<PAGE>
Operating revenues and expenses by segment include intersegment revenues
and expenses which are eliminated in consolidation. For a further discussion of
the individual segments, see Item 1., Financial Statements, Note 11. For the
past two years, inflation has not had a material effect on any of our financial
results.
SEGMENT RESULTS
We use performance cash flows (which we formerly referred to as EBITDA) to
evaluate the performance of our segments, determine how resources will be
allocated and develop strategic plans. We define performance cash flows as
earnings before interest, depreciation and amortization and other adjustments.
Historically our lenders and equity investors have viewed our performance cash
flows measure as an indication of our ability to generate sufficient cash to
meet debt obligations or to pay distributions. We believe that there has been a
shift in investors' evaluation regarding investments in MLPs and they now put as
much focus on the performance of an MLP investment as they do its ability to pay
distributions. For that reason, we disclose performance cash flows as a measure
of our segment performance.
We believe performance cash flows is also useful to our investors because
it allows them to evaluate the effectiveness of our business segments from an
operational perspective, exclusive of the costs to finance those activities and
depreciation and amortization, neither of which are directly relevant to the
efficiency of those operations. This measurement may not be comparable to
measurements used by other companies and should not be used as a substitute for
net income or other performance measures.
A reconciliation of our segment performance cash flows to our net income is
as follows:
<Table>
<Caption>
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
2004 2003 2004 2003
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Natural gas pipelines and plants................... $ 83,904 $ 78,386 $165,917 $156,221
Oil and NGL logistics.............................. 13,252 12,897 20,720 24,497
Natural gas storage................................ 7,721 8,068 16,782 15,069
Platform services.................................. 5,816 6,277 12,179 10,512
-------- -------- -------- --------
Segment performance cash flows................... 110,693 105,628 215,598 206,299
Plus: Other, nonsegment results.................... 3,287 3,011 8,692 8,277
Earnings from unconsolidated affiliates...... 3,258 2,987 5,466 6,303
Cumulative effect of accounting change....... -- -- -- 1,690
Less: Interest and debt expense.................... 26,696 31,838 54,727 66,324
Loss due to early redemptions of debt........ 16,285 -- 16,285 3,762
Depreciation, depletion and amortization..... 26,080 24,846 52,303 48,543
Cash distributions from unconsolidated
affiliates.................................. 700 3,520 1,450 8,230
Minority interest............................ -- 47 (12) 80
Net cash payment received from El Paso
Corporation................................. -- 2,078 1,960 4,118
-------- -------- -------- --------
Net income......................................... $ 47,477 $ 49,297 $103,043 $ 91,512
======== ======== ======== ========
</Table>
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