Enterprise Acquires South Texas Gathering Assets

Enterprise Products Partners L.P.

Enterprise Products Partners L.P. said that it has acquired natural gas gathering systems and related gathering and processing contracts from Cerrito Gathering Co., Ltd. an affiliate of San Antonio-based Lewis Energy Group, L.P. The total consideration paid of $325 million included $146.2 million in cash and approximately 7.1 million Enterprise common units. Enterprise expects the acquisition to be immediately accretive to distributable cash flow per unit for its limited partners.

The Cerrito gathering systems, located near Laredo in South Texas, comprise approximately 484 miles of pipeline (including approximately 172 miles of pipe currently under lease from Enterprise) and 31,000 horsepower compression. They are connected to more than 1,450 wells with an aggregate volume of more than 100 million cubic feet per day (MMcf/d) of rich natural gas sourced from the Olmos and Wilcox trends in South Texas. Volumes currently gathered by the Cerrito systems are delivered into Enterprise's South Texas pipeline infrastructure.

According to Enterprise, the gathering systems will be supported by a long-term dedication from Lewis Energy Group for its production from the Olmos formation; the Olmos accounts for approximately 45% of current rich gas production and existing contracts with third-party producers, which comprise approximately 55% of current throughput. Lewis has approximately 335,000 acres of land for development in the area, with plans to drill 130 new wells in 2006 and up to 1,000 new wells in the future.

Cerrito has experienced significant growth in recent years, with volumes increasing by more than 30 percent in 2005 compared to 2004 and by 91 percent since 2002. In addition to the natural gas gathering and processing dedication, the transaction also includes a long-term dedication to transport lean gas gathered and treated at Lewis's Big Reef Treating facility. Big Reef will gather and treat growing sour gas production from the southern portion of the Edwards Trend of South Texas. Current volumes are approximately 20 MMcf/d with the potential to grow to 75 MMcf/d over the next few years.

In addition to Lewis Energy Group, there are more than 35 small to large exploration companies that have active development programs in the area. Future rich-gas production growth is expected from the Olmos, Wilcox, Austin Chalk, and other deeper, potentially productive horizons. Lewis has also made a long-term dedication of its future potential production from any of these deeper production horizons to the newly acquired system. In total, it is estimated that there is approximately 1.5 trillion cubic feet of recoverable natural gas reserves in the regions served by the Cerrito gathering systems.

“The addition of the Cerrito gas gathering systems will extend our integrated energy value chain in South Texas and broaden our extensive natural gas franchise in Texas while allowing us to provide quality energy solutions for our customers,” said Robert G. Phillips, Enterprise’s president and CEO. “The Cerrito gathering systems are well-managed, high-quality assets that generate stable, fee-based cash flows with low maintenance capital expenditure requirements. Importantly, the consolidation of the Cerrito assets with our existing system ensures a continuing and growing supply of rich natural gas production for our Texas processing plants and natural gas liquids for our liquids pipelines and fractionators, and provides another long-term source of expansion opportunities as producers develop the hydrocarbon resources in this attractive area.”

Enterprise has the largest natural gas pipeline system in Texas, with more than 8,200 miles of pipe that access major supply basins in North Texas (Barnett Shale), East Texas (Bossier), South Texas (Wilcox and Vicksburg), and West Texas (Permian). It is also connected to all major Texas markets, including the cities of San Antonio, Austin, Dallas Fort Worth, Beaumont, Corpus Christi, Houston and the Houston Ship Channel area, as well as 19 natural gas-fired power plants. Enterprise has 10 natural gas processing plants in Texas with the capacity to process 2 billion cubic feet per day of natural gas.

Enterprise Products Partners L.P. is one of the largest publicly traded energy partnerships, with an enterprise value of approximately $15 billion. It is a leading North American provider of midstream energy services to producers and consumers of natural gas, NGLs, and crude oil. Enterprise transports natural gas, NGLs, and crude oil through approximately 33,100 miles of onshore and offshore pipelines and is an industry leader in the development of midstream infrastructure in the United States and the Gulf of Mexico. Services include natural gas transportation, gathering, processing, and storage; NGL fractionation (or separation), transportation, storage, and import and export terminaling; crude oil transportation; and offshore production platform services.