1163675--3/16/2006--HANOVER_COMPRESSION

related topics

{debt, indebtedness, cash}

{cost, regulation, environmental}

{operation, international, foreign}

{customer, product, revenue}

{acquisition, growth, future}

{competitive, industry, competition}

{system, service, information}

{personnel, key, retain}

{gas, price, oil}

{control, financial, internal}

We will need to generate a significant amount of cash to service our debt, to fund working capital and to pay our debts as they come due. The documents governing our outstanding debt, including our compression equipment lease obligations, contain financial and other restrictive covenants. Failing to comply with those covenants could result in an event of default which, if not cured or waived, could have a material adverse effect on us. We have significant leverage relative to our total capitalization, which could result in a downgrade in our credit rating or other adverse consequences if we do not reduce our leverage. We are still in the process of improving our infrastructure capabilities, including our internal controls and procedures, which were strained by our rapid growth, to reduce the risk of future accounting and financial reporting problems. Unforeseen difficulties with the implementation or operation of our enterprise resource planning system could adversely affect our internal controls and our business. We require a substantial amount of capital to expand our compressor rental fleet and our complementary businesses. Our ability to substitute compression equipment under our compression equipment leases is limited and there are risks associated with reaching that limit prior to the expiration of the lease term. A prolonged, substantial reduction in oil or gas prices, or prolonged instability in U.S. or global energy markets, could adversely affect our business. There are many risks associated with conducting operations in international markets. Fluctuations in currency exchange rates in Italy, Argentina and Venezuela could adversely affect our business. Many of our compressor leases with customers have short initial terms, and we cannot be sure that the leases for these rental compressors will be renewed after the end of the initial lease term. We operate in a highly competitive industry. Natural gas operations entail inherent risks that may result in substantial liability to us. Our ability to manage our business effectively will be weakened if we lose key personnel. Our business is subject to a variety of governmental regulations. Our business has acquired facilities in the past, which could subject us to future environmental liabilities.

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1163675--3/16/2006--HANOVER_COMPRESSION_LP