Dallas-based midstream operator Crosstex Energy LP said Wednesday it is reducing its previously reported first and second quarter net income by $0.9 million because of an accounting error related to a natural gas purchase.

Its management and a board-appointed audit committee concluded that the partnership should restate previously issued interim (unaudited) financial statements for the quarters ended March 31 and June 30 due to a clerical accounting error made in the first quarter. Partners’ equity also will be reduced by $0.9 million and current liabilities will be increased by the same amount.

Management said it determined that the partnership purchased gas from a supplier on newly acquired gas processing assets in South Louisiana but that purchase was not accrued in the first quarter due to a clerical error. The error occurred shortly after the acquisition of the South Louisiana assets from El Paso Corp. in November 2005 and during a period when the partnership was upgrading and transitioning to new accounting systems for the acquired assets.

Since the first quarter, the partnership has implemented accounting system improvements and conducted additional training of new personnel, Crosstex said. It also will implement additional accounting controls beginning in the third quarter of 2006 to specifically address the error.

The partnership said its previously released consolidated statements of operations and consolidated balance sheets for the three months ended March 31 and the three and six months ended June 30 also should no longer be relied upon. It will file amendments to its quarterly reports on Form 10-Q in the near term. However, the company said the impact of the error on Crosstex Energy Inc.’s financial statements is not sufficient to warrant restating them.

Crosstex Energy LP operates more than 5,000 miles of pipeline, 12 processing plants, four fractionators, 160 natural gas amine treating plants and 25 dew point control plants. The partnership currently provides services for more than 3 Bcf/d of natural gas, or 6% of marketed U.S. daily production based on August 2005 Department of Energy data. Crosstex Energy Inc. owns a 2% general partner interest, a 42% limited partner interest and the incentive distribution rights of Crosstex Energy LP.

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