##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, 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, 2008ORo

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
  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, 2008 and December 31, 2007


3Unaudited Consolidated Statements of Operations
    for the Three Months Ended March 31, 2008 and 2007


4Unaudited Consolidated Statements of Cash Flows
    for the Three Months Ended March 31, 2008 and 2007


5Unaudited Consolidated Statement of Members
    Capital and Comprehensive Income (Loss) for the Three Months
    Ended March 31, 2008


6Notes to Unaudited Consolidated Financial
    Statements


7Item 2.

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


29Item 3.

Quantitative and Qualitative Disclosures About
    Market Risk


42Item 4.

Controls and Procedures


48PART II  OTHER
    INFORMATIONItem 1.

Legal Proceedings


48Item 1A.

Risk Factors


48Item 4.

Submission of Matters to a Vote of Security
    Holders


48Item 6.

Exhibits


49Section 302 Certification of Chief Executive OfficerSection 302 Certification of Chief Financial OfficerSection 906 Certification of Chief Executive OfficerSection 906 Certification of Chief Financial Officer   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 31,2008


2007(In thousands, except unit information)ASSETSCurrent assets:Cash and cash equivalents

$
60,222


$
72,665Accounts receivable, net


147,742



127,534Risk management assets


10,145



3,289Prepayments and other current assets


3,623



3,881Total current assets


221,732



207,369Property, plant and equipment, net


719,455



694,727Intangible assets, net


198,892



200,546Investment in unconsolidated affiliates


631,261



632,725Risk management assets


18,672



10,598Other assets, net


22,798



23,118Total assets

$
1,812,810


$
1,769,083LIABILITIES AND MEMBERS CAPITALCurrent liabilities:Accounts payable

$
187,289


$
147,046Accrued interest


4,124



11,319Accrued tax liability


661



3,919Risk management liabilities


31,249



27,710Other current liabilities


10,133



12,931Total current liabilities


233,456



202,925Long-term debt (includes $756 and $773 bond premium as of
    March 31, 2008 and December 31, 2007, respectively)


650,756



630,773Deferred tax provision


1,337



1,231Risk management and other noncurrent liabilities


44,500



40,018Commitments and contingencies (Note 10)Members capital:Common units, no par value, 47,389,831 units and
    47,366,048 units issued and outstanding as of
    March 31, 2008 and December 31, 2007, respectively


661,768



661,585Class C units, no par value, 1,184,557 units issued
    and outstanding as of March 31, 2008 and December 31,
    2007


40,492



40,492Class D units, no par value, 3,245,817 units issued
    and outstanding as of March 31, 2008 and December 31,
    2007


112,454



112,454Class E units, no par value, 5,598,839 units issued
    and outstanding as of March 31, 2008 and December 31,
    2007


175,634



175,634Paid-in capital


28,845



23,773Accumulated deficit


(17,699
)


(7,867
)Accumulated other comprehensive loss


(118,733
)


(111,935
)882,761



894,136Total liabilities and members capital

$
1,812,810


$
1,769,083    3




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  UNAUDITED
    CONSOLIDATED STATEMENTS OF OPERATIONS
  Three MonthsEnded March 31,2008


2007(In thousands, except per unit information)Revenue:Natural gas sales

$
180,887


$
111,277Natural gas liquids sales


154,081



87,887Crude oil sales


41,182



Transportation, compression and processing fees


12,682



4,248Condensate and other


12,916



7,576Total revenue


401,748



210,988Costs and expenses:Cost of natural gas and natural gas liquids


297,468



171,776Cost of crude oil purchases


39,842



Transportation


3,121



886Operations and maintenance


11,830



8,498Depreciation and amortization


11,570



8,470General and administrative


11,850



7,516Taxes other than income


741



527Equity in earnings from unconsolidated affiliates


(396
)


(864
)Total costs and expenses


376,026



196,809Operating income


25,722



14,179Other income (expense):Interest and other income


456



620Interest and other financing costs


(11,392
)


(5,193
)Income before income taxes


14,786



9,606Provision for income taxes


(284
)


(904
)Net income

$
14,502


$
8,702Basic net income per common unit:Net income per common unit

$
0.31


$
0.21Weighted average number of common units


47,377



38,736Diluted net income per common unit:Net income per common unit

$
0.25


$
0.20Weighted average number of common units


57,880



39,365Basic net income per subordinated unit:Net income per subordinated unit

$



$
0.21Weighted average number of subordinated units






3,519Diluted net income per subordinated unit:Net income per subordinated unit

$



$
0.21Weighted average number of subordinated units






3,519    4




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  UNAUDITED
    CONSOLIDATED STATEMENTS OF CASH FLOWS
  Three MonthsEnded March 31,2008


2007(In thousands)Cash Flows From Operating Activities:Net income

$
14,502


$
8,702Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


11,570



8,470Amortization of debt issue costs


768



309Equity in earnings from unconsolidated affiliates


(396
)


(864
)Distributions from unconsolidated affiliates


4,276



Equity-based compensation


969



641Deferred tax provision


106



841Other noncash items


(39
)


(33
)Changes in assets and liabilities:Accounts receivable


(20,065
)


(2,075
)Prepayments and other current assets


258



995Risk management assets


(17,240
)


2,615Accounts payable


31,733



6,066Other current liabilities


(7,264
)


(1,677
)Net cash provided by operating activities


19,178



23,990Cash Flows From Investing Activities:Additions to property, plant and equipment


(27,642
)


(17,804
)Additions to intangible assets


(965
)


(305
)Acquisitions


(77
)


(739
)Investment in unconsolidated affiliates


(3,336
)


Distributions from unconsolidated affiliates


776



1,784Other


(354
)


111Net cash used in investing activities


(31,598
)


(16,953
)Cash Flows From Financing Activities:Proceeds from long-term debt


20,000



20,000Repayment of short-term notes payable






(555
)Deferred financing costs


(61
)


(608
)Distributions to unitholders


(24,201
)


(16,923
)Capital contributions from Pre-IPO Investors (Note 7)


4,103



1,459Equity offering costs


(47
)


(474
)Proceeds from option exercises


183



405Net cash (used in) provided by financing activities


(23
)


3,304Net (decrease) increase in cash and cash equivalents


(12,443
)


10,341Cash and cash equivalents, beginning of year


72,665



39,484Cash and cash equivalents, end of period

$
60,222


$
49,825    5




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##### Table of Contents






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


Class C


Class D


Class E





Accumulated


Other





TotalNumber


Common


Number


Class C


Number


Class D


Number


Class E


Paid-in


Earnings


Comprehensive





Comprehensiveof Units


Units


of Units


Units


of Units


Units


of Units


Units


Capital


(Deficit)


Loss


Total


Income (Loss)Balance, December 31, 2007


47,366


$
661,585



1,184


$
40,492



3,246


$
112,454



5,599


$
175,634


$
23,773


$
(7,867
)

$
(111,935
)

$
894,136Capital contributions from Pre-IPO Investors


































4,103











4,103



Distributions to unitholders






































(24,334
)






(24,334
)


Option exercises


14



183







































183



Equity-based compensation


































969











969



Vested restricted units


10















































Net income






































14,502







14,502



14,502Derivative settlements reclassified to income










































12,312



12,312



12,312Unrealized loss-change in fair value of derivatives










































(19,110
)


(19,110
)


(19,110
)Comprehensive loss

















































$
(7,704
)Balance, March 31, 2008


47,390


$
661,768



1,184


$
40,492



3,246


$
112,454



5,599


$
175,634


$
28,845


$
(17,699
)

$
(118,733
)

$
882,761    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. and
    its wholly owned subsidiaries
    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  Business
    Combinations
  Business Combinations.
  Fair
    Value Measurements
  Fair Value Measurements. Accounting for Derivative Instruments and Hedging
    Activities,
  Fair
    Value Option for Financial Assets and Financial
    Liabilities
  The Fair Value Option for Financial Assets and
    Financial Liabilities,
  Non-Controlling
    Interests in Consolidated Financial Statements  an
    Amendment of ARB No. 51
  Non-Controlling Interests in Consolidated Financial
    Statements  an Amendment of ARB
    No. 51
  Disclosures
    about Derivative Instruments and Hedging Activities 
    an amendment of FASB Statement No. 133
  Disclosures about Derivative Instruments and Hedging
    Activities  an amendment of FASB Statement
    No. 133
  Note 3 
    Intangible
    Assets  rights-of-way,
 8




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 3 
    Intangible Assets (continued)
  2008  2009  2010  2011  2012  2013 
    March 31,


December 31,2008


2007Rights-of-way
    and easements, at cost

$
104,427


$
104,427Less accumulated amortization for
    rights-of-way
    and easements


(7,463
)


(8,922
)Contracts


107,886



107,885Less accumulated amortization for contracts


(10,685
)


(7,654
)Customer relationship


5,184



5,204Less accumulated amortization for customer relationship


(457
)


(394
)Intangible assets, net

$
198,892


$
200,546   rights-of-way
  Note 4 
    Acquisitions
  Acquisition
    of Cantera Natural Gas LLC
      Acquisition
    of Cimmarron Gathering, LP
   9




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 4 
    Acquisitions (continued)
        Three MonthsEndedMarch 31, 2007(In thousands, except perunit information)Pro Forma Earnings Data:Revenue

$
290,785Costs and expenses

$
277,187Equity in earnings from unconsolidated affiliates

$
(1,104
)Operating income

$
13,598Income before extraordinary items

$
756Net income

$
756Basic net income per unit:As reported units outstanding


38,736Pro forma units outstanding


43,269As reported net income per unit

$
0.21Pro forma net income per unit

$
0.02Diluted net income per unit:As reported units outstanding


39,365Pro forma units outstanding


57,388As reported net income per unit

$
0.20Pro forma net income per unit

$
0.01Basic net income per subordinated unit:As reported units outstanding


3,519Pro forma units outstanding


3,519As reported net income per unit

$
0.21Pro forma net income per unit

$
0.02Diluted net income per subordinated unit:As reported units outstanding


3,519Pro forma units outstanding


3,519As reported net income per unit

$
0.21Pro forma net income per unit

$
0.02   10




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 5 
    Investment in Unconsolidated Affiliates
        Operating revenue

$
8,774Operating expenses


(3,226
)Depreciation


(1,004
)Interest expense and other


34Net income


4,578Ownership %


51
%2,335Priority allocation of earnings


281Copanos share of management fee charged to Bighorn


58Amortization of difference between the carried investment and
    the underlying equity in net assets


(2,997
)Equity in loss in unconsolidated affiliate

$
(323
)Distributions

$
2,614Current assets

$
9,357Noncurrent assets


98,658Current liabilities


(1,985
)Noncurrent liabilities


Net assets

$
106,030    Note 6 
    Long-Term
    Debt    March 31,


December 31,2008


2007Long-term debt:Credit Facility

$
300,000


$
280,000Senior Notes:8.125% senior notes due 2016


350,000



350,000Unamortized bond premium


756



773Total Senior Notes


350,756



350,773Total

$
650,756


$
630,773  11




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 6 
    Long-Term Debt (continued)
  Credit
    Facility
      Senior
    Notes
       12




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##### Table of Contents





COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CONDENSED
    CONSOLIDATING BALANCE SHEETS
  Note 6 
    Long-Term
    Debt (continued)  March 31, 2008


December 31, 2007Investment

















Investment inin Non-

















Non-Guarantor


Guarantor














Guarantor


GuarantorParent


Co-Issuer


Subsidiaries


Subsidiaries


Eliminations


Total


Parent


Co-Issuer


Subsidiaries


Subsidiaries


Eliminations


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

$
2,778


$



$
57,444


$



$



$
60,222


$
10,018


$



$
62,647


$



$



$
72,665Accounts receivable, net


4







147,738











147,742



476







127,058











127,534Intercompany receivable


49,125







(49,125
)














37,027







(37,027
)










Risk management assets










10,145











10,145











3,289











3,289Prepayments and other current assets


1,286







2,337











3,623



877







3,004











3,881Total current assets


53,193







168,539











221,732



48,398







158,971











207,369Property, plant and equipment, net


253







719,202











719,455



264







694,463











694,727Intangible assets, net










198,892











198,892











200,546











200,546Investment in unconsolidated affiliates










631,261



631,261



(631,261
)


631,261











632,725



632,725



(632,725
)


632,725Investment in consolidated subsidiaries


1,471,389















(1,471,389
)






1,473,187















(1,473,187
)


Risk management assets










18,672











18,672











10,598











10,598Other assets, net


16,898







5,900











22,798



17,589







5,529











23,118Total assets

$
1,541,733


$



$
1,742,466


$
631,261


$
(2,102,650
)

$
1,812,810


$
1,539,438


$



$
1,702,832


$
632,725


$
(2,105,912
)

$
1,769,083LIABILITIES AND MEMBERS/PARTNERS CAPITALCurrent liabilities:Accounts payable

$
28


$



$
187,261


$



$



$
187,289


$
35


$



$
147,011


$



$



$
147,046Accrued interest


3,989







135











4,124



11,319



















11,319Accrued tax liability


661



















661



483







3,436











3,919Risk management liabilities










31,249











31,249











27,710











27,710Other current liabilities


1,654







8,479











10,133



882







12,049











12,931Total current liabilities


6,332







227,124











233,456



12,719







190,206











202,925Long-term debt


650,756



















650,756



630,773



















630,773Deferred tax provision


1,337



















1,337



1,231



















1,231Risk management and other noncurrent liabilities


547







43,953











44,500



579







39,439











40,018Members/Partners capital:Common units


661,768



















661,768



661,585



















661,585Class C units


40,492



















40,492



40,492



















40,492Class D units


112,454



















112,454



112,454



















112,454Class E units


175,634



















175,634



175,634



















175,634Paid-in capital


28,845



1



1,507,296



626,515



(2,133,812
)


28,845



23,773



1



1,507,285



628,375



(2,135,661
)


23,773Accumulated (deficit) earnings


(17,699
)


(1
)


82,826



4,746



(87,571
)


(17,699
)


(7,867
)


(1
)


77,837



4,350



(82,186
)


(7,867
)Accumulated other comprehensive loss


(118,733
)






(118,733
)






118,733



(118,733
)


(111,935
)






(111,935
)






111,935



(111,935
)882,761







1,471,389



631,261



(2,102,650
)


882,761



894,136







1,473,187



632,725



(2,105,912
)


894,136Total liabilities and members/partners capital

$
1,541,733


$



$
1,742,466


$
631,261


$
(2,102,650
)

$
1,812,810


$
1,539,438


$



$
1,702,832


$
632,725


$
(2,105,912
)

$
1,769,083  13




---



##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CONDENSED
    CONSOLIDATING STATEMENTS OF OPERATIONS
  Note 6 
    Long-Term
    Debt (continued)  Three Months Ended March 31,2008


2007Investment 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

$



$



$
180,887


$



$



$
180,887


$



$



$
111,277


$



$



$
111,277Natural gas liquids sales










154,081











154,081











87,887











87,887Crude oil sales










41,182











41,182























Transportation, compression and processing fees










12,682











12,682











4,248











4,248Condensate and other










12,916











12,916











7,576











7,576Total revenue










401,748











401,748











210,988











210,988Costs and expenses:Cost of natural gas and natural gas liquids










297,468











297,468











171,776











171,776Cost of crude oil










39,842











39,842























Transportation










3,121











3,121











886











886Operations and maintenance


511







11,319











11,830



398







8,100











8,498Depreciation and amortization


11







11,559











11,570











8,470











8,470General and administrative


7,461







4,389











11,850



2,734







4,782











7,516Taxes other than income










741











741











527











527Equity in (earnings) loss from unconsolidated affiliates










(396
)


(396
)


396



(396
)










(864
)


(864
)


864



(864
)Total costs and expenses


7,983







368,043



(396
)


396



376,026



3,132







193,677



(864
)


864



196,809Operating (loss) income


(7,983
)






33,705



396



(396
)


25,722



(3,132
)






17,311



864



(864
)


14,179Interest and other income


21







435











456



12







608











620Interest and other financing costs


(11,174
)






(218
)










(11,392
)


(5,141
)






(52
)










(5,193
)(Loss) income before income taxes and equity in earnings from
    consolidated subsidiaries


(19,136
)






33,922



396



(396
)


14,786



(8,261
)






17,867



864



(864
)


9,606Provision for income taxes


(284
)


















(284
)


(904
)


















(904
)(Loss) income before equity in earnings from consolidated
    subsidiaries


(19,420
)






33,922



396



(396
)


14,502



(9,165
)






17,867



864



(864
)


8,702Equity in earnings (loss) from consolidated subsidiaries


33,922















(33,922
)






17,867















(17,867
)


Net income (loss)

$
14,502


$



$
33,922


$
396


$
(34,318
)

$
14,502


$
8,702


$



$
17,867


$
864


$
(18,731
)

$
8,702  14




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CONDENSED
    CONSOLIDATING STATEMENTS OF CASH FLOWS
  Note 6 
    Long-Term
    Debt (continued)  Three Months Ended March 31,2008


2007Investment 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 (used in) provided by operating activities

$
(36,140
)

$



$
55,318


$
4,276


$
(4,276
)

$
19,178


$
6,760


$



$
17,230


$



$



$
23,990Cash Flows From Investing Activities:Net cash provided by (used in) investing activities


28,923







(31,598
)


(2,560
)


(26,363
)


(31,598
)


8,886







(16,953
)


1,784



(10,670
)


(16,953
)Cash Flows From Financing Activities:Net cash (used in) provided by financing activities


(23
)






(28,923
)


3,336



25,587



(23
)


3,859







(9,441
)






8,886



3,304Net (decrease) increase in cash and cash equivalents


(7,240
)






(5,203
)


5,052



(5,052
)


(12,443
)


19,505







(9,164
)


1,784



(1,784
)


10,341Cash and cash equivalents, beginning of year


10,018







62,647



4,382



(4,382
)


72,665



1,286







38,198











39,484Cash and cash equivalents, end of period

$
2,778


$



$
57,444


$
9,434


$
(9,434
)

$
60,222


$
20,791


$



$
29,034


$
1,784


$
(1,784
)

$
49,825


15




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 7 
    Members
    Capital and Distributions  Common
    Units
      Class C
    Units
    Class D
    Units
    Class E
    Units
   16




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 7 
    Members
    Capital and Distributions (continued)  Distributions
      Accounting
    for Equity-Based Compensation
  Share-Based
    Payment, Restricted Common Units, Phantom
    Units Unit Options
  Restricted Common Units.
    WeightedNumber of


AverageRestricted


Grant-DateUnits


Fair ValueOutstanding at beginning of year


241,181


$
22.92Granted






Vested


(10,296
)


14.74Forfeited


(395
)


20.86Outstanding at end of period


230,490


$
23.29     Phantom Units.
 17




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 7 
    Members
    Capital and Distributions (continued)    WeightedNumber of


AveragePhantom


Grant-DateUnits


Fair ValueOutstanding at beginning of year


100,795


$
40.81Granted


5,750



34.94Vested






Forfeited


(250
)


41.45Outstanding at end of period


106,295


$
40.49     Unit Options.
    Number ofUnits


WeightedUnderlying


AverageOptions


Exercise PriceOutstanding at beginning of year


1,442,847


$
22.60Granted


81,500



34.76Exercised


(13,487
)


14.32Forfeited


(20,807
)


36.16Outstanding at end of period


1,490,053


$
21.25     Three MonthsEnded March 31,2008

2007Weighted average exercise price

$34.76

$31.92Expected volatility

20.27%-20.72%

20.9%-21.5%Distribution yield

6.18%

6.03%-6.05%Risk-free interest rate

2.71%-3.46%

4.46%-4.80%Expected term (in years)

6.5

6.5Weighted average grant-date fair value of options granted

$3.19

$3.81Total intrinsic value of options exercised

$285,000

$650,000    18




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 7 
    Members
    Capital and Distributions (continued)      Note 8 
    Net
    Income Per Unit  Earnings Per Share, No. 03-6 03-6), Participating Securities and the Two-Class Method
    under Financial Accounting Standards Board Statement
    No. 128. 03-6
   19




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 8 
    Net
    Income Per Unit (continued)    Three MonthsEnded March 31,2008


2007Net income available  basic

$
14,502


$
8,702Less net income attributable to subordinated unitholders






(725
)Net income  basic


14,502



7,977Net income attributable to subordinated unitholders






725Net income available  diluted(1)

$
14,502


$
8,702Basic weighted average units


47,377



38,736Dilutive weighted average units(1)


57,880



39,365Basic net income per unit

$
0.31


$
0.21Diluted net income per unit(1)

$
0.25


$
0.20     (1)
    
    Our potentially dilutive common equity includes the following:  Three MonthsEnded March 31,2008

2007(In thousands)Employee options


489



485Restricted units


118



144Class C units


1,051



Class D units


3,246



Class E units


5,599



   Note 9 
    Related Party Transactions
  Operations
    Services
   20




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 9 
    Related Party Transactions (continued)
    Natural
    Gas Transactions and Other
    Three MonthsEnded March 31,2008


2007Affiliates of Mr. Eckel:Natural gas sales(1)

$
23


$
25Gathering and compression services(2)


7



8Natural gas purchases(3)


392



341Webb Duval:Natural gas sales(1)






512Natural gas purchases(3)


548



202Transportation costs(4)


101



76Bighorn:Gathering costs(4)


228



Fort Union:Gathering costs(4)


1,876



Treating costs(3)


53



Other:Natural gas sales(1)


59



     (1)
    
    Revenues included in natural gas sales on our consolidated
    statements of operations.(2)
    
    Revenues included in transportation, compression and processing
    fees on our consolidated statements of operations.(3)
    
    Included in costs of natural gas and natural gas liquids on our
    consolidated statements of operations.(4)
    
    Costs included in transportation on our consolidated statements
    of operations.         21




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 9 
    Related Party Transactions (continued)
      Note 10 
    Commitments and Contingencies
  Commitments
           22




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 10 
    Commitments and Contingencies (continued)
  Guarantees
  Guarantors Accounting and Disclosure
    Requirements for Guarantees, Including Indirect Guarantees of
    Indebtedness of Others,
  Regulatory
    Compliance
    Litigation
      Note 11 
    Supplemental Disclosures to the Statements of Cash
    Flows
  Three MonthsEnded March 31,2008

2007(In thousands)Cash payments for interest, net of $527,000 and $361,000
    capitalized in 2008 and 2007, respectively

$
17,582


$
9,620Cash payments for federal and state income taxes

$



$
    23




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 11 
    Supplemental Disclosures to the Statements of Cash Flows
    (continued)
    Note 12 
    Financial
    Instruments  Commodity
    Risk Hedging Program
            Interest
    Rate Risk Hedging Program
     24




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 12 
    Financial Instruments (continued)
      Adoption
    of SFAS No. 157
    
    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;
    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.     25




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 12 
    Financial Instruments (continued)
    Fair Value Measurements on a Recurring Basis as of
    March 31, 2008Level 1


Level 2


Level 3


Total(In thousands)Assets:Commodity derivatives

$



$



$
28,659


$
28,659Other derivatives






158







158Total

$



$
158


$
28,659


$
28,817Liabilities:Commodity derivatives

$



$



$
(63,863
)

$
(63,863
)Other derivatives






(10,328
)






(10,328
)Total

$



$
(10,328
)

$
(63,863
)

$
(74,191
)       Three MonthsEndedMarch 31, 2008Balance, January 1, 2008

$
(48,194
)Total gains or losses:Included in earnings


(8,246
)Included in accumulated other comprehensive loss


(4,523
)Purchases, issuances and settlements


25,759Transfers in and/or out of Level 3


Balance, March 31, 2008

$
(35,204
)Change in unrealized losses relating to instruments still held
    as of March 31, 2008

$
4,484    26




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 12 
    Financial Instruments (continued)
  and/or
  Note 13 
    Segment
    Information    
    Oklahoma, which includes natural gas midstream services in
    central and eastern Oklahoma, including natural gas gathering
    and related compression and dehydration services and natural gas
    processing and a crude oil pipeline. Our Oklahoma segment
    includes assets acquired in the Cimmarron Acquisition and our
    equity investment in Southern Dome.
    Texas, which performs natural gas gathering and transmission and
    related operations and natural gas processing, treating,
    conditioning and related NGL transportation operations in Texas
    and Louisiana. Our Texas segment includes assets acquired in the
    Cimmarron Acquisition and Cantera Acquisition and our equity
    investment in Webb Duval.
    Rocky Mountains, which performs natural gas gathering and
    related operations in Wyoming, was acquired through the Cantera
    Acquisition. Our Rocky Mountains segment includes our equity
    investments in Bighorn and Fort Union, two firm gathering
    agreements with Fort Union and two firm capacity
    transportation agreements with Wyoming Interstate Gas Company.     27




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##### Table of Contents



COPANO
    ENERGY, L.L.C. AND SUBSIDIARIES
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 13 
    Segment Information (continued)
    Rocky


Total


CorporateOklahoma


Texas


Mountains


Segments


and Other


ConsolidatedThree Months Ended March 31, 2008:Sales to external customers

$
216,964


$
191,358


$
11,218


$
419,540


$
(17,792
)

$
401,748Intersegment sales


(518
)


518















Interest and other financing costs


















11,392



11,392Depreciation and amortization


7,109



3,565



670



11,344



226



11,570Equity in (earnings) loss from unconsolidated affiliates


(1,101
)


(291
)


996



(396
)






(396
)Net income (loss)


22,740



30,391



(1,433
)


51,698



(37,196
)


14,502Segment assets


782,301



361,784



693,686



1,837,771



(24,961
)


1,812,810Three Months Ended March 31, 2007:Sales to external customers

$
106,537


$
107,183


$



$
213,720


$
(2,732
)

$
210,988Intersegment sales






















Interest and other financing costs


















5,193



5,193Depreciation and amortization


5,901



2,386







8,287



183



8,470Equity in earnings from unconsolidated affiliates


(214
)


(650
)






(864
)






(864
)Net income (loss)


10,286



10,135







20,421



(11,719
)


8,702  28




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  You should read the following discussion of our financial
    condition and results of operations in conjunction with the
    unaudited consolidated financial statements and notes thereto
    included elsewhere in this report.
  As generally used in the energy industry and in this report,
    the following terms have the following meanings:
  Bbls/d:

Barrels per dayBtu:

British thermal unitsMMBtu:

One million British thermal unitsMMBtu/d:

One million British thermal units per dayMcf/d:

One thousand cubic feet per dayMMcf/d:

One million cubic feet per dayNGLs:

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 processedThroughput:

The volume of product transported or passing through a
    pipeline, plant, terminal or other facility   Overview
      
    Our Oklahoma segment was established as a segment upon our
    acquisition of ScissorTail in August 2005 and provides midstream
    natural gas services in central and eastern Oklahoma, including
    gathering and related compression and dehydration services,
    natural gas processing. This segment also includes a crude oil
    pipeline located in southern Oklahoma and north Texas. For the
    three months ended March 31, 2008 and 2007, this segment
    generated approximately 60% and 56%, respectively, of our total
    segment gross margin.
    Our Texas segment provides midstream natural gas services in
    southeastern and northern Texas, including gathering and
    intrastate transmission of natural gas, and related services
    such as compression, dehydration and marketing. Our Texas
    segment also provides natural gas processing, conditioning and
    treating and NGL fractionation and transportation through our
    Houston Central plant, Sheridan NGL pipeline and our Brenham NGL
    pipeline. In addition, our Texas segment owns a processing plant
    located in southwestern Louisiana. For the three months ended
    March 31, 2008 and 2007, this segment generated
    approximately 68% and 51%, respectively, of our total segment
    gross margin.
    Our Rocky Mountains segment provides midstream natural gas
    services in the Powder River Basin of Wyoming, including
    gathering and treating of natural gas. The Rocky Mountains
    segment was established as a segment as a result of our
    acquisition of Cantera in October 2007. For the three months
    ended March 31, 2008, this segment generated approximately
    1% of our total segment gross margin, which represents margins
    derived from our producer services. The gross margin generated
    by this segment does not include results associated with our
    interests in Bighorn or Fort Union, which are reported as
    equity in earnings (loss) from unconsolidated affiliates.   29




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##### Table of Contents



How We
    Evaluate Our Operations
    Throughput Volumes.
    
    The volume of natural gas transported or gathered through our
    pipelines, which we call pipeline throughput; and
    The volume of natural gas delivered to our wholly owned
    processing plants by third-party pipelines, excluding any
    volumes already included in our pipeline throughput.   30




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##### Table of Contents



Segment Gross Margin.
    Operations and Maintenance
    Expenses.
  General and Administrative Expenses.
  Adjusted EBITDA.
 31




---



##### Table of Contents




    the financial performance of our assets without regard to
    financing methods, capital structure or historical cost basis;
    the ability of our assets to generate cash sufficient to pay
    interest costs and support our indebtedness;
    our operating performance and return on capital as compared to
    those of other companies in the midstream energy sector, without
    regard to financing or capital structure; and
    the viability of acquisitions and capital expenditure projects
    and the overall rates of return on alternative investment
    opportunities.    Distributable Cash Flow.
  How We
    Manage Our Operations
    Our Economic Models.
 32




---



##### Table of Contents



Flow and Transaction Monitoring Systems.
  Producer Activity Evaluation and Reporting.
  Imbalance Monitoring and Control.
  Our
    Long-Term Growth Strategy
    Acquisition Analysis.
 33




---



##### Table of Contents



Capital Expenditure Analysis.
  Forward-Looking
    Statements
    
    our ability to successfully integrate any acquired assets or
    operations;
    the volatility of prices and market demand for natural gas and
    NGLs;
    our ability to continue to obtain new sources of natural gas
    supply;
    the ability of key producers to continue to drill and
    successfully complete and attach new natural gas supplies;
    our ability to retain our key customers;
    general economic conditions;
    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.  Form 10-K
 34




---



##### Table of Contents



Our
    Results of Operations
  Three MonthsEnded March 31,2008


2007($ In thousands)Total segment gross margin(1)

$
61,317


$
38,326Operations and maintenance expenses


11,830



8,498Depreciation and amortization


11,570



8,470General and administrative expenses


11,850



7,516Taxes other than income


741



527Equity in earnings from unconsolidated affiliates


(396
)


(864
)Operating income


25,722



14,179Interest and other financing costs, net


(10,936
)


(4,573
)Provision for income taxes


(284
)


(904
)Net income

$
14,502


$
8,702Total Segment gross margin:Oklahoma

$
36,570


$
21,401Texas


41,576



19,657Rocky Mountains


963



Segment gross margin


79,109



41,058Corporate and other(2)


(17,792
)


(2,732
)Total segment gross margin(1)

$
61,317


$
38,326Segment gross margin per unit:Oklahoma:Service throughput ($/MMBtu)(3)

$
1.81


$
1.28Texas:Service throughput ($/MMBtu)

$
0.66


$
0.34Rocky Mountains:Service throughput ($/MMBtu)(4)

$
0.05


$
Volumes:Oklahoma(3)(5) 
    Service throughput (MMBtu/d)


222,006



185,345Plant inlet volumes (MMBtu/d)


150,610



132,789NGLs produced (Bbls/d)


14,543



12,286Crude pipeline throughput (Bbls/d)


3,691



Texas:Service throughput (MMBtu/d)


696,658



639,773Pipeline throughput (MMBtu/d)(6)


327,998



280,068Plant Inlet volumes (MMBtu/d)(6)(7)


604,736



572,659NGLs produced (Bbls/d)(6)(7)


18,082



15,960Rocky Mountains:Service throughput (MMBtu/d)(4)


226,721



Capital Expenditures:Maintenance capital expenditures

$
3,059


$
1,371Expansion capital expenditures


30,621



18,953Total capital expenditures

$
33,680


$
20,324Operations and maintenance expenses:Oklahoma

$
5,926


$
4,370Texas


5,852



4,128Rocky Mountains


52



Total operations and maintenance expenses

$
11,830


$
8,498  35




---



##### Table of Contents



(1)
    
    Total segment gross margin is a non-GAAP financial measure. For
    a reconciliation of total segment gross margin to its most
    directly comparable GAAP measure, please read
    Non-GAAP Financial Measures.(2)
    
    Corporate and other includes results attributable to
    Copanos commodity risk management activities.(3)
    
    Excludes volumes associated with our interest in Southern Dome.
    For the three months ended March 31, 2008, plant inlet
    volumes for Southern Dome averaged 10,824 MMBtu/d and NGLs
    produced averaged 448 Bbls/d. For the three months ended
    March 31, 2007, plant inlet volumes for Southern Dome
    averaged 5,593 MMBtu/d and NGLs produced averaged
    205 Bbls/d.(4)
    
    Service pipeline throughput represents volumes purchased for
    resale, volumes gathered utilizing firm capacity gathering
    agreements with Fort Union and firm capacity volumes under
    our transportation agreements with Wyoming Interstate Gas
    Company that we have released to producers in the Powder River
    Basin. Excludes results and volumes associated with our
    interests in Bighorn and Fort Union. Volumes transported by
    Bighorn and Fort Union were 218,025 MMBtu/d and
    675,308 MMBtu/d, respectively, for the three months ended
    March 31, 2008.(5)
    
    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. Plant inlet volumes averaged
    99,270 MMBtu/d and NGLs produced averaged 9,994 Bbls/d
    for the three months ended March 31, 2008 for plants owned
    by the Oklahoma segment. Plant inlet volumes averaged
    85,558 MMBtu/d and NGLs produced averaged 8,394 Bbls/d
    for the three months ended March 31, 2007 for plants owned
    by the Oklahoma segment.(6)
    
    Excludes volumes associated with Copanos interest in Webb
    Duval. Gross volumes transported by Webb Duval were
    81,138 MMBtu/d and 103,370 MMBtu/d, net of
    intercompany volumes, for the three months ended March 31,
    2008 and 2007, respectively.(7)
    
    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 581,051 MMBtu/d
    and NGLs produced averaged 16,376 Bbls/d for the three
    months ended March 31, 2008 for plants owned by the Texas
    segment. Plant inlet throughput averaged 572,659 MMBtu/d
    and NGLs produced averaged 15,960 Bbls/d for the three
    months ended March 31, 2007 for plants owned by the Texas
    segment.  Three
    Months Ended March 31, 2008 Compared with Three Months
    Ended March 31, 2007
  Oklahoma Segment Gross Margin.
  Texas Segment Gross Margin.
  Rocky Mountains Segment Gross Margin.
 36




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##### Table of Contents



Corporate and Other.
  Operations and Maintenance
    Expenses.
  Depreciation and Amortization.
  General and Administrative Expenses.
  Interest Expense.
 37




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##### Table of Contents



Liquidity
    and Capital Resources
    Off-Balance Sheet Arrangements.
  Capital Requirements.
  
    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 such as those to acquire
    additional assets to grow our business, to expand and upgrade
    gathering systems, transmission capacity or processing plants
    and to construct or acquire new pipelines or processing plants.      Operating
    Cash Flows.
  Three MonthsEnded March 31,2008


2007(In thousands)Net income

$
14,502


$
8,702Depreciation and amortization


12,338



8,779Equity in earnings from unconsolidated affiliates


(396
)


(864
)Distributions from unconsolidated affiliates


4,276



Equity-based compensation and other


1,036



1,449Cash (used in) provided by working capital


(12,578
)


5,924Net cash provided by operating activities

$
19,178


$
23,990    38




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##### Table of Contents



Investing Cash Flows.
  Financing Cash Flows.
  Cash Distributions and Reserves:
       39




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##### Table of Contents



Our
    Indebtedness
    Credit Ratings.
  Senior Secured Revolving Credit Facility.
        Senior Notes.
    Recent
    Accounting Pronouncements
   40




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##### Table of Contents



Critical
    Accounting Policies
  Form 10-K
  Non-GAAP Financial
    Measures
    Three MonthsEnded March 31,2008


2007Reconciliation of total segment gross margin to operating income:Operating income

$
25,722


$
14,179Add: Operations and maintenance expenses


11,830



8,498Depreciation and amortization


11,570



8,470General and administrative expenses


11,850



7,516Taxes other than income


741



527Equity in earnings from unconsolidated affiliates


(396
)


(864
)Total segment gross margin

$
61,317


$
38,326Reconciliation of EBITDA and Adjusted EBITDA to net income:Net income

$
14,502


$
8,702Add: Depreciation and amortization


11,570



8,470Interest and other financing costs


11,392



5,193Provision for income taxes


284



904EBITDA


37,748



23,269Add: Copanos share of depreciation and amortization
    included in equity in earnings from unconsolidated affiliates


1,269



248Add: Amortization of difference between the carried investment
    and the underlying equity in net assets of equity investments


4,599



(3
)Adjusted EBITDA

$
43,616


$
23,514Reconciliation of EBITDA and Adjusted EBITDA to cash flows from
    operating activities:Cash flow provided by operating activities

$
19,178


$
23,990Add: Cash paid for interest and other financing costs


10,624



4,883Equity in earnings from unconsolidated affiliates


396



864Distributions from unconsolidated affiliates


(4,276
)


Risk management activities


17,240



(2,615
)Increase in working capital and other


(5,414
)


(3,853
)EBITDA


37,748



23,269Add: Copanos share of depreciation and amortization
    included in equity in earnings from unconsolidated affiliates


1,269



248Add: Amortization of difference between the carried investment
    and the underlying equity in net assets of equity investments


4,599



(3
)Adjusted EBITDA

$
43,616


$
23,514  41




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##### Table of Contents



Item 3.
    Quantitative
    and Qualitative Disclosures about Market Risk.    Commodity Price Risk.
  agreed-upon
  fee-for-service percentage-of-index
       42




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##### Table of Contents



Commodity Price Hedging Activities.
  
    purchase put options or put spreads (purchase of a
    put and a sale of a put at a lower strike price) on WTI crude
    oil to hedge natural gas liquids produced or condensate
    collected by us or an entity or asset to be acquired by us if a
    binding purchase and sale agreement has been executed (a
    Pending Acquisition);
    purchase put or call options, enter into collars (purchase of a
    put together with the sale of a call) or call or put
    spreads ((i) purchase of a call and a sale of a call at a
    higher strike price or (ii) purchase of a put and a sale of
    a put at a lower strike price)
    and/or sell
    fixed for floating swaps on natural gas at Henry Hub, HSC or
    other highly liquid points relevant to our operations or a
    Pending Acquisition;
    purchase put options, enter into collars or put
    spreads (purchase of a put and a sale of a put at a lower
    strike price)
    and/or sell
    fixed for floating swaps on NGLs to which we, or a Pending
    Acquisition, has direct price exposure, priced at Mt. Belvieu or
    Conway; and
    purchase put options and collars
    and/or sell
    fixed for floating swaps on the fractionation spread
    or the processing margin spread for any processing
    plant relevant to our operations or a Pending Acquisition.    
    Maturities with respect to the purchase of any crude oil,
    natural gas, NGLs, fractionation spread or processing margin
    spread hedge instruments must be limited to five years from the
    date of the transaction;
    We may not (i) purchase crude oil or natural gas liquids
    put options, (ii) purchase natural gas put or call options,
    (iii) purchase fractionation spread or processing margin
    spread put options or (iv) enter into any crude oil,
    natural gas or natural gas liquids spread options permitted by
    the policy if, as a result of the proposed transaction, net
    notional hedged volumes with respect to the underlying hedged
    commodity would be an amount in excess of 80% of the projected
    requirements or output, as applicable, for the hedged period (a
    calendar year or any remaining portion thereof). Notwithstanding
    this limitation, we are not required to divest outstanding hedge
    positions except to the extent net notional hedged volumes with
    respect to an underlying hedged commodity exceed 100% of the
    projected requirements or output, as applicable, for the hedged
    period; and
    The aggregate volumetric exposure associated with swaps, collars
    and written calls relating to any product must not exceed the
    lesser of 50% of the aggregate hedged position or 35% of the
    projected requirements or output with respect to such product.    over-the-counter
 43




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##### Table of Contents



Oklahoma Segment.
  Texas Segment.
  Rocky Mountains Segment.
  Our
    Commodity Hedge Portfolio
    Purchased
    CenterPoint East Natural Gas Puts
  Put Strike

Put Volumes(Per MMBtu)

(MMBtu/d)2008

$
7.75



3,1002009

$
6.95



5,000   Purchased
    HSC Index Natural Gas Call Spreads
  Call Strike(Per MMBtu)


Call VolumesBought


Sold


(MMBtu/d)2008

$
8.15


$
10.00



9,4002009

$
7.75


$
10.00



8,0002010

$
7.35


$
10.00



7,1002011

$
6.95


$
10.00



7,100   Purchased
    Purity Ethane Puts and Entered into Swaps
  Put


SwapStrike


Volumes


Price


Volumes(Per Gallon)


(Bbls/d)


(Per Gallon)


(Bbls/d)2008

$
0.5700



607


$
0.5650



6072008

$
0.6250



2,900


$
0.6525



1,3002009

$
0.5900



2,200


$
0.6025



1,1002010

$
0.5550



1,600


$
0.5700



5002011

$
0.5300



1,700


$
0.5450



500  44




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##### Table of Contents



Purchased
    Purity Ethane Put Spread Options
  Put Strike(Per MMBtu)


Put VolumesBought


Sold


(Barrels/d)2008

$
0.93


$
0.625



1,1002008

$
0.93


$
0.570



607April  December 2008

$
0.85


$
0.625



1,7002009

$
0.83


$
0.590



1,1002009

$
0.79


$
0.590



1,100   Purchased
    TET Propane Puts and Entered into Swaps
  Put


SwapStrike


Volumes


Price


Volumes(Per Gallon)


(Bbls/d)


(Per Gallon)


(Bbls/d)2008

$
0.8360



2,594


$
0.8700



7452008

$
0.8975



1,100







2008

$
1.0500



396







2009

$
0.8725



2,200







2009

$
0.9650



1,000


$
1.0275



1,0002010

$
0.8500



1,100







2010

$
0.9460



700


$
0.9925



7002011

$
0.8265



1,100







2011

$
0.9340



700


$
0.9750



700   Purchased
    TET Propane Put Spread Options
  Put Strike(Per MMBtu)


Put VolumesBought


Sold


(Barrels/d)2008

$
1.44


$
0.8360



2,000April  December 2008

$
1.38


$
0.8360



594April  December 2008

$
1.38


$
0.8975



3702009

$
1.33


$
0.8725



1,6002009

$
1.33


$
0.8725



6002009

$
1.33


$
0.9650



100   Purchased
    Non-TET Isobutane Puts and Entered into Swaps
  Put


SwapStrike


Volumes


Price


Volumes(Per Gallon)


(Bbls/d)


(Per Gallon)


(Bbls/d)2008

$
0.9900



622


$
1.0450



922008

$
1.0900



250







2009

$
1.0600



450







2009

$
1.1600



100


$
1.2425



1002010

$
1.0350



300







2010

$
1.1145



100


$
1.2025



1002011

$
1.0205



300







2011

$
1.1100



100


$
1.1800



100  45




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##### Table of Contents



Purchased
    Non-TET Isobutane Put Spread Options
  Put Strike(Per MMBtu)


Put VolumesBought


Sold


(Barrels/d)2008

$
1.67


$
0.99



400April  December 2008

$
1.71


$
0.99



2222009

$
1.62


$
1.06



1752009

$
1.57


$
1.06



2752009

$
1.62


$
1.16



100   Purchased
    Non-TET Normal Butane Puts and Entered into Swaps
  Put


SwapStrike


Volumes


Price


Volumes(Per Gallon)


(Bbls/d)


(Per Gallon)


(Bbls/d)2008

$
0.9875



810


$
1.0400



2712008

$
1.0800



300







2009

$
1.0525



700







2009

$
1.1400



400


$
1.2275



4002009









$
(1.7025
)


(320
)2010

$
1.0300



300







2010

$
1.1000



200


$
1.1850



2002011

$
1.0205



300







2011

$
1.0850



200


$
1.1700



200   Purchased
    Non-TET Normal Butane Put Spread Options
  Put Strike(Per MMBtu)


Put VolumesBought


Sold


(Barrels/d)2008

$
1.66


$
0.9875



500April  December 2008

$
1.65


$
0.9875



3002009

$
1.58


$
1.0525



1502009

$
1.54


$
1.0525



5502009

$
1.58


$
1.14



200   Purchased
    Non-TET Natural Gasoline Puts and Entered into Swaps
  Put


SwapStrike


Volumes


Price


Volumes(Per Gallon)


(Bbls/d)


(Per Gallon)


(Bbls/d)2008

$
1.4850



300


$
1.5850



3002009

$
1.4400



200


$
1.5400



2002010

$
1.4080



300







2011

$
1.4100



300







   Purchased
    Non-TET Natural Gasoline Put Spread Options
  Put Strike(Per MMBtu)

Put VolumesBought

Sold

(Barrels/d)2009

$
1.98


$
1.44



120  46




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##### Table of Contents



Purchased
    WTI Crude Oil Puts
  Put Strike


Put Volumes(Per Barrel)


(Bbls/d)2008

$
55.00



1,0002008

$
60.00



7002009

$
55.00



1,0002009

$
60.00



5002010

$
55.00



1,0002010

$
60.00



4002011

$
55.00



1,0002011

$
60.00



400   Purchased
    WTI Crude Oil Put Spread Options
  Put Strike(Per MMBtu)


Put VolumesBought


Sold


(Barrels/d)2008

$
91.50


$
55.00



850April  December 2008

$
97.00


$
55.00



150April  December 2008

$
97.00


$
60.00



6102009

$
86.50


$
55.00



7502009

$
92.00


$
55.00



2502009

$
92.00


$
60.00



500     Interest Rates.
        Risk Management Oversight.
 47




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##### Table of Contents



Credit Risk.
  Item 4.
    Controls
    and Procedures.   PART II 
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings.    Item 1A.
    Risk
    Factors  Form 10-K and/or Form 10-K.
  Item 4.
    Submission
    of Matters to a Vote of Security Holders.      For


33,219,013Against


141,424Abstentions


98,493  48




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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

Registration Rights Agreement dated as of May 1, 2007, by
    and among Copano Energy, L.L.C. and Cimmarron Gathering GP, LLC,
    Taos Gathering, LP and Cimmarron Transportation, LLC
    (incorporated by reference to Exhibit 4.1 to Current Report
    on
    Form 8-K
    filed May 4, 2007).4
.5

Registration Rights Agreement by and between Copano Energy,
    L.L.C. and Cantera Resources Holdings LLC, dated
    October 19, 2007 (incorporated by reference to
    Exhibit 4.1 to Current Report on
    Form 8-K
    filed October 25, 2007).4
.6

Registration Rights Agreement by and among Copano Energy, L.L.C.
    and the Purchasers, dated October 19,2007 (incorporated by
    reference to Exhibit 4.2 to Current Report on
    Form 8-K
    filed October 25, 2007).10
.1

2008 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 27, 2008).31
.1*

Sarbanes-Oxley Section 302 certification of John R. Eckel,
    Jr. (Chief Executive Officer) for Copano Energy, L.L.C.31
.2*

Sarbanes-Oxley Section 302 certification of Matthew J.
    Assiff (Chief Financial Officer) for Copano Energy, L.L.C.32
.1*

Sarbanes-Oxley Section 906 certification of John R. Eckel,
    Jr. (Chief Executive Officer) for Copano Energy, L.L.C.32
.2*

Sarbanes-Oxley Section 906 certification of Matthew J.
    Assiff (Chief Financial Officer) for Copano Energy, L.L.C.    *
    
    Filed herewith. 49




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##### Table of Contents



SIGNATURES
      By:
    /s/  John
    R. Eckel, Jr.     By:
    /s/  Matthew
    J. Assiff    50