##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





Form 10-Q







|þ | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2008

Or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period
from                      to

Commission
File Number 001-33303





TARGA RESOURCES, INC.

(Exact name
of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 74-3117058                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|1000 Louisiana, Suite 4300, Houston, Texas                     |  | 77002                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

Registrants telephone number, including area code:

(713) 584-1000

Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer   ̈    Accelerated filer   ̈    Non-accelerated filer   þ        Smaller reporting company   ̈

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     ̈  No    þ









---

##### Table of Contents

|                             |  |                                                                                                                  |  |   
|---------------------------- |  | ---------------------------------------------------------------------------------------------------------------- |  | --
|PART IFINANCIAL INFORMATION |  |                                                                                                                 
|                             |  |                                                                                                                 
|Item 1.                      |  | Financial Statements                                                                                             |  | 5 
|                             |  |                                                                                                                 
|                             |  | Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007                                            |  | 5 
|                             |  |                                                                                                                 
|                             |  | Consolidated Statements of Operations for the three and six months ended June 30, 2008 and 2007                  |  | 6 
|                             |  |                                                                                                                 
|                             |  | Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2008 and 2007 |  | 7 
|                             |  |                                                                                                                 
|                             |  | Consolidated Statement of Changes in Stockholders Equity for the six months ended June 30,
2008                 |  | 8 
|                             |  |                                                                                                                 
|                             |  | Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007                            |  | 9 
|                             |  |                                                                                                                 
|                             |  | Notes to Consolidated Financial Statements                                                                       |  | 10
|                             |  |                                                                                                                 
|Item 2.                      |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                            |  | 35
|                             |  |                                                                                                                 
|Item 3.                      |  | Quantitative and Qualitative Disclosures about Market Risk                                                       |  | 49
|                             |  |                                                                                                                 
|Item 4T.                     |  | Controls and Procedures                                                                                          |  | 52
|                             | 
|PART IIOTHER INFORMATION    |  |                                                                                                                 
|                             |  |                                                                                                                 
|Item 1.                      |  | Legal Proceedings                                                                                                |  | 53
|                             |  |                                                                                                                 
|Item 1A.                     |  | Risk Factors                                                                                                     |  | 53
|                             |  |                                                                                                                 
|Item 2.                      |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                      |  | 53
|                             |  |                                                                                                                 
|Item 3.                      |  | Defaults Upon Senior Securities                                                                                  |  | 53
|                             |  |                                                                                                                 
|Item 4.                      |  | Submission of Matters to a Vote of Security Holders                                                              |  | 53
|                             |  |                                                                                                                 
|Item 5.                      |  | Other Information                                                                                                |  | 53
|                             |  |                                                                                                                 
|Item 6.                      |  | Exhibits                                                                                                         |  | 53
|                             | 
|SIGNATURES                   |  | 55                                                                                                              



2



---

##### Table of Contents

As generally used in the energy industry and in this Quarterly Report on Form 10-Q, the identified
terms have the following meanings:



|                        |  |                                                                    
|----------------------- |  | -------------------------------------------------------------------
|Bbl                     |  | Barrels                                                            
|BBtu                    |  | Billion British thermal units, a measure of heating value          
|/d                      |  | Per day                                                            
|gal                     |  | Gallons                                                            
|MBbl                    |  | Thousand barrels                                                   
|MMBtu                   |  | Million British thermal units, a measure of heating value          
|MMcf                    |  | Million cubic feet                                                 
|NGL(s)                  |  | Natural gas liquid(s)                                              
|                       
|Price Index Definitions
|GD-HH                   |  | Henry Hub Gas Daily average                                        
|IF-HH                   |  | Inside FERC Gas Market Report, Henry Hub                           
|IF-HSC                  |  | Inside FERC Gas Market Report, Houston Ship Channel/Beaumont, Texas
|IF-NGPL MC              |  | Inside FERC Gas Market Report, Natural Gas Pipeline, Mid-Continent 
|IF-Waha                 |  | Inside FERC Gas Market Report, West Texas Waha                     
|NY-HH                   |  | NYMEX, Henry Hub Natural Gas                                       
|NY-WTI                  |  | NYMEX, West Texas Intermediate Crude Oil                           
|OPIS-MB                 |  | Oil Price Information Service, Mont Belvieu, Texas                 

As used in this Quarterly Report, unless the context otherwise requires, Targa,
our, we, us and similar terms refer to Targa Resources, Inc., together with its consolidated subsidiaries, including our publicly traded master limited partnership, Targa Resources Partners LP, which we refer to
in this Quarterly Report as the Partnership.



3



---

##### Table of Contents

Cautionary Statement About Forward-Looking Statements

This Quarterly Report contains forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934, as amended.
All statements, other than statements of historical fact, included in this Quarterly Report are forward-looking statements. Forward-looking statements include, without limitation, statements regarding our future financial position, business
strategy, future capital and other expenditures, plans and objectives of management for future operations. You can typically identify forward-looking statements by the use of forward-looking words such as may, potential,
project, plan, believe, expect, anticipate, intend, estimate or similar expressions or variations on such expressions. Each forward-looking statement reflects our
current view of future events and is subject to risks, uncertainties and other factors, known and unknown, which could cause our actual results to differ materially from any results expressed or implied by our forward-looking statements. These risks
and uncertainties, many of which are beyond our control, include, but are not limited to:



| |  |  | our ability to access the debt and equity markets, which will depend on general market conditions and the credit ratings for our debt obligations;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our success in risk management activities, including the use of derivative financial instruments to hedge commodity and interest rate risks;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the level of creditworthiness of counterparties to transactions;
| | - |  | ----------------------------------------------------------------



| |  |  | the amount of collateral required to be posted from time to time in our transactions;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | changes in laws and regulations, particularly with regard to taxes, safety and protection of the environment or the gathering and processing industry;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the timing and extent of changes in natural gas, NGL and commodity prices, interest rates and demand for our services;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | weather and other natural phenomena;
| | - |  | ------------------------------------



| |  |  | industry changes, including the impact of consolidations and changes in competition;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | our ability to obtain necessary licenses, permits and other approvals;
| | - |  | ----------------------------------------------------------------------



| |  |  | our ability to grow through acquisitions or internal growth projects, and the successful integration and future performance of such assets;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the level and success of natural gas drilling around our assets, and our success in connecting natural gas supplies to our gathering and processing systems;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | general economic, market and business conditions; and
| | - |  | -----------------------------------------------------



| |  |  | the risks described in this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2007.
| | - |  | ---------------------------------------------------------------------------------------------------------------------

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could be inaccurate, and,
therefore, we cannot assure you that the forward-looking statements included in this Quarterly Report will prove to be accurate. Some of these and other risks and uncertainties that could cause actual results to differ materially from such
forward-looking statements are more fully described in this Quarterly Report and under Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2007. Except as may be required by applicable law, we
undertake no obligation to publicly update or advise of any change in any forward-looking statement, whether as a result of new information, future events or otherwise.

Forward-looking statements contained in this Quarterly Report and all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety
by this cautionary statement.



4



---

##### Table of Contents

PART IFINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

TARGA RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                               |  |                |           |   |                  |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                                                                                               |  | June 30,2008   |           |   | December 31,2007 |  
|                                                                                                                                                                               |  | (Unaudited)    |          
|                                                                                                                                                                               |  | (In thousands) |          
|ASSETS                                                                                                                                                                         |  |                |           |   |                  |   |           |  
|Current assets:                                                                                                                                                                |  |                |           |   |                  |   |           |  
|Cash and cash equivalents                                                                                                                                                      |  | $              | 366,232   |   |                  | $ | 177,949   |  
|Trade receivables, net of allowances of $6,213 and $1,115                                                                                                                      |  |                | 754,924   |   |                  |   | 836,044   |  
|Inventory                                                                                                                                                                      |  |                | 107,555   |   |                  |   | 143,185   |  
|Deferred income taxes                                                                                                                                                          |  |                | 77,756    |   |                  |   | 25,071    |  
|Assets from risk management activities                                                                                                                                         |  |                | 1,926     |   |                  |   | 9,487     |  
|Other current assets                                                                                                                                                           |  |                | 14,516    |   |                  |   | 70,640    |  
|                                                                                                                                                                               |  |                |           |   |                  |   |           |  
|Total current assets                                                                                                                                                           |  |                | 1,322,909 |   |                  |   | 1,262,376 |  
|                                                                                                                                                                               |  |                |           |   |                  |   |           |  
|Property, plant and equipment, at cost                                                                                                                                         |  |                | 2,828,626 |   |                  |   | 2,764,230 |  
|Accumulated depreciation                                                                                                                                                       |  |                | (410,875  | ) |                  |   | (334,160  | )
|                                                                                                                                                                               |  |                |           |   |                  |   |           |  
|Property, plant and equipment, net                                                                                                                                             |  |                | 2,417,751 |   |                  |   | 2,430,070 |  
|Unconsolidated investments                                                                                                                                                     |  |                | 53,778    |   |                  |   | 48,005    |  
|Long-term assets from risk management activities                                                                                                                               |  |                | 3,864     |   |                  |   | 4,279     |  
|Investment in debt obligations of Targa Resources Investments Inc.                                                                                                             |  |                | 14,622    |   |                  |   |          |  
|Other assets                                                                                                                                                                   |  |                | 54,616    |   |                  |   | 45,235    |  
|                                                                                                                                                                               |  |                |           |   |                  |   |           |  
|Total assets                                                                                                                                                                   |  | $              | 3,867,540 |   |                  | $ | 3,789,965 |  
|                                                                                                                                                                               |  |                |           |   |                  |   |           |  
|                                                                                                                                                                               |  |               
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                           |  |                |           |   |                  |   |           |  
|Current liabilities:                                                                                                                                                           |  |                |           |   |                  |   |           |  
|Accounts payable                                                                                                                                                               |  | $              | 409,389   |   |                  | $ | 470,860   |  
|Accrued liabilities                                                                                                                                                            |  |                | 469,425   |   |                  |   | 379,245   |  
|Current maturities of debt                                                                                                                                                     |  |                | 12,500    |   |                  |   | 12,500    |  
|Liabilities from risk management activities                                                                                                                                    |  |                | 204,321   |   |                  |   | 75,568    |  
|                                                                                                                                                                               |  |                |           |   |                  |   |           |  
|Total current liabilities                                                                                                                                                      |  |                | 1,095,635 |   |                  |   | 938,173   |  
|                                                                                                                                                                               |  |                |           |   |                  |   |           |  
|Long-term debt, less current maturities                                                                                                                                        |  |                | 1,340,925 |   |                  |   | 1,398,475 |  
|Long-term liabilities from risk management activities                                                                                                                          |  |                | 249,035   |   |                  |   | 81,019    |  
|Deferred income taxes                                                                                                                                                          |  |                | 58,358    |   |                  |   | 29,501    |  
|Other long-term obligations                                                                                                                                                    |  |                | 38,850    |   |                  |   | 35,267    |  
|Minority interest                                                                                                                                                              |  |                | 108,338   |   |                  |   | 100,826   |  
|Non-controlling interest in Targa Resources Partners LP                                                                                                                        |  |                | 581,404   |   |                  |   | 714,300   |  
|Commitments and contingencies (see Note 12)                                                                                                                                    |  |                |           |   |                  |   |           |  
|Stockholders equity:                                                                                                                                                          |  |                |           |   |                  |   |           |  
|Common stock ($0.001 par value, 1,000 shares authorized, issued, and outstanding at June 30, 2008 and December 31, 2007, collateral
for Targa Resources Investments Inc. debt) |  |                |          |   |                  |   |          |  
|Additional paid-in capital                                                                                                                                                     |  |                | 420,269   |   |                  |   | 473,784   |  
|Retained earnings                                                                                                                                                              |  |                | 139,350   |   |                  |   | 74,736    |  
|Accumulated other comprehensive loss                                                                                                                                           |  |                | (164,624  | ) |                  |   | (56,116   | )
|                                                                                                                                                                               |  |                |           |   |                  |   |           |  
|Total stockholders equity                                                                                                                                                     |  |                | 394,995   |   |                  |   | 492,404   |  
|                                                                                                                                                                               |  |                |           |   |                  |   |           |  
|Total liabilities and stockholders equity                                                                                                                                     |  | $              | 3,867,540 |   |                  | $ | 3,789,965 |  
|                                                                                                                                                                               |  |                |           |   |                  |   |           |  

See notes to consolidated financial statements



5



---

##### Table of Contents

TARGA RESOURCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                        |  |                            |           |   |                          |   |           |      |  |   |           |   |  |   |           |  
|------------------------------------------------------- |  | -------------------------- | --------- | - | ------------------------ | - | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                                        |  | Three Months EndedJune 30, |           |   | Six Months EndedJune 30, |  
|                                                        |  | 2008                       |           |   | 2007                     |   |           | 2008 |  |   | 2007      |  
|                                                        |  |                            |           |   | (Unaudited)              |   |           |      | 
|                                                        |  |                            |           |   | (In thousands)           |   |           |      | 
|Revenues                                                |  | $                          | 2,263,226 |   |                          | $ | 1,610,768 |      |  | $ | 4,465,619 |   |  | $ | 3,059,780 |  
|                                                        |  |                            |           |   |                          |   |           |      |  |   |           |   |  |   |           |  
|Costs and expenses:                                     |  |                            |           |   |                          |   |           |      |  |   |           |   |  |   |           |  
|Product purchases                                       |  |                            | 2,023,089 |   |                          |   | 1,438,307 |      |  |   | 4,024,530 |   |  |   | 2,708,586 |  
|Operating expenses                                      |  |                            | 71,229    |   |                          |   | 62,388    |      |  |   | 134,807   |   |  |   | 120,311   |  
|Depreciation and amortization expense                   |  |                            | 38,750    |   |                          |   | 36,434    |      |  |   | 76,942    |   |  |   | 73,166    |  
|General and administrative expense                      |  |                            | 27,924    |   |                          |   | 23,699    |      |  |   | 52,017    |   |  |   | 42,390    |  
|Gain on sale of assets                                  |  |                            | (2        | ) |                          |   | (311      | )    |  |   | (4,445    | ) |  |   | (131      | )
|                                                        |  |                            |           |   |                          |   |           |      |  |   |           |   |  |   |           |  
|                                                        |  |                            | 2,160,990 |   |                          |   | 1,560,517 |      |  |   | 4,283,851 |   |  |   | 2,944,322 |  
|                                                        |  |                            |           |   |                          |   |           |      |  |   |           |   |  |   |           |  
|Income from operations                                  |  |                            | 102,236   |   |                          |   | 50,251    |      |  |   | 181,768   |   |  |   | 115,458   |  
|Other income (expense):                                 |  |                            |           |   |                          |   |           |      |  |   |           |   |  |   |           |  
|Interest expense, net                                   |  |                            | (23,660   | ) |                          |   | (34,021   | )    |  |   | (49,245   | ) |  |   | (78,003   | )
|Gain on insurance claims (see Note 10)                  |  |                            | 18,566    |   |                          |   |          |      |  |   | 18,566    |   |  |   |          |  
|Equity in earnings of unconsolidated investments        |  |                            | 7,196     |   |                          |   | 3,163     |      |  |   | 10,655    |   |  |   | 5,647     |  
|Minority interest                                       |  |                            | (11,610   | ) |                          |   | (7,207    | )    |  |   | (21,757   | ) |  |   | (12,818   | )
|Non-controlling interest in Targa Resources Partners LP |  |                            | (18,626   | ) |                          |   | (2,679    | )    |  |   | (35,597   | ) |  |   | (4,048    | )
|                                                        |  |                            |           |   |                          |   |           |      |  |   |           |   |  |   |           |  
|Income before income taxes                              |  |                            | 74,102    |   |                          |   | 9,507     |      |  |   | 104,390   |   |  |   | 26,236    |  
|Income tax (expense) benefit                            |  |                            |           |   |                          |   |           |      |  |   |           |   |  |   |           |  
|Current                                                 |  |                            | (275      | ) |                          |   | (693      | )    |  |   | (1,237    | ) |  |   | (693      | )
|Deferred                                                |  |                            | (27,629   | ) |                          |   | 4,686     |      |  |   | (38,539   | ) |  |   | (2,503    | )
|                                                        |  |                            |           |   |                          |   |           |      |  |   |           |   |  |   |           |  
|                                                        |  |                            | (27,904   | ) |                          |   | 3,993     |      |  |   | (39,776   | ) |  |   | (3,196    | )
|                                                        |  |                            |           |   |                          |   |           |      |  |   |           |   |  |   |           |  
|Net income                                              |  | $                          | 46,198    |   |                          | $ | 13,500    |      |  | $ | 64,614    |   |  | $ | 23,040    |  
|                                                        |  |                            |           |   |                          |   |           |      |  |   |           |   |  |   |           |  



See notes to consolidated
financial statements



6



---

##### Table of Contents

TARGA RESOURCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)



|                                                                                                       |  |                            |          |   |                          |   |         |      |  |   |          |   |  |   |         |  
|------------------------------------------------------------------------------------------------------ |  | -------------------------- | -------- | - | ------------------------ | - | ------- | ---- |  | - | -------- | - |  | - | ------- | -
|                                                                                                       |  | Three MonthsEnded June 30, |          |   | Six MonthsEnded June 30, |  
|                                                                                                       |  | 2008                       |          |   | 2007                     |   |         | 2008 |  |   | 2007     |  
|                                                                                                       |  | (Unaudited)                |         
|                                                                                                       |  | (In thousands)             |         
|Net income                                                                                             |  | $                          | 46,198   |   |                          | $ | 13,500  |      |  | $ | 64,614   |   |  | $ | 23,040  |  
|Other comprehensive loss:                                                                              |  |                            |          |   |                          |   |         |      |  |   |          |   |  |   |         |  
|Commodity hedging contracts:                                                                           |  |                            |          |   |                          |   |         |      |  |   |          |   |  |   |         |  
|Change in non-controlling partners share of other comprehensive income of Targa Resources Partners LP |  |                            | 109,381  |   |                          |   | 5,184   |      |  |   | 140,118  |   |  |   | 4,762   |  
|Change in fair value                                                                                   |  |                            | (268,996 | ) |                          |   | (18,669 | )    |  |   | (362,384 | ) |  |   | (88,075 | )
|Reclassification adjustment for settled periods                                                        |  |                            | 36,357   |   |                          |   | (836    | )    |  |   | 52,401   |   |  |   | (14,023 | )
|Related income taxes                                                                                   |  |                            | 46,948   |   |                          |   | 4,550   |      |  |   | 62,637   |   |  |   | 38,477  |  
|Interest rate swaps:                                                                                   |  |                            |          |   |                          |   |         |      |  |   |          |   |  |   |         |  
|Change in non-controlling partners share of other comprehensive income of Targa ResourcesPartners LP  |  |                            | (7,364   | ) |                          |   |        |      |  |   | (255     | ) |  |   |        |  
|Change in fair value                                                                                   |  |                            | 9,165    |   |                          |   | 251     |      |  |   | (270     | ) |  |   | 521     |  
|Reclassification adjustment for settled periods                                                        |  |                            | 849      |   |                          |   | (524    | )    |  |   | 616      |   |  |   | (1,048  | )
|Related income taxes                                                                                   |  |                            | (960     | ) |                          |   | 142     |      |  |   | (35      | ) |  |   | 237     |  
|Available for sale securities:                                                                         |  |                            |          |   |                          |   |         |      |  |   |          |   |  |   |         |  
|Change in fair value                                                                                   |  |                            | (1,900   | ) |                          |   |        |      |  |   | (1,900   | ) |  |   |        |  
|Related income taxes                                                                                   |  |                            | 706      |   |                          |   |        |      |  |   | 706      |   |  |   |        |  
|Foreign currency items:                                                                                |  |                            |          |   |                          |   |         |      |  |   |          |   |  |   |         |  
|Foreign currency translation adjustment                                                                |  |                            | 100      |   |                          |   | 1,016   |      |  |   | (242     | ) |  |   | 1,001   |  
|Related income taxes                                                                                   |  |                            | (51      | ) |                          |   | (379    | )    |  |   | 100      |   |  |   | (377    | )
|                                                                                                       |  |                            |          |   |                          |   |         |      |  |   |          |   |  |   |         |  
|Other comprehensive loss                                                                               |  |                            | (75,765  | ) |                          |   | (9,265  | )    |  |   | (108,508 | ) |  |   | (58,525 | )
|                                                                                                       |  |                            |          |   |                          |   |         |      |  |   |          |   |  |   |         |  
|Comprehensive income (loss)                                                                            |  | $                          | (29,567  | ) |                          | $ | 4,235   |      |  | $ | (43,894  | ) |  | $ | (35,485 | )
|                                                                                                       |  |                            |          |   |                          |   |         |      |  |   |          |   |  |   |         |  



See notes to consolidated
financial statements



7



---

##### Table of Contents

TARGA RESOURCES, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY



|                                       |  |                |  |                          |   |  |                  |         |                                   |  |   |         |  |   |          |   |  |   |          |  
|-------------------------------------- |  | -------------- |  | ------------------------ | - |  | ---------------- | ------- | --------------------------------- |  | - | ------- |  | - | -------- | - |  | - | -------- | -
|                                       |  | Common Stock   |  | AdditionalPaid-inCapital |   |  | RetainedEarnings |         | AccumulatedOtherComprehensiveLoss |  |   | Total   | 
|                                       |  | Shares         |  | Amount                   |   |  |                  |        
|                                       |  | (Unaudited)    | 
|                                       |  | (In thousands) | 
|Balance as of December 31, 2007        |  | 1              |  | $                        |  |  | $                | 473,784 |                                   |  | $ | 74,736  |  | $ | (56,116  | ) |  | $ | 492,404  |  
|Distribution to parent                 |  |               |  |                          |  |  |                  | (53,752 | )                                 |  |   |        |  |   |         |   |  |   | (53,752  | )
|Amortization of equity awards          |  |               |  |                          |  |  |                  | 763     |                                   |  |   |        |  |   |         |   |  |   | 763      |  
|Tax expense on vesting of common stock |  |               |  |                          |  |  |                  | (526    | )                                 |  |   |        |  |   |         |   |  |   | (526     | )
|Other comprehensive loss               |  |               |  |                          |  |  |                  |        |                                   |  |   |        |  |   | (108,508 | ) |  |   | (108,508 | )
|Net income                             |  |               |  |                          |  |  |                  |        |                                   |  |   | 64,614  |  |   |         |   |  |   | 64,614   |  
|                                       |  |                |  |                          |   |  |                  |         |                                   |  |   |         |  |   |          |   |  |   |          |  
|Balance as of June 30, 2008            |  | 1              |  | $                        |  |  | $                | 420,269 |                                   |  | $ | 139,350 |  | $ | (164,624 | ) |  | $ | 394,995  |  
|                                       |  |                |  |                          |   |  |                  |         |                                   |  |   |         |  |   |          |   |  |   |          |  



See notes to consolidated
financial statements



8



---

##### Table of Contents

TARGA RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                  |  |                          |          |   |      |   |          |  
|--------------------------------------------------------------------------------- |  | ------------------------ | -------- | - | ---- | - | -------- | -
|                                                                                  |  | Six Months EndedJune 30, |         
|                                                                                  |  | 2008                     |          |   | 2007 |  
|                                                                                  |  | (Unaudited)              |         
|                                                                                  |  | (In thousands)           |         
|Cash flows from operating activities                                              |  |                          |          |   |      |   |          |  
|Net income                                                                        |  | $                        | 64,614   |   |      | $ | 23,040   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                          |          |   |      |   |          |  
|Amortization in interest expense                                                  |  |                          | 4,091    |   |      |   | 9,011    |  
|Amortization in general and administrative expense                                |  |                          | 883      |   |      |   | 1,127    |  
|Other depreciation and amortization expense                                       |  |                          | 76,942   |   |      |   | 73,166   |  
|Accretion of asset retirement obligations                                         |  |                          | 629      |   |      |   | 494      |  
|Deferred income tax expense                                                       |  |                          | 38,539   |   |      |   | 2,503    |  
|Equity in earnings of unconsolidated investments                                  |  |                          | (10,655  | ) |      |   | (5,647   | )
|Distributions from unconsolidated investments                                     |  |                          | 775      |   |      |   | 2,325    |  
|Minority interest                                                                 |  |                          | 21,757   |   |      |   | 12,818   |  
|Minority interest distributions                                                   |  |                          | (14,245  | ) |      |   | (11,285  | )
|Non-controlling interest in Targa Resources Partners LP                           |  |                          | 35,597   |   |      |   | 4,048    |  
|Distributions to non-controlling interest in Targa Resources Partners LP          |  |                          | (28,235  | ) |      |   | (3,263   | )
|Risk management activities                                                        |  |                          | (1,176   | ) |      |   | (10,325  | )
|Gain on sale of assets                                                            |  |                          | (4,445   | ) |      |   | (131     | )
|Gain on property damage insurance settlement                                      |  |                          | (18,566  | ) |      |   |         |  
|Changes in operating assets and liabilities:                                      |  |                          |          |   |      |   |          |  
|Accounts receivable and other assets                                              |  |                          | 100,841  |   |      |   | (15,595  | )
|Inventory                                                                         |  |                          | 35,630   |   |      |   | 34,699   |  
|Accounts payable and other liabilities                                            |  |                          | 28,919   |   |      |   | 17,327   |  
|                                                                                  |  |                          |          |   |      |   |          |  
|Net cash provided by operating activities                                         |  |                          | 331,895  |   |      |   | 134,312  |  
|                                                                                  |  |                          |          |   |      |   |          |  
|Cash flows from investing activities                                              |  |                          |          |   |      |   |          |  
|Purchases of property, plant and equipment                                        |  |                          | (53,811  | ) |      |   | (68,405  | )
|Proceeds from property insurance                                                  |  |                          | 48,294   |   |      |   | 12,454   |  
|Investment in debt securities of Targa Investments Inc                            |  |                          | (16,400  | ) |      |   |         |  
|Investment in unconsolidated affiliate                                            |  |                          |         |   |      |   | (4,647   | )
|Other                                                                             |  |                          | (3,803   | ) |      |   | 1,987    |  
|                                                                                  |  |                          |          |   |      |   |          |  
|Net cash used in investing activities                                             |  |                          | (25,720  | ) |      |   | (58,611  | )
|                                                                                  |  |                          |          |   |      |   |          |  
|Cash flows from financing activities                                              |  |                          |          |   |      |   |          |  
|Senior secured credit facility:                                                   |  |                          |          |   |      |   |          |  
|Repayments                                                                        |  |                          | (6,250   | ) |      |   | (706,250 | )
|Senior secured credit facility of Targa Resources Partners LP:                    |  |                          |          |   |      |   |          |  
|Borrowings                                                                        |  |                          |         |   |      |   | 342,500  |  
|Repayments                                                                        |  |                          | (301,300 | ) |      |   | (48,000  | )
|Proceeds from issuance of senior unsecured notes of Targa Resources Partners LP   |  |                          | 250,000  |   |      |   |         |  
|Contribution from non-controlling interest in Targa Resources Partners LP         |  |                          |         |   |      |   | 377,593  |  
|Distribution to parent                                                            |  |                          | (53,752  | ) |      |   | (63      | )
|Costs incurred in connection with financing arrangements                          |  |                          | (6,590   | ) |      |   | (4,145   | )
|                                                                                  |  |                          |          |   |      |   |          |  
|Net cash used in financing activities                                             |  |                          | (117,892 | ) |      |   | (38,365  | )
|                                                                                  |  |                          |          |   |      |   |          |  
|Net increase in cash and cash equivalents                                         |  |                          | 188,283  |   |      |   | 37,336   |  
|Cash and cash equivalents, beginning of period                                    |  |                          | 177,949  |   |      |   | 142,739  |  
|                                                                                  |  |                          |          |   |      |   |          |  
|Cash and cash equivalents, end of period                                          |  | $                        | 366,232  |   |      | $ | 180,075  |  
|                                                                                  |  |                          |          |   |      |   |          |  

See notes to consolidated financial statements



9



---

##### Table of Contents

TARGA RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1Organization and Operations

Targa
Resources, Inc. is a Delaware corporation formed on February 26, 2004. Unless the context requires otherwise, references to we, us, our, the Company or Targa are intended to mean the
consolidated business and operations of Targa Resources, Inc.

We are a second-tier, wholly owned subsidiary of our parent holding company,
Targa Resources Investments Inc. (Targa Investments). The only significant asset of Targa Investments is its ownership of 100% of the outstanding capital stock of an intermediate holding company, whose sole asset is its ownership of 100%
of our outstanding capital stock, which consists of one thousand shares of common stock.

Our business operations consist of natural gas
gathering and processing, and the fractionating, storing, terminalling, transporting, distributing and marketing of NGLs. See Note 14Segment Information for a description of our segments and segment operations.

Note 2Basis of Presentation

These unaudited
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The year-end balance sheet data was derived from audited financial statements, but does not include all
disclosures required by GAAP. The unaudited consolidated financial statements for the three and six month periods ended June 30, 2008 and 2007 include all adjustments, both normal and recurring, which are, in the opinion of management,
necessary for a fair statement of the results for the interim periods. All significant intercompany balances and transactions have been eliminated in consolidation. Our financial results for the three and six month periods ended June 30, 2008
are not necessarily indicative of the results that may be expected for the full year ending December 31, 2008. These unaudited consolidated financial statements and other information included in this Quarterly Report on Form 10-Q should be read
in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2007.

We currently own approximately 26.5% of Targa Resources Partners LP (the Partnership), including our 2% general partner interest. Targa Resources GP LLC, the general partner of the Partnership, is wholly
owned by us. The Partnership is consolidated within our Gas Gathering and Processing segment in accordance with Emerging Issues Task Force (EITF) Issue No. 04-5,  Determining Whether a General Partner, or the General
Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights .

The
non-controlling interest in the Partnership on our consolidated balance sheets represents the investment by partners other than Targa Resources, Inc., including those partners share of the net income, distributions and accumulated other
comprehensive income (loss) of the Partnership. Non-controlling interest in net income of the Partnership on our consolidated statements of operations represents those partners share of the net income of the Partnership.

Note 3Accounting Policies and Related Matters

Investments in Debt Securities. Investments in debt securities that we have the positive intent and ability to hold to maturity are classified as held-to-maturity and reported at cost, adjusted for amortization or
accretion of



10



---

##### Table of Contents

premiums or discounts. Securities not classified as held-to-maturity are classified as available-for-sale and are recorded at fair value.
Unrealized gains and losses, net of the related tax effect, on available-for-sale securities are reported as accumulated other comprehensive income or loss which is a separate component of consolidated stockholders equity, and the annual
change in such gains and losses are reported as other comprehensive income. A transfer of securities between categories is recorded at fair value on the date of transfer.

Realized gains and losses on the sale of available-for-sale securities are recorded on the trade date and are determined using the specific identification method. Discounts or premiums are accreted or amortized to
interest income using the effective interest method over the expected terms of the related security.

Investment securities are evaluated
for impairment when economic or market conditions warrant such an evaluation to determine whether a decline in their value below amortized cost is other-than-temporary. Once a decline in value is determined to be other-than-temporary, the value of
the security is reduced and a corresponding charge to earnings is recognized.

The fair value of our available-for-sale securities is based
on quoted market prices. In instances where quoted market prices are not available, fair values are based on indicative valuations provided by a bank.

Accounting Pronouncements Recently Adopted

In September 2006, the Financial Accounting
Standards Board (FASB) issued SFAS 157, Fair Value Measurements. SFAS 157 establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The FASB partially deferred the
effective date of SFAS 157 for nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. We adopted SFAS 157 with respect to financial assets and liabilities that are
recognized on a recurring basis on January 1, 2008. Although our adoption of SFAS 157 did not materially impact our financial condition, results of operations, or cash flows, we are now required to provide additional disclosures as part of our
financial statements.

SFAS 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair
value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3,
defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Our
derivative instruments consist of financially settled commodity and interest rate swap and option contracts and fixed price commodity contracts with certain customers. We determine the value of our derivative contracts utilizing a discounted cash
flow model for swaps and a standard option pricing model for options, based on inputs that are either readily available in public markets or are quoted by counterparties to these contracts. In situations where we obtain inputs via quotes from our
counterparties, we verify the reasonableness of these quotes via similar quotes from another source for each date for which financial statements are presented. We have consistently applied these valuation techniques in all periods presented and
believe we have obtained the most accurate information available for the types of derivative contracts we hold. We have categorized the inputs for these contracts as Level 2 or Level 3. The price quotes for the Level 3 inputs are provided by a
counterparty with whom we regularly transact business.

On June 10, 2008, we paid $16.4 million to acquire from a third party $20.0
million of Targa Investments debt (see Note 5). We have determined the fair value of our investment using an indicative valuation provided by a bank. The indicative valuation was provided for information purposes only, and did not constitute a
bid or offer, or a solicitation of a bid or offer, to initiate or conclude any transaction at the stated indicative value. As such, we have categorized the indicative valuation as a Level 3 input.



11



---

##### Table of Contents

The fair value of our financial instruments as of June 30, 2008 was:



|                                                |  |                |         |         |   |         |  |         |         |  |   |        
|----------------------------------------------- |  | -------------- | ------- | ------- | - | ------- |  | ------- | ------- |  | - | -------
|                                                |  | Total          |         | Level 1 |   | Level 2 |  | Level 3
|                                                |  | (In thousands)
|Assets from commodity derivative contracts      |  | $              | 4,259   |         | $ |        |  | $       | 1,940   |  | $ | 2,319  
|Available-for-sale securities                   |  |                | 14,500  |         |   |        |  |         |        |  |   | 14,500 
|                                                |  |                |         |         |   |         |  |         |         |  |   |        
|Total assets                                    |  | $              | 18,759  |         | $ |        |  | $       | 1,940   |  | $ | 16,819 
|                                                |  |                |         |         |   |         |  |         |         |  |   |        
|Liabilities from commodity derivative contracts |  | $              | 450,938 |         | $ |        |  | $       | 148,967 |  | $ | 301,971
|Liabilities from interest rate swaps            |  |                | 887     |         |   |        |  |         | 887     |  |   |       
|                                                |  |                |         |         |   |         |  |         |         |  |   |        
|Total liabilities                               |  | $              | 451,825 |         | $ |        |  | $       | 149,854 |  | $ | 301,971
|                                                |  |                |         |         |   |         |  |         |         |  |   |        

The following table sets forth a reconciliation of changes in the fair value of our financial
instruments classified as Level 3 in the fair value hierarchy:



|                                                                 |  |                              |          |   |                             |   |        |       |  |   |          |  
|---------------------------------------------------------------- |  | ---------------------------- | -------- | - | --------------------------- | - | ------ | ----- |  | - | -------- | -
|                                                                 |  | CommodityDerivativeContracts |          |   | AvailableFor SaleSecurities |   |        | Total | 
|                                                                 |  | (In thousands)               |         
|Balance as of January 1, 2008                                    |  | $                            | (124,282 | ) |                             | $ |       |       |  | $ | (124,282 | )
|Losses included in accumulated other comprehensive income (loss) |  |                              | (119,185 | ) |                             |   | (1,900 | )     |  |   | (121,085 | )
|Losses included in non-controlling interest in the Partnership   |  |                              | (108,957 | ) |                             |   |       |       |  |   | (108,957 | )
|Settlements                                                      |  |                              | 49,055   |   |                             |   |       |       |  |   | 49,055   |  
|Transfers in/out of Level 3                                      |  |                              | 3,717    |   |                             |   | 16,400 |       |  |   | 20,117   |  
|                                                                 |  |                              |          |   |                             |   |        |       |  |   |          |  
|Balance as of June 30, 2008                                      |  | $                            | (299,652 | ) |                             | $ | 14,500 |       |  | $ | (285,152 | )
|                                                                 |  |                              |          |   |                             |   |        |       |  |   |          |  

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial
Assets and Financial Liabilities, including an amendment of FASB Statement No. 115.SFAS 159 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial
instruments and certain other items at fair value. Our adoption of SFAS 159 on January 1, 2008 did not have a material impact on our consolidated financial statements.

Accounting Pronouncements Recently Issued

In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging Activitiesan amendment of FASB Statement No. 133. SFAS 161 changes the disclosure
requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are
accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entitys financial position, financial performance, and cash flows. SFAS 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November 15, 2008. Early adoption is encouraged. Our adoption of SFAS 161 will not impact our consolidated financial position, results of operations or cash flows.

Note 4Partnership Units and Related Matters

The following table shows Partnership distributions made during the six months ended June 30, 2008:



|                  |  |                             |        |                                   |   |           |  |                   |  |                             |        |  |   |       
|----------------- |  | --------------------------- | ------ | --------------------------------- | - | --------- |  | ----------------- |  | --------------------------- | ------ |  | - | ------
|Quarter Ended     |  | Distribution perCommon Unit |        | Distribution perSubordinated Unit |   | Date Paid |  | TotalDistribution |  | Distributed toThird Parties
|                  |  |                             |        |                                   |   |           |  | (In thousands)   
|March 31, 2008    |  | $                           | 0.4175 |                                   | $ | 0.4175    |  | May 15, 2008      |  | $                           | 19,886 |  | $ | 14,467
|December 31, 2007 |  |                             | 0.3975 |                                   |   | 0.3975    |  | February 14, 2008 |  |                             | 18,793 |  |   | 13,768

See also Note 16Subsequent Events.



12



---

##### Table of Contents

Note 5Investment in Debt Securities of Targa Investments

On June 10, 2008 we paid $16.4 million to acquire from a third party $20.0 million of Targa Investments outstanding variable rate indebtedness.
The stated maturity date of the indebtedness is February 10, 2015, and as of June 30, 2008, the variable rate was 7.9%. We have classified this investment as an available-for-sale security. As of June 30, 2008, we have recorded an
unrealized loss of $1.9 million in accumulated other comprehensive loss, based on an indicative valuation supplied by a bank.

Note
6Unconsolidated Investments

At June 30, 2008, our unconsolidated investments included a 22.8959% ownership interest in
Venice Energy Services Company, LLC (VESCO), a venture that operates a natural gas liquids processing and extraction facility and a 38.75% ownership interest in Gulf Coast Fractionators LP (GCF), a venture that fractionates
natural gas liquids. See also Note 17Subsequent Events.

The following table shows our unconsolidated investments as of the dates
indicated:



|                                           |  |                |        |                  |   |       
|------------------------------------------ |  | -------------- | ------ | ---------------- | - | ------
|                                           |  | June 30,2008   |        | December 31,2007
|                                           |  | (In thousands)
|Natural Gas Gathering and Processing VESCO |  | $              | 33,389 |                  | $ | 28,767
|Logistics Assets GCF                       |  |                | 20,389 |                  |   | 19,238
|                                           |  |                |        |                  |   |       
|                                           |  | $              | 53,778 |                  | $ | 48,005
|                                           |  |                |        |                  |   |       

The following table shows our equity earnings, cash contributions and cash distributions with
respect to our unconsolidated investments for the periods indicated:



|                       |  |                            |       |                          |   |       |  |      |        |  |   |      
|---------------------- |  | -------------------------- | ----- | ------------------------ | - | ----- |  | ---- | ------ |  | - | -----
|                       |  | Three MonthsEnded June 30, |       | Six MonthsEnded June 30,
|                       |  | 2008                       |       | 2007                     |   | 2008  |  | 2007
|                       |  | (In thousands)            
|Equity in earnings of: |  |                            |       |                          |   |       |  |      |        |  |   |      
|VESCO                  |  | $                          | 6,354 |                          | $ | 2,296 |  | $    | 8,729  |  | $ | 3,500
|GCF                    |  |                            | 842   |                          |   | 867   |  |      | 1,926  |  |   | 2,147
|                       |  |                            |       |                          |   |       |  |      |        |  |   |      
|                       |  | $                          | 7,196 |                          | $ | 3,163 |  | $    | 10,655 |  | $ | 5,647
|                       |  |                            |       |                          |   |       |  |      |        |  |   |      
|Cash contributions:    |  |                            |       |                          |   |       |  |      |        |  |   |      
|VESCO                  |  | $                          |      |                          | $ |      |  | $    |       |  | $ | 4,647
|                       |  |                            |       |                          |   |       |  |      |        |  |   |      
|Cash distributions:    |  |                            |       |                          |   |       |  |      |        |  |   |      
|GCF                    |  | $                          |      |                          | $ | 775   |  | $    | 775    |  | $ | 2,325
|                       |  |                            |       |                          |   |       |  |      |        |  |   |      

Our equity in earnings of VESCO includes partially settled business interruption insurance claims
of $4.1 million for the three and six months ended June 30, 2008; and $2.2 million and $3.1 million for the three and six months ended June 30, 2007, respectively.

The following tables show summarized financial information of our unconsolidated investments:



|                             |  |                             |        |                           |   |        |  |       |        |     |   |        |  |     |        |       |   |         |  |   |        |  |   |       
|---------------------------- |  | --------------------------- | ------ | ------------------------- | - | ------ |  | ----- | ------ | --- | - | ------ |  | --- | ------ | ----- | - | ------- |  | - | ------ |  | - | ------
|                             |  | Three Months Ended June 30, |        | Six Months Ended June 30,
|                             |  | 2008                        |        | 2007                      |   | 2008   |  | 2007 
|                             |  | GCF                         |        | VESCO                     |   | GCF    |  | VESCO |        | GCF |   | VESCO  |  | GCF |        | VESCO
|                             |  | (In thousands)             
|Revenues                     |  | $                           | 16,193 |                           | $ | 58,868 |  | $     | 13,537 |     | $ | 38,141 |  | $   | 28,963 |       | $ | 111,254 |  | $ | 24,791 |  | $ | 72,950
|Cost of sales and operations |  |                             | 13,558 |                           |   | 27,938 |  |       | 11,840 |     |   | 37,005 |  |     | 23,272 |       |   | 76,243  |  |   | 20,064 |  |   | 69,699
|Income from operations       |  |                             | 2,635  |                           |   | 9,403  |  |       | 1,697  |     |   | 1,136  |  |     | 5,691  |       |   | 13,484  |  |   | 4,727  |  |   | 3,251 
|Net income                   |  |                             | 2,701  |                           |   | 9,497  |  |       | 1,822  |     |   | 1,136  |  |     | 5,855  |       |   | 13,711  |  |   | 4,979  |  |   | 3,251 



13



---

##### Table of Contents

|                                     |  |                    |        |                        |   |         |  |       |        |  |   |        
|------------------------------------ |  | ------------------ | ------ | ---------------------- | - | ------- |  | ----- | ------ |  | - | -------
|                                     |  | As ofJune 30, 2008 |        | As ofDecember 31, 2007
|                                     |  | GCF                |        | VESCO                  |   | GCF     |  | VESCO
|                                     |  | (In thousands)    
|Current assets                       |  | $                  | 17,061 |                        | $ | 47,503  |  | $     | 15,497 |  | $ | 54,311 
|Property, plant and equipment, net   |  |                    | 48,287 |                        |   | 190,393 |  |       | 50,034 |  |   | 139,893
|Other assets                         |  |                    |       |                        |   | 1,543   |  |       |       |  |   | 328    
|                                     |  |                    |        |                        |   |         |  |       |        |  |   |        
|Total assets                         |  | $                  | 65,348 |                        | $ | 239,439 |  | $     | 65,531 |  | $ | 194,532
|                                     |  |                    |        |                        |   |         |  |       |        |  |   |        
|Current liabilities                  |  | $                  | 5,152  |                        | $ | 42,883  |  | $     | 4,189  |  | $ | 25,533 
|Long-term liabilities                |  |                    |       |                        |   | 22,652  |  |       |       |  |   | 8,805  
|Owners equity                       |  |                    | 60,196 |                        |   | 173,904 |  |       | 61,342 |  |   | 160,194
|                                     |  |                    |        |                        |   |         |  |       |        |  |   |        
|Total liabilities and owners equity |  | $                  | 65,348 |                        | $ | 239,439 |  | $     | 65,531 |  | $ | 194,532
|                                     |  |                    |        |                        |   |         |  |       |        |  |   |        

Note 7Debt Obligations

Our consolidated debt obligations consisted of the following as of the dates indicated:



|                                                                                                |  |                |           |   |                  |   |           |  
|----------------------------------------------------------------------------------------------- |  | -------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                |  | June 30,2008   |           |   | December 31,2007 |  
|                                                                                                |  | (In thousands) |          
|Long-term debt:                                                                                 |  |                |           |   |                  |   |           |  
|Obligations of Targa:                                                                           |  |                |           |   |                  |   |           |  
|Senior secured term loan facility, variable rate, due October 2012                              |  | $              | 528,425   |   |                  | $ | 534,675   |  
|Senior unsecured notes, 81/2% fixed rate, due November 2013                                     |  |                | 250,000   |   |                  |   | 250,000   |  
|Senior secured revolving credit facility, variable rate, due October 2011 (1)                   |  |                |          |   |                  |   |          |  
|Obligations of the Partnership (2)                                                              |  |                |           |   |                  |   |           |  
|Senior secured revolving credit facility, variable rate, due February 2012 (3)                  |  |                | 325,000   |   |                  |   | 626,300   |  
|Senior unsecured notes, 81/4% fixed rate, due July 2016                                         |  |                | 250,000   |   |                  |   |          |  
|                                                                                                |  |                |           |   |                  |   |           |  
|Total debt                                                                                      |  |                | 1,353,425 |   |                  |   | 1,410,975 |  
|Current maturities of debt                                                                      |  |                | (12,500   | ) |                  |   | (12,500   | )
|                                                                                                |  |                |           |   |                  |   |           |  
|Long-term debt                                                                                  |  | $              | 1,340,925 |   |                  | $ | 1,398,475 |  
|                                                                                                |  |                |           |   |                  |   |           |  
|Irrevocable standby letters of credit:                                                          |  |                |           |   |                  |   |           |  
|Letters of credit outstanding under synthetic letter of credit facility (4)                     |  | $              | 261,685   |   |                  | $ | 272,409   |  
|Letters of credit outstanding under senior secured revolving credit facility of the Partnership |  |                | 41,250    |   |                  |   | 25,900    |  
|                                                                                                |  |                |           |   |                  |   |           |  
|                                                                                                |  | $              | 302,935   |   |                  | $ | 298,309   |  
|                                                                                                |  |                |           |   |                  |   |           |  



|(1) | The entire $250 million available under the senior secured revolving credit facility may also be utilized for letters of credit.
|--- | --------------------------------------------------------------------------------------------------------------------------------

|(2) | We consolidate the debt of the Partnership with that of our own; however, we do not have the obligation to make interest payments or debt payments with respect to the debt of the
Partnership.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | As of June 30, 2008, the Partnership had availability under this facility of $483.8 million, after giving effect to outstanding. borrowings of $325.0 million and $41.3 million
in outstanding letters of credit.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | The $300 million senior secured synthetic letter of credit facility terminates in October 2012. As of June 30, 2008, we had $38.3 million available under this facility.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



14



---

##### Table of Contents

Information Regarding Variable Interest Rates Paid

The following table shows the range of interest rates paid and weighted average interest rates paid on our significant consolidated variable-rate debt
obligations during the six months ended June 30, 2008:



|                                                            |  |                             |  |                                    |  
|----------------------------------------------------------- |  | --------------------------- |  | ---------------------------------- | -
|                                                            |  | Range of interestrates paid |  | Weighted averageinterest rate paid |  
|Senior secured term loan facility                           |  | 4.6% to 6.9%                |  | 6.5                                | %
|Senior secured revolving credit facility of the Partnership |  | 3.9% to 6.4%                |  | 5.0                                | %

Obligations of the Partnership

81/4% Senior Unsecured Notes Due 2016

On
June 18, 2008, the Partnership completed the private placement under Rule 144A and Regulation S of the Securities Act of 1933 of $250 million in aggregate principal amount of 81/4% senior unsecured notes due 2016 (the Partnership Notes). Proceeds from the Partnership Notes were used to repay borrowings under the Partnerships senior secured credit
facility.

The Partnership Notes:



| |  |  | are the Partnerships senior unsecured obligations;
| | - |  | ---------------------------------------------------



| |  |  | rank pari passuin right of payment with the Partnerships existing and future senior indebtedness, including indebtedness under its senior secured
credit facility;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | are senior in right of payment to any of the Partnerships future subordinated indebtedness; and
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | are unconditionally guaranteed by the Partnership.
| | - |  | --------------------------------------------------

The Partnership Notes are effectively subordinated to all secured indebtedness under the Partnerships senior secured credit agreement, which is secured by substantially all of the Partnerships assets, to
the extent of the value of the collateral securing that indebtedness.

Interest on
the Partnership Notes accrues at the rate of 81/4% per annum and is payable semi-annually in arrears on January 1, and
July 1, commencing on January 1, 2009. Interest is computed on the basis of a 360-day year comprising twelve 30-day months.

At any time prior to July 1, 2011, the Partnership may on one or more occasions redeem up to 35% of the aggregate principal amount of the Partnership Notes with the net cash proceeds of one or more equity offerings by the Partnership,
at a redemption price of 108.25% of the principal amount plus accrued and unpaid interest and liquidated damages, if any, to the redemption date, provided that:



| | (1) | at least 65% of the aggregate principal amount of the Partnership Notes remains outstanding immediately after the occurrence of such redemption; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | the redemption occurs within 90 days of the date of the closing of such equity offering.
| | --- | ----------------------------------------------------------------------------------------

At any time prior to July 1, 2012, the Partnership may redeem all or part of the Partnership Notes, at a redemption price equal to 100% of the
principal amount of the Partnership Notes redeemed plus the applicable premium as defined in the indenture agreement plus accrued and unpaid interest and liquidated damages, if any, to the date of redemption.



15



---

##### Table of Contents

On or after July 1, 2012, the Partnership may redeem all or part of the Partnership Notes at the
redemption prices set forth below (expressed as percentages of the principal amount), plus accrued and unpaid interest and liquidated damages, if any, on the Partnership Notes redeemed, if redeemed during the twelve-month period beginning on
July 1 of the year indicated:



|                    |  |            |  
|------------------- |  | ---------- | -
|Year                |  | Percentage |  
|2012                |  | 104.125    | %
|2013                |  | 102.063    | %
|2014 and thereafter |  | 100.000    | %

The Partnership Notes are subject to a registration rights agreement dated as of June 18,
2008. Under the registration rights agreement, the Partnership is required to file by June 19, 2009 a registration statement with respect to any Partnership Notes that are not freely transferable without volume restrictions by holders of the
Partnership Notes that are not affiliates of the Partnership. If the Partnership fails to do so, additional interest will accrue on the principal amount of the Partnership Notes. Under FASB Staff Position EITF 00-19-2, Accounting for
Registration Payment Arrangements, the Partnership has determined that the payment of additional interest is not probable, as that term is defined in SFAS 5, Accounting for Contingencies. As a result, the Partnership has
not recorded a liability for any contingent obligation. Any subsequent accruals of a liability or payments made under the registration rights agreement will be charged to earnings as interest expense in the period they are recognized or paid.

Senior Secured Credit Facility of the Partnership

Concurrent with the closing of the private placement of the Partnership Notes, the Partnership increased the commitments under its senior secured credit
facility by $100 million, bringing the total commitments under the facility to $850 million. The Partnership may request additional commitments under its facility of up to $150 million, which would increase the total commitments under the facility
to $1 billion.

Note 8Asset Retirement Obligations

The changes in our aggregate asset retirement obligations are as follows:



|                                 |  |                               |        |  
|-------------------------------- |  | ----------------------------- | ------ | -
|                                 |  | Six Months EndedJune 30, 2008 |       
|                                 |  | (In thousands)                |       
|Beginning of period              |  | $                             | 12,608 |  
|Change in cash flow estimate (1) |  |                               | 2,732  |  
|Accretion expense                |  |                               | 629    |  
|Liabilities settled              |  |                               | (229   | )
|                                 |  |                               |        |  
|End of period                    |  | $                             | 15,740 |  
|                                 |  |                               |        |  



|(1) | The change in cash flow estimate is primarily from a reassessment of abandonment cost estimates for our offshore gathering systems.
|--- | -----------------------------------------------------------------------------------------------------------------------------------

Note 9Stock and Other Compensation Plans

Stock Option Plans

Share-based compensation cost related to stock options included in general and administrative
expense for the three and six months ended June 30, 2008 was $94,000 and $109,000, respectively. Share-based compensation cost related to stock options included in general and administrative expense for the three and six months ended
June 30, 2007 was $15,000 and $30,000, respectively. As of June 30, 2008, our remaining unamortized compensation cost related to stock options was approximately $0.2 million, which is expected to be recognized over a weighted-average
period of approximately one year.



16



---

##### Table of Contents

During the six months ended June 30, 2008 and 2007, there were 170,000 and 82,791 stock options granted,
respectively. The fair value of each option grant was estimated on the date of grant using a Black-Scholes option pricing model, which incorporates various assumptions for 2008 and 2007, including (i) expected term of the options of ten years, (ii)
a risk-free interest rate of 3.6% and 4.9%, respectively, (iii) expected dividend yield of 0%, and (iv) expected stock price volatility on Targa Investments common stock of 29.3% and 29.4%, respectively. Our selection of the risk-free interest
rate was based on published yields for United States government securities with comparable terms. Because Targa Investments does not have publicly traded equity shares, its expected stock price volatility was estimated based upon the historical
price volatility of the Dow Jones MidCap Pipelines Index over a period equal to the expected average term of the options granted. The fair value of options granted during the six months ended June 30, 2008 was $1.63 per share. The fair value of
options granted during the six months ended June 30, 2007 ranged from $0.01 to $0.22 per share, with a weighted-average fair value of $0.12 per share.

Non-vested (Restricted) Common Stock

Share-based compensation cost related to restricted
stock included in general and administrative expense for the three and six months ended June 30, 2008 was $0.3 million and $0.7 million, respectively. Share-based compensation cost related to restricted stock included in general and
administrative expense for the three and six months ended June 30, 2007 was $0.5 million and $1.0 million, respectively. As of June 30, 2008, our remaining unamortized compensation cost related to restricted stock was approximately $0.6
million, which is expected to be recognized over a weighted-average period of approximately one year.

Awards of non-vested common stock
during the six months ended June 30, 2008 and 2007 were 20,000 and 73,049 shares, respectively. The estimated fair values of awards of non-vested common stock during the six months ended June 30, 2008 and 2007 were $3.45 and $1.10 per share,
respectively.

Incentive Plan related to the Partnerships Common Units

The Targa Resources Partners Long-Term Incentive Plan (the Partnership Plan) has been adopted by the general partner of the Partnership to
promote the interests of the Partnership and its affiliates by providing to employees, consultants and directors of the Partnership and its affiliates incentive compensation awards for superior performance that are based on Partnership common units.

Non-Employee Director Grants. On March 25, 2008, the general partner of the Partnership awarded 16,000 restricted common units
of the Partnership (2,000 restricted common units to each of the Partnerships non-management directors and to each of Targa Investments independent directors). The awards will settle with the delivery of common units and are subject to
three-year vesting, without a performance condition, and will vest ratably on each anniversary of the grant date.

Compensation expense on
the restricted common units is recognized on a straight-line basis over the vesting period. The fair value of an award of restricted common units is measured on the grant date using the market price of a common unit on such date. For the three and
six months ended June 30, 2008, the Partnership recognized compensation expense of approximately $78,000 and $119,000 related to equity-based awards, respectively. For the three months ended June 30, 2007 and for the period of commencement
of Partnership operations (February 14, 2007) through June 30, 2007, it recognized compensation expense of approximately $60,000 and $76,000 related to equity-based awards, respectively. The Partnership estimates that the remaining
fair value of $400,000 will be recognized in expense over a weighted average period of approximately two years.

Performance Units.
At June 30, 2008, the aggregate fair value of performance units expected to vest was $8.9 million. For the three and six months ended June 30, 2008 we recognized compensation expense related to the performance units of $0.8 million and $0.9 million.
For the same periods in 2007, we recognized compensation expense related to the performance units of $1.0 million and $1.3 million. The total recognition period for the remaining unrecognized compensation cost is approximately two years.



17



---

##### Table of Contents

Note 10Insurance

Certain of our Louisiana and Texas facilities sustained damage during the 2005 hurricane season from two gulf coast hurricanesKatrina and Rita. We have submitted and continue to submit business interruption
insurance claims for our estimated losses caused by the hurricanes. We recognize income from business interruption insurance claims in our consolidated statements of operations and comprehensive income in the period that a proof of loss is executed
and submitted to the insurers for payment.

The following table summarizes our income recognition of business interruption insurance for
the periods indicated:



|                                                             |  |                            |        |      |                          |       |      |  |      |        |  |   |       |  
|------------------------------------------------------------ |  | -------------------------- | ------ | ---- | ------------------------ | ----- | ---- |  | ---- | ------ |  | - | ----- | -
|                                                             |  | Three MonthsEnded June 30, |        |      | Six Months EndedJune 30, |      
|                                                             |  | 2008                       |        | 2007 |                          |       | 2008 |  | 2007 |       
|                                                             |  | (In thousands)             |       
|Included in revenues                                         |  |                            |        |      |                          |       |      |  |      |        |  |   |       |  
|Natural Gas Gathering and Processing                         |  | $                          | 2,540  |      | $                        | 767   |      |  | $    | 2,540  |  | $ | 894   |  
|Logistics Assets                                             |  |                            | 441    |      |                          | (32   | )    |  |      | 441    |  |   | (32   | )
|NGL Distribution and Marketing                               |  |                            | 8,602  |      |                          | 3,694 |      |  |      | 8,602  |  |   | 3,884 |  
|Wholesale Marketing                                          |  |                            | 5,920  |      |                          | 728   |      |  |      | 5,920  |  |   | 826   |  
|                                                             |  |                            |        |      |                          |       |      |  |      |        |  |   |       |  
|                                                             |  |                            | 17,503 |      |                          | 5,157 |      |  |      | 17,503 |  |   | 5,572 |  
|                                                             |  |                            |        |      |                          |       |      |  |      |        |  |   |       |  
|Included in equity in earnings of unconsolidated investments |  |                            |        |      |                          |       |      |  |      |        | 
|Natural Gas Gathering and Processing                         |  |                            | 4,108  |      |                          | 2,203 |      |  |      | 4,108  |  |   | 2,203 |  
|                                                             |  |                            |        |      |                          |       |      |  |      |        |  |   |       |  
|                                                             |  |                            | 4,108  |      |                          | 2,203 |      |  |      | 4,108  |  |   | 2,203 |  
|                                                             |  |                            |        |      |                          |       |      |  |      |        |  |   |       |  
|                                                             |  | $                          | 21,611 |      | $                        | 7,360 |      |  | $    | 21,611 |  | $ | 7,775 |  
|                                                             |  |                            |        |      |                          |       |      |  |      |        |  |   |       |  

Our initial purchase price allocation for the DMS acquisition in October 2005 included an $81.1
million receivable for insurance claims related to expenditures to repair pre-acquisition property damage caused by Katrina and Rita. During 2008, our cumulative receipts have exceeded such amount. Accordingly, during the three and six months ended
June 30, 2008 we have recognized a gain of $18.6 million.

Note 11Derivative Instruments and Hedging Activities

As of June 30, 2008, accumulated other comprehensive income (loss) (OCI) included $261.6 million ($164.4 million, net of tax) of
unrealized net losses on commodity hedges, and $0.2 million ($0.1 million, net of tax) of unrealized net losses on interest rate hedges.

During the three and six months ended June 30, 2008, deferred net losses on commodity hedges of $36.4 million and $52.4 million, respectively, were reclassified from OCI to revenues, and deferred net losses on interest rate hedges
of $0.8 million and $0.6 million, respectively, were reclassified from OCI to interest expense.

During the three and six months ended
June 30, 2007, deferred net gains on commodity hedges of $0.8 million and $14.0 million, respectively, were reclassified from OCI to revenues, and deferred net gains on interest rate hedges of $0.5 million and $1.0 million, respectively,
were reclassified from OCI to interest expense.

As of June 30, 2008, $201.9 million ($123.2 million, net of tax) of deferred net
losses on commodity hedges and $2.2 million ($1.3 million, net of tax) of deferred net losses on interest rate hedges recorded in OCI are expected to be reclassified to revenues and interest expense, respectively, during the next twelve months.



18



---

##### Table of Contents

As of June 30, 2008, we had the following hedge arrangements which will settle during the years
ended December 31, 2008 through 2012 (except as indicated otherwise, the 2008 volumes reflect daily volumes for the period from July 1, 2008 through December 31, 2008.):

Natural Gas



|                  |  |         |      |                   |      |               |      |                          |      |       |      |       |  |       |  |   |         |  
|----------------- |  | ------- | ---- | ----------------- | ---- | ------------- | ---- | ------------------------ | ---- | ----- | ---- | ----- |  | ----- |  | - | ------- | -
|Instrument Type   |  | Index   |      | Avg. Price$/MMBtu |      | MMBtu per day |      | (in thousands)Fair Value |     
|                  |  |         | 2008 |                   | 2009 |               | 2010 |                          | 2011 |       | 2012 |      
|Natural Gas Sales |  |         |      |                   |      |               |      |                          |      |       |      |       |  |       |  |   |         |  
|Swap              |  | IF-Waha |      | 6.96              |      | 21,918        |      |                         |      |      |      |      |  |      |  | $ | (20,100 | )
|Swap              |  | IF-Waha |      | 6.62              |      |              |      | 21,918                   |      |      |      |      |  |      |  |   | (37,156 | )
|Swap              |  | IF-Waha |      | 7.40              |      |              |      |                         |      | 9,300 |      |      |  |      |  |   | (9,204  | )
|Swap              |  | IF-Waha |      | 7.36              |      |              |      |                         |      |      |      | 5,500 |  |      |  |   | (4,715  | )
|Swap              |  | IF-Waha |      | 7.18              |      |              |      |                         |      |      |      |      |  | 5,500 |  |   | (4,949  | )
|                  |  |         |      |                   |      |               |      |                          |      |       |      |       |  |       |  |   |         |  
|                  |  |         |      |                   |      | 21,918        |      | 21,918                   |      | 9,300 |      | 5,500 |  | 5,500 |  | $ | (76,124 | )
|                  |  |         |      |                   |      |               |      |                          |      |       |      |       |  |       |  |   |         |  

NGLs



|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |          |  
|--------------- |  | ------- | ---- | --------------- | ---- | --------------- | ---- | ------------------------ | ---- | ----- | ---- | ----- |  | ----- |  | - | -------- | -
|Instrument Type |  | Index   |      | Avg. Price$/gal |      | Barrels per day |      | (in thousands)Fair Value |     
|                |  |         | 2008 |                 | 2009 |                 | 2010 |                          | 2011 |       | 2012 |      
|NGL Sales       |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |          |  
|Swap            |  | OPIS-MB |      | 0.81            |      | 3,547           |      |                         |      |      |      |      |  |      |  | $ | (26,986  | )
|Swap            |  | OPIS-MB |      | 0.79            |      |                |      | 3,347                    |      |      |      |      |  |      |  |   | (38,682  | )
|Swap            |  | OPIS-MB |      | 0.87            |      |                |      |                         |      | 2,750 |      |      |  |      |  |   | (22,625  | )
|Swap            |  | OPIS-MB |      | 0.91            |      |                |      |                         |      |      |      | 1,550 |  |      |  |   | (11,395  | )
|Swap            |  | OPIS-MB |      | 0.92            |      |                |      |                         |      |      |      |      |  | 1,250 |  |   | (8,555   | )
|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |          |  
|Total Swaps     |  |         |      |                 |      | 3,547           |      | 3,347                    |      | 2,750 |      | 1,550 |  | 1,250 |  |   | (108,243 | )
|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |          |  
|Floors          |  | OPIS-MB |      | 1.76            |      |                |      |                         |      |      |      | 107   |  |      |  |   | 213      |  
|Floors          |  | OPIS-MB |      | 1.75            |      |                |      |                         |      |      |      |      |  | 125   |  |   | 289      |  
|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |          |  
|Total Floors    |  |         |      |                 |      |                |      |                         |      |      |      | 107   |  | 125   |  |   | 502      |  
|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |          |  
|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  | $ | (107,741 | )
|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |          |  



19



---

##### Table of Contents

As of June 30, 2008, the Partnership had the following hedge arrangements which will settle during
the years ended December 31, 2008 through 2012 (except as indicated otherwise, the 2008 volumes reflect daily volumes for the period from July 1, 2008 through December 31, 2008):

Natural Gas



|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|--------------------- |  | ---------- |  | ----------------- |  | ------------- |  | ------------------------ |  | ------ |  | ----- |  | ----- |  | - | ------- | -
|                      |  | Index      |  | Avg. Price$/MMBtu |  | MMBtu per day |  | (In thousands)Fair Value | 
|Instrument Type       |  |            |  | 2008              |  | 2009          |  | 2010                     |  | 2011   |  | 2012  | 
|Natural Gas Purchases |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|Swap                  |  | NY-HH      |  | 8.43              |  | 1,350         |  |                         |  |       |  |      |  |      |  | $ | 1,258   |  
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|                      |  |            |  |                   |  | 1,350         |  |                         |  |       |  |      |  |      |  |   | 1,258   |  
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|Natural Gas Sales     |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|Swap                  |  | IF-HSC     |  | 8.09              |  | 2,328         |  |                         |  |       |  |      |  |      |  |   | (2,143  | )
|Swap                  |  | IF-HSC     |  | 7.39              |  |              |  | 1,966                    |  |       |  |      |  |      |  |   | (3,236  | )
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|                      |  |            |  |                   |  | 2,328         |  | 1,966                    |  |       |  |      |  |      |  |   | (5,379  | )
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|                      |  |            |  |                   |  |               |  |                         
|Swap                  |  | IF-NGPL MC |  | 8.43              |  | 6,964         |  |                         |  |       |  |      |  |      |  |   | (4,088  | )
|Swap                  |  | IF-NGPL MC |  | 8.02              |  |              |  | 6,256                    |  |       |  |      |  |      |  |   | (7,016  | )
|Swap                  |  | IF-NGPL MC |  | 7.43              |  |              |  |                         |  | 5,685  |  |      |  |      |  |   | (5,536  | )
|Swap                  |  | IF-NGPL MC |  | 7.34              |  |              |  |                         |  |       |  | 2,750 |  |      |  |   | (2,316  | )
|Swap                  |  | IF-NGPL MC |  | 7.18              |  |              |  |                         |  |       |  |      |  | 2,750 |  |   | (2,310  | )
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|                      |  |            |  |                   |  | 6,964         |  | 6,256                    |  | 5,685  |  | 2,750 |  | 2,750 |  |   | (21,265 | )
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|                      |  |            |  |                   |  |               |  |                         
|Swap                  |  | IF-Waha    |  | 8.20              |  | 7,389         |  |                         |  |       |  |      |  |      |  |   | (5,101  | )
|Swap                  |  | IF-Waha    |  | 7.61              |  |              |  | 6,936                    |  |       |  |      |  |      |  |   | (9,380  | )
|Swap                  |  | IF-Waha    |  | 7.38              |  |              |  |                         |  | 5,709  |  |      |  |      |  |   | (5,699  | )
|Swap                  |  | IF-Waha    |  | 7.36              |  |              |  |                         |  |       |  | 3,250 |  |      |  |   | (2,786  | )
|Swap                  |  | IF-Waha    |  | 7.18              |  |              |  |                         |  |       |  |      |  | 3,250 |  |   | (2,924  | )
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|                      |  |            |  |                   |  | 7,389         |  | 6,936                    |  | 5,709  |  | 3,250 |  | 3,250 |  |   | (25,890 | )
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|Total Swaps           |  |            |  |                   |  | 16,681        |  | 15,158                   |  | 11,394 |  | 6,000 |  | 6,000 |  |   | (51,276 | )
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|                      |  |            |  |                   |  |               |  |                         
|Floor                 |  | IF-NGPL MC |  | 6.55              |  | 1,000         |  |                         |  |       |  |      |  |      |  |   | 1       |  
|Floor                 |  | IF-NGPL MC |  | 6.55              |  |              |  | 850                      |  |       |  |      |  |      |  |   | 29      |  
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|                      |  |            |  |                   |  | 1,000         |  | 850                      |  |       |  |      |  |      |  |   | 30      |  
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|Floor                 |  | IF-Waha    |  | 6.85              |  | 670           |  |                         |  |       |  |      |  |      |  |   | 1       |  
|Floor                 |  | IF-Waha    |  | 6.55              |  |              |  | 565                      |  |       |  |      |  |      |  |   | 17      |  
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|                      |  |            |  |                   |  | 670           |  | 565                      |  |       |  |      |  |      |  |   | 18      |  
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|Total Floors          |  |            |  |                   |  | 1,670         |  | 1,415                    |  |       |  |      |  |      |  |   | 48      |  
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  | $ | (51,227 | )
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  



20



---

##### Table of Contents

NGLs



|                |  |         |  |                 |  |                 |  |                          |  |       |  |       |  |       |  |   |          |  
|--------------- |  | ------- |  | --------------- |  | --------------- |  | ------------------------ |  | ----- |  | ----- |  | ----- |  | - | -------- | -
|                |  | Index   |  | Avg. Price$/gal |  | Barrels per day |  | (In thousands)Fair Value | 
|Instrument Type |  |         |  | 2008            |  | 2009            |  | 2010                     |  | 2011  |  | 2012  | 
|NGL Sales       |  |         |  |                 |  |                 |  |                          |  |       |  |       |  |       |  |   |          |  
|Swap            |  | OPIS-MB |  | 1.01            |  | 7,095           |  |                         |  |      |  |      |  |      |  | $ | (45,341  | )
|Swap            |  | OPIS-MB |  | 0.96            |  |                |  | 6,248                    |  |      |  |      |  |      |  |   | (62,001  | )
|Swap            |  | OPIS-MB |  | 0.91            |  |                |  |                         |  | 4,809 |  |      |  |      |  |   | (40,124  | )
|Swap            |  | OPIS-MB |  | 0.92            |  |                |  |                         |  |      |  | 3,400 |  |      |  |   | (26,650  | )
|Swap            |  | OPIS-MB |  | 0.92            |  |                |  |                         |  |      |  |      |  | 2,700 |  |   | (19,612  | )
|                |  |         |  |                 |  |                 |  |                          |  |       |  |       |  |       |  |   |          |  
|Total Swaps     |  |         |  |                 |  | 7,095           |  | 6,248                    |  | 4,809 |  | 3,400 |  | 2,700 |  |   | (193,728 | )
|                |  |         |  |                 |  |                 |  |                          |  |       |  |       |  |       |  |   |          |  
|Floors          |  | OPIS-MB |  | 1.73            |  |                |  |                         |  |      |  | 365   |  |      |  |   | 860      |  
|Floors          |  | OPIS-MB |  | 1.72            |  |                |  |                         |  |      |  |      |  | 422   |  |   | 957      |  
|                |  |         |  |                 |  |                 |  |                          |  |       |  |       |  |       |  |   |          |  
|Total Floors    |  |         |  |                 |  |                |  |                         |  |      |  | 365   |  | 422   |  |   | 1,817    |  
|                |  |         |  |                 |  |                 |  |                          |  |       |  |       |  |       |  |   |          |  
|                |  |         |  |                 |  |                 |  |                          |  |       |  |       |  |       |  | $ | (191,911 | )
|                |  |         |  |                 |  |                 |  |                          |  |       |  |       |  |       |  |   |          |  

Condensate



|                 |  |        |  |                 |  |                 |  |                          |  |      |  |      |  |   |  |   |         |  
|---------------- |  | ------ |  | --------------- |  | --------------- |  | ------------------------ |  | ---- |  | ---- |  | - |  | - | ------- | -
|                 |  | Index  |  | Avg. Price$/Bbl |  | Barrels per day |  | (In thousands)Fair Value | 
|Instrument Type  |  |        |  | 2008            |  | 2009            |  | 2010                     |  | 2011 |  | 2012 | 
|Condensate Sales |  |        |  |                 |  |                 |  |                          |  |      |  |      |  |   |  |   |         |  
|Swap             |  | NY-WTI |  | 67.19           |  | 384             |  |                         |  |     |  |     |  |  |  | $ | (4,922  | )
|Swap             |  | NY-WTI |  | 69.00           |  |                |  | 322                      |  |     |  |     |  |  |  |   | (7,937  | )
|Swap             |  | NY-WTI |  | 68.10           |  |                |  |                         |  | 301  |  |     |  |  |  |   | (6,821  | )
|                 |  |        |  |                 |  |                 |  |                          |  |      |  |      |  |   |  |   |         |  
|Total Swaps      |  |        |  |                 |  | 384             |  | 322                      |  | 301  |  |     |  |  |  |   | (19,680 | )
|                 |  |        |  |                 |  |                 |  |                          |  |      |  |      |  |   |  |   |         |  
|Floor            |  | NY-WTI |  | 60.50           |  | 55              |  |                         |  |     |  |     |  |  |  |   | 0       |  
|Floor            |  | NY-WTI |  | 60.00           |  |                |  | 50                       |  |     |  |     |  |  |  |   | 3       |  
|                 |  |        |  |                 |  |                 |  |                          |  |      |  |      |  |   |  |   |         |  
|Total Floors     |  |        |  |                 |  | 55              |  | 50                       |  |     |  |     |  |  |  |   | 3       |  
|                 |  |        |  |                 |  |                 |  |                          |  |      |  |      |  |   |  |   |         |  
|                 |  |        |  |                 |  |                 |  |                          |  |      |  |      |  |   |  | $ | (19,677 | )
|                 |  |        |  |                 |  |                 |  |                          |  |      |  |      |  |   |  |   |         |  

These contracts may expose us to the risk of financial loss in certain circumstances. Our hedging
arrangements provide us with protection on the hedged volumes if prices decline below the prices at which these hedges are set. If prices rise above the prices which we have hedged, we will receive less revenue on the hedge volumes than we would in
the absence of hedges.

See also Note 16  Subsequent Events.

Customer Hedges

As of June 30, 2008, the Partnership had the following commodity derivative
contracts directly related to short-term fixed price arrangements elected by certain customers in various natural gas purchase and sale agreements, which have been marked to market through earnings:

Customer Hedges



|                    |  |             |  |                  |  |              |  |               |  |       |       |                          |           |  |       |  |   |      |  
|------------------- |  | ----------- |  | ---------------- |  | ------------ |  | ------------- |  | ----- | ----- | ------------------------ | --------- |  | ----- |  | - | ---- | -
|Period              |  | Commodity   |  | InstrumentType   |  | Daily Volume |  | Average Price |  | Index |       | (In thousands)Fair Value |          
|Purchases           |  |             |  |                  |  |              |  |               |  |       |       |                          |           |  |       |  |   |      |  
|Jul 2008 - Dec 2008 |  | Natural gas |  | Swap             |  | 7,043        |  | MMBtu         |  | $     | 12.81 |                          | per MMBtu |  | NY-HH |  | $ | 453  |  
|Jan 2009 - Dec 2009 |  | Natural gas |  | Swap             |  | 658          |  | MMBtu         |  |       | 11.95 |                          | per MMBtu |  | NY-HH |  |   | 123  |  
|Sales               |  |             |  |                  |  |              |  |               |  |       |       |                          |           |  |       |  |   |      |  
|Jul 2008 - Dec 2008 |  | Natural gas |  | Fixed price sale |  | 7,043        |  | MMBtu         |  |       | 12.81 |                          | per MMBtu |  | NY-HH |  |   | (453 | )
|Jan 2009 - Dec 2009 |  | Natural gas |  | Fixed price sale |  | 658          |  | MMBtu         |  |       | 11.95 |                          | per MMBtu |  | NY-HH |  |   | (123 | )
|                    |  |             |  |                  |  |              |  |               |  |       |       |                          |           |  |       |  |   |      |  
|                    |  |             |  |                  |  |              |  |               |  |       |       |                          |           |  |       |  | $ |     |  
|                    |  |             |  |                  |  |              |  |               |  |       |       |                          |           |  |       |  |   |      |  



21



---

##### Table of Contents

The fair value of derivative instruments, depending on the type of instrument, was determined by the use
of present value methods or standard option valuation models with assumptions about commodity prices based on those underlying markets.

Interest Rate
Swaps

As of June 30, 2008, the Partnership had the following interest rate swaps:



|              |  |                |  |        |   |  |                |       
|------------- |  | -------------- |  | ------ | - |  | -------------- | ------
|EffectiveDate |  | ExpirationDate |  | Rate   |   |  | NotionalAmount
|              |  |                |  |        |   |  | (In thousands)
|12/13/2007    |  | 01/24/2011     |  | 4.0775 | % |  | $              | 50,000
|12/18/2007    |  | 01/24/2011     |  | 4.2100 | % |  |                | 50,000
|12/21/2007    |  | 01/24/2012     |  | 4.0750 | % |  |                | 50,000
|12/21/2007    |  | 01/24/2012     |  | 4.0750 | % |  |                | 50,000
|01/09/2008    |  | 01/24/2012     |  | 3.6990 | % |  |                | 50,000
|01/11/2008    |  | 01/24/2012     |  | 3.6400 | % |  |                | 50,000

Each swap fixes the three month LIBOR Rate as indicated for the specified notional amount
outstanding under the Partnerships Amended Credit Agreement over the term of each swap agreement. As of June 30, 2008, the fair value of these interest rate swaps was a liability of $0.9 million.

Note 12Commitments and Contingencies

Environmental

For environmental matters, we record liabilities when remedial efforts are probable and the costs can be reasonably estimated in
accordance with the American Institute of Certified Public Accountants (AICPA) Statement of Position No. 96-1,  Environmental Remediation Liabilities. Environmental reserves do not reflect managements
assessment of the insurance coverage that may be applicable to the matters at issue. Management has assessed each of the matters based on current information and made a judgment concerning its potential outcome, considering the nature of the claim,
the amount and nature of damages sought and the probability of success.

In August 2005, prior to Targas acquisition of Versado Gas
Processors, L.L.C. (Versado), the State of New Mexicos Environment Department (NMED) inspected Versados Eunice Gas Processing Plant and its books and records. Targa Midstream Services Limited Partnership
(TMSLP) is the operator of Versado. In May 2007, the NMED sent Versado a draft compliance order relating to the 2005 inspection, alleging that Versado violated certain emissions standards and permit, monitoring and recordkeeping
requirements. After TMSLP provided certain responses and information concerning the alleged violations, the NMED provided a revised draft compliance order and a settlement offer containing a proposed penalty of approximately $2.1 million to resolve
the remaining alleged violations. More recently, however, we have discussed with the NMED an expansion of the proposed compliance order to include the resolution of other alleged violations associated with the Eunice, Monument and Saunders plants.
We may be required to incur capital expenditures at the Eunice, Monument and Saunders plants and additional facility enhancements, and additional operating costs to resolve the alleged violations, the amount of which currently is not reasonably
estimable. At this time, we cannot estimate the effect, if any, that this matter will have on our results of operations.

Our environmental
liability as of June 30, 2008 was $4.4 million, consisting of $0.5 million for gathering system leaks, $1.8 million for ground water assessment and remediation, and $2.1 million for the gas processing plant environmental violations.

Legal Proceedings

We are a party to
various legal proceedings and/or regulatory proceedings and certain claims, suits and complaints arising in the ordinary course of business have been filed or are pending against us. We believe all



22



---

##### Table of Contents

such matters are without merit or involve amounts, which, if resolved unfavorably, would not have a material effect on our financial position, results of
operations, or cash flows, except for the items more fully described below.

In May 2002, Apache Corporation (Apache) filed
suit in Texas state court against Versado Gas Processors, LLC (Versado), as purchaser and processor of Apaches gas, and Dynegy Midstream Services, Limited Partnership (now known as Targa Midstream Services Limited Partnership, a
wholly-owned subsidiary of ours (TMSLP)), as operator of the Versado assets in New Mexico (Versado Defendants) alleging (i) excessive field losses of natural gas from wells owned by the plaintiff, (ii) that the
Versado Defendants engaged in certain transactions with affiliates, resulting in the Versado Defendants not receiving fair market value when it sold gas and liquids, and (iii) that the formula for calculating the amount the Versado Defendants
received from its buyers of gas and liquids is flawed since it is based on gas price indices that were allegedly manipulated. At trial, the jury found in favor of Apache on the lost gas claim, awarding approximately $1.6 million in damages.
Apaches claims with respect to the alleged sham transactions and index manipulation, among others, were severed by the trial court and abated for a future trial. The parties settled the severed lawsuit in May 2007.

In May 2004, the trial court granted the Versado Defendants motion to set aside the jury verdict on the lost gas claim and vacated the jury award
to Apache. Apache filed its notice of appeal with the 14th Court of Appeals of Houston in October 2004. In 2006, the Court of Appeals reinstated the jury verdict in Apaches favor on the issue of lost gas and also awarded Apache legal fees and
interest, bringing the total award against the Versado Defendants to approximately $2.7 million. After rehearing, the Court of Appeals affirmed its decision reinstating the original jury verdict in Apaches favor. With interest and attorneys
fees that verdict stands at approximately $2.9 million.

In January 2007, the Versado Defendants filed their petition for review with
the Supreme Court of Texas and in March 2007, Apache filed its conditional petition for review with the Supreme Court of Texas. On April 4, 2008, the Supreme Court of Texas granted review of the petitions, and the appeal is currently pending
before the Supreme Court of Texas.

On December 8, 2005, WTG Gas Processing
(WTG) filed suit in the 333rd District Court of Harris County, Texas against several defendants, including us, three other Targa entities and private equity funds affiliated with Warburg Pincus, seeking damages from the defendants. The
suit alleges that we and private equity funds affiliated with Warburg Pincus, along with ConocoPhillips Company (ConocoPhillips) and Morgan Stanley, tortiously interfered with (i) a contract WTG claims to have had to purchase the
SAOU System from ConocoPhillips, and (ii) prospective business relations of WTG. WTG claims the alleged interference resulted from our competition to purchase the ConocoPhillips assets and its successful acquisition of those assets in
2004. On October 2, 2007, the District Court granted defendants motions for summary judgment on all of WTGs claims. We have agreed to indemnify the Partnership for any claim or liability arising out of the WTG suit. WTGs
motion to reconsider and for a new trial was overruled. On January 2, 2008, WTG filed a notice of appeal, and on May 6, 2008 filed its appellants brief with the 14thCourt of Appeals in Houston, Texas. Targa and Warburg Pincus filed their appellees brief on June 26, 2008. We will contest the appeal, but can give no assurances regarding the outcome of the proceeding.

Note 13Related-Party Transactions

Hedging
Arrangements

An affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill Lynch) is an equity
investor in Targa Investments. We have entered into various commodity derivative transactions with Merrill Lynch Commodities Inc. (MLCI), an affiliate of Merrill Lynch. Under the terms of these various commodity derivative transactions,
MLCI has agreed to pay us specified fixed prices in relation to specified notional quantities of natural gas, NGL, and condensate over periods ending in 2010, and we have agreed to pay MLCI



23



---

##### Table of Contents

floating prices based on published index prices of such commodities for delivery at specified locations. The following table shows our open commodity
derivatives with MLCI as of June 30, 2008:



|                  |  |             |  |                 |  |               |  |               |  |       |      |  |            |  |        
|----------------- |  | ----------- |  | --------------- |  | ------------- |  | ------------- |  | ----- | ---- |  | ---------- |  | -------
|Period            |  | Commodity   |  | Instrument Type |  | Daily Volumes |  | Average Price |  | Index
|Jul 2008Dec 2008 |  | Natural gas |  | Swap            |  | 21,918        |  | MMBtu         |  | $     | 6.96 |  | per MMBtu  |  | IF-Waha
|Jan 2009Dec 2009 |  | Natural gas |  | Swap            |  | 21,918        |  | MMBtu         |  | $     | 6.62 |  | per MMBtu  |  | IF-Waha
|                  |  |             |  |                 |  |               | 
|Jul 2008Dec 2008 |  | NGL         |  | Swap            |  | 3,047         |  | Bbl           |  | $     | 0.77 |  | per gallon |  | OPIS-MB
|Jan 2009Dec 2009 |  | NGL         |  | Swap            |  | 2,847         |  | Bbl           |  | $     | 0.74 |  | per gallon |  | OPIS-MB

As of June 30, 2008, the fair value of these open positions is a liability of $115.9 million.
For the three and six months ended June 30, 2008 we paid MLCI $15.1 million and $23.1 million, respectively, for amounts due under settled commodity derivative transactions. For the three and six months ended June 30, 2007, we paid MLCI
$2.5 million and $0.3 million, respectively, for amounts due under settled commodity derivative transactions.

The following
table shows the Partnerships open commodity derivatives with MLCI as of June 30, 2008:



|                  |  |             |  |                 |  |               |  |               |  |       |       |  |            |  |        
|----------------- |  | ----------- |  | --------------- |  | ------------- |  | ------------- |  | ----- | ----- |  | ---------- |  | -------
|Period            |  | Commodity   |  | Instrument Type |  | Daily Volumes |  | Average Price |  | Index
|Jul 2008Dec 2008 |  | Natural gas |  | Swap            |  | 3,847         |  | MMBtu         |  | $     | 8.76  |  | per MMBtu  |  | IF-Waha
|Jan 2009Dec 2009 |  | Natural gas |  | Swap            |  | 3,556         |  | MMBtu         |  |       | 8.07  |  | per MMBtu  |  | IF-Waha
|Jan 2010Dec 2010 |  | Natural gas |  | Swap            |  | 3,289         |  | MMBtu         |  |       | 7.39  |  | per MMBtu  |  | IF-Waha
|                  |  |             |  |                 |  |               | 
|Jul 2008Dec 2008 |  | NGL         |  | Swap            |  | 3,175         |  | Bbl           |  |       | 1.06  |  | per gallon |  | OPIS-MB
|Jan 2009Dec 2009 |  | NGL         |  | Swap            |  | 3,000         |  | Bbl           |  |       | 0.98  |  | per gallon |  | OPIS-MB
|                  |  |             |  |                 |  |               | 
|Jul 2008Dec 2008 |  | Condensate  |  | Swap            |  | 264           |  | Bbl           |  |       | 72.66 |  | per barrel |  | NY-WTI 
|Jan 2009Dec 2009 |  | Condensate  |  | Swap            |  | 202           |  | Bbl           |  |       | 70.60 |  | per barrel |  | NY-WTI 
|Jan 2010Dec 2010 |  | Condensate  |  | Swap            |  | 181           |  | Bbl           |  |       | 69.28 |  | per barrel |  | NY-WTI 

As of June 30, 2008, the fair value of these Partnership open positions is a liability of
$70.4 million. For the six months ended June 30, 2008 and 2007, the Partnership paid MLCI $11.7 million and $1.8 million, respectively, for amounts due under settled commodity derivative transactions.

Other

For the periods indicated,
related-party transactions included in our statements of operations were as follows:



|                               |  |                            |        |                          |   |        |  |      |         |  |   |       
|------------------------------ |  | -------------------------- | ------ | ------------------------ | - | ------ |  | ---- | ------- |  | - | ------
|                               |  | Three Months EndedJune 30, |        | Six Months EndedJune 30,
|                               |  | 2008                       |        | 2007                     |   | 2008   |  | 2007
|                               |  | (In thousands)             |        | (In thousands)          
|Included in Revenues           |  |                            |        |                          |   |        |  |      |         |  |   |       
|GCF                            |  | $                          | 35     |                          | $ | 147    |  | $    | 366     |  | $ | 3,245 
|VESCO                          |  |                            | 665    |                          |   | 4,546  |  |      | 666     |  |   | 4,771 
|MLCI                           |  |                            | 28,029 |                          |   | 13,642 |  |      | 60,349  |  |   | 29,100
|                               |  |                            |        |                          |   |        |  |      |         |  |   |       
|                               |  | $                          | 28,729 |                          | $ | 18,335 |  | $    | 61,381  |  | $ | 37,116
|                               |  |                            |        |                          |   |        |  |      |         |  |   |       
|Included in Costs and Expenses |  |                            |        |                          |   |        |  |      |         |  |   |       
|GCF                            |  | $                          | 1,341  |                          | $ | 770    |  | $    | 2,145   |  | $ | 1,775 
|VESCO                          |  |                            | 47,231 |                          |   | 32,172 |  |      | 100,081 |  |   | 65,657
|MLCI                           |  |                            | 1,574  |                          |   | 3,246  |  |      | 2,873   |  |   | 3,641 
|                               |  |                            |        |                          |   |        |  |      |         |  |   |       
|                               |  | $                          | 50,146 |                          | $ | 36,188 |  | $    | 105,099 |  | $ | 71,073
|                               |  |                            |        |                          |   |        |  |      |         |  |   |       

Note 14Segment Information

We categorize the midstream natural gas industry into, and describe our business in, two divisions: (i) Natural Gas Gathering and Processing (also a
segment) and (ii) NGL Logistics and Marketing. Our NGL



24



---

##### Table of Contents

Logistics and Marketing division consists of three segments: (a) Logistics Assets, (b) NGL Distribution and Marketing and (c) Wholesale
Marketing.

Our Natural Gas Gathering and Processing segment includes assets used in the gathering of natural gas produced from oil and gas
wells and processing this raw natural gas into merchantable natural gas by extracting natural gas liquids and removing impurities. These assets are located in North Texas, Louisiana and the Permian Basin of West Texas and Southeast New Mexico. We
are also party to natural gas processing agreements with third party plants.

Our Logistics Assets segment is involved with gathering and
storing mixed NGLs and fractionating, storing, and transporting finished NGLs. These assets are generally connected to and supplied, in part, by our Natural Gas Gathering and Processing segment and are predominantly located in Mont Belvieu, Texas
and Western Louisiana.

Our NGL Distribution and Marketing segment markets our own natural gas liquids production and purchased natural gas
liquids products in selected United States markets.

Our Wholesale Marketing segment includes our refinery services business and wholesale
propane marketing operations. In our refinery services business, we provide LPG (liquefied petroleum gas) balancing services, purchase natural gas liquids products from refinery customers and sell natural gas liquids products to various customers.
Our wholesale propane marketing operations include the sale of propane and related logistics services to multi-state retailers, independent retailers and other end-users. Wholesale Marketing operates principally in the United States, and has a small
marketing presence in Canada.

The Eliminations and Other column in the tables below includes amounts related to general and
administrative expenses not allocated to segment operations, corporate development, interest expense, income tax expense, and the depreciation and cost of equipment used in our headquarters office. Eliminations and Other also includes
the elimination of intersegment revenues and expenses.

Our reportable segment information is shown in the following tables:



|                                                 |  |                                   |           |                 |   |        |                                     |  |                    |           |                       |   |         |       |   |          |   |  |   |          
|------------------------------------------------ |  | --------------------------------- | --------- | --------------- | - | ------ | ----------------------------------- |  | ------------------ | --------- | --------------------- | - | ------- | ----- | - | -------- | - |  | - | ---------
|                                                 |  | Three Months Ended June 30, 2008 
|                                                 |  | Natural GasGatheringandProcessing |           | LogisticsAssets |   |        | NGLDistributionandMarketingServices |  | WholesaleMarketing |           | Eliminationsand Other |   |         | Total
|                                                 |  | (In thousands)                   
|Revenues                                         |  | $                                 | 543,267   |                 | $ | 27,630 |                                     |  | $                  | 1,383,963 |                       | $ | 308,366 |       | $ |         |   |  | $ | 2,263,226
|Intersegment revenues                            |  |                                   | 516,204   |                 |   | 38,054 |                                     |  |                    | 116,969   |                       |   | 8,960   |       |   | (680,187 | ) |  |   |         
|                                                 |  |                                   |           |                 |   |        |                                     |  |                    |           |                       |   |         |       |   |          |   |  |   |          
|Revenues                                         |  |                                   | 1,059,471 |                 |   | 65,684 |                                     |  |                    | 1,500,932 |                       |   | 317,326 |       |   | (680,187 | ) |  |   | 2,263,226
|                                                 |  |                                   |           |                 |   |        |                                     |  |                    |           |                       |   |         |       |   |          |   |  |   |          
|Product purchases                                |  |                                   | 904,590   |                 |   | (33    | )                                   |  |                    | 916,550   |                       |   | 201,982 |       |   |         |   |  |   | 2,023,089
|Intersegment product purchases                   |  |                                   | 3,550     |                 |   | 33     |                                     |  |                    | 551,969   |                       |   | 106,513 |       |   | (662,065 | ) |  |   |         
|                                                 |  |                                   |           |                 |   |        |                                     |  |                    |           |                       |   |         |       |   |          |   |  |   |          
|Product purchases                                |  |                                   | 908,140   |                 |   |       |                                     |  |                    | 1,468,519 |                       |   | 308,495 |       |   | (662,065 | ) |  |   | 2,023,089
|                                                 |  |                                   |           |                 |   |        |                                     |  |                    |           |                       |   |         |       |   |          |   |  |   |          
|Operating expenses                               |  |                                   | 34,323    |                 |   | 36,373 |                                     |  |                    | 517       |                       |   | 16      |       |   |         |   |  |   | 71,229   
|Intersegment operating expenses                  |  |                                   | 385       |                 |   | 17,737 |                                     |  |                    |          |                       |   |        |       |   | (18,122  | ) |  |   |         
|                                                 |  |                                   |           |                 |   |        |                                     |  |                    |           |                       |   |         |       |   |          |   |  |   |          
|Operating expenses                               |  |                                   | 34,708    |                 |   | 54,110 |                                     |  |                    | 517       |                       |   | 16      |       |   | (18,122  | ) |  |   | 71,229   
|                                                 |  |                                   |           |                 |   |        |                                     |  |                    |           |                       |   |         |       |   |          |   |  |   |          
|Operating margin                                 |  | $                                 | 116,623   |                 | $ | 11,574 |                                     |  | $                  | 31,896    |                       | $ | 8,815   |       | $ |         |   |  | $ | 168,908  
|                                                 |  |                                   |           |                 |   |        |                                     |  |                    |           |                       |   |         |       |   |          |   |  |   |          
|Equity in earnings of unconsolidated investments |  | $                                 | 6,354     |                 | $ | 842    |                                     |  | $                  |          |                       | $ |        |       | $ |         |   |  | $ | 7,196    
|                                                 |  |                                   |           |                 |   |        |                                     |  |                    |           |                       |   |         |       |   |          |   |  |   |          
|Unconsolidated investments                       |  | $                                 | 33,389    |                 | $ | 20,389 |                                     |  | $                  |          |                       | $ |        |       | $ |         |   |  | $ | 53,778   
|Capital expenditures                             |  | $                                 | 22,125    |                 | $ | 15,774 |                                     |  | $                  |          |                       | $ |        |       | $ | 1,163    |   |  | $ | 39,062   



25



---

##### Table of Contents

|                                                 |  |                                  |         |                 |   |        |                                     |  |                    |           |                       |   |         |       |   |          |   |  |   |          
|------------------------------------------------ |  | -------------------------------- | ------- | --------------- | - | ------ | ----------------------------------- |  | ------------------ | --------- | --------------------- | - | ------- | ----- | - | -------- | - |  | - | ---------
|                                                 |  | Three Months Ended June 30, 2007
|                                                 |  | NaturalGasGatheringandProcessing |         | LogisticsAssets |   |        | NGLDistributionandMarketingServices |  | WholesaleMarketing |           | Eliminationsand Other |   |         | Total
|                                                 |  | (In thousands)                  
|Revenues                                         |  | $                                | 391,887 |                 | $ | 20,058 |                                     |  | $                  | 987,231   |                       | $ | 211,592 |       | $ |         |   |  | $ | 1,610,768
|Intersegment revenues                            |  |                                  | 338,445 |                 |   | 29,897 |                                     |  |                    | 62,368    |                       |   | 5,172   |       |   | (435,882 | ) |  |   |         
|                                                 |  |                                  |         |                 |   |        |                                     |  |                    |           |                       |   |         |       |   |          |   |  |   |          
|Revenues                                         |  |                                  | 730,332 |                 |   | 49,955 |                                     |  |                    | 1,049,599 |                       |   | 216,764 |       |   | (435,882 | ) |  |   | 1,610,768
|                                                 |  |                                  |         |                 |   |        |                                     |  |                    |           |                       |   |         |       |   |          |   |  |   |          
|Product purchases                                |  |                                  | 604,767 |                 |   | (1     | )                                   |  |                    | 680,070   |                       |   | 153,471 |       |   |         |   |  |   | 1,438,307
|Intersegment product purchases                   |  |                                  |        |                 |   | 1      |                                     |  |                    | 362,977   |                       |   | 61,059  |       |   | (424,037 | ) |  |   |         
|                                                 |  |                                  |         |                 |   |        |                                     |  |                    |           |                       |   |         |       |   |          |   |  |   |          
|Product purchases                                |  |                                  | 604,767 |                 |   |       |                                     |  |                    | 1,043,047 |                       |   | 214,530 |       |   | (424,037 | ) |  |   | 1,438,307
|                                                 |  |                                  |         |                 |   |        |                                     |  |                    |           |                       |   |         |       |   |          |   |  |   |          
|Operating expenses                               |  |                                  | 28,459  |                 |   | 33,311 |                                     |  |                    | 615       |                       |   | 3       |       |   |         |   |  |   | 62,388   
|Intersegment operating expenses                  |  |                                  | 94      |                 |   | 11,751 |                                     |  |                    |          |                       |   |        |       |   | (11,845  | ) |  |   |         
|                                                 |  |                                  |         |                 |   |        |                                     |  |                    |           |                       |   |         |       |   |          |   |  |   |          
|Operating expenses                               |  |                                  | 28,553  |                 |   | 45,062 |                                     |  |                    | 615       |                       |   | 3       |       |   | (11,845  | ) |  |   | 62,388   
|                                                 |  |                                  |         |                 |   |        |                                     |  |                    |           |                       |   |         |       |   |          |   |  |   |          
|Operating margin                                 |  | $                                | 97,012  |                 | $ | 4,893  |                                     |  | $                  | 5,937     |                       | $ | 2,231   |       | $ |         |   |  | $ | 110,073  
|                                                 |  |                                  |         |                 |   |        |                                     |  |                    |           |                       |   |         |       |   |          |   |  |   |          
|Equity in earnings of unconsolidated investments |  | $                                | 2,296   |                 | $ | 867    |                                     |  | $                  |          |                       | $ |        |       | $ |         |   |  | $ | 3,163    
|                                                 |  |                                  |         |                 |   |        |                                     |  |                    |           |                       |   |         |       |   |          |   |  |   |          
|Unconsolidated investments                       |  | $                                | 25,670  |                 | $ | 19,424 |                                     |  | $                  |          |                       | $ |        |       | $ |         |   |  | $ | 45,094   
|Capital expenditures                             |  | $                                | 20,836  |                 | $ | 9,371  |                                     |  | $                  |          |                       | $ |        |       | $ | 492      |   |  | $ | 30,699   



|                                                 |  |                                   |           |                 |   |         |                                     |  |                    |           |                       |   |         |       |   |            |   |  |   |          
|------------------------------------------------ |  | --------------------------------- | --------- | --------------- | - | ------- | ----------------------------------- |  | ------------------ | --------- | --------------------- | - | ------- | ----- | - | ---------- | - |  | - | ---------
|                                                 |  | Six Months Ended June 30, 2008   
|                                                 |  | Natural GasGatheringandProcessing |           | LogisticsAssets |   |         | NGLDistributionandMarketingServices |  | WholesaleMarketing |           | Eliminationsand Other |   |         | Total
|                                                 |  | (In thousands)                   
|Revenues                                         |  | $                                 | 982,468   |                 | $ | 48,448  |                                     |  | $                  | 2,603,076 |                       | $ | 831,627 |       | $ |           |   |  | $ | 4,465,619
|Intersegment revenues                            |  |                                   | 950,237   |                 |   | 68,390  |                                     |  |                    | 317,473   |                       |   | 29,046  |       |   | (1,365,146 | ) |  |   |         
|                                                 |  |                                   |           |                 |   |         |                                     |  |                    |           |                       |   |         |       |   |            |   |  |   |          
|Revenues                                         |  |                                   | 1,932,705 |                 |   | 116,838 |                                     |  |                    | 2,920,549 |                       |   | 860,673 |       |   | (1,365,146 | ) |  |   | 4,465,619
|                                                 |  |                                   |           |                 |   |         |                                     |  |                    |           |                       |   |         |       |   |            |   |  |   |          
|Product purchases                                |  |                                   | 1,628,635 |                 |   | (33     | )                                   |  |                    | 1,860,936 |                       |   | 534,992 |       |   |            |   |  |   | 4,024,530
|Intersegment product purchases                   |  |                                   | 9,969     |                 |   | 33      |                                     |  |                    | 1,018,398 |                       |   | 307,245 |       |   | (1,335,645 | ) |  |   |         
|                                                 |  |                                   |           |                 |   |         |                                     |  |                    |           |                       |   |         |       |   |            |   |  |   |          
|Product purchases                                |  |                                   | 1,638,604 |                 |   |        |                                     |  |                    | 2,879,334 |                       |   | 842,237 |       |   | (1,335,645 | ) |  |   | 4,024,530
|                                                 |  |                                   |           |                 |   |         |                                     |  |                    |           |                       |   |         |       |   |            |   |  |   |          
|Operating expenses                               |  |                                   | 64,343    |                 |   | 69,421  |                                     |  |                    | 1,016     |                       |   | 27      |       |   |           |   |  |   | 134,807  
|Intersegment operating expenses                  |  |                                   | 533       |                 |   | 28,968  |                                     |  |                    |          |                       |   |        |       |   | (29,501    | ) |  |   |         
|                                                 |  |                                   |           |                 |   |         |                                     |  |                    |           |                       |   |         |       |   |            |   |  |   |          
|Operating expenses                               |  |                                   | 64,876    |                 |   | 98,389  |                                     |  |                    | 1,016     |                       |   | 27      |       |   | (29,501    | ) |  |   | 134,807  
|                                                 |  |                                   |           |                 |   |         |                                     |  |                    |           |                       |   |         |       |   |            |   |  |   |          
|Operating margin                                 |  | $                                 | 229,225   |                 | $ | 18,449  |                                     |  | $                  | 40,199    |                       | $ | 18,409  |       | $ |           |   |  | $ | 306,282  
|                                                 |  |                                   |           |                 |   |         |                                     |  |                    |           |                       |   |         |       |   |            |   |  |   |          
|Equity in earnings of unconsolidated investments |  | $                                 | 8,729     |                 | $ | 1,926   |                                     |  | $                  |          |                       | $ |        |       | $ |           |   |  | $ | 10,655   
|                                                 |  |                                   |           |                 |   |         |                                     |  |                    |           |                       |   |         |       |   |            |   |  |   |          
|Unconsolidated investments                       |  | $                                 | 33,389    |                 | $ | 20,389  |                                     |  | $                  |          |                       | $ |        |       | $ |           |   |  | $ | 53,778   
|Capital expenditures                             |  | $                                 | 34,248    |                 | $ | 21,694  |                                     |  | $                  |          |                       | $ |        |       | $ | 2,222      |   |  | $ | 58,164   



26



---

##### Table of Contents

|                                                 |  |                                   |           |                 |   |                                     |  |   |                    |   |                       |   |         |       |   |          |   |  |   |          
|------------------------------------------------ |  | --------------------------------- | --------- | --------------- | - | ----------------------------------- |  | - | ------------------ | - | --------------------- | - | ------- | ----- | - | -------- | - |  | - | ---------
|                                                 |  | Six Months Ended June 30, 2007   
|                                                 |  | Natural GasGatheringandProcessing |           | LogisticsAssets |   | NGLDistributionandMarketingServices |  |   | WholesaleMarketing |   | Eliminationsand Other |   |         | Total
|                                                 |  | (In thousands)                   
|Revenues                                         |  | $                                 | 749,833   |                 | $ | 36,910                              |  | $ | 1,728,091          |   |                       | $ | 544,946 |       | $ |         |   |  | $ | 3,059,780
|Intersegment revenues                            |  |                                   | 603,340   |                 |   | 55,802                              |  |   | 203,806            |   |                       |   | 13,909  |       |   | (876,857 | ) |  |   |         
|                                                 |  |                                   |           |                 |   |                                     |  |   |                    |   |                       |   |         |       |   |          |   |  |   |          
|Revenues                                         |  |                                   | 1,353,173 |                 |   | 92,712                              |  |   | 1,931,897          |   |                       |   | 558,855 |       |   | (876,857 | ) |  |   | 3,059,780
|                                                 |  |                                   |           |                 |   |                                     |  |   |                    |   |                       |   |         |       |   |          |   |  |   |          
|Product purchases                                |  |                                   | 1,107,322 |                 |   |                                    |  |   | 1,265,994          |   |                       |   | 335,270 |       |   |         |   |  |   | 2,708,586
|Intersegment product purchases                   |  |                                   | 8         |                 |   |                                    |  |   | 647,019            |   |                       |   | 214,837 |       |   | (861,864 | ) |  |   |         
|                                                 |  |                                   |           |                 |   |                                     |  |   |                    |   |                       |   |         |       |   |          |   |  |   |          
|Product purchases                                |  |                                   | 1,107,330 |                 |   |                                    |  |   | 1,913,013          |   |                       |   | 550,107 |       |   | (861,864 | ) |  |   | 2,708,586
|                                                 |  |                                   |           |                 |   |                                     |  |   |                    |   |                       |   |         |       |   |          |   |  |   |          
|Operating expenses                               |  |                                   | 57,513    |                 |   | 61,558                              |  |   | 1,236              |   |                       |   | 4       |       |   |         |   |  |   | 120,311  
|Intersegment operating expenses                  |  |                                   | 140       |                 |   | 14,876                              |  |   | (23                | ) |                       |   |        |       |   | (14,993  | ) |  |   |         
|                                                 |  |                                   |           |                 |   |                                     |  |   |                    |   |                       |   |         |       |   |          |   |  |   |          
|Operating expenses                               |  |                                   | 57,653    |                 |   | 76,434                              |  |   | 1,213              |   |                       |   | 4       |       |   | (14,993  | ) |  |   | 120,311  
|                                                 |  |                                   |           |                 |   |                                     |  |   |                    |   |                       |   |         |       |   |          |   |  |   |          
|Operating margin                                 |  | $                                 | 188,190   |                 | $ | 16,278                              |  | $ | 17,671             |   |                       | $ | 8,744   |       | $ |         |   |  | $ | 230,883  
|                                                 |  |                                   |           |                 |   |                                     |  |   |                    |   |                       |   |         |       |   |          |   |  |   |          
|Equity in earnings of unconsolidated investments |  | $                                 | 3,500     |                 | $ | 2,147                               |  | $ |                   |   |                       | $ |        |       | $ |         |   |  | $ | 5,647    
|                                                 |  |                                   |           |                 |   |                                     |  |   |                    |   |                       |   |         |       |   |          |   |  |   |          
|Unconsolidated investments                       |  | $                                 | 25,670    |                 | $ | 19,424                              |  | $ |                   |   |                       | $ |        |       | $ |         |   |  | $ | 45,094   
|Capital expenditures                             |  | $                                 | 43,774    |                 | $ | 22,824                              |  | $ |                   |   |                       | $ |        |       | $ | 1,182    |   |  | $ | 67,780   

The following table is a reconciliation of operating margin to net income for each of the periods
presented:



|                                                          |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|--------------------------------------------------------- |  | -------------------------- | ------- | - | ------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                          |  | Three Months EndedJune 30, |         |   | Six Months EndedJune 30, |  
|                                                          |  | 2008                       |         |   | 2007                     |   |         | 2008 |  |   | 2007    |  
|                                                          |  | (in thousands)             |        
|Operating margin                                          |  | $                          | 168,908 |   |                          | $ | 110,073 |      |  | $ | 306,282 |   |  | $ | 230,883 |  
|Adjustments to reconcile operating margin to net income:  |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Depreciation and amortization                             |  |                            | (38,750 | ) |                          |   | (36,434 | )    |  |   | (76,942 | ) |  |   | (73,166 | )
|Gain on sales of assets                                   |  |                            | 2       |   |                          |   | 311     |      |  |   | 4,445   |   |  |   | 131     |  
|General and administrative                                |  |                            | (27,924 | ) |                          |   | (23,699 | )    |  |   | (52,017 | ) |  |   | (42,390 | )
|Interest expense, net                                     |  |                            | (23,660 | ) |                          |   | (34,021 | )    |  |   | (49,245 | ) |  |   | (78,003 | )
|Gain on insurance claims                                  |  |                            | 18,566  |   |                          |   |        |      |  |   | 18,566  |   |  |   |        |  
|Equity in earnings of unconsolidated investments          |  |                            | 7,196   |   |                          |   | 3,163   |      |  |   | 10,655  |   |  |   | 5,647   |  
|Minority interest                                         |  |                            | (11,610 | ) |                          |   | (7,207  | )    |  |   | (21,757 | ) |  |   | (12,818 | )
|Non-controlling interest in net income of the Partnership |  |                            | (18,626 | ) |                          |   | (2,679  | )    |  |   | (35,597 | ) |  |   | (4,048  | )
|Income tax (expense) / benefit                            |  |                            | (27,904 | ) |                          |   | 3,993   |      |  |   | (39,776 | ) |  |   | (3,196  | )
|                                                          |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Net income                                                |  | $                          | 46,198  |   |                          | $ | 13,500  |      |  | $ | 64,614  |   |  | $ | 23,040  |  
|                                                          |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  

Note 15Allowance for Doubtful Accounts

On July 18, 2008, SemGroup LP (Semgroup) filed for bankruptcy protection. We had business relationships with SemGroup in our Natural Gas
Gathering and Processing, NGL Distribution and Marketing Services and Logistics Assets segments. As of June 30, 2008, we recognized a reserve of $4.6 million for product delivered and subject to the bankruptcy. During the third quarter, we will
record an additional reserve of $2.4 million for product delivered subsequent to June 30, 2008.



27



---

##### Table of Contents

Note 16Subsequent Events

During July 2008, the Partnership borrowed $87.4 million under its senior secured credit facility to terminate certain out-of-the-money natural gas and NGL commodity swaps. Prior to the terminations, the swaps were
designated as hedges in accordance with SFAS 133, Derivative Instruments and Hedging Activities. Approximately $20.8 million, $38.2 million and $27.9 million will be reclassified from OCI to revenues during 2008, 2009 and 2010,
respectively, when the hedged forecasted sales transactions are expected to occur. The Partnership also entered into new natural gas and NGL commodity swaps at then current market prices that match the production volumes of the terminated swaps
through 2010.

On July 23, 2008, the general partner of the Partnership announced a quarterly distribution of available cash of
$0.5125 per common and subordinated unit for the quarter ended June 30, 2008. The cash distribution of approximately $25.9 million (including distributions to us for our subordinated units, our general partner interest and as the holder of the
incentive distribution rights) is payable on August 14, 2008 to unitholders of record as of the close of business on August 4, 2008.

On July 31, 2008, we acquired an approximate 54% ownership interest in VESCO from subsidiaries of Chevron U.S.A. Inc.

Note 17Consolidating Financial Statements

We are the issuer of the notes discussed in Note 7 to the
financial statements of our Annual Report on Form 10-K for the year ended December 31, 2007. The notes are jointly and severally, irrevocably and unconditionally guaranteed by our wholly-owned subsidiaries (referred to as Guarantor
Subsidiaries).

The following financial information presents condensed consolidating financial statements, which include:



| |  |  | The Parent company only (Parent);
| | - |  | -----------------------------------



| |  |  | The Guarantor Subsidiaries on a consolidated basis;
| | - |  | ---------------------------------------------------



| |  |  | Non-wholly owned and foreign subsidiaries (referred to as Non-Guarantor Subsidiaries);
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | Elimination entries necessary to consolidate the Parent, the Guarantor Subsidiaries, and the Non-Guarantor Subsidiaries; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company on a consolidated basis.
| | - |  | ------------------------------------



28



---

##### Table of Contents

Targa Resources, Inc.

Condensed Consolidating Balance Sheet

June 30, 2008

(Unaudited)

(In thousands)



|                                             |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|-------------------------------------------- |  | ------ | --------- | - | --------------------- | - | --------- | ------------------------- |  | - | ------------------------ | - |  | ------------ | ---------- | - |  | - | --------- | -
|                                             |  | Parent |           |   | GuarantorSubsidiaries |   |           | Non-GuarantorSubsidiaries |  |   | IntercompanyEliminations |   |  | Consolidated |           
|Assets                                       |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Current assets:                              |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Cash and cash equivalents                    |  | $      |          |   |                       | $ | 267,541   |                           |  | $ | 98,691                   |   |  | $            |           |   |  | $ | 366,232   |  
|Accounts receivable and other current assets |  |        | 78,149    |   |                       |   | 756,303   |                           |  |   | 122,225                  |   |  |              |           |   |  |   | 956,677   |  
|                                             |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Total current assets                         |  |        | 78,149    |   |                       |   | 1,023,844 |                           |  |   | 220,916                  |   |  |              |           |   |  |   | 1,322,909 |  
|Property, plant, and equipment, at cost      |  |        |          |   |                       |   | 776,038   |                           |  |   | 2,052,588                |   |  |              |           |   |  |   | 2,828,626 |  
|Accumulated depreciation                     |  |        |          |   |                       |   | 68,906    |                           |  |   | (479,781                 | ) |  |              |           |   |  |   | (410,875  | )
|                                             |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Property, plant, and equipment, net          |  |        |          |   |                       |   | 844,944   |                           |  |   | 1,572,807                |   |  |              |           |   |  |   | 2,417,751 |  
|Unconsolidated investments                   |  |        |          |   |                       |   | 53,778    |                           |  |   |                         |   |  |              |           |   |  |   | 53,778    |  
|Investment in subsidiaries                   |  |        | 872,986   |   |                       |   | 54,688    |                           |  |   |                         |   |  |              | (927,674   | ) |  |   |          |  
|Advances to (from) subsidiaries              |  |        | 122,008   |   |                       |   | (250,002  | )                         |  |   | 127,994                  |   |  |              |           |   |  |   |          |  
|Other assets                                 |  |        | 148,765   |   |                       |   | (94,627   | )                         |  |   | 18,964                   |   |  |              |           |   |  |   | 73,102    |  
|                                             |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Total assets                                 |  | $      | 1,221,908 |   |                       | $ | 1,632,625 |                           |  | $ | 1,940,681                |   |  | $            | (927,674   | ) |  | $ | 3,867,540 |  
|                                             |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Liabilities and stockholders equity         |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Current liabilities:                         |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Accounts payable and other liabilities       |  | $      | (5,166    | ) |                       | $ | 700,217   |                           |  | $ | 388,084                  |   |  | $            |           |   |  | $ | 1,083,135 |  
|Current maturities of debt                   |  |        | 12,500    |   |                       |   |          |                           |  |   |                         |   |  |              |           |   |  |   | 12,500    |  
|                                             |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Total current liabilities                    |  |        | 7,334     |   |                       |   | 700,217   |                           |  |   | 388,084                  |   |  |              |           |   |  |   | 1,095,635 |  
|Long-term liabilities:                       |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Long-term debt, net of current maturities    |  |        | 765,925   |   |                       |   |          |                           |  |   | 575,000                  |   |  |              |           |   |  |   | 1,340,925 |  
|Other long-term obligations                  |  |        | 53,654    |   |                       |   | 130,735   |                           |  |   | 161,854                  |   |  |              |           |   |  |   | 346,243   |  
|                                             |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Total long-term liabilities                  |  |        | 819,579   |   |                       |   | 130,735   |                           |  |   | 736,854                  |   |  |              |           |   |  |   | 1,687,168 |  
|Minority interest                            |  |        |          |   |                       |   |          |                           |  |   |                         |   |  |              | 108,338    |   |  |   | 108,338   |  
|Noncontrolling interest in the Partnership   |  |        |          |   |                       |   |          |                           |  |   |                         |   |  |              | 581,404    |   |  |   | 581,404   |  
|Stockholders equity:                        |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Stockholders equity                         |  |        | 559,619   |   |                       |   | 993,243   |                           |  |   | 1,079,407                |   |  |              | (2,072,650 | ) |  |   | 559,619   |  
|Accumulated other comprehensive loss         |  |        | (164,624  | ) |                       |   | (191,570  | )                         |  |   | (263,664                 | ) |  |              | 455,234    |   |  |   | (164,624  | )
|                                             |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Total stockholders equity                   |  |        | 394,995   |   |                       |   | 801,673   |                           |  |   | 815,743                  |   |  |              | (1,617,416 | ) |  |   | 394,995   |  
|                                             |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Total liabilities and stockholders equity   |  | $      | 1,221,908 |   |                       | $ | 1,632,625 |                           |  | $ | 1,940,681                |   |  | $            | (927,674   | ) |  | $ | 3,867,540 |  
|                                             |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  



29



---

##### Table of Contents

Targa Resources, Inc.

Condensed Consolidating Balance Sheet

December 31, 2007

(Unaudited)

(In thousands)



|                                             |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|-------------------------------------------- |  | ------ | --------- | - | --------------------- | - | --------- | ------------------------- |  | - | ------------------------ | - |  | ------------ | ---------- | - |  | - | --------- | -
|                                             |  | Parent |           |   | GuarantorSubsidiaries |   |           | Non-GuarantorSubsidiaries |  |   | IntercompanyEliminations |   |  | Consolidated |           
|Assets                                       |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Current assets:                              |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Cash and cash equivalents                    |  | $      |          |   |                       | $ | 88,303    |                           |  | $ | 89,646                   |   |  | $            |           |   |  | $ | 177,949   |  
|Accounts receivable and other current assets |  |        | 25,130    |   |                       |   | 954,910   |                           |  |   | 104,387                  |   |  |              |           |   |  |   | 1,084,427 |  
|                                             |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Total current assets                         |  |        | 25,130    |   |                       |   | 1,043,213 |                           |  |   | 194,033                  |   |  |              |           |   |  |   | 1,262,376 |  
|Property, plant, and equipment, at cost      |  |        |          |   |                       |   | 743,652   |                           |  |   | 2,020,578                |   |  |              |           |   |  |   | 2,764,230 |  
|Accumulated depreciation                     |  |        |          |   |                       |   | 94,265    |                           |  |   | (428,425                 | ) |  |              |           |   |  |   | (334,160  | )
|                                             |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Property, plant, and equipment, net          |  |        |          |   |                       |   | 837,917   |                           |  |   | 1,592,153                |   |  |              |           |   |  |   | 2,430,070 |  
|Unconsolidated investments                   |  |        |          |   |                       |   | 48,005    |                           |  |   |                         |   |  |              |           |   |  |   | 48,005    |  
|Investment in subsidiaries                   |  |        | 1,087,322 |   |                       |   | 109,411   |                           |  |   |                         |   |  |              | (1,196,733 | ) |  |   |          |  
|Advances to (from) subsidiaries              |  |        | 66,953    |   |                       |   | (172,735  | )                         |  |   | 105,782                  |   |  |              |           |   |  |   |          |  
|Other assets                                 |  |        | 134,215   |   |                       |   | (97,599   | )                         |  |   | 12,898                   |   |  |              |           |   |  |   | 49,514    |  
|                                             |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Total assets                                 |  | $      | 1,313,620 |   |                       | $ | 1,768,212 |                           |  | $ | 1,904,866                |   |  | $            | (1,196,733 | ) |  | $ | 3,789,965 |  
|                                             |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Liabilities and stockholders equity         |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Current liabilities:                         |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Accounts payable and other liabilities       |  | $      | 11,043    |   |                       | $ | 657,736   |                           |  | $ | 256,894                  |   |  | $            |           |   |  | $ | 925,673   |  
|Current maturities of debt                   |  |        | 12,500    |   |                       |   |          |                           |  |   |                         |   |  |              |           |   |  |   | 12,500    |  
|                                             |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Total current liabilities                    |  |        | 23,543    |   |                       |   | 657,736   |                           |  |   | 256,894                  |   |  |              |           |   |  |   | 938,173   |  
|Long-term liabilities:                       |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Long-term debt, net of current maturities    |  |        | 772,175   |   |                       |   |          |                           |  |   | 626,300                  |   |  |              |           |   |  |   | 1,398,475 |  
|Other long-term obligations                  |  |        | 25,498    |   |                       |   | 100,516   |                           |  |   | 19,773                   |   |  |              |           |   |  |   | 145,787   |  
|                                             |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Total long-term liabilities                  |  |        | 797,673   |   |                       |   | 100,516   |                           |  |   | 646,073                  |   |  |              |           |   |  |   | 1,544,262 |  
|Minority interest                            |  |        |          |   |                       |   |          |                           |  |   |                         |   |  |              | 100,826    |   |  |   | 100,826   |  
|Noncontrolling interest in the Partnership   |  |        |          |   |                       |   |          |                           |  |   |                         |   |  |              | 714,300    |   |  |   | 714,300   |  
|Stockholders equity:                        |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Stockholders equity                         |  |        | 548,520   |   |                       |   | 1,082,065 |                           |  |   | 1,075,149                |   |  |              | (2,157,214 | ) |  |   | 548,520   |  
|Accumulated other comprehensive loss         |  |        | (56,116   | ) |                       |   | (72,105   | )                         |  |   | (73,250                  | ) |  |              | 145,355    |   |  |   | (56,116   | )
|                                             |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Total stockholders equity                   |  |        | 492,404   |   |                       |   | 1,009,960 |                           |  |   | 1,001,899                |   |  |              | (2,011,859 | ) |  |   | 492,404   |  
|                                             |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Total liabilities and stockholders equity   |  | $      | 1,313,620 |   |                       | $ | 1,768,212 |                           |  | $ | 1,904,866                |   |  | $            | (1,196,733 | ) |  | $ | 3,789,965 |  
|                                             |  |        |           |   |                       |   |           |                           |  |   |                          |   |  |              |            |   |  |   |           |  



30



---

##### Table of Contents

Targa Resources, Inc.

Condensed Consolidating Statement of Operations

Three Months Ended June 30, 2008

(Unaudited)

(In
thousands)



|                                                 |  |        |         |   |                       |   |           |                           |  |   |                          |   |  |              |          |   |  |   |           |  
|------------------------------------------------ |  | ------ | ------- | - | --------------------- | - | --------- | ------------------------- |  | - | ------------------------ | - |  | ------------ | -------- | - |  | - | --------- | -
|                                                 |  | Parent |         |   | GuarantorSubsidiaries |   |           | Non-GuarantorSubsidiaries |  |   | IntercompanyEliminations |   |  | Consolidated |         
|Revenues                                         |  | $      |        |   |                       | $ | 2,038,653 |                           |  | $ | 833,414                  |   |  | $            | (608,841 | ) |  | $ | 2,263,226 |  
|                                                 |  |        |         |   |                       |   |           |                           |  |   |                          |   |  |              |          |   |  |   |           |  
|Operating costs and expenses:                    |  |        |         |   |                       |   |           |                           |  |   |                          |   |  |              |          |   |  |   |           |  
|Product purchases                                |  |        |        |   |                       |   | 1,931,771 |                           |  |   | 681,093                  |   |  |              | (589,775 | ) |  |   | 2,023,089 |  
|Operating expenses                               |  |        |        |   |                       |   | 39,263    |                           |  |   | 51,032                   |   |  |              | (19,066  | ) |  |   | 71,229    |  
|Depreciation and amortization                    |  |        |        |   |                       |   | 12,804    |                           |  |   | 25,946                   |   |  |              |         |   |  |   | 38,750    |  
|General and administrative and other             |  |        | 87      |   |                       |   | 21,204    |                           |  |   | 6,631                    |   |  |              |         |   |  |   | 27,922    |  
|                                                 |  |        |         |   |                       |   |           |                           |  |   |                          |   |  |              |          |   |  |   |           |  
|                                                 |  |        | 87      |   |                       |   | 2,005,042 |                           |  |   | 764,702                  |   |  |              | (608,841 | ) |  |   | 2,160,990 |  
|                                                 |  |        |         |   |                       |   |           |                           |  |   |                          |   |  |              |          |   |  |   |           |  
|Income (loss) from operations                    |  |        | (87     | ) |                       |   | 33,611    |                           |  |   | 68,712                   |   |  |              |         |   |  |   | 102,236   |  
|                                                 |  |        |         |   |                      
|Other income (expense):                          |  |        |         |   |                       |   |           |                           |  |   |                          |   |  |              |          |   |  |   |           |  
|Interest expense, net                            |  |        | (15,841 | ) |                       |   |          |                           |  |   | (7,819                   | ) |  |              |         |   |  |   | (23,660   | )
|Other income                                     |  |        | 18,566  |   |                       |   |          |                           |  |   |                         |   |  |              |         |   |  |   | 18,566    |  
|Equity in earnings of unconsolidated investments |  |        |        |   |                       |   | 7,196     |                           |  |   |                         |   |  |              |         |   |  |   | 7,196     |  
|Equity in earnings of subsidiaries               |  |        | 71,192  |   |                       |   | 30,575    |                           |  |   |                         |   |  |              | (101,767 | ) |  |   |          |  
|Minority interest/Non-controlling interest       |  |        |        |   |                       |   |          |                           |  |   |                         |   |  |              | (30,236  | ) |  |   | (30,236   | )
|                                                 |  |        |         |   |                       |   |           |                           |  |   |                          |   |  |              |          |   |  |   |           |  
|Income before income taxes                       |  |        | 73,830  |   |                       |   | 71,382    |                           |  |   | 60,893                   |   |  |              | (132,003 | ) |  |   | 74,102    |  
|Income tax expense                               |  |        | (27,632 | ) |                       |   | (190      | )                         |  |   | (363                     | ) |  |              | 281      |   |  |   | (27,904   | )
|                                                 |  |        |         |   |                       |   |           |                           |  |   |                          |   |  |              |          |   |  |   |           |  
|Net income                                       |  | $      | 46,198  |   |                       | $ | 71,192    |                           |  | $ | 60,530                   |   |  | $            | (131,722 | ) |  | $ | 46,198    |  
|                                                 |  |        |         |   |                       |   |           |                           |  |   |                          |   |  |              |          |   |  |   |           |  

Targa Resources, Inc.

Condensed Consolidating Statement of Operations

Three Months Ended
June 30, 2007

(Unaudited)

(In thousands)



|                                                 |  |        |         |   |                       |   |           |                         |  |   |                          |   |  |              |          |   |  |   |           |  
|------------------------------------------------ |  | ------ | ------- | - | --------------------- | - | --------- | ----------------------- |  | - | ------------------------ | - |  | ------------ | -------- | - |  | - | --------- | -
|                                                 |  | Parent |         |   | GuarantorSubsidiaries |   |           | Non-GuarantorSubsidiary |  |   | IntercompanyEliminations |   |  | Consolidated |         
|Revenues                                         |  | $      |        |   |                       | $ | 1,457,542 |                         |  | $ | 577,805                  |   |  | $            | (424,579 | ) |  | $ | 1,610,768 |  
|                                                 |  |        |         |   |                       |   |           |                         |  |   |                          |   |  |              |          |   |  |   |           |  
|Operating costs and expenses:                    |  |        |         |   |                       |   |           |                         |  |   |                          |   |  |              |          |   |  |   |           |  
|Product purchases                                |  |        |        |   |                       |   | 1,385,230 |                         |  |   | 463,051                  |   |  |              | (409,974 | ) |  |   | 1,438,307 |  
|Operating expenses                               |  |        |        |   |                       |   | 35,481    |                         |  |   | 41,512                   |   |  |              | (14,605  | ) |  |   | 62,388    |  
|Depreciation and amortization                    |  |        |        |   |                       |   | 12,374    |                         |  |   | 24,060                   |   |  |              |         |   |  |   | 36,434    |  
|General and administrative and other             |  |        | 16      |   |                       |   | 18,967    |                         |  |   | 4,405                    |   |  |              |         |   |  |   | 23,388    |  
|                                                 |  |        |         |   |                       |   |           |                         |  |   |                          |   |  |              |          |   |  |   |           |  
|                                                 |  |        | 16      |   |                       |   | 1,452,052 |                         |  |   | 533,028                  |   |  |              | (424,579 | ) |  |   | 1,560,517 |  
|                                                 |  |        |         |   |                       |   |           |                         |  |   |                          |   |  |              |          |   |  |   |           |  
|Income (loss) from operations                    |  |        | (16     | ) |                       |   | 5,490     |                         |  |   | 44,777                   |   |  |              |         |   |  |   | 50,251    |  
|                                                 |  |        |         |   |                      
|Other income (expense):                          |  |        |         |   |                       |   |           |                         |  |   |                          |   |  |              |          |   |  |   |           |  
|Interest income, net                             |  |        | (19,371 | ) |                       |   |          |                         |  |   | (14,650                  | ) |  |              |         |   |  |   | (34,021   | )
|Equity in earnings of unconsolidated investments |  |        |        |   |                       |   | 3,163     |                         |  |   |                         |   |  |              |         |   |  |   | 3,163     |  
|Equity in earnings of subsidiaries               |  |        | 28,768  |   |                       |   | 20,136    |                         |  |   |                         |   |  |              | (48,904  | ) |  |   |          |  
|Minority interest/Non-controlling interest       |  |        |        |   |                       |   |          |                         |  |   |                         |   |  |              | (9,886   | ) |  |   | (9,886    | )
|                                                 |  |        |         |   |                       |   |           |                         |  |   |                          |   |  |              |          |   |  |   |           |  
|Income before income taxes                       |  |        | 9,381   |   |                       |   | 28,789    |                         |  |   | 30,127                   |   |  |              | (58,790  | ) |  |   | 9,507     |  
|Income tax (expense) benefit                     |  |        | 4,119   |   |                       |   | (21       | )                       |  |   | (513                     | ) |  |              | 408      |   |  |   | 3,993     |  
|                                                 |  |        |         |   |                       |   |           |                         |  |   |                          |   |  |              |          |   |  |   |           |  
|Net income                                       |  | $      | 13,500  |   |                       | $ | 28,768    |                         |  | $ | 29,614                   |   |  | $            | (58,382  | ) |  | $ | 13,500    |  
|                                                 |  |        |         |   |                       |   |           |                         |  |   |                          |   |  |              |          |   |  |   |           |  



31



---

##### Table of Contents

Targa Resources, Inc.

Condensed Consolidating Statement of Operations

Six Months Ended June 30, 2008

(Unaudited)

(In
thousands)



|                                                 |  |        |         |   |                       |   |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|------------------------------------------------ |  | ------ | ------- | - | --------------------- | - | ------------------------- |  | - | ------------------------ | - |  | ------------ | ---------- | - |  | - | --------- | -
|                                                 |  | Parent |         |   | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |  |   | IntercompanyEliminations |   |  | Consolidated |           
|Revenues                                         |  | $      |        |   |                       | $ | 4,057,163                 |  | $ | 1,538,175                |   |  | $            | (1,129,719 | ) |  | $ | 4,465,619 |  
|                                                 |  |        |         |   |                       |   |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Operating costs and expenses:                    |  |        |         |   |                       |   |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Product purchases                                |  |        |        |   |                       |   | 3,868,273                 |  |   | 1,252,986                |   |  |              | (1,096,729 | ) |  |   | 4,024,530 |  
|Operating expenses                               |  |        |        |   |                       |   | 74,225                    |  |   | 93,572                   |   |  |              | (32,990    | ) |  |   | 134,807   |  
|Depreciation and amortization                    |  |        |        |   |                       |   | 25,362                    |  |   | 51,580                   |   |  |              |           |   |  |   | 76,942    |  
|General and administrative and other             |  |        | 87      |   |                       |   | 35,966                    |  |   | 11,519                   |   |  |              |           |   |  |   | 47,572    |  
|                                                 |  |        |         |   |                       |   |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|                                                 |  |        | 87      |   |                       |   | 4,003,826                 |  |   | 1,409,657                |   |  |              | (1,129,719 | ) |  |   | 4,283,851 |  
|                                                 |  |        |         |   |                       |   |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Income (loss) from operations                    |  |        | (87     | ) |                       |   | 53,337                    |  |   | 128,518                  |   |  |              |           |   |  |   | 181,768   |  
|                                                 |  |        |         |   |                      
|Other income (expense):                          |  |        |         |   |                       |   |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Interest expense, net                            |  |        | (32,954 | ) |                       |   |                          |  |   | (16,291                  | ) |  |              |           |   |  |   | (49,245   | )
|Other income                                     |  |        | 18,566  |   |                       |   |                          |  |   |                         |   |  |              |           |   |  |   | 18,566    |  
|Equity in earnings of unconsolidated investments |  |        |        |   |                       |   | 10,655                    |  |   |                         |   |  |              |           |   |  |   | 10,655    |  
|Equity in earnings of subsidiaries               |  |        | 118,680 |   |                       |   | 54,688                    |  |   |                         |   |  |              | (173,368   | ) |  |   |          |  
|Minority interest/Non-controlling interest       |  |        |        |   |                       |   |                          |  |   |                         |   |  |              | (57,354    | ) |  |   | (57,354   | )
|                                                 |  |        |         |   |                       |   |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Income before income taxes                       |  |        | 104,205 |   |                       |   | 118,680                   |  |   | 112,227                  |   |  |              | (230,722   | ) |  |   | 104,390   |  
|Income tax expense                               |  |        | (39,591 | ) |                       |   |                          |  |   | (700                     | ) |  |              | 515        |   |  |   | (39,776   | )
|                                                 |  |        |         |   |                       |   |                           |  |   |                          |   |  |              |            |   |  |   |           |  
|Net income                                       |  | $      | 64,614  |   |                       | $ | 118,680                   |  | $ | 111,527                  |   |  | $            | (230,207   | ) |  | $ | 64,614    |  
|                                                 |  |        |         |   |                       |   |                           |  |   |                          |   |  |              |            |   |  |   |           |  

Targa Resources, Inc.

Condensed Consolidating Statement of Operations

Six Months Ended
June 30, 2007

(Unaudited)

(In thousands)



|                                                 |  |        |         |   |                       |   |                         |  |   |                          |   |  |              |          |   |  |   |           |  
|------------------------------------------------ |  | ------ | ------- | - | --------------------- | - | ----------------------- |  | - | ------------------------ | - |  | ------------ | -------- | - |  | - | --------- | -
|                                                 |  | Parent |         |   | GuarantorSubsidiaries |   | Non-GuarantorSubsidiary |  |   | IntercompanyEliminations |   |  | Consolidated |         
|Revenues                                         |  | $      |        |   |                       | $ | 2,766,672               |  | $ | 1,055,995                |   |  | $            | (762,887 | ) |  | $ | 3,059,780 |  
|                                                 |  |        |         |   |                       |   |                         |  |   |                          |   |  |              |          |   |  |   |           |  
|Operating costs and expenses:                    |  |        |         |   |                       |   |                         |  |   |                          |   |  |              |          |   |  |   |           |  
|Product purchases                                |  |        |        |   |                       |   | 2,608,085               |  |   | 843,934                  |   |  |              | (743,433 | ) |  |   | 2,708,586 |  
|Operating expenses                               |  |        |        |   |                       |   | 66,586                  |  |   | 73,179                   |   |  |              | (19,454  | ) |  |   | 120,311   |  
|Depreciation and amortization                    |  |        |        |   |                       |   | 24,025                  |  |   | 49,141                   |   |  |              |         |   |  |   | 73,166    |  
|General and administrative and other             |  |        | 32      |   |                       |   | 34,415                  |  |   | 7,812                    |   |  |              |         |   |  |   | 42,259    |  
|                                                 |  |        |         |   |                       |   |                         |  |   |                          |   |  |              |          |   |  |   |           |  
|                                                 |  |        | 32      |   |                       |   | 2,733,111               |  |   | 974,066                  |   |  |              | (762,887 | ) |  |   | 2,944,322 |  
|                                                 |  |        |         |   |                       |   |                         |  |   |                          |   |  |              |          |   |  |   |           |  
|Income (loss) from operations                    |  |        | (32     | ) |                       |   | 33,561                  |  |   | 81,929                   |   |  |              |         |   |  |   | 115,458   |  
|                                                 |  |        |         |   |                      
|Other income (expense):                          |  |        |         |   |                       |   |                         |  |   |                          |   |  |              |          |   |  |   |           |  
|Interest income, net                             |  |        | (60,868 | ) |                       |   |                        |  |   | (17,135                  | ) |  |              |         |   |  |   | (78,003   | )
|Equity in earnings of unconsolidated investments |  |        |        |   |                       |   | 5,647                   |  |   |                         |   |  |              |         |   |  |   | 5,647     |  
|Equity in earnings of subsidiaries               |  |        | 86,879  |   |                       |   | 47,671                  |  |   |                         |   |  |              | (134,550 | ) |  |   |          |  
|Minority interest/Non-controlling interest       |  |        |        |   |                       |   |                        |  |   |                         |   |  |              | (16,866  | ) |  |   | (16,866   | )
|                                                 |  |        |         |   |                       |   |                         |  |   |                          |   |  |              |          |   |  |   |           |  
|Income before income taxes                       |  |        | 25,979  |   |                       |   | 86,879                  |  |   | 64,794                   |   |  |              | (151,416 | ) |  |   | 26,236    |  
|Income tax expense                               |  |        | (2,939  | ) |                       |   |                        |  |   | (665                     | ) |  |              | 408      |   |  |   | (3,196    | )
|                                                 |  |        |         |   |                       |   |                         |  |   |                          |   |  |              |          |   |  |   |           |  
|Net income                                       |  | $      | 23,040  |   |                       | $ | 86,879                  |  | $ | 64,129                   |   |  | $            | (151,008 | ) |  | $ | 23,040    |  
|                                                 |  |        |         |   |                       |   |                         |  |   |                          |   |  |              |          |   |  |   |           |  



32



---

##### Table of Contents

Targa Resources, Inc.

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2008

(Unaudited)

(In
thousands)



|                                                                                           |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|------------------------------------------------------------------------------------------ |  | ------ | -------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------------------ | - |  | ------------ | -------- | - |  | - | -------- | -
|                                                                                           |  | Parent |          |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | IntercompanyEliminations |   |  | Consolidated |         
|Cash flows from operating activities                                                       |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Net income                                                                                 |  | $      | 64,614   |   |                       | $ | 118,680 |                           |  | $ | 111,527                  |   |  | $            | (230,207 | ) |  | $ | 64,614   |  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Depreciation, amortization and accretion                                                   |  |        | 3,264    |   |                       |   | 25,772  |                           |  |   | 52,656                   |   |  |              |         |   |  |   | 81,692   |  
|Deferred income taxes                                                                      |  |        | 38,354   |   |                       |   |        |                           |  |   | 700                      |   |  |              | (515     | ) |  |   | 38,539   |  
|Earnings from unconsolidated investments                                                   |  |        |         |   |                       |   | (10,655 | )                         |  |   |                         |   |  |              |         |   |  |   | (10,655  | )
|Equity in earnings of subsidiaries                                                         |  |        | (118,680 | ) |                       |   | (54,688 | )                         |  |   |                         |   |  |              | 173,368  |   |  |   |         |  
|Other                                                                                      |  |        | (17,833  | ) |                       |   | (2,899  | )                         |  |   | (44,307                  | ) |  |              | 57,354   |   |  |   | (7,685   | )
|Changes in operating assets and liabilities:                                               |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Accounts receivable and other assets                                                       |  |        | 14,949   |   |                       |   | 112,107 |                           |  |   | (26,215                  | ) |  |              |         |   |  |   | 100,841  |  
|Inventory                                                                                  |  |        |         |   |                       |   | 35,566  |                           |  |   | 64                       |   |  |              |         |   |  |   | 35,630   |  
|Accounts payable and other liabilities                                                     |  |        | (16,211  | ) |                       |   | (46,291 | )                         |  |   | 91,421                   |   |  |              |         |   |  |   | 28,919   |  
|                                                                                           |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Net cash provided by (used in) operating activities                                        |  |        | (31,543  | ) |                       |   | 177,592 |                           |  |   | 185,846                  |   |  |              |         |   |  |   | 331,895  |  
|                                                                                           |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Cash flows from investing activities                                                       |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Purchases of property and equipment                                                        |  |        |         |   |                       |   | (25,574 | )                         |  |   | (28,237                  | ) |  |              |         |   |  |   | (53,811  | )
|Other                                                                                      |  |        | (16,400  | ) |                       |   | 48,306  |                           |  |   | (3,815                   | ) |  |              |         |   |  |   | 28,091   |  
|                                                                                           |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Net cash provided by (used in) investing activities                                        |  |        | (16,400  | ) |                       |   | 22,732  |                           |  |   | (32,052                  | ) |  |              |         |   |  |   | (25,720  | )
|                                                                                           |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Cash flows from financing activities                                                       |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Repayments under senior secured credit facility                                            |  |        | (6,250   | ) |                       |   |        |                           |  |   | (301,300                 | ) |  |              |         |   |  |   | (307,550 | )
|Other                                                                                      |  |        |         |   |                       |   |        |                           |  |   | 243,410                  |   |  |              |         |   |  |   | 243,410  |  
|Receipts from (payments to) subsidiaries                                                   |  |        | 54,193   |   |                       |   | (21,086 | )                         |  |   | (86,859                  | ) |  |              |         |   |  |   | (53,752  | )
|                                                                                           |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Net cash provided by (used in) financing activities                                        |  |        | 47,943   |   |                       |   | (21,086 | )                         |  |   | (144,749                 | ) |  |              |         |   |  |   | (117,892 | )
|                                                                                           |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Net increase (decrease) in cash and cash equivalents                                       |  |        |         |   |                       |   | 179,238 |                           |  |   | 9,045                    |   |  |              |         |   |  |   | 188,283  |  
|Cash and cash equivalents, beginning of period                                             |  |        |         |   |                       |   | 88,303  |                           |  |   | 89,646                   |   |  |              |         |   |  |   | 177,949  |  
|                                                                                           |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Cash and cash equivalents, end of period                                                   |  | $      |         |   |                       | $ | 267,541 |                           |  | $ | 98,691                   |   |  | $            |         |   |  | $ | 366,232  |  
|                                                                                           |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  



33



---

##### Table of Contents

Targa Resources, Inc.

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2007

(Unaudited)

(In
thousands)



|                                                                                            |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|------------------------------------------------------------------------------------------- |  | ------ | -------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------------------ | - |  | ------------ | -------- | - |  | - | -------- | -
|                                                                                            |  | Parent |          |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | IntercompanyEliminations |   |  | Consolidated |         
|Cash flows from operating activities                                                        |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Net income                                                                                  |  | $      | 23,040   |   |                       | $ | 86,879  |                           |  | $ | 64,129                   |   |  | $            | (151,008 | ) |  | $ | 23,040   |  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Depreciation, amortization and accretion                                                    |  |        | 8,705    |   |                       |   | 24,519  |                           |  |   | 49,447                   |   |  |              |         |   |  |   | 82,671   |  
|Deferred income taxes                                                                       |  |        | 2,246    |   |                       |   |        |                           |  |   | 665                      |   |  |              | (408     | ) |  |   | 2,503    |  
|Earnings from unconsolidated investments                                                    |  |        |         |   |                       |   | (5,647  | )                         |  |   |                         |   |  |              |         |   |  |   | (5,647   | )
|Equity in earnings of subsidiaries                                                          |  |        | (86,879  | ) |                       |   | (47,671 | )                         |  |   |                         |   |  |              | 134,550  |   |  |   |         |  
|Other                                                                                       |  |        | 1,050    |   |                       |   | (27,287 | )                         |  |   | 4,685                    |   |  |              | 16,866   |   |  |   | (4,686   | )
|Changes in operating assets and liabilities:                                                |  |        |         |   |                       |   |        |                           |  |   |                         |   |  |              |         |   |  |   |         |  
|Accounts receivable and other assets                                                        |  |        | (479     | ) |                       |   | (6,529  | )                         |  |   | (8,587                   | ) |  |              |         |   |  |   | (15,595  | )
|Inventory                                                                                   |  |        |         |   |                       |   | 33,482  |                           |  |   | 1,217                    |   |  |              |         |   |  |   | 34,699   |  
|Accounts payable and other liabilities                                                      |  |        | (16,575  | ) |                       |   | 54,725  |                           |  |   | (20,823                  | ) |  |              |         |   |  |   | 17,327   |  
|                                                                                            |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Net cash provided by (used in) operating activities                                         |  |        | (68,892  | ) |                       |   | 112,471 |                           |  |   | 90,733                   |   |  |              |         |   |  |   | 134,312  |  
|                                                                                            |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Cash flows from investing activities                                                        |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Purchases of property and equipment                                                         |  |        |         |   |                       |   | (33,915 | )                         |  |   | (34,490                  | ) |  |              |         |   |  |   | (68,405  | )
|Other                                                                                       |  |        |         |   |                       |   | 14,106  |                           |  |   | (4,312                   | ) |  |              |         |   |  |   | 9,794    |  
|                                                                                            |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Net cash used in investing activities                                                       |  |        |         |   |                       |   | (19,809 | )                         |  |   | (38,802                  | ) |  |              |         |   |  |   | (58,611  | )
|                                                                                            |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Cash flows from financing activities                                                        |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Senior secured credit facility:                                                             |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Borrowings                                                                                  |  |        |         |   |                       |   |        |                           |  |   | 342,500                  |   |  |              |         |   |  |   | 342,500  |  
|Repayments                                                                                  |  |        | (706,250 | ) |                       |   |        |                           |  |   | (48,000                  | ) |  |              |         |   |  |   | (754,250 | )
|Non-controlling interest in the Partnership                                                 |  |        |         |   |                       |   |        |                           |  |   |                         |   |  |              |         |   |  |   |         |  
|Other                                                                                       |  |        | 775,142  |   |                       |   | (67,813 | )                         |  |   | (333,944                 | ) |  |              |         |   |  |   | 373,385  |  
|Receipts from subsidiaries                                                                  |  |        |         |   |                       |   |        |                           |  |   |                         |   |  |              |         |   |  |   |         |  
|                                                                                            |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Net cash provided by (used in) financing activities                                         |  |        | 68,892   |   |                       |   | (67,813 | )                         |  |   | (39,444                  | ) |  |              |         |   |  |   | (38,365  | )
|                                                                                            |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Net increase in cash and cash equivalents                                                   |  |        |         |   |                       |   | 24,849  |                           |  |   | 12,487                   |   |  |              |         |   |  |   | 37,336   |  
|Cash and cash equivalents, beginning of period                                              |  |        |         |   |                       |   | 117,661 |                           |  |   | 25,078                   |   |  |              |         |   |  |   | 142,739  |  
|                                                                                            |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  
|Cash and cash equivalents, end of period                                                    |  | $      |         |   |                       | $ | 142,510 |                           |  | $ | 37,565                   |   |  | $            |         |   |  | $ | 180,075  |  
|                                                                                            |  |        |          |   |                       |   |         |                           |  |   |                          |   |  |              |          |   |  |   |          |  



34



---

##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

The following discussion analyzes our financial condition and results of operations. You should read the following discussion of our financial
condition and results of operations in conjunction with our consolidated financial statements and notes included elsewhere in this Quarterly Report on Form 10-Q and in our consolidated financial statements and notes thereto included in our Annual
Report on Form 10-K for the year ended December 31, 2007.

Overview

We are a Delaware corporation formed in 2004 by our management team and Warburg Pincus LLC to acquire, own and operate assets in the midstream natural gas
business.

Our gathering and processing assets are located primarily in the Permian Basin in West Texas and Southeast New Mexico, the
Louisiana Gulf Coast primarily accessing the offshore region of Louisiana, and, through the Partnership, the Fort Worth Basin in North Texas, the Permian Basin in West Texas and the onshore region of the Louisiana Gulf Coast. Our NGL logistics and
marketing assets are located primarily at Mont Belvieu and Galena Park near Houston, Texas and in Lake Charles, Louisiana, with terminals and transportation assets across the United States.

We conduct our business operations through two divisions and report our results of operations under four segments: Our Natural Gas Gathering and
Processing division, which includes the Partnership, is a single segment consisting of our natural gas gathering and processing facilities, as well as certain fractionation capability integrated within those facilities; and the NGL Logistics and
Marketing division, which consists of three segments: Logistics Assets, NGL Distribution and Marketing and Wholesale Marketing.

Critical Accounting
Policies

There have been no significant changes to our critical accounting policies since December 31, 2007. For a more complete
description of our critical accounting polices and estimates, see Item 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsCritical Accounting Policies in our Annual Report on
Form 10-K for the year ended December 31, 2007.

Recent Accounting Pronouncements

On January 1, 2008, we adopted the provisions of Statement of Financial Accounting Standards (SFAS) 157. SFAS 157 defines fair
value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a specified measurement date. See Note 3 of the Notes to Consolidated Financial Statements
included in Item 1 of this Quarterly Report for information regarding fair value disclosures pertaining to our financial assets and liabilities.

The accounting standard-setting bodies have recently issued the following accounting standard that has the potential to affect our future financial statements:



| |  |  | SFAS 161, Disclosures about Derivative Instruments and Hedging Activitiesan amendment of FASB Statement No. 133.
| | - |  | -------------------------------------------------------------------------------------------------------------------

For additional information regarding this recent accounting development and others that may affect our future financial
statements, see Note 3 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report.



35



---

##### Table of Contents

Results of Operations

The following table and discussion relate to the three and six months ended June 30, 2008 and 2007 and is a summary of our results of operations for the periods then ended:



|                                                     |  |                                                |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|---------------------------------------------------- |  | ---------------------------------------------- | ------- | - | ------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                     |  | Three Months EndedJune 30,                     |         |   | Six Months EndedJune 30, |  
|                                                     |  | 2008                                           |         |   | 2007                     |   |         | 2008 |  |   | 2007    |  
|                                                     |  | (In millions, except operating and price data) |        
|Revenues (1)                                         |  | $                                              | 2,263.2 |   |                          | $ | 1,610.8 |      |  | $ | 4,465.6 |   |  | $ | 3,059.8 |  
|Product purchases                                    |  |                                                | 2,023.1 |   |                          |   | 1,438.3 |      |  |   | 4,024.5 |   |  |   | 2,708.6 |  
|Operating expenses                                   |  |                                                | 71.2    |   |                          |   | 62.4    |      |  |   | 134.8   |   |  |   | 120.3   |  
|Depreciation and amortization expense                |  |                                                | 38.8    |   |                          |   | 36.4    |      |  |   | 76.9    |   |  |   | 73.2    |  
|General and administrative expense                   |  |                                                | 27.9    |   |                          |   | 23.7    |      |  |   | 52.0    |   |  |   | 42.4    |  
|Gain on sales of assets                              |  |                                                |        |   |                          |   | (0.3    | )    |  |   | (4.4    | ) |  |   | (0.1    | )
|                                                     |  |                                                |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Income from operations                               |  |                                                | 102.2   |   |                          |   | 50.3    |      |  |   | 181.8   |   |  |   | 115.4   |  
|Interest expense, net                                |  |                                                | (23.7   | ) |                          |   | (34.0   | )    |  |   | (49.2   | ) |  |   | (78.0   | )
|Gain on insurance claims                             |  |                                                | 18.6    |   |                          |   |        |      |  |   | 18.6    |   |  |   |        |  
|Equity in earnings of unconsolidated investments (2) |  |                                                | 7.2     |   |                          |   | 3.1     |      |  |   | 10.7    |   |  |   | 5.7     |  
|Minority interest / non-controlling interest         |  |                                                | (30.2   | ) |                          |   | (9.9    | )    |  |   | (57.5   | ) |  |   | (16.9   | )
|Income tax (expense) benefit                         |  |                                                | (27.9   | ) |                          |   | 4.0     |      |  |   | (39.8   | ) |  |   | (3.2    | )
|                                                     |  |                                                |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Net income                                           |  | $                                              | 46.2    |   |                          | $ | 13.5    |      |  | $ | 64.6    |   |  | $ | 23.0    |  
|                                                     |  |                                                |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Financial data:                                      |  |                                                |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Operating margin (3)                                 |  | $                                              | 168.9   |   |                          | $ | 110.1   |      |  | $ | 306.3   |   |  | $ | 230.9   |  
|Adjusted EBITDA (3)                                  |  |                                                | 137.6   |   |                          |   | 76.3    |      |  |   | 229.3   |   |  |   | 167.1   |  
|                                                     |  |                                                |         |  
|Operating data:                                      |  |                                                |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Gathering throughput MMcf/d (4)                      |  |                                                | 2,072.3 |   |                          |   | 1,999.0 |      |  |   | 2,128.5 |   |  |   | 1,987.9 |  
|Plant natural gas inlet, MMcf/d (4)                  |  |                                                | 2,020.7 |   |                          |   | 1,954.5 |      |  |   | 2,081.9 |   |  |   | 1,946.2 |  
|Gross NGL production, MBbl/d                         |  |                                                | 104.8   |   |                          |   | 106.0   |      |  |   | 104.3   |   |  |   | 105.1   |  
|Natural gas sales, BBtu/d (4)                        |  |                                                | 526.6   |   |                          |   | 533.9   |      |  |   | 529.8   |   |  |   | 520.8   |  
|NGL sales, MBbl/d                                    |  |                                                | 285.9   |   |                          |   | 296.4   |      |  |   | 301.7   |   |  |   | 298.6   |  
|Condensate sales, MBbl/d                             |  |                                                | 3.7     |   |                          |   | 4.1     |      |  |   | 3.7     |   |  |   | 3.7     |  
|                                                     |  |                                                |         |  
|Average realized prices:                             |  |                                                |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Natural Gas, $/MMBtu                                 |  |                                                |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Average realized sales price                         |  |                                                | 10.25   |   |                          |   | 6.93    |      |  |   | 9.01    |   |  |   | 6.76    |  
|Impact of hedging                                    |  |                                                | (0.14   | ) |                          |   | 0.12    |      |  |   | (0.01   | ) |  |   | 0.11    |  
|                                                     |  |                                                |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Average realized price                               |  |                                                | 10.11   |   |                          |   | 7.05    |      |  |   | 9.00    |   |  |   | 6.87    |  
|                                                     |  |                                                |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|NGL, $/gal                                           |  |                                                |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Average realized sales price                         |  |                                                | 1.57    |   |                          |   | 1.08    |      |  |   | 1.52    |   |  |   | 1.02    |  
|Impact of hedging                                    |  |                                                | (0.03   | ) |                          |   |        |      |  |   | (0.02   | ) |  |   |        |  
|                                                     |  |                                                |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Average realized price                               |  |                                                | 1.54    |   |                          |   | 1.08    |      |  |   | 1.50    |   |  |   | 1.02    |  
|                                                     |  |                                                |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Condensate, $/Bbl                                    |  |                                                |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Average realized sales price                         |  |                                                | 119.20  |   |                          |   | 61.65   |      |  |   | 107.38  |   |  |   | 58.77   |  
|Impact of hedging                                    |  |                                                | (5.05   | ) |                          |   | 0.83    |      |  |   | (3.49   | ) |  |   | 1.32    |  
|                                                     |  |                                                |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Average realized price                               |  |                                                | 114.15  |   |                          |   | 62.48   |      |  |   | 103.89  |   |  |   | 60.09   |  
|                                                     |  |                                                |         |   |                          |   |         |      |  |   |         |   |  |   |         |  



|(1) | Includes business interruption insurance revenue of $17.5 million for the three and six months ended June 30, 2008, and $5.2 million and $5.6 million for the
three and six months ended June 30, 2007.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



36



---

##### Table of Contents

|(2) | Includes business interruption insurance revenue of $4.1 million for the three and six months ended June 30, 2008, and $2.2 million for the three and six months ended
June 30, 2007.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Operating margin is total operating revenues less product purchases and operating expense. Adjusted EBITDA is net income before interest, income taxes, depreciation and amortization
and non-cash income or loss related to derivative instruments. See Non-GAAP Financial Measures.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Gathering throughput represents the volume of natural gas gathered and passed through natural gas gathering pipelines from connections to producing wells and central delivery
points. Plant natural gas inlet represents the volume of natural gas passing through the meter located at the inlet of a natural gas processing plant. Plant natural gas inlet volumes include producer take-in-kind volumes, while natural gas sales
exclude producer take-in-kind volumes.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007

Revenues increased by $652.4 million, or 41%, to $2,263.2 million for the three months ended June 30, 2008 compared to $1,610.8
million for the three months ended June 30, 2007. Revenues from the sale of natural gas increased by $142.3 million, consisting of an increase of $147.0 million due to higher realized prices, partially offset by a decrease of $4.7 million due
to lower sales volumes. Revenues from the sale of NGLs increased by $472.1 million, consisting of an increase of $515.3 million due to higher realized prices, partially offset by a decrease of $43.2 million due to lower sales volumes. Revenues from
the sale of condensate increased by $15.8 million, consisting of an increase of $17.6 million due to higher realized prices, partially offset by a decrease of $1.8 million due to lower sales volumes. Other revenues, which includes business
interruption insurance revenue and revenues principally derived from fee-based services, increased by $22.2 million. The increase comprised $12.3 million in higher business interruption insurance revenue and $9.9 million in higher revenues for
fee-based services.

Our average realized prices for natural gas increased by $3.06 per MMBtu (net of a $0.26 decrease due to hedging), or
43%, to $10.11 per MMBtu for the three months ended June 30, 2008 compared to $7.05 per MMBtu for the three months ended June 30, 2007. Average realized prices for NGLs increased by $0.46 per gallon (net of a $0.03 decrease due to
hedging), or 43%, to $1.54 per gallon for the three months ended June 30, 2008 compared to $1.08 per gallon for the three months ended June 30, 2007. Our average realized price for condensate increased by $51.67 per Bbl (net of a $5.88
decrease due to hedging), or 83%, to $114.15 per Bbl for the three months ended June 30, 2008 compared to $62.48 per Bbl for the three months ended June 30, 2007.

Our natural gas sales volumes decreased by 7.3 BBtu/d, or 1%, to 526.6 BBtu/d for the three months ended June 30, 2008 compared to 533.9 BBtu/d for
the three months ended June 30, 2007. NGL sales volumes decreased by 10.5 MBbl/d, or 4%, to 285.9 MBbl/d for the three months ended June 30, 2008 compared to 296.4 MBbl/d for the three months ended June 30, 2007. Condensate sales
volumes decreased by 0.4 MBbl/d, or 10%, to 3.7 MBbl/d for the three months ended June 30, 2008 compared to 4.1 MBbl/d for the three months ended June 30, 2007. For information regarding the period to period changes in our commodity sales
volumes, see Results of OperationsBy Segment.

Product purchases increased by $584.8 million, or 41%, to $2,023.1
million for the three months ended June 30, 2008 compared to $1,438.3 million for the three months ended June 30, 2007. See Results of OperationsBy Segment for an explanation of the components of the increase.

Operating expenses increased by $8.8 million, or 14%, to $71.2 million for the three months ended June 30, 2008 compared to $62.4
million for the three months ended June 30, 2007. See Results of OperationsBy Segment for a detailed explanation of the components of the increase.

Depreciation and amortization expense increased by $2.4 million, or 7%, to $38.8 million for the three months ended June 30, 2008 compared to $36.4 million for the three months ended June 30, 2007. The
increase is due to the addition of property, plant and equipment.



37



---

##### Table of Contents

General and administrative expense increased by $4.2 million, or 18%, to $27.9 million for the three
months ended June 30, 2008 compared to $23.7 million for the three months ended June 30, 2007. The increase primarily consisted of increases of $5.4 million in compensation related expenses and $0.4 million in miscellaneous expenses,
partially offset by a decrease of $1.6 million in professional services fees.

Interest expense decreased by $10.3 million, or 30%, to
$23.7 million for the three months ended June 30, 2008 compared to $34.0 million for the three months ended June 31, 2007. The decrease is primarily from lower outstanding debt during 2008.

Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007

Revenues increased by $1,405.8 million, or 46%, to $4,465.6 million for the six months ended June 30, 2008 compared to $3,059.8 million for the six months ended June 30, 2007. Revenues from the sale of
natural gas increased by $220.2 million, consisting of a $205.3 million increase due to higher realized prices, and a $14.9 million increase due to higher sales volumes. Revenues from the sale of NGLs increased by $1,127.7 million, consisting of
increases of $1,091.1 million due to higher realized prices and $36.6 million due to higher sales volumes. Revenues from the sale of condensate increased by $29.5 million, consisting of an increase of $29.4 million due to higher realized prices and
an increase of $0.1 million due to higher sales volumes. Other revenues, which includes business interruption insurance revenue and revenues principally derived from fee-based services, increased by $28.4 million. The increase comprised $11.9
million in higher business interruption insurance revenue and $16.5 million in higher revenues from fee-based services.

Our average
realized price for natural gas increased by $2.13 per MMBtu (net of a $0.12 decrease due to hedging) , or 31%, to $9.00 per MMBtu for the six months ended June 30, 2008 compared to $6.87 per MMBtu for the six months ended June 30, 2007.
Our average realized price for NGLs increased by $0.48 per gallon (net of a $0.02 decrease due to hedging), or 47%, to $1.50 per gallon for the six months ended June 30, 2008 compared to $1.02 per gallon for the six months ended June 30,
2007. Our average realized price for condensate increased by $43.80 per barrel (net of a $4.81 decrease due to hedging), or 73%, to $103.89 per Bbl for the six months ended June 30, 2008 compared to $60.09 per Bbl for the six months ended
June 30, 2007.

Our natural gas sales volumes increased by 9.0 BBtu/d, or 2%, to 529.8 BBtu/d for the six months ended June 30,
2008 compared to 520.8 BBtu/d for the six months ended June 30, 2007. Our NGL sales volumes increased by 3.1 MBbl/d, or 1%, to 301.7 MBbl/d for the six months ended June 30, 2008 compared to 298.6 MBbl/d for the six months ended
June 30, 2007. Our condensate sales volumes were flat for the six months ended June 30, 2008 compared to 3.7 MBbl/d for the six months ended June 30, 2007. For information regarding the period to period changes in our commodity sales
volumes, see Results of OperationsBy Segment.

Our product purchases increased by $1,315.9 million, or 49%, to $4,024.5
million for the six months ended June 30, 2008 compared to $2,708.6 million for the six months ended June 30, 2007. The increase is primarily due to higher product purchases and prices in the Natural Gas Gathering and Processing, NGL
Distribution and Marketing, and Wholesale Marketing segments.

Our operating expenses increased by $14.5 million, or 12%, to $134.8 million
for the six months ended June 30, 2008 compared to $120.3 million for the six months ended June 30, 2007. See Results of OperationsBy Segment for a more detailed explanation of the components of the increase.

Depreciation and amortization expense increased by $3.7 million, or 5%, to $76.9 million for the six months ended June 30, 2008
compared to $73.2 million for the six months ended June 30, 2007. The increase is due to the addition of property, plant and equipment.

General and administrative expense increased by $9.6 million, or 23%, to $52.0 million for the six months ended June 30, 2008 compared to $42.4 million for the six months ended June 30, 2007. The increase primarily consisted of
increases of $8.2 million in compensation related expenses and $1.6 million in professional services fees, partially offset by a decrease of $0.2 million in miscellaneous expenses.



38



---

##### Table of Contents

Interest expense decreased by $28.8 million, or 37%, to $49.2 million for the six months ended
June 30, 2008 compared to $78.0 million for the six months ended June 31, 2007. The decrease is primarily from lower outstanding debt during 2008.

Results of OperationsBy Segment

Natural Gas Gathering and Processing Segment

The following table provides summary financial data regarding results of operations in our Natural Gas Gathering and Processing segment for the periods
presented:



|                                |  |                                                |         |   |                          |   |         |      |  |   |          |   |  |   |          |  
|------------------------------- |  | ---------------------------------------------- | ------- | - | ------------------------ | - | ------- | ---- |  | - | -------- | - |  | - | -------- | -
|                                |  | Three Months EndedJune 30,                     |         |   | Six Months EndedJune 30, |  
|                                |  | 2008                                           |         |   | 2007                     |   |         | 2008 |  |   | 2007     |  
|                                |  | (In millions, except operating and price data) |        
|Operating statistics: (1)       |  |                                                |         |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Gathering throughput, MMcf/d    |  |                                                | 2,072.3 |   |                          |   | 1,999.0 |      |  |   | 2,128.5  |   |  |   | 1,987.9  |  
|Plant natural gas inlet, MMcf/d |  |                                                | 2,020.7 |   |                          |   | 1,954.5 |      |  |   | 2,081.9  |   |  |   | 1,946.2  |  
|Gross NGL production, MBbl/d    |  |                                                | 104.8   |   |                          |   | 106.0   |      |  |   | 104.3    |   |  |   | 105.1    |  
|Natural gas sales, BBtu/d       |  |                                                | 546.2   |   |                          |   | 552.7   |      |  |   | 548.2    |   |  |   | 537.1    |  
|NGL sales, MBbl/d               |  |                                                | 91.5    |   |                          |   | 91.0    |      |  |   | 90.5     |   |  |   | 90.1     |  
|Condensate sales, MBbl/d        |  |                                                | 5.0     |   |                          |   | 5.4     |      |  |   | 5.0      |   |  |   | 5.1      |  
|                                |  |                                                |         |  
|Natural gas, $/MMBtu            |  |                                                |         |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Average realized sales price    |  |                                                | 10.27   |   |                          |   | 6.95    |      |  |   | 9.03     |   |  |   | 6.75     |  
|Impact of hedging               |  |                                                | (0.13   | ) |                          |   | 0.11    |      |  |   | (0.01    | ) |  |   | 0.13     |  
|                                |  |                                                |         |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Average realized price          |  |                                                | 10.14   |   |                          |   | 7.06    |      |  |   | 9.02     |   |  |   | 6.88     |  
|                                |  |                                                |         |   |                          |   |         |      |  |   |          |   |  |   |          |  
|                                |  |                                                |         |  
|NGLs, $/gal                     |  |                                                |         |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Average realized sales price    |  |                                                | 1.50    |   |                          |   | 1.00    |      |  |   | 1.41     |   |  |   | 0.91     |  
|Impact of hedging               |  |                                                | (0.08   | ) |                          |   | (0.01   | )    |  |   | (0.07    | ) |  |   |         |  
|                                |  |                                                |         |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Average realized price          |  |                                                | 1.42    |   |                          |   | 0.99    |      |  |   | 1.34     |   |  |   | 0.91     |  
|                                |  |                                                |         |   |                          |   |         |      |  |   |          |   |  |   |          |  
|                                |  |                                                |         |  
|Condensate, $/Bbl               |  |                                                |         |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Average realized sales price    |  |                                                | 109.99  |   |                          |   | 59.17   |      |  |   | 98.72    |   |  |   | 55.52    |  
|Impact of hedging               |  |                                                | (3.75   | ) |                          |   | 0.62    |      |  |   | (2.58    | ) |  |   | 0.96     |  
|                                |  |                                                |         |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Average realized price          |  |                                                | 106.24  |   |                          |   | 59.79   |      |  |   | 96.14    |   |  |   | 56.48    |  
|                                |  |                                                |         |   |                          |   |         |      |  |   |          |   |  |   |          |  
|                                |  |                                                |         |  
|Revenues (2)                    |  | $                                              | 1,059.5 |   |                          | $ | 730.3   |      |  | $ | 1,932.7  |   |  | $ | 1,353.1  |  
|Product purchases               |  |                                                | (908.2  | ) |                          |   | (604.7  | )    |  |   | (1,638.6 | ) |  |   | (1,107.3 | )
|Operating expenses              |  |                                                | (34.7   | ) |                          |   | (28.6   | )    |  |   | (64.9    | ) |  |   | (57.6    | )
|                                |  |                                                |         |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Operating margin (3)            |  | $                                              | 116.6   |   |                          | $ | 97.0    |      |  | $ | 229.2    |   |  | $ | 188.2    |  
|                                |  |                                                |         |   |                          |   |         |      |  |   |          |   |  |   |          |  
|Equity in earnings of VESCO (4) |  | $                                              | 6.4     |   |                          | $ | 2.3     |      |  | $ | 8.7      |   |  | $ | 3.5      |  
|                                |  |                                                |         |   |                          |   |         |      |  |   |          |   |  |   |          |  



|(1) | Segment operating statistics include the effect of intersegment sales, which have been eliminated from the consolidated presentation. For all volume statistics presented, the
numerator is the total volume sold during the period and the denominator is the number of calendar days during the period.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes business interruption insurance revenue of $2.6 million for the three and six months ended June 30, 2008, and $0.8 million and $0.9 for the three and six months ended
June 30, 2007.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | See Non-GAAP Financial Measures.
|--- | -----------------------------------

|(4) | Includes business interruption insurance revenue of $4.1 million for the three and six months ended June 30, 2008, and $2.2 million for the three and six months ended
June 30, 2007.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



39



---

##### Table of Contents

Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007

Revenues increased by $329.2 million, or 45%, to $1,059.5 million for the three months ended June 30, 2008 compared to $730.3 million for the three
months ended June 30, 2007. The increase was primarily due to:



| |  |  | an increase in realized commodity prices that increased revenues by $328.6 million, consisting of increases in natural gas, NGL and condensate revenues of $153.1
million, $154.2 million and $21.3 million, respectively;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a decrease attributable to volumes of $4.6 million, consisting of decreases due to lower natural gas and condensate volumes of $4.2 million and $2.0 million,
respectively, offset by an increase due to higher NGL volumes of $1.6 million; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase in other revenues of $5.2 million.
| | - |  | ----------------------------------------------

Our average realized price for natural gas increased by $3.08 per MMBtu (net of a $0.24 decrease due to hedging), or 44%, to $10.14 per MMBtu for the three months ended June 30, 2008 compared to $7.06 per MMBtu
for the three months ended June 30, 2007. Our average realized price for NGL increased by $0.43 per gallon (net of a $0.07 decrease due to hedging), or 43%, to $1.42 per gallon for the three months ended June 30, 2008 compared to $0.99 per
gallon for the three months ended June 30, 2007. Our average realized price for condensate increased by $46.45 per Bbl (net of a $4.37 decrease due to hedging), or 78%, to $106.24 per Bbl for the three months ended June 30, 2008 compared
to $59.79 per barrel for the three months ended June 30, 2007.

Our natural gas sales volumes decreased by 6.5 BBtu/d, or 1%, to 546.2
BBtu/d for the three months ended June 30, 2008 compared to 552.7 BBtu/d for the three months ended June 30, 2007. Our NGL sales volumes increased by 0.5 MBbl/d, or 1%, to 91.5 MBbl/d for the three months ended June 30, 2008 compared
to 91.0 MBbl/d for the three months ended June 30, 2007. Our condensate sales volumes decreased by 0.4 MBbl/d, or 7%, to 5.0 MBbl/d for the three months ended June 30, 2008 compared to 5.4 MBbl/d for the three months ended June 30,
2007.

Product purchases increased by $303.5 million, or 50%, to $908.2 million for the three months ended June 30, 2008 compared to
$604.7 million for the three months ended June 30, 2007. The increase was due primarily to higher commodity prices, including higher spot price purchases for industrial sales.

Operating expenses increased $6.1 million, or 21%, to $34.7 million for the three months ended June 30, 2008 compared to $28.6 million for the three
months ended June 30, 2007. The increase was primarily from:



| |  |  | increased compensation costs of $1.5 million;
| | - |  | ---------------------------------------------



| |  |  | a $2.0 million increase in costs for chemicals, lube oils and utilities; and
| | - |  | ----------------------------------------------------------------------------



| |  |  | increased maintenance expenses of $1.9 million.
| | - |  | -----------------------------------------------

Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007

Revenues increased by $579.6 million,
or 43%, to $1,932.7 million for the six months ended June 30, 2008 compared to $1,353.1 million for the six months ended June 30, 2007. This increase was primarily due to:



| |  |  | an increase in realized commodity prices that increased revenues by $548.3 million, consisting of increases in natural gas, NGL and condensate revenues of $213.4
million, $298.9 million and $36.0 million, respectively;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase attributable to volumes of $23.3 million, consisting of increases due to higher natural gas and NGL volumes of $17.5 million and $6.3 million,
respectively; and a decrease of $0.5 million for condensate; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase in other revenues of $8.0 million.
| | - |  | ----------------------------------------------



40



---

##### Table of Contents

Our average realized price for natural gas increased by $2.14 per MMBtu (net of a $0.14 decrease due to
hedging), or 31%, to $9.02 per MMBtu for the six months ended June 30, 2008 compared to $6.88 per MMBtu for the six months ended June 30, 2007. Our average realized price for NGLs increased by $0.43 per gallon (net of a $0.07 decrease due
to hedging), or 47%, to $1.34 per gallon for the six months ended June 30, 2008 compared to $0.91 per gallon for the six months ended June 30, 2007. Our average realized price for condensate increased by $39.66 per Bbl (net of a $3.54
decrease due to hedging), or 70%, to $96.14 per Bbl for the six months ended June 30, 2008 compared to $56.48 per barrel for the six months ended June 30, 2007.

Our natural gas sales volumes increased by 11.1 BBtu/d, or 2%, to 548.2 BBtu/d for the six months ended June 30, 2008 compared to 537.1 BBtu/d for the six months ended June 30, 2007. Our NGL sales volumes
increased by 0.4 MBbl/d, or less than 1%, to 90.5 MBbl/d for the six months ended June 30, 2008 compared to 90.1 MBbl/d for the six months ended June 30, 2007. Our condensate sales volumes decreased by 0.1 MBbl/d, or 2%, to 5.0 MBbl/d for
the six months ended June 30, 2008 compared to the $5.1 MBbl/d for the six months ended June 30, 2007.

Product purchases
increased by $531.3 million, or 48%, to $1,638.6 million for the six months ended June 30, 2008 compared to $1,107.3 million for the six months ended June 30, 2007. The increase in product purchases for the six months ended June 30,
2008 was due primarily to higher commodity prices, including higher spot price purchases for industrial sales.

Operating expenses
increased by $7.3 million, or 13%, to $64.9 million for the six months ended June 30, 2008 compared to $57.6 million for the six months ended June 30, 2007. The increase was primarily from:



| |  |  | increased compensation costs of $2.4 million;
| | - |  | ---------------------------------------------



| |  |  | a $1.9 million increase in costs for chemicals, lube oils and utilities; and
| | - |  | ----------------------------------------------------------------------------



| |  |  | increased maintenance expenses of $1.6 million.
| | - |  | -----------------------------------------------

Logistics Assets Segment

The following table provides summary financial data regarding results of operations of our
Logistics Assets segment for the periods presented:



|                              |  |                                      |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|----------------------------- |  | ------------------------------------ | ----- | - | ------------------------ | - | ----- | ---- |  | - | ----- | - |  | - | ----- | -
|                              |  | Three Months EndedJune 30,           |       |   | Six Months EndedJune 30, |  
|                              |  | 2008                                 |       |   | 2007                     |   |       | 2008 |  |   | 2007  |  
|                              |  | (In millions, except operating data) |      
|Fractionation volumes, MBbl/d |  |                                      | 235.2 |   |                          |   | 226.3 |      |  |   | 225.6 |   |  |   | 194.7 |  
|Treating volumes, MBbl/d (1)  |  |                                      | 21.4  |   |                          |   | 2.6   |      |  |   | 18.2  |   |  |   | 1.3   |  
|Revenues from services        |  | $                                    | 64.6  |   |                          | $ | 49.4  |      |  | $ | 115.3 |   |  | $ | 91.8  |  
|Other revenues (2)            |  |                                      | 1.1   |   |                          |   | 0.6   |      |  |   | 1.5   |   |  |   | 0.9   |  
|                              |  |                                      |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|                              |  |                                      | 65.7  |   |                          |   | 50.0  |      |  |   | 116.8 |   |  |   | 92.7  |  
|Operating expenses            |  |                                      | (54.1 | ) |                          |   | (45.1 | )    |  |   | (98.4 | ) |  |   | (76.4 | )
|                              |  |                                      |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|Operating margin (3)          |  | $                                    | 11.6  |   |                          | $ | 4.9   |      |  | $ | 18.4  |   |  | $ | 16.3  |  
|                              |  |                                      |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|Equity in earnings of GCF     |  | $                                    | 0.8   |   |                          | $ | 0.9   |      |  | $ | 1.9   |   |  | $ | 2.1   |  
|                              |  |                                      |       |   |                          |   |       |      |  |   |       |   |  |   |       |  



|(1) | Consists of the volumes treated in our low sulfur natural gasoline unit, which began commercial operations in June 2007.
|--- | ------------------------------------------------------------------------------------------------------------------------

|(2) | Includes business interruption insurance revenue of $0.4 million for the three and six months ended June 30, 2008.
|--- | ------------------------------------------------------------------------------------------------------------------

|(3) | See Non-GAAP Financial Measures.
|--- | -----------------------------------



41



---

##### Table of Contents

Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007

Revenues from services (fractionation, terminalling and storage, transportation and treating) increased by $15.2 million, or 31%, to $64.6 million for the
three months ended June 30, 2008 compared to $49.4 million for the three months ended June 30, 2007. The increase was primarily from:



| |  |  | higher fractionation rates and volumes;
| | - |  | ---------------------------------------



| |  |  | an increase in revenues from our low sulfur natural gasoline (LSNG) plant, which commenced commercial operations in June 2007; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase in commercial transportation revenues due to increased trucking activity as a result of pipeline allocations.
| | - |  | -------------------------------------------------------------------------------------------------------------------------

Operating expenses increased by $9.0 million, or 20%, to $54.1 million for the three months ended June 30, 2008 compared to $45.1 million for the
three months ended June 30, 2007. The increase was primarily due to:



| |  |  | increased fuel and electricity expense due to higher natural gas prices and higher fractionation volumes;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | an increase in operating expense at our LSNG plant, which operated for only one month during the three months ended June 30, 2007; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increased commercial transportation expenses primarily due to increased truck activity.
| | - |  | ---------------------------------------------------------------------------------------

Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007

Revenues from services (fractionation, terminalling and storage, transportation and treating) increased by $23.5 million, or 26%, to $115.3 million for the six months ended June 30, 2008 compared to $91.8 million
for the six months ended June 30, 2007. The increase was primarily from:



| |  |  | higher fractionation rates and volumes; and
| | - |  | -------------------------------------------



| |  |  | an increase in revenues from our LSNG plant, which commenced commercial operations in June 2007.
| | - |  | ------------------------------------------------------------------------------------------------

Operating expenses increased by $22.0 million, or 29%, to $98.4 million for the six months ended June 30, 2008 compared to $76.4 million for the six
months ended June 30, 2007. The increase was primarily due to:



| |  |  | increased fuel and electricity expenses primarily due to higher natural gas prices and higher fractionation volumes;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | an increase in operating expenses at our LSNG plant, which operated for only one month during the six months ended June 30, 2007;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | a net decrease in storage cavern emptying gains; and
| | - |  | ----------------------------------------------------



| |  |  | third-party fractionation and operating expenses due to the first quarter 2008 scheduled maintenance at our Cedar Bayou Fractionator.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



42



---

##### Table of Contents

NGL Distribution and Marketing Services Segment

The following table provides summary financial data regarding results of operations of our NGL Distribution and Marketing Services segment for the periods
presented:



|                          |  |                                                |          |   |                          |   |          |      |  |   |          |   |  |   |          |  
|------------------------- |  | ---------------------------------------------- | -------- | - | ------------------------ | - | -------- | ---- |  | - | -------- | - |  | - | -------- | -
|                          |  | Three Months EndedJune 30,                     |          |   | Six Months EndedJune 30, |  
|                          |  | 2008                                           |          |   | 2007                     |   |          | 2008 |  |   | 2007     |  
|                          |  | (In millions, except operating and price data) |         
|NGL sales, MBbl/d         |  |                                                | 252.3    |   |                          |   | 257.4    |      |  |   | 257.3    |   |  |   | 254.9    |  
|NGL realized price, $/gal |  |                                                | 1.55     |   |                          |   | 1.06     |      |  |   | 1.48     |   |  |   | 0.99     |  
|NGL sales revenues        |  | $                                              | 1,491.6  |   |                          | $ | 1,045.2  |      |  | $ | 2,910.4  |   |  | $ | 1,926.5  |  
|Other revenues (1)        |  |                                                | 9.3      |   |                          |   | 4.4      |      |  |   | 10.1     |   |  |   | 5.5      |  
|                          |  |                                                |          |   |                          |   |          |      |  |   |          |   |  |   |          |  
|                          |  |                                                | 1,500.9  |   |                          |   | 1,049.6  |      |  |   | 2,920.5  |   |  |   | 1,932.0  |  
|Product purchases         |  |                                                | (1,468.5 | ) |                          |   | (1,043.0 | )    |  |   | (2,879.3 | ) |  |   | (1,913.0 | )
|Operating expenses        |  |                                                | (0.5     | ) |                          |   | (0.6     | )    |  |   | (1.0     | ) |  |   | (1.3     | )
|                          |  |                                                |          |   |                          |   |          |      |  |   |          |   |  |   |          |  
|Operating margin (2)      |  | $                                              | 31.9     |   |                          | $ | 6.0      |      |  | $ | 40.2     |   |  | $ | 17.7     |  
|                          |  |                                                |          |   |                          |   |          |      |  |   |          |   |  |   |          |  



|(1) | Includes business interruption insurance revenue of $8.6 million and $3.7 million for the three months ended June 30, 2008 and 2007, and $8.6 million and $3.9 million for the
six months ended June 30, 2008 and 2007.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | See Non-GAAP Financial Measures.
|--- | -----------------------------------

Three Months
Ended June 30, 2008 Compared to Three Months Ended June 30, 2007

Our NGL sales revenues increased by $446.4 million, or 43%,
to $1,491.6 million for the three months ended June 30, 2008 compared to $1,045.2 million for the three months ended June 30, 2007. The increase comprised a $467.0 million increase from higher average sales prices, partially offset by a
$20.6 million decrease from lower sales volumes.

Other revenues, which consists primarily of business interruption insurance revenue,
increased by $4.9 million.

Product purchases increased by $425.5 million, or 41%, to $1,468.5 for the three months ended June 30,
2008 compared to $1,043.0 million for the three months ended June 30, 2007. The increase consisted of a $446.1 million increase due to higher commodity prices, partially offset by a $20.6 million decrease from lower purchased volumes.

Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007

Our NGL sales revenues increased by $983.9 million, or 51%, to $2,910.4 million for the six months ended June 30, 2008 compared to $1,926.5 million
for the six months ended June 30, 2007. The increase comprised a $955.0 million increase from higher average sales prices and a $28.9 million increase from higher sales volumes.

Other revenues, which consists primarily of business interruption insurance revenue, increased by $4.6 million.

Product purchases increased by $966.3 million, or 51%, to $2,879.3 million for the six months ended June 30, 2008 compared to $1,913.0 million for
the six months ended June 30, 2007. The increase comprised a $937.6 million increase due to higher commodity prices and a $28.7 million increase from higher purchased volumes.



43



---

##### Table of Contents

Wholesale Marketing Segment

The following table provides summary financial data regarding results of operations of our Wholesale Marketing segment for the periods presented:



|                          |  |                                               |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|------------------------- |  | --------------------------------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                          |  | Three MonthsEnded June 30,                    |        |   | Six MonthsEnded June 30, |  
|                          |  | 2008                                          |        |   | 2007                     |   |        | 2008 |  |   | 2007   |  
|                          |  | (In millions, except operating and pricedata) |       
|NGL sales, MBbl/d         |  |                                               | 46.5   |   |                          |   | 47.4   |      |  |   | 66.7   |   |  |   | 63.8   |  
|NGL realized price, $/gal |  |                                               | 1.75   |   |                          |   | 1.19   |      |  |   | 1.68   |   |  |   | 1.15   |  
|                          |  |                                               |        |  
|NGL sales revenues        |  | $                                             | 311.4  |   |                          | $ | 215.9  |      |  | $ | 854.7  |   |  | $ | 557.8  |  
|Other revenues (1)        |  |                                               | 5.9    |   |                          |   | 0.9    |      |  |   | 6.0    |   |  |   | 1.1    |  
|                          |  |                                               |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|                          |  |                                               | 317.3  |   |                          |   | 216.8  |      |  |   | 860.7  |   |  |   | 558.9  |  
|Product purchases         |  |                                               | (308.5 | ) |                          |   | (214.6 | )    |  |   | (842.2 | ) |  |   | (550.2 | )
|Operating expenses        |  |                                               |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|                          |  |                                               |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Operating margin (2)      |  | $                                             | 8.8    |   |                          | $ | 2.2    |      |  | $ | 18.5   |   |  | $ | 8.7    |  
|                          |  |                                               |        |   |                          |   |        |      |  |   |        |   |  |   |        |  



|(1) | Includes business interruption insurance revenue of $5.9 million and $0.7 million for the three months ended June 30, 2008 and 2007, and $5.9 million and $0.8 million for the
six months ended June 30, 2008 and 2007.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | See Non-GAAP Financial Measures.
|--- | -----------------------------------

Three Months
Ended June 30, 2008 Compared to Three Months Ended June 30, 2007

NGL sales revenue increased by $95.5 million, or 44%, to
$311.4 million for the three months ended June 30, 2008 compared to $215.9 million for the three months ended June 30, 2007. The increase comprised a $99.3 million increase due to higher average sales prices, partially offset by a $3.8
million decrease due to lower sales volumes. The decrease in sales volumes was primarily attributable to a contract expiration and a supply disruption to a customers refinery.

Other revenues, which consisted primarily of business interruption insurance revenue, increased by $5.0 million.

Product purchases increased by $93.9 million, or 44%, to $308.5 million for the three months ended June 30, 2008 compared to $214.6 million for the
three months ended June 30, 2007. The increase comprised a $97.6 million increase due to higher average commodity prices, partially offset by a $3.7 million decrease due to lower purchased volumes.

Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007

NGL sales revenues increased by $296.9 million, or 53%, to $854.7 million for the six months ended June 30, 2008 compared to $557.8 million for the six months ended June 30, 2007. Higher average sales prices
and volumes increased revenue by $268.5 million and $28.4 million, respectively.

Other revenues, which consisted primarily of business
interruption insurance revenue, increased by $4.9 million.

Product purchases increased by $292.0 million, or 53%, to $842.2 million for
the three months ended June 30, 2008 compared to $550.2 million for the three months ended June 30, 2007. The increase consisted of a $264.0 million increase due to higher average commodity prices and a $28.0 million increase from higher
purchased volumes.



44



---

##### Table of Contents

Hurricane Update

Certain of our Louisiana and Texas facilities sustained damage during the 2005 hurricane season from two Gulf Coast hurricanesKatrina and Rita. All repairs at our plant facilities have been completed, other than
at VESCO, which will be completed in the third quarter of 2008.

We have submitted all business interruption claims for our losses caused
by the hurricanes, and continue to work through the adjustment process to bring these claims to a final resolution. We recognize income from business interruption insurance claims in our consolidated statements of operations and comprehensive income
in the period that a proof of loss is executed and submitted to the insurers for payment. This income recognition criterion has resulted in and will likely continue to result in business interruption insurance recoveries being recorded in periods
subsequent to the periods that we experience lost income from the affected property, resulting in fluctuations in our net income that may reduce the comparability of reported quarterly and annual results for some periods into the future.

During 2008, we received $47.9 million and $21.6 million related to property damage and business interruption insurance claims, respectively, most of
which was in connection with the final resolution of our claims related to Katrina under the onshore property insurance program.

Liquidity and Capital
Resources

Our ability to finance our operations, including funding capital expenditures and acquisitions, to meet our indebtedness
obligations, to refinance our indebtedness or to meet our collateral requirements will depend on our ability to generate cash in the future. Our ability to generate cash is subject to a number of factors, some of which are beyond our control,
including weather, commodity prices, particularly for natural gas and NGLs, and our ongoing efforts to manage operating costs and maintenance capital expenditures, as well as general economic, financial, competitive, legislative, regulatory and
other factors. See Item 1A. Risk Factors in this Quarterly Report and Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2007.

Historically, our cash generated from operations has been sufficient to finance our operating expenditures and non-acquisition related capital
expenditures. Based on our anticipated levels of operations and absent any disruptive events, we believe that internally generated cash flow and borrowings available under our senior secured credit facilities should provide sufficient resources to
finance our operations, non-acquisition related capital expenditures, hurricane-related repair expenditures, long-term indebtedness obligations and collateral requirements for at least the next year.

A significant portion of our capital resources are utilized in the form of cash and letters of credit to satisfy counterparty collateral demands. These
counterparty collateral demands reflect our non-investment grade status and counterparties views of our financial condition and ability to satisfy our performance obligations, as well as commodity prices and other factors. As of June 30,
2008, total outstanding letter of credit postings by us and the Partnership were $261.7 million and $41.3 million, respectively.

Our
derivative contracts do not have margin requirements or collateral provisions that could require posting of margin prior to the scheduled cash settlement date. See Item 3. Quantitative and Qualitative Disclosures about Market Risk in
this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2007.

Contractual Obligations.In
June 2008, the Partnership issued $250 million aggregate principal amount of senior unsecured notes. The proceeds from the offering were used to reduce outstanding indebtedness under the Partnerships senior secured credit facility. The
interest rate on the senior unsecured notes is fixed at 8.25% with interest to be paid on January 1 and July 1 of each year and the senior unsecured notes mature on July 1, 2016.



45



---

##### Table of Contents

Available Credit.As of June 30, 2008, we had $250.0 million in availability under our senior
secured revolving credit facility and $38.3 million in availability under our senior secured synthetic letter of credit facility. In addition, the Partnership had $483.7 million in availability under its senior secured credit facility, after
giving effect to outstanding borrowings of $325.0 million, and the issuance of $41.3 million of letters of credit.

Capital
Requirements. The midstream energy business can be capital intensive, requiring significant investment to maintain and upgrade existing operations. A significant portion of the cost of constructing new gathering lines to connect to our gathering
system is generally paid for by the natural gas producer. However, we expect to continue to incur significant expenditures throughout 2008 related to the expansion of our natural gas gathering and processing infrastructure.

We estimate that our total capital expenditures for 2008 will be approximately $184 million. Given our objective of growth through acquisitions,
expansions of existing assets and other internal growth projects, we anticipate that we will invest significant amounts of capital to grow and acquire assets. Expansion capital expenditures may vary significantly based on investment opportunities.

We expect to fund future capital expenditures with funds generated from our operations, borrowings under our senior secured credit
facility, the issuance of additional units by the Partnership and debt offerings.

Cash Flow

Net cash provided by or used in operating activities, investing activities and financing activities for the periods presented were as follows:



|                                |  |                           |        |   |      |   |       |  
|------------------------------- |  | ------------------------- | ------ | - | ---- | - | ----- | -
|                                |  | Six Months Ended June 30, |       
|                                |  | 2008                      |        |   | 2007 |  
|                                |  | (In millions)             |       
|Net cash provided by (used in): |  |                           |        |   |      |   |       |  
|Operating activities            |  | $                         | 331.9  |   |      | $ | 134.3 |  
|Investing activities            |  |                           | (25.7  | ) |      |   | (58.6 | )
|Financing activities            |  |                           | (117.9 | ) |      |   | (38.4 | )

Operating Activities.Net cash provided by operating activities was $331.9 million for the
six months ended June 30, 2008 compared to $134.3 million for the six months ended June 30, 2007. Changes in operating assets and liabilities provided $165.4 million in cash during the six months ended June 30, 2008, compared to
providing $36.4 million in cash during the six months ended June 30, 2007. The increase is primarily from cash receipts related to property damage insurance claims and the timing of accounts receivable collections.

Investing Activities.Net cash used in investing activities was $25.7 million for the six months ended June 30, 2008 compared to $58.6
million for the six months ended June 30, 2007. The $32.9 million decrease was primarily due to the timing of property damage insurance receipts, which were $48.3 million and $12.5 million during the six months ended June 30, 2008 and
2007, respectively.

Financing Activities.Net cash used in financing activities was $117.9 million for the six months ended
June 30, 2008 compared to $38.4 million for the six months ended June 30, 2007. During the six months ended June 30, 2008, we distributed $53.8 million in cash to Targa Investments. In addition, the Partnership reduced its outstanding
indebtedness by $51.3 million.



46



---

##### Table of Contents

Non-GAAP Financial Measures

For a complete discussion of the measures that management uses to evaluate our operations, see Item 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsHow We
Evaluate our Operations in our Annual Report on Form 10-K for the year ended December 31, 2007.

Our operating margin by segment
and in total is as follows for the periods indicated:



|                                        |  |                            |       |                          |   |       |  |      |       |  |   |      
|--------------------------------------- |  | -------------------------- | ----- | ------------------------ | - | ----- |  | ---- | ----- |  | - | -----
|                                        |  | Three MonthsEnded June 30, |       | Six MonthsEnded June 30,
|                                        |  | 2008                       |       | 2007                     |   | 2008  |  | 2007
|                                        |  | (In millions)             
|Natural Gas Gathering and Processing    |  | $                          | 116.6 |                          | $ | 97.0  |  | $    | 229.2 |  | $ | 188.2
|Logistics Assets                        |  |                            | 11.6  |                          |   | 4.9   |  |      | 18.4  |  |   | 16.3 
|NGL Distribution and Marketing Services |  |                            | 31.9  |                          |   | 6.0   |  |      | 40.2  |  |   | 17.7 
|Wholesale Marketing                     |  |                            | 8.8   |                          |   | 2.2   |  |      | 18.5  |  |   | 8.7  
|                                        |  |                            |       |                          |   |       |  |      |       |  |   |      
|                                        |  | $                          | 168.9 |                          | $ | 110.1 |  | $    | 306.3 |  | $ | 230.9
|                                        |  |                            |       |                          |   |       |  |      |       |  |   |      

The following tables reconcile the non-GAAP financial measures used by management to their most
directly comparable GAAP measures for the periods indicated:



|                                                  |  |                            |       |      |                          |       |      |  |      |       |  |   |      
|------------------------------------------------- |  | -------------------------- | ----- | ---- | ------------------------ | ----- | ---- |  | ---- | ----- |  | - | -----
|                                                  |  | Three Months EndedJune 30, |       |      | Six Months EndedJune 30,
|                                                  |  | 2008                       |       | 2007 |                          |       | 2008 |  | 2007
|                                                  |  | (In millions)             
|Reconciliation of Operating Margin to net income: |  |                            |       |      |                          |       |      |  |      |       |  |   |      
|Net income                                        |  | $                          | 46.2  |      | $                        | 13.5  |      |  | $    | 64.6  |  | $ | 23.0 
|Add:                                              |  |                            |       |      |                          |       |      |  |      |       |  |   |      
|Depreciation and amortization expense             |  |                            | 38.8  |      |                          | 36.4  |      |  |      | 76.9  |  |   | 73.2 
|Income tax expense (benefit)                      |  |                            | 27.9  |      |                          | (4.0  | )    |  |      | 39.8  |  |   | 3.2  
|Other, net                                        |  |                            | 4.4   |      |                          | 6.5   |      |  |      | 23.8  |  |   | 11.1 
|Interest expense, net                             |  |                            | 23.7  |      |                          | 34.0  |      |  |      | 49.2  |  |   | 78.0 
|General and administrative                        |  |                            | 27.9  |      |                          | 23.7  |      |  |      | 52.0  |  |   | 42.4 
|                                                  |  |                            |       |      |                          |       |      |  |      |       |  |   |      
|Operating Margin                                  |  | $                          | 168.9 |      | $                        | 110.1 |      |  | $    | 306.3 |  | $ | 230.9
|                                                  |  |                            |       |      |                          |       |      |  |      |       |  |   |      



47



---

##### Table of Contents

|                                                                                |  |                            |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|------------------------------------------------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | - | ----- | ---- |  | - | ------ | - |  | - | ----- | -
|                                                                                |  | Three Months EndedJune 30, |        |   | Six Months EndedJune 30, |  
|                                                                                |  | 2008                       |        |   | 2007                     |   |       | 2008 |  |   | 2007   |  
|                                                                                |  | (In millions)              |       
|Reconciliation of Adjusted EBITDA to net cash provided by operating activities: |  |                            |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|Net cash provided by operating activities                                       |  | $                          | 109.9  |   |                          | $ | 13.3  |      |  | $ | 331.9  |   |  | $ | 134.3 |  
|Interest expense, net (excluding amortization)                                  |  |                            | 21.6   |   |                          |   | 32.2  |      |  |   | 45.1   |   |  |   | 69.0  |  
|Current income tax expense                                                      |  |                            | 0.3    |   |                          |   | 0.7   |      |  |   | 1.2    |   |  |   | 0.7   |  
|Changes in operating working capital which used (provided) cash:                |  |                            |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|Accounts receivable and other assets                                            |  |                            | 108.9  |   |                          |   | 57.7  |      |  |   | (100.8 | ) |  |   | 15.6  |  
|Inventory                                                                       |  |                            | 27.5   |   |                          |   | 18.5  |      |  |   | (35.6  | ) |  |   | (34.7 | )
|Accounts payable and other liabilities                                          |  |                            | (150.1 | ) |                          |   | (45.9 | )    |  |   | (28.9  | ) |  |   | (17.3 | )
|Other, net                                                                      |  |                            | 19.5   |   |                          |   | (0.2  | )    |  |   | 16.4   |   |  |   | (0.5  | )
|                                                                                |  |                            |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|Adjusted EBITDA                                                                 |  | $                          | 137.6  |   |                          | $ | 76.3  |      |  | $ | 229.3  |   |  | $ | 167.1 |  
|                                                                                |  |                            |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|Reconciliation of Adjusted EBITDA to net income:                                |  |                            |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|Net income                                                                      |  | $                          | 46.2   |   |                          | $ | 13.5  |      |  | $ | 64.6   |   |  | $ | 23.0  |  
|Add:                                                                            |  |                            |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|Interest expense, net                                                           |  |                            | 23.7   |   |                          |   | 34.0  |      |  |   | 49.2   |   |  |   | 78.0  |  
|Income tax expense (benefit)                                                    |  |                            | 27.9   |   |                          |   | (4.0  | )    |  |   | 39.8   |   |  |   | 3.2   |  
|Depreciation and amortization                                                   |  |                            | 38.8   |   |                          |   | 36.4  |      |  |   | 76.9   |   |  |   | 73.2  |  
|Non-cash loss (gain) related to derivative instruments                          |  |                            | 1.0    |   |                          |   | (3.6  | )    |  |   | (1.2   | ) |  |   | (10.3 | )
|                                                                                |  |                            |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|Adjusted EBITDA                                                                 |  | $                          | 137.6  |   |                          | $ | 76.3  |      |  | $ | 229.3  |   |  | $ | 167.1 |  
|                                                                                |  |                            |        |   |                          |   |       |      |  |   |        |   |  |   |       |  



48



---

##### Table of Contents

|Item 3. | Quantitative and Qualitative Disclosures about Market Risk
|------- | ----------------------------------------------------------

For an in-depth discussion of market risks, see Item 7A. Quantitative and Qualitative Disclosure about Market Risk in our Annual Report on Form 10-K for the year ended December 31, 2007.

Our principal market risks are our exposure to changes in commodity prices, particularly to the prices of natural gas and NGLs, changes in
interest rates, as well as nonperformance by our customers. We do not use risk sensitive instruments for trading purposes.

Commodity Price Risk

A significant portion of our revenues is derived from percent-of-proceeds contracts under which we receive either an agreed upon percentage
of the actual proceeds that we receive from our sales of the residue natural gas and NGLs or an agreed upon percentage based on index related prices for the natural gas and NGLs. The prices of natural gas and NGLs are subject to fluctuations in
response to changes in supply, demand, market uncertainty and a variety of additional factors beyond our control. We monitor these risks and enter into hedging transactions designed to mitigate the impact of commodity price fluctuations on our
business. Cash flows from a derivative instrument designated as a hedge are classified in the same category as the cash flows from the item being hedged. For an in-depth discussion of our hedging strategies, see Item 7A. Quantitative and
Qualitative Disclosure about Market RiskCommodity Price Risk in our Annual Report on Form 10-K for the year ended December 31, 2007.

Our payment obligations in connection with substantially all of these hedging transactions, and any additional credit exposure due to a rise in natural gas and NGL prices relative to the fixed prices set forth in the
hedges, are secured by a first priority lien in the collateral securing our senior secured indebtedness that ranks equal in right of payment with liens granted in favor of our senior secured lenders. As long as this first priority lien is in effect,
we expect to have no obligation to post cash, letters of credit or other additional collateral to secure these hedges at any time even if our counterpartys exposure to our credit increases over the term of the hedge as a result of higher
commodity prices or because there has been a change in our creditworthiness. A purchased put (or floor) transaction does not create credit exposure to us for our counterparties.

For the three and six months ended June 30, 2008, our hedging activities decreased operating revenues by $36.4 million and $52.4 million,
respectively. For the same periods in 2007, our hedging activities increased operating revenues by $0.8 million and $14.0 million.

As of
June 30, 2008, we had the following hedge arrangements which will settle during the years ended December 31, 2008 through 2012 (except as indicated otherwise, the 2008 volumes reflect daily volumes for the period from July 1, 2008
through December 31, 2008):

Natural Gas



|                  |  |         |      |                   |      |               |      |                          |      |       |      |       |  |       |  |   |         |  
|----------------- |  | ------- | ---- | ----------------- | ---- | ------------- | ---- | ------------------------ | ---- | ----- | ---- | ----- |  | ----- |  | - | ------- | -
|Instrument Type   |  | Index   |      | Avg. Price$/MMBtu |      | MMBtu per day |      | (In thousands)Fair Value |     
|                  |  |         | 2008 |                   | 2009 |               | 2010 |                          | 2011 |       | 2012 |      
|Natural Gas Sales |  |         |      |                   |      |               |      |                          |      |       |      |       |  |       |  |   |         |  
|Swap              |  | IF-Waha |      | 6.96              |      | 21,918        |      |                         |      |      |      |      |  |      |  | $ | (20,100 | )
|Swap              |  | IF-Waha |      | 6.62              |      |              |      | 21,918                   |      |      |      |      |  |      |  |   | (37,156 | )
|Swap              |  | IF-Waha |      | 7.40              |      |              |      |                         |      | 9,300 |      |      |  |      |  |   | (9,204  | )
|Swap              |  | IF-Waha |      | 7.36              |      |              |      |                         |      |      |      | 5,500 |  |      |  |   | (4,715  | )
|Swap              |  | IF-Waha |      | 7.18              |      |              |      |                         |      |      |      |      |  | 5,500 |  |   | (4,949  | )
|                  |  |         |      |                   |      |               |      |                          |      |       |      |       |  |       |  |   |         |  
|                  |  |         |      |                   |      | 21,918        |      | 21,918                   |      | 9,300 |      | 5,500 |  | 5,500 |  | $ | (76,124 | )
|                  |  |         |      |                   |      |               |      |                          |      |       |      |       |  |       |  |   |         |  



49



---

##### Table of Contents

NGLs



|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |          |  
|--------------- |  | ------- | ---- | --------------- | ---- | --------------- | ---- | ------------------------ | ---- | ----- | ---- | ----- |  | ----- |  | - | -------- | -
|Instrument Type |  | Index   |      | Avg. Price$/gal |      | Barrels per day |      | (In thousands)Fair Value |     
|                |  |         | 2008 |                 | 2009 |                 | 2010 |                          | 2011 |       | 2012 |      
|NGL Sales       |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |          |  
|Swap            |  | OPIS-MB |      | 0.81            |      | 3,547           |      |                         |      |      |      |      |  |      |  | $ | (26,986  | )
|Swap            |  | OPIS-MB |      | 0.79            |      |                |      | 3,347                    |      |      |      |      |  |      |  |   | (38,682  | )
|Swap            |  | OPIS-MB |      | 0.87            |      |                |      |                         |      | 2,750 |      |      |  |      |  |   | (22,625  | )
|Swap            |  | OPIS-MB |      | 0.91            |      |                |      |                         |      |      |      | 1,550 |  |      |  |   | (11,395  | )
|Swap            |  | OPIS-MB |      | 0.92            |      |                |      |                         |      |      |      |      |  | 1,250 |  |   | (8,555   | )
|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |          |  
|Total Swaps     |  |         |      |                 |      | 3,547           |      | 3,347                    |      | 2,750 |      | 1,550 |  | 1,250 |  |   | (108,243 | )
|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |          |  
|                |  |         |      |                 |      |                 |      |                         
|Floors          |  | OPIS-MB |      | 1.76            |      |                |      |                         |      |      |      | 107   |  |      |  |   | 213      |  
|Floors          |  | OPIS-MB |      | 1.75            |      |                |      |                         |      |      |      |      |  | 125   |  |   | 289      |  
|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |          |  
|Total Floors    |  |         |      |                 |      |                |      |                         |      |      |      | 107   |  | 125   |  |   | 502      |  
|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |          |  
|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  | $ | (107,741 | )
|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |          |  

As of June 30, 2008, the Partnership had the following hedge arrangements which will settle
during the years ended December 31, 2008 through 2012 (except as indicated otherwise, the 2008 volumes reflect daily volumes for the period from July 1, 2008 through December 31, 2008.):

Natural Gas



|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|--------------------- |  | ---------- |  | ----------------- |  | ------------- |  | ------------------------ |  | ------ |  | ----- |  | ----- |  | - | ------- | -
|                      |  | Index      |  | Avg. Price$/MMBtu |  | MMBtu per day |  | (In thousands)Fair Value | 
|Instrument Type       |  |            |  | 2008              |  | 2009          |  | 2010                     |  | 2011   |  | 2012  | 
|Natural Gas Purchases |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|Swap                  |  | NY-HH      |  | 8.43              |  | 1,350         |  |                         |  |       |  |      |  |      |  | $ | 1,258   |  
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|                      |  |            |  |                   |  | 1,350         |  |                         |  |       |  |      |  |      |  |   | 1,258   |  
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|Natural Gas Sales     |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|Swap                  |  | IF-HSC     |  | 8.09              |  | 2,328         |  |                         |  |       |  |      |  |      |  |   | (2,143  | )
|Swap                  |  | IF-HSC     |  | 7.39              |  |              |  | 1,966                    |  |       |  |      |  |      |  |   | (3,236  | )
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|                      |  |            |  |                   |  | 2,328         |  | 1,966                    |  |       |  |      |  |      |  |   | (5,379  | )
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|Swap                  |  | IF-NGPL MC |  | 8.43              |  | 6,964         |  |                         |  |       |  |      |  |      |  |   | (4,088  | )
|Swap                  |  | IF-NGPL MC |  | 8.02              |  |              |  | 6,256                    |  |       |  |      |  |      |  |   | (7,016  | )
|Swap                  |  | IF-NGPL MC |  | 7.43              |  |              |  |                         |  | 5,685  |  |      |  |      |  |   | (5,536  | )
|Swap                  |  | IF-NGPL MC |  | 7.34              |  |              |  |                         |  |       |  | 2,750 |  |      |  |   | (2,316  | )
|Swap                  |  | IF-NGPL MC |  | 7.18              |  |              |  |                         |  |       |  |      |  | 2,750 |  |   | (2,310  | )
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|                      |  |            |  |                   |  | 6,964         |  | 6,256                    |  | 5,685  |  | 2,750 |  | 2,750 |  |   | (21,265 | )
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|Swap                  |  | IF-Waha    |  | 8.20              |  | 7,389         |  |                         |  |       |  |      |  |      |  |   | (5,101  | )
|Swap                  |  | IF-Waha    |  | 7.61              |  |              |  | 6,936                    |  |       |  |      |  |      |  |   | (9,380  | )
|Swap                  |  | IF-Waha    |  | 7.38              |  |              |  |                         |  | 5,709  |  |      |  |      |  |   | (5,699  | )
|Swap                  |  | IF-Waha    |  | 7.36              |  |              |  |                         |  |       |  | 3,250 |  |      |  |   | (2,786  | )
|Swap                  |  | IF-Waha    |  | 7.18              |  |              |  |                         |  |       |  |      |  | 3,250 |  |   | (2,924  | )
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|                      |  |            |  |                   |  | 7,389         |  | 6,936                    |  | 5,709  |  | 3,250 |  | 3,250 |  |   | (25,890 | )
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|Total Swaps           |  |            |  |                   |  | 16,681        |  | 15,158                   |  | 11,394 |  | 6,000 |  | 6,000 |  |   | (51,276 | )
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|Floor                 |  | IF-NGPL MC |  | 6.55              |  | 1,000         |  |                         |  |       |  |      |  |      |  |   | 1       |  
|Floor                 |  | IF-NGPL MC |  | 6.55              |  |              |  | 850                      |  |       |  |      |  |      |  |   | 29      |  
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|                      |  |            |  |                   |  | 1,000         |  | 850                      |  |       |  |      |  |      |  |   | 30      |  
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|Floor                 |  | IF-Waha    |  | 6.85              |  | 670           |  |                         |  |       |  |      |  |      |  |   | 1       |  
|Floor                 |  | IF-Waha    |  | 6.55              |  |              |  | 565                      |  |       |  |      |  |      |  |   | 17      |  
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|                      |  |            |  |                   |  | 670           |  | 565                      |  |       |  |      |  |      |  |   | 18      |  
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|Total Floors          |  |            |  |                   |  | 1,670         |  | 1,415                    |  |       |  |      |  |      |  |   | 48      |  
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  | $ | (51,227 | )
|                      |  |            |  |                   |  |               |  |                          |  |        |  |       |  |       |  |   |         |  



50



---

##### Table of Contents

NGLs



|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |          |  
|--------------- |  | ------- | ---- | --------------- | ---- | --------------- | ---- | ------------------------ | ---- | ----- | ---- | ----- |  | ----- |  | - | -------- | -
|Instrument Type |  | Index   |      | Avg. Price$/gal |      | Barrels per day |      | (in thousands)Fair Value |     
|                |  |         | 2008 |                 | 2009 |                 | 2010 |                          | 2011 |       | 2012 |      
|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |         
|NGL Sales       |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |          |  
|Swap            |  | OPIS-MB |      | 1.01            |      | 7,095           |      |                         |      |      |      |      |  |      |  | $ | (45,341  | )
|Swap            |  | OPIS-MB |      | 0.96            |      |                |      | 6,248                    |      |      |      |      |  |      |  |   | (62,001  | )
|Swap            |  | OPIS-MB |      | 0.91            |      |                |      |                         |      | 4,809 |      |      |  |      |  |   | (40,124  | )
|Swap            |  | OPIS-MB |      | 0.92            |      |                |      |                         |      |      |      | 3,400 |  |      |  |   | (26,650  | )
|Swap            |  | OPIS-MB |      | 0.92            |      |                |      |                         |      |      |      |      |  | 2,700 |  |   | (19,612  | )
|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |          |  
|Total Swaps     |  |         |      |                 |      | 7,095           |      | 6,248                    |      | 4,809 |      | 3,400 |  | 2,700 |  |   | (193,728 | )
|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |          |  
|Floors          |  | OPIS-MB |      | 1.73            |      |                |      |                         |      |      |      | 365   |  |      |  |   | 860      |  
|Floors          |  | OPIS-MB |      | 1.72            |      |                |      |                         |      |      |      |      |  | 422   |  |   | 957      |  
|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |          |  
|Total Floors    |  |         |      |                 |      |                |      |                         |      |      |      | 365   |  | 422   |  |   | 1,817    |  
|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |          |  
|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  | $ | (191,911 | )
|                |  |         |      |                 |      |                 |      |                          |      |       |      |       |  |       |  |   |          |  

Condensate



|                 |  |        |      |                 |      |                 |      |                          |      |     |      |   |  |   |  |   |         |  
|---------------- |  | ------ | ---- | --------------- | ---- | --------------- | ---- | ------------------------ | ---- | --- | ---- | - |  | - |  | - | ------- | -
|Instrument Type  |  | Index  |      | Avg. Price$/Bbl |      | Barrels per day |      | (in thousands)Fair Value |     
|                 |  |        | 2008 |                 | 2009 |                 | 2010 |                          | 2011 |     | 2012 |  
|                 |  |        |      |                 |      |                 |      |                          |      |     |      |   |  |   |  |   |        
|Condensate Sales |  |        |      |                 |      |                 |      |                          |      |     |      |   |  |   |  |   |         |  
|Swap             |  | NY-WTI |      | 67.19           |      | 384             |      |                         |      |    |      |  |  |  |  | $ | (4,922  | )
|Swap             |  | NY-WTI |      | 69.00           |      |                |      | 322                      |      |    |      |  |  |  |  |   | (7,937  | )
|Swap             |  | NY-WTI |      | 68.10           |      |                |      |                         |      | 301 |      |  |  |  |  |   | (6,821  | )
|                 |  |        |      |                 |      |                 |      |                          |      |     |      |   |  |   |  |   |         |  
|Total Swaps      |  |        |      |                 |      | 384             |      | 322                      |      | 301 |      |  |  |  |  |   | (19,680 | )
|                 |  |        |      |                 |      |                 |      |                          |      |     |      |   |  |   |  |   |         |  
|Floor            |  | NY-WTI |      | 60.50           |      | 55              |      |                         |      |    |      |  |  |  |  |   | 0       |  
|Floor            |  | NY-WTI |      | 60.00           |      |                |      | 50                       |      |    |      |  |  |  |  |   | 3       |  
|                 |  |        |      |                 |      |                 |      |                          |      |     |      |   |  |   |  |   |         |  
|Total Floors     |  |        |      |                 |      | 55              |      | 50                       |      |    |      |  |  |  |  |   | 3       |  
|                 |  |        |      |                 |      |                 |      |                          |      |     |      |   |  |   |  |   |         |  
|                 |  |        |      |                 |      |                 |      |                          |      |     |      |   |  |   |  | $ | (19,677 | )
|                 |  |        |      |                 |      |                 |      |                          |      |     |      |   |  |   |  |   |         |  

These contracts may expose us to the risk of financial loss in certain circumstances. Our hedging
arrangements provide us protection on the hedged volumes if prices decline below the prices at which these hedges are set. If prices rise above the prices at which we have hedged, we will receive less revenue on the hedged volumes than we would
receive in the absence of hedges.



51



---

##### Table of Contents

Interest Rate Risk

We are exposed to changes in interest rates primarily as a result of variable rate debt under our senior secured credit facilities. To the extent that interest rates increase, interest expense on our revolving debt
will also increase. As of June 30, 2008, we had approximately $1,353 million of indebtedness, of which $500 million was at fixed interest rates and $853 million was at variable interest rates. Because of the interest rate risk, the Partnership
had the following open interest rate swaps as of June 30, 2008:



|              |  |                |  |        |   |  |                |       
|------------- |  | -------------- |  | ------ | - |  | -------------- | ------
|EffectiveDate |  | ExpirationDate |  | Rate   |   |  | NotionalAmount
|              |  |                |  |        |   |  | (In thousands)
|12/13/2007    |  | 01/24/2011     |  | 4.0775 | % |  | $              | 50,000
|12/18/2007    |  | 01/24/2011     |  | 4.2100 | % |  |                | 50,000
|12/21/2007    |  | 01/24/2012     |  | 4.0750 | % |  |                | 50,000
|12/21/2007    |  | 01/24/2012     |  | 4.0750 | % |  |                | 50,000
|01/09/2008    |  | 01/24/2012     |  | 3.6990 | % |  |                | 50,000
|01/11/2008    |  | 01/24/2012     |  | 3.6400 | % |  |                | 50,000

Each swap fixes the three month LIBOR rate, as indicated for the specified notional amounts
outstanding over the term of each swap agreement. The fair value of the Partnerships outstanding interest rate swaps was a liability of $0.9 million as of June 30, 2008. We have designated all interest rate swaps as cash flow hedges.
Accordingly, unrealized gains and losses relating to the interest rate swaps are recorded in OCI until the interest expense on the related debt is recognized in earnings. A hypothetical increase of 100 basis points in the underlying interest
rate, after taking into account these interest rate swaps, would increase our annual interest expense by $5.5 million.

Credit Risk

We are subject to risk of losses resulting from nonpayment or nonperformance by our customers. We monitor the creditworthiness of customers to whom we
grant credit and establish credit limits in accordance with our credit policy. On July 18, 2008, SemGroup LP filed for bankruptcy protection. As of June 30, 2008, we recognized a reserve of $4.6 million for product delivered and subject to
the bankruptcy. During the third quarter, we will record an additional reserve of $2.4 million for product delivered subsequent to June 30, 2008.



|Item 4T. | Controls and Procedures
|-------- | -----------------------

Evaluation of
Disclosure Controls and Procedures

Our management, under the supervision of and with the participation of our Chief Executive Officer
and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange
Act) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures were effective
at a reasonable assurance level to provide reasonable assurance that all material information relating to us required to be included in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the Securities and Exchange Commission.

There has been no change in our internal control
over financial reporting during the three and six months ended June 30, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



52



---

##### Table of Contents

PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

The
information required for this item is provided in Note 12, Commitments and Contingencies included in the notes to the consolidated financial statements included under Part I, Item 1, which is incorporated by reference into this item.



|Item 1A. | Risk Factors
|-------- | ------------

For an in-depth
discussion of our risk factors, see Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2007. There have been no material changes to the risk factors included therein.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

Not applicable.



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

Not applicable.



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

Not applicable.



|Item 5. | Other Information
|------- | -----------------

Not
applicable.



|Item 6. | Exhibits
|------- | --------



|               |  |   |  |                                                                                                                                                                                                                                                           
|-------------- |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  |   |  | Description                                                                                                                                                                                                                                               
|3.1            |  |  |  | Amended and Restated Certificate of Incorporation of Targa Resources, Inc. (incorporated by reference to Exhibit 3.1 to Targa Resources, Inc.s Registration Statement on Form S-4 filed
October 31, 2007 (File No. 333-147066)).                         
|               |  |  
|3.2            |  |  |  | Amended and Restated Bylaws of Targa Resources, Inc. (incorporated by reference to Exhibit 3.2 to Targa Resources, Inc.s Registration Statement on Form S-4 filed October 31, 2007 (File No.
333-147066)).                                               
|               |  |  
|3.3            |  |  |  | Certificate of Incorporation of Targa Resources Finance Corporation (incorporated by reference to Exhibit 3.3 to Targa Resources, Inc.s Registration Statement on Form S-4 filed October 31,
2007 (File No. 333-147066)).                                
|               |  |  
|3.4            |  |  |  | Certificate of Amendment of the Certificate of Incorporation of Targa Resources Finance Corporation (incorporated by reference to Exhibit 3.4 to Targa Resources, Inc.s Registration
Statement on Form S-4 filed October 31, 2007 (File No. 333-147066)).
|               |  |  
|3.5            |  |  |  | Bylaws of Targa Resources Finance Corporation (incorporated by reference to Exhibit 3.5 to Targa Resources, Inc.s Registration Statement on Form S-4 filed October 31, 2007 (File No.
333-147066)).                                                      
|               |  |  
|4.1*           |  |  |  | Indenture dated June 18, 2008, among Targa Resources Partners LP, Targa Resources Partners Finance Corporation, the Guarantors named therein and U.S. Bank National Association.                                                                          



53



---

##### Table of Contents

|               |  |   |  |                                                                                                                                                                                                           
|-------------- |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  |   |  | Description                                                                                                                                                                                               
|4.2*           |  |  |  | Registration Rights Agreement dated June 18, 2008, among Targa Resources Partners LP, Targa Resources Partners Finance Corporation, the Guarantors named therein and the initial purchasers named
therein.
|               |  |  
|10.1*          |  |  |  | Commitment Increase Supplement, dated June 18, 2008, by and among Targa Resources Partners LP, Bank of America, N.A. and the other parties signatory thereto.                                             
|               |  |  
|31.1*          |  |  |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                       
|               |  |  
|31.2*          |  |  |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                       
|               |  |  
|32.1*          |  |  |  | Certification of 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 Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                        



|* | Filed herewith
|- | --------------



54



---

##### Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



| |  |  |  |                                    |  |                                                        
| |  |  |  | ---------------------------------- |  | -------------------------------------------------------
| |  |  |  | Targa Resources, Inc. (Registrant)
| |  |  | 
| |  |  |  | By:                                |  | /s/    JOHN ROBERT
SPARGER                             
| |  |  |  |                                    |  | John Robert Sparger                                    
| |  |  |  |                                    |  | Senior Vice President and Chief Accounting Officer     
| |  |  |  |                                    |  | (Authorized signatory and Principal Accounting Officer)

Date: August 11, 2008



55



---

##### Table of Contents

Exhibit Index



|               |  |   |  |                                                                                                                                                                                                                                                           
|-------------- |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  |   |  | Description                                                                                                                                                                                                                                               
|3.1            |  |  |  | Amended and Restated Certificate of Incorporation of Targa Resources, Inc. (incorporated by reference to Exhibit 3.1 to Targa Resources, Inc.s Registration Statement on Form S-4 filed
October 31, 2007 (File No. 333-147066)).                         
|               |  |  
|3.2            |  |  |  | Amended and Restated Bylaws of Targa Resources, Inc. (incorporated by reference to Exhibit 3.2 to Targa Resources, Inc.s Registration Statement on Form S-4 filed October 31, 2007 (File No.
333-147066)).                                               
|               |  |  
|3.3            |  |  |  | Certificate of Incorporation of Targa Resources Finance Corporation (incorporated by reference to Exhibit 3.3 to Targa Resources, Inc.s Registration Statement on Form S-4 filed October 31,
2007 (File No. 333-147066)).                                
|               |  |  
|3.4            |  |  |  | Certificate of Amendment of the Certificate of Incorporation of Targa Resources Finance Corporation (incorporated by reference to Exhibit 3.4 to Targa Resources, Inc.s Registration
Statement on Form S-4 filed October 31, 2007 (File No. 333-147066)).
|               |  |  
|3.5            |  |  |  | Bylaws of Targa Resources Finance Corporation (incorporated by reference to Exhibit 3.5 to Targa Resources, Inc.s Registration Statement on Form S-4 filed October 31, 2007 (File No.
333-147066)).                                                      
|               |  |  
|4.1*           |  |  |  | Indenture dated June 18, 2008, among Targa Resources Partners LP, Targa Resources Partners Finance Corporation, the Guarantors named therein and U.S. Bank National Association.                                                                          
|               |  |  
|4.2*           |  |  |  | Registration Rights Agreement dated June 18, 2008, among Targa Resources Partners LP, Targa Resources Partners Finance Corporation, the Guarantors named therein and the initial purchasers named
therein.                                                
|               |  |  
|10.1*          |  |  |  | Commitment Increase Supplement, dated June 18, 2008, by and among Targa Resources Partners LP, Bank of America, N.A. and the other parties signatory thereto.                                                                                             
|               |  |  
|31.1*          |  |  |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                       
|               |  |  
|31.2*          |  |  |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                       
|               |  |  
|32.1*          |  |  |  | Certification of 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 Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                        



|* | Filed herewith
|- | --------------



56