Dufour Petroleum's trucking and railcar operations allow us to enhance the value of NGLs produced at our processing plants.

In addition to our assets in Texas, we also have three INTERSTATE NATURAL GAS SYSTEMS in other states. Midla, located in Louisiana and Mississippi; AlaTenn, located in Alabama and Tennessee; and UTOS, located offshore Louisiana, comprise 718 miles of transmission pipeline. These pipelines are regulated by the Federal Energy Regulatory Commission (FERC) and operate under FERC-approved tariffs that establish rates, terms and conditions under which each system provides service to its customers. We also have a number of smaller intrastate pipeline systems that typically consist of compression and various interconnections to other pipelines that serve wholesale customers. In 2007 we sold one of our interstate natural gas systems, KPC, a non-contiguous pipeline system that was not central to the operation of our core natural gas assets. Proceeds from this sale were used to finance other strategic projects.

With a fleet of 128 trucks, 140 trailers and 10 railcars, DUFOUR PETROLEUM, L.P.—a Partnership trucking and marketing subsidiary—transports natural gas liquids (NGLs), crude oil and carbon dioxide from wellheads and treating and processing facilities to wholesale customers, such as distributors, refiners and chemical facilities. During 2007, NGL prices continued to trend high relative to natural gas prices, and Dufour’s operations allowed us to enhance the value of NGLs produced at our processing plants by providing ready access to strategic markets.

	Our natural gas marketing company optimizes system deliveries and engages in hedging activities to reduce commodity price exposure.

Our natural gas MARKETING company optimizes our system deliveries by providing natural gas sales services, transportation, balancing, storage and supply to producers and wholesale customers. The Marketing business purchases natural gas on our gathering pipelines or other connected systems, and then sells natural gas to wholesale customers based on published daily or monthly price indices, incorporating a charge for services and pass-through costs of transportation. As a result of the completed segments of our natural gas system expansions and other initiatives during 2007, our Marketing business can now access more natural gas pipelines where the gas can be sold in primary markets at more favorable prices. Our Marketing business engages in hedging activities to reduce its commodity price exposure.

During 2007, increased drilling in the areas where our gathering systems are located contributed to increased volumes on our systems. We expect the growth trend in these areas to continue as evidenced by external production forecasts and the strong rig counts and well permitting in the areas served by our systems. As demonstrated by our expansions and other initiatives in 2007, we take advantage of opportunities to develop energy transportation assets and related facilities that are complementary
to our existing systems. While we remain committed to pursing these advantageous developments and making strategic acquisitions in or near areas where we have assets, our focus in 2008 is primarily on development and optimization of our existing pipeline systems.