Please read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements included in Item 1 of Part I of this quarterly report. Overview
We are principally engaged in the business of gathering, transporting, processing and treating natural gas and fractionating and storing natural gas liquids (NGLs). We manage our business and analyze our results of operations on a segment basis. Our operations are divided into three business segments:
• Gathering and Processing - West (West). Our West segment includes Four Corners and ownership interests in Wamsutter, consisting of (i) 100% of the Class A limited liability company membership interests and (ii) 65% of the Class C limited liability company membership interests (together, the Wamsutter Ownership Interests). We account for the Wamsutter Ownership Interests as an equity investment.

• Gathering and Processing - Gulf (Gulf). Our Gulf segment includes (1) our 60% ownership interest in Discovery and (2) the Carbonate Trend gathering pipeline off the coast of Alabama. We account for our ownership interest in Discovery as an equity investment.

• NGL Services. Our NGL Services segment includes three integrated NGL storage facilities and a 50% undivided interest in a fractionator near Conway, Kansas.

Executive Summary
Our results for the second quarter of 2009 demonstrate continued improvement from difficult circumstances experienced during the previous two quarters where low NGL commodity prices and hurricane-related damages significantly decreased the profitability of our gathering and processing businesses. Net income for the second quarter of 2009 improved about 36% over the first quarter of 2009 despite the unfavorable effects of the incident at our Ignacio gas processing plant described below. Given the current energy commodity price and NGL margin environment, together with our cash balance, we expect to maintain our current level of cash distributions throughout 2009. As discussed further below, Williams, which owns our general-partner interest, will provide us with significant, additional support for 2009 which will enable us to maintain a higher level of cash retention and a stronger overall liquidity position. We maintained our second-quarter unitholder distribution at $0.635 per unit which equaled our first-quarter 2009 distribution. Recent Events
On June 3, 2009, a pipeline ruptured at our Ignacio gas processing plant. We expanded the scope of the investigation beyond the repair of the damaged pipes to ensure that any similarly situated piping was thoroughly inspected and repaired as necessary. During the outage, we re-routed approximately 250 MMcf/d of the plant's normal production capacity to other facilities in the San Juan Basin. The plant was returned to service on June 19. We estimate the incident reduced second-quarter 2009 cash flows by approximately $7.0 million as a result of reduced NGL equity sales volumes of 5 million to 6 million gallons, reduced gathering volumes of 3 to 4 trillion British thermal units (TBtus) and estimated repair costs (including capital expenditures) of approximately $3.0 million.
In 2009, Williams waived the incentive distribution rights (IDRs) related to 2009 distribution periods. The IDRs represent approximately $29.0 million, on an annual basis, at the partnership's current per-unit cash distribution level.
In 2009, our omnibus agreement with Williams was amended to increase the aggregate amount of the credit we can receive related to certain general and administrative expenses for 2009. Consequently, for 2009, Williams will provide up to an additional $10.0 million credit, in addition to the $0.8 million annual credit previously provided under the original omnibus agreement, to the extent that all 2009 non-segment profit general and administrative expenses exceed $36.0 million. We will record total general and administrative expenses (including those expenses that are subject to the credit by Williams) as an expense, and we will record any credits as capital contributions from Williams. Accordingly, our net income will not reflect the benefit of the credit received from

Williams. However, the costs subject to this credit will be allocated entirely to our general partner. As a result, the net income allocated to limited partners on a per-unit basis will reflect the benefit of this credit. Results of Operations
Consolidated Overview
The following table and discussion is a summary of our consolidated results of operations for the three and six months ended June 30, 2009, compared to the three and six months ended June 30, 2008. The results of operations by segment are discussed in further detail following this consolidated overview discussion.

                                  Three months ended                                        Six months ended
                                       June 30,                  % Change from                  June 30,                  % Change from
                                2009             2008               2008(1)              2009             2008               2008(1)
                                     (Thousands)                                              (Thousands)
Financial Results:
Revenues                      $ 106,327        $ 178,245                    -40 %      $ 211,795        $ 328,607                    -36 %
Costs and expenses:
Product cost and shrink
replacement                      20,538           66,009                    +69 %         40,700          118,107                    +66 %
Operating and
maintenance expense              42,381           46,532                     +9 %         82,287           93,616                    +12 %
Depreciation,
amortization and
accretion                        11,164           11,002                     -1 %         22,348           22,228                     -1 %
General and
administrative expense           12,522           13,134                     +5 %         25,002           23,938                     -4 %
Taxes other than income           2,325            2,167                     -7 %          4,761            4,672                     -2 %
Other (income) expense -
net                                 (18 )         (2,811 )                  -99 %          1,661           (2,478 )                   NM

Total costs and expenses         88,912          136,033                    +35 %        176,759          260,083                    +32 %

Operating income                 17,415           42,212                    -59 %         35,036           68,524                    -49 %
Equity earnings -
Wamsutter                        18,975           37,480                    -49 %         34,296           58,674                    -42 %
Discovery investment
income                            4,151            8,570                    -52 %          4,963           22,191                    -78 %
Interest expense                (15,200 )        (16,683 )                   +9 %        (30,316 )        (34,356 )                  +12 %
Interest income                      27              243                    -89 %             61              418                    -85 %

Net income                    $  25,368        $  71,822                    -65 %      $  44,040        $ 115,451                    -62 %

(1) + = Favorable Change; - = Unfavorable Change; NM = A percentage calculation is not meaningful due to change in signs, a zero-value denominator or a percentage change greater than 200.

Three months ended June 30, 2009 vs. three months ended June 30, 2008 Revenues decreased $71.9 million, or 40%, due primarily to lower product sales in our West segment resulting from significantly lower average NGL sales prices and lower sales of NGLs on behalf of third-party producers, combined with lower volumes in both fee revenues and product sales.
Product cost and shrink replacement decreased $45.5 million, or 69%, due primarily to lower product cost and shrink replacement in our West segment related primarily to decreased purchases of NGLs from third-party producers and lower average natural gas prices. Additionally, product cost in our NGL Services segment declined as a result of lower product prices and volumes.
Operating and maintenance expense decreased $4.2 million, or 9%, due primarily to lower fractionation fuel cost and lower system losses in our NGL Services segment.
Other (income) expense - net for 2008 includes a $3.2 million involuntary conversion gain related to the November 2007 Ignacio plant fire in our West segment.

Operating income decreased $24.8 million, or 59%, due primarily to substantially lower average per-unit NGL sales margins on lower NGL sales volumes and gathering volumes reduced by the 17-day plant outage after the June 2009 pipe rupture in our West segment.
Equity earnings from Wamsutter decreased $18.5 million, or 49%, due primarily to lower per-unit NGL sales margins on lower NGL sales volumes and higher operating and maintenance expense.
Discovery investment income decreased $4.4 million, or 52%, due primarily to lower equity earnings resulting from lower NGL sales margins from lower average per-unit margins on higher volumes, partially offset by lower depreciation and accretion expense and lower operating and maintenance expense.
Interest expense decreased $1.5 million, or 9%, due primarily to the lower interest rate on our $250.0 million floating-rate term loan. Six months ended June 30, 2009 vs. six months ended June 30, 2008 Revenues decreased $116.8 million, or 36%, due primarily to lower product sales in our West segment resulting from significantly lower average NGL sales prices and lower sales of NGLs on behalf of third-party producers.
Product cost and shrink replacement decreased $77.4 million, or 66%, due primarily to lower product cost and shrink replacement in our West segment related primarily to decreased purchases of NGLs from third-party producers and lower average natural gas prices.
Operating and maintenance expense decreased $11.3 million, or 12%, due primarily to lower system and imbalance losses in our West segment and lower fractionation fuel costs in our NGL Services segment.
Other (income) expense - net for 2009 reflects a $1.7 million loss recognized on property taken out of service and for 2008 includes a $3.2 million involuntary conversion gain related to the November 2007 Ignacio plant fire in our West segment.
Operating income decreased $33.5 million, or 49%, due primarily to substantially lower average per-unit NGL sales margins and unfavorable changes in other (income) expense - net in our West segment, partially offset by lower operating and maintenance expense.
Equity earnings from Wamsutter decreased $24.4 million, or 42%, due primarily to lower per-unit NGL sales margins on lower NGL sales volumes.
Discovery investment income decreased $17.2 million, or 78%, due primarily to lower equity earnings resulting from lower NGL margins from lower average per-unit margin and lower volumes for both keep-whole and percentage-of-liquids processing agreements, partially offset by $4.2 million hurricane-related proceeds under our Discovery business interruption policy.
Interest expense decreased $4.0 million, or 12%, due primarily to the lower interest rate on our $250.0 million floating-rate term loan.

Results of operations - Gathering and Processing - West The Gathering and Processing - West segment includes our Four Corners natural gas gathering, processing and treating assets and our Wamsutter Ownership Interests.

                                                      Three months ended                 Six months ended
                                                           June 30,                          June 30,
                                                    2009             2008             2009             2008
                                                                          (Thousands)
Financial Results:
Revenues                                          $  91,664        $ 158,563        $ 182,442        $ 290,896
Costs and expenses, including interest:
Product cost and shrink replacement                  19,054           61,144           37,515          108,590
Operating and maintenance expense                    35,963           36,677           68,977           77,570
Depreciation and amortization                        10,278           10,136           20,622           20,435
General and administrative expense - direct           2,300            2,058            4,461            3,988
Taxes other than income                               2,210            2,061            4,339            4,281
Other (income) expense - net                            (16 )         (2,811 )          1,664           (2,477 )

Total costs and expenses, including interest         69,789          109,265          137,578          212,387

Segment operating income                             21,875           49,298           44,864           78,509
Equity earnings - Wamsutter                          18,975           37,480           34,296           58,674

Segment profit                                    $  40,850        $  86,778        $  79,160        $ 137,183



Four Corners

                                                          Three months ended                  Six months ended
                                                               June 30,                           June 30,
                                                         2009             2008             2009             2008
Operating Statistics:
Gathering volumes (billion British thermal
units per day (BBtu/d))                                  1,321            1,410            1,338            1,363
Plant inlet natural gas volumes (BBtu/d)                   554              680              603              614
NGL equity sales (million gallons)                          39               43               78               79
NGL margin ($/gallon)                                 $   0.40          $  0.78          $  0.36          $  0.76
NGL production (million gallons)                           123              140              246              252

Three months ended June 30, 2009 vs. three months ended June 30, 2008 Four Corners' segment operating income decreased $27.4 million, or 56%, due primarily to $20.3 million lower product sales margins resulting primarily from a 49% decrease in average per-unit NGL margins and 9% lower NGL equity sales volumes, combined with $3.2 million decreased gathering revenues and the absence of a $3.2 million 2008 involuntary conversion gain. A more detailed analysis of the components of the change in segment operating income is below.
Revenues decreased $66.9 million, or 42%, due primarily to $62.4 million lower product sales and $3.2 million lower gathering revenue.
Product sales revenues decreased due primarily to:
• $29.6 million related to a 57% decrease in average NGL sales prices realized on sales of NGLs which we received under keep-whole and percent-of-liquids processing contracts (NGL equity sales). This decrease resulted from general decreases in market prices for these commodities between the two periods;

• $21.9 million lower sales of NGLs on behalf of third-party producers. Under these arrangements, we purchase the NGLs from the third-party producers and sell them to an affiliate. This decrease was related to both lower market prices and lower volumes purchased and is offset by lower associated product costs of $21.8 million discussed below;

• $5.9 million lower condensate and liquefied natural gas (LNG) sales on decreased average per-unit condensate prices and lower condensate and LNG volumes; and

• $5.0 million related to a 9% decrease in NGL volumes that Four Corners received under keep-whole and percent-of-liquids processing contracts. The volumes were reduced primarily by the 17-day Ignacio plant outage caused by the pipe rupture in June 2009.

Gathering revenues decreased $3.2 million, or 7%, due primarily to a 6% decrease in gathering volumes which resulted primarily from the 17-day Ignacio plant outage caused by the pipe rupture in June 2009.
Product cost and shrink replacement decreased $42.1 million, or 69%, due primarily to:
• $21.8 million decrease from third-party producers who have us purchase their NGLs, which was offset by the corresponding decrease in product sales discussed above;

• $14.4 million decrease from 69% lower average natural gas prices;

• $3.5 million decrease in condensate and LNG related product cost; and

• $2.3 million decrease from 10% lower natural gas volumes purchased for shrink replacement.

Operating and maintenance expense remained essentially unchanged but includes favorable changes of $2.6 million lower system and imbalance losses resulting primarily from lower volumetric losses and $1.9 million lower unreimbursed gathering fuel costs resulting primarily from lower gas prices. These favorable changes were partially offset by higher right-of-way costs, higher major maintenance and 2009 Ignacio pipeline rupture repair costs.
Other (income) expense - net in 2008 includes a $3.2 million involuntary conversion gain related to the November 2007 Ignacio plant fire. Six months ended June 30, 2009 vs. six months ended June 30, 2008 Four Corners' segment operating income decreased $33.6 million, or 43%, due primarily to $32.0 million lower NGL sales margins resulting primarily from a 53% decrease in average per-unit NGL margins, $5.0 million lower condensate margin and the absence of a $3.2 million 2008 involuntary conversion gain. These decreases were partially offset by $8.6 million lower operating and maintenance expense. A more detailed analysis of the components of the change in segment operating income is below.
Revenues decreased $108.5 million, or 37%, due primarily to the following lower product sales:
• $58.2 million related to a 58% decrease in average NGL sales prices realized on sales of NGLs which we received under keep-whole and percent-of-liquids processing contracts (NGL equity sales). This decrease resulted from general decreases in market prices for these commodities between the two periods;

• $37.8 million lower sales of NGLs on behalf of third-party producers. Under these arrangements, we purchase the NGLs from the third-party producers and sell them to an affiliate. This decrease was related to both lower market prices and lower volumes and is offset by lower associated product costs of $37.6 million discussed below; and

• $11.4 million lower condensate and LNG sales resulting from decreased average per-unit condensate prices and lower condensate and LNG volumes.

Product cost and shrink replacement decreased $71.1 million, or 65%, due primarily to:
• $37.6 million decrease from third-party producers who have us purchase their NGLs, which was offset by the corresponding decrease in product sales discussed above;

• $24.8 million decrease from 64% lower average natural gas prices; and

• $6.1 million decrease in condensate and LNG related product cost.

Operating and maintenance expense decreased $8.6 million, or 11%, due primarily to $10.8 million lower system and imbalance volume losses and $5.0 million lower unreimbursed gathering fuel costs resulting primarily from lower gas prices. While our system losses are generally an unpredictable component of our operating costs, they can be higher during periods of prolonged, severe winter weather, such as those we experienced during January and February of 2008. Additionally, operational inefficiencies caused by the fire at the Ignacio plant impacted our system losses in 2008. These decreases in expense were partially offset by higher major maintenance, right-of-way costs and compression service costs, combined with increased labor costs and 2009 Ignacio pipeline rupture repair costs.
Other (income) expense - net for 2009 reflects a $1.7 million loss recognized on property taken out of service, and for 2008 includes a $3.2 million involuntary conversion gain on the 2007 Ignacio plant fire. Outlook
• NGL and natural gas commodity prices. Because NGL prices, especially ethane, have declined, we expect significantly lower per-unit NGL margins to continue in 2009 compared to 2008. As evidenced by current market conditions, NGL, crude and natural gas prices are highly volatile. Natural gas prices in the San Juan Basin have been lower than other areas of the country, and we expect this trend to continue. Because natural gas cost is a component of our NGL margins, we expect that per-unit NGL margins may be higher in the Four Corners area than some other areas of the country. Four Corners may experience periods when it is not economical to recover ethane, which will reduce our margins. Please see the Commodity Derivatives table below for information about our current energy commodity derivative portfolio.

• Gathering and plant inlet volumes. Despite the Ignacio pipeline rupture and lower projected well connects in 2009, which result in lower projected maintenance capital expenditures, we expect average gathering and plant inlet volumes for 2009 to be only slightly below 2008. Drilling activity by producers is expected to decline in 2009 due to the current weak economy, together with the low commodity price environment. However, when drilling activity increases, we anticipate that recent capital investments will support producer customers' drilling activity, expansion opportunities and production enhancement activities.

• Operating costs. We expect and will continue to pursue reductions in costs as demand for contractors, equipment and supplies decline.

• Assets on Jicarilla land. We concluded our negotiations with the Jicarilla Apache Nation (JAN) during February 2009 with the execution of a 20-year right-of-way agreement. We expect our total-year 2009 right-of-way expense to be approximately $8.7 million, which is significantly higher than the total-year 2008 cost of $3.5 million for our special business licenses with the JAN.

Commodity Derivatives
   The following table presents our Four Corners energy commodity derivatives
including derivatives entered into after June 30, 2009.

                                                                          Volumes            Average
                                                    Period                 Hedged          Price/Unit
Designated as hedging instruments:
NGL sales - ethane (million gallons)        July - September, 2009           16.4         $0.475/gallon
NGL sales - natural gasoline (million
gallons)                                   August - December, 2009            1.7         $1.404/gallon
Natural gas purchases (million
British thermal units per day
(MMBtu/d))                                 August - December, 2009          1,961         $3.670/MMBtu
Not designated as hedging
instruments:
Natural gas purchases (MMBtu/d)             July - September, 2009         12,500         $3.032/MMBtu

We expect the combined impact of these energy commodity derivatives will provide a margin of $0.187/gallon on 16.4 million gallons of ethane sales and $0.884/gallon on 1.7 million gallons of natural gasoline sales.

Wamsutter
   Wamsutter is accounted for using the equity method of accounting. As such,
our interest in Wamsutter's net operating results is reflected as equity
earnings in our Consolidated Statements of Income. The following discussion
addresses in greater detail the results of operations for 100% of Wamsutter.
Please read Note 5 Equity Investments of our Notes to Consolidated Financial
Statements for a discussion of how Wamsutter allocates its net income between
its member owners including us.

                                                  Three months ended                Six months ended
                                                       June 30,                         June 30,
                                                 2009             2008            2009            2008
                                                                      (Thousands)
Financial Results:
Revenues                                      $   45,177        $ 70,222        $ 88,408        $ 137,847
Costs and expenses, including interest:
Product cost and shrink replacement                9,911          26,426          22,339           52,456
Operating and maintenance expense                  6,498          (2,585 )        12,363            9,052
Depreciation and accretion                         5,556           5,214          11,003           10,442
General and administrative expense                 3,795           3,621           7,399            6,840
Taxes other than income                              453             419           1,019              903
Other income, net                                    (11 )          (353 )           (11 )           (520 )

Total costs and expenses                          26,202          32,742          54,112           79,173

Net income                                    $   18,975        $ 37,480        $ 34,296        $  58,674

Williams Partners' interest - equity
earnings per our Consolidated Statements
of Income                                     $   18,975        $ 37,480        $ 34,296        $  58,674




                                                Three months ended         Six months ended
                                                     June 30,                  June 30,
                                                 2009          2008        2009         2008
  Operating Statistics:
  Gathering volumes (BBtu/d)                       545          521          540         477
  Plant inlet natural gas volumes (BBtu/d)         419          427          428         416
  NGL equity sales (million gallons)                35           36           71          77
  NGL margin ($/gallon)                       $   0.39       $ 0.63      $  0.32      $ 0.60
  NGL production (million gallons)                 109          114          214         220

Three months ended June 30, 2009 vs. three months ended June 30, 2008 Wamsutter's net income decreased $18.5 million, or 49%, due primarily to $9.2 million lower product sales margins resulting primarily from sharply decreased per-unit margins on lower NGL sales volumes and $9.1 million higher operating and maintenance expense.
Revenues decreased $25.0 million, or 36%, due primarily to $26.0 million lower product sales, slightly offset by $2.3 million higher fee-based gathering and processing revenue.
Product sales revenues decreased $26.0 million, or 52%, due primarily to:
• $26.0 million related to a 55% decrease in average NGL sales prices realized on sales of NGLs which Wamsutter received under keep-whole processing contracts. This decrease resulted from general decreases in market prices for these commodities between the two periods.

• $1.9 million related to a 4% decrease in NGL volumes that Wamsutter received under keep-whole processing contracts. The decrease in NGL volumes was primarily due to scheduled plant maintenance performed in the second quarter of 2009. Similar maintenance in 2008 was not performed until the third quarter. . . .