to our Providence terminal inspection and reduced demand as a result of an early spring and warmer
weather;
• $122.7 million increase primarily attributable to higher commodity prices, which impact both sales and
purchases, and an increase in NGL production, partially offset by changes in contract mix, increased
fuel consumption, differences in gas quality, the impact of volume curtailments due to plant shutdowns
and producer wellhead freeze offs as a result of near record cold weather at East Texas and North
Louisiana in the first quarter, as well as a decrease in natural gas sales volumes across certain assets.
2009 results include the first quarter impact of a third party owned pipeline rupture, resulting in a fire at
East Texas and our Wyoming pipeline integrity and system enhancement project;
• $57.3 million increase related to commodity derivative activity. This increase includes a decrease in
unrealized losses of $77.5 million due to movements in forward prices of commodities, partially offset
by a decrease in realized cash settlement gains of $20.2 million due to generally higher average prices of
commodities in 2010; and
• $20.1 million increase in transportation, processing and other revenue, which represents our fee-based
revenues, primarily as a result of increased throughput volumes due to our Michigan and Wattenberg
acquisitions, our acquisition of an additional 50% interest in Black Lake, our organic growth project in
the Piceance Basin, as well as the renegotiation of commodity sensitive contracts to fee-based contracts.
Gross Margin
— Gross margin increased in 2010 compared to 2009, primarily as a result of the following:
• $85.4 million increase for our Natural Gas Services segment, primarily related to commodity derivative
activity as explained in the operating revenue section above, higher commodity prices, increased
fee-based throughput volumes resulting from the Michigan acquisition, our organic growth project in
the Piceance Basin and the renegotiation of commodity sensitive contracts to fee-based contracts,
partially offset by reduced natural gas basis spreads, increased fuel consumption, decreased natural gas
volumes and differences in gas quality across certain of our assets, as well as the impact of volume
curtailments due to plant shutdowns and producer wellhead freeze offs as a result of near record cold
weather at East Texas and North Louisiana in the first quarter. 2009 results include the first quarter
impact of a third party owned pipeline rupture, resulting in a fire at East Texas and operational
downtime; and
• $5.3 million increase for our NGL Logistics segment as a result of higher volumes from our Wattenberg
pipeline acquisition and our acquisition of an additional 50% interest in Black Lake.
These increases were partially offset by:
• $20.0 million decrease for our Wholesale Propane Logistics segment. 2010 results reflect a planned
outage related to our Providence terminal inspection and reduced demand as a result of an early spring
and warmer weather. 2009 results reflect increased spot sales volumes and significantly higher per unit
margins, approximately $6.0 million of which was attributable to the sale of inventory that was written
down at the end of the fourth quarter of 2008.
Operating and Maintenance Expense
— Operating and maintenance expense increased in 2010 compared
to 2009 primarily as a result of our Michigan acquisition and integration costs, turnaround activities at certain
assets, our Wattenberg pipeline acquisition and our acquisition of an additional 50% interest in Black Lake.
Depreciation and Amortization Expense
— Depreciation and amortization expense increased in 2010
compared to 2009, primarily as a result of our capital projects completed in 2009, our Michigan acquisition, our
Atlantic Energy acquisition, our Wattenberg pipeline acquisition and our acquisition of an additional 50%
interest in Black Lake.
Step acquisition — equity interest re-measurement gain
— Step acquisition — equity interest
re-measurement gain results from our acquisition of an additional 50% interest in Black Lake, bringing our
ownership interest in Black Lake to 100% in our NGL Logistics segment. Prior to our acquisition of an
additional 50% interest in Black Lake, we accounted for Black Lake under the equity method of accounting.
Subsequent to this transaction we account for Black Lake as a consolidated subsidiary. As a result of acquiring
an additional 50% interest in Black Lake, we remeasured our initial 50% equity interest in Black Lake to its fair
value, and recognized a gain of $9.1 million.
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