1239454--3/17/2006--EL_PASO_EXPLORATION_&_PRODUCTION

related topics

{gas, price, oil}

{financial, litigation, operation}

{cost, regulation, environmental}

{cost, contract, operation}

{acquisition, growth, future}

{operation, natural, condition}

{loss, insurance, financial}

{debt, indebtedness, cash}

Our use of hedging arrangements may adversely affect our future results of operations or liquidity. Estimating our reserves, production and future net cash flow is difficult. The success of our business depends upon our ability to replace reserves that we produce. The success of our business is dependent, in part, on factors that are beyond our control. We face competition from third parties to acquire and develop reserves. Our natural gas and oil drilling and producing operations involve many risks and may not be profitable. Our drilling operations may be delayed or canceled as a result of factors beyond our control, resulting in significant costs to us. We are vulnerable to risks associated with operating in the Gulf of Mexico. Our growth may be dependent upon successful acquisitions which are subject to many uncertainties and could subject us to significant unknown liabilities. Risks Related to Legal and Regulatory Matters Ongoing litigation and investigations related to the restatement of our financial statements associated with our reserve estimates could significantly adversely affect our business. We are subject to complex laws and regulations, including environmental and safety regulations that can negatively affect the cost, manner or feasibility of doing business. Environmental compliance and remediation costs and the costs of environmental liabilities could exceed our estimates. Risks Related to Our Affiliation with El Paso We are a wholly-owned direct subsidiary of El Paso and its financial condition and business strategy subjects us to potential risks that are beyond our control.

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1239454--3/17/2006--EL_PASO_EXPLORATION_&_PRODUCTION_CO