Copano Energy Reports Fourth Quarter and Full Year 2012 Results - Updates 2013 Guidance

Copano Energy Reports Fourth Quarter and Full Year 2012 Results - Updates 2013
                                   Guidance

PR Newswire

HOUSTON, Feb. 28, 2013

HOUSTON, Feb.28, 2013 /PRNewswire/ --Copano Energy, L.L.C. (NASDAQ: CPNO)
today announced its financial results for the three months and year ended
December31, 2012 and its updated 2013 guidance.

Fourth Quarter 2012 Highlights:

  oTotal distributable cash flow of $46.2million, a 9% increase from the
    fourth quarter of 2011
  oTotal segment gross margin of $74.3million, a 20% increase from the prior
    year period
  oAdjusted EBITDA of $60.9million, a 6% increase from the prior year period
  oVolumes gathered from the Eagle Ford Shale play averaged 644,000MMBtu/d,
    a 104% increase from the prior year period
  oTexas segment natural gas liquids (NGL) production of over 56,000Bbls/d,
    a 67% increase from the prior year period

2013 Guidance Update:

  oAdjusted EBITDA and Total Distributable Cash Flow unchanged from previous
    guidance
  oCommon unit distribution to remain at $0.575 per quarter due to merger
    agreement with Kinder Morgan Energy Partners (KMP)
  oExpansion capital expenditures to increase to $400 to $450 million
    compared to previous guidance of $250 to $300 million primarily due to
    addition of the DK pipeline loop, a 65-mile, $100 million project to loop
    the DK pipeline from DeWitt County to Copano's Houston Central complex, as
    well as other new capital projects in Texas and Oklahoma

"Our fourth quarter results demonstrate the momentum of our operations and
success of our Eagle Ford strategy, and provided an excellent finish to an
exciting and eventful 2012," said R. Bruce Northcutt, Copano's President and
Chief Executive Officer.

"Our recently announced transaction with Kinder Morgan Energy Partners
positions Copano to continue executing on our strategy as part of a larger,
more diversified company. We look forward to completing the transaction and
moving ahead as part of KMP, which we expect to occur in the third quarter of
2013," Northcutt added.

Fourth Quarter Financial Results

Total distributable cash flow was $46.2million, a 9% increase from the fourth
quarter of 2011, and a 19% decrease from the third quarter of 2012. The
decrease from the third quarter of 2012 was primarily due to the one-time gain
on the sale of the Lake Charles processing plant in the third quarter. The
increase from the prior-year period was primarily due to increased throughput
from the Eagle Ford Shale. These benefits were partially offset by lower NGL
prices and higher operating expenses. Fourth-quarter 2012 total distributable
cash flow represents 100% coverage of the fourth-quarter distribution of
$0.575 per unit, based on common units outstanding on the distribution record
date.

Revenue for the fourth quarter of 2012 increased 12% from the fourth quarter
of 2011 to $396.8million, and increased 8% from the third quarter of 2012.
Total segment gross margin increased 20% from the fourth quarter of 2011 to
$74.3million, and decreased 1% compared to the third quarter of 2012.
Adjusted EBITDA increased 6% from the fourth quarter of 2011 to $60.9million,
and decreased 17% from the third quarter of 2012. The decrease in Adjusted
EBITDA from the third quarter of 2012 was primarily a result of the one-time
gain on the sale of the Lake Charles processing plant in the third quarter.
Net loss to common units was $50.7million for the fourth quarter of 2012
compared to a net loss of $1.2million for the fourth quarter of 2011. The
net loss in the fourth quarter of 2012 includes a $66.3 million non-cash
impairment charge related to Copano's investments in Bighorn Gas Gathering and
Fort Union Gas Gathering.

Corporate and other activities, which include Copano's commodity risk
management efforts, resulted in a loss of $1.2million for the fourth quarter
of 2012, consisting of $5.7million in non-cash amortization expense and
$1.5million of unrealized losses on commodity derivative instruments, offset
by $6.0million of net cash settlements received. Corporate and other
activities for the fourth quarter of 2011 resulted in a $12.5million loss
consisting of $7.5million of non-cash amortization expense, $2.9million of
net cash settlements paid and $2.1million of unrealized mark-to-market losses
on commodity derivative instruments. Corporate and other activities for the
third quarter of 2012 resulted in a $3.7million loss consisting of
$5.9million of non-cash amortization expense and $2.6million of unrealized
losses on commodity derivative instruments, offset by $4.8million of net cash
settlements received.

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 page7 of this
news release.

Current Expansion Projects Update

  oCopano's first 400 MMcf/d cryogenic expansion at its Houston Central
    complex is mechanically complete, and final preparations are underway for
    a projected in-service date late in the first quarter of 2013.
    Additionally, Formosa's fractionation expansion at its Point Comfort
    facility is underway and is expected to be in service in the second
    quarter of 2013. Copano will have 37,500 Bbls/d of fractionation capacity
    at Formosa's facility when the expansion is complete.
  oAn EPA permit application has been submitted and the public review and
    comment period recently ended for the second 400 MMcf/d cryogenic
    expansion at Houston Central. The 2014 cryogenic expansion is supported
    by long-term, fee-based capacity commitments with major producers. When
    the second cryogenic expansion is complete, Copano will have a total of 1
    Bcf/d of highly efficient cryogenic processing capacity at its Houston
    Central complex.
  oConstruction on the 65-mile southwest extension of Copano's wholly-owned
    DK pipeline into McMullen County, Texas is nearing completion, and is
    expected to begin service in the first quarter of 2013.
  oCopano has approved a project to loop approximately 65 miles of its DK
    pipeline from DeWitt County to the Houston Central complex, along the same
    path as the existing DK pipeline. The project is expected to begin
    service in the fourth quarter of 2013 and is projected to cost
    approximately $100 million. The addition of the loop line creates a fuel
    reduction by reallocation of compression and provides increased pipeline
    capacity to serve the processing plant expansions at Houston Central. The
    project is supported by long-term, fee-based capacity commitments.
  oCopano, along with its joint venture partner, Magellan Midstream Partners,
    continues to make progress on the Double Eagle pipeline. The Three Rivers
    Terminal and the mainline between Three Rivers and the Magellan Terminal
    in Corpus Christi will be placed in service in March 2013. The eastern
    leg of the pipeline from Three Rivers to Karnes County is expected to be
    complete in March 2013 and the western leg from Three Rivers to Gardendale
    is scheduled to be complete by the third quarter of 2013.
  oIn Oklahoma, Copano has completed construction of a pipeline connecting
    Copano's Osage and Stroud systems in order to deliver rich Mississippi
    Lime gas gathered on the Osage system to the Paden processing plant,
    providing processing and nitrogen rejection services to producers in the
    Mississippi Lime.
  oIn the Woodbine Shale play in Texas, Copano has leased and is installing a
    10 MMcf/d refrigeration unit, which is expected to begin processing gas
    early in the second quarter of 2013.

Fourth Quarter Operating Results by Segment

Texas

Segment gross margin for Texas increased 12% from the fourth quarter of 2011
to $54.6million. The increase from the prior year period was primarily a
result of volume growth from the Eagle Ford Shale, partially offset by a
decline in leaner gas volumes at the Houston Central complex, which were
displaced to accommodate richer Eagle Ford Gathering fee-based gas volumes.

During the fourth quarter of 2012, Texas segment service throughput volumes
averaged 814,684MMBtu/d of natural gas and were relatively unchanged when
compared to the fourth quarter of 2011. The Texas segment gathered an average
of 518,355MMBtu/d of natural gas, also were relatively unchanged when
compared to the fourth quarter of 2011. Volumes processed at Copano's plants
and third-party plants in Texas averaged 755,395MMBtu/d during the fourth
quarter of 2012, an increase of 5% over the fourth quarter of 2011, primarily
due to higher volumes processed at the Houston Central complex, partially
offset by the volume impact of the sale of the Lake Charles plant in the third
quarter of 2012. Fourth-quarter NGL production averaged 56,434Bbls/d at
Copano-owned plants and third-party plants, an increase of 67% from the fourth
quarter of 2011, reflecting a substantial increase in the NGL content of
volumes and higher recovery rates at the Houston Central complex, and
increased volumes at the Saint Jo plant in the north Barnett Shale Combo play
in north Texas.

Eagle Ford Gathering, Copano's unconsolidated joint venture with Kinder
Morgan, provided gathering services for an average of 406,425MMBtu/d during
the fourth 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 loss (earnings)
from unconsolidated affiliates." For the fourth quarter of 2012, equity
earnings and distributions from Eagle Ford Gathering totaled $13.8million and
$8.3million, respectively.

Oklahoma

Segment gross margin for Oklahoma was $21.2million for the fourth quarter of
2012, a decrease of 17% compared to the fourth quarter of last year. The
year-over-year decrease was due primarily to lower NGL and natural gas prices,
which resulted in a 16% decrease in realized margins on service throughput
compared to the fourth quarter of 2011.

The Oklahoma segment gathered an average of 303,645MMBtu/d of natural gas, a
decrease of 1% compared to the fourth quarter of 2011, due primarily to lower
lean gas volumes from the Woodford Shale. Volumes processed at wholly owned
and third-party plants in Oklahoma increased 2% compared to the fourth quarter
of 2011, averaging 162,057MMBtu/d. Fourth-quarter NGL production at wholly
owned and third-party plants averaged 16,390Bbls/d, a decrease of 6% from the
fourth quarter of 2011 primarily due to some of Copano's plants operating in
ethane rejection during the fourth quarter of 2012.

Rocky Mountains

Segment gross margin for the Rocky Mountains segment was a loss of
$0.2million in the fourth quarter of 2012 compared to a gain of $0.4million
for the fourth quarter of 2011. Rocky Mountains segment gross margin results
do not include the financial results and volumes associated with Copano's
interest in Bighorn and Fort Union, which are accounted for under the equity
method of accounting and shown in Copano's financial statements under "Equity
in loss (earnings) from unconsolidated affiliates."

Average pipeline throughput for Bighorn and Fort Union on a combined basis
increased 7% to 675,662MMBtu/d in the fourth quarter of 2012 as compared to
630,843MMBtu/d in the fourth 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 from these
producers, the increase did not have a material impact on Copano's equity
earnings or distributions. For the fourth quarter of 2012, combined equity
losses for Bighorn and Fort Union totaled $61.2million, which included a
$66.3million non-cash impairment charge, compared to equity earnings of
$3.7million for the same period in 2011. The fourth quarter of 2012 non-cash
impairment charge was primarily the result of a decline in forecasted future
volumes after a major producer in the region disclosed that some of their
current and future production was being abandoned. Combined distributions
from Bighorn and Fort Union totaled $4.4million in the fourth quarter of 2012
compared to $5.8million in the fourth quarter of the previous year.

Year End Financial Results

Revenue for 2012 increased 5% to $1.4billion compared to $1.3billion in
2011. Operating segment gross margin increased 1% to $293.7million in 2012
compared to $292.2million for 2011. Total segment gross margin increased 14%
to $287.1million for 2012 compared to $252.6million for 2011. Adjusted
EBITDA for 2012 was $242.6million compared to $211.3million for 2011. Net
loss was $139.0million for 2012 compared to a net loss of $156.3million for
2011. Net loss for 2012 includes a $215.0million non-cash impairment
charge relating to Copano's Rocky Mountains assets. Net loss for 2011
includes a loss on the refinancing of unsecured debt of $18.2million, a
$170.0million non-cash impairment charge relating to Copano's Rocky Mountains
assets and a $3.4million non-cash impairment charge relating to assets in
south Texas.

Net loss to common units for 2012 after deducting $36.1million of in-kind
preferred unit distributions totaled $175.1million, or $2.39per unit on a
diluted basis, compared to a net loss to common units for 2011 of
$189.0million, or $2.86per unit on a diluted basis, for 2011. Weighted
average diluted units outstanding totaled 73.2million for 2012 as compared to
66.2million for 2011.

Cash Distributions

On January10, 2013, Copano announced its fourth quarter 2012 cash
distribution of $0.575 per unit, or $2.30 per unit on an annualized basis,
which was paid on February14, 2013 to common unitholders of record at the
close of business on January31, 2013. This distribution is unchanged from
the third quarter of 2012.

Updates to 2013 Guidance

Copano announced today the following updates to its forecast for certain
financial items for 2013:

($ in millions)                                 Calendar 2013
                                                Original     Revised
Adjusted EBITDA                                 $300 to $330 No Change
Total distributable cash flow                   $220 to $240 No Change
Common unit distribution growth rate target     7% to 9%     0% ^(2)
^(1)
Quarterly common unit distribution coverage     100% to 115% 110% to 120% ^(2)
target
Fee-based margin ^(3)                           55% to 60%   60% to 65%
Capital expenditures:
 Expansion                                  $250 to $300 $400 to $450 ^(4)
 Maintenance                                $13 to $18   $18 to $23



(1) Based on annualized fourth quarter 2013 declared distribution
    Assumes consummation of Copano's merger with Kinder Morgan in 2013;
(2) pursuant to the merger agreement, Copano is restricted from increasing its
    quarterly distribution above $0.575 per unit
(3) Represents fee-based component of Copano's total segment gross margin and
    its share of gross margin from unconsolidated affiliates
(4) Increase primarily due to addition of the $100 million DK pipeline loop
    project as well as other new capital projects in Texas and Oklahoma



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 and Wyoming. For more information, please visit
http://www.copano.com.

This news 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, crude oil, condensate
and NGLs, and for products derived from these commodities; Copano's ability to
continue to connect new sources of natural gas, crude oil and condensate, and
the NGL content of new gas supplies; the ability of key producers to continue
to drill and successfully complete and connect new natural gas and condensate
volumes and such producers' performance under their contracts with Copano;
Copano's ability to attract and retain key customers and contract with new
customers, and such customers' performance under their contracts with Copano;
Copano's ability to access or construct new pipeline capacity, gas processing
and NGL fractionation and transportation capacity; the availability of local,
intrastate and interstate transportation systems, trucks and other facilities
and services for condensate, natural gas and NGLs; Copano's ability (and the
ability of its third-party service providers) to meet in-service dates, cost
expectations and operating performance standards for construction projects;
Copano's ability to successfully integrate any acquired asset or operations;
Copano's ability to access its revolving credit facility and to obtain
additional financing on acceptable terms; the effectiveness of Copano's
hedging program; general economic conditions; force majeure events such as the
loss of a market or facility downtime; the effects of government regulations
and policies; Copano's ability to complete the proposed merger with Kinder
Morgan; 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. Copano does not undertake to update
any forward-looking statement except as provided by law.

          Carl A. Luna, SVP and CFO

          Copano Energy, L.L.C.

          713-621-9547

Contacts: 

          Jack Lascar/jlascar@dennardlascar.com

          Anne Pearson/apearson@dennardlascar.com

          Dennard-Lascar Associates / 713-529-6600





–financial statements follow –







COPANO ENERGY, L.L.C. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS


                              ThreeMonthsEnded      YearEnded December31,
                              December31,
                              2012       2011        2012         2011
                                (In thousands, except per unit information)
Revenue: ^
   Natural gas sales^       $ 106,521   $ 104,188   $ 360,340    $ 452,726
   Natural gas liquids          225,485     201,934     814,916      723,063
   sales^
   Transportation,
   compression and processing   59,876      38,925      192,270      121,631
   fees^
   Condensate and other         4,914       10,504      50,194       47,803
       Total revenue^         396,796     355,551     1,417,720    1,345,223
Costs and expenses: ^
   Cost of natural gas and      316,046     288,437     1,105,415    1,068,423
   natural gas liquids^(1)
   Transportation ^(1)          6,414       5,023       25,199       24,225
   Operations and               21,772      18,373      77,943       65,326
   maintenance^
   Depreciation and             19,695      18,013      77,104       69,156
   amortization ^
   Impairment                   742         3,409       29,486       8,409
   General and                  11,709      14,150      50,648       48,680
   administrative^
   Taxes other than income      1,933       1,101       7,392        5,130
   Equity in loss (earnings)
   from unconsolidated          47,355      (13,257)    137,088      145,324
   affiliates
   Gain on sale of operating    (225)       -           (9,941)      -
   assets
       Total costs and          425,441     335,249     1,500,334    1,434,673
       expenses^
Operating (loss) income ^      (28,645)    20,302      (82,614)     (89,450)
Other income (expense): ^
   Interest and other           16          29          586          60
   income^
   Loss on refinancing of       -           -           -            (18,233)
   unsecured debt ^
   Interest and other           (12,441)    (12,737)    (55,264)     (47,187)
   financing costs
(Loss) income before income     (41,070)    7,594       (137,292)    (154,810)
taxes
Provision for income taxes      (272)       (341)       (1,678)      (1,502)
Net (loss) income               (41,342)    7,253       (138,970)    (156,312)
Preferred unit distributions    (9,366)     (8,486)     (36,117)     (32,721)
^
Net loss to common units ^    $ (50,708)  $ (1,233)   $ (175,087)  $ (189,033)
Basic and diluted net loss to $ (0.66)    $ (0.02)    $ (2.39)     $ (2.86)
common units
Weighted average number of
common units - basic and        77,210      66,303      73,225       66,169
diluted ^

_________ ^
(1)Exclusive of operations and maintenance and depreciation, amortization and
impairment shown separately below.





COPANO ENERGY, L.L.C. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                      YearEnded December31,
                                                      2012         2011
Cash Flows From Operating Activities:                 (In thousands)
 Net loss                                             $ (138,970)  $ (156,312)
 Adjustments to reconcile net loss to net cash
 provided by operating activities:
       Depreciation and amortization                    77,104       69,156
       Impairment                                       29,486       8,409
       Amortization of debt issue costs                 3,999        3,764
       Equity in loss from unconsolidated affiliates    137,088      145,324
       Distributions from unconsolidated affiliates     43,031       31,623
       Gain on sale of operating assets                 (9,941)      -
       Loss on refinancing of unsecured debt            -            18,233
       Non-cash gain on risk management activities,     (2,996)      (3,523)
       net
       Equity-based compensation                        8,195        11,558
       Deferred tax provision                           295          317
       Other non-cash items, net                        4,870        162
       Changes in assets and liabilities:
              Accounts receivable                       (6,725)      (19,475)
              Prepayments and other current assets      (441)        245
              Risk management activities                10,627       18,343
              Accounts payable                          (6,999)      29,812
              Other current liabilities                 202          (6,404)
                        Net cash provided by            148,825      151,232
                        operating activities
Cash Flows From Investing Activities:
 Additions to property, plant and equipment             (322,251)    (218,929)
 Additions to intangible assets                         (10,389)     (20,698)
 Acquisitions                                           -            (16,084)
 Investments in unconsolidated affiliates               (72,313)     (121,967)
 Distributions from unconsolidated affiliates           4,443        3,848
 Escrow cash                                            -            8
 Proceeds from sale of assets                           24,124       260
 Other, net                                             2,492        (2,752)
                        Net cash used in investing      (373,894)    (376,314)
                        activities
Cash Flows From Financing Activities:
 Proceeds from long-term debt                           530,375      825,000
 Repayment of long-term debt                            (523,000)    (422,665)
 Retirement of unsecured debt                           -            (14,572)
 Deferred financing costs                               (3,540)      (15,783)
 Distributions to unitholders                           (171,586)    (153,062)
 Proceeds from public offering of common units, net
 of underwriting
       discounts and commissions                        405,355      -
 Equity offering costs                                  (15,910)     (5)
 Proceeds from option exercises                         1,331        3,201
                        Net cash provided by            223,025      222,114
                        financing activities
Net decrease in cash and cash equivalents               (2,044)      (2,968)
Cash and cash equivalents, beginning of year            56,962       59,930
Cash and cash equivalents, end of year                $ 54,918     $ 56,962





COPANO ENERGY, L.L.C. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS


                                                 December31,
                                                 2012            2011
                                                   (In thousands, except unit
                                                   information)
ASSETS
Current assets:
  Cash and cash equivalents                      $ 54,918        $  56,962
  Accounts receivable, net                         126,909          119,193
  Risk management assets                           16,183           4,322
  Prepayments and other current assets             5,555            5,114
       Total current assets                        203,565          185,591
Property, plant and equipment, net                 1,372,509        1,103,699
Intangible assets, net                             162,071          192,425
Investments in unconsolidated affiliates           431,447          544,687
Escrow cash                                        1,848            1,848
Risk management assets                             1,881            6,452
Other assets, net                                  26,843           29,895
       Total assets                              $ 2,200,164     $  2,064,597
LIABILITIES AND MEMBERS' CAPITAL
Current liabilities:
  Accounts payable                               $ 162,147       $  155,921
  Accrued capital expenditures                     11,306           7,033
  Accrued interest                                 11,089           8,686
  Accrued tax liability                            1,551            1,182
  Risk management liabilities                      -                3,565
  Other current liabilities                        20,034           15,007
       Total current liabilities                   206,127          191,394
Long term debt (includes $3,124 and $0 bond
premium as of December 31,
  2012 and 2011, respectively)                     1,001,649        994,525
Deferred tax liability                             2,494            2,199
Risk management and other noncurrent               9,618            4,581
liabilities
Commitments and contingencies
Members' capital:
  SeriesA convertible preferred units, no par
  value, 12,897,029 units and 11,684,074units
       issued and outstanding as of December      285,168          285,168
       31, 2012 and 2011, respectively
  Common units, no par value, 78,966,408 units
  and 66,341,458 units issued and
       outstanding as of December 31, 2012 and     1,555,468        1,164,853
       2011, respectively
Paid in capital                                    72,916           62,277
Accumulated deficit                                (935,482)        (624,121)
Accumulated other comprehensive income (loss)      2,206            (16,279)
                                                   980,276          871,898
       Total liabilities and members' capital    $ 2,200,164     $  2,064,597



COPANO ENERGY, L.L.C. AND SUBSIDIARIES

UNAUDITED RESULTS OF OPERATIONS

^
                              ThreeMonthsEnded      YearEnded December31,
                              December31,
                              2012       2011        2012         2011
                              ($ in thousands)
Total segment gross           $ 74,336    $ 62,091    $ 287,106    $ 252,575
margin^(1)
Operations and maintenance      21,772      18,373      77,943       65,326
expenses ^
Depreciation and                19,695      18,013      77,104       69,156
amortization^
Impairment ^                    742         3,409       29,486       8,409
General and administrative      11,709      14,150      50,648       48,680
expenses^
Taxes other than income^      1,933       1,101       7,392        5,130
Equity in loss (earnings)
from unconsolidated             47,355      (13,257)    137,088      145,324
affiliates^(2)(3)
Gain on sale of operating       (225)       -           (9,941)      -
assets ^
Operating (loss)                (28,645)    20,302      (82,614)     (89,450)
income^(2)(3)
Loss on refinancing of          -           -           -            (18,233)
unsecured debt ^
Interest and other financing    (12,425)    (12,708)    (54,678)     (47,127)
costs, net^
Provision for income taxes^   (272)       (341)       (1,678)      (1,502)
Net (loss) income^            (41,342)    7,253       (138,970)    (156,312)
Preferred unit distributions    (9,366)     (8,486)     (36,117)     (32,721)
^
Net loss to common units ^    $ (50,709)  $ (1,233)   $ (175,087)  $ (189,033)
Total segment gross margin: ^
    Texas ^                   $ 54,646    $ 48,752    $ 204,324    $ 184,437
    Oklahoma ^                  21,150      25,457      88,468     $ 105,080
    Rocky Mountains^(4)         (237)       396         932        $ 2,641
    Segment gross margin ^      75,559      74,605      293,724      292,158
    Corporate and other^(5)     (1,223)     (12,514)    (6,618)    $ (39,583)
     Total segment gross      $ 74,336    $ 62,091    $ 287,106    $ 252,575
     margin^(1)
Segment gross margin per
unit: ^
    Texas: ^
     Service throughput       $ 0.73      $ 0.65      $ 0.62       $ 0.70
     ($/MMBtu) ^
    Oklahoma: ^
     Service throughput       $ 0.76      $ 0.90      $ 0.77       $ 1.00
     ($/MMBtu) ^
Volumes: ^
    Texas: ^(6)
     Service throughput         814,684     818,343     895,212      726,944
     (MMBtu/d)^(7)(8)
     Pipeline throughput        518,355     517,439     552,078      456,686
     (MMBtu/d) ^
     Plant inlet volumes        755,395     718,696     811,813      639,194
     (MMBtu/d)^(8)
     NGLs produced              56,434      33,770      48,802       28,736
     (Bbls/d)^(8)
    Oklahoma:^(9)
     Service throughput         303,645     307,346     315,029      287,408
     (MMBtu/d)^(7)(8)
     Plant inlet volumes        162,057     159,344     158,754      155,675
     (MMBtu/d)^(8)
     NGLs produced (Bbls/d) ^   16,390      17,471      16,644       17,498


Capital Expenditures: ^
    Maintenance capital       $ 2,869     $ 2,379     $ 10,853     $ 13,490
    expenditures^
    Expansion capital           88,693      56,227      348,487      259,803
    expenditures^
     Total capital            $ 91,562    $ 58,606    $ 359,340    $ 273,293
     expenditures^
Operations and maintenance
expenses: ^
    Texas^                  $ 13,911    $ 11,284    $ 47,352     $ 38,099
    Oklahoma ^                  7,742       7,039       30,334       26,982
    Rocky Mountains^          119         50          257          245
     Total operations and     $ 21,772    $ 18,373    $ 77,943     $ 65,326
     maintenance expenses ^



    Total segment gross margin is a non-GAAP financial measure. Please read
(1) Unaudited Non-GAAP Financial Measures" for a reconciliation of total
    segment gross margin to its most directly comparable GAAP measure of
    operating income.
    During the three months ended March31, 2012 and December31, 2012, Copano
(2) recorded a $120million and $66.3million non-cash impairment charge,
    respectively, relating to its investments in Bighorn and Fort Union.
(3) The following table summarizes the results and volumes associated with
    Copano's unconsolidated affiliates ($ in thousands):

                              Three Months Ended December31,
                              2012                     2011
                              Volume  Equity           Volume  Equity
                                      (Earnings)/Loss          (Earnings)/Loss
Eagle Ford                            $ (13,837)               $ (9,240)
Gathering
 Pipeline       (MMBtu/d) 406,425                  145,551
throughput
 NGLs           (Bbls/d)  17,450                   6,735
produced^(a)
Liberty Pipeline    (Bbls/d)  27,558  131              4,946   211
Group
Webb Duval^(b)      (MMBtu/d) 48,437  15               61,411  (111)
Southern Dome                         (411)                    (393)
 Plant inlet    (MMBtu/d) 12,095                   10,287
 NGLs produced  (Bbls/d)  417                      358
Bighorn and Fort    (MMBtu/d) 675,662 61,186           630,843 (3,710)
Union^(c)
                              Year Ended December31,
                              2012                     2011
                              Volume  Equity           Volume  Equity
                                      (Earnings)/Loss          (Earnings)/Loss
Eagle Ford                            $ (34,919)               $ (11,218)
Gathering
 Pipeline       (MMBtu/d) 296,965                  46,456
throughput^(d)
 NGLs produced  (Bbls/d)  12,528                   1,698
Liberty Pipeline    (Bbls/d)  22,029  442              1,876   270
Group^(e)
Webb Duval^(b)      (MMBtu/d) 56,732  (240)            51,907  146
Southern Dome                         (1,104)                  (2,415)
 Plant inlet    (MMBtu/d) 9,961                    11,292
 NGLs produced  (Bbls/d)  351                      403
Bighorn and Fort    (MMBtu/d) 726,026 172,926          604,261 158,592
Union^(c)



(a)  Net of NGLs produced at Copano's Houston Central complex.
(b)  Net of intercompany volumes.
     Changes in pipeline throughput at Fort Union did not have a material
(c) impact on gross margin because Fort Union received payments for
     additional volumes under long-term contractual commitments in each of the
     periods indicated.
     For year ended December 31, 2011, the volume has been recast from 110,827
(d)  MMBtu/d, as previously stated, to show daily flow averaged over the 365
     days instead of the 153 days of physical flow.
     For the year ended December 31, 2011, the volume has been recast from
(e)  4,597 Bbls/d, as previously stated, to show daily flow averaged over the
     365 days instead of the 149 days of physical flow.



    Rocky Mountains segment gross margin includes results from producer
    services, including volumes purchased for resale, volumes gathered under
(4) 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.
    Plant inlet volumes and NGLs produced represent total volumes processed
(6) and produced by the Texas segment at all plants, including plants owned by
    the Texas segment and plants owned by third parties.
    "Service throughput" means the volume of natural gas delivered to
(7) 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.
    Volumes for the three months and year ended December31, 2011 have been
(8) recast from the following results to reflect daily flow averaged over the
    92 and 365 day periods instead of the actual days of physical flow.





                              Three Months Ended Year Ended

                              December31, 2011  December31, 2011
Texas
Service throughput (MMBtu/d)  844,469            795,497
Plant inlet volumes (MMBtu/d) 803,282            758,588
NGLs produced (Bbls/d)        33,951             29,147
Oklahoma
Service throughput (MMBtu/d)  N/A                291,532
Plant inlet volumes (MMBtu/d) N/A                160,406



    Plant inlet volumes and NGLs produced represent total volumes processed
(9) 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 MonthsEnded      Three Months
                       December31,            Ended          YearEnded December31,
                                               September30,
                       2012       2011        2012           2012         2011
                       (In thousands)
Reconciliation of
total segment gross
margin to operating
(loss) income: ^
 Operating (loss)      $ (28,645)  $ 20,302    $   43,185     $ (82,614)   $ (89,450)
 income
        Operations and
 Add: maintenance      21,772      18,373        19,242       77,943       65,326
        expenses
        Depreciation
        and              19,695      18,013        19,259       77,104       69,156
        amortization ^
        Impairment ^     742         3,409         -            29,486       8,409
        General and
        administrative   11,709      14,150        13,697       50,648       48,680
        expenses
        Taxes other      1,933       1,101         1,983        7,392        5,130
        than income
        Equity in loss
        (earnings)
        from             47,355      (13,257)      (12,558)     137,088      145,324
        unconsolidated
        affiliates
        Gain on sale
        of operating     (225)       -             (9,716)      (9,941)      -
        assets ^
Total segment gross    $ 74,336    $ 62,091    $   75,092     $ 287,106    $ 252,575
margin^
Reconciliation of
EBITDA, adjusted
EBITDA and total
distributable cash ^
 flow to net (loss)
 income: ^
 Net (loss) income^  $ (41,342)  $ 7,253     $   28,925     $ (138,970)  $ (156,312)
        Depreciation
 Add: and              19,695      18,013        19,259       77,104       69,156
        amortization
        Interest and
        other            12,441      12,737        13,797       55,264       47,187
        financing
        costs
        Provision for    272         341           474          1,678        1,502
        income taxes
EBITDA                   (8,934)     38,344        62,455       (4,924)      (38,467)
        Amortization
 Add: of commodity     5,755       7,448         5,924        21,757       29,517
        derivative
        options^
        Distributions
        from             12,967      15,142        11,994       47,475       35,471
        unconsolidated
        affiliates^
        Loss on
        refinancing of   -           -             -            -            18,233
        unsecured debt
        ^
        Equity-based     2,999       4,081         3,223        10,574       13,265
        compensation
        Equity in loss
        (earnings)
        from             47,355      (13,257)      (12,558)     137,088      145,324
        unconsolidated
        affiliates
        Unrealized
        loss (gain)
        from commodity   1,485       2,145         2,583        (333)        (550)
        risk
        management
        activities ^
        Impairment ^     742         3,409         -            29,486       8,409
        Other non-cash
        operating        (1,433)     390           (591)        1,461        118
        items ^
Adjusted EBITDA^       60,936      57,702        73,030       242,584      211,320
        Cash interest
 Less:  and other        (11,652)    (12,772)      (13,745)     (54,178)     (46,395)
        financing
        costs
        Provision for
        income taxes     (217)       (278)         (419)        (1,383)      (1,207)
        and other ^
        Maintenance
        capital          (2,869)     (2,379)       (1,743)      (10,853)     (13,490)
        expenditures
Total distributable    $ 46,198    $ 42,273    $   57,123     $ 176,170    $ 150,228
cash flow ^(1)
Actual quarterly       $ 46,108    $ 42,064
distribution
Total distributable      100%        101%
cash flow coverage
__________ ^
(1) Prior to any retained cash reserves established by Copano's Board of
Directors.



SOURCE Copano Energy, L.L.C.

Website: http://www.copano.com