1209821--2/29/2008--CROSSTEX_ENERGY

related topics

{operation, natural, condition}

{gas, price, oil}

{investment, property, distribution}

{debt, indebtedness, cash}

{stock, price, operating}

{customer, product, revenue}

{loss, insurance, financial}

{acquisition, growth, future}

{cost, regulation, environmental}

{regulation, change, law}

Our cash flow consists almost exclusively of distributions from Crosstex Energy, L.P. We are largely prohibited from engaging in activities that compete with the Partnership. In our corporate charter, we have renounced business opportunities that may be pursued by the Partnership or by affiliated stockholders that hold a majority of our common stock. Although we control the Partnership, the general partner owes fiduciary duties to the Partnership and the unitholders. If the general partner is not fully reimbursed or indemnified for obligations and liabilities it incurs in managing the business and affairs of the Partnership, its value, and therefore the value of our common stock, could decline. Acquisitions in the Partnership typically increase debt and subject it to other substantial risks, which could adversely affect results of operations. The Partnership is vulnerable to operational, regulatory and other risks associated with its assets including, with respect to its south Louisiana and the Gulf of Mexico assets, the effects of adverse weather conditions such as hurricanes, because a significant portion of its assets are located in south Louisiana. The Partnership s profitability is dependent upon prices and market demand for natural gas and NGLs, which are beyond its control and have been volatile. The Partnership must continually compete for natural gas supplies, and any decrease in its supplies of natural gas could adversely affect its financial condition and results of operations. A substantial portion of the Partnership s assets are connected to natural gas reserves that will decline over time, and the cash flows associated with those assets will decline accordingly. Growing the Partnership s business by constructing new pipelines and processing and treating facilities subjects the Partnership to construction risks, risks that natural gas supplies will not be available upon completion of the facilities and risks of construction delay and additional costs due to obtaining rights-of-way. The Partnership has limited control over the development of certain assets because it is not the operator. The Partnership expects to encounter significant competition in any new geographic areas into which it seeks to expand and the ability to enter such markets may be limited. The Partnership is exposed to the credit risk of customers and counterparties, and a general increase in the nonpayment and nonperformance by its customers could have an adverse effect on its financial condition and results of operations. The Partnership may not be able to retain existing customers or acquire new customers, which would reduce revenues and limit future profitability. The Partnership depends on certain key customers, and the loss of any of its key customers could adversely affect its financial results. The Partnership s business involves many hazards and operational risks, some of which may not be fully covered by insurance. The threat of terrorist attacks has resulted in increased costs, and future war or risk of war may adversely impact the Partnership s results of operations and its ability to raise capital. Federal, state or local regulatory measures could adversely affect the Partnership s business. The Partnership s business involves hazardous substances and may be adversely affected by environmental regulation.

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1209821--2/29/2008--CROSSTEX_ENERGY_INC