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Last updated on April 23, 2014 at 1:22 EDT

Copano Energy Reports Second Quarter 2012 Results – Issues 2013 Guidance

August 8, 2012

HOUSTON, Aug. 8, 2012 /PRNewswire/ — Copano Energy, L.L.C. (NASDAQ: CPNO) today announced its financial results for the three months ended June 30, 2012.

Second Quarter 2012 Highlights:

  • Total distributable cash flow of $39.5 million, a 5% increase from second quarter 2011
  • Total segment gross margin of $72.9 million, a 12% increase from the prior year period
  • Adjusted EBITDA of $58.3 million, a 7% increase from the prior year period
  • Volumes gathered from the Eagle Ford Shale play averaged 490,000 MMBtu/d, a 277% increase from the prior year period
  • Texas segment NGL production of over 50,000 Bbls/d, an 86% increase from second quarter 2011

2013 Guidance:

  • Adjusted EBITDA forecasted to range from $300 million to $330 million
  • Total Distributable Cash Flow forecasted to range from $220 million to $240 million
  • Common unit distribution growth rate target of 7% to 9%

“Continued strong volume growth from the Eagle Ford Shale and increased volumes at our Saint Jo plant, combined with improving asset performance, led to increased financial results during the second quarter,” said R. Bruce Northcutt, Copano’s President and Chief Executive Officer. “Our results also benefited from our strategy of transitioning to a more fee-based business, which has reduced the impact of the lower commodity price environment.”

“We are pleased with our progress on capital projects and look forward to achieving the full benefits of our Eagle Ford strategy, which will drive cash flow and distribution growth in 2013. At the same time, we have begun to focus on new long-term growth opportunities to create additional value for Copano unitholders,” Northcutt added.

Second Quarter Financial Results

Total distributable cash flow increased 5% from a year ago, to $39.5 million for the second quarter of 2012, and 19% from the first quarter of 2012. The increase from the prior-year period was primarily due to:

  • increased throughput from the Eagle Ford Shale, north Barnett Shale Combo and Woodford Shale plays,
  • volumes processed at the Lake Charles plant in Louisiana, and
  • lower maintenance capital expenditures.

These benefits were partially offset by lower natural gas liquids (NGL) prices and higher interest and operating expenses.

Second-quarter 2012 total distributable cash flow represents 93% coverage of the second-quarter distribution of $0.575 per unit, based on common units outstanding on the distribution record date.

Revenue for the second quarter of 2012 decreased 8% from the second quarter of 2011 to $317.3 million, and 6% from the first quarter of 2012. Total segment gross margin increased 12% from both the second quarter of 2011 and first quarter of 2012 to $72.9 million. Adjusted EBITDA increased 7% from the second quarter of 2011, to $58.3 million and 16% from first quarter of 2012. Net income to common was $12.2 million for the second quarter of 2012, compared to net loss of $17.4 million for the second quarter of 2011.

Corporate and other activities, which include Copano’s commodity risk management efforts, contributed a gain of $3.4 million for the second quarter of 2012 compared to a loss of $10.3 million for the second quarter of 2011 and a loss of $5.1 million for the first quarter of 2012.

Total distributable cash flow, total segment gross margin, adjusted EBITDA and segment gross margin are non-GAAP financial measures, which are reconciled to their most directly comparable GAAP measures at the end of this news release. Please read “Use of Non-GAAP Financial Measures” beginning on page 6 of this news release.

Second Quarter Operating Results by Segment

Texas

Segment gross margin for Texas increased 6% from the second quarter of 2011 to $49.1 million, and increased 8% from the first quarter of 2012. The increase from the prior year was primarily a result of volume growth from the Eagle Ford Shale and north Barnett Shale Combo plays, partially offset by lower NGL prices and a decline in lean gas volumes, which were displaced by rich gas volumes at the Houston Central complex. Also, the Lake Charles plant, which contributed $2.5 million to Texas gross margin for the second quarter of 2012, did not operate during the prior-year period.

During the second quarter of 2012, the Texas segment provided gathering and processing services for an average of 924,465 MMBtu/d of natural gas, an increase of 39% from the second quarter of 2011. The Texas segment gathered an average of 566,388 MMBtu/d of natural gas, an increase of 28% over the second quarter of 2011, primarily due to increased volumes from the Eagle Ford Shale and north Barnett Shale Combo plays. Volumes processed at Copano’s plants and third-party plants in Texas averaged 834,846 MMBtu/d during the second quarter of 2012, an increase of 42% over the second quarter of 2011 primarily due to increased volumes from the north Barnett Shale Combo play and at the Lake Charles plant. Second-quarter NGL production averaged 50,146 Bbls/d at Copano-owned plants and third-party plants, an increase of 86% from the second quarter of 2011 and 42% from the first quarter of 2012, reflecting a substantial increase in the NGL content of volumes at the Houston Central complex, and increased volumes at the Saint Jo plant in the north Barnett Shale Combo play and the Lake Charles plant in Louisiana.

Eagle Ford Gathering, Copano’s unconsolidated joint venture with Kinder Morgan, has been in full service since December 2011 and provided gathering services for an average of 252,912 MMBtu/d during the second quarter of 2012. Texas segment gross margin results do not include the financial results and volumes associated with Copano’s interest in Eagle Ford Gathering, which is accounted for under the equity method of accounting and shown in Copano’s financial statements under “Equity in (earnings) loss from unconsolidated affiliates.” For the second quarter of 2012, equity earnings and distributions from Eagle Ford Gathering totaled $9.8 million and $4.8 million, respectively.

Oklahoma

Segment gross margin for Oklahoma was $20.2 million for the second quarter of 2012, a decrease of 30% compared to the second quarter of last year and 17% from the first quarter of 2012. The year-over-year decrease resulted primarily from a decrease of 39% in realized margins on service throughput compared to the second quarter of 2011 ($0.68 per MMBtu in 2012 compared to $1.11 per MMBtu in 2011) due to lower NGL and natural gas prices. This decrease was partially offset by an increase in service throughput attributable to lean gas volume growth from the Woodford Shale play.

The Oklahoma segment gathered an average of 324,915 MMBtu/d of natural gas, an increase of 14% compared to the second quarter of 2011, due primarily to lean gas from the Woodford Shale area, which increased 46% compared to the second quarter of 2011. Volumes processed at wholly-owned and third-party plants in Oklahoma were flat compared to the second quarter of 2011, averaging 158,016 MMBtu/d. Second quarter NGL production at Copano-owned plants and third-party plants averaged 17,028 Bbls/d, a decrease of 2% from the second quarter of 2011.

Rocky Mountains

Segment gross margin for the Rocky Mountains segment totaled $0.2 million in the second quarter of 2012 compared to $0.8 million for the second quarter of 2011 and $0.4 million for the first quarter of 2012. Rocky Mountains segment gross margin results do not include the financial results and volumes associated with Copano’s interest in Bighorn Gas Gathering and Fort Union Gas Gathering, which are accounted for under the equity method of accounting and shown in Copano’s financial statements under “Equity in (earnings) loss from unconsolidated affiliates.”

Average pipeline throughput for Bighorn and Fort Union on a combined basis increased 40% to 747,009 MMBtu/d in the second quarter of 2012 as compared to 533,329 MMBtu/d in the second quarter of 2011. The volume increase is due primarily to producers increasing volumes on Fort Union to access downstream markets; however, because Fort Union has firm volume commitments, the increase did not have a material impact on Copano’s equity earnings or distributions. For the second quarter of 2012, combined equity earnings for Bighorn and Fort Union totaled $2.6 million, compared to $0.6 million for the same period in 2011. Combined distributions from Bighorn and Fort Union totaled $7.3 million in the second quarter of 2012, compared to $6.3 million in the second quarter of last year.

Cash Distributions

On July 11, 2012, Copano announced its second quarter 2012 cash distribution of $0.575 per unit, or $2.30 per unit on an annualized basis, for all of its outstanding common units. This distribution is unchanged from the first quarter of 2012 and will be paid on August 9, 2012 to common unitholders of record at the close of business on July 31, 2012.

2013 Guidance

Copano announced today its forecast for certain financial items for 2013, as outlined in the table below:

    ($ in millions)                                       Calendar 2013
                                                          -------------
    Adjusted EBITDA                                                $300 to $330
    Total distributable cash flow                                  $220 to $240
    Common unit distribution growth rate
     target(1)                                                         7% to 9%
    Quarterly common unit distribution
     coverage target                                               100% to 115%
    Fee-based margin(2)                                              55% to 60%
    Capital expenditures:
         Expansion                                                 $250 to $300
         Maintenance                                                 $13 to $18
    ___________________________
    (1)  Based on annualized fourth quarter 2013 declared distribution
    (2)  Represents fee-based component of our total segment gross
     margin and our share of gross margin from our unconsolidated
     affiliates

The above forecasted amounts are based on various assumptions, which include an average natural gas price of $3.80 per MMBtu, weighted-average Mont Belvieu and Conway NGL prices of $33.16 per barrel and $29.34 per barrel, respectively, and an average NYMEX crude price of $90.34 per barrel. Additionally, for the third and fourth quarters of 2013, Copano assumes no conversion of its preferred units then outstanding and payment of cash rather than in-kind preferred unit distributions.

Additional assumptions include, among others, timely and on-budget completion of Copano’s announced expansion capital projects, forecasted operational volumes from existing operations and expansion capital projects, Copano’s existing contract portfolio and outstanding commodity hedge portfolio, receipt of volume deficiency payments under certain contracts, consistent operations at third-party facilities and timely completion of expansions at third-party facilities that impact Copano’s operations, estimated interest rates, and budgeted operations and maintenance and general and administrative costs. Management will issue updated 2013 guidance in subsequent earnings announcements only if revised expectations fall outside the ranges set forth above.

Management does not develop detailed forecasts for certain items, including GAAP revenues, depreciation, amortization and non-cash changes in derivatives, and therefore is unable to provide forecasted net income, a comparable GAAP measure, for the period presented.

With respect to the third and fourth quarters of 2012, management expects to continue to provide quarterly gross margin trends and any material updates to full-year 2012 capital expenditures and expense guidance.

Conference Call Information

Copano will hold a conference call on August 9, 2012 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) to discuss its second quarter 2012 financial results. To participate in the call, dial (480) 629-9645 and ask for the Copano call at least 10 minutes prior to the start time, or access it live over the internet at www.copano.com on the “Investor Overview” page of the “Investor Relations” section of Copano’s website.

A replay of the audio webcast will be available shortly after the call on Copano’s website. A telephonic replay will be available through August 16, 2012 by calling (303) 590-3030 and using the pass code 4551423#.

Use of Non-GAAP Financial Measures

This news release and the accompanying schedules include non-generally accepted accounting principles, or non-GAAP, financial measures of total distributable cash flow, total segment gross margin, adjusted EBITDA and segment gross margin. The accompanying schedules provide reconciliations of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States, or GAAP. Non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income (loss), operating income (loss), cash flows from operating activities or any other GAAP measure of liquidity or financial performance. Copano’s non-GAAP financial measures may not be comparable to similarly titled measures of other companies, who may not calculate their measures in the same manner.

Copano’s management team uses non-GAAP financial measures to evaluate its core profitability and to assess the financial performance of its assets. Subject to the limitations expressed above, Copano believes that investors and other market participants benefit from access to the various financial measures that its management uses in evaluating its performance because it allows them to independently evaluate Copano’s performance with the same information used by management.

Copano Energy, L.L.C. is a midstream natural gas company with operations in Texas, Oklahoma, Wyoming and Louisiana. More information is available at http://www.copano.com.

This press release includes “forward-looking statements,” as defined by the Securities and Exchange Commission. Statements that address activities or events that Copano believes will or may occur in the future are forward-looking statements. These statements include, but are not limited to, statements about future producer activity and Copano’s total distributable cash flow and distribution coverage. These statements are based on management’s experience and perception of historical trends, current conditions, expected future developments and other factors management believes are reasonable. Important factors that could cause actual results to differ materially from those in forward-looking statements include the following risks and uncertainties, many of which are beyond Copano’s control: the volatility of prices and market demand for natural gas and natural gas liquids; Copano’s ability to continue to obtain new sources of natural gas supply and retain its key customers; the impact on volumes and resulting cash flow of technological, economic and other uncertainties inherent in estimating future production; producers’ ability to drill and successfully complete and attach new natural gas supplies; the NGL content of new gas supplies; Copano’s ability to access or construct new processing, fractionation and transportation capacity; the availability of downstream transportation and other facilities for natural gas and NGLs; mechanical failures and other operational risks affecting the performance of Copano’s processing plants and other facilities, higher construction costs or project delays due to inflation, limited availability of required resources, or the effects of environmental, legal or other uncertainties; general economic conditions; the effects of government regulations and policies; and other financial, operational and legal risks and uncertainties detailed from time to time in Copano’s quarterly and annual reports filed with the Securities and Exchange Commission.

    Contacts:                          Carl A. Luna, SVP and CFO
    Copano Energy, L.L.C.
    713-621-9547

    Jack Lascar / jlascar@drg-l.com
    Anne Pearson / apearson@drg-l.com
                                       DRG&L / 713-529-6600

-financial statements follow -

                                                                                                               COPANO ENERGY, L.L.C. AND SUBSIDIARIES
                                                                                                           UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                    Three Months Ended                                     Six Months Ended
                                                                         June 30,                                              June 30,

                                                                                2012                               2011                                                 2012                 2011
                                                                                ----                               ----                                                 ----                 ----

                                                                               (In thousands, except per unit information)
    Revenue:
                       Natural gas
                       sales                                                                           $69,993                                             $123,928                                                  $156,205                                       $227,723
                       Natural gas
                       liquids sales                                                                   188,780                                              180,758                                                   383,967                                        329,759
                       Transportation,
                       compression and
                       processing fees                                                                  43,241                                               27,898                                                    83,080                                         52,369
                       Condensate and
                       other                                                                            15,289                                               13,472                                                    31,279                                         26,130

                      Total revenue                                                                    317,303                                              346,056                                                   654,531                                        635,981
                                                                                                       -------                                              -------                                                   -------                                        -------

    Costs and expenses:
                       Cost of natural
                       gas and natural
                       gas liquids (1)                                                                 238,482                                              274,398                                                   504,433                                        498,128
                       Transportation
                        (1)                                                                              5,971                                                6,362                                                    12,420                                         12,211
                       Operations and
                       maintenance                                                                      18,287                                               15,763                                                    36,929                                         30,862
                       Depreciation and
                       amortization                                                                     19,062                                               17,363                                                    38,150                                         34,232
                      Impairment                                                                             -                                                    -                                                    28,744                                              -
                       General and
                       administrative                                                                   10,298                                               11,901                                                    25,242                                         24,499
                       Taxes other than
                       income                                                                            2,110                                                1,397                                                     3,476                                          2,527
                       Equity in
                       (earnings) loss
                       from
                       unconsolidated
                       affiliates                                                                      (12,437)                                              (1,306)                                                  102,291                                         (3,008)

                      Total costs and expenses                                                         281,773                                              325,878                                                   751,685                                        599,451
                                                                                                       -------                                              -------                                                   -------                                        -------

    Operating income (loss)                                                                             35,530                                               20,178                                                   (97,154)                                        36,530
    Other income (expense):
                       Interest and
                       other income                                                                        521                                                    8                                                       559                                             15
                       Loss on
                       refinancing of
                       unsecured debt                                                                        -                                              (18,233)                                                        -                                        (18,233)
                       Interest and
                       other financing
                       costs                                                                           (14,602)                                             (11,454)                                                  (29,026)                                       (23,370)

    Income (loss) before income taxes                                                                   21,449                                               (9,501)                                                 (125,621)                                        (5,058)
    Provision for income taxes                                                                            (331)                                                 140                                                      (932)                                          (771)
                                                                                                          ----                                                  ---                                                      ----                                           ----
    Net income (loss)                                                                                   21,118                                               (9,361)                                                 (126,553)                                        (5,829)
    Preferred unit distributions                                                                        (8,915)                                              (8,076)                                                  (17,613)                                       (15,956)
    Net income (loss) to common units                                                                  $12,203                                             $(17,437)                                                $(144,166)                                      $(21,785)
                                                                                                       =======                                             ========                                                 =========                                       ========

    Basic net income (loss) per common unit:
                       Net income
                       (loss) per
                       common unit                                                                       $0.17                                               $(0.26)                                                   $(2.01)                                        $(0.33)

                       Weighted average
                       number of
                       common units                                                                     72,300                                               66,143                                                    71,630                                         66,065

    Diluted net income (loss) per common unit:
                       Net income
                       (loss) per
                       common unit                                                                       $0.14                                               $(0.26)                                                   $(2.01)                                        $(0.33)

                       Weighted average
                       number of
                       common units                                                                     85,176                                               66,143                                                    71,630                                         66,065

    Distributions declared per common unit                                                              $0.575                                               $0.575                                                    $1.150                                         $1.150
                                                                                 ===                    ======                                               ======                                                    ======                                         ======
    ____________
    (1) Exclusive of operations and maintenance, depreciation and amortization and impairment shown separately below

                                                                      COPANO ENERGY, L.L.C. AND SUBSIDIARIES
                                                                  UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                                                                                                                                                                                         Six Months Ended June 30,

                                                                                                                                                                                                                                                                              2012
                                                                                                                                                                                                                                                                                                  2011
                                                                                                                                                                                                                                                                                                  ----

    Cash Flows From Operating Activities:                                                                                                                                                                                 (In thousands)
                                                                                                                                                                                Net loss                                                      $(126,553)                                                  $(5,829)
                                                                                                                                                                                 Adjustments to
                                                                                                                                                                                 reconcile net loss
                                                                                                                                                                                 to net cash
                                                                                                                                                                                 provided by
                                                                                                                                                                                 operating
                                                                                                                                                                                 activities:
                                                                                                                                                                                 Depreciation and
                                                                                                                                                                                 amortization                                                    38,150                                                    34,232
                                                                                                                                                                                Impairment                                                       28,744                                                         -
                                                                                                                                                                                 Amortization of
                                                                                                                                                                                 debt issue
                                                                                                                                                                                 costs                                                            1,978                                                     1,949
                                                                                                                                                                                 Equity in loss
                                                                                                                                                                                 (income) from
                                                                                                                                                                                 unconsolidated
                                                                                                                                                                                 affiliates                                                     102,291                                                    (3,008)
                                                                                                                                                                                 Distributions
                                                                                                                                                                                 from
                                                                                                                                                                                 unconsolidated
                                                                                                                                                                                 affiliates                                                      20,618                                                    12,323
                                                                                                                                                                                 Loss on
                                                                                                                                                                                 refinancing of
                                                                                                                                                                                 unsecured debt                                                       -                                                    18,233
                                                                                                                                                                                 Non-cash gain
                                                                                                                                                                                 on risk
                                                                                                                                                                                 management
                                                                                                                                                                                 activities, net                                                 (6,021)                                                   (1,536)
                                                                                                                                                                                 Equity-based
                                                                                                                                                                                 compensation                                                     2,314                                                     5,340
                                                                                                                                                                                 Deferred tax
                                                                                                                                                                                 provision                                                          185                                                       168
                                                                                                                                                                                 Other non-cash
                                                                                                                                                                                 items                                                              346                                                       (10)
                                                                                                                                                                                 Changes in
                                                                                                                                                                                 assets and
                                                                                                                                                                                 liabilities,
                                                                                                                                                                                 net of
                                                                                                                                                                                 acquisitions:
                                                                                                                                                                                                       Accounts
                                                                                                                                                                                                       receivable                                                           24,756                                 (15,637)
                                                                                                                                                                                                       Prepayments
                                                                                                                                                                                                       and other
                                                                                                                                                                                                       current
                                                                                                                                                                                                       assets                                                                2,733                                    2,110
                                                                                                                                                                                                       Risk
                                                                                                                                                                                                       management
                                                                                                                                                                                                       activities                                                            6,105                                    5,455
                                                                                                                                                                                                       Accounts
                                                                                                                                                                                                       payable                                                             (45,705)                                  21,498
                                                                                                                                                                                                       Other current
                                                                                                                                                                                                       liabilities                                                           3,621                                      718
                                                                                                                                                                                                                                                                             -----                                      ---
                                                                                                                                                                                                                       Net cash provided by
                                                                                                                                                                                                                       operating activities                                            53,562                                   76,006
                                                                                                                                                                                                                                                                                       ------                                   ------

    Cash Flows From Investing Activities:
                                                                                                                                                                                 Additions to
                                                                                                                                                                                 property, plant
                                                                                                                                                                                 and equipment                                                 (142,465)                                                  (98,289)
                                                                                                                                                                                 Additions to
                                                                                                                                                                                 intangible assets                                               (2,740)                                                   (4,140)
                                                                                                                                                                                Acquisitions                                                          -                                                   (16,084)
                                                                                                                                                                                 Investments in
                                                                                                                                                                                 unconsolidated
                                                                                                                                                                                 affiliates                                                     (34,165)                                                  (65,027)
                                                                                                                                                                                 Distributions from
                                                                                                                                                                                 unconsolidated
                                                                                                                                                                                 affiliates                                                       1,896                                                     1,249
                                                                                                                                                                                Escrow cash                                                           -                                                         6
                                                                                                                                                                                 Proceeds from sale
                                                                                                                                                                                 of assets                                                          178                                                       141
                                                                                                                                                                                Other                                                             3,366                                                      (185)

                                                                                                                                                                                                                       Net cash used in
                                                                                                                                                                                                                       investing activities                                         (173,930)                                (182,329)
                                                                                                                                                                                                                                                                                     --------                                 --------

    Cash Flows From Financing Activities:
                                                                                                                                                                                 Proceeds from long-
                                                                                                                                                                                 term debt                                                      330,375                                                   605,000
                                                                                                                                                                                 Repayment of long-
                                                                                                                                                                                 term debt                                                     (317,000)                                                (392,665)
                                                                                                                                                                                 Payments of
                                                                                                                                                                                 premiums and
                                                                                                                                                                                 expenses on
                                                                                                                                                                                 redemption of
                                                                                                                                                                                 unsecured debt                                                       -                                                   (14,572)
                                                                                                                                                                                 Deferred financing
                                                                                                                                                                                 costs                                                           (3,434)                                                  (15,670)
                                                                                                                                                                                 Distributions to
                                                                                                                                                                                 unitholders                                                    (84,150)                                                  (76,571)
                                                                                                                                                                                 Proceeds from
                                                                                                                                                                                 public offering of
                                                                                                                                                                                 common units, net
                                                                                                                                                                                 of underwriting
                                                                                                                                                                                 discounts
                                                                                                                                                                                 and commissions
                                                                                                                                                                                 of $7,590                                                      188,083                                                         -
                                                                                                                                                                                 Equity offering
                                                                                                                                                                                 costs                                                             (360)                                                       (4)
                                                                                                                                                                                 Proceeds from
                                                                                                                                                                                 option exercises                                                   888                                                     2,431
                                                                                                                                                                                                                       Net cash provided by
                                                                                                                                                                                                                       financing activities                                           114,402                                  107,949
                                                                                                                                                                                                                                                                                      -------                                  -------

    Net (decrease) increase in cash and cash equivalents                                                                                                                                                                             (5,966)                                                     1,626
    Cash and cash equivalents, beginning of year                                                                                                                                                                                     56,962                                                     59,930
                                                                                                                                                                                                                                     ------                                                     ------
    Cash and cash equivalents, end of period                                                                                                                                                                                        $50,996                                                    $61,556
                                                                                                                                                                                                                                    =======                                                    =======

                                                            COPANO ENERGY, L.L.C. AND SUBSIDIARIES
                                                             UNAUDITED CONSOLIDATED BALANCE SHEETS

                                                                 June 30,                                December 31,
                                                                      2012                                       2011
                                                                      ----                                       ----

                                                                             (In thousands, except unit
                                                                                    information)
                                                                            ASSETS
    Current assets:
                      Cash and cash
                      equivalents                                                               $50,996                                                $56,962
                      Accounts
                      receivable,
                      net                                                                        95,105                                                119,193
                      Risk management
                      assets                                                                     21,995                                                  4,322
                      Prepayments and
                      other current
                      assets                                                                      2,381                                                  5,114

                     Total current assets                                                       170,477                                                185,591
                                                                                                -------                                                -------

    Property, plant and equipment, net                                                        1,238,893                                              1,103,699
    Intangible assets, net                                                                      160,391                                                192,425
    Investments in unconsolidated affiliates                                                    453,380                                                544,687
    Escrow cash                                                                                   1,848                                                  1,848
    Risk management assets                                                                       10,445                                                  6,452
    Other assets, net                                                                            27,851                                                 29,895
                                                                                                 ------                                                 ------
                     Total assets                                                            $2,063,285                                             $2,064,597
                                                                                             ==========                                             ==========

                                                              LIABILITIES AND MEMBERS' CAPITAL
    Current liabilities:
                      Accounts
                      payable                                                                  $120,632                                               $155,921
                      Accrued capital
                      expenditures                                                               19,712                                                  7,033
                      Accrued
                      interest                                                                   10,951                                                  8,686
                      Accrued tax
                      liability                                                                     729                                                  1,182
                      Risk management
                      liabilities                                                                 1,833                                                  3,565
                      Other current
                      liabilities                                                                15,953                                                 15,007

                     Total current liabilities                                                  169,810                                                191,394
                                                                                                -------                                                -------

    Long term debt (includes $3,263 and $0 bond premium as
     of June 30, 2012
                      and December
                      31, 2011,
                      respectively)                                                           1,007,788                                                994,525
    Deferred tax liability                                                                        2,385                                                  2,199
    Other noncurrent liabilities                                                                  5,105                                                  4,581

    Commitments and contingencies
    Members' capital:
                      Series A
                      convertible
                      preferred
                      units, no par
                      value,
                      12,275,579
                      units and
                      11,684,074 units issued and
                      outstanding as of June 30,
                      2012 and
                     December 31, 2011, respectively                                            285,168                                                285,168
                      Common units,
                      no par value,
                      72,365,674
                      units and
                      66,341,458
                      units issued
                      and
                      outstanding as of June 30, 2012
                      and December 31, 2011,
                      respectively                                                            1,353,504                                              1,164,853
    Paid in capital                                                                              67,034                                                 62,277
    Accumulated deficit                                                                        (834,712)                                              (624,121)
    Accumulated other comprehensive income (loss)                                                 7,203                                                (16,279)
                                                                                                  -----                                                -------
                                                                                                878,197                                                871,898
                                                                                                -------                                                -------
                      Total liabilities and members'
                      capital                                                                $2,063,285                                             $2,064,597
                                                                                             ==========                                             ==========

                                                                                                          COPANO ENERGY, L.L.C. AND SUBSIDIARIES
                                                                                                             UNAUDITED RESULTS OF OPERATIONS

                                                                 Three Months Ended                               Six Months Ended
                                                                      June 30,                                        June 30,
                                                                      --------                                        --------
                                                                               2012                               2011                                  2012                 2011
                                                                               ----                               ----                                  ----                 ----

                                                                                                     ($ In thousands)
    Total segment gross margin(1)                                                                     $72,850                                        $65,296                                         $137,678                                       $125,642
    Operations and maintenance expenses                                                                18,287                                         15,763                                           36,929                                         30,862
    Depreciation and amortization                                                                      19,062                                         17,363                                           38,150                                         34,232
    Impairment                                                                                              -                                              -                                           28,744                                              -
    General and administrative expenses                                                                10,298                                         11,901                                           25,242                                         24,499
    Taxes other than income                                                                             2,110                                          1,397                                            3,476                                          2,527
    Equity in (earnings) loss from unconsolidated
     affiliates(2)(3)                                                                                 (12,437)                                        (1,306)                                         102,291                                         (3,008)
                                                                                                      -------                                         ------                                          -------                                         ------
                      Operating income
                      (loss)                                                                           35,530                                         20,178                                          (97,154)                                        36,530
    Loss on refinancing of unsecured debt                                                                   -                                        (18,233)                                               -                                        (18,233)
    Interest and other financing costs, net                                                           (14,081)                                       (11,446)                                         (28,467)                                       (23,355)
    Provision for income taxes                                                                           (331)                                           140                                             (932)                                          (771)
                                                                                                         ----                                            ---                                             ----                                           ----
    Net income (loss)                                                                                  21,118                                         (9,361)                                        (126,553)                                        (5,829)
    Preferred unit distributions                                                                       (8,915)                                        (8,076)                                         (17,613)                                       (15,956)
                                                                                                       ------                                         ------                                          -------                                        -------
    Net income (loss) to common units                                                                 $12,203                                       $(17,437)                                       $(144,166)                                      $(21,785)
                                                                                                      =======                                       ========                                        =========                                       ========

    Basic net income (loss) per common unit                                                             $0.17                                         $(0.26)                                          $(2.01)                                        $(0.33)
                                                                                ===                     =====                                         ======                                           ======                                         ======
    Weighted average number of common units - basic                                                    72,300                                         66,143                                           71,630                                         66,065
                                                                                                       ======                                         ======                                           ======                                         ======
    Diluted net income (loss) per common unit                                                           $0.14                                         $(0.26)                                          $(2.01)                                        $(0.33)
                                                                                                        =====                                         ======                                           ======                                         ======
    Weighted average number of common units - diluted                                                  85,176                                         66,143                                           71,630                                         66,065
                                                                                                       ======                                         ======                                           ======                                         ======

    Total segment gross margin:
                     Texas                                                                            $49,101                                        $46,134                                          $94,442                                        $91,145
                     Oklahoma                                                                          20,171                                         28,665                                           44,370                                         51,747
                      Rocky
                      Mountains(4)                                                                        187                                            771                                              545                                          1,813

                     Segment gross margin                                                              69,459                                         75,570                                          139,357                                        144,705
                      Corporate and
                      other(5)                                                                          3,391                                        (10,274)                                          (1,679)                                       (19,063)

                     Total segment gross margin(1)                                                    $72,850                                        $65,296                                         $137,678                                       $125,642
                                                                                                      =======                                        =======                                         ========                                       ========

    Segment gross margin per unit:
                     Texas:
                     Service throughput ($/MMBtu)                                                       $0.58                                          $0.76                                            $0.56                                          $0.76
                     Oklahoma:
                     Service throughput ($/MMBtu)                                                       $0.68                                          $1.11                                            $0.76                                          $1.03

    Volumes:
                     Texas:(6)
                     Service throughput (MMBtu/d)(7)                                                  924,465                                        665,040                                          934,257                                        660,741
                     Pipeline throughput (MMBtu/d)                                                    566,388                                        444,186                                          565,949                                        422,429
                     Plant inlet volumes (MMBtu/d)                                                    834,846                                        588,533                                          834,004                                        574,794
                     NGLs produced (Bbls/d)                                                            50,146                                         26,913                                           42,745                                         25,080
                     Oklahoma:(8)
                     Service throughput (MMBtu/d)(7)                                                  324,915                                        283,870                                          321,600                                        280,293
                     Plant inlet volumes (MMBtu/d)                                                    158,106                                        157,424                                          157,579                                        156,856
                     NGLs produced (Bbls/d)                                                            17,028                                         17,331                                           16,994                                         17,067

                                                                                                       COPANO ENERGY, L.L.C. AND SUBSIDIARIES
                                                                                                          UNAUDITED RESULTS OF OPERATIONS

    Capital Expenditures:
                      Maintenance
                      capital
                      expenditures                                                                     $3,798                                         $5,555                                           $6,241                                         $7,601
                      Expansion
                      capital
                      expenditures                                                                    115,562                                         69,382                                          163,925                                        120,901

                     Total capital expenditures                                                      $119,360                                        $74,937                                         $170,166                                       $128,502
                                                                                                     ========                                        =======                                         ========                                       ========

    Operations and maintenance expenses:
                     Texas                                                                            $11,275                                         $8,908                                          $21,893                                        $17,733
                     Oklahoma                                                                           6,962                                          6,794                                           14,943                                         13,013
                     Rocky Mountains                                                                       50                                             61                                               93                                            116

                      Total operations and maintenance
                      expenses                                                                        $18,287                                        $15,763                                          $36,929                                        $30,862
                                                                                                      =======                                        =======                                          =======                                        =======

    (1)                Total segment
                       gross margin
                       is a non-GAAP
                       financial
                       measure.
                       Please read
                       "Unaudited
                       Non-GAAP
                       Financial
                       Measures" for
                       a
                       reconciliation
                       of total
                       segment gross
                       margin to its
                       most directly
                       comparable
                       GAAP measure
                       of operating
                       income.
    (2)                During the
                       three months
                       ended March
                       31, 2012,
                       Copano
                       recorded a
                       $120 million
                       non-cash
                       impairment
                       charge
                       relating to
                       its
                       investments in
                       Bighorn and
                       Fort Union.
    (3)                The following
                       table
                       summarizes the
                       results and
                       volumes
                       associated
                       with our
                       unconsolidated
                       affiliates ($
                       in thousands):
                                                                                                                                                                              Three Months Ended June 30,
                                                                                                                                                                       2012                                             2011
                                                                                                                                                                       ----                                             ----
                                                                                                                                                                    Volume           Equity (Earnings)/Loss                            Volume          Equity (Earnings)/Loss
                                                                                                                                                                    ------           ----------------------                            ------          ----------------------
    Eagle Ford Gathering                                                                                                                                                                                    $(9,846)                                                               $8
         Pipeline throughput                                                                                                       (MMBtu/d)                      252,912                                                                          -
         NGLs produced(a)                                                                                                          (Bbls/d)                        10,169                                                                          -
    Liberty Pipeline Group                                                                                                         (Bbls/d)                        22,379                                     139                                  -                              1
    Webb Duval(b)                                                                                                                  (MMBtu/d)                       63,199                                     (47)                            48,045                            (18)
    Southern Dome                                                                                                                                                                                               (13)                                                             (669)
         Plant inlet                                                                                                               (MMBtu/d)                        7,352                                                                     11,730
         NGLs produced                                                                                                             (Bbls/d)                           249                                                                        432
    Bighorn and Fort Union(c)                                                                                                      (MMBtu/d)                      747,009                                  (2,574)                           533,329                           (615)

                                                                                                                                                                           Six Months Ended June 30,
                                                                                                                                                                     2012                                             2011
                                                                                                                                                                     ----                                             ----
                                                                                                                                                                  Volume           Equity (Earnings)/Loss                            Volume          Equity (Earnings)/Loss
                                                                                                                                                                  ------           ----------------------                            ------          ----------------------
    Eagle Ford Gathering                                                                                                                                                                                 $(11,908)                                                              $38
         Pipeline throughput                                                                                                       (MMBtu/d)                      229,991                                                                          -
         NGLs produced(a)                                                                                                          (Bbls/d)                        10,040                                                                          -
    Liberty Pipeline Group                                                                                                         (Bbls/d)                        17,690                                     274                                  -                              1
    Webb Duval(b)                                                                                                                  (MMBtu/d)                       62,567                                    (190)                            48,744                            184
    Southern Dome                                                                                                                                                                                            (401)                                                           (1,371)
         Plant inlet                                                                                                               (MMBtu/d)                        8,684                                                                     11,457
         NGLs produced                                                                                                             (Bbls/d)                           306                                                                        413
    Bighorn and Fort Union(c)                                                                                                      (MMBtu/d)                      767,188                                 114,711                            557,059                         (1,834)
    ____________________________________
    (a)        Net of NGLs produced at our Houston Central complex
    (b)        Net of intercompany volumes
    (c)        Changes in pipeline throughput at Fort Union did not have a material impact on gross margin because Fort Union received payments for additional volumes under long-term contractual commitments in each of the periods indicated
    (4)            Rocky Mountains segment gross
                   margin includes results from
                   producer services, including
                   volumes purchased for resale,
                   volumes gathered under firm
                   capacity gathering agreements
                   with Fort Union, volumes
                   transported using Copano's firm
                   capacity agreements with
                   Wyoming Interstate Gas Company
                   and compressor rental services
                   provided to Bighorn.
    (5)            Corporate and other includes
                   results attributable to
                   Copano's commodity risk
                   management activities.
    (6)            Plant inlet volumes and NGLs
                   produced represent total
                   volumes processed and produced
                   by the Texas segment at all
                   plants, including plants owned
                   by the Texas segment and plants
                   owned by third parties.
    (7)            "Service throughput" means the
                   volume of natural gas delivered
                   to Copano's 100%-owned
                   processing plants by third-
                   party pipelines plus Copano's
                   "pipeline throughput," which is
                   the volume of natural gas
                   transported or gathered through
                   Copano's pipelines.
    (8)            Plant inlet volumes and NGLs
                   produced represent total
                   volumes processed and produced
                   by the Oklahoma segment at all
                   plants, including plants owned
                   by the Oklahoma segment and
                   plants owned by third parties.

                                                                                                                     COPANO ENERGY, L.L.C. AND SUBSIDIARIES
                                                                                                                      UNAUDITED NON-GAAP FINANCIAL MEASURES

                                                                                 Three Months Ended June 30,                           Six Months Ended June 30,

                                                                                                        2012                                 2011                                 2012                    2011
                                                                                                        ----                                 ----                                 ----                    ----
    Reconciliation of total segment gross margin to operating
     income (loss):                                                                                            (In thousands)
                             Operating income
                             (loss)                                                                  $35,530                                          $20,178                                         $(97,154)                                         $36,530
                             Add:  Operations and
                             maintenance
                             expenses                                                                 18,287                                           15,763                                           36,929                                           30,862
                             Depreciation
                             and
                             amortization                                                             19,062                                           17,363                                           38,150                                           34,232
                            Impairment                                                                     -                                                -                                           28,744                                                -
                             General and
                             administrative
                             expenses                                                                 10,298                                           11,901                                           25,242                                           24,499
                             Taxes other
                             than income                                                               2,110                                            1,397                                            3,476                                            2,527
                             Equity in
                             (earnings)
                             loss from
                             unconsolidated
                             affiliates                                                              (12,437)                                          (1,306)                                         102,291                                           (3,008)
                                                                                                     -------                                           ------                                          -------                                           ------
                             Total segment gross
                             margin                                                                  $72,850                                          $65,296                                         $137,678                                         $125,642

    Reconciliation of EBITDA, adjusted EBITDA and total
     distributable
                             cash flow to net
                             income (loss):
                            Net income (loss)                                                        $21,118                                          $(9,361)                                       $(126,553)                                         $(5,829)
                             Add:  Depreciation
                             and amortization                                                         19,062                                           17,363                                           38,150                                           34,232
                             Interest and
                             other
                             financing
                             costs                                                                    14,602                                           11,454                                           29,026                                           23,370
                             Provision for
                             income taxes                                                                331                                             (140)                                             932                                              771
                                                                                                         ---                                             ----                                              ---                                              ---
                            EBITDA                                                                    55,113                                           19,316                                          (58,445)                                          52,544
                             Add:  Amortization
                             of commodity
                             derivative options                                                        5,039                                            7,357                                           10,078                                           14,627
                             Distributions
                             from
                             unconsolidated
                             affiliates                                                               12,185                                            7,099                                           22,514                                           13,572
                             Loss on
                             refinancing
                             of unsecured
                             debt                                                                          -                                           18,233                                                -                                           18,233
                             Equity-based
                             compensation                                                              1,121                                            4,109                                            4,352                                            7,091
                             Equity in
                             (earnings)
                             loss from
                             unconsolidated
                             affiliates                                                              (12,437)                                          (1,306)                                         102,291                                           (3,008)
                             Unrealized
                             (gain) loss
                             from
                             commodity
                             risk
                             management
                             activities                                                               (4,980)                                             180                                           (4,401)                                            (363)
                            Impairment                                                                     -                                                -                                           28,744                                                -
                             Other non-
                             cash
                             operating
                             items                                                                     2,252                                             (572)                                           3,485                                             (848)
                                                                                                       -----                                             ----                                            -----                                             ----
                            Adjusted EBITDA                                                           58,293                                           54,416                                          108,618                                          101,848
                             Less:  Interest
                             expense                                                                 (14,548)                                         (10,988)                                         (28,781)                                         (22,594)
                             Current income
                             tax expense
                             and other                                                                  (418)                                            (293)                                            (747)                                            (624)
                             Maintenance
                             capital
                             expenditures                                                             (3,798)                                          (5,555)                                          (6,241)                                          (7,601)
                                                                                                      ------                                           ------                                           ------                                           ------
                             Total distributable
                             cash flow(1)                                                            $39,529                                          $37,580                                          $72,849                                          $71,029

                             Actual quarterly
                             distribution                                                            $42,336                                          $38,687

                             Total distributable
                             cash flow coverage                                                           93%                                              97%

                                               (1) Prior to any retained cash reserves established by Copano's Board of Directors

SOURCE Copano Energy, L.L.C.


Source: PR Newswire