10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

Commission File No. 333-75818

Hanover Equipment Trust 2001B

(Exact name of registrant as specified in its charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)	51-6523442 (I.R.S. Employer Identification No.)
c/o Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware (Address of Principal Executive Offices)	19890 (Zip Code)

(302) 651-1000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to 12(g) of the Act: None

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

     Indicate by check if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o    Accelerated filer o    Non-accelerated filer þ

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     As of June 30, 2006, no common equity securities of Hanover Equipment Trust 2001B (the “Registrant”) were held by non-affiliates of the Registrant. The Registrant is a special purpose Delaware business trust and its sole equity certificate holder is General Electric Capital Corporation.

Documents Incorporated by Reference: NONE

TABLE OF CONTENTS

	Page
PART I
Item 1. Business	4
Item 1A. Risk Factors	8
Item 1B. Unresolved Staff Comments	10
Item 2. Properties	10
Item 3. Legal Proceedings	10
Item 4. Submission of Matters to a Vote of Security Holders	10
PART II
Item 5. Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	10
Item 6. Selected Financial Data	11
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation	12
Item 7A. Quantitative and Qualitative Disclosures about Market Risk	15
Item 8. Financial Statements and Supplementary Data	15
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	15
Item 9A. Controls and Procedures	15
Item 9B. Other Information	15
PART III
Item 10. Directors and Executive Officers of Hanover Equipment Trust 2001B	16
Item 11. Executive Compensation	16
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	16
Item 13. Certain Relationships and Related Transactions	16
Item 14. Principal Accountant Fees and Services	16
PART IV
Item 15. Exhibits and Financial Statement Schedules	16
SIGNATURES	18
Report of Independent Registered Public Accounting Firm	F-1
BALANCE SHEETS	F-2
STATEMENTS OF OPERATIONS	F-3
STATEMENTS OF CASH FLOWS	F-4
STATEMENTS OF CERTIFICATE HOLDER’S EQUITY	F-5
NOTES TO FINANCIAL STATEMENTS	F-6
EXHIBIT INDEX
Certification Pursuant to Rule 13a-14(a)/15d-14(a)
Certification Pursuant to Section 906
Risk Factors

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PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This report contains “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact contained in this report are forward-looking statements. These forward-looking statements can generally be identified as such because the context of the statement will include words such as “believes,” “anticipates,” “expects,” “estimates,” or words of similar import, although some forward-looking statements are expressed differently. Statements that describe future plans, objectives or goals of Hanover Equipment Trust 2001B (the “Registrant,” “Trust,” “we,” “us” or “our”) are also forward looking statements. You should consider these statements carefully because they describe our expectations and beliefs concerning future business conditions, our results of operations, financial position, and our business outlook or state other “forward-looking” information based on currently available information. These forward-looking statements are subject to certain risks and uncertainties applicable to the Trust. These forward-looking statements are also subject to certain risks and uncertainties applicable to Hanover Compression Limited Partnership (“HCLP”), to which we lease all of the equipment owned by the Trust, and Hanover Compressor Company (“Hanover”), the ultimate parent company of HCLP to which (along with HCLP) we look for all of the Trust’s revenue. All of these risks and uncertainties could cause actual results to differ materially from those anticipated as of the date of this report. The risks and uncertainties related to Hanover’s and HCLP’s businesses, as may be described in more detail in Hanover’s Annual Report on Form 10-K for the year ended December 31, 2006, and in subsequent filings by Hanover with the SEC, could cause our actual results to differ from those described in, or otherwise projected or implied by, the forward-looking statements set forth herein. The risks and uncertainties include:

• Hanover and HCLP operate in a highly competitive industry that includes competition among the various providers of contract compression services;

• reduced profit margins or the loss of market share resulting from competition, including pricing pressure in Hanover’s and HCLP’s businesses;

• the introduction of competing technologies by Hanover and HCLP’s competitors;

• a prolonged substantial reduction in oil and natural gas prices, which would cause a decline in the demand for HCLP’s compression and oil and natural gas production equipment;

• governmental safety, health and environmental regulations which could require Hanover and HCLP to make significant expenditures;

• currency fluctuations (in countries including but not limited to Italy, Argentina and Venezuela) and changes in interest rates;

• adverse results in litigation or regulatory proceedings to which Hanover and/or HCLP is a party;

• inability of Hanover or HCLP to comply with the financial and other covenants in or defaults under, their debt agreements and the agreements related to their compression equipment lease obligations which if not cured or waived could have a material adverse effect on Hanover and/or HCLP and the decreased financial flexibility associated with Hanover’s and HCLP’s substantial debt;

• Hanover’s and/or HCLP’s inability to implement certain business objectives including international expansion;

• Hanover’s and/or HCLP’s inability to timely and cost-effectively execute projects in international operating environments, which includes certain inherent risks in their international business activities including the following:

• unexpected changes in regulatory requirements;

• tariffs and other trade barriers that may restrict their ability to enter into new markets;

• governmental actions that result in the deprivation of contract rights;

• changes in political and economic conditions in the countries in which they operate, including civil uprisings, riots, kidnappings and terrorist acts, particularly with respect to their operations in Nigeria;

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• potentially adverse tax consequences;

• restrictions on repatriation of earnings or expropriation of property without fair compensation;

• difficulties in establishing new international offices and risks inherent in establishing new relationships in foreign countries; and

• the burden of complying with the various laws and regulations in the countries in which they operate.

• Hanover’s and/or HCLP’s ability to manage business effectively will be weakened if key personnel are lost;

• liability for acquired facilities in the past which could subject Hanover and/or HCLP to future environmental liabilities;

• Hanover’s or HCLP’s inability to generate the substantial amount of capital needed to expand their compressor rental fleet and their complimentary businesses;

• Hanover and HCLP have a substantial amount of debt, including under their compression equipment lease obligations, that could limit their ability to fund future growth and operations and increase their exposure during adverse economic conditions and as a result of having a significant amount of leverage as compared to their total capitalization which could result in a change made in their credit rating or other adverse consequences if Hanover and HCLP do not decrease their leverage;

• Hanover’s or HCLP’s inability to renew its short-term leases of equipment with its customers so as to fully recoup the cost of the equipment;

• Hanover or HCLP’s inability to generate the significant amount of cash needed to service their debt, to fund working capital and to pay their debts when they become due;

• Hanover’s or HCLP’s future ability to refinance existing or incur additional indebtedness to fund Hanover’s and HCLP’s businesses;

• losses incurred by Hanover and HCLP due to inherent risks associated with their natural gas operations, including equipment defects, malfunctions and failures and natural disasters;

• war, social unrest, terrorist attacks, and/or the responses thereto;

• Hanover’s and/or HCLP’s inability to successfully integrate acquired businesses;

• risks associated with any significant failure or malfunction of Hanover and HCLP’s enterprise resource planning system;

• Hanover’s and/or HCLP’s inability to reduce debt relative to their total capitalization;

• changes in federal bankruptcy or tax laws, comparable state laws or accounting principles.

• Hanover’s inability to consummate the proposed merger with Universal Compression Holdings, Inc.

     All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. The forward-looking statements included herein are only made as of the date of this report, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

Item 1. Business

     Hanover Equipment Trust 2001B (the “Trust”) is a Delaware special purpose business trust which was formed in August 2001. The Trust was formed solely to: (i) issue the 8.75% senior secured notes due 2011 (the “Notes”), (ii) execute, deliver and perform the operating agreements to which it is a party, and (iii) use the proceeds of the Notes and the related equity certificates to purchase approximately $257.8 million of natural gas compression equipment from Hanover Compression Limited Partnership (“HCLP”) and certain of its subsidiaries. The equity funding, issuance of the Notes and equipment purchase occurred on August 30, 2001. The Trust leased its natural gas compression equipment back to HCLP under a ten-year operating lease (the “Lease”). In addition to rental

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payments, HCLP is obligated to pay supplemental rent, costs, taxes, indemnities, and other amounts owing under the Lease. In addition, HCLP is obligated to pay the underwriting, legal, accounting and other costs of the transactions for the Trust. General Electric Capital Corporation (“GE Capital”) holds the Trust’s equity certificate. The equity certificate represents a common undivided beneficial interest in the assets of the Trust with an aggregate liquidation amount equal to at least 3% of the total capital of the Trust. Because it is the sole equity certificate holder of the Trust, GE Capital is the owner of the Trust. However, GE Capital has no obligation to pay the principal or interest on the Notes. Although Hanover and its affiliates have had arms-length business dealings with GE Capital and its affiliates in the past and may do so in the future, none of these transactions have resulted in and are not expected to result in any material conflict of interest between GE Capital and the Trust.

     Under the Lease, the Trust receives lease payments that are sufficient in amount to pay interest on the Notes, and to provide a yield to the equity certificate holder. After September 1, 2006, HCLP has an option to purchase the leased equipment from the Trust for an amount sufficient to repay the Notes in full plus a premium. If HCLP does not exercise its option to purchase all the leased equipment, HCLP is required to use its best efforts to sell the equipment on the Trust’s behalf. In such event, at the end of the lease term, HCLP is required to make a final rent payment equal to approximately $175 million, plus the proceeds from the sale of the leased equipment. All of these amounts will be applied to repay the Notes. If the final rent payment and the proceeds from the sale of the leased equipment are insufficient to pay the Notes in full, HCLP will be liable for an assessment of additional rent with respect to actual excess wear and tear of the leased equipment, as determined by an independent appraisal procedure. If the sale option is exercised, the final rent payment, sale proceeds and the assessment of additional rent may not be sufficient for the Trust to repay the Notes in full. To the extent the final rent payment and the proceeds from the sale of leased equipment exceed the amounts required to pay the Notes, the excess will be used first to repay contributed capital to the equity certificate holder and the balance, if any, will thereafter be returned to HCLP. Hanover Compressor Company (“Hanover”) has guaranteed HCLP’s obligations under the Lease.

     The Trust’s obligations under the Notes are jointly and severally guaranteed, unconditionally and on a senior subordinated basis, by Hanover and HCLP for an amount up to 70.0% of the aggregate principal balance of Notes outstanding, which is equal to the final rent payment under the Lease. If there is no event of default under the Lease and HCLP does not purchase the leased equipment, neither Hanover nor HCLP has any obligation to pay the other 30.0% of the aggregate principal balance of Notes outstanding, and the holders of Notes will be dependent upon the final rent payment, the proceeds of the sale of leased equipment and the assessment of additional rent, if any, to repay the outstanding principal balance of the Notes in full. The value of the leased equipment may decline prior to the end of the lease term due to market and economic conditions, the supply of similar types of equipment, the availability of buyers and the condition of the leased equipment, among other factors. If there is an event of default under the Lease, Hanover and HCLP guarantee, jointly and severally, on a senior subordinated basis, all of the Trust’s obligations under the Notes.

     In February 2007, Hanover entered into an Agreement and Plan Merger with Universal Compression Holdings, Inc., a Delaware corporation (“Universal”), Iliad Holdings, Inc., a Delaware corporation (“Iliad”), Hector Sub, Inc., a Delaware corporation (“Hanover Merger Sub”), and Ulysses Sub, Inc., a Delaware corporation (“Universal Merger Sub”). Iliad is a newly formed, wholly owned direct subsidiary of Universal, and Hanover Merger Sub and Universal Merger Sub are direct wholly owned subsidiaries of Iliad. If the transactions contemplated by the merger agreement are consummated, Hanover and Universal will become direct wholly owned subsidiaries of Iliad, and the stockholders of Hanover and Universal will become stockholders of Iliad. Consummation of the proposed merger is subject to certain conditions that are set forth in the merger agreement including regulatory approval. If the proposed merger closes, each holder of the Notes will have the right to require the Trust to repurchase the Notes at a price of 101% of the principal amount of the Notes plus accrued and unpaid interest. Pursuant to the Lease, HCLP would be required to purchase the amount of equipment necessary to generate sufficient proceeds for the Trust to purchase the respective Notes and prepay a proportionate amount of equity certificates. For more information about the terms of the merger agreement, see Hanover’s Annual Report on Form 10-K for the year ended December 31, 2006.

     In addition, Hanover and Universal have each made customary representations, warranties and covenants in the merger agreement, including, among others, covenants to conduct their businesses in the ordinary course between the execution of the merger agreement and the consummation of the mergers and covenants not to engage in certain kinds of transactions during that period. Hanover has agreed with Universal to certain exceptions to the limitations contained in these covenants, including (1) permitting Hanover to redeem or partially redeem from time to time their 7.25% Convertible Junior Subordinated Debentures due 2029 and (2) commencing on September 1, 2007, permitting Hanover to repurchase in the open market up to $100 million aggregate principal amount of Hanover’s outstanding 4.75% Convertible Senior Notes due 2008, subject to certain limitations. In addition, Hanover and Universal have made certain additional customary covenants to one another, including, among others, covenants, subject to certain exceptions, (A) not to solicit proposals relating to alternative business combination transactions, (B) not to enter into discussions concerning, or provide confidential information in connection with, alternative business combination transactions, (C) to cause stockholder meetings to be held to consider approval of the mergers and the other transactions contemplated by the merger agreement and (D) for their respective Boards of Directors to recommend adoption of the merger agreement by their respective stockholders.

     In February 2003, the Trust completed a registered offering pursuant to a registration statement on Form S-4 to exchange its 8.75% senior secured notes due 2011 (the “new notes”) for all of its outstanding 8.75% senior secured notes due 2011 (the “old notes”). The exchange offer provided that holders of the old notes would receive $1,000 principal amount of new notes for each $1,000 principal amount of old notes exchanged. The terms of the new notes are identical to the terms of the old notes except that the new notes are freely transferable under the Securities Act of 1933 and do not have any exchange or registration rights.

     In March 2003, the exchange offer was completed and all of the old notes were exchanged for new notes. When we refer to the “Notes” in the notes to financial statements, we are referring collectively to the old notes and the new notes, unless otherwise indicated.

     The Trust conducts its business pursuant to the terms of its trust agreement. The Trust exists for the exclusive purposes of:

• issuing the old notes and the new notes;

• issuing the equity certificates to the equity certificate holder;

• investing the gross proceeds of the old notes and the equity certificates in the leased equipment;

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• entering into the Lease, a participation agreement and other ancillary agreements relating to the financing of the leased equipment (collectively, the “Operative Agreements”);

• distributing payments received under the Lease to the holders of the old notes or the new notes, as the case may be, and the equity certificates; and

• engaging in only those other activities necessary or incidental to such purposes.

     Pursuant to the trust agreement, the equity certificate holder authorized the trustee of the Trust to execute and deliver each of the Operative Agreements to which the Trust is a party and to take such other actions as required by each of such Operative Agreements. The Trust holds all legal right and title in and to the leased equipment, the equity certificate holder contributions, the proceeds of the old notes, the Operative Agreements and any other property or payment of any kind (collectively, the “Trust Estate”) for the use and benefit of the equity certificate holder.

     The Trust does not have officers or directors. The trustee of the Trust has a duty to protect and conserve the Trust Estate for the use and benefit of the equity certificate holder, subject to the provisions of the Operative Agreements. Subject to the terms of the trust agreement, the Operative Agreements and applicable law, the trustee of the Trust acts on behalf of the Trust solely as authorized and directed by the equity certificate holder. The trustee may not otherwise manage or control the Trust Estate. The trustee is indemnified by the equity certificate holder for any liabilities or expenses that may be imposed on it arising out of or relating to the Trust Estate, the administration of the Trust Estate, the Operative Agreements or the leased equipment. The equity certificate holder has the right to appoint, remove or replace the trustee. Amendments to the trust agreement must be approved in writing by a party (including, if applicable, the indenture trustee) who would be adversely affected thereby. The trust agreement and the Trust will terminate and the Trust Estate will be distributed, subject to the provisions of the Operative Agreements, to the equity certificate holder upon the sale of all property constituting the Trust Estate or after thirty years. In addition, at any time after six months from the date on which the Lease is no longer in effect, the trustee of the Trust may terminate the trust agreement and the Trust at its option and convey the Trust Estate to the equity certificate holder.

Financing

     To fund the purchase of the leased equipment from HCLP, the Trust issued $250 million aggregate principal amount of Notes and raised $7.75 million in equity from the Trust’s equity certificate holder. Interest accrues on the Notes at the rate of 8.75% per year, payable semi-annually in arrears on March 1 and September 1 of each year. The Notes mature on September 1, 2011. Return on the equity certificate accrues at the Eurodollar rate or the prime rate, plus a spread in each case of 8.375% per year, payable quarterly on March 1, June 1, September 1 and December 1 of each year.

     A schedule reflecting the dates and amounts payable on the Notes and the equity certificate is set forth below. All amounts under the Notes are payable to the trustee, Wilmington Trust Company, who remits the payments to U.S. Bank, the indenture trustee. All amounts under the equity certificate are payable to the equity certificate holder.

Obligation	Amount Due	Date Due
8.75% Senior Secured Notes due 2011	$10,937,500	Each March 1 and September 1 to maturity
Equity Certificate	Accrued return on approximately $7.8 million, based on the floating certificate holder yield rate of the Eurodollar rate or the prime rate, plus a spread in each case of 8.375% (1)	March 1, June 1, September 1 and December 1 to maturity

(1) As of December 31, 2006, based upon the certificate holder yield rate of 13.7%, the Trust would make payments to the equity certificate holder of approximately $266,000 per quarter.

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Industry

Natural Gas Compression Overview

     Typically, compression is required at several intervals of the natural gas production cycle: at the wellhead, at the gathering lines, into and out of gas processing facilities, into and out of storage and throughout the transportation systems.

     Over the life of an oil or gas well, natural reservoir pressure and deliverability typically decline as reserves are produced. As the natural reservoir pressure of the well declines below the line pressure of the gas gathering or pipeline system used to transport the gas to market, gas no longer flows naturally into the pipeline. It is at this time that compression equipment is applied to economically boost the well’s production levels and allow gas to be brought to market.

     In addition to such wellhead and gas field gathering activities, natural gas compressors are used in a number of other applications, most of which are intended to enhance the productivity of oil and gas wells, gas transportation lines and processing plants. Compressors are used to increase the efficiency of a low capacity gas field by providing a central compression point from which the gas can be removed and injected into a pipeline for transmission to facilities for further processing. As gas is transported through a pipeline, compression equipment is applied to allow the gas to continue to flow in the pipeline to its destination. Additionally, compressors are used to re-inject associated gas to lift liquid hydrocarbons and thereby increase the rate of crude oil production from oil and gas wells. Furthermore, compression enables gas to be stored in underground storage reservoirs for subsequent extraction during periods of peak demand. Finally, compressors are often used in combination with oil and gas production and processing equipment to process and refine oil and gas into higher value added and more marketable energy sources, as well as used in connection with compressed natural gas vehicle fueling facilities providing an alternative to gasoline.

     Changing well and pipeline pressures and conditions over the life of a well often require producers to reconfigure or change their compressor units to optimize the well production or pipeline efficiency. Due to the technical nature of the equipment, a dedicated local parts inventory, a diversified fleet of natural gas compressors and a highly trained staff of field service personnel are necessary to perform such functions in the most economic manner.

     Natural gas compressor fabrication involves the design, fabrication and sale of compressors to meet the unique specifications dictated by the well pressure, production characteristics and the particular applications for which compression is sought. Compressor fabrication is essentially an assembly operation in which an engine, compressor, control panel, cooler and necessary piping are attached to a frame called a “skid.” A fabricator typically purchases the various compressor components from third-party manufacturers, but employs its own engineers and labor force to design and fabricate compressor packages.

     In order to meet customers’ needs, gas compressor fabricators typically offer a variety of services to their customers, including:

• engineering, fabrication and assembly of the compressor package;

• installation and testing of the package;

• ongoing performance review to assess the need for a change in compression; and

• periodic maintenance and replacement parts supply.

Our Equipment

     The Trust’s compression equipment includes approximately 949 units representing approximately 503,000 of horsepower.

Customers

     In the fiscal years ended December 31, 2006, 2005 and 2004, our single customer, HCLP, accounted for 100% of our total rental revenues. HCLP’s customer base consists of U.S. and international companies engaged in all aspects of the oil and gas industry, including major integrated oil and gas companies, large and small independent producers, national oil and gas companies, natural gas processors, gatherers and pipelines.

Environmental and Other Regulations

     Under the Lease, HCLP indemnifies the Trust for all losses or liabilities it may suffer as a result of the failure to comply with applicable environmental laws, including requirements pertaining to necessary permits such as air permits. The Trust has no environmental losses or liabilities as of December 31, 2006.

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Employees and Labor Relations

     As of December 31, 2006, the Trust had no employees, officers or directors.

Available Information

     Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and the amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available at the website of the Securities and Exchange Commission, which can be found at http://www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities at 100 F Street, N.E., Washington, D.C. 20549. You can obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.

Item 1A. Risk Factors

The assets and source of revenue available to repay the Notes, satisfy the claims of holders of the Notes and provide a yield to the equity certificate holder are limited, as we have no assets other than our interests in the equipment, and no source of revenue other than the payments under the Lease and the Hanover guarantee.

     The Notes are our obligations and are secured only by a perfected first priority security interest in the equipment and an assignment of the Lease and the Hanover guarantee to the trustee for the Notes. The Notes are not obligations of Hanover or HCLP. The holders of the Notes and the trustee under the indenture will have recourse only against us, the collateral for the benefit of the holders of the Notes, and Hanover and HCLP to the extent of the Hanover guarantee. If HCLP defaults under the Lease and Hanover and HCLP default under the Hanover guarantee, we may not be able to perform our obligations under the indenture or pay a yield to the equity certificate holder.

     The business and performance of HCLP and Hanover are subject to a variety of risks. These risks are described in Item 1A. Risk Factors of Hanover’s annual report on Form 10-K for the year ended December 31, 2006 and are incorporated herein by reference and filed as Exhibit 99.1 to this report.

Obligations under the Hanover guarantee are subordinated to Hanover’s and HCLP’s senior indebtedness as well as all indebtedness and other liabilities of Hanover’s and HCLP’s subsidiaries.

     While the Notes are our senior secured obligations, the Hanover guarantee ranks behind all of Hanover’s and HCLP’s existing and future senior indebtedness. Moreover, the obligations of Hanover and HCLP under the Hanover guarantee will be structurally subordinated to all indebtedness and other liabilities of Hanover’s and HCLP’s respective subsidiaries. Hanover’s and HCLP’s senior indebtedness include obligations under their bank credit facility. Their bank credit facility is secured by liens on the inventory, equipment and certain other property of Hanover and its domestic subsidiaries, and a pledge of 66% of the equity interests in Hanover’s foreign subsidiaries.

     As of December 31, 2006, Hanover had approximately $1,145 million in outstanding indebtedness, guarantees and letters of credit that were senior to its obligations under the Hanover guarantee. As of December 31, 2006, HCLP had approximately $228 million in outstanding indebtedness and letters of credit that was senior to its obligations under the Lease and the Hanover guarantee of the Notes.

     As a result of the subordinated nature of the Hanover guarantee, upon any distribution to any of the creditors of Hanover or HCLP, as the case may be, in a bankruptcy, liquidation or reorganization or similar proceeding relating to Hanover or HCLP or their respective properties, the holders of senior indebtedness of Hanover or HCLP, as the case may be, will be entitled to be paid in full in cash before any payment may be made with respect to the Hanover guarantee.

     Events of default under the indenture differ in certain respects from the events of default under the Lease. Unless there is an event of default under the Lease, we would have recourse under the Hanover guarantee only up to the maximum amount of 70.0% of the aggregate principal balance of notes outstanding, which is equal to the final rent payment under the Lease. As of December 31, 2006, unless there is an event of default under the Lease, we would have recourse under the Hanover guarantee only to the extent of approximately $175 million. As a result, we may not be able to perform our obligations under the indenture.

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     No payments may be made under the Hanover guarantee if there is a default in payment on senior indebtedness of Hanover or HCLP or the maturity of such senior indebtedness is accelerated. In addition, during the continuance of certain defaults under certain senior indebtedness of Hanover or HCLP, Hanover or HCLP, as the case may be, will not be permitted to make payments under the Hanover guarantee for a payment blockage period of up to 179 of 360 consecutive days. In the event that we are unable to pay the Notes, the holders of the Notes would have no recourse under the Hanover guarantee during any such payment blockage period. Furthermore, despite the fact that the Notes are secured by the equipment, any remedies exercisable against such collateral will also be blocked during such period.

Hanover’s proposed merger with Universal is subject to the receipt of consents and approvals from various government entities that may impose conditions on, jeopardize or delay completion of the merger or reduce the anticipated benefits of the merger.

     In February 2007, Hanover announced that it had entered into an agreement to merge with Universal. Completion of the merger is conditioned upon, among other events, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which we refer to as the HSR Act, and the expiration or termination of any mandatory waiting period under applicable non-U.S. antitrust laws, where the failure to observe that waiting period would be reasonably likely to have a material adverse effect on the combined company after the merger.

     Hanover and Universal may not be able to obtain the required consents, orders, approvals and clearances. Moreover, if they are obtained, they may impose conditions on, or require divestitures relating to operations or assets of, Hanover or Universal. The merger agreement requires Hanover and Universal to satisfy any conditions or divestiture requirements imposed upon them unless the conditions or divestitures would be reasonably likely to have a material adverse effect on the combined company after the merger. A substantial delay in obtaining any required approvals or the imposition of any unfavorable conditions or divestitures in connection with the receipt of any required approvals may jeopardize or delay completion of the merger or reduce the anticipated benefits of the merger.

While the merger is pending, Hanover will be subject to business uncertainties and contractual restrictions that could adversely affect Hanover’s business.

     Uncertainty about the effect of the merger on employees, customers and suppliers may have an adverse effect on Hanover and, consequently, on the combined new company. Although Hanover has indicated that it intends to take steps to reduce any adverse effects, these uncertainties may impair Hanover’s ability to attract, retain and motivate key personnel until the merger is consummated and for a period of time thereafter, and could cause customers, suppliers and others who deal with Hanover to seek to change existing business relationships with Hanover. Employee retention may be particularly challenging for Hanover during the pendency of the merger because employees may experience uncertainty about their future roles with the combined company. If, despite Hanover’s retention efforts, employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the combined company, the combined company’s business could be seriously harmed. In addition, the merger agreement restricts Hanover, without Universal’s consent and subject to certain exceptions, from making certain acquisitions and taking other specified actions until the merger occurs or the merger agreement terminates. These restrictions may prevent Hanover from pursuing otherwise attractive business opportunities and making other changes to Hanover’s business that may arise prior to completion of the merger or termination of the merger agreement.

Failure to complete the merger could negatively impact Hanover’s stock price and Hanover’s future business and financial results because of, among other things, the disruption that would occur as a result of uncertainties relating to a failure to complete the merger.

     Although Hanover and Universal have agreed to use their reasonable best efforts to obtain stockholder approval of the merger, the stockholders of both Hanover and Universal may not approve the merger. In addition, Hanover and Universal may not receive the required consents, orders, approvals and clearances to complete the merger or satisfy the other conditions to the completion of the merger. If the merger is not completed for any reason, Hanover could be subject to several risks, including a break up fee and having had the focus of Hanover’s management directed toward the merger and integration planning instead of on Hanover’s core business and other opportunities that could have been beneficial to Hanover. In addition, Hanover would not realize any of the expected benefits of having completed the merger. Hanover has incurred and will continue to incur substantial financial advisory, legal and other expenses associated with the merger even if it does not close.

     If the merger is not completed, the price of Hanover’s common stock may decline to the extent that the current market price of that stock reflects a market assumption that the merger will be completed and that the related benefits and synergies will be realized, or as a result of the market’s perceptions that the merger was not consummated due to an adverse change in Hanover’s business. In addition, Hanover’s business may be harmed, and the price of Hanover’s common stock may decline as a result, to the extent that customers, suppliers and others believe that Hanover cannot compete in the marketplace as effectively without the merger or otherwise remain uncertain about Hanover’s future prospects in the absence of the merger. Similarly, current and prospective employees may experience uncertainty about the future of Hanover if the merger is not completed, and the loss of those employees could adversely affect Hanover. If the merger is not completed, Hanover may not be able to attract and retain key management, marketing and technical personnel due to uncertainty about the future of Hanover, which could harm Hanover’s businesses and results. The realization of any of these risks may materially adversely affect Hanover’s business, financial results, financial condition and its stock price.

If at the end of the Lease term, HCLP fails to purchase the equipment, then HCLP is required to pay an amount equal to the final rent payment with respect to the Lease plus the proceeds, if any, from the sale of the equipment. This amount may be less than the amount due on the Notes.

     Hanover and HCLP are obligated under the Hanover guarantee to guarantee payment in full on the Notes only upon the occurrence of an event of default under the Lease, which would include, among other things, the failure to make any rent payments (including the final rent payment) or properly insure or maintain the equipment. If, by the end of the term of the Lease, HCLP does not exercise its option to purchase the equipment and instead exercises its option to pay the final rent payment in full, sell the equipment, and apply the proceeds from the sale to repay the remainder of the Notes, no event of default under the Lease will have occurred. If the proceeds from the sale of the equipment under the Lease are less than $250 million, the principal amount currently outstanding under the Notes (as such amount may be reduced from time to time upon purchases of equipment under the Lease by HCLP in accordance with the terms of the Lease) and therefore insufficient to pay the remainder of the Notes, the holders of the Notes will incur a loss and neither Hanover nor HCLP will be required to compensate for any such shortfall.

The value of the equipment securing the Notes may not be sufficient to cover the obligations owed to holders of the Notes under the Notes.

     The Notes are secured by collateral consisting of a perfected first priority security interest in the equipment, and an assignment of the Lease and the Hanover guarantee to the trustee for the Notes. If there is a payment default under the Lease or the Hanover guarantee such that HCLP and Hanover do not have sufficient cash and capital resources available to pay their obligations, holders of the Notes will have to look to the value that can be realized from the equipment with respect to the notes.

     The value of the equipment may decline prior to the end of the term of the Lease due to market and economic conditions, the supply of similar types of equipment, the availability of buyers at the end of the Lease term and the condition of the equipment, among other factors. There is no amortization or sinking fund to cover the principal payment of the Notes. Hanover and HCLP have no experience selling leased equipment at the end of the term of an operating lease like the Lease and the proceeds realized upon a future sale of any of the equipment may be less than an appraised value of the equipment. Except for our rights under the Lease and the Hanover guarantees, we have no recourse to the assets of Hanover or HCLP to pay the amounts owed on the Notes. If the remedies after default are exercised under the Lease and the Hanover guarantee, the proceeds realized upon any such exercise of remedies may not be sufficient to satisfy in full amounts owing on the Notes.

There are some limitations on the right to amend the participation agreement and the other operative agreements and to accelerate payments under the Lease and to foreclose on the equipment.

     During a workout or bankruptcy proceeding, the consent of our equity certificate holder may be required to amend, supplement, waive or modify provisions of the Lease, the participation agreement, the indenture and each other operative agreement that is material to such equity certificate holder, if such amendment, waiver, supplement or modification would materially adversely affect the equity certificate holder.

     Events of default under the indenture are different in some ways from the events of default under the Lease. Accordingly, even though the trustee under the indenture will be entitled to accelerate the Notes if there is an event of default under the indenture, we, as lessor under the Lease, would not be entitled to accelerate the lease payments or exercise any of its other remedies under the Lease unless there was an event of default under the Lease. If a default occurs under the indenture without a corresponding default under the Lease, then we would have no source of repayment of the Notes upon acceleration of the Notes by the trustee. Further, unless there is an event of default under the Lease, the holders of the Notes will have recourse under the Hanover guarantee only up to the maximum amount of 70.0% of the aggregate principal balance of notes outstanding, which is equal to the final rent payment under the Lease. As of December 31, 2006, unless there is an event of default under the Lease, we would have recourse under the Hanover guarantee only to the extent of approximately $175 million. As a result, we may not be able to perform our obligations under the indenture.

9

If HCLP declares bankruptcy, our rights against HCLP and Hanover may be limited.

     The right to exercise remedies against HCLP in a bankruptcy proceeding would be stayed, including the right to proceed against the equipment and HCLP under the Lease and Hanover guarantee, and may be stayed against Hanover under the Hanover guarantee. In addition, in the event of a HCLP bankruptcy, (i) distributions, if any, payable with respect to any claim under the Lease may not be sufficient to result in a repayment of the Notes, and (ii) if, after obtaining bankruptcy court approval, we are permitted to foreclose or otherwise sell the equipment during a bankruptcy of HCLP, we may not realize sufficient value to cause the Notes to be repaid.

In addition to the risks discussed above with respect to bankruptcy of HCLP, if we declare bankruptcy, your rights against us may be limited.

     If we were the subject of a bankruptcy petition, the right to exercise virtually all remedies against us would be stayed, including the right to proceed against the collateral held by the collateral agent securing the Notes. A bankruptcy court may recharacterize the Lease as a secured financing incurred by HCLP and therefore restrict your ability to realize on the equipment in order to satisfy the obligation under the Notes. In addition, the bankruptcy court could permit the use or disposition of payments made under the Lease for purposes other than making payments on the Notes and could reduce the amount or modify the timing of payments due under the Notes or the Lease, including by rejecting the Lease.

Other creditors may have prior liens on the collateral that could reduce or eliminate the amount of collateral securing the Notes.

     In general, the priority of the liens on a particular item of collateral securing the Lease is determined by the time that the security interest in that item of collateral is perfected. Creditors such as purchase money lenders may be entitled to a prior claim to someone, such as the collateral agent, even if that person has previously perfected a security interest in the collateral. Furthermore, liens such as landlords’, warehousemen’s and materialmen’s liens and tax liens may by law have priority over the liens granted for your benefit in the collateral.

     We do not believe there are any material prior liens on the collateral securing claims of anyone that is not a party to the Lease. However, additional prior claims may arise by law and a bankruptcy or other court may refuse, on equitable or other grounds, to enforce the terms of the Lease and the participation agreement against the other creditors party to those agreements. If this were to happen, the claims of the other creditors against the collateral could be prior to yours.

Item 1B. Unresolved Staff Comments

     None

Item 2. Properties

     None

Item 3. Legal Proceedings

     From time to time, the Trust may be involved in litigation relating to claims arising out of its operations or in the normal course of business. The Trust is not currently involved in any material litigation or proceeding and is not aware of any such litigation or proceeding threatened against it.

Item 4. Submission of Matters to a Vote of Security Holders

     None

PART II

Item 5. Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

     There is currently no established market for the equity certificate. Hanover Equipment Trust 2001B is a trust with one equity certificate holder. We pay a return to our equity certificate holder each quarter as described under “Business”.

10

     In February 2003, the Trust filed a registration statement on Form S-4 offering to exchange its registered 8.75% senior secured notes due 2011 for all of its outstanding 8.75% senior secured notes due 2011. The exchange offer provides that holders of the old notes will receive $1,000 principal amount of applicable new notes for each $1,000 principal amount of old notes exchanged. The terms of the new notes are identical to the terms of the applicable old notes except that the new notes are freely transferable under the Securities Act of 1933 and do not have any exchange or registration rights. In March 2003, the exchange offer was completed.

Item 6. Selected Financial Data

SELECTED HISTORICAL FINANCIAL DATA OF HANOVER EQUIPMENT TRUST 2001B

     In the table below, we have presented certain financial data for the Trust. The historical financial data was derived from the Trust’s audited financial statements as of and for the years ended December 31, 2006, 2005, 2004 and 2003 and 2002. The Trust was organized under the laws of the State of Delaware and commenced business on August 16, 2001 solely for the purpose of (1) issuing the old notes and the new notes, (2) executing, delivering and performing the Operative Agreements to which it is a party and (3) using the proceeds from the issuance of the old notes and the other financing transactions to purchase the leased equipment.

     The information in this section should be read along with the Trust’s financial statements, accompanying notes and other financial information included elsewhere in this report.

	Year Ended December 31,
	2006		2005		2004		2003		2002
					(in thousands)
Rental revenue	$	23,013	$	22,888	$	22,766	$	23,226	$	25,603
Interest expense on rental equipment		21,875		21,875		21,875		22,307		24,186
Excess rental revenue over interest expense on rental equipment		1,138		1,013		891		919		1,417
Operating expense		83		96		119		165		623
Net income	$	1,055	$	917	$	772	$	754	$	794
Balance Sheet Data (End of Period):
Rental equipment	$	257,750	$	257,750	$	257,750	$	257,750	$	257,750
Total assets		265,188		265,187		265,171		265,147		266,346
8.50% senior secured notes due 2008		250,000		250,000		250,000		250,000		250,000
Certificate holder’s equity		7,750		7,750		7,750		7,750		7,750

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation

General

     The Trust was formed in August 2001 for the purpose of purchasing natural gas compression equipment and leasing that equipment to HCLP under the Lease. The Trust funded the equipment purchase through the issuance of its 8.75% senior secured notes due 2011 and an equity investment from the equity certificate holder.

     In August 2001, the Trust purchased approximately $258 million of gas compression equipment to be leased to HCLP in connection with the Lease. The Trust issued $250 million of 8.75% senior secured notes and raised $7.8 million in equity from the Trust’s equity certificate holder to finance the purchase of the gas compression equipment.

     In February 2003, the Trust filed a registration statement on Form S-4 offering to exchange its registered new notes for all of its outstanding old notes. The exchange offer provided that holders of the old notes would receive $1,000 principal amount of new notes for each $1,000 principal amount of old notes exchanged. The terms of the new notes are identical to the terms of the old notes except that the new notes are freely transferable under the Securities Act of 1933 and do not have any exchange or registration rights. The exchange offer was completed in March 2003.

Critical Accounting Policies and Estimates

     The financial statements of the Trust are significantly affected by its basis of accounting and estimates related to its equipment that are summarized below.

Revenue Recognition

     Revenue from compression equipment rentals is recorded when earned over the period of the ten-year Lease that began on August 30, 2001. Rental revenues are based on the current rental rates and estimated supplemental rent payable by HCLP under the Lease. (See Note 4 to the Financial Statements.)

Concentrations of Credit Risk

     Financial instruments that potentially subject the Trust to concentrations of credit risk consist of cash, cash equivalents and accounts receivable. The Trust’s management believes that the credit risk in temporary cash investments that it has with financial institutions is minimal. Trade accounts receivable are due from HCLP and are due on a short-term basis. The Trust does not obtain collateral for receivables. The recorded assets, obligations and operations of the Trust could be adversely affected if the Trust’s relationship with and/or the financial position of Hanover and/or HCLP is adversely affected.

Rental Equipment

     Rental equipment consists of domestic gas compression equipment and is recorded at cost. Due to the terms of the Lease (see Note 4 to the Financial Statements) and the expected residual value of the equipment at the end of the Lease, management of the Trust believes that the Trust will recover the original cost of the equipment at the end of the Lease. As such, the Trust is not depreciating the rental equipment. If this estimate were to change, the Trust would be required to record depreciation expense.

Long-Lived Assets

     The Trust reviews for the impairment of long-lived assets, including rental equipment and the Trust’s interest in the residual value of the equipment, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss exists when estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. The impairment loss recognized represents the excess of the asset’s carrying value as compared to its estimated fair market value. Adverse changes in market conditions could result in the inability to recover the carrying value of the Trust’s equipment, thereby possibly requiring an impairment charge in the future.

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RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2006 COMPARED TO YEAR ENDED DECEMBER 31, 2005

Revenues

     The Trust’s rental revenues increased by $125,000, or approximately 1%, to $23,013,000 during the year ended December 31, 2006 from $22,888,000 during the year ended December 31, 2005. The Trust’s rental revenue is based primarily on the interest accrued on the Notes and the yield payable to the equity certificate holder. The increase resulted primarily from an increase in the yield rate paid to the equity certificate holder. The interest rate on the Notes is fixed at 8.75% and the amount of interest accrued was $21,875,000 for the years ended December 31, 2006 and 2005. The yield to the equity certificate holder was $1,055,000 for the year ended December 31, 2006 and $917,000 for the year ended December 31, 2005. The yield payable on the equity certificates will vary depending upon the certificate holder yield rate (13.7% as of December 31, 2006 and 12.7% as of December 31, 2005). The certificate holder yield rate is calculated using the Eurodollar rate or, in certain circumstances, the prime rate, plus a spread in each case of 8.375% per year.

     In addition, the Trust received additional rents to reimburse it, as required under the Lease, for its operating expenses. These additional rents amounted to $83,000 for the year ended December 31, 2006 and $96,000 for the year ended December 31, 2005.

Expenses

     Operating expenses decreased by $13,000, or approximately 14%, to $83,000 during the year ended December 31, 2006 from $96,000 during the year ended December 31, 2005. The decrease resulted from reduced professional fees during the year ended December 31, 2006 as compared to the year ended December 31, 2005.

YEAR ENDED DECEMBER 31, 2005 COMPARED TO YEAR ENDED DECEMBER 31, 2004

Revenues

     The Trust’s rental revenues increased by $122,000, or approximately 1%, to $22,888,000 during the year ended December 31, 2005 from $22,766,000 during the year ended December 31, 2004. The increase resulted primarily from an increase in the yield rate paid to the equity certificate holder.

     The Trust’s rental revenue is based primarily on the interest accrued on the Notes and the yield payable to the equity certificate holder. The interest rate on the Notes is fixed at 8.75% and the amount of interest accrued was $21,875,000 for the years ended December 31, 2005 and 2004. The yield to the equity certificate holder was $917,000 for the year ended December 31, 2005 and $772,000 for the year ended December 31, 2004. The yield payable on the equity certificates will vary depending upon the certificate holder yield rate (12.7% as of December 31, 2005 and 10.6% as of December 31, 2004). The certificate holder yield rate is calculated using the Eurodollar rate or, in certain circumstances, the prime rate, plus a spread in each case of 8.375% per year.

     In addition, the Trust received additional rents to reimburse it, as required under the Lease, for its operating expenses. These additional rents amounted to $96,000 for the year ended December 31, 2005 and $119,000 for the year ended December 31, 2004.

Expenses

     Operating expenses decreased by $23,000, or approximately 19%, to $96,000 during the year ended December 31, 2005 from $119,000 during the year ended December 31, 2004. The decrease resulted from reduced professional fees during the year ended December 31, 2005 as compared to the year ended December 31, 2004.

LIQUIDITY AND CAPITAL RESOURCES

     Under the triple net lease terms on the leased equipment, all of the costs of maintaining and financing the leased equipment are borne by HCLP, as the lessee. The Trust believes that it has adequate capital resources for the nature of its business and that the funds provided by operations will be sufficient to satisfy its obligations. Because the Trust is limiting activities to the ownership, financing and leasing of equipment under the Lease, the Trust does not believe it will have any need to obtain additional debt or equity financing for its current operations.

13

     The Trust’s cash and cash equivalents balance at December 31, 2006 and 2005 was $0. Operating activities for the year ended December 31, 2006 provided $1,048,000 of cash, which was used for the payment of the yield due on the equity certificates.

     The Notes are obligations of the Trust and are collateralized by all of the equipment, rents and supplemental rents covered by the Lease. In addition, the Trust’s obligations under the Notes are jointly and severally guaranteed, unconditionally and on a senior subordinated basis, by Hanover, the ultimate parent company of HCLP, and HCLP for an amount up to 70.0% of the aggregate principal balance of Notes outstanding, which is equal to the final rent payment under the Lease. If there is an event of default under the Lease, Hanover and HCLP guarantee, jointly and severally, on a senior subordinated basis, all of the Trust’s obligations under the Notes. Hanover unconditionally guarantees on a senior subordinated basis all of HCLP’s obligations under the Lease. The obligations of HCLP under the Lease are subordinated in right of payment to all existing and future senior indebtedness of HCLP. The obligations of Hanover and HCLP under the guarantee are subordinated in right of payment to all existing and future senior indebtedness of such guarantor. Each guarantee ranks equally in right of payment with all senior subordinated debt and senior to all subordinated debt of such guarantor. The estimated fair market value of the Notes was approximately $260 million and $263 million at December 31, 2006 and 2005, respectively.

     All payments that are received by the Trust under the Lease or guarantee will be applied first to the amounts due under the Notes. The payment of principal, premium, if any, and interest on the Notes are senior in right of payment to the payment in full of amounts due under the equity certificates.

     The Trust did not have the right to redeem the Notes until September 1, 2006. After September 1, 2006, the Trust may redeem the Notes, in whole or in part, if the Trust pays the redemption prices indicated below:

	Redemption Price
After Sept 1, 2006		104.375	%
After Sept 1, 2007		102.917	%
After Sept 1, 2008		101.458	%
After Sept 1, 2009		100.000	%

     The Trust is not affiliated with Hanover or HCLP. The indenture and participation agreement governing the Notes contain covenants that restrict the Trust’s ability to, among other things: incur liens, incur additional indebtedness, enter into any other transactions, make investments, liquidate, and engage in non-related lines of business. In addition, the indenture and participation agreement governing the Notes contain covenants that limit Hanover’s and HCLP’s ability to engage in certain activities and transactions.

Cash Contractual Obligations:	Total		2007		2008-2009		2010-2011		Thereafter
	(In thousands)
2001B equipment lease notes, due 2011	$	250,000	$	—	$	—	$	250,000	$	—
Interest on long-term debt		107,051		22,939		45,879		38,233		—
Total contractual cash obligations	$	357,051	$	22,939	$	45,879	$	288,233	$	—

RECENT ACCOUNTING PRONOUNCEMENTS

     In May 2005, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS 154”). SFAS 154 requires retrospective application for reporting a change in accounting principle in the absence of explicit transition requirements specific to newly adopted accounting principles, unless impracticable. Corrections of errors will continue to be reported under SFAS 154 by restating prior periods as of the beginning of the first period presented. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS 154 did not have a material impact on our consolidated results of operations, cash flows or financial position.

     In February 2006, the FASB issued Statement of Financial Accounting Standards No. 155, “Accounting for Certain Hybrid Instruments — an amendment of FASB Statements No. 133 and 140” (“SFAS 155”). SFAS 155 (a) permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, (b) clarifies which interest-only strips and principal-only strips are not subject to the requirements of FASB No. 133, (c) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, (d) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and (e) amends SFAS No. 140 to eliminate the prohibition on a qualifying special-

14

purpose entity from holding a derivative instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. We are currently evaluating the provisions of SFAS 155 and do not believe that our adoption will have a material impact on our consolidated results of operations, cash flows or financial position.

     In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 provides a single definition of fair value, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value to measure assets and liabilities. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are currently evaluating the provisions of SFAS 157.

SEASONAL FLUCTUATIONS

     The Trust’s results of operations have not reflected any material seasonal tendencies since inception.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

     Not Applicable.

Item 8. Financial Statements and Supplementary Data

     The following documents are filed as part of this report:

     1. Financial Statements

•	Report of Independent Registered Public Accounting Firm	F-	1
•	Balance Sheets	F-	2
•	Statements of Operations	F-	3
•	Statements of Cash Flows	F-	4
•	Statements of Certificate Holder’s Equity	F-	5
•	Notes to Financial Statements	F-	6

     2. Financial Statement Schedules

     All schedules have been omitted because they are not required under the relevant instructions.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

     None

Item 9A. Controls and Procedures

     The Trustee has carried out an evaluation of the effectiveness of the design and operation of the Trust’s disclosure controls and procedures as of the end of the fiscal year ended December 31, 2006. Based upon that evaluation, the Trustee concluded that the Trust’s disclosure controls and procedures are effective. The Trustee, in making these determinations, has relied to the extent reasonable on information provided by Hanover and HCLP. No changes in the Trust’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended December 31, 2006 that have materially affected, or are reasonably likely to materially affect, the Trust’s internal control over financial reporting.

Item 9B. Other Information

     None

15

PART III

Item 10. Directors and Executive Officers of Hanover Equipment Trust 2001B

     Hanover Equipment Trust 2001B is a Delaware special purpose business trust formed in August 2001 and is governed by the terms of its Trust Agreement and managed by its Trustee, Wilmington Trust Company. As such, there are no directors, executive officers or employees of the Trust. The Trust has not adopted a code of ethics that applies to officers because it has no such officers.

Item 11. Executive Compensation

     Hanover Equipment Trust 2001B is a business trust, has no employees and is managed by its Trustee, Wilmington Trust Company. The Trustee receives an annual fee of $16,500 for its services as such. In addition, U.S. Bank serves as the indenture trustee and receives an annual fee of $10,000 for its services.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

     The sole equity certificate holder of Hanover Equipment Trust 2001B is General Electric Capital Corporation (“GE Capital”).

     The Trust does not maintain any equity-based compensation plans.

Item 13. Certain Relationships and Related Transactions

     None

Item 14. Principal Accountant Fees and Services

     The aggregate fees PricewaterhouseCoopers LLP billed for professional services in 2006 and 2005 were:

Type of Fees	2006		2005
	(dollars in thousands)
Audit Fees	$	30	$	29
Audit-Related Services		—		—
Tax Fees		—		—
All Other Fees		—		—
Total	$	30	$	29

     Audit Fees are fees billed by PricewaterhouseCoopers LLP for professional services for the audit of the Trust’s financial statements included in the Trust’s Annual Report on Form 10-K and review of the Trust’s financial statements included in Quarterly Reports on Form 10-Q’s. The Trustee approved all services provided to the Trust by PricewaterhouseCoopers LLP. The Trustee has no pre-approval policy. The Trust does not have an audit committee.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this report:

1. Financial Statements

•	Report of Independent Registered Public Accounting Firm	F-1
•	Balance Sheets	F-2
•	Statements of Operations	F-3
•	Statements of Cash Flows	F-4
•	Statements of Certificate Holder’s Equity	F-5
•	Notes to Financial Statements	F-6

2. Financial Statement Schedules

16

All schedules have been omitted because they are not required under the relevant instructions.

3. Exhibits:

Exhibit
Number	Description
3.1	Certificate of Trust of Hanover Equipment Trust 2001B (incorporated by reference to Exhibit 3.1 to the Trust’s Form S-4, filed with the Commission on December 21, 2001).
3.2	Amended and Restated Trust Agreement of Hanover Equipment Trust 2001B, dated as of August 30, 2001, between General Electric Capital Corporation, as Certificate Holder, and Wilmington Trust Company, as Trustee (incorporated by reference to Exhibit 3.2 to Form S-4 filed with the Commission on December 21, 2001).
4.1	Indenture, dated as of August 30, 2001, between Hanover Equipment Trust 2001B, the Hanover Guarantors parties thereto, and Wilmington Trust FSB, as Trustee and Collateral Agent, with respect to the 8.75% Senior Secured Notes due 2011 (incorporated by reference to Exhibit 10.69 to Quarterly Report of Hanover Compressor Company on Form 10-Q, filed with the Commission on November 15, 2001).
4.2	Exchange and Registration Rights Agreement with respect to the 8.75% Senior Secured Notes due 2011, dated as of August 30, 2001, among Hanover Equipment Trust 2001B, Hanover Compressor Company, certain Guarantors party thereto, Goldman, Sachs & Co., J.P. Morgan Securities Inc., Salomon Smith Barney, Inc. and Credit Suisse First Boston Corporation (incorporated by reference to Exhibit 4.2 to the Trust’s Form S-4 filed with the Commission on December 21, 2001).
4.3	Participation Agreement, dated as of August 31, 2001, among Hanover Compression Limited Partnership, as Lessee, Hanover Equipment Trust 2001B, as Lessor, General Electric Capital Corporation, as Certificate Holders, certain Guarantors party thereto, Wilmington Trust FSB, as Indenture Trustee, Collateral Agent under the Indenture, and in its individual capacity, only to the extent expressly set forth therein, and Wilmington Trust Company, in its individual capacity, only to the extent expressly set forth therein (incorporated by reference to Exhibit 10.66 to Quarterly Report of Hanover Compressor Company on Form 10-Q, filed with the Commission on November 15, 2001).
4.4	Annex A to Participation Agreement and other Operative Agreements, containing certain Rules of Usage and Definitions (incorporated by reference to Exhibit 4.4 to the Trust’s Form S-4 filed with the Commission on December 21, 2001).
4.5	Lease, dated as of August 31, 2001, between Hanover Equipment Trust 2001B, as Lessor, and Hanover Compression Limited Partnership, as Lessee (incorporated by reference to Exhibit 10.64 to Quarterly Report of Hanover Compressor Company on Form 10-Q, filed with the Commission on November 15, 2001).
4.6	Guarantee, dated as of August 31, 2001, made by Hanover Compression Limited Partnership, Hanover Compressor Company, certain Guarantors party thereto, and certain Beneficiaries party thereto (incorporated by reference to Exhibit 10.65 to Quarterly Report of Hanover Compressor Company on Form 10-Q, filed with the Commission on November 15, 2001).
4.7	Security Agreement, dated as of August 31, 2001, made by Hanover Equipment Trust 2001B in favor of Wilmington Trust FSB, as Collateral Agent (incorporated by reference to Exhibit 10.67 to Quarterly Report of Hanover Compressor Company on Form 10-Q, filed with the Commission on November 15, 2001).
4.8	Assignment of Lease, Rents and Guarantee, dated as of August 31, 2001, from Hanover Equipment Trust 2001B to Wilmington Trust FSB, as Collateral Agent (incorporated by reference to Exhibit 10.68 to Quarterly Report of Hanover Compressor Company on Form 10-Q, filed with the Commission on November 15, 2001).
4.9	Instrument of Resignation of Trustee, Appointment and Acceptance of Successor Trustee dated as of September 29, 2004, incorporated by reference to Exhibit 4.9 to Hanover Equipment Trust 2001B’s Current Report on Form 8-K filed with the SEC on October 4, 2004.
31.1	Certification pursuant to Rule 13a- 14(a)/ 15d-14(a) of the Securities Exchange Act of 1934.*
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
99.1	Item 1A. Risk Factors from Hanover Compressor Company’s Form 10-K for the year ended December 31, 2006.*

*	Filed herewith
**	Furnished herewith

17

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Hanover Equipment Trust 2001B
	By: Wilmington Trust Company, not in its individual capacity but solely as Trustee for the Hanover Equipment Trust 2001B
	Name:	/s/ DAVID A. VANASKEY, JR. David A. Vanaskey, Jr.
	Title:	Vice President
Date: March 27, 2007

Note: Because the Registrant is a trust without officers, directors or employees, only the signature of an officer of the trustee of the Registrant is available and has been provided above.

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT

The Registrant has not sent to security holders any annual report covering the Registrant’s last fiscal year or any proxy statements, form of proxy or other proxy soliciting material with respect to any annual or special meeting of security holders.

18

Report of Independent Registered Public Accounting Firm

To the Trustee and the Equity Certificate Holder of
Hanover Equipment Trust 2001B:

     In our opinion, the financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Hanover Equipment Trust 2001B at December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Houston, Texas
March 20, 2007

F-1

HANOVER EQUIPMENT TRUST 2001B

BALANCE SHEETS

(in thousands)

	December 31,		December 31,
	2006		2005
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	—
Accounts receivable—rents		7,438		7,437
Total current assets		7,438		7,437
Rental equipment		257,750		257,750
Total assets	$	265,188	$	265,187
LIABILITIES AND CERTIFICATE HOLDER’S EQUITY
Current liabilities:
Accrued liabilities	$	54	$	60
Interest payable		7,292		7,292
Equity certificate yield payable		92		85
Total current liabilities		7,438		7,437
Notes payable		250,000		250,000
Total liabilities		257,438		257,437
Commitments and contingencies (Note 5)
Certificate holder’s equity:
Equity certificates		7,750		7,750
Accumulated trust earnings		—		—
Certificate holder’s equity		7,750		7,750
Total liabilities and certificate holder’s equity	$	265,188	$	265,187

The accompanying notes are an integral part of these financial statements.

F-2

HANOVER EQUIPMENT TRUST 2001B

STATEMENTS OF OPERATIONS

(in thousands)

	Year Ended December 31,
	2006		2005		2004
Rental revenue	$	23,013	$	22,888	$	22,766
Interest expense on rental equipment		21,875		21,875		21,875
Excess rental revenue over interest expense on rental equipment		1,138		1,013		891
Operating expense		83		96		119
Net income	$	1,055	$	917	$	772

The accompanying notes are an integral part of these financial statements.

F-3

HANOVER EQUIPMENT TRUST 2001B

STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended December 31,
	2006			2005			2004
Cash flows from operating activities:
Net income	$	1,055		$	917		$	772
Changes in assets and liabilities
Accounts receivable—rents		(1	)		(16	)		(24	)
Interest payable		—			—			1
Accrued liabilities		(6	)		2			16
Net cash provided by operating activities		1,048			903			765
Cash flows from investing activities:
Purchase of rental equipment		—			—			—
Net cash used in investing activities		—			—			—
Cash flows from financing activities:
Equity certificates yield paid		(1,048	)		(903	)		(765	)
Net cash used in financing activities		(1,048	)		(903	)		(765	)
Net change in cash and cash equivalents		—			—			—
Cash and cash equivalents at beginning of period		—			—			—
Cash and cash equivalents at end of period	$	—		$	—		$	—
Supplemental disclosure of cash flow information:
Interest paid	$	21,875		$	21,875		$	21,874

The accompanying notes are an integral part of these financial statements.

F-4

HANOVER EQUIPMENT TRUST 2001B

STATEMENTS OF CERTIFICATE HOLDER’S EQUITY

(in thousands)

Equity certificates:
Balance at inception	$	—
Issuance of equity certificates		7,750
Balance at December 31, 2006, 2005, 2004 and 2003	$	7,750
ACCUMULATED TRUST EARNINGS
Balance at December 31, 2003	$	—
Net income		772
Equity certificates yield		(772	)
Balance at December 31, 2004		—
Net income		917
Equity certificates yield		(917	)
Balance at December 31, 2005		—
Net income		1,055
Equity certificates yield		(1,055	)
Balance at December 31, 2006	$	—

The accompanying notes are an integral part of these financial statements.

F-5

HANOVER EQUIPMENT TRUST 2001B

NOTES TO FINANCIAL STATEMENTS

1. Basis of Presentation

     Hanover Equipment Trust 2001B (the “Registrant”, “Trust”, “we”, “us” or “our”) is a Delaware special purpose business trust which was formed in August 2001. The Trust was formed solely to: (i) issue the 8.75% senior secured notes due 2011 (the “Notes”) (see Note 2), (ii) execute, deliver and perform the operating agreements to which it is a party, and (iii) use the proceeds of the Notes and the related equity certificates to purchase approximately $258 million of natural gas compression equipment from Hanover Compression Limited Partnership (“HCLP”) and certain of its subsidiaries. The equity funding, issuance of the Notes and equipment purchase occurred on August 30, 2001. The Trust leased its natural gas compression equipment back to HCLP under a ten-year operating lease (the “Lease”). In addition to rental payments, HCLP is obligated to pay supplemental rent, costs, taxes, indemnities, and other amounts owing under the Lease. In addition, HCLP is obligated to pay the underwriting, legal, accounting and other costs of the transactions for the Trust. In February 2003, the Trust completed a registered offering pursuant to a registration statement on Form S-4 to exchange its 8.75% senior secured notes due 2011 (the “new notes”) for all of its outstanding 8.75% senior secured notes due 2011 (the “old notes”). The exchange offer provided that holders of the old notes would receive $1,000 principal amount of new notes for each $1,000 principal amount of old notes exchanged. The terms of the new notes are identical to the terms of the old notes except that the new notes are freely transferable under the Securities Act of 1933 and do not have any exchange or registration rights. In March 2003, the exchange offer was completed and all of the old notes were exchanged for new notes. When we refer to the “Notes” in these notes to financial statements, we are referring collectively to the old notes and the new notes, unless otherwise indicated.

     In February 2007, Hanover Compressor Company (“Hanover”), the ultimate parent company of HCLP, entered into an Agreement and Plan Merger with Universal Compression Holdings, Inc. Consummation of the proposed merger is subject to certain conditions that are set forth in the merger agreement including regulatory approval. If the proposed merger closes, each holder of the Notes will have the right to require the Trust to repurchase the Notes at a price of 101% of the principal amount of the Notes plus accrued and unpaid interest. Pursuant to the Lease, HCLP would be required to purchase the amount of equipment necessary to generate sufficient proceeds for the Trust to purchase the respective Notes and prepay a proportionate amount of equity certificates. For more information about the terms of the merger agreement, see Hanover’s Annual Report on Form 10-K for the year ended December 31, 2006.

Use of Estimates in the Financial Statements

     The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses, as well as the disclosures of contingent assets and liabilities. Because of the inherent uncertainties in this process, actual future results could differ from those expected at the reporting date. Management believes that its estimates are reasonable.

Cash and Cash Equivalents

     The Trust considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Revenue Recognition

     Revenue from compression equipment rentals is recorded when earned over the period of the ten-year Lease that began on August 30, 2001. Rental revenues are based on the current rental rates and estimated supplemental rent payable by HCLP under the Lease. (See Note 4.)

Concentrations of Credit Risk

     Financial instruments that potentially subject the Trust to concentrations of credit risk consist of cash, cash equivalents and accounts receivable. The Trust’s management believes that the credit risk in temporary cash investments that it has with financial institutions is minimal. Trade accounts receivable are due from HCLP, are due on a short-term basis and are guaranteed by Hanover. The Trust does not obtain collateral for receivables. The recorded assets, obligations and operations of the Trust could be adversely affected if the Trust’s relationship with and/or the financial position of HCLP is adversely affected.

Rental Equipment

F-6

     Rental equipment consists of domestic gas compression equipment and is recorded at cost. At the time of the initial sale of the old notes, an independent appraisal firm prepared an appraisal of the rental equipment as of August 16, 2001. Due to the terms of the Lease (see Note 4), the current fair market value of the Trust assets and based on the above-described appraisal, management of the Trust believes that the Trust will recover the original cost of the equipment at the end of the Lease. As such, the Trust is not depreciating the rental equipment.

Long-Lived Assets

     The Trust reviews for the impairment of long-lived assets, including rental equipment and the Trust’s interest in the residual value of the equipment, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss exists when estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. The impairment loss recognized represents the excess of the asset’s carrying value as compared to its estimated fair market value.

Income Taxes

     No provision has been made for federal or state income taxes because the parties will treat the Trust as a financing vehicle for income tax purposes. The Trust is not a business trust for tax purposes. To the extent the Trust is not considered a mere financing vehicle, then solely for income and franchise tax purposes, the Trust would be treated as a grantor trust. Each certificate holder will include in its gross income such certificate holder’s share of the Trust’s net income.

2. Notes Payable

     Notes payable at December 31, 2006 and 2005 consisted of the following (in thousands):

Senior Secured Notes—fixed rate of 8.75% due September 1, 2011, interest payable semi-annually on March 1 and September 1 $ 250,000

     The Notes are obligations of the Trust and are collateralized by all of the equipment, rents and supplemental rents covered by the Lease. In addition, the Trust’s obligations under the Notes are jointly and severally guaranteed, unconditionally and on a senior subordinated basis, by Hanover, the ultimate parent company of HCLP, and HCLP for an amount up to 70.0% of the aggregate principal balance of Notes outstanding, which is equal to the final rent payment under the Lease. If there is an event of default under the Lease, Hanover and HCLP guarantee, jointly and severally, on a senior subordinated basis, all of the Trust’s obligations under the Notes. Hanover unconditionally guarantees on a senior subordinated basis all of HCLP’s obligations under the Lease. The obligations of HCLP under the Lease are subordinated in right of payment to all existing and future senior indebtedness of HCLP. The obligations of Hanover and HCLP under the guarantee are subordinated in right of payment to all existing and future senior indebtedness of such guarantor. Each guarantee ranks equally in right of payment with all senior subordinated debt and senior to all subordinated debt of such guarantor. The estimated fair market value of the Notes was approximately $260 million and $263 million at December 31, 2006 and 2005, respectively.

     All payments that are received by the Trust under the Lease or the guarantee will be applied first to the amounts due under the Notes. The payment of principal, premium, if any, and interest on the Notes are senior in right of payment to the payment in full of amounts due under the equity certificates.

     The Trust did not have the right to redeem the Notes until September 1, 2006. After September 1, 2006, the Trust may redeem the Notes, in whole or in part, if the Trust pays the redemption prices indicated below:

	Redemption price
After Sept 1, 2006		104.375	%
After Sept 1, 2007		102.917	%
After Sept 1, 2008		101.458	%
After Sept 1, 2009		100.000	%

     The Trust is not affiliated with Hanover or HCLP. The indenture and participation agreement governing the Notes contain covenants that restrict the Trust’s ability to, among other things: incur liens, incur additional indebtedness, enter into any other transactions, make investments, liquidate, and engage in non-related lines of business. In addition, the indenture and participation

F-7

agreement governing the Notes contain covenants that limit Hanover’s and HCLP’s ability to engage in certain activities and transactions.

     In February 2003, the Trust completed a registered offering pursuant to a registration statement on Form S-4 to exchange its 8.75% senior secured notes due 2011 for all of its outstanding old notes. The terms of the new notes are identical to the terms of the old notes except that the new notes are freely transferable under the Securities Act and do not have any exchange or registration rights.

3. Equity Certificates

     The Trust raised approximately $7.75 million from equity certificates issued during the period from August 16, 2001 (inception) through December 31, 2001. The Trust’s equity certificates were issued to General Electric Capital Corporation (“GE Capital”). The original certificate holder assigned its interest to GE Capital and was repaid its capital contribution of $1 in August 2001. The equity certificate holder may receive a return of capital payments for its equity investment in the Trust after full payment of the Notes. The Trust will make a quarterly payment (on the first day of March, June, September, and December; the first payment was made on March 1, 2002) to equity certificate holders equal to the certificate holder yield rate (13.7% and 12.7% as of December 31, 2006 and 2005, respectively) multiplied by the aggregate outstanding certificate holder contributions. As of December 31, 2006 and 2005, approximately $92,000 and $85,000, respectively, was payable to the certificate holder. Equity certificate capital repayment may be made using proceeds from sale of equipment to HCLP or, on the expiration date or earlier termination of the Lease, from the proceeds from the final rent payment and the sale of equipment. (See Note 4.)

4. Lease Transaction

     The Trust’s equipment is rented to HCLP under a ten-year lease with the basic rent payments equal to the interest payable on the Notes and the yield payable to the equity certificate holder. In addition, HCLP will also pay supplemental rent in respect of all amounts which HCLP is obligated to pay, other than basic rent, under the Lease and participation agreement, including, but not limited to, operating costs of the Trust such as audit fees, legal fees, general administrative fees, certain taxes and indemnities.

     The minimum rental payments to be received by the Trust under the Lease are estimated using interest rates and rental equipment balances applicable as of December 31, 2006, as follows (in thousands):

Period ending December 31:
2007	$	22,939
2008		22,939
2009		22,939
2010		22,939
Thereafter		15,295
	$	107,051

     Prior to the stated maturity, HCLP may be required to purchase or shall have the option to purchase the equipment and terminate the Lease under certain conditions and after making the required payments as detailed in the Lease. Twelve months prior to the end of the Lease term, HCLP may (a) elect to purchase all of the equipment on the maturity date of the Notes, for an amount sufficient to repay the Notes, equity certificates and any other amounts owed under the Lease in full or (b) begin selling the equipment on behalf of the Trust. Upon the expiration of the Lease term, if HCLP has elected to sell the equipment on behalf of the Trust, HCLP is required to pay the Trust a final rent payment (the “Final Rent Payment”) of approximately $175 million as determined by and subject to limitations and adjustments as detailed in the Lease. The proceeds from the sale of equipment together with the Final Rent Payment will be applied to repay all amounts payable under the Notes. Any remaining proceeds will first be used to repay the unrecovered amount of the equity certificates and any excess will then be returned to HCLP. If the sale proceeds from the equipment together with the Final Rent Payment are less than the amount necessary to repay the Notes, HCLP will be liable for an assessment of additional rent with respect to excess wear and tear of such equipment as determined by an independent appraisal process and subject to limitations detailed in the Lease. The future minimum rental schedule above includes the future amounts HCLP is required to pay under the Lease exclusive of any Final Rent Payment or purchase option payment.

F-8

5. Commitments and Contingencies

     In the ordinary course of business the Trust may be involved in various pending or threatened legal actions. The Trust is not currently involved in any material litigation or proceeding and is not aware of any such litigation or proceeding threatened against it. The Trust has no other commitments or contingent liabilities which, in the judgment of the Trustee, would result in losses that would materially affect the Trust’s financial position, operating results or cash flows.

6. Recent Accounting Pronouncements

     In May 2005, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS 154”). SFAS 154 requires retrospective application for reporting a change in accounting principle in the absence of explicit transition requirements specific to newly adopted accounting principles, unless impracticable. Corrections of errors will continue to be reported under SFAS 154 by restating prior periods as of the beginning of the first period presented. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS 154 did not have a material impact on our consolidated results of operations, cash flows or financial position.

     In February 2006, the FASB issued Statement of Financial Accounting Standards No. 155, “Accounting for Certain Hybrid Instruments — an amendment of FASB Statements No. 133 and 140” (“SFAS 155”). SFAS 155 (a) permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, (b) clarifies which interest-only strips and principal-only strips are not subject to the requirements of FASB No. 133, (c) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, (d) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and (e) amends SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. We are currently evaluating the provisions of SFAS 155 and do not believe that our adoption will have a material impact on our consolidated results of operations, cash flows or financial position.

     In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 provides a single definition of fair value, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value to measure assets and liabilities. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are currently evaluating the provisions of SFAS 157.

F-9

HANOVER EQUIPMENT TRUST 2001B

SELECTED QUARTERLY UNAUDITED FINANCIAL DATA

     The table below sets forth selected unaudited financial information for 2006 and 2005:

	1st		2nd		3rd		4th
	quarter		quarter		quarter		quarter
	(in thousands)
2006:
Rental revenue	$	5,740	$	5,752	$	5,761	$	5,760
Gross profit		271		283		293		291
Net income		250		261		273		271
2005:
Rental revenue	$	5,712	$	5,705	$	5,730	$	5,741
Gross profit		243		236		262		272
Net income		212		222		236		247

F-10

EXHIBIT INDEX

Exhibit
Number	Description
3.1	Certificate of Trust of Hanover Equipment Trust 2001B (incorporated by reference to Exhibit 3.1 to the Trust’s Form S-4, filed with the Commission on December 21, 2001).
3.2	Amended and Restated Trust Agreement of Hanover Equipment Trust 2001B, dated as of August 30, 2001, between General Electric Capital Corporation, as Certificate Holder, and Wilmington Trust Company, as Trustee (incorporated by reference to Exhibit 3.2 to Form S-4 filed with the Commission on December 21, 2001).
4.1	Indenture, dated as of August 30, 2001, between Hanover Equipment Trust 2001B, the Hanover Guarantors parties thereto, and Wilmington Trust FSB, as Trustee and Collateral Agent, with respect to the 8.75% Senior Secured Notes due 2011 (incorporated by reference to Exhibit 10.69 to Quarterly Report of Hanover Compressor Company on Form 10-Q, filed with the Commission on November 15, 2001).
4.2	Exchange and Registration Rights Agreement with respect to the 8.75% Senior Secured Notes due 2011, dated as of August 30, 2001, among Hanover Equipment Trust 2001B, Hanover Compressor Company, certain Guarantors party thereto, Goldman, Sachs & Co., J.P. Morgan Securities Inc., Salomon Smith Barney, Inc. and Credit Suisse First Boston Corporation (incorporated by reference to Exhibit 4.2 to the Trust’s Form S-4 filed with the Commission on December 21, 2001).
4.3	Participation Agreement, dated as of August 31, 2001, among Hanover Compression Limited Partnership, as Lessee, Hanover Equipment Trust 2001B, as Lessor, General Electric Capital Corporation, as Certificate Holders, certain Guarantors party thereto, Wilmington Trust FSB, as Indenture Trustee, Collateral Agent under the Indenture, and in its individual capacity, only to the extent expressly set forth therein, and Wilmington Trust Company, in its individual capacity, only to the extent expressly set forth therein (incorporated by reference to Exhibit 10.66 to Quarterly Report of Hanover Compressor Company on Form 10-Q, filed with the Commission on November 15, 2001).
4.4	Annex A to Participation Agreement and other Operative Agreements, containing certain Rules of Usage and Definitions (incorporated by reference to Exhibit 4.4 to the Trust’s Form S-4 filed with the Commission on December 21, 2001).
4.5	Lease, dated as of August 31, 2001, between Hanover Equipment Trust 2001B, as Lessor, and Hanover Compression Limited Partnership, as Lessee (incorporated by reference to Exhibit 10.64 to Quarterly Report of Hanover Compressor Company on Form 10-Q, filed with the Commission on November 15, 2001).
4.6	Guarantee, dated as of August 31, 2001, made by Hanover Compression Limited Partnership, Hanover Compressor Company, certain Guarantors party thereto, and certain Beneficiaries party thereto (incorporated by reference to Exhibit 10.65 to Quarterly Report of Hanover Compressor Company on Form 10-Q, filed with the Commission on November 15, 2001).
4.7	Security Agreement, dated as of August 31, 2001, made by Hanover Equipment Trust 2001B in favor of Wilmington Trust FSB, as Collateral Agent (incorporated by reference to Exhibit 10.67 to Quarterly Report of Hanover Compressor Company on Form 10-Q, filed with the Commission on November 15, 2001).
4.8	Assignment of Lease, Rents and Guarantee, dated as of August 31, 2001, from Hanover Equipment Trust 2001B to Wilmington Trust FSB, as Collateral Agent (incorporated by reference to Exhibit 10.68 to Quarterly Report of Hanover Compressor Company on Form 10-Q, filed with the Commission on November 15, 2001).
4.9	Instrument of Resignation of Trustee, Appointment and Acceptance of Successor Trustee dated as of September 29, 2004, incorporated by reference to Exhibit 4.9 to Hanover Equipment Trust 2001B’s Current Report on Form 8-K filed with the SEC on October 4, 2004.
31.1	Certification pursuant to Rule 13a- 14(a)/ 15d-14(a) of the Securities Exchange Act of 1934.*
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
99.1	Item 1A. Risk Factors from Hanover Compressor Company’s Form 10-K for the year ended December 31, 2006.*

*	Filed herewith
**	Furnished herewith

EX-31.1

Exhibit 31.1

CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David A. Vanaskey, Jr., certify that:

1. I have reviewed this Annual Report on Form 10-K of Hanover Equipment Trust 2001B;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and I have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
b)	[Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986];

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of period covered by this report based upon such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 27, 2007

By:	/s/ DAVID A. VANASKEY, JR.
	Name: David A. Vanaskey, Jr.
	Title: Vice President Wilmington Trust Company

EX-32.1

Exhibit 32.1

CERTIFICATION OF CEO PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of Hanover Equipment Trust 2001B (the “Trust”) for the year ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), David A. Vanaskey, Jr., Vice President of Wilmington Trust Company, the trustee for the Trust, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust.

Date: March 27, 2007

By:	/s/ DAVID A. VANASKEY, JR.
	Name: David A. Vanaskey, Jr.
	Title: Vice President Wilmington Trust Company

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Hanover Equipment Trust 2001B and will be retained by Hanover Equipment Trust 2001B and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99.1

Exhibit 99.1

Item 1A.  Risk Factors, such items excerpted in its entirety from Hanover Compressor Company’s Form 10-K for the year ended December 31, 2006 as filed with Securities and Exchange Commission on February 28, 2007.

Item 1A.   Risk Factors

We have a substantial amount of debt, including our compression equipment lease obligations, that could limit our ability to fund future growth and operations and increase our exposure during adverse economic conditions.

At December 31, 2006, we had approximately $1,381.9 million of debt, including approximately $20.0 million in borrowings and excluding outstanding letters of credit of approximately $207.3 million under our bank credit facility. Additional borrowings of up to $222.7 million were available under that facility as of December 31, 2006.

Our substantial debt could have important consequences. For example, these commitments could:

•  make it more difficult for us to satisfy our contractual obligations;

•  increase our vulnerability to general adverse economic and industry conditions;

•  limit our ability to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;

•  increase our vulnerability to interest rate fluctuations because the interest payments on a portion of our debt are at, and a portion of our compression equipment leasing expense is based upon, variable interest rates;

•  limit our flexibility in planning for, or reacting to, changes in our business and our industry;

•  place us at a disadvantage compared to our competitors that have less debt or fewer operating lease commitments; and

•  limit our ability to borrow additional funds.

We will need to generate a significant amount of cash to service our debt, to fund working capital and to pay our debts as they come due.

Our ability to make scheduled payments on our compression equipment lease obligations and our other debt, or to refinance our debt and other obligations, will depend on our ability to generate cash in the future. Our ability to generate cash in the future is subject to, among other factors, our operational performance, as well as general economic, financial, competitive, legislative and regulatory conditions. For the year ended December 31, 2006, we incurred interest expense of $118.0 million related to our debt, including our compression equipment lease obligations.

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Our ability to refinance our debt and other financial obligations at a reasonable cost will be affected by the factors discussed herein and by the general market at the time we refinance. The factors discussed herein could adversely affect our ability to refinance this debt and other financial obligations at a reasonable cost.

Our business may not generate sufficient cash flow from operations, and future borrowings may not be available to us under our bank credit facility in an amount sufficient to enable us to pay our debt, compression equipment lease obligations, operating lease commitments and other financial obligations, or to fund our other liquidity needs. We cannot be sure that we will be able to refinance any of our debt or our other financial obligations on commercially reasonable terms or at all. Our inability to refinance our debt or our other financial obligations on commercially reasonable terms could materially adversely affect our business.

The documents governing our outstanding debt, including our compression equipment lease obligations, contain financial and other restrictive covenants. Failing to comply with those covenants could result in an event of default which, if not cured or waived, could have a material adverse effect on us.

Our bank credit facility and other debt obligations, including the indentures related to our notes and the agreements related to our compression equipment lease obligations, contain, among other things, covenants that may restrict our ability to finance future operations or capital needs or to engage in other business activities. These covenants include provisions that, among other things, restrict our ability to:

•  incur additional debt or issue guarantees;

•  create liens on our assets;

•  engage in mergers, consolidations and dispositions of assets;

•  enter into additional operating leases;

•  pay dividends on or redeem capital stock;

•  enter into derivative transactions;

•  make certain investments or restricted payments;

•  make investments, loans or advancements to certain of our subsidiaries;

•  prepay or modify our debt facilities;

•  enter into transactions with affiliates; or

•  enter into sale leaseback transactions.

In addition, under our bank credit facility we have granted the lenders a security interest in our inventory, equipment and certain of our other property and the property of our U.S. subsidiaries and pledged 66% of the equity interest in certain of our international subsidiaries.

Our bank credit facility also prohibits us (without the lenders’ prior approval) from declaring or paying any dividend (other than dividends payable solely in our common stock or in options, warrants or rights to purchase such common stock) on, or making similar payments with respect to, our capital stock.

Our bank credit facility and other financial obligations and the agreements related to our compression equipment lease obligations require us to maintain financial ratios and tests, which may require that we take action to reduce our debt or act in a manner contrary to our business objectives. Adverse conditions in the oil and gas business or in the United States or global economy or other events related to our business may affect our ability to meet those financial ratios and tests. A breach of any of these covenants or failure to maintain such financial ratios would result in an event of default under our bank credit facility, the agreements related to our compression equipment lease obligations and the agreements relating to our other financial obligations. A material adverse change in our business may also limit our ability to effect borrowings under our bank credit facility. If such an event of default occurs, the lenders could elect to declare all amounts outstanding thereunder, together with accrued interest, to be immediately due and payable.

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We have significant leverage relative to our total capitalization, which could result in a downgrade in our credit rating or other adverse consequences if we do not reduce our leverage.

As of February 20, 2007, our credit ratings as assigned by Moody’s and Standard & Poor’s were:

			Standard
	Moody’s		& Poor’s
Outlook		Positive		Positive
Senior implied rating		B1		BB−
Liquidity Rating		SGL-3		—
2001A equipment lease notes, interest at 8.5%, due September 2008		Ba3, LGD 3		B+
2001B equipment lease notes, interest at 8.8%, due September 2011		Ba3, LGD 3		B+
4.75% convertible senior notes due 2008		B3, LGD 5		B
4.75% convertible senior notes due 2014		B3, LGD 5		B
8.625% senior notes due 2010		B2, LGD 4		B
9.0% senior notes due 2014		B2, LGD 4		B
7.5% senior notes due 2013		B2, LGD 4		B
7.25% convertible junior subordinated notes due 2029*		B3, LGD 6		B−

* Rating is on the TIDES Preferred Securities issued by Hanover Compressor Capital Trust, a trust that we sponsored.

We do not have any credit rating downgrade provisions in our debt agreements or the agreements related to our compression equipment lease obligations that would accelerate their maturity dates. However, a downgrade in our credit rating could materially and adversely affect our ability to renew existing, or obtain access to new credit facilities in the future and could increase the cost of such facilities. In addition, our significant leverage puts us at greater risk of default under one or more of our existing debt agreements if we experience an adverse change to our financial condition or results of operations. Our ability to reduce our leverage depends upon market and economic conditions, as well as our ability to execute liquidity-enhancing transactions such as sales of non-core assets or our equity securities.

Our ability to substitute compression equipment under our compression equipment leases is limited and there are risks associated with reaching that limit prior to the expiration of the lease term.

As of December 31, 2006, we were the lessee in two transactions involving the sale of compression equipment by us to special purpose entities, which in turn lease the equipment back to us. We are entitled under the compression equipment operating lease agreements to substitute equipment that we own for equipment owned by the special purpose entities, provided that the value of the equipment that we are substituting in is equal to or greater than the value of the equipment that is being substituted out. We generally substitute equipment when one of our lease customers exercises a contractual right or otherwise desires to buy the leased equipment or when fleet equipment owned by the special purpose entities becomes obsolete or is selected by us for transfer to international projects. Each lease agreement limits the aggregate amount of replacement equipment that may be substituted to, among other restrictions, a percentage of the termination value under each lease. The termination value is equal to (1) the aggregate amount of outstanding principal of the corresponding notes issued by the special purpose entity, plus accrued and unpaid interest and (2) the aggregate amount of equity investor contributions to the special purpose entity, plus all accrued amounts due on account of the investor yield and any other amounts owed to such investors in the special purpose entity or to the holders of the notes issued by the special purpose entity or their agents. In the following table, termination value does not include amounts in excess of the aggregate outstanding principal amount of notes and the aggregate outstanding amount of the equity investor contributions, as such amounts are periodically paid as supplemental rent as required by our compression equipment operating leases. The aggregate amount of replacement equipment substituted (in dollars and percentage of termination value), the termination value

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and the substitution percentage limitation relating to each of our compression equipment operating leases as of December 31, 2006 are as follows:

								Substitution
								Limitation as
	Value of		Percentage of					Percentage of
	Substituted		Termination			Termination		Termination			Lease Termination
Lease	Equipment		Value(1)			Value(1)		Value			Date
	(Dollars in millions)
2001A compression equipment lease	$	20.2		14.7	%	$	137.1		25	%		September 2008
2001B compression equipment lease		54.0		21.0	%		257.7		25	%		September 2011
Total	$	74.2				$	394.8

(1) Termination value assumes all accrued rents paid before termination.

In the event we reach the substitution limitation prior to a lease termination date, we will not be able to effect any additional substitutions with respect to such lease. This inability to substitute could have a material adverse effect on our business, consolidated financial position, results of operations and cash flows.

A prolonged, substantial reduction in oil or gas prices, or prolonged instability in U.S. or global energy markets, could adversely affect our business.

Our operations depend upon the levels of activity in the global energy market, including natural gas development, production, processing and transportation. Oil and gas prices and the level of drilling and exploration activity can be volatile. For example, oil and gas exploration and development activity and the number of well completions typically decline when there is a significant reduction in oil and gas prices or significant instability in energy markets. As a result, the demand for our gas compression and oil and gas production and processing equipment would be adversely affected. Any future significant, prolonged decline in oil and gas prices could have a material adverse effect on our business, consolidated financial condition, results of operations and cash flows.

Erosion of the financial condition of our customers can also adversely affect our business. During times when the oil or natural gas market weakens, the likelihood of the erosion of the financial condition of these customers increases. If and to the extent the financial condition of our customers declines, our customers could seek to preserve capital by canceling or delaying scheduled maintenance of their existing gas compression and oil and gas production and processing equipment or determining not to purchase new gas compression and oil and gas production and processing equipment. In addition, upon the financial failure of a customer, we could experience a loss associated with the unsecured portion of any of our outstanding accounts receivable.

There are many risks associated with conducting operations in international markets.

We operate in many geographic markets outside the United States. Changes in local economic or political conditions, particularly in Latin America and Nigeria, could have a material adverse effect on our business, consolidated financial condition, results of operations and cash flows. Additional risks inherent in our international business activities include the following:

•  difficulties in managing international operations, including our ability to timely and cost effectively execute projects;

•  unexpected changes in regulatory requirements;

•  tariffs and other trade barriers that may restrict our ability to enter into new markets;

•  governmental actions that result in the deprivation of contract rights;

•  changes in political and economic conditions in the countries in which we operate, including civil uprisings, riots, kidnappings and terrorist acts, particularly with respect to our operations in Nigeria;

•  potentially adverse tax consequences;

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•  restrictions on repatriation of earnings or expropriation of property without fair compensation;

•  difficulties in establishing new international offices and risks inherent in establishing new relationships in foreign countries; and

•  the burden of complying with the various laws and regulations in the countries in which we operate.

Our future plans involve expanding our business in international markets where we currently do not conduct business. The risks inherent in establishing new business ventures, especially in international markets where local customs, laws and business procedures present special challenges, may affect our ability to be successful in these ventures or avoid losses which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Local unrest and violence in Nigeria has adversely affected our financial results and could result in possible impairment and write-downs of our assets in Nigeria if the political situation in Nigeria does not improve.

Our projects in Nigeria are subject to numerous risks and uncertainties associated with operating in Nigeria. Such risks include, among other things, political, social and economic instability, civil uprisings, riots, terrorism, kidnapping, the taking of property without fair compensation and governmental actions that may restrict payments or the movement of funds or result in the deprivation of contract rights. Any of these risks, including risks arising from the increase in violence and local unrest in Nigeria over the past year, have and could further adversely impact our operations in Nigeria and could affect the timing and decrease the amount of revenue we may realize from our investments in Nigeria.

For example, we are involved in a project called the Cawthorne Channel Project in Nigeria in which we rent and operate barge-mounted gas compression and gas processing facilities stationed in a Nigerian coastal waterway. Because of unrest and violence in the region, gas flow to the project was stopped in June 2006. As a result, we did not recognize revenue on the Cawthorne Channel Project for the last six months of 2006, and we may not be able to recognize revenue from this project in the near future. If the violence and local unrest in Nigeria continues or worsens, we may experience further decreases in revenue from our projects in Nigeria.

At December 31, 2006, we had net assets of approximately $72 million related to projects in Nigeria, a majority of which is related to our capital investment and advances/accounts receivable for the Cawthorne Channel Project. If we are unable to operate our assets under our current projects, we may be required to find alternative uses for those assets, which could potentially result in an impairment and write-down of our investment in those assets in Nigeria and could materially impact our consolidated financial position or results of operation.

Further changes to the laws and regulations of Venezuela could adversely impact our results of operations and require us to write-down our investments in Venezuela.

Recently, laws and regulations in Venezuela have been subject to frequent and significant changes. These changes have included currency controls, restrictions on repatriation of capital, expropriation and nationalization of certain firms and industries and changes to the tax laws. We derived approximately 8% of our 2006 revenues and other income from our operations and interests in joint ventures located in Venezuela. If the government of Venezuela institutes further changes to the laws and regulations of Venezuela, those changes could increase the expenses incurred by our Venezuelan operations, resulting in a reduction in our net income or a write-down of our investments in Venezuela. At December 31, 2006, we had net assets in Venezuela, including investments in non-consolidated affiliates, of approximately $267 million.

Fluctuations in currency exchange rates in international jurisdictions could adversely affect our business.

We have not hedged exchange rate exposures, which exposes us to risk of exchange rate losses. We have significant operations that expose us to currency risk in Italy, Argentina and Venezuela. The impact of foreign currency exchange on our statements of operations will depend on the amount of our net assets and liability positions exposed to currency fluctuations in future periods.

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In February 2004 and March 2005, the Venezuelan government devalued the currency to 1,920 bolivars and 2,148 bolivars, respectively, for each U.S. dollar. The impact of any further devaluation on our results will depend upon the amount of our assets (primarily working capital and deferred taxes) exposed to currency fluctuation in Venezuela in future periods.

The economic situation in Argentina and Venezuela is subject to change. To the extent that the situation deteriorates, exchange controls continue in place and the value of the peso and bolivar against the dollar is reduced further, our results of operations in Argentina and Venezuela could be materially and adversely affected, which could result in reductions in our net income.

Our proposed merger with Universal is subject to the receipt of consents and approvals from various government entities that may impose conditions on, jeopardize or delay completion of the mergers or reduce the anticipated benefits of the merger.

In February 2007, we announced that we had entered into an agreement to merge with Universal. Completion of the merger is conditioned upon, among other events, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which we refer to as the HSR Act, and the expiration or termination of any mandatory waiting period under applicable non-U.S. antitrust laws, where the failure to observe that waiting period would be reasonably likely to have a material adverse effect on the combined company after the merger.

It is possible that the required consents, orders, approvals and clearances will not be obtained. Moreover, if they are obtained, they may impose conditions on, or require divestitures relating to operations or assets of, Hanover or Universal. The merger agreement requires Hanover and Universal to satisfy any conditions or divestiture requirements imposed upon them unless the conditions or divestitures would be reasonably likely to have a material adverse effect on the combined company after the merger. A substantial delay in obtaining any required approvals or the imposition of any unfavorable conditions or divestitures in connection with the receipt of any required approvals may jeopardize or delay completion of the merger or reduce the anticipated benefits of the merger.

While the merger is pending, we will be subject to business uncertainties and contractual restrictions that could adversely affect our business.

Uncertainty about the effect of the merger on employees, customers and suppliers may have an adverse effect on us and, consequently, on the combined company. Although we intend to take steps to reduce any adverse effects, these uncertainties may impair our ability to attract, retain and motivate key personnel until the merger is consummated and for a period of time thereafter, and could cause customers, suppliers and others who deal with us to seek to change existing business relationships with us. Employee retention may be particularly challenging during the pendency of the merger because employees may experience uncertainty about their future roles with the combined company. If, despite our retention efforts, employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the combined company, the combined company’s business could be seriously harmed. In addition, the merger agreement restricts us, without Universal’s consent and subject to certain exceptions, from making certain acquisitions and taking other specified actions until the merger occurs or the merger agreement terminates. These restrictions may prevent us from pursuing otherwise attractive business opportunities and making other changes to our business that may arise prior to completion of the merger or termination of the merger agreement.

Failure to complete the merger could negatively impact our stock price and our future business and financial results because of, among other things, the disruption that would occur as a result of uncertainties relating to a failure to complete the merger.

Although Hanover and Universal have agreed to use their reasonable best efforts to obtain stockholder approval of the merger, the stockholders of both Hanover and Universal may not approve

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the merger. In addition, Hanover and Universal may not receive the required consents, orders, approvals and clearances to complete the merger or satisfy the other conditions to the completion of the merger. If the merger is not completed for any reason, we could be subject to several risks, including the following:

•  being required to pay Universal a termination fee of up to $70 million in certain circumstances, as described further in the next risk factor; and

•  having had the focus of our management directed toward the merger and integration planning instead of on our core business and other opportunities that could have been beneficial to us.

In addition, we would not realize any of the expected benefits of having completed the merger. We have incurred and will continue to incur substantial financial advisory, legal and other expenses associated with the merger even if it does not close.

If the merger is not completed, the price of our common stock may decline to the extent that the current market price of that stock reflects a market assumption that the merger will be completed and that the related benefits and synergies will be realized, or as a result of the market’s perceptions that the merger was not consummated due to an adverse change in our business. In addition, our business may be harmed, and the price of our common stock may decline as a result, to the extent that customers, suppliers and others believe that we cannot compete in the marketplace as effectively without the merger or otherwise remain uncertain about our future prospects in the absence of the merger. Similarly, current and prospective employees may experience uncertainty about the future of our company if the merger is not completed, and the loss of those employees could adversely affect us. If the merger is not completed, we may not be able to attract and retain key management, marketing and technical personnel due to uncertainty about the future of our company, which could harm our businesses and results. The realization of any of these risks may materially adversely affect our business, financial results, financial condition and stock price.

The merger agreement limits our ability to pursue an alternative acquisition proposal and may require us to pay a termination fee of up to $70 million if we do.

The merger agreement prohibits the parties from soliciting, initiating or encouraging alternative merger or acquisition proposals with any third party. The merger agreement also provides for the payment by Hanover or Universal of a termination fee of up to $70 million if the merger agreement is terminated in certain circumstances in connection with a competing acquisition proposal or the withdrawal by the board of directors of one of the companies of its recommendation that the stockholders of that company vote for the merger.

These provisions limit our ability to pursue offers from third parties that could result in greater value to our stockholders. The obligation to make the termination fee payment also may discourage a third party from pursuing an alternative acquisition proposal.

Many of our compressor leases with customers have short initial terms, and we cannot be sure that the leases for these rental compressors will be renewed after the end of the initial lease term.

The length of our compressor leases with customers varies based on operating conditions and customer needs. In most cases, under currently prevailing lease rates, the initial lease terms are not long enough to enable us to fully recoup the average cost of acquiring or fabricating the equipment. We cannot be sure that a substantial number of our lessees will continue to renew their leases or that we will be able to re-lease the equipment to new customers or that any renewals or re-leases will be at comparable lease rates. The inability to renew or re-lease a substantial portion of our compressor rental fleet would have a material adverse effect upon our business, consolidated financial condition, results of operations and cash flows.

We operate in a highly competitive industry.

We experience competition from companies that may be able to adapt more quickly to technological changes within our industry and throughout the economy as a whole, more readily take advantage of acquisitions and other opportunities and adopt more aggressive pricing policies. We also may not be able to take advantage of certain opportunities or make certain investments because of our significant leverage and the

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restrictive covenants in our bank credit facility, the agreements related to our compression equipment lease obligations and our other obligations. In times of weak market conditions, we may experience reduced profit margins from increased pricing pressure. We may not be able to continue to compete successfully in times of weak market conditions or against such competition. If we cannot compete successfully, we may lose market share and our business, consolidated financial condition, results of operations and cash flows could be materially adversely affected.

Natural gas operations entail inherent risks that may result in substantial liability to us.

Natural gas operations entail inherent risks, including equipment defects, malfunctions and failures and natural disasters, which could result in uncontrollable flows of gas or well fluids, fires and explosions. These risks may expose us, as an equipment operator or fabricator, to liability for personal injury, wrongful death, property damage, pollution and other environmental damage. Our business, consolidated financial condition, results of operations and cash flows could be materially adversely affected if we incur substantial liability and the damages are not covered by insurance or are in excess of policy limits.

Our ability to manage our business effectively will be weakened if we are unable to attract and retain qualified personnel.

We believe that our success depends on our ability to attract and retain qualified employees. There is significant demand in our industry for experienced qualified employees. If we fail to retain our skilled personnel and to recruit other skilled personnel, we could be unable to compete effectively. Our ability to retain personnel may also be impacted by the proposed merger with Universal.

Our business is subject to a variety of governmental regulations.

We are subject to a variety of federal, state, local and international laws and regulations relating to the environment, health and safety, export controls, currency exchange, labor and employment and taxation. These laws and regulations are complex, change frequently and have tended to become more stringent over time. Failure to comply with these laws and regulations may result in a variety of administrative, civil and criminal enforcement measures, including assessment of monetary penalties, imposition of remedial requirements and issuance of injunctions as to future compliance. From time to time as part of the regular overall evaluation of our operations, including newly acquired operations, we may be subject to compliance audits by regulatory authorities in the various countries in which we operate.

We may need to apply for or amend facility permits or licenses from time to time with respect to storm water or wastewater discharges, waste handling, or air emissions relating to manufacturing activities or equipment operations, which subjects us to new or revised permitting conditions that may be onerous or costly to comply with. In addition, certain of our customer service arrangements may require us to operate, on behalf of a specific customer, petroleum storage units such as underground tanks or pipelines and other regulated units, all of which may impose additional compliance and permitting obligations.

As one of the largest natural gas compression companies in the United States, we conduct operations at numerous facilities in a wide variety of locations across the country. Our operations at many of these facilities require federal, state or local environmental permits or other authorizations. Additionally, natural gas compressors at many of our customer facilities require individual air permits or general authorizations to operate under various air regulatory programs established by rule or regulation. These permits and authorizations frequently contain numerous compliance requirements, including monitoring and reporting obligations and operational restrictions, such as emission limits. Generally, our customers are contractually responsible for any permits on their facilities, however, given the large number of facilities in which we operate, and the numerous environmental permits and other authorizations applicable to our operations, we occasionally identify or are notified of technical violations of certain requirements existing in various permits and other authorizations, and it is likely that similar technical violations will occur in the future. Occasionally, we have been assessed penalties for our non-compliance, and we could be subject to such penalties in the future. While such penalties generally do not have a material financial impact on our business or operations, it is possible

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future violations could result in substantial penalties. In addition, future events, such as compliance with more stringent laws, regulations or permit conditions, a major expansion of our operations into more heavily regulated activities, more vigorous enforcement policies by regulatory agencies, or stricter or different interpretations of existing laws and regulations could require us to make material expenditures.

Our stock price may experience volatility.

Our stock price, like that of other companies, can be volatile. Some of the factors that could affect our stock price are quarterly increases or decreases in revenue or earnings, changes in revenue or earnings estimates by the investment community, and speculation in the press or investment community about our financial condition or results of operations and our proposed merger with Universal. General market conditions and U.S. or international economic factors unrelated to our performance may also affect our stock price. For these reasons, investors should not rely on recent trends to predict future stock prices or financial results.

We are dependent on particular suppliers and are vulnerable to product shortages and price increases.

Some of the components used in our products are obtained from a single source or a limited group of suppliers. Our reliance on these suppliers involves several risks, including price increases, inferior component quality and a potential inability to obtain an adequate supply of required components in a timely manner. The partial or complete loss of certain of these sources could have a negative impact on our results of operations and could damage our customer relationships. Further, a significant increase in the price of one or more of these components could have a negative impact on our results of operations.

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