##### Table of Contents









UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


(Mark One)


þ


ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF


THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 2005


OR


o


TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF


THE SECURITIES EXCHANGE ACT OF 1934


For the transition period
from                to                .


Commission File Number 1-14365


El Paso Corporation




|                                                                                                      |  |                    
|----------------------------------------------------------------------------------------------------- |  | -------------------
|Delaware                                                                                              |  | 76-0568816         
|(State or Other Jurisdiction of                                                                       |  | (I.R.S. Employer   
|Incorporation or Organization)                                                                        |  | Identification No.)
|                                                                                                     
|El Paso Building
    1001 Louisiana Street
    Houston, Texas(Address of Principal Executive Offices) |  | 77002(Zip Code)    

Telephone Number: (713) 420-2600


Internet Website: www.elpaso.com


Securities registered pursuant to Section 12(b) of
the Act:


|                                     |  |                        
|------------------------------------ |  | -----------------------
|                                     |  | Name of Each Exchange  
|Title of Each Class                  |  | on which Registered    
|                                     |  |                        
|Common Stock, par value $3 per share |  | New York Stock Exchange

Securities registered pursuant to Section 12(g) of
the Act: None


þ o


o þ


þ o


S-K 10-K 10-K. þ






|                           |                      |                         
|-------------------------- | -------------------- | ------------------------
|Large accelerated filer  þ | Accelerated filer  o | Non-accelerated filer  o

o þ


State the aggregate market value of
the voting and non-voting common equity held by non-affiliates
of the registrant.





Indicate the number of shares
outstanding of each of the registrants classes of common
stock, as of the latest practicable date.





Documents Incorporated by Reference


10-K










---



##### 










EL PASO CORPORATION


TABLE OF CONTENTS


|                                                                                     |  |                                                                                                                                   |  |      |     | 
|------------------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                     |  | Caption                                                                                                                           |  | Page |    
|                                                                                     |  |                                                                                                                                   |  |      |    
|                                                                                     |  | PART I                                                                                                                            |  |      |     | 
|Item 1.                                                                              |  | Business                                                                                                                          |  |      | 1   | 
|Item 1A.                                                                             |  | Risk Factors                                                                                                                      |  |      | 24  | 
|                                                                                     |  | Cautionary Statement for Purposes of the
    Safe Harbor Provisions of the Private Securities
    Litigation Reform Act of 1995 |  |      |     | 
|Item 1B.                                                                             |  | Unresolved Staff Comments                                                                                                         |  |      | 33  | 
|Item 2.                                                                              |  | Properties                                                                                                                        |  |      | 33  | 
|Item 3.                                                                              |  | Legal Proceedings                                                                                                                 |  |      | 33  | 
|Item 4.                                                                              |  | Submission of Matters to a Vote of Security
    Holders                                                                           |  |      | 35  | 
|                                                                                     |  | PART II                                                                                                                           |  |      |     | 
|Item 5.                                                                              |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities              |  |      | 36  | 
|Item 6.                                                                              |  | Selected Financial Data                                                                                                           |  |      | 37  | 
|Item 7.                                                                              |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                                         |  |      | 38  | 
|Item 7A.                                                                             |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                                    |  |      | 79  | 
|Item 8.                                                                              |  | Financial Statements and Supplementary
    Data                                                                                   |  |      | 82  | 
|Item 9.                                                                              |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                                          |  |      | 155 | 
|Item 9A.                                                                             |  | Controls and Procedures                                                                                                           |  |      | 155 | 
|Item 9B.                                                                             |  | Other Information                                                                                                                 |  |      | 155 | 
|                                                                                     |  | PART III                                                                                                                          |  |      |     | 
|Item 10.                                                                             |  | Directors and Executive Officers of the
    Registrant                                                                            |  |      | 156 | 
|Item 11.                                                                             |  | Executive Compensation                                                                                                            |  |      | 156 | 
|Item 12.                                                                             |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                                |  |      | 156 | 
|Item 13.                                                                             |  | Certain Relationships and Related
    Transactions                                                                                |  |      | 156 | 
|Item 14.                                                                             |  | Principal Accountant Fees and Services                                                                                            |  |      | 156 | 
|                                                                                     |  | PART IV                                                                                                                           |  |      |     | 
|Item 15.                                                                             |  | Exhibits and Financial Statement
    Schedules                                                                                    |  |      | 157 | 
|                                                                                     |  | Signatures                                                                                                                        |  |      | 187 | 
|Amendment #4 to Supplemental Benefits Plan                                          
|Supplement #2 to Severance Pay Plan                                                 
|Form of Indemnification Agreement                                                   
|Amendment #1 to 2005 Omnibus Incentive Compensation Plan                            
|2005 Supplemental Benefits Plan                                                     
|Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends           
|Subsidiaries of El Paso Corporation                                                 
|Consent of Independent Registered Public Accounting Firm, PricewaterhouseCoopers LLP
|Consent of Independent Registered Public Accounting Firm, PricewaterhouseCoopers LLP
|Consent of Ryder Scott Company, L.P.                                                
|Certification of CEO pursuant to Section 302                                        
|Certification of CFO pursuant to Section 302                                        
|Certification of CEO pursuant to Section 906                                        
|Certification of CFO pursuant to Section 906                                        





|      |  |                                                 
|----- |  | ------------------------------------------------
|/d    |  | = per day                                       
|Bbl   |  | = barrel                                        
|BBtu  |  | = billion British thermal units                 
|Bcf   |  | = billion cubic feet                            
|Bcfe  |  | = billion cubic feet of natural gas equivalents 
|LNG   |  | = liquefied natural gas                         
|MBbls |  | = thousand barrels                              
|Mcf   |  | = thousand cubic feet                           
|Mcfe  |  | = thousand cubic feet of natural gas equivalents
|MDth  |  | = thousand dekatherms                           
|MMBtu |  | = million British thermal units                 
|MMcf  |  | = million cubic feet                            
|MMcfe |  | = million cubic feet of natural gas equivalents 
|MMWh  |  | = thousand megawatt hours                       
|MW    |  | = megawatt                                      
|NGL   |  | = natural gas liquids                           
|TBtu  |  | = trillion British thermal units                
|Tcfe  |  | = trillion cubic feet of natural gas equivalents





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PART I





ITEM 1. BUSINESS




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



Natural Gas Transmission.


Exploration and Production.


Other. mid-1990s




| |                                
| | -------------------------------
| | Business Objective and Strategy



|                           |  |                                                                                                                                                                                                                                                                                                  
|-------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Pipelines                  |  | Enhancing the value of our transmission business through
    successful recontracting, continuous efficiency improvements
    through cost management and prudent capital spending in the
    United States and Mexico, while providing outstanding
    customer service through safe operations.
|                          
|Exploration and Production |  | Growing our reserve base in a manner that creates shareholder
    value through disciplined capital allocation, cost control and
    portfolio management.                                                                                                                                       
|                          
|Marketing and Trading      |  | Marketing our natural gas and oil production at optimal prices
    and managing associated price risks.                                                                                                                                                                                          



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##### Table of Contents



Pipelines Segment













| |                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Reservation revenues. Reservation revenues are from
    customers (referred to as firm customers) that reserve capacity
    on our pipeline system, storage facilities or LNG terminalling
    facilities. These firm customers are obligated to pay a monthly
    reservation or demand charge, regardless of the amount of
    natural gas they transport or store, for the term of their
    contracts.
|
| | Usage revenues. Usage revenues are from both firm
    customers and interruptible customers (those without reserved
    capacity) that pay usage charges based on the volume of gas
    actually transported, stored, injected or withdrawn.                                                                                                                                                              



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| |   |                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Seeking to expand our systems by attracting new customers,
    markets or supply sources while leveraging our existing assets
    to the extent possible;                                       
|
| |  | Recontracting or contracting available or expiring capacity and
    resolving open rate cases;                                                                                                  
|
| |  | Focusing on efficiency in our operations and cost control,
    including efficiencies that may be available across our systems
    or due to the
    coast-to-coast scale of
    our operations;
|
| |  | Investing in maintenance and pipeline integrity projects to
    maintain the value and ensure the safety of our pipeline systems
    and assets;                                                
|
| |  | Providing outstanding customer service; and                                                                                                                                                     
|
| |  | Providing natural gas transmission and related services through
    safe operations.                                                                                                            

Wholly Owned Interstate Transmission Systems




|                              |  |                                                                                                                                                                                                                                                                                       |  |                         |        |          |                       |  |       |          |  |  |      |          |  |      |       |  |      |  |       |  |  |  |       | 
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | -------- | --------------------- |  | ----- | -------- |  |  | ---- | -------- |  | ---- | ----- |  | ---- |  | ----- |  |  |  | ----- | 
|                              |  |                                                                                                                                                                                                                                                                                       |  | As of December 31, 2005 |        |          |                      
|                              |  |                                                                                                                                                                                                                                                                                       |  |                         |        |          | Average Throughput(1) | 
|Transmission                  |  | Supply and                                                                                                                                                                                                                                                                            |  | Miles of                |        |          | Design                |  |       | Storage  |  |  |      |         
|System                        |  | Market Region                                                                                                                                                                                                                                                                         |  | Pipeline                |        |          | Capacity              |  |       | Capacity |  |  | 2005 |          |  | 2004 |       |  | 2003 | 
|                              |  |                                                                                                                                                                                                                                                                                       |  |                         |        |          |                       |  |       |          |  |  |      |          |  |      |       |  |      | 
|                              |  |                                                                                                                                                                                                                                                                                       |  |                         |        | (MMcf/d) |                       |  | (Bcf) |          |  |  |      | (BBtu/d) |  |      |      
|Tennessee Gas Pipeline (TGP)  |  | Extends from Louisiana, the Gulf of Mexico and south Texas to
    the northeast section of the U.S., including the metropolitan
    areas of New York City and Boston.                                                                                                                |  |                         | 14,100 |          |                       |  | 6,876 |          |  |  | 90   |          |  |      | 4,443 |  |      |  | 4,469 |  |  |  | 4,710 | 
|ANR Pipeline (ANR)            |  | Extends from Louisiana, Oklahoma, Texas and the Gulf of Mexico
    to the midwestern and northeastern regions of the U.S.,
    including the metropolitan areas of Detroit, Chicago and
    Milwaukee.                                                                                |  |                         | 10,500 |          |                       |  | 6,775 |          |  |  | 192  |          |  |      | 4,100 |  |      |  | 4,067 |  |  |  | 4,232 | 
|El Paso Natural Gas (EPNG)    |  | Extends from the San Juan, Permian and Anadarko basins to
    California, its single largest market, as well as markets in
    Arizona, Nevada, New Mexico, Oklahoma, Texas and northern Mexico.                                                                                      |  |                         | 10,700 |          |                       |  | 5,650 | (2)      |  |  |     | (3)      |  |      | 4,053 |  |      |  | 4,074 |  |  |  | 3,874 | 
|Southern Natural Gas (SNG)    |  | Extends from natural gas fields in Texas, Louisiana,
    Mississippi, Alabama and the Gulf of Mexico to markets in
    Louisiana, Mississippi, Alabama, Florida, Georgia, South
    Carolina and Tennessee, including the metropolitan areas of
    Atlanta and Birmingham.           |  |                         | 7,700  |          |                       |  | 3,450 |          |  |  | 60   |          |  |      | 1,984 |  |      |  | 2,163 |  |  |  | 2,101 | 
|Colorado Interstate Gas (CIG) |  | Extends from production areas in the Rocky Mountain region and
    the Anadarko Basin to the front range of the Rocky Mountains and
    multiple interconnections with pipeline systems transporting gas
    to the midwest, the southwest, California and the Pacific
    northwest. |  |                         | 4,000  |          |                       |  | 3,000 |          |  |  | 29   |          |  |      | 1,902 |  |      |  | 1,744 |  |  |  | 1,685 | 

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|                                   |  |                                                                                                                                                                                                                                                                                   |  |                         |     |          |                       |  |       |          |  |  |      |          |  |      |       |  |      |  |       |  |  |  |       | 
|---------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | --- | -------- | --------------------- |  | ----- | -------- |  |  | ---- | -------- |  | ---- | ----- |  | ---- |  | ----- |  |  |  | ----- | 
|                                   |  |                                                                                                                                                                                                                                                                                   |  | As of December 31, 2005 |     |          |                      
|                                   |  |                                                                                                                                                                                                                                                                                   |  |                         |     |          | Average Throughput(1) | 
|Transmission                       |  | Supply and                                                                                                                                                                                                                                                                        |  | Miles of                |     |          | Design                |  |       | Storage  |  |  |      |         
|System                             |  | Market Region                                                                                                                                                                                                                                                                     |  | Pipeline                |     |          | Capacity              |  |       | Capacity |  |  | 2005 |          |  | 2004 |       |  | 2003 | 
|                                   |  |                                                                                                                                                                                                                                                                                   |  |                         |     |          |                       |  |       |          |  |  |      |          |  |      |       |  |      | 
|                                   |  |                                                                                                                                                                                                                                                                                   |  |                         |     | (MMcf/d) |                       |  | (Bcf) |          |  |  |      | (BBtu/d) |  |      |      
|Wyoming Interstate (WIC)           |  | Extends from western Wyoming and the Powder River Basin to
    various pipeline interconnections near Cheyenne, Wyoming.                                                                                                                                                          |  |                         | 600 |          |                       |  | 1,997 |          |  |  |     |          |  |      | 1,479 |  |      |  | 1,201 |  |  |  | 1,213 | 
|Mojave Pipeline (MPC)              |  | Connects with the EPNG system near Cadiz, California, the EPNG
    and Transwestern systems at Topock, Arizona and to the Kern
    River Gas Transmission Company system in California. This system
    also extends to customers in the vicinity of Bakersfield,
    California. |  |                         | 400 |          |                       |  | 407   |          |  |  |     |          |  |      | 161   |  |      |  | 161   |  |  |  | 192   | 
|Cheyenne Plains Gas Pipeline (CPG) |  | Extends from the Cheyenne hub in Colorado to various pipeline
    interconnections near Greensburg, Kansas.                                                                                                                                                                       |  |                         | 400 |          |                       |  | 757   |          |  |  |     |          |  |      | 433   |  |      |  | 89    |  |  |  |      | 






|    |                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes throughput transported on behalf of affiliates.                                                                                                                       
|(2) | This capacity reflects winter-sustainable west-flow capacity of
    4,850 MMcf/d and approximately 800 MMcf/d of east-end
    delivery capacity.                               
|(3) | Effective January 1, 2006, EPNG began offering
    interruptible storage service from a storage facility that has a
    maximum working capacity of up to approximately 44 Bcf.

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|        |                           |          |  |     |             |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |  |               | 
|------- | ------------------------- | -------- |  | --- | ----------- | ----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  | ------------- | 
|        |                           |          |  |     |             | Anticipated |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Project |                           | Capacity |  |     | Description |             | Completion Date                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 
|        |                           |          |  |     |             |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 
|        |                           | (MMcf/d) |  |     |             |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|ANR     |                           |          |  |     |             |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |  |              
|        | Wisconsin 2006 expansion  |          |  | 164 |             |             | To construct and operate a 3.8 mile, 30-inch pipeline extension
    of the Madison Lateral Loop, a 3.1 mile, 16-inch pipeline
    loop(1)of the Little Chute Lateral in Outagamie County, a 20,620
    horsepower compressor station, a 2,370 horsepower compressor
    unit at the Janesville compressor station, and upgrades of five
    existing meter stations in various counties in Wisconsin.                                                                                                                                                                                                                                                              |  |  | November 2006 | 
|       
|TGP     |                           |          |  |     |             |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |  |              
|        | Triple-T expansion        |          |  | 200 |             |             | To construct 6.2 miles of 24-inch pipeline to extend its
    existing 30-inch Triple-T Line, beginning in Eugene Island
    Block 349, to interconnect with Enterprise Products
    Partners Anaconda System on the EI 371 platform,
    as well as associated piping and other appurtenant facilities.                                                                                                                                                                                                                                                                                                                                                           |  |  | August 2006   | 
|        | Northeast ConneXion-NY/NJ |          |  | 49  |             |             | To modify an existing dehydration tower, filed jointly with
    National Fuel, serving the Hebron Storage Field in Potter
    County, Pennsylvania, expand capacity on Line 300, located
    in Bradford and Susquehanna Counties, Pennsylvania by building
    6 miles of
    loop(1)line, add compression facilities at Compressor Station 313
    in Potter County, Pennsylvania, and at Station 317 in Bradford
    County, Pennsylvania, upgrade Ramsey Meter Station in Bergen
    County, New Jersey, and use additional incremental capacity
    resulting from the replacement of compression facilities at
    Station 325 in Sussex County, New Jersey. |  |  | November 2006 | 
|        | Louisiana Deepwater Link  |          |  | 850 |             |             | To construct a 300 foot extension of its 20-inch Grand Isle
    supply lateral, construct 2,100 feet of 24-inch West Delta
    supply lateral, abandon 3,100 feet of the 20-inch line
    connected to the Grand Isle platform, and install appurtenant
    facilities on Enterprises Independence Hub platform
    located in Mississippi Canyon Block 920.                                                                                                                                                                                                                                                                                                      |  |  | October 2006  | 
|       
|WIC     |                           |          |  |     |             |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |  |              
|        | Piceance Basin expansion  |          |  | 333 |             |             | To construct and operate approximately 142 miles of 24-inch
    pipeline, compression and metering facilities to move additional
    supplies into the WIC system.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |  | March 2006    | 






|    |                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | A loop is the installation of a pipeline, parallel to an
    existing pipeline, with
    tie-ins at several
    points along the existing pipeline. Looping increases a
    transmission systems capacity.

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Partially Owned Interstate Transmission Systems


|                                                          |  |                                                                                                                                 |  |                         |    |  |               |  |          |             |  |          |       |  |  |      |       |  |      |  |       |  |  |  |       | 
|--------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | -- |  | ------------- |  | -------- | ----------- |  | -------- | ----- |  |  | ---- | ----- |  | ---- |  | ----- |  |  |  | ----- | 
|                                                          |  |                                                                                                                                 |  | As of December 31, 2005 |    |  | Average       | 
|                                                          |  |                                                                                                                                 |  |                         |    |  | Throughput(2) | 
|Transmission                                              |  | Supply and                                                                                                                      |  | Ownership               |    |  | Miles of      |  |          | Design      |  |          |       | 
|System(1)                                                 |  | Market Region                                                                                                                   |  | Interest                |    |  | Pipeline(2)   |  |          | Capacity(2) |  |          | 2005  |  |  | 2004 |       |  | 2003 | 
|                                                          |  |                                                                                                                                 |  |                         |    |  |               |  |          |             |  |          |       |  |  |      |       |  |      | 
|                                                          |  |                                                                                                                                 |  | (Percent)               |    |  |               |  | (MMcf/d) |             |  | (BBtu/d) |      
|Florida Gas
    Transmission(3)                           |  | Extends from south Texas to south Florida.                                                                                      |  |                         | 50 |  |               |  | 4,867    |             |  |          | 2,090 |  |  |      | 1,916 |  |      |  | 2,014 |  |  |  | 1,963 | 
|Great Lakes Gas Transmission                              |  | Extends from the Manitoba-Minnesota border to the
    Michigan-Ontario border at St. Clair, Michigan.                           |  |                         | 50 |  |               |  | 2,115    |             |  |          | 2,500 |  |  |      | 2,376 |  |      |  | 2,200 |  |  |  | 2,366 | 
|Samalayuca Pipeline and Gloria a Dios Compression Station |  | Extends from U.S.-Mexico border to the State of Chihuahua,
    Mexico.                                                          |  |                         | 50 |  |               |  | 23       |             |  |          | 460   |  |  |      | 423   |  |      |  | 433   |  |  |  | 409   | 
|San Fernando Pipeline                                     |  | Extends from Pemex Compression Station 19 to the Pemex metering
    station in San Fernando, Mexico in the State of Tamaulipas. |  |                         | 50 |  |               |  | 71       |             |  |          | 1,000 |  |  |      | 951   |  |      |  | 951   |  |  |  | 130   | 






|    |                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------
|(1) | These systems are accounted for as equity investments.                                                                      
|(2) | Miles, volumes and average throughput represent the
    systems totals and are not adjusted for our ownership
    interest.
|(3) | We have a 50 percent equity interest in Citrus Corporation,
    which owns this system.                                     



Underground Natural Gas Storage Entities




|                                |  |                         |     |  |             |  |    |          |  |  |           | 
|------------------------------- |  | ----------------------- | --- |  | ----------- |  | -- | -------- |  |  | --------- | 
|                                |  | As of December 31, 2005 |     |  |            
|                                |  |                         |     |  |            
|                                |  | Ownership               |     |  | Storage     |  |    |         
|Storage Entity                  |  | Interest                |     |  | Capacity(1) |  |    | Location | 
|                                |  |                         |     |  |             |  |    |          | 
|                                |  | (Percent)               |     |  | (Bcf)       |  |    |         
|Bear Creek Storage              |  |                         | 100 |  |             |  | 58 |          |  |  | Louisiana | 
|ANR Storage                     |  |                         | 100 |  |             |  | 56 |          |  |  | Michigan  | 
|Blue Lake Gas Storage           |  |                         | 75  |  |             |  | 47 |          |  |  | Michigan  | 
|Eaton Rapids Gas
    Storage(2) |  |                         | 50  |  |             |  | 13 |          |  |  | Michigan  | 
|Young Gas
    Storage(2)        |  |                         | 48  |  |             |  | 6  |          |  |  | Colorado  | 






|    |                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes a total of 133 Bcf contracted to affiliates. Storage
    capacity is under long-term contracts and is not adjusted for
    our ownership interest.
|(2) | These systems were accounted for as equity investments as of
    December 31, 2005.                                                                        

LNG Facility




6



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##### Table of Contents



Markets and Competition


end-users








Contract Expirations





7



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##### Table of Contents





TGP


|                                                                                                                                   |  |                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|---------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Customer Information                                                                                                               |  | Contract Information                                                                                                                                                   |  | Competition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                   |  |                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Approximately 466 firm and interruptible customers, none of
    which individually represents more than 10 percent of
    revenues |  | Approximately 481 firm transportation contracts. Weighted
    average remaining
    contract term of approximately five years.                                         |  | TGP faces strong competition in the northeast, Appalachian,
    midwest and southeast market areas. It competes with other
    interstate and intrastate pipelines for deliveries to
    multiple-connection customers who can take deliveries at
    alternative points. Natural gas delivered on the TGP system
    competes with alternative energy sources such as electricity,
    hydroelectric power, coal and fuel oil. In addition, TGP
    competes with pipelines and gathering systems for connection to
    new supply sources in Texas, the Gulf of Mexico and from the
    Canadian border.
    In the offshore areas of the Gulf of Mexico, factors such as the
    distance of the supply fields from the pipeline, relative basis
    pricing of the pipeline receipt points, and costs of
    intermediate gathering or required processing of the natural gas
    to be transported may influence determinations of whether
    natural gas is ultimately attached to our system.                                          
|                                                                                                                                  
|                                                                                                                                  
|ANR                                                                                                                                |  |                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Customer Information                                                                                                               |  | Contract Information                                                                                                                                                   |  | Competition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Approximately 297 firm and  interruptible
    customers
    Major Customer:  We
    Energies  (829 BBtu/d)                         |  | Approximately 634 firm transportation contracts. Weighted
    average remaining
    contract term of approximately five years.
    Contract terms expire in 2006-2010. |  | ANRs principal markets are in the midwest where it
    competes with other interstate and intrastate pipeline companies
    and local distribution companies to provide natural gas
    transportation and storage services. ANR competes directly with
    other interstate pipelines, including Guardian Pipeline, for
    markets in Wisconsin. We Energies owns an interest in Guardian,
    which is currently serving a portion of its firm transportation
    requirements. ANR also competes directly with other interstate
    pipelines in the midwest market to serve electric generation and
    local distribution companies.
    ANR also competes directly with numerous pipelines and gathering
    systems for access to new supply sources. ANRs principal
    supply sources are the Rockies and mid-continent production
    accessed in Kansas and Oklahoma, western Canadian production
    delivered to Wisconsin and the Chicago area and Gulf of Mexico
    sources, including deepwater production and LNG imports.
|                                                                                                                                  

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|                                                                                                                                                                  |  |                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                           
|----------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                 
|EPNG                                                                                                                                                              |  |                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                           
|Customer Information                                                                                                                                              |  | Contract Information                                                                                                                                                                                                                        |  | Competition                                                                                                                                                                                                                                                                                                                                                               
|Approximately 163 firm and  interruptible
    customers
    Major Customers:  Southern California
    Gas   Company  (453 BBtu/d)   (93 BBtu/d)  (768
    BBtu/d) |  | Approximately 251 firm transportation contracts. Weighted
    average remaining
    contract term of approximately four years.
    Contract term expires in 2006.
    Contract term expire in 2007.
    Contract terms expire in 2009-2011. |  | EPNG faces competition in the west and southwest from other
    existing and proposed pipelines, from California storage
    facilities, and alternative energy sources that are used to
    generate electricity such as hydroelectric power, nuclear, coal
    and fuel oil. In addition, initiatives to bring LNG into
    California and northern Mexico are underway.
|Southwest Gas Corporation   (12
    BBtu/d)  (470 BBtu/d)   (74
    BBtu/d)                                                                                       |  | Contract term expires in 2006.
    Contract term expires in 2011.
    Contract term expires in 2015.                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                 

|                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                       
|SNG                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Customer Information                                                                                                                                                                                                                                    |  | Contract Information                                                                                                                                                                                                                                                                          |  | Competition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Approximately 225 firm  and
    interruptible  customers
    Major Customers:  Atlanta Gas Light
    Company   (959 BBtu/d)
    Southern Company Services  (418 BBtu/d)
    Alabama Gas Corporation   (415 BBtu/d) Scana
    Corporation   (346 BBtu/d) |  | Approximately 181 firm transportation contracts. Weighted
    average remaining
    contract term of approximately six years.
    Contract terms expire in 2008-2015.
    Contract terms expire in 2010-2018.
    Contract terms expire in 2006-2013.
    Contract terms expire in 2006-2019. |  | SNG faces strong competition in a number of its key markets. SNG
    competes with other interstate and intrastate pipelines for
    deliveries to multiple-connection customers who can take
    deliveries at alternative points. Natural gas delivered on our
    system competes with alternative energy sources used to generate
    electricity, such as hydroelectric power, coal and fuel oil.
    SNGs four largest customers are able to obtain a
    significant portion of their natural gas requirements through
    transportation from other pipelines. Also, SNG competes with
    several pipelines for the transportation business of their other
    customers. In addition, SNG competes with pipelines and
    gathering systems for connection to new supply services.                                                   
|                                                                                                                                                                                                                                                       
|CIG                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Customer Information                                                                                                                                                                                                                                    |  | Contract Information                                                                                                                                                                                                                                                                          |  | Competition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Approximately 111 firm and   interruptible
    customers
    Major Customer:  Public Service Company
    of  Colorado   (970 BBtu/d)  (187 BBtu/d)  (261
    BBtu/d)                                                                                    |  | Approximately 184 firm transportation contracts. Weighted
    average remaining
    contract term of approximately five years.
    Contract terms expire in 2007.
    Contract term expires in 2008.
    Contract terms expires in 2009-2014.                                                 |  | CIG serves two major markets. Its on-system market
    consists of utilities and other customers located along the
    front range of the Rocky Mountains in Colorado and Wyoming. Its
    off-system market consists of the transportation of
    Rocky Mountain production from multiple supply basins to
    interconnections with other pipelines bound for the midwest, the
    southwest, California and the Pacific northwest. Competition for
    its on-system market consists of an intrastate pipeline, local
    production from the Denver- Julesburg basin, and long-haul
    shippers who elect to sell into this market rather than the
    off-system market. Competition for its off-system market
    consists of other existing and proposed interstate pipelines
    that are directly connected to its supply sources.
|                                                                                                                                                                                                                                                       

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|                                                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|WIC                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Customer Information                                                                                                                                                                                                                   |  | Contract Information                                                                                                                                                                                                                                                                         |  | Competition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Approximately 47 firm  and
    interruptible  customers
    Major Customers:  Williams Power
    Company     (353 BBtu/d)  CIG    (247 BBtu/d)  Western
    Gas
    Resources    (235 BBtu/d)  Cantera
    Gas Company    (226 BBtu/d) |  | Approximately 47 firm transportation contracts. Weighted
    average remaining
    contract term of approximately six years.
    Contract terms expire in 2008-2013.
    Contract terms expire in 2006-2016.
    Contract terms expire in 2007-2013.
    Contract terms expire in 2012-2013. |  | WIC competes with pipelines that are existing, proposed and
    currently under construction to provide transportation services
    to delivery points in northeast Colorado and western Wyoming.
    WICs one Bcf/d Medicine Bow lateral is the primary
    source of transportation for increasing volumes of Powder River
    Basin supply and can readily be expanded as supply increases.
    Currently, there are two other interstate pipelines that
    transport limited volumes out of this basin.
|                                                                                                                                                                                                                                      

|                                                                                                                                                                                |  |                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|MPC                                                                                                                                                                             |  |                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                        
|Customer Information                                                                                                                                                            |  | Contract Information                                                                                                                                                                                  |  | Competition                                                                                                                                                                                                                                                                                            
|Approximately 13 firm and  interruptible
    customers
    Major
    Customers:  EPNG    (312
    BBtu/d)  Los Angeles
    Department     of Water and
    Power    (50 BBtu/d) |  | Approximately six firm transportation contracts. Weighted
    average remaining
    contract term of approximately eight years.
    Contract term expires in 2015.
    Contract term expires in 2007. |  | MPC faces competition from other existing and proposed
    pipelines, and alternative energy sources that are used to
    generate electricity such as hydroelectric power, nuclear, coal
    and fuel oil. In addition, initiatives to bring LNG into
    California and northern Mexico are underway.
|                                                                                                                                                                               

CPG


|                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                                                                       
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Customer Information                                                                                                                                                                                                                                                                        |  | Contract Information                                                                                                                                                                                                                                                          |  | Competition                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                                                                       
|Approximately 20 firm and  interruptible
    customers
    Major Customers: Oneok Energy
    Services    Company
    L.P.    (195 BBtu/d) Anadarko
    Energy
    Service    Company    (112
    BBtu/d) Encana Marketing     (USA)
    Inc.     (170 BBtu/d) Kerr
    McGee    (83 BBtu/d) |  | Approximately 16 firm transportation contracts Weighted
    average remaining
    contract term of approximately nine years.
    Contract terms expire in 2015.
    Contract terms expire in 2015-2016.
    Contract term expires in 2015.
    Contract terms expire in 2015. |  | CPG competes directly with other interstate pipelines serving
    the mid-continent region. Indirectly, CPG competes with other
    existing and proposed interstate pipelines that transport Rocky
    Mountain gas to other markets.

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Exploration and Production Segment






|                |                                    |                                                 |                                                              
|--------------- | ---------------------------------- | ----------------------------------------------- | -------------------------------------------------------------
|Region          |                                    | Operating Areas/Basins                         
|                |                                    |                                                
|United States   |                                    |                                                
|                | Onshore                            |                                                 | East Texas and North Louisiana Rocky Mountains               
|                |                                    | Black Warrior
    Arkoma
    Raton
    Illinois
|                | Texas Gulf Coast                   |                                                 | South Texas                                                  
|                | Gulf of Mexico and south Louisiana |                                                 | Gulf of Mexico (Federal and State waters)
    South Louisiana
|Internationally |                                    |                                                
|                | Brazil                             |                                                 | Camamu, Santos, Espirito Santo and Potiguar                  







| |   |                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------
| |  | Re-shaping our portfolio toward longer-lived, shallower decline
    rate reserves;                      
|
| |  | Leveraging operational expertise we already possess in key
    operating areas, geologies or techniques;
|
| |  | Balancing our exposure to regions, basins and commodities;                                              
|
| |  | Achieving risk-adjusted returns competitive with those available
    within our existing inventory; and 
|
| |  | Increasing our reserves more rapidly by supplementing drilling
    activities.                          

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Natural Gas and Oil Properties




| |                                                                    
| | -------------------------------------------------------------------
| | Natural Gas, Oil and Condensate and NGL Reserves and
    Production



|                                                 |                                    |                        |         |           |                |  |        |         |        |  |         |        |        |            |         |           |           |  |     |     |     |   |        |         |  | 
|------------------------------------------------ | ---------------------------------- | ---------------------- | ------- | --------- | -------------- |  | ------ | ------- | ------ |  | ------- | ------ | ------ | ---------- | ------- | --------- | --------- |  | --- | --- | --- | - | ------ | ------- |  | 
|                                                 |                                    | Net Proved Reserves(1) |         |           |               
|                                                 |                                    |                        |         |           |               
|                                                 |                                    |                        |         | Total     |                |  | 2005   |        
|                                                 |                                    | Natural Gas            |         |           | Oil/Condensate |  |        | NGL     |        |  |         |        |        | Production |        
|                                                 |                                    | (MMcf)                 |         |           | (MBbls)        |  |        | (MBbls) |        |  | (MMcfe) |        |        | (Percent)  |         |           | (MMcfe)   | 
|                                                 |                                    |                        |         |           |                |  |        |         |        |  |         |        |        |            |         |           |           | 
|Reserves and Production by Region                |                                    |                        |         |           |                |  |        |         |        |  |         |        |        |            |         |           |           |  |     |     |     |   |        |        
|United
    States(2)                             |                                    |                        |         |           |                |  |        |         |        |  |         |        |        |            |         |           |           |  |     |     |     |   |        |        
|                                                 | Onshore                            |                        |         | 1,258,329 |                |  |        | 32,007  |        |  |         | 1,207  |        |            |         | 1,457,615 |           |  |     | 60  | %   |   |        | 109,361 | 
|                                                 | Texas Gulf Coast                   |                        |         | 392,783   |                |  |        | 2,765   |        |  |         | 9,702  |        |            |         | 467,580   |           |  |     | 20  | %   |   |        | 77,014  | 
|                                                 | Gulf of Mexico and south Louisiana |                        |         | 179,654   |                |  |        | 8,456   |        |  |         | 1,653  |        |            |         | 240,311   |           |  |     | 10  | %   |   |        | 65,432  | 
|                                                 |                                    |                        |         |           |                |  |        |         |        |  |         |        |        |            |         |           |           | 
|                                                 | Total United States                |                        |         | 1,830,766 |                |  |        | 43,228  |        |  |         | 12,562 |        |            |         | 2,165,506 |           |  |     | 90  | %   |   |        | 251,807 | 
|Brazil                                           |                                    |                        | 56,388  |           |                |  | 32,250 |         |        |  |        |        |        |            | 249,890 |           |           |  | 10  | %   |     |   | 19,300 |        
|                                                 |                                    |                        |         |           |                |  |        |         |        |  |         |        |        |            |         |           |           | 
|                                                 | Total                              |                        |         | 1,887,154 |                |  |        | 75,478  |        |  |         | 12,562 |        |            |         | 2,415,396 |           |  |     | 100 | %   |   |        | 271,107 | 
|                                                 |                                    |                        |         |           |                |  |        |         |        |  |         |        |        |            |         |           |           | 
|Unconsolidated investment in
    Four Star(3)(4) |                                    |                        | 192,895 |           |                |  | 3,349  |         |        |  | 6,668   |        |        |            | 252,996 |           |           |  | 100 | %   |     |   | 8,844  |        
|                                                 |                                    |                        |         |           |                |  |        |         |        |  |         |        |        |            |         |           |           | 
|Reserves by Classification                       |                                    |                        |         |           |                |  |        |         |        |  |         |        |        |            |         |           |           |  |     |     |     |   |        |        
|United
    States(2)                             |                                    |                        |         |           |                |  |        |         |        |  |         |        |        |            |         |           |           |  |     |     |     |   |        |        
|                                                 | Producing                          |                        |         | 1,175,838 |                |  |        | 19,831  |        |  |         | 9,503  |        |            |         | 1,351,841 |           |  |     | 63  | %   |   |        |         | 
|                                                 | Non-Producing                      |                        |         | 228,173   |                |  |        | 8,750   |        |  |         | 1,507  |        |            |         | 289,716   |           |  |     | 13  | %   |   |        |         | 
|                                                 | Undeveloped                        |                        |         | 426,755   |                |  |        | 14,647  |        |  |         | 1,552  |        |            |         | 523,949   |           |  |     | 24  | %   |   |        |         | 
|                                                 |                                    |                        |         |           |                |  |        |         |        |  |         |        |        |            |         |           |           | 
|                                                 |                                    | Total proved           |         |           | 1,830,766      |  |        |         | 43,228 |  |         |        | 12,562 |            |         |           | 2,165,506 |  |     |     | 100 | % |        |         |  | 
|                                                 |                                    |                        |         |           |                |  |        |         |        |  |         |        |        |            |         |           |           | 
|Brazil                                           |                                    |                        |         |           |                |  |        |         |        |  |         |        |        |            |         |           |           |  |     |     |     |   |        |        
|                                                 | Producing                          |                        |         | 17,260    |                |  |        | 632     |        |  |         |       |        |            |         | 21,052    |           |  |     | 9   | %   |   |        |         | 
|                                                 | Non-Producing                      |                        |         | 10,162    |                |  |        | 512     |        |  |         |       |        |            |         | 13,234    |           |  |     | 5   | %   |   |        |         | 
|                                                 | Undeveloped                        |                        |         | 28,966    |                |  |        | 31,106  |        |  |         |       |        |            |         | 215,604   |           |  |     | 86  | %   |   |        |         | 
|                                                 |                                    |                        |         |           |                |  |        |         |        |  |         |        |        |            |         |           |           | 
|                                                 |                                    | Total proved           |         |           | 56,388         |  |        |         | 32,250 |  |         |        |       |            |         |           | 249,890   |  |     |     | 100 | % |        |         |  | 
|                                                 |                                    |                        |         |           |                |  |        |         |        |  |         |        |        |            |         |           |           | 
|Worldwide                                        |                                    |                        |         |           |                |  |        |         |        |  |         |        |        |            |         |           |           |  |     |     |     |   |        |        
|                                                 | Producing                          |                        |         | 1,193,098 |                |  |        | 20,463  |        |  |         | 9,503  |        |            |         | 1,372,893 |           |  |     | 57  | %   |   |        |         | 
|                                                 | Non-Producing                      |                        |         | 238,335   |                |  |        | 9,262   |        |  |         | 1,507  |        |            |         | 302,950   |           |  |     | 12  | %   |   |        |         | 
|                                                 | Undeveloped                        |                        |         | 455,721   |                |  |        | 45,753  |        |  |         | 1,552  |        |            |         | 739,553   |           |  |     | 31  | %   |   |        |         | 
|                                                 |                                    |                        |         |           |                |  |        |         |        |  |         |        |        |            |         |           |           | 
|                                                 |                                    | Total proved           |         |           | 1,887,154      |  |        |         | 75,478 |  |         |        | 12,562 |            |         |           | 2,415,396 |  |     |     | 100 | % |        |         |  | 
|                                                 |                                    |                        |         |           |                |  |        |         |        |  |         |        |        |            |         |           |           | 
|Unconsolidated investment in
    Four Star(3)    |                                    |                        |         |           |                |  |        |         |        |  |         |        |        |            |         |           |           |  |     |     |     |   |        |        
|                                                 | Producing                          |                        |         | 154,979   |                |  |        | 3,246   |        |  |         | 5,371  |        |            |         | 206,677   |           |  |     | 82  | %   |   |        |         | 
|                                                 | Non-Producing                      |                        |         | 3,105     |                |  |        | 20      |        |  |         | 28     |        |            |         | 3,395     |           |  |     | 1   | %   |   |        |         | 
|                                                 | Undeveloped                        |                        |         | 34,811    |                |  |        | 83      |        |  |         | 1,269  |        |            |         | 42,924    |           |  |     | 17  | %   |   |        |         | 
|                                                 |                                    |                        |         |           |                |  |        |         |        |  |         |        |        |            |         |           |           | 
|                                                 |                                    | Total Four Star        |         |           | 192,895        |  |        |         | 3,349  |  |         |        | 6,668  |            |         |           | 252,996   |  |     |     | 100 | % |        |         |  | 
|                                                 |                                    |                        |         |           |                |  |        |         |        |  |         |        |        |            |         |           |           | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Net proved reserves exclude our Power segments equity
    interests in proved reserves in Indonesia and in Peru of
    162,254 MMcf of natural gas and 2,058 MBbls of oil,
    condensate and NGL for total natural gas equivalents of
    174,600 MMcfe, all net to our ownership interests. Our
    Power segment has completed or expects to complete the sale of
    these equity interests in 2006.                                                                                              
|(2) | Net proved reserves exclude royalties and interests owned by
    others and reflect contractual arrangements and royalty
    obligations in effect at the time of the estimate.                                                                                                                                                                                                                                                                                                                        
|(3) | Our share of Four Stars proved reserves has been estimated
    based on an evaluation of those reserves by El Pasos
    internal reservoir engineers and not by engineers of Four Star.
    An independent reservoir engineering firm, Ryder Scott, which
    was engaged by us, prepared an estimate on 86 percent of
    Four Stars proved reserves. Based on the amount of Four
    Stars proved reserves determined by Ryder Scott, we
    believe our reported reserve amounts are reasonable.
|(4) | Represents our proportionate share of Four Stars
    production since the acquisition date.                                                                                                                                                                                                                                                                                                                                                                                                           

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13



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##### Table of Contents





| |                  
| | -----------------
| | Acreage and Wells



|              |                                    |                 |        |         |             |  |        |          |         |  |           |           |           |          |         |           |           |  |           |           |           |  |         |           |           | 
|------------- | ---------------------------------- | --------------- | ------ | ------- | ----------- |  | ------ | -------- | ------- |  | --------- | --------- | --------- | -------- | ------- | --------- | --------- |  | --------- | --------- | --------- |  | ------- | --------- | --------- | 
|              |                                    | Developed       |        |         | Undeveloped |  |        | Total    |        
|Acreage       |                                    |                 |        |         |             |  |        |          |        
|              |                                    | Gross(1)        |        |         | Net(2)      |  |        | Gross(1) |         |  | Net(2)    |           |           | Gross(1) |         |           | Net(2)    | 
|              |                                    |                 |        |         |             |  |        |          |         |  |           |           |           |          |         |           |           | 
|United States |                                    |                 |        |         |             |  |        |          |         |  |           |           |           |          |         |           |           |  |           |           |           |  |         |          
|              | Onshore                            |                 |        | 867,392 |             |  |        | 518,892  |         |  |           | 1,591,543 |           |          |         | 1,216,552 |           |  |           | 2,458,935 |           |  |         | 1,735,444 |          
|              | Texas Gulf Coast                   |                 |        | 103,234 |             |  |        | 79,439   |         |  |           | 151,751   |           |          |         | 109,241   |           |  |           | 254,985   |           |  |         | 188,680   |          
|              | Gulf of Mexico and south Louisiana |                 |        | 530,464 |             |  |        | 362,938  |         |  |           | 540,972   |           |          |         | 494,481   |           |  |           | 1,071,436 |           |  |         | 857,419   |          
|              |                                    |                 |        |         |             |  |        |          |         |  |           |           |           |          |         |           |           | 
|              |                                    | Total           |        |         | 1,501,090   |  |        |          | 961,269 |  |           |           | 2,284,266 |          |         |           | 1,820,274 |  |           |           | 3,785,356 |  |         |           | 2,781,543 | 
|Brazil        |                                    |                 | 49,262 |         |             |  | 17,242 |          |         |  | 1,157,268 |           |           |          | 346,788 |           |           |  | 1,206,530 |           |           |  | 364,030 |          
|              |                                    |                 |        |         |             |  |        |          |         |  |           |           |           |          |         |           |           | 
|              |                                    | Worldwide Total |        |         | 1,550,352   |  |        |          | 978,511 |  |           |           | 3,441,534 |          |         |           | 2,167,062 |  |           |           | 4,991,886 |  |         |           | 3,145,573 | 
|              |                                    |                 |        |         |             |  |        |          |         |  |           |           |           |          |         |           |           | 



|                 |                                    |                     |   |       |                |  |   |                  |                  |  |              |                 |     |          |   |     |           |  |    |          |       |  |        |       |       |  |   |    |    |  |   |    |    | 
|---------------- | ---------------------------------- | ------------------- | - | ----- | -------------- |  | - | ---------------- | ---------------- |  | ------------ | --------------- | --- | -------- | - | --- | --------- |  | -- | -------- | ----- |  | ------ | ----- | ----- |  | - | -- | -- |  | - | -- | -- | 
|                 |                                    |                     |   |       |                |  |   |                  |                  |  |              | Number of Wells |    
|                 |                                    | Productive          |   |       |                |  |   |                  | Being Drilled at | 
|                 |                                    | Natural Gas         |   |       | Productive Oil |  |   | Total Productive |                  |  | December 31, |                
|                 |                                    | Wells               |   |       | Wells          |  |   | Wells            |                  |  | 2005         |                
|Productive Wells |                                    |                     |   |       |                |  |   |                  |                  |  |              |                
|                 |                                    | Gross(1)            |   |       | Net(2)         |  |   | Gross(1)         |                  |  | Net(2)       |                 |     | Gross(1) |   |     | Net(2)(3) |  |    | Gross(1) |       |  | Net(2) |      
|                 |                                    |                     |   |       |                |  |   |                  |                  |  |              |                 |     |          |   |     |           |  |    |          |       |  |        |      
|United States    |                                    |                     |   |       |                |  |   |                  |                  |  |              |                 |     |          |   |     |           |  |    |          |       |  |        |       |       |  |   |    |    |  |   |   
|                 | Onshore                            |                     |   | 3,424 |                |  |   | 2,614            |                  |  |              | 514             |     |          |   | 363 |           |  |    | 3,938    |       |  |        | 2,977 |       |  |   | 36 |    |  |   | 29 |   
|                 | Texas Gulf Coast                   |                     |   | 831   |                |  |   | 702              |                  |  |              |                |     |          |   |    |           |  |    | 831      |       |  |        | 702   |       |  |   |   |    |  |   |   |   
|                 | Gulf of Mexico and south Louisiana |                     |   | 175   |                |  |   | 115              |                  |  |              | 53              |     |          |   | 35  |           |  |    | 228      |       |  |        | 150   |       |  |   | 4  |    |  |   | 1  |   
|                 |                                    |                     |   |       |                |  |   |                  |                  |  |              |                 |     |          |   |     |           |  |    |          |       |  |        |      
|                 |                                    | Total United States |   |       | 4,430          |  |   |                  | 3,431            |  |              |                 | 567 |          |   |     | 398       |  |    |          | 4,997 |  |        |       | 3,829 |  |   |    | 40 |  |   |    | 30 | 
|Brazil           |                                    |                     | 4 |       |                |  | 3 |                  |                  |  | 6            |                 |     |          | 5 |     |           |  | 10 |          |       |  | 8      |       |       |  |  |    |    |  |  |   
|                 |                                    |                     |   |       |                |  |   |                  |                  |  |              |                 |     |          |   |     |           |  |    |          |       |  |        |      
|                 |                                    | Worldwide Total     |   |       | 4,434          |  |   |                  | 3,434            |  |              |                 | 573 |          |   |     | 403       |  |    |          | 5,007 |  |        |       | 3,837 |  |   |    | 40 |  |   |    | 30 | 
|                 |                                    |                     |   |       |                |  |   |                  |                  |  |              |                 |     |          |   |     |           |  |    |          |       |  |        |      

|              |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |     |      |  |  |     |     |  |  |     |     | 
|------------- | ---------- | ---------------- |  | -- | ---------------- |  |  | ---- | -- |  | ---- | -- | -- | ---- |  | --- | ---- |  |  | --- | --- |  |  | --- | --- | 
|              |            | Net Exploratory  |  |    | Net Development  | 
|              |            | Wells Drilled(2) |  |    | Wells Drilled(2) | 
|Wells Drilled |            |                  |  |    |                  | 
|              |            | 2005             |  |    | 2004             |  |  | 2003 |    |  | 2005 |    |    | 2004 |  |     | 2003 | 
|              |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |     |      | 
|United States |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |     |      |  |  |     |     |  |  |    
|              | Productive |                  |  | 86 |                  |  |  | 13   |    |  |      | 54 |    |      |  | 279 |      |  |  | 298 |     |  |  | 272 |    
|              | Dry        |                  |  | 2  |                  |  |  | 10   |    |  |      | 22 |    |      |  | 4   |      |  |  | 3   |     |  |  | 1   |    
|              |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |     |      | 
|              |            | Total            |  |    | 88               |  |  |      | 23 |  |      |    | 76 |      |  |     | 283  |  |  |     | 301 |  |  |     | 273 | 
|              |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |     |      | 
|Brazil        |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |     |      |  |  |     |     |  |  |    
|              | Productive |                  |  |   |                  |  |  |     |    |  |      | 2  |    |      |  |    |      |  |  |    |     |  |  |    |    
|              | Dry        |                  |  |   |                  |  |  | 1    |    |  |      | 4  |    |      |  |    |      |  |  |    |     |  |  |    |    
|              |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |     |      | 
|              |            | Total            |  |    |                 |  |  |      | 1  |  |      |    | 6  |      |  |     |     |  |  |     |    |  |  |     |    | 
|              |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |     |      | 
|Worldwide     |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |     |      |  |  |     |     |  |  |    
|              | Productive |                  |  | 86 |                  |  |  | 13   |    |  |      | 56 |    |      |  | 279 |      |  |  | 298 |     |  |  | 272 |    
|              | Dry        |                  |  | 2  |                  |  |  | 11   |    |  |      | 26 |    |      |  | 4   |      |  |  | 3   |     |  |  | 1   |    
|              |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |     |      | 
|              |            | Total            |  |    | 88               |  |  |      | 24 |  |      |    | 82 |      |  |     | 283  |  |  |     | 301 |  |  |     | 273 | 
|              |            |                  |  |    |                  |  |  |      |    |  |      |    |    |      |  |     |      | 






|    |                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Gross interest reflects the total acreage or wells we
    participated in, regardless of our ownership interest in the
    acreage or wells.    
|(2) | Net interest is the aggregate of the fractional working
    interests that we have in the gross acreage, gross wells or
    gross drilled wells.
|(3) | At December 31, 2005, we operated 3,541 of the 3,841 net
    productive wells.                                                                  

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| |                                                                      
| | ---------------------------------------------------------------------
| | Net Production, Sales Prices, Transportation and Production
    Costs



|                                                                     |               |                                 |               |   |         |         |  |      |         |         |  |   |         |         | 
|-------------------------------------------------------------------- | ------------- | ------------------------------- | ------------- | - | ------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ------- | 
|                                                                     |               | 2005                            |               |   | 2004    |         |  | 2003 |        
|                                                                     |               |                                 |               |   |         |         |  |      |        
|Net Production Volumes                                               |               |                                 |               |   |         |         |  |      |         |         |  |  
|                                                                     | United States |                                 |               |   |         |         |  |      |         |         |  |   |        
|                                                                     |               | Natural gas (MMcf)              |               |   | 206,714 |         |  |      | 238,009 |         |  |   | 338,762 |        
|                                                                     |               | Oil, condensate and NGL (MBbls) |               |   | 7,516   |         |  |      | 8,498   |         |  |   | 11,778  |        
|                                                                     |               |                                 | Total (MMcfe) |   |         | 251,807 |  |      |         | 288,994 |  |   |         | 409,432 | 
|                                                                     | Brazil        |                                 |               |   |         |         |  |      |         |         |  |   |        
|                                                                     |               | Natural gas (MMcf)              |               |   | 15,578  |         |  |      | 6,848   |         |  |   |        |        
|                                                                     |               | Oil, condensate and NGL (MBbls) |               |   | 620     |         |  |      | 320     |         |  |   |        |        
|                                                                     |               |                                 | Total (MMcfe) |   |         | 19,300  |  |      |         | 8,772   |  |   |         |        | 
|                                                                     | Worldwide     |                                 |               |   |         |         |  |      |         |         |  |   |        
|                                                                     |               | Natural gas (MMcf)              |               |   | 222,292 |         |  |      | 244,857 |         |  |   | 338,762 |        
|                                                                     |               | Oil, condensate and NGL (MBbls) |               |   | 8,136   |         |  |      | 8,818   |         |  |   | 11,778  |        
|                                                                     |               |                                 | Total (MMcfe) |   |         | 271,107 |  |      |         | 297,766 |  |   |         | 409,432 | 
|                                                                    
|Natural Gas Average Realized Sales Price
    ($/Mcf)(1)              |               |                                 |               |   |         |         |  |      |         |         |  |  
|                                                                     | United States |                                 |               |   |         |         |  |      |         |         |  |   |        
|                                                                     |               | Excluding hedges                |               | $ | 7.92    |         |  | $    | 6.02    |         |  | $ | 5.51    |        
|                                                                     |               | Including hedges                |               | $ | 6.69    |         |  | $    | 5.94    |         |  | $ | 5.40    |        
|                                                                     | Brazil        |                                 |               |   |         |         |  |      |         |         |  |   |        
|                                                                     |               | Excluding hedges                |               | $ | 2.33    |         |  | $    | 2.01    |         |  | $ |        |        
|                                                                     |               | Including hedges                |               | $ | 2.33    |         |  | $    | 2.01    |         |  | $ |        |        
|                                                                     | Worldwide     |                                 |               |   |         |         |  |      |         |         |  |   |        
|                                                                     |               | Excluding hedges                |               | $ | 7.53    |         |  | $    | 5.90    |         |  | $ | 5.51    |        
|                                                                     |               | Including hedges                |               | $ | 6.39    |         |  | $    | 5.83    |         |  | $ | 5.40    |        
|                                                                    
|Oil, Condensate, and NGL Average Realized Sales Price
    ($/Bbl)(1) |               |                                 |               |   |         |         |  |      |         |         |  |  
|                                                                     | United States |                                 |               |   |         |         |  |      |         |         |  |   |        
|                                                                     |               | Excluding hedges                |               | $ | 45.86   |         |  | $    | 34.44   |         |  | $ | 26.64   |        
|                                                                     |               | Including hedges                |               | $ | 45.86   |         |  | $    | 34.44   |         |  | $ | 25.96   |        
|                                                                     | Brazil        |                                 |               |   |         |         |  |      |         |         |  |   |        
|                                                                     |               | Excluding hedges                |               | $ | 53.42   |         |  | $    | 43.01   |         |  | $ |        |        
|                                                                     |               | Including hedges                |               | $ | 42.42   |         |  | $    | 39.19   |         |  | $ |        |        
|                                                                     | Worldwide     |                                 |               |   |         |         |  |      |         |         |  |   |        
|                                                                     |               | Excluding hedges                |               | $ | 46.43   |         |  | $    | 34.75   |         |  | $ | 26.64   |        
|                                                                     |               | Including hedges                |               | $ | 45.60   |         |  | $    | 34.61   |         |  | $ | 25.96   |        
|                                                                    
|Average Transportation Cost                                          |               |                                 |               |   |         |         |  |      |         |         |  |  
|                                                                     | United States |                                 |               |   |         |         |  |      |         |         |  |   |        
|                                                                     |               | Natural gas ($/Mcf)             |               | $ | 0.20    |         |  | $    | 0.17    |         |  | $ | 0.18    |        
|                                                                     |               | Oil, condensate and NGL ($/Bbl) |               | $ | 0.69    |         |  | $    | 1.16    |         |  | $ | 1.05    |        
|                                                                     | Worldwide     |                                 |               |   |         |         |  |      |         |         |  |   |        
|                                                                     |               | Natural gas ($/Mcf)             |               | $ | 0.18    |         |  | $    | 0.17    |         |  | $ | 0.18    |        
|                                                                     |               | Oil, condensate and NGL ($/Bbl) |               | $ | 0.63    |         |  | $    | 1.12    |         |  | $ | 1.05    |        

15



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|                                       |               |                              |                       |   |      |      |  |      |      |      |  |   |      |      | 
|-------------------------------------- | ------------- | ---------------------------- | --------------------- | - | ---- | ---- |  | ---- | ---- | ---- |  | - | ---- | ---- | 
|                                       |               | 2005                         |                       |   | 2004 |      |  | 2003 |     
|                                       |               |                              |                       |   |      |      |  |      |     
|Average Production
    Cost($/Mcfe)(2) |               |                              |                       |   |      |      |  |      |      |      |  |  
|                                       | United States |                              |                       |   |      |      |  |      |      |      |  |   |     
|                                       |               | Average lease operating cost |                       | $ | 0.73 |      |  | $    | 0.62 |      |  | $ | 0.42 |     
|                                       |               | Average production taxes     |                       |   | 0.27 |      |  |      | 0.11 |      |  |   | 0.14 |     
|                                       |               |                              |                       |   |      |      |  |      |     
|                                       |               |                              | Total production cost |   | $    | 1.00 |  |      | $    | 0.73 |  |   | $    | 0.56 | 
|                                       |               |                              |                       |   |      |      |  |      |     
|                                       | Brazil        |                              |                       |   |      |      |  |      |      |      |  |   |     
|                                       |               | Average lease operating cost |                       | $ | 0.42 |      |  | $    |     |      |  | $ |     |     
|                                       |               |                              |                       |   |      |      |  |      |     
|                                       | Worldwide     |                              |                       |   |      |      |  |      |      |      |  |   |     
|                                       |               | Average lease operating cost |                       | $ | 0.72 |      |  | $    | 0.60 |      |  | $ | 0.42 |     
|                                       |               | Average production taxes     |                       |   | 0.24 |      |  |      | 0.11 |      |  |   | 0.14 |     
|                                       |               |                              |                       |   |      |      |  |      |     
|                                       |               |                              | Total production cost |   | $    | 0.96 |  |      | $    | 0.71 |  |   | $    | 0.56 | 
|                                       |               |                              |                       |   |      |      |  |      |     






|    |                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------
|(1) | Prices are stated before transportation costs.                                                                             
|(2) | Production costs include lease operating costs and production
    related taxes (including ad valorem and severance taxes).



| |                                                      
| | -----------------------------------------------------
| | Acquisition, Development and Exploration Expenditures



|                               |                                                               |                                      |                            |     |       |       |   |      |     |     |   |     |       |       | 
|------------------------------ | ------------------------------------------------------------- | ------------------------------------ | -------------------------- | --- | ----- | ----- | - | ---- | --- | --- | - | --- | ----- | ----- | 
|                               |                                                               | 2005                                 |                            |     | 2004  |       |   | 2003 |    
|                               |                                                               |                                      |                            |     |       |       |   |      |    
|                               |                                                               | (In millions)                        |                           
|United States                  |                                                               |                                      |                            |     |       |       |   |      |     |     |   |    
|                               | Acquisition Costs:                                            |                                      |                            |     |       |       |   |      |     |     |   |     |      
|                               |                                                               | Proved                               |                            | $   | 643   |       |   | $    | 33  |     |   | $   | 10    |      
|                               |                                                               | Unproved                             |                            |     | 143   |       |   |      | 32  |     |   |     | 35    |      
|                               | Development Costs                                             |                                      |                            | 503 |       |       |   | 395  |     |     |   | 668 |      
|                               | Exploration Costs:                                            |                                      |                            |     |       |       |   |      |     |     |   |     |      
|                               |                                                               | Delay rentals                        |                            |     | 3     |       |   |      | 7   |     |   |     | 6     |      
|                               |                                                               | Seismic acquisition and reprocessing |                            |     | 7     |       |   |      | 29  |     |   |     | 56    |      
|                               |                                                               | Drilling                             |                            |     | 133   |       |   |      | 149 |     |   |     | 405   |      
|                               | Asset Retirement
    Obligations(1)                           |                                      |                            | 1   |       |       |   | 30   |     |     |   | 124 |      
|                               |                                                               |                                      |                            |     |       |       |   |      |    
|                               |                                                               | Total full cost pool expenditures    |                            |     | 1,433 |       |   |      | 675 |     |   |     | 1,304 |      
|                               |                                                               | Non-full cost pool expenditures      |                            |     | 22    |       |   |      | 11  |     |   |     | 17    |      
|                               |                                                               |                                      |                            |     |       |       |   |      |    
|                               |                                                               |                                      | Total cost
    incurred(2) |     | $     | 1,455 |   |      | $   | 686 |   |     | $     | 1,321 | 
|                               |                                                               |                                      |                            |     |       |       |   |      |    
|                               | Acquisition of unconsolidated investment in Four Star
    (2) |                                      | $                          | 769 |       |       | $ |     |     |     | $ |    |      
|                               |                                                               |                                      |                            |     |       |       |   |      |    
|Brazil and Other International |                                                               |                                      |                            |     |       |       |   |      |     |     |   |    
|                               | Acquisition Costs:                                            |                                      |                            |     |       |       |   |      |     |     |   |     |      
|                               |                                                               | Proved                               |                            | $   | 8     |       |   | $    | 69  |     |   | $   |      |      
|                               |                                                               | Unproved                             |                            |     | 1     |       |   |      | 3   |     |   |     | 4     |      
|                               | Development Costs                                             |                                      |                            | 6   |       |       |   | 1    |     |     |   |    |      
|                               | Exploration Costs:                                            |                                      |                            |     |       |       |   |      |     |     |   |     |      
|                               |                                                               | Seismic acquisition and reprocessing |                            |     | 7     |       |   |      | 15  |     |   |     | 11    |      
|                               |                                                               | Drilling                             |                            |     | 8     |       |   |      | 10  |     |   |     | 84    |      
|                               | Asset Retirement Obligations                                  |                                      |                            |    |       |       |   | 3    |     |     |   |    |      
|                               |                                                               |                                      |                            |     |       |       |   |      |    
|                               |                                                               | Total full cost pool expenditures    |                            |     | 30    |       |   |      | 101 |     |   |     | 99    |      
|                               |                                                               | Non-full cost pool expenditures      |                            |     |      |       |   |      | 3   |     |   |     | 1     |      
|                               |                                                               |                                      |                            |     |       |       |   |      |    
|                               |                                                               |                                      | Total cost incurred        |     | $     | 30    |   |      | $   | 104 |   |     | $     | 100   | 
|                               |                                                               |                                      |                            |     |       |       |   |      |    

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|          |                                                               |                                      |                            |     |       |       |   |      |     |     |   |     |       |       | 
|--------- | ------------------------------------------------------------- | ------------------------------------ | -------------------------- | --- | ----- | ----- | - | ---- | --- | --- | - | --- | ----- | ----- | 
|          |                                                               | 2005                                 |                            |     | 2004  |       |   | 2003 |    
|          |                                                               |                                      |                            |     |       |       |   |      |    
|          |                                                               | (In millions)                        |                           
|Worldwide |                                                               |                                      |                            |     |       |       |   |      |     |     |   |    
|          | Acquisition Costs:                                            |                                      |                            |     |       |       |   |      |     |     |   |     |      
|          |                                                               | Proved                               |                            | $   | 651   |       |   | $    | 102 |     |   | $   | 10    |      
|          |                                                               | Unproved                             |                            |     | 144   |       |   |      | 35  |     |   |     | 39    |      
|          | Development Costs                                             |                                      |                            | 509 |       |       |   | 396  |     |     |   | 668 |      
|          | Exploration Costs:                                            |                                      |                            |     |       |       |   |      |     |     |   |     |      
|          |                                                               | Delay rentals                        |                            |     | 3     |       |   |      | 7   |     |   |     | 6     |      
|          |                                                               | Seismic acquisition and reprocessing |                            |     | 14    |       |   |      | 44  |     |   |     | 67    |      
|          |                                                               | Drilling                             |                            |     | 141   |       |   |      | 159 |     |   |     | 489   |      
|          | Asset Retirement
    Obligations(1)                           |                                      |                            | 1   |       |       |   | 33   |     |     |   | 124 |      
|          |                                                               |                                      |                            |     |       |       |   |      |    
|          |                                                               | Total full cost pool expenditures    |                            |     | 1,463 |       |   |      | 776 |     |   |     | 1,403 |      
|          |                                                               | Non-full cost pool expenditures      |                            |     | 22    |       |   |      | 14  |     |   |     | 18    |      
|          |                                                               |                                      |                            |     |       |       |   |      |    
|          |                                                               |                                      | Total cost
    incurred(2) |     | $     | 1,485 |   |      | $   | 790 |   |     | $     | 1,421 | 
|          |                                                               |                                      |                            |     |       |       |   |      |    
|          | Acquisition of unconsolidated investment in Four Star
    (2) |                                      | $                          | 769 |       |       | $ |     |     |     | $ |    |      
|          |                                                               |                                      |                            |     |       |       |   |      |    






|    |                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes an increase to our property, plant and equipment of
    approximately $114 million in 2003 associated with our
    adoption of Statement of Financial Accounting Standards (SFAS)
    No. 143.                
|   
|(2) | Includes $179 million of deferred income tax adjustments
    related to the acquisition of full-cost pool properties and
    $217 million related to the acquisition of our
    unconsolidated investment in Four Star.





| |                        
| | -----------------------
| | Markets and Competition





17



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##### Table of Contents



Marketing and Trading Segment




Production-related Natural Gas and Oil Derivatives




|                   |                                       |      |  |       |      |  |  |       |  |  |      |     |  |  |  |    | 
|------------------ | ------------------------------------- | ---- |  | ----- | ---- |  |  | ----- |  |  | ---- | --- |  |  |  | -- | 
|                   |                                       | 2006 |  |       | 2007 |  |  | 2008  |  |  | 2009 |    
|                   |                                       |      |  |       |      |  |  |       |  |  |      |    
|Natural Gas (TBtu) |                                       |      |  |       |      |  |  |       |  |  |      |     |  |  |  |   
|                   | Volumes with floor price              |      |  | 120   |      |  |  | 51    |  |  |      | 18  |  |  |  | 17 | 
|                   | Volumes with ceiling price            |      |  | 60    |      |  |  | 21    |  |  |      | 18  |  |  |  | 17 | 
|                   | Volumes with fixed prices             |      |  | 25    |      |  |  |      |  |  |      |    |  |  |  |   | 
|Oil (MBbls)        |                                       |      |  |       |      |  |  |       |  |  |      |     |  |  |  |   
|                   | Volumes with floor and ceiling prices |      |  |      |      |  |  | 1,009 |  |  |      | 930 |  |  |  |   | 
|                   | Volumes with fixed prices             |      |  | 1,044 |      |  |  |      |  |  |      |    |  |  |  |   | 



| |                                               
| | ----------------------------------------------
| | Contracts Related to Legacy Trading Operations

Natural gas transportation-related contracts.


|                         |  |                   |  |                           |                      |  |                 |             
|------------------------ |  | ----------------- |  | ------------------------- | -------------------- |  | --------------- | ------------
|                         |  | Alliance Pipeline |  | Enterprise Texas Pipeline |                      |  | Other Pipelines
|                         |  |                   |  |                           |                      |  |                
|Daily capacity (MMBtu/d) |  | 160,000           |  |                           | 435,000              |  |                 | 918,000(1)  
|Expiration               |  | 2015              |  |                           | May 2006             |  |                 | 2006 to 2028
|Receipt points           |  | AECO Canada       |  |                           | South Texas          |  |                 | Various     
|Delivery points          |  | Chicago           |  |                           | Houston Ship Channel |  |                 | Various     



| | 
| | 
| | 

| |     |                                                                                                
| | --- | -----------------------------------------------------------------------------------------------
| | (1) | Approximately 700,000 MMBtu/ d of this capacity is
    contracted with our pipeline affiliates.

Other natural gas derivative contracts.


Power contracts.




18



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| |                        
| | -----------------------
| | Markets and Competition





| |   |                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------
| |  | Affiliates of major oil and natural gas producers;                                                             
|
| |  | Large domestic and foreign utility companies;                                                                  
|
| |  | Affiliates of large local distribution companies;                                                              
|
| |  | Affiliates of other interstate and intrastate pipelines; and                                                   
|
| |  | Independent energy marketers and power producers with varying
    scopes of operations and financial resources.

19



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##### Table of Contents



Power Segment




|                                       |                      |      |  |                    |  |          |  |                 |  |                 |  |           |  |  |  |                          |  |  |  |            |  |  |  |                 | 
|-------------------------------------- | -------------------- | ---- |  | ------------------ |  | -------- |  | --------------- |  | --------------- |  | --------- |  |  |  | ------------------------ |  |  |  | ---------- |  |  |  | --------------- | 
|                                       |                      |      |  | El Paso            |  |          |  |                 |  | Expiration      |  |          
|                                       |                      |      |  | Ownership          |  | Gross    |  |                 |  | Year of Power   |  |          
|Project(1)                             |                      | Area |  | Interest           |  | Capacity |  | Power Purchaser |  | Sales Contracts |  | Fuel Type
|                                       |                      |      |  |                    |  |          |  |                 |  |                 |  |          
|                                       |                      |      |  | (Percent)          |  | (MW)     |  |                 |  |                 |  |          
|International                          |                      |      |  |                    |  |          |  |                 |  |                 |  |           |  |  |  |                          |  |  |  |            |  |  |  |                
|Brazil                                 |                      |      |  |                    |  |          |  |                 |  |                 |  |           |  |  |  |                          |  |  |  |            |  |  |  |                
|                                       | Araucaria(2)         |      |  | Brazil             |  |          |  | 60              |  |                 |  | 484       |  |  |  | COPEL                    |  |  |  |           |  |  |  | Natural Gas     | 
|                                       | Macae(2)             |      |  | Brazil             |  |          |  | 100             |  |                 |  | 928       |  |  |  | Petrobras                |  |  |  | 2007       |  |  |  | Natural Gas     | 
|                                       | Manaus(3)            |      |  | Brazil             |  |          |  | 100             |  |                 |  | 238       |  |  |  | Manaus Energia           |  |  |  | 2008       |  |  |  | Oil             | 
|                                       | Porto Velho          |      |  | Brazil             |  |          |  | 50              |  |                 |  | 404       |  |  |  | Eletronorte              |  |  |  | 2010, 2023 |  |  |  | Oil             | 
|                                       | Rio
    Negro(3)     |      |  | Brazil             |  |          |  | 100             |  |                 |  | 158       |  |  |  | Manaus Energia           |  |  |  | 2008       |  |  |  | Oil             | 
|Asia(4)                                |                      |      |  |                    |  |          |  |                 |  |                 |  |           |  |  |  |                          |  |  |  |            |  |  |  |                
|                                       | Fauji                |      |  | Pakistan           |  |          |  | 42              |  |                 |  | 157       |  |  |  | Pakistan Water and Power |  |  |  | 2029       |  |  |  | Natural Gas     | 
|                                       | Habibullah           |      |  | Pakistan           |  |          |  | 50              |  |                 |  | 136       |  |  |  | Pakistan Water and Power |  |  |  | 2029       |  |  |  | Natural Gas     | 
|                                       | Sengkang             |      |  | Indonesia          |  |          |  | 48              |  |                 |  | 135       |  |  |  | PLN                      |  |  |  | 2022       |  |  |  | Natural Gas     | 
|Central and other South
    America(4) |                      |      |  |                    |  |          |  |                 |  |                 |  |           |  |  |  |                          |  |  |  |           
|                                       | Aguaytia             |      |  | Peru               |  |          |  | 24              |  |                 |  | 155       |  |  |  | Various                  |  |  |  | 2005, 2006 |  |  |  | Natural Gas     | 
|                                       | CEPP                 |      |  | Dominican Republic |  |          |  | 48              |  |                 |  | 67        |  |  |  | CDEEE, Spot Market       |  |  |  | 2014       |  |  |  | Oil             | 
|                                       | Fortuna              |      |  | Panama             |  |          |  | 25              |  |                 |  | 300       |  |  |  | Union Fenosa             |  |  |  | 2005, 2008 |  |  |  | Hydroelectric   | 
|                                       | Itabo                |      |  | Dominican Republic |  |          |  | 25              |  |                 |  | 416       |  |  |  | CDEEE and AES            |  |  |  | 2016       |  |  |  | Oil/Coal        | 
|Europe                                 |                      |      |  |                    |  |          |  |                 |  |                 |  |           |  |  |  |                          |  |  |  |           
|                                       | EMA(4)               |      |  | Hungary            |  |          |  | 50              |  |                 |  | 69        |  |  |  | Dunaferr Energy Services |  |  |  | 2016       |  |  |  | Natural Gas/Oil | 
|Domestic                               |                      |      |  |                    |  |          |  |                 |  |                 |  |           |  |  |  |                          |  |  |  |            |  |  |  |                
|                                       | Berkshire            |      |  | MA - U.S.          |  |          |  | 56              |  |                 |  | 261       |  |  |  | (5)                     |  |  |  | (5)       |  |  |  | Natural Gas     | 
|                                       | Midland Cogeneration |      |  | MI - U.S.          |  |          |  | 44              |  |                 |  | 1,575     |  |  |  | Consumers Power, Dow     |  |  |  | 2025       |  |  |  | Natural Gas     | 




|    |                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Our Macae project in Brazil is consolidated. All others in this
    table are reflected as investments in unconsolidated affiliates
    in our financial statements.
|(2) | See Part II, Item 8, Financial Statements and
    Supplementary Data, Note 16 for a further discussion of
    these plants.                                         
|(3) | See Part II, Item 8, Financial Statements and
    Supplementary Data, Note 21 for a further discussion of the
    transfer of ownership in 2008 of these facilities.
|(4) | We have sold or have received approval from our Board of
    Directors to sell these facilities in 2006.                                                            
|(5) | Our Marketing and Trading segment sells the power that this
    facility generates to the wholesale power market.                                                   



|                   |  |           |    |  |          |  |          |             |  |          |               |  |  |  |     | 
|------------------ |  | --------- | -- |  | -------- |  | -------- | ----------- |  | -------- | ------------- |  |  |  | --- | 
|                   |  | El Paso   |    |  |          |  |          |             | 
|                   |  | Ownership |    |  | Miles of |  |          | Design      |  |          | Average 2005  | 
|Pipeline           |  | Interest  |    |  | Pipeline |  |          | Capacity(1) |  |          | Throughput(1) | 
|                   |  |           |    |  |          |  |          |             |  |          |               | 
|                   |  | (Percent) |    |  |          |  | (MMcf/d) |             |  | (BBtu/d) |              
|Bolivia to Brazil  |  |           | 8  |  |          |  | 1,957    |             |  |          | 1,059         |  |  |  | 841 | 
|Argentina to Chile |  |           | 22 |  |          |  | 336      |             |  |          | 138           |  |  |  | 100 | 






|    |                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------
|(1) | Volumes represent the pipelines total design capacity and
    average throughput and are not adjusted for our ownership
    interest.

Field Services Segment




20



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##### Table of Contents



Other Operations and Assets




Regulatory Environment


Pipelines.




| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | rates and charges for natural gas transportation, storage, LNG
    terminalling and related services;
|
| |  | certification and construction of new facilities;                                                    
|
| |  | extension or abandonment of facilities;                                                              
|
| |  | maintenance of accounts and records;                                                                 
|
| |  | relationships between pipeline and energy affiliates;                                                
|
| |  | terms and conditions of service;                                                                     
|
| |  | depreciation and amortization policies;                                                              
|
| |  | acquisition and disposition of facilities; and                                                       
|
| |  | initiation and discontinuation of services.                                                          



Exploration and Production.




21



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International and Domestic Power.




Field Services.


Environmental




Employees




Executive Officers of the Registrant




|                    |  |                                                                                                   |  |         |      |  |     |  |    | 
|------------------- |  | ------------------------------------------------------------------------------------------------- |  | ------- | ---- |  | --- |  | -- | 
|                    |  |                                                                                                   |  | Officer |      |  |    
|Name                |  | Office                                                                                            |  | Since   |      |  | Age | 
|                    |  |                                                                                                   |  |         |      |  |     | 
|Douglas L. Foshee   |  | President and Chief Executive Officer of El Paso                                                  |  |         | 2003 |  |     |  | 46 | 
|D. Mark Leland      |  | Executive Vice President and Chief Financial Officer of
    El Paso                               |  |         | 2005 |  |     |  | 44 | 
|Robert W. Baker     |  | Executive Vice President and General Counsel of El Paso                                           |  |         | 2002 |  |     |  | 49 | 
|Lisa A. Stewart     |  | Executive Vice President of El Paso and President of
    El Paso Exploration & Production Company |  |         | 2004 |  |     |  | 48 | 
|Susan B. Ortenstone |  | Senior Vice President (Human Resources and Administration) of
    El Paso                         |  |         | 2003 |  |     |  | 49 | 
|Stephen C. Beasley  |  | President of Eastern Pipeline Group                                                               |  |         | 2005 |  |     |  | 54 | 
|James J. Cleary     |  | President of Western Pipeline Group                                                               |  |         | 2005 |  |     |  | 51 | 
|James C. Yardley    |  | President of Southern Pipeline Group                                                              |  |         | 2005 |  |     |  | 54 | 
|Daniel B. Martin    |  | Senior Vice President of Pipeline Operations                                                      |  |         | 2005 |  |     |  | 49 | 



22



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23



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##### Table of Contents



Available Information







ITEM 1A. RISK FACTORS







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





Risks Related to Our Business




| |                                                                           
| | --------------------------------------------------------------------------
| | Our operations are subject to operational hazards and
    uninsured risks.



self-insurance




| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | The success of our pipeline business depends, in part, on
    factors beyond our control.



24



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| |   |                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | service area competition;                                                                                                                                                                         
|
| |  | expiration and/or turn back of significant contracts;                                                                                                                                             
|
| |  | changes in regulation and action of regulatory bodies;                                                                                                                                            
|
| |  | future weather conditions;                                                                                                                                                                        
|
| |  | price competition;                                                                                                                                                                                
|
| |  | drilling activity and availability of natural gas supplies;                                                                                                                                       
|
| |  | decreased availability of conventional gas supply sources and
    the availability and timing of other gas supply sources, such as
    LNG;                                                       
|
| |  | decreased natural gas demand due to various factors, including
    increases in prices and the increased availability or popularity
    of alternative energy sources such as hydroelectric power;
|
| |  | increased costs of capital;                                                                                                                                                                       
|
| |  | opposition to energy infrastructure development, especially in
    environmentally sensitive areas;                                                                                               
|
| |  | adverse general economic conditions;                                                                                                                                                              
|
| |  | expiration and/or renewal of existing interests in real
    property, including real property on Native American lands; and                                                                       
|
| |  | unfavorable movements in natural gas and NGL prices in certain
    supply and demand areas.                                                                                                       



| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | The revenues of our pipeline businesses are generated
    under contracts that must be renegotiated periodically.







| |   |                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | competition by other pipelines, including the change in rates or
    upstream supply of existing pipeline competitors, as well as the
    proposed construction by other companies of additional pipeline
    capacity or LNG terminals in markets served by our interstate
    pipelines;
|
| |  | changes in state regulation of local distribution companies,
    which may cause them to negotiate short-term contracts or turn
    back their capacity when their contracts expire;                                                                                                      
|
| |  | reduced demand and market conditions in the areas we serve;                                                                                                                                                                                                                               
|
| |  | the availability of alternative energy sources or gas supply
    points; and                                                                                                                                                                                                              
|
| |  | regulatory actions.                                                                                                                                                                                                                                                                       





| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Fluctuations in energy commodity prices could adversely
    affect our pipeline businesses.



25



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##### Table of Contents







| |   |                                                                                           
| | - | ------------------------------------------------------------------------------------------
| |  | regional, domestic and international supply and demand;                                   
|
| |  | availability and adequacy of transportation facilities;                                   
|
| |  | energy legislation;                                                                       
|
| |  | federal and state taxes, if any, on the sale or transportation
    of natural gas and NGL;
|
| |  | abundance of supplies of alternative energy sources; and                                  
|
| |  | political unrest among oil producing countries.                                           



| |                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The expansion of our pipeline systems by constructing new
    facilities subjects us to construction and other risks that may
    adversely affect the financial results of our pipeline
    businesses.





| |   |                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the ability to obtain all necessary approvals and permits by
    regulatory agencies on a timely basis on terms that are
    acceptable to us;                                                                                                                   
|
| |  | potential changes of federal, state and local statutes and
    regulations, including environmental requirements that prevent a
    project from proceeding or increase the anticipated cost of the
    expansion project;                                       
|
| |  | impediments on our ability to acquire rights-of-ways or land
    rights on a timely basis or within our anticipated costs;                                                                                                                                       
|
| |  | the ability to construct projects within anticipated costs,
    including the risk that we may incur cost overruns resulting
    from inflation or increased costs of equipment, materials,
    labor, or other factors beyond our control, that may be material;
|
| |  | anticipated future growth in natural gas supply does not
    materialize; and                                                                                                                                                                                    
|
| |  | the lack of transportation, storage or throughput commitments
    that result in write-offs of development costs.                                                                                                                                                



26



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| |                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Natural gas and oil prices are volatile. A substantial
    decrease in natural gas and oil prices could adversely affect
    the financial results of our exploration and production
    business.





| |   |                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the level of consumer demand for, and the supply of, natural gas
    and oil;                                                                                                                     
|
| |  | commodity processing, gathering and transportation availability;                                                                                                                                  
|
| |  | the level of imports of, and the price of, foreign natural gas
    and oil;                                                                                                                       
|
| |  | the ability of the members of the Organization of Petroleum
    Exporting Countries to agree to and maintain oil price and
    production controls;                                               
|
| |  | domestic governmental regulations and taxes;                                                                                                                                                      
|
| |  | the price and availability of alternative fuel sources;                                                                                                                                           
|
| |  | the availability of pipeline capacity;                                                                                                                                                            
|
| |  | weather conditions;                                                                                                                                                                               
|
| |  | market uncertainty;                                                                                                                                                                               
|
| |  | political conditions or hostilities in natural gas and oil
    producing regions;                                                                                                                 
|
| |  | worldwide economic conditions; and                                                                                                                                                                
|
| |  | decreased demand for the use of natural gas and oil because of
    market concerns about global warming or changes in governmental
    policies and regulations due to climate change initiatives.





| |                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------
| | The success of our exploration and production business is
    dependent, in part, on factors that are beyond our
    control.





| |   |                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the results of future drilling activity;                                                                                                                                 
|
| |  | the availability of rigs, equipment and labor to support
    drilling activity and production operations;                                                                
|
| |  | our ability to identify and precisely locate prospective
    geologic structures and to drill and successfully complete wells
    in those structures in a timely manner;
|
| |  | our ability to expand our leased land positions in desirable
    areas, which often are subject to intensely competitive
    conditions;                                 
|
| |  | increased competition in the search for and acquisition of
    reserves;                                                                                                 

27



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##### Table of Contents





| |   |                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | significant increases in future drilling, production and
    development costs, including drilling rig rates and oil field
    services costs;                                                                                         
|
| |  | adverse changes in future tax policies, rates, and drilling or
    production incentives by state, federal, or foreign governments;                                                                                                    
|
| |  | increased federal or state regulations, including environmental
    regulations, that limit or restrict the ability to drill natural
    gas or oil wells, reduce operational flexibility, or increase
    capital and operating costs;
|
| |  | our lack of control over jointly owned properties and properties
    operated by others;                                                                                                                                               
|
| |  | the availability of alternative sources of energy;                                                                                                                                                                                     
|
| |  | declines in production volumes, including those from the Gulf of
    Mexico; and                                                                                                                                                       
|
| |  | continued access to sufficient capital to fund drilling programs
    to develop and replace a reserve base with rapid depletion
    characteristics.                                                                                   



| |                                                                                                            
| | -----------------------------------------------------------------------------------------------------------
| | Our natural gas and oil drilling and producing operations
    involve many risks and may not be profitable.









| |                                                                               
| | ------------------------------------------------------------------------------
| | Estimating our reserves, production and future net cash
    flow is difficult.



28



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| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| | The success of our exploration and production business
    depends upon our ability to replace reserves that we
    produce.





| |                                                                                                
| | -----------------------------------------------------------------------------------------------
| | We face competition from third parties to acquire and
    develop natural gas and oil reserves.





| |                                                                                  
| | ---------------------------------------------------------------------------------
| | Our use of derivative financial instruments could result
    in financial losses.





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| |                                                                                      
| | -------------------------------------------------------------------------------------
| | Our businesses are subject to the risk of payment defaults
    by our counterparties.





| |                                                                  
| | -----------------------------------------------------------------
| | Our foreign operations and investments involve special
    risks.





| |   |                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | loss of revenue, property and equipment as a result of hazards
    such as expropriation, nationalization, wars, insurrection and
    other political risks;
|
| |  | the effects of currency fluctuations and exchange controls, such
    as devaluation of foreign currencies and other economic
    problems; and              
|
| |  | changes in laws, regulations and policies of foreign
    governments, including those associated with changes in the
    governing parties.                 



| |                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Retained liabilities associated with businesses that we
    have sold could exceed our estimates and we could experience
    difficulties in managing these liabilities.



Risks Related to Legal and Regulatory Matters




| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | The outcome of pending governmental investigations could
    be materially adverse to us.



30



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| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | The agencies that regulate our pipeline businesses and
    their customers affect our profitability.

re-designed








| |                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------
| | Environmental compliance and remediation costs and the
    costs of environmental liabilities could exceed our
    estimates.

clean-up




| |   |                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The uncertainties in estimating pollution control and clean up
    costs, including for sites for which only preliminary site
    investigation or assessments have been completed;
|
| |  | The discovery of new sites or additional information at existing
    sites;                                                                                                        
|
| |  | The uncertainty in quantifying liability under environmental
    laws that impose joint and several liability on all potentially
    responsible parties; and                      
|
| |  | The nature of environmental laws and regulations, including the
    interpretation and enforcement thereof.                                                                        



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| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Costs of litigation matters and other contingencies could
    exceed our estimates.





| |                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our system of internal controls is designed to provide
    reasonable assurance regarding the reliability of our financial
    reporting and the preparation of our financial statements for
    external purposes. A loss of public confidence in the quality of
    our internal controls or disclosures could have a negative
    impact on us.

decision-making


Risks Related to Our Liquidity




| |                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have significant debt and below investment grade credit
    ratings, which have impacted and will continue to impact our
    financial condition, results of operations and liquidity.



We
may not achieve our targeted level of debt reduction or complete
our asset sales in a timely manner or at all.






| |                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A breach of the covenants applicable to our debt and other
    financing obligations could affect our ability to borrow funds
    and could accelerate our debt and other financing obligations
    and those of our subsidiaries.



32



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| |                                                                  
| | -----------------------------------------------------------------
| | We are subject to financing and interest rate exposure
    risks.





| |   |                                                                 
| | - | ----------------------------------------------------------------
| |  | our credit ratings;                                             
|
| |  | interest rates;                                                 
|
| |  | the structured and commercial financial markets;                
|
| |  | market perceptions of us or the natural gas and energy industry;
|
| |  | tax rates due to new tax laws;                                  
|
| |  | our stock price; and                                            
|
| |  | market prices for energy.                                       






ITEM 1B. UNRESOLVED STAFF COMMENTS







ITEM 2. PROPERTIES









ITEM 3. LEGAL PROCEEDINGS




Marvin Goldfarb, et al v. El Paso Corporation, William Wise,
H. Brent Austin, and Rodney D. Erskine, Residuary Estate Mollie Nussbacher, Adele Brody Life
Tenant, et al v. El Paso Corporation, William Wise, and H. Brent
Austin, George S. Johnson, et al
v. El Paso Corporation, William Wise, and H. Brent Austin, Renneck Wilson, et al v. El
Paso Corporation, William Wise, H. Brent Austin, and Rodney D.
Erskine, Sandra Joan Malin
Revocable Trust, et al v. El Paso Corporation, William Wise, H.
Brent Austin, and Rodney D. Erskine, Lee S. Shalov, et al v. El Paso Corporation, William
Wise, H. Brent Austin, and Rodney D. Erskine, Paul C. Scott, et al v. El Paso
Corporation, William Wise, H. Brent Austin, and Rodney D.
Erskine, Brenda Greenblatt, et
al v. El Paso Corporation, William Wise, H. Brent Austin, and
Rodney D. Erskine, Stefanie
Beck, et al v. El Paso Corporation, William Wise, and H. Brent
Austin, J. Wayne Knowles, et
al v. El Paso Corporation,


33



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##### Table of Contents



William Wise, H. Brent Austin, and Rodney D. Erskine, The Ezra Charitable Trust,
et al v. El Paso Corporation, William Wise, Rodney D. Erskine
and H. Brent Austin,


James Felton v. El Paso Corporation,
Ronald Kuehn, Jr., Douglas Foshee and D. Dwight Scott; Sinclair
Haberman v. El Paso Corporation, Ronald Kuehn, Jr., and William
Wise; Patrick Hinner v. El Paso Corporation, Ronald Kuehn, Jr.,
Douglas Foshee, D. Dwight Scott and William Wise; Stanley Peltz
v. El Paso Corporation, Ronald Kuehn, Jr., Douglas Foshee and D.
Dwight Scott; Yolanda Cifarelli v. El Paso Corporation, Ronald
Kuehn, Jr., Douglas Foshee and D. Dwight Scott; Andrew W.
Albstein v. El Paso Corporation, William Wise; George S. Johnson
v. El Paso Corporation, Ronald Kuehn, Jr., Douglas Foshee, and
D. Dwight Scott; Robert Corwin v. El Paso Corporation, Mark
Leland, Brent Austin, Ronald Kuehn, Jr., D. Dwight Scott and
William Wise; Michael Copland v. El Paso Corporation, Ronald
Kuehn, Jr., Douglas Foshee and D. Dwight Scott; Leslie Turbowitz
v. El Paso Corporation, Mark Leland, Brent Austin, Ronald Kuehn,
Jr., D. Dwight Scott and William Wise; David Sadek v. El Paso
Corporation, Ronald Kuehn, Jr., Douglas Foshee, D. Dwight Scott;
Stanley Sved v. El Paso Corporation, Ronald Kuehn, Jr., and
William Wise; Nancy Gougler v. El Paso Corporation, Ronald
Kuehn, Jr., Douglas Foshee and D. Dwight Scott; William
Sinnreich v. El Paso Corporation, Ronald Kuehn, Jr., Douglas
Foshee, D. Dwight Scott and William Wise; Joseph Fisher v. El
Paso Corporation, Ronald Kuehn, Jr., Douglas Foshee, D. Dwight
Scott and William Wise; Glickenhaus & Co. v. El Paso
Corporation, Rod Erskine, Ronald Kuehn, Jr., Brent Austin,
William Wise, Douglas Foshee and D. Dwight Scott; and Thompson
v. El Paso Corporation, Ronald Kuehn, Douglas Foshee and D.
Dwight Scott


Grunet Realty Corp. v. William A. Wise,
Byron Allumbaugh, John Bissell, Juan Carlos Braniff, James
Gibbons, Anthony Hall Jr., Ronald Kuehn Jr., J. Carleton MacNeil
Jr., Thomas McDade, Malcolm Wallop, Joe Wyatt and Dwight Scott, Russo v. William Wise,
Brent Austin, Dwight Scott, Ralph Eads, Ronald Kuehn, Jr.,
Douglas Foshee, Rodney Erskine, PricewaterhouseCoopers and El
Paso Corporation John
Gebhart and Marilyn Clark v. El Paso Corporation, Byron
Allumbaugh, John Bissell, Juan Carlos Braniff, James Gibbons,
Anthony Hall Jr., Ronald Kuehn, Jr., J. Carleton MacNeil, Jr.,
Thomas McDade, Malcolm Wallop, William Wise, Joe Wyatt, Ralph
Eads, Brent Austin and John Somerhalder Stephen Brudno, et al. v. William
A. Wise, et al. Alan Laties v. William Wise, John
L. Bissell, Juan Carlos Braniff, James L. Dunlap, Douglas L.
Foshee, Robert W. Goldman, Anthony Hall, Thomas R. Hix, William
H. Joyce, Ronald L. Kuehn, Jr., J. Carlton MacNeil, Jr., J.
Michael Talbert, John L. Whitmire, Joe B. Wyatt and El Paso
Corporation


Environmental Proceedings


Air Permit Violation.


Coastal Eagle Point Air Issues.


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##### Table of Contents





Corpus Christi Refinery Air Violations.


EPNG State of Arizona Pipe-Coating.


Kentucky Polychlorinated Biphenyls (PCB) Project.


Natural Buttes.


Shoup Natural Gas Processing Plant.


Tucson Waste Management.







|         |                                                    
|-------- | ---------------------------------------------------
|ITEM  4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



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PART II







|         |                                                                                                                 
|-------- | ----------------------------------------------------------------------------------------------------------------
|ITEM  5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
    STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES





|     |                |      |   |       |     |  |   |           |  |  |   |      | 
|---- | -------------- | ---- | - | ----- | --- |  | - | --------- |  |  | - | ---- | 
|     |                | High |   |       | Low |  |   | Dividends | 
|     |                |      |   |       |     |  |   |           | 
|2005 |                |      |   |       |     |  |   |           |  |  |   |     
|     | Fourth Quarter |      | $ | 14.07 |     |  | $ | 10.78     |  |  | $ | 0.04 | 
|     | Third Quarter  |      |   | 14.16 |     |  |   | 11.13     |  |  |   | 0.04 | 
|     | Second Quarter |      |   | 11.87 |     |  |   | 9.30      |  |  |   | 0.04 | 
|     | First Quarter  |      |   | 13.15 |     |  |   | 10.01     |  |  |   | 0.04 | 
|2004 |                |      |   |       |     |  |   |           |  |  |   |     
|     | Fourth Quarter |      | $ | 11.85 |     |  | $ | 8.42      |  |  | $ | 0.04 | 
|     | Third Quarter  |      |   | 9.20  |     |  |   | 7.37      |  |  |   | 0.04 | 
|     | Second Quarter |      |   | 7.95  |     |  |   | 6.58      |  |  |   | 0.04 | 
|     | First Quarter  |      |   | 9.88  |     |  |   | 6.57      |  |  |   | 0.04 | 





Odd-lot Sales Program


odd-lot 1-877-453-1503.


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ITEM 6. SELECTED FINANCIAL DATA


10-K.


|                         |                                                                        |                                                |   |        |      |  |   |        |   |  |      |        |   |      |   |        |   |  |   |        |  
|------------------------ | ---------------------------------------------------------------------- | ---------------------------------------------- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------ | - | ---- | - | ------ | - |  | - | ------ | -
|                         |                                                                        | As of or for the Year Ended December 31,       |  
|                         |                                                                        |                                                |  
|                         |                                                                        | 2005                                           |   |        | 2004 |  |   | 2003   |   |  | 2002 |        |   | 2001 |  
|                         |                                                                        |                                                |   |        |      |  |   |        |   |  |      |        |   |      |  
|                         |                                                                        | (In millions, except per common share amounts) |  
|Operating Results Data:  |                                                                        |                                                |   |        |      |  |   |        |   |  |      |        |   |      |   |        |   |  |   |       
|                         | Operating
    revenues(1)                                              |                                                | $ | 4,017  |      |  | $ | 5,539  |   |  | $    | 6,339  |   |      | $ | 6,455  |   |  | $ | 9,871  |  
|                         | Loss from continuing
    operations(2)                                 |                                                | $ | (702   | )    |  | $ | (829   | ) |  | $    | (605   | ) |      | $ | (1,336 | ) |  | $ | (267   | )
|                         | Net loss available to common stockholders                              |                                                | $ | (633   | )    |  | $ | (947   | ) |  | $    | (1,883 | ) |      | $ | (1,875 | ) |  | $ | (447   | )
|                         | Basic and diluted loss per common share from continuing
    operations |                                                | $ | (1.13  | )    |  | $ | (1.30  | ) |  | $    | (1.01  | ) |      | $ | (2.39  | ) |  | $ | (0.53  | )
|                         | Cash dividends declared per common share                               |                                                | $ | 0.16   |      |  | $ | 0.16   |   |  | $    | 0.16   |   |      | $ | 0.87   |   |  | $ | 0.85   |  
|                         | Basic and diluted average common shares outstanding                    |                                                |   | 646    |      |  |   | 639    |   |  |      | 597    |   |      |   | 560    |   |  |   | 505    |  
|Financial Position Data: |                                                                        |                                                |   |        |      |  |   |        |   |  |      |        |   |      |   |        |   |  |   |       
|                         | Total
    assets(1)                                                    |                                                | $ | 31,838 |      |  | $ | 31,383 |   |  | $    | 36,968 |   |      | $ | 41,947 |   |  | $ | 44,273 |  
|                         | Long-term financing
    obligations(3)                                 |                                                |   | 17,023 |      |  |   | 18,241 |   |  |      | 20,275 |   |      |   | 16,105 |   |  |   | 12,690 |  
|                         | Securities of
    subsidiaries(3)                                      |                                                |   | 31     |      |  |   | 367    |   |  |      | 447    |   |      |   | 3,421  |   |  |   | 4,013  |  
|                         | Stockholders equity                                                   |                                                |   | 3,389  |      |  |   | 3,438  |   |  |      | 4,346  |   |      |   | 5,749  |   |  |   | 6,666  |  






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) |  | Decreases were a result of asset sales activities during these
    periods. See Part II, Item 8, Financial Statements and
    Supplementary Data, Note 3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(2) |  | We incurred net losses of $0.4 billion in 2005,
    $1.1 billion in 2004, $1.2 billion in 2003 and
    $0.9 billion in 2002 related to gains, losses and
    impairments of assets and equity investments as well as
    restructuring charges related to industry changes and the
    realignment of our businesses under our strategic plan. In 2003,
    we also entered into an agreement in principle to settle claims
    associated with the western energy crisis of 2000 and 2001. This
    settlement resulted in charges of $59 million in 2005,
    $104 million in 2003 and $899 million in 2002, before
    income taxes. In addition, we incurred ceiling test charges of
    $5 million, $5 million and $1.9 billion in 2003,
    2002 and 2001 on our full cost natural gas and oil properties.
    During 2001, we merged with The Coastal Corporation and incurred
    costs and asset impairments related to this merger that totaled
    approximately $1.5 billion. For further discussions of
    events affecting comparability of our results in 2005, 2004 and
    2003, see Part II, Item 8, Financial Statements and
    Supplementary Data, Notes 2 through 5.
|(3) |  | The increases in total long-term financing obligations in 2002
    and 2003 was a result of the consolidations of our Chaparral and
    Gemstone power investments, the restructuring of other financing
    transactions, and in 2003, the reclassification of securities of
    subsidiaries as a result of our adoption of SFAS No. 150,
    Accounting for Certain Financial Instruments with
    Characteristics of both Liabilities and Equity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS






Overview


Business Purpose and Description.




Drivers of our Profitability.






| |   |                                                                                         
| | - | ----------------------------------------------------------------------------------------
| |  | Expand our existing pipeline systems and gain access to new
    supply areas and sources
| |  | Contract and recontract pipeline capacity with our customers                            
| |  | Successfully resolve our pending rate cases                                             
| |  | Improve operational efficiency                                                          





| |   |                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Increase our natural gas and oil proved reserve base and
    production volumes through successful drilling programs or
    acquisitions and efficient operations
| |  | Manage commodity price risk to optimize the amounts we receive
    for the commodities we sell                                                                   





| |   |                                                                                                 
| | - | ------------------------------------------------------------------------------------------------
| |  | Successfully manage and complete the orderly exit of our legacy
    assets and trading positions
| |  | Successfully resolve legacy contingencies                                                       
| |  | Reduce debt levels and interest costs                                                           

Summary of Operational/ Financial Performance in 2005.


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|                   |  |                            
|------------------ |  | ---------------------------
|Area of Operations |  | Events Affecting Operations



|                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Pipelines                       |  | Finalized new rates at Southern Natural Gas Company.                                                                                                                                                                                                                                                                                                                                                                                              
|                               
|                                |  | Re-contracted or contracted available or expiring capacity.                                                                                                                                                                                                                                                                                                                                                                                       
|                               
|                                |  | Proceeded with several pipeline expansion projects in our
    pipeline systems and at our Elba Island LNG facility.                                                                                                                                                                                                                                                                                                                               
|                               
|                                |  | Incurred significant damage to sections of our Gulf Coast and
    offshore pipeline facilities due to Hurricanes Katrina and Rita.
    These hurricanes also resulted in the shut-in of a significant
    portion of gas supply on our systems.                                                                                                                                                                                                   
|                               
|E & P and Marketing and Trading |  | Completed the turnaround of our exploration and production
    business by (i) stabilizing production rates, in spite of
    incurring a reduction of our annual production of approximately
    12 Bcfe as a result of Hurricanes Katrina and Rita and
    (ii) growing our reserve base through our capital drilling
    program and through four acquisitions of natural gas and oil
    properties, including our acquisition of Medicine Bow.
|                               
|                                |  | Sold our natural gas and oil production at higher commodity
    prices. However, we incurred substantial losses associated with
    derivative contracts used to provide price protection on our
    production and in settling hedges that had been put in place
    during a lower price environment.                                                                                                                                           
|                               
|                                |  | Assigned or terminated the majority of our power contracts, our
    Cordova tolling agreement and the remaining derivative contracts
    associated with our power contract restructuring operations.                                                                                                                                                                                                                                             
|                               
|Other                           |  | Completed or announced the divestiture of substantially all of
    our remaining operations in our midstream, power and other
    businesses, for total proceeds of approximately
    $2.4 billion ($2.0 billion through December 31,
    2005). The net effect of these sales activities resulted in
    substantial losses in 2005.                                                                                                             
|                               
|                                |  | Furthered legal and contractual disputes, including those
    related to our Brazilian power plants and domestic legal matters.                                                                                                                                                                                                                                                                                                                   

What to Expect Going Forward.




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Liquidity


Overview.


Available Liquidity.


|                                                      |  |               |     | 
|----------------------------------------------------- |  | ------------- | --- | 
|                                                      |  | (in billions) |    
|                                                      |  |               |    
|Available cash                                        |  | $             | 2.0 | 
|Available capacity under our credit
    agreements(1) |  |               | 0.3 | 
|                                                      |  |               |    
|Net available liquidity at December 31, 2005          |  | $             | 2.3 | 
|                                                      |  |               |    






|    |                                                
|--- | -----------------------------------------------
|(1) | See discussion of Capital Resources on page 42.

Expected 2006 Cash Flows.




|            |       |           |     |                 |            |   |     |       |  |   |     |     | 
|----------- | ----- | --------- | --- | --------------- | ---------- | - | --- | ----- |  | - | --- | --- | 
|            |       |           |     | Exploration and |            |   |    
|            |       | Pipelines |     |                 | Production |   |     | Total | 
|            |       |           |     |                 |            |   |     |       | 
|Maintenance |       | $         | 0.5 |                 |            | $ | 0.7 |       |  | $ | 1.2 |    
|Growth      |       |           | 0.5 |                 |            |   | 0.3 |       |  |   | 0.8 |    
|            |       |           |     |                 |            |   |     |       | 
|            | Total |           | $   | 1.0             |            |   | $   | 1.0   |  |   | $   | 2.0 | 
|            |       |           |     |                 |            |   |     |       | 



Factors Impacting our Liquidity.


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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Price Risk Management Activities.We enter into
    derivative contracts to provide price protection on a portion of
    our anticipated natural gas and oil production. Specifically,
    our Exploration and Production and Marketing and Trading
    segments use swap and option contracts to fix the amount of cash
    we will receive on contracted volumes sold or to provide floor
    or ceiling prices on these volumes. Floor prices are the minimum
    cash prices to be received and ceiling prices are the maximum
    cash prices to be received under the option contracts.



|            |  |          |       |         |           |   |       |             |         |  |       |  |  |         |       |  |       |  |       |  |  |   |       | 
|----------- |  | -------- | ----- | ------- | --------- | - | ----- | ----------- | ------- |  | ----- |  |  | ------- | ----- |  | ----- |  | ----- |  |  | - | ----- | 
|            |  | Swaps(1) |       |         | Floors(1) |   |       | Ceilings(1) |        
|            |  |          |       |         |           |   |       |             |        
|            |  |          |       | Average |           |   |       |             | Average |  |       |  |  | Average |      
|            |  | Volumes  |       |         | Price     |   |       | Volumes     |         |  | Price |  |  | Volumes |       |  | Price | 
|Natural Gas |  |          |       |         |           |   |       |             |         |  |       |  |  |         |       |  |       | 
|2006        |  |          | 110   |         |           | $ | 4.89  |             |         |  | 120   |  |  | $       | 7.00  |  |       |  | 60    |  |  | $ | 9.50  | 
|2007        |  |          | 5     |         |           | $ | 3.56  |             |         |  | 51    |  |  | $       | 6.41  |  |       |  | 21    |  |  | $ | 9.00  | 
|2008        |  |          | 5     |         |           | $ | 3.42  |             |         |  | 18    |  |  | $       | 6.00  |  |       |  | 18    |  |  | $ | 10.00 | 
|2009-2012   |  |          | 16    |         |           | $ | 3.74  |             |         |  | 17    |  |  | $       | 6.00  |  |       |  | 17    |  |  | $ | 8.75  | 
|Oil         |  |          |       |         |           |   |       |             |         |  |       |  |  |         |       |  |       |  |       |  |  |   |       | 
|2006        |  |          | 1,428 |         |           | $ | 52.45 |             |         |  |      |  |  |         |      |  |       |  |      |  |  |   |      | 
|2007        |  |          | 192   |         |           | $ | 35.15 |             |         |  | 1,009 |  |  | $       | 55.00 |  |       |  | 1,009 |  |  | $ | 60.38 | 
|2008        |  |          |      |         |           |   |      |             |         |  | 930   |  |  | $       | 55.00 |  |       |  | 930   |  |  | $ | 57.03 | 






| |     |                                                                                                                                       
| | --- | --------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Volumes presented are TBtu for natural gas and MBbl for oil.
    Prices presented are per MMBtu of natural gas and per Bbl
    of oil.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Cash Margining Requirements on Derivative Contracts. A
    substantial portion of our natural gas and oil derivative
    contracts are at prices significantly below current market
    prices, which has resulted in us posting substantial cash margin
    deposits with the counterparties for the value of these
    instruments. During 2005, we experienced volatility in the level
    of margins posted, primarily resulting from the increase in
    commodity prices as a result of Hurricanes Katrina and Rita. The
    resulting increased commodity prices required us to post
    $0.7 billion of additional cash margin deposits with
    counterparties to our derivative contracts. In the fourth
    quarter of 2005, $0.5 billion of margin deposits had been
    returned to us due to a decrease in prices and settlements, but
    these cash recoveries were largely offset by cash collateral
    requirements relating to an agreement we entered into to assign
    a majority of the contracts in our power portfolio to a third
    party. In 2006, we expect approximately $1.2 billion of
    collateral supported by both cash margin deposits and letters of
    credit, to be returned to us, which includes the collateral that
    we anticipate to receive upon completion of the assignment of the

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| |  |                                                                                                                                                                
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | positions related to our power portfolio in December 2005. If
    commodity prices decrease, we could recover some of this amount
    earlier than anticipated.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | Any future increases in prices could have a significant impact
    on our operating cash flows as additional margin deposits would
    be required. Based on our derivative positions at
    December 31, 2005, a $0.10/MMBtu increase in the price of
    natural gas would result in an increase in our margin
    requirements by $19 million for transactions that settle in
    2006, $6 million for transactions that settle in 2007,
    $5 million for transactions that settle in 2008 and
    $13 million for transactions that settle in 2009 and
    thereafter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Hurricanes.Hurricanes Katrina and Rita impacted
    virtually all producers and transporters doing business in the
    Gulf of Mexico region. We incurred significant damage to our
    property, including our transmission facilities. To date, we
    estimate total repair costs related to these storms to be
    approximately $457 million, of which $380 million is
    claimed through our property damage insurer, which is a mutual
    insurance company that is subject to individual and aggregate
    loss limits by event. Based on the level of our claims and the
    claims of all insured parties, we will not receive a portion of
    the costs we will incur to repair our systems. Based on current
    estimates, we anticipate that up to $164 million of capital
    and maintenance expenditures claimed through our property damage
    insurer will not be recovered due to these limits. Also, the
    timing of reimbursements we will receive may occur later than
    the capital expenditures on the damaged facilities, which may
    increase our net capital expenditures for 2006 and could
    negatively impact our estimates of cash flow.



Capital Resources


Existing Financing Facilities.


|                                         |  |   |        |  
|---------------------------------------- |  | - | ------ | -
|Debt obligations as of December 31, 2004 |  | $ | 19,196 |  
|Principal amounts borrowed               |  |   | 1,638  |  
|Repayment/retirement of principal        |  |   | (1,912 | )
|Sale of
    entities(1)                  |  |   | (575   | )
|Other                                    |  |   | (113   | )
|                                         |  |   |       
|Total debt as of December 31, 2005       |  | $ | 18,234 |  
|                                         |  |   |       






|    |                                                                              
|--- | -----------------------------------------------------------------------------
|(1) | Related to the sale of Cedar Brakes I and II and Mohawk River
    Funding II.





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $3 billion credit agreement. As of December 31,
    2005, we had borrowed $1.23 billion as a term loan and issued
    approximately $1.7 billion of letters of credit under this
    credit agreement. The agreement is collateralized by our equity
    interests in TGP, EPNG, ANR, CIG, Southern Gas Storage Company
    (which owns an interest in Bear Creek Storage Company) and ANR
    Storage Company.
|
| |  | $500 million revolving credit facility. In August
    2005, our subsidiary, EEPC, entered into and borrowed
    $500 million under a five-year revolving credit facility
    bearing interest at LIBOR plus                                                                                                                                                                                                    

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | 1.875%. Amounts borrowed were used to partially fund the
    acquisition of Medicine Bow. The facility can be utilized for
    funded borrowings or for the issuance of letters of credit and
    is collateralized by certain EEPC natural gas and oil production
    properties. Our current intent is to issue $500 million to
    $800 million of our common stock to repay amounts borrowed
    under this facility and for other purposes, the timing of which
    is dependent on market conditions.                                                                                                                             
|
| |  | $400 million revolving credit agreement. In November
    2005, we entered into a $400 million revolving borrowing
    base credit agreement collateralized by certain natural gas and
    oil production properties owned by one of our subsidiaries,
    which is also a co-borrower. Under the agreement we have initial
    borrowing availability of $300 million. The credit
    agreement can be used for revolving credit loans or for the
    issuance of letters of credit and will mature in May 2006. As of
    December 31, 2005, there were no outstanding borrowings or
    letters of credit issued under this agreement.



Overview of Cash Flow Activities for 2005
Compared to 2004




|                          |                                 |                                                          |                                 |                                                  |      |     |      |   |      |     |      |  
|------------------------- | ------------------------------- | -------------------------------------------------------- | ------------------------------- | ------------------------------------------------ | ---- | --- | ---- | - | ---- | --- | ---- | -
|                          |                                 | 2005                                                     |                                 |                                                  | 2004 |    
|                          |                                 |                                                          |                                 |                                                  |      |    
|                          |                                 | (In billions)                                            |                                
|Cash flow from operations |                                 |                                                          |                                 |                                                  |      |     |      |  
|                          | Continuing operating activities |                                                          |                                 |                                                  |      |     |      |   |     
|                          |                                 | Net loss before discontinued operations                  |                                 | $                                                | (0.7 | )   |      | $ | (0.8 | )  
|                          |                                 | Non-cash income items                                    |                                 |                                                  | 1.6  |     |      |   | 2.3  |    
|                          |                                 | Changes in assets and liabilities                        |                                 |                                                  |      |     |      |   |      |    
|                          |                                 |                                                          |                                 | Change in broker margin deposits                 |      |     | (0.7 | ) |      |     | 0.1  |  
|                          |                                 |                                                          |                                 | Settlements of derivatives designated as hedges  |      |     | (0.4 | ) |      |     |     |  
|                          |                                 |                                                          |                                 | Assignment of power derivative liabilities       |      |     | (0.4 | ) |      |     |     |  
|                          |                                 |                                                          |                                 | Proceeds from entering into derivative contracts |      |     | 0.4  |   |      |     |     |  
|                          |                                 |                                                          |                                 | Changes in other assets and liabilities          |      |     | 0.5  |   |      |     | (0.5 | )
|                          |                                 |                                                          |                                 |                                                  |      |    
|                          |                                 |                                                          | Total cash flow from operations |                                                  | $    | 0.3 |      |   | $    | 1.1 |     
|                          |                                 |                                                          |                                 |                                                  |      |    
|Other cash inflows        |                                 |                                                          |                                 |                                                  |      |     |      |  
|                          | Continuing investing activities |                                                          |                                 |                                                  |      |     |      |   |     
|                          |                                 | Net proceeds from the sale of assets and investments     |                                 | $                                                | 1.4  |     |      | $ | 1.9  |    
|                          |                                 | Net proceeds from restricted cash                        |                                 |                                                  | 0.1  |     |      |   | 0.6  |    
|                          |                                 | Other                                                    |                                 |                                                  | 0.2  |     |      |   | 0.1  |    
|                          |                                 |                                                          |                                 |                                                  |      |    
|                          |                                 |                                                          | 1.7                             |                                                  |      |     | 2.6  |  
|                          |                                 |                                                          |                                 |                                                  |      |    
|                          | Continuing financing activities |                                                          |                                 |                                                  |      |     |      |   |     
|                          |                                 | Net proceeds from the issuance of long-term debt         |                                 |                                                  | 1.6  |     |      |   | 1.3  |    
|                          |                                 | Proceeds from the issuance of preferred and common stock |                                 |                                                  | 0.7  |     |      |   | 0.1  |    
|                          |                                 | Net discontinued operations activity                     |                                 |                                                  | 0.6  |     |      |   | 1.0  |    
|                          |                                 |                                                          |                                 |                                                  |      |    
|                          |                                 |                                                          | 2.9                             |                                                  |      |     | 2.4  |  
|                          |                                 |                                                          |                                 |                                                  |      |    
|                          |                                 |                                                          | Total other cash inflows        |                                                  | $    | 4.6 |      |   | $    | 5.0 |     
|                          |                                 |                                                          |                                 |                                                  |      |    

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|                    |                                 |                                                                  |                           |                    |      |     |     |   |     |     |     | 
|------------------- | ------------------------------- | ---------------------------------------------------------------- | ------------------------- | ------------------ | ---- | --- | --- | - | --- | --- | --- | 
|                    |                                 | 2005                                                             |                           |                    | 2004 |    
|                    |                                 |                                                                  |                           |                    |      |    
|                    |                                 | (In billions)                                                    |                          
|Other cash outflows |                                 |                                                                  |                           |                    |      |     |     |  
|                    | Continuing investing activities |                                                                  |                           |                    |      |     |     |   |    
|                    |                                 | Additions to property, plant, and equipment                      |                           | $                  | 1.7  |     |     | $ | 1.8 |    
|                    |                                 | Net cash paid for acquisitions                                   |                           |                    | 1.0  |     |     |   |    |    
|                    |                                 | Other                                                            |                           |                    | 0.1  |     |     |   |    |    
|                    |                                 |                                                                  |                           |                    |      |    
|                    |                                 |                                                                  | 2.8                       |                    |      |     | 1.8 |  
|                    |                                 |                                                                  |                           |                    |      |    
|                    | Continuing financing activities |                                                                  |                           |                    |      |     |     |   |    
|                    |                                 | Payments to retire long-term debt and redeem preferred interests |                           |                    | 1.7  |     |     |   | 2.5 |    
|                    |                                 | Payments of revolving credit facilities                          |                           |                    |     |     |     |   | 0.9 |    
|                    |                                 | Redemption of preferred stock of a subsidiary                    |                           |                    | 0.3  |     |     |   |    |    
|                    |                                 | Dividends paid to common stockholders                            |                           |                    | 0.1  |     |     |   | 0.1 |    
|                    |                                 | Other                                                            |                           |                    |     |     |     |   | 0.1 |    
|                    |                                 |                                                                  |                           |                    |      |    
|                    |                                 |                                                                  | 2.1                       |                    |      |     | 3.6 |  
|                    |                                 |                                                                  |                           |                    |      |    
|                    |                                 |                                                                  | Total other cash outflows |                    |      | 4.9 |     |   |     | 5.4 |    
|                    |                                 |                                                                  |                           |                    |      |    
|                    |                                 |                                                                  |                           | Net change in cash |      | $   |    |   |     | $   | 0.7 | 
|                    |                                 |                                                                  |                           |                    |      |    



| |                                          
| | -----------------------------------------
| | Cash from Continuing Operating Activities







| |                                          
| | -----------------------------------------
| | Cash From Continuing Investing Activities





|                                                                 |                                             |   |     |     | 
|---------------------------------------------------------------- | ------------------------------------------- | - | --- | --- | 
|Production exploration, development and acquisition expenditures |                                             | $ | 1.8 |    
|Pipeline expansion, maintenance and integrity projects           |                                             |   | 0.8 |    
|Other                                                            |                                             |   | 0.1 |    
|                                                                 |                                             |   |    
|                                                                 | Total capital expenditures and acquisitions |   | $   | 2.7 | 
|                                                                 |                                             |   |    

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| |                                          
| | -----------------------------------------
| | Cash From Continuing Financing Activities



Off-Balance Sheet Arrangements




Guarantees








Letters of Credit




Interests in Variable Interest Entities




45



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##### Table of Contents





Contractual Obligations




|                                                               |                                   |               |     |       |      |  |    |       |  |  |      |       |  |      |    |       |            |  |    |       |  |  |    |        |  |  |     |        | 
|-------------------------------------------------------------- | --------------------------------- | ------------- | --- | ----- | ---- |  | -- | ----- |  |  | ---- | ----- |  | ---- | -- | ----- | ---------- |  | -- | ----- |  |  | -- | ------ |  |  | --- | ------ | 
|                                                               |                                   | 2006          |     |       | 2007 |  |    | 2008  |  |  | 2009 |       |  | 2010 |    |       | Thereafter |  |    | Total | 
|                                                               |                                   |               |     |       |      |  |    |       |  |  |      |       |  |      |    |       |            |  |    |       | 
|                                                               |                                   | (In millions) |    
|Long-term financing
    obligations:(1)                        |                                   |               |     |       |      |  |    |       |  |  |      |       |  |      |    |       |            |  |    |       |  |  |    |        |  |  |     |       
|                                                               | Principal                         |               | $   | 1,211 |      |  | $  | 781   |  |  | $    | 676   |  |      | $  | 2,479 |            |  | $  | 2,058 |  |  | $  | 11,085 |  |  | $   | 18,290 | 
|                                                               | Interest                          |               |     | 1,316 |      |  |    | 1,281 |  |  |      | 1,212 |  |      |    | 1,145 |            |  |    | 945   |  |  |    | 10,939 |  |  |     | 16,838 | 
|Other contractual
    liabilities(2)                           |                                   |               | 101 |       |      |  | 47 |       |  |  | 32   |       |  |      | 15 |       |            |  | 12 |       |  |  | 50 |        |  |  | 257 |       
|Operating
    leases(3)                                        |                                   |               | 81  |       |      |  | 71 |       |  |  | 14   |       |  |      | 11 |       |            |  | 7  |       |  |  | 33 |        |  |  | 217 |       
|Other contractual commitments and purchase
    obligations:(4) |                                   |               |     |       |      |  |    |       |  |  |      |       |  |      |    |       |            |  |    |       |  |  |    |        |  |  |     |       
|                                                               | Transportation and
    storage(5) |               |     | 112   |      |  |    | 100   |  |  |      | 94    |  |      |    | 91    |            |  |    | 89    |  |  |    | 368    |  |  |     | 854    | 
|                                                               | Commodity
    purchases(6)        |               |     | 33    |      |  |    | 32    |  |  |      | 21    |  |      |    | 14    |            |  |    | 14    |  |  |    | 28     |  |  |     | 142    | 
|                                                               | Other(7)                          |               |     | 377   |      |  |    | 48    |  |  |      | 52    |  |      |    | 22    |            |  |    | 22    |  |  |    | 41     |  |  |     | 562    | 
|                                                               |                                   |               |     |       |      |  |    |       |  |  |      |       |  |      |    |       |            |  |    |       | 
|                                                               | Total contractual obligations     |               | $   | 3,231 |      |  | $  | 2,360 |  |  | $    | 2,101 |  |      | $  | 3,777 |            |  | $  | 3,147 |  |  | $  | 22,544 |  |  | $   | 37,160 | 
|                                                               |                                   |               |     |       |      |  |    |       |  |  |      |       |  |      |    |       |            |  |    |       | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | See Part II, Item 8, Financial Statements and
    Supplementary Data, Note 14.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(2) | Includes contractual, environmental and other obligations
    included in other current and noncurrent liabilities in our
    balance sheet. Excludes expected contributions to our pension
    and other postretirement benefit plans of $61 million in
    2006 and $176 million for the four year period ended
    December 31, 2010, because these expected contributions are
    not contractually required. Also excludes potential amounts due
    under an indemnification of a former subsidiary for benefits
    being paid to a closed group of retirees. We have a liability of
    approximately $380 million related to the litigation
    associated with this matter as of December 31, 2005.
|(3) | See Part II, Item 8, Financial Statements and
    Supplementary Data, Note 16.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(4) | Other contractual commitments and purchase obligations are
    defined as legally enforceable agreements to purchase goods or
    services that have fixed or minimum quantities and fixed or
    minimum variable price provisions, and that detail approximate
    timing of the underlying obligations.                                                                                                                                                                                                                                                                                                                                                                                                   
|(5) | These are commitments for demand charges for firm access to
    natural gas transportation and storage capacity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(6) | Includes purchase commitments for natural gas and power.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(7) | Includes commitments for drilling and seismic activities in our
    exploration and production operations and various other
    maintenance, engineering, procurement and construction
    contracts, as well as service and license agreements used by our
    other operations.                                                                                                                                                                                                                                                                                                                                                                                                                            

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Commodity-based Derivative Contracts






|                                        |                                      |               |                                         |      |          |      |   |          |      |      |          |      |      |          |   |      |       |      |   |     |     |     |   |        |        |      |  
|--------------------------------------- | ------------------------------------ | ------------- | --------------------------------------- | ---- | -------- | ---- | - | -------- | ---- | ---- | -------- | ---- | ---- | -------- | - | ---- | ----- | ---- | - | --- | --- | --- | - | ------ | ------ | ---- | -
|                                        |                                      | Maturity      |                                         |      | Maturity |      |   | Maturity |      |      | Maturity |      |      | Maturity |   |      | Total |     
|                                        |                                      | Less Than     |                                         |      | 1 to 3   |      |   | 4 to 5   |      |      | 6 to 10  |      |      | Beyond   |   |      | Fair  |     
|                                        |                                      | 1 Year        |                                         |      | Years    |      |   | Years    |      |      | Years    |      |      | 10 Years |   |      | Value |     
|                                        |                                      |               |                                         |      |          |      |   |          |      |      |          |      |      |          |   |      |       |     
|                                        |                                      | (In millions) |                                        
|Derivatives designated as
    hedges(1) |                                      |               |                                         |      |          |      |   |          |      |      |          |      |      |          |   |      |       |      |   |     |     |     |   |       
|                                        | Assets                               |               | $                                       | 31   |          |      | $ |         |      |      | $        |     |      |          | $ |     |       |      | $ |    |     |     | $ | 31     |       
|                                        | Liabilities                          |               |                                         | (570 | )        |      |   | (62      | )    |      |          | (34  | )    |          |   | (18  | )     |      |   |    |     |     |   | (684   | )     
|                                        |                                      |               |                                         |      |          |      |   |          |      |      |          |      |      |          |   |      |       |     
|                                        |                                      |               | Total derivatives designated as hedges  |      |          | (539 | ) |          |      | (62  | )        |      |      | (34      | ) |      |       | (18  | ) |     |     |    |   |        |        | (653 | )
|                                        |                                      |               |                                         |      |          |      |   |          |      |      |          |      |      |          |   |      |       |     
|Other commodity-based derivatives       |                                      |               |                                         |      |          |      |   |          |      |      |          |      |      |          |   |      |       |      |   |     |     |     |   |       
|                                        | Exchange-traded
    positions(1)     |               |                                         |      |          |      |   |          |      |      |          |      |      |          |   |      |       |      |   |     |     |     |   |        |       
|                                        |                                      | Assets        |                                         |      | 191      |      |   |          | 360  |      |          |      | 158  |          |   |      |      |      |   |     |    |     |   |        | 709    |     
|                                        |                                      | Liabilities   |                                         |      | (155     | )    |   |          | (1   | )    |          |      |     |          |   |      |      |      |   |     |    |     |   |        | (156   | )   
|                                        | Non-exchange traded
    positions(2) |               |                                         |      |          |      |   |          |      |      |          |      |      |          |   |      |       |      |   |     |     |     |   |        |       
|                                        |                                      | Assets        |                                         |      | 414      |      |   |          | 467  |      |          |      | 229  |          |   |      | 135   |      |   |     | 16  |     |   |        | 1,261  |     
|                                        |                                      | Liabilities   |                                         |      | (693     | )    |   |          | (979 | )    |          |      | (501 | )        |   |      | (377  | )    |   |     | (27 | )   |   |        | (2,577 | )   
|                                        |                                      |               |                                         |      |          |      |   |          |      |      |          |      |      |          |   |      |       |     
|                                        |                                      |               | Total other commodity-based derivatives |      |          | (243 | ) |          |      | (153 | )        |      |      | (114     | ) |      |       | (242 | ) |     |     | (11 | ) |        |        | (763 | )
|                                        |                                      |               |                                         |      |          |      |   |          |      |      |          |      |      |          |   |      |       |     
|                                        | Total commodity-based derivatives    |               | $                                       | (782 | )        |      | $ | (215     | )    |      | $        | (148 | )    |          | $ | (260 | )     |      | $ | (11 | )   |     | $ | (1,416 | )     
|                                        |                                      |               |                                         |      |          |      |   |          |      |      |          |      |      |          |   |      |       |     






|    |                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | These positions are traded on active exchanges such as the New
    York Mercantile Exchange, the International Petroleum Exchange
    and the London Clearinghouse.                                                                                                                
|   
|(2) | During the first quarter of 2006, we assigned our contracts to
    supply natural gas to the Jacksonville Electric Authority and
    The City of Lakeland for no cash consideration. We will record a
    gain of approximately $50 million related to this
    assignment in 2006.

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|                                                         |                                                                         |                                                       |      |       |             |   |       |             |        |   |        |        |        |  
|-------------------------------------------------------- | ----------------------------------------------------------------------- | ----------------------------------------------------- | ---- | ----- | ----------- | - | ----- | ----------- | ------ | - | ------ | ------ | ------ | -
|                                                         |                                                                         |                                                       |      | Other |             |   | Total |            
|                                                         |                                                                         | Derivatives                                           |      |       | Commodity-  |   |       | Commodity-  |       
|                                                         |                                                                         | Designated                                            |      |       | Based       |   |       | Based       |       
|                                                         |                                                                         | as Hedges                                             |      |       | Derivatives |   |       | Derivatives |       
|                                                         |                                                                         |                                                       |      |       |             |   |       |             |       
|                                                         |                                                                         | (In millions)                                         |     
|Fair value of contracts outstanding at December 31, 2003 |                                                                         | $                                                     | (31  | )     |             | $ | 1,437 |             |        | $ | 1,406  |       
|                                                         |                                                                         |                                                       |      |       |             |   |       |             |       
|                                                         | Fair value of contract settlements during the period                    |                                                       |      | 49    |             |   |       | (848        | )      |   |        | (799   | )     
|                                                         | Change in fair value of contracts                                       |                                                       |      | 38    |             |   |       | (641        | )      |   |        | (603   | )     
|                                                         | Designation of other commodity based derivatives as
    hedges(1)       |                                                       |      | (592  | )           |   |       | 592         |        |   |        |       |       
|                                                         | Option premiums
    paid(2)                                             |                                                       |      |      |             |   |       | 64          |        |   |        | 64     |       
|                                                         |                                                                         |                                                       |      |       |             |   |       |             |       
|                                                         |                                                                         | Net change in contracts outstanding during the period |      |       | (505        | ) |       |             | (833   | ) |        |        | (1,338 | )
|                                                         |                                                                         |                                                       |      |       |             |   |       |             |       
|Fair value of contracts outstanding at December 31, 2004 |                                                                         |                                                       | (536 | )     |             |   | 604   |             |        |   | 68     |       
|                                                         |                                                                         |                                                       |      |       |             |   |       |             |       
|                                                         | Fair value of contract settlements during the
    period(3)             |                                                       |      | 665   |             |   |       | (174        | )      |   |        | 491    |       
|                                                         | Change in fair value of contracts                                       |                                                       |      | (793  | )           |   |       | (767        | )      |   |        | (1,560 | )     
|                                                         | Assignment of power contracts                                           |                                                       |      |      |             |   |       | (442        | )      |   |        | (442   | )     
|                                                         | Reclassification of derivatives that no longer qualify as
    hedges(4) |                                                       |      | 11    |             |   |       | (11         | )      |   |        |       |       
|                                                         | Option premiums
    paid(2)                                             |                                                       |      |      |             |   |       | 27          |        |   |        | 27     |       
|                                                         |                                                                         |                                                       |      |       |             |   |       |             |       
|                                                         |                                                                         | Net change in contracts outstanding during the period |      |       | (117        | ) |       |             | (1,367 | ) |        |        | (1,484 | )
|                                                         |                                                                         |                                                       |      |       |             |   |       |             |       
|Fair value of contracts outstanding at December 31, 2005 |                                                                         | $                                                     | (653 | )     |             | $ | (763  | )           |        | $ | (1,416 | )     
|                                                         |                                                                         |                                                       |      |       |             |   |       |             |       






|    |                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents the fair value of the contracts on the day they were
    designated as hedges.                                                                                                                                                                                                                                                                                                               
|(2) | Amounts are net of premiums received.                                                                                                                                                                                                                                                                                                                                                                   
|(3) | Includes derivative contracts sold in conjunction with the sales
    of Cedar Brakes I and II and Mohawk River Funding II
    and amounts paid in conjunction with the assignment of our
    Cordova tolling agreement. In connection with the sales of Cedar
    Brakes I and II and Mohawk River Funding II, we also
    assigned or terminated a number of our other commodity-based
    derivatives.
|(4) | The loss of hedge accounting was a result of a reduction of
    anticipated production volumes.                                                                                                                                                                                                                                                                                                         

Fair Value of Contract Settlements.


Changes in Fair Value of Contracts.


Assignment of Power Contracts.


Results of Operations


Overview




48



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|                                                                  |                                 |                   |        |       |      |  |        |       |       |  |        |        |       | 
|----------------------------------------------------------------- | ------------------------------- | ----------------- | ------ | ----- | ---- |  | ------ | ----- | ----- |  | ------ | ------ | ----- | 
|                                                                  |                                 | 2005              |        |       | 2004 |  |        | 2003  |      
|                                                                  |                                 |                   |        |       |      |  |        |       |      
|                                                                  |                                 | (In millions)     |       
|Segment                                                           |                                 |                   |        |       |      |  |        |       |       |  |        |       
|                                                                  | Pipelines                       |                   | $      | 1,226 |      |  | $      | 1,331 |       |  | $      | 1,234  |      
|                                                                  | Exploration and Production      |                   |        | 696   |      |  |        | 734   |       |  |        | 1,091  |      
|                                                                  | Marketing and Trading           |                   |        | (837  | )    |  |        | (539  | )     |  |        | (809   | )    
|                                                                  | Power                           |                   |        | (451  | )    |  |        | (576  | )     |  |        | (40    | )    
|                                                                  | Field Services                  |                   |        | 285   |      |  |        | 84    |       |  |        | 129    |      
|                                                                  |                                 |                   |        |       |      |  |        |       |      
|                                                                  |                                 | Segment EBIT      |        |       | 919  |  |        |       | 1,034 |  |        |        | 1,605 | 
|Corporate and other                                               |                                 |                   | (521   | )     |      |  | (217   | )     |       |  | (852   | )     
|                                                                  |                                 |                   |        |       |      |  |        |       |      
|                                                                  |                                 | Consolidated EBIT |        |       | 398  |  |        |       | 817   |  |        |        | 753   | 
|Interest and debt expense                                         |                                 |                   | (1,380 | )     |      |  | (1,607 | )     |       |  | (1,790 | )     
|Distributions on preferred interests of consolidated subsidiaries |                                 |                   | (9     | )     |      |  | (25    | )     |       |  | (52    | )     
|Income taxes                                                      |                                 |                   | 289    |       |      |  | (14    | )     |       |  | 484    |       
|                                                                  |                                 |                   |        |       |      |  |        |       |      
|                                                                  | Loss from continuing operations |                   |        | (702  | )    |  |        | (829  | )     |  |        | (605   | )    
|Discontinued operations, net of income taxes                      |                                 |                   | 100    |       |      |  | (118   | )     |       |  | (1,269 | )     
|Cumulative effect of accounting changes, net of income taxes      |                                 |                   | (4     | )     |      |  |       |       |       |  | (9     | )     
|                                                                  |                                 |                   |        |       |      |  |        |       |      
|                                                                  | Net loss                        |                   | $      | (606  | )    |  | $      | (947  | )     |  | $      | (1,883 | )    
|                                                                  |                                 |                   |        |       |      |  |        |       |      



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Pipelines Segment


Overview










|                |  |        |        |                  |                    |  |    | 
|--------------- |  | ------ | ------ | ---------------- | ------------------ |  | -- | 
|                |  |        |        | Percent of Total |                   
|                |  | BBtu/d |        |                  | Available Capacity | 
|                |  |        |        |                  |                    | 
|2006            |  |        | 4,437  |                  |                    |  | 14 | 
|2007            |  |        | 5,874  |                  |                    |  | 19 | 
|2008            |  |        | 2,931  |                  |                    |  | 9  | 
|2009 and beyond |  |        | 18,406 |                  |                    |  | 58 | 

50



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##### Table of Contents



Operating Results




|                                   |                                          |                             |        |       |        |   |        |       |        |   |        |       |        | 
|---------------------------------- | ---------------------------------------- | --------------------------- | ------ | ----- | ------ | - | ------ | ----- | ------ | - | ------ | ----- | ------ | 
|                                   |                                          | 2005                        |        |       | 2004   |   |        | 2003  |       
|                                   |                                          |                             |        |       |        |   |        |       |       
|                                   |                                          | (In millions, except volume |       
|                                   |                                          | amounts)                    |       
|Operating revenues                 |                                          | $                           | 2,783  |       |        | $ | 2,651  |       |        | $ | 2,647  |      
|Operating expenses                 |                                          |                             | (1,764 | )     |        |   | (1,522 | )     |        |   | (1,584 | )    
|                                   |                                          |                             |        |       |        |   |        |       |       
|                                   | Operating income                         |                             |        | 1,019 |        |   |        | 1,129 |        |   |        | 1,063 |       
|Other income                       |                                          |                             | 207    |       |        |   | 202    |       |        |   | 171    |      
|                                   |                                          |                             |        |       |        |   |        |       |       
|                                   | EBIT                                     |                             | $      | 1,226 |        |   | $      | 1,331 |        |   | $      | 1,234 |       
|                                   |                                          |                             |        |       |        |   |        |       |       
|Throughput volumes
    (BBtu/d)(1) |                                          |                             |        |       |        |   |        |       |        |   |        |      
|                                   | TGP                                      |                             |        | 4,493 |        |   |        | 4,519 |        |   |        | 4,760 |       
|                                   | EPNG and MPC                             |                             |        | 4,214 |        |   |        | 4,235 |        |   |        | 4,066 |       
|                                   | ANR                                      |                             |        | 4,100 |        |   |        | 4,067 |        |   |        | 4,232 |       
|                                   | CIG, WIC and CPG                         |                             |        | 3,641 |        |   |        | 2,795 |        |   |        | 2,743 |       
|                                   | SNG                                      |                             |        | 1,984 |        |   |        | 2,163 |        |   |        | 2,101 |       
|                                   | Equity investments (our ownership share) |                             |        | 2,833 |        |   |        | 2,798 |        |   |        | 2,433 |       
|                                   |                                          |                             |        |       |        |   |        |       |       
|                                   |                                          | Total throughput            |        |       | 21,265 |   |        |       | 20,577 |   |        |       | 20,335 | 
|                                   |                                          |                             |        |       |        |   |        |       |       






|    |                                         
|--- | ----------------------------------------
|(1) | Volumes exclude intrasegment activities.



|                                                                                              |                      |                         |     |      |                         |   |     |       |      |   |        |   |  |         |     |      |         |   |     |       |  |   |        |    |  |   |     |    |  |   |     |    | 
|--------------------------------------------------------------------------------------------- | -------------------- | ----------------------- | --- | ---- | ----------------------- | - | --- | ----- | ---- | - | ------ | - |  | ------- | --- | ---- | ------- | - | --- | ----- |  | - | ------ | -- |  | - | --- | -- |  | - | --- | -- | 
|                                                                                              |                      | 2005 to 2004            |     |      | 2004 to 2003            |  
|                                                                                              |                      |                         |     |      |                         |  
|                                                                                              |                      |                         |     | EBIT |                         |   |     |       | EBIT |  
|                                                                                              |                      | Revenue                 |     |      | Expense                 |   |     | Other |      |   | Impact |   |  | Revenue |     |      | Expense |   |     | Other |  |   | Impact |   
|                                                                                              |                      |                         |     |      |                         |   |     |       |      |   |        |   |  |         |     |      |         |   |     |       |  |   |        |   
|                                                                                              |                      | Favorable/(Unfavorable) |     |      | Favorable/(Unfavorable) |  
|                                                                                              |                      | (In millions)           |     |      | (In millions)           |  
|Pipeline expansions                                                                           |                      | $                       | 82  |      |                         | $ | (28 | )     |      | $ | (2     | ) |  | $       | 52  |      |         | $ | 33  |       |  | $ | (6     | )  |  | $ | (6  | )  |  | $ | 21  |   
|Contract modifications/terminations/settlements                                               |                      |                         | 48  |      |                         |   |    |       |      |   | 1      |   |  |         | 49  |      |         |   | (93 | )     |  |   | 37     |    |  |   |    |    |  |   | (56 | ) 
|Gas not used in operations, revaluations, processing revenues
    and other natural gas sales |                      |                         | 1   |      |                         |   | (11 | )     |      |   |       |   |  |         | (10 | )    |         |   | 79  |       |  |   | (19    | )  |  |   |    |    |  |   | 60  |   
|Hurricanes Katrina and Rita                                                                   |                      |                         | (13 | )    |                         |   | (29 | )     |      |   |       |   |  |         | (42 | )    |         |   |    |       |  |   |       |    |  |   |    |    |  |   |    |   
|General and administrative expense                                                            |                      |                         |    |      |                         |   | (60 | )     |      |   |       |   |  |         | (60 | )    |         |   |    |       |  |   | (44    | )  |  |   |    |    |  |   | (44 | ) 
|Operating costs                                                                               |                      |                         |    |      |                         |   | (43 | )     |      |   |       |   |  |         | (43 | )    |         |   |    |       |  |   | 130    |    |  |   |    |    |  |   | 130 |   
|Impairments of pipeline development projects                                                  |                      |                         |    |      |                         |   | (46 | )     |      |   |       |   |  |         | (46 | )    |         |   |    |       |  |   |       |    |  |   |    |    |  |   |    |   
|Other regulatory matters                                                                      |                      |                         |    |      |                         |   | (4  | )     |      |   | 1      |   |  |         | (3  | )    |         |   |    |       |  |   | (9     | )  |  |   | (19 | )  |  |   | (28 | ) 
|Equity earnings from Citrus                                                                   |                      |                         |    |      |                         |   |    |       |      |   | 1      |   |  |         | 1   |      |         |   |    |       |  |   |       |    |  |   | 22  |    |  |   | 22  |   
|Mexico investments                                                                            |                      |                         | (2  | )    |                         |   |    |       |      |   | 1      |   |  |         | (1  | )    |         |   | 9   |       |  |   | (6     | )  |  |   | 17  |    |  |   | 20  |   
|Other(1)                                                                                      |                      |                         | 16  |      |                         |   | (21 | )     |      |   | 3      |   |  |         | (2  | )    |         |   | (24 | )     |  |   | (21    | )  |  |   | 17  |    |  |   | (28 | ) 
|                                                                                              |                      |                         |     |      |                         |   |     |       |      |   |        |   |  |         |     |      |         |   |     |       |  |   |        |   
|                                                                                              | Total impact on EBIT |                         | $   | 132  |                         |   | $   | (242  | )    |   | $      | 5 |  |         | $   | (105 | )       |   | $   | 4     |  |   | $      | 62 |  |   | $   | 31 |  |   | $   | 97 | 
|                                                                                              |                      |                         |     |      |                         |   |     |       |      |   |        |   |  |         |     |      |         |   |     |       |  |   |        |   






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

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Expansions






| |     |         |  |                            |  |  |               |  |  |                           |                 |  |  |                                                 
| | --- | ------- |  | -------------------------- |  |  | ------------- |  |  | ------------------------- | --------------- |  |  | ------------------------------------------------
| |     |         |  | Anticipated Completion     |  |  | Estimated     |  |  |                          
| |     | Project |  | or In-Service Date         |  |  | Cost          |  |  | Estimated Future Revenues
| |     |         |  |                            |  |  |               |  |  |                          
| | ANR |         |  | Wisconsin 2006             |  |  | November 2006 |  |  |                           | $48 million     |  |  | 2006 - $1 million; 2007 - $8 million;           
| |     |         |  |                            |  |  |               |  |  |                           |                 |  |  | Thereafter - $11 million annually               
| | SNG |         |  | Elba Island LNG facility   |  |  | February 2006 |  |  |                           | $157  million   |  |  | $29 million annually                            
| | WIC |         |  | Piceance Basin             |  |  | March 2006    |  |  |                           | $132  million   |  |  | 2006 - $11 million; 2007 - $19 million;         
| |     |         |  |                            |  |  |               |  |  |                           |                 |  |  | Thereafter - $21 million annually               
| | CIG |         |  | Raton Basin                |  |  | September and |  |  |                           | $54 million     |  |  | 2006 - $9 million;                              
| |     |         |  |                            |  |  | December 2005 |  |  |                           |                 |  |  | Thereafter - $13 million annually               
| | TGP |         |  | Northeast ConneXion- NY/NJ |  |  | November 2006 |  |  |                           | $39 million     |  |  | 2006 - $2 million;
    Thereafter - $11 annually
| |     |         |  | Triple T                   |  |  | August 2006   |  |  |                           | $10  million(1) |  |  | (2)                                             
| |     |         |  | Louisiana Deepwater        |  |  | October 2006  |  |  |                           | $11 million     |  |  | (2)                                             




|    |                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | An additional $8 million of costs will be funded by ANR.                                                                                                                                                                                         
|(2) | Revenues for these projects will be based on throughput levels
    as natural gas reserves are developed. We expect these revenues
    to commence in 2006 for the Triple T expansion and in 2007
    for the Louisiana Deepwater Link expansion.

Contract Modifications/Terminations/ Settlements






| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ANR. In 2005, ANR (i) completed the restructuring of
    its transportation contracts with one of its shippers on its
    Southwest and Southeast Legs as well as a related gathering
    contract, which increased revenues and EBIT by $29 million
    in 2005 and (ii) settled two transportation agreements
    previously rejected in the bankruptcy of USGen New England,
    Inc., which increased EBIT by $15 million but will have no
    ongoing impact. In 2004, ANR (i) renegotiated or
    restructured several contracts including its contracts with We
    Energies, which contributed to the decrease in its revenues by
    $36 million in 2004 and (ii) terminated the Dakota
    gasification facility contract on its system, which resulted in
    lower operating revenues and lower operating expenses during
    2004, without a significant overall impact on operating income
    and EBIT.
|
| | EPNG. In 2005, EPNG benefited from the termination of the
    restrictions in 2004 on remarketing expiring capacity contracts,
    which increased revenues and EBIT by $5 million during 2005
    as compared to 2004. In 2004, EPNG experienced a reduction in
    revenues of $24 million due to the expiration at the end of
    2003 of its historical risk sharing provisions, which had
    provided revenues, net of a sharing obligation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | In December 2004, Southern California Gas Company (SoCal)
    acquired approximately 750 MMcf/d of capacity on
    EPNGs system under new contracts with various terms
    extending from 2009 to 2011 commencing September 2006. We have
    executed the relevant transportation service agreements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | with SoCal. Effective September 2006, approximately
    500 MMcf/d of capacity formerly held by SoCal to serve its
    noncore customers will be available for recontracting. We are
    remarketing the remaining expiring capacity to serve
    SoCals non-core customers or to serve new markets. We are
    also pursuing the option of using some or all of this capacity
    to provide new services to existing markets. At this time, we
    are uncertain how much of this existing capacity will be
    recontracted, and if so at what rates.

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


Hurricanes Katrina and Rita.


General and Administrative Expenses


Operating Costs.




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Impairments of Pipeline Development Projects.


Other Regulatory Matters.




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In 2003, we re-applied SFAS No. 71, Accounting for
    the Effects of Certain Types of Regulation, on our CIG and
    WIC systems, resulting in income from recording the regulatory
    assets of these systems. SFAS No. 71 requires a
    company to capitalize items that will be considered in future
    rate proceedings. Upon re-application, we recorded
    $18 million in income resulting from the capitalization of
    those items that we believe will be considered in CIGs and
    WICs future rate cases. At the same time CIG and WIC
    re-applied SFAS No. 71, they adopted the FERC
    depreciation rate for their regulated plant and equipment. This
    change resulted in an annual increase in depreciation expense of
    approximately $9 million. As of December 31, 2004, ANR
    Storage Company re-applied SFAS No. 71, which had an
    immaterial impact, and also adopted the FERC depreciation rate,
    which will result in future depreciation expense increases of
    approximately $4 million annually.
|
| | Rate Cases. Our pipeline systems periodically file for
    changes in their rates, which are subject to the approval of the
    FERC. Changes in rates and other tariff provisions resulting
    from these regulatory proceedings have the potential to
    positively or negatively impact our profitability. Currently,
    certain of our pipelines have no requirements to file new rate
    cases and expect to continue operating under their existing
    rates. However, certain other pipelines listed below are
    currently in rate proceedings or have upcoming rate actions.                                                                                                                                                                                                                                                                                                                                                                                                                                                           



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | EPNG  Filed a rate case in June 2005 proposing an
    increase in revenues of 10.6 percent or $56 million
    over current tariff rates and also proposing new services and
    revisions to certain terms and conditions of existing services,
    including the adoption of a fuel tracking mechanism. On
    January 1, 2006, the rates, which are subject to refund,
    and the fuel tracking mechanism became effective. Additionally,
    settlement discussions with major customers are underway and
    implementation of new services is scheduled for April 1,
    2006.
|
| |  | CIG  Will be required to file for new rates to be
    effective in the fourth quarter of 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | MPC  Is expected to file for new rates that would be
    effective March 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

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Exploration and Production Segment


Overview






|                                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|---------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Goal or Strategy                               |  | Actions Taken                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | Results                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Improve capital
    discipline and
    returns |  | Created a standard economic measure known as PVR (present value
    ratio) to evaluate project success. This ratio represents the
    present value of future after-tax cash flows discounted at 12%
    over total investment. Our target ratio is 1.15, which simply
    means that every $1.00 invested returns $1.15 on an after-tax,
    discounted basis over the life of the project. A rigorous
    post-spending analysis is prepared and a monthly scorecard for
    each operating region is evaluated by management.                                                                          |  | Our 2005 actual post-drill PVR was 1.19 using a $4.75/MMBtu plan
    price compared to our pre-drill PVR target of 1.23. Our PVR was
    2.11 using 2005 realized prices with the year-end strip prices
    thereafter.                                                                                                                                                                                                                                                                                                                      
|Improve portfolio management                   |  | Allocated a greater percentage of capital expenditures to
    onshore exploration and development opportunities.
    Acquired Medicine Bow to expand our presence in the Rockies and
    east Texas and GMT Energy Corporation to expand our presence in
    east Texas.
    Divested certain high cost onshore and offshore properties with
    high abandonment liabilities and only 25 Bcfe of proved
    reserves.
    Implemented a consistent risk analysis process and reduced
    capital exposure to deep drilling. Utilized comprehensive
    mapping with life-of-property exploitation plans. |  | Our onshore reserves increased from 55 percent of our total
    reserves at year end 2004 to 60 percent of our total
    reserves at year end 2005. Our unconventional coal seam reserves
    comprise approximately one third of our total reserve base.
    These longer-life reserves form a stable production base and
    should make our business more predictable.
    The Medicine Bow acquisition accelerated the changes in our
    portfolio since over 80 percent of the proved reserves overlap
    with our core onshore areas.
|Improve our production mix                     |  | Increased our onshore production through drilling activities and
    our acquisition program, including the acquisition of our equity
    investment in Four Star.                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | From 2004 to 2005, total onshore production grew as a percentage
    of total production. A substantial portion of the increase was
    organic growth as opposed to acquisitions.                                                                                                                                                                                                                                                                                                                                                           
|Grow our
    reserves base                     |  | Created a balanced acquisition and drilling program that focused
    on increasing long life reserves while converting proved
    undeveloped reserves (PUD) to producing developed reserves.                                                                                                                                                                                                                                                                                                                                                                                                             |  | During 2005, we produced 271 Bcfe (excluding our equity
    share of Four Star production of 9 Bcfe) while our drilling
    and acquisition programs generated net additions of 505 Bcfe
    (excluding our equity share of Four Star of 262 Bcfe). We also
    increased our reserves over production ratio from 7.2 years
    to 8.9 years. In 2005, we developed 22 percent of our total
    2004 year-end PUD reserves.                                                                                                                  

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|                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                                                                                                                                                                                                              
|-------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Goal or Strategy                                                           |  | Actions Taken                                                                                                                                                                                                                                                                                                                                                                                                 |  | Results                                                                                                                                                                                                                                                                                                                                                                      
|                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                                                                                                                                                                                                              
|Build an inventory
    of attractive
    lower risk
    drilling prospects |  | Improved our ability to grow by creating a regional structure
    that leverages a strong acreage position in key producing
    basins.
    Utilized detailed mapping and reservoir analysis and a
    standardized risk measurement system to identify drilling and
    workover or recompletion opportunities.
    Completed $1.1 billion of acquisitions that complement our
    existing core operations. |  | Identified 629 wells to be drilled in 2006 with 2,620 more in
    future years at a $5.50/MMBtu price forecast for natural gas
    that generates a PVR of 1.15 or greater.
    Created a balanced inventory along the entire risk spectrum with
    low risk development prospects coupled with high potential
    offshore exploration and international oil opportunities.

Significant Operational Factors Affecting the Year Ended
December 31, 2005




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Higher realized prices. We benefited from a strong
    commodity pricing environment in 2005. Realized natural gas
    prices, which include the impact of our hedges, increased
    10 percent while oil, condensate and NGL prices increased
    32 percent compared to 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Average daily production of 743 MMcfe/d (excluding
    24 MMcfe/d from our equity investment in Four Star).
    Our average daily equivalent production decreased from 2004
    primarily due to several hurricanes in the Gulf of Mexico, which
    caused us to shut in significant volumes in our Gulf of Mexico
    and south Louisiana region. We have continued to increase
    production volumes in our Onshore region as a result of our
    successful drilling and acquisition programs. However,
    production volumes in our Gulf of Mexico and south Louisiana
    region, adjusted for the impact of hurricanes, and Texas Gulf
    Coast region continued to gradually decrease as drilling
    programs and overall lower capital spending in those areas have
    not been sufficient to offset the historically steep production
    decline rates in these regions.                                                                                                                                                                                                                                        
|
| |  | Impact of hurricanes on production volumes. The Gulf
    Coast hurricanes negatively impacted our annual production by
    approximately 12 Bcfe or 34 MMcfe/d during 2005. Prior
    to Hurricane Katrina in late August 2005, our production from
    the Gulf of Mexico was about 205 MMcfe/d. A substantial
    portion of our shut-in production from Hurricane Katrina was
    brought back online during September 2005 to a level of about
    170 MMcfe/d just prior to Hurricane Rita. We continue to
    experience substantial shut-in volumes from Hurricane Rita;
    however, Gulf of Mexico production levels have returned to
    approximately 130 MMcfe/d at December 31, 2005 and
    currently remain at that level. We expect the majority of the
    remaining operated Gulf of Mexico production to come back online
    during the first half of 2006. Also impacted were our onshore
    Texas Gulf Coast and Arklatex areas, where damage from Hurricane
    Rita initially impacted approximately 60 MMcfe/d of
    production. However, production was restored within a few days
    of the event.
|
| |  | Drilling results. In 2005, we participated in drilling a
    total of 483 gross wells with a 99 percent success
    rate and a PVR of 1.19 based on a plan price of $4.75/MMBtu. Our
    drilling results by region were as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

Onshore region.


Texas Gulf Coast region.


Gulf of Mexico and south Louisiana region.


56



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##### Table of Contents





Outlook for 2006






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Capital expenditures of approximately $1 billion, excluding
    acquisitions;                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | Average daily production volumes for the year of approximately
    755 MMcfe/d to 780 MMcfe/d, which excludes approximately 70
    MMcfe/d from our equity interest in Four Star. Our daily
    production volumes in Brazil averaged approximately
    53 MMcfe/d during 2005. Our Brazilian production was
    reduced by about 30 MMcfe/d in February 2006 due to a
    contractual decrease in our interest from 79 percent to 35
    percent in UnoPasos production in Brazil as a result of
    achieving payout;
|
| |  | Average cash operating costs of approximately $1.64/Mcfe to
    $1.71/Mcfe for the year;                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Domestic unit of production depletion rate of $2.22/Mcfe in the
    first quarter of 2006. This compares to $2.16/Mcfe in the fourth
    quarter of 2005. The increase is expected due to higher finding
    and development costs and the costs of acquired reserves;                                                                                                                                                                                                                                                  
|
| |  | Brazilian unit of production depletion rate of $1.96/ Mcfe in
    the first quarter of 2006. This compares to $2.39/ Mcfe in the
    fourth quarter of 2005; and                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Significant industry-wide increases in drilling and oilfield
    service costs that will require constant monitoring of capital
    spending programs and a mitigation effort designed to manage and
    improve field efficiency.                                                                                                                                                                                                                                                                                      

Production Hedge Position






57



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Natural
Gas


|             |  |               |        |        |         |   |      |              |        |  |             |  |  |        |      |  |        |  |        |        |  |   |        |        |  |        |        |  |        |   |      |  |  |  |        |  |  |   |      | 
|------------ |  | ------------- | ------ | ------ | ------- | - | ---- | ------------ | ------ |  | ----------- |  |  | ------ | ---- |  | ------ |  | ------ | ------ |  | - | ------ | ------ |  | ------ | ------ |  | ------ | - | ---- |  |  |  | ------ |  |  | - | ---- | 
|             |  | Quarter Ended |       
|             |  |               |       
|             |  | March 31      |        |        | June 30 |   |      | September 30 |        |  | December 31 |  |  | Total  |     
|             |  |               |        |        |         |   |      |              |        |  |             |  |  |        |     
|             |  |               |        | Hedged |         |   |      |              | Hedged |  |             |  |  | Hedged |      |  |        |  | Hedged |        |  |   |        | Hedged | 
|             |  |               |        | Price  |         |   |      |              | Price  |  |             |  |  | Price  |      |  |        |  | Price  |        |  |   |        | Price  | 
|             |  | Volume        |        |        | (per    |   |      | Volume       |        |  | (per        |  |  | Volume |      |  | (per   |  |        | Volume |  |   | (per   |        |  | Volume |        |  | (per   |  
|             |  | (BBtu)        |        |        | MMBtu)  |   |      | (BBtu)       |        |  | MMBtu)      |  |  | (BBtu) |      |  | MMBtu) |  |        | (BBtu) |  |   | MMBtu) |        |  | (BBtu) |        |  | MMBtu) |  
|             |  |               |        |        |         |   |      |              |        |  |             |  |  |        |      |  |        |  |        |        |  |   |        |        |  |        |        |  |        |  
|2006(1)      |  |               | 21,349 |        |         | $ | 7.07 |              |        |  | 21,367      |  |  | $      | 6.01 |  |        |  | 21,385 |        |  | $ | 6.01   |        |  |        | 21,385 |  |        | $ | 6.28 |  |  |  | 85,486 |  |  | $ | 6.34 | 
|2007         |  |               | 1,579  |        |         | $ | 3.79 |              |        |  | 1,447       |  |  | $      | 3.64 |  |        |  | 1,155  |        |  | $ | 3.35   |        |  |        | 1,155  |  |        | $ | 3.35 |  |  |  | 5,336  |  |  | $ | 3.56 | 
|2008         |  |               | 1,142  |        |         | $ | 3.35 |              |        |  | 1,142       |  |  | $      | 3.35 |  |        |  | 1,155  |        |  | $ | 3.49   |        |  |        | 1,155  |  |        | $ | 3.49 |  |  |  | 4,594  |  |  | $ | 3.42 | 
|2009 to 2012 |  |               |        |        |         |   |      |              |        |  |             |  |  |        |      |  |        |  |        |        |  |   |        |        |  |        |        |  |        |   |      |  |  |  | 16,026 |  |  | $ | 3.74 | 




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The hedged natural gas prices in the table represent the price
    on the hedge contract when it was entered into or the price on
    the day it was designated as a hedge. The average cash prices to
    be received under these hedge contracts when they settle is
    approximately $3.95 per MMBtu for each of the quarters
    ended March 31, June 30, September 30 and
    December 31, 2006 and the year ended December 31, 2006.

Oil.


Operating Results




|                                            |                                          |                                          |     |       |        |   |      |  |  |  |     |       |       |   |  |  |  |  |     |       |       |  
|------------------------------------------- | ---------------------------------------- | ---------------------------------------- | --- | ----- | ------ | - | ---- |  |  |  | --- | ----- | ----- | - |  |  |  |  | --- | ----- | ----- | -
|                                            |                                          | 2005                                     |     |       |        |   | 2004 |  |  |  |     | 2003  |      
|                                            |                                          |                                          |     |       |        |   |      |  |  |  |     |       |      
|                                            |                                          | (In millions, except volumes and prices) |    
|Operating Revenues:                         |                                          |                                          |     |       |        |   |      |  |  |  |     |       |       |   |  |  |  |  |     |      
|                                            | Natural gas                              |                                          | $   | 1,420 |        |   |      |  |  |  | $   | 1,428 |       |   |  |  |  |  | $   | 1,831 |      
|                                            | Oil, condensate and NGL                  |                                          |     | 371   |        |   |      |  |  |  |     | 305   |       |   |  |  |  |  |     | 305   |      
|                                            | Other                                    |                                          |     | (4    | )      |   |      |  |  |  |     | 2     |       |   |  |  |  |  |     | 5     |      
|                                            |                                          |                                          |     |       |        |   |      |  |  |  |     |       |       |   | 
|                                            |                                          | Total operating revenues                 |     |       | 1,787  |   |      |  |  |  |     |       | 1,735 |   |  |  |  |  |     |       | 2,141 |  
|Transportation and net product
    costs(1) |                                          |                                          | (47 | )     |        |   |      |  |  |  | (54 | )     |       |   |  |  |  |  | (82 | )    
|                                            |                                          |                                          |     |       |        |   |      |  |  |  |     |       |       |   | 
|                                            |                                          | Total operating margin                   |     |       | 1,740  |   |      |  |  |  |     |       | 1,681 |   |  |  |  |  |     |       | 2,059 |  
|                                            |                                          |                                          |     |       |        |   |      |  |  |  |     |       |       |   | 
|Operating Expenses:                         |                                          |                                          |     |       |        |   |      |  |  |  |     |       |       |   |  |  |  |  |     |      
|                                            | Depreciation, depletion and amortization |                                          |     | (612  | )      |   |      |  |  |  |     | (548  | )     |   |  |  |  |  |     | (576  | )    
|                                            | Production
    costs(2)                  |                                          |     | (261  | )      |   |      |  |  |  |     | (210  | )     |   |  |  |  |  |     | (229  | )    
|                                            | General and administrative expenses      |                                          |     | (185  | )      |   |      |  |  |  |     | (173  | )     |   |  |  |  |  |     | (160  | )    
|                                            | Other                                    |                                          |     | (11   | )      |   |      |  |  |  |     | (24   | )     |   |  |  |  |  |     | (21   | )    
|                                            |                                          |                                          |     |       |        |   |      |  |  |  |     |       |       |   | 
|                                            |                                          | Total operating
    expenses(1)          |     |       | (1,069 | ) |      |  |  |  |     |       | (955  | ) |  |  |  |  |     |       | (986  | )
|                                            |                                          |                                          |     |       |        |   |      |  |  |  |     |       |       |   | 
|                                            | Operating income                         |                                          |     | 671   |        |   |      |  |  |  |     | 726   |       |   |  |  |  |  |     | 1,073 |      
|Other
    income(4)                         |                                          |                                          | 25  |       |        |   |      |  |  |  | 8   |       |       |   |  |  |  |  | 18  |      
|                                            |                                          |                                          |     |       |        |   |      |  |  |  |     |       |       |   | 
|                                            | EBIT                                     |                                          | $   | 696   |        |   |      |  |  |  | $   | 734   |       |   |  |  |  |  | $   | 1,091 |      
|                                            |                                          |                                          |     |       |        |   |      |  |  |  |     |       |       |   | 

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|                                                    |                                                  |                                                         |                              |         |          |      |  |      |         |    |          |         |         |      |  |     |     |    |   |         |         |      | 
|--------------------------------------------------- | ------------------------------------------------ | ------------------------------------------------------- | ---------------------------- | ------- | -------- | ---- |  | ---- | ------- | -- | -------- | ------- | ------- | ---- |  | --- | --- | -- | - | ------- | ------- | ---- | 
|                                                    |                                                  |                                                         |                              | Percent |          |      |  |      | Percent |    |          |        
|                                                    |                                                  | 2005                                                    |                              |         | Variance |      |  | 2004 |         |    | Variance |         |         | 2003 | 
|                                                    |                                                  |                                                         |                              |         |          |      |  |      |         |    |          |         |         |      | 
|Consolidated volumes, prices and costs per unit:    |                                                  |                                                         |                              |         |          |      |  |      |         |    |          |         |         |      |  |     |     |    |   |        
|                                                    | Natural gas                                      |                                                         |                              |         |          |      |  |      |         |    |          |         |         |      |  |     |     |    |   |         |        
|                                                    |                                                  | Volumes (MMcf)                                          |                              |         | 222,292  |      |  |      | (9      | )% |          |         | 244,857 |      |  |     | (28 | )% |   |         | 338,762 |     
|                                                    |                                                  | Average realized prices including hedges
    ($/Mcf)(3) |                              | $       | 6.39     |      |  |      | 10      | %  |          | $       | 5.83    |      |  |     | 8   | %  |   | $       | 5.40    |     
|                                                    |                                                  | Average realized prices excluding hedges
    ($/Mcf)(3) |                              | $       | 7.53     |      |  |      | 28      | %  |          | $       | 5.90    |      |  |     | 7   | %  |   | $       | 5.51    |     
|                                                    |                                                  | Average transportation costs ($/Mcf)                    |                              | $       | 0.18     |      |  |      | 6       | %  |          | $       | 0.17    |      |  |     | (6  | )% |   | $       | 0.18    |     
|                                                    | Oil, condensate and NGL                          |                                                         |                              |         |          |      |  |      |         |    |          |         |         |      |  |     |     |    |   |         |        
|                                                    |                                                  | Volumes (MBbls)                                         |                              |         | 8,136    |      |  |      | (8      | )% |          |         | 8,818   |      |  |     | (25 | )% |   |         | 11,778  |     
|                                                    |                                                  | Average realized prices including hedges
    ($/Bbl)(3) |                              | $       | 45.60    |      |  |      | 32      | %  |          | $       | 34.61   |      |  |     | 33  | %  |   | $       | 25.96   |     
|                                                    |                                                  | Average realized prices excluding hedges
    ($/Bbl)(3) |                              | $       | 46.43    |      |  |      | 34      | %  |          | $       | 34.75   |      |  |     | 30  | %  |   | $       | 26.64   |     
|                                                    |                                                  | Average transportation costs ($/Bbl)                    |                              | $       | 0.63     |      |  |      | (44     | )% |          | $       | 1.12    |      |  |     | 7   | %  |   | $       | 1.05    |     
|                                                    | Total equivalent volumes (MMcfe)                 |                                                         |                              | 271,107 |          |      |  | (9   | )%      |    |          | 297,766 |         |      |  | (27 | )%  |    |   | 409,432 |        
|                                                    | Production costs ($/Mcfe)                        |                                                         |                              |         |          |      |  |      |         |    |          |         |         |      |  |     |     |    |   |         |        
|                                                    |                                                  | Average lease operating costs                           |                              | $       | 0.72     |      |  |      | 20      | %  |          | $       | 0.60    |      |  |     | 43  | %  |   | $       | 0.42    |     
|                                                    |                                                  | Average production taxes                                |                              |         | 0.24     |      |  |      | 118     | %  |          |         | 0.11    |      |  |     | (21 | )% |   |         | 0.14    |     
|                                                    |                                                  |                                                         |                              |         |          |      |  |      |         |    |          |         |         |      | 
|                                                    |                                                  |                                                         | Total production
    cost(2) |         | $        | 0.96 |  |      |         | 35 | %        |         | $       | 0.71 |  |     |     | 27 | % |         | $       | 0.56 | 
|                                                    |                                                  |                                                         |                              |         |          |      |  |      |         |    |          |         |         |      | 
|                                                    | Average general and administrative cost ($/Mcfe) |                                                         | $                            | 0.68    |          |      |  | 17   | %       |    | $        | 0.58    |         |      |  | 49  | %   |    | $ | 0.39    |        
|                                                    | Unit of production depletion cost ($/Mcfe)       |                                                         | $                            | 2.10    |          |      |  | 24   | %       |    | $        | 1.69    |         |      |  | 29  | %   |    | $ | 1.31    |        
|Unconsolidated affiliate volumes (Four
    Star)(4) |                                                  |                                                         |                              |         |          |      |  |      |         |    |          |         |         |      |  |     |     |    |   |        
|                                                    | Natural gas (MMcf)                               |                                                         |                              | 6,689   |          |      |  |      |         |    |          |         |         |      |  |     |     |    |   |         |        
|                                                    | Oil, condensate and NGL (MBbls)                  |                                                         |                              | 359     |          |      |  |      |         |    |          |         |         |      |  |     |     |    |   |         |        
|                                                    | Total equivalent volumes (MMcfe)                 |                                                         |                              | 8,844   |          |      |  |      |         |    |          |         |         |      |  |     |     |    |   |         |        




|    |                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Transportation and net product costs are included in operating
    expenses on our consolidated statement of income.                                                                          
|(2) | Production costs include lease operating costs and production
    related taxes (including ad valorem and severance taxes).                                                                   
|(3) | Prices are stated before transportation costs.                                                                                                                                                
|(4) | Includes equity earnings and volumes for our investment in Four
    Star. Our equity interest in Four Star was acquired in
    connection with our acquisition of Medicine Bow in August 2005.

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| |                                                                          
| | -------------------------------------------------------------------------
| | Year Ended December 31, 2005 Compared to Year Ended
    December 31, 2004



|                                                 |                                       |                         |   |      |           |  |     |       |      |   |      |    |     |  |     |      |     |  
|------------------------------------------------ | ------------------------------------- | ----------------------- | - | ---- | --------- |  | --- | ----- | ---- | - | ---- | -- | --- |  | --- | ---- | --- | -
|                                                 |                                       | Variance                |  
|                                                 |                                       |                         |  
|                                                 |                                       | Operating               |   |      | Operating |  |     |      
|                                                 |                                       | Revenue                 |   |      | Expense   |  |     | Other |      |   | EBIT |   
|                                                 |                                       |                         |   |      |           |  |     |       |      |   |      |   
|                                                 |                                       | Favorable/(Unfavorable) |  
|                                                 |                                       | (In millions)           |  
|Natural Gas Revenue                              |                                       |                         |   |      |           |  |     |       |      |   |      |    |     |  |     |     
|                                                 | Higher realized prices in 2005        |                         | $ | 362  |           |  | $   |      |      |   | $    |   |     |  | $   | 362  |    
|                                                 | Lower volumes in 2005                 |                         |   | (133 | )         |  |     |      |      |   |      |   |     |  |     | (133 | )  
|                                                 | Impact of hedges                      |                         |   | (237 | )         |  |     |      |      |   |      |   |     |  |     | (237 | )  
|Oil, Condensate and NGL Revenue                  |                                       |                         |   |      |           |  |     |       |      |   |      |    |     |  |     |     
|                                                 | Higher realized prices in 2005        |                         |   | 95   |           |  |     |      |      |   |      |   |     |  |     | 95   |    
|                                                 | Lower volumes in 2005                 |                         |   | (24  | )         |  |     |      |      |   |      |   |     |  |     | (24  | )  
|                                                 | Impact of hedges                      |                         |   | (5   | )         |  |     |      |      |   |      |   |     |  |     | (5   | )  
|Depreciation, Depletion and Amortization Expense |                                       |                         |   |      |           |  |     |       |      |   |      |    |     |  |     |     
|                                                 | Higher depletion rate in 2005         |                         |   |     |           |  |     | (110  | )    |   |      |   |     |  |     | (110 | )  
|                                                 | Lower production volumes in 2005      |                         |   |     |           |  |     | 45    |      |   |      |   |     |  |     | 45   |    
|Production Costs                                 |                                       |                         |   |      |           |  |     |       |      |   |      |    |     |  |     |     
|                                                 | Higher lease operating costs in 2005  |                         |   |     |           |  |     | (17   | )    |   |      |   |     |  |     | (17  | )  
|                                                 | Higher production taxes in 2005       |                         |   |     |           |  |     | (34   | )    |   |      |   |     |  |     | (34  | )  
|General and Administrative Expenses              |                                       |                         |  |      |           |  | (12 | )     |      |   |     |    |     |  | (12 | )   
|Other                                            |                                       |                         |   |      |           |  |     |       |      |   |      |    |     |  |     |     
|                                                 | Earnings from investment in Four Star |                         |   |     |           |  |     |      |      |   |      | 19 |     |  |     | 19   |    
|                                                 | Other                                 |                         |   | (6   | )         |  |     | 14    |      |   |      | 5  | (1) |  |     | 13   |    
|                                                 |                                       |                         |   |      |           |  |     |       |      |   |      |   
|                                                 |                                       | Total Variances         |   | $    | 52        |  |     | $     | (114 | ) |      | $  | 24  |  |     | $    | (38 | )
|                                                 |                                       |                         |   |      |           |  |     |       |      |   |      |   






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

Operating revenues.


Depreciation, depletion and amortization expense.


Production costs.


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General and administrative expenses.


Year Ended December 31, 2004 Compared to Year Ended
December 31, 2003




|                                                 |                                      |                         |    |      |           |   |     |          |    |  |      |   |    |  |     |      |      |  
|------------------------------------------------ | ------------------------------------ | ----------------------- | -- | ---- | --------- | - | --- | -------- | -- |  | ---- | - | -- |  | --- | ---- | ---- | -
|                                                 |                                      | Variance                |   
|                                                 |                                      |                         |   
|                                                 |                                      | Operating               |    |      | Operating |   |     |         
|                                                 |                                      | Revenue                 |    |      | Expense   |   |     | Other(1) |    |  | EBIT |  
|                                                 |                                      |                         |    |      |           |   |     |          |    |  |      |  
|                                                 |                                      | Favorable/(Unfavorable) |   
|                                                 |                                      | (In millions)           |   
|Natural Gas Revenue                              |                                      |                         |    |      |           |   |     |          |    |  |      |   |    |  |     |     
|                                                 | Lower volumes in 2004                |                         | $  | (518 | )         |   | $   |         |    |  | $    |  |    |  | $   | (518 | )   
|                                                 | Higher realized prices in 2004       |                         |    | 96   |           |   |     |         |    |  |      |  |    |  |     | 96   |     
|                                                 | Impact of hedges                     |                         |    | 19   |           |   |     |         |    |  |      |  |    |  |     | 19   |     
|Oil, Condensate and NGL Revenue                  |                                      |                         |    |      |           |   |     |          |    |  |      |   |    |  |     |     
|                                                 | Lower volumes in 2004                |                         |    | (79  | )         |   |     |         |    |  |      |  |    |  |     | (79  | )   
|                                                 | Higher realized prices in 2004       |                         |    | 72   |           |   |     |         |    |  |      |  |    |  |     | 72   |     
|                                                 | Impact of hedges                     |                         |    | 7    |           |   |     |         |    |  |      |  |    |  |     | 7    |     
|Depreciation, Depletion and Amortization Expense |                                      |                         |    |      |           |   |     |          |    |  |      |   |    |  |     |     
|                                                 | Lower production volumes in 2004     |                         |    |     |           |   |     | 146      |    |  |      |  |    |  |     | 146  |     
|                                                 | Higher depletion rate in 2004        |                         |    |     |           |   |     | (115     | )  |  |      |  |    |  |     | (115 | )   
|Production Costs                                 |                                      |                         |    |      |           |   |     |          |    |  |      |   |    |  |     |     
|                                                 | Higher lease operating costs in 2004 |                         |    |     |           |   |     | (8       | )  |  |      |  |    |  |     | (8   | )   
|                                                 | Lower production taxes in 2004       |                         |    |     |           |   |     | 27       |    |  |      |  |    |  |     | 27   |     
|General and Administrative Expenses              |                                      |                         |   |      |           |   | (13 | )        |    |  |     |   |    |  | (13 | )   
|Other                                            |                                      |                         | (3 | )    |           |   | (6  | )        |    |  | 18   |   |    |  | 9   |     
|                                                 |                                      |                         |    |      |           |   |     |          |    |  |      |  
|                                                 |                                      | Total Variances         |    | $    | (406      | ) |     | $        | 31 |  |      | $ | 18 |  |     | $    | (357 | )
|                                                 |                                      |                         |    |      |           |   |     |          |    |  |      |  






|    |                                                                        
|--- | -----------------------------------------------------------------------
|(1) | Other consists of changes in transportation costs and other
    income.

Operating Revenues.


Depreciation, depletion and amortization expense.


Production costs.


General and administrative expenses.


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Marketing and Trading Segment






|               |                                                    |             |                                                                                    |        |                                                                                                                                                                                     |            |  |          | 
|-------------- | -------------------------------------------------- | ----------- | ---------------------------------------------------------------------------------- | ------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------- |  | -------- | 
|               |                                                    |             |                                                                                    |        |                                                                                                                                                                                     | Expected   | 
|               |                                                    |             |                                                                                    |        |                                                                                                                                                                                     | Earnings   | 
|Contract Type  |                                                    | Description |                                                                                    | Status |                                                                                                                                                                                     | Volatility | 
|               |                                                    |             |                                                                                    |        |                                                                                                                                                                                     |            | 
|Mark-to-Market |                                                    |             |                                                                                    |        |                                                                                                                                                                                     |            |  |         
|               | Production-related natural gas and oil derivatives |             | Option contracts with various floor and ceiling prices;
    fixed-for-float swaps. |        | Significantly impacted our results in 2005 due to changes in
    natural gas and oil prices and may continue to do so if
    volatility continues in the future.                    |            |  | High     | 
|               | Power                                              |             | PJM basis positions.                                                               |        | Impacted by changes in regional power prices in 2005 and may
    continue to be impacted if volatility continues.                                                                   |            |  | Moderate | 
|               |                                                    |             | Power supply contracts.                                                            |        | Entered into positions in December 2005 to substantially
    eliminate price risk associated with these contracts.                                                                  |            |  | Low      | 
|               | Other natural gas                                  |             | Fixed-price, physical delivery contracts; fixed-for-float swaps.                   |        | Terminated or assigned a significant number of contracts in
    recent years and anticipate additional assignments in 2006,
    which will result in further reduction in exposure. |            |  | Low      | 
|Accrual        |                                                    |             |                                                                                    |        |                                                                                                                                                                                     |            |  |         
|               | Transportation-related                             |             | Pipeline capacity contracts.                                                       |        | Experienced significant losses historically due to regional
    changes in natural gas prices. Significant expirations in 2006
    and 2015 will reduce our exposure.               |            |  | Low      | 
|               | Long-term gas supply obligations                   |             | Supply contracts with delivery obligations up to 1 Bcf/d.                          |        | Approximately 90 percent of obligations are index-priced
    and remaining fixed price obligations are hedged.                                                                      |            |  | Low      | 



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Production-related Natural Gas and Oil Derivatives




|            |  |          |       |         |           |   |       |             |         |  |       |  |  |         |       |  |       |  |       |  |  |   |       | 
|----------- |  | -------- | ----- | ------- | --------- | - | ----- | ----------- | ------- |  | ----- |  |  | ------- | ----- |  | ----- |  | ----- |  |  | - | ----- | 
|            |  | Swaps(1) |       |         | Floors(1) |   |       | Ceilings(1) |        
|            |  |          |       |         |           |   |       |             |        
|            |  |          |       | Average |           |   |       |             | Average |  |       |  |  | Average |      
|            |  | Volumes  |       |         | Price     |   |       | Volumes     |         |  | Price |  |  | Volumes |       |  | Price | 
|Natural Gas |  |          |       |         |           |   |       |             |         |  |       |  |  |         |       |  |       | 
|2006        |  |          | 25    |         |           | $ | 8.11  |             |         |  | 120   |  |  | $       | 7.00  |  |       |  | 60    |  |  | $ | 9.50  | 
|2007        |  |          |      |         |           |   |      |             |         |  | 51    |  |  | $       | 6.41  |  |       |  | 21    |  |  | $ | 9.00  | 
|2008        |  |          |      |         |           |   |      |             |         |  | 18    |  |  | $       | 6.00  |  |       |  | 18    |  |  | $ | 10.00 | 
|2009        |  |          |      |         |           |   |      |             |         |  | 17    |  |  | $       | 6.00  |  |       |  | 17    |  |  | $ | 8.75  | 
|Oil         |  |          |       |         |           |   |       |             |         |  |       |  |  |         |       |  |       |  |       |  |  |   |       | 
|2006        |  |          | 1,044 |         |           | $ | 58.81 |             |         |  |      |  |  |         |      |  |       |  |      |  |  |   |      | 
|2007        |  |          |      |         |           |   |      |             |         |  | 1,009 |  |  | $       | 55.00 |  |       |  | 1,009 |  |  | $ | 60.38 | 
|2008        |  |          |      |         |           |   |      |             |         |  | 930   |  |  | $       | 55.00 |  |       |  | 930   |  |  | $ | 57.03 | 






| |     |                                                                                                                                       
| | --- | --------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Volumes presented are TBtu for natural gas and MBbl for oil.
    Prices presented are per MMBtu of natural gas and per Bbl
    of oil.



Contracts Related to Legacy Trading Operations


Natural gas contracts.






Power Contracts.




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Operating Results




|              |                     |                |   |      |      |   |   |      |      |   |   |      |      |  
|------------- | ------------------- | -------------- | - | ---- | ---- | - | - | ---- | ---- | - | - | ---- | ---- | -
|              |                     | 2005           |   |      | 2004 |   |   | 2003 |     
|              |                     |                |   |      |      |   |   |      |     
|              |                     | (In millions)  |  
|Overall EBIT: |                     |                |   |      |      |   |   |      |      |   |   |     
|              | Gross
    margin(1) |                | $ | (796 | )    |   | $ | (508 | )    |   | $ | (636 | )   
|              | Operating expenses  |                |   | (59  | )    |   |   | (54  | )    |   |   | (183 | )   
|              |                     |                |   |      |      |   |   |      |     
|              |                     | Operating loss |   |      | (855 | ) |   |      | (562 | ) |   |      | (819 | )
|              | Other income, net   |                |   | 18   |      |   |   | 23   |      |   |   | 10   |     
|              |                     |                |   |      |      |   |   |      |     
|              |                     | EBIT           |   | $    | (837 | ) |   | $    | (539 | ) |   | $    | (809 | )
|              |                     |                |   |      |      |   |   |      |     

|                                                   |                        |                                                                 |                |              |                    |      |      |      |      |      |      |      |      |      |      |      |  
|-------------------------------------------------- | ---------------------- | --------------------------------------------------------------- | -------------- | ------------ | ------------------ | ---- | ---- | ---- | ---- | ---- | ---- | ---- | ---- | ---- | ---- | ---- | -
|                                                   |                        | 2005                                                            |                |              | 2004               |      |      | 2003 |     
|                                                   |                        |                                                                 |                |              |                    |      |      |      |     
|                                                   |                        | (In millions)                                                   |               
|Gross Margin by Significant Contract Type:         |                        |                                                                 |                |              |                    |      |      |      |      |      |      |     
|Production-Related Natural Gas and Oil Derivatives |                        |                                                                 |                |              |                    |      |      |      |      |      |      |     
|                                                   |                        | Changes in fair value of options and swaps                      |                | $            | (436               | )    |      | $    | 53   |      |      | $    |     |     
|                                                   |                        | Changes in fair value of other derivatives                      |                |              |                   |      |      |      | (439 | )    |      |      | (425 | )   
|                                                   |                        |                                                                 |                |              |                    |      |      |      |     
|                                                   |                        |                                                                 | Gross margin   |              |                    | (436 | )    |      |      | (386 | )    |      |      | (425 | )   
|Contracts Related to Legacy Trading Operations     |                        |                                                                 |                |              |                    |      |      |      |      |      |      |     
|                                                   | Natural gas contracts: |                                                                 |                |              |                    |      |      |      |      |      |      |      |     
|                                                   |                        | Transportation-related contracts:                               |                |              |                    |      |      |      |      |      |      |      |      |     
|                                                   |                        |                                                                 | Demand charges |              |                    | (156 | )    |      |      | (151 | )    |      |      | (177 | )   
|                                                   |                        |                                                                 | Settlements(2) |              |                    | 121  |      |      |      | 87   |      |      |      | 18   |     
|                                                   |                        | Changes in fair value of other natural gas derivative contracts |                |              | 39                 |      |      |      | 44   |      |      |      | (6   | )   
|                                                   | Power contracts:       |                                                                 |                |              |                    |      |      |      |      |      |      |      |     
|                                                   |                        | Changes in fair value of Cordova tolling agreement              |                |              | (136               | )    |      |      | (36  | )    |      |      | 75   |     
|                                                   |                        | Change in fair value of other power derivatives                 |                |              | (250               | )    |      |      | (85  | )    |      |      | (96  | )   
|                                                   |                        | Other                                                           |                |              | 22                 |      |      |      | 19   |      |      |      | (25  | )   
|                                                   |                        |                                                                 |                |              |                    |      |      |      |     
|                                                   |                        |                                                                 |                | Gross margin |                    |      | (360 | )    |      |      | (122 | )    |      |      | (211 | )   
|                                                   |                        |                                                                 |                |              |                    |      |      |      |     
|                                                   |                        |                                                                 |                |              | Total gross margin |      | $    | (796 | )    |      | $    | (508 | )    |      | $    | (636 | )
|                                                   |                        |                                                                 |                |              |                    |      |      |      |     






|    |                                                                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Gross margin for our Marketing and Trading segment consists of
    revenues from commodity trading and origination activities less
    the costs of commodities sold, including changes in the fair
    value of our derivative contracts.
|   
|(2) | Includes a $50 million gain in 2004 related to the early
    termination of an LNG contract and a $17 million loss in
    2003 related to the early termination of a storage contract.                                                    

Production-related Natural Gas and Oil Derivative
Contracts


Options and swaps.


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Other production-related derivatives.


Contracts Related to Legacy Trading Operations




| |                      
| | ---------------------
| | Natural Gas Contracts

Transportation-related contracts.


|                  |                       |      |   |    |      |  |   |      |   |  |   |    |    
|----------------- | --------------------- | ---- | - | -- | ---- |  | - | ---- | - |  | - | -- | ---
|                  |                       | 2005 |   |    | 2004 |  |   | 2003 |  
|                  |                       |      |   |    |      |  |   |      |  
|Alliance:         |                       |      |   |    |      |  |   |      |   |  |   |   
|                  | Demand charges        |      | $ | 65 |      |  | $ | 61   |   |  | $ | 56 |    
|                  | Recovery              |      |   | 93 | %    |  |   | 72   | % |  |   | 74 | %  
|Enterprise Texas: |                       |      |   |    |      |  |   |      |   |  |   |   
|                  | Demand charges        |      | $ | 26 |      |  | $ | 27   |   |  | $ | 23 |    
|                  | Recovery              |      |   | 8  | %    |  |   | 2    | % |  |   |   | (1)
|Other:            |                       |      |   |    |      |  |   |      |   |  |   |   
|                  | Demand
    charges(2) |      | $ | 65 |      |  | $ | 63   |   |  | $ | 98 |    
|                  | Recovery              |      |   | 94 | %    |  |   | 38   | % |  |   | 8  | %  






|    |                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In 2003, we were unable to recover demand charges and incurred
    $13 million in losses in excess of the demand charges
    related to managing the capacity under these contracts.
|   
|(2) | Includes demand charges related to storage contracts of
    $1 million, $2 million, and $21 million in 2005,
    2004, and 2003.                                                    

Other natural gas derivative contracts.






| |                
| | ---------------
| | Power Contracts



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Cordova tolling agreement.


Other power derivatives.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During 2005, 2004 and 2003, we supplied power to Morgan Stanley
    under a power supply agreement related to our formerly-owned UCF
    entity. We were also required to purchase power under a number
    of other power agreements, which included those used to manage
    our risk on the power supply obligation to Morgan Stanley. As a
    result of increasing power prices and increases in the
    differences in power prices at various locations in PJM, our
    Morgan Stanley contract decreased in fair value by
    $345 million, $72 million and $77 million in
    2005, 2004 and 2003. These decreases were partially offset by
    increases in the fair value of our power purchase contacts of
    $223 million, $81 million and $48 million in
    2005, 2004 and 2003.





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Contracts related to our former power contract restructuring
    activities. During the first quarter of 2005, we assigned
    our contracts to supply power to our Power segments Cedar
    Brakes I and II entities to Constellation. We recorded a loss of
    $30 million in 2004 related to entering into an agreement
    to assign these contracts. In 2004 and 2003, these contracts
    decreased in fair value by $64 million and
    $67 million. In conjunction with the assignment, we also
    entered into derivative contracts with Constellation that swap
    the locational differences in power prices at several power
    plants in eastern PJM and the west PJM hub through 2013. Due to
    unfavorable changes in the power prices at each location, the
    fair value of these swaps decreased by $105 million during
    2005.



Other.


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Operating Expenses






| |   |                                                                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Recording $26 million of charges in operating expenses in
    2003 related to the Western Energy Settlement prior to the
    transfer of this obligation to our corporate operations.                                                                                                                                                                                
|
| |  | Recording bad debt expense associated with a fuel supply
    agreement we have with the Berkshire power plant of
    $2 million, $10 million and $28 million in 2005,
    2004 and 2003.                                                                                                                                                                             
|
| |  | Incurring lower corporate overhead allocation and general and
    administrative expenses based on overall cost reduction efforts
    at the corporate level and our reduced level of operations in
    2004 and 2005. These reductions were primarily due to a
    reduction of our trading activities coupled with the closing of
    our office in London in 2003.

Power Segment








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Macae. Our Macae power plant sells a majority of its
    power to the wholesale Brazilian power market. Macae also has a
    contract that requires Petrobras to make minimum revenue
    payments until August 2007. Petrobras has not made payments
    under the contract since December 2004 and initiated arbitration
    proceedings related to that obligation. In early 2006, we signed
    a memorandum of understanding to resolve the arbitration
    proceedings and sell Macae to Petrobras for approximately
    $358 million. The completion of the sale of Macae is
    subject to the negotiation of a definitive purchase and sale
    agreement, and approvals by Brazilian regulators. As a result of
    the dispute and the indication of value we would receive for the
    potential sale of the plant, we recorded impairments of
    $351 million in 2005. Depending on the terms of the final
    agreement, we could be required to record additional losses
    related to the disposition and the resolution of disputes
    related to Macae.
|
| |  | Porto Velho. The Porto Velho plant sells power to
    Eletronorte under two power sales agreements that expire in 2010
    and 2023. Eletronorte absorbs substantially all of the
    plants fuel costs and purchases all of the energy and
    capacity sold by the plant, provided that the plant operates
    within certain operational requirements. As a result, the
    profitability of the plant is dependent primarily on meeting the
    operational requirements of the contract and through efficient
    operations and maintenance practices. In October 2004, our Porto
    Velho project experienced an outage with its steam turbine,
    which resulted in a partial reduction in the plants
    capacity. The project expects to have the steam turbine back in
    service in the first quarter of 2006. In addition, the project
    is also currently negotiating certain provisions of its power
    purchase agreement and the outcome of these negotiations may
    impact the future financial performance of the project.                     
|
| |  | Manaus and Rio Negro. In January 2005, we signed new
    power sales contracts for our Manaus and Rio Negro power plants
    with Manaus Energia. Under these new contracts, Manaus Energia
    will pay a price for its power that is similar to that in the
    previous contracts. In addition, Manaus Energia will assume
    ownership of the plants in 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Other. At our Araucaria power plant, the power sales
    contract is currently in international arbitration due to
    non-payment by the utility that purchases power from the plant.
    In early 2006, we signed a letter of intent to resolve the
    arbitration proceedings and to sell our investment in Araucaria
    to COPEL for $190 million. We also have an interest in two
    pipelines which reached full capacity in 2003 and currently
    generate income through the transportation of natural gas to
    various customers in South America.

Operating Results




|                          |                                                      |                                               |                |      |      |      |   |      |      |      |   |      |     |     |  
|------------------------- | ---------------------------------------------------- | --------------------------------------------- | -------------- | ---- | ---- | ---- | - | ---- | ---- | ---- | - | ---- | --- | --- | -
|                          |                                                      | 2005                                          |                |      | 2004 |      |   | 2003 |     
|                          |                                                      |                                               |                |      |      |      |   |      |     
|                          |                                                      | (In millions)                                 |               
|Overall EBIT:             |                                                      |                                               |                |      |      |      |   |      |      |      |   |     
|                          | Gross
    margin(1)                                  |                                               | $              | 110  |      |      | $ | 525  |      |      | $ | 753  |    
|                          | Operating expenses                                   |                                               |                | (539 | )    |      |   | (921 | )    |      |   | (773 | )  
|                          |                                                      |                                               |                |      |      |      |   |      |     
|                          |                                                      |                                               | Operating loss |      |      | (429 | ) |      |      | (396 | ) |      |     | (20 | )
|                          | Losses from unconsolidated affiliates                |                                               |                | (139 | )    |      |   | (249 | )    |      |   | (91  | )  
|                          | Other income                                         |                                               |                | 117  |      |      |   | 69   |      |      |   | 71   |    
|                          |                                                      |                                               |                |      |      |      |   |      |     
|                          |                                                      | EBIT                                          |                | $    | (451 | )    |   | $    | (576 | )    |   | $    | (40 | )  
|                          |                                                      |                                               |                |      |      |      |   |      |     
|EBIT by Area:             |                                                      |                                               |                |      |      |      |   |      |      |      |   |     
|Brazil                    |                                                      |                                               |                |      |      |      |   |      |      |      |   |     
|                          | Impairments                                          |                                               |                |      |      |      |   |      |      |      |   |      |    
|                          |                                                      | Macae                                         |                | $    | (351 | )    |   | $    |     |      |   | $    |    |    
|                          |                                                      | Manaus and Rio Negro                          |                |      |     |      |   |      | (183 | )    |   |      |    |    
|                          | EBIT from operations                                 |                                               |                | 44   |      |      |   | 235  |      |      |   | 177  |    
|Other International Power |                                                      |                                               |                |      |      |      |   |      |      |      |   |     
|                          | Asia                                                 |                                               |                |      |      |      |   |      |      |      |   |      |    
|                          |                                                      | Impairments related to anticipated sales      |                |      | (87  | )    |   |      | (182 | )    |   |      |    |    
|                          |                                                      | Gain on sale of KIECO, PPN and Chinese plants |                |      | 131  |      |   |      |     |      |   |      |    |    
|                          |                                                      | EBIT from operations                          |                |      | 15   |      |   |      | 64   |      |   |      | 47  |    
|                          | Central and other South America                      |                                               |                |      |      |      |   |      |      |      |   |      |    
|                          |                                                      | Impairments related to anticipated sales      |                |      | (89  | )    |   |      |     |      |   |      |    |    
|                          |                                                      | Gain on sale of Argentina                     |                |      |     |      |   |      |     |      |   |      | 28  |    
|                          |                                                      | EBIT from operations                          |                |      | 5    |      |   |      | 1    |      |   |      | 8   |    
|                          | EBIT from other international plants and investments |                                               |                | 14   |      |      |   | (1   | )    |      |   | 24   |    

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|               |                                                                              |                                                                                                 |     |      |      |   |     |      |      |   |     |     |      |  
|-------------- | ---------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | --- | ---- | ---- | - | --- | ---- | ---- | - | --- | --- | ---- | -
|               |                                                                              | 2005                                                                                            |     |      | 2004 |   |     | 2003 |     
|               |                                                                              |                                                                                                 |     |      |      |   |     |      |     
|               |                                                                              | (In millions)                                                                                   |    
|Domestic Power |                                                                              |                                                                                                 |     |      |      |   |     |      |      |   |     |    
|               | Midland Cogeneration Venture                                                 |                                                                                                 |     | (162 | )    |   |     | (171 | )    |   |     | 29  |     
|               | Other impairments,
    net(2)                                                |                                                                                                 |     |      |      |   |     |      |      |   |     |     |     
|               |                                                                              | Sale of interest in Cedar Brakes I and II and UCF and related
    power restructuring contracts |     |      |     |   |     |      | (324 | ) |     |     | (15  | )
|               |                                                                              | Decline in value of Chaparral investment                                                        |     |      |     |   |     |      |     |   |     |     | (207 | )
|               |                                                                              | Milford receivable write-off due to lender dispute                                              |     |      |     |   |     |      |     |   |     |     | (88  | )
|               |                                                                              | Other domestic plants and investments                                                           |     |      | (5   | ) |     |      | (105 | ) |     |     | (208 | )
|               | Proceeds from portion of MRF III bankruptcy claim
    previously written off |                                                                                                 |     | 53   |      |   |     |     |      |   |     |    |     
|               | EBIT from operations                                                         |                                                                                                 |     |     |      |   |     | 143  |      |   |     | 256 |     
|Other(3)       |                                                                              |                                                                                                 | (19 | )    |      |   | (53 | )    |      |   | (91 | )  
|               |                                                                              |                                                                                                 |     |      |      |   |     |      |     
|               | EBIT                                                                         |                                                                                                 | $   | (451 | )    |   | $   | (576 | )    |   | $   | (40 | )   
|               |                                                                              |                                                                                                 |     |      |      |   |     |      |     






|    |                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Gross margin for our Power segment consists of revenues from our
    power plants and the revenues, cost of electricity purchases and
    changes in fair value of restructured power contracts. The cost
    of fuel used in the power generation process is included in
    operating expenses.
|(2) | Includes impairment charges and gains (losses) on the sales of
    assets and investments.                                                                                                                                                                                                       
|(3) | Includes impairments and losses on the sales of power turbines
    of $27 million, $1 million and $33 million in
    2005, 2004 and 2003. Also includes $40 million of gains on
    the sales of cost basis investments in 2005.                                                                 

Brazil




Macae.


Porto Velho.


Manaus and Rio Negro.


South American Pipelines.


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Other International Power






Domestic Power






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | MCV. As of December 31, 2005, we maintain an equity
    ownership in a natural gas-fired power plant, MCV. Although the
    price of electricity sold by MCV is indexed to coal, the plant
    is fueled by natural gas, which it purchases under both
    long-term contracts and on the spot market. Due to significant
    increases in natural gas prices, the economic performance of the
    facility was greatly impacted. In 2004, we impaired our
    investment in MCV by $161 million based on a decline in the
    value of the investment due to the increase in fuel costs. In
    2005, we recorded our proportionate share of losses on MCV based
    on MCVs impairment of the plant assets. These impairments
    and recorded losses reduced our net investment in the plant to
    zero at December 31, 2005. MCVs owners are pursuing
    various commercial alternatives, which could result in the
    recovery of some of our previously impaired investment.                                                                                                                                                                    
|
| |  | Other Impairments and EBIT from Operations. Prior to
    2003, Chaparral Investors, L.L.C. owned interests in a number of
    domestic power facilities and was the principal equity
    investment through which we conducted our domestic power
    activities. We consolidated Chaparral and its related power
    plants in early 2003. In 2003 and 2004, among other impairments
    noted in the table above, we recorded substantial impairments,
    net of gains and losses based on the anticipated sale of our
    merchant and contracted plants, as well as operational and
    contractual issues at several of these facilities. Included in
    these amounts was a $25 million loss in 2004 on the
    termination of a power contract with our Marketing and Trading
    segment related to one of the assets sold, which was eliminated
    in consolidation. As these facilities were sold through 2004, we
    experienced lower EBIT in each year from the operation of these
    facilities. See Part II, Item 8, Financial Statements
    and Supplementary Data, Notes 2, 3, and 21 for a further
    discussion of these matters.

Field Services Segment






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|                                              |                           |                |     |     |      |   |     |      |      |   |     |      |      |  
|--------------------------------------------- | ------------------------- | -------------- | --- | --- | ---- | - | --- | ---- | ---- | - | --- | ---- | ---- | -
|                                              |                           | 2005           |     |     | 2004 |   |     | 2003 |     
|                                              |                           |                |     |     |      |   |     |      |     
|                                              |                           | (In millions)  |    
|Gathering and processing gross
    margins(1) |                           | $              | 25  |     |      | $ | 93  |      |      | $ | 96  |     
|Operating expenses                            |                           |                |     |     |      |   |     |      |      |   |     |     
|                                              | Loss on long-lived assets |                |     | (10 | )    |   |     | (507 | )    |   |     | (173 | )   
|                                              | Other operating expenses  |                |     | (31 | )    |   |     | (87  | )    |   |     | (120 | )   
|                                              |                           |                |     |     |      |   |     |      |     
|                                              |                           | Operating loss |     |     | (16  | ) |     |      | (501 | ) |     |      | (197 | )
|Earnings from unconsolidated affiliates       |                           |                | 301 |     |      |   | 618 |      |      |   | 329 |     
|Other expense                                 |                           |                |    |     |      |   | (33 | )    |      |   | (3  | )   
|                                              |                           |                |     |     |      |   |     |      |     
|                                              |                           | EBIT           |     | $   | 285  |   |     | $    | 84   |   |     | $    | 129  |  
|                                              |                           |                |     |     |      |   |     |      |     






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

|                                    |                                                    |                         |    |     |      |   |     |      |      |   |     |      |      |  
|----------------------------------- | -------------------------------------------------- | ----------------------- | -- | --- | ---- | - | --- | ---- | ---- | - | --- | ---- | ---- | -
|                                    |                                                    | 2005                    |    |     | 2004 |   |     | 2003 |     
|                                    |                                                    |                         |    |     |      |   |     |      |     
|                                    |                                                    | (In millions)           |   
|Gathering and Processing Activities |                                                    |                         |    |     |      |   |     |      |      |   |     |     
|                                    | Gathering and processing margins                   |                         | $  | 25  |      |   | $   | 93   |      |   | $   | 96   |     
|                                    | Operating expenses                                 |                         |    | (8  | )    |   |     | (87  | )    |   |     | (120 | )   
|                                    | Other income (expense)                             |                         |    | 7   |      |   |     | 11   |      |   |     | (7   | )   
|                                    |                                                    |                         |    |     |      |   |     |      |     
|                                    |                                                    | EBIT                    |    |     | 24   |   |     |      | 17   |   |     |      | (31  | )
|                                    |                                                    |                         |    |     |      |   |     |      |     
|GulfTerra/Enterprise-related Items  |                                                    |                         |    |     |      |   |     |      |      |   |     |     
|                                    | Assets sold to GulfTerra                           |                         |    | 5   |      |   |     | 9    |      |   |     | (7   | )   
|                                    | Assets/interests sold to Enterprise                |                         |    |     |      |   |     |      |      |   |     |      |     
|                                    |                                                    | Sale of GP/LP interests |    |     | 183  |   |     |      | 507  |   |     |      | 266  |  
|                                    |                                                    | Sale of south Texas     |    |     |     |   |     |      | (11  | ) |     |      | (167 | )
|                                    |                                                    | Goodwill impairment     |    |     |     |   |     |      | (480 | ) |     |      |     |  
|                                    |                                                    | Other                   |    |     | (1   | ) |     |      | (45  | ) |     |      |     |  
|                                    | Equity earnings                                    |                         |    |    |      |   |     | 100  |      |   |     | 153  |     
|                                    |                                                    |                         |    |     |      |   |     |      |     
|                                    |                                                    | EBIT                    |    |     | 187  |   |     |      | 80   |   |     |      | 245  |  
|                                    |                                                    |                         |    |     |      |   |     |      |     
|Other Asset Sales                   |                                                    |                         |    |     |      |   |     |      |      |   |     |     
|                                    | Sale of Javelina investment                        |                         |    | 111 |      |   |     |     |      |   |     |     |     
|                                    | Dauphin Island/ Mobile Bay                         |                         |    |    |      |   |     |     |      |   |     | (86  | )   
|                                    | Termination of Needle Mountain gas supply contract |                         |    | (28 | )    |   |     |     |      |   |     |     |     
|                                    | Other                                              |                         |    | (9  | )    |   |     | (13  | )    |   |     | 1    |     
|                                    |                                                    |                         |    |     |      |   |     |      |     
|                                    |                                                    |                         | 74 |     |      |   | (13 | )    |      |   | (85 | )   
|                                    |                                                    |                         |    |     |      |   |     |      |     
|                                    |                                                    | EBIT                    |    | $   | 285  |   |     | $    | 84   |   |     | $    | 129  |  
|                                    |                                                    |                         |    |     |      |   |     |      |     

Gathering and Processing Activities.


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GulfTerra/Enterprise Related Items.




| |   |                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Gain of $266 million on the sale of 50 percent of our
    interest in GulfTerra to Enterprise in 2003. At the same time,
    we recorded an impairment of our south Texas assets of
    $167 million based on the planned sale of these assets to
    Enterprise;
|
| |  | Gain of $507 million upon the sale of our remaining 50
    percent interest in the general partner of GulfTerra to
    Enterprise in 2004. As a result of this sale, we also impaired
    goodwill recorded on the segment; and                                  
|
| |  | Gain of $183 million on the sale of our remaining general
    partner and limited partner interests in Enterprise in 2005.                                                                                                                                       

Corporate and Other Expenses, Net




|                                                                          |                                                        |               |      |     |      |   |      |      |   |   |      |      |  
|------------------------------------------------------------------------- | ------------------------------------------------------ | ------------- | ---- | --- | ---- | - | ---- | ---- | - | - | ---- | ---- | -
|                                                                          |                                                        | 2005          |      |     | 2004 |   |      | 2003 |  
|                                                                          |                                                        |               |      |     |      |   |      |      |  
|                                                                          |                                                        | (In millions) |     
|Change in litigation, insurance and other reserves                        |                                                        | $             | (418 | )   |      | $ | (81  | )    |   | $ | (10  | )   
|Western Energy Settlement                                                 |                                                        |               | (72  | )   |      |   | (38  | )    |   |   | (2   | )   
|Impairments, contract terminations and gains (losses) on asset
    sales: |                                                        |               |      |     |      |   |      |      |   |   |      |     
|                                                                          | Telecommunications business                            |               |      | 5   |      |   |      |     |   |   |      | (396 | )
|                                                                          | LNG business                                           |               |      |    |      |   |      |     |   |   |      | (108 | )
|                                                                          | Aircraft                                               |               |      |    |      |   |      | 8    |   |   |      | (8   | )
|Other operating earnings (losses) from other businesses                   |                                                        |               | 21   |     |      |   | 32   |      |   |   | (22  | )   
|Restructuring charges                                                     |                                                        |               | (27  | )   |      |   | (91  | )    |   |   | (91  | )   
|Debt gains (losses):                                                      |                                                        |               |      |     |      |   |      |      |   |   |      |     
|                                                                          | Foreign currency fluctuations on Euro-denominated debt |               |      | 36  |      |   |      | (26  | ) |   |      | (112 | )
|                                                                          | Early extinguishment/exchange of debt                  |               |      | (29 | )    |   |      | (18  | ) |   |      | (49  | )
|Other                                                                     |                                                        |               | (37  | )   |      |   | (3   | )    |   |   | (54  | )   
|                                                                          |                                                        |               |      |     |      |   |      |      |  
|Total EBIT                                                                |                                                        | $             | (521 | )   |      | $ | (217 | )    |   | $ | (852 | )   
|                                                                          |                                                        |               |      |     |      |   |      |      |  



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Interest and Debt Expense




|                                             |                                 |               |       |       |      |   |       |       |  |   |       |       | 
|-------------------------------------------- | ------------------------------- | ------------- | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|                                             |                                 | 2005          |       |       | 2004 |   |       | 2003  | 
|                                             |                                 |               |       |       |      |   |       |       | 
|                                             |                                 | (In millions) |      
|Long-term debt, including current maturities |                                 | $             | 1,348 |       |      | $ | 1,533 |       |  | $ | 1,696 |      
|Other interest                               |                                 |               | 32    |       |      |   | 74    |       |  |   | 94    |      
|                                             |                                 |               |       |       |      |   |       |       | 
|                                             | Total interest and debt expense |               | $     | 1,380 |      |   | $     | 1,607 |  |   | $     | 1,790 | 
|                                             |                                 |               |       |       |      |   |       |       | 



Distributions on Preferred Interests of Consolidated
Subsidiaries




Income Taxes






| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| |  | earnings from unconsolidated affiliates where we anticipate
    receiving dividends;
|
| |  | foreign income taxed at different rates;                                            
|
| |  | sales and write offs of foreign investments;                                        
|
| |  | valuation allowances;                                                               
|
| |  | audit settlements;                                                                  
|
| |  | non-deductible goodwill impairments; and                                            
|
| |  | non-taxable medicare reimbursements.                                                

pre-tax


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Discontinued Operations




Commitments and Contingencies




Critical Accounting Policies




Price Risk Management Activities.


|                                  |  |               |        |                     |            |   |                     |        |  |   |            |   |  |        |        |   |  |   |     | 
|--------------------------------- |  | ------------- | ------ | ------------------- | ---------- | - | ------------------- | ------ |  | - | ---------- | - |  | ------ | ------ | - |  | - | --- | 
|                                  |  |               |        | 10 Percent Increase |            |   | 10 Percent Decrease |       
|                                  |  |               |        |                     |            |   |                     |       
|                                  |  | Fair Value    |        |                     | Fair Value |   |                     | Change |  |   | Fair Value |   |  | Change |       
|                                  |  |               |        |                     |            |   |                     |        |  |   |            |   |  |        |       
|                                  |  | (In millions) |       
|Derivatives designated as hedges  |  | $             | (653   | )                   |            | $ | (751                | )      |  | $ | (98        | ) |  | $      | (555   | ) |  | $ | 98  | 
|Other commodity-based derivatives |  |               | (763   | )                   |            |   | (903                | )      |  |   | (140       | ) |  |        | (626   | ) |  |   | 137 | 
|                                  |  |               |        |                     |            |   |                     |        |  |   |            |   |  |        |       
|Total                             |  | $             | (1,416 | )                   |            | $ | (1,654              | )      |  | $ | (238       | ) |  | $      | (1,181 | ) |  | $ | 235 | 
|                                  |  |               |        |                     |            |   |                     |        |  |   |            |   |  |        |       

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Accounting for Natural Gas and Oil Producing Activities.








Asset and Investment Impairments.


75



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Accounting for Legal and Environmental Reserves.




Accounting for Pension and Other Postretirement Benefits.




76



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|                         |                                        |                  |   |           |                               |  |   |                  |             |  |                    |    |   |  |   |     |  
|------------------------ | -------------------------------------- | ---------------- | - | --------- | ----------------------------- |  | - | ---------------- | ----------- |  | ------------------ | -- | - |  | - | --- | -
|                         |                                        | Pension Benefits |   |           | Other Postretirement Benefits | 
|                         |                                        |                  |   |           |                               | 
|                         |                                        |                  |   | Projected |                               |  |   |                  | Accumulated | 
|                         |                                        | Net Benefit      |   |           | Benefit                       |  |   | Net Benefit      |             |  | Postretirement     |   
|                         |                                        | Expense (Income) |   |           | Obligation                    |  |   | Expense (Income) |             |  | Benefit Obligation |   
|                         |                                        |                  |   |           |                               |  |   |                  |             |  |                    |   
|One percent increase in: |                                        |                  |   |           |                               |  |   |                  |             |  |                    |    |   |  |   |    
|                         | Discount rates                         |                  | $ | (14       | )                             |  | $ | (205             | )           |  | $                  |   |   |  | $ | (41 | )
|                         | Expected return on plan assets         |                  |   | (21       | )                             |  |   |                 |             |  |                    | (2 | ) |  |   |    |  
|                         | Rate of compensation increase          |                  |   | 1         |                               |  |   | 6                |             |  |                    |   |   |  |   |    |  
|                         | Health care cost trends                |                  |   |          |                               |  |   |                 |             |  |                    | 1  |   |  |   | 20  |  
|                        
|One percent decrease in: |                                        |                  |   |           |                               |  |   |                  |             |  |                    |    |   |  |   |    
|                         | Discount rates                         |                  | $ | 15        |                               |  | $ | 245              |             |  | $                  |   |   |  | $ | 44  |  
|                         | Expected return on plan assets
    (1) |                  |   | 21        |                               |  |   |                 |             |  |                    | 2  |   |  |   |    |  
|                         | Rate of compensation increase          |                  |   | (1        | )                             |  |   | (5               | )           |  |                    |   |   |  |   |    |  
|                         | Health care cost trends                |                  |   |          |                               |  |   |                 |             |  |                    | (1 | ) |  |   | (18 | )






|    |                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | If the actual return on plan assets was one percent lower than
    the expected return on plan assets, our expected cash
    contributions to our pension and other postretirement benefit
    plans would not significantly change.

market-related market-related market-related


pre-tax


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New Accounting Pronouncements Issued But Not Yet Adopted


New Accounting
Pronouncements Issued But Not Yet Adopted,


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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK






| |   |                     
| | - | --------------------
| |  | Commodity Price Risk



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Natural gas and oil price changes, impacting the forecasted sale
    of natural gas and oil in our Exploration and Production segment;                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Locational price differences in natural gas changes, affecting
    our ability to optimize pipeline transportation capacity
    contracts held in our Marketing and Trading segment; and                                                                                                                                                                                                                                                                                                                                
|
| |  | Electricity and natural gas price changes and locational pricing
    changes, affecting the value of our natural gas contracts and
    remaining power contracts held in our Marketing and Trading and
    Power segments. During 2005, we assigned or entered into
    agreements to assign to third parties the majority of our power
    contract portfolio, including our Cordova tolling agreement. As
    a result, our sensitivity to change in power prices will be
    significantly reduced in future periods.



| |   |                   
| | - | ------------------
| |  | Interest Rate Risk



| |   |                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Changes in interest rates affect the interest expense we incur
    on our variable-rate
    debt and the fair value of our fixed-rate debt;                                                
|
| |  | Changes in interest rates used in the estimation of the fair
    value of our derivative positions can result in increases or
    decreases in the unrealized value of those positions; and
|
| |  | Changes in interest rates used to discount liabilities which can
    result in higher or lower accretion expense over time.                                                                



| |   |                                    
| | - | -----------------------------------
| |  | Foreign Currency Exchange Rate Risk



| |   |                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Weakening or strengthening of the U.S. dollar relative to the
    Euro can result in an increase or decrease in the value of our
    Euro-denominated debt obligations and the related interest costs
    associated with that debt; and
|
| |  | Changes in foreign currencies exchange rates where we have
    international investments may impact the value of those
    investments and the earnings and cash flows from those
    investments.                                      





| |   |                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Forward contracts, which commit us to purchase or sell energy
    commodities in the future;                                                                                                                
|
| |  | Futures contracts, which are exchange-traded standardized
    commitments to purchase or sell a commodity or financial
    instrument, or to make a cash settlement at a specific price and
    future date;
|
| |  | Options, which convey the right to buy or sell a commodity,
    financial instrument or index at a predetermined price;                                                                                     
|
| |  | Swaps, which require payments to or from counterparties based
    upon the differential between two prices for a predetermined
    contractual (notional) quantity; and                                     
|
| |  | Structured contracts, which may involve a variety of the above
    characteristics.                                                                                                                         



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Commodity Price Risk


Marketing and Trading


one-day Value-at-Risk. Value-at


one-day energy-related Value-at-Risk one-day Value-at-Risk Value-at-Risk Value-at-Risk.


Exploration and
Production




|                                                                              |                   |               |   |                     |            |  |                     |            |   |  |            |      |   |          |   |      |   |  |   |     | 
|----------------------------------------------------------------------------- | ----------------- | ------------- | - | ------------------- | ---------- |  | ------------------- | ---------- | - |  | ---------- | ---- | - | -------- | - | ---- | - |  | - | --- | 
|                                                                              |                   |               |   | 10 Percent Increase |            |  | 10 Percent Decrease |           
|                                                                              |                   |               |   |                     |            |  |                     |           
|                                                                              |                   | Fair Value    |   |                     | Fair Value |  |                     | (Decrease) |   |  | Fair Value |      |   | Increase |  
|                                                                              |                   |               |   |                     |            |  |                     |            |   |  |            |      |   |          |  
|                                                                              |                   | (In millions) |  
|Impact of changes in commodity prices on derivative commodity
    instruments |                   |               |   |                     |            |  |                     |            |   |  |            |      |   |          |   |      |   |  |   |    
|                                                                              | December 31, 2005 |               | $ | (684                | )          |  | $                   | (786       | ) |  | $          | (102 | ) |          | $ | (582 | ) |  | $ | 102 | 
|                                                                              | December 31, 2004 |               | $ | (557                | )          |  | $                   | (697       | ) |  | $          | (140 | ) |          | $ | (417 | ) |  | $ | 140 | 

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Interest Rate Risk


debt-related weighted-average interest-bearing


|                                                                                    |                       |                                                      |       |     |                   |   |     |          |   |   |      |     |   |      |       |     |            |   |       |       |   |   |        |     |   |         |        |  |       |   |        |  |  |   |        |  |  |   |        |  | 
|----------------------------------------------------------------------------------- | --------------------- | ---------------------------------------------------- | ----- | --- | ----------------- | - | --- | -------- | - | - | ---- | --- | - | ---- | ----- | --- | ---------- | - | ----- | ----- | - | - | ------ | --- | - | ------- | ------ |  | ----- | - | ------ |  |  | - | ------ |  |  | - | ------ |  | 
|                                                                                    |                       | December 31, 2005                                    |       |     | December 31, 2004 |  
|                                                                                    |                       |                                                      |       |     |                   |  
|                                                                                    |                       | Expected Fiscal Year of Maturity of Carrying Amounts |       |     |                   |   |    
|                                                                                    |                       |                                                      |       |     | Fair              |   |     | Carrying |   |   | Fair |    
|                                                                                    |                       | 2006                                                 |       |     | 2007              |   |     | 2008     |   |   | 2009 |     |   | 2010 |       |     | Thereafter |   |       | Total |   |   | Value  |     |   | Amounts |        |  | Value |  
|                                                                                    |                       |                                                      |       |     |                   |   |     |          |   |   |      |     |   |      |       |     |            |   |       |       |   |   |        |     |   |         |        |  |       |  
|                                                                                    |                       | (In millions)                                        |      
|Long-term debt and other obligations, including current
    portion  fixed rate    |                       | $                                                    | 1,062 |     |                   | $ | 747 |          |   | $ | 643  |     |   | $    | 1,300 |     |            | $ | 1,536 |       |   | $ | 10,841 |     |   | $       | 16,129 |  |       | $ | 16,573 |  |  | $ | 17,747 |  |  | $ | 18,387 | 
|                                                                                    | Average interest rate |                                                      |       | 4.9 | %                 |   |     | 6.7      | % |   |      | 6.9 | % |      |       | 6.5 | %          |   |       | 8.5   | % |   |        | 7.6 | % |         |        |  |       |   |        |  |  |   |        |  |  |   |        |  | 
|Long-term debt and other obligations, including current
    portion  variable rate |                       | $                                                    | 149   |     |                   | $ | 33  |          |   | $ | 33   |     |   | $    | 1,179 |     |            | $ | 515   |       |   | $ | 196    |     |   | $       | 2,105  |  |       | $ | 2,105  |  |  | $ | 1,442  |  |  | $ | 1,442  | 
|                                                                                    | Average interest rate |                                                      |       | 9.5 | %                 |   |     | 6.1      | % |   |      | 6.1 | % |      |       | 6.2 | %          |   |       | 6.1   | % |   |        | 5.9 | % |         |        |  |       |   |        |  |  |   |        |  |  |   |        |  | 

Foreign Currency Exchange Rate Risk


Debt


      


Power Contracts




81



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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA


Index




|                                                                            |                                                                                        |      |    |     | 
|--------------------------------------------------------------------------- | -------------------------------------------------------------------------------------- | ---- | -- | --- | 
|                                                                            |                                                                                        | Page |   
|                                                                            |                                                                                        |      |   
|Managements Annual Report on Internal Control over
    Financial Reporting |                                                                                        |      | 83 |    
|Report of Independent Registered Public Accounting Firm                     |                                                                                        |      | 84 |    
|Consolidated Statements of Income                                           |                                                                                        |      | 86 |    
|Consolidated Balance Sheets                                                 |                                                                                        |      | 87 |    
|Consolidated Statements of Cash Flows                                       |                                                                                        |      | 89 |    
|Consolidated Statements of Stockholders Equity                             |                                                                                        |      | 91 |    
|Consolidated Statements of Comprehensive Income                             |                                                                                        |      | 92 |    
|Notes to Consolidated Financial Statements                                  |                                                                                        |      | 93 |    
|                                                                            | 1.   Basis of Presentation and Significant
    Accounting Policies                     |      |    | 93  | 
|                                                                            | 2.   Acquisitions                                                                      |      |    | 101 | 
|                                                                            | 3.   Divestitures                                                                      |      |    | 102 | 
|                                                                            | 4.   Restructuring and Other Charges                                                   |      |    | 105 | 
|                                                                            | 5.   (Gain) Loss on Long-Lived Assets                                                  |      |    | 106 | 
|                                                                            | 6.   Other Income and Other Expenses                                                   |      |    | 107 | 
|                                                                            | 7.   Income Taxes                                                                      |      |    | 107 | 
|                                                                            | 8.   Earnings Per Share                                                                |      |    | 110 | 
|                                                                            | 9.   Fair Value of Financial Instruments                                               |      |    | 110 | 
|                                                                            | 10.  Price Risk Management Activities                                                  |      |    | 110 | 
|                                                                            | 11.  Regulatory Assets and Liabilities                                                 |      |    | 115 | 
|                                                                            | 12.  Other Assets and Liabilities                                                      |      |    | 115 | 
|                                                                            | 13.  Property, Plant and Equipment                                                     |      |    | 116 | 
|                                                                            | 14.  Debt, Other Financing Obligations and Other
    Credit Facilities                 |      |    | 117 | 
|                                                                            | 15.  Preferred Interests of Consolidated Subsidiaries                                  |      |    | 122 | 
|                                                                            | 16.  Commitments and Contingencies                                                     |      |    | 122 | 
|                                                                            | 17.  Retirement Benefits                                                               |      |    | 132 | 
|                                                                            | 18.  Capital Stock                                                                     |      |    | 136 | 
|                                                                            | 19.  Stock-Based Compensation                                                          |      |    | 137 | 
|                                                                            | 20.  Business Segment Information                                                      |      |    | 139 | 
|                                                                            | 21.  Investments in, Earnings from and Transactions
    with Unconsolidated Affiliates |      |    | 142 | 
|Supplemental Financial Information                                          |                                                                                        |      |    |    
|                                                                            | Supplemental Selected Quarterly
    Financial Information (Unaudited)                  |      |    | 147 | 
|                                                                            | Supplemental Natural Gas and Oil
    Operations (Unaudited)                            |      |    | 148 | 
|Financial Statement Schedule                                                |                                                                                        |      |    |    
|                                                                            | Schedule II 
    Valuation and Qualifying Accounts                                    |      |    | 154 | 

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MANAGEMENTS ANNUAL REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING






| |   |                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Pertain to the maintenance of records that, in reasonable
    detail, accurately and fairly reflect the transactions and
    dispositions of our assets;                                                                                                                                                                                     
|
| |  | Provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of the financial statements in
    accordance with generally accepted accounting principles, and
    that our receipts and expenditures are being made only in
    accordance with authorizations of our management and directors;
    and
|
| |  | Provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of our
    assets that could have a material effect on the financial
    statements.                                                                                                                               

Internal Control 
Integrated Framework


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








Consolidated Financial Statements and Financial Statement
Schedule




Accounting for Conditional Asset Retirement Obligations, Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug Improvement and Modernization Act of
2003 Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and
Equity, Accounting for Asset Retirement Obligations


Internal Control Over Financial Reporting


Internal Control  Integrated
Framework Internal Control  Integrated
Framework


84



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85



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EL PASO CORPORATION




CONSOLIDATED STATEMENTS OF INCOME


(In millions, except per common share amounts)


|                                                                  |                                                              |                         |       |       |      |   |       |       |   |   |        |       |  
|----------------------------------------------------------------- | ------------------------------------------------------------ | ----------------------- | ----- | ----- | ---- | - | ----- | ----- | - | - | ------ | ----- | -
|                                                                  |                                                              | Year Ended December 31, |      
|                                                                  |                                                              |                         |      
|                                                                  |                                                              | 2005                    |       |       | 2004 |   |       | 2003  |  
|                                                                  |                                                              |                         |       |       |      |   |       |       |  
|Operating revenues                                                |                                                              |                         |       |       |      |   |       |       |   |   |        |      
|                                                                  | Pipelines                                                    |                         | $     | 2,783 |      |   | $     | 2,651 |   |   | $      | 2,647 |  
|                                                                  | Exploration and Production                                   |                         |       | 1,787 |      |   |       | 1,735 |   |   |        | 2,141 |  
|                                                                  | Marketing and Trading                                        |                         |       | (796  | )    |   |       | (508  | ) |   |        | (635  | )
|                                                                  | Power                                                        |                         |       | 129   |      |   |       | 653   |   |   |        | 1,054 |  
|                                                                  | Field Services                                               |                         |       | 123   |      |   |       | 1,097 |   |   |        | 1,283 |  
|                                                                  | Corporate and eliminations                                   |                         |       | (9    | )    |   |       | (89   | ) |   |        | (151  | )
|                                                                  |                                                              |                         |       |       |      |   |       |       |  
|                                                                  |                                                              |                         | 4,017 |       |      |   | 5,539 |       |   |   | 6,339  |      
|                                                                  |                                                              |                         |       |       |      |   |       |       |  
|Operating expenses                                                |                                                              |                         |       |       |      |   |       |       |   |   |        |      
|                                                                  | Cost of products and services                                |                         |       | 323   |      |   |       | 1,218 |   |   |        | 1,637 |  
|                                                                  | Operation and maintenance                                    |                         |       | 2,083 |      |   |       | 1,744 |   |   |        | 1,999 |  
|                                                                  | Depreciation, depletion and amortization                     |                         |       | 1,121 |      |   |       | 1,068 |   |   |        | 1,157 |  
|                                                                  | Loss on long-lived assets                                    |                         |       | 407   |      |   |       | 1,077 |   |   |        | 860   |  
|                                                                  | Taxes, other than income taxes                               |                         |       | 270   |      |   |       | 250   |   |   |        | 292   |  
|                                                                  |                                                              |                         |       |       |      |   |       |       |  
|                                                                  |                                                              |                         | 4,204 |       |      |   | 5,357 |       |   |   | 5,945  |      
|                                                                  |                                                              |                         |       |       |      |   |       |       |  
|Operating income (loss)                                           |                                                              |                         | (187  | )     |      |   | 182   |       |   |   | 394    |      
|Earnings from unconsolidated affiliates                           |                                                              |                         | 342   |       |      |   | 546   |       |   |   | 363    |      
|Other income                                                      |                                                              |                         | 295   |       |      |   | 187   |       |   |   | 198    |      
|Other expenses                                                    |                                                              |                         | 52    |       |      |   | 98    |       |   |   | 202    |      
|Interest and debt expense                                         |                                                              |                         | 1,380 |       |      |   | 1,607 |       |   |   | 1,790  |      
|Distributions on preferred interests of consolidated subsidiaries |                                                              |                         | 9     |       |      |   | 25    |       |   |   | 52     |      
|                                                                  |                                                              |                         |       |       |      |   |       |       |  
|Loss before income taxes                                          |                                                              |                         | (991  | )     |      |   | (815  | )     |   |   | (1,089 | )    
|Income taxes                                                      |                                                              |                         | (289  | )     |      |   | 14    |       |   |   | (484   | )    
|                                                                  |                                                              |                         |       |       |      |   |       |       |  
|Loss from continuing operations                                   |                                                              |                         | (702  | )     |      |   | (829  | )     |   |   | (605   | )    
|Discontinued operations, net of income taxes                      |                                                              |                         | 100   |       |      |   | (118  | )     |   |   | (1,269 | )    
|Cumulative effect of accounting changes, net of income taxes      |                                                              |                         | (4    | )     |      |   |      |       |   |   | (9     | )    
|                                                                  |                                                              |                         |       |       |      |   |       |       |  
|Net loss                                                          |                                                              |                         | (606  | )     |      |   | (947  | )     |   |   | (1,883 | )    
|Preferred stock dividends                                         |                                                              |                         | 27    |       |      |   |      |       |   |   |       |      
|                                                                  |                                                              |                         |       |       |      |   |       |       |  
|Net loss available to common stockholders                         |                                                              | $                       | (633  | )     |      | $ | (947  | )     |   | $ | (1,883 | )    
|                                                                  |                                                              |                         |       |       |      |   |       |       |  
|Basic and diluted loss per common share                           |                                                              |                         |       |       |      |   |       |       |   |   |        |      
|                                                                  | Loss from continuing operations                              |                         | $     | (1.13 | )    |   | $     | (1.30 | ) |   | $      | (1.01 | )
|                                                                  | Discontinued operations, net of income taxes                 |                         |       | 0.16  |      |   |       | (0.18 | ) |   |        | (2.12 | )
|                                                                  | Cumulative effect of accounting changes, net of income taxes |                         |       | (0.01 | )    |   |       |      |   |   |        | (0.02 | )
|                                                                  |                                                              |                         |       |       |      |   |       |       |  
|                                                                  | Net loss per common share                                    |                         | $     | (0.98 | )    |   | $     | (1.48 | ) |   | $      | (3.15 | )
|                                                                  |                                                              |                         |       |       |      |   |       |       |  
|Basic and diluted average common shares outstanding               |                                                              |                         | 646   |       |      |   | 639   |       |   |   | 597    |      
|                                                                  |                                                              |                         |       |       |      |   |       |       |  



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EL PASO CORPORATION


CONSOLIDATED BALANCE SHEETS


(In millions, except share amounts)


|                                       |                                                           |                                                            |                                          |        |       |        |        |        |       |        | 
|-------------------------------------- | --------------------------------------------------------- | ---------------------------------------------------------- | ---------------------------------------- | ------ | ----- | ------ | ------ | ------ | ----- | ------ | 
|                                       |                                                           | December 31,                                               |                                         
|                                       |                                                           |                                                            |                                         
|                                       |                                                           | 2005                                                       |                                          |        | 2004  |       
|                                       |                                                           |                                                            |                                          |        |       |       
|ASSETS                                
|Current assets                         |                                                           |                                                            |                                          |        |       |        |        |       
|                                       | Cash and cash equivalents                                 |                                                            | $                                        | 2,132  |       |        | $      | 2,117  |      
|                                       | Accounts and notes receivable                             |                                                            |                                          |        |       |        |        |        |      
|                                       |                                                           | Customer, net of allowance of $67 in 2005 and $198 in 2004 |                                          |        | 1,120 |        |        |        | 1,307 |       
|                                       |                                                           | Affiliates                                                 |                                          |        | 58    |        |        |        | 133   |       
|                                       |                                                           | Other                                                      |                                          |        | 141   |        |        |        | 187   |       
|                                       | Assets from price risk management activities              |                                                            |                                          | 641    |       |        |        | 601    |      
|                                       | Margin and other deposits held by others                  |                                                            |                                          | 1,124  |       |        |        | 79     |      
|                                       | Assets held for sale and from discontinued operations     |                                                            |                                          | 36     |       |        |        | 289    |      
|                                       | Deferred income taxes                                     |                                                            |                                          | 396    |       |        |        | 418    |      
|                                       | Other                                                     |                                                            |                                          | 537    |       |        |        | 501    |      
|                                       |                                                           |                                                            |                                          |        |       |       
|                                       |                                                           |                                                            | Total current assets                     |        |       | 6,185  |        |        |       | 5,632  | 
|                                       |                                                           |                                                            |                                          |        |       |       
|Property, plant and equipment, at cost |                                                           |                                                            |                                          |        |       |        |        |       
|                                       | Pipelines                                                 |                                                            |                                          | 19,965 |       |        |        | 19,418 |      
|                                       | Natural gas and oil properties, at full cost              |                                                            |                                          | 15,738 |       |        |        | 14,968 |      
|                                       | Other                                                     |                                                            |                                          | 1,397  |       |        |        | 2,238  |      
|                                       |                                                           |                                                            |                                          |        |       |       
|                                       |                                                           |                                                            | 37,100                                   |        |       |        | 36,624 |       
|                                       | Less accumulated depreciation, depletion and amortization |                                                            |                                          | 17,965 |       |        |        | 18,075 |      
|                                       |                                                           |                                                            |                                          |        |       |       
|                                       |                                                           |                                                            | Total property, plant and equipment, net |        |       | 19,135 |        |        |       | 18,549 | 
|                                       |                                                           |                                                            |                                          |        |       |       
|Other assets                           |                                                           |                                                            |                                          |        |       |        |        |       
|                                       | Investments in unconsolidated affiliates                  |                                                            |                                          | 2,473  |       |        |        | 2,574  |      
|                                       | Assets from price risk management activities              |                                                            |                                          | 1,368  |       |        |        | 1,584  |      
|                                       | Goodwill and other intangible assets, net                 |                                                            |                                          | 413    |       |        |        | 421    |      
|                                       | Other                                                     |                                                            |                                          | 2,264  |       |        |        | 2,623  |      
|                                       |                                                           |                                                            |                                          |        |       |       
|                                       |                                                           |                                                            | 6,518                                    |        |       |        | 7,202  |       
|                                       |                                                           |                                                            |                                          |        |       |       
|                                       |                                                           |                                                            | Total assets                             |        | $     | 31,838 |        |        | $     | 31,383 | 
|                                       |                                                           |                                                            |                                          |        |       |       



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EL PASO CORPORATION


CONSOLIDATED BALANCE SHEETS


(In millions, except share amounts)


|                                                         |                                                                                                                                                                           |              |                                            |        |      |        |        |        |     |        | 
|-------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------ | ------------------------------------------ | ------ | ---- | ------ | ------ | ------ | --- | ------ | 
|                                                         |                                                                                                                                                                           | December 31, |                                           
|                                                         |                                                                                                                                                                           |              |                                           
|                                                         |                                                                                                                                                                           | 2005         |                                            |        | 2004 |       
|                                                         |                                                                                                                                                                           |              |                                            |        |      |       
|LIABILITIES AND STOCKHOLDERS EQUITY                    
|Current liabilities                                      |                                                                                                                                                                           |              |                                            |        |      |        |        |       
|                                                         | Accounts payable                                                                                                                                                          |              |                                            |        |      |        |        |        |    
|                                                         |                                                                                                                                                                           | Trade        |                                            | $      | 864  |        |        | $      | 965 |       
|                                                         |                                                                                                                                                                           | Affiliates   |                                            |        | 10   |        |        |        | 21  |       
|                                                         |                                                                                                                                                                           | Other        |                                            |        | 730  |        |        |        | 474 |       
|                                                         | Short-term financing obligations, including current maturities                                                                                                            |              |                                            | 1,211  |      |        |        | 955    |    
|                                                         | Liabilities from price risk management activities                                                                                                                         |              |                                            | 1,418  |      |        |        | 852    |    
|                                                         | Liabilities related to discontinued operations                                                                                                                            |              |                                            | 8      |      |        |        | 115    |    
|                                                         | Margin deposits held by us                                                                                                                                                |              |                                            | 497    |      |        |        | 131    |    
|                                                         | Accrued interest                                                                                                                                                          |              |                                            | 295    |      |        |        | 333    |    
|                                                         | Other                                                                                                                                                                     |              |                                            | 679    |      |        |        | 726    |    
|                                                         |                                                                                                                                                                           |              |                                            |        |      |       
|                                                         |                                                                                                                                                                           |              | Total current liabilities                  |        |      | 5,712  |        |        |     | 4,572  | 
|                                                         |                                                                                                                                                                           |              |                                            |        |      |       
|Long-term financing obligations, less current maturities |                                                                                                                                                                           |              | 17,023                                     |        |      |        | 18,241 |       
|                                                         |                                                                                                                                                                           |              |                                            |        |      |       
|Other                                                    |                                                                                                                                                                           |              |                                            |        |      |        |        |       
|                                                         | Liabilities from price risk management activities                                                                                                                         |              |                                            | 2,005  |      |        |        | 1,026  |    
|                                                         | Deferred income taxes                                                                                                                                                     |              |                                            | 1,407  |      |        |        | 1,287  |    
|                                                         | Other                                                                                                                                                                     |              |                                            | 2,271  |      |        |        | 2,452  |    
|                                                         |                                                                                                                                                                           |              |                                            |        |      |       
|                                                         |                                                                                                                                                                           |              | 5,683                                      |        |      |        | 4,765  |       
|                                                         |                                                                                                                                                                           |              |                                            |        |      |       
|Commitments and contingencies                            |                                                                                                                                                                           |              |                                            |        |      |        |        |       
|Securities of subsidiaries                               |                                                                                                                                                                           |              |                                            |        |      |        |        |       
|                                                         | Securities of consolidated subsidiaries                                                                                                                                   |              |                                            | 31     |      |        |        | 367    |    
|Stockholders equity                                     |                                                                                                                                                                           |              |                                            |        |      |        |        |       
|                                                         | Preferred stock, par value $0.01 per share; authorized
    50,000,000 shares; issued 750,000, 4.99% convertible
    perpetual shares in 2005; stated at liquidation value |              |                                            | 750    |      |        |        |       |    
|                                                         | Common stock, par value $3 per share; authorized
    1,500,000,000 shares; issued 667,082,043 shares in 2005 and
    651,064,508 shares in 2004                           |              |                                            | 2,001  |      |        |        | 1,953  |    
|                                                         | Additional paid-in capital                                                                                                                                                |              |                                            | 4,592  |      |        |        | 4,538  |    
|                                                         | Accumulated deficit                                                                                                                                                       |              |                                            | (3,415 | )    |        |        | (2,809 | )  
|                                                         | Accumulated other comprehensive income (loss)                                                                                                                             |              |                                            | (332   | )    |        |        | 1      |    
|                                                         | Treasury stock (at cost); 7,620,272 shares in 2005 and 7,767,088
    shares in 2004                                                                                       |              |                                            | (190   | )    |        |        | (225   | )  
|                                                         | Unamortized compensation                                                                                                                                                  |              |                                            | (17    | )    |        |        | (20    | )  
|                                                         |                                                                                                                                                                           |              |                                            |        |      |       
|                                                         |                                                                                                                                                                           |              | Total stockholders equity                 |        |      | 3,389  |        |        |     | 3,438  | 
|                                                         |                                                                                                                                                                           |              |                                            |        |      |       
|                                                         |                                                                                                                                                                           |              | Total liabilities and stockholders equity |        | $    | 31,838 |        |        | $   | 31,383 | 
|                                                         |                                                                                                                                                                           |              |                                            |        |      |       



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EL PASO CORPORATION


CONSOLIDATED STATEMENTS OF CASH FLOWS


(In millions)


|                                     |                                                                             |                                                                              |                                                  |                                                     |       |        |      |        |       |       |       |        |       |        |        |  
|------------------------------------ | --------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------------------------------------ | --------------------------------------------------- | ----- | ------ | ---- | ------ | ----- | ----- | ----- | ------ | ----- | ------ | ------ | -
|                                     |                                                                             | Year Ended December 31,                                                      |                                                 
|                                     |                                                                             |                                                                              |                                                 
|                                     |                                                                             | 2005                                                                         |                                                  |                                                     | 2004  |        |      | 2003   |      
|                                     |                                                                             |                                                                              |                                                  |                                                     |       |        |      |        |      
|Cash flows from operating activities |                                                                             |                                                                              |                                                  |                                                     |       |        |      |        |       |       |       |       
|                                     | Net loss                                                                    |                                                                              | $                                                | (606                                                | )     |        | $    | (947   | )     |       | $     | (1,883 | )    
|                                     | Less income (loss) from discontinued operations, net of income
    taxes    |                                                                              |                                                  | 100                                                 |       |        |      | (118   | )     |       |       | (1,269 | )    
|                                     |                                                                             |                                                                              |                                                  |                                                     |       |        |      |        |      
|                                     | Net loss before discontinued operations                                     |                                                                              |                                                  | (706                                                | )     |        |      | (829   | )     |       |       | (614   | )    
|                                     | Adjustments to reconcile net loss to net cash from operating
    activities |                                                                              |                                                  |                                                     |       |        |      |        |       |       |       |        |      
|                                     |                                                                             | Depreciation, depletion and amortization                                     |                                                  |                                                     | 1,121 |        |      |        | 1,068 |       |       |        | 1,157 |       
|                                     |                                                                             | Deferred income tax benefit                                                  |                                                  |                                                     | (267  | )      |      |        | (44   | )     |       |        | (618  | )     
|                                     |                                                                             | Loss on long-lived assets                                                    |                                                  |                                                     | 407   |        |      |        | 1,077 |       |       |        | 785   |       
|                                     |                                                                             | Earnings from unconsolidated affiliates, adjusted for cash
    distributions |                                                  |                                                     | (63   | )      |      |        | (211  | )     |       |        | (17   | )     
|                                     |                                                                             | Other non-cash income items                                                  |                                                  |                                                     | 388   |        |      |        | 447   |       |       |        | 503   |       
|                                     |                                                                             | Asset and liability changes                                                  |                                                  |                                                     |       |        |      |        |       |       |       |        |       |       
|                                     |                                                                             |                                                                              | Accounts and notes receivable                    |                                                     |       | 94     |      |        |       | 492   |       |        |       | 2,548  |       
|                                     |                                                                             |                                                                              | Change in price risk management activities, net  |                                                     |       | 325    |      |        |       | 191   |       |        |       | 85     |       
|                                     |                                                                             |                                                                              | Accounts payable                                 |                                                     |       | (103   | )    |        |       | (322  | )     |        |       | (2,142 | )     
|                                     |                                                                             |                                                                              | Broker and other margins on deposit with others  |                                                     |       | (1,045 | )    |        |       | 121   |       |        |       | 623    |       
|                                     |                                                                             |                                                                              | Broker and other margins on deposit with us      |                                                     |       | 366    |      |        |       | (24   | )     |        |       | 32     |       
|                                     |                                                                             |                                                                              | Western Energy Settlement liability              |                                                     |       | (395   | )    |        |       | (626  | )     |        |       |       |       
|                                     |                                                                             |                                                                              | Other asset changes                              |                                                     |       | 232    |      |        |       | 14    |       |        |       | (182   | )     
|                                     |                                                                             |                                                                              | Other liability changes                          |                                                     |       | (102   | )    |        |       | (298  | )     |        |       | 102    |       
|                                     |                                                                             |                                                                              |                                                  |                                                     |       |        |      |        |      
|                                     |                                                                             |                                                                              | Cash provided by continuing activities           |                                                     |       | 252    |      |        |       | 1,056 |       |        |       | 2,262  |       
|                                     |                                                                             |                                                                              | Cash provided by discontinued activities         |                                                     |       | 16     |      |        |       | 260   |       |        |       | 67     |       
|                                     |                                                                             |                                                                              |                                                  |                                                     |       |        |      |        |      
|                                     |                                                                             |                                                                              |                                                  | Net cash provided by operating activities           |       |        | 268  |        |       |       | 1,316 |        |       |        | 2,329  |  
|                                     |                                                                             |                                                                              |                                                  |                                                     |       |        |      |        |      
|Cash flows from investing activities |                                                                             |                                                                              |                                                  |                                                     |       |        |      |        |       |       |       |       
|                                     | Capital expenditures                                                        |                                                                              |                                                  | (1,718                                              | )     |        |      | (1,804 | )     |       |       | (2,349 | )    
|                                     | Cash paid for acquisitions, net of cash acquired                            |                                                                              |                                                  | (1,025                                              | )     |        |      | (47    | )     |       |       | (1,078 | )    
|                                     | Net proceeds from the sale of assets and investments                        |                                                                              |                                                  | 1,424                                               |       |        |      | 1,927  |       |       |       | 2,458  |      
|                                     | Net change in restricted cash                                               |                                                                              |                                                  | 74                                                  |       |        |      | 578    |       |       |       | (534   | )    
|                                     | Net change in notes receivable from affiliates                              |                                                                              |                                                  | 11                                                  |       |        |      | 120    |       |       |       | (43    | )    
|                                     | Other                                                                       |                                                                              |                                                  | 192                                                 |       |        |      | (1     | )     |       |       |       |      
|                                     |                                                                             |                                                                              |                                                  |                                                     |       |        |      |        |      
|                                     |                                                                             |                                                                              | Cash provided by (used in) continuing activities |                                                     |       | (1,042 | )    |        |       | 773   |       |        |       | (1,546 | )     
|                                     |                                                                             |                                                                              | Cash provided by discontinued activities         |                                                     |       | 541    |      |        |       | 1,130 |       |        |       | 357    |       
|                                     |                                                                             |                                                                              |                                                  |                                                     |       |        |      |        |      
|                                     |                                                                             |                                                                              |                                                  | Net cash provided by (used in) investing activities |       |        | (501 | )      |       |       | 1,903 |        |       |        | (1,189 | )
|                                     |                                                                             |                                                                              |                                                  |                                                     |       |        |      |        |      



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EL PASO CORPORATION


CONSOLIDATED STATEMENTS OF CASH FLOWS


(In millions)


|                                                                        |                                                                           |                                                  |                                                     |        |      |     |     |        |        |        |      |        |      |        |  
|----------------------------------------------------------------------- | ------------------------------------------------------------------------- | ------------------------------------------------ | --------------------------------------------------- | ------ | ---- | --- | --- | ------ | ------ | ------ | ---- | ------ | ---- | ------ | -
|                                                                        |                                                                           | Year Ended December 31,                          |                                                    
|                                                                        |                                                                           |                                                  |                                                    
|                                                                        |                                                                           | 2005                                             |                                                     |        | 2004 |     |     | 2003   |       
|                                                                        |                                                                           |                                                  |                                                     |        |      |     |     |        |       
|Cash flows from financing activities                                    |                                                                           |                                                  |                                                     |        |      |     |     |        |        |        |      |       
|                                                                        | Net proceeds from issuance of long-term debt                              |                                                  |                                                     | 1,620  |      |     |     | 1,300  |        |        |      | 3,633  |     
|                                                                        | Payments to retire long-term debt and other financing obligations         |                                                  |                                                     | (1,668 | )    |     |     | (2,306 | )      |        |      | (2,824 | )   
|                                                                        | Net repayments under revolving and other short-term credit
    facilities |                                                  |                                                     |       |      |     |     | (850   | )      |        |      | (650   | )   
|                                                                        | Net proceeds from issuance of notes payable                               |                                                  |                                                     |       |      |     |     |       |        |        |      | 84     |     
|                                                                        | Repayment of notes payable                                                |                                                  |                                                     |       |      |     |     | (214   | )      |        |      | (8     | )   
|                                                                        | Net proceeds from issuance of preferred stock                             |                                                  |                                                     | 723    |      |     |     |       |        |        |      |       |     
|                                                                        | Payments to minority interest and preferred interest holders              |                                                  |                                                     | (306   | )    |     |     | (35    | )      |        |      | (1,277 | )   
|                                                                        | Issuances of common stock                                                 |                                                  |                                                     |       |      |     |     | 73     |        |        |      | 120    |     
|                                                                        | Dividends paid                                                            |                                                  |                                                     | (121   | )    |     |     | (101   | )      |        |      | (203   | )   
|                                                                        | Contributions from discontinued operations                                |                                                  |                                                     | 557    |      |     |     | 1,025  |        |        |      | 424    |     
|                                                                        | Other                                                                     |                                                  |                                                     |       |      |     |     | (33    | )      |        |      | (177   | )   
|                                                                        |                                                                           |                                                  |                                                     |        |      |     |     |        |       
|                                                                        |                                                                           | Cash provided by (used in) continuing activities |                                                     |        | 805  |     |     |        | (1,141 | )      |      |        | (878 | )     
|                                                                        |                                                                           | Cash used in discontinued activities             |                                                     |        | (557 | )   |     |        | (1,390 | )      |      |        | (424 | )     
|                                                                        |                                                                           |                                                  |                                                     |        |      |     |     |        |       
|                                                                        |                                                                           |                                                  | Net cash provided by (used in) financing activities |        |      | 248 |     |        |        | (2,531 | )    |        |      | (1,302 | )
|                                                                        |                                                                           |                                                  |                                                     |        |      |     |     |        |       
|Change in cash and cash equivalents                                     |                                                                           |                                                  | 15                                                  |        |      |     | 688 |        |        |        | (162 | )     
|Cash and cash equivalents                                               |                                                                           |                                                  |                                                     |        |      |     |     |        |        |        |      |       
|                                                                        | Beginning of period                                                       |                                                  |                                                     | 2,117  |      |     |     | 1,429  |        |        |      | 1,591  |     
|                                                                        |                                                                           |                                                  |                                                     |        |      |     |     |        |       
|                                                                        | End of period                                                             |                                                  | $                                                   | 2,132  |      |     | $   | 2,117  |        |        | $    | 1,429  |     
|                                                                        |                                                                           |                                                  |                                                     |        |      |     |     |        |       
|Supplemental Cash Flow Information Related to
    Continuing Operations |                                                                           |                                                  |                                                     |        |      |     |     |        |        |        |      |       
|                                                                        | Interest paid, net of amounts capitalized                                 |                                                  | $                                                   | 1,336  |      |     | $   | 1,536  |        |        | $    | 1,657  |     
|                                                                        | Income tax payments                                                       |                                                  |                                                     | 22     |      |     |     | 67     |        |        |      | 22     |     



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EL PASO CORPORATION


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


(In millions, except per share amounts)


|                                               |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |   |     |     |     |   |       |        |        |  
|---------------------------------------------- | ------------------------------------------ | -------------------------------- | --- | --- | ------ | - | ----- | ------ | ------ | - | ------ | --- | --- | ------ | ----- | ------ | ------ | - | --- | --- | --- | - | ----- | ------ | ------ | -
|                                               |                                            | For the Years Ended December 31, |    
|                                               |                                            |                                  |    
|                                               |                                            | 2005                             |     |     | 2004   |   |       | 2003   |       
|                                               |                                            |                                  |     |     |        |   |       |        |       
|                                               |                                            | Shares                           |     |     | Amount |   |       | Shares |        |   | Amount |     |     | Shares |       |        | Amount |  
|                                               |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |  
|Preferred stock, $0.01 par value               |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |   |     |     |     |   |       |       
|                                               | Balance at beginning of year               |                                  |     |    |        |   | $     |       |        |   |        |    |     |        | $     |       |        |   |     |    |     |   | $     |       |       
|                                               | Equity offering                            |                                  |     | 1   |        |   |       | 750    |        |   |        |    |     |        |       |       |        |   |     |    |     |   |       |       |       
|                                               |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |  
|                                               | Balance at end of year                     |                                  |     | 1   |        |   |       | 750    |        |   |        |    |     |        |       |       |        |   |     |    |     |   |       |       |       
|                                               |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |  
|Common stock, $3.00 par value                  |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |   |     |     |     |   |       |       
|                                               | Balance at beginning of year               |                                  |     | 651 |        |   |       | 1,953  |        |   |        | 639 |     |        |       | 1,917  |        |   |     | 605 |     |   |       | 1,816  |       
|                                               | Exchange of equity security units          |                                  |     | 14  |        |   |       | 41     |        |   |        |    |     |        |       |       |        |   |     | 15  |     |   |       | 45     |       
|                                               | Western Energy Settlement equity offerings |                                  |     |    |        |   |       |       |        |   |        | 9   |     |        |       | 26     |        |   |     | 18  |     |   |       | 53     |       
|                                               | Other, net                                 |                                  |     | 2   |        |   |       | 7      |        |   |        | 3   |     |        |       | 10     |        |   |     | 1   |     |   |       | 3      |       
|                                               |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |  
|                                               |                                            | Balance at end of year           |     |     | 667    |   |       |        | 2,001  |   |        |     | 651 |        |       |        | 1,953  |   |     |     | 639 |   |       |        | 1,917  |  
|                                               |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |  
|Additional paid-in capital:                    |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |   |     |     |     |   |       |       
|                                               | Balance at beginning of year               |                                  |     |     |        |   |       | 4,538  |        |   |        |     |     |        |       | 4,576  |        |   |     |     |     |   |       | 4,444  |       
|                                               | Compensation related issuances             |                                  |     |     |        |   |       | (18    | )      |   |        |     |     |        |       | 15     |        |   |     |     |     |   |       | 8      |       
|                                               | Tax effects of equity plans                |                                  |     |     |        |   |       | 2      |        |   |        |     |     |        |       | 5      |        |   |     |     |     |   |       | (26    | )     
|                                               | Exchange of equity security units          |                                  |     |     |        |   |       | 230    |        |   |        |     |     |        |       |       |        |   |     |     |     |   |       | 189    |       
|                                               | Western Energy Settlement equity offerings |                                  |     |     |        |   |       |       |        |   |        |     |     |        |       | 46     |        |   |     |     |     |   |       | 67     |       
|                                               | Dividends                                  |                                  |     |     |        |   |       | (131   | )      |   |        |     |     |        |       | (104   | )      |   |     |     |     |   |       | (96    | )     
|                                               | Other                                      |                                  |     |     |        |   |       | (29    | )      |   |        |     |     |        |       |       |        |   |     |     |     |   |       | (10    | )     
|                                               |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |  
|                                               |                                            | Balance at end of year           |     |     |        |   |       |        | 4,592  |   |        |     |     |        |       |        | 4,538  |   |     |     |     |   |       |        | 4,576  |  
|                                               |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |  
|Accumulated deficit:                           |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |   |     |     |     |   |       |       
|                                               | Balance at beginning of year               |                                  |     |     |        |   |       | (2,809 | )      |   |        |     |     |        |       | (1,862 | )      |   |     |     |     |   |       | 21     |       
|                                               | Net loss                                   |                                  |     |     |        |   |       | (606   | )      |   |        |     |     |        |       | (947   | )      |   |     |     |     |   |       | (1,883 | )     
|                                               |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |  
|                                               |                                            | Balance at end of year           |     |     |        |   |       |        | (3,415 | ) |        |     |     |        |       |        | (2,809 | ) |     |     |     |   |       |        | (1,862 | )
|                                               |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |  
|Accumulated other comprehensive income (loss): |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |   |     |     |     |   |       |       
|                                               | Balance at beginning of year               |                                  |     |     |        |   |       | 1      |        |   |        |     |     |        |       | (40    | )      |   |     |     |     |   |       | (235   | )     
|                                               | Other comprehensive income (loss)          |                                  |     |     |        |   |       | (333   | )      |   |        |     |     |        |       | 41     |        |   |     |     |     |   |       | 195    |       
|                                               |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |  
|                                               |                                            | Balance at end of year           |     |     |        |   |       |        | (332   | ) |        |     |     |        |       |        | 1      |   |     |     |     |   |       |        | (40    | )
|                                               |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |  
|Treasury stock, at cost:                       |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |   |     |     |     |   |       |       
|                                               | Balance at beginning of year               |                                  |     | (8  | )      |   |       | (225   | )      |   |        | (7  | )   |        |       | (222   | )      |   |     | (6  | )   |   |       | (201   | )     
|                                               | Compensation related issuances             |                                  |     | 1   |        |   |       | 47     |        |   |        |    |     |        |       | 9      |        |   |     |    |     |   |       |       |       
|                                               | Other                                      |                                  |     | (1  | )      |   |       | (12    | )      |   |        | (1  | )   |        |       | (12    | )      |   |     | (1  | )   |   |       | (21    | )     
|                                               |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |  
|                                               |                                            | Balance at end of year           |     |     | (8     | ) |       |        | (190   | ) |        |     | (8  | )      |       |        | (225   | ) |     |     | (7  | ) |       |        | (222   | )
|                                               |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |  
|Unamortized compensation:                      |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |   |     |     |     |   |       |       
|                                               | Balance at beginning of year               |                                  |     |     |        |   |       | (20    | )      |   |        |     |     |        |       | (23    | )      |   |     |     |     |   |       | (95    | )     
|                                               | Issuance of restricted stock               |                                  |     |     |        |   |       | (22    | )      |   |        |     |     |        |       | (28    | )      |   |     |     |     |   |       | (1     | )     
|                                               | Amortization of restricted stock           |                                  |     |     |        |   |       | 18     |        |   |        |     |     |        |       | 23     |        |   |     |     |     |   |       | 60     |       
|                                               | Forfeitures of restricted stock            |                                  |     |     |        |   |       | 7      |        |   |        |     |     |        |       | 9      |        |   |     |     |     |   |       | 15     |       
|                                               | Other                                      |                                  |     |     |        |   |       |       |        |   |        |     |     |        |       | (1     | )      |   |     |     |     |   |       | (2     | )     
|                                               |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |  
|                                               |                                            | Balance at end of year           |     |     |        |   |       |        | (17    | ) |        |     |     |        |       |        | (20    | ) |     |     |     |   |       |        | (23    | )
|                                               |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |  
|Total stockholders equity                     |                                            |                                  | 659 |     |        | $ | 3,389 |        |        |   | 643    |     |     | $      | 3,438 |        |        |   | 632 |     |     | $ | 4,346 |       
|                                               |                                            |                                  |     |     |        |   |       |        |        |   |        |     |     |        |       |        |        |  



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EL PASO CORPORATION




CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


(In millions)


|                   |                                                                                                               |                                                                                                                                                     |                                   |    |      |      |      |      |    |    |        |     |     |     | 
|------------------ | ------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------- | -- | ---- | ---- | ---- | ---- | -- | -- | ------ | --- | --- | --- | 
|                   |                                                                                                               | Year Ended December 31,                                                                                                                             |                                  
|                   |                                                                                                               |                                                                                                                                                     |                                  
|                   |                                                                                                               | 2005                                                                                                                                                |                                   |    | 2004 |      |      | 2003 |   
|                   |                                                                                                               |                                                                                                                                                     |                                   |    |      |      |      |      |   
|Net loss           |                                                                                                               | $                                                                                                                                                   | (606                              | )  |      | $    | (947 | )    |    | $  | (1,883 | )  
|                   |                                                                                                               |                                                                                                                                                     |                                   |    |      |      |      |      |   
|                   | Foreign currency translation adjustments (net of income tax of
    $4 in 2005, $(38) in 2004 and $51 in 2003) |                                                                                                                                                     |                                   | (9 | )    |      |      | 11   |    |    |        | 108 |    
|                   | Minimum pension liability accrual (net of income tax of $2 in
    2005, $11 in 2004 and $7 in 2003)           |                                                                                                                                                     |                                   | (3 | )    |      |      | (22  | )  |    |        | 11  |    
|                   | Net gains (losses) from cash flow hedging activities:                                                         |                                                                                                                                                     |                                   |    |      |      |      |      |    |    |        |     |    
|                   |                                                                                                               | Unrealized mark-to-market gains (losses) arising during period
    (net of income tax of $229 in 2005, $8 in 2004 and $50
    in 2003)              |                                   |    | (415 | )    |      |      | 22 |    |        |     | 101 |    
|                   |                                                                                                               | Reclassification adjustments for changes in initial value to
    settlement date (net of income tax of $46 in 2005, $8
    in 2004 and $11 in 2003) |                                   |    | 79   |      |      |      | 30 |    |        |     | (25 | )  
|                   | Change in unrealized gains on available for sale securities (net
    of income tax of $9 in 2005)             |                                                                                                                                                     |                                   | 15 |      |      |      |     |    |    |        |    |    
|                   |                                                                                                               |                                                                                                                                                     |                                   |    |      |      |      |      |   
|                   |                                                                                                               |                                                                                                                                                     | Other comprehensive income (loss) |    |      | (333 | )    |      |    | 41 |        |     |     | 195 | 
|                   |                                                                                                               |                                                                                                                                                     |                                   |    |      |      |      |      |   
|Comprehensive loss |                                                                                                               | $                                                                                                                                                   | (939                              | )  |      | $    | (906 | )    |    | $  | (1,688 | )  
|                   |                                                                                                               |                                                                                                                                                     |                                   |    |      |      |      |      |   



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EL PASO CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. Basis of Presentation and Significant Accounting
Policies


Basis of Presentation




Principles of
Consolidation


Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51.


Use of Estimates




Regulated Operations


Accounting for the Effects of Certain Types of
Regulation




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Cash and Cash
Equivalents




non-current non-current


Allowance for Doubtful
Accounts




Property, Plant and Equipment




|                             |                                     |        |  |               |                   |  |  |      | 
|---------------------------- | ----------------------------------- | ------ |  | ------------- | ----------------- |  |  | ---- | 
|Type                         |                                     | Method |  |               | Depreciable Lives | 
|                             |                                     |        |  |               |                   | 
|                             |                                     |        |  | (In years)    |                  
|Regulated interstate systems |                                     |        |  |               |                   |  |  |     
|                             | SFAS No. 71                         |        |  | Composite (1  | )                 |  |  | 1-63 | 
|                             | Non-SFAS No. 71                     |        |  | Composite (1  | )                 |  |  | 1-66 | 
|Non-regulated systems        |                                     |        |  |               |                   |  |  |     
|                             | Transmission and storage facilities |        |  | Straight-line |                   |  |  | 5-34 | 
|                             | Power facilities                    |        |  | Straight-line |                   |  |  | 27   | 
|                             | Gathering and processing systems    |        |  | Straight-line |                   |  |  | 3-35 | 
|                             | Buildings and improvements          |        |  | Straight-line |                   |  |  | 9-25 | 
|                             | Office and miscellaneous equipment  |        |  | Straight-line |                   |  |  | 1-15 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Under the composite (group) method, assets with similar useful
    lives and other characteristics are grouped and depreciated as
    one asset. We apply the depreciation rate approved in our rate
    settlements to the total cost of the group until its net book
    value equals its salvage value. We
    re-evaluate
    depreciation rates each time we redevelop our transportation
    rates when we file with the FERC for an increase or decrease in
    rates.





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Asset and Investment
Impairments




Natural Gas and Oil
Properties










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Goodwill and Other
Intangible Assets






|                                |                                           |               |     |       |          |   |      |       |  |   |       |   |  |   |      |     | 
|------------------------------- | ----------------------------------------- | ------------- | --- | ----- | -------- | - | ---- | ----- |  | - | ----- | - |  | - | ---- | --- | 
|                                |                                           |               |     | Field |          |   |      |       | 
|                                |                                           | Pipelines     |     |       | Services |   |      | Power |  |   | Total |  
|                                |                                           |               |     |       |          |   |      |       |  |   |       |  
|                                |                                           | (In millions) |    
|Goodwill as of January 1, 2004  |                                           | $             | 413 |       |          | $ | 480  |       |  | $ | 3     |   |  | $ | 896  |    
|Impairments of goodwill in 2004 |                                           |               |    |       |          |   | (480 | )     |  |   |      |   |  |   | (480 | )  
|Other changes in 2004           |                                           |               |    |       |          |   |     |       |  |   | (3    | ) |  |   | (3   | )  
|                                |                                           |               |     |       |          |   |      |       |  |   |       |  
|                                | Goodwill as of December 31, 2004 and 2005 |               | $   | 413   |          |   | $    |      |  |   | $     |  |  |   | $    | 413 | 
|                                |                                           |               |     |       |          |   |      |       |  |   |       |  



Pension and Other
Postretirement Benefits






106-2, Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of
2003 106-2


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Revenue Recognition




Pipelines revenues.


Exploration and Production revenues.


Power and Marketing and Trading revenues. Price Risk
Management Activities




| |                                            
| | -------------------------------------------
| | Environmental Costs and Other Contingencies

Environmental Costs.




Other Contingencies.


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Price Risk Management Activities






| |   |                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | derivatives entered into to hedge or otherwise reduce the
    commodity, interest rate and foreign currency exposure on our
    natural gas and oil production and our long-term debt;
|
| |  | derivatives related to our historical power contract
    restructuring business; and                                                                                                  
|
| |  | derivatives related to trading activities that we historically
    entered into with the objective of generating profits from
    exposure to shifts or changes in market prices.     

non-current








| |             
| | ------------
| | Income Taxes





| |                             
| | ----------------------------
| | Foreign Currency Translation





| |                                            
| | -------------------------------------------
| | Accounting for Asset Retirement Obligations

Accounting for Asset Retirement Obligations Accounting for Conditional Asset
Retirement Obligations




98



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|                                            |                                               |               |     |     |      |   |     |     | 
|------------------------------------------- | --------------------------------------------- | ------------- | --- | --- | ---- | - | --- | --- | 
|                                            |                                               | 2005          |     |     | 2004 |  
|                                            |                                               |               |     |     |      |  
|                                            |                                               | (In millions) |    
|Net asset retirement liability at January 1 |                                               | $             | 322 |     |      | $ | 269 |    
|Liabilities
    settled(1)                  |                                               |               | (93 | )   |      |   | (38 | )  
|Accretion expense                           |                                               |               | 28  |     |      |   | 25  |    
|Liabilities incurred                        |                                               |               | 19  |     |      |   | 36  |    
|Changes in estimate                         |                                               |               | (16 | )   |      |   | 30  |    
|Adoption of FIN No. 47                      |                                               |               | 15  |     |      |   |    |    
|                                            |                                               |               |     |     |      |  
|                                            | Net asset retirement liability at December 31 |               | $   | 275 |      |   | $   | 322 | 
|                                            |                                               |               |     |     |      |  




|    |                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Increase is due primarily to the sale of certain domestic
    natural gas and oil properties in our Exploration and Production
    segment. For a further discussion of these divestitures see Note
    3.





| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | Accounting for Certain Financial Instruments with
    Characteristics of both Liabilities and Equity

Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and
Equity


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long-term




| |                         
| | ------------------------
| | Stock-Based Compensation

Accounting for
Stock Issued to Employees, Accounting for
Stock-Based
Compensation,


|                                                                                                                                |                                |                                 |      |       |      |   |      |       |   |   |        |       |  
|------------------------------------------------------------------------------------------------------------------------------- | ------------------------------ | ------------------------------- | ---- | ----- | ---- | - | ---- | ----- | - | - | ------ | ----- | -
|                                                                                                                                |                                | Year Ended December 31,         |     
|                                                                                                                                |                                |                                 |     
|                                                                                                                                |                                | 2005                            |      |       | 2004 |   |      | 2003  |  
|                                                                                                                                |                                |                                 |      |       |      |   |      |       |  
|                                                                                                                                |                                | (In millions, except per common |     
|                                                                                                                                |                                | share amounts)                  |     
|Net loss available to common stockholders, as reported                                                                          |                                | $                               | (633 | )     |      | $ | (947 | )     |   | $ | (1,883 | )    
|Add: Stock-based employee compensation expense included in
    reported net loss, net of taxes                                  |                                |                                 | 12   |       |      |   | 14   |       |   |   | 38     |      
|Deduct: Total stock-based compensation expense determined under
    fair-value based method for all awards, net of
    taxes(1) |                                |                                 | (19  | )     |      |   | (25  | )     |   |   | (38    | )    
|                                                                                                                                |                                |                                 |      |       |      |   |      |       |  
|Net loss available to common stockholders, pro forma                                                                            |                                | $                               | (640 | )     |      | $ | (958 | )     |   | $ | (1,883 | )    
|                                                                                                                                |                                |                                 |      |       |      |   |      |       |  
|Loss per share:                                                                                                                 |                                |                                 |      |       |      |   |      |       |   |   |        |      
|                                                                                                                                | Basic and diluted, as reported |                                 | $    | (0.98 | )    |   | $    | (1.48 | ) |   | $      | (3.15 | )
|                                                                                                                                |                                |                                 |      |       |      |   |      |       |  
|                                                                                                                                | Basic and diluted, pro forma   |                                 | $    | (0.99 | )    |   | $    | (1.50 | ) |   | $      | (3.15 | )
|                                                                                                                                |                                |                                 |      |       |      |   |      |       |  






|    |                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Amounts have been adjusted from those previously reported to
    reflect the impact of actual forfeitures of unvested stock
    option awards on proforma compensation expense.



| |                                                         
| | --------------------------------------------------------
| | New Accounting Pronouncements Issued But Not Yet Adopted



Accounting for Stock-Based Compensation. Share-Based
Payment


Accounting for Pipeline Integrity Costs.


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2. Acquisitions


Medicine Bow.




|                                          |  |                      |       |   |      |   |       |  
|----------------------------------------- |  | -------------------- | ----- | - | ---- | - | ----- | -
|                                          |  | Year Ended           |      
|                                          |  | December 31,         |      
|                                          |  |                      |      
|                                          |  | 2005(1)              |       |   | 2004 |  
|                                          |  |                      |       |   |      |  
|                                          |  | (In millions, except |      
|                                          |  | per share amounts)   |      
|Revenues                                  |  | $                    | 4,056 |   |      | $ | 5,589 |  
|Net loss available to common stockholders |  |                      | (623  | ) |      |   | (958  | )
|Basic and diluted loss per share          |  |                      | (0.96 | ) |      |   | (1.50 | )






|    |                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Excludes a $13 million charge or loss of $(0.02) per share
    for change in control payments triggered at Medicine Bow as a
    result of the acquisition.

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Chaparral and Gemstone.




|   |             
|-- | ------------
|3. | Divestitures



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



|                           |       |               |       |       |      |   |       |       |  |   |       |       | 
|-------------------------- | ----- | ------------- | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|                           |       | 2005          |       |       | 2004 |   |       | 2003  | 
|                           |       |               |       |       |      |   |       |       | 
|                           |       | (In millions) |      
|Pipelines                  |       | $             | 49    |       |      | $ | 59    |       |  | $ | 145   |      
|Exploration and Production |       |               | 7     |       |      |   | 24    |       |  |   | 673   |      
|Power                      |       |               | 625   |       |      |   | 884   |       |  |   | 768   |      
|Field Services             |       |               | 657   |       |      |   | 1,029 |       |  |   | 753   |      
|Corporate                  |       |               | 121   |       |      |   | 16    |       |  |   | 149   |      
|                           |       |               |       |       |      |   |       |       | 
|Total
    continuing(1)    |       |               | 1,459 |       |      |   | 2,012 |       |  |   | 2,488 |      
|Discontinued               |       |               | 577   |       |      |   | 1,295 |       |  |   | 808   |      
|                           |       |               |       |       |      |   |       |       | 
|                           | Total |               | $     | 2,036 |      |   | $     | 3,307 |  |   | $     | 3,296 | 
|                           |       |               |       |       |      |   |       |       | 






|    |                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Proceeds exclude returns of invested capital and cash
    transferred with the assets sold and include costs incurred in
    preparing assets for disposal. These items decreased our sales
    proceeds by $35 million, $85 million and
    $30 million for the years ended December 31, 2005,
    2004 and 2003.

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|                           |  |                                                                                                                                                                                                                                                |  |                                                                                                                                                                             |  |                                                                                                                                                                                                             
|-------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                           |  | 2005                                                                                                                                                                                                                                           |  | 2004                                                                                                                                                                        |  | 2003                                                                                                                                                                                                        
|                           |  |                                                                                                                                                                                                                                                |  |                                                                                                                                                                             |  |                                                                                                                                                                                                             
|Pipelines                  |  |  Facilities located in the southeastern U.S.
     Interest in a gathering system in the western U.S.                                                                                                                                         |  |  Australian pipelines
     Interest in gathering systems                                                                                                                  |  |  2.1% interest in Alliance pipeline
     Equity interest in Portland Natural Gas Transmission
    System
     Horsham pipeline in Australia                                                              
|                          
|Exploration and Production |  |  Miscellaneous domestic natural gas and oil properties                                                                                                                                                                                        |  |  Brazilian exploration and production acreage                                                                                                                              |  |  Natural gas and oil properties in NM, TX, LA, OK and
    the Gulf of Mexico                                                                                                                               
|                          
|Power                      |  |  Cedar Brakes I and II
     Interest in power plants in Korea, India, England
    and China
     Four domestic power plants
     Portion of investment in Intercontinental
    Exchange
     Mohawk River Funding II
     Power turbines |  |  Utility Contract Funding
     31 domestic power plants and several turbines                                                                                              |  |  Interest in CE Generation L.L.C.
     Mt. Carmel power plant
     CAPSA/CAPEX investments
     East Coast Power                                                                                        
|                          
|Field Services             |  |  General partner and
    common unit interests in Enterprise
     Interest in Indian Springs natural gas gathering
    system and processing facility
     Interest in Javelina natural gas processing and
    pipeline assets              |  |  Remaining general partnership interest, common units
    and Series C units in GulfTerra
     South TX processing plants
     Dauphin Island and Mobile Bay investments |  |  Gathering systems located in WY
     Midstream assets in the north LA and Mid-Continent
    regions
     Common, Series B preference units and
    50 percent general partnership interests in GulfTerra
|                          
|Corporate                  |  |  Lakeside Technology Center                                                                                                                                                                                                                   |  |  Aircraft                                                                                                                                                                  |  |  Aircraft
     Enerplus Global Energy Management Company and
    its financial operations
     EnCap funds management business and its investments                                                       
|                          
|Discontinued               |  |  Interest in Paraxylene facility
     MTBE processing facility
     International natural gas and oil properties
     South Louisiana gathering and processing assets
     Ammonia manufacturing facility                                 |  |  Natural gas and oil properties in Canada and other
    international production assets
     Aruba and Eagle Point refineries and other
    petroleum assets              |  |  Corpus Christi refinery
     Florida petroleum terminals
     Louisiana lease crude
     Coal reserves
     Canadian natural gas and oil properties
     Asphalt facilities                          





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

South Louisiana Gathering and Processing Operations. pre-tax


International Power Operations.


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International Natural Gas and Oil Production Operations.


Petroleum Markets.




Coal Mining.




|                                                         |  |               |      |   |               |   |               |            |  |   |           |   |  |        |      |       |  |   |   |  |  |   |      |  
|-------------------------------------------------------- |  | ------------- | ---- | - | ------------- | - | ------------- | ---------- |  | - | --------- | - |  | ------ | ---- | ----- |  | - | - |  |  | - | ---- | -
|                                                         |  | South         |      |   |               |   |               |            |  |   |           |   | 
|                                                         |  | Louisiana     |      |   |               |   | International |            |  |   |           |   |  |       
|                                                         |  | Gathering     |      |   |               |   | Natural Gas   |            |  |   |           |   |  |       
|                                                         |  | and           |      |   | International |   |               | and Oil    |  |   |           |   |  |        |     
|                                                         |  | Processing    |      |   | Power         |   |               | Production |  |   | Petroleum |   |  | Coal   |      |      
|                                                         |  | Operations    |      |   | Operations    |   |               | Operations |  |   | Markets   |   |  | Mining |      | Total | 
|                                                         |  |               |      |   |               |   |               |            |  |   |           |   |  |        |      |       | 
|                                                         |  | (In millions) |     
|Year Ended December 31, 2005                             |  |               |      |   |               |   |               |            |  |   |           |   |  |        |      |       |  |   |   |  |  |   |      |  
|Revenues                                                 |  | $             | 292  |   |               | $ | 160           |            |  | $ | 2         |   |  | $      | 125  |       |  | $ |  |  |  | $ | 579  |  
|Costs and expenses                                       |  |               | (264 | ) |               |   | (136          | )          |  |   | (1        | ) |  |        | (181 | )     |  |   |  |  |  |   | (582 | )
|Gain (loss) on long-lived assets                         |  |               | 394  |   |               |   | (177          | )          |  |   | (5        | ) |  |        | 7    |       |  |   |  |  |  |   | 219  |  
|Other income                                             |  |               |     |   |               |   | 9             |            |  |   |          |   |  |        | 12   |       |  |   |  |  |  |   | 21   |  
|                                                         |  |               |      |   |               |   |               |            |  |   |           |   |  |        |      |       |  |  
|Income (loss) before income taxes                        |  | $             | 422  |   |               | $ | (144          | )          |  | $ | (4        | ) |  | $      | (37  | )     |  | $ |  |  |  |   | 237  |  
|                                                         |  |               |      |   |               |   |               |            |  |   |           |   |  |        |      |       |  |  
|Income taxes                                             |  |               |      |   |               |   |               |            |  |   |           |   |  |        |      |       |  |   |   |  |  |   | 137  |  
|                                                         |  |               |      |   |               |   |               |            |  |   |           |   |  |        |      |       |  |  
|Income from discontinued operations, net of income taxes |  |               |      |   |               |   |               |            |  |   |           |   |  |        |      |       |  |   |   |  |  | $ | 100  |  
|                                                         |  |               |      |   |               |   |               |            |  |   |           |   |  |        |      |       |  |  

104



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|                                                       |  |               |      |   |               |   |               |            |  |   |           |   |  |        |        |   |       |   |     |   |  |   |        |  
|------------------------------------------------------ |  | ------------- | ---- | - | ------------- | - | ------------- | ---------- |  | - | --------- | - |  | ------ | ------ | - | ----- | - | --- | - |  | - | ------ | -
|                                                       |  | South         |      |   |               |   |               |            |  |   |           |   | 
|                                                       |  | Louisiana     |      |   |               |   | International |            |  |   |           |   |  |       
|                                                       |  | Gathering     |      |   |               |   | Natural Gas   |            |  |   |           |   |  |       
|                                                       |  | and           |      |   | International |   |               | and Oil    |  |   |           |   |  |        |       
|                                                       |  | Processing    |      |   | Power         |   |               | Production |  |   | Petroleum |   |  | Coal   |        |   |      
|                                                       |  | Operations    |      |   | Operations    |   |               | Operations |  |   | Markets   |   |  | Mining |        |   | Total |  
|                                                       |  |               |      |   |               |   |               |            |  |   |           |   |  |        |        |   |       |  
|                                                       |  | (In millions) |     
|Year Ended December 31, 2004                           |  |               |      |   |               |   |               |            |  |   |           |   |  |        |        |   |       |   |     |   |  |   |        |  
|Revenues                                               |  | $             | 265  |   |               | $ | 142           |            |  | $ | 31        |   |  | $      | 787    |   |       | $ |    |   |  | $ | 1,225  |  
|Costs and expenses                                     |  |               | (229 | ) |               |   | (140          | )          |  |   | (53       | ) |  |        | (839   | ) |       |   |    |   |  |   | (1,261 | )
|Loss on long-lived assets                              |  |               |     |   |               |   | (30           | )          |  |   | (22       | ) |  |        | (36    | ) |       |   |    |   |  |   | (88    | )
|Other income                                           |  |               |     |   |               |   | 5             |            |  |   |          |   |  |        | 15     |   |       |   |    |   |  |   | 20     |  
|Interest and debt expense                              |  |               |     |   |               |   |              |            |  |   | 1         |   |  |        | (3     | ) |       |   |    |   |  |   | (2     | )
|                                                       |  |               |      |   |               |   |               |            |  |   |           |   |  |        |        |   |       |  
|Income (loss) before income taxes                      |  | $             | 36   |   |               | $ | (23           | )          |  | $ | (43       | ) |  | $      | (76    | ) |       | $ |    |   |  |   | (106   | )
|                                                       |  |               |      |   |               |   |               |            |  |   |           |   |  |        |        |   |       |  
|Income taxes                                           |  |               |      |   |               |   |               |            |  |   |           |   |  |        |        |   |       |   |     |   |  |   | 12     |  
|                                                       |  |               |      |   |               |   |               |            |  |   |           |   |  |        |        |   |       |  
|Loss from discontinued operations, net of income taxes |  |               |      |   |               |   |               |            |  |   |           |   |  |        |        |   |       |   |     |   |  | $ | (118   | )
|                                                       |  |               |      |   |               |   |               |            |  |   |           |   |  |        |        |   |       |  
|Year Ended December 31, 2003                           |  |               |      |   |               |   |               |            |  |   |           |   |  |        |        |   |       |   |     |   |  |   |        |  
|Revenues                                               |  | $             | 246  |   |               | $ | 122           |            |  | $ | 88        |   |  | $      | 5,652  |   |       | $ | 27  |   |  | $ | 6,135  |  
|Costs and expenses                                     |  |               | (242 | ) |               |   | (115          | )          |  |   | (129      | ) |  |        | (5,793 | ) |       |   | (13 | ) |  |   | (6,292 | )
|Loss on long-lived assets                              |  |               |     |   |               |   |              |            |  |   | (89       | ) |  |        | (1,404 | ) |       |   | (9  | ) |  |   | (1,502 | )
|Other income (expense)                                 |  |               |     |   |               |   | 5             |            |  |   |          |   |  |        | (10    | ) |       |   | 1   |   |  |   | (4     | )
|Interest and debt expense                              |  |               |     |   |               |   | (1            | )          |  |   | 4         |   |  |        | (11    | ) |       |   |    |   |  |   | (8     | )
|                                                       |  |               |      |   |               |   |               |            |  |   |           |   |  |        |        |   |       |  
|Income (loss) before income taxes                      |  | $             | 4    |   |               | $ | 11            |            |  | $ | (126      | ) |  | $      | (1,566 | ) |       | $ | 6   |   |  |   | (1,671 | )
|                                                       |  |               |      |   |               |   |               |            |  |   |           |   |  |        |        |   |       |  
|Income taxes                                           |  |               |      |   |               |   |               |            |  |   |           |   |  |        |        |   |       |   |     |   |  |   | (402   | )
|                                                       |  |               |      |   |               |   |               |            |  |   |           |   |  |        |        |   |       |  
|Loss from discontinued operations, net of income taxes |  |               |      |   |               |   |               |            |  |   |           |   |  |        |        |   |       |   |     |   |  | $ | (1,269 | )
|                                                       |  |               |      |   |               |   |               |            |  |   |           |   |  |        |        |   |       |  



|   |                                
|-- | -------------------------------
|4. | Restructuring and Other Charges



Employee severance, retention and transition costs.


Office relocation and consolidation.


Western Energy Settlement.


105



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Other.


5. (Gain) Loss on Long-Lived Assets




|                         |                                                                                                |                                                                  |   |     |      |   |     |       |       |   |    |       |     | 
|------------------------ | ---------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | - | --- | ---- | - | --- | ----- | ----- | - | -- | ----- | --- | 
|                         |                                                                                                | 2005                                                             |   |     | 2004 |   |     | 2003  |      
|                         |                                                                                                |                                                                  |   |     |      |   |     |       |      
|                         |                                                                                                | (In millions)                                                    |  
|Net realized (gain) loss |                                                                                                | $                                                                | 1 |     |      | $ | (16 | )     |       | $ | 69 |      
|                         |                                                                                                |                                                                  |   |     |      |   |     |       |      
|Asset impairments        |                                                                                                |                                                                  |   |     |      |   |     |       |       |   |    |      
|                         | Power                                                                                          |                                                                  |   |     |      |   |     |       |       |   |    |       |    
|                         |                                                                                                | Brazilian
    assets(1)                                          |   |     | 333  |   |     |       | 183   |   |    |       |    | 
|                         |                                                                                                | Domestic assets and restructured power contract entities
    (2) |   |     |     |   |     |       | 397   |   |    |       | 147 | 
|                         |                                                                                                | Turbines(2)                                                      |   |     | 18   |   |     |       | 1     |   |    |       | 33  | 
|                         | Pipelines                                                                                      |                                                                  |   |     |      |   |     |       |       |   |    |       |    
|                         |                                                                                                | Pipeline development
    projects(3)                             |   |     | 46   |   |     |       |      |   |    |       |    | 
|                         | Field Services                                                                                 |                                                                  |   |     |      |   |     |       |       |   |    |       |    
|                         |                                                                                                | Goodwill
    impairment(4)                                       |   |     |     |   |     |       | 480   |   |    |       |    | 
|                         |                                                                                                | Indian Springs processing
    assets(2)                          |   |     |     |   |     |       | 13    |   |    |       |    | 
|                         |                                                                                                | South Texas processing
    assets(2)                             |   |     |     |   |     |       |      |   |    |       | 167 | 
|                         |                                                                                                | Other                                                            |   |     | 9    |   |     |       | 10    |   |    |       | 4   | 
|                         | Exploration and Production                                                                     |                                                                  |   |     |      |   |     |       |       |   |    |       |    
|                         |                                                                                                | Other                                                            |   |     |     |   |     |       | 8     |   |    |       | 10  | 
|                         | Corporate                                                                                      |                                                                  |   |     |      |   |     |       |       |   |    |       |    
|                         |                                                                                                | Telecommunications
    assets(2)                                 |   |     |     |   |     |       |      |   |    |       | 396 | 
|                         |                                                                                                | Other                                                            |   |     |     |   |     |       | 1     |   |    |       | 34  | 
|                         |                                                                                                |                                                                  |   |     |      |   |     |       |      
|                         |                                                                                                | Total asset impairments                                          |   |     | 406  |   |     |       | 1,093 |   |    |       | 791 | 
|                         |                                                                                                |                                                                  |   |     |      |   |     |       |      
|                         | Loss on long-lived assets                                                                      |                                                                  |   | 407 |      |   |     | 1,077 |       |   |    | 860   |    
|                         | (Gain) loss on sale of investments in unconsolidated affiliates,
    net of
    impairments(5) |                                                                  |   | (91 | )    |   |     | (124  | )     |   |    | 176   |    
|                         |                                                                                                |                                                                  |   |     |      |   |     |       |      
|                         | Loss on assets and investments                                                                 |                                                                  | $ | 316 |      |   | $   | 953   |       |   | $  | 1,036 |    
|                         |                                                                                                |                                                                  |   |     |      |   |     |       |      






|    |                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | These assets were impaired as a result of negotiations
    associated with the power contracts of these plants. See
    Note 16 for a further discussion of these matters.                                           
|(2) | We adjusted the carrying value of these assets to their
    estimated fair value, less cost to sell.                                                                                                                 
|(3) | This impairment resulted from our decision to discontinue
    development of several pipeline expansion projects.                                                                                                    
|(4) | This impairment resulted from the sale of substantially all of
    our interests in GulfTerra, as well as the sale of our
    processing assets in south Texas to affiliates of Enterprise in
    2004 (see Note 21).
|(5) | See Note 21 for a further description of these gains and
    losses.                                                                                                                                                 



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6. Other Income and Other Expenses




|               |                                                                                                |               |   |     |      |  |   |      |     |  |   |     |     | 
|-------------- | ---------------------------------------------------------------------------------------------- | ------------- | - | --- | ---- |  | - | ---- | --- |  | - | --- | --- | 
|               |                                                                                                | 2005          |   |     | 2004 |  |   | 2003 |    
|               |                                                                                                |               |   |     |      |  |   |      |    
|               |                                                                                                | (In millions) |  
|Other Income   |                                                                                                |               |   |     |      |  |   |      |     |  |   |    
|               | Interest income                                                                                |               | $ | 129 |      |  | $ | 93   |     |  | $ | 83  |    
|               | Allowance for funds used during construction                                                   |               |   | 31  |      |  |   | 23   |     |  |   | 19  |    
|               | Development, management and administrative services fees on
    power projects from affiliates |               |   | 13  |      |  |   | 15   |     |  |   | 12  |    
|               | Re-application of SFAS No. 71 (CIG and WIC)                                                    |               |   |    |      |  |   |     |     |  |   | 18  |    
|               | Foreign currency gain                                                                          |               |   | 36  |      |  |   | 13   |     |  |   | 12  |    
|               | Gain on sale of cost basis investments                                                         |               |   | 40  |      |  |   |     |     |  |   | 7   |    
|               | Dividend income                                                                                |               |   | 19  |      |  |   |     |     |  |   | 6   |    
|               | Other                                                                                          |               |   | 27  |      |  |   | 43   |     |  |   | 41  |    
|               |                                                                                                |               |   |     |      |  |   |      |    
|               |                                                                                                | Total         |   | $   | 295  |  |   | $    | 187 |  |   | $   | 198 | 
|               |                                                                                                |               |   |     |      |  |   |      |    
|Other Expenses |                                                                                                |               |   |     |      |  |   |      |     |  |   |    
|               | Foreign currency losses                                                                        |               | $ | 1   |      |  | $ | 26   |     |  | $ | 112 |    
|               | Loss on early extinguishment of debt                                                           |               |   | 29  |      |  |   | 12   |     |  |   | 37  |    
|               | Loss on exchange of equity security units                                                      |               |   |    |      |  |   |     |     |  |   | 12  |    
|               | Minority interest in consolidated subsidiaries                                                 |               |   | 4   |      |  |   | 40   |     |  |   | 3   |    
|               | Other                                                                                          |               |   | 18  |      |  |   | 20   |     |  |   | 38  |    
|               |                                                                                                |               |   |     |      |  |   |      |    
|               |                                                                                                | Total         |   | $   | 52   |  |   | $    | 98  |  |   | $   | 202 | 
|               |                                                                                                |               |   |     |      |  |   |      |    

7. Income Taxes


Pretax Income (Loss) and Income Tax Expense (Benefit).


|                                           |          |               |                    |      |      |      |      |      |     |    |        |        |      |      |  
|------------------------------------------ | -------- | ------------- | ------------------ | ---- | ---- | ---- | ---- | ---- | --- | -- | ------ | ------ | ---- | ---- | -
|                                           |          | 2005          |                    |      | 2004 |      |      | 2003 |    
|                                           |          |               |                    |      |      |      |      |      |    
|                                           |          | (In millions) |                   
|Pretax Income (Loss)                       |          |               |                    |      |      |      |      |      |     |    |        |       
|                                           | U.S.     |               | $                  | (640 | )    |      | $    | (757 | )   |    | $      | (1,334 | )   
|                                           | Foreign  |               |                    | (351 | )    |      |      | (58  | )   |    |        | 245    |     
|                                           |          |               |                    |      |      |      |      |      |    
|                                           |          | $             | (991               | )    |      | $    | (815 | )    |     | $  | (1,089 | )     
|                                           |          |               |                    |      |      |      |      |      |    
|Components of Income Tax Expense (Benefit) |          |               |                    |      |      |      |      |      |     |    |        |       
|                                           | Current  |               |                    |      |      |      |      |      |     |    |        |        |     
|                                           |          | Federal       |                    | $    | (10  | )    |      | $    | (15 | )  |        | $      | 35   |     
|                                           |          | State         |                    |      | (35  | )    |      |      | 36  |    |        |        | 57   |     
|                                           |          | Foreign       |                    |      | 23   |      |      |      | 37  |    |        |        | 42   |     
|                                           |          |               |                    |      |      |      |      |      |    
|                                           |          |               | (22                | )    |      |      | 58   |      |     |    | 134    |       
|                                           |          |               |                    |      |      |      |      |      |    
|                                           | Deferred |               |                    |      |      |      |      |      |     |    |        |        |     
|                                           |          | Federal       |                    |      | (297 | )    |      |      | (68 | )  |        |        | (568 | )   
|                                           |          | State         |                    |      | 67   |      |      |      | (7  | )  |        |        | (54  | )   
|                                           |          | Foreign       |                    |      | (37  | )    |      |      | 31  |    |        |        | 4    |     
|                                           |          |               |                    |      |      |      |      |      |    
|                                           |          |               | (267               | )    |      |      | (44  | )    |     |    | (618   | )     
|                                           |          |               |                    |      |      |      |      |      |    
|                                           |          |               | Total income taxes |      | $    | (289 | )    |      | $   | 14 |        |        | $    | (484 | )
|                                           |          |               |                    |      |      |      |      |      |    

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Effective Tax Rate Reconciliation.


|                                                  |                                                                                     |                             |      |     |      |   |      |      |   |   |      |     |  
|------------------------------------------------- | ----------------------------------------------------------------------------------- | --------------------------- | ---- | --- | ---- | - | ---- | ---- | - | - | ---- | --- | -
|                                                  |                                                                                     | 2005                        |      |     | 2004 |   |      | 2003 |  
|                                                  |                                                                                     |                             |      |     |      |   |      |      |  
|                                                  |                                                                                     | (In millions, except rates) |     
|Income taxes at the statutory federal rate of 35% |                                                                                     | $                           | (347 | )   |      | $ | (285 | )    |   | $ | (381 | )  
|Increase (decrease)                               |                                                                                     |                             |      |     |      |   |      |      |   |   |      |    
|                                                  | Sales and write-offs of foreign investments                                         |                             |      | (7  | )    |   |      | 14   |   |   |      | (53 | )
|                                                  | Valuation allowances                                                                |                             |      | 91  |      |   |      | 18   |   |   |      | (57 | )
|                                                  | Foreign income taxed at different rates                                             |                             |      | 115 |      |   |      | 144  |   |   |      | (20 | )
|                                                  | Earnings from unconsolidated affiliates where we anticipate
    receiving dividends |                             |      | (37 | )    |   |      | (18  | ) |   |      | (13 | )
|                                                  | Audit
    settlements(1)                                                            |                             |      | (58 | )    |   |      |     |   |   |      |    |  
|                                                  | Non-deductible goodwill impairments                                                 |                             |      |    |      |   |      | 139  |   |   |      | 29  |  
|                                                  | Non-taxable medicare reimbursements                                                 |                             |      | (25 | )    |   |      |     |   |   |      |    |  
|                                                  | Other                                                                               |                             |      | (21 | )    |   |      | 2    |   |   |      | 11  |  
|                                                  |                                                                                     |                             |      |     |      |   |      |      |  
|Income taxes                                      |                                                                                     | $                           | (289 | )   |      | $ | 14   |      |   | $ | (484 | )  
|                                                  |                                                                                     |                             |      |     |      |   |      |      |  
|Effective tax rate                                |                                                                                     |                             | 29   | %   |      |   | (2   | )%   |   |   | 44   | %  
|                                                  |                                                                                     |                             |      |     |      |   |      |      |  






|    |                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We finalized The Coastal Corporations IRS tax audits for
    years prior to 1997, and as a result, recorded a tax benefit of
    approximately $58 million in 2005.

Deferred Tax Assets and Liabilities.


|                           |                                              |               |                              |       |       |       |     |       |       |       | 
|-------------------------- | -------------------------------------------- | ------------- | ---------------------------- | ----- | ----- | ----- | --- | ----- | ----- | ----- | 
|                           |                                              | 2005          |                              |       | 2004  |      
|                           |                                              |               |                              |       |       |      
|                           |                                              | (In millions) |                             
|Deferred tax liabilities   |                                              |               |                              |       |       |       |     |      
|                           | Property, plant and equipment                |               | $                            | 3,299 |       |       | $   | 2,565 |      
|                           | Investments in unconsolidated affiliates     |               |                              | 192   |       |       |     | 410   |      
|                           | Regulatory and other assets                  |               |                              | 321   |       |       |     | 327   |      
|                           |                                              |               |                              |       |       |      
|                           |                                              |               | Total deferred tax liability |       |       | 3,812 |     |       |       | 3,302 | 
|                           |                                              |               |                              |       |       |      
|Deferred tax assets        |                                              |               |                              |       |       |       |     |      
|                           | Net operating loss and tax credit carryovers |               |                              |       |       |       |     |       |      
|                           |                                              | Federal       |                              |       | 1,101 |       |     |       | 1,194 |      
|                           |                                              | State         |                              |       | 204   |       |     |       | 174   |      
|                           |                                              | Foreign       |                              |       | 76    |       |     |       | 35    |      
|                           | Environmental liability                      |               |                              | 159   |       |       |     | 174   |      
|                           | Price risk management activities             |               |                              | 573   |       |       |     |      | (1)  
|                           | Legal and other reserves                     |               |                              | 280   |       |       |     | 124   |      
|                           | Other                                        |               |                              | 601   |       |       |     | 783   |      
|                           | Valuation allowance                          |               |                              | (164  | )     |       |     | (51   | )    
|                           |                                              |               |                              |       |       |      
|                           |                                              |               | Total deferred tax asset     |       |       | 2,830 |     |       |       | 2,433 | 
|                           |                                              |               |                              |       |       |      
|Net deferred tax liability |                                              | $             | 982                          |       |       | $     | 869 |      
|                           |                                              |               |                              |       |       |      






|    |                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As of December 31, 2004, we had a net deferred tax
    liability associated with our price risk management activities
    which was included as part of Regulatory and other assets above.



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Tax Credit and NOL Carryovers.


|                                |  |                  |     |  |           |   |     |           |  |   |           |  |  |       |       |  |  |   |       | 
|------------------------------- |  | ---------------- | --- |  | --------- | - | --- | --------- |  | - | --------- |  |  | ----- | ----- |  |  | - | ----- | 
|                                |  | Carryover Period |    
|                                |  |                  |    
|                                |  | 2006             |     |  | 2007-2010 |   |     | 2011-2015 |  |   | 2016-2025 |  |  | Total |      
|                                |  |                  |     |  |           |   |     |           |  |   |           |  |  |       |      
|                                |  | (In millions)    |    
|U.S. federal net operating loss |  | $                |    |  |           | $ | 10  |           |  | $ | 15        |  |  | $     | 2,745 |  |  | $ | 2,770 | 
|State net operating loss        |  |                  | 126 |  |           |   | 699 |           |  |   | 553       |  |  |       | 1,236 |  |  |   | 2,614 | 



Valuation Allowances.




Other Tax Matters.


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8. Earnings Per Share




9. Fair Value of Financial Instruments




|                                                              |  |               |        |   |            |   |          |        |  |   |            |  |  |   |        | 
|------------------------------------------------------------- |  | ------------- | ------ | - | ---------- | - | -------- | ------ |  | - | ---------- |  |  | - | ------ | 
|                                                              |  | 2005          |        |   | 2004       |  
|                                                              |  |               |        |   |            |  
|                                                              |  | Carrying      |        |   |            |   | Carrying |        |  |  
|                                                              |  | Amount        |        |   | Fair Value |   |          | Amount |  |   | Fair Value | 
|                                                              |  |               |        |   |            |   |          |        |  |   |            | 
|                                                              |  | (In millions) |       
|Long-term financing obligations, including current maturities |  | $             | 18,234 |   |            | $ | 18,678   |        |  | $ | 19,189     |  |  | $ | 19,829 | 
|Commodity-based price risk management derivatives             |  |               | (1,416 | ) |            |   | (1,416   | )      |  |   | 68         |  |  |   | 68     | 
|Interest rate and foreign currency derivatives                |  |               | 2      |   |            |   | 2        |        |  |   | 239        |  |  |   | 239    | 
|Investments                                                   |  |               | 61     |   |            |   | 61       |        |  |   | 47         |  |  |   | 47     | 

long-term


10. Price Risk Management Activities




|                         |                                                       |                                                                       |   |      |        |   |   |      |     | 
|------------------------ | ----------------------------------------------------- | --------------------------------------------------------------------- | - | ---- | ------ | - | - | ---- | --- | 
|                         |                                                       | 2005                                                                  |   |      | 2004   |  
|                         |                                                       |                                                                       |   |      |        |  
|                         |                                                       | (In millions)                                                         |  
|Net assets (liabilities) |                                                       |                                                                       |   |      |        |   |   |     
|                         | Derivatives designated as hedges                      |                                                                       | $ | (653 | )      |   | $ | (536 | )  
|                         | Other commodity-based derivative
    contracts(1)     |                                                                       |   | (763 | )      |   |   | 604  |    
|                         |                                                       |                                                                       |   |      |        |  
|                         |                                                       | Total commodity-based derivatives                                     |   |      | (1,416 | ) |   |      | 68  | 
|                         | Interest rate and foreign currency
    derivatives(2) |                                                                       |   | 2    |        |   |   | 239  |    
|                         |                                                       |                                                                       |   |      |        |  
|                         |                                                       | Net assets (liabilities) from price risk management
    activities(3) |   | $    | (1,414 | ) |   | $    | 307 | 
|                         |                                                       |                                                                       |   |      |        |  






|    |                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Decrease is due primarily to the sale or assignment of a number
    of derivative contracts and significant changes in natural gas
    and oil prices during 2005.
|(2) | Decrease is due to settlement of hedge contracts upon repurchase
    of related debt as discussed below.                                                          
|(3) | Included in both current and
    non-current assets and
    liabilities on the balance sheet.                                                                     

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Derivatives
Designated as Hedges








Cash Flow Hedges.


111



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|                                                    |                                         |               |   |      |                  |  |   |             |   |  |      |      |   |  |  |      | 
|--------------------------------------------------- | --------------------------------------- | ------------- | - | ---- | ---------------- |  | - | ----------- | - |  | ---- | ---- | - |  |  | ---- | 
|                                                    |                                         | Accumulated   |   |      |                  |  |  
|                                                    |                                         | Other         |   |      |                  |  |  
|                                                    |                                         | Comprehensive |   |      | Estimated        |  |   |            
|                                                    |                                         | Income (Loss) |   |      | Income (Loss)    |  |   | Final       |  
|                                                    |                                         |               |   |      | Reclassification |  |   | Termination |  
|                                                    |                                         | 2005          |   |      | 2004             |  |   | in 2006(1)  |   |  | Year |     
|                                                    |                                         |               |   |      |                  |  |   |             |   |  |      |     
|                                                    |                                         | (In millions) |   |      |                 
|Commodity cash flow hedges                          |                                         |               |   |      |                  |  |   |             |   |  |      |      |   |  |  |     
|                                                    | Held by consolidated
    entities(2)    |               | $ | (285 | )                |  | $ | 54          |   |  | $    | (220 | ) |  |  | 2012 | 
|                                                    | Held by unconsolidated affiliates       |               |   | (7   | )                |  |   | (8          | ) |  |      | 2    |   |  |  | 2013 | 
|                                                    |                                         |               |   |      |                  |  |   |             |   |  |      |     
|                                                    | Total commodity cash flow hedges        |               |   | (292 | )                |  |   | 46          |   |  |      | (218 | ) |  |  |      | 
|Interest rate and foreign currency cash flow hedges |                                         |               |   |      |                  |  |   |             |   |  |      |      |   |  |  |     
|                                                    | Fixed
    rate(3)                       |               |   | 2    |                  |  |   | 4           |   |  |      |     |   |  |  | 2015 | 
|                                                    | Undesignated                            |               |   | (4   | )                |  |   | (8          | ) |  |      |     |   |  |  | 2009 | 
|                                                    |                                         |               |   |      |                  |  |   |             |   |  |      |     
|                                                    | Total foreign currency cash flow hedges |               |   | (2   | )                |  |   | (4          | ) |  |      |     |   |  |  |      | 
|                                                    |                                         |               |   |      |                  |  |   |             |   |  |      |     
|                                                    | Total(4)                                |               | $ | (294 | )                |  | $ | 42          |   |  | $    | (218 | ) |  |  |      | 
|                                                    |                                         |               |   |      |                  |  |   |             |   |  |      |     






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Reclassifications occur upon the physical delivery of the hedged
    commodity and the corresponding expiration of the hedge or if
    the forecasted transaction is no longer probable.                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(2) | We have a derivative that hedges a portion of the production
    owned by UnoPaso, a wholly-owned subsidiary that owns natural
    gas and oil properties in Brazil. As a result of the earlier
    than expected payout of certain of UnoPasos natural gas
    and oil properties, which will reduce our interest in the
    properties and related anticipated production volumes, we
    recorded an $11 million loss in the third quarter of 2005
    related to the elimination of the accumulated other
    comprehensive loss associated with this hedge and reclassified
    the hedge as an other commodity-based derivative contract.
|(3) | In March 2005, we repurchased approximately
    528 million
    of debt, of which
    375 million
    was hedged with interest rate and foreign currency derivatives.
    As a result of the repurchase, we removed the hedging
    designation on these derivatives and settled substantially all
    of the contracts. We recorded a gain of approximately
    $2 million during the first quarter of 2005 upon the
    reversal of the related accumulated other comprehensive income
    associated with these derivatives.                                                                                                               
|(4) | Accumulated other comprehensive income (loss) also includes:
    a) $(4) million and $5 million of net cumulative
    foreign currency translation adjustments as of December 31,
    2005 and 2004; b) $(49) million and $(46) million
    of additional minimum pension liability as of December 31,
    2005 and 2004; and c) $15 million of unrealized gains
    related to an available for sale security as of
    December 31, 2005. All amounts are net of taxes.                                                                                                                                                                       





Fair Value Hedges.  


 


112



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| |                                  
| | ---------------------------------
| | Other Commodity-Based Derivatives











| |            
| | -----------
| | Credit Risk





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|                                   |                                         |                                          |     |       |                     |   |     |          |   |   |       |     |   |   |     |       |  
|---------------------------------- | --------------------------------------- | ---------------------------------------- | --- | ----- | ------------------- | - | --- | -------- | - | - | ----- | --- | - | - | --- | ----- | -
|                                   |                                         | Net Derivative Instrument Asset Exposure |    
|                                   |                                         |                                          |    
|                                   |                                         |                                          |     | Below |                     |   | Not |          |   |  
|Counterparty                       |                                         | Investment Grade(1)                      |     |       | Investment Grade(1) |   |     | Rated(1) |   |   | Total |    
|                                   |                                         |                                          |     |       |                     |   |     |          |   |   |       |    
|                                   |                                         | (In millions)                            |    
|December 31, 2005                  |                                         |                                          |     |       |                     |   |     |          |   |   |       |     |   |   |     |      
|Energy marketers                   |                                         | $                                        | 554 |       |                     | $ | 110 |          |   | $ |      |     |   | $ | 664 |      
|Natural gas and electric utilities |                                         |                                          | 6   |       |                     |   |    |          |   |   | 134   |     |   |   | 140 |      
|Commodity exchanges                |                                         |                                          | 515 |       |                     |   |    |          |   |   |      |     |   |   | 515 |      
|Other                              |                                         |                                          | 45  |       |                     |   |    |          |   |   | 1     |     |   |   | 46  |      
|                                   |                                         |                                          |     |       |                     |   |     |          |   |   |       |    
|                                   | Net financial instrument assets
    (2) |                                          |     | 1,120 |                     |   |     | 110      |   |   |       | 135 |   |   |     | 1,365 |  
|                                   | Collateral held by us                   |                                          |     | (831  | )                   |   |     | (96      | ) |   |       | (68 | ) |   |     | (995  | )
|                                   |                                         |                                          |     |       |                     |   |     |          |   |   |       |    
|                                   | Net exposure from derivative assets     |                                          | $   | 289   |                     |   | $   | 14       |   |   | $     | 67  |   |   | $   | 370   |  
|                                   |                                         |                                          |     |       |                     |   |     |          |   |   |       |    

|                                   |                                         |                                          |     |       |                     |   |     |          |   |   |       |     |   |   |     |       |  
|---------------------------------- | --------------------------------------- | ---------------------------------------- | --- | ----- | ------------------- | - | --- | -------- | - | - | ----- | --- | - | - | --- | ----- | -
|                                   |                                         | Net Derivative Instrument Asset Exposure |    
|                                   |                                         |                                          |    
|                                   |                                         |                                          |     | Below |                     |   | Not |          |   |  
|Counterparty                       |                                         | Investment Grade(1)                      |     |       | Investment Grade(1) |   |     | Rated(1) |   |   | Total |    
|                                   |                                         |                                          |     |       |                     |   |     |          |   |   |       |    
|                                   |                                         | (In millions)                            |    
|December 31, 2004                  |                                         |                                          |     |       |                     |   |     |          |   |   |       |     |   |   |     |      
|Energy marketers                   |                                         | $                                        | 440 |       |                     | $ | 44  |          |   | $ | 35    |     |   | $ | 519 |      
|Natural gas and electric utilities |                                         |                                          | 424 |       |                     |   |    |          |   |   | 91    |     |   |   | 515 |      
|Commodity exchanges                |                                         |                                          | 242 |       |                     |   |    |          |   |   |      |     |   |   | 242 |      
|Other                              |                                         |                                          | 3   |       |                     |   |    |          |   |   | 7     |     |   |   | 10  |      
|                                   |                                         |                                          |     |       |                     |   |     |          |   |   |       |    
|                                   | Net financial instrument assets
    (2) |                                          |     | 1,109 |                     |   |     | 44       |   |   |       | 133 |   |   |     | 1,286 |  
|                                   | Collateral held by us                   |                                          |     | (349  | )                   |   |     | (39      | ) |   |       | (81 | ) |   |     | (469  | )
|                                   |                                         |                                          |     |       |                     |   |     |          |   |   |       |    
|                                   | Net exposure from derivative assets     |                                          | $   | 760   |                     |   | $   | 5        |   |   | $     | 52  |   |   | $   | 817   |  
|                                   |                                         |                                          |     |       |                     |   |     |          |   |   |       |    






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Investment Grade and Below Investment
    Grade are determined using publicly available credit
    ratings. Investment Grade includes counterparties
    with a minimum Standard & Poors rating of BBB- or
    Moodys rating of Baa3. Below Investment Grade
    includes counterparties with a public credit rating that do not
    meet the criteria of Investment Grade. Not
    Rated includes counterparties that are not rated by any
    public rating service.                                  
|(2) | Net asset exposure from financial instrument assets primarily
    relates to our assets and liabilities from price risk management
    activities. These exposures have been prepared by netting assets
    against liabilities on counterparties where we have a
    contractual right to offset. The positions netted include both
    current and non-current amounts and do not include amounts
    already billed or delivered under the derivative contracts,
    which would be netted against these exposures.





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11. Regulatory Assets and Liabilities




|                                   |                                                                             |                                          |   |     |      |   |   |    |     | 
|---------------------------------- | --------------------------------------------------------------------------- | ---------------------------------------- | - | --- | ---- | - | - | -- | --- | 
|Description                        |                                                                             | 2005                                     |   |     | 2004 |  
|                                   |                                                                             |                                          |   |     |      |  
|                                   |                                                                             | (In millions)                            |  
|Current regulatory assets          |                                                                             | $                                        | 4 |     |      | $ | 3 |   
|                                   |                                                                             |                                          |   |     |      |  
|Non-current regulatory assets      |                                                                             |                                          |   |     |      |   |   |   
|                                   | Grossed-up deferred taxes on capitalized funds used during
    construction |                                          |   | 96  |      |   |   | 85 |    
|                                   | Postretirement benefits                                                     |                                          |   | 25  |      |   |   | 30 |    
|                                   | Unamortized net loss on reacquired debt                                     |                                          |   | 20  |      |   |   | 23 |    
|                                   | Under-collected state income tax                                            |                                          |   | 7   |      |   |   | 7  |    
|                                   | Other                                                                       |                                          |   | 16  |      |   |   | 10 |    
|                                   |                                                                             |                                          |   |     |      |  
|                                   |                                                                             | Total non-current regulatory assets      |   |     | 164  |   |   |    | 155 | 
|                                   |                                                                             |                                          |   |     |      |  
|                                   |                                                                             | Total regulatory assets                  |   | $   | 168  |   |   | $  | 158 | 
|                                   |                                                                             |                                          |   |     |      |  
|Current regulatory liabilities     |                                                                             | $                                        | 9 |     |      | $ | 9 |   
|                                   |                                                                             |                                          |   |     |      |  
|Non-current regulatory liabilities |                                                                             |                                          |   |     |      |   |   |   
|                                   | Environmental liability                                                     |                                          |   | 110 |      |   |   | 97 |    
|                                   | Cost of removal of offshore assets                                          |                                          |   | 48  |      |   |   | 50 |    
|                                   | Property and plant depreciation                                             |                                          |   | 41  |      |   |   | 35 |    
|                                   | Postretirement benefits                                                     |                                          |   | 16  |      |   |   | 13 |    
|                                   | Plant regulatory liability                                                  |                                          |   | 11  |      |   |   | 11 |    
|                                   | Excess deferred income taxes                                                |                                          |   | 8   |      |   |   | 11 |    
|                                   | Other                                                                       |                                          |   | 8   |      |   |   | 11 |    
|                                   |                                                                             |                                          |   |     |      |  
|                                   |                                                                             | Total non-current regulatory liabilities |   |     | 242  |   |   |    | 228 | 
|                                   |                                                                             |                                          |   |     |      |  
|                                   |                                                                             | Total regulatory liabilities             |   | $   | 251  |   |   | $  | 237 | 
|                                   |                                                                             |                                          |   |     |      |  

12. Other Assets and Liabilities




|                         |                                  |               |   |     |      |  |   |     |     | 
|------------------------ | -------------------------------- | ------------- | - | --- | ---- |  | - | --- | --- | 
|                         |                                  | 2005          |   |     | 2004 | 
|                         |                                  |               |   |     |      | 
|                         |                                  | (In millions) |  
|Other current assets     |                                  |               |   |     |      |  |   |    
|                         | Prepaid expenses                 |               | $ | 90  |      |  | $ | 119 |    
|                         | Restricted cash (Note 1)         |               |   | 281 |      |  |   | 180 |    
|                         | Inventory                        |               |   | 140 |      |  |   | 155 |    
|                         | Other                            |               |   | 26  |      |  |   | 47  |    
|                         |                                  |               |   |     |      | 
|                         |                                  | Total         |   | $   | 537  |  |   | $   | 501 | 
|                         |                                  |               |   |     |      | 
|Other non-current assets |                                  |               |   |     |      |  |   |    
|                         | Pension assets (Note 17)         |               | $ | 886 |      |  | $ | 933 |    
|                         | Notes receivable from affiliates |               |   | 263 |      |  |   | 287 |    
|                         | Restricted cash (Note 1)         |               |   | 168 |      |  |   | 180 |    
|                         | Unamortized debt expenses        |               |   | 176 |      |  |   | 192 |    
|                         | Regulatory assets (Note 11)      |               |   | 164 |      |  |   | 155 |    

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|                              |                                                         |               |   |       |       |  |   |     |       | 
|----------------------------- | ------------------------------------------------------- | ------------- | - | ----- | ----- |  | - | --- | ----- | 
|                              |                                                         | 2005          |   |       | 2004  | 
|                              |                                                         |               |   |       |       | 
|                              |                                                         | (In millions) |  
|                              | Long-term receivables                                   |               |   | 410   |       |  |   | 316 |      
|                              | Assets of discontinued operations (Note 3)              |               |   |      |       |  |   | 298 |      
|                              | Other                                                   |               |   | 197   |       |  |   | 262 |      
|                              |                                                         |               |   |       |       | 
|                              |                                                         | Total         |   | $     | 2,264 |  |   | $   | 2,623 | 
|                              |                                                         |               |   |       |       | 
|Other current liabilities     |                                                         |               |   |       |       |  |   |    
|                              | Accrued taxes, other than income                        |               | $ | 109   |       |  | $ | 135 |      
|                              | Western Energy Settlement                               |               |   |      |       |  |   | 44  |      
|                              | Income taxes                                            |               |   | 52    |       |  |   | 80  |      
|                              | Environmental, legal and rate reserves (Note 16)        |               |   | 181   |       |  |   | 84  |      
|                              | Deposits                                                |               |   | 31    |       |  |   | 39  |      
|                              | Other postretirement benefits (Note 17)                 |               |   | 35    |       |  |   | 38  |      
|                              | Accrued lease obligations                               |               |   | 43    |       |  |   | 4   |      
|                              | Asset retirement obligations (Note 1)                   |               |   | 33    |       |  |   | 28  |      
|                              | Dividends payable                                       |               |   | 35    |       |  |   | 25  |      
|                              | Accrued liabilities                                     |               |   | 36    |       |  |   | 74  |      
|                              | Other                                                   |               |   | 124   |       |  |   | 175 |      
|                              |                                                         |               |   |       |       | 
|                              |                                                         | Total         |   | $     | 679   |  |   | $   | 726   | 
|                              |                                                         |               |   |       |       | 
|Other non-current liabilities |                                                         |               |   |       |       |  |   |    
|                              | Environmental and legal reserves (Note 16)              |               | $ | 1,028 |       |  | $ | 763 |      
|                              | Western Energy Settlement                               |               |   |      |       |  |   | 351 |      
|                              | Other postretirement and employment benefits (Note 17)  |               |   | 224   |       |  |   | 249 |      
|                              | Regulatory liabilities (Note 11)                        |               |   | 242   |       |  |   | 228 |      
|                              | Asset retirement obligations (Note 1)                   |               |   | 194   |       |  |   | 244 |      
|                              | Other deferred credits                                  |               |   | 186   |       |  |   | 126 |      
|                              | Accrued lease obligations                               |               |   | 77    |       |  |   | 126 |      
|                              | Insurance reserves                                      |               |   | 132   |       |  |   | 125 |      
|                              | Liabilities related to discontinued operations (Note 3) |               |   |      |       |  |   | 55  |      
|                              | Other                                                   |               |   | 188   |       |  |   | 185 |      
|                              |                                                         |               |   |       |       | 
|                              |                                                         | Total         |   | $     | 2,271 |  |   | $   | 2,452 | 
|                              |                                                         |               |   |       |       | 

13. Property, Plant and Equipment


work-in-progress




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14. Debt, Other Financing Obligations and Other Credit
Facilities


|                                                               |       |               |        |        |      |   |        |        | 
|-------------------------------------------------------------- | ----- | ------------- | ------ | ------ | ---- | - | ------ | ------ | 
|                                                               |       | 2005          |        |        | 2004 |  
|                                                               |       |               |        |        |      |  
|                                                               |       | (In millions) |       
|Short-term financing obligations, including current maturities |       | $             | 1,211  |        |      | $ | 955    |       
|Long-term financing obligations                                |       |               | 17,023 |        |      |   | 18,241 |       
|                                                               |       |               |        |        |      |  
|                                                               | Total |               | $      | 18,234 |      |   | $      | 19,196 | 
|                                                               |       |               |        |        |      |  



|                                         |                                    |   |        |        | 
|---------------------------------------- | ---------------------------------- | - | ------ | ------ | 
|Debt obligations as of December 31, 2004 |                                    | $ | 19,196 |       
|Principal amounts borrowed               |                                    |   | 1,638  |       
|Repayment/retirement of principal        |                                    |   | (1,912 | )     
|Sale of
    entities(1)                  |                                    |   | (575   | )     
|Other                                    |                                    |   | (113   | )     
|                                         |                                    |   |       
|                                         | Total debt as of December 31, 2005 |   | $      | 18,234 | 
|                                         |                                    |   |       






|    |                                                                              
|--- | -----------------------------------------------------------------------------
|(1) | Related to the sale of Cedar Brakes I and II and
    Mohawk River Funding II.

Short-Term Financing
Obligations




|                                                                         |  |               |       |  |      |   |     | 
|------------------------------------------------------------------------ |  | ------------- | ----- |  | ---- | - | --- | 
|                                                                         |  | 2005          |       |  | 2004 |  
|                                                                         |  |               |       |  |      |  
|                                                                         |  | (In millions) |      
|Current maturities of long-term debt and other financing
    obligations |  | $             | 1,211 |  |      | $ | 948 | 
|Short-term financing obligation                                          |  |               |      |  |      |   | 7   | 
|                                                                         |  |               |       |  |      |  
|                                                                         |  | $             | 1,211 |  |      | $ | 955 | 
|                                                                         |  |               |       |  |      |  

Long-Term Financing
Obligations




|               |                                    |                                                                  |  |   |       |     |  |   |       | 
|-------------- | ---------------------------------- | ---------------------------------------------------------------- |  | - | ----- | --- |  | - | ----- | 
|               |                                    | 2005                                                             |  |   | 2004  |    
|               |                                    |                                                                  |  |   |       |    
|               |                                    | (In millions)                                                    | 
|Long-term debt |                                    |                                                                  |  |   |       |     |  |  
|               | ANR Pipeline Company               |                                                                  |  |   |       |     |  |   |      
|               |                                    | Debentures and notes, 7.0% through 9.625%, due 2010 through 2025 |  | $ | 732   |     |  | $ | 800   | 
|               |                                    | Notes, 13.75% due 2010                                           |  |   | 12    |     |  |   | 12    | 
|               | Colorado Interstate Gas Company    |                                                                  |  |   |       |     |  |   |      
|               |                                    | Senior debentures, 10.0% and 6.85%, due 2005 and 2037            |  |   | 100   |     |  |   | 280   | 
|               |                                    | Senior notes, 5.95% and 6.80%, due 2015                          |  |   | 600   |     |  |   |      | 
|               | El Paso CGP Company,
    L.L.C.(1) |                                                                  |  |   |       |     |  |   |      
|               |                                    | Notes, 6.5% through 7.75%, due 2006 through 2010                 |  |   |      |     |  |   | 930   | 
|               |                                    | Senior debentures, 6.375% through 10.75%, due 2008 through 2037  |  |   |      |     |  |   | 1,357 | 
|               | El Paso Corporation                |                                                                  |  |   |       |     |  |   |      
|               |                                    | Senior debentures, 6.375% through 10.75%, due 2008 through 2037  |  |   | 166   | (1) |  |   |      | 
|               |                                    | Senior notes, 5.75% through 10.75%, due 2006 through 2037        |  |   | 3,439 | (1) |  |   | 1,956 | 
|               |                                    | Equity security units, 6.14% due 2007                            |  |   |      |     |  |   | 272   | 
|               |                                    | Notes, 6.50% through 7.875%, due 2005 through 2018               |  |   | 1,854 | (1) |  |   | 1,952 | 
|               |                                    | Medium-term notes, 6.95% through 9.0%, due 2005 through 2032     |  |   | 2,735 |     |  |   | 2,784 | 
|               |                                    | Zero coupon convertible debentures due 2021                      |  |   | 611   |     |  |   | 822   | 
|               |                                    | $1.25 billion term loan, LIBOR plus 2.75% due 2009               |  |   | 1,225 |     |  |   | 1,245 | 

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|                            |                                                    |                                                               |                                                                |       |       |        |        |     |       |        | 
|--------------------------- | -------------------------------------------------- | ------------------------------------------------------------- | -------------------------------------------------------------- | ----- | ----- | ------ | ------ | --- | ----- | ------ | 
|                            |                                                    | 2005                                                          |                                                                |       | 2004  |       
|                            |                                                    |                                                               |                                                                |       |       |       
|                            |                                                    | (In millions)                                                 |                                                               
|                            | El Paso Natural Gas Company                        |                                                               |                                                                |       |       |        |        |     |      
|                            |                                                    | Notes, 7.625% and 8.375%, due 2010 and 2032                   |                                                                |       | 655   |        |        |     | 655   |       
|                            |                                                    | Debentures, 7.5% and 8.625%, due 2022 and 2026                |                                                                |       | 460   |        |        |     | 460   |       
|                            | El Paso Exploration & Production Company           |                                                               |                                                                |       |       |        |        |     |      
|                            |                                                    | Senior notes, 7.75%, due 2013                                 |                                                                |       | 1,200 |        |        |     | 1,200 |       
|                            |                                                    | Revolving credit facility, LIBOR plus 1.875% due 2010         |                                                                |       | 500   |        |        |     |      |       
|                            | Power                                              |                                                               |                                                                |       |       |        |        |     |      
|                            |                                                    | Non-recourse senior notes, 8.5% and 9.875%, due 2013 and 2014 |                                                                |       |      |        |        |     | 666   |       
|                            |                                                    | Non-recourse notes, variable rates, due 2007 and 2008         |                                                                |       | 225   |        |        |     | 320   |       
|                            |                                                    | Recourse notes, 7.27% and 8.5%, due 2016                      |                                                                |       |      |        |        |     | 40    |       
|                            | Southern Natural Gas Company                       |                                                               |                                                                |       |       |        |        |     |      
|                            |                                                    | Notes, 6.125% through 8.875%, due 2007 through 2032           |                                                                |       | 1,200 |        |        |     | 1,200 |       
|                            | Tennessee Gas Pipeline Company                     |                                                               |                                                                |       |       |        |        |     |      
|                            |                                                    | Debentures, 6.0% through 7.625%, due 2011 through 2037        |                                                                |       | 1,386 |        |        |     | 1,386 |       
|                            |                                                    | Notes, 8.375%, due 2032                                       |                                                                |       | 240   |        |        |     | 240   |       
|                            | Other                                              |                                                               |                                                                | 325   |       |        |        | 137 |      
|                            |                                                    |                                                               |                                                                |       |       |       
|                            |                                                    |                                                               | 17,665                                                         |       |       |        | 18,714 |    
|                            |                                                    |                                                               |                                                                |       |       |       
|Other financing obligations |                                                    |                                                               |                                                                |       |       |        |        |    
|                            | Capital Trust I                                    |                                                               |                                                                | 325   |       |        |        | 325 |      
|                            | Coastal Finance I                                  |                                                               |                                                                | 300   |       |        |        | 300 |      
|                            |                                                    |                                                               |                                                                |       |       |       
|                            |                                                    |                                                               | 625                                                            |       |       |        | 625    |    
|                            |                                                    |                                                               |                                                                |       |       |       
|                            |                                                    |                                                               | Subtotal                                                       |       |       | 18,290 |        |     |       | 19,339 | 
|Less:                       |                                                    |                                                               |                                                                |       |       |        |        |    
|                            | Unamortized discount and premium on long-term debt |                                                               |                                                                | 56    |       |        |        | 150 |      
|                            | Current maturities                                 |                                                               |                                                                | 1,211 |       |        |        | 948 |      
|                            |                                                    |                                                               |                                                                |       |       |       
|                            |                                                    |                                                               | Total long-term financing obligations, less current maturities |       | $     | 17,023 |        |     | $     | 18,241 | 
|                            |                                                    |                                                               |                                                                |       |       |       






|    |                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Approximately $2.3 billion of El Paso CGP Company,
    L.L.C. debt was exchanged for El Paso debt or assumed by
    El Paso in December 2005.



|          |                                             |                                     |                                    |               |  |               |            |      |       |               |  |   |       |     | 
|--------- | ------------------------------------------- | ----------------------------------- | ---------------------------------- | ------------- |  | ------------- | ---------- | ---- | ----- | ------------- |  | - | ----- | --- | 
|          |                                             |                                     |                                    |               |  |               |            | Cash |      
|Company   |                                             | Type                                |                                    | Interest Rate |  |               | Book Value |      |       | Received/Paid | 
|          |                                             |                                     |                                    |               |  |               |            |      |       |               | 
|          |                                             |                                     |                                    |               |  | (In millions) |           
|Issuances |                                             |                                     |                                    |               |  |               |            |      |       |               |  |   |       |    
|          | Colorado Interstate Gas Company             |                                     | Senior notes due 2015              |               |  | 5.95%         |            |      | $     | 200           |  |   | $     | 197 | 
|          | Cheyenne Plains Gas Pipeline
    Company(1) |                                     | Non-recourse term loan due 2015    |               |  | Variable      |            |      |       | 266           |  |   |       | 261 | 
|          | El Paso Exploration & Production Company    |                                     | Revolving credit facility due 2010 |               |  | LIBOR+1.875%  |            |      |       | 500           |  |   |       | 495 | 
|          | El
    Paso(2)                              |                                     | Senior notes due 2007              |               |  | 7.625%        |            |      |       | 272           |  |   |       | 272 | 
|          | Colorado Interstate Gas Company             |                                     | Senior notes due 2015              |               |  | 6.8%          |            |      |       | 400           |  |   |       | 395 | 
|          |                                             |                                     |                                    |               |  |               |            |      |       |               | 
|          |                                             | Increases through December 31, 2005 |                                    |               |  |               |            | $    | 1,638 |               |  | $ | 1,620 |    
|          |                                             |                                     |                                    |               |  |               |            |      |       |               | 

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|                                               |                                 |                                     |                                       |               |  |               |            |      |       |               |  |   |       |     | 
|---------------------------------------------- | ------------------------------- | ----------------------------------- | ------------------------------------- | ------------- |  | ------------- | ---------- | ---- | ----- | ------------- |  | - | ----- | --- | 
|                                               |                                 |                                     |                                       |               |  |               |            | Cash |      
|Company                                        |                                 | Type                                |                                       | Interest Rate |  |               | Book Value |      |       | Received/Paid | 
|                                               |                                 |                                     |                                       |               |  |               |            |      |       |               | 
|                                               |                                 |                                     |                                       |               |  | (In millions) |           
|Repayments, repurchases, retirements and other |                                 |                                     |                                       |               |  |               |            |      |       |               |  |   |       |    
|                                               | El Paso                         |                                     | Zero coupon
    debentures(3)         |               |  |              |            |      | $     | 236           |  |   | $     | 237 | 
|                                               | El Paso                         |                                     | Notes                                 |               |  | 6.88%         |            |      |       | 167           |  |   |       | 167 | 
|                                               | Cedar Brakes
    I(4)           |                                     | Non-recourse senior notes             |               |  | 8.5%          |            |      |       | 241           |  |   |       | 15  | 
|                                               | Cedar Brakes
    II(4)          |                                     | Non-recourse senior notes             |               |  | 9.88%         |            |      |       | 334           |  |   |       | 14  | 
|                                               | Mohawk River Funding II
    (4) |                                     | Non-recourse note                     |               |  | 9.0%          |            |      |       | 37            |  |   |       | 8   | 
|                                               | El
    Paso(5)                  |                                     | Euro notes                            |               |  | 5.75%         |            |      |       | 695           |  |   |       | 722 | 
|                                               | El
    Paso(2)                  |                                     | Senior notes due 2007                 |               |  | 6.14%         |            |      |       | 272           |  |   |       |    | 
|                                               | Colorado Interstate Gas Company |                                     | Senior debentures                     |               |  | 10.00%        |            |      |       | 180           |  |   |       | 180 | 
|                                               | Other                           |                                     | Long-term debt                        |               |  | Various       |            |      |       | 438           |  |   |       | 325 | 
|                                               |                                 |                                     |                                       |               |  |               |            |      |       |               | 
|                                               |                                 | Decreases through December 31, 2005 |                                       |               |  |               |            | $    | 2,600 |               |  | $ | 1,668 |    
|                                               | Coastal Finance I               |                                     | Trust originated preferred securities |               |  | 8.375%        |            |      |       | 300           |  |   |       | 300 | 
|                                               | El Paso                         |                                     | Zero coupon
    debentures(3)         |               |  |              |            |      |       | 603           |  |   |       | 603 | 
|                                               | Other                           |                                     | Long-term debt                        |               |  | Various       |            |      |       | 2             |  |   |       | 2   | 
|                                               |                                 |                                     |                                       |               |  |               |            |      |       |               | 
|                                               |                                 | Decreases through February 28, 2006 |                                       |               |  |               |            | $    | 3,505 |               |  | $ | 2,573 |    
|                                               |                                 |                                     |                                       |               |  |               |            |      |       |               | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In addition to the borrowing, we have an associated letter of
    credit facility for $12 million, under which we issued
    $6 million of letters of credit in May 2005. We also
    concurrently entered into swaps to convert the variable interest
    rate on approximately $213 million of this debt to a
    current fixed rate of 5.94%.                                                                                                                                                        
|(2) | In July 2005, we remarketed $272 million of notes which
    originally formed a portion of our 9.0% equity security units.
    Existing note holders utilized proceeds from the remarketing to
    satisfy their obligation under the equity security units to
    purchase common stock which had the effect of exchanging debt
    for equity. We have reflected this transaction as a non-cash
    financing transaction and the issuance of the new remarketed
    notes as a financing cash inflow.
|(3) | This security has a yield-to-maturity of approximately 4%.                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(4) | Prior to the sale of Cedar Brakes I and II, and Mohawk
    River Funding II, we made $37 million of scheduled
    principal repayments. Upon the sale of these entities, the
    remaining balance of $575 million was eliminated.                                                                                                                                                                                                                                                                      
|(5) | We recorded a $26 million loss on the early extinguishment
    of this debt.                                                                                                                                                                                                                                                                                                                                                                                                                            

long-term


Debt Maturities




|           |                                                                         |   |        |        | 
|---------- | ----------------------------------------------------------------------- | - | ------ | ------ | 
|2006       |                                                                         | $ | 1,211  |       
|2007       |                                                                         |   | 781    |       
|2008       |                                                                         |   | 676    |       
|2009       |                                                                         |   | 2,479  |       
|2010       |                                                                         |   | 2,058  |       
|Thereafter |                                                                         |   | 11,085 |       
|           |                                                                         |   |       
|           | Total long-term financing obligations, including current
    maturities |   | $      | 18,290 | 
|           |                                                                         |   |       



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Credit Facilities












| |                      
| | ---------------------
| | Restrictive Covenants

$3 billion revolving credit facility.




| |     |                                                                                                                                                                                                                                                                                                                                     
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | El Pasos ratio of Debt to Consolidated EBITDA, (each
    as defined in the credit agreement), shall not exceed 6.25 to
    1.0 at any time on or after September 30, 2005, and prior
    to June 30, 2006, and 6.0 to 1.0 at any time on or after
    June 30, 2006, until maturity;                                               
|
| | (b) | El Pasos ratio of Consolidated EBITDA, (as defined in
    the credit agreement), to interest expense plus dividends paid
    shall not be less than 1.6 to 1.0 prior to
    March 31, 2006, 1.75 to 1.0 on or after March 31,
    2006, and prior to March 31, 2007, and 1.8 to 1.0 on
    or after March 31, 2007, until maturity;

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| |     |                                                                                                                                                                                                                                                                                         
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) | EPNG, TGP, ANR and CIG cannot incur incremental Debt if the
    incurrence of this incremental Debt would cause their Debt to
    Consolidated EBITDA ratio, (each as defined in the credit
    agreement), for that particular company to exceed 5.0 to 1.0;                           
|
| | (d) | the proceeds from the issuance of Debt by our pipeline company
    borrowers can only be used for maintenance and expansion capital
    expenditures or investments in other
    FERC-regulated assets,
    to fund working capital requirements, or to refinance existing
    debt; and
|
| | (e) | the occurrence of an event of default and after the expiration
    of any applicable grace period, with respect to Debt in an
    aggregate principal amount of $200 million or more.                                                                                                   

$500 million credit facility.


$400 million credit agreement.


Other Restrictions and Provisions.






Other Financing
Arrangements


Capital Trusts.




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Coastal Finance I.


Non-Recourse Project Financings.


Letters of Credit




15. Preferred Interests of Consolidated Subsidiaries






|    |                              
|--- | -----------------------------
|16. | Commitments and Contingencies

Legal Proceedings


Shareholder/ Derivative/ ERISA
Litigation




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Shareholder Litigation.Twenty-eight purported
    shareholder class action lawsuits have been pending since 2002
    and are consolidated in federal court in Houston, Texas. This
    consolidated lawsuit, which alleges violations of federal
    securities laws against us and several of our current and former
    officers and directors, includes allegations regarding the
    accuracy or completeness of press releases and other public
    statements made during the class period from 2000 through early
    2004 related to alleged wash trades, mark-to-market accounting,
    off-balance sheet debt, the overstatement of natural gas and oil
    reserves and manipulation of the California energy market.
    Formal discovery in the consolidated lawsuit is currently
    stayed. The Court has ordered the parties to mediate this case
    in April 2006.
|
| | Derivative Litigation.Since 2002, six shareholder
    derivative actions have also been filed. Two of these actions
    were filed in federal court in Houston, two were filed in state
    court in Houston, and two were filed in Delaware Chancery Court.
    Only three of these actions remain following consolidation and
    dismissal of the other cases.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



| |   |                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Houston federal court cases: The first federal court
    case was filed in 2002 and the second was filed in 2004. The
    2002 federal court case generally alleges the same claims pled
    in the

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | consolidated shareholder class action described above, with the
    exception that there are no allegations related to the
    overstatement of natural gas and oil reserves. The 2004 federal
    court case includes allegations related to the overstatement of
    natural gas and oil reserves, in addition to the allegations
    alleged in the 2002 federal court case. The two federal court
    actions in Houston are both currently stayed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | The Houston state court cases: The two state court
    actions in Houston have been consolidated. The plaintiffs in
    those cases originally alleged that the manipulation of
    California gas prices exposed us to claims of antitrust
    conspiracy, FERC penalties and erosion of share value. The
    plaintiffs in the consolidated state court case recently amended
    their petition to add claims of unjust enrichment of certain
    former executives allegedly attributable to round trip trading
    and restructuring of energy contracts and breach of fiduciary
    duty claims for failure to recover 2001 compensation paid to
    certain officers and related to the overstatement of natural gas
    and oil reserves. Discovery is ongoing in this case.                                                                                                                                               
|
| |  | The Delaware Chancery Court cases: The first of these two
    cases was filed in 2002, and generally alleges the same claims
    pled in the consolidated shareholder class action described
    above, with the exception that there were no allegations related
    to the overstatement of natural gas and oil reserves. This
    lawsuit was voluntarily dismissed by plaintiffs in July 2005.
    The second Delaware derivative case was filed in April 2005 and
    seeks to recover the compensation paid to a former executive in
    2001 alleging unjust enrichment allegedly attributable to round
    trip trading and restructuring of energy contracts and breach of
    fiduciary duty claims for failure to seek recovery of the 2001
    compensation. In December 2005, the court dismissed this lawsuit
    because of the plaintiffs failure to make demand on the
    Board of Directors before filing suit.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ERISA Class Action Suits.In December 2002, a
    purported class action lawsuit entitled William H. Lewis, III
    v. El Paso Corporation, et al.was filed in the U.S.
    District Court for the Southern District of Texas alleging
    generally that our direct and indirect communications with
    participants in the El Paso Corporation Retirement Savings Plan
    included misrepresentations and omissions that caused members of
    the class to hold and maintain investments in El Paso stock in
    violation of the Employee Retirement Income Security Act
    (ERISA). That lawsuit was subsequently amended to include
    allegations relating to our reporting of natural gas and oil
    reserves. Formal discovery in this lawsuit is currently stayed.
|
| | We and our representatives have insurance coverages that are
    applicable to each of these shareholder, derivative and ERISA
    lawsuits subject to certain deductibles and co-pay obligations.
    We have established certain accruals for these matters, which we
    believe are adequate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

Cash Balance Plan Lawsuit. Tomlinson, et al. v. El Paso Corporation and El Paso
Corporation Pension Plan


Retiree Medical Benefits Matters. Yolton et al. v. El Paso Tennessee Pipeline Co. and
Case Corporation


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Natural Gas Commodities Litigation. Cornerstone Propane Partners, L.P. v. Reliant Energy Services
Inc., et al. Roberto E. Calle Gracey v. American Electric
Power Company, Inc., et al. Dominick Viola v.
Reliant Energy Services Inc., et al. in re: Gas Commodity
Litigation. Texas Ohio Energy, Inc. v.
CenterPoint Energy, Inc. et al. Fairhaven Power v. El Paso Corporation et al. Utility Savings and Refund Services, et al.
v. Reliant Energy, et al. Abelman Art Glass, et al. v. Encana Corporation, et al. In re Western States Wholesale Natural Gas Antitrust
Litigation Leggett et al. v. Duke Energy
Corporation et al. Ever-Bloom Inc. v. AEP Energy Services Inc. et
al. Farmland Industries, Inc. v.
Oneok Inc. Learjet, Inc. v.
Oneok Inc.


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


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Qui Tam


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


Hurricane Litigation. George Barasich,
et al. v. Columbia Gulf Transmission Company, et al. Charles Villa Jr., et al. v. Columbia Gulf
Transmission Company, et al.


Bank of America. Bank of America, et al. v. El Paso Natural
Gas Company, et al. Deane W. Moore, et al. v.
Burlington Northern, Inc., et al Bank of
America, et al. v. El Paso Natural Gas and Burlington Resources
Oil and Gas Company, El Paso Natural Gas Company v. Burlington Resources, Inc. and
Burlington Resources Oil and Gas Company, L.P.


Araucaria.


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Macae.










126



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##### Table of Contents







MTBE.


Government Investigations


Round Trip Trades.


Price Reporting.


Reserve Revisions.


Iraq Oil Sales.


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##### Table of Contents







Rates and Regulatory Matters


EPNG Rate Case.


Other Contingencies


Iraq Imports.


Navajo Nation.


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Brazilian Matters.






Environmental Matters






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|              |  |                   |     |  |      |   |     | 
|------------- |  | ----------------- | --- |  | ---- | - | --- | 
|              |  | December 31, 2005 |    
|              |  |                   |    
|Sites         |  | Expected          |     |  | High |  
|              |  |                   |     |  |      |  
|              |  | (In millions)     |    
|Operating     |  | $                 | 75  |  |      | $ | 75  | 
|Non-operating |  |                   | 265 |  |      |   | 402 | 
|Superfund     |  |                   | 39  |  |      |   | 69  | 
|              |  |                   |     |  |      |  
|Total         |  | $                 | 379 |  |      | $ | 546 | 
|              |  |                   |     |  |      |  



|                                                 |  |   |     |  
|------------------------------------------------ |  | - | --- | -
|Balance as of January 1, 2005                    |  | $ | 380 |  
|Additions/adjustments for remediation activities |  |   | 65  |  
|Payments for remediation activities              |  |   | (66 | )
|                                                 |  |   |    
|Balance as of December 31, 2005                  |  | $ | 379 |  
|                                                 |  |   |    



Polychlorinated Biphenyls (PCB) Cost Recoveries.


CERCLA Matters.


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Commitments, Purchase Obligations and Other Matters


Operating Leases.


|                         |       |                  |    |     | 
|------------------------ | ----- | ---------------- | -- | --- | 
|Year Ending December 31, |       | Operating Leases |   
|                         |       |                  |   
|                         |       | (In millions)    |   
|2006                     |       | $                | 81 |    
|2007                     |       |                  | 71 |    
|2008                     |       |                  | 14 |    
|2009                     |       |                  | 11 |    
|2010                     |       |                  | 7  |    
|Thereafter               |       |                  | 33 |    
|                         |       |                  |   
|                         | Total |                  | $  | 217 | 
|                         |       |                  |   



Guarantees.




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Retiree
Medical Benefits Matters


Other Commercial Commitments.




17. Retirement Benefits


Overview of Retirement Benefits


Pension Benefits.






Retirement Savings Plan.


Other Postretirement Benefits. co-payment


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Pension and Other Postretirement Benefits


|                                     |  |               |       |  |               |   |       |      |  |   |      |  |  |   |     | 
|------------------------------------ |  | ------------- | ----- |  | ------------- | - | ----- | ---- |  | - | ---- |  |  | - | --- | 
|                                     |  | Primary       |       |  | Other         |  
|                                     |  | Pension Plan  |       |  | Pension Plans |  
|                                     |  |               |       |  |               |  
|                                     |  | 2005          |       |  | 2004          |   |       | 2005 |  |   | 2004 | 
|                                     |  |               |       |  |               |   |       |      |  |   |      | 
|                                     |  | (In millions) |      
|Projected benefit obligation         |  | $             | 2,059 |  |               | $ | 1,948 |      |  | $ | 176  |  |  | $ | 170 | 
|Accumulated benefit obligation       |  |               | 2,041 |  |               |   | 1,934 |      |  |   | 176  |  |  |   | 169 | 
|Fair value of plan assets            |  |               | 2,253 |  |               |   | 2,196 |      |  |   | 97   |  |  |   | 93  | 
|Accrued benefit liability            |  |               |      |  |               |   |      |      |  |   | 77   |  |  |   | 74  | 
|Prepaid benefit cost                 |  |               | 918   |  |               |   | 960   |      |  |   |     |  |  |   |    | 
|Accumulated other comprehensive loss |  |               |      |  |               |   |      |      |  |   | 75   |  |  |   | 70  | 



Change in Projected Benefit Obligation, Plan Assets and
Funded Status.


|                              |                                                            |                  |   |                |          |       |   |       |     |  |      |     |   |  |   |     |  
|----------------------------- | ---------------------------------------------------------- | ---------------- | - | -------------- | -------- | ----- | - | ----- | --- |  | ---- | --- | - |  | - | --- | -
|                              |                                                            |                  |   |                |          | Other |  
|                              |                                                            |                  |   | Postretirement |         
|                              |                                                            | Pension Benefits |   |                | Benefits |      
|                              |                                                            |                  |   |                |          |      
|                              |                                                            | 2005             |   |                | 2004     |       |   | 2005  |     |  | 2004 |    
|                              |                                                            |                  |   |                |          |       |   |       |     |  |      |    
|                              |                                                            | (In millions)    |  
|Change in benefit obligation: |                                                            |                  |   |                |          |       |   |       |     |  |      |     |   |  |   |    
|                              | Projected benefit obligation at beginning of period        |                  | $ | 2,118          |          |       | $ | 2,091 |     |  | $    | 541 |   |  | $ | 575 |  
|                              | Service cost                                               |                  |   | 22             |          |       |   | 31    |     |  |      | 1   |   |  |   | 1   |  
|                              | Interest cost                                              |                  |   | 121            |          |       |   | 121   |     |  |      | 29  |   |  |   | 34  |  
|                              | Participant contributions                                  |                  |   |               |          |       |   |      |     |  |      | 34  |   |  |   | 27  |  
|                              | Settlements, curtailments and special termination benefits |                  |   |               |          |       |   | (3    | )   |  |      |    |   |  |   |    |  
|                              | Actuarial loss (gain)                                      |                  |   | 178            | (1)      |       |   | 76    | (1) |  |      | (5  | ) |  |   | (20 | )
|                              | Benefits paid                                              |                  |   | (203           | )        |       |   | (198  | )   |  |      | (73 | ) |  |   | (76 | )
|                              | Other                                                      |                  |   | (1             | )        |       |   |      |     |  |      |    |   |  |   |    |  
|                              |                                                            |                  |   |                |          |       |   |       |     |  |      |    
|                              | Projected benefit obligation at end of period              |                  | $ | 2,235          |          |       | $ | 2,118 |     |  | $    | 527 |   |  | $ | 541 |  
|                              |                                                            |                  |   |                |          |       |   |       |     |  |      |    
|Change in plan assets:        |                                                            |                  |   |                |          |       |   |       |     |  |      |     |   |  |   |    
|                              | Fair value of plan assets at beginning of period           |                  | $ | 2,289          |          |       | $ | 2,197 |     |  | $    | 220 |   |  | $ | 196 |  
|                              | Actual return on plan assets                               |                  |   | 255            |          |       |   | 277   |     |  |      | 20  |   |  |   | 12  |  
|                              | Employer contributions                                     |                  |   | 9              |          |       |   | 12    |     |  |      | 50  |   |  |   | 61  |  
|                              | Participant contributions                                  |                  |   |               |          |       |   |      |     |  |      | 34  |   |  |   | 27  |  
|                              | Benefits paid                                              |                  |   | (203           | )        |       |   | (198  | )   |  |      | (73 | ) |  |   | (76 | )
|                              | Administrative expenses                                    |                  |   |               |          |       |   | 1     |     |  |      |    |   |  |   |    |  
|                              |                                                            |                  |   |                |          |       |   |       |     |  |      |    
|                              | Fair value of plan assets at end of period                 |                  | $ | 2,350          |          |       | $ | 2,289 |     |  | $    | 251 |   |  | $ | 220 |  
|                              |                                                            |                  |   |                |          |       |   |       |     |  |      |    

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|                                 |                                                     |                  |   |                |          |       |   |       |   |  |      |      |   |  |   |      |  
|-------------------------------- | --------------------------------------------------- | ---------------- | - | -------------- | -------- | ----- | - | ----- | - |  | ---- | ---- | - |  | - | ---- | -
|                                 |                                                     |                  |   |                |          | Other |  
|                                 |                                                     |                  |   | Postretirement |         
|                                 |                                                     | Pension Benefits |   |                | Benefits |      
|                                 |                                                     |                  |   |                |          |      
|                                 |                                                     | 2005             |   |                | 2004     |       |   | 2005  |   |  | 2004 |     
|                                 |                                                     |                  |   |                |          |       |   |       |   |  |      |     
|                                 |                                                     | (In millions)    |  
|Reconciliation of funded status: |                                                     |                  |   |                |          |       |   |       |   |  |      |      |   |  |   |     
|                                 | Fair value of plan assets at September 30           |                  | $ | 2,350          |          |       | $ | 2,289 |   |  | $    | 251  |   |  | $ | 220  |  
|                                 | Less: Projected benefit obligation at end of period |                  |   | 2,235          |          |       |   | 2,118 |   |  |      | 527  |   |  |   | 541  |  
|                                 |                                                     |                  |   |                |          |       |   |       |   |  |      |     
|                                 | Funded status at September 30                       |                  |   | 115            |          |       |   | 171   |   |  |      | (276 | ) |  |   | (321 | )
|                                 | Fourth quarter contributions and income             |                  |   | 2              |          |       |   | 2     |   |  |      | 11   |   |  |   | 13   |  
|                                 | Unrecognized net actuarial
    loss(2)              |                  |   | 814            |          |       |   | 800   |   |  |      | 20   |   |  |   | 32   |  
|                                 | Unrecognized net transition obligation              |                  |   |               |          |       |   |      |   |  |      |     |   |  |   | 8    |  
|                                 | Unrecognized prior service cost                     |                  |   | (13            | )        |       |   | (17   | ) |  |      | (5   | ) |  |   | (6   | )
|                                 |                                                     |                  |   |                |          |       |   |       |   |  |      |     
|                                 | Prepaid (accrued) benefit cost at December 31       |                  | $ | 918            |          |       | $ | 956   |   |  | $    | (250 | ) |  | $ | (274 | )
|                                 |                                                     |                  |   |                |          |       |   |       |   |  |      |     






|    |                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Increase is due primarily to changes in our discount rate and
    mortality assumptions in 2005 and 2004.                                                                                                                                                                                                                                                                                       
|   
|(2) | We recognize the difference between our actual return on plan
    assets and our expected return over a three year period.
    Our deferred actuarial gains and losses are recognized only to
    the extent that all of our remaining unrecognized actual gains
    and loses exceed the greater of 10 percent of our projected
    benefit obligations or market related value of plan assets.



Expected Payment of Future Benefits.


|             |       |                  |     |                      |             |   |     |     | 
|------------ | ----- | ---------------- | --- | -------------------- | ----------- | - | --- | --- | 
|Year Ending  |       |                  |     | Other Postretirement |            
|December 31, |       | Pension Benefits |     |                      | Benefits(1) |  
|             |       |                  |     |                      |             |  
|             |       | (In millions)    |    
|2006         |       | $                | 167 |                      |             | $ | 49  |    
|2007         |       |                  | 168 |                      |             |   | 47  |    
|2008         |       |                  | 167 |                      |             |   | 46  |    
|2009         |       |                  | 167 |                      |             |   | 45  |    
|2010         |       |                  | 166 |                      |             |   | 44  |    
|2011-2015    |       |                  | 815 |                      |             |   | 197 |    
|             |       |                  |     |                      |             |  
|             | Total |                  | $   | 1,650                |             |   | $   | 428 | 
|             |       |                  |     |                      |             |  






|    |                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes a reduction of $3 million for the years 2006
    through 2008 and $4 million for each year thereafter for an
    expected subsidy related to the Medicare Prescription Drug,
    Improvement and Modernization Act of 2003.

Components of Net Benefit Cost (Income).


|                                                           |                           |                  |      |                      |          |   |      |      |  |   |      |     |   |      |     |    |      |   |     |    |  |   |    |    | 
|---------------------------------------------------------- | ------------------------- | ---------------- | ---- | -------------------- | -------- | - | ---- | ---- |  | - | ---- | --- | - | ---- | --- | -- | ---- | - | --- | -- |  | - | -- | -- | 
|                                                           |                           |                  |      | Other Postretirement |         
|                                                           |                           | Pension Benefits |      |                      | Benefits |  
|                                                           |                           |                  |      |                      |          |  
|                                                           |                           | 2005             |      |                      | 2004     |   |      | 2003 |  |   | 2005 |     |   | 2004 |     |    | 2003 |  
|                                                           |                           |                  |      |                      |          |   |      |      |  |   |      |     |   |      |     |    |      |  
|                                                           |                           | (In millions)    |     
|Service cost                                               |                           | $                | 22   |                      |          | $ | 31   |      |  | $ | 36   |     |   | $    | 1   |    |      | $ | 1   |    |  | $ | 1  |   
|Interest cost                                              |                           |                  | 121  |                      |          |   | 121  |      |  |   | 134  |     |   |      | 29  |    |      |   | 34  |    |  |   | 35 |   
|Expected return on plan assets                             |                           |                  | (168 | )                    |          |   | (187 | )    |  |   | (227 | )   |   |      | (12 | )  |      |   | (11 | )  |  |   | (9 | ) 
|Amortization of net actuarial loss                         |                           |                  | 69   |                      |          |   | 47   |      |  |   | 7    |     |   |      |    |    |      |   | 4   |    |  |   | 1  |   
|Amortization of transition obligation                      |                           |                  |     |                      |          |   |     |      |  |   | (1   | )   |   |      | 8   |    |      |   | 8   |    |  |   | 8  |   
|Amortization of prior service
    cost(1)                  |                           |                  | (2   | )                    |          |   | (3   | )    |  |   | (3   | )   |   |      | (1  | )  |      |   | (1  | )  |  |   | (1 | ) 
|Settlements, curtailment, and special termination benefits |                           |                  |     |                      |          |   | (4   | )    |  |   | 11   |     |   |      |    |    |      |   |    |    |  |   | (6 | ) 
|Other                                                      |                           |                  | 7    |                      |          |   |     |      |  |   |     |     |   |      |    |    |      |   |    |    |  |   |   |   
|                                                           |                           |                  |      |                      |          |   |      |      |  |   |      |     |   |      |     |    |      |  
|                                                           | Net benefit cost (income) |                  | $    | 49                   |          |   | $    | 5    |  |   | $    | (43 | ) |      | $   | 25 |      |   | $   | 35 |  |   | $  | 29 | 
|                                                           |                           |                  |      |                      |          |   |      |      |  |   |      |     |   |      |     |    |      |  






|    |                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As permitted, the amortization of any prior service cost is
    determined using a straight-line amortization of the cost over
    the average remaining service period of employees expected to
    receive benefits under the plan.

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Actuarial Assumptions and Sensitivity Analysis.


|                                                                         |                                       |                  |  |       |                         |  |  |      |  |  |      |      |  |      |  |      |      |  |  |      |  |  |  |      | 
|------------------------------------------------------------------------ | ------------------------------------- | ---------------- |  | ----- | ----------------------- |  |  | ---- |  |  | ---- | ---- |  | ---- |  | ---- | ---- |  |  | ---- |  |  |  | ---- | 
|                                                                         |                                       |                  |  | Other |                        
|                                                                         |                                       | Pension Benefits |  |       | Postretirement Benefits | 
|                                                                         |                                       |                  |  |       |                         | 
|                                                                         |                                       | 2005             |  |       | 2004                    |  |  | 2003 |  |  | 2005 |      |  | 2004 |  |      | 2003 | 
|                                                                         |                                       |                  |  |       |                         |  |  |      |  |  |      |      |  |      |  |      |      | 
|                                                                         |                                       | (Percent)        |  |       | (Percent)               | 
|Assumptions related to benefit obligations at September 30:              |                                       |                  |  |       |                         |  |  |      |  |  |      |      |  |      |  |      |      |  |  |      |  |  |  |     
|                                                                         | Discount rate                         |                  |  | 5.50  |                         |  |  | 5.75 |  |  |      |      |  |      |  | 5.25 |      |  |  | 5.75 |  |  |  |      | 
|                                                                         | Rate of compensation increase         |                  |  | 4.00  |                         |  |  | 4.00 |  |  |      |      |  |      |  |      |      |  |  |      |  |  |  |      | 
|Assumptions related to benefit costs for the year ended
    December 31: |                                       |                  |  |       |                         |  |  |      |  |  |      |      |  |      |  |      |      |  |  |      |  |  |  |     
|                                                                         | Discount rate                         |                  |  | 5.75  |                         |  |  | 6.00 |  |  |      | 6.75 |  |      |  | 5.75 |      |  |  | 6.00 |  |  |  | 6.75 | 
|                                                                         | Expected return on plan
    assets(1) |                  |  | 8.00  |                         |  |  | 8.50 |  |  |      | 8.80 |  |      |  | 7.50 |      |  |  | 7.50 |  |  |  | 7.50 | 
|                                                                         | Rate of compensation increase         |                  |  | 4.00  |                         |  |  | 4.00 |  |  |      | 4.00 |  |      |  |      |      |  |  |      |  |  |  |      | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The expected return on plan assets is a pre-tax rate (before a
    tax rate ranging from 26 percent to 27 percent on other
    postretirement benefits) that is primarily based on an expected
    risk-free investment return, adjusted for historical risk
    premiums and specific risk adjustments associated with our debt
    and equity securities. These expected returns were then weighted
    based on our target asset allocations of our investment
    portfolio.



|                               |                                               |               |   |     |      |  |   |     |  
|------------------------------ | --------------------------------------------- | ------------- | - | --- | ---- |  | - | --- | -
|                               |                                               | 2005          |   |     | 2004 | 
|                               |                                               |               |   |     |      | 
|                               |                                               | (In millions) |  
|One percentage point increase: |                                               |               |   |     |      |  |   |    
|                               | Aggregate of service cost and interest cost   |               | $ | 1   |      |  | $ | 1   |  
|                               | Accumulated postretirement benefit obligation |               |   | 20  |      |  |   | 19  |  
|One percentage point decrease: |                                               |               |   |     |      |  |   |    
|                               | Aggregate of service cost and interest cost   |               | $ | (1  | )    |  | $ | (1  | )
|                               | Accumulated postretirement benefit obligation |               |   | (18 | )    |  |   | (18 | )

Plan Assets.


|                         |       |               |    |     |                            |  |    |             |  |  |        |     |  |             |    |     |             |  |    |     |  |  |    |     | 
|------------------------ | ----- | ------------- | -- | --- | -------------------------- |  | -- | ----------- |  |  | ------ | --- |  | ----------- | -- | --- | ----------- |  | -- | --- |  |  | -- | --- | 
|                         |       | Pension Plans |    |     | Other Postretirement Plans | 
|                         |       |               |    |     |                            | 
|Asset Category           |       | Target        |    |     | Actual 2005                |  |    | Actual 2004 |  |  | Target |     |  | Actual 2005 |    |     | Actual 2004 | 
|                         |       |               |    |     |                            |  |    |             |  |  |        |     |  |             |    |     |             | 
|                         |       | (Percent)     |    |     | (Percent)                  | 
|Equity
    securities(1) |       |               | 60 |     |                            |  | 65 |             |  |  | 62     |     |  |             | 65 |     |             |  | 61 |     |  |  | 60 |    
|Debt securities          |       |               | 40 |     |                            |  | 34 |             |  |  | 37     |     |  |             | 35 |     |             |  | 32 |     |  |  | 33 |    
|Other                    |       |               |   |     |                            |  | 1  |             |  |  | 1      |     |  |             |   |     |             |  | 7  |     |  |  | 7  |    
|                         |       |               |    |     |                            |  |    |             |  |  |        |     |  |             |    |     |             | 
|                         | Total |               |    | 100 |                            |  |    | 100         |  |  |        | 100 |  |             |    | 100 |             |  |    | 100 |  |  |    | 100 | 
|                         |       |               |    |     |                            |  |    |             |  |  |        |     |  |             |    |     |             | 






|    |                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | During the third quarter of 2005, we liquidated all of the
    El Paso common stock included in plan assets. At
    September 30, 2004, actuals for our pension plans include
    $42 million (1.8 percent of total assets) of our
    common stock.



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Other Matters.


18. Capital Stock


Common Stock




Convertible Perpetual Preferred
Stock






Dividends




|                            |                                   |               |      |                   |                 |  |     |                   | 
|--------------------------- | --------------------------------- | ------------- | ---- | ----------------- | --------------- |  | --- | ----------------- | 
|                            |                                   |               |      | Convertible       |                
|                            |                                   | Common Stock  |      |                   | Preferred Stock | 
|                            |                                   | ($0.04/share) |      |                   | (4.99%/year)    | 
|                            |                                   |               |      |                   |                 | 
|Amount paid in 2005         |                                   |               | $104 |                   |                 |  | $17 |                  
|Amount paid in January 2006 |                                   |               | $25  |                   |                 |  | $10 |                  
|Declared in 2006:           |                                   |               |      |                   |                 |  |     |                  
|                            | Date of declaration               |               |      | February 14, 2006 |                 |  |     | February 14, 2006 | 
|                            | Date payable                      |               |      | April 3, 2006     |                 |  |     | April 3, 2006     | 
|                            | Payable to shareholders on record |               |      | March 3, 2006     |                 |  |     | March 15, 2006    | 



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19. Stock-Based Compensation






Non-qualified Stock
Options




|                                 |                       |               |            |            |          |   |       |             |          |  |            |            |   |             |       |       |          |  |            |            |   |   |       |       | 
|-------------------------------- | --------------------- | ------------- | ---------- | ---------- | -------- | - | ----- | ----------- | -------- |  | ---------- | ---------- | - | ----------- | ----- | ----- | -------- |  | ---------- | ---------- | - | - | ----- | ----- | 
|                                 |                       | Stock Options |           
|                                 |                       |               |           
|                                 |                       | 2005          |            |            | 2004     |   |       | 2003        |         
|                                 |                       |               |            |            |          |   |       |             |         
|                                 |                       |               |            | Weighted   |          |   |       |             | Weighted |  |            |            |   | Weighted    |      
|                                 |                       | # Shares of   |            |            | Average  |   |       | # Shares of |          |  | Average    |            |   | # Shares of |       |       | Average  | 
|                                 |                       | Underlying    |            |            | Exercise |   |       | Underlying  |          |  | Exercise   |            |   | Underlying  |       |       | Exercise | 
|                                 |                       | Options       |            |            | Price    |   |       | Options     |          |  | Price      |            |   | Options     |       |       | Price    | 
|                                 |                       |               |            |            |          |   |       |             |          |  |            |            |   |             |       |       |          | 
|Outstanding at beginning of year |                       |               | 33,923,578 |            |          | $ | 42.73 |             |          |  | 36,245,014 |            |   | $           | 47.90 |       |          |  | 43,208,374 |            |   | $ | 49.16 |      
|                                 | Granted               |               |            | 4,254,270  |          |   | $     | 10.74       |          |  |            | 4,842,453  |   |             | $     | 7.16  |          |  |            | 1,180,041  |   |   | $     | 7.29  | 
|                                 | Exercised             |               |            | (219,244   | )        |   | $     | 7.31        |          |  |            | (3,193     | ) |             | $     | 7.64  |          |  |            |           |   |   |       |      | 
|                                 | Converted(1)          |               |            |           |          |   |       |            |          |  |            | (11,333    | ) |             | $     | 42.99 |          |  |            | (871,250   | ) |   | $     | 42.00 | 
|                                 | Forfeited or canceled |               |            | (9,875,119 | )        |   | $     | 45.78       |          |  |            | (7,149,363 | ) |             | $     | 44.75 |          |  |            | (7,272,151 | ) |   | $     | 49.53 | 
|                                 |                       |               |            |            |          |   |       |             |          |  |            |            |   |             |       |       |          | 
|Outstanding at end of year       |                       |               | 28,083,485 |            |          | $ | 37.12 |             |          |  | 33,923,578 |            |   | $           | 42.73 |       |          |  | 36,245,014 |            |   | $ | 47.90 |      
|                                 |                       |               |            |            |          |   |       |             |          |  |            |            |   |             |       |       |          | 
|Exercisable at end of year       |                       |               | 20,792,538 |            |          | $ | 46.96 |             |          |  | 28,455,056 |            |   | $           | 49.45 |       |          |  | 28,703,151 |            |   | $ | 46.04 |      
|                                 |                       |               |            |            |          |   |       |             |          |  |            |            |   |             |       |       |          | 






|    |                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes the conversion of stock options into common stock and
    cash at no cost to employees based upon achievement of certain
    performance targets and lapse of time. These options had an
    original stated exercise price of approximately $43 per
    share and $42 per share in 2004 and 2003.

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|                |  |                     |            |                  |                     |  |          |                |  |   |             |          |  |                |            |  |  |   |       | 
|--------------- |  | ------------------- | ---------- | ---------------- | ------------------- |  | -------- | -------------- |  | - | ----------- | -------- |  | -------------- | ---------- |  |  | - | ----- | 
|                |  | Options Outstanding |            |                  | Options Exercisable | 
|                |  |                     |            |                  |                     | 
|                |  |                     |            | Weighted Average |                     |  | Weighted |                |  |   |             | Weighted | 
|Range of        |  | Number              |            |                  | Remaining Years of  |  |          | Average        |  |   | Number      |          |  | Average        |           
|Exercise Prices |  | Outstanding         |            |                  | Contractual Life    |  |          | Exercise Price |  |   | Exercisable |          |  | Exercise Price |           
|                |  |                     |            |                  |                     |  |          |                |  |   |             |          |  |                |           
|$ 0.00 - $14.29 |  |                     | 8,866,680  |                  |                     |  | 8.4      |                |  | $ | 8.74        |          |  |                | 1,575,733  |  |  | $ | 7.24  | 
|$14.30 - $28.59 |  |                     | 2,292,259  |                  |                     |  | 1.3      |                |  | $ | 21.76       |          |  |                | 2,292,259  |  |  | $ | 21.76 | 
|$28.60 - $42.88 |  |                     | 4,740,576  |                  |                     |  | 2.9      |                |  | $ | 39.79       |          |  |                | 4,740,576  |  |  | $ | 39.79 | 
|$42.89 - $57.18 |  |                     | 4,405,272  |                  |                     |  | 3.6      |                |  | $ | 46.91       |          |  |                | 4,405,272  |  |  | $ | 46.91 | 
|$57.19 - $70.63 |  |                     | 7,778,698  |                  |                     |  | 4.1      |                |  | $ | 66.82       |          |  |                | 7,778,698  |  |  | $ | 66.82 | 
|                |  |                     |            |                  |                     |  |          |                |  |   |             |          |  |                |           
|                |  |                     | 28,083,485 |                  |                     |  | 5.0      |                |  | $ | 37.12       |          |  |                | 20,792,538 |  |  | $ | 46.96 | 
|                |  |                     |            |                  |                     |  |          |                |  |   |             |          |  |                |           

SFAS No. 123 Assumptions


Black-Scholes option-pricing


|                        |  |      |      |  |      |  |      |      |  |  |      | 
|----------------------- |  | ---- | ---- |  | ---- |  | ---- | ---- |  |  | ---- | 
|Assumption:             |  | 2005 |      |  | 2004 |  |      | 2003 | 
|                        |  |      |      |  |      |  |      |      | 
|Expected Term in Years  |  |      | 4.82 |  |      |  | 5.35 |      |  |  | 6.19 | 
|Expected Volatility     |  |      | 42%  |  |      |  | 45%  |      |  |  | 52%  | 
|Expected Dividends      |  |      | 1.5% |  |      |  | 2.1% |      |  |  | 2.2% | 
|Risk-Free Interest Rate |  |      | 3.7% |  |      |  | 3.7% |      |  |  | 3.4% | 



Restricted Stock






Employee Stock Purchase
Program




138



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|    |                             
|--- | ----------------------------
|20. | Business Segment Information



















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|                                                                  |                                 |               |        |      |      |   |        |      |   |   |        |      |  
|----------------------------------------------------------------- | ------------------------------- | ------------- | ------ | ---- | ---- | - | ------ | ---- | - | - | ------ | ---- | -
|                                                                  |                                 | 2005          |        |      | 2004 |   |        | 2003 |  
|                                                                  |                                 |               |        |      |      |   |        |      |  
|                                                                  |                                 | (In millions) |       
|Segment EBIT                                                      |                                 | $             | 919    |      |      | $ | 1,034  |      |   | $ | 1,605  |     
|Corporate and other                                               |                                 |               | (521   | )    |      |   | (217   | )    |   |   | (852   | )   
|Interest and debt expense                                         |                                 |               | (1,380 | )    |      |   | (1,607 | )    |   |   | (1,790 | )   
|Distributions on preferred interests of consolidated subsidiaries |                                 |               | (9     | )    |      |   | (25    | )    |   |   | (52    | )   
|Income taxes                                                      |                                 |               | 289    |      |      |   | (14    | )    |   |   | 484    |     
|                                                                  |                                 |               |        |      |      |   |        |      |  
|                                                                  | Loss from continuing operations |               | $      | (702 | )    |   | $      | (829 | ) |   | $      | (605 | )
|                                                                  |                                 |               |        |      |      |   |        |      |  



|                                                                                                     |            |                                               |       |                 |            |  |           |             |     |  |        |       |  |          |      |       |              |  |     |       |  |  |      |       |  |  |       |        | 
|---------------------------------------------------------------------------------------------------- | ---------- | --------------------------------------------- | ----- | --------------- | ---------- |  | --------- | ----------- | --- |  | ------ | ----- |  | -------- | ---- | ----- | ------------ |  | --- | ----- |  |  | ---- | ----- |  |  | ----- | ------ | 
|                                                                                                     |            | As of or for the Year Ended December 31, 2005 |      
|                                                                                                     |            |                                               |      
|                                                                                                     |            | Segments                                      |       |                 |           
|                                                                                                     |            |                                               |       |                 |           
|                                                                                                     |            |                                               |       | Exploration and |            |  | Marketing |             |     |  |        | Field |  |          |     
|                                                                                                     |            | Pipelines                                     |       |                 | Production |  |           | and Trading |     |  | Power  |       |  | Services |      |       | Corporate(1) |  |     | Total | 
|                                                                                                     |            |                                               |       |                 |            |  |           |             |     |  |        |       |  |          |      |       |              |  |     |       | 
|                                                                                                     |            | (In millions)                                 |      
|Revenue from external customers                                                                      |            |                                               |       |                 |            |  |           |             |     |  |        |       |  |          |      |       |              |  |     |       |  |  |      |       |  |  |       |       
|                                                                                                     | Domestic   |                                               | $     | 2,706           |            |  | $         | 466         | (2) |  | $      | 411   |  |          | $    | 71    |              |  | $   | 96    |  |  | $    | 84    |  |  | $     | 3,834  | 
|                                                                                                     | Foreign    |                                               |       | 7               |            |  |           | 54          | (2) |  |        | 3     |  |          |      | 47    |              |  |     |      |  |  |      |      |  |  |       | 111    | 
|Intersegment revenue                                                                                 |            |                                               | 70    |                 |            |  | 1,267     | (2)         |     |  | (1,210 | )     |  |          | 11   |       |              |  | 27  |       |  |  | (93  | )     |  |  | 72    | (3)   
|Operation and maintenance                                                                            |            |                                               | 908   |                 |            |  | 383       |             |     |  | 54     |       |  |          | 140  |       |              |  | 27  |       |  |  | 571  |       |  |  | 2,083 |       
|Depreciation, depletion, and amortization                                                            |            |                                               | 437   |                 |            |  | 612       |             |     |  | 4      |       |  |          | 23   |       |              |  | 3   |       |  |  | 42   |       |  |  | 1,121 |       
|(Gain) loss on long-lived assets                                                                     |            |                                               | 35    |                 |            |  |          |             |     |  |       |       |  |          | 366  |       |              |  | 10  |       |  |  | (4   | )     |  |  | 407   |       
|Earnings (losses) from unconsolidated affiliates                                                     |            |                                               | 161   |                 |            |  | 19        |             |     |  |       |       |  |          | (139 | )     |              |  | 301 |       |  |  |     |       |  |  | 342   |       
|EBIT                                                                                                 |            |                                               | 1,226 |                 |            |  | 696       |             |     |  | (837   | )     |  |          | (451 | )     |              |  | 285 |       |  |  | (521 | )     |  |  | 398   |       
|Discontinued operations, net of income taxes                                                         |            |                                               |      |                 |            |  | 9         |             |     |  |       |       |  |          | (126 | )     |              |  | 251 |       |  |  | (34  | )     |  |  | 100   |       
|Assets of continuing operations
    (4)                                                              |            |                                               |       |                 |            |  |           |             |     |  |        |       |  |          |      |       |              |  |     |       |  |  |      |       |  |  |       |       
|                                                                                                     | Domestic   |                                               |       | 16,421          |            |  |           | 5,215       |     |  |        | 3,786 |  |          |      | 70    |              |  |     | 99    |  |  |      | 4,087 |  |  |       | 29,678 | 
|                                                                                                     | Foreign(5) |                                               |       | 26              |            |  |           | 355         |     |  |        | 33    |  |          |      | 1,653 |              |  |     |      |  |  |      | 57    |  |  |       | 2,124  | 
|Capital expenditures, capital investments and advances to
    unconsolidated affiliates, net
    (6) |            |                                               | 908   |                 |            |  | 1,851     |             |     |  |       |       |  |          | 6    |       |              |  | 8   |       |  |  | 14   |       |  |  | 2,787 |       
|Total investments in unconsolidated affiliates                                                       |            |                                               | 1,042 |                 |            |  | 761       |             |     |  |       |       |  |          | 670  |       |              |  |    |       |  |  |     |       |  |  | 2,473 |       






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes eliminations of intercompany transactions. Our
    intersegment revenues, along with our intersegment operating
    expenses, were incurred in the normal course of business between
    our operating segments. We recorded an intersegment revenue
    elimination of $91 million and an operation and maintenance
    expense elimination of $2 million, which is included in the
    Corporate column, to remove intersegment
    transactions.
|(2) | Revenues from external customers include gains and losses
    related to our hedging of price risk associated with our natural
    gas and oil production. Intersegment revenues represent sales to
    our Marketing and Trading segment, which is responsible for
    marketing our production.                                                                                                                                                             
|(3) | Relates to intercompany activities between our continuing
    operations and our discontinued operations.                                                                                                                                                                                                                                                                                                                                                     
|(4) | Excludes assets of discontinued operations of $36 million
    (see Note 3).                                                                                                                                                                                                                                                                                                                                                                                   
|(5) | Of total foreign assets, approximately $672 million relates
    to property, plant and equipment and approximately
    $1.0 billion relates to investments in and advances to
    unconsolidated affiliates.                                                                                                                                                                                                                                                  
|(6) | Amounts are net of third party reimbursements of our capital
    expenditures and returns of invested capital.                                                                                                                                                                                                                                                                                                                                                

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|                                                                                                    |            |                                               |       |                 |            |  |           |             |     |  |        |       |  |          |       |       |              |  |     |       |  |  |      |       |  |  |       |        | 
|--------------------------------------------------------------------------------------------------- | ---------- | --------------------------------------------- | ----- | --------------- | ---------- |  | --------- | ----------- | --- |  | ------ | ----- |  | -------- | ----- | ----- | ------------ |  | --- | ----- |  |  | ---- | ----- |  |  | ----- | ------ | 
|                                                                                                    |            | As of or for the Year Ended December 31, 2004 |      
|                                                                                                    |            |                                               |      
|                                                                                                    |            | Segments                                      |       |                 |           
|                                                                                                    |            |                                               |       |                 |           
|                                                                                                    |            |                                               |       | Exploration and |            |  | Marketing |             |     |  |        | Field |  |          |      
|                                                                                                    |            | Pipelines                                     |       |                 | Production |  |           | and Trading |     |  | Power  |       |  | Services |       |       | Corporate(1) |  |     | Total | 
|                                                                                                    |            |                                               |       |                 |            |  |           |             |     |  |        |       |  |          |       |       |              |  |     |       | 
|                                                                                                    |            | (In millions)                                 |      
|Revenue from external customers                                                                     |            |                                               |       |                 |            |  |           |             |     |  |        |       |  |          |       |       |              |  |     |       |  |  |      |       |  |  |       |       
|                                                                                                    | Domestic   |                                               | $     | 2,554           |            |  | $         | 535         | (2) |  | $      | 697   |  |          | $     | 241   |              |  | $   | 938   |  |  | $    | 132   |  |  | $     | 5,097  | 
|                                                                                                    | Foreign    |                                               |       | 9               |            |  |           | 26          | (2) |  |        | 2     |  |          |       | 318   |              |  |     |      |  |  |      | 15    |  |  |       | 370    | 
|Intersegment revenue                                                                                |            |                                               | 88    |                 |            |  | 1,174     | (2)         |     |  | (1,207 | )     |  |          | 94    |       |              |  | 159 |       |  |  | (236 | )     |  |  | 72    | (3)   
|Operation and maintenance                                                                           |            |                                               | 777   |                 |            |  | 365       |             |     |  | 53     |       |  |          | 274   |       |              |  | 74  |       |  |  | 201  |       |  |  | 1,744 |       
|Depreciation, depletion, and amortization                                                           |            |                                               | 410   |                 |            |  | 548       |             |     |  | 13     |       |  |          | 38    |       |              |  | 8   |       |  |  | 51   |       |  |  | 1,068 |       
|(Gain) loss on long-lived assets                                                                    |            |                                               | (1    | )               |            |  | 8         |             |     |  |       |       |  |          | 569   |       |              |  | 507 |       |  |  | (6   | )     |  |  | 1,077 |       
|Earnings (losses) from unconsolidated affiliates                                                    |            |                                               | 173   |                 |            |  | 4         |             |     |  |       |       |  |          | (249  | )     |              |  | 618 |       |  |  |     |       |  |  | 546   |       
|EBIT                                                                                                |            |                                               | 1,331 |                 |            |  | 734       |             |     |  | (539   | )     |  |          | (576  | )     |              |  | 84  |       |  |  | (217 | )     |  |  | 817   |       
|Discontinued operations, net of income taxes                                                        |            |                                               |      |                 |            |  | (36       | )           |     |  |       |       |  |          | (24   | )     |              |  | 20  |       |  |  | (78  | )     |  |  | (118  | )     
|Assets of continuing operations
    (4)                                                             |            |                                               |       |                 |            |  |           |             |     |  |        |       |  |          |       |       |              |  |     |       |  |  |      |       |  |  |       |       
|                                                                                                    | Domestic   |                                               |       | 15,930          |            |  |           | 3,714       |     |  |        | 2,372 |  |          |       | 982   |              |  |     | 518   |  |  |      | 4,424 |  |  |       | 27,940 | 
|                                                                                                    | Foreign(5) |                                               |       | 58              |            |  |           | 366         |     |  |        | 32    |  |          |       | 2,380 |              |  |     |      |  |  |      | 96    |  |  |       | 2,932  | 
|Capital expenditures, capital investments and advances to
    unconsolidated affiliates,
    net(6) |            |                                               | 1,047 |                 |            |  | 728       |             |     |  |       |       |  |          | 27    |       |              |  | (15 | )     |  |  | 10   |       |  |  | 1,797 |       
|Total investments in unconsolidated affiliates                                                      |            |                                               | 1,032 |                 |            |  | 6         |             |     |  |       |       |  |          | 1,225 |       |              |  | 305 |       |  |  | 6    |       |  |  | 2,574 |       






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes eliminations of intercompany transactions. Our
    intersegment revenues, along with our intersegment operating
    expenses, were incurred in the normal course of business between
    our operating segments. We recorded an intersegment revenue
    elimination of $236 million and an operation and
    maintenance expense elimination of $25 million, which is
    included in the Corporate column, to remove
    intersegment transactions.
|(2) | Revenues from external customers include gains and losses
    related to our hedging of price risk associated with our natural
    gas and oil production. Intersegment revenues represent sales to
    our Marketing and Trading segment, which is responsible for
    marketing our production.                                                                                                                                                               
|(3) | Relates to intercompany activities between our continuing
    operations and our discontinued operations.                                                                                                                                                                                                                                                                                                                                                       
|(4) | Excludes assets of discontinued operations of $511 million
    (see Note 3).                                                                                                                                                                                                                                                                                                                                                                                    
|(5) | Of total foreign assets, approximately $1.1 billion relates
    to property, plant and equipment and approximately
    $1.5 billion relates to investments in and advances to
    unconsolidated affiliates.                                                                                                                                                                                                                                                    
|(6) | Amounts are net of third party reimbursements of our capital
    expenditures and returns of invested capital.                                                                                                                                                                                                                                                                                                                                                  

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|                                                                                                  |            |                                               |       |                 |            |  |           |             |     |  |        |       |  |          |       |       |              |  |     |       |  |  |        |       |  |  |        |        | 
|------------------------------------------------------------------------------------------------- | ---------- | --------------------------------------------- | ----- | --------------- | ---------- |  | --------- | ----------- | --- |  | ------ | ----- |  | -------- | ----- | ----- | ------------ |  | --- | ----- |  |  | ------ | ----- |  |  | ------ | ------ | 
|                                                                                                  |            | As of or for the Year Ended December 31, 2003 |      
|                                                                                                  |            |                                               |      
|                                                                                                  |            | Segments                                      |       |                 |           
|                                                                                                  |            |                                               |       |                 |           
|                                                                                                  |            |                                               |       | Exploration and |            |  | Marketing |             |     |  |        | Field |  |          |      
|                                                                                                  |            | Pipelines                                     |       |                 | Production |  |           | and Trading |     |  | Power  |       |  | Services |       |       | Corporate(1) |  |     | Total | 
|                                                                                                  |            |                                               |       |                 |            |  |           |             |     |  |        |       |  |          |       |       |              |  |     |       | 
|                                                                                                  |            | (In millions)                                 |      
|Revenue from external customers                                                                   |            |                                               |       |                 |            |  |           |             |     |  |        |       |  |          |       |       |              |  |     |       |  |  |        |       |  |  |        |       
|                                                                                                  | Domestic   |                                               | $     | 2,527           |            |  | $         | 201         | (2) |  | $      | 1,430 |  |          | $     | 515   |              |  | $   | 907   |  |  | $      | 113   |  |  | $      | 5,693  | 
|                                                                                                  | Foreign    |                                               |       | 2               |            |  |           |            |     |  |        |      |  |          |       | 394   |              |  |     | 2     |  |  |        | 13    |  |  |        | 411    | 
|Intersegment revenue                                                                              |            |                                               | 118   |                 |            |  | 1,940     | (2)         |     |  | (2,065 | )     |  |          | 145   |       |              |  | 374 |       |  |  | (277   | )     |  |  | 235    | (3)   
|Operation and maintenance                                                                         |            |                                               | 847   |                 |            |  | 342       |             |     |  | 158    |       |  |          | 472   |       |              |  | 85  |       |  |  | 95     |       |  |  | 1,999  |       
|Depreciation, depletion, and amortization                                                         |            |                                               | 386   |                 |            |  | 576       |             |     |  | 25     |       |  |          | 76    |       |              |  | 27  |       |  |  | 67     |       |  |  | 1,157  |       
|(Gain) loss on long-lived assets                                                                  |            |                                               | (10   | )               |            |  | 5         |             |     |  | (3     | )     |  |          | 185   |       |              |  | 173 |       |  |  | 510    |       |  |  | 860    |       
|Earnings (losses) from unconsolidated affiliates                                                  |            |                                               | 119   |                 |            |  | 13        |             |     |  |       |       |  |          | (91   | )     |              |  | 329 |       |  |  | (7     | )     |  |  | 363    |       
|EBIT                                                                                              |            |                                               | 1,234 |                 |            |  | 1,091     |             |     |  | (809   | )     |  |          | (40   | )     |              |  | 129 |       |  |  | (852   | )     |  |  | 753    |       
|Discontinued operations, net of income taxes                                                      |            |                                               |      |                 |            |  | 24        |             |     |  |       |       |  |          | 8     |       |              |  | 2   |       |  |  | (1,303 | )     |  |  | (1,269 | )     
|Assets of continuing operations
    (4)                                                           |            |                                               |       |                 |            |  |           |             |     |  |        |       |  |          |       |       |              |  |     |       |  |  |        |       |  |  |        |       
|                                                                                                  | Domestic   |                                               |       | 15,659          |            |  |           | 3,459       |     |  |        | 2,661 |  |          |       | 3,897 |              |  |     | 1,870 |  |  |        | 3,916 |  |  |        | 31,462 | 
|                                                                                                  | Foreign(5) |                                               |       | 27              |            |  |           | 308         |     |  |        | 5     |  |          |       | 2,824 |              |  |     |      |  |  |        | 141   |  |  |        | 3,305  | 
|Capital expenditures and investments in and advances to
    unconsolidated affiliates,
    net(6) |            |                                               | 837   |                 |            |  | 1,300     |             |     |  | (1     | )     |  |          | 1,081 |       |              |  | (25 | )     |  |  | 89     |       |  |  | 3,281  |       
|Total investments in unconsolidated affiliates                                                    |            |                                               | 1,018 |                 |            |  | 79        |             |     |  |       |       |  |          | 1,626 |       |              |  | 655 |       |  |  | 5      |       |  |  | 3,383  |       






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes eliminations of intercompany transactions. Our
    intersegment revenues, along with our intersegment operating
    expenses, were incurred in the normal course of business between
    our operating segments. We recorded an intersegment revenue
    elimination of $338 million and an operation and
    maintenance expense elimination of $59 million, which is
    included in the Corporate column, to remove
    intersegment transactions.
|(2) | Revenues from external customers include gains and losses
    related to our hedging of price risk associated with our natural
    gas and oil production. Intersegment revenues represent sales to
    our Marketing and Trading segment, which is responsible for
    marketing our production.                                                                                                                                                               
|(3) | Relates to intercompany activities between our continuing
    operations and our discontinued operations.                                                                                                                                                                                                                                                                                                                                                       
|(4) | Excludes assets of discontinued operations of $2.2 billion.                                                                                                                                                                                                                                                                                                                                                                                                     
|(5) | Of total foreign assets, approximately $1.2 billion relates
    to property, plant and equipment, and approximately
    $1.7 billion relates to investments in and advances to
    unconsolidated affiliates.                                                                                                                                                                                                                                                   
|(6) | Amounts are net of third party reimbursements of our capital
    expenditures and returns of invested capital. Our Power segment
    includes approximately $1 billion to acquire remaining
    interest in Chaparral and Gemstone (see Note 2).                                                                                                                                                                                                                

21. Investments in, Earnings from and Transactions with
Unconsolidated Affiliates






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|                                               |                                             |                |  |         |               |  |                        |                           |  |   |       |     |       |      |       |     |       |   |     |      |     |   |     |      |     |   |     |      |     | 
|---------------------------------------------- | ------------------------------------------- | -------------- |  | ------- | ------------- |  | ---------------------- | ------------------------- |  | - | ----- | --- | ----- | ---- | ----- | --- | ----- | - | --- | ---- | --- | - | --- | ---- | --- | - | --- | ---- | --- | 
|                                               |                                             | Net Ownership  |  |         |               |  | Earnings (Losses) from |                          
|                                               |                                             | Interest       |  |         | Investment    |  |                        | Unconsolidated Affiliates | 
|                                               |                                             |                |  |         |               |  |                        |                           | 
|                                               |                                             | 2005           |  |         | 2004          |  |                        | 2005                      |  |   | 2004  |     |       | 2005 |       |     | 2004  |   |     | 2003 |    
|                                               |                                             |                |  |         |               |  |                        |                           |  |   |       |     |       |      |       |     |       |   |     |      |    
|                                               |                                             | (Percent)      |  |         | (In millions) |  |                        | (In millions)             | 
|Domestic:                                      |                                             |                |  |         |               |  |                        |                           |  |   |       |     |       |      |       |     |       |   |     |      |     |   |     |      |     |   |     |     
|                                               | Four
    Star(1)                            |                |  | 43      |               |  |                        |                          |  |   | $     | 754 |       |      | $     |    |       |   | $   | 19   |     |   | $   |     |     |   | $   |     |    
|                                               | Citrus                                      |                |  | 50      |               |  |                        | 50                        |  |   |       | 596 |       |      |       | 589 |       |   |     | 66   |     |   |     | 65   |     |   |     | 43   |    
|                                               | Enterprise Products
    Partners(2)         |                |  |        |               |  |                        |                          |  |   |       |    |       |      |       | 257 |       |   |     | 183  |     |   |     | 6    |     |   |     |     |    
|                                               | GulfTerra Energy
    Partners(2)            |                |  |        |               |  |                        |                          |  |   |       |    |       |      |       |    |       |   |     |     |     |   |     | 601  |     |   |     | 419  |    
|                                               | Midland Cogeneration Venture                |                |  | 44      |               |  |                        | 44                        |  |   |       |    |       |      |       | 191 |       |   |     | (162 | )   |   |     | (171 | )   |   |     | 29   |    
|                                               | Great Lakes Gas Transmission                |                |  | 50      |               |  |                        | 50                        |  |   |       | 300 |       |      |       | 316 |       |   |     | 59   |     |   |     | 65   |     |   |     | 57   |    
|                                               | Javelina(2)                                 |                |  |        |               |  |                        | 40                        |  |   |       |    |       |      |       | 45  |       |   |     | 121  |     |   |     | 15   |     |   |     | (2   | )  
|                                               | Milford(2)                                  |                |  |        |               |  |                        |                          |  |   |       |    |       |      |       |    |       |   |     |     |     |   |     | (1   | )   |   |     | (88  | )  
|                                               | Chaparral
    Investors(2)                  |                |  |        |               |  |                        |                          |  |   |       |    |       |      |       |    |       |   |     |     |     |   |     |     |     |   |     | (207 | )  
|                                               | Other Domestic Investments                  |                |  | various |               |  |                        | various                   |  |   |       | 55  |       |      |       | 47  |       |   |     | 19   |     |   |     | 25   |     |   |     | (36  | )  
|                                               |                                             |                |  |         |               |  |                        |                           |  |   |       |     |       |      |       |     |       |   |     |      |    
|                                               |                                             | Total domestic |  |         |               |  |                        |                           |  |   |       |     | 1,705 |      |       |     | 1,445 |   |     |      | 305 |   |     |      | 605 |   |     |      | 215 | 
|                                               |                                             |                |  |         |               |  |                        |                           |  |   |       |     |       |      |       |     |       |   |     |      |    
|Foreign:                                       |                                             |                |  |         |               |  |                        |                           |  |   |       |     |       |      |       |     |       |   |     |      |     |   |     |      |     |   |     |     
|                                               | Korea Independent Energy
    Corporation(2) |                |  |        |               |  |                        | 50                        |  |   |       |    |       |      |       | 176 |       |   |     | 127  |     |   |     | 22   |     |   |     | 29   |    
|                                               | Araucaria
    Power(3)                      |                |  | 60      |               |  |                        | 60                        |  |   |       | 187 |       |      |       | 186 |       |   |     |     |     |   |     |     |     |   |     |     |    
|                                               | EGE
    Itabo(4)                            |                |  | 25      |               |  |                        | 25                        |  |   |       | 24  |       |      |       | 88  |       |   |     | (58  | )   |   |     | 1    |     |   |     | 1    |    
|                                               | Bolivia to Brazil Pipeline                  |                |  | 8       |               |  |                        | 8                         |  |   |       | 96  |       |      |       | 86  |       |   |     | 20   |     |   |     | 24   |     |   |     | 17   |    
|                                               | EGE
    Fortuna(4)                          |                |  | 25      |               |  |                        | 25                        |  |   |       | 68  |       |      |       | 65  |       |   |     | 2    |     |   |     | 6    |     |   |     | 3    |    
|                                               | Aguaytia
    Energy(4)                      |                |  | 24      |               |  |                        | 24                        |  |   |       | 23  |       |      |       | 39  |       |   |     | (11  | )   |   |     | (5   | )   |   |     | 4    |    
|                                               | San Fernando Pipeline                       |                |  | 50      |               |  |                        | 50                        |  |   |       | 53  |       |      |       | 46  |       |   |     | 14   |     |   |     | 13   |     |   |     | 5    |    
|                                               | Habibullah
    Power(4)(5)                  |                |  | 50      |               |  |                        | 50                        |  |   |       | 16  |       |      |       | 20  |       |   |     | (13  | )   |   |     | (46  | )   |   |     | (3   | )  
|                                               | Manaus(6)                                   |                |  | 100     |               |  |                        |                          |  |   |       | 65  |       |      |       |    |       |   |     | 10   |     |   |     |     |     |   |     |     |    
|                                               | Rio
    Negro(6)                            |                |  | 100     |               |  |                        |                          |  |   |       | 49  |       |      |       |    |       |   |     | 9    |     |   |     |     |     |   |     |     |    
|                                               | Saba Power
    Company(4)                   |                |  | 94      |               |  |                        | 94                        |  |   |       |    |       |      |       | 7   |       |   |     | (7   | )   |   |     | (51  | )   |   |     | 4    |    
|                                               | Other Foreign
    Investments(5)            |                |  | various |               |  |                        | various                   |  |   |       | 187 |       |      |       | 416 |       |   |     | (56  | )   |   |     | (23  | )   |   |     | 88   |    
|                                               |                                             |                |  |         |               |  |                        |                           |  |   |       |     |       |      |       |     |       |   |     |      |    
|                                               |                                             | Total foreign  |  |         |               |  |                        |                           |  |   |       |     | 768   |      |       |     | 1,129 |   |     |      | 37  |   |     |      | (59 | ) |     |      | 148 | 
|                                               |                                             |                |  |         |               |  |                        |                           |  |   |       |     |       |      |       |     |       |   |     |      |    
|Total investments in unconsolidated affiliates |                                             |                |  |         |               |  |                        |                           |  | $ | 2,473 |     |       | $    | 2,574 |     |       |   |     |      |     |   |     |      |     |   |     |     
|                                               |                                             |                |  |         |               |  |                        |                           |  |   |       |     |       |      |       |     |       |   |     |      |    
|Total earnings from unconsolidated affiliates  |                                             |                |  |         |               |  |                        |                           |  |   |       |     |       |      |       |     |       | $ | 342 |      |     | $ | 546 |      |     | $ | 363 |     
|                                               |                                             |                |  |         |               |  |                        |                           |  |   |       |     |       |      |       |     |       |   |     |      |    






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We acquired our interest in Four Star in 2005 in connection with
    our acquisition of Medicine Bow.                                                                                                                                                                                                                                                                                                                                               
|   
|(2) | We sold our interest in Enterprise, Javelina and Korea
    Independent Energy Corporation in 2005 and GulfTerra in 2004. We
    also transferred our interest in Milford and consolidated
    Chaparral Investors during 2003.                                                                                                                                                                                                                      
|   
|(3) | We signed a letter of intent in February 2006 to sell our
    interest in this power facility.                                                                                                                                                                                                                                                                                                                                                      
|   
|(4) | We sold our interest in Aguaytia Energy in the first quarter of
    2006. We have received approval from our Board of Directors to
    sell our interest in the other investments, which are targeted
    to close in the first half of 2006.                                                                                                                                                                                                       
|   
|(5) | As of December 31, 2005 and 2004, we also had outstanding
    advances and receivables of $37 million and
    $64 million related to our investment in Habibullah Power.
    We also had other outstanding advances and receivables of
    $348 million and $320 million related to our other
    foreign investments as of December 31, 2005 and 2004, of
    which $331 million and $307 million are related to our
    investment in Porto Velho.
|   
|(6) | While we continue to have 100 percent ownership, we
    deconsolidated these investments in January 2005, upon entering
    into an agreement that will transfer ownership of these plants
    to the power purchaser in January 2008.                                                                                                                                                                                                              

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|                                                         |  |               |      |   |      |   |      |      |  |   |      |  
|-------------------------------------------------------- |  | ------------- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|Investment or Group                                      |  | 2005          |      |   | 2004 |   |      | 2003 | 
|                                                         |  |               |      |   |      |   |      |      | 
|                                                         |  | (In millions) |     
|Midland Cogeneration
    Venture(1)                      |  | $             | (162 | ) |      | $ | (161 | )    |  | $ |     |  
|Asia power investments                                   |  |               | (64  | ) |      |   | (182 | )    |  |   | (1   | )
|Central and South American power investments             |  |               | (89  | ) |      |   |     |      |  |   | 24   |  
|Chaparral Investors                                      |  |               |     |   |      |   |     |      |  |   | (207 | )
|Domestic power plants held for sale, sold or transferred |  |               |     |   |      |   | (44  | )    |  |   | (163 | )
|Dauphin Island Gathering/Mobile Bay Processing           |  |               |     |   |      |   |     |      |  |   | (86  | )
|Enterprise/GulfTerra(2)                                  |  |               | 183  |   |      |   | 507  |      |  |   | 266  |  
|Javelina                                                 |  |               | 111  |   |      |   |     |      |  |   |     |  
|KIECO                                                    |  |               | 108  |   |      |   |     |      |  |   |     |  
|Other                                                    |  |               | 4    |   |      |   | 4    |      |  |   | (9   | )
|                                                         |  |               |      |   |      |   |      |      | 
|                                                         |  | $             | 91   |   |      | $ | 124  |      |  | $ | (176 | )
|                                                         |  |               |      |   |      |   |      |      | 






|    |                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents an impairment of our investment in 2004 and our
    proportionate share of losses from our investment in MCV in
    2005, primarily based on MCVs impairment of the plant
    assets.
|(2) | See further discussion of these sales below.                                                                                                                                                     



|                                |                                          |                         |   |       |      |  |   |       |  |  |   |       | 
|------------------------------- | ---------------------------------------- | ----------------------- | - | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                                |                                          | Year Ended December 31, |  
|                                |                                          |                         |  
|                                |                                          | 2005                    |   |       | 2004 |  |   | 2003  | 
|                                |                                          |                         |   |       |      |  |   |       | 
|                                |                                          | (In millions)           |  
|Operating results data:         |                                          |                         |   |       |      |  |   |       |  |  |   |      
|                                | Operating revenues                       |                         | $ | 1,611 |      |  | $ | 2,211 |  |  | $ | 3,360 | 
|                                | Operating expenses                       |                         |   | 1,468 |      |  |   | 1,485 |  |  |   | 2,309 | 
|                                | Income (loss) from continuing operations |                         |   | (123  | )    |  |   | 388   |  |  |   | 519   | 
|                                | Net income
    (loss)(1)                 |                         |   | (123  | )    |  |   | 388   |  |  |   | 520   | 
|Financial position
    data:(2) |                                          |                         |   |       |      |  |   |       |  |  |   |      
|                                | Current assets                           |                         | $ | 1,002 |      |  | $ | 1,248 |  |  |   |       | 
|                                | Non-current assets                       |                         |   | 4,016 |      |  |   | 5,265 |  |  |   |       | 
|                                | Short-term debt                          |                         |   | 250   |      |  |   | 250   |  |  |   |       | 
|                                | Other current liabilities                |                         |   | 478   |      |  |   | 488   |  |  |   |       | 
|                                | Long-term debt                           |                         |   | 1,381 |      |  |   | 2,044 |  |  |   |       | 
|                                | Other non-current liabilities            |                         |   | 786   |      |  |   | 779   |  |  |   |       | 
|                                | Minority interest                        |                         |   | 84    |      |  |   | 73    |  |  |   |       | 
|                                | Redeemable preferred stock               |                         |   | 9     |      |  |   |      |  |  |   |       | 
|                                | Equity in net assets                     |                         |   | 2,030 |      |  |   | 2,879 |  |  |   |       | 






|    |                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes net income of $15 million, $7 million and
    $119 million in 2005, 2004 and 2003, related to our
    proportionate share of affiliates in which we hold greater than
    a 50 percent interest.
|   
|(2) | Includes total assets of $485 million and $593 million
    as of December 31, 2005 and 2004 related to our
    proportionate share of affiliates in which we hold greater than
    a 50 percent interest.



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|                                            |  |               |     |  |      |   |     |      |  |   |     | 
|------------------------------------------- |  | ------------- | --- |  | ---- | - | --- | ---- |  | - | --- | 
|                                            |  | 2005          |     |  | 2004 |   |     | 2003 | 
|                                            |  |               |     |  |      |   |     |      | 
|                                            |  | (In millions) |    
|Operating
    revenue(1)                    |  | $             | 117 |  |      | $ | 199 |      |  | $ | 216 | 
|Other revenue  management fees             |  |               |    |  |      |   | 3   |      |  |   | 13  | 
|Cost of sales                               |  |               | 15  |  |      |   | 101 |      |  |   | 105 | 
|Reimbursement for operating
    expenses(1) |  |               | 5   |  |      |   | 95  |      |  |   | 139 | 
|Other income                                |  |               | 9   |  |      |   | 8   |      |  |   | 10  | 
|Interest income                             |  |               | 47  |  |      |   | 44  |      |  |   | 36  | 
|Interest expense                            |  |               |    |  |      |   |    |      |  |   | 2   | 






|    |                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------
|(1) | Decrease in 2005 is due primarily to the sale of GulfTerra
    during 2004. See further discussion below.

GulfTerra and Enterprise






|                                        |                                                  |               |   |     |      |   |     |      |  |   |     |     | 
|--------------------------------------- | ------------------------------------------------ | ------------- | - | --- | ---- | - | --- | ---- |  | - | --- | --- | 
|                                        |                                                  | 2005          |   |     | 2004 |   |     | 2003 | 
|                                        |                                                  |               |   |     |      |   |     |      | 
|                                        |                                                  | (In millions) |  
|Operating revenue                       |                                                  | $             |  |     |      | $ | 28  |      |  | $ | 33  |    
|Operating expenses                      |                                                  |               |  |     |      |   | 113 |      |  |   | 114 |    
|Reimbursements                          |                                                  |               |  |     |      |   | (71 | )    |  |   | (91 | )  
|Earnings from unconsolidated affiliates |                                                  |               |   |     |      |   |     |      |  |   |     |    
|                                        | Proportionate share of earnings and other income |               |   |    |      |   |     | 100  |  |   |     | 153 | 
|                                        | Gains on sales of investments                    |               |   | 183 |      |   |     | 507  |  |   |     | 266 | 

Matters that Could Impact Our
Investments


Investments in Power Facilities.




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Investment in Bolivia.


Citrus Corporation.


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Supplemental Selected Quarterly Financial Information
(Unaudited)




|     |                                                     |                                                |   |       |         |  |   |              |       |   |             |      |       |       |   |      |       |   |   |       |       |  
|---- | --------------------------------------------------- | ---------------------------------------------- | - | ----- | ------- |  | - | ------------ | ----- | - | ----------- | ---- | ----- | ----- | - | ---- | ----- | - | - | ----- | ----- | -
|     |                                                     | Quarters Ended                                 |   |       |        
|     |                                                     |                                                |   |       |        
|     |                                                     | March 31                                       |   |       | June 30 |  |   | September 30 |       |   | December 31 |      |       | Total |  
|     |                                                     |                                                |   |       |         |  |   |              |       |   |             |      |       |       |  
|     |                                                     | (In millions, except per common share amounts) |  
|2005 |                                                     |                                                |   |       |         |  |   |              |       |   |             |      |       |       |   |      |       |   |   |      
|     | Operating revenues                                  |                                                | $ | 1,108 |         |  | $ | 1,184        |       |   | $           | 768  |       |       | $ | 957  |       |   | $ | 4,017 |      
|     | Loss on long-lived assets                           |                                                |   | 7     |         |  |   | 276          |       |   |             | 3    |       |       |   | 121  |       |   |   | 407   |      
|     | Operating income (loss)                             |                                                |   | 243   |         |  |   | 89           |       |   |             | (158 | )     |       |   | (361 | )     |   |   | (187  | )    
|     | Earnings (losses) from unconsolidated affiliates    |                                                |   | 190   |         |  |   | (19          | )     |   |             | 14   |       |       |   | 157  |       |   |   | 342   |      
|     | Income (loss) from continuing operations            |                                                |   | 115   |         |  |   | (212         | )     |   |             | (322 | )     |       |   | (283 | )     |   |   | (702  | )    
|     | Discontinued operations, net of income
    taxes(1) |                                                |   | (9    | )       |  |   | (26          | )     |   |             | 10   |       |       |   | 125  |       |   |   | 100   |      
|     | Net income (loss)                                   |                                                |   | 106   |         |  |   | (238         | )     |   |             | (312 | )     |       |   | (162 | )     |   |   | (606  | )    
|     | Net income (loss) available to common stockholders  |                                                |   | 106   |         |  |   | (246         | )     |   |             | (321 | )     |       |   | (172 | )     |   |   | (633  | )    
|     | Basic and diluted earnings per common share         |                                                |   |       |         |  |   |              |       |   |             |      |       |       |   |      |       |   |   |       |      
|     |                                                     | Income (loss) from continuing operations       |   |       | 0.18    |  |   |              | (0.34 | ) |             |      | (0.51 | )     |   |      | (0.45 | ) |   |       | (1.13 | )
|     |                                                     | Net income (loss)                              |   |       | 0.17    |  |   |              | (0.38 | ) |             |      | (0.50 | )     |   |      | (0.26 | ) |   |       | (0.98 | )

|     |                                                     |                                                |   |       |         |   |   |              |      |  |             |       |       |       |   |       |       |   |   |       |       |  
|---- | --------------------------------------------------- | ---------------------------------------------- | - | ----- | ------- | - | - | ------------ | ---- |  | ----------- | ----- | ----- | ----- | - | ----- | ----- | - | - | ----- | ----- | -
|     |                                                     | Quarters Ended                                 |   |       |        
|     |                                                     |                                                |   |       |        
|     |                                                     | March 31                                       |   |       | June 30 |   |   | September 30 |      |  | December 31 |       |       | Total |  
|     |                                                     |                                                |   |       |         |   |   |              |      |  |             |       |       |       |  
|     |                                                     | (In millions, except per common share amounts) |  
|2004 |                                                     |                                                |   |       |         |   |   |              |      |  |             |       |       |       |   |       |       |   |   |      
|     | Operating revenues                                  |                                                | $ | 1,472 |         |   | $ | 1,443        |      |  | $           | 1,349 |       |       | $ | 1,275 |       |   | $ | 5,539 |      
|     | Loss on long-lived assets                           |                                                |   | 238   |         |   |   | 17           |      |  |             | 582   |       |       |   | 240   |       |   |   | 1,077 |      
|     | Operating income (loss)                             |                                                |   | 180   |         |   |   | 361          |      |  |             | (368  | )     |       |   | 9     |       |   |   | 182   |      
|     | Earnings (losses) from unconsolidated affiliates    |                                                |   | 87    |         |   |   | 98           |      |  |             | 617   |       |       |   | (256  | )     |   |   | 546   |      
|     | Income (loss) from continuing operations            |                                                |   | (126  | )       |   |   | 28           |      |  |             | (205  | )     |       |   | (526  | )     |   |   | (829  | )    
|     | Discontinued operations, net of income
    taxes(1) |                                                |   | (70   | )       |   |   | (23          | )    |  |             | (9    | )     |       |   | (16   | )     |   |   | (118  | )    
|     | Net income (loss)                                   |                                                |   | (196  | )       |   |   | 5            |      |  |             | (214  | )     |       |   | (542  | )     |   |   | (947  | )    
|     | Basic and diluted earnings per common share         |                                                |   |       |         |   |   |              |      |  |             |       |       |       |   |       |       |   |   |       |      
|     |                                                     | Income (loss) from continuing operations       |   |       | (0.20   | ) |   |              | 0.04 |  |             |       | (0.32 | )     |   |       | (0.82 | ) |   |       | (1.30 | )
|     |                                                     | Net income (loss)                              |   |       | (0.31   | ) |   |              | 0.01 |  |             |       | (0.33 | )     |   |       | (0.85 | ) |   |       | (1.48 | )






|    |                                                                                                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Our petroleum markets operations, our Canadian and certain other
    international natural gas and oil production operations, our
    south Louisiana gathering and processing operations, and our
    consolidated international power operations in Central America
    and Asia are classified as discontinued operations (See
    Note 3 for further discussion).

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Supplemental Natural Gas and Oil Operations (Unaudited)






|     |                                                           |                                   |        |        |        |  |     |           |     |  |        |        |        | 
|---- | --------------------------------------------------------- | --------------------------------- | ------ | ------ | ------ |  | --- | --------- | --- |  | ------ | ------ | ------ | 
|     |                                                           | United                            |        |        |        |  |    
|     |                                                           | States                            |        |        | Brazil |  |     | Worldwide |    
|     |                                                           |                                   |        |        |        |  |     |           |    
|2005 |                                                           |                                   |        |        |        |  |     |           |     |  |        |       
|     | Natural gas and oil properties:                           |                                   |        |        |        |  |     |           |     |  |        |        |       
|     |                                                           | Costs subject to amortization     |        | $      | 14,874 |  |     | $         | 371 |  |        | $      | 15,245 | 
|     |                                                           | Costs not subject to amortization |        |        | 384    |  |     |           | 107 |  |        |        | 491    | 
|     |                                                           |                                   |        |        |        |  |     |           |    
|     |                                                           |                                   | 15,258 |        |        |  | 478 |           |     |  | 15,736 |       
|     | Less accumulated depreciation, depletion and amortization |                                   |        | 11,021 |        |  |     | 183       |     |  |        | 11,204 |       
|     |                                                           |                                   |        |        |        |  |     |           |    
|     | Net capitalized costs                                     |                                   | $      | 4,237  |        |  | $   | 295       |     |  | $      | 4,532  |       
|     |                                                           |                                   |        |        |        |  |     |           |    
|     | FAS 143 abandonment liability                             |                                   | $      | 186    |        |  | $   | 4         |     |  | $      | 190    |       
|     |                                                           |                                   |        |        |        |  |     |           |    
|2004 |                                                           |                                   |        |        |        |  |     |           |     |  |        |       
|     | Natural gas and oil properties:                           |                                   |        |        |        |  |     |           |     |  |        |        |       
|     |                                                           | Costs subject to amortization     |        | $      | 14,211 |  |     | $         | 337 |  |        | $      | 14,548 | 
|     |                                                           | Costs not subject to amortization |        |        | 308    |  |     |           | 112 |  |        |        | 420    | 
|     |                                                           |                                   |        |        |        |  |     |           |    
|     |                                                           |                                   | 14,519 |        |        |  | 449 |           |     |  | 14,968 |       
|     | Less accumulated depreciation, depletion and amortization |                                   |        | 11,130 |        |  |     | 138       |     |  |        | 11,268 |       
|     |                                                           |                                   |        |        |        |  |     |           |    
|     | Net capitalized costs                                     |                                   | $      | 3,389  |        |  | $   | 311       |     |  | $      | 3,700  |       
|     |                                                           |                                   |        |        |        |  |     |           |    
|     | FAS143 abandonment liability                              |                                   | $      | 252    |        |  | $   | 4         |     |  | $      | 256    |       
|     |                                                           |                                   |        |        |        |  |     |           |    



|     |                                               |                        |                             |       |        |       |   |           |    |     |   |       |     |       | 
|---- | --------------------------------------------- | ---------------------- | --------------------------- | ----- | ------ | ----- | - | --------- | -- | --- | - | ----- | --- | ----- | 
|     |                                               | United                 |                             |       |        |       |  
|     |                                               | States                 |                             |       | Brazil |       |   | Worldwide |   
|     |                                               |                        |                             |       |        |       |   |           |   
|2005 |                                               |                        |                             |       |        |       |   |           |    |     |   |      
|     | Property acquisition costs                    |                        |                             |       |        |       |   |           |    |     |   |       |    
|     |                                               | Proved properties      |                             | $     | 643    |       |   | $         | 8  |     |   | $     | 651 |      
|     |                                               | Unproved properties    |                             |       | 143    |       |   |           |   |     |   |       | 143 |      
|     | Exploration costs                             |                        |                             | 143   |        |       |   | 15        |    |     |   | 158   |    
|     | Development costs                             |                        |                             | 503   |        |       |   | 6         |    |     |   | 509   |    
|     |                                               |                        |                             |       |        |       |   |           |   
|     | Costs expended in 2005                        |                        |                             | 1,432 |        |       |   | 29        |    |     |   | 1,461 |    
|     | Asset retirement obligation costs             |                        |                             | 1     |        |       |   |          |    |     |   | 1     |    
|     |                                               |                        |                             |       |        |       |   |           |   
|     |                                               |                        | Total costs
    incurred(1) |       | $      | 1,433 |   |           | $  | 29  |   |       | $   | 1,462 | 
|     |                                               |                        |                             |       |        |       |   |           |   
|     | Unconsolidated investment in Four
    Star(1) |                        | $                           | 769   |        |       | $ |          |    |     | $ | 769   |    
|     |                                               |                        |                             |       |        |       |   |           |   
|2004 |                                               |                        |                             |       |        |       |   |           |    |     |   |      
|     | Property acquisition costs                    |                        |                             |       |        |       |   |           |    |     |   |       |    
|     |                                               | Proved properties      |                             | $     | 33     |       |   | $         | 69 |     |   | $     | 102 |      
|     |                                               | Unproved properties    |                             |       | 32     |       |   |           | 3  |     |   |       | 35  |      
|     | Exploration costs                             |                        |                             | 185   |        |       |   | 25        |    |     |   | 210   |    
|     | Development costs                             |                        |                             | 395   |        |       |   | 1         |    |     |   | 396   |    
|     |                                               |                        |                             |       |        |       |   |           |   
|     |                                               | Costs expended in 2004 |                             |       | 645    |       |   |           | 98 |     |   |       | 743 |      
|     | Asset retirement obligation costs             |                        |                             | 30    |        |       |   | 3         |    |     |   | 33    |    
|     |                                               |                        |                             |       |        |       |   |           |   
|     |                                               |                        | Total costs incurred        |       | $      | 675   |   |           | $  | 101 |   |       | $   | 776   | 
|     |                                               |                        |                             |       |        |       |   |           |   

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|     |                                          |                        |                      |     |        |       |  |           |    |    |  |     |       |       | 
|---- | ---------------------------------------- | ---------------------- | -------------------- | --- | ------ | ----- |  | --------- | -- | -- |  | --- | ----- | ----- | 
|     |                                          | United                 |                      |     |        |       | 
|     |                                          | States                 |                      |     | Brazil |       |  | Worldwide |   
|     |                                          |                        |                      |     |        |       |  |           |   
|2003 |                                          |                        |                      |     |        |       |  |           |    |    |  |    
|     | Property acquisition costs               |                        |                      |     |        |       |  |           |    |    |  |     |      
|     |                                          | Proved properties      |                      | $   | 10     |       |  | $         |   |    |  | $   | 10    |      
|     |                                          | Unproved properties    |                      |     | 35     |       |  |           | 4  |    |  |     | 39    |      
|     | Exploration costs                        |                        |                      | 467 |        |       |  | 95        |    |    |  | 562 |      
|     | Development costs                        |                        |                      | 668 |        |       |  |          |    |    |  | 668 |      
|     |                                          |                        |                      |     |        |       |  |           |   
|     |                                          | Costs expended in 2003 |                      |     | 1,180  |       |  |           | 99 |    |  |     | 1,279 |      
|     | Asset retirement obligation
    costs(2) |                        |                      | 124 |        |       |  |          |    |    |  | 124 |      
|     |                                          |                        |                      |     |        |       |  |           |   
|     |                                          |                        | Total costs incurred |     | $      | 1,304 |  |           | $  | 99 |  |     | $     | 1,403 | 
|     |                                          |                        |                      |     |        |       |  |           |   






|    |                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes $179 million of deferred income tax adjustments
    related to the acquisition of full-cost pool properties and
    $217 million related to the acquisition of our
    unconsolidated investment in Four Star.
|   
|(2) | Includes an increase to our property, plant and equipment of
    approximately $114 million in 2003 associated with our
    adoption of Statement of Financial Accounting Standard
    No. 143.                        







|                |             |              |     |     |                 |   |     |              |  |   |      |    |  |      |    |    |  |   |     |    | 
|--------------- | ----------- | ------------ | --- | --- | --------------- | - | --- | ------------ |  | - | ---- | -- |  | ---- | -- | -- |  | - | --- | -- | 
|                |             | Cumulative   |     |     | Costs Excluded  |   |     | Cumulative   | 
|                |             | Balance      |     |     | for Years Ended |   |     | Balance      | 
|                |             |              |     |     | December 31     |   |     |              | 
|                |             | December 31, |     |     |                 |   |     | December 31, | 
|                |             | 2005         |     |     | 2005            |   |     | 2004         |  |   | 2003 |    |  | 2002 |   
|                |             |              |     |     |                 |   |     |              |  |   |      |    |  |      |   
|Worldwide(1)(2) |             |              |     |     |                 |   |     |              |  |   |      |    |  |      |    |    |  |   |     |   
|                | Acquisition |              | $   | 358 |                 |   | $   | 221          |  |   | $    | 52 |  |      | $  | 26 |  |   | $   | 59 | 
|                | Exploration |              |     | 132 |                 |   |     | 29           |  |   |      | 13 |  |      |    | 29 |  |   |     | 61 | 
|                | Development |              |     | 1   |                 |   |     |             |  |   |      |   |  |      |    |   |  |   |     | 1  | 
|                |             |              |     |     |                 |   |     |              |  |   |      |    |  |      |   
|                |             | $            | 491 |     |                 | $ | 250 |              |  | $ | 65   |    |  | $    | 55 |    |  | $ | 121 |   
|                |             |              |     |     |                 |   |     |              |  |   |      |    |  |      |   






|    |                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes operations in the United States and Brazil.                                                                                             
|(2) | Includes capitalized interest of $19 million,
    $7 million, and less than $1 million for the years
    ended December 31, 2005, 2004, and 2003.





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|                                              |                                               |                                   |  |                    |            |   |        |            |     |   |           |        |      |        |  |        |           |   |  |              |        |   |  |        |        |   |  |        |        |  
|--------------------------------------------- | --------------------------------------------- | --------------------------------- |  | ------------------ | ---------- | - | ------ | ---------- | --- | - | --------- | ------ | ---- | ------ |  | ------ | --------- | - |  | ------------ | ------ | - |  | ------ | ------ | - |  | ------ | ------ | -
|                                              |                                               |                                   |  | Oil and Condensate |            |   | NGL    |           
|                                              |                                               | Natural Gas (in Bcf)              |  |                    | (in MBbls) |   |        | (in MBbls) |    
|                                              |                                               |                                   |  |                    |            |   |        |            |    
|                                              |                                               | United                            |  |                    |            |   | United |            |     |   |           | United |     
|                                              |                                               | States(1)                         |  |                    | Brazil     |   |        | Worldwide  |     |   | States(1) |        |      | Brazil |  |        | Worldwide |   |  | States(1)(3) |       
|                                              |                                               |                                   |  |                    |            |   |        |            |     |   |           |        |      |        |  |        |           |   |  |              |       
|Consolidated                                  |                                               |                                   |  |                    |            |   |        |            |     |   |           |        |      |        |  |        |           |   |  |              |        |   |  |        |        |   |  |       
|Net proved developed and undeveloped reserves |                                               |                                   |  |                    |            |   |        |            |     |   |           |        |      |        |  |        |           |   |  |              |        |   |  |        |        |   |  |       
|                                              | January 1, 2003                               |                                   |  | 2,488              |            |   |        |           |     |   |           | 2,488  |      |        |  | 38,354 |           |   |  |             |        |   |  | 38,354 |        |   |  | 21,607 |       
|                                              |                                               | Revisions of previous estimates   |  |                    | (24        | ) |        |            |    |   |           |        | (24  | )      |  |        | 895       |   |  |              |       |   |  |        | 895    |   |  |        | (2,717 | )
|                                              |                                               | Extensions, discoveries and other |  |                    | 405        |   |        |            |    |   |           |        | 405  |        |  |        | 5,000     |   |  |              | 20,543 |   |  |        | 25,543 |   |  |        | 1,795  |  
|                                              |                                               | Purchases of reserves in place    |  |                    | 2          |   |        |            |    |   |           |        | 2    |        |  |        | 5         |   |  |              |       |   |  |        | 5      |   |  |        | 27     |  
|                                              |                                               | Sales of reserves in place        |  |                    | (471       | ) |        |            |    |   |           |        | (471 | )      |  |        | (4,328    | ) |  |              |       |   |  |        | (4,328 | ) |  |        | (504   | )
|                                              |                                               | Production                        |  |                    | (339       | ) |        |            |    |   |           |        | (339 | )      |  |        | (7,555    | ) |  |              |       |   |  |        | (7,555 | ) |  |        | (4,223 | )
|                                              |                                               |                                   |  |                    |            |   |        |            |     |   |           |        |      |        |  |        |           |   |  |              |       
|                                              | December 31, 2003                             |                                   |  | 2,061              |            |   |        |           |     |   |           | 2,061  |      |        |  | 32,371 |           |   |  | 20,543       |        |   |  | 52,914 |        |   |  | 15,985 |       
|                                              |                                               | Revisions of previous estimates   |  |                    | (172       | ) |        |            |    |   |           |        | (172 | )      |  |        | (999      | ) |  |              | 252    |   |  |        | (747   | ) |  |        | 724    |  
|                                              |                                               | Extensions, discoveries and other |  |                    | 79         |   |        |            | 38  |   |           |        | 117  |        |  |        | 2,214     |   |  |              | 1,848  |   |  |        | 4,062  |   |  |        | 58     |  
|                                              |                                               | Purchases of reserves in place    |  |                    | 15         |   |        |            | 38  |   |           |        | 53   |        |  |        |          |   |  |              | 1,848  |   |  |        | 1,848  |   |  |        |       |  
|                                              |                                               | Sales of reserves in place        |  |                    | (21        | ) |        |            |    |   |           |        | (21  | )      |  |        | (1,276    | ) |  |              |       |   |  |        | (1,276 | ) |  |        | (47    | )
|                                              |                                               | Production                        |  |                    | (238       | ) |        |            | (7  | ) |           |        | (245 | )      |  |        | (4,979    | ) |  |              | (320   | ) |  |        | (5,299 | ) |  |        | (3,519 | )
|                                              |                                               |                                   |  |                    |            |   |        |            |     |   |           |        |      |        |  |        |           |   |  |              |       
|                                              | December 31, 2004                             |                                   |  | 1,724              |            |   |        | 69         |     |   |           | 1,793  |      |        |  | 27,331 |           |   |  | 24,171       |        |   |  | 51,502 |        |   |  | 13,201 |       
|                                              |                                               | Revisions of previous estimates   |  |                    | (43        | ) |        |            | (2  | ) |           |        | (45  | )      |  |        | 260       |   |  |              | 7,927  |   |  |        | 8,187  |   |  |        | 1,148  |  
|                                              |                                               | Extensions, discoveries and other |  |                    | 183        |   |        |            | 5   |   |           |        | 188  |        |  |        | 8,145     |   |  |              | 772    |   |  |        | 8,917  |   |  |        | 169    |  
|                                              |                                               | Purchases of reserves in place    |  |                    | 192        |   |        |            |    |   |           |        | 192  |        |  |        | 13,338    |   |  |              |       |   |  |        | 13,338 |   |  |        | 772    |  
|                                              |                                               | Sales of reserves in place        |  |                    | (18        | ) |        |            |    |   |           |        | (18  | )      |  |        | (969      | ) |  |              |       |   |  |        | (969   | ) |  |        | (89    | )
|                                              |                                               | Production                        |  |                    | (207       | ) |        |            | (16 | ) |           |        | (223 | )      |  |        | (4,877    | ) |  |              | (620   | ) |  |        | (5,497 | ) |  |        | (2,639 | )
|                                              |                                               |                                   |  |                    |            |   |        |            |     |   |           |        |      |        |  |        |           |   |  |              |       
|                                              | December 31, 2005                             |                                   |  | 1,831              |            |   |        | 56         |     |   |           | 1,887  |      |        |  | 43,228 |           |   |  | 32,250       |        |   |  | 75,478 |        |   |  | 12,562 |       
|                                              |                                               |                                   |  |                    |            |   |        |            |     |   |           |        |      |        |  |        |           |   |  |              |       
|Proved developed reserves                     |                                               |                                   |  |                    |            |   |        |            |     |   |           |        |      |        |  |        |           |   |  |              |        |   |  |        |        |   |  |       
|                                              | December 31, 2003                             |                                   |  | 1,428              |            |   |        |           |     |   |           | 1,428  |      |        |  | 22,821 |           |   |  |             |        |   |  | 22,821 |        |   |  | 14,088 |       
|                                              | December 31, 2004                             |                                   |  | 1,287              |            |   |        | 54         |     |   |           | 1,341  |      |        |  | 19,641 |           |   |  | 2,613        |        |   |  | 22,254 |        |   |  | 11,943 |       
|                                              | December 31, 2005                             |                                   |  | 1,404              |            |   |        | 27         |     |   |           | 1,431  |      |        |  | 28,581 |           |   |  | 1,144        |        |   |  | 29,725 |        |   |  | 11,010 |       
|Unconsolidated investment in Four Star(2)     |                                               |                                   |  |                    |            |   |        |            |     |   |           |        |      |        |  |        |           |   |  |              |        |   |  |        |        |   |  |       
|                                              | December 31, 2005                             |                                   |  |                    |            |   |        |            |     |   |           |        |      |        |  |        |           |   |  |              |        |   |  |        |        |   |  |        |       
|                                              | Net proved developed and undeveloped reserves |                                   |  | 193                |            |   |        |           |     |   |           | 193    |      |        |  | 3,349  |           |   |  |             |        |   |  | 3,349  |        |   |  | 6,668  |       
|                                              | Proved developed reserves                     |                                   |  | 158                |            |   |        |           |     |   |           | 158    |      |        |  | 3,266  |           |   |  |             |        |   |  | 3,266  |        |   |  | 5,399  |       






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Net proved reserves exclude royalties and interests owned by
    others and reflects contractual arrangements and royalty
    obligations in effect at the time of the estimate.                                                                                                                                                                                                                                                                                                                                           
|   
|(2) | Our unconsolidated share of Four Stars proved reserves has
    been estimated based on an evaluation of those reserves by El
    Pasos internal reservoir engineers, and not by engineers
    of Four Star. An independent reservoir engineering firm, Ryder
    Scott, which was engaged by us, prepared an estimate on
    86 percent of Four Stars proved reserves. Based on
    the amount of Four Stars proved reserves determined by
    Ryder Scott, we believe our reported reserve amounts are
    reasonable.
|   
|(3) | All of our NGL reserves are in the United States.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          



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|     |                                                             |                             |       |      |        |       |   |           |    |    |     |      |       |       | 
|---- | ----------------------------------------------------------- | --------------------------- | ----- | ---- | ------ | ----- | - | --------- | -- | -- | --- | ---- | ----- | ----- | 
|     |                                                             | United                      |       |      |        |       |  
|     |                                                             | States                      |       |      | Brazil |       |   | Worldwide |   
|     |                                                             |                             |       |      |        |       |   |           |   
|2005 |                                                             |                             |       |      |        |       |   |           |    |    |     |     
|     | Net Revenues                                                |                             |       |      |        |       |   |           |    |    |     |      |      
|     |                                                             | Sales to external customers |       | $    | 431    |       |   | $         | 62 |    |     | $    | 493   |      
|     |                                                             | Affiliated sales            |       |      | 1,256  |       |   |           | (9 | )  |     |      | 1,247 |      
|     |                                                             |                             |       |      |        |       |   |           |   
|     |                                                             |                             | Total |      |        | 1,687 |   |           |    | 53 |     |      |       | 1,740 | 
|     | Production
    costs(1)                                     |                             |       | (253 | )      |       |   | (8        | )  |    |     | (261 | )    
|     | Depreciation, depletion and amortization                    |                             |       | (567 | )      |       |   | (45       | )  |    |     | (612 | )    
|     |                                                             |                             |       |      |        |       |   |           |   
|     |                                                             |                             | 867   |      |        |       |  |           |    |    | 867 |     
|     | Income tax expense                                          |                             |       | (309 | )      |       |   |          |    |    |     | (309 | )    
|     |                                                             |                             |       |      |        |       |   |           |   
|     | Results of operations from producing activities             |                             | $     | 558  |        |       | $ |          |    |    | $   | 558  |      
|     |                                                             |                             |       |      |        |       |   |           |   
|     | Equity earnings from unconsolidated investment in Four Star |                             | $     | 19   |        |       | $ |          |    |    | $   | 19   |      
|     |                                                             |                             |       |      |        |       |   |           |   
|2004 |                                                             |                             |       |      |        |       |   |           |    |    |     |     
|     | Net Revenues                                                |                             |       |      |        |       |   |           |    |    |     |      |      
|     |                                                             | Sales to external customers |       | $    | 500    |       |   | $         | 26 |    |     | $    | 526   |      
|     |                                                             | Affiliated sales            |       |      | 1,155  |       |   |           |   |    |     |      | 1,155 |      
|     |                                                             |                             |       |      |        |       |   |           |   
|     |                                                             |                             | Total |      |        | 1,655 |   |           |    | 26 |     |      |       | 1,681 | 
|     | Production
    costs(1)                                     |                             |       | (210 | )      |       |   |          |    |    |     | (210 | )    
|     | Depreciation, depletion and amortization                    |                             |       | (530 | )      |       |   | (18       | )  |    |     | (548 | )    
|     |                                                             |                             |       |      |        |       |   |           |   
|     |                                                             |                             | 915   |      |        |       | 8 |           |    |    | 923 |     
|     | Income tax expense                                          |                             |       | (333 | )      |       |   | (3        | )  |    |     | (336 | )    
|     |                                                             |                             |       |      |        |       |   |           |   
|     | Results of operations from producing activities             |                             | $     | 582  |        |       | $ | 5         |    |    | $   | 587  |      
|     |                                                             |                             |       |      |        |       |   |           |   

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|     |                                                 |                             |       |      |        |       |    |           |   |   |       |      |       |       | 
|---- | ----------------------------------------------- | --------------------------- | ----- | ---- | ------ | ----- | -- | --------- | - | - | ----- | ---- | ----- | ----- | 
|     |                                                 | United                      |       |      |        |       |   
|     |                                                 | States                      |       |      | Brazil |       |    | Worldwide |  
|     |                                                 |                             |       |      |        |       |    |           |  
|2003 |                                                 |                             |       |      |        |       |    |           |   |   |       |     
|     | Net Revenues                                    |                             |       |      |        |       |    |           |   |   |       |      |      
|     |                                                 | Sales to external customers |       | $    | 147    |       |    | $         |  |   |       | $    | 147   |      
|     |                                                 | Affiliated sales            |       |      | 1,912  |       |    |           |  |   |       |      | 1,912 |      
|     |                                                 |                             |       |      |        |       |    |           |  
|     |                                                 |                             | Total |      |        | 2,059 |    |           |   |  |       |      |       | 2,059 | 
|     | Production
    costs(1)                         |                             |       | (229 | )      |       |    |          |   |   |       | (229 | )    
|     | Depreciation, depletion and amortization        |                             |       | (576 | )      |       |    |          |   |   |       | (576 | )    
|     | Ceiling test charges                            |                             |       |     |        |       |    | (5        | ) |   |       | (5   | )    
|     |                                                 |                             |       |      |        |       |    |           |  
|     |                                                 |                             | 1,254 |      |        |       | (5 | )         |   |   | 1,249 |     
|     | Income tax (expense) benefit                    |                             |       | (449 | )      |       |    | 2         |   |   |       | (447 | )    
|     |                                                 |                             |       |      |        |       |    |           |  
|     | Results of operations from producing activities |                             | $     | 805  |        |       | $  | (3        | ) |   | $     | 802  |      
|     |                                                 |                             |       |      |        |       |    |           |  






|    |                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------
|(1) | Production cost includes lease operating costs and production
    related taxes, including ad valorem and severance taxes.



|                                                                                                      |  |        |        |   |        |   |       |           |  |   |        |  
|----------------------------------------------------------------------------------------------------- |  | ------ | ------ | - | ------ | - | ----- | --------- |  | - | ------ | -
|                                                                                                      |  | United |        |   |        |   |      
|                                                                                                      |  | States |        |   | Brazil |   |       | Worldwide | 
|                                                                                                      |  |        |        |   |        |   |       |           | 
|2005                                                                                                  |  |        |        |   |        |   |       |           |  |   |        |  
|Future cash
    inflows(1)                                                                            |  | $      | 18,175 |   |        | $ | 1,992 |           |  | $ | 20,167 |  
|Future production costs                                                                               |  |        | (3,968 | ) |        |   | (453  | )         |  |   | (4,421 | )
|Future development costs                                                                              |  |        | (1,335 | ) |        |   | (309  | )         |  |   | (1,644 | )
|Future income tax expenses                                                                            |  |        | (3,160 | ) |        |   | (286  | )         |  |   | (3,446 | )
|                                                                                                      |  |        |        |   |        |   |       |           | 
|Future net cash flows                                                                                 |  |        | 9,712  |   |        |   | 944   |           |  |   | 10,656 |  
|10% annual discount for estimated timing of cash flows                                                |  |        | (3,660 | ) |        |   | (381  | )         |  |   | (4,041 | )
|                                                                                                      |  |        |        |   |        |   |       |           | 
|Standardized measure of discounted future net cash flows                                              |  | $      | 6,052  |   |        | $ | 563   |           |  | $ | 6,615  |  
|                                                                                                      |  |        |        |   |        |   |       |           | 
|Standardized measure of discounted future net cash flows,
    including effects of hedging activities |  | $      | 5,748  |   |        | $ | 560   |           |  | $ | 6,308  |  
|                                                                                                      |  |        |        |   |        |   |       |           | 
|Unconsolidated investment in Four Star                                                                |  |        |        |   |        |   |       |           |  |   |        |  
|Standardized measure of discounted future net cash flows                                              |  | $      | 617    |   |        | $ |      |           |  | $ | 617    |  
|                                                                                                      |  |        |        |   |        |   |       |           | 
|2004                                                                                                  |  |        |        |   |        |   |       |           |  |   |        |  
|Future cash
    inflows(1)                                                                            |  | $      | 11,895 |   |        | $ | 1,077 |           |  | $ | 12,972 |  
|Future production costs                                                                               |  |        | (3,585 | ) |        |   | (135  | )         |  |   | (3,720 | )
|Future development costs                                                                              |  |        | (1,234 | ) |        |   | (274  | )         |  |   | (1,508 | )
|Future income tax expenses                                                                            |  |        | (1,184 | ) |        |   | (141  | )         |  |   | (1,325 | )
|                                                                                                      |  |        |        |   |        |   |       |           | 
|Future net cash flows                                                                                 |  |        | 5,892  |   |        |   | 527   |           |  |   | 6,419  |  
|10% annual discount for estimated timing of cash flows                                                |  |        | (2,004 | ) |        |   | (219  | )         |  |   | (2,223 | )
|                                                                                                      |  |        |        |   |        |   |       |           | 
|Standardized measure of discounted future net cash flows                                              |  | $      | 3,888  |   |        | $ | 308   |           |  | $ | 4,196  |  
|                                                                                                      |  |        |        |   |        |   |       |           | 
|Standardized measure of discounted future net cash flows,
    including effects of hedging activities |  | $      | 3,907  |   |        | $ | 305   |           |  | $ | 4,212  |  
|                                                                                                      |  |        |        |   |        |   |       |           | 
|2003                                                                                                  |  |        |        |   |        |   |       |           |  |   |        |  
|Future cash
    inflows(1)                                                                            |  | $      | 13,302 |   |        | $ | 588   |           |  | $ | 13,890 |  
|Future production costs                                                                               |  |        | (3,025 | ) |        |   | (65   | )         |  |   | (3,090 | )
|Future development costs                                                                              |  |        | (1,325 | ) |        |   | (236  | )         |  |   | (1,561 | )
|Future income tax expenses                                                                            |  |        | (1,695 | ) |        |   | (75   | )         |  |   | (1,770 | )
|                                                                                                      |  |        |        |   |        |   |       |           | 
|Future net cash flows                                                                                 |  |        | 7,257  |   |        |   | 212   |           |  |   | 7,469  |  
|10% annual discount for estimated timing of cash flows                                                |  |        | (2,449 | ) |        |   | (128  | )         |  |   | (2,577 | )
|                                                                                                      |  |        |        |   |        |   |       |           | 
|Standardized measure of discounted future net cash flows                                              |  | $      | 4,808  |   |        | $ | 84    |           |  | $ | 4,892  |  
|                                                                                                      |  |        |        |   |        |   |       |           | 
|Standardized measure of discounted future net cash flows,
    including effects of hedging activities |  | $      | 4,759  |   |        | $ | 84    |           |  | $ | 4,843  |  
|                                                                                                      |  |        |        |   |        |   |       |           | 

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|    |                                                                                                                                                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | United States excludes $502 million, $1 million and
    $104 million of future net cash outflows attributable to
    hedging activities in the years 2005, 2004 and 2003. Brazil
    excludes $4 million and $5 million of future net cash
    outflows attributable to hedging activities in 2005 and 2004.





|                                                                                |  |                             |        |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                |  | Years Ended December 31,(1) |       
|                                                                                |  |                             |       
|                                                                                |  | 2005                        |        |   | 2004 |   |        | 2003 | 
|                                                                                |  |                             |        |   |      |   |        |      | 
|                                                                                |  | (In millions)               |       
|Sales and transfers of natural gas and oil produced net of
    production costs |  | $                           | (1,477 | ) |      | $ | (1,470 | )    |  | $ | (1,829 | )
|Net changes in prices and production costs                                      |  |                             | 2,884  |   |      |   | 29     |      |  |   | 1,586  |  
|Extensions, discoveries and improved recovery, less related costs               |  |                             | 793    |   |      |   | 268    |      |  |   | 1,105  |  
|Changes in estimated future development costs                                   |  |                             | 2      |   |      |   | 4      |      |  |   | (16    | )
|Previously estimated development costs incurred during the period               |  |                             | 247    |   |      |   | 156    |      |  |   | 220    |  
|Revision of previous quantity estimates                                         |  |                             | 47     |   |      |   | (453   | )    |  |   | (94    | )
|Accretion of discount                                                           |  |                             | 476    |   |      |   | 568    |      |  |   | 526    |  
|Net change in income taxes                                                      |  |                             | (1,093 | ) |      |   | 257    |      |  |   | 159    |  
|Purchases of reserves in place                                                  |  |                             | 956    |   |      |   | 114    |      |  |   | 5      |  
|Sale of reserves in place                                                       |  |                             | (83    | ) |      |   | (75    | )    |  |   | (1,229 | )
|Change in production rates, timing and other                                    |  |                             | (333   | ) |      |   | (94    | )    |  |   | 150    |  
|                                                                                |  |                             |        |   |      |   |        |      | 
|Net change                                                                      |  | $                           | 2,419  |   |      | $ | (696   | )    |  | $ | 583    |  
|                                                                                |  |                             |        |   |      |   |        |      | 




(1)


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SCHEDULE II


EL PASO CORPORATION


VALUATION AND QUALIFYING ACCOUNTS


Years Ended December 31, 2005, 2004 and 2003


(In millions)


|            |                                            |            |   |         |          |  |   |            |     |          |          |      |          |           |   |     |     |  |   |       | 
|----------- | ------------------------------------------ | ---------- | - | ------- | -------- |  | - | ---------- | --- | -------- | -------- | ---- | -------- | --------- | - | --- | --- |  | - | ----- | 
|            |                                            |            |   | Charged |          |  |   |            |     |          |         
|            |                                            | Balance at |   |         | to Costs |  |   |            |     | Charged  |          |      | Balance  |          
|            |                                            | Beginning  |   |         | and      |  |   |            |     | to Other |          |      | at End   |          
|Description |                                            | of Period  |   |         | Expenses |  |   | Deductions |     |          | Accounts |      |          | of Period |  
|            |                                            |            |   |         |          |  |   |            |     |          |          |      |          |           |  
|2005        |                                            |            |   |         |          |  |   |            |     |          |          |      |          |           |   |     |     |  |   |      
|            | Allowance for doubtful accounts            |            | $ | 198     |          |  | $ | (68        | )   |          | $        | (54  | )(1)     |           | $ | (9  | )   |  | $ | 67    | 
|            | Valuation allowance on deferred tax assets |            |   | 51      |          |  |   | 98         | (2) |          |          | (5   | )        |           |   | 20  |     |  |   | 164   | 
|            | Legal reserves                             |            |   | 592     |          |  |   | 496        |     |          |          | (516 | ) (3)(4) |           |   | 2   |     |  |   | 574   | 
|            | Environmental reserves                     |            |   | 380     |          |  |   | 65         |     |          |          | (66  | )(4)     |           |   |    |     |  |   | 379   | 
|2004        |                                            |            |   |         |          |  |   |            |     |          |          |      |          |           |   |     |     |  |   |      
|            | Allowance for doubtful accounts            |            | $ | 272     |          |  | $ | (48        | )   |          | $        | (22  | )(1)     |           | $ | (4  | )   |  | $ | 198   | 
|            | Valuation allowance on deferred tax assets |            |   | 9       |          |  |   | 46         | (2) |          |          | (4   | )        |           |   |    |     |  |   | 51    | 
|            | Legal reserves                             |            |   | 1,169   |          |  |   | 145        |     |          |          | (655 | ) (3)(4) |           |   | (67 | )   |  |   | 592   | 
|            | Environmental reserves                     |            |   | 412     |          |  |   | 17         |     |          |          | (51  | )(4)     |           |   | 2   |     |  |   | 380   | 
|2003        |                                            |            |   |         |          |  |   |            |     |          |          |      |          |           |   |     |     |  |   |      
|            | Allowance for doubtful accounts            |            | $ | 176     |          |  | $ | 18         |     |          | $        | (31  | )(1)     |           | $ | 109 | (5) |  | $ | 272   | 
|            | Valuation allowance on deferred tax assets |            |   | 72      |          |  |   | 4          |     |          |          | (68  | )(2)     |           |   | 1   |     |  |   | 9     | 
|            | Legal reserves                             |            |   | 1,031   |          |  |   | 180        | (3) |          |          | (43  | )(4)     |           |   | 1   |     |  |   | 1,169 | 
|            | Environmental reserves                     |            |   | 389     |          |  |   | 8          |     |          |          | (52  | )(4)     |           |   | 67  | (6) |  |   | 412   | 






|    |                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Relates primarily to accounts written off.                                                                                                                                                                                          
|(2) | Relates primarily to valuation allowances for deferred tax
    assets related to the Western Energy Settlement, foreign ceiling
    test charges, foreign asset impairments and state and foreign
    net operating loss carryovers.
|(3) | Relates to our Western Energy Settlement of $104 million in
    2003. In 2005 and 2004, we paid approximately $442 million
    and $602 million to the settling parties.                                                            
|(4) | Relates primarily to payments for various litigation reserves,
    including the Western Energy Settlement, environmental
    remediation reserves or revenue crediting and rate settlement
    reserves.                           
|(5) | Relates primarily to receivables from trading counterparties,
    reclassified due to bankruptcy or declining credit that have
    been accounted for within our price risk management activities.                                  
|(6) | Relates primarily to liabilities previously classified in our
    petroleum discontinued operations, but reclassified as
    continuing operations due to our retention of these obligations.                                       

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|         |                                                                                         
|-------- | ----------------------------------------------------------------------------------------
|ITEM  9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
    AND FINANCIAL DISCLOSURE






ITEM 9A. CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures








Changes in Internal Control over Financial Reporting







ITEM 9B. OTHER INFORMATION




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PART III





ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT


10-K


10b5-1, 10b5-1





ITEM 11. EXECUTIVE COMPENSATION









|          |                                                                                                   
|--------- | --------------------------------------------------------------------------------------------------
|ITEM  12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
    MANAGEMENT AND RELATED STOCKHOLDER MATTERS






ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS







ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES




|              |       |              |        |        |              |   |        |        | 
|------------- | ----- | ------------ | ------ | ------ | ------------ | - | ------ | ------ | 
|              |       | December 31, |        |        | December 31, |  
|              |       | 2005         |        |        | 2004         |  
|              |       |              |        |        |              |  
|Audit         |       | $            | 14,428 |        |              | $ | 19,818 |       
|Audit Related |       |              | 2,050  |        |              |   | 1,772  |       
|Tax           |       |              | 513    |        |              |   | 453    |       
|              |       |              |        |        |              |  
|              | Total |              | $      | 16,991 |              |   | $      | 22,043 | 
|              |       |              |        |        |              |  

Audit


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##### Table of Contents



Audit Related


Tax







PART IV







|          |                                           
|--------- | ------------------------------------------
|ITEM  15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as a part of this
report:






|                                                                                             |                                                         |                                                         |     |     |     | 
|-------------------------------------------------------------------------------------------- | ------------------------------------------------------- | ------------------------------------------------------- | --- | --- | --- | 
|                                                                                             |                                                         | Page                                                    |    
|                                                                                             |                                                         |                                                         |    
|                                                                                             | Consolidated Statements of Income                       |                                                         |     | 86  |    
|                                                                                             | Consolidated Balance Sheets                             |                                                         |     | 87  |    
|                                                                                             | Consolidated Statements of Cash Flows                   |                                                         |     | 89  |    
|                                                                                             | Consolidated Statements of Stockholders Equity         |                                                         |     | 91  |    
|                                                                                             | Consolidated Statements of Comprehensive Income         |                                                         |     | 92  |    
|                                                                                             | Notes to Consolidated Financial Statements              |                                                         |     | 93  |    
|                                                                                             | Report of Independent Registered Public Accounting Firm |                                                         |     | 84  |    
|                                                                                            
|2. Financial statement schedules and supplementary
    information required to be submitted. |                                                         |                                                         |     |    
|                                                                                            
|                                                                                             | Schedule II  Valuation and Qualifying Accounts         |                                                         |     | 154 |    
|                                                                                             | Midland Cogeneration Venture Limited Partnership        |                                                         |     |     |    
|                                                                                             |                                                         | Report of Independent Registered Public Accounting Firm |     |     | 158 | 
|                                                                                             |                                                         | Consolidated Balance Sheets                             |     |     | 160 | 
|                                                                                             |                                                         | Consolidated Statements of Operations                   |     |     | 162 | 
|                                                                                             |                                                         | Consolidated Statements of Partners Equity             |     |     | 163 | 
|                                                                                             |                                                         | Consolidated Statements of Cash Flows                   |     |     | 164 | 
|                                                                                             |                                                         | Notes to Consolidated Financial Statements              |     |     | 165 | 
|                                                                                            
|3. Exhibit list                                                                              |                                                         |                                                         | 181 |    

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








Consolidated financial statements




Internal control over financial reporting






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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP


CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31,


(In Thousands)


|                               |                                                                                                    |                                     |           |            |           |   |           |            |           | 
|------------------------------ | -------------------------------------------------------------------------------------------------- | ----------------------------------- | --------- | ---------- | --------- | - | --------- | ---------- | --------- | 
|                               |                                                                                                    | 2005                                |           |            | 2004      |  
|                               |                                                                                                    |                                     |           |            |           |  
|ASSETS                        
|CURRENT ASSETS:                |                                                                                                    |                                     |           |            |           |   |           |           
|                               | Cash and cash equivalents                                                                          |                                     | $         | 360,562    |           |   | $         | 125,781    |          
|                               | Accounts and notes receivable  related parties                                                    |                                     |           | 30,514     |           |   |           | 54,368     |          
|                               | Accounts receivable                                                                                |                                     |           | 108,393    |           |   |           | 42,984     |          
|                               | Gas inventory                                                                                      |                                     |           | 16,138     |           |   |           | 17,509     |          
|                               | Unamortized property taxes                                                                         |                                     |           | 18,238     |           |   |           | 18,060     |          
|                               | Derivative assets                                                                                  |                                     |           | 241,135    |           |   |           | 94,977     |          
|                               | Broker margin accounts and prepaid expenses                                                        |                                     |           | 20,294     |           |   |           | 13,147     |          
|                               |                                                                                                    |                                     |           |            |           |  
|                               |                                                                                                    | Total current assets                |           |            | 795,274   |   |           |            | 366,826   | 
|                               |                                                                                                    |                                     |           |            |           |  
|PROPERTY, PLANT AND EQUIPMENT: |                                                                                                    |                                     |           |            |           |   |           |           
|                               | Property, plant and equipment                                                                      |                                     |           | 2,479,071  |           |   |           | 2,466,944  |          
|                               | Pipeline                                                                                           |                                     |           | 21,432     |           |   |           | 21,432     |          
|                               |                                                                                                    |                                     |           |            |           |  
|                               |                                                                                                    | Total property, plant and equipment |           |            | 2,500,503 |   |           |            | 2,488,376 | 
|                               | Accumulated depreciation (Note 3)                                                                  |                                     |           | (2,276,089 | )         |   |           | (1,062,821 | )        
|                               |                                                                                                    |                                     |           |            |           |  
|                               |                                                                                                    | Net property, plant and equipment   |           |            | 224,414   |   |           |            | 1,425,555 | 
|                               |                                                                                                    |                                     |           |            |           |  
|OTHER ASSETS:                  |                                                                                                    |                                     |           |            |           |   |           |           
|                               | Restricted investment securities held-to-maturity                                                  |                                     |           | 90,915     |           |   |           | 139,410    |          
|                               | Derivative assets non-current                                                                      |                                     |           | 186,336    |           |   |           | 24,337     |          
|                               | Deferred financing costs, net of accumulated amortization of
    $19,580 and $18,498, respectively |                                     |           | 5,385      |           |   |           | 6,467      |          
|                               | Prepaid gas costs, spare parts deposit, materials and supplies                                     |                                     |           | 15,554     |           |   |           | 17,782     |          
|                               |                                                                                                    |                                     |           |            |           |  
|                               |                                                                                                    | Total other assets                  |           |            | 298,190   |   |           |            | 187,996   | 
|                               |                                                                                                    |                                     |           |            |           |  
|TOTAL ASSETS                   |                                                                                                    | $                                   | 1,317,878 |            |           | $ | 1,980,377 |           
|                               |                                                                                                    |                                     |           |            |           |  



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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP


CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31,
Continued


(In Thousands)


|                                              |                                                                |                               |           |         |         |   |           |         |         | 
|--------------------------------------------- | -------------------------------------------------------------- | ----------------------------- | --------- | ------- | ------- | - | --------- | ------- | ------- | 
|                                              |                                                                | 2005                          |           |         | 2004    |  
|                                              |                                                                |                               |           |         |         |  
|LIABILITIES AND PARTNERS EQUITY             
|CURRENT LIABILITIES:                          |                                                                |                               |           |         |         |   |           |        
|                                              | Accounts payable and accrued liabilities  related
    parties |                               | $         | 16,651  |         |   | $         | 12,772  |        
|                                              | Accounts payable and accrued liabilities                       |                               |           | 118,663 |         |   |           | 69,921  |        
|                                              | Gas supplier funds on deposit  related parties                |                               |           | 44,353  |         |   |           |        |        
|                                              | Gas supplier funds on deposit                                  |                               |           | 148,650 |         |   |           | 19,613  |        
|                                              | Interest payable                                               |                               |           | 45,057  |         |   |           | 47,738  |        
|                                              | Current portion of long-term debt                              |                               |           | 63,459  |         |   |           | 76,548  |        
|                                              |                                                                |                               |           |         |         |  
|                                              |                                                                | Total current liabilities     |           |         | 436,833 |   |           |         | 226,592 | 
|                                              |                                                                |                               |           |         |         |  
|NON-CURRENT LIABILITIES:                      |                                                                |                               |           |         |         |   |           |        
|                                              | Long-term debt                                                 |                               |           | 878,638 |         |   |           | 942,097 |        
|                                              | Other                                                          |                               |           | 805     |         |   |           | 1,712   |        
|                                              |                                                                |                               |           |         |         |  
|                                              |                                                                | Total non-current liabilities |           |         | 879,443 |   |           |         | 943,809 | 
|                                              |                                                                |                               |           |         |         |  
|COMMITMENTS AND CONTINGENCIES (Notes 8 and 9) |                                                                |                               |           |         |         |   |           |        
|TOTAL LIABILITIES                             |                                                                |                               | 1,316,276 |         |         |   | 1,170,401 |        
|                                              |                                                                |                               |           |         |         |  
|PARTNERS EQUITY                              |                                                                |                               | 1,602     |         |         |   | 809,976   |        
|                                              |                                                                |                               |           |         |         |  
|TOTAL LIABILITIES AND PARTNERS EQUITY        |                                                                | $                             | 1,317,878 |         |         | $ | 1,980,377 |        
|                                              |                                                                |                               |           |         |         |  



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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP


CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE Years Ended
December 31,


(In Thousands)


|                        |                                     |                                   |          |           |           |   |         |          |         |   |         |          |          |  
|----------------------- | ----------------------------------- | --------------------------------- | -------- | --------- | --------- | - | ------- | -------- | ------- | - | ------- | -------- | -------- | -
|                        |                                     | 2005                              |          |           | 2004      |   |         | 2003     |        
|                        |                                     |                                   |          |           |           |   |         |          |        
|OPERATING REVENUES:     |                                     |                                   |          |           |           |   |         |          |         |   |         |         
|                        | Capacity                            |                                   | $        | 403,722   |           |   | $       | 405,415  |         |   | $       | 404,681  |         
|                        | Electric                            |                                   |          | 167,577   |           |   |         | 225,154  |         |   |         | 162,093  |         
|                        | Steam                               |                                   |          | 20,600    |           |   |         | 19,090   |         |   |         | 17,638   |         
|                        |                                     |                                   |          |           |           |   |         |          |        
|                        |                                     | Total operating revenues          |          |           | 591,899   |   |         |          | 649,659 |   |         |          | 584,412  |  
|                        |                                     |                                   |          |           |           |   |         |          |        
|OPERATING EXPENSES:     |                                     |                                   |          |           |           |   |         |          |         |   |         |         
|                        | Fuel costs (Note 2)                 |                                   |          | 124,610   |           |   |         | 413,061  |         |   |         | 254,988  |         
|                        | Depreciation                        |                                   |          | 73,845    |           |   |         | 88,712   |         |   |         | 89,437   |         
|                        | Operations                          |                                   |          | 16,114    |           |   |         | 18,769   |         |   |         | 16,943   |         
|                        | Maintenance                         |                                   |          | 7,958     |           |   |         | 13,508   |         |   |         | 15,107   |         
|                        | Property and single business taxes  |                                   |          | 29,580    |           |   |         | 28,834   |         |   |         | 30,040   |         
|                        | Administrative, selling and general |                                   |          | 15,871    |           |   |         | 11,236   |         |   |         | 9,959    |         
|                        | Asset impairment loss (Note 3)      |                                   |          | 1,159,000 |           |   |         |         |         |   |         |         |         
|                        |                                     |                                   |          |           |           |   |         |          |        
|                        |                                     | Total operating expenses          |          |           | 1,426,978 |   |         |          | 574,120 |   |         |          | 416,474  |  
|                        |                                     |                                   |          |           |           |   |         |          |        
|OPERATING INCOME (LOSS) |                                     |                                   | (835,079 | )         |           |   | 75,539  |          |         |   | 167,938 |         
|                        |                                     |                                   |          |           |           |   |         |          |        
|OTHER INCOME (EXPENSE): |                                     |                                   |          |           |           |   |         |          |         |   |         |         
|                        | Interest and other income           |                                   |          | 14,365    |           |   |         | 5,460    |         |   |         | 5,100    |         
|                        | Interest expense                    |                                   |          | (96,730   | )         |   |         | (104,618 | )       |   |         | (113,247 | )       
|                        |                                     |                                   |          |           |           |   |         |          |        
|                        |                                     | Total other income (expense), net |          |           | (82,365   | ) |         |          | (99,158 | ) |         |          | (108,147 | )
|                        |                                     |                                   |          |           |           |   |         |          |        
|NET INCOME (LOSS)       |                                     | $                                 | (917,444 | )         |           | $ | (23,619 | )        |         | $ | 59,791  |         
|                        |                                     |                                   |          |           |           |   |         |          |        



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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP


CONSOLIDATED STATEMENTS OF PARTNERS EQUITY AND
COMPREHENSIVE INCOME (LOSS) FOR THE Years Ended December
31,


(In Thousands)


|                           |                            |                                                                 |         |          |          |   |         |          |        |   |         |          |         |  
|-------------------------- | -------------------------- | --------------------------------------------------------------- | ------- | -------- | -------- | - | ------- | -------- | ------ | - | ------- | -------- | ------- | -
|                           |                            | General                                                         |         |          | Limited  |   |         |         
|                           |                            | Partners                                                        |         |          | Partners |   |         | Total    |       
|                           |                            |                                                                 |         |          |          |   |         |          |       
|BALANCE, DECEMBER 31, 2002 |                            | $                                                               | 627,947 |          |          | $ | 106,363 |          |        | $ | 734,310 |         
|Comprehensive Income       |                            |                                                                 |         |          |          |   |         |          |        |   |         |         
|                           | Net Income                 |                                                                 |         | 52,056   |          |   |         | 7,735    |        |   |         | 59,791   |        
|                           | Other Comprehensive Income |                                                                 |         |          |          |   |         |          |        |   |         |          |        
|                           |                            | Unrealized gain on hedging activities since beginning of period |         |          | 34,484   |   |         |          | 5,125  |   |         |          | 39,609  |  
|                           |                            | Reclassification adjustments recognized in net income above     |         |          | (30,153  | ) |         |          | (4,481 | ) |         |          | (34,634 | )
|                           |                            |                                                                 |         |          |          |   |         |          |       
|                           |                            | Total other comprehensive income                                |         |          | 4,331    |   |         |          | 644    |   |         |          | 4,975   |  
|                           |                            |                                                                 |         |          |          |   |         |          |       
|                           | Total Comprehensive Income |                                                                 |         | 56,387   |          |   |         | 8,379    |        |   |         | 64,766   |        
|                           |                            |                                                                 |         |          |          |   |         |          |       
|BALANCE, DECEMBER 31, 2003 |                            | $                                                               | 684,334 |          |          | $ | 114,742 |          |        | $ | 799,076 |         
|Comprehensive Income       |                            |                                                                 |         |          |          |   |         |          |        |   |         |         
|                           | Net Loss                   |                                                                 |         | (20,563  | )        |   |         | (3,056   | )      |   |         | (23,619  | )      
|                           | Other Comprehensive Income |                                                                 |         |          |          |   |         |          |        |   |         |          |        
|                           |                            | Unrealized gain on hedging activities since beginning of period |         |          | 62,292   |   |         |          | 9,256  |   |         |          | 71,548  |  
|                           |                            | Reclassification adjustments recognized in net income above     |         |          | (32,239  | ) |         |          | (4,790 | ) |         |          | (37,029 | )
|                           |                            |                                                                 |         |          |          |   |         |          |       
|                           |                            | Total other comprehensive income                                |         |          | 30,053   |   |         |          | 4,466  |   |         |          | 34,519  |  
|                           |                            |                                                                 |         |          |          |   |         |          |       
|                           | Total Comprehensive Income |                                                                 |         | 9,490    |          |   |         | 1,410    |        |   |         | 10,900   |        
|                           |                            |                                                                 |         |          |          |   |         |          |       
|BALANCE, DECEMBER 31, 2004 |                            | $                                                               | 693,824 |          |          | $ | 116,152 |          |        | $ | 809,976 |         
|Comprehensive Income       |                            |                                                                 |         |          |          |   |         |          |        |   |         |         
|                           | Net Loss                   |                                                                 |         | (798,754 | )        |   |         | (118,690 | )      |   |         | (917,444 | )      
|                           | Other Comprehensive Income |                                                                 |         |          |          |   |         |          |        |   |         |          |        
|                           |                            | Unrealized gain on hedging activities since beginning of period |         |          | 141,965  |   |         |          | 21,095 |   |         |          | 163,060 |  
|                           |                            | Reclassification adjustments recognized in net income above     |         |          | (21,496  | ) |         |          | (3,194 | ) |         |          | (24,690 | )
|                           |                            | Dedesignated cash flow hedges (Note 2)                          |         |          | (25,509  | ) |         |          | (3,791 | ) |         |          | (29,300 | )
|                           |                            |                                                                 |         |          |          |   |         |          |       
|                           |                            | Total other comprehensive income                                |         |          | 94,960   |   |         |          | 14,110 |   |         |          | 109,070 |  
|                           |                            |                                                                 |         |          |          |   |         |          |       
|                           | Total Comprehensive Loss   |                                                                 |         | (703,794 | )        |   |         | (104,580 | )      |   |         | (808,374 | )      
|                           |                            |                                                                 |         |          |          |   |         |          |       
|BALANCE, DECEMBER 31, 2005 |                            | $                                                               | (9,970  | )        |          | $ | 11,572  |          |        | $ | 1,602   |         
|                           |                            |                                                                 |         |          |          |   |         |          |       



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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP


CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE Years Ended
December 31,


(In Thousands)


|                                                     |                                                                                             |                                                     |         |           |         |   |         |          |          |   |         |          |         |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------------- | --------------------------------------------------- | ------- | --------- | ------- | - | ------- | -------- | -------- | - | ------- | -------- | ------- | -
|                                                     |                                                                                             | 2005                                                |         |           | 2004    |   |         | 2003     |         
|                                                     |                                                                                             |                                                     |         |           |         |   |         |          |         
|CASH FLOWS FROM OPERATING ACTIVITIES:                |                                                                                             |                                                     |         |           |         |   |         |          |          |   |         |         
|                                                     | Net income (loss)                                                                           |                                                     | $       | (917,444  | )       |   | $       | (23,619  | )        |   | $       | 59,791   |        
|                                                     | Adjustments to reconcile net income (loss) to net cash provided
    by operating activities |                                                     |         |           |         |   |         |          |          |   |         |          |        
|                                                     | Depreciation and amortization                                                               |                                                     |         | 74,927    |         |   |         | 89,925   |          |   |         | 90,792   |        
|                                                     | Asset impairment loss                                                                       |                                                     |         | 1,159,000 |         |   |         |         |          |   |         |         |        
|                                                     | (Increase) decrease in derivative assets                                                    |                                                     |         | (199,087  | )       |   |         | 20,130   |          |   |         | 4,906    |        
|                                                     | Increase in accounts receivable                                                             |                                                     |         | (41,555   | )       |   |         | (15,214  | )        |   |         | (1,211   | )      
|                                                     | (Increase) decrease in gas inventory                                                        |                                                     |         | 1,371     |         |   |         | 2,789    |          |   |         | (732     | )      
|                                                     | (Increase) decrease in unamortized property taxes                                           |                                                     |         | (178      | )       |   |         | (388     | )        |   |         | 683      |        
|                                                     | Increase in broker margin accounts and prepaid expenses                                     |                                                     |         | (7,147    | )       |   |         | (5,046   | )        |   |         | (4,778   | )      
|                                                     | (Increase) decrease in prepaid gas costs, materials and supplies                            |                                                     |         | 2,228     |         |   |         | 3,841    |          |   |         | (8,704   | )      
|                                                     | Increase (decrease) in accounts payable and accrued liabilities                             |                                                     |         | 52,621    |         |   |         | 25,775   |          |   |         | (712     | )      
|                                                     | Increase in gas supplier funds on deposit                                                   |                                                     |         | 173,390   |         |   |         | 15,096   |          |   |         | 4,517    |        
|                                                     | Decrease in interest payable                                                                |                                                     |         | (2,681    | )       |   |         | (5,271   | )        |   |         | (3,377   | )      
|                                                     | Increase (decrease) in other non-current liabilities                                        |                                                     |         | (907      | )       |   |         | (1,197   | )        |   |         | 311      |        
|                                                     |                                                                                             |                                                     |         |           |         |   |         |          |         
|                                                     |                                                                                             | Net cash provided by operating activities           |         |           | 294,538 |   |         |          | 106,821  |   |         |          | 141,486 |  
|                                                     |                                                                                             |                                                     |         |           |         |   |         |          |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                |                                                                                             |                                                     |         |           |         |   |         |          |          |   |         |         
|                                                     | Plant modifications and purchases of plant equipment                                        |                                                     |         | (31,704   | )       |   |         | (20,460  | )        |   |         | (33,278  | )      
|                                                     | Maturity of restricted investment securities held-to-maturity                               |                                                     |         | 318,192   |         |   |         | 674,553  |          |   |         | 601,225  |        
|                                                     | Purchase of restricted investment securities held-to-maturity                               |                                                     |         | (269,697  | )       |   |         | (674,208 | )        |   |         | (602,279 | )      
|                                                     |                                                                                             |                                                     |         |           |         |   |         |          |         
|                                                     |                                                                                             | Net cash provided by (used in) investing activities |         |           | 16,791  |   |         |          | (20,115  | ) |         |          | (34,332 | )
|                                                     |                                                                                             |                                                     |         |           |         |   |         |          |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                |                                                                                             |                                                     |         |           |         |   |         |          |          |   |         |         
|                                                     | Repayment of financing obligation                                                           |                                                     |         | (76,548   | )       |   |         | (134,576 | )        |   |         | (93,928  | )      
|                                                     |                                                                                             |                                                     |         |           |         |   |         |          |         
|                                                     |                                                                                             | Net cash used in financing activities               |         |           | (76,548 | ) |         |          | (134,576 | ) |         |          | (93,928 | )
|                                                     |                                                                                             |                                                     |         |           |         |   |         |          |         
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                                             |                                                     | 234,781 |           |         |   | (47,870 | )        |          |   | 13,226  |         
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     |                                                                                             |                                                     | 125,781 |           |         |   | 173,651 |          |          |   | 160,425 |         
|                                                     |                                                                                             |                                                     |         |           |         |   |         |          |         
|CASH AND EQUIVALENTS AT END OF PERIOD                |                                                                                             | $                                                   | 360,562 |           |         | $ | 125,781 |          |          | $ | 173,651 |         
|                                                     |                                                                                             |                                                     |         |           |         |   |         |          |         



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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|    |                                     
|--- | ------------------------------------
|(1) | The Partnership and Associated Risks













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|    |                                           
|--- | ------------------------------------------
|(2) | Summary of Significant Accounting Policies



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| |                                                   
| | --------------------------------------------------
| | Principles of Consolidation and Operating Segments





| |                    
| | -------------------
| | Revenue Recognition





| |           
| | ----------
| | Fuel Costs

mark-to Mark-to






| |                    
| | -------------------
| | Accounts Receivable





| |          
| | ---------
| | Inventory

last-in, first-in,


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| |                       
| | ----------------------
| | Materials and Supplies





| |             
| | ------------
| | Depreciation

25-year




| |                   
| | ------------------
| | Federal Income Tax





| |                        
| | -----------------------
| | Statement of Cash Flows





| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments

held-to




| |                                                                 
| | ----------------------------------------------------------------
| | Accounting for Derivative Instruments and Hedging
    Activities





| |                          
| | -------------------------
| | Electric Sales Agreements



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| |                             
| | ----------------------------
| | Natural Gas Supply Contracts





| |                        
| | -----------------------
| | Natural Gas Credit Risk





| |                            
| | ---------------------------
| | Mark-to-Market
    Activity

marked-to mark-to


mark-to mark-to mark-to




| |                                                                              
| | -----------------------------------------------------------------------------
| | Natural Gas Supply Futures and Options Which Qualify for
    Hedge Accounting



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mark-to


mark-to






| |                                       
| | --------------------------------------
| | Accumulated Other Comprehensive Income



| |                                                                                                       
| | ------------------------------------------------------------------------------------------------------
| | Accumulated other comprehensive income reflects the following
    balances at December 31 (thousands):

|                                                 |                                                       |      |         |         |      |   |        |         |   |   |        |         |  
|------------------------------------------------ | ----------------------------------------------------- | ---- | ------- | ------- | ---- | - | ------ | ------- | - | - | ------ | ------- | -
|                                                 |                                                       | 2005 |         |         | 2004 |   |        | 2003    |  
|                                                 |                                                       |      |         |         |      |   |        |         |  
|Beginning Accumulated Other Comprehensive Income |                                                       | $    | 65,774  |         |      | $ | 31,255 |         |   | $ | 26,280 |        
|                                                 | Unrealized gain on hedging activities                 |      |         | 163,060 |      |   |        | 71,548  |   |   |        | 39,609  |  
|                                                 | Reclassification adjustments recognized in net income |      |         | (24,690 | )    |   |        | (37,029 | ) |   |        | (34,634 | )
|                                                 | Dedesignated cash flow hedges                         |      |         | (29,300 | )    |   |        |        |   |   |        |        |  
|                                                 |                                                       |      |         |         |      |   |        |         |  
|Ending Accumulated Other Comprehensive Income    |                                                       | $    | 174,844 |         |      | $ | 65,774 |         |   | $ | 31,255 |        
|                                                 |                                                       |      |         |         |      |   |        |         |  



| |                        
| | -----------------------
| | New Accounting Standard



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|    |                 
|--- | ----------------
|(3) | Asset Impairment







171



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|    |                                                  
|--- | -------------------------------------------------
|(4) | Restricted Investment Securities Held-To-Maturity

held-to


|                                                                                   |  |      |        |  |      |   |         | 
|---------------------------------------------------------------------------------- |  | ---- | ------ |  | ---- | - | ------- | 
|                                                                                   |  | 2005 |        |  | 2004 |  
|                                                                                   |  |      |        |  |      |  
|Funds restricted for rental payments pursuant to the Overall
    Lease Transaction |  | $    | 90,111 |  |      | $ | 138,150 | 
|Funds restricted for management non-qualified plans                                |  |      | 804    |  |      |   | 1,260   | 
|                                                                                   |  |      |        |  |      |  
|Total                                                                              |  | $    | 90,915 |  |      | $ | 139,410 | 
|                                                                                   |  |      |        |  |      |  



|    |                                         
|--- | ----------------------------------------
|(5) | Accounts Payable and Accrued Liabilities



|                                     |                                    |      |         |         |      |   |        |        | 
|------------------------------------ | ---------------------------------- | ---- | ------- | ------- | ---- | - | ------ | ------ | 
|                                     |                                    | 2005 |         |         | 2004 |  
|                                     |                                    |      |         |         |      |  
|Accounts payable  related parties   |                                    | $    | 16,651  |         |      | $ | 12,772 |       
|                                     |                                    |      |         |         |      |  
|Accounts payable  non-related       |                                    |      |         |         |      |   |        |       
|                                     | Trade creditors                    |      | $       | 100,956 |      |   | $      | 53,476 | 
|                                     | Property and single business taxes |      |         | 11,088  |      |   |        | 11,833 | 
|                                     | Other                              |      |         | 6,619   |      |   |        | 4,612  | 
|                                     |                                    |      |         |         |      |  
|Total accounts payable  non-related |                                    | $    | 118,663 |         |      | $ | 69,921 |       
|                                     |                                    |      |         |         |      |  



|    |                              
|--- | -----------------------------
|(6) | Gas Supplier Funds on Deposit



|                                                     |                                                                                                                   |      |   |         |      |  |   |         | 
|---------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | ---- | - | ------- | ---- |  | - | ------- | 
|                                                     |                                                                                                                   | 2005 |   |         | 2004 | 
|                                                     |                                                                                                                   |      |   |         |      | 
|Cash or letters of credit supplied by MCV to others: |                                                                                                                   |      |   |         |      |  |   |        
|                                                     | Cash paid, recorded in Broker margin accounts and prepaid
    expenses                                          |      | $ | 16,520  |      |  | $ | 8,670   | 
|                                                     | Letters of credit provided to others                                                                              |      |   | 2,430   |      |  |   | 2,430   | 
|Cash or letters of credit supplied to MCV by others: |                                                                                                                   |      |   |         |      |  |   |        
|                                                     | Cash received, recorded in Gas supplier funds on
    deposit                                                    |      |   | 148,650 |      |  |   | 19,613  | 
|                                                     | Cash received by El Paso (a related party), recorded in
    Gas supplier funds on deposit  related
    parties |      |   | 44,353  |      |  |   |        | 
|                                                     | Letters of credit provided to MCV from non-related parties                                                        |      |   | 21,700  |      |  |   | 24,600  | 
|                                                     | Letters of credit provided to MCV by El Paso (a related
    party)                                                |      |   | 385,700 |      |  |   | 184,000 | 



|    |               
|--- | --------------
|(7) | Long-Term Debt



|                                                                                                                                                                    |  |      |         |   |      |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | --------- | -
|                                                                                                                                                                    |  | 2005 |         |   | 2004 |  
|                                                                                                                                                                    |  |      |         |   |      |  
|Financing obligation, maturing through 2015, payable in
    semi-annual installments of principal and interest,
    collateralized by property, plant and equipment |  | $    | 942,097 |   |      | $ | 1,018,645 |  
|Less current portion                                                                                                                                                |  |      | (63,459 | ) |      |   | (76,548   | )
|                                                                                                                                                                    |  |      |         |   |      |  
|Total long-term debt                                                                                                                                                |  | $    | 878,638 |   |      | $ | 942,097   |  
|                                                                                                                                                                    |  |      |         |   |      |  

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| |                     
| | --------------------
| | Financing Obligation









25-year








|     |  |           |         |  |          |   |         |       |  |   |         | 
|---- |  | --------- | ------- |  | -------- | - | ------- | ----- |  | - | ------- | 
|     |  | Principal |         |  | Interest |   |         | Total | 
|     |  |           |         |  |          |   |         |       | 
|2006 |  | $         | 63,459  |  |          | $ | 92,515  |       |  | $ | 155,974 | 
|2007 |  |           | 62,916  |  |          |   | 87,988  |       |  |   | 150,904 | 
|2008 |  |           | 67,753  |  |          |   | 83,163  |       |  |   | 150,916 | 
|2009 |  |           | 70,335  |  |          |   | 76,755  |       |  |   | 147,090 | 
|2010 |  |           | 62,917  |  |          |   | 70,085  |       |  |   | 133,002 | 
|     |  |           |         |  |          |   |         |       | 
|     |  | $         | 327,380 |  |          | $ | 410,506 |       |  | $ | 737,886 | 
|     |  |           |         |  |          |   |         |       | 

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| |                           
| | --------------------------
| | Revolving Credit Agreement





| |                        
| | -----------------------
| | Intercreditor Agreement





|    |                                 
|--- | --------------------------------
|(8) | COMMITMENTS AND OTHER AGREEMENTS





| |                         
| | ------------------------
| | Power Purchase Agreement

year-to




| |                                   
| | ----------------------------------
| | Steam and Electric Power Agreement



year-to


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| |                         
| | ------------------------
| | Steam Purchase Agreement

1 3 year-to






| |                      
| | ---------------------
| | Gas Supply Agreements





| |                              
| | -----------------------------
| | Gas Transportation Agreements





| |                               
| | ------------------------------
| | Gas Turbine Service Agreements



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| |                                
| | -------------------------------
| | Steam Turbine Service Agreement





| |           
| | ----------
| | Site Lease







|    |              
|--- | -------------
|(9) | Contingencies



| |               
| | --------------
| | Property Taxes





| |                   
| | ------------------
| | NOx
    Allowances



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| |                     
| | --------------------
| | Environmental Issues

209-02






|     |                    
|---- | -------------------
|(10) | Retirement Benefits



| |                                 
| | --------------------------------
| | Postretirement Health Care Plans





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106-2 106-1,




|                                               |  |      |          |   |      |   |          |  
|---------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                               |  | 2005 |          |   | 2004 |  
|                                               |  |      |          |   |      |  
|Change in benefit obligation:                  |  |      |          |   |      |   |          |  
|Benefit obligation at beginning of year        |  | $    | 4,972.6  |   |      | $ | 3,276.0  |  
|Service cost                                   |  |      | 311.5    |   |      |   | 232.1    |  
|Interest cost                                  |  |      | 230.1    |   |      |   | 174.8    |  
|Actuarial gain                                 |  |      | 9.2      |   |      |   | 1,298.0  |  
|Benefits paid during year                      |  |      | (108.0   | ) |      |   | (8.3     | )
|                                               |  |      |          |   |      |  
|Benefit obligation at end of year              |  |      | 5,415.4  |   |      |   | 4,972.6  |  
|                                               |  |      |          |   |      |  
|Change in Plan assets:                         |  |      |          |   |      |   |          |  
|Fair value of Plan assets at beginning of year |  |      | 3,317.7  |   |      |   | 2,826.8  |  
|Actual return on Plan assets                   |  |      | 246.2    |   |      |   | 292.7    |  
|Employer contribution                          |  |      | 426.3    |   |      |   | 206.5    |  
|Benefits paid during year                      |  |      | (108.0   | ) |      |   | (8.3     | )
|                                               |  |      |          |   |      |  
|Fair value of Plan assets at end of year       |  |      | 3,882.2  |   |      |   | 3,317.7  |  
|                                               |  |      |          |   |      |  
|Unfunded status                                |  |      | 1,533.2  |   |      |   | 1,654.9  |  
|Unrecognized prior service cost                |  |      | (141.6   | ) |      |   | (155.9   | )
|Unrecognized net loss                          |  |      | (1,378.4 | ) |      |   | (1,499.0 | )
|                                               |  |      |          |   |      |  
|Accrued benefit cost                           |  | $    | 13.2     |   |      | $ |         |  
|                                               |  |      |          |   |      |  



|                                         |  |      |        |   |      |   |        |      |  |   |        |  
|---------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                         |  | 2005 |        |   | 2004 |   |        | 2003 | 
|                                         |  |      |        |   |      |   |        |      | 
|Components of net periodic benefit cost: |  |      |        |   |      |   |        |      |  |   |        |  
|Service cost                             |  | $    | 311.5  |   |      | $ | 232.1  |      |  | $ | 212.5  |  
|Interest cost                            |  |      | 230.1  |   |      |   | 174.8  |      |  |   | 178.2  |  
|Expected return on Plan assets           |  |      | (187.7 | ) |      |   | (216.1 | )    |  |   | (163.7 | )
|Amortization of unrecognized net loss    |  |      | 85.6   |   |      |   | 15.7   |      |  |   | 30.5   |  
|                                         |  |      |        |   |      |   |        |      | 
|Net periodic benefit cost                |  | $    | 439.5  |   |      | $ | 206.5  |      |  | $ | 257.5  |  
|                                         |  |      |        |   |      |   |        |      | 



|                                                        |  |                |       |  |                |   |       | 
|------------------------------------------------------- |  | -------------- | ----- |  | -------------- | - | ----- | 
|                                                        |  | 1-Percentage-  |       |  | 1-Percentage   |  
|                                                        |  | Point Increase |       |  | Point Decrease |  
|                                                        |  |                |       |  |                |  
|Effect on total of service and interest cost components |  | $              | 53.2  |  |                | $ | 76.4  | 
|Effect on postretirement benefit obligation             |  | $              | 545.1 |  |                | $ | 475.9 | 

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|                                        |                      |      |       |       |      |  |       |       |  |  |       |       | 
|--------------------------------------- | -------------------- | ---- | ----- | ----- | ---- |  | ----- | ----- |  |  | ----- | ----- | 
|                                        |                      | 2005 |       |       | 2004 |  |       | 2003  | 
|                                        |                      |      |       |       |      |  |       |       | 
|Discount rate                           |                      |      | 5.50% |       |      |  | 5.75% |       |  |  | 6.00% |      
|Long-term rate of return on Plan assets |                      |      | 8.00% |       |      |  | 8.00% |       |  |  | 8.00% |      
|Inflation benefit amount                |                      |      |       |       |      |  |       |       |  |  |       |      
|                                        | 1999 through 2005    |      |       | 0.00% |      |  |       | 0.00% |  |  |       | 0.00% | 
|                                        | 2006 and later years |      |       | 5.00% |      |  |       | 5.00% |  |  |       | 4.00% | 



Plan Assets.






|                          |       |      |    |     |      |  |    |     |  
|------------------------- | ----- | ---- | -- | --- | ---- |  | -- | --- | -
|Asset Category:           |       | 2005 |    |     | 2004 | 
|                          |       |      |    |     |      | 
|Cash and cash equivalents |       |      | 8  | %   |      |  | 1  | %  
|Fixed income              |       |      | 16 | %   |      |  | 19 | %  
|Equity securities         |       |      | 76 | %   |      |  | 80 | %  
|                          |       |      |    |     |      | 
|                          | Total |      |    | 100 | %    |  |    | 100 | %
|                          |       |      |    |     |      | 

Contributions.




| |                             
| | ----------------------------
| | Retirement and Savings Plans







| |                                 
| | --------------------------------
| | Supplemental Retirement Benefits



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(11) PARTNERS EQUITY AND RELATED PARTY
TRANSACTIONS




|                                            |                                          |                              |        |     |          |   |        |                                           |      |                                                           |                                               |   |         |       |  |      |         |       |  |   |         |        |  | 
|------------------------------------------- | ---------------------------------------- | ---------------------------- | ------ | --- | -------- | - | ------ | ----------------------------------------- | ---- | --------------------------------------------------------- | --------------------------------------------- | - | ------- | ----- |  | ---- | ------- | ----- |  | - | ------- | ------ |  | 
|Beneficial Owner, Equity Partner,           |                                          | Equity                       |        |     |          |   |        |                                           |      |                                                           |                                               |   |        
|Type of Partner and Nature of Related Party |                                          | Interest                     |        |     | Interest |   |        | Related Party Transactions and Agreements |      | 2005                                                      |                                               |   | 2004    |       |  | 2003 |        
|                                            |                                          |                              |        |     |          |   |        |                                           |      |                                                           |                                               |   |         |       |  |      |        
|CMS Energy Company                          |                                          |                              |        |     |          |   |        |                                           |      |                                                           |                                               |   |         |       |  |      |         |       |  |   |         |       
|CMS Midland, Inc.                           |                                          | $                            | 784    |     |          |   | 49.0   | %                                         |      | Power purchase agreements                                 |                                               | $ | 372,739 |       |  | $    | 601,535 |       |  | $ | 513,774 |       
|                                            |                                          |                              |        |     |          |   |        |                                           |      |                                                           |                                               |   |         |       |  |      |        
|                                            | General Partner; wholly-owned            |                              |        |     |          |   |        |                                           |      |                                                           | Purchases under gas transportation agreements |   |         | 9,354 |  |      |         | 9,349 |  |   |         | 14,294 | 
|                                            | subsidiary of Consumers Energy           |                              |        |     |          |   |        |                                           |      |                                                           | Purchases under spot gas agreements           |   |         |      |  |      |         |      |  |   |         | 663    | 
|                                            | Company                                  |                              |        |     |          |   |        |                                           |      |                                                           | Purchases under gas supply agreements         |   |         |      |  |      |         |      |  |   |         | 2,330  | 
|                                            |                                          |                              |        |     |          |   |        |                                           |      | Gas storage agreement                                     |                                               |   | 2,563   |       |  |      | 2,563   |       |  |   | 2,563   |       
|                                            |                                          |                              |        |     |          |   |        |                                           |      | Land lease/easement agreements                            |                                               |   | 600     |       |  |      | 600     |       |  |   | 600     |       
|                                            |                                          |                              |        |     |          |   |        |                                           |      | Accounts receivable                                       |                                               |   | 26,365  |       |  |      | 50,364  |       |  |   | 40,373  |       
|                                            |                                          |                              |        |     |          |   |        |                                           |      | Accounts payable                                          |                                               |   | 1,053   |       |  |      | 1,031   |       |  |   | 1,025   |       
|                                            |                                          |                              |        |     |          |   |        |                                           |      | Sales under spot gas agreements                           |                                               |   |        |       |  |      |        |       |  |   | 3,260   |       
|El Paso Corporation                         |                                          | $                            | (5,121 | )   |          |   | 18.1   | %                                         |      |                                                           |                                               |   |         |       |  |      |         |       |  |   |         |       
|Source Midland Limited Partnership          |                                          |                              |        |     |          |   |        |                                           |      | Purchase under gas transportation agreements              |                                               |   | 12,002  |       |  |      | 12,334  |       |  |   | 13,023  |       
|(SMLP) General Partner; owned by          |                                          |                              |        |     |          |   |        |                                           |      | Purchases under spot gas agreement                        |                                               |   |        |       |  |      |        |       |  |   | 610     |       
|subsidiaries of El Paso Corporation         |                                          |                              |        |     |          |   |        |                                           |      | Purchases under gas supply agreement                      |                                               |   | 132,887 |       |  |      | 70,000  |       |  |   | 54,308  |       
|                                            |                                          |                              |        |     |          |   |        |                                           |      | Gas agency agreement                                      |                                               |   | 136     |       |  |      | 264     |       |  |   | 238     |       
|                                            |                                          |                              |        |     |          |   |        |                                           |      | Deferred reservation charges under gas purchase agreement |                                               |   | 1,576   |       |  |      | 3,152   |       |  |   | 4,728   |       
|                                            |                                          |                              |        |     |          |   |        |                                           |      | Accounts payable                                          |                                               |   | 14,924  |       |  |      | 10,997  |       |  |   | 5,751   |       
|                                            |                                          |                              |        |     |          |   |        |                                           |      | Sales under spot gas agreements                           |                                               |   |        |       |  |      |        |       |  |   | 3,474   |       
|                                            |                                          |                              |        |     |          |   |        |                                           |      | Gas supplier funds on deposit                             |                                               |   | 44,353  |       |  |      |        |       |  |   |        |       
|                                            |                                          |                              |        |     |          |   |        |                                           |      | Letter of credit provided to MCV                          |                                               |   | 385,700 |       |  |      | 184,000 |       |  |   |        |       
|El Paso Midland, Inc. (El Paso Midland)   |                                          |                              | (3,073 | )   |          |   | 10.9   |                                           |      | See related party activity listed under SMLP.             |                                               |   |         |       |  |      |         |       |  |   |         |       
|General Partner; wholly-owned subsidiary    |                                          |                              |        |     |          |   |        |                                           |      |                                                           |                                               |   |         |       |  |      |         |       |  |   |         |       
|of El Paso Corporation                      |                                          |                              |        |     |          |   |        |                                           |      |                                                           |                                               |   |         |       |  |      |         |       |  |   |         |       
|MEI Limited Partnership (MEI)             |                                          |                              |        |     |          |   |        |                                           |      | See related party activity listed under SMLP.             |                                               |   |         |       |  |      |         |       |  |   |         |       
|A General and Limited Partner;              |                                          |                              |        |     |          |   |        |                                           |      |                                                           |                                               |   |         |       |  |      |         |       |  |   |         |       
|50% interest owned by El Paso Midland, Inc. |                                          |                              |        |     |          |   |        |                                           |      |                                                           |                                               |   |         |       |  |      |         |       |  |   |         |       
|and 50% interest owned by SMLP              |                                          |                              |        |     |          |   |        |                                           |      |                                                           |                                               |   |         |       |  |      |         |       |  |   |         |       
|                                            |                                          | General Partnership Interest |        |     | (2,560   | ) |        |                                           | 9.1  |                                                           |                                               |   |         |       |  |      |         |       |  |   |         |        |  | 
|                                            |                                          | Limited Partnership Interest |        |     | (256     | ) |        |                                           | .9   |                                                           |                                               |   |         |       |  |      |         |       |  |   |         |        |  | 
|Micogen Limited Partnership                 |                                          |                              | (1,280 | )   |          |   | 4.5    |                                           |      | See related party activity listed under SMLP.             |                                               |   |         |       |  |      |         |       |  |   |         |       
|                                            | (MLP) Limited Partner, owned           |                              |        |     |          |   |        |                                           |      |                                                           |                                               |   |         |       |  |      |         |       |  |   |         |        | 
|                                            | subsidiaries of El Paso Corporation      |                              |        |     |          |   |        |                                           |      |                                                           |                                               |   |         |       |  |      |         |       |  |   |         |        | 
|                                            |                                          |                              |        |     |          |   |        |                                           |      |                                                           |                                               |   |         |       |  |      |        
|                                            |                                          | Total El Paso Corporation    |        | $   | (12,290  | ) |        |                                           | 43.5 | %                                                         |                                               |   |         |       |  |      |         |       |  |   |         |        |  | 
|                                            |                                          |                              |        |     |          |   |        |                                           |      |                                                           |                                               |   |         |       |  |      |        
|The Dow Chemical Company                    |                                          |                              |        |     |          |   |        |                                           |      |                                                           |                                               |   |         |       |  |      |         |       |  |   |         |       
|The Dow Chemical Company                    |                                          | $                            | 13,107 |     |          |   | 7.5    | %                                         |      | Steam and electric power agreement                        |                                               |   | 42,873  |       |  |      | 39,055  |       |  |   | 36,207  |       
|                                            |                                          |                              |        |     |          |   |        |                                           |      |                                                           |                                               |   |         |       |  |      |        
|Limited Partner                             |                                          |                              |        |     |          |   |        |                                           |      | Steam purchase agreement  Dow Corning Corp (affiliate)   |                                               |   | 4,368   |       |  |      | 4,289   |       |  |   | 4,017   |       
|                                            |                                          |                              |        |     |          |   |        |                                           |      | Purchases under demineralized water supply agreement      |                                               |   | 6,671   |       |  |      | 8,142   |       |  |   | 6,396   |       
|                                            |                                          |                              |        |     |          |   |        |                                           |      | Accounts receivable                                       |                                               |   | 4,148   |       |  |      | 4,003   |       |  |   | 3,431   |       
|                                            |                                          |                              |        |     |          |   |        |                                           |      | Accounts payable                                          |                                               |   | 674     |       |  |      | 744     |       |  |   | 610     |       
|                                            |                                          |                              |        |     |          |   |        |                                           |      | Standby and backup fees                                   |                                               |   | 821     |       |  |      | 766     |       |  |   | 731     |       
|Alanna Corporation                          |                                          |                              |        |     |          |   |        |                                           |      |                                                           |                                               |   |         |       |  |      |         |       |  |   |         |       
|Alanna Corporation                          |                                          | $                            | 1      | (1) |          |   | .00001 | %                                         |      | Note receivable                                           |                                               |   | 1       |       |  |      | 1       |       |  |   | 1       |       
|                                            |                                          |                              |        |     |          |   |        |                                           |      |                                                           |                                               |   |         |       |  |      |        
|                                            | Limited Partner; wholly-owned subsidiary |                              |        |     |          |   |        |                                           |      |                                                           |                                               |   |         |       |  |      |         |       |  |   |         |        | 
|                                            | of Alanna Holdings Corporation           |                              |        |     |          |   |        |                                           |      |                                                           |                                               |   |         |       |  |      |         |       |  |   |         |        | 
|TOTAL PARTNERS EQUITY                      |                                          | $                            | 1,602  |     |          |   | 100.0  | %                                         |      |                                                           |                                               |   |         |       |  |      |         |       |  |   |         |       
|                                            |                                          |                              |        |     |          |   |        |                                           |      |                                                           |                                               |   |         |       |  |      |        

Footnotes to Partners Equity and Related Party
Transactions




|    |                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------
|(1) | Alannas capital stock is pledged to secure MCVs
    obligation under the lease and other overall lease transaction
    documents.

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EL PASO CORPORATION


EXHIBIT LIST


December 31, 2005




| |   |    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2 | .A |  | Merger Agreement, dated as of December 15, 2003, by and among
    Enterprise Products Partners L.P., Enterprise Products GP, LLC,
    Enterprise Products Management LLC, GulfTerra Energy Partners,
    L.P. and GulfTerra Energy Company, L.L.C. (including the form of
    Assumption Agreement to be entered into in connection with the
    merger, attached as an exhibit thereto) (Exhibit 2.1 to our Form
    8-K filed December 15, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 2 | .B |  | Parent Company Agreement, dated as of December 15, 2003, by
    and among Enterprise Products Partners L.P., Enterprise Products
    GP, LLC, Enterprise Products GTM, LLC, El Paso Corporation,
    Sabine River Investors I, L.L.C., Sabine River Investors II,
    L.L.C., El Paso EPN Investments, L.L.C. and GulfTerra GP
    Holding Company (including the form of Second Amended and
    Restated Limited Liability Company Agreement of Enterprise
    Products GP, LLC, to be entered into in connection with the
    merger, attached as an exhibit thereto) (Exhibit 2.2 to our
    Form 8-K filed December 15, 2003);
    Amendment No. 1 to Parent Company Agreement, dated as
    of December 15, 2003, by and among Enterprise Products
    Partners L.P., Enterprise Products GP, LLC, Enterprise Products
    GTM, LLC, El Paso Corporation, Sabine River Investors I,
    L.L.C., Sabine River Investors II, L.L.C., El Paso EPN
    Investments, L.L.C. and GulfTerra GP Holding Company, dated as
    of April 19, 2004 (including the forms of Second
    Amended and Restated Limited Liability Company Agreement of
    Enterprise Products GP, LLC, Exchange and Registration Rights
    Agreement and Performance Guaranty, to be entered into by the
    parties named therein in connection with the merger of
    Enterprise and GulfTerra, attached as Exhibits 1, 2
    and 3, respectively, thereto) (Exhibit 2.1 to our Form
    8-K filed April 21, 2004); Second Amended and Restated
    Limited Liability Company Agreement of GulfTerra Energy Company,
    L.L.C., adopted by GulfTerra GP Holding Company, a Delaware
    corporation, and Enterprise Products GTM, LLC, a Delaware
    limited liability company, as of December 15, 2003
    (Exhibit 2.3 to our Form 8-K filed December 15, 2003);
    Purchase and Sale Agreement (Gas Plants), dated as of
    December 15, 2003, by and between El Paso Corporation, El
    Paso Field Services Management, Inc., El Paso Transmission,
    L.L.C., El Paso Field Services Holding Company and Enterprise
    Products Operating L.P. (Exhibit 2.4 to our Form 8-K filed
    December 15, 2003); Purchase and Sale Agreement, dated as
    of January 14, 2005, by and among Enterprise GP Holdings,
    L.P., Sabine River Investors I, L.L.C., Sabine River Investors
    II, L.L.C., El Paso Corporation and GulfTerra GP Holding Company
    (Exhibit 2.B.1 to our 2004 Form 10-K)
| | 3 | .A |  | Second Amended and Restated Certificate of Incorporation
    (included in Exhibit 3.A to our Current Report on Form 8-K
    filed May 31, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 3 | .B |  | By-Laws effective as of February 14, 2006 (Exhibit 3.B
    to our Current Report on Form 8-K filed February 16,
    2006.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 4 | .A |  | Indenture dated as of May 10, 1999, by and between El Paso
    and HSBC Bank USA, National Association (as
    successor-in-interest to JPMorgan Chase Bank (formerly The Chase
    Manhattan Bank)), as Trustee (Exhibit 4.A to our 2004 Form
    10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 4 | .B |  | Certificate of Designations of 4.99% Convertible Perpetual
    Preferred Stock (included in Exhibit 3.A to our Current
    Report on Form 8-K filed May 31, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

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| |     |    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4   | .C |  | Registration Rights Agreement, dated April 15, 2005, by and
    among El Paso Corporation and the Initial Purchasers party
    thereto (Exhibit 4.A to our Current Report on Form 8-K
    filed April 15, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 4   | .D |  | Registration Rights Agreement dated as of December 28, 2005
    among El Paso Corporation, Goldman Sachs & Co. and
    Citigroup Global Markets Inc. (Exhibit 10.A to our Current
    Report on Form 8-K filed January 4, 2006)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 4   | .E |  | Tenth Supplemental Indenture dated as of December 28, 2005
    between El Paso Corporation and HSBC Bank USA, National
    Association, as trustee. (Exhibit 4.A to our Current Report
    on Form 8-K filed January 4, 2006)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 10  | .A |  | Amended and Restated Credit Agreement dated as of
    November 23, 2004, among El Paso Corporation, ANR Pipeline
    Company, Colorado Interstate Gas Company, El Paso Natural Gas
    Company, Tennessee Gas Pipeline Company, the several banks and
    other financial institutions from time to time parties thereto
    and JPMorgan Chase Bank, N.A., as administrative agent and as
    collateral agent (Exhibit 10.A to our Form 8-K filed
    November 29, 2004); Amended and Restated Subsidiary
    Guarantee Agreement dated as of November 23, 2004, made by
    each of the Subsidiary Guarantors, as defined therein, in favor
    of JPMorgan Chase Bank, N.A., as collateral agent
    (Exhibit 10.C to our Form 8-K filed November 29,
    2004); Amended and Restated Parent Guarantee Agreement dated as
    of November 23, 2004, made by El Paso Corporation, in favor
    of JPMorgan Chase Bank, N.A., as Collateral Agent
    (Exhibit 10.D to our Form 8-K filed November 29, 2004)
| | 10  | .B |  | Amended and Restated Security Agreement dated as of
    November 23, 2004, among El Paso Corporation, ANR Pipeline
    Company, Colorado Interstate Gas Company, El Paso Natural Gas
    Company, Tennessee Gas Pipeline Company, the Subsidiary
    Guarantors and certain other credit parties thereto and JPMorgan
    Chase Bank, N.A., not in its individual capacity, but solely as
    collateral agent for the Secured Parties and as the depository
    bank (Exhibit 10.B to our Form 8-K filed November 29,
    2004)                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | +10 | .C |  | 1995 Compensation Plan for Non-Employee Directors Amended and
    Restated effective as of December 4, 2003
    (Exhibit 10.F to our 2003 Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | +10 | .D |  | Stock Option Plan for Non-Employee Directors Amended and
    Restated effective as of January 20, 1999
    (Exhibit 10.G to our 2004 Form 10-K);
    Amendment No. 1 effective as of July 16, 1999 to
    the Stock Option Plan for Non-Employee Directors
    (Exhibit 10.G.1 to our 2004 Form 10-K);
    Amendment No. 2 effective as of February 7, 2001
    to the Stock Option Plan for Non-Employee Directors
    (Exhibit 10.F.1 to our 2001 First Quarter Form 10-Q)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | +10 | .E |  | 2001 Stock Option Plan for Non-Employee Directors effective as
    of January 29, 2001 (Exhibit 10.1 to our Form S-8
    filed June 29, 2001); Amendment No. 1 effective as of
    February 7, 2001 to the 2001 Stock Option Plan for
    Non-Employee Directors (Exhibit 10.G.1 to our 2001
    Form 10-K); Amendment No. 2 effective as of
    December 4, 2003 to the 2001 Stock Option Plan for
    Non-Employee Directors (Exhibit 10.H.1 to our 2003
    Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | +10 | .F |  | 1995 Omnibus Compensation Plan Amended and Restated effective as
    of August 1, 1998 (Exhibit 10.I to our 2004
    Form 10-K); Amendment No. 1 effective as of
    December 3, 1998 to the 1995 Omnibus Compensation Plan
    (Exhibit 10.I.1 to our 2004 Form 10-K);
    Amendment No. 2 effective as of January 20, 1999
    to the 1995 Omnibus Compensation Plan (Exhibit 10.I.2 to
    our 2004 Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | +10 | .G |  | 1999 Omnibus Incentive Compensation Plan dated January 20,
    1999 (Exhibit 10.1 to our Form S-8 filed May 20,
    1999); Amendment No. 1 effective as of
    February 7, 2001 to the 1999 Omnibus Incentive Compensation
    Plan (Exhibit 10.V.1 to our 2001 First Quarter
    Form 10-Q); Amendment No. 2 effective as of
    May 1, 2003 to the 1999 Omnibus Incentive Compensation Plan
    (Exhibit 10.I.1 to our 2003 Second Quarter Form 10-Q)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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##### Table of Contents



| |      |      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---- | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | +10  | .H   |  | 2001 Omnibus Incentive Compensation Plan effective as of
    January 29, 2001 (Exhibit 10.1 to our Form S-8
    filed June 29, 2001); Amendment No. 1 effective
    as of February 7, 2001 to the 2001 Omnibus Incentive
    Compensation Plan (Exhibit 10.J.1 to our 2001
    Form 10-K); Amendment No. 2 effective as of
    April 1, 2001 to the 2001 Omnibus Incentive Compensation
    Plan (Exhibit 10.J.1 to our 2002 Form 10-K);
    Amendment No. 3 effective as of July 17, 2002 to
    the 2001 Omnibus Incentive Compensation Plan
    (Exhibit 10.J.1 to our 2002 Second Quarter Form 10-Q);
    Amendment No. 4 effective as of May 1, 2003 to
    the 2001 Omnibus Incentive Compensation Plan
    (Exhibit 10.J.1 to our 2003 Second Quarter Form 10-Q);
    Amendment No. 5 effective as of March 8, 2004 to
    the 2001 Omnibus Incentive Compensation Plan
    (Exhibit 10.K.1 to our 2003 Form 10-K)
| | +10  | .I   |  | Supplemental Benefits Plan Amended and Restated effective
    December 7, 2001 (Exhibit 10.K to our 2001
    Form 10-K); Amendment No. 1 effective as of
    November 7, 2002 to the Supplemental Benefits Plan
    (Exhibit 10.K.1 to our 2002 Form 10-K);
    Amendment No. 3 effective December 17, 2004 to
    the Supplemental Benefits Plan (Exhibit 10.UU to our 2004
    Third Quarter Form 10-Q); Amendment No. 2
    effective as of June 1, 2004 to the Supplemental Benefits
    Plan (Exhibit 10.L.1 to our 2004 Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                 
| | *+10 | .I.1 |  | Amendment No. 4 to the Supplemental Benefits Plan effective
    as of December 31, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | +10  | .J   |  | Senior Executive Survivor Benefit Plan Amended and Restated
    effective as of August 1, 1998 (Exhibit 10.M to our
    2004 Form 10-K); Amendment No. 1 effective as of
    February 7, 2001 to the Senior Executive Survivor Benefit
    Plan (Exhibit 10.I.1 to our 2001 First Quarter
    Form 10-Q); Amendment No. 2 effective as of
    October 1, 2002 to the Senior Executive Survivor Benefit
    Plan (Exhibit 10.L.1 to our 2002 Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | +10  | .K   |  | Key Executive Severance Protection Plan Amended and Restated
    effective as of August 1, 1998 (Exhibit 10.N to
    our 2004 Form 10-K); Amendment No. 1 effective as
    of February 7, 2001 to the Key Executive Severance
    Protection Plan (Exhibit 10.K.1 to our 2001 First Quarter
    Form 10-Q); Amendment No. 2 effective as of
    November 7, 2002 to the Key Executive Severance Protection
    Plan (Exhibit 10.N.1 to our 2002 Form 10-K);
    Amendment No. 3 effective as of December 6, 2002
    to the Key Executive Severance Protection Plan
    (Exhibit 10.N.1 to our 2002 Form 10-K);
    Amendment No. 4 effective as of September 2, 2003
    to the Key Executive Severance Protection Plan
    (Exhibit 10.N.1 to our 2003 Third Quarter Form 10-Q)                                                                                                                                        
| | +10  | .L   |  | 2004 Key Executive Severance Protection Plan effective as of
    March 9, 2004 (Exhibit 10.P to our 2003 Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | +10  | .M   |  | Director Charitable Award Plan Amended and Restated effective as
    of August 1, 1998 (Exhibit 10.P to our 2004
    Form 10-K); Amendment No. 1 effective as of
    February 7, 2001 to the Director Charitable Award Plan
    (Exhibit 10.L.1 to our 2001 First Quarter Form 10-Q);
    Amendment No. 2 effective as of December 4, 2003
    to the Director Charitable Award Plan (Exhibit 10.Q.1 to
    our 2003 Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | +10  | .N   |  | Strategic Stock Plan Amended and Restated effective as of
    December 3, 1999 (Exhibit 10.1 to our Form S-8
    filed January 14, 2000); Amendment No. 1
    effective as of February 7, 2001 to the Strategic Stock
    Plan (Exhibit 10.M.1 to our 2001 First Quarter
    Form 10-Q); Amendment No. 2 effective as of
    November 7, 2002 to the Strategic Stock Plan;
    Amendment No. 3 effective as of December 6, 2002 to the
    Strategic Stock Plan and Amendment No. 4 effective as
    of January 29, 2003 to the Strategic Stock Plan
    (Exhibit 10.P.1 to our 2002 Form 10-K)                                                                                                                                                                                                                                                                                                                          
| | +10  | .O   |  | Domestic Relocation Policy effective November 1, 1996
    (Exhibit 10.R to our 2004 Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | +10  | .P   |  | Executive Award Plan of Sonat Inc. Amended and Restated
    effective as of July 23, 1998, as amended May 27, 1999
    (Exhibit 10.S to our 2004 Form 10-K); Termination of
    the Executive Award Plan of Sonat Inc. (Exhibit 10.K.1 to
    our 2000 Second Quarter Form 10-Q)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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##### Table of Contents



| |      |      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ---- | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | +10  | .Q   |  | Omnibus Plan for Management Employees Amended and Restated
    effective as of December 3, 1999 (Exhibit 10.1 to
    our Form S-8 filed December 18, 2000);
    Amendment No. 1 effective as of December 1, 2000
    to the Omnibus Plan for Management Employees (Exhibit 10.1
    to our Form S-8 filed December 18, 2000);
    Amendment No. 2 effective as of February 7, 2001
    to the Omnibus Plan for Management Employees
    (Exhibit 10.U.1 to our 2001 First Quarter Form 10-Q);
    Amendment No. 3 effective as of December 7, 2001
    to the Omnibus Plan for Management Employees (Exhibit 10.1
    to our Form S-8 filed February 11, 2002);
    Amendment No. 4 effective as of December 6, 2002 to
    the Omnibus Plan for Management Employees (Exhibit 10.T.1
    to our 2002 Form 10-K)           
| | +10  | .R   |  | El Paso Production Companies Long-Term Incentive Plan effective
    as of January 1, 2003 (Exhibit 10.AA to our 2003 First
    Quarter Form 10-Q); Amendment No. 1 effective as
    of June 6, 2003 to the El Paso Production Companies
    Long-Term Incentive Plan (Exhibit 10.AA.1 to our 2003
    Second Quarter Form 10-Q); Amendment No. 2
    effective as of December 31, 2003 to the El Paso Production
    Companies Long-Term Incentive Plan (Exhibit 10.V.1 to our
    2003 Form 10-K)                                                                                                                                                                                                                                                                                                                         
| | +10  | .S   |  | Severance Pay Plan Amended and Restated effective as of
    October 1, 2002; Supplement No. 1 to the
    Severance Pay Plan effective as of January 1, 2003; and
    Amendment No. 1 to Supplement No. 1
    effective as of March 21, 2003 (Exhibit 10.Z to our 2003 First
    Quarter Form 10-Q); Amendment No. 2 to
    Supplement No. 1 effective as of
    June 1, 2003 (Exhibit 10.Z.1 to our 2003 Second
    Quarter Form 10-Q); Amendment No. 3 to
    Supplement No. 1 effective as of September 2,
    2003 (Exhibit 10.Z.1 to our 2003 Third Quarter
    Form 10-Q); Amendment No. 4 to
    Supplement No. 1 effective as of October 1, 2003
    (Exhibit 10.W.1 to our 2003 Form 10-K); Amendment
    No. 5 to Supplement No. 1 effective as of
    February 2, 2004 (Exhibit 10.W.1 to our 2003
    Form 10-K)
| | *+10 | .S.1 |  | Supplement No. 2 dated April 1, 2005 to the Severance
    Pay Plan Amended and Restated effective as of October 1,
    2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | +10  | .T   |  | Letter Agreement dated July 16, 2004 between El Paso
    Corporation and D. Dwight Scott. (Exhibit 10.VV to our 2003
    Third Quarter Form 10-Q)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | +10  | .U   |  | Letter Agreement dated July 15, 2003 between El Paso and
    Douglas L. Foshee (Exhibit 10.U to our 2003 Third Quarter
    Form 10-Q)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | +10  | .V   |  | Letter Agreement dated December 18, 2003 between El Paso
    and Douglas L. Foshee (Exhibit 10.BB.1 to our 2003
    Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | +10  | .W   |  | Letter Agreement dated January 6, 2004 between El Paso and
    Lisa A. Stewart (Exhibit 10.CC to our 2003 Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | +10  | .X   |  | Form of Indemnification Agreement of each member of the Board of
    Directors effective November 7, 2002 or the effective date
    such director was elected to the Board of Directors, whichever
    is later (Exhibit 10.FF to our 2002 Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | *+10 | .Y   |  | Form of Indemnification Agreement executed by El Paso for the
    benefit of each officer and effective the date listed in
    Schedule A thereto.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | +10  | .Z   |  | Indemnification Agreement executed by El Paso for the benefit of
    Douglas L. Foshee, effective December 17, 2004
    (Exhibit 10.XX to our 2003 Third Quarter Form 10-Q)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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| |      |       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---- | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10   | .AA   |  | Master Settlement Agreement dated as of June 24, 2003, by
    and between, on the one hand, El Paso Corporation, El Paso
    Natural Gas Company, and El Paso Merchant Energy, L.P.; and, on
    the other hand, the Attorney General of the State of California,
    the Governor of the State of California, the California Public
    Utilities Commission, the California Department of Water
    Resources, the California Energy Oversight Board, the Attorney
    General of the State of Washington, the Attorney General of the
    State of Oregon, the Attorney General of the State of Nevada,
    Pacific Gas & Electric Company, Southern California Edison
    Company, the City of Los Angeles, the City of Long Beach, and
    classes consisting of all individuals and entities in California
    that purchased natural gas and/or electricity for use and not
    for resale or generation of electricity for the purpose of
    resale, between September 1, 1996 and
    March 20, 2003, inclusive, represented by class
    representatives Continental Forge Company, Andrew Berg, Andrea
    Berg, Gerald J. Marcil, United Church Retirement Homes of Long
    Beach, Inc., doing business as Plymouth West, Long Beach
    Brethren Manor, Robert Lamond, Douglas Welch, Valerie Welch,
    William Patrick Bower, Thomas L. French, Frank Stella, Kathleen
    Stella, John Clement Molony, SierraPine, Ltd., John Frazee and
    Jennifer Frazee, John W.H.K. Phillip, and Cruz Bustamante
    (Exhibit 10.HH to our 2003 Second Quarter Form 10-Q)
| | 10   | .BB   |  | Agreement With Respect to Collateral dated as of June 11,
    2004, by and among El Paso Production Oil & Gas USA,
    L.P., a Delaware limited partnership, Bank of America, N.A.,
    acting solely in its capacity as Collateral Agent under the
    Collateral Agency Agreement, and The Office of the Attorney
    General of the State of California, acting solely in its
    capacity as the Designated Representative under the Designated
    Representative Agreement (Exhibit 10.HH to our 2003
    Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 10   | .CC   |  | Joint Settlement Agreement submitted and entered into by El Paso
    Natural Gas Company, El Paso Merchant Energy Company, El Paso
    Merchant Energy-Gas, L.P., the Public Utilities Commission of
    the State of California, Pacific Gas & Electric Company,
    Southern California Edison Company and the City of Los Angeles
    (Exhibit 10.II to our 2003 Second Quarter Form 10-Q)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | 10   | .DD   |  | Swap Settlement Agreement dated effective as of August 16,
    2004, among the Company, El Paso Merchant Energy, L.P.,
    East Coast Power Holding Company L.L.C. and ECTMI Trutta
    Holdings LP (Exhibit 10.A to our Form 8-K filed
    October 15, 2004, and terminated as described in our
    Form 8-K filed December 3, 2004)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 10   | .EE   |  | Purchase Agreement dated April 11, 2005, by and among El
    Paso Corporation and the Initial Purchasers party thereto
    (Exhibit 10.A to our Form 8-K filed April 15,
    2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | +10  | .FF   |  | Agreement and General Release dated May 4, 2005, by and
    between El Paso Corporation and John W. Somerhalder II
    (Exhibit 10.A to our Form 8-K filed May 4, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | +10  | .GG   |  | El Paso Corporation 2005 Compensation Plan for Non-Employee
    Directors (Exhibit 10.A to our Form 8-K filed on
    May 31, 2005).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | +10  | .HH   |  | El Paso Corporation 2005 Omnibus Incentive Compensation Plan
    (Exhibit 10.B to our Form 8-K filed on May 31,
    2005).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | *+10 | .HH.1 |  | Amendment No. 1 to the 2005 Omnibus Incentive Compensation
    Plan effective as of December 2, 2005                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | +10  | .II   |  | El Paso Corporation Employee Stock Purchase Plan, Amended and
    Restated Effective as of July 1, 2005. (Exhibit 10.E
    to our 2005 Second Quarter Form 10-Q)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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| |      |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ---- | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10   | .JJ |  | Credit Agreement among El Paso Corporation and El Paso
    Production Oil & Gas USA, L.P., as Borrowers, Fortis
    Capital Corp., as Administrative Agent, Arranger and Bookrunner,
    dated as of November 3, 2005 (Exhibit 10.A to our
    Form 8-K filed on November 4, 2005); First Amendment,
    Consent and Waiver Agreement, dated as of December 20, 2005,
    among El Paso Corporation and El Paso Production Oil &
    Gas USA, L.P., as Borrowers, Fortis Capital Corp., as
    Administrative Agent for the Lenders, and the several Lenders
    party from time to time thereto (Exhibit 10.B to our
    Form 8-K filed on January 4, 2006)
| | *+10 | .KK |  | 2005 Supplemental Benefits Plan effective as of January 1,
    2005                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | 12   |     |  | Ratio of Earnings to Combined Fixed Charges and Preferred Stock
    Dividends                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 21   |     |  | Subsidiaries of El Paso Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | *23  | .A  |  | Consent of Independent Registered Public Accounting Firm,
    PricewaterhouseCoopers LLP (Houston)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | *23  | .B  |  | Consent of Independent Registered Public Accounting Firm
    PricewaterhouseCoopers LLP (Detroit)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | *23  | .C  |  | Consent of Ryder Scott Company, L.P.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | *31  | .A  |  | Certification of Chief Executive Officer pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | *31  | .B  |  | Certification of Chief Financial Officer pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | *32  | .A  |  | Certification of Chief Executive Officer pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | *32  | .B  |  | Certification of Chief Financial Officer pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

Undertaking




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SIGNATURES






| |                    
| | -------------------
| | EL PASO CORPORATION



| |    |                      
| | -- | ---------------------
| | By | /s/ Douglas L. Foshee

| |                                      
| | -------------------------------------
| |                                      
| | Douglas L. Foshee                    
| | President and Chief Executive Officer



|                                                 |  |                                                                                        |  |               |  | 
|------------------------------------------------ |  | -------------------------------------------------------------------------------------- |  | ------------- |  | 
|Signature                                        |  | Title                                                                                  |  | Date         
|                                                 |  |                                                                                        |  |              
|                                                
|                                                
|/s/ Douglas L. FosheeDouglas L. Foshee           |  | President, Chief Executive Officer and Director
    (Principal Executive Officer)      |  | March 3, 2006
|                                                
|                                                
|/s/ D. Mark LelandD. Mark Leland                 |  | Executive Vice President and Chief Financial Officer
    (Principal Financial Officer) |  | March 3, 2006
|                                                
|                                                
|/s/ John R. SultJohn R. Sult                     |  | Senior Vice President and Controller
    (Principal Accounting Officer)                |  | March 3, 2006
|                                                
|/s/ Ronald L. Kuehn,
    Jr.Ronald L. Kuehn, Jr. |  | Chairman of the Board                                                                  |  | March 3, 2006
|                                                
|/s/ Juan Carlos BraniffJuan Carlos Braniff       |  | Director                                                                               |  | March 3, 2006
|                                                
|/s/ James L. DunlapJames L. Dunlap               |  | Director                                                                               |  | March 3, 2006
|                                                
|/s/ Robert W. GoldmanRobert W. Goldman           |  | Director                                                                               |  | March 3, 2006
|                                                
|/s/ Anthony W. Hall,
    Jr.Anthony W. Hall, Jr. |  | Director                                                                               |  | March 3, 2006
|                                                
|/s/ Thomas R. HixThomas R. Hix                   |  | Director                                                                               |  | March 3, 2006
|                                                
|/s/ William H. JoyceWilliam H. Joyce             |  | Director                                                                               |  | March 3, 2006

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|                                         |  |          |  |               |  | 
|---------------------------------------- |  | -------- |  | ------------- |  | 
|Signature                                |  | Title    |  | Date         
|                                         |  |          |  |              
|/s/ Ferrell P. McCleanFerrell P. McClean |  | Director |  | March 3, 2006
|/s/ J. Michael TalbertJ. Michael Talbert |  | Director |  | March 3, 2006
|/s/ Robert F. VagtRobert F. Vagt         |  | Director |  | March 3, 2006
|                                        
|/s/ John L. WhitmireJohn L. Whitmire     |  | Director |  | March 3, 2006
|                                        
|/s/ Joe B. WyattJoe B. Wyatt             |  | Director |  | March 3, 2006

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EL PASO CORPORATION


EXHIBIT INDEX


December 31, 2005




| |   |    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2 | .A |  | Merger Agreement, dated as of December 15, 2003, by and among
    Enterprise Products Partners L.P., Enterprise Products GP, LLC,
    Enterprise Products Management LLC, GulfTerra Energy Partners,
    L.P. and GulfTerra Energy Company, L.L.C. (including the form of
    Assumption Agreement to be entered into in connection with the
    merger, attached as an exhibit thereto) (Exhibit 2.1 to our Form
    8-K filed December 15, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 2 | .B |  | Parent Company Agreement, dated as of December 15, 2003, by
    and among Enterprise Products Partners L.P., Enterprise Products
    GP, LLC, Enterprise Products GTM, LLC, El Paso Corporation,
    Sabine River Investors I, L.L.C., Sabine River Investors II,
    L.L.C., El Paso EPN Investments, L.L.C. and GulfTerra GP
    Holding Company (including the form of Second Amended and
    Restated Limited Liability Company Agreement of Enterprise
    Products GP, LLC, to be entered into in connection with the
    merger, attached as an exhibit thereto) (Exhibit 2.2 to our
    Form 8-K filed December 15, 2003);
    Amendment No. 1 to Parent Company Agreement, dated as
    of December 15, 2003, by and among Enterprise Products
    Partners L.P., Enterprise Products GP, LLC, Enterprise Products
    GTM, LLC, El Paso Corporation, Sabine River Investors I,
    L.L.C., Sabine River Investors II, L.L.C., El Paso EPN
    Investments, L.L.C. and GulfTerra GP Holding Company, dated as
    of April 19, 2004 (including the forms of Second
    Amended and Restated Limited Liability Company Agreement of
    Enterprise Products GP, LLC, Exchange and Registration Rights
    Agreement and Performance Guaranty, to be entered into by the
    parties named therein in connection with the merger of
    Enterprise and GulfTerra, attached as Exhibits 1, 2
    and 3, respectively, thereto) (Exhibit 2.1 to our Form
    8-K filed April 21, 2004); Second Amended and Restated
    Limited Liability Company Agreement of GulfTerra Energy Company,
    L.L.C., adopted by GulfTerra GP Holding Company, a Delaware
    corporation, and Enterprise Products GTM, LLC, a Delaware
    limited liability company, as of December 15, 2003
    (Exhibit 2.3 to our Form 8-K filed December 15, 2003);
    Purchase and Sale Agreement (Gas Plants), dated as of
    December 15, 2003, by and between El Paso Corporation, El
    Paso Field Services Management, Inc., El Paso Transmission,
    L.L.C., El Paso Field Services Holding Company and Enterprise
    Products Operating L.P. (Exhibit 2.4 to our Form 8-K filed
    December 15, 2003); Purchase and Sale Agreement, dated
    as of January 14, 2005, by and among Enterprise GP
    Holdings, L.P., Sabine River Investors I, L.L.C., Sabine River
    Investors II, L.L.C., El Paso Corporation and GulfTerra GP
    Holding Company (Exhibit 2.B.1 to our 2004 Form 10-K)
| | 3 | .A |  | Second Amended and Restated Certificate of Incorporation
    (included in Exhibit 3.A to our Current Report on Form 8-K
    filed May 31, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 3 | .B |  | By-Laws effective as of February 14, 2006 (Exhibit 3.B
    to our Current Report on Form 8-K filed February 16,
    2006)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 4 | .A |  | Indenture dated as of May 10, 1999, by and between El Paso
    and HSBC Bank USA, National Association (as
    successor-in-interest to JPMorgan Chase Bank (formerly The Chase
    Manhattan Bank)), as Trustee (Exhibit 4.A to our 2004 Form
    10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 4 | .B |  | Certificate of Designations of 4.99% Convertible Perpetual
    Preferred Stock (included in Exhibit 3.A to our Current
    Report on Form 8-K filed May 31, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

189



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| |     |    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4   | .C |  | Registration Rights Agreement, dated April 15, 2005, by and
    among El Paso Corporation and the Initial Purchasers party
    thereto (Exhibit 4.A to our Current Report on Form 8-K
    filed April 15, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 4   | .D |  | Registration Rights Agreement dated as of December 28, 2005
    among El Paso Corporation, Goldman Sachs & Co. and
    Citigroup Global Markets Inc. (Exhibit 10.A to our Current
    Report on Form 8-K filed January 4, 2006)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 4   | .E |  | Tenth Supplemental Indenture dated as of December 28, 2005
    between El Paso Corporation and HSBC Bank USA, National
    Association, as trustee. (Exhibit 4.A to our Current Report
    on Form 8-K filed January 4, 2006)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 10  | .A |  | Amended and Restated Credit Agreement dated as of
    November 23, 2004, among El Paso Corporation, ANR Pipeline
    Company, Colorado Interstate Gas Company, El Paso Natural Gas
    Company, Tennessee Gas Pipeline Company, the several banks and
    other financial institutions from time to time parties thereto
    and JPMorgan Chase Bank, N.A., as administrative agent and as
    collateral agent (Exhibit 10.A to our Form 8-K filed
    November 29, 2004); Amended and Restated Subsidiary
    Guarantee Agreement dated as of November 23, 2004, made by
    each of the Subsidiary Guarantors, as defined therein, in favor
    of JPMorgan Chase Bank, N.A., as collateral agent
    (Exhibit 10.C to our Form 8-K filed November 29,
    2004); Amended and Restated Parent Guarantee Agreement dated as
    of November 23, 2004, made by El Paso Corporation, in favor
    of JPMorgan Chase Bank, N.A., as Collateral Agent
    (Exhibit 10.D to our Form 8-K filed November 29, 2004)
| | 10  | .B |  | Amended and Restated Security Agreement dated as of
    November 23, 2004, among El Paso Corporation, ANR Pipeline
    Company, Colorado Interstate Gas Company, El Paso Natural Gas
    Company, Tennessee Gas Pipeline Company, the Subsidiary
    Guarantors and certain other credit parties thereto and JPMorgan
    Chase Bank, N.A., not in its individual capacity, but solely as
    collateral agent for the Secured Parties and as the depository
    bank (Exhibit 10.B to our Form 8-K filed November 29,
    2004)                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | +10 | .C |  | 1995 Compensation Plan for Non-Employee Directors Amended and
    Restated effective as of December 4, 2003
    (Exhibit 10.F to our 2003 Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | +10 | .D |  | Stock Option Plan for Non-Employee Directors Amended and
    Restated effective as of January 20, 1999
    (Exhibit 10.G to our 2004 Form 10-K);
    Amendment No. 1 effective as of July 16, 1999 to
    the Stock Option Plan for Non-Employee Directors
    (Exhibit 10.G.1 to our 2004 Form 10-K);
    Amendment No. 2 effective as of February 7, 2001
    to the Stock Option Plan for Non-Employee Directors
    (Exhibit 10.F.1 to our 2001 First Quarter Form 10-Q)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | +10 | .E |  | 2001 Stock Option Plan for Non-Employee Directors effective as
    of January 29, 2001 (Exhibit 10.1 to our Form S-8
    filed June 29, 2001); Amendment No. 1 effective as of
    February 7, 2001 to the 2001 Stock Option Plan for
    Non-Employee Directors (Exhibit 10.G.1 to our 2001
    Form 10-K); Amendment No. 2 effective as of
    December 4, 2003 to the 2001 Stock Option Plan for
    Non-Employee Directors (Exhibit 10.H.1 to our 2003
    Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | +10 | .F |  | 1995 Omnibus Compensation Plan Amended and Restated effective as
    of August 1, 1998 (Exhibit 10.I to our 2004
    Form 10-K); Amendment No. 1 effective as of
    December 3, 1998 to the 1995 Omnibus Compensation Plan
    (Exhibit 10.I.1 to our 2004 Form 10-K);
    Amendment No. 2 effective as of January 20, 1999
    to the 1995 Omnibus Compensation Plan (Exhibit 10.I.2 to
    our 2004 Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | +10 | .G |  | 1999 Omnibus Incentive Compensation Plan dated January 20,
    1999 (Exhibit 10.1 to our Form S-8 filed May 20,
    1999); Amendment No. 1 effective as of
    February 7, 2001 to the 1999 Omnibus Incentive Compensation
    Plan (Exhibit 10.V.1 to our 2001 First Quarter
    Form 10-Q); Amendment No. 2 effective as of
    May 1, 2003 to the 1999 Omnibus Incentive Compensation Plan
    (Exhibit 10.I.1 to our 2003 Second Quarter Form 10-Q)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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| |      |      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---- | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | +10  | .H   |  | 2001 Omnibus Incentive Compensation Plan effective as of
    January 29, 2001 (Exhibit 10.1 to our Form S-8
    filed June 29, 2001); Amendment No. 1 effective
    as of February 7, 2001 to the 2001 Omnibus Incentive
    Compensation Plan (Exhibit 10.J.1 to our 2001
    Form 10-K); Amendment No. 2 effective as of
    April 1, 2001 to the 2001 Omnibus Incentive Compensation
    Plan (Exhibit 10.J.1 to our 2002 Form 10-K);
    Amendment No. 3 effective as of July 17, 2002 to
    the 2001 Omnibus Incentive Compensation Plan
    (Exhibit 10.J.1 to our 2002 Second Quarter Form 10-Q);
    Amendment No. 4 effective as of May 1, 2003 to
    the 2001 Omnibus Incentive Compensation Plan
    (Exhibit 10.J.1 to our 2003 Second Quarter Form 10-Q);
    Amendment No. 5 effective as of March 8, 2004 to
    the 2001 Omnibus Incentive Compensation Plan
    (Exhibit 10.K.1 to our 2003 Form 10-K)
| | +10  | .I   |  | Supplemental Benefits Plan Amended and Restated effective
    December 7, 2001 (Exhibit 10.K to our 2001
    Form 10-K); Amendment No. 1 effective as of
    November 7, 2002 to the Supplemental Benefits Plan
    (Exhibit 10.K.1 to our 2002 Form 10-K);
    Amendment No. 3 effective December 17, 2004 to
    the Supplemental Benefits Plan (Exhibit 10.UU to our 2004
    Third Quarter Form 10-Q); Amendment No. 2
    effective as of June 1, 2004 to the Supplemental Benefits
    Plan (Exhibit 10.L.1 to our 2004 Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                 
| | *+10 | .I.1 |  | Amendment No. 4 to the Supplemental Benefits Plan effective
    as of December 31, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | +10  | .J   |  | Senior Executive Survivor Benefit Plan Amended and Restated
    effective as of August 1, 1998 (Exhibit 10.M to our
    2004 Form 10-K); Amendment No. 1 effective as of
    February 7, 2001 to the Senior Executive Survivor Benefit
    Plan (Exhibit 10.I.1 to our 2001 First Quarter
    Form 10-Q); Amendment No. 2 effective as of
    October 1, 2002 to the Senior Executive Survivor Benefit
    Plan (Exhibit 10.L.1 to our 2002 Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | +10  | .K   |  | Key Executive Severance Protection Plan Amended and Restated
    effective as of August 1, 1998 (Exhibit 10.N to
    our 2004 Form 10-K); Amendment No. 1 effective as
    of February 7, 2001 to the Key Executive Severance
    Protection Plan (Exhibit 10.K.1 to our 2001 First Quarter
    Form 10-Q); Amendment No. 2 effective as of
    November 7, 2002 to the Key Executive Severance Protection
    Plan (Exhibit 10.N.1 to our 2002 Form 10-K);
    Amendment No. 3 effective as of December 6, 2002
    to the Key Executive Severance Protection Plan
    (Exhibit 10.N.1 to our 2002 Form 10-K);
    Amendment No. 4 effective as of September 2, 2003
    to the Key Executive Severance Protection Plan
    (Exhibit 10.N.1 to our 2003 Third Quarter Form 10-Q)                                                                                                                                        
| | +10  | .L   |  | 2004 Key Executive Severance Protection Plan effective as of
    March 9, 2004 (Exhibit 10.P to our 2003 Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | +10  | .M   |  | Director Charitable Award Plan Amended and Restated effective as
    of August 1, 1998 (Exhibit 10.P to our 2004
    Form 10-K); Amendment No. 1 effective as of
    February 7, 2001 to the Director Charitable Award Plan
    (Exhibit 10.L.1 to our 2001 First Quarter Form 10-Q);
    Amendment No. 2 effective as of December 4, 2003
    to the Director Charitable Award Plan (Exhibit 10.Q.1 to
    our 2003 Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | +10  | .N   |  | Strategic Stock Plan Amended and Restated effective as of
    December 3, 1999 (Exhibit 10.1 to our Form S-8
    filed January 14, 2000); Amendment No. 1
    effective as of February 7, 2001 to the Strategic Stock
    Plan (Exhibit 10.M.1 to our 2001 First Quarter
    Form 10-Q); Amendment No. 2 effective as of
    November 7, 2002 to the Strategic Stock Plan;
    Amendment No. 3 effective as of December 6, 2002 to the
    Strategic Stock Plan and Amendment No. 4 effective as
    of January 29, 2003 to the Strategic Stock Plan
    (Exhibit 10.P.1 to our 2002 Form 10-K)                                                                                                                                                                                                                                                                                                                          
| | +10  | .O   |  | Domestic Relocation Policy effective November 1, 1996
    (Exhibit 10.R to our 2004 Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | +10  | .P   |  | Executive Award Plan of Sonat Inc. Amended and Restated
    effective as of July 23, 1998, as amended May 27, 1999
    (Exhibit 10.S to our 2004 Form 10-K); Termination of
    the Executive Award Plan of Sonat Inc. (Exhibit 10.K.1 to
    our 2000 Second Quarter Form 10-Q)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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| |      |      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ---- | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | +10  | .Q   |  | Omnibus Plan for Management Employees Amended and Restated
    effective as of December 3, 1999 (Exhibit 10.1 to
    our Form S-8 filed December 18, 2000);
    Amendment No. 1 effective as of December 1, 2000
    to the Omnibus Plan for Management Employees (Exhibit 10.1
    to our Form S-8 filed December 18, 2000);
    Amendment No. 2 effective as of February 7, 2001
    to the Omnibus Plan for Management Employees
    (Exhibit 10.U.1 to our 2001 First Quarter Form 10-Q);
    Amendment No. 3 effective as of December 7, 2001
    to the Omnibus Plan for Management Employees (Exhibit 10.1
    to our Form S-8 filed February 11, 2002);
    Amendment No. 4 effective as of December 6, 2002 to
    the Omnibus Plan for Management Employees (Exhibit 10.T.1
    to our 2002 Form 10-K)           
| | +10  | .R   |  | El Paso Production Companies Long-Term Incentive Plan effective
    as of January 1, 2003 (Exhibit 10.AA to our 2003 First
    Quarter Form 10-Q); Amendment No. 1 effective as
    of June 6, 2003 to the El Paso Production Companies
    Long-Term Incentive Plan (Exhibit 10.AA.1 to our 2003
    Second Quarter Form 10-Q); Amendment No. 2
    effective as of December 31, 2003 to the El Paso Production
    Companies Long-Term Incentive Plan (Exhibit 10.V.1 to our
    2003 Form 10-K)                                                                                                                                                                                                                                                                                                                         
| | +10  | .S   |  | Severance Pay Plan Amended and Restated effective as of
    October 1, 2002; Supplement No. 1 to the
    Severance Pay Plan effective as of January 1, 2003; and
    Amendment No. 1 to Supplement No. 1
    effective as of March 21, 2003 (Exhibit 10.Z to our 2003 First
    Quarter Form 10-Q); Amendment No. 2 to
    Supplement No. 1 effective as of
    June 1, 2003 (Exhibit 10.Z.1 to our 2003 Second
    Quarter Form 10-Q); Amendment No. 3 to
    Supplement No. 1 effective as of September 2,
    2003 (Exhibit 10.Z.1 to our 2003 Third Quarter
    Form 10-Q); Amendment No. 4 to
    Supplement No. 1 effective as of October 1, 2003
    (Exhibit 10.W.1 to our 2003 Form 10-K); Amendment
    No. 5 to Supplement No. 1 effective as of
    February 2, 2004 (Exhibit 10.W.1 to our 2003
    Form 10-K)
| | *+10 | .S.1 |  | Supplement No. 2 dated April 1, 2005 to the Severance
    Pay Plan Amended and Restated effective as of October 1,
    2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | +10  | .T   |  | Letter Agreement dated July 16, 2004 between El Paso
    Corporation and D. Dwight Scott. (Exhibit 10.VV to our 2003
    Third Quarter Form 10-Q)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | +10  | .U   |  | Letter Agreement dated July 15, 2003 between El Paso and
    Douglas L. Foshee (Exhibit 10.U to our 2003 Third Quarter
    Form 10-Q)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | +10  | .V   |  | Letter Agreement dated December 18, 2003 between El Paso
    and Douglas L. Foshee (Exhibit 10.BB.1 to our 2003
    Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | +10  | .W   |  | Letter Agreement dated January 6, 2004 between El Paso and
    Lisa A. Stewart (Exhibit 10.CC to our 2003 Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | +10  | .X   |  | Form of Indemnification Agreement of each member of the Board of
    Directors effective November 7, 2002 or the effective date
    such director was elected to the Board of Directors, whichever
    is later (Exhibit 10.FF to our 2002 Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | *+10 | .Y   |  | Form of Indemnification Agreement executed by El Paso for the
    benefit of each officer and effective the date listed in
    Schedule A thereto.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | +10  | .Z   |  | Indemnification Agreement executed by El Paso for the benefit of
    Douglas L. Foshee, effective December 17, 2004
    (Exhibit 10.XX to our 2003 Third Quarter Form 10-Q)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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| |      |       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---- | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10   | .AA   |  | Master Settlement Agreement dated as of June 24, 2003, by
    and between, on the one hand, El Paso Corporation, El Paso
    Natural Gas Company, and El Paso Merchant Energy, L.P.; and, on
    the other hand, the Attorney General of the State of California,
    the Governor of the State of California, the California Public
    Utilities Commission, the California Department of Water
    Resources, the California Energy Oversight Board, the Attorney
    General of the State of Washington, the Attorney General of the
    State of Oregon, the Attorney General of the State of Nevada,
    Pacific Gas & Electric Company, Southern California Edison
    Company, the City of Los Angeles, the City of Long Beach, and
    classes consisting of all individuals and entities in California
    that purchased natural gas and/or electricity for use and not
    for resale or generation of electricity for the purpose of
    resale, between September 1, 1996 and
    March 20, 2003, inclusive, represented by class
    representatives Continental Forge Company, Andrew Berg, Andrea
    Berg, Gerald J. Marcil, United Church Retirement Homes of Long
    Beach, Inc., doing business as Plymouth West, Long Beach
    Brethren Manor, Robert Lamond, Douglas Welch, Valerie Welch,
    William Patrick Bower, Thomas L. French, Frank Stella, Kathleen
    Stella, John Clement Molony, SierraPine, Ltd., John Frazee and
    Jennifer Frazee, John W.H.K. Phillip, and Cruz Bustamante
    (Exhibit 10.HH to our 2003 Second Quarter Form 10-Q)
| | 10   | .BB   |  | Agreement With Respect to Collateral dated as of June 11,
    2004, by and among El Paso Production Oil & Gas USA,
    L.P., a Delaware limited partnership, Bank of America, N.A.,
    acting solely in its capacity as Collateral Agent under the
    Collateral Agency Agreement, and The Office of the Attorney
    General of the State of California, acting solely in its
    capacity as the Designated Representative under the Designated
    Representative Agreement (Exhibit 10.HH to our 2003
    Form 10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 10   | .CC   |  | Joint Settlement Agreement submitted and entered into by El Paso
    Natural Gas Company, El Paso Merchant Energy Company, El Paso
    Merchant Energy-Gas, L.P., the Public Utilities Commission of
    the State of California, Pacific Gas & Electric Company,
    Southern California Edison Company and the City of Los Angeles
    (Exhibit 10.II to our 2003 Second Quarter Form 10-Q)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | 10   | .DD   |  | Swap Settlement Agreement dated effective as of August 16,
    2004, among the Company, El Paso Merchant Energy, L.P.,
    East Coast Power Holding Company L.L.C. and ECTMI Trutta
    Holdings LP (Exhibit 10.A to our Form 8-K filed
    October 15, 2004, and terminated as described in our
    Form 8-K filed December 3, 2004)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 10   | .EE   |  | Purchase Agreement dated April 11, 2005, by and among El
    Paso Corporation and the Initial Purchasers party thereto
    (Exhibit 10.A to our Form 8-K filed April 15,
    2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | +10  | .FF   |  | Agreement and General Release dated May 4, 2005, by and
    between El Paso Corporation and John W. Somerhalder II
    (Exhibit 10.A to our Form 8-K filed May 4, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | +10  | .GG   |  | El Paso Corporation 2005 Compensation Plan for Non-Employee
    Directors (Exhibit 10.A to our Form 8-K filed on
    May 31, 2005).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | +10  | .HH   |  | El Paso Corporation 2005 Omnibus Incentive Compensation Plan
    (Exhibit 10.B to our Form 8-K filed on May 31,
    2005).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | *+10 | .HH.1 |  | Amendment No. 1 to the 2005 Omnibus Incentive Compensation
    Plan effective as of December 2, 2005                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | +10  | .II   |  | El Paso Corporation Employee Stock Purchase Plan, Amended and
    Restated Effective as of July 1, 2005. (Exhibit 10.E
    to our 2005 Second Quarter Form 10-Q)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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| |      |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ---- | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10   | .JJ |  | Credit Agreement among El Paso Corporation and El Paso
    Production Oil & Gas USA, L.P., as Borrowers, Fortis
    Capital Corp., as Administrative Agent, Arranger and Bookrunner,
    dated as of November 3, 2005 (Exhibit 10.A to our
    Form 8-K filed on November 4, 2005); First Amendment,
    Consent and Waiver Agreement, dated as of December 20, 2005,
    among El Paso Corporation and El Paso Production Oil &
    Gas USA, L.P., as Borrowers, Fortis Capital Corp., as
    Administrative Agent for the Lenders, and the several Lenders
    party from time to time thereto (Exhibit 10.B to our
    Form 8-K filed on January 4, 2006)
| | *+10 | .KK |  | 2005 Supplemental Benefits Plan effective as of January 1,
    2005                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | *12  |     |  | Ratio of Earnings to Combined Fixed Charges and Preferred Stock
    Dividends                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | *21  |     |  | Subsidiaries of El Paso Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | *23  | .A  |  | Consent of Independent Registered Public Accounting Firm,
    PricewaterhouseCoopers LLP (Houston)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | *23  | .B  |  | Consent of Independent Registered Public Accounting Firm
    PricewaterhouseCoopers LLP (Detroit)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | *23  | .C  |  | Consent of Ryder Scott Company, L.P.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | *31  | .A  |  | Certification of Chief Executive Officer pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | *31  | .B  |  | Certification of Chief Financial Officer pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | *32  | .A  |  | Certification of Chief Executive Officer pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | *32  | .B  |  | Certification of Chief Financial Officer pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

194