<PAGE>   1
 
================================================================================

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                             ---------------------

                                   FORM 10-K

                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995           COMMISSION FILE NO. 1-2921
 
                      PANHANDLE EASTERN PIPE LINE COMPANY
             (Exact name of registrant as specified in its charter)
 
<TABLE>
<S>                                           <C>
                   DELAWARE                                     44-0382470
       (State or other jurisdiction of                       (I.R.S. Employer
        incorporation or organization)                     Identification No.)
</TABLE>
 
                             5400 WESTHEIMER COURT
                                 P.O. BOX 1642
                           HOUSTON, TEXAS 77251-1642
         (Address, including zip code, of principal executive offices)
                                 (713) 627-5400
                    (Telephone number, including area code)

                             ---------------------

          Securities registered pursuant to Section 12(b) of the Act:
 
<TABLE>
<CAPTION>
                                                          NAME OF EACH EXCHANGE
             TITLE OF EACH CLASS                           ON WHICH REGISTERED
             -------------------                          ---------------------              
<S>                                           <C>
          7.95% Debentures Due 2023                 The New York Stock Exchange, Inc.
</TABLE>
 
        Securities registered pursuant to Section 12(g) of the Act: NONE
 
     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  /X/   No / /
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in any definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  /X/
 
     The Registrant meets the conditions set forth in General Instructions
(J)(1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K with the
reduced disclosure format. Items 4, 10, 11, 12 and 13 have been omitted and Item
7 has been reduced in accordance with such Instruction J.
 
     The Registrant's parent, Panhandle Eastern Corporation (File No. 1-8157),
files reports and proxy materials pursuant to the Securities Exchange Act of
1934.
 
                             ---------------------
 
     State the aggregate market value of the voting stock held by non-affiliates
of the Registrant.
 
                                      NONE
 
     Indicate number of shares outstanding of each of the Registrant's classes
of Common Stock, as of the latest practicable date.
 
<TABLE>
<CAPTION>
                                                       NUMBER OF SHARES OUTSTANDING
             TITLE OF EACH CLASS                         AS OF FEBRUARY 29, 1996
             -------------------                       ----------------------------          
<S>                                           <C>
       Common Stock, without par value                            1,000
</TABLE>
 
================================================================================
<PAGE>   2
 
                               TABLE OF CONTENTS
 
                                     PART I
 
<TABLE>
<S>       <C>                                                                              <C>
Item 1.   Business.......................................................................     1
          General........................................................................     1
          Natural Gas Transmission.......................................................     2
          Regulation.....................................................................     3
          Rates and Regulatory Proceedings...............................................     4
          Competition....................................................................     4
          Environmental Matters..........................................................     5
          General Matters................................................................     5
Item 2.   Properties.....................................................................     5
Item 3.   Legal Proceedings..............................................................     5

                                   PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters..........     7
Item 6.   Selected Financial Data........................................................     7
Item 7.   Management's Discussion and Analysis of Financial Condition and Results of
          Operations.....................................................................     7
Item 8.   Financial Statements and Supplementary Data....................................    10
Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial
          Disclosure.....................................................................    10

                                   PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K................    11
Index to Financial Statements and Schedules..............................................    13
</TABLE>
 
                             ---------------------
 
     All gas volumes used herein are stated at 14.73 pounds per square inch, on
a dry basis, at 60 degrees Fahrenheit.

<PAGE>   3
 
                                     PART I
 
ITEM 1. BUSINESS
 
GENERAL
 
     Panhandle Eastern Pipe Line Company ("PEPL"), a subsidiary of Panhandle
Eastern Corporation, d/b/a PanEnergy Corp ("PanEnergy"), is a Delaware
corporation incorporated in 1929. PEPL and its subsidiaries (the "Company") are
primarily engaged in the interstate transportation and storage of natural gas.
 
     Information concerning components of the Company's consolidated operating
revenues, including revenues attributable to transportation, storage and sales
of natural gas, for the years 1995, 1994 and 1993 is contained in the
Consolidated Statement of Income on page F-2, which is incorporated herein by
reference.
 
     Executive offices of PEPL are located at 5400 Westheimer Court, Houston,
Texas 77056-5310, and the telephone number is (713) 627-5400.
 
  Certain Terms
 
     Certain terms used in the description of the Company's business are
explained below.
 
     Capacity Release Program: An arrangement that allows firm open-access
transportation or storage customers to assign pipeline capacity rights to third
parties pursuant to procedures prescribed by FERC.
 
     Federal Energy Regulatory Commission ("FERC"): The agency that regulates
the transportation of natural gas in interstate commerce under the Natural Gas
Act of 1938 (the "NGA") and the Natural Gas Policy Act of 1978 (the "NGPA").
FERC's jurisdiction includes rate-making, construction of facilities and
authorization to provide service.
 
     Firm Service: Transportation or storage of third-party gas, for which
customers pay a charge to reserve pipeline or storage capacity.
 
     Gathering Systems: Pipeline, processing and related facilities that access
production and other sources of natural gas supplies for delivery to mainline
transportation systems.
 
     Merchant Service: Prior to FERC Order 636, traditional service volumes
aggregated by pipelines, under purchase contracts with producers, and
transported and resold to natural gas utilities and other customers at
FERC-approved rates.
 
     Order 636: The FERC pipeline service restructuring rule that guided the
industry's transition to unbundled, open-access pipeline contract transportation
and related services, creating a more market-responsive environment.
 
     Straight Fixed-Variable ("SFV"): A rate design that assigns return on
equity, related taxes and other fixed costs to the reservation component of
rates.
 
     Transition Costs: Those costs incurred as a result of the pipelines'
transition to unbundled services under Order 636. The disposition of natural gas
contracts tied to the former merchant function comprises the majority of such
costs.
 
     Units of Measure:
 
<TABLE>
                <S>                                  <C>
                MMcf/d:                              Million cubic feet per day
                Bcf:                                 Billion cubic feet
                Tcf:                                 Trillion cubic feet
</TABLE>
 
                                        1
<PAGE>   4
 
NATURAL GAS TRANSMISSION
 
  General
 
     PEPL and its principal subsidiary, Trunkline Gas Company ("Trunkline"),
together with Texas Eastern Transmission Corporation ("TETCO") and Algonquin Gas
Transmission Company ("Algonquin"), both subsidiaries of PanEnergy, own and
operate one of the nation's largest gas transmission networks. This fully
interconnected 22,000-mile system can receive natural gas from most major North
American producing regions for delivery to markets in the Mid-Atlantic, New
England and Midwest states. During 1995, PanEnergy's pipelines delivered 2.63
Tcf of natural gas, equal to approximately 12% of U.S. consumption.
 
  Market and Supply Area Deliveries
 
     As used herein, "market area" with respect to each pipeline refers to those
portions of the pipeline that include primarily delivery points for natural gas
leaving the pipeline, and "supply area" with respect to each pipeline refers to
those portions of the pipeline that include primarily receipt points for gas
entering the pipeline. Market-area deliveries represent volumes of gas delivered
to the market area, while supply-area deliveries represent volumes of gas
delivered to the supply area. Generally, rates for supply-area service have
lower margins than rates for market-area service.
 
     Set forth below is information concerning throughput volumes for PEPL and
Trunkline for 1995, 1994 and 1993 (volumes in Bcf).
 
<TABLE>
<CAPTION>
                                      1995      % TOTAL     1994      % TOTAL     1993      % TOTAL
                                      -----     -------     -----     -------     -----     -------
    <S>                               <C>       <C>         <C>       <C>         <C>       <C>
    Market Area
      PEPL..........................    620        53         579        50         560        49
      Trunkline.....................    390        34         434        38         455        40
      Intercompany Eliminations.....     --        --          --        --         (64)       (6)
                                      -----       ---       -----       ---       -----       ---
              Total.................  1,010        87       1,013        88         951        83
                                      -----       ---       -----       ---       -----       ---
    Supply Area
      PEPL..........................     39         4          41         4          43         4
      Trunkline.....................    109         9          97         8         147        13
              Total.................    148        13         138        12         190        17
                                      -----       ---       -----       ---       -----       ---
    Total Volumes...................  1,158       100       1,151       100       1,141       100
                                      =====       ===       =====       ===       =====       ===
    Summary by Pipeline (Total
      Volumes)
      PEPL(1).......................    659        57         620        54         603        53
      Trunkline(2)..................    499        43         531        46         602        53
      Intercompany Eliminations.....     --        --          --        --         (64)       (6)
                                      -----       ---       -----       ---       -----       ---
    Total...........................  1,158       100       1,151       100       1,141       100
                                      =====       ===       =====       ===       =====       ===
</TABLE>
 
---------------
 
(1) PEPL volumes include 22 Bcf, 45 Bcf and 13 Bcf in deliveries to TETCO during
    1995, 1994 and 1993, respectively.
 
(2) Trunkline volumes include 21 Bcf, 43 Bcf and 38 Bcf in deliveries to TETCO
    during 1995, 1994 and 1993, respectively.
 
     During 1995, total billings for transportation and storage services
provided by the Company to Consumers Power Company ("Consumers") accounted for
approximately 10% of the Company's consolidated revenues. Consumers was the only
customer of the Company accounting for 10% or more of consolidated revenues in
1995.
 
     Demand for gas transmission on the Company's pipeline systems is seasonal,
with the highest throughput occurring during the colder periods in the first and
fourth quarters -- the winter heating season. However, the
 
                                        2
<PAGE>   5
 
SFV rate design required by Order 636 has resulted in pipeline earnings
generally being more evenly distributed throughout the year.
 
  Midwest Area
 
     PEPL. PEPL's market volumes are concentrated among approximately 20
utilities located in the Midwest market area that encompasses large portions of
Michigan, Ohio, Indiana, Illinois and Missouri. PEPL's major customers serving
this market include utilities, producers and independent marketers. PEPL's total
deliveries increased 6% in 1995 as a result of larger contract quantities and
increased use of capacity release by customers.
 
     In August 1995, PEPL transferred most of its Mid-Continent natural gas
gathering facilities to a non-FERC-regulated subsidiary of PEPL.
 
     During 1995, PEPL renegotiated contracts with six of its major customers to
provide 390 MMcf/d of transportation and storage service for the next several
years.
 
     Trunkline. Trunkline's major customers include eight utilities located in
portions of Tennessee, Missouri, Illinois, Indiana and Michigan.
 
     Trunkline's total throughput decreased 6% in 1995 as a result of warmer
weather during the first quarter, capacity constraints from South Texas due to
compressor outages and interruptible volumes lost to competitors' capacity
release programs.
 
     In April 1995, Trunkline added 310 MMcf/d of firm and seasonal
transportation service to the Chicago market under five-year contracts with The
Peoples Gas Light and Coke Company ("Peoples"). These volumes are in addition to
60 MMcf/d of service to Peoples begun in 1993.
 
     In late 1995, PEPL and Trunkline began to combine the two pipeline systems'
management and operations to create efficiencies by aligning marketing efforts
and standardizing services.
 
  Storage
 
     PEPL owns and operates three underground storage fields located in
Illinois, Michigan and Oklahoma. Trunkline owns and operates one storage field
in Louisiana. The combined maximum working gas capacity is 44 Bcf. Additionally,
PEPL, through its Pan Gas Storage Company ("Pan Gas") subsidiary, is the owner
of a storage field in Kansas with an estimated maximum capacity of 26 Bcf. PEPL
is the operator of the field. Since the implementation of the Order 636
restructuring, PEPL, Trunkline and Pan Gas all offer firm and interruptible
storage on an open-access basis. In addition to owning storage fields, PEPL also
leases storage capacity. PEPL and Trunkline have retained the right to use up to
15 Bcf and 10 Bcf, respectively, of their storage capacity for system needs.
 
  Investment in Northern Border Partners, L.P.
 
     A PEPL subsidiary owns an 8.5% equity interest (a 32.5% voting interest) in
Northern Border Partners, L.P. ("Northern Border MLP"), consisting of general
partner and subordinated limited partner interests. Northern Border MLP owns a
70% interest in Northern Border Pipeline Company ("Northern Border Pipeline"),
which owns and operates a transmission system consisting of 969 miles of
pipeline extending from the Canadian border through Montana to Iowa. Northern
Border Pipeline transports natural gas both under traditional long-term
contracts and on an open-access basis. It has a certificated transport capacity
of 975 MMcf/d.
 
REGULATION
 
     PEPL, Trunkline and Pan Gas are "natural gas companies" under the NGA and
NGPA and, as such, are subject to the jurisdiction of FERC.
 
                                        3
<PAGE>   6
 
     The NGA grants to FERC authority over the construction and operation of
pipeline and related facilities utilized in the transportation and sale of
natural gas in interstate commerce, including the extension, enlargement or
abandonment of such facilities. PEPL and its subsidiaries hold required
certificates of public convenience and necessity issued by FERC, authorizing
them to construct and operate the pipelines, facilities and properties now in
operation for which certificates are required, and to transport and store
natural gas in interstate commerce.
 
     FERC also has authority to regulate rates and charges for natural gas
transported in or stored for interstate commerce or sold by a natural gas
company in interstate commerce for resale. PEPL and its subsidiaries file with
FERC applications for changes in transportation and storage rates and charges.
These changes are normally allowed to become effective after a suspension
period, subject to refund, until such time as FERC authorizes the actual level
of rates and charges.
 
     PEPL and Trunkline operate as open-access transporters of natural gas. In
1992, FERC issued Order 636, which requires open-access pipelines to provide
firm and interruptible transportation services on an equal basis for all gas
supplies, whether purchased from the pipeline or from another gas supplier. To
implement this requirement, Order 636 provides, among other things, for
mandatory unbundling of services that have historically been provided by
pipelines into separate open-access transportation, sales and storage services.
 
     Order 636, which is on appeal to the courts, provides for the use of the
SFV rate design, which assigns return on equity, related taxes and other fixed
costs to the reservation component of rates. In addition, Order 636 allows
pipelines to recover eligible costs resulting from implementation of Order 636.
Recoverable transition costs include gas supply realignment costs, unrecovered
deferred gas purchase costs, other existing costs incurred in connection with
bundled sales services that cannot be assigned to customers of unbundled
services, and capital costs attributable to the restructuring. PEPL's transition
cost recoveries, which are subject to certain challenges pending before FERC,
will occur through 1998.
 
     Regulation of the importation and exportation of natural gas is vested in
the Secretary of Energy, who has delegated various aspects of this jurisdiction
to FERC and the Office of Fossil Fuels of the Department of Energy.
 
     PEPL and its subsidiaries are subject to the Natural Gas Pipeline Safety
Act of 1968, which regulates gas pipeline safety requirements, and to federal
and state environmental legislation.
 
RATES AND REGULATORY PROCEEDINGS
 
     When rate cases are pending final FERC approval, a portion of the revenues
collected by the Company's natural gas pipelines is subject to possible refunds.
A summary of the status of significant pending rate cases and related regulatory
matters involving PEPL and Trunkline is contained in Note 3 of the Notes to
Consolidated Financial Statements, which is incorporated herein by reference.
 
COMPETITION
 
     PEPL and Trunkline compete with other interstate and intrastate pipeline
companies in the transportation and storage of natural gas. The principal
elements of competition among pipelines are rates, terms of service, and
flexibility and reliability of service. PEPL and Trunkline continue to offer
selective discounting to maximize revenues from existing capacity.
 
     PEPL and Trunkline compete directly with ANR Pipeline Company, Natural Gas
Pipeline Company of America and Texas Gas Transmission Corporation in the
Midwest market area.
 
     Natural gas competes with other forms of energy available to the Company's
customers and end users, including electricity, coal and fuel oils. The primary
competitive factor is price. Changes in the availability or price of natural gas
and other forms of energy, the level of business activity, conservation,
legislation and governmental regulations, the capability to convert to
alternative fuels, and other factors, including weather, affect the demand for
natural gas in the areas served by the Company.
 
                                        4
<PAGE>   7
 
ENVIRONMENTAL MATTERS
 
     For a discussion of environmental matters involving the Company, see Note
11 of the Notes to Consolidated Financial Statements, which is incorporated
herein by reference.
 
GENERAL MATTERS
 
     While the Company does engage in some research and development activities,
no such activities conducted during the past three years have been material to
the Company's business, nor have there been any material customer-sponsored
research activities during that period relating to the Company's business
activities.
 
     PEPL and Trunkline are members of and provide support to the Gas Research
Institute ("GRI"), which plans and manages research and development efforts for
the gas industry. The funds used to support GRI are derived from a surcharge on
the pipelines' rates pursuant to FERC authorization. Payments amounted to
approximately $5.1 million, $8.5 million and $9.4 million in 1995, 1994 and
1993.
 
     Foreign operations and export sales are not material to the Company's
business as a whole.
 
     As of January 1, 1996, the Company had approximately 1,600 employees.
 
ITEM 2. PROPERTIES
 
     PEPL's transmission system, which consists of four large-diameter parallel
pipelines and 13 mainline compressor stations, extends a distance of
approximately 1,300 miles from producing areas in the Anadarko Basin of Texas,
Oklahoma and Kansas through the states of Missouri, Illinois, Indiana and Ohio
into Michigan.
 
     Trunkline's transmission system extends approximately 1,400 miles from the
Gulf Coast areas of Texas and Louisiana through the states of Arkansas,
Mississippi, Tennessee, Kentucky, Illinois and Indiana to a point on the
Indiana-Michigan border near Elkhart, Indiana. The system consists principally
of three large-diameter parallel pipelines and 18 mainline compressor stations.
 
     Trunkline also owns and operates two offshore Louisiana gas supply systems
consisting of 337 miles of pipeline extending approximately 81 miles into the
Gulf of Mexico.
 
     For information concerning natural gas storage properties, see "Natural Gas
Transmission -- Storage" under Item 1, which is incorporated herein by
reference.
 
ITEM 3. LEGAL PROCEEDINGS
 
     For information concerning material legal proceedings, see Notes 3, 11 and
12 of the Notes to Consolidated Financial Statements, which are incorporated
herein by reference.
 
                                        5
<PAGE>   8
 
                      [Map of Panhandle Eastern Corporation
                      Showing Pipelines, Storage Facilities,
                 Principal Supply Areas and Proposed Pipelines.]
 
                                        6
<PAGE>   9
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
     All of the outstanding common stock, without par value, of PEPL is owned by
PanEnergy. In December 1995, PEPL declared and paid a $400 million dividend on
common stock in the form of a promissory note due PanEnergy bearing interest at
prime and maturing on June 30, 1996. In December 1994, PEPL declared and paid a
cash dividend on common stock of $300 million.
 
ITEM 6. SELECTED FINANCIAL DATA
 
     Selected consolidated financial and operating data is presented on Page
F-17, which is incorporated herein by reference.
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 
     The following information is provided to facilitate increased understanding
of the 1995 and 1994 consolidated financial statements and accompanying notes of
the Company, and should be read in conjunction therewith and with the
information set forth under Item 1. Because all of the outstanding capital stock
of PEPL is owned by PanEnergy, the following discussion has been prepared in
accordance with the reduced disclosure format permitted by Form 10-K for issuers
that are wholly-owned subsidiaries of reporting companies under the Securities
Exchange Act of 1934.
 
OPERATING ENVIRONMENT
 
     The Company's traditional pipeline sales services ceased in 1994 and all
services are now offered on an unbundled basis. Order 636 requires use of the
straight fixed-variable rate design which makes earnings less sensitive to
throughput changes. The new rate design has caused the percentage of throughput
related to firm contracts to rise from 63% in 1993 to 87% in 1995. The Company's
pipelines have not experienced any significant reductions in firm capacity sold;
however, PEPL and Trunkline continue to offer selective discounting to maximize
revenues from existing capacity.
 
     As the new environment has evolved, industry participants have indicated a
desire for greater standardization of pipeline tariffs. Responding to these
concerns, PEPL and Trunkline, along with affiliates TETCO and Algonquin, filed
with FERC in 1995 to increase the level of standardization of their gas tariffs
to enhance the nationwide transportation of natural gas. PEPL and Trunkline have
begun to combine operations to provide standard operating practices and services
to customers. This consolidation will contribute to an approximate 7% reduction
in PanEnergy's combined work force. The related cost of termination benefits, to
be recognized in the first quarter 1996, is expected to be substantially offset
by resulting savings throughout the remainder of 1996.
 
     With implementation of Order 636 and the elimination of merchant services,
the Company's pipelines are incurring certain costs for the transition. At
December 31, 1995, the Company had incurred approximately $60 million of
transition costs, including amounts that have been recovered from customers.
PEPL's transition cost recoveries, which are subject to certain challenges that
are pending before FERC, will occur through 1998. The Company believes that
Order 636 transition cost issues will not have a material adverse effect on
future consolidated results of operations or financial position.
 
     On September 1, 1994, Trunkline placed into effect, subject to refund, a
general rate increase as a result of a filing made in accordance with terms of a
rate case settlement in 1993. A settlement resolving this rate case became
effective February 1, 1996. On January 30, 1996, Trunkline filed a subsequent
general rate increase, subject to refund. FERC issued an order on February 29,
1996 suspending the effective date to August 1, 1996.
 
     For information concerning certain regulatory proceedings, environmental
matters and other contingencies, see Notes 3, 5, 7, 11, 12 and 13 of the Notes
to Consolidated Financial Statements.
 
                                        7
<PAGE>   10
 
RESULTS OF OPERATIONS
 
     The Company reported consolidated net income of $100.7 million for 1995
compared with $118.5 million for 1994.
 
  OPERATING INCOME ANALYSIS
 
                      PANHANDLE EASTERN PIPE LINE COMPANY*
 
<TABLE>
<CAPTION>
    Millions                                                              1995       1994
    --------                                                             ------     ------
    <S>                                                                  <C>        <C>
    Transportation Revenue.............................................  $304.8     $315.3
    Storage Revenue....................................................    47.3       51.2
    Other Revenue......................................................    19.6       21.2
                                                                         ------     ------
    TOTAL NET REVENUES.................................................   371.7      387.7
    Operating Expenses.................................................   193.1      206.5
    Depreciation and Amortization......................................    34.7       30.1
                                                                         ------     ------
    OPERATING INCOME...................................................  $143.9     $151.1
                                                                         ======     ======
    VOLUMES (Bcf)
    Market-area Transports.............................................     620        579
    Supply-area Transports.............................................      39         41
                                                                         ------     ------
    Total Deliveries...................................................     659        620
                                                                         ======     ======
</TABLE>
 
---------------
 
     * Includes PEPL and other natural gas transmission entities owned by PEPL,
       exclusive of Trunkline.
 
     PEPL's operating income decreased $7.2 million in 1995 as compared with
1994. The comparison for the year includes the effects of $20.4 million of
income recorded in 1995 for the resolution of certain regulatory matters, offset
by $34.5 million recorded in 1994 for similar resolutions. The transfer of
gathering assets to a non-FERC-regulated affiliate in August 1995 resulted in
lower revenues and expenses of approximately $11.4 million and $10.2 million,
respectively, as compared with 1994. Excluding the impact of these items, PEPL's
revenues from its core business were stable and earnings improved due to lower
operating expenses. Depreciation and amortization increased due to a 1994 rate
reduction amounting to $2.9 million and depreciation on market-expansion
projects.
 
                                        8
<PAGE>   11
 
                             TRUNKLINE GAS COMPANY
 
<TABLE>
<CAPTION>
                                 Millions                                 1995       1994
    -------------------------------------------------------------------  ------     ------
    <S>                                                                  <C>        <C>
    Transportation Revenue.............................................  $151.2     $166.2
                                                                         ------     ------
    Sales Revenue......................................................      --      177.9
    Natural Gas Purchased..............................................      --      177.9
                                                                         ------     ------
              Net Sales Revenue........................................      --         --
    Storage Revenue....................................................     2.4        3.2
    Other Revenue......................................................     6.5        6.7
                                                                         ------     ------
    TOTAL NET REVENUES.................................................   160.1      176.1
    Operating Expenses.................................................    92.1      106.8
    Depreciation and Amortization......................................    22.4       21.6
                                                                         ------     ------
    OPERATING INCOME...................................................  $ 45.6     $ 47.7
                                                                         ======     ======
    VOLUMES (Bcf)
    Market-area Transports.............................................     390        434*
    Supply-area Transports.............................................     109         97
                                                                         ------     ------
    Total Deliveries...................................................     499        531
                                                                         ======     ======
</TABLE>
 
---------------
 
* Includes 89 Bcf of sales volumes.
 
     Operating income for Trunkline decreased $2.1 million in 1995 as compared
with 1994, primarily resulting from $4 million of revenues recorded in 1994
related to a contract settlement. Decreased transportation revenue, due to lower
volumes attributable to warmer weather during the first half of 1995, was offset
by lower operating costs. Sales revenue and associated gas purchased costs
declined $177.9 million as a result of the elimination of Trunkline's merchant
function in late 1994.
 
  ELIMINATIONS
 
     Included in the amounts outlined above are several intercompany
transactions that do not impact consolidated operating income.
 
  OTHER INCOME AND DEDUCTIONS
 
     The decrease of $36.9 million in net other income in 1995 compared with
1994 reflects lower interest income on net advances receivable from PanEnergy,
as receivables for intercompany advances no longer bear interest effective
January 1, 1995.
 
  INTEREST EXPENSE
 
     Consolidated interest expense decreased $10.2 million, or 20%, in 1995
compared with 1994. The decrease is primarily a result of lower average debt
balances outstanding, reflecting the early retirement in October 1995 of PEPL's
$125 million of 9 7/8% debentures due October 1996.
 
  INCOME TAX
 
     The effective tax rates for 1995 and 1994 differed from the statutory
federal income tax rates primarily because of the effect of state income taxes.
 
                                        9
<PAGE>   12
 
CAPITAL EXPENDITURES
 
     Capital expenditures totaled $64.6 million in 1995, compared with $83.5
million in 1994. Capital expenditures for 1996 are expected to approximate $50
million, with the majority of expenditures related to further enhancement of
PEPL's and Trunkline's pipeline integrity and reliability. Funding for 1996
capital expenditures is expected to be provided by cash from operations, debt
issuances and/or the collection of intercompany amounts owed the Company.
 
INTERCOMPANY ADVANCES
 
     Net intercompany advances are carried as open accounts, are not segregated
between current and non-current amounts and, during 1994, bore interest at
variable rates based on LIBOR (London Interbank Offered Rates). Effective
January 1, 1995, intercompany advances do not bear interest. Increases and
decreases in advances result from the movement of funds to provide for
operations, capital expenditures and debt payments of PanEnergy and its
subsidiaries. The collection of advances receivable is subject to the
availability of funds to PanEnergy, whose major sources of internally-generated
funds include dividends and advances from subsidiaries. Net advances and note
receivable -- parent (including current portion) aggregated $566.9 million and
$591.8 million at December 31, 1995 and 1994, respectively.
 
DIVIDENDS
 
     In December 1995, PEPL declared and paid a $400 million dividend on common
stock in the form of a promissory note due PanEnergy bearing interest at prime
and maturing on June 30, 1996. In December 1994, PEPL declared and paid a cash
dividend on common stock of $300 million.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
     Reference is made to "Index -- Financial Statements" under Item 14(a)(1).
 
     See the consolidated quarterly financial data on page F-16, which is
incorporated herein by reference.
 
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
       DISCLOSURES
 
     None.
 
                                       10
<PAGE>   13
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
     (a) The following documents are filed as a part of this report or
incorporated herein by reference:
 
          (1) The Consolidated Financial Statements of Panhandle Eastern Pipe
     Line Company and Subsidiaries are listed on the Index, page 13.
 
          (2) Exhibits filed herewith are designated by an asterisk (*); all
     exhibits not so designated are incorporated herein by reference to a prior
     filing as indicated.
 
<TABLE>
<CAPTION>
  EXHIBIT                                                                                FILE
  NUMBER               DESCRIPTION                   ORIGINALLY FILED AS EXHIBIT        NUMBER
  ------    ----------------------------------    ----------------------------------   --------
  <S>       <C>                                   <C>                                  <C>
  2.01      Stock Repurchase and Receivables      2.1 to Form 8-K of PEPL, dated         1-2921
            Assignment Agreement dated as of      February 18, 1993
            December 31, 1992 among Panhandle
            Eastern Corporation, Panhandle
            Eastern Pipe Line Company,
            Panhandle Financing Company, Texas
            Eastern Corporation and Trunkline
            Gas Company, executed on February
            16, 1993

  2.02      Amended and Restated Agreement of     2.1 to Form 8-K of PEPL, dated         1-2921
            Limited Partnership of Northern       October 15, 1993
            Border Partners, L.P.

  2.03      Amended and Restated Agreement of     2.2 to Form 8-K of PEPL, dated         1-2921
            Limited Partnership for Northern      October 15, 1993
            Border Intermediate Limited
            Partnership

  2.04      Credit Agreement between Northern     2.3 to Form 8-K of PEPL, dated         1-2921
            Border Partners, L.P., as             October 15, 1993
            borrower, and Northern Plains
            Natural Gas Company, Northwest
            Border Pipeline Company and Pan
            Border Gas Company, as lenders

  2.05      Conveyance, Contribution and          2.4 to Form 8-K of PEPL, dated         1-2921
            Assumption Agreement among            October 15, 1993
            Northern Plains Natural Gas
            Company, Northwest Border Pipeline
            Company, Pan Border Gas Company,
            Northern Border Partners, L.P.,
            and Northern Border Intermediate
            Limited Partnership

  2.06      Underwriting Agreement, between       2.5 to Form 8-K of PEPL, dated         1-2921
            Northern Border Partners, L.P.,       October 15, 1993
            Northern Border Intermediate
            Limited Partnership, Northern
            Plains Natural Gas Company, Pan
            Border Gas Company, Enron Corp.
            and Panhandle Eastern Corporation,
            and Goldman, Sachs & Co. on behalf
            of the Underwriters
</TABLE>
 
                                       11
<PAGE>   14
 
<TABLE>
<CAPTION>
  EXHIBIT                                                                                FILE
  NUMBER               DESCRIPTION                   ORIGINALLY FILED AS EXHIBIT        NUMBER
  ------    ----------------------------------    ----------------------------------   --------
  <S>       <C>                                   <C>                                  <C>
  3.01      Restated Certificate of               3.01 to Form 10-K of PEPL for the      1-2921
            Incorporation of Panhandle Eastern    year ended December 31, 1993
            Pipe Line Company, dated October
            25, 1993

  3.02      By-Laws of Panhandle Eastern Pipe     19(a) to Form 10-Q of PEPL for         1-2921
            Line Company, effective July 23,      quarter ended September 30, 1986
            1986

  4.01      Indenture, dated as of February 1,    4 to Form S-3 of PEPL filed          33-58552
            1993, between Panhandle Eastern       February 19, 1993
            Pipe Line Company and Morgan
            Guarantee Trust Company of New
            York

  4.02      Letter, dated February 24, 1994,      4.06 to Form 10-K of PEPL for the      1-2921
            from Nations Bank of Texas,           year ended December 31, 1993
            National Association accepting its
            appointment as successor Trustee
            with respect to all securities
            issued or to be issued under the
            Indenture dated as of February 1,
            1993, included as Exhibit 4.05

  10.01     Contract for Firm Transportation      10.41 to Form 10-K of PEC for the      1-8157
            of Natural Gas between Consumers      year ended December 31, 1989
            Power Company and Trunkline Gas
            Company, dated November 1, 1989,
            and Amendment, dated November 1,
            1989

  10.02     Contract for Firm Transportation      10.47 to Form 10-K of PEC for year     1-8157
            of Natural Gas between Consumers      ended December 31, 1991
            Power Company and Trunkline Gas
            Company, dated November 1, 1991

  10.03     Contract for Firm Transportation      10.3 to Form 10-K of PEPL for the      1-2921
            of Natural Gas between Consumers      year ended December 31, 1993
            Power Company and Trunkline Gas
            Company, dated September 1, 1993

  *23       Consent of KPMG Peat Marwick LLP

  *24       Powers of Attorney

  *27       Financial Data Schedule for
            December 31, 1995
</TABLE>
 
     The total amount of securities of the Registrant or its subsidiaries
authorized under any instrument with respect to long-term debt not filed as an
Exhibit does not exceed 10% of the total assets of the Registrant and its
subsidiaries on a consolidated basis. The Registrant agrees, upon request of the
Securities and Exchange Commission, to furnish copies of any or all of such
instruments.
 
     (b) Reports on Form 8-K
 
     No Reports on Form 8-K were filed during the fourth quarter of 1995.
 
                                       12
<PAGE>   15
 
              PANHANDLE EASTERN PIPE LINE COMPANY AND SUBSIDIARIES
 
                                     INDEX
 
                       FINANCIAL STATEMENTS AND SCHEDULES

                             ---------------------
 
                              FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                                                        PAGE
                                                                                        ----
<S>                                                                                     <C>
Independent Auditors' Report..........................................................  F-1

Consolidated Statement of Income......................................................  F-2

Consolidated Balance Sheet............................................................  F-3

Consolidated Statement of Common Stockholder's Equity.................................  F-5

Consolidated Statement of Cash Flows..................................................  F-6

Notes to Consolidated Financial Statements............................................  F-7
</TABLE>
 
     All Schedules are omitted because they are not applicable, not required or
the information is included in the Consolidated Financial Statements or the
Notes thereto.
 
                                       13
<PAGE>   16
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
Panhandle Eastern Pipe Line Company:
 
     We have audited the accompanying consolidated balance sheets of Panhandle
Eastern Pipe Line Company and Subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of income, common stockholder's equity and
cash flows for each of the years in the three-year period ended December 31,
1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Panhandle
Eastern Pipe Line Company and Subsidiaries at December 31, 1995 and 1994, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1995 in conformity with generally
accepted accounting principles.
 
                                          KPMG PEAT MARWICK LLP
 
Houston, Texas
January 23, 1996
 
                                       F-1
<PAGE>   17
 
              PANHANDLE EASTERN PIPE LINE COMPANY AND SUBSIDIARIES
 
                        CONSOLIDATED STATEMENT OF INCOME
 
<TABLE>
<CAPTION>
                                                                     YEARS ENDED DECEMBER 31
                                                                   ----------------------------
                            Millions                                1995       1994       1993
-----------------------------------------------------------------  ------     ------     ------
<S>                                                                <C>        <C>        <C>
OPERATING REVENUES
  Transportation and storage of natural gas......................  $516.8     $535.9     $453.8
  Sales of natural gas...........................................      --      177.9      392.1
  Other..........................................................    23.2       26.1       24.6
                                                                   ------     ------     ------
          Total (Notes 2, 3 and 5)...............................   540.0      739.9      870.5
                                                                   ------     ------     ------
COSTS AND EXPENSES
  Natural gas purchased..........................................      --      177.9      281.3
  Operating and maintenance......................................   190.9      198.4      232.6
  General and administrative.....................................    72.2       86.3       95.5
  Depreciation and amortization (Note 8).........................    59.2       51.7       55.6
  Miscellaneous taxes............................................    27.8       27.9       27.7
                                                                   ------     ------     ------
          Total (Note 2).........................................   350.1      542.2      692.7
                                                                   ------     ------     ------
Operating Income.................................................   189.9      197.7      177.8
                                                                   ------     ------     ------
OTHER INCOME AND DEDUCTIONS
  Equity in earnings of unconsolidated affiliates (Note 7).......     7.5        5.3       14.2
  Gains (losses) on sales of assets, net (Note 7)................     2.7       (1.3)      44.8
  Interest income -- parent (Note 2).............................     0.7       42.6       24.8
  Other interest and miscellaneous income........................     3.9        2.7        9.8
  Miscellaneous deductions.......................................    (3.9)      (1.5)      (1.4)
                                                                   ------     ------     ------
          Total..................................................    10.9       47.8       92.2
                                                                   ------     ------     ------
Gross Income.....................................................   200.8      245.5      270.0
                                                                   ------     ------     ------
INTEREST EXPENSE
  Long-term debt (Note 9)........................................    36.9       45.0       47.0
  Rate refund provisions (Note 3)................................     3.8        4.0        4.7
  Other (Note 9).................................................     0.3        2.2       15.0
                                                                   ------     ------     ------
          Total..................................................    41.0       51.2       66.7
                                                                   ------     ------     ------
Income Before Income Tax.........................................   159.8      194.3      203.3
INCOME TAX (Note 4)..............................................    59.1       75.8       83.2
                                                                   ------     ------     ------
NET INCOME.......................................................  $100.7     $118.5     $120.1
                                                                   ======     ======     ======
</TABLE>
 
          See accompanying notes to consolidated financial statements
 
                                       F-2
<PAGE>   18
 
              PANHANDLE EASTERN PIPE LINE COMPANY AND SUBSIDIARIES
 
                           CONSOLIDATED BALANCE SHEET
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                              DECEMBER 31
                                                                        -----------------------
Millions                                                                  1995          1994
--------                                                                ---------     ---------
<S>                                                                     <C>           <C>
CURRENT ASSETS
  Cash and cash equivalents...........................................  $     0.2     $     0.4
  Note receivable -- parent (Note 2)..................................         --           8.0
  Accounts receivable
     Customers (Note 5)...............................................       29.7          15.3
     Affiliates (Note 2)..............................................        6.1          17.0
     Other............................................................        3.4           6.6
  Inventory and supplies (Note 6).....................................       55.3          65.7
  Current deferred income tax (Note 4)................................       13.0          10.7
  Other (Notes 3 and 6)...............................................       46.1          52.9
                                                                        ---------     ---------
          Total.......................................................      153.8         176.6
                                                                        ---------     ---------
INVESTMENTS
  Advances and note receivable -- parent (Note 2).....................      566.9         583.8
  Other (Note 7)......................................................       48.3          45.1
                                                                        ---------     ---------
          Total.......................................................      615.2         628.9
                                                                        ---------     ---------
PLANT, PROPERTY AND EQUIPMENT
  Original cost (Note 8)..............................................    2,782.1       2,742.8
  Accumulated depreciation and amortization...........................   (1,818.8)     (1,763.2)
                                                                        ---------     ---------
          Net plant, property and equipment...........................      963.3         979.6
                                                                        ---------     ---------
DEFERRED CHARGES (Notes 1, 3 and 11)..................................      155.1         198.5
                                                                        ---------     ---------
TOTAL ASSETS..........................................................  $ 1,887.4     $ 1,983.6
                                                                        =========     =========
</TABLE>
 
          See accompanying notes to consolidated financial statements
 
                                       F-3
<PAGE>   19
 
              PANHANDLE EASTERN PIPE LINE COMPANY AND SUBSIDIARIES
 
                           CONSOLIDATED BALANCE SHEET
 
                      LIABILITIES AND STOCKHOLDER'S EQUITY
 
<TABLE>
<CAPTION>
                                                                              DECEMBER 31
                                                                        -----------------------
Millions                                                                  1995          1994
--------                                                                ---------     ---------
<S>                                                                     <C>           <C>
CURRENT LIABILITIES
  Long-term debt due within one year (Note 9).........................  $     4.5     $      --
  Note payable -- parent (Note 9).....................................      400.0            --
  Rate refund provisions (Note 3).....................................       53.3          51.2
  Accounts payable
     Trade............................................................       10.6           7.2
     Affiliates (Note 2)..............................................       20.4          22.6
  Accrued income tax -- parent (Note 4)...............................       55.3          69.0
  Other accrued taxes.................................................       18.8          19.2
  Other (Notes 6 and 11)..............................................       59.1          59.8
                                                                        ---------     ---------
          Total.......................................................      622.0         229.0
                                                                        ---------     ---------
DEFERRED LIABILITIES AND CREDITS
  Deferred income tax (Note 4)........................................      176.5         191.9
  Rate refund provisions (Note 3).....................................       66.4          81.8
  Other (Note 11).....................................................      115.3         139.2
                                                                        ---------     ---------
          Total.......................................................      358.2         412.9
                                                                        ---------     ---------
LONG-TERM DEBT (Note 9)...............................................      299.2         428.5
                                                                        ---------     ---------
COMMITMENTS AND CONTINGENT LIABILITIES (Notes 3, 5, 7, 10, 11, 12 and
  13)
COMMON STOCKHOLDER'S EQUITY
  Common stock, one thousand shares authorized,
     issued and outstanding, no par value.............................        1.0           1.0
  Paid-in capital.....................................................      465.9         471.8
  Retained earnings...................................................      141.1         440.4
                                                                        ---------     ---------
          Total.......................................................      608.0         913.2
                                                                        ---------     ---------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY............................  $ 1,887.4     $ 1,983.6
                                                                        =========     =========
</TABLE>
 
          See accompanying notes to consolidated financial statements
 
                                       F-4
<PAGE>   20
 
              PANHANDLE EASTERN PIPE LINE COMPANY AND SUBSIDIARIES
 
             CONSOLIDATED STATEMENT OF COMMON STOCKHOLDER'S EQUITY
 
<TABLE>
<CAPTION>
                                                                    YEARS ENDED DECEMBER 31
                                                                --------------------------------
                           Millions                              1995        1994         1993
--------------------------------------------------------------  -------     -------     --------
<S>                                                             <C>         <C>         <C>
COMMON STOCK..................................................  $   1.0     $   1.0     $    1.0
                                                                -------     -------     --------
PAID-IN CAPITAL
  Balance at beginning of year................................    471.8       471.8        472.0
  Other.......................................................     (5.9)         --         (0.2)
                                                                -------     -------     --------
  Balance at end of year......................................    465.9       471.8        471.8
                                                                -------     -------     --------
RETAINED EARNINGS
  Balance at beginning of year................................    440.4       621.9        501.9
  Net income..................................................    100.7       118.5        120.1
  Common stock dividends paid.................................   (400.0)     (300.0)          --
  Preferred stock dividends paid..............................       --          --         (0.1)
                                                                -------     -------     --------
  Balance at end of year......................................    141.1       440.4        621.9
                                                                -------     -------     --------
TOTAL COMMON STOCKHOLDER'S EQUITY.............................  $ 608.0     $ 913.2     $1,094.7
                                                                =======     =======     ========
</TABLE>
 
          See accompanying notes to consolidated financial statements
 
                                       F-5
<PAGE>   21
 
              PANHANDLE EASTERN PIPE LINE COMPANY AND SUBSIDIARIES
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                    YEARS ENDED DECEMBER 31
                                                                -------------------------------
                           Millions                              1995        1994        1993
--------------------------------------------------------------  -------     -------     -------
<S>                                                             <C>         <C>         <C>
OPERATING ACTIVITIES
  Net income..................................................  $ 100.7     $ 118.5     $ 120.1
  Adjustments to reconcile net income to operating cash
     flows --
     Depreciation and amortization............................     59.2        51.7        55.6
     Deferred income tax expense (benefit)....................     (3.7)       16.1       (66.1)
     Interest income -- parent................................     (0.7)      (42.6)      (24.8)
     Regulatory resolution....................................    (20.7)      (27.3)       51.9
     Gain on sale of investments, net.........................       --          --       (48.2)
     Other non-cash items in net income.......................     (0.4)       (3.5)      (11.3)
     Net change in operating assets and liabilities (detail
       below).................................................     17.7        49.7       157.2
                                                                -------     -------     -------
  Net Cash Flows Provided by Operating Activities.............    152.1       162.6       234.4
                                                                -------     -------     -------
INVESTING ACTIVITIES
  Capital expenditures........................................    (64.6)      (83.5)      (93.5)
  Net decrease (increase) in advances/note
     receivable -- parent.....................................     25.6       271.4      (293.8)
  Net investment decreases....................................       --          --       145.2
  Property sales, retirements and other.......................     13.4        25.6       138.2
                                                                -------     -------     -------
  Net Cash Flows Provided by (Used in) Investing Activities...    (25.6)      213.5      (103.9)
                                                                -------     -------     -------
FINANCING ACTIVITIES
  Retirement of debt..........................................   (125.1)     (175.1)     (324.8)
  Issuance of debt............................................       --        99.9       253.8
  Net decrease in advances/note payable -- parent.............       --          --       (50.0)
  Dividends paid..............................................       --      (300.0)       (0.1)
  Other.......................................................     (1.6)       (0.9)       (9.4)
                                                                -------     -------     -------
  Net Cash Flows Used in Financing Activities.................   (126.7)     (376.1)     (130.5)
                                                                -------     -------     -------
NET CHANGE IN CASH
  Decrease in cash and cash equivalents.......................     (0.2)         --          --
  Cash and cash equivalents, beginning of year................      0.4         0.4         0.4
                                                                -------     -------     -------
  Cash and Cash Equivalents, End of Year......................  $   0.2     $   0.4     $   0.4
                                                                =======     =======     =======
NET CHANGE IN OPERATING ASSETS AND LIABILITIES
  Accounts receivable.........................................  $ (11.4)    $  47.6     $  10.6
  Inventory and supplies......................................     10.4         3.8        23.0
  Unrecovered purchased gas and related costs.................       --          --        39.5
  Income tax -- parent........................................    (13.7)      (12.0)       51.8
  Other current assets........................................     24.1        20.9        (1.0)
  Rate refund provisions......................................     15.3        47.7        (0.5)
  Accounts payable............................................      2.7       (35.2)       20.7
  Other current liabilities...................................     (3.8)      (14.8)       17.5
  Transition cost recoveries (payments), net..................     (0.1)        9.9        (5.6)
  Other deferred charges and liabilities, net.................     (5.8)      (18.2)        1.2
                                                                -------     -------     -------
  Total.......................................................  $  17.7     $  49.7     $ 157.2
                                                                =======     =======     =======
SUPPLEMENTAL DISCLOSURES
  Cash paid for interest (net of amount capitalized)..........  $  39.7     $  43.0     $  64.9
  Cash paid for income tax (including intercompany amounts)...     78.9       103.0        32.0
</TABLE>
 
          See accompanying notes to consolidated financial statements
 
                                       F-6
<PAGE>   22
 
              PANHANDLE EASTERN PIPE LINE COMPANY AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
INDEX                                                                                   PAGE
-----                                                                                   ----
<S>    <C>                                                                              <C>
  1.   Accounting Policies Summary....................................................   F-7
  2.   Transactions with Affiliates...................................................   F-8
  3.   Natural Gas Revenues and Regulatory Matters....................................   F-9
  4.   Income Tax.....................................................................  F-10
  5.   Financial Instruments and Credit Risk..........................................  F-11
  6.   Inventory and Gas Imbalances...................................................  F-12
  7.   Investments....................................................................  F-12
  8.   Plant, Property and Equipment..................................................  F-12
  9.   Debt and Credit Facilities.....................................................  F-13
 10.   Leases.........................................................................  F-13
 11.   Environmental Matters..........................................................  F-13
 12.   Litigation.....................................................................  F-14
 13.   Pension and Other Benefits.....................................................  F-14
</TABLE>
 
1. ACCOUNTING POLICIES SUMMARY
 
     The accounting policies are presented to assist the reader in evaluating
the consolidated financial statements of Panhandle Eastern Pipe Line Company
(PEPL) and its subsidiaries (the Company), including Trunkline Gas Company
(Trunkline). PEPL is a wholly-owned subsidiary of PanEnergy Corp (PanEnergy),
formerly Panhandle Eastern Corporation. Certain amounts for prior years have
been reclassified in the consolidated financial statements to conform to the
current presentation.
 
     The Company is involved in the interstate transportation and storage of
natural gas. The interstate gas transmission operations of PEPL and Trunkline
are subject to the rules, regulations and accounting procedures of the Federal
Energy Regulatory Commission (FERC). PEPL and Trunkline meet the criteria and,
accordingly, follow the reporting and accounting requirements of Statement of
Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of
Certain Types of Regulation."
 
     Principles of Consolidation. The consolidated financial statements include
the accounts of PEPL and all subsidiaries. All significant intercompany items
have been eliminated in consolidation. Investments in 20% to 50%-owned
affiliates and in less than 20%-owned affiliates where the Company has general
partnership interests and significant influence over operations are accounted
for under the equity method. See Note 7.
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements.
Certain amounts of reported revenues and expenses are also affected by these
estimates and assumptions. Actual results could differ from those estimates.
 
     Revenue Recognition. The Company recognizes transportation and storage
revenues in the period service is provided. When rate cases are pending final
FERC approval, a portion of the revenues collected by each interstate natural
gas pipeline is subject to possible refunds. The Company has established
adequate reserves where required for such cases. See Note 3 for a summary of
significant pending rate cases before FERC and related regulatory matters.
 
     Cash and Cash Equivalents. All liquid investments with maturities at date
of purchase of three months or less are considered cash equivalents.
 
                                       F-7
<PAGE>   23
 
     Plant, Property and Equipment. Plant, property and equipment is stated at
original cost, which does not purport to represent replacement or realizable
value. The Company in 1995 adopted SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of," with no
impact to the Company's consolidated financial statements. Assets are grouped
and evaluated based on the ability to identify separate cash flows generated
therefrom.
 
     At the time FERC-regulated properties are retired, the original cost plus
the cost of retirement, less salvage, is charged to accumulated depreciation and
amortization. When entire FERC-regulated operating units are sold or
non-regulated properties are retired or sold, the plant and related accumulated
depreciation and amortization accounts are reduced and any gain or loss is
credited or charged to income, unless otherwise permitted by FERC. Depreciation
of plant, property and equipment is computed using the straight-line method. See
Note 8.
 
     Early Retirement of Debt. The Company defers certain costs and losses
related to the early retirement of long-term debt and amortizes such amounts as
they are recovered through rates. At December 31, 1995 and 1994, other deferred
charges included $15.3 million and $18.6 million, respectively, of such costs.
 
     Interest Cost Capitalization. The Company capitalizes interest on major
projects during construction. The rates used by PEPL and Trunkline are
calculated pursuant to FERC rules and include an allowance for equity funds.
 
     Deferred Income Tax. The Company follows the asset and liability method of
accounting for income tax as prescribed by SFAS No. 109, "Accounting for Income
Taxes." Under this method, the effect of a change in tax rates on deferred tax
assets and liabilities is recognized in income in the period the rate change is
enacted. See Note 4.
 
2. TRANSACTIONS WITH AFFILIATES
 
     The following table summarizes transactions with affiliates included in the
consolidated statement of income:
 
<TABLE>
<CAPTION>
                                                                  YEARS ENDED DECEMBER 31
                                                                ----------------------------
                             Millions                            1995       1994       1993
    ----------------------------------------------------------  ------     ------     ------
    <S>                                                         <C>        <C>        <C>
    Transportation of natural gas.............................  $ 33.4     $ 38.4     $ 36.5
    Other operating revenues..................................    10.7       16.2       14.6
    Natural gas purchased.....................................      --       58.3       34.1
    Operating expenses
      Billed to affiliates....................................     2.4        2.2        1.9
      Billed from affiliates..................................     2.6        6.5        4.3
    General and administrative expenses
      Billed to affiliates....................................     4.2        3.0       11.6
      Billed from affiliates..................................    45.9       55.7       62.5
    Interest income...........................................     0.7       42.6       24.8
</TABLE>
 
     During 1994 and 1993, net intercompany advances bore interest at variable
rates based on LIBOR (London Interbank Offered Rates). Effective January 1,
1995, intercompany advances do not bear interest. Net intercompany advances are
carried as open accounts and are not segregated between current and non-current
amounts. Increases and decreases in advances result from the movement of funds
to provide for operations, capital expenditures and debt payments of PanEnergy
and its subsidiaries. The collection of advances receivable is subject to the
availability of funds to PanEnergy, whose major sources of funds include
dividends and advances from subsidiaries.
 
     See Notes 4, 5, 7 and 13 for discussion of other specific transactions with
affiliates.
 
                                       F-8
<PAGE>   24
 
3. NATURAL GAS REVENUES AND REGULATORY MATTERS
 
  FERC Order 636 and Transition Costs
 
     During 1993, PEPL and Trunkline began providing restructured services
pursuant to FERC Order 636. This order, which is on appeal to the courts,
requires pipeline service restructuring that unbundles sales, transportation and
storage services. Order 636 allows pipelines to recover eligible costs resulting
from implementation of the order (transition costs).
 
     At December 31, 1995, the Company had recorded approximately $60 million of
transition costs, including amounts that have been recovered from customers.
PEPL's transition cost recoveries, which are subject to certain challenges
pending before FERC, will occur through 1998.
 
     In the past, during the normal course of business, PEPL and Trunkline
entered into certain gas purchase contracts containing take-or-pay provisions,
which exposed the Company to financial risk. PEPL and Trunkline are currently
collecting certain take-or-pay settlement costs with respect to such contracts
through volumetric surcharges with interest through 1997. The Company had
regulatory assets recorded of approximately $22.8 million and $26.7 million at
December 31, 1995 and 1994, respectively, for such amounts. Trunkline intends to
file after 1997 for recovery of amounts not fully recovered by these surcharges.
 
     The U.S. Department of the Interior announced its intention to seek
additional royalties from gas producers as a result of payments received by such
producers in connection with past take-or-pay settlements, and buyouts and
buydowns of gas sales contracts with natural gas pipelines. PEPL and Trunkline,
with respect to certain producer contract settlements, may be contractually
required to reimburse or, in some instances, to indemnify producers against such
royalty claims. The potential liability of the producers to the government and
of the pipelines to the producers involves complex issues of law and fact which
are likely to take a substantial period of time to resolve. If PEPL and
Trunkline ultimately have to reimburse or indemnify the producers, they will
file with FERC to recover a portion of these costs from pipeline customers.
 
     The Company believes that Order 636 transition cost issues and take-or-pay
settlement matters will not have a material adverse effect on future
consolidated results of operations or financial position.
 
  Jurisdictional Transportation and Sales Rates
 
     PEPL. On April 1, 1992 and November 1, 1992, PEPL placed into effect,
subject to refund, general rate increases. FERC issued an order on May 25, 1995
on the earlier rate proceeding and PEPL has requested rehearing of certain
matters in that order. On February 5, 1996, FERC issued an order on the latter
rate proceeding and PEPL has requested rehearing of certain matters in that
order also.
 
     Effective April 1, 1989, PEPL placed into effect, subject to refund, sales
and transportation rates reflecting a restructuring of rates, including seasonal
rate structures. On December 7, 1995, FERC issued an order, subject to
rehearing, which addressed all remaining matters on the rate proceeding, with no
additional refunds due customers.
 
     As a result of the resolution of certain rate case proceedings, PEPL in
1994 and 1995 recorded operating income and interest reductions of $23.9 million
and $1.1 million (1994), and $15.5 million and $5.1 million (1995),
respectively.
 
     Trunkline. On September 1, 1994, Trunkline placed into effect, subject to
refund, a general rate increase as a result of a filing made in accordance with
terms of a rate case settlement in 1993. A settlement resolving this rate case
became effective February 1, 1996.
 
     On January 30, 1996, Trunkline filed a subsequent general rate increase,
subject to refund. FERC issued an order on February 29, 1996 suspending the
effective date to August 1, 1996.
 
                                       F-9
<PAGE>   25
 
     Other. At December 31, 1995 and 1994, regulatory assets of $9.5 million and
$4.3 million (1995), and $9.3 million and $14.4 million (1994), were included in
other current assets and deferred charges, respectively, related to gas purchase
and transportation contract settlements in prior years.
 
     PEPL and Trunkline have, pursuant to FERC requirements, requested FERC
approval to record the impact of adopting SFAS No. 109, including the
recognition of a portion of the impact as an increase to stockholder's equity.
The FERC accounting branch has denied approval of these requests pending future
rate proceedings, and PEPL and Trunkline have filed for rehearing. While it is
not known when FERC will address this issue, the Company believes the ultimate
resolution of this matter will not have a material adverse effect on
consolidated financial position.
 
4. INCOME TAX
 
     The Company's taxable income is included in a consolidated federal income
tax return with PanEnergy. Therefore, income tax has been provided in accordance
with PanEnergy's tax allocation policy, which requires subsidiaries to calculate
federal income tax as if separate taxable income, as defined, was reported.
 
     Income tax recognized in the consolidated statement of income is summarized
as follows:
 
<TABLE>
<CAPTION>
                                                                  YEARS ENDED DECEMBER 31
                                                                 --------------------------
                             Millions                            1995      1994       1993
    -----------------------------------------------------------  -----     -----     ------
    <S>                                                          <C>       <C>       <C>
    Current
      Federal..................................................  $54.0     $50.8     $127.4
      State....................................................    8.8       8.9       21.9
                                                                 -----     -----     ------
              Total current....................................   62.8      59.7      149.3
                                                                 -----     -----     ------
    Deferred
      Federal..................................................    2.3      11.1      (57.2)
      State....................................................   (6.0)      5.0       (8.9)
                                                                 -----     -----     ------
              Total deferred...................................   (3.7)     16.1      (66.1)
                                                                 -----     -----     ------
    Total income tax...........................................  $59.1     $75.8     $ 83.2
                                                                 =====     =====     ======
</TABLE>
 
     Income tax in 1995 included benefits of $5.6 million reflecting a revised
estimate of deferred state income taxes for Trunkline and a change in method of
allocating state income tax expense affecting Pan Border Gas Company, a
non-regulated affiliate. Deferred income tax in 1993 included a charge of $0.7
million for enacted changes in federal and state tax laws and rates.
 
     Total income tax differs from the amount computed by applying the federal
income tax rate to income before income tax. The reasons for this difference are
as follows:
 
<TABLE>
<CAPTION>
                                                                  YEARS ENDED DECEMBER 31
                                                                 --------------------------
                             Millions                            1995      1994       1993
    -----------------------------------------------------------  -----     -----      -----
    <S>                                                          <C>       <C>        <C>
    Federal income tax rate....................................     35%       35%        35%
                                                                 =====     =====      =====
    Income tax, computed at the statutory rate.................  $55.9     $68.0      $71.1
    Adjustments resulting from --
      State income tax, net of federal income tax effect.......    1.8       9.1        8.5
      Other items..............................................    1.4      (1.3)       3.6
                                                                 -----     -----      -----
              Total income tax.................................  $59.1     $75.8      $83.2
                                                                 =====     =====      =====
    Effective tax rate.........................................   37.0%     39.0%      40.9%
                                                                 =====     =====      =====
</TABLE>
 
                                      F-10
<PAGE>   26
 
     The tax effects of temporary differences that resulted in deferred income
tax assets and liabilities, and a description of the significant financial
statement items that created these differences are as follows:
 
<TABLE>
<CAPTION>
                                                                           DECEMBER 31
                                                                       -------------------
                                Millions                                1995        1994
    -----------------------------------------------------------------  -------     -------
    <S>                                                                <C>         <C>
    Deferred liabilities and credits.................................  $  69.9     $  75.3
    Rate refund provisions...........................................     16.2        17.9
    Other............................................................      9.0        10.0
                                                                       -------     -------
              Total deferred income tax assets.......................     95.1       103.2
                                                                       -------     -------
    Plant, property and equipment....................................   (149.1)     (158.5)
    Deferred charges.................................................    (63.2)      (74.7)
    Investments......................................................    (16.7)      (16.6)
    State deferred income tax, net of federal tax effect.............    (13.4)      (17.5)
    Other current assets.............................................     (7.0)      (12.4)
    Other............................................................     (9.2)       (4.7)
                                                                       -------     -------
              Total deferred income tax liabilities..................   (258.6)     (284.4)
                                                                       -------     -------
    Deferred income tax liability, inclusive of current amounts......  $(163.5)    $(181.2)
                                                                       =======     =======
</TABLE>
 
5. FINANCIAL INSTRUMENTS AND CREDIT RISK
 
  Financial Instruments
 
<TABLE>
<CAPTION>
                                                                                   APPROXIMATE
                          Millions                                   BOOK VALUE    FAIR VALUE
    -----------------------------------------------------            ----------    -----------
                                                                     ASSETS (LIABILITIES)
    <S>                                                    <C>       <C>           <C>
    December 31, 1995
      Cash...............................................   Note 1    $    0.2       $   0.2
      Other current receivables..........................                  3.4           3.4
      Note payable -- parent.............................   Note 9      (400.0)       (400.0)*
      Long-term debt.....................................   Note 9      (303.7)       (318.0)*
    December 31, 1994
      Cash...............................................   Note 1    $    0.4       $   0.4
      Promissory note....................................                  8.0           8.0
      Other current receivables..........................                  6.6           6.6
      Long-term debt.....................................   Note 9      (428.5)       (397.0)*
</TABLE>
 
     --------------------
 
     * Based on quoted market prices for the same or similar issues, discounted
       cash flows and/or rates currently available to the Company for debt with
       similar terms and remaining maturities.
 
     PanEnergy's four interstate pipelines have implemented an agreement to sell
with limited recourse, on a continuing basis, current accounts receivable at a
discount. The Company received $34 million for accounts receivable sold that
remained outstanding at December 31, 1995. In 1993, the Company sold liquefied
natural gas (LNG) project settlement receivables, with limited recourse. At
December 31, 1995, $64.7 million remained outstanding on the LNG settlement
receivables sold. In the opinion of management, the probability that the Company
will be required to perform under either of these recourse provisions is remote.
 
     The following financial instruments have no book value associated with them
and there are no fair values readily determinable since quoted market prices are
not available: recourse provisions of the LNG project settlement and trade
receivable sales agreements, and the Northern Border Pipeline Company (Northern
Border Pipeline) transportation agreement guarantee (Note 7). The fair values of
net advances receivable are not readily determinable since such amounts are
carried as open accounts. See Note 2.
 
     Significant Customers and Concentrations. Customer billings that exceeded
10% of consolidated revenues during the years ended December 31, 1995, 1994 or
1993 were those to Consumers Power Company totaling $54.5 million, $251.7
million and $290.4 million, respectively.
 
                                      F-11
<PAGE>   27
 
     The Company's primary market area is located in the Midwest region of the
United States. The Company has a concentration of receivables due from gas and
electric utilities in this area, which may affect the Company's overall credit
risk in that certain customers may be similarly affected by changes in economic,
regulatory or other factors. Trade receivables are generally not collateralized;
however, the Company analyzes customers' credit positions prior to extending
credit.
 
6. INVENTORY AND GAS IMBALANCES
 
     Inventory and supplies, which include gas held for operations, are recorded
using the average cost and last-in, first-out methods ($33.1 million and $22.2
million, respectively, at December 31, 1995) and do not exceed recoverable cost.
The consolidated balance sheet includes in-kind balances as a result of
differences in gas volumes received and delivered. At December 31, 1995 and
1994, other current assets and other current liabilities included $11.1 million
and $11.2 million (1995), and $6.4 million and $7.1 million (1994),
respectively, for these imbalances.
 
7. INVESTMENTS
 
     Northern Border Partners, L.P. is a master limited partnership (MLP) that
owns 70% of Northern Border Pipeline, a partnership operating a pipeline
transporting natural gas from Canada to the Midwest area of the United States.
At December 31, 1995, the Company had general partner interests as well as
subordinated and common limited partnership interests, totaling 8.45%, in
Northern Border Partners, L.P., and through the MLP, an effective 5.95%
ownership interest in Northern Border Pipeline.
 
     During 1993, the Company sold 74% of its MLP limited partner units,
resulting in a fourth quarter gain of $48.2 million ($28.7 million after tax).
The Company received net proceeds of approximately $147 million. Equity in
earnings from Northern Border Partners, L.P. in 1995, 1994 and 1993 was $7.2
million, $4.5 million and $13.9 million, respectively.
 
     Under the terms of a settlement related to a transportation agreement
between PEPL and Northern Border Pipeline, PEPL guarantees payment to Northern
Border Pipeline under a transportation agreement by an affiliate of Pan-Alberta
Gas Limited. The transportation agreement requires estimated total payments of
$163.4 million for the years 1996 through 2001. In the opinion of management,
the probability that PEPL will be required to perform under this guarantee is
remote.
 
     Undistributed earnings of investments in affiliates were $55.6 million at
December 31, 1995 and $53.1 million at December 31, 1994. Distributions and
dividends received by the Company amounted to $5 million in both 1995 and 1994,
and $10.6 million in 1993.
 
8. PLANT, PROPERTY AND EQUIPMENT
 
     A summary of plant, property and equipment by classification follows:
 
<TABLE>
<CAPTION>
                                                                               DECEMBER 31
                                                           DEPRECIATION    --------------------
                          Millions                           % RATES         1995        1994
    -----------------------------------------------------  ------------    --------    --------
    <S>                                                    <C>             <C>         <C>
    Transmission.........................................     1.60-1.96    $1,972.0    $1,898.7
    Gathering............................................     1.30-2.40       294.9       341.2
    Underground storage..................................     2.90-3.50       319.2       319.2
    General plant........................................    3.50-12.50       171.7       169.1
    Construction work in progress........................       --             24.3        14.6
                                                                           --------    --------
              Total plant, property and equipment........                  $2,782.1    $2,742.8
                                                                           ========    ========
</TABLE>
 
                                      F-12
<PAGE>   28
 
9. DEBT AND CREDIT FACILITIES
 
     A summary of long-term debt is as follows:
 
<TABLE>
<CAPTION>
                                                                           DECEMBER 31
                                                                        ------------------
                                 Millions                                1995        1994
    ------------------------------------------------------------------  ------      ------
    <S>                                                                 <C>         <C>
    Debentures
      9 7/8% maturing 1996............................................  $   --      $125.0
      7.95% maturing 2023.............................................   100.0       100.0
      7.2% maturing 2024..............................................   100.0       100.0
    Notes
      4% maturing 1996................................................     4.5         4.5
      7 7/8% maturing 2004............................................   100.0       100.0
    Unamortized Discount..............................................    (0.8)       (1.0)
    Less Current Maturities...........................................    (4.5)         --
                                                                        ------      ------
              Total Long-term Debt....................................  $299.2      $428.5
                                                                        ======      ======
</TABLE>
 
     The interest rates indicated were in effect on principal balances
outstanding at December 31, 1995. Interest costs capitalized in 1995, 1994 and
1993 were $0.3 million, $0.3 million and $0.4 million, respectively.
 
     Required sinking fund and installment payments applicable to long-term debt
total $4.5 million in 1996. There are no required payments due in 1997 through
2000.
 
     In December 1995, PEPL declared and paid a $400 million dividend on common
stock in the form of a promissory note due PanEnergy. This promissory note bears
interest at prime and matures on June 30, 1996.
 
     PEPL has an effective shelf registration statement with the Securities and
Exchange Commission for the issuance of $100 million of unsecured debt
securities.
 
     Credit Agreements. On January 31, 1996, PEPL canceled its variable-rate,
$100 million bank credit agreement.
 
10. LEASES
 
     The Company utilizes assets under operating leases in several areas of
operations. Consolidated rental expense for these leases and for lease expenses
allocated from affiliates amounted to $16.8 million, $13.2 million and $12
million in 1995, 1994 and 1993, respectively. Minimum rental payments under the
Company's various operating leases for the years 1996 through 2000 are $18.3
million, $15.3 million, $8.9 million, $7.5 million and $6.4 million,
respectively. Thereafter, payments aggregate $16.2 million.
 
11. ENVIRONMENTAL MATTERS
 
     The Company has identified environmental contamination at up to 53 sites on
the PEPL and Trunkline systems and is undertaking cleanup programs at these
sites. The contamination resulted from the past use of lubricants containing
PCBs (polychlorinated biphenyls) and the prior use of wastewater collection
facilities and other on-site disposal areas. Soil and sediment testing, to date,
has detected no significant off-site contamination. The Company has communicated
with the Environmental Protection Agency and appropriate state regulatory
agencies on these matters. In August 1995, Trunkline entered into a consent
order under a cleanup program with the Tennessee Department of Environment and
Conservation for the cleanup of its Tennessee facility. Cleanups in other states
by PEPL and Trunkline are also proceeding. The environmental cleanup programs
are expected to continue until 2002.
 
     At December 31, 1995 and 1994, the Company had undiscounted liabilities
recorded of $68.9 million and $70 million, respectively, relating to PEPL and
Trunkline PCB, wastewater and disposal area cleanup programs and had regulatory
assets recorded of $79.2 million and $82.4 million, respectively, representing
costs to be recovered from customers.
 
                                      F-13
<PAGE>   29
 
     The federal and state cleanup programs are not expected to interrupt or
diminish the Company's ability to deliver natural gas to customers. The Company
believes the ultimate resolution of matters relating to the environmental issues
discussed above will not have a material adverse effect on consolidated results
of operations or financial position.
 
12. LITIGATION
 
     The Company is involved in various legal actions and claims arising in the
normal course of business. Based upon its current assessment of the facts and
the law, management does not believe that the outcome of any such action or
claim will have a material adverse effect upon the consolidated financial
position of the Company. However, these actions and claims in the aggregate seek
substantial damages against the Company and are subject to the uncertainties
inherent in any litigation.
 
13. PENSION AND OTHER BENEFITS
 
     Pension Benefits. PanEnergy has, and the Company participates in, a
non-contributory trusteed pension plan covering eligible employees with a
minimum of one year vesting service. The plan provides pension benefits for
eligible employees of the Company that are generally based on the employee's
years of benefit accrual service and highest average eligible earnings.
PanEnergy's policy is to fund amounts, as necessary, on an actuarial basis to
provide assets sufficient to meet the benefits to be paid to plan members.
 
     The components of the Company's net pension benefit, allocated by
PanEnergy, are as follows:
 
<TABLE>
<CAPTION>
                                                                  YEARS ENDED DECEMBER 31
                                                                 --------------------------
                             Millions                             1995      1994      1993
    -----------------------------------------------------------  ------    ------    ------
    <S>                                                          <C>       <C>       <C>
    Actual return on plan assets...............................  $ 56.3    $ (0.7)   $ 26.1
    Amount deferred............................................   (32.8)     23.6      (4.7)
                                                                 ------    ------    ------
    Expected return on plan assets.............................    23.5      22.9      21.4
    Service cost benefits earned during the period.............    (4.0)     (4.6)     (4.3)
    Interest cost on projected benefit obligations.............   (11.6)    (11.1)    (11.3)
    Net amortization...........................................     2.7       2.7       2.7
                                                                 ------    ------    ------
              Net pension benefit..............................  $ 10.6    $  9.9    $  8.5
                                                                 ======    ======    ======
</TABLE>
 
     Assumptions used in the Company's pension accounting are as follows:
 
<TABLE>
<CAPTION>
                                                                         DECEMBER 31
                                                                 ---------------------------
                                                                  1995      1994      1993
                                                                 -------   -------   -------
    <S>                                                          <C>       <C>       <C>
    Discount rate..............................................   7.5%      8.5%      7.5%
    Rate of increase in compensation levels....................    5.0       5.0       5.0
    Expected long-term rate of return on plan assets...........    9.5       9.5       9.5
</TABLE>
 
     PanEnergy also sponsors, and the Company participates in, an employee
savings plan which covers substantially all employees. The Company expensed plan
contributions of $3.8 million, $4.3 million and $4.2 million in 1995, 1994 and
1993, respectively.
 
     Other Postretirement Benefits. The Company's postretirement benefits, in
conjunction with PanEnergy, consist of certain health care and life insurance
benefits. Substantially all of the Company's employees may become eligible for
these benefits when they reach retirement age while working for the Company and
have attained 10 years of specified service. The benefits are provided through
contributory and noncontributory trusteed benefit plans.
 
     The Company accrues such benefit costs over the active service period of
employees to the date of full eligibility for the benefits. The net unrecognized
transition obligation, resulting from the implementation of accrual accounting,
is being amortized over approximately 20 years commencing with 1993.
 
                                      F-14
<PAGE>   30
 
     It is the Company's and PanEnergy's general policy to fund accrued
postretirement health care costs. PanEnergy's retiree life insurance plan is
fully funded based on actuarially-determined requirements. FERC policy generally
allows, subject to individual pipeline proceedings, for current rate recovery of
funded accrued postretirement benefit costs including amortization of the
transition obligation. PEPL's and Trunkline's postretirement costs are included
in current tariff rates, with PEPL's rate case subject to further FERC review.
 
     The Company's net postretirement benefit cost, allocated by PanEnergy, is
summarized as follows:
 
<TABLE>
<CAPTION>
                                                                    YEARS ENDED DECEMBER 31
                                                                    -----------------------
                               Millions                             1995     1994     1993
    --------------------------------------------------------------  -----    -----    -----
    <S>                                                             <C>      <C>      <C>
    Actual return on plan assets..................................  $13.6    $  --    $ 4.4
    Amount deferred...............................................   (8.2)     5.3      0.6
                                                                    -----    -----    -----
    Expected return on plan assets................................    5.4      5.3      5.0
    Service cost benefits earned during the period................   (0.7)    (0.9)    (0.7)
    Interest cost on accumulated obligations......................   (8.8)    (8.5)    (8.2)
    Net amortization and deferral.................................   (2.2)    (2.3)    (2.2)
                                                                    -----    -----    -----
              Net postretirement benefits cost....................  $(6.3)   $(6.4)   $(6.1)
                                                                    =====    =====    =====
</TABLE>
 
     The assumed health care cost trend rate used to estimate the cost of
postretirement benefits was 9% for 1996. The health care cost trend rate is
expected to decrease, with a 5.5% ultimate trend rate expected to be achieved by
1999. The effect of a 1% increase in the assumed health care cost trend rate for
each future year is $0.3 million on the annual aggregate of the service and
interest cost components of net periodic postretirement benefit cost and $4.6
million on PanEnergy's accumulated postretirement benefit obligation
attributable to the Company at December 31, 1995. Other assumptions used in
postretirement benefit accounting are as follows:
 
<TABLE>
<CAPTION>
                                                                          DECEMBER 31
                                                                    -----------------------
                                                                    1995     1994     1993
                                                                    -----    -----    -----
    <S>                                                             <C>      <C>      <C>
    Discount rate.................................................    7.5%     8.5%     7.5%
    Rate of increase in compensation levels.......................    5.0      5.0      5.0
    Expected long-term rate of return on plan assets..............    9.5      9.5      9.5
    Assumed tax rate, health care portion only....................   39.6     39.6     39.6
</TABLE>
 
     Other Postemployment Benefits. The Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits," effective January 1, 1994.
This standard requires accruals for benefits provided by the Company to certain
former or inactive employees. PEPL has received permission from FERC to defer
such costs, pending future rate filings requesting recovery. Trunkline is
recovering such costs in current tariff rates over a ten-year period. The
earnings impact of this change in accounting policy was not significant.
 
                                      F-15
<PAGE>   31
 
              PANHANDLE EASTERN PIPE LINE COMPANY AND SUBSIDIARIES
 
                     CONSOLIDATED QUARTERLY FINANCIAL DATA
 
<TABLE>
<CAPTION>
                                                                        QUARTERS ENDED
                                                           ----------------------------------------
                                                                        JUNE                  DEC.
Millions                                                   MARCH 31      30      SEPT. 30      31
--------                                                   --------    ------    --------    ------
<S>                                                        <C>         <C>       <C>         <C>
1995
  Operating revenues.....................................   $142.4     $124.9     $140.4     $132.3
  Operating expenses.....................................     91.1       87.8       88.0       83.2
                                                            ------     ------     ------     ------
  Operating income.......................................     51.3       37.1       52.4       49.1
  Other income, net of deductions........................      2.1        1.9       (0.3)       7.2
  Interest expense.......................................     12.0       12.2        7.3        9.5
                                                            ------     ------     ------     ------
  Income before income tax...............................     41.4       26.8       44.8       46.8
  Income tax.............................................     16.3       10.5       17.7       14.6
                                                            ------     ------     ------     ------
  Net Income.............................................   $ 25.1     $ 16.3     $ 27.1     $ 32.2
                                                            ======     ======     ======     ======
1994
  Operating revenues.....................................   $215.5     $182.6     $182.8     $159.0
  Operating expenses.....................................    148.6      145.7      140.9      107.0
                                                            ------     ------     ------     ------
  Operating income.......................................     66.9       36.9       41.9       52.0
  Other income, net of deductions........................      8.8       12.3       13.7       13.0
  Interest expense.......................................     12.7       12.6       12.7       13.2
                                                            ------     ------     ------     ------
  Income before income tax...............................     63.0       36.6       42.9       51.8
  Income tax.............................................     24.7       14.0       17.4       19.7
                                                            ------     ------     ------     ------
  Net Income.............................................   $ 38.3     $ 22.6     $ 25.5     $ 32.1
                                                            ======     ======     ======     ======
</TABLE>
 
                                      F-16
<PAGE>   32
 
              PANHANDLE EASTERN PIPE LINE COMPANY AND SUBSIDIARIES
 
         SUMMARY OF SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
 
<TABLE>
<CAPTION>
                                                      YEARS ENDED DECEMBER 31
                                    ------------------------------------------------------------
             Millions                 1995        1994        1993          1992          1991
----------------------------------  --------    --------    --------      --------      --------
<S>                                 <C>         <C>         <C>           <C>           <C>
OPERATING REVENUES................  $  540.0    $  739.9    $  870.5      $  972.0(1)   $  913.2
COSTS AND EXPENSES
  Natural gas purchased...........        --       177.9       281.3         359.0         329.3
  Operating and maintenance.......     190.9       198.4       232.6         244.7         269.2
  Depreciation and amortization...      59.2        51.7        55.6          72.8          93.3
  Other costs and expenses........     100.0       114.2       123.2         138.5         134.3
                                    ---------   ---------   ---------     ---------     ---------
OPERATING INCOME..................  $  189.9    $  197.7    $  177.8      $  157.0      $   87.1
INTEREST EXPENSE..................  $   41.0    $   51.2    $   66.7      $   61.0      $  112.4
NET INCOME........................  $  100.7    $  118.5    $  120.1(2)   $   62.5(1)   $   13.2
PLANT, PROPERTY AND EQUIPMENT.....  $2,782.1    $2,742.8    $2,685.2      $2,873.0      $2,867.9
Accumulated depreciation and
amortization......................  (1,818.8)   (1,763.2)   (1,709.4)     (1,799.6)     (1,856.6)
                                    ---------   ---------   ---------     ---------     ---------
Net plant, property and
  equipment.......................  $  963.3    $  979.6    $  975.8      $1,073.4      $1,011.3
TOTAL ASSETS......................  $1,887.4    $1,983.6    $2,265.1      $2,501.2      $2,686.8
CAPITAL STRUCTURE
  Long-term debt due within
     one year.....................  $    4.5    $     --    $  112.5      $   48.0      $  100.2
  Notes payable...................     400.0          --          --          50.0         275.7
  Long-term debt..................     299.2       428.5       390.8         525.9         557.2
  Common stockholder's equity.....     608.0       913.2     1,094.7         974.9         912.7
                                    ---------   ---------   ---------     ---------     ---------
TOTAL CAPITALIZATION..............  $1,311.7    $1,341.7    $1,598.0      $1,598.8      $1,845.8
OPERATING CASH FLOW...............  $  152.1    $  162.6    $  234.4      $  106.5      $   12.4
CAPITAL EXPENDITURES..............  $   64.6    $   83.5    $   93.5      $   63.3      $   47.0
VOLUMES, BCF(3)
  Transports......................     1,158       1,151       1,053         1,017           890
  Sales(4)........................        --          --          88           156           148
                                    ---------   ---------   ---------     ---------     ---------
  Total...........................     1,158       1,151       1,141         1,173         1,038
                                    =========   =========   =========     =========     =========
</TABLE>
 
---------------
 
(1) Includes $19.9 million in operating revenues and $15.9 million in net income
    related to a settlement with PanEnergy Corp's liquefied natural gas project.
 
(2) Includes a gain of $48.2 million ($28.7 million after tax) resulting from
    the sale of a partial interest in Northern Border Partners, L.P.
 
(3) Billion cubic feet at 14.73 pounds per square inch atmospheric pressure.
 
(4) Excludes 89 Bcf and 41 Bcf for 1994 and 1993, respectively, which are
    reported as transports.
 
See the Notes to Consolidated Financial Statements for a discussion of material
                                 contingencies
 
                                      F-17
<PAGE>   33
 
                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
 
                                        PANHANDLE EASTERN PIPE LINE COMPANY
 
                                        By     /s/  ROBERT W. REED
                                        ---------------------------------
                                             (Robert W. Reed, Secretary)
 
Date: March 28, 1996
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated on March 28, 1996.
 
<TABLE>
<CAPTION>
             NAME AND SIGNATURE                                     TITLE
---------------------------------------------    --------------------------------------------
<C>                                              <S>
(i) Principal executive officer:*

           /s/  PAUL M. ANDERSON                 Chairman and Chief Executive Officer
--------------------------------------------- 
             (Paul M. Anderson)

(ii) Principal financial officer:*

           /s/  PAUL F. FERGUSON, JR.            Senior Vice President and Chief Financial Officer 
--------------------------------------------- 
           (Paul F. Ferguson, Jr.)                       

(iii) Principal accounting officer:*

             /s/  SANDRA P. MEYER                Vice President
---------------------------------------------
              (Sandra P. Meyer)

(iv) Directors:*
              PAUL M. ANDERSON
              DENNIS R. HENDRIX
                G. L. MAZANEC
              STEVEN M. ROVERUD

* Signed on behalf of each of these persons:

       By         /s/  ROBERT W. REED
         ------------------------------------
     (Robert W. Reed, Attorney-in-Fact)
</TABLE>
 
                                      F-18
<PAGE>   34
 
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
  EXHIBIT                                                                                FILE
  NUMBER               DESCRIPTION                   ORIGINALLY FILED AS EXHIBIT        NUMBER
  ------               -----------                   ---------------------------        ------
  <S>       <C>                                   <C>                                  <C>
  2.01      Stock Repurchase and Receivables      2.1 to Form 8-K of PEPL, dated         1-2921
            Assignment Agreement dated as of      February 18, 1993
            December 31, 1992 among Panhandle
            Eastern Corporation, Panhandle
            Eastern Pipe Line Company,
            Panhandle Financing Company, Texas
            Eastern Corporation and Trunkline
            Gas Company, executed on February
            16, 1993

  2.02      Amended and Restated Agreement of     2.1 to Form 8-K of PEPL, dated         1-2921
            Limited Partnership of Northern       October 15, 1993
            Border Partners, L.P.

  2.03      Amended and Restated Agreement of     2.2 to Form 8-K of PEPL, dated         1-2921
            Limited Partnership for Northern      October 15, 1993
            Border Intermediate Limited
            Partnership

  2.04      Credit Agreement between Northern     2.3 to Form 8-K of PEPL, dated         1-2921
            Border Partners, L.P., as             October 15, 1993
            borrower, and Northern Plains
            Natural Gas Company, Northwest
            Border Pipeline Company and Pan
            Border Gas Company, as lenders

  2.05      Conveyance, Contribution and          2.4 to Form 8-K of PEPL, dated         1-2921
            Assumption Agreement among            October 15, 1993
            Northern Plains Natural Gas
            Company, Northwest Border Pipeline
            Company, Pan Border Gas Company,
            Northern Border Partners, L.P.,
            and Northern Border Intermediate
            Limited Partnership

  2.06      Underwriting Agreement, between       2.5 to Form 8-K of PEPL, dated         1-2921
            Northern Border Partners, L.P.,       October 15, 1993
            Northern Border Intermediate
            Limited Partnership, Northern
            Plains Natural Gas Company, Pan
            Border Gas Company, Enron Corp.
            and Panhandle Eastern Corporation,
            and Goldman, Sachs & Co. on behalf
            of the Underwriters

  3.01      Restated Certificate of               3.01 to Form 10-K of PEPL for the      1-2921
            Incorporation of Panhandle Eastern    year ended December 31, 1993
            Pipe Line Company, dated October
            25, 1993

  3.02      By-Laws of Panhandle Eastern Pipe     19(a) to Form 10-Q of PEPL for         1-2921
            Line Company, effective July 23,      quarter ended September 30, 1986
            1986
</TABLE>
<PAGE>   35
 
<TABLE>
<CAPTION>
  EXHIBIT                                                                                FILE
  NUMBER               DESCRIPTION                   ORIGINALLY FILED AS EXHIBIT        NUMBER
  ------               -----------                   ---------------------------        ------
  <S>       <C>                                   <C>                                  <C>
  4.01      Indenture, dated as of February 1,    4 to Form S-3 of PEPL filed          33-58552
            1993, between Panhandle Eastern       February 19, 1993
            Pipe Line Company and Morgan
            Guarantee Trust Company of New
            York

  4.02      Letter, dated February 24, 1994,      4.06 to Form 10-K of PEPL for the      1-2921
            from Nations Bank of Texas,           year ended December 31, 1993
            National Association accepting its
            appointment as successor Trustee
            with respect to all securities
            issued or to be issued under the
            Indenture dated as of February 1,
            1993, included as Exhibit 4.05

  10.01     Contract for Firm Transportation      10.41 to Form 10-K of PEC for the      1-8157
            of Natural Gas between Consumers      year ended December 31, 1989
            Power Company and Trunkline Gas
            Company, dated November 1, 1989,
            and Amendment, dated November 1,
            1989

  10.02     Contract for Firm Transportation      10.47 to Form 10-K of PEC for year     1-8157
            of Natural Gas between Consumers      ended December 31, 1991
            Power Company and Trunkline Gas
            Company, dated November 1, 1991

  10.03     Contract for Firm Transportation      10.3 to Form 10-K of PEPL for the      1-2921
            of Natural Gas between Consumers      year ended December 31, 1993
            Power Company and Trunkline Gas
            Company, dated September 1, 1993

  *23       Consent of KPMG Peat Marwick LLP

  *24       Powers of Attorney

  *27       Financial Data Schedule for
            December 31, 1995
</TABLE>
 
     The total amount of securities of the Registrant or its subsidiaries
authorized under any instrument with respect to long-term debt not filed as an
Exhibit does not exceed 10% of the total assets of the Registrant and its
subsidiaries on a consolidated basis. The Registrant agrees, upon request of the
Securities and Exchange Commission, to furnish copies of any or all of such
instruments.
 
     (b) Reports on Form 8-K
 
     No Reports on Form 8-K were filed during the fourth quarter of 1995.