ANNUAL REPORT ANNUAL 20 08 LOCATIONS NORTH DAKOTA BAKKEN GATHERING SYSTEM— BAKKEN GATHERING SYSTEM— located in northwestern North Dakota, currently consisting of 23 miles of pipelines with located in eastern Montana, consisting of 374 miles of pipelines, a associated processing and treating facilities under construction. processing plant, a fractionation facility and three compressor stations. BADLANDS GATHERING SYSTEM— WORLAND GATHERING SYSTEM— located primarily in southwestern North Dakota, consisting of located in central Wyoming, consisting of 153 miles of 221 miles of pipelines, a processing plant, a natural gas treating pipelines, a processing plant, a natural gas treating facility, facility, a fractionation facility and seven compressor stations. a fractionation facility and seven compressor stations. CEDAR HILLS AIR COMPRESSION MONTANA NORTH DAKOTA AND WATER INJECTION FACILITIES— located in North Dakota, in close proximity to our Badlands gathering system. SUSTAINING LONG-TERM UNITHOLDER VALUE WYOMING HILAND PARTNERS, LP OKLAHOMA HLND ENID, OKLAHOMA Corporate Headquarters EAGLE CHIEF GATHERING SYSTEM— KINTA AREA GATHERING SYSTEMS— located in northwestern Oklahoma, consisting located in southeastern Oklahoma, consisting of 601 miles of pipe- of 609 miles of pipelines, a processing plant lines, four amine treating facilities and 13 compressor stations. and eight compressor stations. MATLI GATHERING SYSTEM— located in northcentral Oklahoma, consisting of WOODFORD SHALE 58 miles of pipelines, a processing plant, a natural GATHERING SYSTEM— gas treating facility and three compressor stations. located in southeastern Oklahoma, consisting of 55 miles of pipelines and four compressor stations. Hiland Partners 205 West Maple Suite 1100 Enid, Oklahoma 73701 P: 580.242.6040 F: 580.616.2080 www.hilandpartners.com HLND CORPORATE INFORMATION ABOUT THE HILAND COMPANIES The Hiland family of companies includes two separate publicly traded securities on the Nasdaq stock exchange—Hiland Partners, LP (HLND) and Hiland Holdings GP, LP (HPGP)—which offer investors two distinct ways to invest in our business. Hiland Partners, LP (Nasdaq: HLND) Hiland Partners, LP (HLND) is a midstream energy partnership engaged in the purchas- BOARDS OF DIRECTORS PARTNERSHIP DATA ing, gathering, compressing, dehydrating, treating, processing and marketing of natural Harold Hamm—Chairman of the Board (HLND, HPGP) Internet gas and the fractionating, or separating, and marketing of natural gas liquids, or www.hilandpartners.com Joseph L. Griffin—Director, President and Chief Executive Officer NGLs. Hiland Partners also provides air compression and water injection services to (HLND, HPGP) Investor Relations Continental Resources, Inc. (NYSE: CLR), a publicly traded exploration and production Matthew S. Harrison— Director, Vice President and Derek Gipson company controlled by affiliates of Hiland Partners’ general partner for use in its oil Chief Financial Officer (HLND, HPGP) 580-242-6040 and gas secondary recovery operations. Hiland Partners’ operations are primarily [email protected] Edward D. Doherty—Director (HLND, HPGP) located in the Mid-Continent and Rocky Mountain regions of the United States. In its midstream segment, Hiland Partners connects the wells of natural gas and crude oil Dr. Cheryl L. Evans—Director (HPGP) Headquarters 205 West Maple, Suite 1100 producers in its operating areas to its gathering systems, treats natural gas to remove Michael L. Greenwood—Director (HLND, HPGP) Post Office Box 5103 impurities, processes natural gas for the removal of NGLs, fractionates NGLs into NGL Dr. Bobby B. Lyle—Director (HPGP) Enid, OK 73702-5103 products and provides an aggregate supply of natural gas and NGL products to a John T. McNabb, II—Director (HLND) 580-242-6040 variety of transmission pipelines and markets. Hiland Partners’ midstream assets Shelby E. Odell—Director (HLND) consist of 14 natural gas gathering systems with approximately 2,111 miles of gas Transfer Agent Rayford T. Reid—Director (HLND, HPGP) gathering pipelines, five natural gas processing plants, seven natural gas treating American Stock Transfer and Trust Company 59 Maiden Lane facilities and three NGL fractionation facilities. Hiland Partners’ compression assets New York, NY 10038 consist of two air compression facilities and a water injection plant. EXECUTIVE OFFICERS Auditors Joseph L. Griffin—President and Chief Executive Officer Hiland Holdings GP, LP (Nasdaq: HPGP) Grant Thornton LLP Matthew S. Harrison— Vice President and Chief Financial Officer Hiland Holdings GP, LP’s (HPGP) cash-generating assets consist of its ownership Securities Kent C. Christopherson—Vice President and interests in Hiland Partners. Hiland Holdings’ aggregate ownership interests in Hiland Hiland Partners, LP common units are listed on the Chief Operations Officer Partners consist of: NASDAQ Stock Exchange under the symbol HLND. (i.) a 100% ownership interest of the 2% general partner interest in Hiland K-1 Tax Reports Partners; For questions or corrections: (ii.) 2,321,471 common units and 3,060,000 subordinated units of Hiland This Annual Report is distributed with the SEC Form 10-K for Hiland HLND: 866-867-4061 Partners, LP which is incorporated in this Annual Report by this reference. Partners; and HPGP: 800-973-7565 This Annual Report is subject to the SEC Form 10-K report, which includes (iii.) all of the incentive distribution rights in Hiland Partners, which entitle a more complete description of the company’s business and factors that Hiland Holdings GP, LP to receive increasing percentages, up to a may affect the company, specifically including those matters described maximum of 48.0%, of any cash distributed by Hiland Partners as certain in the section titled “Risk Factors.” If the SEC Form 10-K report is not target distribution levels are reached in excess of $0.675 per Hiland included, copies are available at Hiland’s website (www.hilandpartners.com) Partners common and subordinated unit in any quarter. or by contacting Hiland’s Investor Relations Department. Designed by Curran & Connors, Inc. / www.curran-connors.com / Inc. Connors, & Curran by Designed HILAND PARTNERS, LP 2008 ANNUAL REPORT HILAND PARTNERS, LP SUMMARY FINANCIAL & OPERATING DATA HILAND PARTNERS, LP PREDECESSOR YEAR ENDED DECEMBER 31, (in thousands, except operating data) 2008 2007 2006 2005 2004 SUMMARY OF OPERATIONS DATA: Total revenues $ 387,999 $ 278,043 $ 219,686 $ 166,601 $ 98,296 Operating costs and expenses: Midstream purchases 276,600 195,212 156,193 133,089 82,532 Operations and maintenance 30,526 23,279 16,071 7,359 4,933 Depreciation, amortization and accretion 37,502 29,855 22,130 11,112 4,127 Bad debt 3040000 (Gain) loss on asset sales 0000 (19) General and administrative 8,753 7,587 4,994 2,470 1,082 Total operating costs and expenses 353,685 255,933 199,388 154,030 92,655 Operating income 34,314 22,110 20,298 12,571 5,641 Other income (expense): Interest expense (13,639) (11,346) (5,532) (1,942) (702) Amortization of deferred loan costs (574) (410) (407) (484) (102) Interest income and other 346 430 323 192 40 Total other income (expense) (13,867) (11,326) (5,616) (2,234) (764) Income from continuing operations 20,447 10,784 14,682 10,337 4,877 Discontinued operations, net 0000 35 Net income $ 20,447 $ 10,784 $ 14,682 $ 10,337 $ 4,912 OTHER FINANCIAL DATA: EBITDA(1) $ 72,162 $ 52,395 $ 42,751 $ 23,875 $ 9,843 Total assets 426,139 410,473 343,816 193,969 49,175 Long-term debt, net of current maturities 256,466 226,104 147,064 33,784 12,643 Net equity 133,156 139,167 167,746 138,589 24,510 OPERATING DATA: Inlet natural gas (Mcf/d) 252,670 215,551 157,556 57,545 50,283 Natural gas sales (MMBtu/d) 90,910 80,731 66,947 47,096 40,560 NGL sales (Bbls/d) 5,920 4,696 3,347 1,965 1,133 (1) EBITDA is defined as net income (loss) plus interest expense, provision for income taxes and depreciation, amortization and accretion expense. Please refer to Hiland’s SEC filings for further clarification. ONE 2008 ANNUAL REPORT Hiland Partners, LP NASDAQ: HLND HILAND OPERATIONAL AND FINANCIAL HIGHLIGHTS NATURAL GAS SALES NGL SALES (MMBtu/d) (Bbls/d) A UNIQUE RELATIONSHIP 5,920 100,000 6,000 We began our midstream operations in 1990 when then 90,910 CAGR 80,731 privately held Continental Resources, Inc. formed a gas CAGR 5,000 4,696 42% 80,000 20% gathering/processing company to support its exploration 66,947 4,000 and production activities. 60,000 3,347 47,096 Hiland and Continental Resources are separate entities, 44,063 3,000 with Harold Hamm as the controlling equity holder of both. 40,000 1,965 2,000 This gives Hiland an affiliate relationship with a large, active 1,437 20,000 exploration and production company. Our relationship with 1,000 Continental Resources affords us the opportunity to gain 0 0 insight regarding natural gas reserve potential in emerging ’04 ’05 ’06 ’07 ’08 ’04 ’05 ’06 ’07 ’08 unconventional resource plays, such as the Bakken and NOTE: Historical 2004 data reflects the combined results NOTE: Historical 2004 data reflects the combined results of Hiland’s predecessor and Hiland Partners, LLC. of Hiland’s predecessor and Hiland Partners, LLC. Woodford shales, and thus the ability to generate and invest in organic growth projects and system expansion opportunities at favorable rates of return. COMPARISON OF CUMULATIVE TOTAL RETURN1 Among Hiland Partners, LP, the S&P 500 Index and the Alerian MLP Index2 STRATEGICALLY LOCATED ASSETS 300 Hiland’s physical assets serve emerging areas of crude oil and natural gas exploration such as the Bakken Shale 250 in Montana and North Dakota, and the Woodford Shale in 200 southeastern Oklahoma. We believe our ability to design, construct and operate natural gas midstream gathering, 150 processing and treating facilities for upstream companies 100 $92 in these areas and in other new and emerging resource $82 plays provides us a competitive advantage in developing 50 $29 organic growth projects.