"We are pleased with our second quarter 2009 results in light of the challenging comparison with the prior year period when quarterly average crude oil and natural gas liquids prices reached record levels," said John Eckel, Copano Energy's Chairman and Chief Executive Officer. "During the second quarter 2009, processed gas volumes for Copano and its unconsolidated affiliates grew by 2% sequentially from the prior quarter. Unprocessed gas volumes fell 5% partly reflecting seasonal factors, and overall volumes fell 3%. As a result of increased unit margins, segment gross margin for our operating segments increased 17% from the first quarter of 2009. The results also reflect the progress of our continuing cost control efforts," Mr. Eckel added.

Second Quarter Financial Results

Revenue for the second quarter of 2009 decreased 60% to $202.9 million compared with $501.3 million for the second quarter of 2008. Total segment gross margin decreased 26% to $53.4 million for the second quarter of 2009, from $72.1 million for the same period a year ago.

Adjusted EBITDA for the second quarter of 2009 decreased 32% to $39.0 million compared with $57.4 million for the second quarter of 2008. Adjusted EBITDA is earnings before interest, taxes, depreciation and amortization, adjusted to include Copano's share of depreciation, amortization and interest costs attributable to its unconsolidated affiliates. Non-cash charges incurred during the second quarter of 2009 that were not added back in determining adjusted EBITDA include amortization expense of $9.3 million related to the option component of Copano's risk management portfolio.

Total distributable cash flow for the second quarter of 2009, which includes amortization expense related to the option component of Copano's risk management portfolio, totaled $32.9 million compared to $49.0 million for the second quarter of 2008. Second quarter 2009 total distributable cash flow represents 103% coverage of the second quarter 2009 distribution of $0.575 per unit. During the second quarter of 2009, Copano did not repurchase any of its unsecured notes whereas in the prior two quarters, Copano recognized gains of $3.9 million and $15.3 million, respectively, from unsecured note repurchases.

Net income decreased by 74% to $6.0 million, or $0.10 per unit on a diluted basis, for the second quarter of 2009 compared to net income of $23.2 million, or $0.40 per unit on a diluted basis, for the second quarter of 2008. The major drivers of Copano's net income for the second quarter of 2009 compared to the second quarter of 2008 included:

   --  a decrease in total segment gross margin of $18.7 million consisting       of a $46.9 million decrease in operating segment gross margins       primarily reflecting average NGL price declines of 59% in the Conway       index and 57% in the Mt. Belvieu index and lower overall service       throughput volumes, offset by an increase of $28.2 million from       Copano's commodity risk management activities;   --  a decrease of $2.7 million in equity in earnings of unconsolidated       affiliates; and    --  an increase in depreciation and amortization expenses of $1.0 million       primarily related to expanded operations in north Texas;     offset by:   --  a decrease of $4.1 million in interest expense as a result of (i) a       decrease of noncash mark-to-market charges on interest rate swaps of       $5.4 million offset by (ii) an increase in interest expense of $1.3       million as a result of increased average outstanding borrowings       slightly offset by lower average interest rates between the periods;       and    --  a decrease in general and administrative expenses of $1.6 million       primarily related to successful cost reduction efforts, including       reduced employee compensation expense and third-party service provider       fees.    

Weighted average diluted units decreased slightly to 57.9 million for the second quarter of 2009 compared with 58.0 million for the same period in 2008.

Segment gross margin, total segment gross margin, EBITDA, adjusted EBITDA and total distributable cash flow are non-GAAP financial measures that are defined and reconciled to the most directly comparable GAAP measures at the end of this news release.

Second Quarter Operating Results by Segment

Copano manages its business in three geographical operating segments: Oklahoma, Texas and the Rocky Mountains.

Oklahoma

The Oklahoma segment provides midstream natural gas services in central and east Oklahoma and owns a crude oil pipeline located in south Oklahoma and north Texas.

During the second quarter of 2009, segment gross margin for the Oklahoma segment decreased 61% to $18.6 million compared to $47.9 million for the second quarter of 2008. The decrease resulted primarily from a 67% decline in realized margins on service throughput from the second quarter of 2008 ($0.76 per MMBtu in 2009 compared with $2.30 per MMBtu in 2008), reflecting lower NGL and natural gas prices. During the second quarter of 2009, NGL prices based on Conway index prices and Copano's weighted average product production mix averaged $25.57 per barrel compared with $62.27 per barrel during the second quarter of 2008, a decrease of $36.70, or 59%. During the second quarter of 2009, natural gas prices based on CenterPoint East index prices averaged $2.70 per MMBtu compared with $9.26 per MMBtu during the second quarter of 2008, a decrease of $6.56, or 71%.

The decrease in segment gross margin for the Oklahoma segment was partially offset by increased service throughput and processing volumes. The Oklahoma segment gathered an average of 267,576 MMBtu/d of natural gas, processed an average of 166,846 MMBtu/d of natural gas and produced an average of 15,981 Bbls/d of NGLs at its plants and third-party plants during the second quarter of 2009, representing increases of 17%, 7% and 3%, respectively, compared with the second quarter of 2008. During the second quarter of 2008, the Oklahoma segment gathered an average of 228,941 MMBtu/d of natural gas, processed an average of 155,430 MMBtu/d of natural gas and produced an average of 15,465 Bbls/d of NGLs.

Texas

The Texas segment provides midstream natural gas services in Texas and also owns a processing plant in southwest Louisiana.

Segment gross margin for the Texas segment decreased approximately 42% in the second quarter of 2009 to $23.3 million compared to $40.5 million for the second quarter of 2008. The decrease resulted primarily from a 36% decline in realized margins on service throughput from the second quarter of 2008 ($0.41 per MMBtu in 2009 compared with $0.64 per MMBtu in 2008), reflecting lower NGL prices. During the second quarter of 2009, NGL prices based on Mt. Belvieu index prices and Copano's weighted average product production mix averaged $30.09 per barrel compared with $69.42 per barrel during the second quarter of 2008, a decrease of $39.33, or 57%.

The decrease in segment gross margin for the Texas segment was also attributable to decreased service throughput and processing volumes. During the second quarter of 2009, the Texas segment provided gathering, transportation and processing services for an average of 630,674 MMBtu/d of natural gas compared with 700,545 MMBtu/d for the second quarter of 2008. The Texas segment gathered an average of 290,005 MMBtu/d of natural gas and processed an average of 559,597 MMBtu/d of natural gas during the second quarter of 2009 representing decreases of 8% and 11%, respectively, as compared with the second quarter of 2008. The Texas segment produced an average of 18,425 Bbls/d of NGLs at its plants and third-party plants during the second quarter of 2009, an increase of 4% as compared with the second quarter of 2008. During the second quarter of 2008, the Texas segment gathered an average of 313,523 MMBtu/d of natural gas, processed an average of 629,334 MMBtu/d of natural gas and produced an average of 17,721 Bbls/d of NGLs.

Rocky Mountains

The Rocky Mountains segment provides services to producers in Wyoming's Powder River Basin and owns managing member interests in Bighorn of 51% and in Fort Union of 37.04%.

Segment gross margin for the Rocky Mountains segment was $0.7 million for the second quarter of 2009 compared with $1.2 million for the same period in 2008. Producer services throughput, which represents volumes purchased for resale, volumes gathered using firm capacity gathering agreements with Fort Union and volumes transported under firm capacity transportation agreements with Wyoming Interstate Gas Company (WIC), or using additional capacity that Copano obtains on WIC, averaged 166,022 MMBtu/d for the second quarter of 2009, as compared to 229,513 MMBtu/d for the same period in 2008. The decrease in segment gross margin was the result of lower volumes and unit margins primarily due to a continuing softened pricing environment in the Rocky Mountains creating disincentives for producers to continue drilling programs or to initiate de-watering programs on wells previously drilled. The Rocky Mountains segment results do not include the financial results and volumes associated with Copano's interests in Bighorn and Fort Union, which are accounted for under the equity method of accounting and are shown under "Equity in earnings from unconsolidated affiliates." Average pipeline throughput for Bighorn and Fort Union on a combined basis increased 4% in the second quarter of 2009 as compared with the second quarter of 2008. For the second quarter of 2009, average pipeline throughput for Bighorn and Fort Union totaled 185,622 MMBtu/d and 795,072 MMBtu/d, respectively, as compared to 217,373 MMBtu/d and 727,688 MMBtu/d, respectively, for the second quarter of 2008.

Corporate and Other

Corporate and other gross margin includes Copano's commodity risk management activities. These activities produced a gain of $10.8 million for the second quarter of 2009 compared to a loss of $17.5 million for the second quarter of 2008. The gain for the second quarter of 2009 included $20.8 million of net cash settlements received for expired commodity derivative instruments offset by $0.7 million of unrealized mark-to-market losses on undesignated economic hedges and $9.3 million of non-cash amortization expense relating to the option component of Copano's risk management portfolio. The second quarter 2008 loss included $6.7 million of net cash settlements paid for expired commodity derivative instruments, $8.5 million of non-cash amortization expense relating to the option component of Copano's risk management portfolio and $2.3 million of unrealized mark-to-market losses on undesignated economic hedges.

Year-to-Date Financial Results

Revenue for the first six months of 2009 decreased 54% to $419.3 million compared to $903.0 million for the same period of last year. Total segment gross margin decreased 21% to $106.0 million for the six months ended June 30, 2009 from $133.4 million for the same period in 2008. For the six months ended June 30, 2009, total segment gross margin included a net gain of $26.9 million related to Copano's risk management activities, comprised of $45.9 million of net cash settlements received on expired commodity derivative instruments offset by $18.5 million of non-cash amortization expense relating to the option component of Copano's risk management portfolio and $0.5 million of unrealized mark-to-market losses on undesignated economic hedges. Total segment gross margin for the six months ended June 30, 2008 included a net loss of $35.3 million related to Copano's risk management activities comprised of $12.5 million of net cash settlements paid on expired commodity derivative instruments, $16.0 million of non-cash amortization expense relating to the option component of Copano's risk management portfolio and $6.8 million of unrealized mark-to-market losses on undesignated economic hedges.

Adjusted EBITDA decreased 23% to $79.5 million for the first six months of 2009 compared to $103.2 million for the same period of last year. Total distributable cash flow decreased 25% to $68.0 million for the six months ended June 30, 2009 compared to $90.5 million for the same period of 2008.

Net income decreased by 68% to $11.9 million, or $0.21 per unit on a diluted basis, for the six months ended June 30, 2009 compared to net income of $37.7 million, or $0.65 per unit on a diluted basis, for the six months ended June 30, 2008. The major drivers of net income for 2009 compared to 2008 included:

   --  a decrease in total segment gross margin of $27.4 million consisting       of a $89.6 million decrease in operating segment gross margins       primarily reflecting average NGL price declines of 58% in the Conway       index and 57% in the Mt. Belvieu index and lower overall service       throughput volumes, offset by an increase of $62.2 million from       commodity risk management activities;   --  an increase in operations, maintenance, depreciation and amortization       expenses of $3.6 million primarily related to expanded operations in       north Texas; and    --  a decrease of $1.6 million in equity in earnings of unconsolidated       affiliates;     offset by:   --  a gain of $3.9 million related to the repurchase and retirement of       $18.2 million aggregate principal amount of 7.75% senior unsecured       notes due 2018 at market prices averaging 78% of the face amount of       the notes; and   --  a decrease in general and administrative expenses of $2.7 million       primarily related to successful cost reduction efforts, including       reduced employee compensation expense and third-party service provider       fees    --  a decrease of $1.0 million in interest expense as a result of (i) a       decrease of noncash mark-to-market charges on interest rate swaps of       $5.4 million offset by (ii) an increase in interest expense of $4.4       million as a result of increased average outstanding borrowings       slightly offset by lower average interest rates between the periods.    

Weighted average diluted units decreased slightly to 57.9 million for the six months ended June 30, 2009 as compared to 58.0 million units for the six months ended June 30, 2008.

Cash Distributions

On July 15, 2009, Copano announced a second quarter 2009 cash distribution of $0.575 per unit, or $2.30 per unit on an annualized basis, for all of its outstanding common units. This distribution is equal to Copano's distribution of $0.575 per unit for the first quarter of 2009 and is payable on August 13, 2009 to common unitholders of record at the close of business on August 3, 2009.

Conference Call Information

Copano will hold a conference call to discuss its second quarter 2009 financial results and recent developments on Thursday, August 6, 2009 at 10:00 a.m. Eastern Daylight Time (9:00 a.m. Central Daylight Time). To participate in the call, dial (480) 629-9722 and ask for the Copano call 10 minutes prior to the start time, or access it live over the internet at http://www.copanoenergy.com/ on the "Investor Overview" page of the "Investor Relations" section of Copano's website.

A replay of the audio webcast will be available shortly after the call on Copano's website. Additionally, a telephonic replay will be available through August 13, 2009 by calling (303) 590-3030 and using the pass code 4106205#.

Use of Non-GAAP Financial Measures

This news release and the accompanying schedules include the non-generally accepted accounting principles, or non-GAAP, financial measures of segment gross margin, total segment gross margin, EBITDA, adjusted EBITDA and total distributable cash flow. 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, operating income, cash flows from operating activities or any other GAAP measure of liquidity or financial performance. Copano uses non-GAAP financial measures as measures of its core profitability or to assess the financial performance of its assets. Copano believes that investors benefit from having access to the same financial measures that its management uses in evaluating Copano's liquidity position or financial performance.

Copano defines segment gross margin as an operating segment's revenue minus cost of sales. Cost of sales includes the following: cost of natural gas and NGLs purchased, cost of crude oil purchased and costs for transportation of volumes. Total segment gross margin is the sum of the operating segment gross margins and the results of Copano's risk management activities that are included in Corporate and other. Copano views total segment gross margin as an important performance measure of the core profitability of its operations. Segment gross margin allows Copano's senior management to compare volume and price performance of the segments and to more easily identify operational or other issues within a segment. The GAAP measure most directly comparable to total segment gross margin is operating income.

Copano defines EBITDA as net income (loss) plus interest and other financing costs, provision for income taxes and depreciation, amortization and impairment expense.