Energy Transfer 8-K Energy Transfer Partners Reports Quarterly Results

Exhibit 99.1

ENERGY TRANSFER PARTNERS
REPORTS QUARTERLY RESULTS

Dallas — November 9, 2010—Energy Transfer Partners, L.P. (NYSE:ETP)today reported Adjusted EBITDA, Distributable Cash Flow, and net income for the quarter ended September 30, 2010. Adjusted EBITDA for the three months ended September 30, 2010 totaled $280.5 million, a decrease of $4.2 million from the three months ended September 30, 2009. Distributable Cash Flow for the three months ended September 30, 2010 totaled $160.5 million, an increase of $14.3 million from the three months ended September 30, 2009. Net income for the three months ended September 30, 2010, totaled $107.4 million, an increase of $34.9 million from the three months ended September 30, 2009.

Adjusted EBITDA for the nine months ended September 30, 2010 totaled $1.13 billion, an increase of $63.1 million from the nine months ended September 30, 2009. Distributable Cash Flow for the three months ended September 30, 2010 totaled $745.2 million, an increase of $43.9 million from the nine months ended September 30, 2009. Net income for the nine months ended September 30, 2010, including the impact of the non-cash charge discussed below, totaled $390.3 million, a decrease of $140.0 million from the nine months ended September 30, 2009.

Net income for the nine months ended September 30, 2010 includes a $52.6 million non-cash charge recorded in connection with our May 2010 transfer of substantially all of our interest in the Midcontinent Express Pipeline in exchange for the redemption of 12.3 million ETP Common Units held by our general partner.

Related to ETP’s liquidity position, the Partnership raised approximately $512.5 million in net proceeds during the three months ended September 30, 2010 through issuances of common units in a public offering and under an equity distribution agreement. As of September 30, 2010, in addition to approximately $77.7 million of cash on hand, the Partnership had available capacity under its revolving credit facility of approximately $1.98 billion.

An analysis of the Partnership’s segment results and other supplementary data is provided after the financial tables shown below. Management will discuss the third quarter 2010 results on the Partnership’s conference call scheduled for 9:00 a.m. Central Time today. The conference call will be broadcast live via an internet web cast, which can be accessed through www.energytransfer.com. The call will be available for replay on the Partnership’s website for a limited time.

Adjusted EBITDA and Distributable Cash Flow are non-GAAP financial measures used by industry analysts, investors, lenders, and rating agencies to assess the financial performance and the operating results of the Partnership’s fundamental business activities and should not be considered in isolation or as a substitute for net income, income from operations, cash flows from operating activities, or other GAAP measures. A table reconciling Adjusted EBITDA and Distributable Cash Flow with appropriate GAAP financial measures is included in the summarized financial information included in this release. Beginning with the quarter ended September 30, 2010 and applied retroactively to all periods presented, the Partnership has revised the items included in commodity risk management activities in its reconciliation of net income to Adjusted EBITDA and net income to Distributable Cash Flow. (See notes under “Supplemental Information” for further information.)

Energy Transfer Partners, L.P. (NYSE:ETP) is a publicly traded partnership owning and operating a diversified portfolio of energy assets. ETP has pipeline operations in Arizona, Colorado, Louisiana, New Mexico, and Utah, and owns the largest intrastate pipeline system in Texas. ETP currently has natural gas operations that include approximately 17,500 miles of gathering and transportation pipelines, treating and processing assets, and three storage facilities located in Texas. ETP also is one of the three largest retail marketers of propane in the United States, serving more than one million customers across the country.

Energy Transfer Equity, L.P. (NYSE:ETE) is a publicly traded partnership, which owns the general partner of Energy Transfer Partners and approximately 50.2 million ETP limited partner units; and owns the general partner of Regency Energy Partners and approximately 26.3 million Regency limited partner units.

The information contained in this press release is available on the Partnership’s website atwww.energytransfer.com.

Contacts
Investor Relations:
Energy Transfer
Brent Ratliff
214-981-0700 (office)

Media Relations:
Vicki Granado
Granado Communications Group
214-599-8785 (office)
214-498-9272 (cell)

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ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)

	September 30,		December 31,
	2010		2009
ASSETS
CURRENT ASSETS	$	949,300	$	1,271,963
PROPERTY, PLANT AND EQUIPMENT, net		9,560,135		8,670,247
ADVANCES TO AND INVESTMENTS IN AFFILIATES		7,863		663,298
LONG-TERM PRICE RISK MANAGEMENT ASSETS		201		—
GOODWILL		772,825		745,505
INTANGIBLES AND OTHER ASSETS, net		424,007		383,959
Total assets	$	11,714,331	$	11,734,972
LIABILITIES AND PARTNERS’ CAPITAL
CURRENT LIABILITIES	$	824,657	$	823,539
LONG-TERM DEBT, less current maturities		6,004,646		6,176,918
OTHER NON-CURRENT LIABILITIES		151,891		134,807
COMMITMENTS AND CONTINGENCIES
PARTNERS’ CAPITAL		4,733,137		4,599,708
Total liabilities and partners’ capital	$	11,714,331	$	11,734,972

ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit and unit data)
(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
REVENUES:
Natural gas operations	$	1,082,866		$	943,975		$	3,435,521		$	3,004,163
Retail propane		183,786			162,224			914,372			829,901
Other		23,992			23,397			80,438			77,449
Total revenues		1,290,644			1,129,596			4,430,331			3,911,513
COSTS AND EXPENSES:
Cost of products sold — natural gas operations		666,022			591,797			2,232,867			1,865,914
Cost of products sold — retail propane		104,533			80,232			519,796			378,524
Cost of products sold — other		6,856			6,119			20,470			18,842
Operating expenses		174,740			158,883			515,021			517,337
Depreciation and amortization		85,612			81,684			252,765			230,461
Selling, general and administrative		44,734			33,534			137,743			143,015
Total costs and expenses		1,082,497			952,249			3,678,662			3,154,093
OPERATING INCOME		208,147			177,347			751,669			757,420
OTHER INCOME (EXPENSE):
Interest expense, net of interest capitalized		(101,241	)		(101,503	)		(309,217	)		(284,228	)
Equity in earnings of affiliates		595			9,581			10,848			11,751
Gains (losses) on disposal of assets		281			(1,088	)		(198	)		(1,333	)
Gains (losses) on non-hedged interest rate derivatives		(11,963	)		(18,241	)		(11,963	)		32,327
Allowance for equity funds used during construction		12,432			30			18,039			18,618
Impairment of investment in affiliate		—			—			(52,620	)		—
Other, net		1,129			3,433			(3,731	)		4,400
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT)		109,380			69,559			402,827			538,955
Income tax expense (benefit)		1,993			(2,897	)		12,486			8,594
NET INCOME		107,387			72,456			390,341			530,361
GENERAL PARTNER’S INTEREST IN NET INCOME		97,046			88,927			287,644			266,396
LIMITED PARTNERS’ INTEREST IN NET INCOME (LOSS)	$	10,341		$	(16,471	)	$	102,697		$	263,965
BASIC NET INCOME (LOSS) PER LIMITED PARTNER UNIT	$	0.05		$	(0.10	)	$	0.54		$	1.60
BASIC AVERAGE NUMBER OF UNITS OUTSTANDING		185,247,021			168,815,563			186,761,917			164,183,538
DILUTED NET INCOME (LOSS) PER LIMITED PARTNER UNIT	$	0.05		$	(0.10	)	$	0.53		$	1.59
DILUTED AVERAGE NUMBER OF UNITS OUTSTANDING		186,214,685			168,815,563			187,708,683			164,886,492

SUPPLEMENTAL INFORMATION
(Dollars in thousands)
(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010				2009
				(Revised — see			(Revised — see				(Revised — see
				note (b)			note (b)				note (b)
				below)			below)				below)
Reconciliation of net income to Adjusted EBITDA (a):
Net income	$	107,387		$	72,456		$	390,341			$	530,361
Interest expense, net of interest capitalized		101,241			101,503			309,217				284,228
Income tax expense (benefit)		1,993			(2,897	)		12,486				8,594
Depreciation and amortization		85,612			81,684			252,765				230,461
Non-cash unit-based compensation expense		6,822			6,459			21,422				20,942
(Gains) losses on disposals of assets		(281	)		1,088			198				1,333
(Gains) losses on non-hedged interest rate derivatives		11,963			18,241			11,963				(32,327	)
Allowance for equity funds used during construction		(12,432	)		(30	)		(18,039	)	��		(18,618	)
Unrealized (gains) losses on commodity risk management activities (b)		(20,703	)		2,889			70,682				36,520
Impairment of investment in affiliate		—			—			52,620				—
Proportionate share of joint ventures’ interest, depreciation and allowance for equity funds used during construction		(1	)		6,698			22,434				9,651
Other, net		(1,129	)		(3,433	)		3,731				(4,400	)
Adjusted EBITDA	$	280,472		$	284,658		$	1,129,820			$	1,066,745
Reconciliation of net income to Distributable Cash Flow (a):
Net income	$	107,387		$	72,456		$	390,341			$	530,361
Amortization of finance costs charged to interest		2,835			2,234			7,216				6,386
Deferred income taxes		4,337			(6,040	)		4,492				3,663
Depreciation and amortization		85,612			81,684			252,765				230,461
Non-cash unit-based compensation expense		6,822			6,459			21,422				20,942
(Gains) losses on disposals of assets		(281	)		1,088			198				1,333
Unrealized (gains) losses on non-hedged interest rate derivatives		12,963			18,241			12,963				(32,327	)
Allowance for equity funds used during construction		(12,432	)		(30	)		(18,039	)			(18,618	)
Unrealized (gains) losses on commodity risk management activities		(20,703	)		2,889			70,682				36,520
Impairment of investment in affiliate		—			—			52,620				—
Distributions in excess of (less than) equity in earnings, net		387			(5,266	)		20,765				(5,696	)
Maintenance capital expenditures		(26,411	)		(27,483	)		(70,266	)			(71,766	)
Distributable Cash Flow	$	160,516		$	146,232		$	745,159			$	701,259

(a) The Partnership has disclosed in this press release Adjusted EBITDA and Distributable Cash Flow, which are non-GAAP financial measures. Management believes Adjusted EBITDA and Distributable Cash Flow provide useful information to investors as measure of comparison with peer companies, including companies that may have different financing and capital structures. The presentation of Adjusted EBITDA and Distributable Cash Flow also allows investors to view our performance in a manner similar to the methods used by management and provides additional insight into our operating results.

There are material limitations to using measures such as Adjusted EBITDA and Distributable Cash Flow, including the difficulty associated with using either as the sole measure to compare the results of one company to another, and the inability to analyze certain significant items that directly affect a company’s net income or loss or cash flows. In addition, our calculations of Adjusted EBITDA and Distributable Cash Flow may not be consistent with similarly titled measures of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP, such as gross margin, operating income, net income, and cash flow from operating activities.

Definition of Adjusted EBITDA

The Partnership’s definition of Adjusted EBITDA has been revised during the current period, as discussed in note (b) below. The Partnership defines Adjusted EBITDA as total partnership earnings before interest, taxes, depreciation, amortization and other non-cash items, such as non-cash compensation expense, gains and losses on disposals of assets, the allowance for equity funds used during construction, unrealized gains and losses on commodity risk management activities, non-cash impairment charges, and other non-operating income or expense items. Unrealized gains and losses on commodity risk management activities includes unrealized gains and losses on commodity derivatives and inventory fair value adjustments (excluding lower of cost or market adjustments).

Adjusted EBITDA is used by management to determine our operating performance and, along with other financial and volumetric data, as internal measures for setting annual operating budgets, assessing financial performance of our numerous business locations, as a measure for evaluating targeted businesses for acquisition and as a measurement component of incentive compensation.

Definition of Distributable Cash Flow

The Partnership defines Distributable Cash Flow as net income, adjusted for certain non-cash items, less maintenance capital expenditures. Non-cash items include depreciation and amortization, deferred income taxes, non-cash compensation expense, gains and losses on disposals of assets, the allowance for equity funds used during construction, unrealized gains and losses on commodity risk management activities, and non-cash impairment charges. Unrealized gains and losses on commodity risk management activities includes unrealized gains and losses on commodity derivatives and inventory fair value adjustments (excluding lower of cost or market adjustments). Distributable Cash Flow also reflects earnings from affiliates on a cash basis.

Distributable Cash Flow is used by management to evaluate our overall performance. Our partnership agreement requires us to distribute all available cash, and Distributable Cash Flow is calculated to evaluate our ability to fund distributions through cash generated by our operations.

(b) The Partnership has presented Adjusted EBITDA and Distributable Cash Flow in previous communications; however, the Partnership changed its definition for these non-GAAP measures in the quarter ended September 30, 2010 to remove lower of cost or market adjustments and the subsequent gross margin impact of such previously recognized inventory adjustments. These amounts had previously been included in unrealized gains and losses on commodity risk management activities, which now reflects unrealized gains and losses on non-hedged derivatives, fair value hedged derivatives and inventory, and the ineffective portion of cash flow hedges. The Partnership believes that with this change, Adjusted EBITDA and Distributable Cash Flow more accurately reflect the Partnership’s operating performance and therefore are more useful measures. This change has been applied retroactively to all periods presented. See “Non-GAAP Measures” available on the Partnership’s website at www.energytransfer.com for the reconciliation of net income to Adjusted EBITDA for prior periods (beginning with the fiscal year ended August 31, 2005) reflecting the changes described above.

     REPORTABLE SEGMENTS (unaudited)

	Three Months Ended September 30, 2010
											All Other
											(including
								Retail Propane			unallocated
	Intrastate							and Other			selling,
	Transportation		Interstate					Retail Propane			general and
	and Storage		Transportation			Midstream		Related			administrative)			Eliminations			Total
Volumes by segment:
Natural gas transported (MMBtu/d)		13,250,836		1,807,012			—		—
Natural gas sold (MMBtu/d)		1,812,938		24,282			1,553,671		—
NGLs produced (Bbls/d)		—		—			53,004		—
Retail propane gallons (in thousands)		—		—			—		85,722
Results by segment:
Revenues from external customers	$	529,507	$	74,659		$	458,381	$	205,833		$	22,264		$	—		$	1,290,644
Intersegment revenues		369,487		—			416,703		—			1,325			(787,515	)		—
Total revenues		898,994		74,659			875,084		205,833			23,589			(787,515	)		1,290,644
Cost of products sold		660,107		—			775,769		109,910			19,056			(787,431	)		777,411
Gross margin		238,887		74,659			99,315		95,923			4,533			(84	)		513,233
Operating expenses		56,167		19,886			19,734		75,990			3,047			(84	)		174,740
Depreciation and amortization		29,340		12,643			21,592		20,609			1,428			—			85,612
Selling, general and administrative		19,630		7,554			5,196		12,377			(23	)		—			44,734
Segment operating income (loss)	$	133,750	$	34,576		$	52,793	$	(13,053	)	$	81		$	—		$	208,147
Supplemental segment data:
Gains (losses) on non-hedged interest rate derivatives	$	—	$	—		$	—	$	—		$	(11,963	)	$	—		$	(11,963	)
Unrealized gains (losses) on commodity risk management activities		20,585		—			118		—			—			—			20,703
Allowance for equity funds used during construction		—		12,432			—		—			—			—			12,432
Non-cash unit-based compensation expense		3,440		417			507		1,057			1,401			—			6,822
Equity in earnings of affiliates		578		17			—		—			—			—			595
Distributions from equity method investees		926		56			—		—			—			—			982
Proportionate share of joint ventures’ interest, depreciation and allowance for equity funds used during construction		—		(1	)		—		—			—			—			(1	)
Maintenance capital expenditures		12,591		4,415			3,574		3,566			2,265			—			26,411

	Three Months Ended September 30, 2009
											All Other
											(including
								Retail Propane			unallocated
	Intrastate							and Other			selling,
	Transportation		Interstate					Retail Propane			general and
	and Storage		Transportation		Midstream			Related			administrative)			Eliminations			Total
Volumes by segment:
Natural gas transported (MMBtu/d)		11,111,011		1,688,388		—			—
Natural gas sold (MMBtu/d)		886,463		19,060		1,021,963			—
NGLs produced (Bbls/d)		—		—		46,628			—
Retail propane gallons (in thousands)		—		—		—			87,569
Results by segment:
Revenues from external customers	$	364,087	$	71,415	$	507,721		$	184,287		$	2,086		$	—		$	1,129,596
Intersegment revenues		102,626		—		65,345			—			372			(168,343	)		—
Total revenues		466,713		71,415		573,066			184,287			2,458			(168,343	)		1,129,596
Cost of products sold		278,868		—		480,746			85,028			1,849			(168,343	)		678,148
Gross margin		187,845		71,415		92,320			99,259			609			—			451,448
Operating expenses		45,053		13,718		16,054			81,298			2,760			—			158,883
Depreciation and amortization		27,188		12,521		18,091			23,031			853			—			81,684
Selling, general and administrative		5,823		3,566		14,761			11,480			(2,096	)		—			33,534
Segment operating income (loss)	$	109,781	$	41,610	$	43,414		$	(16,550	)	$	(908	)	$	—		$	177,347
Supplemental segment data:
Gains (losses) on non-hedged interest rate derivatives	$	—	$	—	$	—		$	—		$	(18,241	)	$	—		$	(18,241	)
Unrealized gains (losses) on commodity risk management activities		2,550		—		(6,953	)		1,514			—			—			(2,889	)
Allowance for equity funds used during construction		—		30		—			—			—			—			30
Non-cash unit-based compensation expense		1,700		427		1,158			1,172			2,002			—			6,459
Equity in earnings of affiliates		892		8,689		—			—			—			—			9,581
Distributions from equity method investees		1,155		3,160		—			—			—			—			4,315
Proportionate share of joint ventures’ interest, depreciation and allowance for equity funds used during construction		—		6,698		—			—			—			—			6,698
Maintenance capital expenditures		13,752		3,115		3,911			6,445			260			—			27,483

	Nine Months Ended September 30, 2010
												All Other
												(including
									Retail Propane			unallocated
	Intrastate								and Other			selling,
	Transportation			Interstate					Retail Propane			general and
	and Storage			Transportation		Midstream			Related			administrative)			Eliminations			Total
Volumes by segment:
Natural gas transported (MMBtu/d)		12,132,099			1,625,469		—			—
Natural gas sold (MMBtu/d)		1,642,910			23,027		1,370,293			—
NGLs produced (Bbls/d)		—			—		50,836
Retail propane gallons (in thousands)		—			—		—			388,306
Results by segment:
Revenues from external customers	$	1,662,037		$	213,007	$	1,484,211		$	987,114		$	83,962		$	—		$	4,430,331
Intersegment revenues		952,336			—		945,438			—			3,706			(1,901,480	)		—
Total revenues		2,614,373			213,007		2,429,649			987,114			87,668			(1,901,480	)		4,430,331
Cost of products sold		1,930,798					2,138,125			534,800			70,638			(1,901,228	)		2,773,133
Gross margin		683,575			213,007		291,524			452,314			17,030			(252	)		1,657,198
Operating expenses		145,497			56,147		56,597			247,692			9,340			(252	)		515,021
Depreciation and amortization		87,484			37,856		62,209			60,994			4,222			—			252,765
Selling, general and administrative		54,822			20,666		17,728			36,343			8,184			—			137,743
Segment operating income (loss)	$	395,772		$	98,338	$	154,990		$	107,285		$	(4,716	)	$	—		$	751,669
Supplemental segment data:
Gains (losses) on non-hedged interest rate derivatives	$	—		$	—	$	—		$	—		$	(11,963	)	$	—		$	(11,963	)
Unrealized gains (losses) on commodity risk management activities		(55,775	)		—		(11,559	)		(3,348	)		—			—			(70,682	)
Allowance for equity funds used during construction		—			18,039		—			—			—			—			18,039
Non-cash unit-based compensation expense		9,747			1,253		2,292			3,599			4,531			—			21,422
Equity in earnings of affiliates		1,951			8,897		—			—			—			—			10,848
Distributions from equity method investees		2,916			28,697		—			—			—			—			31,613
Proportionate share of joint ventures’ interest, depreciation and allowance for equity funds used during construction		—			22,434		—			—			—			—			22,434
Maintenance capital expenditures		21,209			16,134		10,559			18,109			4,255			—			70,266

	Nine Months Ended September 30, 2009
												All Other
												(including
									Retail Propane			unallocated
	Intrastate								and Other			selling,
	Transportation			Interstate					Retail Propane			general and
	and Storage			Transportation		Midstream			Related			administrative)			Eliminations			Total
Volumes by segment:
Natural gas transported (MMBtu/d)		12,769,022			1,706,199		—			—
Natural gas sold (MMBtu/d)		879,861			19,481		1,009,547			—
NGLs produced (Bbls/d)		—			—		47,143			—
Retail propane gallons (in thousands)		—			—		—			398,202
Results by segment:
Revenues from external customers	$	1,192,564		$	203,349	$	1,607,497		$	902,471		$	5,632		$	—		$	3,911,513
Intersegment revenues		396,734			—		142,969			—			372			(540,075	)		—
Total revenues		1,589,298			203,349		1,750,466			902,471			6,004			(540,075	)		3,911,513
Cost of products sold		895,433			—		1,510,030			393,019			4,873			(540,075	)		2,263,280
Gross margin		693,865			203,349		240,436			509,452			1,131			—			1,648,233
Operating expenses		155,461			46,427		50,858			259,768			4,823			—			517,337
Depreciation and amortization		78,080			36,017		51,792			63,477			1,095			—			230,461
Selling, general and administrative		49,899			19,150		41,183			34,128			(1,345	)		—			143,015
Segment operating income (loss)	$	410,425		$	101,755	$	96,603		$	152,079		$	(3,442	)	$	—		$	757,420
Supplemental segment data:
Gains (losses) on non-hedged interest rate derivatives	$	—		$	—	$	—		$	(17	)	$	32,344		$	—		$	32,327
Unrealized gains (losses) on commodity risk management activities		(68,908	)		—		(12,347	)		44,735			—			—			(36,520	)
Allowance for equity funds used during construction		—			18,618		—			—			—			—			18,618
Non-cash unit-based compensation expense		4,370			1,793		4,863			3,242			6,674			—			20,942
Equity in earnings of affiliates		2,202			9,549		—			—			—			—			11,751
Distributions from equity method investees		2,895			3,160		—			—			—			—			6,055
Proportionate share of joint ventures’ interest, depreciation and allowance for equity funds used during construction		—			9,651		—			—			—			—			9,651
Maintenance capital expenditures		31,984			8,922		13,455			15,628			1,777			—			71,766

Summary Analysis of Results by Segment
(tabular dollar amounts in thousands)

Intrastate Transportation and Storage

Gross Margin.The components of our intrastate transportation and storage segment gross margin were as follows:

	Three Months Ended							Nine Months Ended
	September 30,							September 30,
	2010		2009			Change		2010		2009		Change
Transportation fees	$	152,223	$	142,144		$	10,079	$	447,775	$	496,248	$	(48,473	)
Natural gas sales and other		27,504		27,411			93		83,464		65,361		18,103
Retained fuel revenues		35,930		29,244			6,686		109,017		99,973		9,044
Storage margin, including fees		23,230		(10,954	)		34,184		43,319		32,283		11,036
Total gross margin	$	238,887	$	187,845		$	51,042	$	683,575	$	693,865	$	(10,290	)

Intrastate transportation and storage gross margin changes were primarily due to the following factors:

• Transportation fees increased during the three months ended September 30, 2010 as a result of volume increases due to increased production by our customers in areas where our assets are located and more favorable basis differentials principally between the West and East Texas market hubs. For the nine months ended September 30, 2010, the decrease in transportation fees resulted from less production and less favorable basis differentials during the first six months of 2010.

• Changes in margin from natural gas sales and other activity during the nine months ended September 30, 2010 were primarily due to the impacts from system optimization activities.

• Retention revenue increased during both the three and nine months ended September 30, 2010 principally due to more favorable pricing.

Storage margin was comprised of the following:

	Three Months Ended									Nine Months Ended
	September 30,									September 30,
	2010			2009			Change			2010			2009			Change
Withdrawals from storage natural gas inventory (MMBtu)		7,459,977			300,786			7,159,191			35,347,967			11,555,189			23,792,778
Margin on physical sales	$	2,397		$	(472	)	$	2,869		$	68,049		$	(11,488	)	$	79,537
Fair value adjustments		(7,908	)		(14,778	)		6,870			(70,162	)		(44,337	)		(25,825	)
Settlements of financial derivatives		(8,479	)		10,012			(18,491	)		(17,408	)		169,726			(187,134	)
Unrealized gains (losses) on derivatives		27,867			(17,788	)		45,655			33,161			(107,506	)		140,667
Net impact of natural gas inventory transactions		13,877			(23,026	)		36,903			13,640			6,395			7,245
Revenues from fee-based storage		9,286			10,764			(1,478	)		30,913			28,869			2,044
Other costs		67			1,308			(1,241	)		(1,234	)		(2,981	)		1,747
Total storage margin	$	23,230		$	(10,954	)	$	34,184		$	43,319		$	32,283		$	11,036

For both the three and nine months ended September 30, 2010, the spread between the spot price and the forward price has narrowed relative to the prior year, resulting in a favorable impact to our storage margin compared to the same periods in the prior year.

Operating Expenses.For the three months ended September 30, 2010, intrastate operating expenses increased principally due to increases in maintenance expense of $5.8 million, including $4.1 million for repairs on our Oasis pipeline, and an increase in ad valorem expenses of $5.1 million.

For the nine months ended September 30, 2010, operating expenses decreased by approximately $10.0 million primarily due to a decrease in consumption expense of $13.2 million, lower electricity expense of $3.9 million, and lower compressor maintenance expense of $1.1 million as compared to the nine months ended September 30, 2009. These decreases were offset by increases in pipeline maintenance expense of $6.2 million and ad valorem expenses of $1.5 million as compared to the nine months ended September 30, 2009.

Depreciation and Amortization.Intrastate transportation and storage depreciation and amortization expense increased during the three and nine months ended September 30, 2010 compared to the prior periods primarily due to the completion of pipeline projects in connection with the continued expansion of our pipeline system.

Selling, General and Administrative.Intrastate selling, general and administrative expenses increased for the three and nine months ended September 30, 2010 as a result of an increase in employee related costs (including allocated overhead expenses) of $17.3 million and $18.4 million, respectively. This increase was offset by a decrease in professional fees of approximately $3.8 million and $12.8 million for the three and nine months ended September 30, 2009, respectively.

Interstate Transportation

The interstate transportation segment data presented above does not include our interstate pipeline joint ventures, for which we reflect our proportionate share of income within “Equity in earnings of affiliates” below operating income in our condensed consolidated statement of operations.

Revenues.For the three months ended September 30, 2010, revenues increased by approximately $3.2 million compared to the three months ended September 30, 2009 primarily as a result of favorable market conditions for transporting natural gas from the San Juan to East delivery points during the period.

For the nine months ended September 30, 2010, revenues increased by approximately $9.7 million compared to the prior period primarily due to increases in margin related to our operational gas sales, in addition to the completion of the Phoenix project in February 2009. This increase was partially offset by a decrease in transportation revenues due to lower transported volumes compared to the nine months ended September 30, 2009.

Operating Expenses.Operating expenses increased during the three and nine months ended September 30, 2010 primarily due to increases in ad valorem taxes resulting from increased property values related to the Phoenix pipeline.

Depreciation and Amortization.Depreciation and amortization expense increased during the nine months ended September 30, 2010, primarily due to incremental depreciation associated with the completion of the Phoenix pipeline expansion that was completed in February 2009.

Selling, General and Administrative.Selling, general and administrative expenses increased during the three and nine months ended September 30, 2010 primarily due to higher employee-related costs and allocated overhead.

Midstream

Gross Margin. The components of our midstream segment gross margin were as follows:

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2010			2009		Change			2010			2009		Change
Gathering and processing fee-based revenues	$	55,840		$	41,554	$	14,286		$	165,718		$	135,438	$	30,280
Non fee-based contracts and processing		48,799			41,229		7,570			146,295			90,599		55,696
Other		(5,324	)		9,537		(14,861	)		(20,489	)		14,399		(34,888	)
Total gross margin	$	99,315		$	92,320	$	6,995		$	291,524		$	240,436	$	51,088

Gathering and processing fee-based revenues increased between the periods due to the following:

• For the three months ended September 30, 2010, increased volumes in our North Texas system resulted in increased fee-based revenues of $7.8 million compared to the three months ended September 30, 2009. Additionally, increased volumes resulting from our recent acquisitions and other growth capital expenditures located in Louisiana provided an increase in our margin of $6.9 million for the three months ended September 30, 2010 as compared to the three months ended September 30, 2009.

• For the nine months ended September 30, 2010, increased volumes in our North Texas system resulted in increased fee-based revenues of $18.2 million as compared with the same period last year. Additionally, increased volumes resulting from our recent acquisitions and other growth capital expenditures located in Louisiana provided an increase of $19.1 million in our fee-based margin. A decrease in fee-based volumes on our Southeast Texas system offset the above noted increases for the nine months ended September 30, 2010 as compared to the nine months ended September 30, 2009.

Non fee-based contracts and processing margins increased between the periods due to the following:

• For the three months ended September 30, 2010, our non fee-based gross margins increased primarily due to higher processing volumes at our Godley plant and more favorable NGL prices.

• For the nine months ended September 30, 2010, an increase in NGL volumes for which we receive processing fees, as well as more favorable pricing, resulted in an increase in our non fee-based margin.

Other midstream gross margin reflects the following:

• For the three months ended September 30, 2010, the decrease in other midstream gross margin resulted from losses of $5.3 million from marketing activities due to less favorable market conditions compared to the three months ended September 30, 2009. During the three months ended September 30, 2010, our midstream segment realized derivative gains that had previously been recorded through mark-to-market adjustments. Therefore, the costs being hedged during the period ended September 30, 2010 did not have an offset as the unrealized gains were recognized in a prior period. We recorded unrealized gains of $0.1 million during the three months ended September 30, 2010 compared to unrealized gains of $11.2 million during the three months ended September 30, 2009.

• For the nine months ended September 30, 2010, the decrease in other midstream gross margin was due to losses of $20.5 million from marketing activities due to less favorable market conditions compared to the nine months ended September 30, 2009. Additionally, marketing activities recorded unrealized gains in the prior year associated with physical transactions that occurred during the nine months ended September 30, 2010 so that the physical transaction being hedged did not have the offset of the financial derivative used to hedge it during the same period. We recorded unrealized losses of $11.6 million during the nine months ended September 30, 2010 compared to unrealized gains of $5.8 million during the nine months ended September 30, 2009.

Operating Expenses.Operating expenses increased between the periods primarily as a result of increases in maintenance costs and other various operating costs as a result of the increased activity noted above.

Depreciation and Amortization.Midstream depreciation and amortization expense increased between the periods primarily due to incremental depreciation from the continued expansion of our Louisiana assets.

Selling, General and Administrative.For the three months ended September 30, 2010, midstream selling, general and administrative expenses decreased compared to the three months ended September 30, 2009 primarily due to a decrease in professional fees of $11.1 million offset by a net increase in all other general and administrative costs of $1.6 million primarily due to increased employee-related costs between the periods.

For the nine months ended September 30, 2010, midstream selling, general and administrative expenses decreased compared to the nine months ended September 30, 2009 primarily due to a decrease in professional fees.

Retail Propane and Other Retail Propane Related

Gross Margin.For the three months ended September 30, 2010, gross margin decreased primarily due to the slight decline in volumes and unrealized gains of $1.5 million recorded during the three months ended September 30, 2009. For the nine months ended September 30, 2010, gross margin decreased primarily due to the impact of the mark-to-market accounting of financial instruments in 2009 and a slight decrease due to the decline in volumes during the current period.

Operating Expenses. Operating expenses decreased during the three and nine months ended September 30, 2010 primarily due to decreases in employee wages and benefits as a result of lower seasonal staffing needs and performance-based bonus accruals.