Common use of SUBSEQUENT EVENT Clause in Contracts

SUBSEQUENT EVENT. On April 8, 2002, we were sold to El Paso Energy Partners as part of a larger transaction with other assets sold from El Paso Field Services. Excluded from this transaction was approximately $15 million of communications assets that are reflected in property, plant, and equipment on our balance sheet. The total consideration for all assets sold to El Paso Energy Partners was approximately $735 million, subject to adjustments for actual working capital acquired. To the Owners of EPGT Texas Pipeline, L.P., El Paso Gas Storage Company and El Paso Hub Services Company: In our opinion, the accompanying combined balance sheet and the related combined statements of income, owners' equity and cash flows present fairly, in all material respects, the financial position of EPGT Texas Pipeline, L.P., El Paso Gas Storage Company and El Paso Hub Services Company (collectively, the "Companies") at December 31, 2000, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Companies' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described in Note 4 to the combined financial statements, the Companies have significant transactions and relationships with affiliated entities. Because of these relationships, it is possible that the terms of these transactions are not the same as those that would result from transactions among wholly unrelated parties. Furthermore, as discussed in Note 2, the combined financial statements include various cost allocations and management estimates based on assumptions that management believes are reasonable under the circumstances. However, these allocations and estimates are not necessarily indicative of the costs and expenses that would have resulted had the Companies been operated as a separate entity. /s/ PRICEWATERHOUSECOOPERS LLP Houston, Texas April 18, 2002 (b) Pro forma financial statements We are providing the accompanying unaudited pro forma condensed consolidated and combined financial statements to (i) reflect the acquisition of midstream assets from El Paso Corporation, (ii) the sale of our Prince TLP and our approximate 9 percent overriding royalty in the Prince Field, and (iii) the assumption of debt and borrowings to fund the acquisition as if we completed these transactions as of January 1, 2001. The unaudited pro forma condensed consolidated and combined financial statements are not necessarily indicative of our consolidated financial position or results of operations that might have occurred had the transactions been completed at the beginning of the earliest period presented, nor do they necessarily indicate our consolidated operating results and financial position for any future period. The accompanying Notes to the Unaudited Pro Forma Condensed Consolidated and Combined Financial Statements explain the assumptions used in preparing the financial information. Accounting policy differences were not material and, accordingly, adjustments have not been included in these statements. The unaudited pro forma financial information gives effect to the following transactions as if they had occurred as of January 1, 2001: (1) The repayment in April 2002 of the limited recourse debt of approximately $95 million related to our Prince TLP. (2) The acquisition in April 2002 of EPGT Texas and the El Paso Field Services gathering and processing businesses, including 1,300 miles of gathering systems in the Permian Basin and a 42.3 percent non-operating interest in the Indian Basin natural gas processing and treating facility. Total consideration for this transaction was approximately $735 million consisting of a cash payment of approximately $420 million, the exchange of our Prince TLP and our approximate 9 percent overriding royalty interest in the Prince Field with a fair value of approximately $190 million, issuance of approximately $6 million of common units and the assumption of approximately $119 million of indebtedness. (3) The acquisition in October 2001 of the remaining 50% equity interest that we did not already own in Deepwater Holdings. The High Island Offshore System and the East Breaks natural gas gathering system became indirect wholly-owned assets through this transaction. The total purchase price was approximately $81 million, consisting of $26 million cash and $55 million of assumed indebtedness. Our historical consolidated financial statements include the accounts and results of operations of these assets from the purchase date. (4) The acquisition in October 2001 of interests in the titleholder of, and other interests in, the Chaco cryogenic natural gas processing plant for approximately $198.5 million. The total purchase price was composed of: - A payment of $77.0 million to acquire the Chaco plant from the bank group that provided the financing for the facility; and - A payment of $121.5 million to El Paso Field Services, L.P., an El Paso Corporation affiliate, in connection with the execution of a 20-year agreement relating to the processing capacity of the Chaco plant and dedication of natural gas gathered by El Paso Field Services. Our historical consolidated financial statements include the accounts and results of operations of these assets from the purchase date. (5) The $133 million acquisition in February 2001 of the South Texas natural gas liquids transportation and fractionation assets from a subsidiary of El Paso Corporation. Our historical consolidated financial statements include the accounts and results of operations of these assets from the purchase date. (6) The exclusion of the (i) results of operations and losses on the disposition of Deepwater Holdings' interests in the Stingray and UTOS systems, and the West Cameron Dehydration facility; (ii) results of operations and losses on disposition of our interests in Nautilus, Manta Ray Offshore, Nemo, Green Canyon and Tarpon as well as interests in two offshore platforms; and (iii) income of $25.4 million we recognized from the related payments from El Paso Corporation. EL PASO ENERGY PARTNERS, L.P. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEET AS OF DECEMBER 31, 2001 (IN THOUSANDS) EL PASO ENERGY PARTNERS, L.P. HISTORICAL EPN HOLDING ASSET ACQUISITION(A) ADJUSTMENT PROFORMA -------------- -------------- ---------- ---------- ASSETS Current assets Cash and cash equivalents............... $ 13,084 $ 95,000 (B) $ 13,084 (95,000)(B) 416,000 (C) 4,000 (C) (420,000)(D) 119,000 (E) (119,000)(E) Accounts receivable, net Trade................................ 33,162 $ 39,593 (39,593)(D) 33,162 Affiliates........................... 22,863 11,424 (11,424)(D) 22,863 Other current assets.................... 557 25,039 (14,730)(D) 10,866 ---------- -------- --------- ---------- Total current assets............ 69,666 76,056 (65,747) 79,975 Property, plant and equipment, net..................................... 1,103,427 776,153 (188,183)(D) 1,679,877 (30,000)(D) 18,480 (D) Investment in processing agreement........ 119,981 119,981 Investment in unconsolidated affiliates... 34,442 34,442 Other noncurrent assets................... 29,754 1,108 (1,108)(D) 29,754 ---------- -------- --------- ---------- Total assets.................... $1,357,270 $853,317 $(266,558) $1,944,029 ========== ======== ========= ========== 34 EL PASO ENERGY PARTNERS, L.P. UNAUDITED PRO FORMA CO NDENSED CONSO LID ATED AND COMBINED BALANCE SHEET -- (CONTINUED) EL PASO ENERGY EPN HOLDING PARTNERS, L.P. ASSET HISTORICAL ACQUISITION(A) ADJUSTMENT PROFORMA -------------- ---------- ---------- LIABILITIES AND PARTNERS' CAPITAL Current liabilities Accounts payable Trade................................ $ 14,987 $ 10,543 $ (10,543)(D) $ 14,987 Affiliates........................... 9,918 4,016 (4,016)(D) 9,918 Accrued interest........................ 6,401 6,401 Note payable to affiliate............... 119,000 (D) (119,000)(E) Current maturities of limited recourse term loan............................ 19,000 (19,000)(B) -- Other current liabilities............... 4,159 18,057 (2,107)(D) 20,109 ---------- -------- --------- ---------- Total current liabilities....... 54,465 32,616 (35,666) 51,415 Revolving credit facility................. 300,000 95,000 (B) 399,000 4,000 (C) EPN Holding limited recourse facility..... 416,000 (C) 535,000 119,000 (E) Long-term debt............................ 425,000 425,000 Limited recourse term loan, less current maturities.............................. 76,000 (76,000)(B) -- Other noncurrent liabilities.............. 1,079 76,091 (52,298)(D) 24,872 ---------- -------- --------- ---------- Total liabilities............... 856,544 108,707 470,036 1,435,287 Commitments and contingencies Minority interest......................... 199 199 Partners' capital......................... 500,726 6,000 (D) 508,543 1,817 (D) Owners' net investment.................... 744,411 (744,411)(D) ---------- -------- --------- ---------- Total liabilities and partners' capital....................... $1,357,270 $853,317 $(266,558) $1,944,029 ========== ======== ========= ========== EL PASO ENERGY 35 PARTNERS, L.P. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED AND COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001 (IN THOUSANDS) PROFORMA PRO FORMA DEEPWATER DEEPWATER TRANSPORTATION EL PASO DEEPWATER HOLDINGS, HOLDINGS, PROFORMA AND ENERGY HOLDINGS, L.L.C. L.L.C. CHACO FRACTIONATION PARTNERS, L.P. L.L.C. DIVESTITURES ACQUISITION PLANT ASSET HISTORICAL HISTORICAL(F) ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ------------- ------------ ----------- ----------- -------------- Operating revenues................ $202,231 $ 40,933 $(2,726)(G) $ -- $20,299 (L) $5,042 (N) Operating expenses Cost of natural gas............. 51,542 Operation and maintenance, net........................... 35,548 16,740 (658)(G) 5,215 (L) 1,368 (N) Depreciation, depletion and amortization.................. 38,649 8,899 (323)(G) 422 (H) 6,512 (L) 750 (N) Asset impairment charge......... 3,921 -------- -------- ------- ------- ------- ------ 129,660 25,639 (981) 422 11,727 2,118 -------- -------- ------- ------- ------- ------ Operating income (loss)........... 72,571 15,294 (1,745) (422) 8,572 2,924 -------- -------- ------- ------- ------- ------ Other income (loss) Earnings from unconsolidated affiliates.................... 8,449 9,925 (I) Net (loss) gain on sale of assets........................ (11,367) (21,453) 21,453 (G) Other income (loss)............. 28,726 68 -------- -------- ------- ------- ------- ------ 25,808 (21,385) 21,453 9,925 -- -- -------- -------- ------- ------- ------- ------ Income (loss) before interest, income taxes and other charges......................... 98,379 (6,091) 19,708 9,503 8,572 2,924 Interest and debt expense....... 43,130 5,936 (5,936)(J) 7,072 (M) 1,702 (O) 4,988 (K) Minority interest............... 100 Income tax benefit.............. -------- -------- ------- ------- ------- ------ 43,230 5,936 -- (948) 7,072 1,702 -------- ------- ------- ------- ------ Net income allocated to general partner....................... 24,661 Net income allocated to Series B unitholders................... 17,228 -------- Net income (loss) allocated to Basic and diluted net income Weighted average basic and diluted OTHER GULF OF MEXICO EPN HOLDING DIVESTITURE PRINCE ASSET ADJUSTMENTS EXCHANGE(Q) ACQUISITION(A) ADJUSTMENT PROFORMA ----------- -------------- ---------- -------- Operating revenues................ $ -- $(8,825) $350,412 $ -- $607,366 Operating expenses Cost of natural gas............. -- 194,305 245,847 Operation and maintenance, net........................... (2,269) 66,615 122,559 Depreciation, depletion and amortization.................. (2,988) 32,305 (2,236)(R) 82,452 462 (S) Asset impairment charge......... 3,921 ------- -------- -------- -------- ------- -------- -------- -------- Operating income (loss)........... -- (3,568) 57,187 1,774 152,587 Other income (loss) Earnings from unconsolidated -------- ------- -------- -------- -------- affiliates.................... 18,374 Net (loss) gain on sale of assets........................ 11,367 (P) Other income (loss)............. (25,504)(P) (5,026) (1,736) ------- -------- -------- -------- (14,137) -- (5,026) -- 16,638 Income (loss) before interest, income taxes and other -------- ------- -------- -------- -------- charges......................... (14,137) (3,568) 52,161 1,774 169,225 Interest and debt expense....... (1,588) -- 23,701 (T) 82,470] 3,465 (U) Minority interest............... 100 Income tax benefit.............. (24) (24) ------- -------- -------- -------- Net income (loss)............... $(14,137) $(1,980) $ 52,185 $(25,392) 86,679 ======== ======= ======== ======== Net income allocated to general partner....................... 24,976 Net income allocated to Series B Net income (loss) allocated to Basic and diluted net income Weighted average basic and diluted NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS EPN HOLDING ASSET ACQUISITION AND PRINCE EXCHANGE BALANCE SHEET ADJUSTMENTS A This column represents the audited historical combined balance sheet and statement of operations for the EPN Holding asset acquisition, which includes EPGT Texas, L.P., El Paso Gas Storage Company, El Paso Hub Services Company, and the El Paso Field Services gathering and processing businesses. B To record borrowings of $95 million under our revolving credit facility for use in repaying our limited recourse term loan associated with our Prince TLP. C To record borrowings of $416 million under the EPN Holding limited recourse credit facility and $4 million under our revolving credit facility related to the EPN Holding asset acquisition. D To record the EPN Holding asset acquisition. Our purchase price was $735 million consisting of: 1) a cash payment of $420 million, 2) an exchange of our Prince TLP and 9 percent overriding royalty interest with a fair value of $190 million, 3) issuance of $6 million in common units 4) the assumption of $119 million of short-term indebtedness payable to El Paso Corporation. We acquired all of the historical property, plant and equipment with the exception of approximately $30 million of communications equipment, the natural gas imbalance receivables and payables and the environmental liabilities on the combined balance sheet. We recorded an excess purchase price of $18 million related to the acquisition of these assets. In addition, we recognized a gain of $1.8 million on the Prince exchange. E To record borrowings of $119 million under EPN Holding's limited recourse credit facility related to the repayment of our assumed short-term debt with El Paso Corporation described in footnote D above. DEEPWATER HOLDINGS TRANSACTION F This column represents the historical Deepwater Holdings, L.L.C. consolidated statement of operations. G To eliminate the results of operations of Stingray, UTOS and the West Cameron Dehydration facility, our associated equity earnings from these assets, and the effect of the non-recurring loss related to the sales of these assets. These assets were sold pursuant to a Federal Trade Commission order related to El Paso Corporation. H To record depreciation expense associated with the allocation of the excess purchase price assigned to Deepwater Holdings' property, plant and equipment relating to our acquisition of the additional interest in Deepwater Holdings. Such property, plant and equipment will be depreciated on a straight line basis over the remaining useful lives o

SUBSEQUENT EVENT. On April 8, 2002, we were sold to El Paso Energy Partners as part Partners, L.P. for total consideration of a larger transaction with other assets sold from El Paso Field Servicesapproximately $735 million subject to adjustment for actual working capital acquired. Excluded from this transaction was approximately $15 30 million of communications assets that are reflected in property, plant, and equipment on our the accompanying balance sheetsheets. The total consideration for all assets sold to El Paso Energy Partners was approximately $735 million, subject to adjustments for actual working capital acquired. REPORT OF INDEPENDENT ACCOUNTANTS To the Owners of EPGT Texas Pipeline, L.P., El Paso Gas Storage Company and Company, El Paso Hub Services Company, and the El Paso Field Services Gathering and Processing Businesses: In our opinion, the accompanying combined balance sheet sheets and the related combined statements of income, owners' equity net investment and cash flows present fairly, in all material respects, the financial position of EPGT Texas Pipeline, L.P., El Paso Gas Storage Company and Company, El Paso Hub Services Company Company, and the El Paso Field Services Gathering and Processing Businesses (collectively, the "CompaniesBusinesses") at December 31, 2001 and 2000, and the results of their operations and their cash flows for the three years then in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the CompaniesBusinesses' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described in Note 4 5 to the combined financial statements, the Companies Businesses have significant transactions and relationships with affiliated entities. Because of these relationships, it is possible that the terms of these transactions are not the same as those that would result from transactions among wholly unrelated parties. Furthermore, as discussed in Note 2, the combined financial statements include various cost allocations and management estimates based on assumptions that management believes are reasonable under the circumstances. However, these allocations and estimates are not necessarily indicative of the costs and expenses that would have resulted had the Companies Businesses been operated as a separate entity. /s/ PRICEWATERHOUSECOOPERS LLP Houston, Texas April 18, 2002 (b) Pro forma financial statements We are providing the accompanying unaudited pro forma condensed consolidated and combined financial statements to (i) reflect the acquisition of midstream assets from El Paso Corporation, (ii) the sale of our Prince TLP and our approximate 9 percent overriding royalty in the Prince Field, and (iii) the assumption of debt and borrowings to fund the acquisition as if we completed these transactions as of January 1, 2001. The unaudited pro forma condensed consolidated and combined financial statements are not necessarily indicative of our consolidated financial position or results of operations that might have occurred had the transactions been completed at the beginning of the earliest period presented, nor do they necessarily indicate our consolidated operating results and financial position for any future period. The accompanying Notes to the Unaudited Pro Forma Condensed Consolidated and Combined Financial Statements explain the assumptions used in preparing the financial information. Accounting policy differences were not material and, accordingly, adjustments have not been included in these statements. The unaudited pro forma financial information gives effect to the following transactions as if they had occurred as of January 1, 2001: (1) The repayment in April 2002 of the limited recourse debt of approximately $95 million related to our Prince TLP. (2) The acquisition in April 2002 of EPGT Texas and the El Paso Field Services gathering and processing businesses, including 1,300 miles of gathering systems in the Permian Basin and a 42.3 percent non-operating interest in the Indian Basin natural gas processing and treating facility. Total consideration for this transaction was approximately $735 million consisting of a cash payment of approximately $420 million, the exchange of our Prince TLP and our approximate 9 percent overriding royalty interest in the Prince Field with a fair value of approximately $190 million, issuance of approximately $6 million of common units and the assumption of approximately $119 million of indebtedness. (3) The acquisition in October 2001 of the remaining 50% equity interest that we did not already own in Deepwater Holdings. The High Island Offshore System and the East Breaks natural gas gathering system became indirect wholly-owned assets through this transaction. The total purchase price was approximately $81 million, consisting of $26 million cash and $55 million of assumed indebtedness. Our historical consolidated financial statements include the accounts and results of operations of these assets from the purchase date. (4) The acquisition in October 2001 of interests in the titleholder of, and other interests in, the Chaco cryogenic natural gas processing plant for approximately $198.5 million. The total purchase price was composed of: - A payment of $77.0 million to acquire the Chaco plant from the bank group that provided the financing for the facility; and - A payment of $121.5 million to El Paso Field ServicesTEXAS PIPELINE, L.P., an El Paso Corporation affiliate, in connection with the execution of a 20-year agreement relating to the processing capacity of the Chaco plant and dedication of natural gas gathered by El Paso Field Services. Our historical consolidated financial statements include the accounts and results of operations of these assets from the purchase date. (5) The $133 million acquisition in February 2001 of the South Texas natural gas liquids transportation and fractionation assets from a subsidiary of El Paso Corporation. Our historical consolidated financial statements include the accounts and results of operations of these assets from the purchase date. (6) The exclusion of the (i) results of operations and losses on the disposition of Deepwater Holdings' interests in the Stingray and UTOS systems, and the West Cameron Dehydration facility; (ii) results of operations and losses on disposition of our interests in Nautilus, Manta Ray Offshore, Nemo, Green Canyon and Tarpon as well as interests in two offshore platforms; and (iii) income of $25.4 million we recognized from the related payments from El Paso Corporation. EL PASO ENERGY PARTNERS, L.P. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED GAS STORAGE COMPANY AND COMBINED BALANCE SHEET AS OF DECEMBER 31, 2001 (IN THOUSANDS) EL PASO ENERGY PARTNERSHUB SERVICES COMPANY COMBINED FINANCIAL STATEMENTS EPGT TEXAS PIPELINE, L.P. HISTORICAL EPN HOLDING ASSET ACQUISITION(A) ADJUSTMENT PROFORMA -------------- -------------- ---------- ---------- ASSETS L.P., EL PASO GAS STORAGE COMPANY AND EL PASO HUB SERVICES COMPANY Current assets Cash and cash equivalents............... ................................. $ 13,084 27 Accounts receivable LIABILITIES AND OWNERS' EQUITY Current liabilities Accounts payable Other current liabilities................................. 226 Other noncurrent liabilities.............................. 78 -------- Total liabilities................................. 114,691 Commitments and contingencies Owners' equity.............................................. 391,110 EPGT TEXAS PIPELINE, L.P., EL PASO GAS STORAGE COMPANY AND EL PASO HUB SERVICES COMPANY COMBINED STATEMENTS OF INCOME (IN THOUSANDS) YEAR ENDED DECEMBER 31, 2000 1999 PRE-ACQUISITION Operating revenues Gathering and transportation services..................... $103,507 $ 95,000 99,516 Natural gas sales......................................... 22,643 2,153 Other revenue............................................. 7,602 3,238 133,752 104,907 Operating expenses Cost of natural gas....................................... 30,696 9,650 Operations and maintenance................................ 78,992 67,038 Depreciation and amortization............................. 28,075 27,833 137,763 104,521 Other expense............................................... 5,344 951 EPGT TEXAS PIPELINE, L.P., EL PASO GAS STORAGE COMPANY AND EL PASO HUB SERVICES COMPANY COMBINED STATEMENTS OF CASH FLOWS (BIN THOUSANDS) YEAR ENDED DECEMBER 31, 2000 1999 Net (loss) income........................................... $ (9,318) $ 13,084 (95,000)(B625) 416,000 Adjustments to reconcile net income to cash provided by operating activities Depreciation and amortization............................. 28,075 27,833 Working capital changes: Decrease in accounts receivable........................... 5,849 65,458 (CIncrease) 4,000 decrease in inventory.......................... (C18,939) 11,066 Increase (decrease) in natural gas imbalance payable...... 21,132 (25,578) (420,000)(DIncrease) 119,000 decrease in other current assets............... 10,532 (E12,685) Non-working capital changes: Decrease in noncurrent assets and liabilities............. 6,446 1,458 Net cash provided by operating activities......... 36,950 5,994 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures........................................ (15,915) (119,000)(E9,468) Accounts receivable, net Trade................................ 33,162 $ 39,593 (39,593)(D) 33,162 Affiliates........................... 22,863 11,424 (11,424)(D) 22,863 Other current assets.................... 557 25,039 (14,730)(D) 10,866 ---------- -------- --------- ---------- Total current assets............ 69,666 76,056 (65,747) 79,975 PropertyProceeds from the sale of property, plant and equipment, net..................................... 1,103,427 776,153 ..... 122 7,629 CASH FLOWS FROM FINANCING ACTIVITIES Net cash distributions to owners............................ (188,183)(D21,146) 1,679,877 (30,000)(D4,218) 18,480 Net cash used in financing activities....................... (D21,146) Investment (4,218) Increase (decrease) in processing agreement........ 119,981 119,981 Investment in unconsolidated affiliates... 34,442 34,442 Other noncurrent assets................... 29,754 1,108 cash and cash equivalents............ 11 (1,108)(D63) 29,754 ---------- -------- --------- ---------- Total assets.................... $1,357,270 $853,317 $(266,558) $1,944,029 =Cash and cash equivalents Beginning of period....................................... 16 79 End of period............................................. $ 27 $ 16 ========= ======== ========= ========== 34 EL PASO ENERGY PARTNERS, L.P. UNAUDITED PRO FORMA CO NDENSED CONSO LID ATED AND COMBINED BALANCE SHEET -- (CONTINUED) EL PASO ENERGY EPN HOLDING PARTNERS, L.P. ASSET HISTORICAL ACQUISITION(A) ADJUSTMENT PROFORMA -------------- ---------- ---------- LIABILITIES AND PARTNERS' CAPITAL Current liabilities Accounts payable Trade................................ SUPPLEMENTAL CASH FLOW INFORMATION: Income taxes deemed paid.................................. $ 14,987 327 $ 10,543 $ (10,543)(D) $ 14,987 Affiliates........................... 9,918 4,016 (4,016)(D) 9,918 Accrued interest........................ 6,401 6,401 Note payable to affiliate............... 119,000 (D) (119,000)(E) Current maturities of limited recourse term loan............................ 19,000 (19,000)(B) -- Other current liabilities............... 4,159 18,057 (2,107)(D) 20,109 ---------- -------- --------- ---------- Total current liabilities....... 54,465 32,616 (35,666) 51,415 Revolving credit facility................. 300,000 95,000 (B) 399,000 4,000 (C) EPN Holding limited recourse facility..... 416,000 (C) 535,000 119,000 (E) Long-term debt............................ 425,000 425,000 Limited recourse term loan, less current maturities.............................. 76,000 (76,000)(B) -- Other noncurrent liabilities.............. 1,079 76,091 (52,298)(D) 24,872 ---------- -------- --------- ---------- Total liabilities............... 856,544 108,707 470,036 1,435,287 Commitments and contingencies Minority interest......................... 199 199 Partners' capital......................... 500,726 6,000 (D) 508,543 1,817 (D) Owners' net investment.................... 744,411 (744,411)(D) ---------- -------- --------- ---------- Total liabilities and partners' capital....................... $1,357,270 $853,317 $(266,558) $1,944,029 =53 ========= ======== SCHEDULE OF NONCASH ACTIVITIES: Adjustments due to effect of "push-down" accounting....... $(198,219) $ -- ========= ========== See accompanying notes. EPGT TEXAS PIPELINE, L.P., EL PASO ENERGY 35 PARTNERS, L.P. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED GAS STORAGE COMPANY AND EL PASO HUB SERVICES COMPANY COMBINED STATEMENT STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001 OWNERS' EQUITY (IN THOUSANDS) PROFORMA PRO FORMA DEEPWATER DEEPWATER TRANSPORTATION EL PASO DEEPWATER HOLDINGS, HOLDINGS, PROFORMA AND ENERGY HOLDINGS, L.L.C. L.L.C. CHACO FRACTIONATION PARTNERS, L.P. L.L.C. DIVESTITURES ACQUISITION PLANT ASSET HISTORICAL HISTORICAL(F) ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ------------- ------------ ----------- ----------- -------------- Operating revenues................ $202,231 $ 40,933 $(2,726)(G) $ -- $20,299 (L) $5,042 (N) Operating expenses Cost of natural gas............. 51,542 Operation and maintenance, net........................... 35,548 16,740 (658)(G) 5,215 (L) 1,368 (N) Depreciation, depletion and amortization.................. 38,649 8,899 (323)(G) 422 (H) 6,512 (L) 750 (N) Asset impairment charge......... 3,921 -------- -------- ------- ------- ------- ------ 129,660 25,639 (981) 422 11,727 2,118 -------- -------- ------- ------- ------- ------ Operating income (loss)........... 72,571 15,294 (1,745) (422) 8,572 2,924 -------- -------- ------- ------- ------- ------ Other income (loss) Earnings from unconsolidated affiliates.................... 8,449 9,925 (I) Net (loss) gain on sale of assets........................ (11,367) (21,453) 21,453 (G) Other income (loss)............. 28,726 68 -------- -------- ------- ------- ------- ------ 25,808 (21,385) 21,453 9,925 -- -- -------- -------- ------- ------- ------- ------ Income (loss) before interest, income taxes and other charges......................... 98,379 (6,091) 19,708 9,503 8,572 2,924 Interest and debt expense....... 43,130 5,936 (5,936)(J) 7,072 (M) 1,702 (O) 4,988 (K) Minority interest............... 100 Income tax benefit.............. -------- -------- ------- ------- ------- ------ 43,230 5,936 -- (948) 7,072 1,702 -------- ------- ------- ------- ------ Net income allocated to general partner....................... 24,661 Net income allocated to Series B unitholders................... 17,228 -------- Net income (loss) allocated to Basic and diluted net income Weighted average basic and diluted OTHER GULF OF MEXICO EPN HOLDING DIVESTITURE PRINCE ASSET ADJUSTMENTS EXCHANGE(Q) ACQUISITION(A) ADJUSTMENT PROFORMA ----------- -------------- ---------- -------- Operating revenues................ $ -- $(8,825) $350,412 $ -- $607,366 Operating expenses Cost of natural gas............. -- 194,305 245,847 Operation and maintenance, net........................... (2,269) 66,615 122,559 Depreciation, depletion and amortization.................. (2,988) 32,305 (2,236)(R) 82,452 462 (S) Asset impairment charge......... 3,921 ------- -------- -------- -------- ------- -------- -------- -------- Operating income (loss)........... -- (3,568) 57,187 1,774 152,587 Other income (loss) Earnings from unconsolidated -------- ------- -------- -------- -------- affiliates.................... 18,374 Net (loss) gain on sale of assets........................ 11,367 (P) Other income (loss)............. (25,504)(P) (5,026) (1,736) ------- -------- -------- -------- (14,137) -- (5,026) -- 16,638 Income (loss) before interest, income taxes and other -------- ------- -------- -------- -------- charges......................... (14,137) (3,568) 52,161 1,774 169,225 Interest and debt expense....... (1,588) -- 23,701 (T) 82,470] 3,465 (U) Minority interest............... 100 Income tax benefit.............. (24) (24) ------- -------- -------- -------- Net income (loss)............... $(14,137) $(1,980) $ 52,185 $(25,392) 86,679 ======== ======= ======== ======== Net income allocated to general partner....................... 24,976 Net income allocated to Series B Net income (loss) allocated to Basic and diluted net income Weighted average basic and diluted NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS EPN HOLDING ASSET ACQUISITION AND PRINCE EXCHANGE BALANCE SHEET ADJUSTMENTS A This column represents the audited historical combined balance sheet and statement of operations for the EPN Holding asset acquisition, which includes EPGT Texas, L.P., El Paso Gas Storage Company, El Paso Hub Services Company, and the El Paso Field Services gathering and processing businesses. B To record borrowings of $95 million under our revolving credit facility for use in repaying our limited recourse term loan associated with our Prince TLP. C To record borrowings of $416 million under the EPN Holding limited recourse credit facility and $4 million under our revolving credit facility related to the EPN Holding asset acquisition. D To record the EPN Holding asset acquisition. Our purchase price was $735 million consisting of: 1) a cash payment of $420 million, 2) an exchange of our Prince TLP and 9 percent overriding royalty interest with a fair value of $190 million, 3) issuance of $6 million in common units 4) the assumption of $119 million of short2000 1999 PRE-term indebtedness payable to El Paso Corporation. We acquired all of the historical property, plant and equipment with the exception of approximately $30 million of communications equipment, the natural gas imbalance receivables and payables and the environmental liabilities on the combined balance sheet. We recorded an excess purchase price of $18 million related to the acquisition of these assets. In addition, we recognized a gain of $1.8 million on the Prince exchange. E To record borrowings of $119 million under EPN Holding's limited recourse credit facility related to the repayment of our assumed short-term debt with El Paso Corporation described in footnote D above. DEEPWATER HOLDINGS TRANSACTION F This column represents the historical Deepwater Holdings, L.L.C. consolidated statement of operations. G To eliminate the results of operations of Stingray, UTOS and the West Cameron Dehydration facility, our associated equity earnings from these assets, and the effect of the non-recurring loss related to the sales of these assets. These assets were sold pursuant to a Federal Trade Commission order related to El Paso Corporation. H To record depreciation expense associated with the allocation of the excess purchase price assigned to Deepwater Holdings' property, plant and equipment relating to our acquisition of the additional interest in Deepwater Holdings. Such property, plant and equipment will be depreciated on a straight line basis over the remaining useful lives oACQUISITION