Adjusted net earnings available for common stockholders for the current quarter were $42.7 million ($.34 per share), compared with $36.0 million ($.29 per share) in the prior year. Adjusted net earnings for the current quarter exclude a $9.4 million ($.08 per share) mark-to-market unrealized gain on open economic hedges of processing spreads and a $2.4 million ($.02 per share) reduction of the provision for repair and abandonment costs recorded as a result of damage to the company's Sea Robin pipeline system caused by Hurricane Ike. Adjusted net earnings for the current quarter include a $9.8 million ($.08 per share) mark-to-market gain on economic hedges that was recognized in 2008 but excluded from 2008's adjusted earnings. The prior year's adjusted net earnings available for common stockholders exclude an $8.5 million ($.07 per share) mark-to-market unrealized gain on open economic hedges of processing spreads and a $2.0 million ($.02 per share) charge related to the partial repurchase of the company's preferred stock. Adjusted items are shown on an after-tax basis. A reconciliation of net earnings to adjusted net earnings for the quarter is set forth in the following table.

                                                                                                  
 Select Non-GAAP Financial Information                               Three months ended Sept. 30, 
 ($000s, except per share amounts)                                      2009           2008       
 Net earnings available for common stockholders                      $  44,748      $  42,476     
 After-tax adjustments:                                                                           
 MTM (gain) loss on open economic hedges                             $  (9,481  )   $  (8,518  )  
 MTM gain recorded in prior accounting period                        $  9,765       $  -          
 Reduction in provision for repair and abandonment costs             $  (2,372  )   $  -          
 Loss on extinguishment of preferred stock                           $  -           $  2,036      
 Adjusted net earnings available for common stockholders             $  42,660      $  35,994     
 Reported net earnings per share available for common stockholders   $  0.36        $  0.34       
 Adjusted net earnings per share available for common stockholders   $  0.34        $  0.29       
                                                                                                  


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On July 17, 2009, Southern Union Gas Services, the company's gathering and processing subsidiary, experienced a fire at its Keystone processing plant. As a result of the fire, the company experienced reduced throughput volumes that negatively impacted gross margin for the three and nine months ended September 30, 2009 by approximately $4.6 million ($.02 per share). During the same periods, the company recorded a $4.5 million ($.02 per share) charge to write-off equipment damaged by the fire. The company expects the Keystone plant to be running at or near its pre-fire capacity by year end.

For the nine month period ended September 30, 2009, the company reported net earnings available for common stockholders of $119.9 million ($.97 per share), compared with $158.5 million ($1.28 per share) in the prior year.

Adjusted net earnings available for common stockholders for the nine months ended September 30, 2009 were $159.5 million ($1.28 per share), compared with $165.9 million ($1.34 per share) in the prior year. Adjusted net earnings for the current nine month period exclude a $3.8 million ($.03 per share) mark-to-market unrealized loss on open economic hedges of processing spreads and a $7.7 million ($.06 per share) charge to increase the provision for repair and abandonment costs as a result of damage to the company's Sea Robin pipeline system caused by Hurricane Ike. Adjusted net earnings for the current nine month period also include a $28.1 million ($.22 per share) mark-to-market gain on economic hedges that was recognized in 2008 but excluded from 2008's adjusted earnings. The prior year's adjusted net earnings available for common stockholders exclude a $3.3 million ($.03 per share) mark-to-market unrealized loss on open economic hedges of processing spreads and a $4.0 million ($.03 per share) charge related to the partial repurchase of the company's preferred stock. Adjusted items are shown on an after-tax basis. A reconciliation of net earnings to adjusted net earnings for the nine months ended September 30, 2009 and 2008 is set forth in the following table.

                                                                                                 
 Select Non-GAAP Financial Information                               Nine months ended Sept. 30, 
 ($000s, except per share amounts)                                      2009         2008        
 Net earnings available for common stockholders                      $  119,944   $  158,522     
 After-tax adjustments:                                                                          
 MTM (gain) loss on open economic hedges                             $  3,754     $  3,340       
 MTM gain recorded in prior accounting period                        $  28,085    $  -           
 Increase to provision for repair and abandonment costs              $  7,720     $  -           
 Loss on extinguishment of preferred stock                           $  -         $  4,031       
 Adjusted net earnings available for common stockholders             $  159,503   $  165,893     
 Reported net earnings per share available for common stockholders   $  0.97      $  1.28        
 Adjusted net earnings per share available for common stockholders   $  1.28      $  1.34        
                                                                                                 


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For the three months ended September 30, 2009, net operating revenues, calculated as revenue less cost of gas and other energy and revenue-related taxes, decreased $20.7 million to $269.9 million from $290.6 million in the prior year. Adjusted net operating revenue, which removes the impact of mark-to-market accounting treatment, decreased $6.5 million during the quarter to $270.3 million. The decrease was primarily related to lower realized commodity prices at the company's gathering and processing segment. A reconciliation of operating revenue to net operating revenue and adjusted net operating revenue is available at the end of this press release.

For the three months ended September 30, 2009, Southern Union reported adjusted EBIT of $113.5 million, compared with adjusted EBIT of $105.9 million in the prior period. The $7.6 million increase was primarily due to increases of $5.2 million in the corporate and other segment, $3.8 million in the transportation and storage segment, and $3.6 million in the distribution segment, offset by a $5.0 million decrease in the gathering and processing segment. A reconciliation of EBIT to adjusted EBIT and EBIT to net earnings is available at the end of this press release.

The company uses adjusted net earnings, adjusted net operating revenues, and earnings before interest and taxes ("EBIT"), or adjusted EBIT, as appropriate, as its primary measures of evaluating financial performance. The company also believes these measures present its financial performance in a manner that is more consistent with the presentation used by the investment community in its evaluation of the company's financial performance. Adjusted net earnings, adjusted net operating revenues, EBIT and adjusted EBIT are non-GAAP measures and should be used in conjunction with net earnings and other financial measures such as operating income or net cash flows provided by operating activities.

Management's Perspective

Commenting on the quarter, George L. Lindemann, chairman and CEO, said, "I am pleased that earnings and cash flows remained strong across our business segments. We continue to diligently work through the commissioning process for Trunkline LNG's Infrastructure Enhancement Project. Once in service, this project will further enhance our stable, low-risk business profile. We are also happy to reaffirm our 2009 adjusted earnings per share guidance."

Vice chairman, president and COO Eric D. Herschmann added, "We have been actively managing our hedging program over the last several months and are pleased to say that we have added additional positions to our portfolio for 2010 and 2011. For 2010, we have 40,000 MMBtu per day of natural gas liquids equivalents hedged at $10.44. We also have 5,000 MMBtu per day of natural gas hedged at $5.33. For 2011, we have hedged 10,000 MMBtu per day of natural gas liquids equivalents at $11.19. We also have 10,000 MMBtu per day of natural gas hedged at $6.14."

Key Factors Impacting Third Quarter 2009 Performance Relative to Prior Year

Southern Union's transportation and storage segment posted adjusted EBIT of $97.3 million, compared with $93.5 million in the prior year. The $3.8 million increase was primarily attributable to a $3.3 million increase in EBIT at Panhandle Energy, which includes Panhandle Eastern Pipe Line Company, LP and its subsidiaries, and a $500,000 increase in equity earnings from the company's unconsolidated investment in Citrus Corp., parent of Florida Gas Transmission Company, LLC. Panhandle Energy saw higher operating revenues of $2.7 million, lower adjusted operating expenses of $3.6 million, excluding a $3.8 million reduction in 2009 related to revised lower estimates for repair and abandonment costs associated with damage caused by Hurricane Ike, and higher depreciation and amortization expense of $2.2 million. The increase in operating revenues was largely due to a $1.7 million increase in transportation and storage revenue, primarily a result of higher average rates realized on Panhandle Eastern Pipe Line, and a $1.8 million increase in LNG terminalling revenue. Adjusted operating expenses were $3.6 million lower due to the $9.5 million charge in the third quarter of 2008 for Hurricanes Gustav and Ike. Excluding that charge, operating expenses in 2009 were $5.9 million higher than 2008, primarily due to an increase in environmental reserves, and higher outside services costs for pipeline integrity testing and legal services.

The gathering and processing segment reported adjusted EBIT of $8.2 million, compared with $13.2 million in the prior year.