                                         |                              |         |                  |      |        |          |         |      |      |      |     |      |        |      |          |      |        |      |        |      |     |    |     |    |  
|---------------------------------------------------- | ----------------------------- | ------------------------------------------------------- | ---------------------------- | ------- | ---------------- | ---- | ------ | -------- | ------- | ---- | ---- | ---- | --- | ---- | ------ | ---- | -------- | ---- | ------ | ---- | ------ | ---- | --- | -- | --- | -- | -
|                                                     |                               | Quarter Ended                                           |                              |         | Six Months Ended |     
|                                                     |                               | June 30,                                                |                              |         | June 30,         |     
|                                                     |                               |                                                         |                              |         |                  |     
|                                                     |                               |                                                         |                              | Percent |                  |      |        |          | Percent |     
|                                                     |                               | 2005                                                    |                              |         | 2004             |      |        | Variance |         |      | 2005 |      |     | 2004 |        |      | Variance |     
|                                                     |                               |                                                         |                              |         |                  |      |        |          |         |      |      |      |     |      |        |      |          |     
|Volumes, prices and costs:                           |                               |                                                         |                              |         |                  |      |        |          |         |      |      |      |     |      |        |      |          |      |        |      |        |      |     |   
|                                                     | Natural gas                   |                                                         |                              |         |                  |      |        |          |         |      |      |      |     |      |        |      |          |      |        |      |        |      |     |    |    
|                                                     |                               | Volumes (MMcf)                                          |                              |         | 19,219           |      |        |          | 26,099  |      |      |      | (26 | )%   |        |      | 39,857   |      |        |      | 50,874 |      |     |    | (22 | )%
|                                                     |                               | Average realized prices including hedges
    ($/Mcf)(3) |                              | $       | 4.16             |      |        | $        | 5.65    |      |      |      | (26 | )%   |        | $    | 4.16     |      |        | $    | 5.37   |      |     |    | (23 | )%
|                                                     |                               | Average realized prices excluding hedges
    ($/Mcf)(3) |                              | $       | 6.56             |      |        | $        | 5.99    |      |      |      | 10  | %    |        | $    | 6.27     |      |        | $    | 5.83   |      |     |    | 8   | % 
|                                                     |                               | Average transportation costs ($/Mcf)                    |                              | $       | 0.09             |      |        | $        | 0.05    |      |      |      | 80  | %    |        | $    | 0.11     |      |        | $    | 0.09   |      |     |    | 22  | % 
|                                                     | Oil, condensate and NGL       |                                                         |                              |         |                  |      |        |          |         |      |      |      |     |      |        |      |          |      |        |      |        |      |     |    |    
|                                                     |                               | Volumes (MBbls)                                         |                              |         | 1,260            |      |        |          | 1,062   |      |      |      | 19  | %    |        |      | 2,347    |      |        |      | 2,260  |      |     |    | 4   | % 
|                                                     |                               | Average realized prices including hedges
    ($/Bbl)(3) |                              | $       | 42.98            |      |        | $        | 33.17   |      |      |      | 30  | %    |        | $    | 41.80    |      |        | $    | 31.81  |      |     |    | 31  | % 
|                                                     |                               | Average realized prices excluding hedges
    ($/Bbl)(3) |                              | $       | 42.98            |      |        | $        | 33.17   |      |      |      | 30  | %    |        | $    | 41.80    |      |        | $    | 31.81  |      |     |    | 31  | % 
|                                                     |                               | Average transportation costs ($/Bbl)                    |                              | $       | 0.62             |      |        | $        | 1.26    |      |      |      | (51 | )%   |        | $    | 0.68     |      |        | $    | 1.18   |      |     |    | (42 | )%
|Total equivalent volumes (MMcfe)                     |                               |                                                         | 26,776                       |         |                  |      | 32,470 |          |         |      | (18  | )%   |     |      | 53,937 |      |          |      | 64,435 |      |        |      | (16 | )%
|Production cost ($/Mcfe)                             |                               |                                                         |                              |         |                  |      |        |          |         |      |      |      |     |      |        |      |          |      |        |      |        |      |     |   
|                                                     | Average lease operating costs |                                                         | $                            | 0.88    |                  |      | $      | 0.59     |         |      |      | 49   | %   |      | $      | 0.87 |          |      | $      | 0.63 |        |      |     | 38 | %  
|                                                     | Average production taxes      |                                                         |                              | (0.12   | )                |      |        | 0.10     |         |      |      | (220 | )%  |      |        | 0.05 |          |      |        | 0.03 |        |      |     | 67 | %  
|                                                     |                               |                                                         |                              |         |                  |      |        |          |         |      |      |      |     |      |        |      |          |     
|                                                     |                               |                                                         | Total production
    cost(2) |         | $                | 0.76 |        |          | $       | 0.69 |      |      |     | 10   | %      |      | $        | 0.92 |        |      | $      | 0.66 |     |    |     | 39 | %
|                                                     |                               |                                                         |                              |         |                  |      |        |          |         |      |      |      |     |      |        |      |          |     
|Average general and administrative expenses ($/Mcfe) |                               | $                                                       | 0.61                         |         |                  | $    | 0.60   |          |         |      | 2    | %    |     | $    | 0.60   |      |          | $    | 0.56   |      |        |      | 7   | % 
|Unit of production depletion cost ($/Mcfe)           |                               | $                                                       | 2.79                         |         |                  | $    | 2.32   |          |         |      | 20   | %    |     | $    | 2.76   |      |          | $    | 2.29   |      |        |      | 21  | % 






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



| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | Quarter and Six Months Ended June 30, 2005 Compared to
    Quarter and Six Months Ended June 30, 2004



29



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|                                                  |                                                |                         |   |     |           |   |   |          |   |        |   |   |   |  |   |     |     |  
|------------------------------------------------- | ---------------------------------------------- | ----------------------- | - | --- | --------- | - | - | -------- | - | ------ | - | - | - |  | - | --- | --- | -
|                                                  |                                                | Variance                |  
|                                                  |                                                |                         |  
|                                                  |                                                | Operating               |   |     | Operating |   |   |          |   | EBIT   |  
|                                                  |                                                | Revenue                 |   |     | Expense   |   |   | Other(1) |   | Impact |  
|                                                  |                                                |                         |   |     |           |   |   |          |   |        |  
|                                                  |                                                | Favorable/(Unfavorable) |  
|                                                  |                                                | (In millions)           |  
|Quarter Ended June 30,                            |                                                |                         |   |     |           |   |   |          |   |        |   |   |   |  |   |    
|Natural Gas Revenue                               |                                                |                         |   |     |           |   |   |          |   |        |   |   |   |  |   |    
|                                                  | Higher prices in 2005                          |                         | $ | 11  |           |   | $ |         |   |        | $ |  |   |  | $ | 11  |    
|                                                  | Lower volumes in 2005                          |                         |   | (42 | )         |   |   |         |   |        |   |  |   |  |   | (42 | )  
|                                                  | Impact from hedge program in 2005 versus 2004  |                         |   | (37 | )         |   |   |         |   |        |   |  |   |  |   | (37 | )  
|Oil, Condensate, and NGL Revenue                  |                                                |                         |   |     |           |   |   |          |   |        |   |   |   |  |   |    
|                                                  | Higher prices in 2005                          |                         |   | 12  |           |   |   |         |   |        |   |  |   |  |   | 12  |    
|                                                  | Higher volumes in 2005                         |                         |   | 7   |           |   |   |         |   |        |   |  |   |  |   | 7   |    
|Depreciation, Depletion, and Amortization Expense |                                                |                         |   |     |           |   |   |          |   |        |   |   |   |  |   |    
|                                                  | Higher depletion rate in 2005                  |                         |   |    |           |   |   | (13      | ) |        |   |  |   |  |   | (13 | )  
|                                                  | Lower production volumes in 2005               |                         |   |    |           |   |   | 13       |   |        |   |  |   |  |   | 13  |    
|Production Costs                                  |                                                |                         |   |     |           |   |   |          |   |        |   |   |   |  |   |    
|                                                  | Higher lease operating costs in 2005           |                         |   |    |           |   |   | (5       | ) |        |   |  |   |  |   | (5  | )  
|                                                  | Lower production taxes in 2005                 |                         |   |    |           |   |   | 6        |   |        |   |  |   |  |   | 6   |    
|Other                                             |                                                |                         |   |     |           |   |   |          |   |        |   |   |   |  |   |    
|                                                  | Lower general and administrative costs in 2005 |                         |   |    |           |   |   | 4        |   |        |   |  |   |  |   | 4   |    
|                                                  | Other                                          |                         |   | 1   |           |   |   | (2       | ) |        |   |  |   |  |   | (1  | )  
|                                                  |                                                |                         |   |     |           |   |   |          |   |        |   |  
|                                                  |                                                | Total variances         |   | $   | (48       | ) |   | $        | 3 |        |   | $ |  |  |   | $   | (45 | )
|                                                  |                                                |                         |   |     |           |   |   |          |   |        |   |  

|                                                  |                                                |                         |   |     |           |   |   |          |    |      |        |   |   |  |   |     |     |  
|------------------------------------------------- | ---------------------------------------------- | ----------------------- | - | --- | --------- | - | - | -------- | -- | ---- | ------ | - | - |  | - | --- | --- | -
|                                                  |                                                | Variance                |  
|                                                  |                                                |                         |  
|                                                  |                                                | Operating               |   |     | Operating |   |   |          |    | EBIT |       
|                                                  |                                                | Revenue                 |   |     | Expense   |   |   | Other(1) |    |      | Impact |  
|                                                  |                                                |                         |   |     |           |   |   |          |    |      |        |  
|                                                  |                                                | Favorable/(Unfavorable) |  
|                                                  |                                                | (In millions)           |  
|Six Months Ended June 30,                         |                                                |                         |   |     |           |   |   |          |    |      |        |   |   |  |   |    
|Natural Gas Revenue                               |                                                |                         |   |     |           |   |   |          |    |      |        |   |   |  |   |    
|                                                  | Higher prices in 2005                          |                         | $ | 18  |           |   | $ |         |    |      | $      |  |   |  | $ | 18  |    
|                                                  | Lower volumes in 2005                          |                         |   | (64 | )         |   |   |         |    |      |        |  |   |  |   | (64 | )  
|                                                  | Impact from hedge program in 2005 versus 2004  |                         |   | (61 | )         |   |   |         |    |      |        |  |   |  |   | (61 | )  
|Oil, Condensate, and NGL Revenue                  |                                                |                         |   |     |           |   |   |          |    |      |        |   |   |  |   |    
|                                                  | Higher prices in 2005                          |                         |   | 23  |           |   |   |         |    |      |        |  |   |  |   | 23  |    
|                                                  | Higher volumes in 2005                         |                         |   | 3   |           |   |   |         |    |      |        |  |   |  |   | 3   |    
|Depreciation, Depletion, and Amortization Expense |                                                |                         |   |     |           |   |   |          |    |      |        |   |   |  |   |    
|                                                  | Higher depletion rate in 2005                  |                         |   |    |           |   |   | (26      | )  |      |        |  |   |  |   | (26 | )  
|                                                  | Lower production volumes in 2005               |                         |   |    |           |   |   | 24       |    |      |        |  |   |  |   | 24  |    
|Production Costs                                  |                                                |                         |   |     |           |   |   |          |    |      |        |   |   |  |   |    
|                                                  | Higher lease operating costs in 2005           |                         |   |    |           |   |   | (6       | )  |      |        |  |   |  |   | (6  | )  
|                                                  | Higher production taxes in 2005                |                         |   |    |           |   |   | (1       | )  |      |        |  |   |  |   | (1  | )  
|Other                                             |                                                |                         |   |     |           |   |   |          |    |      |        |   |   |  |   |    
|                                                  | Lower general and administrative costs in 2005 |                         |   |    |           |   |   | 4        |    |      |        |  |   |  |   | 4   |    
|                                                  | Other                                          |                         |   |    |           |   |   | (1       | )  |      |        | 5 |   |  |   | 4   |    
|                                                  |                                                |                         |   |     |           |   |   |          |    |      |        |  
|                                                  |                                                | Total variances         |   | $   | (81       | ) |   | $        | (6 | )    |        | $ | 5 |  |   | $   | (82 | )
|                                                  |                                                |                         |   |     |           |   |   |          |    |      |        |  






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

30



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##### Table of Contents



Operating Revenues.


Depreciation, depletion, and amortization expense.


Production costs.


Other.


Non-regulated Business  Power Segment






| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | Significant developments in our operations that occurred
    since December 31, 2004 include:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Asia. During the second and third quarters of 2005, we
    announced the sale of substantially all of our Asian power
    assets. We recorded impairments on certain of these assets based
    on information received about the value we may receive when we
    sell them. We expect to receive total proceeds of approximately
    $32 million from the sale of these assets, which we expect
    will be substantially completed by the end of 2005. We will
    continue to assess the fair value of those assets throughout the
    sales process, which may result in additional impairments or
    gains in future periods.
|
| |  | Other International Power. During the second quarter of
    2005, we engaged an investment banker to facilitate the sale of
    our Central American power assets. We recorded an impairment in
    the second quarter of 2005 based on information received about
    the value we may receive upon the sale of these assets. We will
    continue to assess the value of these assets throughout the
    sales process, which may result in additional impairments that
    may be significant. See item 1, Financial Statements,
    Note 2 for further information on our divestitures.                                        

31



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



|              |                                                  |                                    |                         |    |                  |     |   |      |     |   |      |    |      |     |   |    |     |     |  
|------------- | ------------------------------------------------ | ---------------------------------- | ----------------------- | -- | ---------------- | --- | - | ---- | --- | - | ---- | -- | ---- | --- | - | -- | --- | --- | -
|              |                                                  | Quarter Ended                      |                         |    | Six Months Ended |    
|              |                                                  | June 30,                           |                         |    | June 30,         |    
|              |                                                  |                                    |                         |    |                  |    
|              |                                                  | 2005                               |                         |    | 2004             |     |   | 2005 |     |   | 2004 |   
|              |                                                  |                                    |                         |    |                  |     |   |      |     |   |      |   
|              |                                                  | (In millions)                      |                        
|Overall EBIT: |                                                  |                                    |                         |    |                  |     |   |      |     |   |      |    |      |     |   |   
|              | Gross
    margin(1)                              |                                    | $                       | 21 |                  |     | $ | 31   |     |   | $    | 38 |      |     | $ | 66 |    
|              | Operating expenses                               |                                    |                         |    |                  |     |   |      |     |   |      |    |      |     |   |    |    
|              |                                                  | Gain (loss) on long-lived assets   |                         |    | (61              | )   |   |      | 1   |   |      |    | (60  | )   |   |    | (87 | )  
|              |                                                  | Other operating expenses           |                         |    | (23              | )   |   |      | (26 | ) |      |    | (44  | )   |   |    | (53 | )  
|              |                                                  |                                    |                         |    |                  |     |   |      |     |   |      |   
|              |                                                  |                                    | Operating income (loss) |    |                  | (63 | ) |      |     | 6 |      |    |      | (66 | ) |    |     | (74 | )
|              | Earnings (losses) from unconsolidated affiliates |                                    |                         |    |                  |     |   |      |     |   |      |    |      |     |   |    |    
|              |                                                  | Impairments, net of gains (losses) |                         |    | (92              | )   |   |      | 3   |   |      |    | (133 | )   |   |    | 3   |    
|              |                                                  | Equity in earnings                 |                         |    | 4                |     |   |      | 3   |   |      |    | 14   |     |   |    | 15  |    
|              | Other income                                     |                                    |                         | 10 |                  |     |   | 4    |     |   |      | 13 |      |     |   | 9  |    
|              |                                                  |                                    |                         |    |                  |     |   |      |     |   |      |   
|              |                                                  | EBIT                               |                         | $  | (141             | )   |   | $    | 16  |   |      | $  | (172 | )   |   | $  | (47 | )  
|              |                                                  |                                    |                         |    |                  |     |   |      |     |   |      |   






|    |                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.



|                                   |                                        |                                                              |      |      |                  |   |    |      |     |   |      |      |    |   |     |    |     |  
|---------------------------------- | -------------------------------------- | ------------------------------------------------------------ | ---- | ---- | ---------------- | - | -- | ---- | --- | - | ---- | ---- | -- | - | --- | -- | --- | -
|                                   |                                        | Quarter Ended                                                |      |      | Six Months Ended |  
|                                   |                                        | June 30,                                                     |      |      | June 30,         |  
|                                   |                                        |                                                              |      |      |                  |  
|                                   |                                        | 2005                                                         |      |      | 2004             |   |    | 2005 |     |   | 2004 |     
|                                   |                                        |                                                              |      |      |                  |   |    |      |     |   |      |     
|                                   |                                        | (In millions)                                                |     
|EBIT by Area:                      |                                        |                                                              |      |      |                  |   |    |      |     |   |      |      |    |   |     |   
|Asia and Other International Power |                                        |                                                              |      |      |                  |   |    |      |     |   |      |      |    |   |     |   
|                                   | Earnings from plant operations         |                                                              | $    | 8    |                  |   | $  | 7    |     |   | $    | 16   |    |   | $   | 17 |    
|                                   | Impairments, net - Central America     |                                                              |      | (111 | )                |   |    |     |     |   |      | (111 | )  |   |     |   |    
|                                   | Impairments - Asia                     |                                                              |      | (32  | )                |   |    |     |     |   |      | (73  | )  |   |     |   |    
|Domestic Power                     |                                        |                                                              |      |      |                  |   |    |      |     |   |      |      |    |   |     |   
|                                   | Domestic Power Contract Restructurings |                                                              |      |      |                  |   |    |      |     |   |      |      |    |   |     |    |    
|                                   |                                        | Impairments, net of gains (losses)                           |      |      |                 |   |    |      | 1   |   |      |      |   |   |     |    | (87 | )
|                                   |                                        | Change in fair value                                         |      |      |                 |   |    |      | 19  |   |      |      |   |   |     |    | 36  |  
|                                   | Other Domestic Operations              |                                                              |      |      |                  |   |    |      |     |   |      |      |    |   |     |    |    
|                                   |                                        | Losses from consolidated and unconsolidated plant operations |      |      | (2               | ) |    |      | (14 | ) |      |      | (1 | ) |     |    | (16 | )
|                                   |                                        | Impairment, net of gains (losses)                            |      |      | (4               | ) |    |      | 3   |   |      |      | (3 | ) |     |    | 3   |  
|                                   |                                        |                                                              |      |      |                  |   |    |      |     |   |      |     
|EBIT                               |                                        | $                                                            | (141 | )    |                  | $ | 16 |      |     | $ | (172 | )    |    | $ | (47 | ) 
|                                   |                                        |                                                              |      |      |                  |   |    |      |     |   |      |     

Asia and Other International Power.




32



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##### Table of Contents



Domestic Power Contract Restructurings.


Other Domestic Operations.


Non-regulated Business  Field Services Segment




Interest and Debt Expense




Affiliated Interest Income (Expense), Net




Income Taxes




|                   |  |                                 |     |   |                  |   |    |      |  |   |      |   |  |   |    |  
|------------------ |  | ------------------------------- | --- | - | ---------------- | - | -- | ---- |  | - | ---- | - |  | - | -- | -
|                   |  | Quarter Ended                   |     |   | Six Months Ended |  
|                   |  | June 30,                        |     |   | June 30,         |  
|                   |  |                                 |     |   |                  |  
|                   |  | 2005                            |     |   | 2004             |   |    | 2005 |  |   | 2004 |  
|                   |  |                                 |     |   |                  |   |    |      |  |   |      |  
|                   |  | (In millions, except for rates) |    
|Income taxes       |  | $                               | (15 | ) |                  | $ | 29 |      |  | $ | 25   |   |  | $ | 31 |  
|Effective tax rate |  |                                 | 18  | % |                  |   | 35 | %    |  |   | 227  | % |  |   | 34 | %



33



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##### Table of Contents





Discontinued Operations








Commitments and Contingencies




34



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##### Table of Contents






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






| |   |                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------
| |  | 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.                                                         



35



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##### 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
    financial system to monitor unauthorized password changes;                                                                                                                  
|
| |  | Developed a segregation of duties matrix for our primary
    financial system that documents existing role assignments;                                                                                                                   
|
| |  | Formalized and issued a company-wide account reconciliation
    policy;                                                                                                                                                                   
|
| |  | Implemented an account reconciliation monitoring tool that also
    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.                                                                                                                                  





| |   |                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Performed an in-depth analysis of the companys primary
    financial accounting system to examine existing functional
    access to identify any potentially incompatible duties.

36



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| |   |                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Enhanced the segregation of duties matrix for our primary
    financial accounting system based on the in-depth analysis of
    user access.                                                                                                    
|
| |  | Modified the primary financial accounting system to eliminate or
    modify potentially conflicting functionality.                                                                                                                              
|
| |  | Rewrote the computer programs for the mark-to-market accounting
    system to significantly reduce the number of different
    combinations of user access and to modify remaining capabilities
    to eliminate potentially conflicting duties.
|
| |  | Implemented a process to evaluate all new user access requests
    against segregation of duties matrices to ensure no new
    conflicts are created for our applications described above.                                                      
|
| |  | Separated security administration rights from system update
    capabilities for our applications described above.                                                                                                                              
|
| |  | Implemented monitoring procedures to monitor activities of
    security administration roles for our applications described
    above.                                                                                                          
|
| |  | Improved communications to establish the expectation that
    non-routine transactions must be communicated to ensure timely
    identification and thorough review of transactions.                                                            
|
| |  | Established periodic business unit meetings to ensure relevant
    information related to non-routine transactions is captured and
    validated.                                                                                               
|
| |  | Enhanced the Disclosure Committee Charter and meeting content to
    better address areas impacted by non-routine transactions,
    including discussion of impairments, significant estimates and
    legal and regulatory changes.            



37



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##### Table of Contents








PART II  OTHER INFORMATION





Item 1. Legal Proceedings







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







Item 3. Defaults Upon Senior Securities







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







Item 5. Other Information







Item 6. Exhibits




| |  |         |      |    |             |                                                                                                        
| |  | ------- | ---- | -- | ----------- | -------------------------------------------------------------------------------------------------------
| |  | Exhibit |      |    |            
| |  | Number  |      |    | Description
| |  |         |      |    |            
| |  |         | *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.

38



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##### Table of Contents






SIGNATURES






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



| |                              
| | -----------------------------
| | /s/ D. Mark Leland           
| |                              
| | D. Mark Leland               
| | 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)      

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##### 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.