##### 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 fiscal year ended December 31, 2004                                                     
|          
|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 no. 333-75814-1


Hanover Compression Limited Partnership


(Exact name of registrant as specified in its charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 75-2344249                              
|(State or Other Jurisdiction of
    Incorporation or Organization) |  | (I.R.S. Employer
    Identification No.)

12001 North Houston Rosslyn, Houston, Texas 77086


(Address of principal executive offices, zip code)


Registrants telephone number, including area code:


(281) 447-8787


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


None


Securities registered pursuant to 12(g) of the Act:


Title of class:     None


þ o


o


o þ






DOCUMENTS INCORPORATED BY REFERENCE












---










HANOVER COMPRESSION LIMITED PARTNERSHIP


TABLE OF CONTENTS


|                                                |          |  |                                                                                           |      |  |    | 
|----------------------------------------------- | -------- |  | ----------------------------------------------------------------------------------------- | ---- |  | -- | 
|                                                |          |  |                                                                                           | Page
|                                                |          |  |                                                                                           |     
|PART I                                         
|                                                | Item 1.  |  | Business                                                                                  |      |  | 3  | 
|                                                | Item 2.  |  | Properties                                                                                |      |  | 5  | 
|                                                | Item 3.  |  | Legal Proceedings                                                                         |      |  | 6  | 
|PART II                                        
|                                                | Item 5.  |  | Market for Registrants Common Equity
    and Related Stockholder Matters                 |      |  | 6  | 
|                                                | Item 7.  |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations |      |  | 7  | 
|                                                | Item 7A. |  | Quantitative and Qualitative Disclosures
    About Market Risk                            |      |  | 45 | 
|                                                | Item 8.  |  | Financial Statements and Supplementary
    Data                                           |      |  | 47 | 
|                                                | Item 9.  |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure  |      |  | 47 | 
|                                                | Item 9A. |  | Controls and Procedures                                                                   |      |  | 47 | 
|                                                | Item 9B. |  | Other Information                                                                         |      |  | 47 | 
|PART III                                       
|                                                | Item 14. |  | Principal Accounting Fees and Services                                                    |      |  | 48 | 
|PART IV                                        
|                                                | Item 15. |  | Exhibits and Financial Statement
    Schedule                                             |      |  | 49 | 
|SIGNATURES                                      |          |  | 55                                                                                        |     
|Consent of PricewaterhouseCoopers LLP          
|Certification of CEO Pursuant to Rule 13a-14(a)
|Certification of CFO Pursuant to Rule 13a-14(a)
|Certification of CEO Pursuant to Section 906   
|Certification of CFO Pursuant to Section 906   



1



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##### Table of Contents






PART I


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS






| |   |                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our inability to renew our short-term leases of equipment with
    our customers so as to fully recoup our cost of the equipment;                                                                                       
|
| |  | a prolonged substantial reduction in oil and natural gas prices,
    which could cause a decline in the demand for our compression
    and oil and natural gas production and processing equipment;                     
|
| |  | reduced profit margins or the loss of market share resulting
    from competition or the introduction of competing technologies
    by other companies;                                                                 
|
| |  | changes in economic or political conditions in the countries in
    which we do business, including civil uprisings, riots,
    terrorism, the taking of property without fair compensation and
    legislative changes;
|
| |  | changes in currency exchange rates;                                                                                                                                                                                     
|
| |  | the inherent risks associated with our operations, such as
    equipment defects, malfunctions and natural disasters;                                                                                                   
|
| |  | our inability to implement certain business objectives, such as:                                                                                                                                                        



| |   |                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------
| |  | international expansion,                                                                                                
|
| |  | integrating acquired businesses,                                                                                        
|
| |  | generating sufficient cash,                                                                                             
|
| |  | accessing capital markets,                                                                                              
|
| |  | refinancing existing or incurring additional indebtedness to
    fund our business, and                                 
|
| |  | executing our exit and sale strategy with respect to assets
    classified on our balance sheet as assets held for sale;



| |   |                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------
| |  | risks associated with any significant failure or malfunction of
    our enterprise resource planning system;                                       
|
| |  | governmental safety, health, environmental and other
    regulations, which could require us to make significant
    expenditures; and             
|
| |  | our inability to comply with covenants in our debt agreements
    and the decreased financial flexibility associated with our
    substantial debt.





2



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|        |         
|------- | --------
|Item 1. | Business

General










Business Segments






| |   |                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | U.S. rentals. Our U.S. rental segment primarily
    provides natural gas compression and production and processing
    equipment rental and maintenance services to meet specific
    customer requirements on HCLP-owned assets located within the
    United States.
|
| |  | International rentals. Our international rentals segment
    provides substantially the same services as our U.S. rental
    segment except it services locations outside the United States.                                                                          

3



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##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Compressor and accessory fabrication. Our compressor and
    accessory fabrication segment involves the design, fabrication
    and sale of natural gas compression units and accessories to
    meet unique customer specifications.                                                                                                                                                                             
|
| |  | Production and processing equipment fabrication. Our
    production and processing equipment fabrication segment includes
    the design, fabrication and sale of equipment used in the
    production and treating of crude oil and natural gas; and the
    engineering, procurement and manufacturing of heavy wall
    reactors for refineries and the construction of desalination
    plants and tank farms.
|
| |  | Parts, service and used equipment. Our parts, service and
    used equipment segment provides a full range of services to
    support the surface production needs of customers, from
    installation and normal maintenance and services to full
    operation of a customers owned assets and surface
    equipment as well as sales of used equipment.                                                       



Employees




Electronic Information


http://www.sec.gov. http://www.hanover-co.com.




http://www.hanover-co.com.


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|        |           
|------- | ----------
|Item 2. | Properties



|                              |  |        |        |        |  |      |         |  |  |                                                
|----------------------------- |  | ------ | ------ | ------ |  | ---- | ------- |  |  | -----------------------------------------------
|                              |  |        |        | Square |  |     
|Location                      |  | Status |        | Feet   |  | Uses
|                              |  |        |        |        |  |     
|Broken Arrow, Oklahoma        |  |        | Owned  |        |  |      | 127,505 |  |  | Compressor and accessory fabrication           
|Houston, Texas                |  |        | Owned  |        |  |      | 190,531 |  |  | Compressor and accessory fabrication           
|Houston, Texas                |  |        | Leased |        |  |      | 51,941  |  |  | Office                                         
|Anaco, Venezuela              |  |        | Leased |        |  |      | 10,000  |  |  | Compressor rental and service                  
|Casacara Station, Colombia    |  |        | Owned  |        |  |      | 14,000  |  |  | Compressor rental and service                  
|Casper, Wyoming               |  |        | Owned  |        |  |      | 28,390  |  |  | Compressor rental and service                  
|Comodoro Rivadavia, Argentina |  |        | Leased |        |  |      | 21,000  |  |  | Compressor rental and service                  
|Comodoro Rivadavia, Argentina |  |        | Owned  |        |  |      | 26,000  |  |  | Compressor rental and service                  
|Davis, Oklahoma               |  |        | Owned  |        |  |      | 393,870 |  |  | Compressor rental and service                  
|Farmington, New Mexico        |  |        | Owned  |        |  |      | 20,361  |  |  | Compressor rental and service                  
|Farmington, New Mexico        |  |        | Leased |        |  |      | 18,691  |  |  | Compressor rental and service                  
|Gillette, Wyoming             |  |        | Leased |        |  |      | 10,200  |  |  | Compressor rental and service                  
|Houston, Texas                |  |        | Leased |        |  |      | 13,200  |  |  | Compressor rental and service                  
|Kilgore, Texas                |  |        | Owned  |        |  |      | 33,039  |  |  | Compressor rental and service                  
|Maturin, Venezuela            |  |        | Owned  |        |  |      | 20,000  |  |  | Compressor rental and service                  
|Midland, Texas                |  |        | Owned  |        |  |      | 53,300  |  |  | Compressor rental and service                  
|Neuquen, Argentina            |  |        | Owned  |        |  |      | 30,000  |  |  | Compressor rental and service                  
|Pampa, Texas                  |  |        | Leased |        |  |      | 24,000  |  |  | Compressor rental and service                  
|Pocola, Oklahoma              |  |        | Owned  |        |  |      | 18,705  |  |  | Compressor rental and service                  
|Santa Cruz, Bolivia           |  |        | Leased |        |  |      | 30,622  |  |  | Compressor rental and service                  
|Victoria, Texas               |  |        | Owned  |        |  |      | 28,609  |  |  | Compressor rental and service                  
|Walsall, UK  Redhouse        |  |        | Owned  |        |  |      | 15,300  |  |  | Compressor rental and service                  
|Walsall, UK  Westgate        |  |        | Owned  |        |  |      | 44,700  |  |  | Compressor rental and service                  
|Yukon, Oklahoma               |  |        | Owned  |        |  |      | 22,453  |  |  | Compressor rental and service                  
|Houston, Texas                |  |        | Leased |        |  |      | 28,750  |  |  | Parts, service and used equipment              
|Broussard, Louisiana          |  |        | Owned  |        |  |      | 74,402  |  |  | Production and processing equipment fabrication
|Calgary, Alberta, Canada      |  |        | Owned  |        |  |      | 97,250  |  |  | Production and processing equipment fabrication
|Columbus, Texas               |  |        | Owned  |        |  |      | 219,552 |  |  | Production and processing equipment fabrication
|Corpus Christi, Texas         |  |        | Owned  |        |  |      | 11,000  |  |  | Production and processing equipment fabrication
|Dubai, UAE                    |  |        | Owned  |        |  |      | 106,218 |  |  | Production and processing equipment fabrication
|Hamriyah Free Zone, UAE       |  |        | Owned  |        |  |      | 52,474  |  |  | Production and processing equipment fabrication
|Mantova, Italy                |  |        | Owned  |        |  |      | 680,484 |  |  | Production and processing equipment fabrication
|Tulsa, Oklahoma               |  |        | Owned  |        |  |      | 40,100  |  |  | Production and processing equipment fabrication
|Victoria, Texas               |  |        | Owned  |        |  |      | 50,506  |  |  | Production and processing equipment fabrication



5



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|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings






PART II







|        |                                                                          
|------- | -------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity and Related
    Stockholder Matters





Securities Authorized for Issuance Under Equity Compensation
Plans






6



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations



Overview








| |                       
| | ----------------------
| | Impact of Rapid Growth





7



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| |                       
| | ----------------------
| | Management Initiatives





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Successfully implementing our new organizational
    structure. HCLP has developed three U.S. and four
    international geographic business units (GBUs). Our
    GBU managers have been given the authority to operate their
    business unit with profit and loss responsibility. Equally
    important, the GBU structure allows us to be closer to our
    customers in the key regions of the world in which we operate
    and the ability to react more timely as new opportunities arise.
    This allows us to better provide our full offering of products
    and services to our clients on a local basis.                                                                                                                                                                                                                                                
|
| |  | Expanding existing products and services into new
    markets. While continuing to take advantage of the promising
    growth opportunities presented to us in our traditional U.S. and
    Latin America markets, we are committed to establishing a
    presence in new, emerging areas for natural gas development.
    During the year we opened offices in Nigeria, Russia, and the
    Middle East. Long term, we believe there are tremendous growth
    opportunities in these markets, especially for a broader scope
    of HCLPs products and services. We believe our GBU
    structure will enhance our ability to deliver into these
    emerging markets.                                                                                                                                                                                                 
|
| |  | Moving beyond compression. We have continued to develop
    and deliver products and services that extend beyond the rental
    of compression equipment. As we move forward, we are seeing new
    opportunities driven more by our ability to deliver a total
    solution rather than just a single product. A total solution
    will typically incorporate multiple HCLP product offerings,
    including compression, production and/or processing equipment,
    engineering, installation, and operating services.                                                                                                                                                                                                                                                                                                                                                
|
| |  | Focused approach to core operations. In an effort to
    intensify our focus on our core business, during 2004 we sold
    our used equipment business, a gas-driven power generation
    turbine, two fabrication facilities, and our Canadian
    compression rental operations, generating net cash proceeds of
    approximately $77.6 million that was utilized to reduce our
    debt. In 2003, we sold our interests in two non-oilfield power
    generation facilities for approximately $27.2 million,
    consisting of $6.4 million in cash, $3.3 million in
    notes (of which $2.8 matured and was paid in 2004 and $0.5
    matures in 2005) and our release from a capital lease that had
    an outstanding balance of approximately $17.5 million.
    These businesses or assets were sold because they were not core
    to our long-term objectives.
|
| |  | Maintaining a commitment to capital discipline and debt
    reduction. For 2004, HCLP had capital expenditures,
    including business acquisitions, of $90.5 million compared
    to $157.5 million in 2003 and $259.6 million in 2002.
    Additionally, during 2004 Hanover and HCLP reduced its
    consolidated debt and compressor lease obligations by
    approximately $149.1 million. Hanover and HCLP are
    committed to continuing to reduce our leverage and to manage our
    capital under a disciplined, return-focused approach. While we
    plan to spend more in 2005 on growth opportunities, we intend
    this capital spending to be balanced with debt reduction from
    cash flow and to be approved under strict return-on-capital
    guidelines.                                                                                          





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Develop international opportunities. International
    markets continue to represent the greatest growth opportunity
    for our business. We believe that these markets are underserved
    in the area of the products and services we offer. In addition,
    we typically see higher risk adjusted returns in international
    markets relative to the United States. We intend to allocate
    additional resources toward international markets, to open
    offices abroad, where appropriate, and to move idle
    U.S. units into service in international markets, where
    applicable.
|
| |  | Focus on process improvement. We believe we are well
    positioned to grow our business organically and to capitalize
    upon several existing opportunities in order to generate
    increasing returns on the                                                                                                                                                                                                                                                                                                                                                                                  

8



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | capital we have deployed. We intend to take advantage of our
    recently implemented enterprise resource planning system
    platform to help us better evaluate our markets and business
    opportunities and make more informed and timely decisions. We
    plan to develop a more disciplined and systematic approach to
    evaluating return on capital, exercising cost controls and
    operating and managing our business. In addition, we will
    continue to take the best practices from across our organization
    and formalizing these practices into common company-wide
    standards that we expect will bring improved operating and
    financial performance.
|
| |  | Continue our capital discipline. We plan to continue our
    capital discipline by lowering the working capital we have
    deployed and reducing our substantial level of debt with both
    excess operating cash flow and proceeds from asset sales. We are
    also focused on improving the management of our working capital
    by lowering the number of days outstanding for our accounts
    receivable and reducing inventory levels. To reduce debt,
    Hanover and HCLP are committed to under-spending cash flow.
    During 2004, we used cash flows from operations and asset sales
    to decrease our outstanding debt by approximately
    $149.1 million.         
|
| |  | Continue to improve our U.S. fleet utilization. By
    limiting the addition of new units, moving idle U.S. units
    into service in international markets and retiring less
    profitable units, we plan to continue to improve our
    U.S. fleet utilization.                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Increase prices selectively for our U.S. rental
    business. In early 2003, we began to selectively introduce
    price increases for our U.S. compression rental business.
    Such price increases, along with a slight improvement in market
    conditions, resulted in a 5% increase in revenue from our
    U.S. rentals business in the year ended December 31,
    2004 as compared to the year ended December 31, 2003. We
    are in the process of implementing additional price increases
    for our U.S. compression rental business as market conditions
    allow.                                                                                                    



| |                    
| | -------------------
| | Industry Conditions







| |                   
| | ------------------
| | Summary of Results

Net losses.


9



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Results by Segment.


|                           |                                                 |                          |           |         |   |      |           |         |   |   |           |         |  
|-------------------------- | ----------------------------------------------- | ------------------------ | --------- | ------- | - | ---- | --------- | ------- | - | - | --------- | ------- | -
|                           |                                                 | Years ended December 31,
|                           |                                                 |                         
|                           |                                                 | 2004                     |           | 2003    |   | 2002
|                           |                                                 |                          |           |         |   |     
|Revenues and other income: |                                                 |                          |           |         |   |      |           |         |   |   |           |        
|                           | U.S. rentals                                    |                          | $         | 341,570 |   |      | $         | 324,186 |   |   | $         | 328,600 |  
|                           | International rentals                           |                          |           | 214,598 |   |      |           | 191,301 |   |   |           | 175,337 |  
|                           | Parts, service and used equipment               |                          |           | 180,321 |   |      |           | 164,935 |   |   |           | 223,685 |  
|                           | Compressor and accessory fabrication            |                          |           | 158,629 |   |      |           | 106,896 |   |   |           | 114,009 |  
|                           | Production and processing equipment fabrication |                          |           | 270,284 |   |      |           | 260,660 |   |   |           | 149,656 |  
|                           | Equity in income of non-consolidated affiliate  |                          |           | 19,780  |   |      |           | 23,014  |   |   |           | 18,554  |  
|                           | Other                                           |                          |           | 3,623   |   |      |           | 4,088   |   |   |           | 3,600   |  
|                           |                                                 |                          |           |         |   |      |           |         |   |   |           |        
|                           |                                                 | $                        | 1,188,805 |         |   | $    | 1,075,080 |         |   | $ | 1,013,441 |        
|                           |                                                 |                          |           |         |   |      |           |         |   |   |           |        
|Expenses:                  |                                                 |                          |           |         |   |      |           |         |   |   |           |        
|                           | U.S. rentals                                    |                          | $         | 144,580 |   |      | $         | 127,425 |   |   | $         | 122,172 |  
|                           | International rentals                           |                          |           | 63,953  |   |      |           | 61,875  |   |   |           | 52,996  |  
|                           | Parts, service and used equipment               |                          |           | 135,929 |   |      |           | 123,255 |   |   |           | 179,843 |  
|                           | Compressor and accessory fabrication            |                          |           | 144,832 |   |      |           | 96,922  |   |   |           | 99,446  |  
|                           | Production and processing equipment fabrication |                          |           | 242,251 |   |      |           | 234,203 |   |   |           | 127,442 |  
|                           |                                                 |                          |           |         |   |      |           |         |   |   |           |        
|                           |                                                 | $                        | 731,545   |         |   | $    | 643,680   |         |   | $ | 581,899   |        
|                           |                                                 |                          |           |         |   |      |           |         |   |   |           |        
|Gross profit margin:       |                                                 |                          |           |         |   |      |           |         |   |   |           |        
|                           | U.S. rentals                                    |                          |           | 58      | % |      |           | 61      | % |   |           | 63      | %
|                           | International rentals                           |                          |           | 70      | % |      |           | 68      | % |   |           | 70      | %
|                           | Parts, service and used equipment               |                          |           | 25      | % |      |           | 25      | % |   |           | 20      | %
|                           | Compressor and accessory fabrication            |                          |           | 9       | % |      |           | 9       | % |   |           | 13      | %
|                           | Production and processing equipment fabrication |                          |           | 10      | % |      |           | 10      | % |   |           | 15      | %



| |                    
| | -------------------
| | Belleli Acquisition





10



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| |                       
| | ----------------------
| | Facility Consolidation





| |                                                
| | -----------------------------------------------
| | Hanover Securities Litigation And Investigation





Critical Accounting Estimates




11



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| |                        
| | -----------------------
| | Allowances and Reserves







| |                                  
| | ---------------------------------
| | Long-Lived Assets and Investments







12



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| |           
| | ----------
| | Tax Assets









| |                                                              
| | -------------------------------------------------------------
| | Revenue Recognition  Percentage of Completion
    Accounting







13



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| |                             
| | ----------------------------
| | Contingencies and Litigation





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




| |        
| | -------
| | Summary





|                                                                             |       |   |       |       | 
|---------------------------------------------------------------------------- | ----- | - | ----- | ----- | 
|Write-off of deferred financing costs (in Depreciation and
    amortization) |       | $ | 1,686 |      
|Cancellation of interest rate swap (in Interest expense)                     |       |   | 2,028 |      
|                                                                             |       |   |       |      
|                                                                             | Total |   | $     | 3,714 | 
|                                                                             |       |   |       |      



|                                                                             |       |   |         |         | 
|---------------------------------------------------------------------------- | ----- | - | ------- | ------- | 
|Rental fleet asset impairment (in Depreciation and amortization)             |       | $ | 14,334  |        
|Cumulative effect of accounting change-FIN 46                                |       |   | 133,707 |        
|Belleli goodwill impairment (in Goodwill impairment)                         |       |   | 35,466  |        
|Write-off of deferred financing costs (in Depreciation and
    amortization) |       |   | 2,461   |        
|Loss on sale/write-down of discontinued operations                           |       |   | 21,617  |        
|                                                                             |       |   |         |        
|                                                                             | Total |   | $       | 207,585 | 
|                                                                             |       |   |         |        

14



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| |                         
| | ------------------------
| | Business Segment Results

U.S. Rentals




|                  |  |                          |         |          |  |            |         |  |  |  |      | 
|----------------- |  | ------------------------ | ------- | -------- |  | ---------- | ------- |  |  |  | ---- | 
|                  |  | Years Ended December 31, |         |         
|                  |  |                          |         | Increase
|                  |  | 2004                     |         | 2003     |  | (Decrease)
|                  |  |                          |         |          |  |           
|Revenue           |  | $                        | 341,570 |          |  | $          | 324,186 |  |  |  | 5%   | 
|Operating expense |  |                          | 144,580 |          |  |            | 127,425 |  |  |  | 13%  | 
|                  |  |                          |         |          |  |            |         |  |  |  |      | 
|Gross profit      |  | $                        | 196,990 |          |  | $          | 196,761 |  |  |  | 0%   | 
|Gross margin      |  |                          | 58%     |          |  |            | 61%     |  |  |  | (3)% | 



International Rentals




|                  |  |                          |         |          |  |            |         |  |  |  |     | 
|----------------- |  | ------------------------ | ------- | -------- |  | ---------- | ------- |  |  |  | --- | 
|                  |  | Years Ended December 31, |         |         
|                  |  |                          |         | Increase
|                  |  | 2004                     |         | 2003     |  | (Decrease)
|                  |  |                          |         |          |  |           
|Revenue           |  | $                        | 214,598 |          |  | $          | 191,301 |  |  |  | 12% | 
|Operating expense |  |                          | 63,953  |          |  |            | 61,875  |  |  |  | 3%  | 
|                  |  |                          |         |          |  |            |         |  |  |  |     | 
|Gross profit      |  | $                        | 150,645 |          |  | $          | 129,426 |  |  |  | 16% | 
|Gross margin      |  |                          | 70%     |          |  |            | 68%     |  |  |  | 2%  | 



Parts, Service and Used Equipment




|                  |  |                          |         |          |  |            |         |  |  |  |     | 
|----------------- |  | ------------------------ | ------- | -------- |  | ---------- | ------- |  |  |  | --- | 
|                  |  | Years Ended December 31, |         |         
|                  |  |                          |         | Increase
|                  |  | 2004                     |         | 2003     |  | (Decrease)
|                  |  |                          |         |          |  |           
|Revenue           |  | $                        | 180,321 |          |  | $          | 164,935 |  |  |  | 9%  | 
|Operating expense |  |                          | 135,929 |          |  |            | 123,255 |  |  |  | 10% | 
|                  |  |                          |         |          |  |            |         |  |  |  |     | 
|Gross profit      |  | $                        | 44,392  |          |  | $          | 41,680  |  |  |  | 7%  | 
|Gross margin      |  |                          | 25%     |          |  |            | 25%     |  |  |  | 0%  | 



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Compression and Accessory Fabrication




|                  |  |                          |         |          |  |            |         |  |  |  |     | 
|----------------- |  | ------------------------ | ------- | -------- |  | ---------- | ------- |  |  |  | --- | 
|                  |  | Years Ended December 31, |         |         
|                  |  |                          |         | Increase
|                  |  | 2004                     |         | 2003     |  | (Decrease)
|                  |  |                          |         |          |  |           
|Revenue           |  | $                        | 158,629 |          |  | $          | 106,896 |  |  |  | 48% | 
|Operating Expense |  |                          | 144,832 |          |  |            | 96,922  |  |  |  | 49% | 
|                  |  |                          |         |          |  |            |         |  |  |  |     | 
|Gross Profit      |  | $                        | 13,797  |          |  | $          | 9,974   |  |  |  | 38% | 
|Gross Margin      |  |                          | 9%      |          |  |            | 9%      |  |  |  | 0%  | 



Production and Processing Equipment Fabrication




|                  |  |                          |         |          |  |            |         |  |  |  |    | 
|----------------- |  | ------------------------ | ------- | -------- |  | ---------- | ------- |  |  |  | -- | 
|                  |  | Years Ended December 31, |         |         
|                  |  |                          |         | Increase
|                  |  | 2004                     |         | 2003     |  | (Decrease)
|                  |  |                          |         |          |  |           
|Revenue           |  | $                        | 270,284 |          |  | $          | 260,660 |  |  |  | 4% | 
|Operating expense |  |                          | 242,251 |          |  |            | 234,203 |  |  |  | 3% | 
|                  |  |                          |         |          |  |            |         |  |  |  |    | 
|Gross profit      |  | $                        | 28,033  |          |  | $          | 26,457  |  |  |  | 6% | 
|Gross margin      |  |                          | 10%     |          |  |            | 10%     |  |  |  | 0% | 





| |              
| | -------------
| | Other Revenue





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| |         
| | --------
| | Expenses











|                    |                      |              |       |       |  |   |        |        |  
|------------------- | -------------------- | ------------ | ----- | ----- |  | - | ------ | ------ | -
|                    |                      | Year Ended  
|                    |                      | December 31,
|                    |                      |             
|                    |                      | 2004         |       | 2003 
|                    |                      |              |       |      
|Italy               |                      | $            | 4,170 |       |  | $ | 221    |       
|Argentina           |                      |              | (624  | )     |  |   | 494    |       
|Venezuela           |                      |              | 1,165 |       |  |   | (2,443 | )     
|All other countries |                      |              | 511   |       |  |   | (820   | )     
|                    |                      |              |       |       |  |   |        |       
|                    | Exchange gain (loss) |              | $     | 5,222 |  |   | $      | (2,548 | )
|                    |                      |              |       |       |  |   |        |       





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







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









18



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| |                                       
| | --------------------------------------
| | Cumulative Effect of Accounting Change







Year Ended December 31, 2003 Compared to Year Ended
December 31, 2002




| |        
| | -------
| | Summary









|                                                                             |       |   |         |         | 
|---------------------------------------------------------------------------- | ----- | - | ------- | ------- | 
|Rental fleet asset impairment (in Depreciation and amortization)             |       | $ | 14,334  |        
|Cumulative effect of accounting change-FIN 46                                |       |   | 133,707 |        
|Belleli goodwill impairment (in Goodwill impairment)                         |       |   | 35,466  |        
|Write-off of deferred financing costs (in Depreciation and
    amortization) |       |   | 2,461   |        
|Loss on sale/write-down of discontinued operations                           |       |   | 21,617  |        
|                                                                             |       |   |         |        
|                                                                             | Total |   | $       | 207,585 | 
|                                                                             |       |   |         |        

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|                                                                                                      |       |   |        |         | 
|----------------------------------------------------------------------------------------------------- | ----- | - | ------ | ------- | 
|Inventory reserves (in Parts and service and used equipment
    expense)                              |       | $ | 6,800  |        
|Severance and other charges (in Selling, general and
    administrative expense)                      |       |   | 6,160  |        
|Write-off of idle equipment and assets to be sold or abandoned
    (in Depreciation and amortization) |       |   | 34,485 |        
|Goodwill impairments (in Goodwill impairment)                                                         |       |   | 52,103 |        
|Non-consolidated affiliate write-downs/charges (in Other expense)                                     |       |   | 15,950 |        
|Write-down of discontinued operations                                                                 |       |   | 58,282 |        
|Note receivable reserves (in Other expense)                                                           |       |   | 8,454  |        
|Write-off of abandoned purchase option (in Other expense)                                             |       |   | 500    |        
|                                                                                                      |       |   |        |        
|                                                                                                      | Total |   | $      | 182,734 | 
|                                                                                                      |       |   |        |        



| |                         
| | ------------------------
| | Business Segment Results

U.S. Rentals




|                  |  |                          |         |          |  |            |         |  |  |  |      | 
|----------------- |  | ------------------------ | ------- | -------- |  | ---------- | ------- |  |  |  | ---- | 
|                  |  | Years Ended December 31, |         |         
|                  |  |                          |         | Increase
|                  |  | 2003                     |         | 2002     |  | (Decrease)
|                  |  |                          |         |          |  |           
|Revenue           |  | $                        | 324,186 |          |  | $          | 328,600 |  |  |  | (1)% | 
|Operating expense |  |                          | 127,425 |          |  |            | 122,172 |  |  |  | 4%   | 
|                  |  |                          |         |          |  |            |         |  |  |  |      | 
|Gross profit      |  | $                        | 196,761 |          |  | $          | 206,428 |  |  |  | (5)% | 
|Gross margin      |  |                          | 61%     |          |  |            | 63%     |  |  |  | (2)% | 



International Rentals




|                  |  |                          |         |          |  |            |         |  |  |  |      | 
|----------------- |  | ------------------------ | ------- | -------- |  | ---------- | ------- |  |  |  | ---- | 
|                  |  | Years Ended December 31, |         |         
|                  |  |                          |         | Increase
|                  |  | 2003                     |         | 2002     |  | (Decrease)
|                  |  |                          |         |          |  |           
|Revenue           |  | $                        | 191,301 |          |  | $          | 175,337 |  |  |  | 9%   | 
|Operating expense |  |                          | 61,875  |          |  |            | 52,996  |  |  |  | 17%  | 
|                  |  |                          |         |          |  |            |         |  |  |  |      | 
|Gross profit      |  | $                        | 129,426 |          |  | $          | 122,341 |  |  |  | 6%   | 
|Gross margin      |  |                          | 68%     |          |  |            | 70%     |  |  |  | (2)% | 





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Parts, Service and Used Equipment




|                  |  |              |         |          |  |            |         |  |  |  |       | 
|----------------- |  | ------------ | ------- | -------- |  | ---------- | ------- |  |  |  | ----- | 
|                  |  | Years Ended  |         |         
|                  |  | December 31, |         |         
|                  |  |              |         | Increase
|                  |  | 2003         |         | 2002     |  | (Decrease)
|                  |  |              |         |          |  |           
|Revenue           |  | $            | 164,935 |          |  | $          | 223,685 |  |  |  | (26)% | 
|Operating expense |  |              | 123,255 |          |  |            | 179,843 |  |  |  | (31)% | 
|                  |  |              |         |          |  |            |         |  |  |  |       | 
|Gross profit      |  | $            | 41,680  |          |  | $          | 43,842  |  |  |  | (5)%  | 
|Gross margin      |  |              | 25%     |          |  |            | 20%     |  |  |  | 5%    | 



Compression and Accessory Fabrication




|                  |  |                          |         |          |  |            |         |  |  |  |       | 
|----------------- |  | ------------------------ | ------- | -------- |  | ---------- | ------- |  |  |  | ----- | 
|                  |  | Years Ended December 31, |         |         
|                  |  |                          |         | Increase
|                  |  | 2003                     |         | 2002     |  | (Decrease)
|                  |  |                          |         |          |  |           
|Revenue           |  | $                        | 106,896 |          |  | $          | 114,009 |  |  |  | (6)%  | 
|Operating Expense |  |                          | 96,922  |          |  |            | 99,446  |  |  |  | (3)%  | 
|                  |  |                          |         |          |  |            |         |  |  |  |       | 
|Gross Profit      |  | $                        | 9,974   |          |  | $          | 14,563  |  |  |  | (32)% | 
|Gross Margin      |  |                          | 9%      |          |  |            | 13%     |  |  |  | (4)%  | 



Production and Processing Equipment Fabrication




|                  |  |                          |         |          |  |            |         |  |  |  |      | 
|----------------- |  | ------------------------ | ------- | -------- |  | ---------- | ------- |  |  |  | ---- | 
|                  |  | Years Ended December 31, |         |         
|                  |  |                          |         | Increase
|                  |  | 2003                     |         | 2002     |  | (Decrease)
|                  |  |                          |         |          |  |           
|Revenue           |  | $                        | 260,660 |          |  | $          | 149,656 |  |  |  | 74%  | 
|Operating expense |  |                          | 234,203 |          |  |            | 127,442 |  |  |  | 84%  | 
|                  |  |                          |         |          |  |            |         |  |  |  |      | 
|Gross profit      |  | $                        | 26,457  |          |  | $          | 22,214  |  |  |  | 19%  | 
|Gross margin      |  |                          | 10%     |          |  |            | 15%     |  |  |  | (5)% | 



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| |              
| | -------------
| | Other Revenue





| |         
| | --------
| | Expenses











22



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



23



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





| |                                                      
| | -----------------------------------------------------
| | Cumulative Effect of Accounting Change for
    FIN 46



Leasing Transactions and Accounting Change for FIN 46








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|             |  |           |         |                  |  |            |                |  |  |   |        | 
|------------ |  | --------- | ------- | ---------------- |  | ---------- | -------------- |  |  | - | ------ | 
|             |  | Residual  |         |                  |  | Minority  
|             |  | Value     |         | Lease            |  | Interest  
|             |  | Guarantee |         | Termination Date |  | Obligation
|Lease        |  |           |         |                  |  |           
|October 2000 |  | $         | 47,482  |                  |  |            | October 2005   |  |  | $ | 1,728  | 
|August 2001  |  |           | 232,000 |                  |  |            | September 2008 |  |  |   | 9,300  | 
|August 2001  |  |           | 175,000 |                  |  |            | September 2011 |  |  |   | 7,750  | 
|             |  |           |         |                  |  |            |                |  |  |   |        | 
|             |  | $         | 454,482 |                  |  |            |                |  |  | $ | 18,778 | 
|             |  |           |         |                  |  |            |                |  |  |   |        | 









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Liquidity and Capital Resources






|                                                             |  |      |          |      |  |   |         |  
|------------------------------------------------------------ |  | ---- | -------- | ---- |  | - | ------- | -
|For the Year Ended December 31:                              |  | 2004 |          | 2003
|                                                             |  |      |          |     
|Net cash provided by (used in) continuing operations:        |  |      |          |      |  |   |         |  
|Operating activities                                         |  | $    | 141,812  |      |  | $ | 171,825 |  
|Investing activities                                         |  |      | (61,818  | )    |  |   | (70,866 | )
|Financing activities                                         |  |      | (180,440 | )    |  |   | (87,680 | )
|Effect of exchange rate changes on cash and cash equivalents |  |      | 841      |      |  |   | 800     |  
|Net cash provided by discontinued operations                 |  |      | 81,062   |      |  |   | 23,529  |  
|                                                             |  |      |          |      |  |   |         |  
|Net change in cash and cash equivalents                      |  | $    | (18,543  | )    |  | $ | 37,608  |  
|                                                             |  |      |          |      |  |   |         |  











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|                                                |                                                |                      |           |         |           |           |         |           |        |            |         |         |         |   |         |         |         |   |         |         |         | 
|----------------------------------------------- | ---------------------------------------------- | -------------------- | --------- | ------- | --------- | --------- | ------- | --------- | ------ | ---------- | ------- | ------- | ------- | - | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                                |                                                | Total                |           | 2005    |           | 2006-2007 |         | 2008-2009 |        | Thereafter
|Cash Contractual Obligations:                   |                                                |                      |           |         |           |           |         |           |        |           
|                                                |                                                | (In thousands)      
|Due to General Partner                          |                                                |                      |           |         |           |           |         |           |        |            |         |         |         |   |         |         |         |   |         |        
|                                                | 4.75% convertible senior notes due 2014        |                      | $         | 143,750 |           |           | $       |          |        |            | $       |        |         |   | $       |        |         |   | $       | 143,750 |        
|                                                | 8.625% senior notes due 2010                   |                      |           | 200,000 |           |           |         |          |        |            |         |        |         |   |         |        |         |   |         | 200,000 |        
|                                                | 9.0% senior notes due 2014                     |                      |           | 200,000 |           |           |         |          |        |            |         |        |         |   |         |        |         |   |         | 200,000 |        
|                                                | 11% zero coupon subordinated notes due 2007(2) |                      |           | 262,622 |           |           |         |          |        |            |         | 262,622 |         |   |         |        |         |   |         |        |        
|Long term Debt(1)                               |                                                |                      |           |         |           |           |         |           |        |            |         |         |         |   |         |         |         |   |         |        
|                                                | Bank credit facility due 2006                  |                      |           | 7,000   |           |           |         |          |        |            |         | 7,000   |         |   |         |        |         |   |         |        |        
|                                                | Other long-term debt                           |                      |           | 3,178   |           |           |         | 1,430     |        |            |         | 1,526   |         |   |         | 94      |         |   |         | 128     |        
|                                                | 2000B equipment lease notes, due 2005(3)       |                      |           | 55,861  |           |           |         | 55,861    |        |            |         |        |         |   |         |        |         |   |         |        |        
|                                                | 2001A equipment lease notes, due 2008          |                      |           | 300,000 |           |           |         |          |        |            |         |        |         |   |         | 300,000 |         |   |         |        |        
|                                                | 2001B equipment lease notes, due 2011          |                      |           | 250,000 |           |           |         |          |        |            |         |        |         |   |         |        |         |   |         | 250,000 |        
|                                                |                                                |                      |           |         |           |           |         |           |        |            |         |         |         |   |         |         |         |   |         |        
|                                                |                                                | Total long-term debt |           |         | 1,422,411 |           |         |           | 57,291 |            |         |         | 271,148 |   |         |         | 300,094 |   |         |         | 793,878 | 
|Interest on long-term debt(4)                   |                                                |                      | 578,011   |         |           |           | 92,769  |           |        |            | 181,220 |         |         |   | 148,469 |         |         |   | 155,553 |        
|Minority interest obligations(1)(5)             |                                                |                      | 18,778    |         |           |           | 1,728   |           |        |            |        |         |         |   | 9,300   |         |         |   | 7,750   |        
|Purchase commitments                            |                                                |                      | 137,464   |         |           |           | 134,899 |           |        |            | 2,502   |         |         |   | 60      |         |         |   | 3       |        
|Facilities and other equipment operating leases |                                                |                      | 9,371     |         |           |           | 2,955   |           |        |            | 3,883   |         |         |   | 1,671   |         |         |   | 862     |        
|                                                |                                                |                      |           |         |           |           |         |           |        |            |         |         |         |   |         |         |         |   |         |        
|Total contractual cash obligations              |                                                | $                    | 2,166,035 |         |           | $         | 289,642 |           |        | $          | 458,753 |         |         | $ | 459,594 |         |         | $ | 958,046 |        
|                                                |                                                |                      |           |         |           |           |         |           |        |            |         |         |         |   |         |         |         |   |         |        






|    |                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For more information on our long-term debt and minority interest
    obligations, see Notes 11, 12 and 13 to the Notes to
    Consolidated Financial Statements in Item 15 of this
    Form 10-K.                                                                                                                                        
|   
|(2) | Balance payable at December 31, 2004, including 11%
    discount per annum, was $206.5 million.                                                                                                                                                                                                                                          
|   
|(3) | During February 2005, we repaid the 2000B compressor equipment
    lease using borrowings from our bank credit facility.                                                                                                                                                                                                                 
|   
|(4) | Interest amounts calculated using interest rates in effect as of
    December 31, 2004, including the effect of interest rate
    swaps. The interest amounts do not include original issue
    discount that accretes under our 11% zero coupon subordinated
    notes due 2007.                                                        
|   
|(5) | Represents third party equity interest of lease equipment trusts
    that was required to be consolidated into our financial
    statements. See Managements Discussion and Analysis
    of Financial Condition and Results of Operations 
    Leasing Transactions and Accounting Change for FIN 46
    in Item 7 of this Form 10-K.



Debt Refinancing.


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Bank Credit Facility.




28



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Credit Ratings.


|                                                                        |  |         |  |          |        | 
|----------------------------------------------------------------------- |  | ------- |  | -------- | ------ | 
|                                                                        |  |         |  | Standard
|                                                                        |  | Moodys |  | & Poors
|                                                                        |  |         |  |         
|Outlook                                                                 |  | Stable  |  |          | Stable | 
|Senior implied rating                                                   |  | B1      |  |          | BB-    | 
|Liquidity Rating                                                        |  | SGL-3   |  |          |       | 
|Bank credit facility due December 2006                                  |  | Ba3     |  |          |       | 
|2001A equipment lease notes, interest at 8.5%, due September 2008       |  | B2      |  |          | B+     | 
|2001B equipment lease notes, interest at 8.8%, due September 2011       |  | B2      |  |          | B+     | 
|4.75% convertible senior notes due 2008                                 |  | B3      |  |          | B      | 
|4.75% convertible senior notes due 2014                                 |  | B3      |  |          | B      | 
|8.625% senior notes due 2010                                            |  | B3      |  |          | B      | 
|9.0% senior notes due 2014                                              |  | B3      |  |          | B      | 
|Zero coupon subordinated notes, interest at 11%, due
    March 31, 2007 |  | Caa1    |  |          | B-     | 
|7.25% convertible subordinated notes due 2029*                          |  | Caa1    |  |          | B-     | 






|  |                                                                                                                                                           
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Rating is on the Mandatorily Redeemable Convertible Preferred
    Securities issued by Hanover Compressor Capital Trust, a trust
    sponsored by Hanover.



International Operations.




|                    |                      |              |       |       |  |   |        |        |  
|------------------- | -------------------- | ------------ | ----- | ----- |  | - | ------ | ------ | -
|                    |                      | Year Ended  
|                    |                      | December 31,
|                    |                      |             
|                    |                      | 2004         |       | 2003 
|                    |                      |              |       |      
|Italy               |                      | $            | 4,170 |       |  | $ | 221    |       
|Argentina           |                      |              | (624  | )     |  |   | 494    |       
|Venezuela           |                      |              | 1,165 |       |  |   | (2,443 | )     
|All other countries |                      |              | 511   |       |  |   | (820   | )     
|                    |                      |              |       |       |  |   |        |       
|                    | Exchange gain (loss) |              | $     | 5,222 |  |   | $      | (2,548 | )
|                    |                      |              |       |       |  |   |        |       



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Derivative Financial Instruments.






|                         |  |               |                   |                  |  |                 |       |                   |  |   |         |  |  |   |        |  
|------------------------ |  | ------------- | ----------------- | ---------------- |  | --------------- | ----- | ----------------- |  | - | ------- |  |  | - | ------ | -
|                         |  |               |                   |                  |  |                 |       | Fair Value of    
|                         |  |               |                   | Fixed Rate to be |  |                 |       | Swap at          
|Floating Rate to be Paid |  | Maturity Date |                   | Received         |  | Notional Amount |       | December 31, 2004
|                         |  |               |                   |                  |  |                 |       |                  
|Six Month LIBOR +4.72%   |  |               | December 15, 2010 |                  |  |                 | 8.625 | %                 |  | $ | 100,000 |  |  | $ | (3,254 | )
|Six Month LIBOR +4.64%   |  |               | December 15, 2010 |                  |  |                 | 8.625 | %                 |  | $ | 100,000 |  |  | $ | (2,742 | )





|             |  |               |                  |                       |  |                 |        |                   |  |   |         |  |  |   |      |  
|------------ |  | ------------- | ---------------- | --------------------- |  | --------------- | ------ | ----------------- |  | - | ------- |  |  | - | ---- | -
|             |  |               |                  |                       |  |                 |        | Fair Value of    
|             |  |               |                  |                       |  |                 |        | Swap at          
|Lease        |  | Maturity Date |                  | Fixed Rate to be Paid |  | Notional Amount |        | December 31, 2004
|             |  |               |                  |                       |  |                 |        |                  
|March 2000   |  |               | March 11, 2005   |                       |  |                 | 5.2550 | %                 |  | $ | 100,000 |  |  | $ | (527 | )
|August 2000  |  |               | March 11, 2005   |                       |  |                 | 5.2725 | %                 |  | $ | 100,000 |  |  | $ | (534 | )
|October 2000 |  |               | October 26, 2005 |                       |  |                 | 5.3975 | %                 |  | $ | 100,000 |  |  | $ |     |  



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Off-Balance Sheet Arrangements




|                        |  |      |      |                   |  |   |        | 
|----------------------- |  | ---- | ---- | ----------------- |  | - | ------ | 
|                        |  |      |      | Maximum Potential
|                        |  |      |      | Undiscounted     
|                        |  |      |      | Payments as of   
|                        |  | Term |      | December 31, 2004
|                        |  |      |      |                  
|Simco/Harwat Consortium |  |      | 2005 |                   |  | $ | 12,257 | 
|El Furrial              |  |      | 2013 |                   |  | $ | 36,018 | 



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Factors That May Affect Our Financial Condition and Future
Results




| |                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have a substantial amount of debt, including our
    compression equipment lease obligations, that could limit our
    ability to fund future growth and operations and increase our
    exposure during adverse economic conditions.







| |   |                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | make it more difficult for us to satisfy our contractual
    obligations;                                                                                                                                                             
|
| |  | increase our vulnerability to general adverse economic and
    industry conditions;                                                                                                                                                   
|
| |  | limit our ability to fund future working capital, capital
    expenditures, acquisitions or other general corporate
    requirements;                                                                                                 
|
| |  | increase our vulnerability to interest rate fluctuations because
    the interest payments on a portion of our debt are at, and a
    portion of our compression equipment leasing expense is based
    upon, variable interest rates;
|
| |  | limit our flexibility in planning for, or reacting to, changes
    in our business and our industry;                                                                                                                                  
|
| |  | place us at a disadvantage compared to our competitors that have
    less debt or fewer operating lease commitments; and                                                                                                              
|
| |  | limit our ability to borrow additional funds.                                                                                                                                                                                         



| |                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------
| | We will need to generate a significant amount of cash to
    service our debt, to fund working capital and to pay our debts
    as they come due.









34



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| |                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The documents governing our outstanding debt, including
    our compression equipment lease obligations, contain financial
    and other restrictive covenants. Failing to comply with those
    covenants could result in an event of default which, if not
    cured or waived, could have a material adverse effect on
    us.





| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | incur additional debt or issue guarantees;                                    
|
| |  | create liens on our assets;                                                   
|
| |  | engage in mergers, consolidations and dispositions of assets;                 
|
| |  | enter into additional operating leases;                                       
|
| |  | enter into derivative transactions;                                           
|
| |  | make certain investments or restricted payments;                              
|
| |  | make distributions to Hanover by HCLP other than under certain
    conditions;
|
| |  | make investments, loans or advancements to certain of our
    subsidiaries;   
|
| |  | prepay or modify our debt facilities;                                         
|
| |  | enter into transactions with affiliates; or                                   
|
| |  | enter into sale leaseback transactions.                                       







35



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| |                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have significant leverage relative to our total
    capitalization, which could result in a further downgrade in our
    credit rating or other adverse consequences if we do not reduce
    our leverage.



|                                                                        |  |         |        |            |  |  |        | 
|----------------------------------------------------------------------- |  | ------- | ------ | ---------- |  |  | ------ | 
|                                                                        |  |         |        | Standard &
|                                                                        |  | Moodys |        | Poors    
|                                                                        |  |         |        |           
|Outlook                                                                 |  |         | Stable |            |  |  | Stable | 
|Senior implied rating                                                   |  |         | B1     |            |  |  | BB-    | 
|Liquidity rating                                                        |  |         | SGL-3  |            |  |  |       | 
|Bank credit facility due December 2006                                  |  |         | Ba3    |            |  |  |       | 
|2001A equipment lease notes, interest at 8.5%, due September 2008       |  |         | B2     |            |  |  | B+     | 
|2001B equipment lease notes, interest at 8.8%, due September 2011       |  |         | B2     |            |  |  | B+     | 
|4.75% convertible senior notes due 2008                                 |  |         | B3     |            |  |  | B      | 
|4.75% convertible senior notes due 2014                                 |  |         | B3     |            |  |  | B      | 
|8.625% senior notes due 2010                                            |  |         | B3     |            |  |  | B      | 
|9.0% senior notes due 2014                                              |  |         | B3     |            |  |  | B      | 
|Zero coupon subordinated notes, interest at 11%, due
    March 31, 2007 |  |         | Caa1   |            |  |  | B-     | 
|7.25% convertible subordinated notes due 2029*                          |  |         | Caa1   |            |  |  | B-     | 






|  |                                                                                                                                                           
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Rating is on the Mandatorily Redeemable Convertible Preferred
    Securities issued by Hanover Compressor Capital Trust, a trust
    sponsored by Hanover.





| |                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are still in the process of improving our
    infrastructure capabilities, including our internal controls and
    procedures, which were strained by our rapid growth, to reduce
    the risk of future accounting and financial reporting
    problems.





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| |                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Unforeseen difficulties with the implementation or
    operation of our enterprise resource planning system could
    adversely affect our internal controls and our business.





| |                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------
| | We require a substantial amount of capital to expand our
    compressor rental fleet and our complementary businesses.





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| |                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our ability to substitute compression equipment under our
    compression equipment leases is limited and there are risks
    associated with reaching that limit prior to the expiration of
    the lease term.



|                |       |                       |      |               |  |             |       |               |  |                   |       |       |  |  |     |  |  |  |                |  | 
|--------------- | ----- | --------------------- | ---- | ------------- |  | ----------- | ----- | ------------- |  | ----------------- | ----- | ----- |  |  | --- |  |  |  | -------------- |  | 
|                |       |                       |      |               |  |             |       | Substitution  |  |                  
|                |       |                       |      |               |  |             |       | Limitation as |  |                  
|                |       | Value of              |      | Percentage of |  | Original    |       | Percentage of |  |                  
|                |       | Substituted           |      | Termination   |  | Termination |       | Termination   |  | Lease Termination
|Lease           |       | Equipment             |      | Value(1)      |  | Value(1)    |       | Value         |  | Date             
|                |       |                       |      |               |  |             |       |               |  |                  
|                |       | (dollars in millions)
|October 2000(2) |       | $                     | 24.6 |               |  |             | 14.3% |               |  | $                 | 172.6 |       |  |  | 25% |  |  |  | October 2005   | 
|August 2001     |       |                       | 33.8 |               |  |             | 10.9% |               |  |                   | 309.3 |       |  |  | 25% |  |  |  | September 2008 | 
|August 2001     |       |                       | 32.7 |               |  |             | 12.7% |               |  |                   | 257.7 |       |  |  | 25% |  |  |  | September 2011 | 
|                |       |                       |      |               |  |             |       |               |  |                   |       |       |  |  |     |  |  |  |                | 
|                | Total |                       | $    | 91.1          |  |             |       |               |  |                   | $     | 739.6 |  |  |     |  |  |  |                |  | 
|                |       |                       |      |               |  |             |       |               |  |                   |       |       |  |  |     |  |  |  |                | 






|    |                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------
|(1) | Termination value assumes all accrued rents paid before
    termination.                                                       
|   
|(2) | During February 2005, we repaid the October 2000 compressor
    equipment lease using borrowings from our bank credit facility.





| |                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A prolonged, substantial reduction in oil or gas prices,
    or prolonged instability in U.S. or global energy markets,
    could adversely affect our business.



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| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | There are many risks associated with conducting operations
    in international markets.





| |   |                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | difficulties in managing international operations;                                                                                                                                                     
|
| |  | unexpected changes in regulatory requirements;                                                                                                                                                         
|
| |  | tariffs and other trade barriers that may restrict our ability
    to enter into new markets;                                                                                                          
|
| |  | governmental actions that result in the deprivation of contract
    rights;                                                                                                                            
|
| |  | changes in political and economic conditions in the countries in
    which we operate, including civil uprisings, riots and terrorist
    acts, particularly with respect to our operations in Nigeria;
|
| |  | potentially adverse tax consequences;                                                                                                                                                                  
|
| |  | restrictions on repatriation of earnings or expropriation of
    property without fair compensation;                                                                                                   
|
| |  | difficulties in establishing new international offices and risks
    inherent in establishing new relationships in foreign countries;                                                                  
|
| |  | the burden of complying with the various laws and regulations in
    the countries in which we operate; and                                                                                            
|
| |  | fluctuations in currency exchange rates and the value of the
    U.S. dollar, particularly with respect to our operations in
    Argentina, Venezuela and Europe.                                      





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| |                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------
| | Political conditions and fluctuations in currency exchange
    rates in Italy, Argentina and Venezuela could adversely affect
    our business.







|                    |                      |              |       |       |  |   |        |        |  
|------------------- | -------------------- | ------------ | ----- | ----- |  | - | ------ | ------ | -
|                    |                      | Year Ended  
|                    |                      | December 31,
|                    |                      |             
|                    |                      | 2004         |       | 2003 
|                    |                      |              |       |      
|Italy               |                      | $            | 4,170 |       |  | $ | 221    |       
|Argentina           |                      |              | (624  | )     |  |   | 494    |       
|Venezuela           |                      |              | 1,165 |       |  |   | (2,443 | )     
|All other countries |                      |              | 511   |       |  |   | (820   | )     
|                    |                      |              |       |       |  |   |        |       
|                    | Exchange gain (loss) |              | $     | 5,222 |  |   | $      | (2,548 | )
|                    |                      |              |       |       |  |   |        |       





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| |                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Many of our compressor leases with customers have short
    initial terms, and we cannot be sure that the leases for these
    rental compressors will be renewed after the end of the initial
    lease term.





| |                                             
| | --------------------------------------------
| | We operate in a highly competitive industry.





| |                                                                                                 
| | ------------------------------------------------------------------------------------------------
| | Natural gas operations entail inherent risks that may
    result in substantial liability to us.





| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | Our ability to manage our business effectively will be
    weakened if we lose key personnel.





| |                                                                      
| | ---------------------------------------------------------------------
| | Our business is subject to a variety of governmental
    regulations.



41



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| |                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------
| | Our business has acquired facilities in the past which
    could subject us to future environmental liabilities.



42



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New Accounting Pronouncements










43



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Accounting
for Stock Issued to Employees,








44



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|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market
    Risk





|               |  |              |        |          |  |               |         |  |  |   |      |  
|-------------- |  | ------------ | ------ | -------- |  | ------------- | ------- |  |  | - | ---- | -
|               |  |              |        |          |  | Fair Value of
|               |  |              |        |          |  | the Swap at  
|               |  | Company Pays |        | Notional |  | December 31, 
|Maturity Date  |  | Fixed Rate   |        | Amount   |  | 2004         
|               |  |              |        |          |  |              
|March 11, 2005 |  |              | 5.2550 | %        |  | $             | 100,000 |  |  | $ | (527 | )
|March 11, 2005 |  |              | 5.2725 | %        |  | $             | 100,000 |  |  | $ | (534 | )



|                         |  |               |                   |            |  |          |       |               |  |   |         |  |  |   |        |  
|------------------------ |  | ------------- | ----------------- | ---------- |  | -------- | ----- | ------------- |  | - | ------- |  |  | - | ------ | -
|                         |  |               |                   |            |  |          |       | Fair Value of
|                         |  |               |                   | Fixed Rate |  |          |       | Swap at      
|                         |  |               |                   | to be      |  | Notional |       | December 31, 
|Floating Rate to be Paid |  | Maturity Date |                   | Received   |  | Amount   |       | 2004         
|                         |  |               |                   |            |  |          |       |              
|Six Month LIBOR +4.72%   |  |               | December 15, 2010 |            |  |          | 8.625 | %             |  | $ | 100,000 |  |  | $ | (3,254 | )
|Six Month LIBOR +4.64%   |  |               | December 15, 2010 |            |  |          | 8.625 | %             |  | $ | 100,000 |  |  | $ | (2,742 | )







45



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46



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|                    |                      |              |       |       |  |   |        |        |  
|------------------- | -------------------- | ------------ | ----- | ----- |  | - | ------ | ------ | -
|                    |                      | Year Ended  
|                    |                      | December 31,
|                    |                      |             
|                    |                      | 2004         |       | 2003 
|                    |                      |              |       |      
|Italy               |                      | $            | 4,170 |       |  | $ | 221    |       
|Argentina           |                      |              | (624  | )     |  |   | 494    |       
|Venezuela           |                      |              | 1,165 |       |  |   | (2,443 | )     
|All other countries |                      |              | 511   |       |  |   | (820   | )     
|                    |                      |              |       |       |  |   |        |       
|                    | Exchange gain (loss) |              | $     | 5,222 |  |   | $      | (2,548 | )
|                    |                      |              |       |       |  |   |        |       








|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|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 Controls.







|         |                  
|-------- | -----------------
|Item 9B. | Other Information



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|                    |  |                                                      |  |             |         |              |  |   |         | 
|------------------- |  | ---------------------------------------------------- |  | ----------- | ------- | ------------ |  | - | ------- | 
|                    |  |                                                      |  | Current     |         | 2004 Bonus  
|Name                |  | Position                                             |  | Base Salary |         | Paid in 2005
|                    |  |                                                      |  |             |         |             
|John E. Jackson     |  | President and Chief Executive Officer; Director      |  | $           | 540,000 |              |  | $ | 303,400 | 
|Gary M. Wilson      |  | Senior Vice President, General Counsel and Secretary |  | $           | 275,000 |              |  | $ | 108,000 | 
|Lee E. Beckelman    |  | Vice President and Chief Financial Officer           |  | $           | 250,000 |              |  | $ | 50,000  | 
|Anita H. Colglazier |  | Vice President  Controller                          |  | $           | 175,000 |              |  | $ | 43,000  | 
|Peter G. Schreck    |  | Vice President  Treasury and Planning               |  | $           | 185,000 |              |  | $ | 55,200  | 
|Stephen P. York     |  | Vice President  Investor Relations and Technology   |  | $           | 180,000 |              |  | $ | 54,800  | 
|Maxwell C. McDonald |  | Vice President  U.S. Operations                     |  | $           | 200,000 |              |  | $ | 56,500  | 
|Steve W. Muck       |  | Vice President  International Operations            |  | $           | 190,000 |              |  | $ | 58,000  | 
|Hilary S. Ware      |  | Vice President  Human Resources                     |  | $           | 210,000 |              |  | $ | 64,500  | 




PART III







|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accounting Fees and Services



|                      |  |                |       |         |  |   |       | 
|--------------------- |  | -------------- | ----- | ------- |  | - | ----- | 
|Types of Fees         |  | FY 2004        |       | FY 2003
|                      |  |                |       |        
|                      |  | (In thousands)
|Audit fees(a)         |  | $              | 5,265 |         |  | $ | 2,193 | 
|Audit-related fees(b) |  |                | 46    |         |  |   | 48    | 
|Tax fees(c)           |  |                | 498   |         |  |   | 1,119 | 
|All other fees(d)     |  |                | 2     |         |  |   | 26    | 
|                      |  |                |       |         |  |   |       | 
|Total fees            |  | $              | 5,811 |         |  | $ | 3,386 | 
|                      |  |                |       |         |  |   |       | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Audit fees include fees billed by PwC related to audits and
    reviews of financial statements that the Company is required to
    file with the SEC, audit of internal control over financial
    reporting, statutory audits of certain of the Companys
    subsidiaries financial statements as required under local
    regulations and other services which PwC provides as the
    Companys principal auditor including issuance of comfort
    letters and assistance with and review of documents filed with
    the SEC.
|   
|(b) | Audit related fees include fees billed by PwC related to
    employee benefit plan audits and consultations concerning
    financial accounting and reporting standards.                                                                                                                                                                                                                                                                                                                                                             
|   
|(c) | Tax fees include fees billed by PwC primarily related to tax
    compliance and consulting services.                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(d) | All other fees include fees billed by PwC related to software
    licensing agreements and financial systems design and
    implementation work performed prior to May 2003.                                                                                                                                                                                                                                                                                                                                                         



48



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de minimus





PART IV







|         |                                       
|-------- | --------------------------------------
|Item 15. | Exhibits, Financial Statement Schedule

Documents filed as a part of this report.




| |                                                                                                   
| | --------------------------------------------------------------------------------------------------
| | 1. Financial Statements.The following financial
    statements are filed as a part of this report.

|                                                        |  |  |      | 
|------------------------------------------------------- |  |  | ---- | 
|Report of Independent Registered Public Accounting Firm |  |  | F-1  | 
|Consolidated Balance Sheet                              |  |  | F-2  | 
|Consolidated Statement of Operations                    |  |  | F-3  | 
|Consolidated Statement of Comprehensive Income (Loss)   |  |  | F-4  | 
|Consolidated Statement of Cash Flows                    |  |  | F-5  | 
|Consolidated Statement of Partners Equity              |  |  | F-7  | 
|Notes to Consolidated Financial Statements              |  |  | F-8  | 
|Selected Quarterly Financial Data (unaudited)           |  |  | F-48 | 



| |                                
| | -------------------------------
| | 2. Financial Statement Schedule

|                                                                                                         |  |  |     | 
|-------------------------------------------------------------------------------------------------------- |  |  | --- | 
|Schedule II  Valuation and Qualifying Accounts                                                          |  |  | S-1 | 
|All other schedules have been omitted because they are not
    required under the relevant instructions.



| |            
| | -----------
| | 3. Exhibits

|        |   |             |  |                                                                                                                                                                                                                                                                          
|------- | - | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |            
|Number  |   | Description
|        |   |            
|        | 3 | .1          |  | Certificate of Limited Partnership of Hanover Compression
    Limited Partnership (incorporated by reference to
    Exhibit 3.3 to the Registration Statement on Form S-4
    (Registration No. 333-75814)).                                                             
|        | 3 | .2          |  | Certificate of Amendment to Certificate of Limited Partnership
    of Hanover Compression Limited Partnership, dated as of
    January 2, 2001 (incorporated by reference to
    Exhibit 3.4 to the Registration Statement on Form S-4
    (Registration No. 333-75814)).
|        | 3 | .3          |  | Certificate of Amendment to Certificate of Limited Partnership
    of Hanover Compression Limited Partnership, dated as of
    August 20, 2001 (incorporated by reference to
    Exhibit 3.5 to the Registration Statement on Form S-4
    (Registration No. 333-75814)).
|        | 3 | .4          |  | Limited Partnership Agreement of Hanover Compression Limited
    Partnership (incorporated by reference to Exhibit 3.6 to
    the Registration Statement on Form S-4 (Registration
    No. 333-75814)).                                                                  
|        | 3 | .5          |  | Amendment to Limited Partnership Agreement of Hanover
    Compression Limited Partnership (incorporated by reference to
    Exhibit 3.7 to the Registration Statement on Form S-4
    (Registration No. 333-75814)).                                                     

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|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | -- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 4  | .1          |  | Indenture for the 8.50% Senior Secured Notes due 2008, dated as
    of August 30, 2001, among the 2001A Trust, as issuer,
    Hanover Compression Limited Partnership and certain
    subsidiaries, as guarantors, and Wilmington Trust FSB, as
    Trustee, incorporated by reference to Exhibit 10.69 to
    Hanover Compressor Companys (Hanovers)
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2001.                                                                                                        
|        | 4  | .2          |  | Form of 8.50% Senior Secured Notes due 2008, incorporated by
    reference to Exhibit 4.10 to Hanovers Annual Report
    on Form 10-K for the year ended December 31, 2003.                                                                                                                                                                                                                                                                                                                                                                     
|        | 4  | .3          |  | Indenture for the 8.75% Senior Secured Notes due 2011, dated as
    of August 30, 2001, among the 2001B Trust, as issuer,
    Hanover Compression Limited Partnership and certain
    subsidiaries, as guarantors, and Wilmington Trust FSB, as
    Trustee, incorporated by reference to Exhibit 10.75 to
    Hanovers Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2001.                                                                                                                                             
|        | 4  | .4          |  | Form of 8.75% Senior Secured Notes due 2011, incorporated by
    reference to Exhibit 4.12 to Hanovers Annual Report
    on Form 10-K for the year ended December 31, 2003.                                                                                                                                                                                                                                                                                                                                                                     
|        | 4  | .5          |  | Indenture for the Zero Coupon Subordinated Notes due
    March 31, 2007, dated as of May 14, 2003, between
    Hanover Compressor Company and Wachovia Bank, National
    Association, as trustee, incorporated by reference to
    Exhibit 4.1 to Hanovers Registration Statement (File
    No. 333-106384) on Form S-3, as filed with the SEC on
    June 23, 2003.                                                                                                                                                                           
|        | 4  | .6          |  | Form of Zero Coupon Subordinated Notes due March 31, 2007,
    incorporated by reference to Exhibit 4.14 to Hanovers
    Annual Report on Form 10-K for the year ended
    December 31, 2003.                                                                                                                                                                                                                                                                                                                                                   
|        | 4  | .7          |  | Senior Indenture, dated as of December 15, 2003, among
    Hanover Compressor Company, Subsidiary Guarantors named therein
    and Wachovia Bank, National Association, as trustee,
    incorporated by reference to Exhibit 4.1 to Hanovers
    Registration Statement on Form 8-A, as filed with the SEC
    on December 15, 2003.                                                                                                                                                                                                            
|        | 4  | .8          |  | First Supplemental Indenture to the Senior Indenture dated as of
    December 15, 2003, relating to the 8.625% Senior Notes due
    2010, dated as of December 15, 2003, among Hanover
    Compressor Company, Hanover Compression Limited Partnership and
    Wachovia Bank, National Association, as trustee, incorporated by
    reference to Exhibit 4.2 to Hanovers Registration
    Statement on Form 8-A, as filed with the SEC on
    December 15, 2003.                                                                                
|        | 4  | .9          |  | Form of 8.625% Senior Notes due 2010, incorporated by reference
    to Exhibit 4.17 to Hanovers Annual Report on
    Form 10-K for the year ended December 31, 2003.                                                                                                                                                                                                                                                                                                                                                                            
|        | 4  | .10         |  | Second Supplemental Indenture to the Senior Indenture dated as
    of December 15, 2003, relating to the 4.75% Convertible
    Senior Notes due 2014, dated as of December 15, 2003,
    between Hanover Compressor Company and Wachovia Bank, National
    Association, as trustee, incorporated by reference to
    Exhibit 4.4 to Hanovers Current Report on
    Form 8-K, as filed with the SEC on December 16, 2003.                                                                                                                       
|        | 4  | .11         |  | Form of 4.75% Convertible Senior Notes due 2014, incorporated by
    reference to Exhibit 4.19 to Hanovers Annual Report
    on Form 10-K for the year ended December 31, 2003.                                                                                                                                                                                                                                                                                                                                                                 
|        | 4  | .12         |  | Third Supplemental Indenture to the Senior Indenture dated as of
    December 15, 2003, relating to the 9.0% Senior Notes due
    2014, dated as of June 1, 2004, among Hanover Compressor
    Company, Hanover Compression Limited Partnership and Wachovia
    Bank, National Association, as trustee, incorporated by
    reference to Exhibit 4.2 to the Registration Statement of
    Hanover Compressor Company and Hanover Compression Limited
    Partnership on Form 8-A under the Securities Act of 1934,
    as filed on June 2, 2004.
|        | 4  | .13         |  | Form of 9% Senior Notes due 2014, incorporated by reference to
    Exhibit 4.3 to the Registration Statement of Hanover
    Compressor Company and Hanover Compression Limited Partnership
    on Form 8-A under the Securities Act of 1934, as filed on
    June 2, 2004.                                                                                                                                                                                                                                                                       
|        | 10 | .1          |  | Stipulation and Agreement of Settlement, dated as of
    October 23, 2003, incorporated by reference to
    Exhibit 10.1 to Hanovers Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2003.                                                                                                                                                                                                                                                                                                                                

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|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | -- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .2          |  | PIGAP Settlement Agreement, dated as of May 14, 2003, by
    and among Schlumberger Technology Corporation, Schlumberger
    Oilfield Limited, Schlumberger Surenco S.A., Hanover Compressor
    Company and Hanover Compression Limited Partnership,
    incorporated by reference to Exhibit 10.2 to Hanovers
    Annual Report on Form 10-K for the year ended
    December 31, 2003.                                                                                                                                                                        
|        | 10 | .3          |  | Credit Agreement, dated as of December 15, 2003, among
    Hanover Compressor Company, Hanover Compression Limited
    Partnership, Bank One, NA as Syndication Agent, JPMorgan Chase
    Bank, as Administrative Agent, and the several lenders parties
    thereto, incorporated by reference to Exhibit 10.1 to
    Hanovers Current Report on Form 8-K, as filed with
    the SEC on December 16, 2003.                                                                                                                                                     
|        | 10 | .4          |  | Guarantee and Collateral Agreement, dated as of
    December 15, 2003, among Hanover Compressor Company,
    Hanover Compression Limited Partnership and certain of their
    subsidiaries in favor of JPMorgan Chase Bank, as Collateral
    Agent, incorporated by reference to Exhibit 10.2 to
    Hanovers Current Report on Form 8-K, as filed with
    the SEC on December 16, 2003.                                                                                                                                                                      
|        | 10 | .5          |  | Hanover Guarantee, dated as of December 15, 2003, made by
    Hanover Compressor Company in favor of JPMorgan Chase Bank, as
    Administrative Agent for the lenders parties to the Credit
    Agreement dated as of December 15, 2003, incorporated by
    reference to Exhibit 10.6 to Hanovers Annual Report
    on Form 10-K for the year ended December 31, 2003.                                                                                                                                                                                         
|        | 10 | .6          |  | Subsidiaries Guarantee, dated as of December 15,
    2003, in favor of JPMorgan Chase Bank, as Administrative Agent
    for the lenders parties to the Credit Agreement dated as of
    December 15, 2003, incorporated by reference to
    Exhibit 10.7 to Hanovers Annual Report on
    Form 10-K for the year ended December 31, 2003.                                                                                                                                                                                                                      
|        | 10 | .7          |  | Lease, dated as of October 27, 2000, between Hanover
    Equipment Trust 2000B (the 2000B Trust) and
    Hanover Compression Inc., incorporated by reference to
    Exhibit 10.54 to Hanovers Registration Statement
    (File No. 333-50836) on Form S-4, as filed with the
    SEC on December 22, 2000.                                                                                                                                                                                                                                                    
|        | 10 | .8          |  | Guarantee, dated as of October 27, 2000 made by Hanover
    Compressor Company, Hanover Compression Inc. and certain
    subsidiaries, incorporated by reference to Exhibit 10.55 to
    Hanovers Registration Statement (File No. 333-50836)
    on Form S-4, as filed with the SEC on December 22,
    2000.                                                                                                                                                                                                                                                  
|        | 10 | .9          |  | Participation Agreement, dated as of October 27, 2000,
    among Hanover Compression Inc., the 2000B Trust, The Chase
    Manhattan Bank, National Westminster Bank PLC, Citibank N.A.,
    Credit Suisse First Boston and the Industrial Bank of Japan as
    co-agents; Bank Hapoalim B.M. and FBTC Leasing Corp., as
    investors, Wilmington Trust Company and various lenders,
    incorporated by reference to Exhibit 10.56 to
    Hanovers Registration Statement (File No. 333-50836)
    on Form S-4, as filed with the SEC on December 22,
    2000.
|        | 10 | .10         |  | Security Agreement, dated as of October 27, 2000, made by
    the 2000B Trust in favor of The Chase Manhattan Bank as agent
    for the lenders, incorporated by reference to Exhibit 10.57
    to Hanovers Registration Statement (File
    No. 333-50836) on Form S-4, as filed with the SEC on
    December 22, 2000.                                                                                                                                                                                                                                        
|        | 10 | .11         |  | Assignment of Leases, Rents and Guarantee, dated as of
    October 27, 2000, made by the 2000B Trust to The Chase
    Manhattan Bank as agent for the lenders, incorporated by
    reference to Exhibit 10.58 to Hanovers Registration
    Statement (File No. 333-50836) on Form S-4, as filed
    with the SEC on December 22, 2000.                                                                                                                                                                                                                          
|        | 10 | .12         |  | Lease, dated as of August 31, 2001, between Hanover
    Equipment Trust 2001A (the 2001A Trust) and
    Hanover Compression Limited Partnership, incorporated by
    reference to Exhibit 10.64 to Hanovers Quarterly
    Report on Form 10-Q for the quarter ended
    September 30, 2001.                                                                                                                                                                                                                                                                   
|        | 10 | .13         |  | Guarantee, dated as of August 31, 2001, made by Hanover
    Compressor Company, Hanover Compression Limited Partnership, and
    certain subsidiaries, incorporated by reference to
    Exhibit 10.65 to Hanovers Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2001.                                                                                                                                                                                                                                                                   
|        | 10 | .14         |  | Participation Agreement, dated as of August 31, 2001, among
    Hanover Compression Limited Partnership, the 2001A Trust, and
    General Electric Capital Corporation, incorporated by reference
    to Exhibit 10.66 to Hanovers Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2001.                                                                                                                                                                                                                                                  

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|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | -- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .15         |  | Security Agreement, dated as of August 31, 2001, made by
    the 2001A Trust in favor Wilmington Trust FSB as agent,
    incorporated by reference to Exhibit 10.67 to
    Hanovers Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2001.                                                                                                                                        
|        | 10 | .16         |  | Assignment of Leases, Rents and Guarantee from the 2001A Trust
    to Wilmington Trust FSB, dated as of August 31, 2001,
    incorporated by reference to Exhibit 10.68 to
    Hanovers Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2001.                                                                                                                                    
|        | 10 | .17         |  | Lease, dated as of August 31, 2001, between Hanover
    Equipment Trust 2001B (the 2001B Trust) and
    Hanover Compression Limited Partnership, incorporated by
    reference to Exhibit 10.70 to Hanovers Quarterly
    Report on Form 10-Q for the quarter ended
    September 30, 2001.                                                                                                          
|        | 10 | .18         |  | Guarantee, dated as of August 31, 2001, made by Hanover
    Compressor Company, Hanover Compression Limited Partnership, and
    certain subsidiaries, incorporated by reference to
    Exhibit 10.71 to Hanovers Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2001.                                                                                                          
|        | 10 | .19         |  | Participation Agreement, dated as of August 31, 2001, among
    Hanover Compression Limited Partnership, the 2001B Trust, and
    General Electric Capital Corporation, incorporated by reference
    to Exhibit 10.72 to Hanovers Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2001.                                                                                         
|        | 10 | .20         |  | Security Agreement, dated as of August 31, 2001, made by
    the 2001B Trust in favor of Wilmington Trust FSB as agent,
    incorporated by reference to Exhibit 10.73 to
    Hanovers Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2001.                                                                                                                                     
|        | 10 | .21         |  | Assignment of Leases, Rents and Guarantee from the 2001B Trust
    to Wilmington Trust FSB, dated as of August 31, 2001,
    incorporated by reference to Exhibit 10.74 to
    Hanovers Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2001.                                                                                                                                    
|        | 10 | .22         |  | Amendment, dated as of December 15, 2003, to the 2000A and
    2000B Synthetic Guarantees, Credit Agreements and Participation
    Agreements, incorporated by reference to Exhibit 10.36 to
    Hanovers Annual Report on Form 10-K for the year
    ended December 31, 2003.                                                                                                                         
|        | 10 | .23         |  | Amended and Restated Guarantee and Collateral Agreement, dated
    January 31, 2003, made by Hanover Compressor Company,
    certain of Hanovers subsidiaries, JPMorgan Chase Bank, as
    administrative agent, and the lenders parties thereto,
    incorporated by reference to Exhibit 10.6 to Hanovers
    Annual Report on Form 10-K for the fiscal year ended
    December 31, 2002.           
|        | 10 | .24         |  | Purchase Agreement, dated as of July 11, 2000, among
    Hanover Compressor Company, Hanover Compression Inc.,
    Dresser-Rand Company and Ingersoll-Rand Company, incorporated by
    reference to Exhibit 99.2 to Hanovers Current Report
    on Form 8-K filed with the SEC on September 14, 2000.                                                                                                 
|        | 10 | .25         |  | Agreement and Plan of Merger, dated as of July 13, 2000,
    among Hanover Compressor Company, Caddo Acquisition Corporation,
    and OEC Compression Corporation, incorporated by reference to
    Exhibit 10.51 to Hanovers Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2000.                                                                                              
|        | 10 | .26         |  | Amendment No. 1 to Agreement and Plan of Merger, dated as
    of November 14, 2000, by and among Hanover Compressor
    Company, Caddo Acquisition Corporation and OEC Compression
    Corporation, incorporated by reference to Exhibit 10.43 to
    Hanovers Annual Report on Form 10-K for the year
    ended December 31, 2003.                                                                    
|        | 10 | .27         |  | Amendment No. 2 to Agreement and Plan of Merger, dated as
    of February 2, 2001, by and among Hanover Compressor
    Company, Caddo Acquisition Corporation and OEC Compression
    Corporation, incorporated by reference to Exhibit 10.44 to
    Hanovers Annual Report on Form 10-K for the year
    ended December 31, 2003.                                                                     
|        | 10 | .28         |  | Purchase Agreement, dated June 28, 2001, among Schlumberger
    Technology Corporation, Schlumberger Oilfield Holdings Ltd.,
    Schlumberger Surenco S.A., Camco International Inc., Hanover
    Compressor Company and Hanover Compression Limited Partnership,
    incorporated by reference to Exhibit 10.63 to
    Hanovers Quarterly Report on Form 10-Q for the
    quarter ended June 30, 2001.

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|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .29         |  | Schedule 1.2(c) to Purchase Agreement, dated June 28,
    2001, among Schlumberger Technology Corporation, Schlumberger
    Oilfield Holdings Limited, Schlumberger Surenco S.A., Camco
    International Inc., Hanover Compressor Company and Hanover
    Compression Limited Partnership, incorporated by reference to
    Exhibit 99.1 to Hanovers Current Report on
    Form 8-K filed with the SEC on February 6, 2003.       
|        | 10 | .30         |  | Amendment No. 1, dated as of August 31, 2001, to
    Purchase Agreement among Schlumberger Technology Corporation,
    Schlumberger Oilfield Holdings Ltd., Schlumberger Surenco S.A.,
    Camco International Inc., Hanover Compressor Company and Hanover
    Compression Limited Partnership, incorporated by reference to
    Exhibit 99.3 to Hanovers Current Report on
    Form 8-K filed with the SEC on September 14, 2001.
|        | 10 | .31         |  | Most Favored Supplier and Alliance Agreement, dated
    August 31, 2001, among Schlumberger Oilfield Holdings
    Limited, Schlumberger Technology Corporation and Hanover
    Compression Limited Partnership, incorporated by reference to
    Exhibit 99.4 to Hanovers Current Report on
    Form 8-K filed with the SEC on September 14, 2001.                                                                                 
|        | 10 | .32         |  | Agreement by and among SJMB, L.P., Charles Underbrink, John L.
    Thompson, Belleli Energy S.r.l. and Hanover Compressor Company
    and certain of its subsidiaries dated September 20, 2002,
    incorporated by reference to Exhibit 10.62 to
    Hanovers Annual Report on Form 10-K for the fiscal
    year ended December 31, 2002.                                                                                         
|        | 10 | .33         |  | Hanover Compressor Company 1992 Stock Compensation Plan,
    incorporated by reference to Exhibit 10.63 to
    Hanovers Annual Report on Form 10-K for the fiscal
    year ended December 31, 2002.                                                                                                                                                                                                                              
|        | 10 | .34         |  | Hanover Compressor Company Senior Executive Stock Option Plan,
    incorporated by reference to Exhibit 10.4 to Hanovers
    Registration Statement (File No. 333-24953) on
    Form S-1, as amended.                                                                                                                                                                                                                            
|        | 10 | .35         |  | Hanover Compressor Company 1993 Management Stock Option Plan,
    incorporated by reference to Exhibit 10.5 to Hanovers
    Registration Statement (File No. 333-24953) on
    Form S-1, as amended.                                                                                                                                                                                                                             
|        | 10 | .36         |  | Hanover Compressor Company Incentive Option Plan, incorporated
    by reference to Exhibit 10.6 to Hanovers Registration
    Statement (File No. 333-24953) on Form S-1, as amended.                                                                                                                                                                                                                                               
|        | 10 | .37         |  | Amendment and Restatement of the Hanover Compressor Company
    Incentive Option Plan, incorporated by reference to
    Exhibit 10.7 to Hanovers Registration Statement (File
    No. 333-24953) on Form S-1, as amended.                                                                                                                                                                                                        
|        | 10 | .38         |  | Hanover Compressor Company 1995 Employee Stock Option Plan,
    incorporated by reference to Exhibit 10.8 to Hanovers
    Registration Statement (File No. 333-24953) on
    Form S-1, as amended.                                                                                                                                                                                                                               
|        | 10 | .39         |  | Hanover Compressor Company 1995 Management Stock Option Plan,
    incorporated by reference to Exhibit 10.9 to Hanovers
    Registration Statement (File No. 333-24953) on
    Form S-1, as amended.                                                                                                                                                                                                                             
|        | 10 | .40         |  | Form of Stock Option Agreement for DeVille and Mcneil,
    incorporated by reference to Exhibit 10.70 to
    Hanovers Annual Report on Form 10-K for the fiscal
    year ended December 31, 2002.                                                                                                                                                                                                                                  
|        | 10 | .41         |  | Form of Stock Option Agreements for Wind Bros, incorporated by
    reference to Exhibit 10.71 to Hanovers Annual Report
    on Form 10-K for the fiscal year ended December 31,
    2002.                                                                                                                                                                                                                                          
|        | 10 | .42         |  | Hanover Compressor Company 1996 Employee Stock Option Plan,
    incorporated by reference to Exhibit 10.10 to
    Hanovers Registration Statement (File No. 333-24953)
    on Form S-1, as amended.                                                                                                                                                                                                                              
|        | 10 | .43         |  | Hanover Compressor Company 1997 Stock Option Plan, as amended,
    incorporated by reference to Exhibit 10.23 to
    Hanovers Registration Statement (File No. 333-24953)
    on Form S-1, as amended.                                                                                                                                                                                                                           
|        | 10 | .44         |  | 1997 Stock Purchase Plan, incorporated by reference to
    Exhibit 10.24 to Hanovers Registration Statement
    (File No. 333-24953) on Form S-1, as
    amended.                                                                                                                                                                                                                                                                
|        | 10 | .45         |  | Hanover Compressor Company 1998 Stock Option Plan, incorporated
    by reference to Exhibit 10.7 to Hanovers Quarterly
    Report on Form 10-Q for the quarter ended
    September 30, 1998.                                                                                                                                                                                                                                       
|        | 10 | .46         |  | Hanover Compressor Company December 9, 1998 Stock Option
    Plan, incorporated by reference to Exhibit 10.33 to
    Hanovers Annual Report on Form 10-K for the fiscal
    year ended December 31, 1998.                                                                                                                                                                                                                        

53



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|        |    |             |  |                                                                                                                                                                                                                                 
|------- | -- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .47         |  | Hanover Compressor Company 1999 Stock Option Plan, incorporated
    by reference to Exhibit 4.1 to Hanovers Registration
    Statement (File No. 333-32096) on Form S-8 filed with
    the SEC on March 10, 2000.            
|        | 10 | .48         |  | Hanover Compressor Company 2001 Equity Incentive Plan,
    incorporated by reference to Exhibit 4.1 to Hanovers
    Registration Statement (File No. 333-73904) on
    Form S-8 filed with the SEC on November 21,
    2001. 
|        | 10 | .49         |  | Hanover Compressor Company 2003 Stock Incentive Plan,
    incorporated by reference to Hanovers Definitive Proxy
    Statement on Schedule 14A, as filed with the SEC on
    April 15, 2003.                                 
|        | 10 | .50         |  | Employment Letter with Chad C. Deaton, dated August 19,
    2002, incorporated by reference to Exhibit 10.79 to
    Hanovers Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2002.                     
|        | 10 | .51         |  | Employment Letter with Peter Schreck, dated August 22,
    2000, incorporated by reference to Exhibit 10.1 to
    Hanovers Quarterly Report on Form 10-Q for the
    quarter ended March 31, 2003.                           
|        | 10 | .52         |  | Employment Letter with Stephen York, dated March 6, 2002,
    incorporated by reference to Exhibit 10.2 to Hanovers
    Quarterly Report on Form 10-Q for the quarter ended
    March 31, 2003.                              
|        | 10 | .53         |  | Separation Agreement with Mark Berg, dated February 27,
    2004, incorporated by reference as Exhibit 10.74 to
    Hanovers Annual Report on Form 10-K for the year
    ended December 31, 2003.                            
|        | 10 | .54         |  | Employment Letter with Gary M. Wilson dated April 9, 2004,
    incorporated by reference to Exhibit 10.1 to Hanovers
    Quarterly Report on Form 10-Q for the quarter ended
    June 30, 2004.                              
|        | 10 | .55         |  | Employment Letter with John E. Jackson dated October 5,
    2004, incorporated by reference to Exhibit 10.1 to
    Hanovers Current Report on Form 8-K, as filed with
    the SEC on October 6, 2004.                        
|        | 10 | .56         |  | Employment Letter with Lee E. Beckelman dated January 31,
    2005, incorporated by reference to Exhibit 10.1 to
    Hanovers Current Report on Form 8-K, as filed with
    the SEC on February 1, 2005.                     
|        | 10 | .57         |  | Employment Letter with Anita H. Colglazier dated April 4,
    2002 with explanatory note, incorporated by reference to
    Exhibit 10.61 to Hanovers Annual Report on
    Form 10-K for the year ended December 31,
    2004.
|        | 10 | .58         |  | Description of Change of Control Arrangement with Hilary S.
    Ware, incorporated by reference to Exhibit 10.62 to
    Hanovers Annual Report on Form 10-K for the year
    ended December 31, 2004.                        
|        | 14 | .1          |  | P.R.I.D.E. in Performance  Hanovers Guide to
    Ethical Business Conduct, incorporated by reference to
    Exhibit 14.1 to the Hanovers Annual Report on
    Form 10-K for the year ended December 31, 2003.                
|        | 14 | .2          |  | Amendment to the Hanovers Code of Ethics, incorporated by
    reference to the Hanovers Current Report on Form 8-K,
    as filed with the SEC on January 20, 2005.                                                            
|        | 23 | .1          |  | Consent of PricewaterhouseCoopers LLP.*                                                                                                                                                                                         
|        | 31 | .1          |  | Certification of the Chief Executive Officer pursuant to
    Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of
    1934.*                                                                                              
|        | 31 | .2          |  | Certification of the Chief Financial Officer pursuant to
    Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of
    1934.*                                                                                              
|        | 32 | .1          |  | Certification of the Chief Executive Officer pursuant to 18
    U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                 
|        | 32 | .2          |  | Certification of the Chief Financial Officer pursuant to 18
    U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                 








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SIGNATURES






| |                                            
| | -------------------------------------------
| | Hanover Compression
    Limited Partnership



| |     |                    
| | --- | -------------------
| | By: | /s/ John E. Jackson

| |                                      
| | -------------------------------------
| |                                      
| | John E. Jackson                      
| | President and Chief Executive Officer





|                                               |  |                                                                                                                     |  |                |  | 
|---------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                                      |  | Title                                                                                                               |  | Date          
|                                               |  |                                                                                                                     |  |               
|                                              
|/s/ John E. JacksonJohn
    E. Jackson         |  | President and Chief Executive Officer and Manager of the General
    Partnership (Principal Executive Officer)      |  | March 22, 2005
|                                              
|/s/ Lee E. BeckelmanLee
    E. Beckelman       |  | Vice President and Chief Financial Officer and Manager of the
    General Partnership (Principal Financial Officer) |  | March 22, 2005
|                                              
|/s/ Anita H. ColglazierAnita
    H. Colglazier |  | Vice President and Controller (Principal Accounting Officer)                                                        |  | March 22, 2005
|                                              
|/s/ Gary M. WilsonGary
    M. Wilson           |  | Senior Vice President, General Counsel, Secretary and Manager of
    the General Partnership                        |  | March 22, 2005

55



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Report of Independent Registered Public Accounting Firm










PricewaterhouseCoopers LLP






F-1



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


CONSOLIDATED BALANCE SHEET


|                                           |                                                                                 |                                        |           |           |           |  |           |           |           | 
|------------------------------------------ | ------------------------------------------------------------------------------- | -------------------------------------- | --------- | --------- | --------- |  | --------- | --------- | --------- | 
|                                           |                                                                                 | December 31,                          
|                                           |                                                                                 |                                       
|                                           |                                                                                 | 2004                                   |           | 2003     
|                                           |                                                                                 |                                        |           |          
|                                           |                                                                                 | (in thousands)                        
|ASSETS                                    
|Current assets:                            |                                                                                 |                                        |           |           |           |  |           |          
|                                           | Cash and cash equivalents                                                       |                                        | $         | 38,076    |           |  | $         | 56,619    |          
|                                           | Accounts receivable, net of allowance of $7,573 and $5,460,
    respectively    |                                        |           | 205,644   |           |  |           | 195,183   |          
|                                           | Inventory, net                                                                  |                                        |           | 184,798   |           |  |           | 155,297   |          
|                                           | Costs and estimated earnings in excess of billings on
    uncompleted contracts |                                        |           | 70,103    |           |  |           | 50,128    |          
|                                           | Prepaid taxes                                                                   |                                        |           | 6,988     |           |  |           | 4,677     |          
|                                           | Current deferred income taxes                                                   |                                        |           | 13,200    |           |  |           | 26,203    |          
|                                           | Assets held for sale                                                            |                                        |           | 5,169     |           |  |           | 17,344    |          
|                                           | Other current assets                                                            |                                        |           | 30,869    |           |  |           | 36,786    |          
|                                           |                                                                                 |                                        |           |           |           |  |           |          
|                                           |                                                                                 | Total current assets                   |           |           | 554,847   |  |           |           | 542,237   | 
|Property, plant and equipment, net         |                                                                                 |                                        | 1,877,041 |           |           |  | 2,027,654 |          
|Goodwill, net                              |                                                                                 |                                        | 182,497   |           |           |  | 176,629   |          
|Intangible and other assets                |                                                                                 |                                        | 61,110    |           |           |  | 64,258    |          
|Investments in non-consolidated affiliates |                                                                                 |                                        | 90,326    |           |           |  | 88,718    |          
|Assets held for sale, non-current          |                                                                                 |                                        | 6,391     |           |           |  | 13,981    |          
|                                           |                                                                                 |                                        |           |           |           |  |           |          
|                                           |                                                                                 | Total assets                           |           | $         | 2,772,212 |  |           | $         | 2,913,477 | 
|                                           |                                                                                 |                                        |           |           |           |  |           |          
|                                          
|LIABILITIES AND PARTNERS EQUITY          
|Current liabilities:                       |                                                                                 |                                        |           |           |           |  |           |          
|                                           | Short-term debt                                                                 |                                        | $         | 5,106     |           |  | $         | 32,519    |          
|                                           | Current maturities of long-term debt                                            |                                        |           | 1,430     |           |  |           | 3,511     |          
|                                           | Accounts payable, trade                                                         |                                        |           | 57,402    |           |  |           | 53,354    |          
|                                           | Accrued liabilities                                                             |                                        |           | 115,279   |           |  |           | 119,877   |          
|                                           | Advance billings                                                                |                                        |           | 42,588    |           |  |           | 34,380    |          
|                                           | Liabilities held for sale                                                       |                                        |           | 517       |           |  |           | 1,128     |          
|                                           | Billings on uncompleted contracts in excess of costs and
    estimated earnings |                                        |           | 20,256    |           |  |           | 8,427     |          
|                                           |                                                                                 |                                        |           |           |           |  |           |          
|                                           |                                                                                 | Total current liabilities              |           |           | 242,578   |  |           |           | 253,196   | 
|Long-term debt                             |                                                                                 |                                        | 608,613   |           |           |  | 939,292   |          
|Due to general partner                     |                                                                                 |                                        | 750,217   |           |           |  | 529,251   |          
|Other liabilities                          |                                                                                 |                                        | 47,232    |           |           |  | 39,031    |          
|Deferred income taxes                      |                                                                                 |                                        | 66,901    |           |           |  | 63,185    |          
|                                           |                                                                                 |                                        |           |           |           |  |           |          
|                                           |                                                                                 | Total liabilities                      |           |           | 1,715,541 |  |           |           | 1,823,955 | 
|Commitments and contingencies (Note 19)    |                                                                                 |                                        |           |           |           |  |           |          
|Minority interest                          |                                                                                 |                                        | 18,778    |           |           |  | 28,628    |          
|Partners equity:                          |                                                                                 |                                        |           |           |           |  |           |          
|                                           | Partners capital                                                               |                                        |           | 1,020,375 |           |  |           | 1,051,667 |          
|                                           | Accumulated other comprehensive income                                          |                                        |           | 17,518    |           |  |           | 9,227     |          
|                                           |                                                                                 |                                        |           |           |           |  |           |          
|                                           | Total partners equity                                                          |                                        |           | 1,037,893 |           |  |           | 1,060,894 |          
|                                           |                                                                                 |                                        |           |           |           |  |           |          
|                                           |                                                                                 | Total liabilities and partners equity |           | $         | 2,772,212 |  |           | $         | 2,913,477 | 
|                                           |                                                                                 |                                        |           |           |           |  |           |          



F-2



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


CONSOLIDATED STATEMENT OF OPERATIONS


|                                                                             |                                                 |                          |           |         |   |      |           |         |  |   |           |         | 
|---------------------------------------------------------------------------- | ----------------------------------------------- | ------------------------ | --------- | ------- | - | ---- | --------- | ------- |  | - | --------- | ------- | 
|                                                                             |                                                 | Years Ended December 31,
|                                                                             |                                                 |                         
|                                                                             |                                                 | 2004                     |           | 2003    |   | 2002
|                                                                             |                                                 |                          |           |         |   |     
|                                                                             |                                                 | (in thousands )         
|Revenues and other income:                                                   |                                                 |                          |           |         |   |      |           |         |  |   |           |        
|                                                                             | U.S. rentals                                    |                          | $         | 341,570 |   |      | $         | 324,186 |  |   | $         | 328,600 | 
|                                                                             | International rentals                           |                          |           | 214,598 |   |      |           | 191,301 |  |   |           | 175,337 | 
|                                                                             | Parts, service and used equipment               |                          |           | 180,321 |   |      |           | 164,935 |  |   |           | 223,685 | 
|                                                                             | Compressor and accessory fabrication            |                          |           | 158,629 |   |      |           | 106,896 |  |   |           | 114,009 | 
|                                                                             | Production and processing equipment fabrication |                          |           | 270,284 |   |      |           | 260,660 |  |   |           | 149,656 | 
|                                                                             | Equity in income of non-consolidated affiliates |                          |           | 19,780  |   |      |           | 23,014  |  |   |           | 18,554  | 
|                                                                             | Other                                           |                          |           | 3,623   |   |      |           | 4,088   |  |   |           | 3,600   | 
|                                                                             |                                                 |                          |           |         |   |      |           |         |  |   |           |        
|                                                                             |                                                 |                          | 1,188,805 |         |   |      | 1,075,080 |         |  |   | 1,013,441 |        
|                                                                             |                                                 |                          |           |         |   |      |           |         |  |   |           |        
|Expenses:                                                                    |                                                 |                          |           |         |   |      |           |         |  |   |           |        
|                                                                             | U.S. rentals                                    |                          |           | 144,580 |   |      |           | 127,425 |  |   |           | 122,172 | 
|                                                                             | International rentals                           |                          |           | 63,953  |   |      |           | 61,875  |  |   |           | 52,996  | 
|                                                                             | Parts, service and used equipment               |                          |           | 135,929 |   |      |           | 123,255 |  |   |           | 179,843 | 
|                                                                             | Compressor and accessory fabrication            |                          |           | 144,832 |   |      |           | 96,922  |  |   |           | 99,446  | 
|                                                                             | Production and processing equipment fabrication |                          |           | 242,251 |   |      |           | 234,203 |  |   |           | 127,442 | 
|                                                                             | Selling, general and administrative             |                          |           | 173,066 |   |      |           | 159,870 |  |   |           | 150,863 | 
|                                                                             | Foreign currency translation                    |                          |           | (5,222  | ) |      |           | 2,548   |  |   |           | 16,727  | 
|                                                                             | Other                                           |                          |           | 407     |   |      |           | 2,905   |  |   |           | 27,607  | 
|                                                                             | Depreciation and amortization                   |                          |           | 174,376 |   |      |           | 168,232 |  |   |           | 147,209 | 
|                                                                             | Goodwill impairment                             |                          |           |        |   |      |           | 35,466  |  |   |           | 52,103  | 
|                                                                             | Leasing expense                                 |                          |           |        |   |      |           | 43,139  |  |   |           | 90,074  | 
|                                                                             | Interest expense                                |                          |           | 131,215 |   |      |           | 73,707  |  |   |           | 27,859  | 
|                                                                             |                                                 |                          |           |         |   |      |           |         |  |   |           |        
|                                                                             |                                                 |                          | 1,205,387 |         |   |      | 1,129,547 |         |  |   | 1,094,341 |        
|                                                                             |                                                 |                          |           |         |   |      |           |         |  |   |           |        
|Loss from continuing operations before income taxes                          |                                                 |                          | (16,582   | )       |   |      | (54,467   | )       |  |   | (80,900   | )      
|Provision for (benefit from) income taxes                                    |                                                 |                          | 28,916    |         |   |      | (1,330    | )       |  |   | (11,365   | )      
|                                                                             |                                                 |                          |           |         |   |      |           |         |  |   |           |        
|Loss from continuing operations                                              |                                                 |                          | (45,498   | )       |   |      | (53,137   | )       |  |   | (69,535   | )      
|Income from discontinued operations, net of tax                              |                                                 |                          | 6,314     |         |   |      | 10,190    |         |  |   | 4,493     |        
|Income (loss) on sale/write-downs of discontinued operations,
    net of tax |                                                 |                          | 3,771     |         |   |      | (14,051   | )       |  |   | (40,350   | )      
|                                                                             |                                                 |                          |           |         |   |      |           |         |  |   |           |        
|Loss before cumulative effect of accounting changes                          |                                                 |                          | (35,413   | )       |   |      | (56,998   | )       |  |   | (105,392  | )      
|Cumulative effect of accounting changes, net of tax                          |                                                 |                          |          |         |   |      | (86,910   | )       |  |   |          |        
|                                                                             |                                                 |                          |           |         |   |      |           |         |  |   |           |        
|Net loss                                                                     |                                                 | $                        | (35,413   | )       |   | $    | (143,908  | )       |  | $ | (105,392  | )      
|                                                                             |                                                 |                          |           |         |   |      |           |         |  |   |           |        



F-3



---



##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)


|                                   |                                                                          |                          |         |       |   |      |          |        |  |   |          |        |  
|---------------------------------- | ------------------------------------------------------------------------ | ------------------------ | ------- | ----- | - | ---- | -------- | ------ |  | - | -------- | ------ | -
|                                   |                                                                          | Years Ended December 31,
|                                   |                                                                          |                         
|                                   |                                                                          | 2004                     |         | 2003  |   | 2002
|                                   |                                                                          |                          |         |       |   |     
|                                   |                                                                          | (in thousands)          
|Net loss                           |                                                                          | $                        | (35,413 | )     |   | $    | (143,908 | )      |  | $ | (105,392 | )     
|Other comprehensive income (loss): |                                                                          |                          |         |       |   |      |          |        |  |   |          |       
|                                   | Change in fair value of derivative financial instruments, net of
    tax |                          |         | 8,638 |   |      |          | 5,693  |  |   |          | (8,866 | )
|                                   | Foreign currency translation adjustment                                  |                          |         | (347  | ) |      |          | 17,230 |  |   |          | 1,727  |  
|                                   |                                                                          |                          |         |       |   |      |          |        |  |   |          |       
|Comprehensive loss                 |                                                                          | $                        | (27,122 | )     |   | $    | (120,985 | )      |  | $ | (112,531 | )     
|                                   |                                                                          |                          |         |       |   |      |          |        |  |   |          |       



F-4



---



##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


CONSOLIDATED STATEMENT OF CASH FLOWS


|                                                        |                                                                                     |                                                                                |                                                                           |                                                        |         |         |          |          |         |         |          |          |         |         |          |  
|------------------------------------------------------- | ----------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | ------------------------------------------------------------------------- | ------------------------------------------------------ | ------- | ------- | -------- | -------- | ------- | ------- | -------- | -------- | ------- | ------- | -------- | -
|                                                        |                                                                                     | Years Ended December 31,                                                      
|                                                        |                                                                                     |                                                                               
|                                                        |                                                                                     | 2004                                                                           |                                                                           | 2003                                                   |         | 2002   
|                                                        |                                                                                     |                                                                                |                                                                           |                                                        |         |        
|                                                        |                                                                                     | (in thousands)                                                                
|Cash flows from operating activities:                   |                                                                                     |                                                                                |                                                                           |                                                        |         |         |          |          |         |         |          |         
|                                                        | Net loss                                                                            |                                                                                | $                                                                         | (35,413                                                | )       |         | $        | (143,908 | )       |         | $        | (105,392 | )      
|                                                        | Adjustments:                                                                        |                                                                                |                                                                           |                                                        |         |         |          |          |         |         |          |          |        
|                                                        |                                                                                     | Depreciation and amortization                                                  |                                                                           |                                                        | 174,376 |         |          |          | 168,232 |         |          |          | 147,209 |        
|                                                        |                                                                                     | Loss (income) from discontinued operations, net of tax                         |                                                                           |                                                        | (10,085 | )       |          |          | 3,861   |         |          |          | 35,857  |        
|                                                        |                                                                                     | Cumulative effect of accounting changes, net of tax                            |                                                                           |                                                        |        |         |          |          | 86,910  |         |          |          |        |        
|                                                        |                                                                                     | Bad debt expense                                                               |                                                                           |                                                        | 2,658   |         |          |          | 4,028   |         |          |          | 7,091   |        
|                                                        |                                                                                     | Gain on sale of property, plant and equipment                                  |                                                                           |                                                        | (6,076  | )       |          |          | (6,012  | )       |          |          | (7,769  | )      
|                                                        |                                                                                     | Equity in income of non-consolidated affiliates, net of
    dividends received |                                                                           |                                                        | (10,112 | )       |          |          | (4,563  | )       |          |          | (1,966  | )      
|                                                        |                                                                                     | Loss on investments and charges for non-consolidated affiliates                |                                                                           |                                                        |        |         |          |          |        |         |          |          | 15,950  |        
|                                                        |                                                                                     | (Gain) loss on derivative instruments                                          |                                                                           |                                                        | 1,886   |         |          |          | (4,606  | )       |          |          | (3,245  | )      
|                                                        |                                                                                     | Provision for inventory impairment and reserves                                |                                                                           |                                                        | 1,062   |         |          |          | 1,536   |         |          |          | 13,853  |        
|                                                        |                                                                                     | Write-down of notes receivable                                                 |                                                                           |                                                        |        |         |          |          |        |         |          |          | 8,454   |        
|                                                        |                                                                                     | Goodwill impairment                                                            |                                                                           |                                                        |        |         |          |          | 35,466  |         |          |          | 52,103  |        
|                                                        |                                                                                     | Gain on sale of non-consolidated affiliates                                    |                                                                           |                                                        | (300    | )       |          |          |        |         |          |          |        |        
|                                                        |                                                                                     | Restricted stock compensation expense                                          |                                                                           |                                                        | 2,599   |         |          |          | 1,178   |         |          |          | 423     |        
|                                                        |                                                                                     | Pay-in-kind interest on long-term notes payable                                |                                                                           |                                                        | 20,966  |         |          |          | 21,048  |         |          |          | 17,163  |        
|                                                        |                                                                                     | Deferred income taxes                                                          |                                                                           |                                                        | 15,776  |         |          |          | (14,746 | )       |          |          | (12,614 | )      
|                                                        |                                                                                     | Changes in assets and liabilities, excluding business
    combinations:        |                                                                           |                                                        |         |         |          |          |         |         |          |          |         |        
|                                                        |                                                                                     |                                                                                | Accounts receivable and notes                                             |                                                        |         | (4,021  | )        |          |         | 17,537  |          |          |         | 90,279  |         
|                                                        |                                                                                     |                                                                                | Inventory                                                                 |                                                        |         | (23,028 | )        |          |         | 5,632   |          |          |         | 4,422   |         
|                                                        |                                                                                     |                                                                                | Costs and estimated earnings versus billings on uncompleted
    contracts |                                                        |         | (5,733  | )        |          |         | 16,455  |          |          |         | 33,368  |         
|                                                        |                                                                                     |                                                                                | Accounts payable and other liabilities                                    |                                                        |         | (3,806  | )        |          |         | (30,343 | )        |          |         | (68,023 | )       
|                                                        |                                                                                     |                                                                                | Advance billings                                                          |                                                        |         | 16,130  |          |          |         | (4,213  | )        |          |         | (8,394  | )       
|                                                        |                                                                                     |                                                                                | Other                                                                     |                                                        |         | 4,933   |          |          |         | 18,333  |          |          |         | (15,806 | )       
|                                                        |                                                                                     |                                                                                |                                                                           |                                                        |         |         |          |          |         |         |          |         
|                                                        |                                                                                     |                                                                                |                                                                           | Net cash provided by continuing operations             |         |         | 141,812  |          |         |         | 171,825  |          |         |         | 202,963  |  
|                                                        |                                                                                     |                                                                                |                                                                           | Net cash provided by discontinued operations           |         |         | 8,115    |          |         |         | 14,671   |          |         |         | 8,149    |  
|                                                        |                                                                                     |                                                                                |                                                                           |                                                        |         |         |          |          |         |         |          |         
|                                                        |                                                                                     |                                                                                |                                                                           | Net cash provided by operating activities              |         |         | 149,927  |          |         |         | 186,496  |          |         |         | 211,112  |  
|                                                        |                                                                                     |                                                                                |                                                                           |                                                        |         |         |          |          |         |         |          |         
|Cash flows from investing activities:                   |                                                                                     |                                                                                |                                                                           |                                                        |         |         |          |          |         |         |          |         
|                                                        | Capital expenditures                                                                |                                                                                |                                                                           | (90,496                                                | )       |         |          | (142,466 | )       |         |          | (249,203 | )      
|                                                        | Payments for deferred lease transaction costs                                       |                                                                                |                                                                           |                                                       |         |         |          | (1,246   | )       |         |          | (1,568   | )      
|                                                        | Proceeds from sale of property, plant and equipment                                 |                                                                                |                                                                           | 24,265                                                 |         |         |          | 23,009   |         |         |          | 69,685   |        
|                                                        | Proceeds from sale of non-consolidated affiliates                                   |                                                                                |                                                                           | 4,663                                                  |         |         |          | 500      |         |         |          |         |        
|                                                        | Cash used for business acquisitions, net                                            |                                                                                |                                                                           |                                                       |         |         |          | (15,000  | )       |         |          | (10,440  | )      
|                                                        | Cash returned from non-consolidated affiliates                                      |                                                                                |                                                                           |                                                       |         |         |          | 64,837   |         |         |          | 17,429   |        
|                                                        | Cash used to acquire investments in and advances to
    non-consolidated affiliates |                                                                                |                                                                           | (250                                                   | )       |         |          | (500     | )       |         |          |         |        
|                                                        |                                                                                     |                                                                                |                                                                           |                                                        |         |         |          |          |         |         |          |         
|                                                        |                                                                                     |                                                                                |                                                                           | Net cash used in continuing operations                 |         |         | (61,818  | )        |         |         | (70,866  | )        |         |         | (174,097 | )
|                                                        |                                                                                     |                                                                                |                                                                           | Net cash provided by (used in) discontinued operations |         |         | 72,947   |          |         |         | 27,396   |          |         |         | (19,606  | )
|                                                        |                                                                                     |                                                                                |                                                                           |                                                        |         |         |          |          |         |         |          |         
|                                                        |                                                                                     |                                                                                |                                                                           | Net cash provided by (used in) investing activities    |         |         | 11,129   |          |         |         | (43,470  | )        |         |         | (193,703 | )
|                                                        |                                                                                     |                                                                                |                                                                           |                                                        |         |         |          |          |         |         |          |         
|Cash flows from financing activities:                   |                                                                                     |                                                                                |                                                                           |                                                        |         |         |          |          |         |         |          |         
|                                                        | Borrowings on revolving credit facilities                                           |                                                                                |                                                                           | 52,200                                                 |         |         |          | 145,000  |         |         |          | 141,750  |        
|                                                        | Repayments on revolving credit facilities                                           |                                                                                |                                                                           | (72,200                                                | )       |         |          | (274,500 | )       |         |          | (142,250 | )      
|                                                        | Payments for debt issue costs                                                       |                                                                                |                                                                           | (253                                                   | )       |         |          | (7,464   | )       |         |          | (644     | )      
|                                                        | Partners distribution, net                                                         |                                                                                |                                                                           | (8,541                                                 | )       |         |          | (15,062  | )       |         |          | (9,945   | )      
|                                                        | Borrowings from general partner, senior notes due 2014                              |                                                                                |                                                                           | 194,125                                                |         |         |          | 138,941  |         |         |          |         |        
|                                                        | Borrowings from general partner, senior notes due 2010                              |                                                                                |                                                                           |                                                       |         |         |          | 193,698  |         |         |          |         |        
|                                                        | Payments of 1999 equipment lease obligations                                        |                                                                                |                                                                           |                                                       |         |         |          | (200,000 | )       |         |          |         |        
|                                                        | Payments of 2000A equipment lease obligations                                       |                                                                                |                                                                           | (200,000                                               | )       |         |          |         |         |         |          |         |        
|                                                        | Payments of 2000B equipment lease obligations                                       |                                                                                |                                                                           | (115,000                                               | )       |         |          |         |         |         |          |         |        
|                                                        | Repayment of other debt                                                             |                                                                                |                                                                           | (30,771                                                | )       |         |          | (68,293  | )       |         |          | (7,654   | )      
|                                                        |                                                                                     |                                                                                |                                                                           |                                                        |         |         |          |          |         |         |          |         
|                                                        |                                                                                     |                                                                                |                                                                           | Net cash used in continuing operations                 |         |         | (180,440 | )        |         |         | (87,680  | )        |         |         | (18,743  | )
|                                                        |                                                                                     |                                                                                |                                                                           | Net cash used in discontinued operations               |         |         |         |          |         |         | (18,538  | )        |         |         | (884     | )
|                                                        |                                                                                     |                                                                                |                                                                           |                                                        |         |         |          |          |         |         |          |         
|                                                        |                                                                                     |                                                                                |                                                                           | Net cash used in financing activities                  |         |         | (180,440 | )        |         |         | (106,218 | )        |         |         | (19,627  | )
|                                                        |                                                                                     |                                                                                |                                                                           |                                                        |         |         |          |          |         |         |          |         
|Effect of exchange rate changes on cash and equivalents |                                                                                     |                                                                                | 841                                                                       |                                                        |         |         | 800      |          |         |         | (1,962   | )       
|                                                        |                                                                                     |                                                                                |                                                                           |                                                        |         |         |          |          |         |         |          |         
|Net increase (decrease) in cash and cash equivalents    |                                                                                     |                                                                                | (18,543                                                                   | )                                                      |         |         | 37,608   |          |         |         | (4,180   | )       
|Cash and cash equivalents at beginning of year          |                                                                                     |                                                                                | 56,619                                                                    |                                                        |         |         | 19,011   |          |         |         | 23,191   |         
|                                                        |                                                                                     |                                                                                |                                                                           |                                                        |         |         |          |          |         |         |          |         
|Cash and cash equivalents at end of year                |                                                                                     | $                                                                              | 38,076                                                                    |                                                        |         | $       | 56,619   |          |         | $       | 19,011   |         
|                                                        |                                                                                     |                                                                                |                                                                           |                                                        |         |         |          |          |         |         |          |         



F-5



---



##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


CONSOLIDATED STATEMENT OF CASH FLOWS


|                                                  |                                                            |                          |   |         |  |      |   |        |   |  |   |         |  
|------------------------------------------------- | ---------------------------------------------------------- | ------------------------ | - | ------- |  | ---- | - | ------ | - |  | - | ------- | -
|                                                  |                                                            | Years Ended December 31,
|                                                  |                                                            |                         
|                                                  |                                                            | 2004                     |   | 2003    |  | 2002
|                                                  |                                                            |                          |   |         |  |     
|                                                  |                                                            | (in thousands)          
|Supplemental disclosure of cash flow information: |                                                            |                          |   |         |  |      |   |        |   |  |   |        
|                                                  | Interest paid, net of capitalized amounts                  |                          | $ | 109,674 |  |      | $ | 33,765 |   |  | $ | 7,697   |  
|                                                  |                                                            |                          |   |         |  |      |   |        |   |  |   |        
|                                                  | Income taxes paid (refunded), net                          |                          | $ | 15,830  |  |      | $ | 1,129  |   |  | $ | (4,212  | )
|                                                  |                                                            |                          |   |         |  |      |   |        |   |  |   |        
|Supplemental disclosure of noncash transactions:  |                                                            |                          |   |         |  |      |   |        |   |  |   |        
|                                                  | Debt paid for property, plant and equipment                |                          |   |        |  |      |   |       |   |  | $ | (4,352  | )
|                                                  |                                                            |                          |   |         |  |      |   |        |   |  |   |        
|                                                  | Assets sold in exchange for note receivable                |                          | $ | 1,314   |  |      | $ | 3,300  |   |  | $ | 258     |  
|                                                  |                                                            |                          |   |         |  |      |   |        |   |  |   |        
|                                                  | Partners non-cash capital contributions                   |                          | $ | 12,662  |  |      | $ | 4,669  |   |  | $ | 3,235   |  
|                                                  |                                                            |                          |   |         |  |      |   |        |   |  |   |        
|Acquisitions of businesses:                       |                                                            |                          |   |         |  |      |   |        |   |  |   |        
|                                                  | Cash                                                       |                          |   |        |  |      | $ | 209    |   |  |   |        |  
|                                                  |                                                            |                          |   |         |  |      |   |        |   |  |   |        
|                                                  | Property, plant and equipment acquired                     |                          |   |        |  |      | $ | 267    |   |  | $ | 11,716  |  
|                                                  |                                                            |                          |   |         |  |      |   |        |   |  |   |        
|                                                  | Other assets acquired, net of cash acquired                |                          |   |        |  |      | $ | 3,918  |   |  | $ | 102,204 |  
|                                                  |                                                            |                          |   |         |  |      |   |        |   |  |   |        
|                                                  | Investments in and advances to non-consolidated affiliates |                          |   |        |  |      | $ | (4,673 | ) |  |   |        |  
|                                                  |                                                            |                          |   |         |  |      |   |        |   |  |   |        
|                                                  | Goodwill                                                   |                          |   |        |  |      | $ | 15,558 |   |  | $ | 5,162   |  
|                                                  |                                                            |                          |   |         |  |      |   |        |   |  |   |        
|                                                  | Liabilities assumed                                        |                          |   |        |  |      | $ | (279   | ) |  | $ | (72,209 | )
|                                                  |                                                            |                          |   |         |  |      |   |        |   |  |   |        
|                                                  | Debt issued or assumed                                     |                          |   |        |  |      |   |       |   |  | $ | (36,433 | )
|                                                  |                                                            |                          |   |         |  |      |   |        |   |  |   |        



F-6



---



##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


CONSOLIDATED STATEMENT OF PARTNERS EQUITY


Years Ended December 31, 2004, 2003 and 2002


|                                                                        |  |                |           |               |  |   |         |  
|----------------------------------------------------------------------- |  | -------------- | --------- | ------------- |  | - | ------- | -
|                                                                        |  |                |           | Accumulated  
|                                                                        |  |                |           | other        
|                                                                        |  | Partners      |           | comprehensive
|                                                                        |  | capital        |           | income (loss)
|                                                                        |  |                |           |              
|                                                                        |  | (in thousands)
|Balance at December 31, 2001                                            |  | $              | 1,312,527 |               |  | $ | (6,557  | )
|Partners distributions, net                                            |  |                | (6,710    | )             |  |   |        |  
|Foreign currency translation adjustment                                 |  |                |          |               |  |   | 1,727   |  
|Change in fair value of derivative financial instrument, net of
    tax |  |                |          |               |  |   | (8,866  | )
|Income tax benefit from Hanover stock options exercised                 |  |                | 2,547     |               |  |   |        |  
|Net loss                                                                |  |                | (105,392  | )             |  |   |        |  
|                                                                        |  |                |           |               |  |   |         |  
|Balance at December 31, 2002                                            |  |                | 1,202,972 |               |  |   | (13,696 | )
|Partners distributions, net                                            |  |                | (10,393   | )             |  |   |        |  
|Foreign currency translation adjustment                                 |  |                |          |               |  |   | 17,230  |  
|Change in fair value of derivative financial instrument, net of
    tax |  |                |          |               |  |   | 5,693   |  
|Income tax benefit from Hanover stock options exercised                 |  |                | 2,996     |               |  |   |        |  
|Net loss                                                                |  |                | (143,908  | )             |  |   |        |  
|                                                                        |  |                |           |               |  |   |         |  
|Balance at December 31, 2003                                            |  |                | 1,051,667 |               |  |   | 9,227   |  
|Partners distributions, net                                            |  |                | 4,121     |               |  |   |        |  
|Foreign currency translation adjustment                                 |  |                |          |               |  |   | (347    | )
|Change in fair value of derivative financial instrument, net of
    tax |  |                |          |               |  |   | 8,638   |  
|Net loss                                                                |  |                | (35,413   | )             |  |   |        |  
|                                                                        |  |                |           |               |  |   |         |  
|Balance at December 31, 2004                                            |  | $              | 1,020,375 |               |  | $ | 17,518  |  
|                                                                        |  |                |           |               |  |   |         |  



F-7



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


December 31, 2004, 2003 and 2002




|   |                                                          
|-- | ---------------------------------------------------------
|1. | The Company, Business and Significant Accounting Policies









| |                            
| | ---------------------------
| | Principles of Consolidation





| |                                             
| | --------------------------------------------
| | Use of Estimates in the Financial Statements



F-8



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |                          
| | -------------------------
| | Cash and Cash Equivalents





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







| |                              
| | -----------------------------
| | Concentrations of Credit Risk







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



F-9



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |                              
| | -----------------------------
| | Property, Plant and Equipment



|                                                          |  |  |                | 
|--------------------------------------------------------- |  |  | -------------- | 
|Compression equipment, facilities and other rental assets |  |  | 4 to 30 years  | 
|Buildings                                                 |  |  | 20 to 30 years | 
|Transportation, shop equipment and other                  |  |  | 3 to 12 years  | 





| |                  
| | -----------------
| | Computer software





| |                                          
| | -----------------------------------------
| | Long-Lived Assets, other than Intangibles







| |                               
| | ------------------------------
| | Goodwill and Other Intangibles





| |                            
| | ---------------------------
| | Sale Leaseback Transactions



F-10



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






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





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





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



|                     |                                                                                                          |                          |         |        |   |      |          |        |   |   |          |        |  
|-------------------- | -------------------------------------------------------------------------------------------------------- | ------------------------ | ------- | ------ | - | ---- | -------- | ------ | - | - | -------- | ------ | -
|                     |                                                                                                          | Years Ended December 31,
|                     |                                                                                                          |                         
|                     |                                                                                                          | 2004                     |         | 2003   |   | 2002
|                     |                                                                                                          |                          |         |        |   |     
|Net loss as reported |                                                                                                          | $                        | (35,413 | )      |   | $    | (143,908 | )      |   | $ | (105,392 | )     
|                     | Add back: Restricted stock grant expense, net of tax                                                     |                          |         | 2,599  |   |      |          | 766    |   |   |          | 275    |  
|                     | Deduct: Stock-based employee compensation expense determined
    under the fair value method, net of tax |                          |         | (4,817 | ) |      |          | (2,628 | ) |   |          | (2,753 | )
|                     |                                                                                                          |                          |         |        |   |      |          |        |   |   |          |       
|Pro forma net loss   |                                                                                                          | $                        | (37,631 | )      |   | $    | (145,770 | )      |   | $ | (107,870 | )     
|                     |                                                                                                          |                          |         |        |   |      |          |        |   |   |          |       



F-11



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)








| |                     
| | --------------------
| | Comprehensive Income



|                                                                         |  |              |        |      |  |   |        |  
|------------------------------------------------------------------------ |  | ------------ | ------ | ---- |  | - | ------ | -
|                                                                         |  | December 31,
|                                                                         |  |             
|                                                                         |  | 2004         |        | 2003
|                                                                         |  |              |        |     
|Change in fair value of derivative financial instruments, net of
    tax |  | $            | (608   | )    |  | $ | (9,246 | )
|Foreign currency translation adjustment                                  |  |              | 18,126 |      |  |   | 18,473 |  
|                                                                         |  |              |        |      |  |   |        |  
|                                                                         |  | $            | 17,518 |      |  | $ | 9,227  |  
|                                                                         |  |              |        |      |  |   |        |  





| |                      
| | ---------------------
| | Financial Instruments









F-12



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |                  
| | -----------------
| | Reclassifications



2.     Business Acquisitions






| |                             
| | ----------------------------
| | Year Ended December 31, 2003

Belleli Acquisition.






F-13



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |                             
| | ----------------------------
| | Year Ended December 31, 2002













| |                      
| | ---------------------
| | Pro Forma Information



|         |  |              |           |  
|-------- |  | ------------ | --------- | -
|         |  | Years Ended 
|         |  | December 31,
|         |  | 2002        
|         |  |             
|         |  | (unaudited) 
|Revenue  |  | $            | 1,108,990 |  
|Net loss |  |              | (105,046  | )



|   |                                                       
|-- | ------------------------------------------------------
|3. | Discontinued Operations and Other Assets Held for Sale



F-14



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)












F-15



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                                        |                                                 |                          |        |        |   |      |        |        |  |   |        |        | 
|------------------------------------------------------- | ----------------------------------------------- | ------------------------ | ------ | ------ | - | ---- | ------ | ------ |  | - | ------ | ------ | 
|                                                        |                                                 | Years Ended December 31,
|                                                        |                                                 | 2004                     |        | 2003   |   | 2002
|                                                        |                                                 |                          |        |        |   |     
|Revenues and other:                                     |                                                 |                          |        |        |   |      |        |        |  |   |        |       
|                                                        | U.S. rentals                                    |                          | $      | 261    |   |      | $      | 4,490  |  |   | $      | 2,870  | 
|                                                        | International rentals                           |                          |        | 12,930 |   |      |        | 15,103 |  |   |        | 14,363 | 
|                                                        | Parts, service and used equipment               |                          |        | 9,663  |   |      |        | 21,311 |  |   |        | 20,357 | 
|                                                        | Equity in income of non-consolidated affiliates |                          |        | 123    |   |      |        | 624    |  |   |        | 662    | 
|                                                        | Other                                           |                          |        | 695    |   |      |        | 928    |  |   |        | 641    | 
|                                                        |                                                 |                          |        |        |   |      |        |        |  |   |        |       
|                                                        |                                                 |                          | 23,672 |        |   |      | 42,456 |        |  |   | 38,893 |       
|                                                        |                                                 |                          |        |        |   |      |        |        |  |   |        |       
|Expenses:                                               |                                                 |                          |        |        |   |      |        |        |  |   |        |       
|                                                        | U.S. rentals                                    |                          |        | 914    |   |      |        | 1,176  |  |   |        | 363    | 
|                                                        | International rentals                           |                          |        | 5,827  |   |      |        | 5,590  |  |   |        | 4,583  | 
|                                                        | Parts, service and used equipment               |                          |        | 7,010  |   |      |        | 14,698 |  |   |        | 13,486 | 
|                                                        | Selling, general and administrative             |                          |        | 1,657  |   |      |        | 8,297  |  |   |        | 11,159 | 
|                                                        | Foreign currency translation                    |                          |        | (1,087 | ) |      |        |       |  |   |        | 26     | 
|                                                        | Depreciation and amortization                   |                          |        | 2,964  |   |      |        | 3,438  |  |   |        | 4,712  | 
|                                                        | Interest expense                                |                          |        |       |   |      |        | 796    |  |   |        | 481    | 
|                                                        | Other                                           |                          |        | 468    |   |      |        | 433    |  |   |        | 1,309  | 
|                                                        |                                                 |                          |        |        |   |      |        |        |  |   |        |       
|                                                        |                                                 |                          | 17,753 |        |   |      | 34,428 |        |  |   | 36,119 |       
|                                                        |                                                 |                          |        |        |   |      |        |        |  |   |        |       
|Income from discontinued operations before income taxes |                                                 |                          | 5,919  |        |   |      | 8,028  |        |  |   | 2,774  |       
|Benefit from income taxes                               |                                                 |                          | (395   | )      |   |      | (2,162 | )      |  |   | (1,719 | )     
|                                                        |                                                 |                          |        |        |   |      |        |        |  |   |        |       
|Income from discontinued operations                     |                                                 | $                        | 6,314  |        |   | $    | 10,190 |        |  | $ | 4,493  |       
|                                                        |                                                 |                          |        |        |   |      |        |        |  |   |        |       





|                             |                            |                          |       |            |       |            |       |       |       |   |       |       |       |   |       |        |        | 
|---------------------------- | -------------------------- | ------------------------ | ----- | ---------- | ----- | ---------- | ----- | ----- | ----- | - | ----- | ----- | ----- | - | ----- | ------ | ------ | 
|                             |                            |                          |       | Non-       |       |            |       |      
|                             |                            |                          |       | Oilfield   |       |            |       |      
|                             |                            | Used                     |       | Power      |       |            |       |      
|                             |                            | Equipment                |       | Generation |       | Facilities |       | Total
|                             |                            |                          |       |            |       |            |       |      
|Current assets               |                            | $                        | 2,455 |            |       | $          | 2,714 |       |       | $ |      |       |       | $ | 5,169 |       
|Property plant and equipment |                            |                          |      |            |       |            | 1,077 |       |       |   | 5,314 |       |       |   | 6,391 |       
|                             |                            |                          |       |            |       |            |       |       |       |   |       |       |       |   |       |       
|                             | Total assets held for sale |                          |       | 2,455      |       |            |       | 3,791 |       |   |       | 5,314 |       |   |       | 11,560 |       
|Current liabilities          |                            |                          |      |            |       |            | 517   |       |       |   |      |       |       |   | 517   |       
|                             |                            |                          |       |            |       |            |       |       |       |   |       |       |       |   |       |       
|                             | Liabilities held for sale  |                          |       |           |       |            |       | 517   |       |   |       |      |       |   |       | 517    |       
|                             |                            |                          |       |            |       |            |       |       |       |   |       |       |       |   |       |       
|                             |                            | Net assets held for sale |       | $          | 2,455 |            |       | $     | 3,274 |   |       | $     | 5,314 |   |       | $      | 11,043 | 
|                             |                            |                          |       |            |       |            |       |       |       |   |       |       |       |   |       |       

F-16



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                             |                            |                          |       |            |       |            |        |        |        |   |        |        |        |   |        |        |        | 
|---------------------------- | -------------------------- | ------------------------ | ----- | ---------- | ----- | ---------- | ------ | ------ | ------ | - | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                             |                            |                          |       | Non-       |       |            |        |       
|                             |                            |                          |       | Oilfield   |       |            |        |       
|                             |                            | Used                     |       | Power      |       |            |        |       
|                             |                            | Equipment                |       | Generation |       | Facilities |        | Total 
|                             |                            |                          |       |            |       |            |        |       
|Current assets               |                            | $                        | 6,820 |            |       | $          | 10,524 |        |        | $ |       |        |        | $ | 17,344 |       
|Property plant and equipment |                            |                          | 924   |            |       |            | 1,386  |        |        |   | 11,671 |        |        |   | 13,981 |       
|                             |                            |                          |       |            |       |            |        |        |        |   |        |        |        |   |        |       
|                             | Total assets held for sale |                          |       | 7,744      |       |            |        | 11,910 |        |   |        | 11,671 |        |   |        | 31,325 |       
|Current liabilities          |                            |                          |      |            |       |            | 1,128  |        |        |   |       |        |        |   | 1,128  |       
|                             |                            |                          |       |            |       |            |        |        |        |   |        |        |        |   |        |       
|                             | Liabilities held for sale  |                          |       |           |       |            |        | 1,128  |        |   |        |       |        |   |        | 1,128  |       
|                             |                            |                          |       |            |       |            |        |        |        |   |        |        |        |   |        |       
|                             |                            | Net assets held for sale |       | $          | 7,744 |            |        | $      | 10,782 |   |        | $      | 11,671 |   |        | $      | 30,197 | 
|                             |                            |                          |       |            |       |            |        |        |        |   |        |        |        |   |        |       



|   |          
|-- | ---------
|4. | Inventory



|                   |  |              |         |      |  |   |         | 
|------------------ |  | ------------ | ------- | ---- |  | - | ------- | 
|                   |  | December 31,
|                   |  |             
|                   |  | 2004         |         | 2003
|                   |  |              |         |     
|Parts and supplies |  | $            | 135,751 |      |  | $ | 114,063 | 
|Work in progress   |  |              | 42,708  |      |  |   | 29,412  | 
|Finished goods     |  |              | 6,339   |      |  |   | 11,822  | 
|                   |  |              |         |      |  |   |         | 
|                   |  | $            | 184,798 |      |  | $ | 155,297 | 
|                   |  |              |         |      |  |   |         | 



|                                                                                                                                                                                                                                                                                                                                                                                                                         | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|During the year ended December 31, 2004, 2003 and 2002 we
    recorded approximately $1.1 million, $1.5 million and
    $13.9 million, respectively, in inventory write-downs and
    reserves for parts inventory which was either obsolete, excess
    or carried at a price above market value. As of
    December 31, 2004 and 2003, we had inventory reserves of
    $11.7 million and $12.7 million, respectively. | 



|   |                                                          
|-- | ---------------------------------------------------------
|5. | Compressor and Production Equipment Fabrication Contracts



|                                        |  |              |          |      |  |   |          |  
|--------------------------------------- |  | ------------ | -------- | ---- |  | - | -------- | -
|                                        |  | December 31,
|                                        |  |             
|                                        |  | 2004         |          | 2003
|                                        |  |              |          |     
|Costs incurred on uncompleted contracts |  | $            | 386,577  |      |  | $ | 366,626  |  
|Estimated earnings                      |  |              | 49,584   |      |  |   | 47,782   |  
|                                        |  |              |          |      |  |   |          |  
|                                        |  |              | 436,161  |      |  |   | 414,408  |  
|Less  billings to date                 |  |              | (386,314 | )    |  |   | (372,707 | )
|                                        |  |              |          |      |  |   |          |  
|                                        |  | $            | 49,847   |      |  | $ | 41,701   |  
|                                        |  |              |          |      |  |   |          |  



|                                                                                |  |              |         |      |  |   |        |  
|------------------------------------------------------------------------------- |  | ------------ | ------- | ---- |  | - | ------ | -
|                                                                                |  | December 31,
|                                                                                |  |             
|                                                                                |  | 2004         |         | 2003
|                                                                                |  |              |         |     
|Costs and estimated earnings in excess of billings on
    uncompleted contracts |  | $            | 70,103  |      |  | $ | 50,128 |  
|Billings on uncompleted contracts in excess of costs and
    estimated earnings |  |              | (20,256 | )    |  |   | (8,427 | )
|                                                                                |  |              |         |      |  |   |        |  
|                                                                                |  | $            | 49,847  |      |  | $ | 41,701 |  
|                                                                                |  |              |         |      |  |   |        |  

F-17



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|   |                              
|-- | -----------------------------
|6. | Property, plant and equipment



|                                                          |  |              |           |      |  |   |           |  
|--------------------------------------------------------- |  | ------------ | --------- | ---- |  | - | --------- | -
|                                                          |  | December 31,
|                                                          |  |             
|                                                          |  | 2004         |           | 2003
|                                                          |  |              |           |     
|Compression equipment, facilities and other rental assets |  | $            | 2,361,492 |      |  | $ | 2,407,873 |  
|Land and buildings                                        |  |              | 89,573    |      |  |   | 80,142    |  
|Transportation and shop equipment                         |  |              | 78,577    |      |  |   | 77,912    |  
|Other                                                     |  |              | 51,054    |      |  |   | 41,741    |  
|                                                          |  |              |           |      |  |   |           |  
|                                                          |  |              | 2,580,696 |      |  |   | 2,607,668 |  
|                                                          |  |              |           |      |  |   |           |  
|Accumulated depreciation                                  |  |              | (703,655  | )    |  |   | (580,014  | )
|                                                          |  |              |           |      |  |   |           |  
|                                                          |  | $            | 1,877,041 |      |  | $ | 2,027,654 |  
|                                                          |  |              |           |      |  |   |           |  







F-18



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|   |                            
|-- | ---------------------------
|7. | Intangible and Other Assets



|                                                      |  |              |        |      |  |   |        | 
|----------------------------------------------------- |  | ------------ | ------ | ---- |  | - | ------ | 
|                                                      |  | December 31,
|                                                      |  |             
|                                                      |  | 2004         |        | 2003
|                                                      |  |              |        |     
|Deferred debt issuance and leasing transactions costs |  | $            | 29,946 |      |  | $ | 33,100 | 
|Notes receivable                                      |  |              | 7,300  |      |  |   | 7,319  | 
|Intangibles                                           |  |              | 6,070  |      |  |   | 7,298  | 
|Other                                                 |  |              | 17,794 |      |  |   | 16,541 | 
|                                                      |  |              |        |      |  |   |        | 
|                                                      |  | $            | 61,110 |      |  | $ | 64,258 | 
|                                                      |  |              |        |      |  |   |        | 







|                                         |  |                         |        |                         |  |          |         |              |  |   |        |  |  |   |         |  
|---------------------------------------- |  | ----------------------- | ------ | ----------------------- |  | -------- | ------- | ------------ |  | - | ------ |  |  | - | ------- | -
|                                         |  | As of December 31, 2004 |        | As of December 31, 2003
|                                         |  |                         |        |                        
|                                         |  | Gross                   |        |                         |  | Gross    |         |             
|                                         |  | carrying                |        | Accumulated             |  | carrying |         | Accumulated 
|                                         |  | amount                  |        | amortization            |  | amount   |         | amortization
|                                         |  |                         |        |                         |  |          |         |             
|                                         |  | (in thousands)         
|Deferred debt issuance transaction costs |  | $                       | 42,623 |                         |  | $        | (12,677 | )            |  | $ | 42,583 |  |  | $ | (9,483  | )
|Marketing related (3-20 yr life)         |  |                         | 4,581  |                         |  |          | (2,435  | )            |  |   | 4,419  |  |  |   | (1,482  | )
|Customer related (20 yr life)            |  |                         | 3,684  |                         |  |          | (889    | )            |  |   | 3,390  |  |  |   | (490    | )
|Technology based (5 yr life)             |  |                         | 1,529  |                         |  |          | (567    | )            |  |   | 1,463  |  |  |   | (206    | )
|Contract based (17 yr life)              |  |                         | 650    |                         |  |          | (483    | )            |  |   | 650    |  |  |   | (446    | )
|                                         |  |                         |        |                         |  |          |         |              |  |   |        |  |  |   |         |  
|                                         |  | $                       | 53,067 |                         |  | $        | (17,051 | )            |  | $ | 52,505 |  |  | $ | (12,107 | )
|                                         |  |                         |        |                         |  |          |         |              |  |   |        |  |  |   |         |  





|           |      |   |        |       | 
|---------- | ---- | - | ------ | ----- | 
|           | 2005 |   | $      | 8,701 | 
|           | 2006 |   |        | 4,870 | 
|           | 2007 |   |        | 4,843 | 
|           | 2008 |   |        | 4,136 | 
|           | 2009 |   |        | 3,050 | 
|Thereafter |      |   | 10,416 |      
|           |      |   |        |      
|           |      | $ | 36,016 |      
|           |      |   |        |      



|   |                                           
|-- | ------------------------------------------
|8. | Investments in Non-Consolidated Affiliates



F-19



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






|                        |  |           |       |          |  |                  |  |                           
|----------------------- |  | --------- | ----- | -------- |  | ---------------- |  | --------------------------
|                        |  | Ownership |       |          |  |                 
|                        |  | Interest  |       | Location |  | Type of Business
|                        |  |           |       |          |  |                 
|PIGAP II                |  |           | 30.0% |          |  | Venezuela        |  | Gas Compression Plant     
|El Furrial              |  |           | 33.3% |          |  | Venezuela        |  | Gas Compression Plant     
|Simco/Harwat Consortium |  |           | 35.5% |          |  | Venezuela        |  | Gas Compression Plant     
|CrystaTech, Inc.        |  |           | 46.0% |          |  | United States    |  | Process Technology Company



|                                    |  |              |         |      |  |   |         | 
|----------------------------------- |  | ------------ | ------- | ---- |  | - | ------- | 
|                                    |  | December 31,
|                                    |  |             
|                                    |  | 2004         |         | 2003
|                                    |  |              |         |     
|Current assets                      |  | $            | 148,938 |      |  | $ | 176,925 | 
|Non-current assets                  |  |              | 528,669 |      |  |   | 585,335 | 
|Current liabilities, excluding debt |  |              | 35,407  |      |  |   | 43,753  | 
|Debt payable                        |  |              | 349,030 |      |  |   | 409,157 | 
|Other non-current liabilities       |  |              | 41,053  |      |  |   | 36,114  | 
|Owners equity                      |  |              | 252,117 |      |  |   | 273,236 | 



|                 |  |                          |         |      |  |      |         |  |  |   |         | 
|---------------- |  | ------------------------ | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                 |  | Years Ended December 31,
|                 |  |                         
|                 |  | 2004                     |         | 2003 |  | 2002
|                 |  |                          |         |      |  |     
|Revenues         |  | $                        | 186,457 |      |  | $    | 277,575 |  |  | $ | 288,268 | 
|Operating income |  |                          | 127,698 |      |  |      | 136,998 |  |  |   | 85,907  | 
|Net income       |  |                          | 57,775  |      |  |      | 60,526  |  |  |   | 72,031  | 





F-20



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




















|   |         
|-- | --------
|9. | Goodwill



F-21



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)












|                                     |       |              |        |                 |  |                |        |            |   |              |       |       |  |   |   |   |  |   |        |         | 
|------------------------------------ | ----- | ------------ | ------ | --------------- |  | -------------- | ------ | ---------- | - | ------------ | ----- | ----- |  | - | - | - |  | - | ------ | ------- | 
|                                     |       |              |        |                 |  | Purchase       |        |            |   |             
|                                     |       |              |        |                 |  | Adjustment     |        |            |   |             
|                                     |       | December 31, |        |                 |  | and Other      |        | Goodwill   |   | December 31,
|                                     |       | 2003         |        | Dispositions(1) |  | Adjustments(2) |        | Impairment |   | 2004        
|                                     |       |              |        |                 |  |                |        |            |   |             
|U.S. rentals                         |       | $            | 94,904 |                 |  | $              |       |            |   | $            | 4,859 |       |  | $ |  |   |  | $ | 99,763 |        
|International rentals                |       |              | 34,282 |                 |  |                | (2,145 | )          |   |              | 2,948 |       |  |   |  |   |  |   | 35,085 |        
|Parts, service and used equipment    |       |              | 32,870 |                 |  |                |       |            |   |              | 206   |       |  |   |  |   |  |   | 33,076 |        
|Compressor and accessory fabrication |       |              | 14,573 |                 |  |                |       |            |   |              |      |       |  |   |  |   |  |   | 14,573 |        
|                                     |       |              |        |                 |  |                |        |            |   |              |       |       |  |   |   |   |  |   |        |        
|                                     | Total |              | $      | 176,629         |  |                | $      | (2,145     | ) |              | $     | 8,013 |  |   | $ |  |  |   | $      | 182,497 | 
|                                     |       |              |        |                 |  |                |        |            |   |              |       |       |  |   |   |   |  |   |        |        






|    |                                                                                       
|--- | --------------------------------------------------------------------------------------
|(1) | Relates to sale of the compression rental assets of our Canadian
    subsidiary.      
|   
|(2) | Relates primarily to purchase price adjustments for taxes
    related to acquisitions.

|                                     |       |              |        |              |  |             |        |            |  |              |        |        |  |   |         |         |   |   |        |         | 
|------------------------------------ | ----- | ------------ | ------ | ------------ |  | ----------- | ------ | ---------- |  | ------------ | ------ | ------ |  | - | ------- | ------- | - | - | ------ | ------- | 
|                                     |       |              |        |              |  | Purchase    |        |            |  |             
|                                     |       |              |        |              |  | Adjustment  |        |            |  |             
|                                     |       | December 31, |        |              |  | and Other   |        | Goodwill   |  | December 31,
|                                     |       | 2002         |        | Acquisitions |  | Adjustments |        | Impairment |  | 2003        
|                                     |       |              |        |              |  |             |        |            |  |             
|U.S. rentals                         |       | $            | 94,655 |              |  | $           |       |            |  | $            | 249    |        |  | $ |        |         |   | $ | 94,904 |        
|International rentals                |       |              | 34,659 |              |  |             |       |            |  |              | (377   | )      |  |   |        |         |   |   | 34,282 |        
|Parts, service and used equipment    |       |              | 32,691 |              |  |             | 558    |            |  |              | (379   | )      |  |   |        |         |   |   | 32,870 |        
|Compressor and accessory fabrication |       |              | 14,573 |              |  |             |       |            |  |              |       |        |  |   |        |         |   |   | 14,573 |        
|Production and processing equipment  |       |              | 3,941  |              |  |             | 15,000 |            |  |              | 16,525 |        |  |   | (35,466 | )       |   |   |       |        
|                                     |       |              |        |              |  |             |        |            |  |              |        |        |  |   |         |         |   |   |        |        
|                                     | Total |              | $      | 180,519      |  |             | $      | 15,558     |  |              | $      | 16,018 |  |   | $       | (35,466 | ) |   | $      | 176,629 | 
|                                     |       |              |        |              |  |             |        |            |  |              |        |        |  |   |         |         |   |   |        |        






F-22



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|    |                    
|--- | -------------------
|10. | Accrued Liabilities



|                                                      |  |              |         |      |  |   |         | 
|----------------------------------------------------- |  | ------------ | ------- | ---- |  | - | ------- | 
|                                                      |  | December 31,
|                                                      |  |             
|                                                      |  | 2004         |         | 2003
|                                                      |  |              |         |     
|Accrued salaries, bonuses and other employee benefits |  | $            | 30,323  |      |  | $ | 30,179  | 
|Accrued income and other taxes                        |  |              | 29,768  |      |  |   | 15,948  | 
|Current portion of interest rate swaps                |  |              | 1,061   |      |  |   | 11,703  | 
|Accrued interest                                      |  |              | 17,428  |      |  |   | 19,565  | 
|Accrued interest  due to general partner             |  |              | 5,298   |      |  |   | 1,003   | 
|Accrued other                                         |  |              | 31,401  |      |  |   | 41,479  | 
|                                                      |  |              |         |      |  |   |         | 
|                                                      |  | $            | 115,279 |      |  | $ | 119,877 | 
|                                                      |  |              |         |      |  |   |         | 





|    |     
|--- | ----
|11. | Debt



|                                   |  |              |       |      |  |   |        | 
|---------------------------------- |  | ------------ | ----- | ---- |  | - | ------ | 
|                                   |  | December 31,
|                                   |  |             
|                                   |  | 2004         |       | 2003
|                                   |  |              |       |     
|Belleli factored receivables      |  | $            | 1,011 |      |  | $ | 13,261 | 
|Belleli revolving credit facility |  |              | 4,095 |      |  |   | 16,141 | 
|Other, interest at 5.0%, due 2004  |  |              |      |      |  |   | 3,117  | 
|                                   |  |              |       |      |  |   |        | 
|Short-term debt                    |  | $            | 5,106 |      |  | $ | 32,519 | 
|                                   |  |              |       |      |  |   |        | 



F-23



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                                                                                                |  |              |         |      |  |   |         |  
|--------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | ---- |  | - | ------- | -
|                                                                                                                |  | December 31,
|                                                                                                                |  |             
|                                                                                                                |  | 2004         |         | 2003
|                                                                                                                |  |              |         |     
|Bank credit facility due December 2006                                                                          |  | $            | 7,000   |      |  | $ | 27,000  |  
|2000A equipment lease notes, interest at 4.2%, due March 2005                                                   |  |              |        |      |  |   | 193,600 |  
|2000B equipment lease notes, interest at 5.2%, due October 2005                                                 |  |              | 55,861  |      |  |   | 167,411 |  
|2001A equipment lease notes, interest at 8.5%, due September 2008                                               |  |              | 300,000 |      |  |   | 300,000 |  
|2001B equipment lease notes, interest at 8.8%, due September 2011                                               |  |              | 250,000 |      |  |   | 250,000 |  
|Real estate mortgage, collateralized by certain land and
    buildings, payable through September 2004          |  |              |        |      |  |   | 2,917   |  
|Fair value adjustment fixed to floating interest rate swaps                                                    |  |              | (5,996  | )    |  |   |        |  
|Other, interest at various rates, collateralized by equipment
    and other assets, net of unamortized discount |  |              | 3,178   |      |  |   | 1,875   |  
|                                                                                                                |  |              |         |      |  |   |         |  
|                                                                                                                |  |              | 610,043 |      |  |   | 942,803 |  
|Less current maturities                                                                                        |  |              | (1,430  | )    |  |   | (3,511  | )
|                                                                                                                |  |              |         |      |  |   |         |  
|Long-term debt                                                                                                  |  | $            | 608,613 |      |  | $ | 939,292 |  
|                                                                                                                |  |              |         |      |  |   |         |  



|           |  |              |         | 
|---------- |  | ------------ | ------- | 
|           |  | December 31,
|           |  | 2004        
|           |  |             
|2005       |  | $            | 57,291  | 
|2006       |  |              | 8,304   | 
|2007       |  |              | 222     | 
|2008       |  |              | 300,045 | 
|2009       |  |              | 49      | 
|Thereafter |  |              | 244,132 | 
|           |  |              |         | 
|           |  | $            | 610,043 | 
|           |  |              |         | 



| |                     
| | --------------------
| | Bank Credit Facility





F-24



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)












|    |                       
|--- | ----------------------
|12. | Due to General Partner



F-25



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






|                                                  |  |              |         |      |  |   |         | 
|------------------------------------------------- |  | ------------ | ------- | ---- |  | - | ------- | 
|                                                  |  | December 31,
|                                                  |  |             
|                                                  |  | 2004         |         | 2003
|                                                  |  |              |         |     
|4.75% senior notes due 2014                       |  | $            | 143,750 |      |  | $ | 143,750 | 
|8.625% senior notes due 2010                      |  |              | 200,000 |      |  |   | 200,000 | 
|9.0% senior notes due 2014                        |  |              | 200,000 |      |  |   |        | 
|11% zero coupon subordinated notes due March 2007 |  |              | 206,467 |      |  |   | 185,501 | 
|                                                  |  |              |         |      |  |   |         | 
|                                                  |  | $            | 750,217 |      |  | $ | 529,251 | 
|                                                  |  |              |         |      |  |   |         | 



| |                         
| | ------------------------
| | Convertible Senior Notes





| |             
| | ------------
| | Senior Notes





F-26



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |                               
| | ------------------------------
| | Zero Coupon Subordinated Notes





|                                                           |  |                                                  |  |                                                                        
|---------------------------------------------------------- |  | ------------------------------------------------ |  | -----------------------------------------------------------------------
|Primary Financial Term                                     |  | Restructured Note                                |  | Original Note                                                          
|                                                           |  |                                                  |  |                                                                        
|Principal Outstanding at March 31, 2003:                   |  | $171 million                                     |  | $171 million                                                           
|                                                          
|Maturity:                                                  |  | March 31, 2007                                   |  | December 31, 2005                                                      
|                                                          
|Interest Rate:                                             |  | Zero coupon accreting at 11.0% fixed             |  | 13.5%, 14.5% beginning March 1, 2004,                                  
|                                                           |  |                                                  |  | 15.5% beginning March 1, 2005                                          
|                                                          
|Schlumberger First Call Rights on Hanover Equity Issuance: |  | None                                             |  | Schlumberger had first call on any Hanover equity offering
    proceeds
|                                                          
|Call Provision:                                            |  | Hanover cannot call the Note prior to March 2006 |  | Callable at any time                                                   





F-27



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)








|    |                                                      
|--- | -----------------------------------------------------
|13. | Leasing Transactions and Accounting Change for FIN 46









F-28



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






|             |  |           |         |                  |  |            |                |  |  |   |        | 
|------------ |  | --------- | ------- | ---------------- |  | ---------- | -------------- |  |  | - | ------ | 
|             |  | Residual  |         |                  |  | Minority  
|             |  | Value     |         | Lease            |  | Interest  
|Lease        |  | Guarantee |         | Termination Date |  | Obligation
|             |  |           |         |                  |  |           
|October 2000 |  | $         | 47,482  |                  |  |            | October 2005   |  |  | $ | 1,728  | 
|August 2001  |  |           | 232,000 |                  |  |            | September 2008 |  |  |   | 9,300  | 
|August 2001  |  |           | 175,000 |                  |  |            | September 2011 |  |  |   | 7,750  | 
|             |  |           |         |                  |  |            |                |  |  |   |        | 
|             |  | $         | 454,482 |                  |  |            |                |  |  | $ | 18,778 | 
|             |  |           |         |                  |  |            |                |  |  |   |        | 









F-29



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)








|    |             
|--- | ------------
|14. | Income Taxes



|              |  |                          |         |      |  |      |         |   |  |   |         |  
|------------- |  | ------------------------ | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|              |  | Years Ended December 31,
|              |  |                         
|              |  | 2004                     |         | 2003 |  | 2002
|              |  |                          |         |      |  |     
|U.S.          |  | $                        | (56,733 | )    |  |      | (56,545 | ) |  | $ | (99,308 | )
|International |  |                          | 40,151  |      |  |      | 2,078   |   |  |   | 18,408  |  
|              |  |                          |         |      |  |      |         |   |  |   |         |  
|              |  | $                        | (16,582 | )    |  | $    | (54,467 | ) |  | $ | (80,900 | )
|              |  |                          |         |      |  |      |         |   |  |   |         |  



|                                                |               |                          |        |        |        |      |        |         |         |   |         |        |         |  
|----------------------------------------------- | ------------- | ------------------------ | ------ | ------ | ------ | ---- | ------ | ------- | ------- | - | ------- | ------ | ------- | -
|                                                |               | Years Ended December 31,
|                                                |               |                         
|                                                |               | 2004                     |        | 2003   |        | 2002
|                                                |               |                          |        |        |        |     
|Current tax provision (benefit):                |               |                          |        |        |        |      |        |         |         |   |         |       
|                                                | Federal       |                          | $      | 168    |        |      | $      |        |         |   | $       | (9,551 | )      
|                                                | State         |                          |        | (27    | )      |      |        | 245     |         |   |         | (227   | )      
|                                                | International |                          |        | 12,999 |        |      |        | 13,171  |         |   |         | 11,027 |        
|                                                |               |                          |        |        |        |      |        |         |         |   |         |       
|                                                |               | Total current            |        |        | 13,140 |      |        |         | 13,416  |   |         |        | 1,249   |  
|                                                |               |                          |        |        |        |      |        |         |         |   |         |       
|Deferred tax provision (benefit):               |               |                          |        |        |        |      |        |         |         |   |         |       
|                                                | Federal       |                          |        | (231   | )      |      |        | (23,293 | )       |   |         | (4,989 | )      
|                                                | State         |                          |        | 1,959  |        |      |        |        |         |   |         |       |        
|                                                | International |                          |        | 14,048 |        |      |        | 8,547   |         |   |         | (7,625 | )      
|                                                |               |                          |        |        |        |      |        |         |         |   |         |       
|                                                |               | Total deferred           |        |        | 15,776 |      |        |         | (14,746 | ) |         |        | (12,614 | )
|                                                |               |                          |        |        |        |      |        |         |         |   |         |       
|Total provision for (benefit from) income taxes |               | $                        | 28,916 |        |        | $    | (1,330 | )       |         | $ | (11,365 | )     
|                                                |               |                          |        |        |        |      |        |         |         |   |         |       



|                                                                                                        |  |                          |        |      |  |      |         |   |  |   |         |  
|------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------ | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                                                                        |  | Years Ended December 31,
|                                                                                                        |  |                         
|                                                                                                        |  | 2004                     |        | 2003 |  | 2002
|                                                                                                        |  |                          |        |      |  |     
|Federal income tax at statutory rate                                                                    |  | $                        | (5,803 | )    |  | $    | (19,064 | ) |  | $ | (28,315 | )
|State income taxes, net of federal benefit                                                              |  |                          | 1,256  |      |  |      | 159     |   |  |   | (148    | )
|International effective rate/ U.S. rate differential
    (including international valuation allowances) |  |                          | 6,783  |      |  |      | 13,975  |   |  |   | (5,841  | )
|U.S. impact of international operations, net of federal
    benefit                                     |  |                          | 14,877 |      |  |      | 5,270   |   |  |   | 7,894   |  
|Nondeductible goodwill                                                                                  |  |                          |       |      |  |      |        |   |  |   | 10,117  |  
|U.S. valuation allowances                                                                               |  |                          | 10,848 |      |  |      |        |   |  |   | 2,609   |  
|Other, net                                                                                              |  |                          | 955    |      |  |      | (1,670  | ) |  |   | 2,319   |  
|                                                                                                        |  |                          |        |      |  |      |         |   |  |   |         |  
|                                                                                                        |  | $                        | 28,916 |      |  | $    | (1,330  | ) |  | $ | (11,365 | )
|                                                                                                        |  |                          |        |      |  |      |         |   |  |   |         |  

F-30



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                               |                                             |              |          |          |   |   |          |          |  
|------------------------------ | ------------------------------------------- | ------------ | -------- | -------- | - | - | -------- | -------- | -
|                               |                                             | December 31,
|                               |                                             |             
|                               |                                             | 2004         |          | 2003    
|                               |                                             |              |          |         
|Deferred tax assets:           |                                             |              |          |          |   |   |          |         
|                               | Net operating losses carryforward           |              | $        | 265,469  |   |   | $        | 211,581  |  
|                               | Investment in joint ventures                |              |          | 737      |   |   |          | 8,955    |  
|                               | Inventory                                   |              |          | 5,048    |   |   |          | 16,623   |  
|                               | Alternative minimum tax credit carryforward |              |          | 5,337    |   |   |          | 5,407    |  
|                               | Derivative instruments                      |              |          | 722      |   |   |          | 5,279    |  
|                               | Accrued liabilities                         |              |          | 3,634    |   |   |          | 10,858   |  
|                               | Intangibles                                 |              |          | 11,093   |   |   |          | 14,274   |  
|                               | Capital loss carryforward                   |              |          | 10,293   |   |   |          | 5,852    |  
|                               | Other                                       |              |          | 22,057   |   |   |          | 6,794    |  
|                               |                                             |              |          |          |   |   |          |         
|Gross deferred tax assets      |                                             |              | 324,390  |          |   |   | 285,623  |         
|                               | Valuation allowance                         |              |          | (39,662  | ) |   |          | (29,269  | )
|                               |                                             |              |          |          |   |   |          |         
|                               |                                             |              | 284,728  |          |   |   | 256,354  |         
|                               |                                             |              |          |          |   |   |          |         
|Deferred tax liabilities:      |                                             |              |          |          |   |   |          |         
|                               | Property, plant and equipment               |              |          | (332,294 | ) |   |          | (291,249 | )
|                               | Other                                       |              |          | (6,135   | ) |   |          | (2,087   | )
|                               |                                             |              |          |          |   |   |          |         
|Gross deferred tax liabilities |                                             |              | (338,429 | )        |   |   | (293,336 | )       
|                               |                                             |              |          |          |   |   |          |         
|                               |                                             | $            | (53,701  | )        |   | $ | (36,982  | )       
|                               |                                             |              |          |          |   |   |          |         









|    |                           
|--- | --------------------------
|15. | Accounting for Derivatives



F-31



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)








|                         |  |               |                   |                  |  |                 |       |                   |  |   |         |  |  |   |        |  
|------------------------ |  | ------------- | ----------------- | ---------------- |  | --------------- | ----- | ----------------- |  | - | ------- |  |  | - | ------ | -
|                         |  |               |                   |                  |  |                 |       | Fair Value of    
|                         |  |               |                   | Fixed Rate to be |  |                 |       | Swap at          
|Floating Rate to be Paid |  | Maturity Date |                   | Received         |  | Notional Amount |       | December 31, 2004
|                         |  |               |                   |                  |  |                 |       |                  
|Six Month LIBOR +4.72%   |  |               | December 15, 2010 |                  |  |                 | 8.625 | %                 |  | $ | 100,000 |  |  | $ | (3,254 | )
|Six Month LIBOR +4.64%   |  |               | December 15, 2010 |                  |  |                 | 8.625 | %                 |  | $ | 100,000 |  |  | $ | (2,742 | )





|      |              |               |  |                       |                  |                 |  |                   |         |  |  |  |          |  |  |   |      |  
|----- | ------------ | ------------- |  | --------------------- | ---------------- | --------------- |  | ----------------- | ------- |  |  |  | -------- |  |  | - | ---- | -
|      |              |               |  |                       |                  |                 |  | Fair Value of    
|      |              |               |  |                       |                  |                 |  | Swap at          
|Lease |              | Maturity Date |  | Fixed Rate to be Paid |                  | Notional Amount |  | December 31, 2004
|      |              |               |  |                       |                  |                 |  |                  
|      | March 2000   |               |  |                       | March 11, 2005   |                 |  |                   | 5.2550% |  |  |  | $100,000 |  |  | $ | (527 | )
|      | August 2000  |               |  |                       | March 11, 2005   |                 |  |                   | 5.2725% |  |  |  | $100,000 |  |  | $ | (534 | )
|      | October 2000 |               |  |                       | October 26, 2005 |                 |  |                   | 5.3975% |  |  |  | $100,000 |  |  | $ |     |  





F-32



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)












|    |              
|--- | -------------
|16. | Stock Options



F-33



---



##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                       |                    |        |           |                  |   |   |      |       | 
|-------------------------------------- | ------------------ | ------ | --------- | ---------------- | - | - | ---- | ----- | 
|                                       |                    |        |           | Weighted average
|                                       |                    | Shares |           | price per share 
|                                       |                    |        |           |                 
|Options outstanding, December 31, 2001 |                    |        | 7,664,475 |                  |   | $ | 6.62 |      
|                                       | Options granted(1) |        |           | 1,497,706        |   |   |      | 13.35 | 
|                                       | Options canceled   |        |           | (261,323         | ) |   |      | 10.29 | 
|                                       | Options exercised  |        |           | (1,422,850       | ) |   |      | 4.69  | 
|                                       |                    |        |           |                  |   |   |      |      
|Options outstanding, December 31, 2002 |                    |        | 7,478,008 |                  |   |   | 8.21 |      
|                                       | Options granted(1) |        |           | 539,285          |   |   |      | 11.41 | 
|                                       | Options canceled   |        |           | (652,963         | ) |   |      | 11.06 | 
|                                       | Options exercised  |        |           | (1,432,636       | ) |   |      | 4.68  | 
|                                       |                    |        |           |                  |   |   |      |      
|Options outstanding, December 31, 2003 |                    |        | 5,931,694 |                  |   |   | 9.07 |      
|                                       | Options granted(1) |        |           | 77,474           |   |   |      | 11.47 | 
|                                       | Options canceled   |        |           | (624,656         | ) |   |      | 13.19 | 
|                                       | Options exercised  |        |           | (1,140,073       | ) |   |      | 8.38  | 
|                                       |                    |        |           |                  |   |   |      |      
|Options outstanding, December 31, 2004 |                    |        | 4,244,439 |                  |   |   | 8.67 |      
|                                       |                    |        |           |                  |   |   |      |      






|    |                                                          
|--- | ---------------------------------------------------------
|(1) | Option price equal to fair market value on date of grant.



|                         |  |                     |           |                     |  |          |     |        |  |          |       |  |  |  |           |  |  |   |       | 
|------------------------ |  | ------------------- | --------- | ------------------- |  | -------- | --- | ------ |  | -------- | ----- |  |  |  | --------- |  |  | - | ----- | 
|                         |  | Options Outstanding |           | Options Exercisable
|                         |  |                     |           |                    
|                         |  |                     |           | Weighted            |  |          |     |       
|                         |  |                     |           | Average             |  | Weighted |     |        |  | Weighted
|                         |  |                     |           | Remaining           |  | Average  |     |        |  | Average 
|                         |  |                     |           | Life in             |  | Exercise |     |        |  | Exercise
|Range of exercise prices |  | Shares              |           | Years               |  | Price    |     | Shares |  | Price   
|                         |  |                     |           |                     |  |          |     |        |  |         
|$0.00-2.50               |  |                     | 1,377,880 |                     |  |          | 0.6 |        |  | $        | 2.27  |  |  |  | 1,377,880 |  |  | $ | 2.27  | 
|$2.51-5.00               |  |                     | 16,659    |                     |  |          | 0.7 |        |  |          | 4.75  |  |  |  | 16,659    |  |  |   | 4.75  | 
|$5.01-7.50               |  |                     | 47,084    |                     |  |          | 1.3 |        |  |          | 5.70  |  |  |  | 47,084    |  |  |   | 5.70  | 
|$7.51-10.00              |  |                     | 1,329,227 |                     |  |          | 3.7 |        |  |          | 9.75  |  |  |  | 1,227,599 |  |  |   | 9.75  | 
|$10.01-12.50             |  |                     | 634,824   |                     |  |          | 7.4 |        |  |          | 11.61 |  |  |  | 275,354   |  |  |   | 11.97 | 
|$12.51-15.00             |  |                     | 677,913   |                     |  |          | 6.8 |        |  |          | 14.46 |  |  |  | 334,625   |  |  |   | 14.47 | 
|$15.01-17.50             |  |                     | 75,000    |                     |  |          | 7.2 |        |  |          | 17.25 |  |  |  | 50,000    |  |  |   | 17.25 | 
|$17.51-20.00             |  |                     | 21,000    |                     |  |          | 7.1 |        |  |          | 18.95 |  |  |  | 12,067    |  |  |   | 18.91 | 
|$20.01-22.50             |  |                     | 23,152    |                     |  |          | 0.2 |        |  |          | 20.09 |  |  |  | 23,152    |  |  |   | 20.09 | 
|$22.51-25.00             |  |                     | 41,700    |                     |  |          | 6.4 |        |  |          | 25.00 |  |  |  | 25,980    |  |  |   | 25.00 | 
|                         |  |                     |           |                     |  |          |     |        |  |          |       |  |  |  |           |  |  |   |       | 
|                         |  |                     | 4,244,439 |                     |  |          |     |        |  |          |       |  |  |  | 3,390,400 |  |  |   |       | 
|                         |  |                     |           |                     |  |          |     |        |  |          |       |  |  |  |           |  |  |   |       | 





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HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|               |  |      |           |      |  |      |         |  |  |  |         | 
|-------------- |  | ---- | --------- | ---- |  | ---- | ------- |  |  |  | ------- | 
|               |  | 2004 |           | 2003 |  | 2002
|               |  |      |           |      |  |     
|Expected life  |  |      | 7.5 years |      |  |      | 6 years |  |  |  | 6 years | 
|Interest rate  |  |      | 4.17%     |      |  |      | 3.16%   |  |  |  | 4.4%    | 
|Volatility     |  |      | 38.0%     |      |  |      | 40.3%   |  |  |  | 39.3%   | 
|Dividend yield |  |      | 0%        |      |  |      | 0%      |  |  |  | 0%      | 





|    |              
|--- | -------------
|17. | Benefit Plans





|    |                                             
|--- | --------------------------------------------
|18. | Related Party and Certain Other Transactions



| |                               
| | ------------------------------
| | Transactions with GKH Entities









| |                                        
| | ---------------------------------------
| | Transactions with Schlumberger Entities



F-35



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)












F-36



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




Transactions with General Partner and Hanover






| |                                 
| | --------------------------------
| | Other Related Party Transactions









F-37



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)












| |                                            
| | -------------------------------------------
| | Transactions with Former Executive Officers

Michael J. McGhan.




F-38



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HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|     |  |                  |           |                  |  |                  |           |  |  |  |       | 
|---- |  | ---------------- | --------- | ---------------- |  | ---------------- | --------- |  |  |  | ----- | 
|     |  |                  |           | Largest Note     |  |                 
|     |  | Aggregate Note   |           | Principal Amount |  |                 
|     |  | Principal Amount |           | Outstanding      |  | Weighted Average
|     |  | Outstanding at   |           | during each      |  | Rate of Interest
|Year |  | Period End       |           | Period           |  | at Period End   
|     |  |                  |           |                  |  |                 
|2003 |  | $                |          |                  |  | $                | 2,200,000 |  |  |  | 4.88% | 
|2002 |  | $                | 2,200,000 |                  |  | $                | 2,600,000 |  |  |  | 4.88% | 







Charles D. Erwin.


|     |  |                  |   |                  |  |                  |         |  |  |  |     |  
|---- |  | ---------------- | - | ---------------- |  | ---------------- | ------- |  |  |  | --- | -
|     |  |                  |   | Largest Note     |  |                 
|     |  | Aggregate Note   |   | Principal Amount |  |                 
|     |  | Principal Amount |   | Outstanding      |  | Weighted Average
|     |  | Outstanding at   |   | during each      |  | Rate of Interest
|Year |  | Period End       |   | Period           |  | at Period End   
|     |  |                  |   |                  |  |                 
|2002 |  | $                |  |                  |  | $                | 631,800 |  |  |  | 4.3 | %



F-39



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HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




Joe C. Bradford.


|     |  |             |         |             |  |           |         |  |  |  |      | 
|---- |  | ----------- | ------- | ----------- |  | --------- | ------- |  |  |  | ---- | 
|     |  | Aggregate   |         | Largest     |  |          
|     |  | Note        |         | Note        |  | Weighted 
|     |  | Principal   |         | Principal   |  | Average  
|     |  | Amount      |         | Amount      |  | Rate of  
|     |  | Outstanding |         | Outstanding |  | Interest 
|     |  | at Period   |         | during each |  | at Period
|Year |  | End         |         | Period      |  | End      
|     |  |             |         |             |  |          
|2004 |  | $           | 535,473 |             |  | $         | 535,473 |  |  |  | 7.3% | 
|2003 |  | $           | 535,473 |             |  | $         | 535,473 |  |  |  | 4.0% | 
|2002 |  | $           | 535,473 |             |  | $         | 579,845 |  |  |  | 4.3% | 



|    |                              
|--- | -----------------------------
|19. | Commitments and Contingencies



F-40



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HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                                 |  |      |           |                   |  |   |         | 
|------------------------------------------------ |  | ---- | --------- | ----------------- |  | - | ------- | 
|                                                 |  |      |           | Maximum Potential
|                                                 |  |      |           | Undiscounted     
|                                                 |  |      |           | Payments as of   
|                                                 |  | Term |           | December 31, 2004
|                                                 |  |      |           |                  
|Performance guarantees through letters of credit |  |      | 2005-2007 |                   |  | $ | 83,706  | 
|Standby letters of credit                        |  |      | 2005-2006 |                   |  |   | 16,558  | 
|Commercial letters of credit                     |  |      | 2005      |                   |  |   | 3,777   | 
|Bid bonds and performance bonds                  |  |      | 2005-2009 |                   |  |   | 96,962  | 
|                                                 |  |      |           |                   |  |   |         | 
|                                                 |  |      |           |                   |  | $ | 201,003 | 
|                                                 |  |      |           |                   |  |   |         | 





|                                             |                         |      |  |                   |  |  |   |        | 
|-------------------------------------------- | ----------------------- | ---- |  | ----------------- |  |  | - | ------ | 
|                                             |                         |      |  | Maximum Potential
|                                             |                         |      |  | Undiscounted     
|                                             |                         |      |  | Payments as of   
|                                             |                         | Term |  | December 31, 2004
|                                             |                         |      |  |                  
|Indebtedness of non-consolidated affiliates: |                         |      |  |                   |  |  |   |       
|                                             | Simco/Harwat Consortium |      |  | 2005              |  |  | $ | 12,257 | 
|                                             | El Furrial              |      |  | 2013              |  |  |   | 36,018 | 









F-41



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HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)










|    |              
|--- | -------------
|20. | Other Expense







|    |                                            
|--- | -------------------------------------------
|21. | Restructuring, Impairment and Other Charges



|                                                                             |       |   |       |       | 
|---------------------------------------------------------------------------- | ----- | - | ----- | ----- | 
|Write-off of deferred financing costs (in Depreciation and
    amortization) |       | $ | 1,686 |      
|Cancellation of interest rate swap (in Interest expense)                     |       |   | 2,028 |      
|                                                                             |       |   |       |      
|                                                                             | Total |   | $     | 3,714 | 
|                                                                             |       |   |       |      

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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                                                             |       |   |         |         | 
|---------------------------------------------------------------------------- | ----- | - | ------- | ------- | 
|Rental fleet asset impairment (in Depreciation and amortization)             |       | $ | 14,334  |        
|Cumulative effect of accounting change  FIN 46                              |       |   | 133,707 |        
|Belleli goodwill impairment (in Goodwill impairment)                         |       |   | 35,466  |        
|Write-off of deferred financing costs (in Depreciation and
    amortization) |       |   | 2,461   |        
|Loss on sale/write-down of discontinued operations                           |       |   | 21,617  |        
|                                                                             |       |   |         |        
|                                                                             | Total |   | $       | 207,585 | 
|                                                                             |       |   |         |        



|                                                                                                      |       |   |        |         | 
|----------------------------------------------------------------------------------------------------- | ----- | - | ------ | ------- | 
|Inventory reserves  (in Parts and service and used
    equipment expense)                            |       | $ | 6,800  |        
|Severance and other charges (in Selling, general and
    administrative)                              |       |   | 6,160  |        
|Write off of idle equipment and assets to be sold or abandoned
    (in Depreciation and amortization) |       |   | 34,485 |        
|Goodwill impairments                                                                                  |       |   | 52,103 |        
|Non-consolidated affiliate write-downs/charges (in Other expense)                                     |       |   | 15,950 |        
|Write-down of discontinued operations                                                                 |       |   | 58,282 |        
|Note receivable reserves (in Other expense)                                                           |       |   | 8,454  |        
|Write-off of abandoned purchase option (in Other expense)                                             |       |   | 500    |        
|                                                                                                      |       |   |        |        
|                                                                                                      | Total |   | $      | 182,734 | 
|                                                                                                      |       |   |        |        





|    |                              
|--- | -----------------------------
|22. | New Accounting Pronouncements







F-43



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)








Accounting
for Stock Issued to Employees,




F-44



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HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)








|    |                                             
|--- | --------------------------------------------
|23. | Industry Segments and Geographic Information



F-45



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)








|      |                                  |                           |   |               |  |                |   |             |  |             |   |         |  |              |   |         |  |  |   |         |  |  |   |         |  |  |   |           | 
|----- | -------------------------------- | ------------------------- | - | ------------- |  | -------------- | - | ----------- |  | ----------- | - | ------- |  | ------------ | - | ------- |  |  | - | ------- |  |  | - | ------- |  |  | - | --------- | 
|      |                                  |                           |   |               |  |                |   |             |  | Production  |   |         |  |             
|      |                                  |                           |   |               |  |                |   | Compressor  |  | and         |   |         |  |             
|      |                                  |                           |   |               |  | Parts, service |   | and         |  | processing  |   |         |  |             
|      |                                  |                           |   | International |  | and used       |   | accessory   |  | equipment   |   |         |  |             
|      |                                  | U.S. rentals              |   | rentals       |  | equipment      |   | fabrication |  | fabrication |   | Other   |  | Consolidated
|      |                                  |                           |   |               |  |                |   |             |  |             |   |         |  |             
|      |                                  | (In thousands of dollars)
|2004: |                                  |                           |   |               |  |                |   |             |  |             |   |         |  |              |   |         |  |  |   |         |  |  |   |         |  |  |   |          
|      | Revenues from external customers |                           | $ | 341,570       |  |                | $ | 214,598     |  |             | $ | 180,321 |  |              | $ | 158,629 |  |  | $ | 270,284 |  |  | $ | 23,403  |  |  | $ | 1,188,805 | 
|      | Gross profit                     |                           |   | 196,990       |  |                |   | 150,645     |  |             |   | 44,392  |  |              |   | 13,797  |  |  |   | 28,033  |  |  |   | 23,403  |  |  |   | 457,260   | 
|      | Identifiable assets              |                           |   | 1,478,893     |  |                |   | 606,489     |  |             |   | 61,078  |  |              |   | 56,825  |  |  |   | 145,149 |  |  |   | 423,778 |  |  |   | 2,772,212 | 
|      | Capital expenditures             |                           |   | 40,271        |  |                |   | 36,713      |  |             |   |        |  |              |   |        |  |  |   | 7,907   |  |  |   | 5,605   |  |  |   | 90,496    | 
|2003: |                                  |                           |   |               |  |                |   |             |  |             |   |         |  |              |   |         |  |  |   |         |  |  |   |         |  |  |   |          
|      | Revenues from external customers |                           | $ | 324,186       |  |                | $ | 191,301     |  |             | $ | 164,935 |  |              | $ | 106,896 |  |  | $ | 260,660 |  |  | $ | 27,102  |  |  | $ | 1,075,080 | 
|      | Gross profit                     |                           |   | 196,761       |  |                |   | 129,426     |  |             |   | 41,680  |  |              |   | 9,974   |  |  |   | 26,457  |  |  |   | 27,102  |  |  |   | 431,400   | 
|      | Identifiable assets              |                           |   | 1,619,596     |  |                |   | 538,881     |  |             |   | 60,843  |  |              |   | 71,611  |  |  |   | 59,487  |  |  |   | 563,059 |  |  |   | 2,913,477 | 
|      | Capital expenditures             |                           |   | 73,007        |  |                |   | 59,200      |  |             |   | 24      |  |              |   | 2,735   |  |  |   | 7,500   |  |  |   |        |  |  |   | 142,466   | 
|2002: |                                  |                           |   |               |  |                |   |             |  |             |   |         |  |              |   |         |  |  |   |         |  |  |   |         |  |  |   |          
|      | Revenues from external customers |                           | $ | 328,600       |  |                | $ | 175,337     |  |             | $ | 223,685 |  |              | $ | 114,009 |  |  | $ | 149,656 |  |  | $ | 22,154  |  |  | $ | 1,013,441 | 
|      | Gross profit                     |                           |   | 206,428       |  |                |   | 122,341     |  |             |   | 43,842  |  |              |   | 14,563  |  |  |   | 22,214  |  |  |   | 22,154  |  |  |   | 431,542   | 
|      | Identifiable assets              |                           |   | 684,963       |  |                |   | 533,197     |  |             |   | 92,644  |  |              |   | 76,511  |  |  |   | 125,071 |  |  |   | 658,835 |  |  |   | 2,171,221 | 
|      | Capital expenditures             |                           |   | 120,581       |  |                |   | 100,382     |  |             |   | 1,093   |  |              |   | 441     |  |  |   | 26,706  |  |  |   |        |  |  |   | 249,203   | 



| |                
| | ---------------
| | Geographic Data

|      |                                  |                           |   |                  |  |              |   |           |  |  |   |           | 
|----- | -------------------------------- | ------------------------- | - | ---------------- |  | ------------ | - | --------- |  |  | - | --------- | 
|      |                                  | United States             |   | International(1) |  | Consolidated
|      |                                  |                           |   |                  |  |             
|      |                                  | (In thousands of dollars)
|2004: |                                  |                           |   |                  |  |              |   |           |  |  |   |          
|      | Revenues from external customers |                           | $ | 620,191          |  |              | $ | 568,614   |  |  | $ | 1,188,805 | 
|      | Identifiable assets              |                           | $ | 1,796,585        |  |              | $ | 975,627   |  |  | $ | 2,772,212 | 
|2003: |                                  |                           |   |                  |  |              |   |           |  |  |   |          
|      | Revenues from external customers |                           | $ | 647,176          |  |              | $ | 427,904   |  |  | $ | 1,075,080 | 
|      | Identifiable assets              |                           | $ | 1,945,955        |  |              | $ | 967,522   |  |  | $ | 2,913,477 | 
|2002: |                                  |                           |   |                  |  |              |   |           |  |  |   |          
|      | Revenues from external customers |                           | $ | 692,823          |  |              | $ | 320,618   |  |  | $ | 1,013,441 | 
|      | Identifiable assets              |                           | $ | 1,085,194        |  |              | $ | 1,086,027 |  |  | $ | 2,171,221 | 






|    |                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | International operations include approximately
    $141.6 million, $122.8 million and $104.0 million
    of revenues and $332.2 million, $348.2 million and
    $431.0 million of identifiable assets for 2004, 2003

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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |                                                                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | and 2002, respectively, related to operations and investments in
    Venezuela. Approximately $89.2 million, $79.4 million
    and $141.0 million of the identifiable assets in 2004, 2003
    and 2002, respectively, relates to the joint ventures acquired
    in connection with the POC acquisition completed in August 2001.
    (See Note 8.)



|    |                  
|--- | -----------------
|24. | Subsequent Events



F-47



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##### Table of Contents



HANOVER COMPRESSION LIMITED PARTNERSHIP


SELECTED QUARTERLY UNAUDITED FINANCIAL DATA




|            |                                                              |                |   |         |   |         |   |         |   |  |   |          |   |  |   |         |  
|----------- | ------------------------------------------------------------ | -------------- | - | ------- | - | ------- | - | ------- | - |  | - | -------- | - |  | - | ------- | -
|            |                                                              | 1st            |   | 2nd     |   | 3rd     |   | 4th    
|            |                                                              | Quarter        |   | Quarter |   | Quarter |   | Quarter
|            |                                                              |                |   |         |   |         |   |        
|            |                                                              | (In thousands)
|2004(2):    |                                                              |                |   |         |   |         |   |         |   |  |   |          |   |  |   |        
|            | Revenue                                                      |                | $ | 269,831 |   |         | $ | 292,876 |   |  | $ | 315,811  |   |  | $ | 310,287 |  
|            | Gross profit                                                 |                |   | 112,941 |   |         |   | 118,254 |   |  |   | 116,588  |   |  |   | 109,477 |  
|            | Net loss                                                     |                |   | (5,801  | ) |         |   | (4,066  | ) |  |   | (35      | ) |  |   | (25,511 | )
|2003(1)(2): |                                                              |                |   |         |   |         |   |         |   |  |   |          |   |  |   |        
|            | Revenue                                                      |                | $ | 269,792 |   |         | $ | 272,288 |   |  | $ | 270,837  |   |  | $ | 262,163 |  
|            | Gross profit                                                 |                |   | 111,991 |   |         |   | 108,825 |   |  |   | 106,219  |   |  |   | 104,365 |  
|            | Income (loss) before cumulative effect of accounting changes |                |   | 3,420   |   |         |   | 3,999   |   |  |   | (58,026  | ) |  |   | (6,391  | )
|            | Net income (loss)                                            |                |   | 3,420   |   |         |   | 3,999   |   |  |   | (144,936 | ) |  |   | (6,391  | )






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | During the third quarter of 2003, we recorded a
    $35.5 million goodwill impairment, $14.3 million
    rental fleet impairment, $16.8 million write-down of
    discontinued operations and $133.7 million cumulative
    effect of accounting change for the adoption of FIN 46.
    During the fourth quarter of 2003, we recorded a
    $2.5 million write-off of deferred financing costs and
    $2.3 million write-down of discontinued operations.
|   
|(2) | Amounts reflect reclassifications for discontinued operations.
    (See Note 3.)                                                                                                                                                                                                                                                                                                                                                                           

F-48



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##### Table of Contents



SCHEDULE II


HANOVER COMPRESSION LIMITED PARTNERSHIP


VALUATION AND QUALIFYING ACCOUNTS


|                                                                                                    |      |                |   |            |  |            |   |            |  |  |   |        |     |  |   |        | 
|--------------------------------------------------------------------------------------------------- | ---- | -------------- | - | ---------- |  | ---------- | - | ---------- |  |  | - | ------ | --- |  | - | ------ | 
|                                                                                                    |      |                |   | Additions  |  |            |   |           
|                                                                                                    |      | Balance at     |   | Charged to |  |            |   | Balance at
|                                                                                                    |      | Beginning      |   | Costs and  |  |            |   | End of    
|Description                                                                                         |      | of Period      |   | Expenses   |  | Deductions |   | Period    
|                                                                                                    |      |                |   |            |  |            |   |           
|                                                                                                    |      | (In thousands)
|Allowance for doubtful accounts deducted from accounts
    receivable in the balance sheet          |      |                |   |            |  |            |   |            |  |  |   |        |     |  |   |       
|                                                                                                    | 2004 |                | $ | 5,460      |  |            | $ | 2,658      |  |  | $ | 545    | (1) |  | $ | 7,573  | 
|                                                                                                    | 2003 |                |   | 5,162      |  |            |   | 4,028      |  |  |   | 3,730  | (1) |  |   | 5,460  | 
|                                                                                                    | 2002 |                |   | 6,300      |  |            |   | 7,091      |  |  |   | 8,229  | (1) |  |   | 5,162  | 
|Allowance for obsolete and slow moving inventory deducted from
    inventories in the balance sheet |      |                |   |            |  |            |   |            |  |  |   |        |     |  |   |       
|                                                                                                    | 2004 |                | $ | 12,729     |  |            | $ | 1,062      |  |  | $ | 2,092  | (2) |  | $ | 11,699 | 
|                                                                                                    | 2003 |                |   | 14,211     |  |            |   | 1,536      |  |  |   | 3,018  | (2) |  |   | 12,729 | 
|                                                                                                    | 2002 |                |   | 2,101      |  |            |   | 13,853     |  |  |   | 1,743  | (2) |  |   | 14,211 | 
|Allowance for deferred tax assets not expected to be realized                                       |      |                |   |            |  |            |   |            |  |  |   |        |     |  |   |       
|                                                                                                    | 2004 |                | $ | 29,269     |  |            | $ | 23,396     |  |  | $ | 13,003 | (3) |  | $ | 39,662 | 
|                                                                                                    | 2003 |                |   | 23,371     |  |            |   | 20,409     |  |  |   | 14,511 | (3) |  |   | 29,269 | 
|                                                                                                    | 2002 |                |   |           |  |            |   | 23,371     |  |  |   |       |     |  |   | 23,371 | 
|Allowance for employee loans                                                                        |      |                |   |            |  |            |   |            |  |  |   |        |     |  |   |       
|                                                                                                    | 2003 |                | $ | 6,021      |  |            | $ |           |  |  | $ | 6,021  | (4) |  | $ |       | 
|                                                                                                    | 2002 |                |   |           |  |            |   | 6,021      |  |  |   |       |     |  |   | 6,021  | 






|    |                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------
|(1) | Uncollectible accounts written off, net of recoveries.                                                     
|   
|(2) | Obsolete inventory written off at cost, net of value received.                                             
|   
|(3) | Reflects utilization of prior year valuation allowance in the
    current year.                            
|   
|(4) | During 2003, the notes receivable for loans to employees who
    were not executive officers were forgiven.

S-1



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##### Table of Contents



EXHIBIT INDEX


|        |   |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | - | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |            
|Number  |   | Description
|        |   |            
|        | 3 | .1          |  | Certificate of Limited Partnership of Hanover Compression
    Limited Partnership (incorporated by reference to
    Exhibit 3.3 to the Registration Statement on Form S-4
    (Registration No. 333-75814)).                                                                                                                                                                                                                                                     
|        | 3 | .2          |  | Certificate of Amendment to Certificate of Limited Partnership
    of Hanover Compression Limited Partnership, dated as of
    January 2, 2001 (incorporated by reference to
    Exhibit 3.4 to the Registration Statement on Form S-4
    (Registration No. 333-75814)).                                                                                                                                                                                        
|        | 3 | .3          |  | Certificate of Amendment to Certificate of Limited Partnership
    of Hanover Compression Limited Partnership, dated as of
    August 20, 2001 (incorporated by reference to
    Exhibit 3.5 to the Registration Statement on Form S-4
    (Registration No. 333-75814)).                                                                                                                                                                                        
|        | 3 | .4          |  | Limited Partnership Agreement of Hanover Compression Limited
    Partnership (incorporated by reference to Exhibit 3.6 to
    the Registration Statement on Form S-4 (Registration
    No. 333-75814)).                                                                                                                                                                                                                                                          
|        | 3 | .5          |  | Amendment to Limited Partnership Agreement of Hanover
    Compression Limited Partnership (incorporated by reference to
    Exhibit 3.7 to the Registration Statement on Form S-4
    (Registration No. 333-75814)).                                                                                                                                                                                                                                             
|        | 4 | .1          |  | Indenture for the 8.50% Senior Secured Notes due 2008, dated as
    of August 30, 2001, among the 2001A Trust, as issuer,
    Hanover Compression Limited Partnership and certain
    subsidiaries, as guarantors, and Wilmington Trust FSB, as
    Trustee, incorporated by reference to Exhibit 10.69 to
    Hanover Compressor Companys (Hanovers)
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2001.                        
|        | 4 | .2          |  | Form of 8.50% Senior Secured Notes due 2008, incorporated by
    reference to Exhibit 4.10 to Hanovers Annual Report
    on Form 10-K for the year ended December 31, 2003.                                                                                                                                                                                                                                                                                     
|        | 4 | .3          |  | Indenture for the 8.75% Senior Secured Notes due 2011, dated as
    of August 30, 2001, among the 2001B Trust, as issuer,
    Hanover Compression Limited Partnership and certain
    subsidiaries, as guarantors, and Wilmington Trust FSB, as
    Trustee, incorporated by reference to Exhibit 10.75 to
    Hanovers Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2001.                                                             
|        | 4 | .4          |  | Form of 8.75% Senior Secured Notes due 2011, incorporated by
    reference to Exhibit 4.12 to Hanovers Annual Report
    on Form 10-K for the year ended December 31, 2003.                                                                                                                                                                                                                                                                                     
|        | 4 | .5          |  | Indenture for the Zero Coupon Subordinated Notes due
    March 31, 2007, dated as of May 14, 2003, between
    Hanover Compressor Company and Wachovia Bank, National
    Association, as trustee, incorporated by reference to
    Exhibit 4.1 to Hanovers Registration Statement (File
    No. 333-106384) on Form S-3, as filed with the SEC on
    June 23, 2003.                                                                                           
|        | 4 | .6          |  | Form of Zero Coupon Subordinated Notes due March 31, 2007,
    incorporated by reference to Exhibit 4.14 to Hanovers
    Annual Report on Form 10-K for the year ended
    December 31, 2003.                                                                                                                                                                                                                                                                   
|        | 4 | .7          |  | Senior Indenture, dated as of December 15, 2003, among
    Hanover Compressor Company, Subsidiary Guarantors named therein
    and Wachovia Bank, National Association, as trustee,
    incorporated by reference to Exhibit 4.1 to Hanovers
    Registration Statement on Form 8-A, as filed with the SEC
    on December 15, 2003.                                                                                                                            
|        | 4 | .8          |  | First Supplemental Indenture to the Senior Indenture dated as of
    December 15, 2003, relating to the 8.625% Senior Notes due
    2010, dated as of December 15, 2003, among Hanover
    Compressor Company, Hanover Compression Limited Partnership and
    Wachovia Bank, National Association, as trustee, incorporated by
    reference to Exhibit 4.2 to Hanovers Registration
    Statement on Form 8-A, as filed with the SEC on
    December 15, 2003.
|        | 4 | .9          |  | Form of 8.625% Senior Notes due 2010, incorporated by reference
    to Exhibit 4.17 to Hanovers Annual Report on
    Form 10-K for the year ended December 31, 2003.                                                                                                                                                                                                                                                                                            
|        | 4 | .10         |  | Second Supplemental Indenture to the Senior Indenture dated as
    of December 15, 2003, relating to the 4.75% Convertible
    Senior Notes due 2014, dated as of December 15, 2003,
    between Hanover Compressor Company and Wachovia Bank, National
    Association, as trustee, incorporated by reference to
    Exhibit 4.4 to Hanovers Current Report on
    Form 8-K, as filed with the SEC on December 16, 2003.                                       



---



##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | -- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 4  | .11         |  | Form of 4.75% Convertible Senior Notes due 2014, incorporated by
    reference to Exhibit 4.19 to Hanovers Annual Report
    on Form 10-K for the year ended December 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                 
|        | 4  | .12         |  | Third Supplemental Indenture to the Senior Indenture dated as of
    December 15, 2003, relating to the 9.0% Senior Notes due
    2014, dated as of June 1, 2004, among Hanover Compressor
    Company, Hanover Compression Limited Partnership and Wachovia
    Bank, National Association, as trustee, incorporated by
    reference to Exhibit 4.2 to the Registration Statement of
    Hanover Compressor Company and Hanover Compression Limited
    Partnership on Form 8-A under the Securities Act of 1934,
    as filed on June 2, 2004.                
|        | 4  | .13         |  | Form of 9% Senior Notes due 2014, incorporated by reference to
    Exhibit 4.3 to the Registration Statement of Hanover
    Compressor Company and Hanover Compression Limited Partnership
    on Form 8-A under the Securities Act of 1934, as filed on
    June 2, 2004.                                                                                                                                                                                                                                                                                       
|        | 10 | .1          |  | Stipulation and Agreement of Settlement, dated as of
    October 23, 2003, incorporated by reference to
    Exhibit 10.1 to Hanovers Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2003.                                                                                                                                                                                                                                                                                                                                                
|        | 10 | .2          |  | PIGAP Settlement Agreement, dated as of May 14, 2003, by
    and among Schlumberger Technology Corporation, Schlumberger
    Oilfield Limited, Schlumberger Surenco S.A., Hanover Compressor
    Company and Hanover Compression Limited Partnership,
    incorporated by reference to Exhibit 10.2 to Hanovers
    Annual Report on Form 10-K for the year ended
    December 31, 2003.                                                                                                                                                                        
|        | 10 | .3          |  | Credit Agreement, dated as of December 15, 2003, among
    Hanover Compressor Company, Hanover Compression Limited
    Partnership, Bank One, NA as Syndication Agent, JPMorgan Chase
    Bank, as Administrative Agent, and the several lenders parties
    thereto, incorporated by reference to Exhibit 10.1 to
    Hanovers Current Report on Form 8-K, as filed with
    the SEC on December 16, 2003.                                                                                                                                                     
|        | 10 | .4          |  | Guarantee and Collateral Agreement, dated as of
    December 15, 2003, among Hanover Compressor Company,
    Hanover Compression Limited Partnership and certain of their
    subsidiaries in favor of JPMorgan Chase Bank, as Collateral
    Agent, incorporated by reference to Exhibit 10.2 to
    Hanovers Current Report on Form 8-K, as filed with
    the SEC on December 16, 2003.                                                                                                                                                                      
|        | 10 | .5          |  | Hanover Guarantee, dated as of December 15, 2003, made by
    Hanover Compressor Company in favor of JPMorgan Chase Bank, as
    Administrative Agent for the lenders parties to the Credit
    Agreement dated as of December 15, 2003, incorporated by
    reference to Exhibit 10.6 to Hanovers Annual Report
    on Form 10-K for the year ended December 31, 2003.                                                                                                                                                                                         
|        | 10 | .6          |  | Subsidiaries Guarantee, dated as of December 15,
    2003, in favor of JPMorgan Chase Bank, as Administrative Agent
    for the lenders parties to the Credit Agreement dated as of
    December 15, 2003, incorporated by reference to
    Exhibit 10.7 to Hanovers Annual Report on
    Form 10-K for the year ended December 31, 2003.                                                                                                                                                                                                                      
|        | 10 | .7          |  | Lease, dated as of October 27, 2000, between Hanover
    Equipment Trust 2000B (the 2000B Trust) and
    Hanover Compression Inc., incorporated by reference to
    Exhibit 10.54 to Hanovers Registration Statement
    (File No. 333-50836) on Form S-4, as filed with the
    SEC on December 22, 2000.                                                                                                                                                                                                                                                    
|        | 10 | .8          |  | Guarantee, dated as of October 27, 2000 made by Hanover
    Compressor Company, Hanover Compression Inc. and certain
    subsidiaries, incorporated by reference to Exhibit 10.55 to
    Hanovers Registration Statement (File No. 333-50836)
    on Form S-4, as filed with the SEC on December 22,
    2000.                                                                                                                                                                                                                                                  
|        | 10 | .9          |  | Participation Agreement, dated as of October 27, 2000,
    among Hanover Compression Inc., the 2000B Trust, The Chase
    Manhattan Bank, National Westminster Bank PLC, Citibank N.A.,
    Credit Suisse First Boston and the Industrial Bank of Japan as
    co-agents; Bank Hapoalim B.M. and FBTC Leasing Corp., as
    investors, Wilmington Trust Company and various lenders,
    incorporated by reference to Exhibit 10.56 to
    Hanovers Registration Statement (File No. 333-50836)
    on Form S-4, as filed with the SEC on December 22,
    2000.
|        | 10 | .10         |  | Security Agreement, dated as of October 27, 2000, made by
    the 2000B Trust in favor of The Chase Manhattan Bank as agent
    for the lenders, incorporated by reference to Exhibit 10.57
    to Hanovers Registration Statement (File
    No. 333-50836) on Form S-4, as filed with the SEC on
    December 22, 2000.                                                                                                                                                                                                                                        



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##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                              
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .11         |  | Assignment of Leases, Rents and Guarantee, dated as of
    October 27, 2000, made by the 2000B Trust to The Chase
    Manhattan Bank as agent for the lenders, incorporated by
    reference to Exhibit 10.58 to Hanovers Registration
    Statement (File No. 333-50836) on Form S-4, as filed
    with the SEC on December 22, 2000.                                                      
|        | 10 | .12         |  | Lease, dated as of August 31, 2001, between Hanover
    Equipment Trust 2001A (the 2001A Trust) and
    Hanover Compression Limited Partnership, incorporated by
    reference to Exhibit 10.64 to Hanovers Quarterly
    Report on Form 10-Q for the quarter ended
    September 30, 2001.                                                                                               
|        | 10 | .13         |  | Guarantee, dated as of August 31, 2001, made by Hanover
    Compressor Company, Hanover Compression Limited Partnership, and
    certain subsidiaries, incorporated by reference to
    Exhibit 10.65 to Hanovers Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2001.                                                                                               
|        | 10 | .14         |  | Participation Agreement, dated as of August 31, 2001, among
    Hanover Compression Limited Partnership, the 2001A Trust, and
    General Electric Capital Corporation, incorporated by reference
    to Exhibit 10.66 to Hanovers Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2001.                                                                              
|        | 10 | .15         |  | Security Agreement, dated as of August 31, 2001, made by
    the 2001A Trust in favor Wilmington Trust FSB as agent,
    incorporated by reference to Exhibit 10.67 to
    Hanovers Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2001.                                                                                                                             
|        | 10 | .16         |  | Assignment of Leases, Rents and Guarantee from the 2001A Trust
    to Wilmington Trust FSB, dated as of August 31, 2001,
    incorporated by reference to Exhibit 10.68 to
    Hanovers Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2001.                                                                                                                         
|        | 10 | .17         |  | Lease, dated as of August 31, 2001, between Hanover
    Equipment Trust 2001B (the 2001B Trust) and
    Hanover Compression Limited Partnership, incorporated by
    reference to Exhibit 10.70 to Hanovers Quarterly
    Report on Form 10-Q for the quarter ended
    September 30, 2001.                                                                                               
|        | 10 | .18         |  | Guarantee, dated as of August 31, 2001, made by Hanover
    Compressor Company, Hanover Compression Limited Partnership, and
    certain subsidiaries, incorporated by reference to
    Exhibit 10.71 to Hanovers Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2001.                                                                                               
|        | 10 | .19         |  | Participation Agreement, dated as of August 31, 2001, among
    Hanover Compression Limited Partnership, the 2001B Trust, and
    General Electric Capital Corporation, incorporated by reference
    to Exhibit 10.72 to Hanovers Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2001.                                                                              
|        | 10 | .20         |  | Security Agreement, dated as of August 31, 2001, made by
    the 2001B Trust in favor of Wilmington Trust FSB as agent,
    incorporated by reference to Exhibit 10.73 to
    Hanovers Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2001.                                                                                                                          
|        | 10 | .21         |  | Assignment of Leases, Rents and Guarantee from the 2001B Trust
    to Wilmington Trust FSB, dated as of August 31, 2001,
    incorporated by reference to Exhibit 10.74 to
    Hanovers Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2001.                                                                                                                         
|        | 10 | .22         |  | Amendment, dated as of December 15, 2003, to the 2000A and
    2000B Synthetic Guarantees, Credit Agreements and Participation
    Agreements, incorporated by reference to Exhibit 10.36 to
    Hanovers Annual Report on Form 10-K for the year
    ended December 31, 2003.                                                                                                              
|        | 10 | .23         |  | Amended and Restated Guarantee and Collateral Agreement, dated
    January 31, 2003, made by Hanover Compressor Company,
    certain of Hanovers subsidiaries, JPMorgan Chase Bank, as
    administrative agent, and the lenders parties thereto,
    incorporated by reference to Exhibit 10.6 to Hanovers
    Annual Report on Form 10-K for the fiscal year ended
    December 31, 2002.
|        | 10 | .24         |  | Purchase Agreement, dated as of July 11, 2000, among
    Hanover Compressor Company, Hanover Compression Inc.,
    Dresser-Rand Company and Ingersoll-Rand Company, incorporated by
    reference to Exhibit 99.2 to Hanovers Current Report
    on Form 8-K filed with the SEC on September 14, 2000.                                                                                      
|        | 10 | .25         |  | Agreement and Plan of Merger, dated as of July 13, 2000,
    among Hanover Compressor Company, Caddo Acquisition Corporation,
    and OEC Compression Corporation, incorporated by reference to
    Exhibit 10.51 to Hanovers Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2000.                                                                                   



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##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .26         |  | Amendment No. 1 to Agreement and Plan of Merger, dated as
    of November 14, 2000, by and among Hanover Compressor
    Company, Caddo Acquisition Corporation and OEC Compression
    Corporation, incorporated by reference to Exhibit 10.43 to
    Hanovers Annual Report on Form 10-K for the year
    ended December 31, 2003.                                                                                                
|        | 10 | .27         |  | Amendment No. 2 to Agreement and Plan of Merger, dated as
    of February 2, 2001, by and among Hanover Compressor
    Company, Caddo Acquisition Corporation and OEC Compression
    Corporation, incorporated by reference to Exhibit 10.44 to
    Hanovers Annual Report on Form 10-K for the year
    ended December 31, 2003.                                                                                                 
|        | 10 | .28         |  | Purchase Agreement, dated June 28, 2001, among Schlumberger
    Technology Corporation, Schlumberger Oilfield Holdings Ltd.,
    Schlumberger Surenco S.A., Camco International Inc., Hanover
    Compressor Company and Hanover Compression Limited Partnership,
    incorporated by reference to Exhibit 10.63 to
    Hanovers Quarterly Report on Form 10-Q for the
    quarter ended June 30, 2001.                            
|        | 10 | .29         |  | Schedule 1.2(c) to Purchase Agreement, dated June 28,
    2001, among Schlumberger Technology Corporation, Schlumberger
    Oilfield Holdings Limited, Schlumberger Surenco S.A., Camco
    International Inc., Hanover Compressor Company and Hanover
    Compression Limited Partnership, incorporated by reference to
    Exhibit 99.1 to Hanovers Current Report on
    Form 8-K filed with the SEC on February 6, 2003.       
|        | 10 | .30         |  | Amendment No. 1, dated as of August 31, 2001, to
    Purchase Agreement among Schlumberger Technology Corporation,
    Schlumberger Oilfield Holdings Ltd., Schlumberger Surenco S.A.,
    Camco International Inc., Hanover Compressor Company and Hanover
    Compression Limited Partnership, incorporated by reference to
    Exhibit 99.3 to Hanovers Current Report on
    Form 8-K filed with the SEC on September 14, 2001.
|        | 10 | .31         |  | Most Favored Supplier and Alliance Agreement, dated
    August 31, 2001, among Schlumberger Oilfield Holdings
    Limited, Schlumberger Technology Corporation and Hanover
    Compression Limited Partnership, incorporated by reference to
    Exhibit 99.4 to Hanovers Current Report on
    Form 8-K filed with the SEC on September 14, 2001.                                                                                 
|        | 10 | .32         |  | Agreement by and among SJMB, L.P., Charles Underbrink, John L.
    Thompson, Belleli Energy S.r.l. and Hanover Compressor Company
    and certain of its subsidiaries dated September 20, 2002,
    incorporated by reference to Exhibit 10.62 to
    Hanovers Annual Report on Form 10-K for the fiscal
    year ended December 31, 2002.                                                                                         
|        | 10 | .33         |  | Hanover Compressor Company 1992 Stock Compensation Plan,
    incorporated by reference to Exhibit 10.63 to
    Hanovers Annual Report on Form 10-K for the fiscal
    year ended December 31, 2002.                                                                                                                                                                                                                              
|        | 10 | .34         |  | Hanover Compressor Company Senior Executive Stock Option Plan,
    incorporated by reference to Exhibit 10.4 to Hanovers
    Registration Statement (File No. 333-24953) on
    Form S-1, as amended.                                                                                                                                                                                                                            
|        | 10 | .35         |  | Hanover Compressor Company 1993 Management Stock Option Plan,
    incorporated by reference to Exhibit 10.5 to Hanovers
    Registration Statement (File No. 333-24953) on
    Form S-1, as amended.                                                                                                                                                                                                                             
|        | 10 | .36         |  | Hanover Compressor Company Incentive Option Plan, incorporated
    by reference to Exhibit 10.6 to Hanovers Registration
    Statement (File No. 333-24953) on Form S-1, as amended.                                                                                                                                                                                                                                               
|        | 10 | .37         |  | Amendment and Restatement of the Hanover Compressor Company
    Incentive Option Plan, incorporated by reference to
    Exhibit 10.7 to Hanovers Registration Statement (File
    No. 333-24953) on Form S-1, as amended.                                                                                                                                                                                                        
|        | 10 | .38         |  | Hanover Compressor Company 1995 Employee Stock Option Plan,
    incorporated by reference to Exhibit 10.8 to Hanovers
    Registration Statement (File No. 333-24953) on
    Form S-1, as amended.                                                                                                                                                                                                                               
|        | 10 | .39         |  | Hanover Compressor Company 1995 Management Stock Option Plan,
    incorporated by reference to Exhibit 10.9 to Hanovers
    Registration Statement (File No. 333-24953) on
    Form S-1, as amended.                                                                                                                                                                                                                             
|        | 10 | .40         |  | Form of Stock Option Agreement for DeVille and Mcneil,
    incorporated by reference to Exhibit 10.70 to
    Hanovers Annual Report on Form 10-K for the fiscal
    year ended December 31, 2002.                                                                                                                                                                                                                                  
|        | 10 | .41         |  | Form of Stock Option Agreements for Wind Bros, incorporated by
    reference to Exhibit 10.71 to Hanovers Annual Report
    on Form 10-K for the fiscal year ended December 31,
    2002.                                                                                                                                                                                                                                          



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##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                 
|------- | -- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .42         |  | Hanover Compressor Company 1996 Employee Stock Option Plan,
    incorporated by reference to Exhibit 10.10 to
    Hanovers Registration Statement (File No. 333-24953)
    on Form S-1, as amended.                          
|        | 10 | .43         |  | Hanover Compressor Company 1997 Stock Option Plan, as amended,
    incorporated by reference to Exhibit 10.23 to
    Hanovers Registration Statement (File No. 333-24953)
    on Form S-1, as amended.                       
|        | 10 | .44         |  | 1997 Stock Purchase Plan, incorporated by reference to
    Exhibit 10.24 to Hanovers Registration Statement
    (File No. 333-24953) on Form S-1, as
    amended.                                                            
|        | 10 | .45         |  | Hanover Compressor Company 1998 Stock Option Plan, incorporated
    by reference to Exhibit 10.7 to Hanovers Quarterly
    Report on Form 10-Q for the quarter ended
    September 30, 1998.                                   
|        | 10 | .46         |  | Hanover Compressor Company December 9, 1998 Stock Option
    Plan, incorporated by reference to Exhibit 10.33 to
    Hanovers Annual Report on Form 10-K for the fiscal
    year ended December 31, 1998.                    
|        | 10 | .47         |  | Hanover Compressor Company 1999 Stock Option Plan, incorporated
    by reference to Exhibit 4.1 to Hanovers Registration
    Statement (File No. 333-32096) on Form S-8 filed with
    the SEC on March 10, 2000.            
|        | 10 | .48         |  | Hanover Compressor Company 2001 Equity Incentive Plan,
    incorporated by reference to Exhibit 4.1 to Hanovers
    Registration Statement (File No. 333-73904) on
    Form S-8 filed with the SEC on November 21,
    2001. 
|        | 10 | .49         |  | Hanover Compressor Company 2003 Stock Incentive Plan,
    incorporated by reference to Hanovers Definitive Proxy
    Statement on Schedule 14A, as filed with the SEC on
    April 15, 2003.                                 
|        | 10 | .50         |  | Employment Letter with Chad C. Deaton, dated August 19,
    2002, incorporated by reference to Exhibit 10.79 to
    Hanovers Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2002.                     
|        | 10 | .51         |  | Employment Letter with Peter Schreck, dated August 22,
    2000, incorporated by reference to Exhibit 10.1 to
    Hanovers Quarterly Report on Form 10-Q for the
    quarter ended March 31, 2003.                           
|        | 10 | .52         |  | Employment Letter with Stephen York, dated March 6, 2002,
    incorporated by reference to Exhibit 10.2 to Hanovers
    Quarterly Report on Form 10-Q for the quarter ended
    March 31, 2003.                              
|        | 10 | .53         |  | Separation Agreement with Mark Berg, dated February 27,
    2004, incorporated by reference as Exhibit 10.74 to
    Hanovers Annual Report on Form 10-K for the year
    ended December 31, 2003.                            
|        | 10 | .54         |  | Employment Letter with Gary M. Wilson dated April 9, 2004,
    incorporated by reference to Exhibit 10.1 to Hanovers
    Quarterly Report on Form 10-Q for the quarter ended
    June 30, 2004.                              
|        | 10 | .55         |  | Employment Letter with John E. Jackson dated October 5,
    2004, incorporated by reference to Exhibit 10.1 to
    Hanovers Current Report on Form 8-K, as filed with
    the SEC on October 6, 2004.                        
|        | 10 | .56         |  | Employment Letter with Lee E. Beckelman dated January 31,
    2005, incorporated by reference to Exhibit 10.1 to
    Hanovers Current Report on Form 8-K, as filed with
    the SEC on February 1, 2005.                     
|        | 10 | .57         |  | Employment Letter with Anita H. Colglazier dated April 4,
    2002 with explanatory note, incorporated by reference to
    Exhibit 10.61 to Hanovers Annual Report on
    Form 10-K for the year ended December 31,
    2004.
|        | 10 | .58         |  | Description of Change of Control Arrangement with Hilary S.
    Ware, incorporated by reference to Exhibit 10.62 to
    Hanovers Annual Report on Form 10-K for the year
    ended December 31, 2004.                        
|        | 14 | .1          |  | P.R.I.D.E. in Performance  Hanovers Guide to
    Ethical Business Conduct, incorporated by reference to
    Exhibit 14.1 to the Companys Annual Report on
    Form 10-K for the year ended December 31, 2003.                
|        | 14 | .2          |  | Amendment to the Hanovers Code of Ethics, incorporated by
    reference to the Hanovers Current Report on Form 8-K,
    as filed with the SEC on January 20, 2005.                                                            
|        | 23 | .1          |  | Consent of PricewaterhouseCoopers LLP.*                                                                                                                                                                                         



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##### Table of Contents



|        |    |             |  |                                                                                                                                                                
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 31 | .1          |  | Certification of the Chief Executive Officer pursuant to
    Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of
    1934.*                             
|        | 31 | .2          |  | Certification of the Chief Financial Officer pursuant to
    Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of
    1934.*                             
|        | 32 | .1          |  | Certification of the Chief Executive Officer pursuant to 18
    U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.*
|        | 32 | .2          |  | Certification of the Chief Financial Officer pursuant to 18
    U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.*