##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 10-Q
   þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    March 31,
    2010ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934   Commission file number:
    001-32329
      Copano Energy, L.L.C.
 (Exact Name of Registrant as
    Specified in Its Charter)
  Delaware(State or Other Jurisdiction
    of
    Incorporation or Organization)

51-0411678(I.R.S. Employer
    Identification No.)    2727 Allen Parkway, Suite 1200
    Houston, Texas 77019 (Address of Principal
    Executive Offices)
   (713) 621-9547
 (Registrants telephone
    number, including area code)
   þ o
  Regulation S-T o o
  12b-2
  Large
    accelerated
    filer þ
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ




---



##### 





TABLE OF
    CONTENTS
   
 PagePART I  FINANCIAL INFORMATIONItem 1.


Financial Statements


3Unaudited Consolidated Balance Sheets as of
    March 31, 2010 and December 31, 2009


3Unaudited Consolidated Statements of Operations
    for the Three Months Ended March 31, 2010 and 2009


4Unaudited Consolidated Statements of Cash Flows
    for the Three Months Ended March 31, 2010 and 2009


5Unaudited Consolidated Statement of Members
    Capital and Comprehensive Income (Loss) for the Three Months
    Ended March 31, 2010 and 2009


6Notes to Unaudited Consolidated Financial
    Statements


7Item 2.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


34Item 3.


Quantitative and Qualitative Disclosures About
    Market Risk


50Item 4.


Controls and Procedures


52PART II  OTHER
    INFORMATIONItem 1.


Legal Proceedings


53Item 1A.


Risk Factors


53Item 6.


Exhibits


54EX-31.1EX-31.2EX-32.1EX-32.2   2




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##### Table of Contents



Item 1.
    Financial
    Statements.  COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  UNAUDITED
    CONSOLIDATED BALANCE SHEETS
  March 31,


December 31,2010


2009(In thousands, except unit information)ASSETSCurrent assets:Cash and cash equivalents

$
54,148


$
44,692Accounts receivable, net


89,203



91,156Risk management assets


30,334



36,615Prepayments and other current assets


3,770



4,937Total current assets


177,455



177,400Property, plant and equipment, net


850,444



841,323Intangible assets, net


187,858



190,376Investment in unconsolidated affiliates


613,825



618,503Escrow cash


1,858



1,858Risk management assets


17,170



15,381Other assets, net


21,488



22,571Total assets

$
1,870,098


$
1,867,412LIABILITIES AND MEMBERS CAPITALCurrent liabilities:Accounts payable

$
112,590


$
111,021Accrued interest


9,935



11,921Accrued tax liability


879



672Risk management liabilities


7,426



9,671Other current liabilities


15,788



9,358Total current liabilities


146,618



142,643Long-term debt (includes $608 and $628 bond premium as of
    March 31, 2010 and December 31, 2009, respectively)


717,798



852,818Deferred tax provision


1,889



1,862Risk management and other noncurrent liabilities


7,474



10,063Commitments and contingencies (Note 9)Members capital:Common units, no par value, 65,468,775 units and
    54,670,029 units issued and outstanding as of
    March 31, 2010 and December 31, 2009, respectively


1,156,889



879,504Class D units, no par value, 0 and 3,245,817 units
    issued and outstanding as of March 31, 2010 and
    December 31, 2009, respectively






112,454Paid-in capital


45,624



42,518Accumulated deficit


(191,432
)


(158,267
)Accumulated other comprehensive loss


(14,762
)


(16,183
)996,319



860,026Total liabilities and members capital

$
1,870,098


$
1,867,412    3




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  UNAUDITED
    CONSOLIDATED STATEMENTS OF OPERATIONS
  Three Months Ended March 31,2010


2009(In thousands, except per unit information)Revenue:Natural gas sales

$
120,216


$
94,979Natural gas liquids sales


119,318



80,831Transportation, compression and processing fees


13,114



14,999Condensate and other


14,018



10,269Total revenue


266,666



201,078Costs and expenses:Cost of natural gas and natural gas
    liquids(1)


209,865



143,319Transportation(1)


5,676



5,984Operations and maintenance


12,103



12,672Depreciation and amortization


15,201



13,105General and administrative


10,542



10,725Taxes other than income


1,162



786Equity in earnings from unconsolidated affiliates


(1,795
)


(1,484
)Total costs and expenses


252,754



185,107Operating income


13,912



15,971Other income (expense):Interest and other income


7



46Gain on retirement of unsecured debt






3,939Interest and other financing costs


(14,945
)


(14,448
)(Loss) income before income taxes and discontinued operations


(1,026
)


5,508Provision for income taxes


(234
)


(164
)(Loss) income from continuing operations


(1,260
)


5,344Discontinued operations, net of tax (Note 13)






561Net (loss) income

$
(1,260
)

$
5,905Basic net (loss) income per common unit:(Loss) income per common unit from continuing operations

$
(0.02
)

$
0.10Income per common unit from discontinued operations






0.01Net (loss) income per common unit

$
(0.02
)

$
0.11Weighted average number of common units


58,206



54,012Diluted net (loss) income per common unit:(Loss) income per common unit from continuing operations

$
(0.02
)

$
0.09Income per common unit from discontinued operations






0.01Net (loss) income per common unit

$
(0.02
)

$
0.10Weighted average number of common units


58,206



57,814     (1)
    
    Exclusive of operations and maintenance and depreciation and
    amortization shown separately below.   4




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES



UNAUDITED
    CONSOLIDATED STATEMENTS OF CASH FLOWS  Three MonthsEnded March 31,2010


2009(In thousands)Cash Flows From Operating Activities:Net (loss) income

$
(1,260
)

$
5,905Adjustments to reconcile net (loss) income to net cash provided
    by operating activities:Depreciation and amortization


15,201



13,165Amortization of debt issue costs


895



1,270Equity in earnings from unconsolidated affiliates


(1,795
)


(1,484
)Distributions from unconsolidated affiliates


5,765



5,371Gain on retirement of unsecured debt






(3,939
)Non-cash loss (gain) on risk management activities, net


533



(239
)Equity-based compensation


2,703



1,705Deferred tax provision


27



12Other non-cash items


(301
)


332Changes in assets and liabilities:Accounts receivable


2,124



28,277Prepayments and other current assets


1,167



1,060Risk management activities


597



9,188Accounts payable


2,063



(22,925
)Other current liabilities


1,445



(2,300
)Net cash provided by operating activities


29,164



35,398Cash Flows From Investing Activities:Additions to property, plant and equipment


(19,162
)


(19,423
)Additions to intangible assets


(263
)


(417
)Investment in unconsolidated affiliates


(435
)


(632
)Distributions from unconsolidated affiliates


972



1,560Proceeds from sale of assets


259



Other


188



(539
)Net cash used in investing activities


(18,441
)


(19,451
)Cash Flows From Financing Activities:Proceeds from long-term debt


35,000



50,000Repayment of long-term debt


(170,000
)


Retirement of unsecured debt






(14,286
)Distributions to unitholders


(31,457
)


(31,057
)Proceeds from public offering of common units, net of
    underwriting discounts and commissions of $7,223


164,786



Equity offering costs


(272
)


Proceeds from option exercises


676



5Net cash (used in) provided by financing activities


(1,267
)


4,662Net increase in cash and cash equivalents


9,456



20,609Cash and cash equivalents, beginning of year


44,692



63,684Cash and cash equivalents, end of period

$
54,148


$
84,293    5




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIESUNAUDITED CONSOLIDATED STATEMENT OF MEMBERS
    CAPITAL AND COMPREHENSIVE INCOME (LOSS)
  AccumulatedCommon


Class C


Class D








Other





TotalNumber


Common


Number


Class C


Number


Class D


Paid-in


Accumulated


Comprehensive





Comprehensiveof Units


Units


of Units


Units


of Units


Units


Capital


Deficit


(Loss) Income


Total


Income (Loss)Balance, December 31, 2009


54,670


$
879,504






$




3,246


$
112,454


$
42,518


$
(158,267
)

$
(16,183
)

$
860,026Conversion of Class D units into common units


3,246



112,454











(3,246
)


(112,454
)

















$
Distributions to unitholders






























(31,905
)






(31,905
)


Issuance of common units to public


7,446



172,008































172,008



Equity offering costs






(7,753
)






























(7,753
)


Equity-based compensation


107



676



















3,106











3,782



Net loss






























(1,260
)






(1,260
)


(1,260
)Derivative settlements reclassified to income


































855



855



855Unrealized gain-change in fair value of derivatives


































566



566



566Comprehensive income









































$
161Balance, March 31, 2010


65,469


$
1,156,889






$







$



$
45,624


$
(191,432
)

$
(14,762
)

$
996,319   AccumulatedCommon


Class C


Class D





Accumulated


Other





TotalNumber


Common


Number


Class C


Number


Class D


Paid-in


Earnings


Comprehensive





Comprehensiveof Units


Units


of Units


Units


of Units


Units


Capital


(Deficit)


Income (Loss)


Total


Income (Loss)(In thousands)Balance, December 31, 2008


53,965


$
865,343



395


$
13,497



3,246


$
112,454


$
33,734


$
(54,696
)

$
67,626


$
1,037,958Distributions to unitholders






























(31,462
)






(31,462
)

$
Equity-based compensation


104



5



















3,156











3,161



Net income






























5,905







5,905



5,905Derivative settlements reclassified to income


































(14,696
)


(14,696
)


(14,696
)Unrealized gain-change in fair value of derivatives


































7,013



7,013



7,013Comprehensive loss









































$
(1,778
)Balance, March 31, 2009


54,069


$
865,348



395


$
13,497



3,246


$
112,454


$
36,890


$
(80,253
)

$
59,943


$
1,007,879


6




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##### Table of Contents





COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  Note 1  Organization
    and Basis of Presentation
  Organization
  Unless the context
    requires otherwise, references to Copano,
    we, our, us or like terms
    refer to Copano Energy, L.L.C., its subsidiaries and entities it
    manages or operates
    Basis
    of Presentation and Principles of Consolidation
        Form 10-K
 7




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 2  New
    Accounting Pronouncements
  Fair
    Value Measurements
  No. 2010-06, Fair Value Measurements and Disclosures: Improving
    Disclosures about Fair Value Measurements 820-10 2010-06 2010-06
  Note 3  Intangible
    Assets
  rights-of-way, ASC 350-30, 2010  2011  2012  2013  2014  2015 
  March 31,


December 31,2010


2009Rights-of-way
    and easements, at cost

$
116,384


$
116,122Less accumulated amortization for
    rights-of-way
    and easements


(19,450
)


(18,204
)Contracts


107,916



107,916Less accumulated amortization for contracts


(20,786
)


(19,330
)Customer relationships


4,864



4,864Less accumulated amortization for customer relationships


(1,070
)


(992
)Intangible assets, net

$
187,858


$
190,376   rights-of-way rights-of-way
  Note 4  Investment
    in Unconsolidated Affiliates
   8




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 4  Investment
    in Unconsolidated Affiliates (Continued)
      Bighorn


Fort Union


Southern Dome


Webb DuvalOperating revenue

$
8,049


$
14,160


$
7,687


$
511Operating expenses


(3,122
)


(2,189
)


(6,162
)


(518
)Depreciation and amortization


(1,270
)


(1,730
)


(186
)


(191
)Interest income (expense) and other


4



(1,002
)


2



Net income (loss)


3,661



9,239



1,341



(198
)Ownership %


51
%


37.04
%


69.5
%


62.5
%1,867



3,422



932



(124
)Priority allocation of earnings and other


170







(18
)


Copanos share of management fees charged


71



22



43



35Amortization of difference between the carried investment and
    the underlying equity in net assets


(3,042
)


(1,606
)


(2
)


5Equity in (loss) earnings from unconsolidated affiliates

$
(934
)

$
1,838


$
955


$
(84
)Distributions

$
2,897


$
2,778


$
1,043


$
Current assets

$
6,572


$
12,619


$
3,986


$
430Noncurrent assets


91,897



211,094



15,381



5,995Current liabilities


(1,383
)


(21,451
)


(5,244
)


(945
)Noncurrent liabilities


(244
)


(84,592
)






(59
)Net assets

$
96,842


$
117,670


$
14,123


$
5,421  9




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 4  Investment
    in Unconsolidated Affiliates (Continued)
    Bighorn


Fort Union


Southern Dome


Webb DuvalOperating revenue

$
8,900


$
15,121


$
3,247


$
498Operating expenses


(3,315
)


(1,439
)


(2,808
)


(395
)Depreciation and amortization


(1,142
)


(1,948
)


(187
)


(197
)Interest (expense) income and other






(1,365
)


2



Net income (loss)


4,443



10,369



254



(94
)Ownership %


51
%


37.04
%


69.5
%


62.5
%2,266



3,841



176



(59
)Priority allocation of earnings and other


148



(225
)






Copanos share of management fees charged


60



21



43



34Amortization of difference between the carried investment and
    the underlying equity in net assets


(3,215
)


(1,606
)


(2
)


5Equity in (loss) earnings from unconsolidated affiliates

$
(741
)

$
2,031


$
217


$
(20
)Distributions

$
3,209


$
2,778


$
626


$
281Current assets

$
9,037


$
15,086


$
2,372


$
627Noncurrent assets


97,145



213,672



16,190



6,756Current liabilities


(2,091
)


(20,243
)


(3,107
)


(471
)Noncurrent liabilities






(99,708
)






(55
)Net assets

$
104,091


$
108,807


$
15,455


$
6,857   Note 5  Long-Term
    Debt
    March 31,


December 31,2010


2009Long-term debt:Credit Facility

$
135,000


$
270,000Senior Notes:8.125% senior unsecured notes due 2016


332,665



332,665Unamortized bond premium-senior notes due 2016


608



6287.75% senior unsecured notes due 2018


249,525



249,525Total Senior Notes


582,798



582,818Total

$
717,798


$
852,818  10




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 5  Long-Term
    Debt (Continued)
  Senior
    Secured Revolving Credit Facility
        
    a minimum EBITDA to interest expense ratio (using four
    quarters EBITDA as defined under the Credit Facility) of
    2.5 to 1.0;
    a maximum total debt to EBITDA ratio of 5.0 to 1.0 (with no
    future reductions) with the option to increase the total debt to
    EBITDA ratio to not more than 5.5 to 1.0 for a period of up to
    nine months following an acquisition or a series of acquisitions
    totaling $50 million in a
    12-month
    period (subject to an increased applicable interest rate margin
    and commitment fee rate).    four-quarter
    Senior
    Notes
  8.125% Senior Notes Due 2016.
   11




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 5  Long-Term
    Debt (Continued)
  7.75% Senior Notes Due 2018.
    General.
   12




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 5  Long
    Term Debt (Continued)
  CONDENSED
    CONSOLIDATING BALANCE SHEETS
  March 31, 2010


December 31, 2009Investment in

















Investment inGuarantor


Non-Guarantor














Guarantor


Non-GuarantorParent


Co-Issuer


Subsidiaries


Subsidiaries


Eliminations


Total


Parent


Co-Issuer


Subsidiaries


Subsidiaries


Eliminations


Total(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
13,054


$



$
41,094


$



$



$
54,148


$
3,861


$



$
40,831


$



$



$
44,692Accounts receivable, net


66







89,137











89,203



29







91,127











91,156Intercompany receivable


14,253



(1
)


(14,252
)














21,034







(21,034
)










Risk management assets










30,334











30,334











36,615











36,615Prepayments and other current assets


2,356







1,414











3,770



3,610







1,327











4,937Discontinued operations














































Total current assets


29,729



(1
)


147,727











177,455



28,534







148,866











177,400Property, plant and equipment, net


86







850,358











850,444



96







841,227











841,323Intangible assets, net










187,858











187,858











190,376











190,376Investment in unconsolidated affiliates










613,825



613,825



(613,825
)


613,825











618,503



618,503



(618,503
)


618,503Investment in consolidated subsidiaries


1,685,254















(1,685,254
)






1,684,994















(1,684,994
)


Escrow cash










1,858











1,858











1,858











1,858Risk management assets










17,170











17,170











15,381











15,381Other assets, net


14,959







6,529











21,488



15,854







6,717











22,571Total assets

$
1,730,028


$
(1
)

$
1,825,325


$
613,825


$
(2,299,079
)

$
1,870,098


$
1,729,478


$



$
1,822,928


$
618,503


$
(2,303,497
)

$
1,867,412LIABILITIES AND MEMBERS/PARTNERS CAPITALCurrent liabilities:Accounts payable

$
419


$



$
112,171


$



$



$
112,590


$



$



$
111,021


$



$



$
111,021Accrued interest


9,176







759











9,935



11,146







775











11,921Accrued tax liability


879



















879



672



















672Risk management liabilities










7,426











7,426











9,671











9,671Other current liabilities


3,265







12,523











15,788



2,637







6,721











9,358Total current liabilities


13,739







132,879











146,618



14,455







128,188











142,643Long-term debt


717,798



















717,798



852,818



















852,818Deferred tax provision


1,889



















1,889



1,862



















1,862Risk management and other noncurrent liabilities


283







7,191











7,474



317







9,746











10,063Members/Partners capital:Common units


1,156,889



















1,156,889



879,504



















879,504Class D units


























112,454



















112,454Paid-in capital


45,624



1



1,172,582



589,302



(1,761,885
)


45,624



42,518



1



1,191,268



595,775



(1,787,044
)


42,518Accumulated (deficit) earnings


(191,432
)


(2
)


527,434



24,523



(551,955
)


(191,432
)


(158,267
)


(1
)


509,909



22,728



(532,636
)


(158,267
)Other comprehensive (loss) income


(14,762
)






(14,761
)






14,761



(14,762
)


(16,183
)






(16,183
)






16,183



(16,183
)996,319



(1
)


1,685,255



613,825



(2,299,079
)


996,319



860,026







1,684,994



618,503



(2,303,497
)


860,026Total liabilities and members/partners capital

$
1,730,028


$
(1
)

$
1,825,325


$
613,825


$
(2,299,079
)

$
1,870,098


$
1,729,478


$



$
1,822,928


$
618,503


$
(2,303,497
)

$
1,867,412  13




---



##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 5  Long
    Term Debt (Continued)
  CONDENSED
    CONSOLIDATING STATEMENTS OF OPERATIONS
  Three Months Ended March 31,2010


2009Investment in

















Investment inGuarantor


Non-Guarantor














Guarantor


Non-GuarantorParent


Co-Issuer


Subsidiaries


Subsidiaries


Eliminations


Total


Parent


Co-Issuer


Subsidiaries


Subsidiaries


Eliminations


Total(In thousands)Revenue:Natural gas sales

$



$



$
120,216


$



$



$
120,216


$



$



$
94,979


$



$



$
94,979Natural gas liquids sales










119,318











119,318











80,831











80,831Transportation, compression and processing fees










13,114











13,114











14,999











14,999Condensate and other










14,018











14,018











10,269











10,269Total revenue










266,666











266,666











201,078











201,078Costs and expenses:Cost of natural gas and natural gas liquids










209,865











209,865











143,319











143,319Transportation










5,676











5,676











5,984











5,984Operations and maintenance










12,103











12,103



270







12,402











12,672Depreciation and amortization


10







15,191











15,201



10







13,095











13,105General and administrative


5,195







5,347











10,542



6,451







4,274











10,725Taxes other than income










1,162











1,162











786











786Equity in earnings from unconsolidated affiliates










(1,795
)


(1,795
)


1,795



(1,795
)










(1,484
)


(1,484
)


1,484



(1,484
)Total costs and expenses


5,205







247,549



(1,795
)


1,795



252,754



6,731







178,376



(1,484
)


1,484



185,107Operating (loss) income


(5,205
)






19,117



1,795



(1,795
)


13,912



(6,731
)






22,702



1,484



(1,484
)


15,971Other income (expense):Interest and other income










7











7











46











46Gain on retirement of unsecured debt


























3,939



















3,939Interest and other financing costs


(13,347
)






(1,598
)










(14,945
)


(13,417
)






(1,031
)










(14,448
)(Loss) income before income taxes, discontinued operations and
    equity in earnings from consolidated subsidiaries


(18,552
)






17,526



1,795



(1,795
)


(1,026
)


(16,209
)






21,717



1,484



(1,484
)


5,508Provision for income taxes


(234
)


















(234
)


(164
)


















(164
)(Loss) income before discontinued operations and equity in
    earnings from consolidated subsidiaries


(18,786
)






17,526



1,795



(1,795
)


(1,260
)


(16,373
)






21,717



1,484



(1,484
)


5,344Discontinued operations, net of tax


































561











561(Loss) income before equity earnings from consolidated
    subsidiaries


(18,786
)






17,526



1,795



(1,795
)


(1,260
)


(16,373
)






22,278



1,484



(1,484
)


5,905Equity in earnings from consolidated subsidiaries


17,526















(17,526
)






22,278















(22,278
)


Net (loss) income

$
(1,260
)

$



$
17,526


$
1,795


$
(19,321
)

$
(1,260
)

$
5,905


$



$
22,278


$
1,484


$
(23,762
)

$
5,905  14




---



##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 5  Long
    Term Debt (Continued)
  CONDENSED
    CONSOLIDATING STATEMENTS OF CASH FLOWS
  Three Month Ended March 31,2010


2009Investment in

















Investment inGuarantor


Non-Guarantor














Guarantor


Non-GuarantorParent


Co-Issuer


Subsidiaries


Subsidiaries


Eliminations


Total


Parent


Co-Issuer


Subsidiaries


Subsidiaries


Eliminations


Total(In thousands)Cash Flows From Operating Activities:Net cash provided by (used in) operating activities

$
(12,540
)

$



$
41,704


$
5,765


$
(5,765
)

$
29,164


$
8,667


$



$
26,731


$
5,371


$
(5,371
)

$
35,398Cash Flows From Investing Activities:














































Additions to property, plant and equipment










(19,425
)










(19,425
)










(19,840
)










(19,840
)Investment in unconsolidated affiliates










(435
)


(435
)


435



(435
)










(632
)


(632
)


632



(632
)Distributions from unconsolidated affiliates










972



972



(972
)


972











1,560



1,560



(1,560
)


1,560Investment in consolidated affiliates


























(25
)














25



Distributions from consolidated affiliates


23,000















(23,000
)






6,000















(6,000
)


Proceeds from sale of assets










259











259























Other










188











188











(539
)










(539
)Net cash provided by (used in) investing activities


23,000







(18,441
)


537



(23,537
)


(18,441
)


5,975







(19,451
)


928



(6,903
)


(19,451
)Cash Flows From Financing Activities:Proceeds from long-term debt


35,000



















35,000



50,000



















50,000Repayments of long-term debt


(170,000
)


















(170,000
)


(14,286
)


















(14,286
)Distributions to unitholders


(31,457
)


















(31,457
)


(31,057
)


















(31,057
)Equity offering of common units


164,786



















164,786























Equity offering of common units-offering costs


(272
)


















(272
)






















Contributions from parent


































25







(25
)


Distributions to parent










(23,000
)






23,000















(6,000
)






6,000



Other


676











435



(435
)


676



10







(5
)


632



(632
)


5Net cash (used in) provided by financing activities


(1,267
)






(23,000
)


435



22,565



(1,267
)


4,667







(5,980
)


632



5,343



4,662Net (decrease) increase in cash and cash equivalents


9,193







263



6,737



(6,737
)


9,456



19,309







1,300



6,931



(6,931
)


20,609Cash and cash equivalents, beginning of year


3,861



(1
)


40,832



59,896



(59,896
)


44,692



20,417






$
43,267


$
30,212


$
(30,212
)

$
63,684Cash and cash equivalents, end of year

$
13,054


$
(1
)

$
41,095


$
66,633


$
(66,633
)

$
54,148


$
39,726


$



$
44,567


$
37,143


$
(37,143
)

$
84,293  15




---



##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 6  Members
    Capital and Distributions
  Common
    Units
    Class D
    Units
  one-for-one
  Distributions
    DistributionQuarter Ending

Per Unit

Date Declared

Record Date

Payment Date

AmountDecember 31, 2009

$0.5750

January 13, 2010

February 1, 2010

February 11, 2010

$31,911,000March 31, 2010

$0.5750

April 14, 2010

April 30, 2010

May 13, 2010

$38,134,000   Accounting
    for Equity-Based Compensation
    Equity Awards. Form 10-K
  Liability Awards.
  Accounting for Certain Financial
    Instruments With Characteristics of Both Liabilities and
    Equity
  Note 7  Net
    Income (Loss) Per Unit
  Earnings Per Share
 16




---



##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 7  Net
    Income (Loss) Per Unit (Continued)
        Three Months Ended March 31,2010


2009(In thousands, except per unit information)Net (loss) income available  basic and diluted

$
(1,260
)

$
5,905Basic weighted average units


58,206



54,012Dilutive weighted average
    units(1)(2)


58,206



57,814Basic net (loss) income per unit:(Loss) income per unit from continuing operations

$
(0.02
)

$
0.10Income per unit from discontinued operations






0.01Net (loss) income per unit

$
(0.02
)

$
0.11Diluted net (loss) income per unit:(Loss) income per unit from continuing operations
    (1)(2)

$
(0.02
)

$
0.09Income per unit from discontinued operations
    (1)(2)






0.01Net (loss) income per unit

$
(0.02
)

$
0.10     (1)
    
    Our potentially dilutive common equity includes the following:  Three Months EndedMarch 31,2010


2009(In thousands)Employee options






76Restricted units






16Phantom units






11Contingent incentive plan unit awards






59Class C units






395Class D units






3,246  17




---



##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 7  Net
    Income (Loss) Per Unit (Continued)
    (2)
    
    The following potentially dilutive common equity was excluded
    from the dilutive net income (loss) per unit calculation because
    to include these equity securities would have been anti-dilutive:  Three Months EndedMarch 31,2010


2009(In thousands)Employee options


1,246



1,339Unit appreciation rights


318



Restricted units


105



149Phantom units


697



576Class D units


1,561



Contingent incentive plan unit awards


39



    Note 8  Related
    Party Transactions
  Natural
    Gas and Related Transactions
    Three Months Ended March 31,2010


2009Affiliates of
    Mr. Lawing:(1)Natural gas
    sales(2)

$
1


$
Gathering and compression
    services(3)


2



6Natural gas
    purchases(4)


281



350Reimbursable
    costs(5)


75



Reimbursements
    paid(6)






638Payable by us as of March 31,
    2010(7)


63Webb Duval:Natural gas
    sales(2)






368Natural gas
    purchases(4)


53



214Transportation
    costs(8)


70



101Management
    fees(9)


56



55Reimbursable
    costs(9)


67



149Payable to us as of March 31,
    2010(10)


1,133Payable by us as of March 31,
    2010(7)


460Southern Dome:Management
    fees(9)


63



63Reimbursable
    costs(9)


96



74Payable to us as of March 31,
    2010(10)


745 18




---



##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 8 
     Related Party Transactions (Continued)
  Three Months Ended March 31,2010


2009Bighorn:Compressor rental
    fees(11)


417



Gathering
    costs(8)


16



107Natural gas
    purchases(4)


3



Management
    fees(9)


93



72Reimbursable
    costs(9)


713



679Payable to us as of March 31,
    2010(10)


194Payable by us as of March 31,
    2010(7)


82Fort Union:Gathering
    costs(8)


1,371



2,009Treating
    costs(4)


52



184Management
    fees(9)


56



57Reimbursable
    costs(9)


85



10Payable to us as of March 31,
    2010(10)


33Payable by us as of March 31,
    2010(7)


163Other:Natural gas
    sales(2)


60



38Payable to us as of March 31,
    2010(10)


36     (1)
    
    These entities were controlled by
    John R. Eckel, Jr., our former Chairman and Chief Executive
    Officer, until his death in November 2009, and since that time
    have been controlled by Douglas L. Lawing, our Executive Vice
    President, General Counsel and Secretary.(2)
    
    Revenues included in natural gas
    sales on our consolidated statements of operations.(3)
    
    Revenues included in
    transportation, compression and processing fees on our
    consolidated statements of operations.(4)
    
    Included in costs of natural gas
    and natural gas liquids on our consolidated statements of
    operations.(5)
    
    Reimbursable costs received from
    Copano/Operations, Inc. (Copano Operations) for its
    use of shared personnel, facilities and equipment, which was the
    only compensation we received from Copano Operations.(6)
    
    Reimbursable costs paid to Copano
    Operations for our use of shared personnel, office space,
    equipment, goods and services under an agreement that terminated
    on January 1, 2010. Effective January 1, 2010, we
    hired the personnel we share with Copano Operations, assumed
    responsibility for procuring the shared office space, equipment,
    goods and services and entered into a new agreement under which
    Copano Operations pays us for use of our shared personnel and
    other shared items.(7)
    
    Included in accounts payable on the
    consolidated balance sheets.(8)
    
    Costs included in transportation on
    our consolidated statements of operations.(9)
    
    Management fees and reimbursable
    costs received from our unconsolidated affiliates consists of
    the total compensation paid to us by our unconsolidated
    affiliates and is included in general and administrative
    expenses on our consolidated statements of operations.(10)
    
    Included in accounts receivable on
    the consolidated balance sheets.(11)
    
    Revenues included in condensate and
    other on our consolidated statements of operations. 19




---



##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 8  Related
    Party Transactions (Continued)
     Other
    Transactions
    Note 9  Commitments
    and Contingencies
  Commitments
           20




---



##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 9  Commitments
    and Contingencies (Continued)
    Regulatory
    Compliance
    Litigation
      Note 10  Supplemental
    Disclosures to the Statements of Cash Flows
  Three Months EndedMarch 31,2010


2009(In thousands)Cash payments for interest, net of $495,000 and $1,163,000
    capitalized in 2010 and 2009, respectively

$
14,966


$
15,061Cash payments for federal and state income taxes

$



$
     Note 11  Financial
    Instruments
   21




---



##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 11  Financial
    Instruments (Continued)
  Commodity
    Risk Hedging Program
    over-the-counter
       22




---



##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 11  Financial
    Instruments (Continued)
    Purchased
    Houston Ship Channel Index Natural Gas Options
  Call Spread


CallCall Strike(Per MMBtu)


Call Volumes


StrikeBought


Sold


(MMBtu/d)


(Per MMBtu)


Volume (MMBtu/d)2010

$
7.3500


$
10.0000



7,100


$
10.0000



10,0002011

$
6.9500


$
10.0000



7,100


$
10.0000



10,000   Purchased
    Houston Ship Channel Index Natural Gas Basis Swap
  Price


Volume(per MMBtu)


(MMBtu/d)2010(1)

$
0.0450



10,000     (1)
    
    Instrument is not designated as a cash flow hedge under hedge
    accounting.  Sold
    CenterPoint East Index Natural Gas Basis Swap
  Price


Volume(per MMBtu)


(MMBtu/d)2010(1)

$
0.2300



10,000     (1)
    
    Instrument is not designated as a cash flow hedge under hedge
    accounting.  Purchased
    Mt. Belvieu Purity Ethane Puts and Entered into Swaps
  Put


SwapStrike


Volumes


Price


Volumes(Per gallon)


(Bbls/d)


(Per gallon)


(Bbls/d)2010

$
0.5550



1,600


$
0.5700



5002011

$
0.5300



1,700


$
0.5450



5002011

$
0.5300



500







2011

$
0.6200



500







2012

$
0.5900



1,000







   Purchased
    Mt. Belvieu TET Propane Puts and Entered into Swaps
  Put


SwapStrike


Volumes


Price


Volumes(Per gallon)


(Bbls/d)


(Per gallon)


(Bbls/d)2010

$
0.8500



1,100







2010

$
0.9460



700


$
0.9925



7002011

$
0.8265



1,100







2011

$
0.9340



700


$
0.9750



7002011

$
1.3300



900







2012

$
1.1500



700







  23




---



##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 11  Financial
    Instruments (Continued)
  Purchased
    Mt. Belvieu TET Propane Put Spread Options
  Put SpreadStrike


Volumes(Per gallon)


(Bbls/d)Bought


Sold2010

$
1.4900


$
0.8500



1,1002010

$
1.4900


$
0.9460



700   Purchased
    Mt. Belvieu Non-TET Isobutane Puts and Entered into
    Swaps
  Put


SwapStrike


Volumes


Price


Volumes(Per gallon)


(Bbls/d)


(Per gallon)


(Bbls/d)2010

$
1.0350



300







2010

$
1.1145



100


$
1.2025



1002011

$
1.0205



300







2011

$
1.1100



100


$
1.1800



1002011

$
1.7100



200







2012

$
1.3900



300







   Purchased
    Mt. Belvieu Non-TET Isobutane Put Spread Options
  Put SpreadStrike(Per gallon)


VolumesBought


Sold


(Bbls/d)2010

$
1.8900


$
1.1145



1002010

$
1.8900


$
1.0350



300   Purchased
    Mt. Belvieu Non-TET Normal Butane Puts and Entered into
    Swaps
  Put


SwapStrike


Volumes


Price


Volumes(Per gallon)


(Bbls/d)


(Per gallon)


(Bbls/d)2010

$
1.0300



300







2010

$
1.1000



200


$
1.1850



2002011

$
1.0205



300







2011

$
1.0850



200


$
1.1700



2002011

$
1.7100



350







2012

$
1.3600



350







   Purchased
    Mt. Belvieu Non-TET Normal Butane Put Spread Options
  Put SpreadStrike


Volumes(Per gallon)


(Bbls/d)Bought


Sold2010

$
1.8800


$
1.1000



2002010

$
1.8800


$
1.0300



300  24




---



##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 11  Financial
    Instruments (Continued)
  Purchased
    Mt. Belvieu Non-TET Natural Gasoline Puts
  PutStrike


Volumes(Per gallon)


(Bbls/d)2010

$
1.4080



3002011

$
1.4100



300   Purchased
    Mt. Belvieu Non-TET Natural Gasoline Put Spread
    Options
  Put SpreadStrike


Volumes(Per gallon)


(Bbls/d)Bought


Sold2010

$
2.5400


$
1.4080



300   Purchased
    WTI Crude Oil Puts
  PutStrike


Volumes(Per barrel)


(Bbls/d)2010

$
55.00



1,0002010

$
60.00



4002011(1)

$
55.00



1,0002011

$
60.00



4002011

$
77.00



7002011

$
79.00



4002011(2)

$
85.00



2002012

$
79.00



3002012(2)

$
83.00



3502012(2)

$
85.00



350     (1)
    
    Instrument is not designated as a cash flow hedge under hedge
    accounting.(2)
    
    Instrument purchased April 2010.  Purchased
    WTI Crude Oil Put Spread Options
  Put SpreadStrike(Per barrel)


VolumesBought


Sold


(Bbls/d)2010

$
118.00


$
55.00



1,0002010

$
118.00


$
60.00



400   Interest
    Rate Risk Hedging Program
   25




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 11  Financial
    Instruments (Continued)
      ASC
    820 Fair Value Measurement and ASC 815 Disclosures about
    Derivative Instruments and Hedging Activities
    
    Level 1  Unadjusted quoted prices in active
    markets that are accessible at the measurement date for
    identical, unrestricted assets or liabilities;
    Level 2  Quoted prices in markets that are not
    considered to be active or financial instruments for which all
    significant inputs are observable, either directly or
    indirectly; and
    Level 3  Prices or valuations that require
    inputs that are both significant to the fair value measurement
    and unobservable. These inputs may be used with internally
    developed methodologies that result in managements best
    estimate of fair value.   26




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 11  Financial
    Instruments (Continued)
    Fair Value Measurements on Hedging
    Instruments(a)March 31, 2010Level 1


Level 2


Level 3


Total(In thousands)Assets:Natural Gas:Short-term 
    Designated(b)

$



$



$
196


$
196Long-term 
    Designated(c)










526



526Natural Gas Liquids:Short-term 
    Designated(b)










16,724



16,724Long-term 
    Designated(c)










13,252



13,252Crude Oil:Short-term 
    Designated(b)










13,414



13,414Long-term 
    Designated(c)










3,123



3,123Long-term  Not
    designated(c)










266



266Total

$



$



$
47,501


$
47,501Liabilities:Natural Gas:Short-term  Not
    designated(d)

$



$
156


$



$
156Natural Gas Liquids:Short-term 
    Designated(d)










2,898



2,898Long-term 
    Designated(e)










1,580



1,580Interest Rate:Short-term  Not
    designated(d)






4,370







4,370Long-term  Not
    designated(e)






3,722







3,722Total

$



$
8,248


$
4,478


$
12,726Total designated assets

$



$



$
42,757


$
42,757Total not designated (liabilities)/assets

$



$
(8,248
)

$
266


$
(7,982
)     (a)
    
    Instruments re-measured on a
    recurring basis.(b)
    
    Included on the consolidated
    balance sheets as a current asset under the heading of
    Risk management assets.(c)
    
    Included on the consolidated
    balance sheets as a noncurrent asset under the heading of
    Risk management assets.(d)
    
    Included on the consolidated
    balance sheets as a current liability under the heading of
    Risk management liabilities.(e)
    
    Included on the consolidated
    balance sheets as a noncurrent liability under the heading of
    Risk management and other noncurrent liabilities.  27




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 11  Financial
    Instruments (Continued)
  Fair Value Measurements on Hedging
    Instruments(a)December 31, 2009Level 1


Level 2


Level 3


Total(In thousands)AssetsCommodity derivatives:Short-term 
    Designated(b)

$



$



$
36,588


$
36,588Short-term  Not
    designated(b)






27







27Long-term 
    Designated(c)










14,805



14,805Long-term  Not
    designated(c)










576



576Total

$



$
27


$
51,969


$
51,996LiabilitiesCommodity derivatives:Short-term 
    Designated(d)

$



$



$
4,763


$
4,763Long-term 
    Designated(e)










4,600



4,600Interest rate derivatives:Short-term  Not
    designated(d)






4,909







4,909Long-term  Not
    designated(e)






3,238







3,238Total

$



$
8,147


$
9,363


$
17,510Total designated assets

$



$



$
42,030


$
42,030Total not designated (liabilities)/assets

$



$
(8,120
)

$
576


$
(7,544
)     (a)
    
    Instruments re-measured on a
    recurring basis.(b)
    
    Included on the consolidated
    balance sheets as a current asset under the heading of
    Risk management assets.(c)
    
    Included on the consolidated
    balance sheets as a noncurrent asset under the heading of
    Risk management assets.(d)
    
    Included on the consolidated
    balance sheets as a current liability under the heading of
    Risk management liabilities.(e)
    
    Included on the consolidated
    balance sheets as a noncurrent liability under the heading of
    Risk management and other noncurrent liabilities.    (1-month 3-month
   28




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 11  Financial
    Instruments (Continued)
    Three Months Ended March 31, 2010Natural Gas


Natural Gas Liquids


Crude Oil


Total(In thousands)Assets balance, beginning of period

$
2,752


$
15,641


$
24,213


$
42,606Total gains or losses:Non-cash amortization of option premium


(1,456
)


(4,057
)


(2,465
)


(7,978
)Other amounts included in earnings






2,066



4,720



6,786Included in accumulated other comprehensive loss


(572
)


6,583



(4,723
)


1,288Purchases






7,381







7,381Settlements






(2,116
)


(4,940
)


(7,056
)Transfers in and/or out of Level 3














Asset balance, end of year

$
724


$
25,498


$
16,805


$
43,027Change in unrealized losses (income) included in earnings
    related to instruments still held as of the end of the period

$



$
(56
)

$
(438
)

$
(494
)   Three Months EndedMarch 31, 2009(In thousands)Assets balance, beginning of year

$
152,677Total gains or losses:Non-cash amortization of option premium


(9,188
)Other amounts included in earnings


25,285Included in accumulated other comprehensive loss


(7,502
)Purchases


Settlements


(25,120
)Transfers in and/or out of Level 3


Asset balance, end of year

$
136,152Change in unrealized losses (income) included in earnings
    related to instruments still held as of the end of the year

$
56     and/or
 29




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 11  Financial
    Instruments (Continued)
      The
    Effect of Derivative Instruments on the Statements of
    Operations
    (In thousands)
  Amount of Gain(Loss) Recognizedin Income onDerivativeAmount of Gain


Amount of Gain


(IneffectiveDerivatives in ASC

(Loss) Recognized


(Loss) Reclassified


Portion and Amount815 Cash Flow

in OCI on


from Accumulated


Excluded fromHedging

Derivatives


OCI into Income


Effectiveness


Statements of OperationsRelationships

(Effective Portion)


(Effective Portion)


Testing)


LocationThree Months Ended March 31, 2010Natural gas

$
(2,013
)

$
(1,439
)

$



Natural gas salesNatural gas liquids


4,930



(1,654
)


(56
)

Natural gas liquids salesCrude oil


(2,351
)


2,370



25


Condensate and otherInterest rate swaps






(132
)





Interest and other financing costsTotal

$
566


$
(855
)

$
(31
)Three Months Ended March 31, 2009Natural gas

$
255


$
(766
)

$



Natural gas salesNatural gas liquids


(3,534
)


11,494



(16
)

Natural gas liquids salesCrude oil


(4,223
)


4,049



123


Condensate and otherInterest rate swaps


(181
)


(81
)





Interest and other financing costsTotal

$
(7,683
)

$
14,696


$
107  30




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 11  Financial
    Instruments (Continued)
    The
    Effect of Derivative Instruments on the Statements of
    Operations
    (In thousands)
  Derivatives Not Designated as

Amount of GainHedging Instruments

(Loss) Recognized


Statement of OperationsUnder ASC 820

in Income on Derivative


LocationThree months ended March 31, 2010Natural gas

$
(227
)

Natural gas salesCrude oil


(306
)

Condensate and otherInterest rate swaps


(1,466
)

Interest and other financing costsTotal

$
(1,999
)Three months ended March 31, 2009Natural gas liquids

$
56


Natural gas liquids salesInterest rate swaps


75


Interest and other financing costsTotal

$
131   Note 12  Fair
    Value of Financial Instruments
    March 31, 2010Carrying


EstimatedValue


Fair Value(In thousands)Cash and cash equivalents

$
54,148


$
54,148Credit Facility


135,000



131,9712016 Notes


332,665



337,6552018 Notes


249,525



249,525   31




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 13  Discontinued
    Operations
    Three Months EndedMarch 31,2010


2009Crude oil sales

$



$
15,338Cost of crude oil purchases






14,428Income from discontinued operations before taxes

$



$
561Income tax expense






Net income from discontinued operations

$



$
561   Note 14 
    Segment
    Information    
    Oklahoma, which includes midstream natural gas services in
    central and east Oklahoma, including gathering of natural gas
    and related services such as compression, dehydration, treating,
    processing and nitrogen rejection. This segment includes our
    equity investment in Southern Dome and, through
    September 30, 2009, included a crude oil pipeline.
    Texas, which includes midstream natural gas services in south
    and north Texas, including gathering and intrastate transmission
    of natural gas, and related services such as compression,
    dehydration, treating, conditioning or processing and marketing.
    Our Texas segment also provides NGL fractionation and
    transportation. Our Texas segment includes our Louisiana
    processing assets and our equity investment in Webb Duval.
    Rocky Mountains, which includes natural gas gathering and
    treating and compressor rental services in Wyoming. Our Rocky
    Mountains segment includes our equity investments in Bighorn and
    Fort Union.     32




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 14 
    Segment Information (Continued)
    Rocky


Total


CorporateOklahoma(a)


Texas


Mountains


Segments


and Other


ConsolidatedThree Months Ended March 31, 2010:Total segment gross margin

$
24,275


$
27,165


$
1,103


$
52,543


$
(1,418
)

$
51,125Operations and maintenance expenses


5,433



6,569



101



12,103







12,103Depreciation and amortization


8,415



5,585



766



14,766



435



15,201General and administrative expenses


2,287



2,410



537



5,234



5,308



10,542Taxes other than income


499



663







1,162







1,162Equity in (earnings) loss from unconsolidated affiliates


(954
)


65



(906
)


(1,795
)






(1,795
)Operating income (loss)

$
8,595


$
11,873


$
605


$
21,073


$
(7,161
)

$
13,912Natural gas sales

$
59,481


$
61,811


$
604


$
121,896


$
(1,680
)

$
120,216Natural gas liquids sales


61,023



60,286







121,309



(1,991
)


119,318Transportation, compression and processing fees


1,243



7,337



4,534



13,114







13,114Condensate and other


8,956



2,392



417



11,765



2,253



14,018Sales to external customers

$
130,703


$
131,826


$
5,555


$
268,084


$
(1,418
)

$
266,666Intersegment sales

$



$



$



$



$



$
Interest and other financing costs

$



$



$



$



$
14,945


$
14,945Segment assets

$
719,306


$
453,612


$
686,564


$
1,859,482


$
10,616


$
1,870,098Three Months Ended March 31, 2009:Total segment gross margin

$
14,300


$
20,580


$
799


$
35,679


$
16,096


$
51,775Operations and maintenance expenses


5,616



7,054



2



12,672







12,672Depreciation and amortization


7,754



4,347



671



12,772



333



13,105General and administrative expenses


1,971



2,251



749



4,971



5,754



10,725Taxes other than income


404



380



2



786







786Equity in (earnings) loss from unconsolidated affiliates


(217
)


24



(1,291
)


(1,484
)






(1,484
)Operating (loss) income

$
(1,228
)

$
6,524


$
666


$
5,962


$
10,009


$
15,971Natural gas sales

$
40,868


$
51,754


$
2,737


$
95,359


$
(380
)

$
94,979Natural gas liquids sales


33,066



36,180







69,246



11,585



80,831Transportation, compression and processing fees


1,787



7,595



5,617



14,999







14,999Condensate and other


4,549



829







5,378



4,891



10,269Sales to external customers

$
80,270


$
96,358


$
8,354


$
184,982


$
16,096


$
201,078Intersegment sales

$
(290
)

$
290


$



$



$



$
Interest and other financing costs

$



$



$



$



$
14,448


$
14,448     (a)
    
    All information excludes the
    results of discontinued operations for the sale of the crude oil
    pipeline and related assets (Note 13) except for the
    information related to intersegment sales and interest and other
    financing costs. 33




---



##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  Form 10-K 10-K).
    /d:

Per dayBcf:

One billion cubic feetBtu:

One British thermal unitLean Gas:

Natural gas that is low in NGL contentMMBtu:

One million British thermal unitsMcf:

One thousand cubic feetMMcf:

One million cubic feetNGLs:

Natural gas liquids, which consist primarily of ethane,
    propane, isobutane, normal butane, natural gasoline and
    stabilized condensateResidue gas:

The pipeline quality natural gas remaining after natural gas
    is processedRich gas:

Natural gas that is high in NGL contentThroughput:

The volume of natural gas or NGLs transported or passing
    through a pipeline, plant, terminal or other facility   Overview
    
    Our Oklahoma segment provides midstream natural gas services in
    central and east Oklahoma, including gathering of natural gas
    and related services such as compression, dehydration, treating,
    processing and nitrogen rejection. This segment includes our
    equity investment in Southern Dome, and through September 2009,
    included a crude oil pipeline.
    Our Texas segment provides midstream natural gas services in
    south and north Texas, including gathering and intrastate
    transmission of natural gas, and related services such as
    compression, dehydration, treating, conditioning or processing
    and marketing. Our Texas segment also provides NGL fractionation
    and transportation through our Houston Central plant and our NGL
    pipelines. In addition, our Texas segment includes a processing
    plant located in southwest Louisiana and our equity investment
    in Webb Duval.
    Our Rocky Mountains segment provides midstream natural gas
    services in the Powder River Basin of Wyoming, including
    gathering and treating of natural gas and compressor rental
    services. This segment also includes our equity investments in
    Bighorn and Fort Union.    Recent
    Developments
  Commencement of fractionation activities.
 34




---



##### Table of Contents



Expanded commodity risk management
    portfolio.
  Declaration of distribution.
  Common unit offering.
  Trends
    and Uncertainties
  10-K.
  Commodity
    Prices and Producer Activity
        First-Quarter Commodity Prices.
 35




---



##### Table of Contents



Pricing Trends in Texas. 12-month First-of-the-month
    Texas
    Prices for Crude Oil, Natural Gas and
    NGLs(1)
  
   (1)
    
    Average crude oil prices are based
    on NYMEX. Natural gas prices are
    first-of-the-month
    index prices. Average quarterly NGL prices are calculated based
    on our weighted-average product mix at Mt. Belvieu for the
    period indicated.  Quarterly Data for Texas:Q1 2009


Q2 2009


Q3 2009


Q4 2009



Q1 2010Houston Ship Channel ($/MMBtu)

$
4.21


$
3.44


$
3.32


$
4.16



$
5.36Mt. Belvieu ($/barrel)

$
25.81


$
30.12


$
35.09


$
42.96



$
47.66NYMEX crude oil ($/barrel)

$
43.31


$
59.79


$
68.24


$
76.13



$
78.72Service throughput (MMBtu/d)


644,752



630,674



613,234



576,224




582,958Plant inlet (MMBtu/d)


558,115



559,597



543,994



497,368




457,233NGLs produced (Bbls/d)


16,878



18,425



18,197



18,292




15,339Segment gross margin (in thousands)

$
20,580


$
23,320


$
26,875


$
32,845



$
27,165   Pricing Trends in Oklahoma. 18-month First-of-the-month
 36




---



##### Table of Contents



Oklahoma
    Prices for Crude Oil, Natural Gas and
    NGLs(1)
  
   (1)
    
    Average crude oil prices are based
    on NYMEX. Natural gas prices are
    first-of-the-month
    index prices. Average quarterly NGL prices are calculated based
    on our weighted-average product mix at Conway for the period
    indicated. Segment gross margin results exclude activities
    attributable to our crude oil pipeline and related assets
    discussed in Note 13, Discontinued Operations,
    to our unaudited consolidated financial statements included in
    Item 1 of this report.  Quarterly Data for Oklahoma:Q1 2009


Q2 2009


Q3 2009


Q4 2009



Q1 2010CenterPoint East ($/MMBtu)

$
3.37


$
2.70


$
2.98


$
4.01



$
5.22Conway ($/barrel)

$
24.13


$
25.57


$
27.62


$
40.86



$
44.44NYMEX crude oil ($/barrel)

$
43.31


$
59.79


$
68.24


$
76.13



$
78.72Service throughput (MMBtu/d)


271,222



267,576



260,296



250,248




248,784Plant inlet (MMBtu/d)


160,181



166,846



166,884



159,713




152,190NGLs produced (Bbls/d)


15,309



15,981



16,474



16,123




15,334Segment gross margin (in thousands)

$
14,300


$
17,472


$
18,284


$
26,628



$
24,275   Basis Trends.
  Pricing Trends in the Rocky Mountains. First-of-the-month
 37




---



##### Table of Contents



Rocky
    Mountains Natural Gas
    Prices(1)
  
   (1)
    
    Natural gas prices are
    first-of-the-month index prices.  Quarterly Data for Rocky Mountains:Q1 2009


Q2 2009


Q3 2009


Q4 2009



Q1 2010-CIG ($/MMBtu)

$
3.27


$
2.36


$
2.67


$
3.96



$
5.14Pipeline throughput
    (MMBtu/d)(1)


1,005,998



980,694



952,126



965,033




931,319Segment gross margin (in
    thousands)(2)

$
799


$
711


$
634


$
1,110



$
1,103     (1)
    
    Includes 100% of Bighorn and
    Fort Union.(2)
    
    Excludes results and volumes
    associated with our equity interests in Bighorn and
    Fort Union.  First Quarter Drilling and Production
    Activity.
  six-day start-up
   38




---



##### Table of Contents



Other Industry Trends.
  Factors
    Affecting Operating Results and Financial Condition
  start-up
    How We
    Evaluate Our Operations
    10-K.
 39




---



##### Table of Contents



Reconciliation of Non-GAAP Financial
    Measures.
  Three Months Ended March 31,2010


2009(In thousands)Reconciliation of total segment gross margin to operating income:Operating income

$
13,912


$
15,971Add: Operations and maintenance expenses


12,103



12,672Depreciation and amortization


15,201



13,105General and administrative expenses


10,542



10,725Taxes other than income


1,162



786Equity in earnings from unconsolidated affiliates


(1,795
)


(1,484
)Total segment gross margin

$
51,125


$
51,775Reconciliation of EBITDA and adjusted EBITDA to net (loss)
    income:Net (loss) income

$
(1,260
)

$
5,905Add: Depreciation and
    amortization(1)


15,201



13,165Interest and other financing costs


14,945



14,448Provision for income taxes


234



164EBITDA


29,120



33,682Add: Amortization of difference between the carried investment
    and the underlying equity in net assets of equity investments


4,645



4,818Copanos share of depreciation and amortization included in
    equity in earnings from unconsolidated affiliates


1,537



1,557Copanos share of interest and other financing costs
    incurred by our equity method investments


371



508Adjusted EBITDA

$
35,673


$
40,565Reconciliation of EBITDA and adjusted EBITDA to cash flows from
    operating activities:Cash flow provided by operating activities

$
29,164


$
35,398Add: Cash paid for interest and other financing costs


14,050



13,178Equity in earnings from unconsolidated affiliates


1,795



1,484Distributions from unconsolidated affiliates


(5,765
)


(5,371
)Risk management activities


(597
)


(9,188
)Changes in working capital and other


(9,527
)


(1,819
)EBITDA


29,120



33,682Add: Amortization of difference between the carried investment
    and the underlying equity in net assets of equity investments


4,645



4,818Copanos share of depreciation and amortization included in
    equity in earnings from unconsolidated affiliates


1,537



1,557Copanos share of interest and other financing costs
    incurred by our equity method investments


371



508Adjusted EBITDA

$
35,673


$
40,565 40




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##### Table of Contents



Three Months Ended March 31,2010


2009(In thousands)Reconciliation of net (loss) income to total distributable cash
    flow:Net (loss) income

$
(1,260
)

$
5,905Add: Depreciation and
    amortization(1)


15,201



13,165Amortization of commodity derivative options


7,978



9,188Amortization of debt issue costs


895



1,270Equity-based compensation


2,715



1,959Distributions from unconsolidated affiliates


6,737



6,931Unrealized loss associated with line fill contributions and gas
    imbalances


1,582



166Unrealized loss (gain) on derivatives


533



(239
)Deferred taxes and other


(301
)


346Less: Equity in earnings from unconsolidated affiliates


(1,795
)


(1,484
)Maintenance capital expenditures


(1,431
)


(2,151
)Total distributable cash
    flow(2)

$
30,854


$
35,056     (1)
    
    Includes activity related to our crude oil pipeline and related
    assets for the three months ended March 31, 2009, which are
    classified as discontinued operations as discussed in
    Note 13, Discontinued Operations, to our
    unaudited consolidated financial statements included in
    Item 1 of this report.(2)
    
    Prior to any retained cash reserves established by our Board of
    Directors.  How We
    Manage Our Operations
      10-K.
  Forward-Looking
    Statements
   41




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##### Table of Contents




    our ability to successfully integrate any acquired asset or
    operations;
    the volatility of prices and market demand for natural gas,
    crude oil and NGLs;
    our ability to continue to connect new sources of natural gas
    supply;
    our ability to access NGL fractionation capacity;
    the ability of key producers to continue to drill and
    successfully complete and attach new natural gas supplies;
    our ability to retain key customers and contract with new
    customers;
    the availability of local, intrastate and interstate
    transportation systems and other facilities for natural gas and
    NGLs;
    our ability to access our revolving credit facility and to
    obtain additional financing on acceptable terms;
    the effectiveness of our hedging program;
    general economic conditions;
    force majeure situations such as the loss of a market or
    facility downtime;
    the effects of government regulations and policies; and
    other financial, operational and legal risks and uncertainties
    detailed from time to time in our filings with the SEC.  10-K.
 42




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##### Table of Contents



Our
    Results of Operations
  Three Months EndedMarch 31,2010


2009($ in thousands)Total segment gross
    margin(1)(2)

$
51,125


$
51,775Operations and maintenance
    expenses(2)


12,103



12,672Depreciation and
    amortization(2)


15,201



13,105General and administrative expenses


10,542



10,725Taxes other than income


1,162



786Equity in earnings from unconsolidated
    affiliates(3)(4)(5)


(1,795
)


(1,484
)Operating
    income(2)


13,912



15,971Gain on retirement of unsecured debt






3,939Interest and other financing costs, net


(14,938
)


(14,402
)Provision for income taxes


(234
)


(164
)Discontinued operations, net of tax






561Net (loss) income

$
(1,260
)

$
5,905Total segment gross
    margin:(8)Oklahoma(2)

$
24,275


$
14,300Texas


27,165



20,580Rocky
    Mountains(6)


1,103



799Segment gross
    margin(2)


52,543



35,679Corporate and
    other(7)


(1,418
)


16,096Total segment gross
    margin(1)(2)

$
51,125


$
51,775Segment gross margin per
    unit:(8)Oklahoma:Service throughput
    ($/MMBtu)(2)

$
1.08


$
0.59Texas:Service throughput ($/MMBtu)

$
0.52


$
0.35Volumes:(8)Oklahoma:(9)Service throughput (MMBtu/d)


248,784



271,222Plant inlet volumes (MMBtu/d)


152,190



160,181NGLs produced (Bbls/d)


15,334



15,309Texas:(10)Service throughput (MMBtu/d)


582,958



644,752Pipeline throughput (MMBtu/d)


316,937



304,158Plant inlet volumes (MMBtu/d)


457,233



558,195NGLs produced (Bbls/d)


15,339



16,878Capital expendituresMaintenance capital expenditures

$
1,431


$
2,151Expansion capital expenditures


20,406



10,535Total capital expenditures

$
21,837


$
12,686Operations and maintenance expenses:Oklahoma(2)

$
5,433


$
5,616Texas


6,569



7,054Rocky Mountains


101



2Total operations and maintenance
    expenses(2)

$
12,103


$
12,672     (1)
    
    Total segment gross margin is a
    non-GAAP financial measure. See  How We
    Evaluate Our Operations for a reconciliation of total
    segment gross margin to its most directly comparable GAAP
    measure of operating income.(2)
    
    Excludes results attributable to
    our crude oil pipeline and related assets for the three months
    ended March 31, 2009, which are classified as discontinued
    operations, as discussed in Note 13, Discontinued
    Operations, in our unaudited consolidated financial
    statements included in Item 1 of this report. 43




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##### Table of Contents



(3)
    
    Includes results and volumes
    associated with our interests in Bighorn and Fort Union.
    Combined volumes gathered by Bighorn and Fort Union were
    931,319 MMBtu/d and 1,005,998 MMBtu/d for the three
    months ended March 31, 2010 and 2009, respectively.  (4)
    
    Includes results and volumes
    associated with our interest in Southern Dome. For the three
    months ended March 31, 2010, plant inlet volumes for
    Southern Dome averaged 14,130 MMBtu/d and NGLs produced
    averaged 499 Bbls/d. For the three months ended
    March 31, 2009, plant inlet volumes for Southern Dome
    averaged 10,608 MMBtu/d and NGLs produced averaged
    367 Bbls/d.(5)
    
    Includes results and volumes
    associated with our interest in Webb Duval. Gross volumes
    transported by Webb Duval, net of intercompany volumes, were
    60,091 MMBtu/d and 88,740 MMBtu/d for the three months
    ended March 31, 2010 and 2009, respectively.(6)
    
    Rocky Mountains segment gross
    margin includes results from producer services, including
    volumes purchased for resale, volumes gathered under firm
    capacity gathering agreements with Fort Union, volumes
    transported using our firm capacity agreements with WIC and
    compressor rental services provided to Bighorn. Excludes results
    and volumes associated with our interest in Bighorn and
    Fort Union.(7)
    
    Corporate and other includes
    results attributable to our commodity risk management activities.(8)
    
    Service throughput
    means the volume of natural gas delivered to our wholly owned
    processing plants by third-party pipelines plus our
    pipeline throughput, which is the volume of natural
    gas transported or gathered through our pipelines.(9)
    
    Plant inlet volumes and NGLs
    produced represent total volumes processed and produced by the
    Oklahoma segment at all plants, including plants owned by the
    Oklahoma segment and plants owned by third parties. For the
    three months ended March 31, 2010, plant inlet volumes
    averaged 117,602 MMBtu/d and NGLs produced averaged
    12,468 Bbls/d for plants owned by the Oklahoma segment. For
    the three months ended March 31, 2009, plant inlet volumes
    averaged 122,902 MMBtu/d and NGLs produced averaged
    12,535 Bbls/d for plants owned by the Oklahoma segment.
    Excludes volumes associated with our interest in Southern Dome.(10)
    
    Plant inlet volumes and NGLs
    produced represent total volumes processed and produced by the
    Texas segment at all plants, including plants owned by the Texas
    segment and plants owned by third parties. Plant inlet volumes
    averaged 450,417 MMBtu/d and NGLs produced averaged
    14,852 Bbls/d for the three months ended March 31,
    2010 for plants owned by the Texas segment. Plant inlet volumes
    averaged 535,083 MMBtu/d and NGLs produced averaged
    15,049 Bbls/d for the three months ended March 31,
    2009 for plants owned by the Texas segment. Excludes volumes
    associated with our interest in Webb Duval.  Three
    Months Ended March 31, 2010 Compared To Three Months Ended
    March 31, 2009
    
    $3.9 million decrease in earnings related to the gain on
    the retirement of debt in the three months ended March 31,
    2009;
    $2.1 million of additional depreciation and amortization
    expenses primarily related to expanded operations in north Texas
    and retirement of certain assets in Oklahoma;
    $0.7 million decrease in total segment gross margin
    consisting of a decrease of $17.5 million from our
    commodity risk management activities, offset by a
    $16.8 million increase in combined operating segment gross
    margins primarily reflecting a
    period-over-period
    increase in average NGL prices of 84% on the Conway index and
    85% on the Mt. Belvieu index, slightly offset by lower overall
    service throughput volumes; and
    $0.5 million increase in interest and other financing costs
    primarily related to (i) an unrealized loss on interest
    rate swaps for 2010 of $0.1 million compared to a
    $0.1 million gain in 2009, a change of $0.2 million
    and (ii) an increase of $0.3 million in interest paid
    on interest rate swap arrangements.  Oklahoma Segment Gross Margin. period-over-period
 44




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##### Table of Contents



Texas Segment Gross Margin. period-over-period. start-up
  Rocky Mountains Segment Gross Margin.
  Corporate and Other. mark-to-market
  Operations and Maintenance
    Expenses.
  Depreciation and, Amortization.
 45




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##### Table of Contents



General and Administrative Expenses.
  Interest and Other Financing Costs. mark-to-market mark-to-market
  Gain on Unsecured Debt Retirement.
  Cash
    Flows
    Three Months Ended March 31,2010


2009(In thousands)Net cash provided by operating activities

$
29,164


$
35,398Net cash used in investing activities


(18,441
)


(19,451
)Net cash (used in) provided by financing activities


(1,267
)


4,662     Operating Cash Flows.
  
    risk management activities used an additional $8.6 million
    of cash flow for the three months ended March 31, 2010 as
    compared to the three months ended March 31, 2009,
    primarily because we purchased commodity derivative instruments
    at a total cost of $7.4 million during the three months
    ended March 31, 2010, whereas in the three months ended
    March 31, 2009, we did not purchase commodity derivative
    instruments; 46




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##### Table of Contents




    a $1.9 million increase in operating activities (consisting
    of a $2.1 million decrease in operating income and a
    $4 million increase resulting from the timing of related
    cash receipts and disbursements) for the three months ended
    March 31, 2010 compared with the same period in 2009;
    a $0.4 million increase in cash distributions received from
    our unconsolidated affiliates (Bighorn, Fort Union, Webb
    Duval and Southern Dome) in the three months ended
    March 31, 2010 compared to the three months ended
    March 31, 2009; and
    a $0.1 million decrease in interest payments for the months
    ended March 31, 2010 compared to the same period in 2009 as
    a result of lower average borrowings.  Investing Cash Flows. rights-of-way
  Financing Cash Flows.
  Liquidity
    and Capital Resources
  Sources of Liquidity.
  10-K.
  Effects of Recent Economic Changes;
    Outlook.
 47




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##### Table of Contents



Capital Expenditures.
  
    maintenance capital expenditures, which are capital expenditures
    employed to replace partially or fully depreciated assets to
    maintain the existing operating capacity of our assets and to
    extend their useful lives, or other capital expenditures that
    are incurred in maintaining existing system volumes and related
    cash flows; and
    expansion capital expenditures, which are capital expenditures
    made to expand or increase the efficiency of the existing
    operating capacity of our assets. Expansion capital expenditures
    include expenditures that facilitate an increase in volumes
    within our operations, whether through construction or
    acquisition. Expenditures that reduce our operating costs will
    be considered expansion capital expenditures only if the
    reduction in operating expenses exceeds cost reductions
    typically resulting from routine maintenance.  rights-of-way
  Cash Distributions.
  One Quarter


Four QuartersCommon
    units(1)

$
38,134


$
152,536  48




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##### Table of Contents



(1)
    
    Includes distributions on
    restricted common units and phantom units issued under our
    Long-Term Incentive Plan (LTIP). Distributions made
    on restricted units and phantom units issued to date are subject
    to the same vesting provisions as the restricted units and
    phantom units. As of April 30, 2010, we had 105,101
    outstanding restricted units and 738,056 outstanding phantom
    units.  Our
    Indebtedness
    Credit Ratings.
  Revolving Credit Facility.
        Senior Unsecured Notes.
    Off-Balance
    Sheet Arrangements
    Recent
    Accounting Pronouncements
    Critical
    Accounting Policies
  Form 10-K
 49




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##### Table of Contents



Item 3.
    Quantitative
    and Qualitative Disclosures about Market Risk.    Commodity
    Price Risk
    Oklahoma. percentage-of-proceeds agreed-upon percentage-of-index
  Texas. fee-for-service percentage-of-index
    Rocky Mountains.
  Other Commodity Price Risks.
 50




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##### Table of Contents



Sensitivity.
  Our Hedge
    Portfolio
  Commodity Hedges.
  Interest Rate Swaps.
  Counterparty
    Risk
   51




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##### Table of Contents



Item 4.
    Controls
    and Procedures.  Rule 13a-15(b) Rules 13a-15(e) 15d-15(e) Rule 13a-15(f)
 52




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##### Table of Contents



PART II-OTHER
    INFORMATION Item 1.
    Legal
    Proceedings.    Item 1A.
    Risk
    Factors.  Form 10-K
  Federal
    and state legislative and regulatory initiatives relating to
    hydraulic fracturing could result in increased costs and
    additional operating restrictions or delays as well as adversely
    affect our services.
   53




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##### Table of Contents



Item 6.
    Exhibits.    Number

Description2
.1

Purchase Agreement dated as of August 31, 2007 among Copano
    Energy, L.L.C., Copano Energy/Rocky Mountains, L.L.C., and
    Cantera Resources Holdings LLC (incorporated by reference to
    Exhibit 2.1 to Current Report on
    Form 8-K
    filed October 25, 2007).2
.2

Contribution Agreement dated as of April 5, 2007 by and
    among Cimmarron Gathering GP, LLC, Taos Gathering, LP and
    Cimmarron Transportation, L.L.C. and Copano Energy, L.L.C.
    (incorporated by reference to Exhibit 2.1 to Current Report
    on
    Form 8-K
    filed April 11, 2007).3
.1

Certificate of Formation of Copano Energy Holdings, L.L.C. (now
    Copano Energy, L.L.C.) (incorporated by reference to
    Exhibit 3.1 to Registration Statement on
    Form S-1
    filed July 30, 2004).3
.2

Certificate of Amendment to Certificate of Formation of Copano
    Energy Holdings, L.L.C. (now Copano Energy, L.L.C.)
    (incorporated by reference to Exhibit 3.2 to Registration
    Statement on
    Form S-1
    filed July 30, 2004).3
.3

Third Amended and Restated Limited Liability Company Agreement
    of Copano Energy, L.L.C. (incorporated by reference to
    Exhibit 3.1 to Current Report on
    Form 8-K
    filed April 30, 2007).3
.4

Amendment No. 1 to Third Amended and Restated Limited
    Liability Company Agreement of Copano Energy, L.L.C.
    (incorporated by reference to Exhibit 3.1 to Current Report
    on
    Form 8-K
    filed May 4, 2007).3
.5

Amendment No. 2 to Third Amended and Restated Limited
    Liability Company Agreement of Copano Energy, L.L.C. dated
    October 19, 2007 (incorporated by reference to
    Exhibit 3.1 to Current Report on
    Form 8-K
    filed October 25, 2007).3
.6

Amendment No. 3 to Third Amended and Restated Limited
    Liability Company Agreement of Copano Energy, L.L.C., dated
    October 19, 2007 (incorporated by reference to
    Exhibit 3.2 to Current Report on
    Form 8-K
    filed October 25, 2007).4
.1

Indenture dated as of February 7, 2006, among Copano
    Energy, L.L.C., Copano Energy Finance Corporation, the
    Guarantors parties thereto and U.S. Bank National Association,
    as trustee (incorporated by reference to Exhibit 4.1 to
    Current Report on
    Form 8-K
    filed February 8, 2006).4
.2

Rule 144A Global Note representing $224,500,000 principal
    amount of 8.125% Senior Notes due 2016 (incorporated by
    reference to Exhibit 4.2 to Current Report on
    Form 8-K
    filed February 8, 2006).4
.3

Regulation S Global Note representing $500,000 principal
    amount of 8.125% Senior Notes due 2016 (incorporated by
    reference to Exhibit 4.3 to Current Report on
    Form 8-K
    filed February 8, 2006).4
.4

Indenture, dated May 16, 2008, among Copano Energy, L.L.C.,
    Copano Energy Finance Corporation, the Subsidiary Guarantors
    named therein and U.S. Bank National Association, as trustee
    (incorporated by reference to Exhibit 4.1 to Current Report
    on
    Form 8-K
    filed May 19, 2008).4
.5

Form of Global Note representing 7.75% Senior Notes due
    2018 (included in 144A/Regulation S Appendix to
    Exhibit 4.7 above).10
.1

Administrative and Operating Services Agreement effective
    January 1, 2010, among Copano/Operations, Inc. and CPNO
    Services, L.P. (incorporated by reference to Exhibit 10.3
    to Annual Report on
    Form 10-K
    filed March 1, 2010).10
.2

2010 Administrative Guidelines for the Copano Energy, L.L.C.
    Management Incentive Compensation Plan (incorporated by
    reference to Exhibit 10.1 to Current Report on
    Form 8-K
    filed February 23, 2010).31
.1*

Sarbanes-Oxley Section 302 certification of Principal
    Executive Officer.31
.2*

Sarbanes-Oxley Section 302 certification of Principal
    Financial Officer.32
.1*

Sarbanes-Oxley Section 906 certification of Principal
    Executive Officer.32
.2*

Sarbanes-Oxley Section 906 certification of Principal
    Financial Officer.     *
    
    Filed herewith.
    
    Portions of this exhibit have been omitted pursuant to a request
    for confidential treatment. 54




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##### Table of Contents



SIGNATURES
      By:
    /s/  R.
    Bruce Northcutt  
    By:
    /s/  Carl
    A. Luna     55