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El Paso Energy Partners announces net income up 70 percent to $28.7 million and cash flow up 92 percent to $70.9 million

HOUSTON, July 30, 2002 — El Paso Energy Partners L.P. reported second quarter 2002 net income of $28.7 million ($0.33 per unit), up 70 percent from $16.9 million ($0.19 per unit), excluding one-time charges in the second quarter of 2001.

Including one-time charges of $5.1 million, net income for the 2001 quarter was $11.8 million ($0.04 per unit). The charges were primarily related to the sale of EPN’s interest in the UTOS pipeline.

Second quarter 2002 cash flow as measured by adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) increased 92 percent to $70.9 million compared with $36.9 million in the second quarter of 2001. The surge in cash flow was attributable to our growing Natural Gas Pipelines and Plants segment, which includes the Texas and offshore natural gas pipeline systems.

“We are pleased to report our seventh consecutive quarter of record cash flows,” said Robert G. Phillips, chief executive officer of EPN. “These excellent results are directly attributable to our $750-million acquisition of Texas and New Mexico natural gas midstream assets, which generated $29 million of cash flow during the quarter, exceeding our expectations. These results, coupled with the recently announced new transportation contracts on the Texas system, further demonstrate our proven track record of successfully completing accretive acquisitions and managing those assets for maximum financial performance.”

“Continuing our strong growth in cash flow into 2003, we recently announced that we are acquiring the San Juan Basin gathering system and other assets from El Paso Corporation (NYSE: EP – News). These assets are a perfect fit for EPN and meet our strict criteria for accretive long-term cash flows. We are also acquiring the Typhoon offshore oil and gas gathering pipelines and natural gas liquids (NGL) transportation assets in South Texas, which are highly synergistic with our existing fractionation and storage assets,” Phillips continued.

“In addition, prospects to expand our considerable greenfield project base have never been better. Demand for transportation and platform services has remained strong, driven by the development of numerous discoveries in the Deepwater Trend of the Gulf of Mexico. Our expertise in this area is attracting significant new opportunities. We are excited about our continuing success in the Deepwater and are making excellent progress on our existing projects including the Marco Polo and Falcon Nest production platforms, the Medusa natural gas pipeline, and our Cameron Highway Oil Pipeline System,” concluded Phillips.

On July 18, 2002, EPN declared a cash distribution of $0.65 per common unit payable August 15, 2002 to unitholders of record at the close of business on July 31, 2002. This represents an annualized distribution of $2.60 per year and an increase of 13 percent over the $0.575 paid in August 2001. On July 25, 2002, EPN announced that it will increase its distribution payable in November 2002, to an annualized rate of $2.70 per unit.

As part of the April 2002, $750-million transaction to acquire Texas and New Mexico natural gas assets, EPN sold the Prince platform and overriding royalty interest. As prescribed by generally accepted accounting principles, current and historical earnings from these assets are presented as discontinued operations.

Segment results

Natural Gas Pipelines and Plants cash flow was $47.1 million in the 2002 second quarter, more than four times the $11.4 million reported for the 2001 quarter. The increase is primarily due to the acquisition of Texas and New Mexico natural gas assets that was completed in April 2002. Also contributing to the increase were assets acquired in October 2001 including the Chaco processing plant and the 50-percent interest that EPN did not already own in the High Island Offshore System (HIOS) and East Breaks Gathering System. Volumes were 6,451 thousand dekatherms per day (Mdth/d) for the 2002 quarter compared with 2,235 Mdth/d in the 2001 quarter.

The increase in volumes was due to the addition of new assets since the second quarter of 2001, partially offset by lower HIOS volumes, which fluctuate with drilling activity in the Outer Continental Shelf area of the Gulf of Mexico. During the quarter EPN entered into three new transportation and storage contracts on its 9,400-mile EPGT Texas intrastate system totaling 246 billion cubic feet of natural gas capacity per year. Each of these contracts represents accretive cash flow to EPN.

Oil and NGL Logistics, which includes our oil pipelines and NGL transportation, fractionation, and storage assets, generated cash flow of $12.1 million compared with $13.4 million in the 2001 second quarter. Operating volumes were 240,184 barrels per day (Bbls/d) in the second quarter of 2002 compared with 248,825 Bbls/d in the second quarter of 2001. Higher volumes and cash flow contributions from EPN Texas and our Allegheny Oil Pipeline were offset by lower volumes and contributions from EPN’s 36-percent-owned Poseidon Oil Pipeline. Positive contributions were also made by our recently acquired NGL storage operations in Louisiana and Mississippi.

During the quarter, progress continued on EPN’s 380-mile Cameron Highway Oil Pipeline System, which the partnership will build and operate. The 500,000-Bbl/d pipeline will transport oil from the Atlantis, Holstein, and Mad Dog developments, as well as other fields in the central and western Deepwater Trend, to the major oil market areas of Port Arthur and Texas City, Texas. The partnership estimates that construction of this pipeline system will be completed during the second half of 2004.

Natural Gas Storage cash flow for the second quarter of 2002 was $2.1 million compared with $3.8 million in the second quarter of 2001, reflecting less interruptible storage activity at EPN’s Mississippi salt dome storage caverns.

Expansion of the Petal natural gas storage facility and the 60-mile takeaway pipeline with interconnects to the Southern Natural Gas and Destin pipeline systems were completed during the quarter, and EPN commenced storage services to Southern Company (NYSE: SO – News) on July 1, 2002. EPN estimates that revenues generated by its new services to Southern Company will add $7 million of cash flow during the remainder of 2002 and $16 million annually thereafter.

Platform Services cash flow was $7.4 million in the 2002 second quarter compared with $6.3 million in the 2001 period. During the quarter EPN signed definitive agreements for two new Platform Services projects. First, EPN and Cal Dive International (Nasdaq: CDIS – News) will jointly develop a platform for Anadarko Petroleum Corporation’s (NYSE: APC – News) Marco Polo discovery with installation anticipated to occur in the third quarter of 2003. Second, EPN will build and operate the Falcon Nest platform and related facilities for Pioneer Natural Resources Company’s (NYSE: PXD – News) Falcon field discovery with operations expected to begin in the first quarter of 2003.

Other Segment cash flow for the second quarter of 2002 was $2.2 million versus $2.0 million in the 2001 period. This cash flow includes the $2.25-million quarterly payment from El Paso Corporation related to EPN asset sales in 2001, oil and gas production activities, which the partnership is continuing to de-emphasize, and other non-segment related cash flow and expenses.

El Paso Energy Partners, L.P. is one of the largest publicly traded master limited partnerships with interests in a diversified set of midstream assets, including onshore and offshore natural gas and oil pipelines; offshore production platforms; natural gas storage and processing facilities, and natural gas liquids fractionation, transportation, storage and terminalling assets. Visit El Paso Energy Partners on the Web at www.elpasopartners.com .