|UNITED
STATESSECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
|----------------------------------------------------------------------

|FORM
10-Q
|---------

|[X]     QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|-----------------------------------------------------------------------------------------------

|For the quarterly period ended September 30, 2003 or
|----------------------------------------------------

|[   ]      TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|---------------------------------------------------------------------------------------------------

|For
the transition period from ________ to ________.
|----------------------------------------------------

|Commission
file numbers: 1-14323                                                      333-93239-01
|--------------------------------------------------------------------------------------------------

|ENTERPRISE PRODUCTS PARTNERS L.P.
ENTERPRISE PRODUCTS OPERATING L.P.
(Exact name of registrants as specified in their charters)
|-------------------------------------------------------------------------------------------------------------------------------

|Delaware                                                       |  | 76-0568219                          
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 76-0568220                          
|(State or other jurisdiction of
incorporation of organization) |  | (I.R.S. Employer Identification No.)

|2727
North Loop West, Houston, Texas 77008-1037 (Address of principal executive
offices)       (Zip Code)
|---------------------------------------------------------------------------------------------------------

|Registrants
telephone number, including area code:   (713) 880-6500
|--------------------------------------------------------------------

Indicate
by check mark whether the registrants: (1) have 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 registrants were required to file such reports), and
(2) have been subject to such filing requirements for the past 90 days.

YES [X] NO [ ]

Indicate
by check mark if either registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act).

YES [X] NO [ ]

There
were 211,768,371 Common Units of Enterprise Products Partners L.P. outstanding at
November 1, 2003. Enterprise Products Partners L.P.s Common Units trade on the New
York Stock Exchange under symbol EPD. Enterprise Products Operating
L.P. is owned 98.9899% by its parent, EPD, and 1.0101% by the General Partner. No
common equity securities of Enterprise Products Operating L.P. are publicly-traded.



---

# EXPLANATORY NOTE

This
report constitutes a combined quarterly report on Form 10-Q for Enterprise Products
Partners L.P. (the Company)(Commission File No. 1-14323) and its 98.9899%
owned subsidiary, Enterprise Products Operating L.P. (the Operating
Partnership)(Commission File No. 333-93239-01). Since the Operating Partnership owns
substantially all of the Companys consolidated assets and conducts substantially all
of the Companys business and operations, the information set forth herein, except
for Part I, Item 1, constitutes combined information for the Company and the Operating
Partnership. In accordance with Rule 3-10 of Regulation S-X, Part I, Item 1 contains
separate financial statements for the Company and the Operating Partnership.



---

ENTERPRISE PRODUCTS PARTNERS L.P. 
ENTERPRISE PRODUCTS OPERATING L.P. 
TABLE OF CONTENTS

|                |                                                             | Page No.
|--------------- | ----------------------------------------------------------- | --------
|Glossary        |                                                             |         
|                | PART I.  FINANCIAL INFORMATION.                             |         
|               
|Item 1.         | Financial Statements.                                       |         
|Item 1A.        | Enterprise Products Partners L.P.                           | 1       
|Item 1B.        | Enterprise Products Operating L.P.                          | 25      
|               
|Item 2.         | Managements Discussion and Analysis of Financial Condition |         
|                | and Results of Operations.                                  | 46      
|               
|Item 3.         | Quantitative and Qualitative Disclosures about Market Risk. | 67      
|               
|Item 4.         | Controls and Procedures.                                    | 68      
|               
|                | PART II.  OTHER INFORMATION.                                |         
|               
|Item 6.         | Exhibits and Reports on Form 8-K.                           | 69      
|               
|Signatures page |                                                             | 72      



---

# Glossary

The following abbreviations, acronyms
or terms used in this Form 10-Q are defined below:

|                          |                                                                                                                                                                                                                                                                                              
|------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Acadian Gas               | Acadian Gas, LLC and subsidiaries, acquired from Shell in April 2001                                                                                                                                                                                                                         
|Accum. OCI                | Accumulated Other Comprehensive Income (Loss), as applicable                                                                                                                                                                                                                                 
|BBtus                     | Billion British thermal units, a measure of heating value                                                                                                                                                                                                                                    
|Bcf                       | Billion cubic feet                                                                                                                                                                                                                                                                           
|BEF                       | Belvieu Environmental Fuels, an equity investment of EPOLP through
 September 2003.  On September 30, 2003, BEF became a majority-owned
 consolidated subsidiary (see footnote 3 of the Notes to Unaudited Consolidated
 Financial Statements included under Item 1 of this quarterly report)
|Belle Rose                | Belle Rose NGL Pipeline LLC, an equity investment of EPOLP                                                                                                                                                                                                                                   
|BRF                       | Baton Rouge Fractionators LLC, an equity investment of EPOLP                                                                                                                                                                                                                                 
|BRPC                      | Baton Rouge Propylene Concentrator, LLC, an equity investment of EPOLP                                                                                                                                                                                                                       
|Btu                       | British thermal unit, a measure of heating value                                                                                                                                                                                                                                             
|CEO                       | Chief Executive Officer                                                                                                                                                                                                                                                                      
|CFO                       | Chief Financial Officer                                                                                                                                                                                                                                                                      
|CMAI                      | Chemical Market Associates, Inc.                                                                                                                                                                                                                                                             
|Company                   | Enterprise Products Partners L.P. and its consolidated subsidiaries, including the                                                                                                                                                                                                           
|                          | Operating Partnership                                                                                                                                                                                                                                                                        
|Diamond-Koch              | Refers to affiliates of Valero Energy Corporation and Koch Industries, Inc.                                                                                                                                                                                                                  
|Dixie                     | Dixie Pipeline Company, an equity investment of EPOLP                                                                                                                                                                                                                                        
|EPCO                      | Enterprise Products Company (including its affiliates), an affiliate of the                                                                                                                                                                                                                  
|                          | Company and our ultimate parent company                                                                                                                                                                                                                                                      
|EPIK                      | EPIK Terminalling L.P. and EPIK Gas Liquids, LLC, collectively, an equity                                                                                                                                                                                                                    
|                          | investment of EPOLP until March 1, 2003, after which time it became 100%                                                                                                                                                                                                                     
|                          | owned by EPOLP                                                                                                                                                                                                                                                                               
|EPOLP                     | Enterprise Products Operating L.P., the operating subsidiary of the Company                                                                                                                                                                                                                  
|                          | (also referred to as the Operating Partnership)                                                                                                                                                                                                                                            
|Evangeline                | Evangeline Gas Pipeline Company, L.P. and Evangeline Gas Corp., collectively,                                                                                                                                                                                                                
|                          | an equity investment of EPOLP                                                                                                                                                                                                                                                                
|FASB                      | Financial Accounting Standards Board                                                                                                                                                                                                                                                         
|Feedstock                 | A raw material required for an industrial process such as in petrochemical                                                                                                                                                                                                                   
|                          | manufacturing                                                                                                                                                                                                                                                                                
|Forward sales contracts   | The sale of a commodity or other product in a current period for delivery in a                                                                                                                                                                                                               
|                          | future period                                                                                                                                                                                                                                                                                
|GAAP                      | Generally Accepted Accounting Principles in the United States of America                                                                                                                                                                                                                     
|General Partner           | Enterprise Products GP, LLC, the General Partner of the Company and the                                                                                                                                                                                                                      
|                          | Operating Partnership                                                                                                                                                                                                                                                                        
|La Porte                  | La Porte Pipeline Company, L.P. and La Porte GP, LLC, collectively, an equity                                                                                                                                                                                                                
|                          | investment of EPOLP                                                                                                                                                                                                                                                                          
|MBA                       | Mont Belvieu Associates, see MBA acquisition below                                                                                                                                                                                                                                         
|MBA acquisition           | Refers to the acquisition of Mont Belvieu Associates remaining interest in the                                                                                                                                                                                                              
|                          | Mont Belvieu NGL fractionation facility in 1999                                                                                                                                                                                                                                              
|MBFC                      | Mississippi Business Finance Corporation                                                                                                                                                                                                                                                     
|MBPD                      | Thousand barrels per day                                                                                                                                                                                                                                                                     
|Mid-America               | Mid-America Pipeline Company, LLC (we acquired an indirect 98% interest in                                                                                                                                                                                                                   
|                          | Mid-America in July 2002)                                                                                                                                                                                                                                                                    
|MMBtus                    | Million British thermal units, a measure of heating value                                                                                                                                                                                                                                    
|Mont Belvieu              | Mont Belvieu, Texas                                                                                                                                                                                                                                                                          
|Mont Belvieu Storage II   | Refers to NGL and petrochemical storage businesses located in Mont Belvieu                                                                                                                                                                                                                   
|                          | that were acquired from Diamond-Koch                                                                                                                                                                                                                                                         
|Mont Belvieu Splitter III | See Splitter III                                                                                                                                                                                                                                                                           
|Moodys                   | Moodys Investors Service                                                                                                                                                                                                                                                                    
|MTBE                      | Methyl tertiary butyl ether                                                                                                                                                                                                                                                                  



---

# Glossary (continued)

|                      |                                                                                                                                                                                                                                                                                                                               
|--------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Nemo                  | Nemo Gathering Company, LLC, an equity investment of EPOLP                                                                                                                                                                                                                                                                    
|Neptune               | Neptune Pipeline Company LLC, an equity investment of EPOLP                                                                                                                                                                                                                                                                   
|NGL or NGLs           | Natural gas liquid(s)                                                                                                                                                                                                                                                                                                         
|NYMEX                 | New York Merchantile Exchange                                                                                                                                                                                                                                                                                                 
|NYSE                  | New York Stock Exchange                                                                                                                                                                                                                                                                                                       
|OPIS                  | Oil Price Information Service                                                                                                                                                                                                                                                                                                 
|Operating Partnership | Enterprise Products Operating L.P. and its subsidiaries                                                                                                                                                                                                                                                                       
|OTC                   | Olefins Terminal Corporation, an equity investment of the Company until August  1, 2003, after which time it
became a consolidated subsidiary (see footnote 3 of  the Notes to Unaudited Consolidated Financial Statements
included under Item 1  of this quarterly report)                                                   
|Promix                | K/D/S Promix LLC, an equity investment of EPOLP                                                                                                                                                                                                                                                                               
|SEC                   | U.S. Securities and Exchange Commission                                                                                                                                                                                                                                                                                       
|Seminole              | Seminole Pipeline Company (we acquired an indirect 78.4% interest in Seminole                                                                                                                                                                                                                                                 
|                      | in July 2002)                                                                                                                                                                                                                                                                                                                 
|SFAS                  | Statement of Financial Accounting Standards issued by the FASB                                                                                                                                                                                                                                                                
|Shell                 | Shell Oil Company, its subsidiaries and affiliates                                                                                                                                                                                                                                                                            
|Splitter III          | Refers to the propylene fractionation facility we acquired from Diamond-Koch                                                                                                                                                                                                                                                  
|Starfish              | Starfish Pipeline Company LLC, an equity investment of EPOLP                                                                                                                                                                                                                                                                  
|Throughput            | Refers to the physical movement of volumes through a pipeline                                                                                                                                                                                                                                                                 
|Toca-Western          | Refers to natural gas processing and NGL fractionation assets acquired from                                                                                                                                                                                                                                                   
|                      | Western Gas Resources, Inc.                                                                                                                                                                                                                                                                                                   
|Tri-States            | Tri-States NGL Pipeline LLC, an equity investment of EPOLP                                                                                                                                                                                                                                                                    
|Venice                | Refers to natural gas processing and NGL fractionation assets owned by VESCO                                                                                                                                                                                                                                                  
|Unit                  | Refers to limited partner interests in the Company (i.e., Common, Subordinated                                                                                                                                                                                                                                                
|                      | and Special Units)                                                                                                                                                                                                                                                                                                            
|VESCO                 | Venice Energy Services Company, LLC, a cost method investment of EPOLP                                                                                                                                                                                                                                                        
|Williams              | The Williams Companies, Inc. and subsidiaries                                                                                                                                                                                                                                                                                 
|Wilprise              | Wilprise Pipeline Company, LLC, an equity investment of EPOLP through  September 2003.  On October 1, 2003,
Wilprise became a majority-owned  consolidated subsidiary (see our discussion of Subsequent Events in the Notes 
to Unaudited Consolidated Financial Statements included under Item 1 of this  quarterly report)
|1999 Trust            | EPOLP 1999 Grantor Trust, a subsidiary of EPOLP                                                                                                                                                                                                                                                                               

For definitions of other commonly
used terms used in our industry, please refer to the Glossary section of our
2002 annual report on Form 10-K/A (Commission File No. 1-14323).



---

PART I. FINANCIAL STATEMENTS.
Item 1A. ENTERPRISE PRODUCTS PARTNERS L.P.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

|ASSETS                                                                        | September 30,
2003 | December 31,
2002
|----------------------------------------------------------------------------- | ------------------ | -----------------
|Current Assets                                                                |                    |                  
|Cash and cash equivalents  (includes restricted cash of $14,655 at            |                    |                  
|September 30, 2003 and $8,751 at December 31, 2002)                           |                    |                  
|Accounts and notes receivable - trade, net of allowance for doubtful accounts |                    |                  
|of $20,372 at September 30, 2003 and $21,196 at December 31, 2002             |                    |                  
|Accounts receivable - affiliates                                              |                    |                  
|Inventories                                                                   |                    |                  
|Prepaid and other current assets                                              |                    |                  
|                                                                              |                    |                  
|Total current assets                                                          |                    |                  
|Property, Plant and Equipment, Net                                            |                    |                  
|Investments in and Advances to Unconsolidated Affiliates                      |                    |                  
|Intangible assets, net of accumulated amortization of $36,332 at              |                    |                  
|September 30, 2003 and $25,546 at December 31, 2002                           |                    |                  
|Goodwill                                                                      |                    |                  
|Deferred Tax Asset                                                            |                    |                  
|Long-Term Receivables                                                         |                    |                  
|Other Assets                                                                  |                    |                  
|                                                                              |                    |                  
|Total                                                                         |                    |                  
|                                                                              |                    |                  
|LIABILITIES AND PARTNERS EQUITY                                              |                    |                  
|Current Liabilities                                                           |                    |                  
|Current maturities of debt                                                    |                    |                  
|Accounts payable - trade                                                      |                    |                  
|Accounts payable - affiliates                                                 |                    |                  
|Accrued gas payables                                                          |                    |                  
|Accrued expenses                                                              |                    |                  
|Accrued interest                                                              |                    |                  
|Other current liabilities                                                     |                    |                  
|                                                                              |                    |                  
|Total current liabilities                                                     |                    |                  
|Long-Term Debt                                                                |                    |                  
|Other Long-Term Liabilities                                                   |                    |                  
|Minority Interest                                                             |                    |                  
|Commitments and Contingencies                                                 |                    |                  
|Partners Equity                                                              |                    |                  
|Common Units  (211,768,371 Units outstanding at September 30, 2003            |                    |                  
|and 141,694,766 at December 31, 2002)                                         |                    |                  
|Subordinated Units (32,114,804 Units outstanding at December 31, 2002)        |                    |                  
|Special Units (10,000,000 Units outstanding at December 31, 2002)             |                    |                  
|Treasury Units acquired by Trust, at cost (798,958 Units outstanding          |                    |                  
|at September 30, 2003 and 859,200 Units at December 31, 2002)                 |                    |                  
|General Partner                                                               |                    |                  
|Accumulated Other Comprehensive Income (Loss)                                 |                    |                  
|                                                                              |                    |                  
|Total Partners Equity                                                        |                    |                  
|                                                                              |                    |                  
|Total                                                                         |                    |                  
|                                                                              |                    |                  

See Notes to Unaudited
Consolidated Financial Statements

1

---

ENTERPRISE PRODUCTS PARTNERS L.P.
STATEMENTS OF CONSOLIDATED OPERATIONS
AND COMPREHENSIVE INCOME
(Dollars in thousands, except per Unit amounts)

|                                                                         | For the Three Months
Ended September 30, | For the Nine Months
Ended September 30,
|------------------------------------------------------------------------ | ---------------------------------------- | ---------------------------------------
|
|REVENUES                                                                 |                                          |                                        
|Third parties                                                            |                                          |                                        
|Related parties                                                          |                                          |                                        
|                                                                         |                                          |                                        
|Total                                                                    |                                          |                                        
|                                                                         |                                          |                                        
|COST AND EXPENSES                                                        |                                          |                                        
|Operating costs and expenses                                             |                                          |                                        
|Third parties                                                            |                                          |                                        
|Related parties                                                          |                                          |                                        
|Selling, general and administrative                                      |                                          |                                        
|Third parties                                                            |                                          |                                        
|Related parties                                                          |                                          |                                        
|                                                                         |                                          |                                        
|Total                                                                    |                                          |                                        
|                                                                         |                                          |                                        
|EQUITY IN INCOME (LOSS) OF UNCONSOLIDATED AFFILIATES                     |                                          |                                        
|                                                                         |                                          |                                        
|OPERATING INCOME                                                         |                                          |                                        
|                                                                         |                                          |                                        
|OTHER INCOME (EXPENSE)                                                   |                                          |                                        
|Interest expense                                                         |                                          |                                        
|Dividend income from unconsolidated affiliates                           |                                          |                                        
|Interest income - other                                                  |                                          |                                        
|Other, net                                                               |                                          |                                        
|                                                                         |                                          |                                        
|Other income  (expense)                                                  |                                          |                                        
|                                                                         |                                          |                                        
|INCOME (LOSS) BEFORE PROVISION FOR INCOME                                |                                          |                                        
|TAXES AND MINORITY INTEREST                                              |                                          |                                        
|PROVISION FOR INCOME TAXES                                               |                                          |                                        
|                                                                         |                                          |                                        
|INCOME (LOSS) BEFORE MINORITY INTEREST                                   |                                          |                                        
|MINORITY INTEREST                                                        |                                          |                                        
|                                                                         |                                          |                                        
|NET INCOME (LOSS)                                                        |                                          |                                        
|Reclassification of change in value of financial instruments             |                                          |                                        
|recorded as cash flow hedges                                             |                                          |                                        
|Gain on settlement of financial instruments recorded as cash flow hedges |                                          |                                        
|Amortization of gain on settlement of financial instruments to earnings  |                                          |                                        
|                                                                         |                                          |                                        
|COMPREHENSIVE INCOME (LOSS)                                              |                                          |                                        
|                                                                         |                                          |                                        
|                                                                         |                                          |                                        
|ALLOCATION OF NET INCOME (LOSS) TO:                                      |                                          |                                        
|Limited partners                                                         |                                          |                                        
|                                                                         |                                          |                                        
|General partner                                                          |                                          |                                        
|                                                                         |                                          |                                        
|BASIC EARNINGS PER UNIT                                                  |                                          |                                        
|Income (loss) before minority interest                                   |                                          |                                        
|                                                                         |                                          |                                        
|Net income (loss) per Common and Subordinated unit                       |                                          |                                        
|                                                                         |                                          |                                        
|DILUTED EARNINGS PER UNIT                                                |                                          |                                        
|Income (loss) before minority interest                                   |                                          |                                        
|                                                                         |                                          |                                        
|Net income (loss) per Common, Subordinated                               |                                          |                                        
|and Special unit                                                         |                                          |                                        
|                                                                         |                                          |                                        

See Notes to Unaudited
Consolidated Financial Statements

2

---

ENTERPRISE PRODUCTS PARTNERS L.P.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in thousands)

|                                                              | For the Nine Months
Ended September 30,
|------------------------------------------------------------- | ---------------------------------------
|
|OPERATING ACTIVITIES                                          |                                        
|Net income                                                    |                                        
|Adjustments to reconcile net income to cash flows provided    |                                        
|by (used for) operating activities:                           |                                        
|Depreciation and amortization in operating costs and expenses |                                        
|Depreciation in selling, general and administrative costs     |                                        
|Amortization in interest expense                              |                                        
|Equity in loss (income) of unconsolidated affiliates          |                                        
|Distributions received from unconsolidated affiliates         |                                        
|Operating lease expense paid by EPCO                          |                                        
|Other expenses paid by EPCO                                   |                                        
|Minority interest                                             |                                        
|Loss (gain) on sale of assets                                 |                                        
|Deferred income tax expense                                   |                                        
|Changes in fair market value of financial instruments         |                                        
|Net effect of changes in operating accounts                   |                                        
|                                                              |                                        
|Operating activities cash flows                               |                                        
|                                                              |                                        
|INVESTING ACTIVITIES                                          |                                        
|Capital expenditures                                          |                                        
|Proceeds from sale of assets                                  |                                        
|Business combinations, net of cash received                   |                                        
|Acquisition of intangible asset                               |                                        
|Investments in and advances to unconsolidated affiliates      |                                        
|                                                              |                                        
|Investing activities cash flows                               |                                        
|                                                              |                                        
|FINANCING ACTIVITIES                                          |                                        
|Borrowings under debt agreements                              |                                        
|Repayments of debt                                            |                                        
|Debt issuance costs                                           |                                        
|Distributions paid to partners                                |                                        
|Distributions paid to minority interests                      |                                        
|Contributions from minority interests                         |                                        
|Proceeds from issuance of Common Units                        |                                        
|Treasury Units purchased                                      |                                        
|Treasury Units reissued                                       |                                        
|Settlement of treasury lock financial instruments             |                                        
|Increase in restricted cash                                   |                                        
|                                                              |                                        
|Financing activities cash flows                               |                                        
|                                                              |                                        
|NET CHANGE IN CASH AND CASH EQUIVALENTS                       |                                        
|CASH AND CASH EQUIVALENTS, JANUARY 1                          |                                        
|                                                              |                                        
|CASH AND CASH EQUIVALENTS, SEPTEMBER 30                       |                                        
|                                                              |                                        

See Notes to Unaudited
Consolidated Financial Statements

3

---

ENTERPRISE PRODUCTS PARTNERS L.P.
STATEMENTS OF CONSOLIDATED PARTNERS EQUITY
(Dollars in thousands, see Note 9 for Unit History)

|                                      | Limited Partners |  |   |           |  
|------------------------------------- | ---------------- |  | - | --------- | -
|
|Balance, December 31, 2002            |                  |  | $ | 949,835   |  
|Net income                            |                  |  |   | 45,557    |  
|Operating leases paid by EPCO         |                  |  |   | 5,933     |  
|Other expenses paid by EPCO           |                  |  |   | 598       |  
|Cash distributions to partners        |                  |  |   | (177,177  | )
|Proceeds from issuance of             |                  |  |   |           |  
|Common Units in January 2003          |                  |  |   | 253,107   |  
|Proceeds from issuance of             |                  |  |   |           |  
|Common Units in June 2003             |                  |  |   | 256,001   |  
|Proceeds from issuance of             |                  |  |   |           |  
|Common Units in connection            |                  |  |   |           |  
|with DRP in August 2003               |                  |  |   | 25,765    |  
|Proceeds from August 2003 issuance of |                  |  |   |           |  
|Common Units in connection with:      |                  |  |   |           |  
|-   EUPP                              |                  |  |   | 156       |  
|-   EPCO Unit option plan             |                  |  |   | 644       |  
|Reissuance of Treasury Units          |                  |  |   |           |  
|to satisfy EPCO Unit option           |                  |  |   |           |  
|plan in August 2003                   |                  |  |   | 7         |  
|Conversion of 10.7 million EPCO       |                  |  |   |           |  
|Subordinated Units to                 |                  |  |   |           |  
|Common Units                          |                  |  |   | 97,123    |  
|Conversion of 10.0 million            |                  |  |   |           |  
|Shell Special Units to                |                  |  |   |           |  
|Common Units                          |                  |  |   | 143,926   |  
|Retirement of Common Units            |                  |  |   | (629      | )
|Treasury Lock financial instruments   |                  |  |   |           |  
|recorded as cash flow hedges:         |                  |  |   |           |  
|-   Reclassification of change in     |                  |  |   |           |  
|fair value                            |                  |  |   |           |  
|-   Cash gains on settlement          |                  |  |   |           |  
|-   Amortization of gain as component |                  |  |   |           |  
|of interest expense                   |                  |  |   |           |  
|Other                                 |                  |  |   | (291      | )
|                                      |                  |  |   |           |  
|Balance, September 30, 2003           |                  |  | $ | 1,600,555 |  
|                                      |                  |  |   |           |  

See Notes to Unaudited
Consolidated Financial Statements

4

---

ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.    GENERAL

In
the opinion of Enterprise Products Partners L.P., the accompanying unaudited consolidated
financial statements include all adjustments consisting of normal recurring accruals
necessary for a fair presentation of its:

| |  | consolidated
financial position as of September 30, 2003;
| | - | ---------------------------------------------------------

| |  | consolidated
results of operations for the three and nine months ended September 30, 2003 and 2002;
| | - | ---------------------------------------------------------------------------------------------------

| |  | consolidated
cash flows for the nine months ended September 30, 2003 and 2002; and
| | - | ----------------------------------------------------------------------------------

| |  | consolidated
partners equity for the nine months ended September 30, 2003.
| | - | ---------------------------------------------------------------------------

Within these footnote disclosures of
Enterprise Products Partners L.P., references to we, us,
our or the Company shall mean the consolidated financial
statements of Enterprise Products Partners L.P.

References
to Operating Partnership shall mean the consolidated financial statements of
our primary operating subsidiary, Enterprise Products Operating L.P., which are included
elsewhere in this combined quarterly report on Form 10-Q. We own 98.9899% of the Operating
Partnership and act as guarantor of certain of its debt obligations. Our General Partner,
Enterprise Products GP, LLC, owns the remaining 1.0101% of the Operating Partnership.
Essentially all of our assets, liabilities, revenues and expenses are recorded at the
Operating Partnership level in our consolidated financial statements.

Although
we believe the disclosures in these financial statements are adequate to make the
information presented not misleading, certain information and footnote disclosures
normally included in annual financial statements prepared in accordance with GAAP have
been condensed or omitted pursuant to the rules and regulations of the SEC. These
unaudited financial statements should be read in conjunction with our annual report on
Form 10-K/A (File No. 1-14323) for the year ended December 31, 2002.

The
results of operations for the three and nine months ended September 30, 2003 are not
necessarily indicative of the results to be expected for the full year.

Dollar
amounts presented in the tabular data within these footnote disclosures are stated in
thousands of dollars, unless otherwise indicated.

Certain
abbreviated entity names and other capitalized and industry terms are defined within the
glossary of this quarterly report on Form 10-Q.

Certain
reclassifications have been made to the prior years financial statements to conform
to the current year presentation. These reclassifications had no effect on previously
reported results of consolidated operations.

See
Note 13 for the pro forma effect on net income and earnings per Unit if we had used the
fair-value based method of accounting for Unit options.

2.    RECENTLY ISSUED ACCOUNTING STANDARDS

SFAS
No. 143, Accounting for Asset Retirement Obligations. We adopted this standard
as of January 1, 2003. This statement establishes accounting standards for the recognition
and measurement of an asset retirement obligation (ARO) liability and the
associated asset retirement cost. Our adoption of this standard had no material impact on
our financial statements. For a discussion regarding our implementation of this new
standard, see Note 5.

SFAS
No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections.  We adopted provisions of this
standard as of January 1, 2003. This statement revised accounting guidance related to the
extinguishment of debt and accounting for certain lease transactions. It also

5

---

amended
other accounting literature to clarify its meaning, applicability and to make various
technical corrections. Our adoption of this standard has had no material impact on our
financial statements.

SFAS
No. 146, Accounting for Costs Associated with Exit and Disposal Activities. We
adopted this standard as of January 1, 2003. This statement requires companies to
recognize costs associated with exit or disposal activities when they are incurred rather
than at the date of an entitys commitment to an exit or disposal plan. Our adoption
of this standard has had no material impact on our financial statements.

SFAS
No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure. We adopted this standard as of December 31, 2002. This statement
provides alternative methods of transition from a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 in both annual and interim financial
statements. We have provided the information required by this statement under Note 13.
Apart from this additional footnote disclosure, our adoption of this standard has had no
material impact on our financial statements.

SFAS
No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities. This statement amends and clarifies accounting guidance for derivative
instruments, including certain derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133. This statement is effective for contracts entered
into or modified after June 30, 2003, for hedging relationships designated after June 30,
2003, and to certain preexisting contracts. We adopted SFAS No. 149 on a prospective basis
as of July 1, 2003. Our adoption of this standard has had no material impact on our
financial statements.

SFAS
No. 150, Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity. This standard establishes classification and measurement
standards for financial instruments with characteristics of both liabilities and equity.
It requires an issuer of such financial instruments to reclassify the instrument from
equity to a liability or an asset. The effective date of this standard for us was July 1,
2003. Our adoption of this standard has had no material impact on our financial
statements.

FIN
45, Guarantors Accounting and Disclosure Requirement from Guarantees,
Including Indirect Guarantees of Indebtedness of Others. We implemented this FASB
interpretation as of December 31, 2002. This interpretation of SFAS No. 5, 57 and 107, and
rescission of FASB Interpretation No. 34 elaborates on the disclosures to be made by a
guarantor in its interim and annual financial statements about its obligations under
certain guarantees that it has issued. It also clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee. We have provided the information required
by this interpretation under Note 8.

FIN
46, Consolidation of Variable Interest Entities  An Interpretation of ARB No.
51. This interpretation of ARB No. 51 addresses requirements for accounting
consolidation of a variable interest entity (VIE) with its primary
beneficiary. In general, if an equity owner of a VIE meets certain criteria defined within
FIN 46, the assets, liabilities and results of the activities of the VIE should be
included in the consolidated financial statements of the owner. Our adoption of FIN 46 as
of January 31, 2003 has had no material effect on our financial statements.

3.    BUSINESS COMBINATIONS

During
the first nine months of 2003, we acquired EPIKs remaining 50% ownership interest,
the Port Neches Pipeline, and an additional 33.33% interest in BEF. In addition, we began
consolidating the financial statements of OTC beginning August 2003 as a result of our
obtaining control over this entity. We also made minor adjustments to the allocation of
the purchase price we paid to acquire indirect interests in Mid-America and Seminole
pipelines. Due to the immaterial nature of each transaction or event, individually and in
the aggregate, our discussion of each of these transactions is limited to the following:

Acquisition
of remaining 50% interest in EPIK. In March 2003, we purchased the remaining 50% ownership
interests in EPIK. EPIK owns an NGL export terminal located in southeast Texas on the
Houston Ship

6

---

Channel. As a result of this acquisition, EPIK became a consolidated
wholly-owned subsidiary of ours (previously, it had been an equity-method unconsolidated
affiliate).

Acquisition
of Port Neches Pipeline. In March 2003, we acquired entities owning the Port Neches
Pipeline (formerly known as the Quest Pipeline). The 70-mile Port Neches Pipeline
transports high-purity grade isobutane produced at our facilities in Mont Belvieu to
customers in Port Neches, Texas.

Acquisition
of 33.33% interest in BEF. At the end of September 2003, we acquired an additional 33.33%
partnership interest in BEF, which owns a facility that currently produces MTBE (a motor
gasoline additive that enhances octane and is used in reformulated gasoline). Due to this
acquisition, BEF became a majority-owned consolidated subsidiary of ours on September 30,
2003. Previously, BEF was accounted for as an equity-method unconsolidated affiliate.

Consolidation
of OTC. In August 2003, we became the operator of OTCs above ground polymer grade
propylene storage and export facility located in Seabrook, Texas. We currently own 50% of
OTC and represent its major customer. As a result of obtaining significant control over
OTC through our operator, owner and customer relationship with the facility, we began
consolidating OTCs financial statements with ours beginning August 1, 2003.
Previously, OTC was accounted for as an equity-method unconsolidated affiliate.

Other
purchase price adjustments. We made purchase price adjustments relating to our $1.2
billion acquisition of indirect interests in the Mid-America and Seminole pipelines. These
adjustments total a net $4.8 million and primarily relate to liabilities existing at July
31, 2002, which was the closing date of the acquisitions.

The
following table shows our allocation of the purchase price for 2003 acquisitions, effects
of consolidating entities that were formerly accounted for under the equity-method, and
adjustments to purchase price allocations from prior periods.

|                                   | 2003
Business
Acquisitions | Consolidation
of OTC | Other
Purchase
Price
Adjustments | Total  
|---------------------------------- | -------------------------- | -------------------- | -------------------------------- | -------
|Cash and cash equivalents          |                            |                      | $                                | 18,562 
|Accounts receivable                |                            |                      |                                  | 7,819  
|Inventories                        |                            |                      |                                  | 10,593 
|Prepaid and other current assets   |                            |                      |                                  | 5,114  
|Property, plant and equipment, net |                            |                      |                                  | 85,087 
|Investments in and advances to     |                            |                      |                                  |        
|unconsolidated affiliates          |                            |                      |                                  | (43,684
|Other assets                       |                            |                      |                                  | 4,989  
|Accounts payable                   |                            |                      |                                  | (5,007 
|Accrued gas payables               |                            |                      |                                  | (5,370 
|Accrued expenses                   |                            |                      |                                  | (1,734 
|Other current liabilities          |                            |                      |                                  | (4,329 
|Other liabilities                  |                            |                      |                                  | (5,001 
|Minority interest                  |                            |                      |                                  | (26,437
|                                   |                            |                      |                                  |        
|Total net assets recorded          |                            |                      |                                  | 40,602 
|Investee cash balances             |                            |                      |                                  |        
|recorded upon consolidation        |                            |                      |                                  | (18,562
|                                   |                            |                      |                                  |        
|Business combinations, net of      |                            |                      |                                  |        
|cash received                      |                            |                      | $                                | 22,040 
|                                   |                            |                      |                                  |        

7

---

4.    INVENTORIES

Our
inventories were as follows at the dates indicated:

|                        | September 30,
2003 | December 31,
2002
|----------------------- | ------------------ | -----------------
|Regular inventory       |                    |                  
|Forward-sales inventory |                    |                  
|                        |                    |                  
|Inventory               |                    |                  
|                        |                    |                  

Our
regular inventory is comprised of inventories of NGLs, certain petrochemical products, and
natural gas that are available for sale through our marketing activities. The forward
sales inventory is comprised of segregated NGL volumes dedicated to the fulfillment of
forward sales contracts.

Due
to fluctuating market conditions in the midstream energy industry in which we operate, we
occasionally recognize lower of cost or market (LCM) adjustments when the
costs of our inventories exceed their net realizable value. These non-cash adjustments are
charged to operating costs and expenses in the period they are recognized. For the three
and nine months ended September 30, 2003, we recognized $0.7 million and $15.1 million,
respectively, of such LCM adjustments. For the three and nine months ended September 30,
2002, we recognized $1.5 million and $6.2 million, respectively, of these adjustments. The
majority of these write-downs were taken against NGL inventories.

5.    PROPERTY, PLANT AND EQUIPMENT

Our
property, plant and equipment and accumulated depreciation were as follows at the dates
indicated:

|                                         | Estimated
Useful Life
in Years | September 30,
2003 | December 31,
2002
|---------------------------------------- | ------------------------------ | ------------------ | -----------------
|Plants and pipelines                     |                                |                    | 5-35             
|Underground and other storage facilities |                                |                    | 5-35             
|Transportation equipment                 |                                |                    | 3-35             
|Land                                     |                                |                    |                  
|Construction in progress                 |                                |                    |                  
|                                         |                                |                    |                  
|Total                                    |                                |                    |                  
|Less accumulated depreciation            |                                |                    |                  
|                                         |                                |                    |                  
|Property, plant and equipment, net       |                                |                    |                  
|                                         |                                |                    |                  

Depreciation
expense for the three months ended September 30, 2003 and 2002 was $24.7 million and $20.7
million, respectively. For the nine months ended September 30, 2003 and 2002, it was $73.1
million and $48.6 million, respectively.

Asset
retirement obligations. SFAS No. 143 establishes accounting standards for the recognition
and measurement of an ARO liability and the associated asset retirement cost. Under the
implementation guidelines of SFAS No. 143, we reviewed our long-lived assets for ARO
liabilities and identified such liabilities in several operational areas. These include
ARO liabilities related to (i) right-of-way easements over property not owned by us and
(ii) regulatory requirements triggered by the abandonment or retirement of certain
currently operated facilities.

As
a result of our analysis of identified AROs, we were not required to recognize such
potential liabilities. Our rights under the easements are renewable and only require
retirement action upon nonrenewal of the easement agreements. We currently expect to renew
all such easement agreements and to use these properties for the

8

---

foreseeable future.
Therefore, an ARO liability is not estimable for such easements. Should we decide not to
renew these right-of-way agreements, an ARO liability would be recorded at that time. We
also identified potential ARO liabilities arising from regulatory requirements related to
the future abandonment or retirement of certain currently operated facilities. At present,
we currently have no intention or legal obligation to abandon or retire such facilities.
An ARO liability would be recorded if future abandonment or retirement of such facilities
occurred.

Certain
Gulf of Mexico natural gas pipelines owned by our equity method investees, Starfish,
Neptune and Nemo, have identified AROs relating to regulatory requirements. At
present, these entities have no plans to abandon or retire their major transmission
pipelines; however, there are plans to retire certain minor gas gathering lines
periodically through 2013. Should the management of these companies decide to abandon or
retire their major transmission pipelines, an ARO liability would be recorded at that
time. With regard to the minor gas gathering pipelines scheduled for retirement, Starfish
and Neptune collectively recorded ARO liabilities during 2003 totaling $2.8 million (on a
gross basis).

6.    
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

We
own interests in a number of related businesses that are accounted for under the equity or
cost methods. The investments in and advances to these unconsolidated affiliates are
grouped according to the business segment to which they relate. For a general discussion
of our business segments, see Note 12. The following table shows our investments in and
advances to unconsolidated affiliates at the dates indicated:

|                                                                            | Ownership
Percentage | September 30,
2003 | December 31,
2002
|--------------------------------------------------------------------------- | -------------------- | ------------------ | -----------------
|Accounted for on equity basis:                                              |                      |                    |                  
|Fractionation:                                                              |                      |                   
|BRF                                                                         |                      |                    |                  
|BRPC                                                                        |                      |                    |                  
|Promix                                                                      |                      |                    |                  
|La Porte                                                                    |                      |                    |                  
|OTC (1)                                                                     |                      |                    |                  
|Pipeline:                                                                   |                      |                    |                  
|EPIK (1)                                                                    |                      |                    |                  
|Wilprise (1)                                                                |                      |                    |                  
|Tri-States (1)                                                              |                      |                    |                  
|Belle Rose                                                                  |                      |                    |                  
|Dixie                                                                       |                      |                    |                  
|Starfish                                                                    |                      |                    |                  
|Neptune                                                                     |                      |                    |                  
|Nemo                                                                        |                      |                    |                  
|Evangeline                                                                  |                      |                    |                  
|Octane Enhancement:                                                         |                      |                    |                  
|BEF (1)                                                                     |                      |                    |                  
|Accounted for on cost basis:                                                |                      |                    |                  
|Processing:                                                                 |                      |                    |                  
|VESCO                                                                       |                      |                    |                  
|                                                                            |                      |                    |                  
|Total                                                                       |                      |                    |                  
|                                                                            |                      |                    |                  
|                                                                           
|(1) See Notes 3 and 15 for a discussion of changes in ownership or control.

9

---

The
following table shows our equity in income (loss) of unconsolidated affiliates for the
periods indicated:

|                    | Ownership | For the Three Months
Ended September 30, | For the Nine Months
Ended September 30,
|------------------- | --------- | ---------------------------------------- | ---------------------------------------
|
|Fractionation:      |           |                                          |                                        
|BRF                 |           |                                          |                                        
|BRPC                |           |                                          |                                        
|Promix              |           |                                          |                                        
|La Porte            |           |                                          |                                        
|OTC                 |           |                                          |                                        
|Pipelines:          |           |                                          |                                        
|EPIK                |           |                                          |                                        
|Wilprise            |           |                                          |                                        
|Tri-States          |           |                                          |                                        
|Belle Rose          |           |                                          |                                        
|Dixie               |           |                                          |                                        
|Starfish            |           |                                          |                                        
|Neptune             |           |                                          |                                        
|Nemo                |           |                                          |                                        
|Evangeline          |           |                                          |                                        
|Octane Enhancement: |           |                                          |                                        
|BEF                 |           |                                          |                                        
|                    |           |                                          |                                        
|Total               |           |                                          |                                        
|                    |           |                                          |                                        

The
following tables present summarized income statement information for our unconsolidated
affiliates accounted for under the equity method (for the periods indicated, on a 100%
basis). We have grouped this information by the business segment to which the entities
relate.

|                   | Summarized Income Statement Information for the Three Months Ended
|------------------ | ------------------------------------------------------------------
|
|
|Pipelines          |                                                                   
|Fractionation      |                                                                   
|Octane Enhancement |                                                                   

|                   | Summarized Income Statement Information for the Nine Months Ended
|------------------ | -----------------------------------------------------------------
|
|
|Pipelines          |                                                                  
|Fractionation      |                                                                  
|Octane Enhancement |                                                                  

Our
initial investment in Promix, La Porte, Dixie, Neptune and Nemo exceeded our share of the
historical cost of the underlying net assets of such entities (the excess
cost). The excess cost of these investments is reflected in our investments in and
advances to unconsolidated affiliates for these entities. That portion of excess cost
attributable to the tangible plant and/or pipeline assets of each entity is amortized
against equity earnings from these entities in a manner similar to depreciation. That
portion of excess cost attributable to goodwill is subject to periodic impairment testing
and is not amortized.

10

---

The
following table summarizes our excess cost information at September 30, 2003 and December
31, 2002 by the business segment to which the unconsolidated affiliates relate:

|                                                                                      |  | Original Excess Cost
attributable to | Unamortized balance at
|------------------------------------------------------------------------------------- |  | ------------------------------------ | ----------------------
|
|Fractionation                                                                         |  |                                      | 20-35 years           
|Pipelines                                                                             |  |                                      | 35 years (1)          
|                                                                                     
|                                                                                     
|(1) Goodwill is not amortized; however, it is subject to periodic impairment testing.

For
each of the three months ended September 30, 2003 and 2002, we recorded $0.4 million of
excess cost amortization, which is reflected in our equity in earnings from unconsolidated
affiliates. We recorded $1.2 million of excess cost amortization for each of the nine
month periods ended September 30, 2003 and 2002.

Purchase
of remaining 50% interest in EPIK

As
discussed in Note 3, we purchased the remaining 50% ownership interest in EPIK in March
2003. As a result of this acquisition, EPIK became a consolidated wholly-owned subsidiary.
We recorded $1.8 million of equity income from EPIK for the two months that it was an
unconsolidated subsidiary during the first quarter of 2003.

Purchase of
an additional 33.33%  interest in BEF

As
discussed in Note 3, we purchased an additional 33.33% partnership interest in BEF on
September 30, 2003. As a result of this acquisition, BEF became a majority-owned
consolidated subsidiary of ours. Prior to this acquisition and consolidation, our share of
BEFs losses for the first nine months of 2003 was $27.9 million, which reflects an
impairment charge recorded by BEF prior to our purchase of the additional partnership
interest.

BEF
owns a facility that currently produces MTBE, a motor gasoline additive that enhances
octane and is used in reformulated gasoline. The production of MTBE is primarily driven by
oxygenated fuel programs enacted under the federal Clean Air Act Amendments of 1990. As a
result of environmental concerns, several states have enacted legislation to ban or
significantly limit the use of MTBE in motor gasoline within their jurisdictions. In
addition, federal legislation has been drafted to ban MTBE and replace the oxygenate with
renewable fuels such as ethanol.

As
a result of declining domestic demand and a prolonged period of weak MTBE production
economics, several of BEFs competitors have announced their withdrawal from the
marketplace. Due to the deteriorating business environment and outlook and the completion
of its preliminary engineering studies regarding conversion alternatives, BEF evaluated
the carrying value of its long-lived assets for impairment during the third quarter of
2003. This review indicated that the carrying value of its long-lived assets exceeded
their collective fair value, which resulted in a non-cash impairment charge of $67.5
million. Our share of this loss is $22.5 million and is recorded as a component of
Equity in income (loss) of unconsolidated affiliates in our Statements of
Consolidated Operations and Comprehensive Income for the three and nine months ended
September 30, 2003. Our historical equity (and in the future, consolidated) earnings from
BEF are classified under the Octane Enhancement business segment.

BEFs
assets were written down to fair value, which was determined by independent appraisers
using present value techniques. The impaired assets principally represent the plant
facility and other assets associated with MTBE production. The fair value analysis
incorporates future courses of action being taken (or contemplated to be taken) by BEF
management, including modification of the facility to produce iso-octane and alkylate. If
the underlying assumptions in the fair value analysis change resulting in expected future
cash flows being less than the new carrying value of the facility, additional impairment
charges may result in the future.

11

---

BEF
is currently in the process of preparing detailed engineering plans to convert the
facility to iso-octane production. The project is expected to be complete by mid-2004. The
facility will continue to produce MTBE as market conditions warrant and will be capable of
producing either MTBE or iso-octane once the plant modifications are complete. Depending
on the outcome of various factors (including pending federal legislation) the facility may
be further modified in the future to produce alkylate.

7.    INTANGIBLE ASSETS AND GOODWILL

Intangible assets

The
following table summarizes our intangible assets at September 30, 2003 and December 31,
2002:

|                                              |  |  | At September 30, 2003 |         | At December 31, 2002
|--------------------------------------------- |  |  | --------------------- | ------- | --------------------
|
|Shell natural gas processing agreement        |  |  | $                     | 206,216 |                     
|Mont Belvieu Storage II contracts             |  |  |                       | 8,127   |                     
|Mont Belvieu Splitter III contracts           |  |  |                       | 53,000  |                     
|Toca-Western natural gas processing contracts |  |  |                       | 11,187  |                     
|Toca-Western NGL fractionation contracts      |  |  |                       | 20,042  |                     
|Venice contracts                              |  |  |                       | 4,635   |                     
|                                              |  |  |                       |         |                     
|Total                                         |  |  | $                     | 303,207 |                     
|                                              |  |  |                       |         |                     

The
following table shows amortization expense associated with our intangible assets for the
three and nine months ended September 30, 2003 and 2002:

|                                              | For the Three Months
Ended September 30, | For the Nine Months
Ended September 30,
|--------------------------------------------- | ---------------------------------------- | ---------------------------------------
|
|Shell natural gas processing agreement        |                                          |                                        
|Mont Belvieu Storage II contracts             |                                          |                                        
|Mont Belvieu Splitter III contracts           |                                          |                                        
|Toca-Western natural gas processing contracts |                                          |                                        
|Toca-Western NGL fractionation contracts      |                                          |                                        
|Venice contracts                              |                                          |                                        
|                                              |                                         
|Total                                         |                                          |                                        
|                                              |                                          |                                        

Goodwill

Our
goodwill is attributable to the excess of the purchase price over the fair value of assets
acquired and is comprised of the following (at September 30, 2003 and December 31, 2002):

|Mont Belvieu Splitter III acquisition |  |  | $ | 73,690 | 
|------------------------------------- |  |  | - | ------ | 
|MBA acquisition                       |  |  |   | 7,857  | 
|                                      | 
|                                      |  |  | $ | 81,547 | 
|                                      | 

Our
goodwill amounts are recorded as part of the Fractionation segment since they are related
to assets classified within this operating segment.

12

---

8.    DEBT OBLIGATIONS

Our
debt obligations consisted of the following at the dates indicated:

|                                                         | September 30,
2003 | December 31,
2002
|-------------------------------------------------------- | ------------------ | -----------------
|Borrowings under:                                        |                    |                  
|364-Day Term Loan, variable rate, due July 2003          |                    |                  
|364-Day Revolving Credit facility, variable rate,        |                    |                  
|due November 2004                                        |                    |                  
|Multi-Year Revolving Credit facility, variable rate,     |                    |                  
|due November 2005                                        |                    |                  
|Senior Notes A, 8.25% fixed rate, due March 2005         |                    |                  
|Seminole Notes, 6.67% fixed rate, $15 million due        |                    |                  
|each December, 2002 through 2005                         |                    |                  
|MBFC Loan, 8.70% fixed rate, due March 2010              |                    |                  
|Senior Notes B, 7.50% fixed rate, due February 2011      |                    |                  
|Senior Notes C, 6.375% fixed rate, due February 2013     |                    |                  
|Senior Notes D, 6.875% fixed rate, due March 2033        |                    |                  
|                                                         |                    |                  
|Total principal amount                                   |                    |                  
|Unamortized balance of increase in fair value related to |                    |                  
|hedging a portion of fixed-rate debt                     |                    |                  
|Less unamortized discount on:                            |                    |                  
|Senior Notes A                                           |                    |                  
|Senior Notes B                                           |                    |                  
|Senior Notes D                                           |                    |                  
|Less current maturities of debt                          |                    |                  
|                                                         |                    |                  
|Long-term debt                                           |                    |                  
|                                                         |                    |                  

Letters
of credit. At September 30, 2003 and December 31, 2002, we had $75 million of standby
letter of credit capacity under our Multi-Year Revolving Credit facility. We had $13.9
million of letters of credit outstanding under this facility at September 30, 2003 and
$2.4 million outstanding at December 31, 2002.

Covenants.
          We were in compliance with the various covenants of our debt agreements at
          September 30, 2003 and December 31, 2002. Certain financial ratio covenants of
          our revolving credit facilities were amended in connection with the refinancing
          of our 364-Day Revolving Credit facility in October 2003 (see Note 15).

Parent-Subsidiary
guarantor relationships. We act as guarantor of all of our Operating Partnerships
consolidated debt obligations, with the exception of the Seminole Notes. If the Operating
Partnership were to default on any debt we guarantee, we would be responsible for
full repayment of that obligation. The Seminole Notes are unsecured obligations of Seminole
Pipeline Company (of which we own an effective 78.4% of its ownership interests).

New
senior notes issued during first quarter of 2003

During
the first quarter of 2003, we completed the issuance of $850 million of long-term senior
notes (Senior Notes C and D). Senior Notes C and D are unsecured obligations of our
Operating Partnership and rank equally with its existing and future unsecured and
unsubordinated indebtedness and senior to any future subordinated indebtedness. We
guarantee both Senior Notes C and D for our subsidiary through an unsecured and
unsubordinated guarantee that is non-recourse to the General Partner. These notes were
issued under an indenture containing certain covenants and are subject to a make-whole
redemption right if we elect to call the debt prior to its scheduled maturity. These
covenants restrict our ability, with certain exceptions, to incur debt secured by liens
and engage in sale and leaseback transactions.

13

---

Senior
Notes C. In January 2003, we issued $350 million in principal amount of 6.375% fixed-rate
senior notes due February 1, 2013 (Senior Notes C), from which we received net
proceeds before offering expenses of approximately $347.7 million. These private placement
notes were sold at face value with no discount or premium. We used the proceeds from this
offering to repay a portion of the indebtedness outstanding under the 364-Day Term Loan
that we incurred to finance the Mid-America and Seminole acquisitions. In May 2003, we
exchanged 100% of the private placement Senior Notes C for publicly-registered Senior
Notes C.

Senior
Notes D. In February 2003, we issued $500 million in principal amount of 6.875% fixed-rate
senior notes due March 1, 2033 (Senior Notes D), from which we received net
proceeds before offering expenses of approximately $489.8 million. These private placement
notes were sold at 98.842% of their face amount. We used $421.4 million from this offering
to repay the remaining principal balance outstanding under the 364-Day Term Loan. In
addition, we applied $60.0 million of the proceeds to reduce the balance outstanding under
the 364-Day Revolving Credit facility. The remaining proceeds were used for working
capital purposes. In July 2003, we exchanged 100% of the private placement Senior Notes D
for publicly-registered Senior Notes D.

Repayment
of 364-Day Term Loan

In
July 2002, our Operating Partnership entered into the $1.2 billion senior unsecured
364-Day Term Loan to fund the acquisition of indirect interests in Mid-America
and Seminole. We used $178.5 million of the $182.5 million in proceeds from our October
2002 equity offering to partially repay this loan. We also used $252.8 million of the
$258.2 million in proceeds from the January 2003 equity offering (see Note 9), $347.0
million of the $347.7 million in proceeds from our issuance of Senior Notes C and $421.4
million in proceeds from our issuance of Senior Notes D to completely repay the 364-Day
Term Loan in February 2003.

Revolving
credit facilities

We
used $60.0 million in proceeds from the issuance of Senior Notes D in February 2003 to
reduce the balance outstanding under our 364-Day Revolving Credit facility. In addition,
we applied $261.2 million of the net proceeds from our June 2003 equity offering (see Note
9) to reduce the balances then outstanding under our revolving credit facilities, of which
$102 million was applied against the 364-Day Revolving Credit facility and $159.2 million
against the Multi-Year Revolving Credit facility.

At
September 30, 2003, we had $230 million of stand-alone borrowing capacity available under
our 364-Day Revolving Credit facility, with no principal balance outstanding. In addition,
we had $270 million in stand-alone borrowing capacity available under our Multi-Year
Revolving Credit facility at September 30, 2003. We had $145 million of principal and
$13.9 million in letters of credit outstanding under this facility at that date, with
$111.1 million of unused capacity.

The
original credit line available under our 364-Day Revolving Credit facility was set to
expire in November 2003. In late October 2003, we refinanced the term of this facility.
See Note 15 for additional information regarding this subsequent event.

Information
regarding variable interest rates paid

The
following table shows the range of interest rates paid and weighted-average interest rate
paid on our variable-rate debt obligations for the nine months ended September 30, 2003:

|                                                | Range of
interest rates
paid | Weighted-
average
interest rate
paid
|----------------------------------------------- | ---------------------------- | ------------------------------------
|364-Day Term Loan (a)                           |                              |                                     
|364-Day Revolving Credit facility               |                              |                                     
|Multi-Year Revolving Credit facility            |                              |                                     
|                                               
|                                               
|(a)  This facility was repaid in February 2003.

14

---

# 9.    CAPITAL STRUCTURE

Our
Common Units represent, and prior to their conversion to Common Units on August 1 2003,
our, Subordinated Units and convertible Special Units represented limited partner
interests in the Company. We are managed by our General Partner. The rights available to
our partners are described in the Third Amended and Restated Agreement of Limited
Partnership (together with any amendments thereto). Our Common Units trade on the NYSE
under the symbol EPD.

We
allocate earnings and related amounts to Common and Subordinated (prior to their
conversion to Common Units on August 1, 2003) Unitholders and the General Partner in
accordance with our partnership agreement. These classes of partnership interests are also
entitled to receive cash distributions. For financial accounting and tax purposes, the
Special Units (prior to their conversion to Common Units on August 1, 2003), were not
allocated any portion of net income; however, for tax purposes, the Special Units were
allocated a certain amount of depreciation.

In
January 2003, we completed a public offering of 14,662,500 Common Units (including
1,912,500 Common Units sold pursuant to the underwriters over-allotment option) from
which we received net proceeds before offering expenses of approximately $258.2 million,
including our General Partners $5.2 million in capital contributions. We used $252.8
million of the proceeds from this offering to repay a portion of the indebtedness
outstanding under our 364-Day Term Loan (see Note 8). The remaining proceeds were used for
working capital purposes and offering expenses.

In
June 2003, we completed a public offering of 11,960,000 Common Units (including 1,560,000
Common Units sold pursuant to the underwriters over-allotment option) from which we
received net proceeds before offering expenses of approximately $261.9 million, including
our General Partners $5.3 million in capital contributions. We used the net proceeds
from this offering to reduce indebtedness outstanding under our revolving credit
facilities (see Note 8). The remaining proceeds were used for offering expenses.

In
August 2003, we issued 1,268,404 Common Units in connection with our distribution
reinvestment plan from which we received net proceeds of approximately $26.0 million,
including our General Partners $0.3 million in capital contributions. The proceeds
from this offering were used for general partnership purposes. We also issued 67,897
Common Units as a result of equity-based awards and employee Common Unit purchases.

Our
partnership agreement stipulated that the Subordinated Units would undergo an early
conversion to Common Units if certain criteria were satisfied. As a result of meeting the
necessary criteria, 10,704,936 of EPCOs Subordinated Units converted to Common Units
on May 1, 2003 and the remaining 21,409,868 Subordinated Units converted on August 1,
2003. These conversions have no impact upon our earnings per unit or distributions since
Subordinated Units were already included in both the basic and fully-diluted earnings per
unit calculations and are distribution-bearing.

On
August 1, 2003, the last 10,000,000 of Shells non-distribution bearing Special Units
converted to Common Units. The conversion affected basic earnings per Unit beginning with
the third quarter of 2003. These units were already included in our fully-diluted earnings
per Unit computations. Since Common Units are distribution-bearing, our limited partner
cash distributions to Shell will increase beginning with the distribution we expect to
make in November 2003.

15

---

The
following table details Unit activity within each class of our limited partner interests
during the nine months ended September 30, 2003:

|                                                 | Limited Partners | 
|------------------------------------------------ | ---------------- | 
|
|Balance, December 31, 2002                       |                  | 
|Common Units issued in January 2003              |                  | 
|Conversion of Subordinated Units                 |                  | 
|to Common Units in May 2003                      |                  | 
|Common Units issued in June 2003                 |                  | 
|Conversion of Special Units                      |                  | 
|to Common Units in August 2003                   |                  | 
|Conversion of Subordinated Units                 |                  | 
|to Common Units in August 2003                   |                  | 
|Common Units issued for DRP in August 2003       |                  | 
|Common Units issued for EUPP in August 2003      |                  | 
|Common Units issued due to exercise of           |                  | 
|options in August 2003                           |                  | 
|Reissuance of Treasury Units to satisfy exercise |                  | 
|of options in August 2003                        |                  | 
|Retirement of Treasury Units in August 2003      |                  | 
|                                                 |                  | 
|Balance, September 30, 2003                      |                  | 
|                                                 |                  | 

10.    SUPPLEMENTAL CASH FLOWS DISCLOSURE

The
net effect of changes in operating accounts is as follows for the periods indicated:

|                                            | For the Nine Months
Ended September 30,
|------------------------------------------- | ---------------------------------------
|
|(Increase) decrease in:                     |                                        
|Accounts and notes receivable               |                                        
|Inventories                                 |                                        
|Prepaid and other current assets            |                                        
|Other assets                                |                                        
|Increase (decrease) in:                     |                                        
|Accounts payable                            |                                        
|Accrued gas payable                         |                                        
|Accrued expenses                            |                                        
|Accrued interest                            |                                        
|Other current liabilities                   |                                        
|Other liabilities                           |                                        
|                                            |                                        
|Net effect of changes in operating accounts |                                        
|                                            |                                        

During
the first nine months of 2003, we completed three business acquisitions; made adjustments
to the purchase price allocation of the Mid-America and Seminole acquisitions; and
consolidated three entities that had been previously accounted for using the
equity-method. These transactions and events affected various balance sheet accounts (see
Note 3). The 2002 period reflects our acquisition of indirect interests in Mid-America and
Seminole pipelines from Williams and propylene fractionation and NGL and petrochemical
storage assets from Diamond-Koch.

16

---

We
record certain financial instruments relating to commodity positions and interest rate
hedging activities at their respective fair values using mark-to-market accounting. For
the nine months ended September 30, 2002, we recognized a net $12.8 million in non-cash
mark-to-market decreases in the fair value of these instruments, primarily in our
commodity financial instruments portfolio. We had a limited number of such positions
outstanding during the first nine months of 2003, with the non-cash change in fair value
of these instruments being an increase of $25 thousand.

Cash
and cash equivalents (as shown on our Statements of Consolidated Cash Flows) exclude
restricted cash held by a brokerage firm both as margin deposits associated with our
financial instruments portfolio and cash deposits pertaining to physical natural gas
purchase transactions we made on the NYMEX exchange. The restricted cash balance at
September 30, 2003 and December 31, 2002 was $14.7 million and $8.8 million, respectively.

During
the second quarter of 2003, we recognized a $6.7 million long-term receivable from a
customer relating to the construction of certain pipeline equipment. Of this amount, $3.9
million relates to charges originally recorded as construction-in-progress and $2.8
million represents deferred revenue classified as a component of other liabilities. This
receivable is expected to be collected over the next ten years and bears an effective
annual interest rate of approximately 12%.

Certain
of our expenses are paid by EPCO, which are accounted for as non-cash related party
expenses in our Statements of Consolidated Operations and Comprehensive Income (with an
offset to Partners Equity on the Consolidated Balance Sheets recorded as a general
contribution to the Company). These expenses include (i) operating leases for which EPCO
has retained the corresponding cash lease payment obligation and (ii) administrative
service costs incurred by EPCO on behalf of us in excess of our actual cash reimbursement
to EPCO. For the nine months ended September 30, 2003 and 2002, operating leases paid by
EPCO totaled $6.8 million for each period. EPCOs unreimbursed administrative service
costs for the three and nine months ended September 30, 2003 were $0.6 million.

11.    FINANCIAL INSTRUMENTS

We
are exposed to financial market risks, including changes in commodity prices and interest
rates. We may use financial instruments (i.e., futures, forwards, swaps, options, and
other financial instruments with similar characteristics) to mitigate the risks of certain
identifiable and anticipated transactions, primarily within our Processing segment. In
general, the types of risks we attempt to hedge are those relating to the variability of
future earnings and cash flows caused by changes in commodity prices and interest rates.
As a matter of policy, we do not use financial instruments for speculative (or trading)
purposes.

Commodity
hedging financial instruments

During
the first nine months of 2002, we recognized a loss of $52.3 million from our Processing
segments commodity hedging activities that was recorded as an operating cost in our
Statements of Consolidated Operations and Comprehensive Income. Of this loss, $1.4 million
was recorded during the third quarter of 2002. In March 2002, the effectiveness of our
primary commodity hedging strategy deteriorated due to an unexpected rapid increase in
natural gas prices whereby the loss in value of our fixed-price natural gas financial
instruments was not offset by increased gas processing margins. We exited the strategy
underlying this loss in 2002.

During
the first nine months of 2003, we utilized a limited number of commodity financial
instruments from which we recorded a loss of $0.9 million. Of this loss amount, $6
thousand was recognized during the third quarter of 2003. The fair value of open positions
at September 30, 2003 was a nominal payable amount.

Interest
rate hedging financial instruments

During
the fourth quarter of 2002, we entered into seven treasury lock transactions. Each
treasury lock transaction carried a maturity date of either January 31, 2003 or April 15,
2003. The purpose of these financial instruments was to hedge the underlying U.S. treasury
interest rate associated with our anticipated issuance of debt

17

---

in early 2003 to refinance
the Mid-America and Seminole acquisitions. The notional amounts of the treasury lock
transactions totaled $550 million, with a total treasury lock rate of approximately 4%.

These
transactions were accounted for as cash flow hedges under SFAS No. 133. The fair value of
these financial instruments at December 31, 2002 was a current liability of $3.8 million
offset by a current asset of $0.2 million. The net $3.6 million non-cash mark-to-market
liability was recorded as a component of comprehensive income on that date, with no impact
on 2002 net income.

We
settled all of the treasury locks in early February 2003 in connection with our issuance
of Senior Notes C and D (see Note 8). The settlement of these financial instruments
resulted in our receipt of $5.4 million in cash. This amount was recorded as a gain in
other comprehensive income during the first quarter of 2003 and represents the effective
portion of the treasury locks.

Of
the $5.4 million recorded in other comprehensive income during the first quarter of 2003,
$4.0 million is attributable to our issuance of Senior Notes C and is being amortized to
earnings as a reduction in interest expense over the 10-year term of this debt. The
remaining $1.4 million is attributable to our issuance of Senior Notes D and is being
amortized to earnings as a reduction in interest expense over the 10-year term of the
anticipated transaction as required by SFAS No. 133. The estimated amount to be
reclassified from accumulated other comprehensive income to earnings during 2003 is $0.4
million. As a result of settlement of the treasury locks, the $3.6 million non-cash
mark-to-market liability recorded at December 31, 2002 was reclassified out of accumulated
other comprehensive income in Partners Equity to offset the current asset and
liability we recorded at December 31, 2002 with no impact on 2003 net income.

12.    SEGMENT INFORMATION

We
have five reportable business (or operating) segments: Pipelines, Fractionation,
Processing, Octane Enhancement and Other. Our reportable segments are generally organized
according to the type of services rendered (or process employed) and products produced
and/or sold, as applicable. The segments are regularly evaluated by the CEO of the General
Partner. Pipelines consists of NGL, petrochemical and natural gas pipeline systems,
storage and import/export terminal services. Fractionation primarily includes NGL
fractionation, isomerization, and polymer-grade and chemical-grade propylene fractionation
services. Processing includes the natural gas processing business and its related NGL
marketing activities. Octane Enhancement represents our investment in BEF, a facility that
produces motor gasoline additives to enhance octane (currently producing MTBE). The Other
business segment consists of fee-based marketing services and various operational support
activities.

We
evaluate segment performance based on the non-GAAP financial measure of gross operating
margin. We define total segment gross operating margin as operating income before: (1)
depreciation and amortization expense; (2) operating lease expenses for which we do not
have the payment obligation; (3) gains and losses on the sale of assets; and (4) selling,
general and administrative expenses. Gross operating margin is exclusive of other income
and expense transactions, provision for income taxes, minority interest and extraordinary
charges. Gross operating margin by segment is calculated by subtracting segment operating
costs and expenses (net of the adjustments noted above) from segment revenues, with both
segment totals before the elimination of intercompany transactions. In accordance with
GAAP, intercompany accounts and transactions are eliminated in consolidation.

Gross
operating margin (either in total or by individual segment) is an important performance
measure of the core profitability of our operations. This non-GAAP financial measure forms
the basis of our internal financial reporting and is used by senior management in deciding
how to allocate capital resources among business segments. We believe that investors
benefit from having access to the same financial measures that our management uses. The
GAAP measure most directly comparable to total segment gross operating margin is operating
income.

18

---

The
following table shows our measurement of total segment gross operating margin for the
periods indicated:

|                                                                                                                                                                                                                                                                                                                                                                                    | For the Three Months
Ended September 30, | For the Nine Months
Ended September 30,
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------- | ---------------------------------------
|
|Revenues (a)                                                                                                                                                                                                                                                                                                                                                                        |                                          |                                        
|Less operating costs and expenses (a)                                                                                                                                                                                                                                                                                                                                               |                                          |                                        
|Add equity in income (loss) of unconsolidated affiliates (b)                                                                                                                                                                                                                                                                                                                        |                                          |                                        
|                                                                                                                                                                                                                                                                                                                                                                                    |                                          |                                        
|Subtotal                                                                                                                                                                                                                                                                                                                                                                            |                                          |                                        
|Add:  Depreciation and amortization in operating costs and expenses (c)                                                                                                                                                                                                                                                                                                             |                                          |                                        
|Retained lease expense, net in operating expenses allocable to us (d)                                                                                                                                                                                                                                                                                                               |                                          |                                        
|Retained lease expense, net in operating expenses allocable to                                                                                                                                                                                                                                                                                                                      |                                          |                                        
|our General Partners minority interest in us (e)                                                                                                                                                                                                                                                                                                                                   |                                          |                                        
|Loss (gain) on sale of assets in operating costs and expenses (c)                                                                                                                                                                                                                                                                                                                   |                                          |                                        
|                                                                                                                                                                                                                                                                                                                                                                                    |                                          |                                        
|Total segment gross operating margin                                                                                                                                                                                                                                                                                                                                                |                                          |                                        
|                                                                                                                                                                                                                                                                                                                                                                                    |                                          |                                        
|                                                                                                                                                                                                                                                                                                                                                                                   
|(a)    These amounts are comprised of both third-party and related party totals as shown on our Statements of Consolidated
Operations and Comprehensive Income.                                                                                                                                                                                                                    
|(b)    This amount is taken directly from our
 Statements of Consolidated Operations and Comprehensive Income.                                                                                                                                                                                                                                                                     
|(c)    This amount is taken directly from the operating activities section of our Statements of Consolidated Cash Flows.                                                                                                                                                                                                                                                           
|(d)    This non-cash amount represents our share of the value of the operating leases contributed by EPCO to the Operating Partnership
for which EPCO has retained the cash payment obligation (the retained leases). This amount is taken from the operating
activities section (Operating lease expense paid to EPCO line item) of our Statements of Consolidated Cash Flows.
|(e)    This non-cash amount represents a minority interest holders share of the value of the retained leases.  This amount is a
component of Contributions from minority interests as shown in the financing activities section of our Statements of Consolidated Cash
Flows.                                                                                                   

The
following table reconciles GAAP operating income as shown on our Statements of
Consolidated Operations and Comprehensive Income to total segment gross operating margin
for the periods indicated:

|                                                              | For the Three Months
Ended September 30, |  | For the Nine Months
Ended September 30,
|------------------------------------------------------------- | ---------------------------------------- |  | ---------------------------------------
|
|Operating income                                              |                                          |  | $                                      
|Adjustments to reconcile operating income                     |                                          | 
|to total gross operating margin:                              |                                          | 
|Depreciation and amortization in operating costs and expenses |                                          |  |                                        
|Retained lease expense, net in operating costs and expenses   |                                          |  |                                        
|Loss (gain) on sale of assets in operating costs and expenses |                                          |  |                                        
|Selling, general and administrative costs                     |                                          |  |                                        
|                                                              |                                          |  |                                        
|Total segment gross operating margin                          |                                          |  | $                                      
|                                                              |                                          |  |                                        

19

---

Information
by business segment, together with reconciliations to the consolidated totals, is
presented in the following table:

|                                          | Operating Segments | Adjs.   | 
|----------------------------------------- | ------------------ | ------- | 
|
|Revenues from third parties:              |                    |         | 
|Three months ended September 30, 2003     | $                  | 182,559 | 
|Three months ended September 30, 2002     |                    | 173,304 | 
|Nine months ended September 30, 2003      |                    |         | 
|Nine months ended September 30, 2002      |                    |         | 
|                                         
|Revenues from related parties:            |                    |        
|Three months ended September 30, 2003     |                    | 744     | 
|Three months ended September 30, 2002     |                    | 6,477   | 
|Nine months ended September 30, 2003      |                    |         | 
|Nine months ended September 30, 2002      |                    |         | 
|                                         
|Intersegment and intrasegment revenues:   |                    |        
|Three months ended September 30, 2003     |                    | 52,570  | 
|Three months ended September 30, 2002     |                    | 59,737  | 
|Nine months ended September 30, 2003      |                    |         | 
|Nine months ended September 30, 2002      |                    |         | 
|                                         
|Total revenues:                           |                    |        
|Three months ended September 30, 2003     |                    | 235,873 | 
|Three months ended September 30, 2002     |                    | 239,518 | 
|Nine months ended September 30, 2003      |                    |         | 
|Nine months ended September 30, 2002      |                    |         | 
|                                         
|Equity in income (loss) of unconsolidated |                    |        
|affiliates:                               |                    |        
|Three months ended September 30, 2003     |                    | 918     | 
|Three months ended September 30, 2002     |                    | 2,102   | 
|Nine months ended September 30, 2003      |                    |         | 
|Nine months ended September 30, 2002      |                    |         | 
|                                         
|Gross operating margin by individual      |                    |        
|business segment and in total:            |                    |        
|Three months ended September 30, 2003     |                    | 30,617  | 
|Three months ended September 30, 2002     |                    | 34,585  | 
|Nine months ended September 30, 2003      |                    |         | 
|Nine months ended September 30, 2002      |                    |         | 
|                                         
|Segment assets:                           |                    |        
|At September 30, 2003                     |                    |         | 
|At December 31, 2002                      |                    |         | 
|                                         
|Investments in and advances               |                    |        
|to unconsolidated affiliates:             |                    |        
|At September 30, 2003                     |                    |         | 
|At December 31, 2002                      |                    |         | 
|                                         
|Intangible Assets:                        |                    |        
|At September 30, 2003                     |                    |         | 
|At December 31, 2002                      |                    |         | 
|                                         
|Goodwill:                                 |                    |        
|At September 30, 2003 and                 |                    |        
|December 31, 2002                         |                    |         | 

20

---

Our
revenues are derived from a wide customer base. All consolidated revenues during the three
and nine months ended September 30, 2003 and 2002 were earned in the United States. The
increase in period-to-period revenues is primarily due to acquisitions and higher NGL,
propylene and natural gas prices, both of which offset the effects of lower volumes at
many of our pipelines and facilities.

For
the three months ended September 30, 2003 and 2002, total segment gross operating margin
was $68.5 million and $107.2 million, respectively. The $38.7 million decrease in gross
operating margin for the 2003 period is primarily due to weaker Processing segment sales
margins and propylene fractionation results and a $22.5 million impairment charge related
to our investment in BEF, which more than offset higher earnings from the Pipelines
segment. Our Pipelines segment benefited from acquisitions and increased demand for
import-related services.

For
the nine month periods ended September 30, 2003 and 2002, total segment gross operating
margin was $301.5 million and $200.4 million, respectively. The primary reasons for the
increase in total segment gross operating margin between the periods are (a) 2003 includes
gross operating margin from Mid-America and Seminole (acquired in July 2002) and (b) 2002
includes significant commodity hedging losses (see Note 11). Mid-America and
Seminoles gross operating margin is classified under our Pipelines segment while
commodity hedging results are primarily a function of our Processing segment activities.

Segment
assets for Octane Enhancement totaled $39.1 million at September 30, 2003. This amount
reflects the consolidation of BEF at that date due to our acquisition of an additional
33.33% ownership interest in BEF. As a result of this consolidation, our investment in and
advances to BEF recorded under the Octane Enhancement segment was eliminated. The
September 30, 2003 carrying value of segment assets related to BEF reflects the impairment
charge noted previously. For additional information regarding our purchase of the
additional interest in BEF, see Note 3. For additional information regarding BEFs
impairment charge, see Note 6.

# 13.     UNIT OPTION PLAN
ACCOUNTING

During 1998,
EPCO adopted its 1998 Long-Term Incentive Plan (the 1998 Plan). Under the 1998
Plan, non-qualified incentive options to purchase a fixed number of our Common Units (the
Units) may be granted to EPCOs key employees who perform management,
administrative or operational functions for us. The exercise price per Unit, vesting and
expiration terms, and rights to receive distributions on Units granted are determined by
EPCO for each grant. EPCO purchases Units under the 1998 Plan at fair value either in the
open market or from us (in the form of newly-issued Common Units or reissued Treasury
Units). In general, our responsibility for reimbursing EPCO for the cash outlay it incurs
when these options are exercised is as follows:

| |  | We pay EPCO for the costs attributable to equity-based awards granted to operations
personnel it employs on our behalf. Our payment to EPCO is in the form of a special
distribution.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | We
pay EPCO for the costs attributable to equity-based awards granted to administrative and
management personnel it hires in response to our expansion and business activities. Our
payment to EPCO is in the form of a special distribution.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | We pay EPCO for our share of the costs attributable to equity-based awards granted to
certain of its employees in administrative and management positions that were active at
the time of our initial public offering in July 1998 who manage our business and affairs.
These costs are reimbursed through the administrative service fees we pay EPCO. EPCO is
responsible for the actual costs of such awards when these options are exercised. To the
extent that EPCOs total administrative costs (including the cost of such
equity-based awards) exceed the annual administrative service fees we pay to them, such
excess costs will result in a charge against our earnings as a non-cash related party
expense and a corresponding credit to Partners Equity recorded as a contribution.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We
account for our share of the cost of these awards using the intrinsic value-based method
in accordance with APB No. 25, Accounting for Stock Issued to Employees. The
exercise price of each option granted is equivalent to or greater than the market price of
the Unit at the date of grant. Accordingly, no compensation expense related to Unit option
grants has been recognized in our Statements of Consolidated Operations and Comprehensive
Income. Any special distributions that we make to reimburse EPCO are a component of
Cash distributions to partners as shown in our Statements of Consolidated
Partners Equity.

21

---

Accounting
principles require us to illustrate the pro forma effect
on our net income and earnings per Unit as if the fair value-based method of accounting
(based on SFAS No. 123, Accounting for Stock Based Compensation) had been
applied to the 1998 Plan. The following table shows these pro forma effects for the
periods indicated:

|                                          | For the Three Months
Ended September 30, | For the Nine Months
Ended September 30,
|----------------------------------------- | ---------------------------------------- | ---------------------------------------
|
|Historical net income (loss)              |                                          |                                        
|Additional Unit option-based compensation |                                          |                                        
|expense estimated using the fair          |                                          |                                        
|value-based method                        |                                          |                                        
|                                          |                                         
|Pro forma net income (loss)               |                                          |                                        
|                                          |                                         
|                                         
|Basic net income (loss) per Unit:         |                                          |                                        
|As reported                               |                                          |                                        
|                                          |                                         
|Pro forma                                 |                                          |                                        
|                                          |                                         
|Diluted net income (loss) per Unit:       |                                          |                                        
|As reported                               |                                          |                                        
|                                          |                                         
|Pro forma                                 |                                          |                                        
|                                          |                                         

14.    EARNINGS PER UNIT

Basic
earnings per Unit is computed by dividing net income available to limited partner
interests by the weighted-average number of Common and Subordinated Units outstanding
during a period. In general, diluted earnings per Unit is computed by dividing net income
available to limited partner interests by the weighted-average number of Common,
Subordinated, Special Units and incremental Common Units from the assumed exercise of
dilutive Unit options outstanding during a period. In a period of net operating losses,
the Special Units and incremental Common Units from the assumed exercise of dilutive Unit
options are excluded from the calculation of diluted earnings per Unit due to their
antidilutive effect (as occurred for the first quarter of 2002 and third quarter of 2003).
Treasury Units are not considered to be outstanding Units; therefore, they are excluded
from the computation of both basic and diluted earnings per Unit.

Dilutive
potential Common Units are calculated in accordance with the treasury stock method, which
assumes that proceeds from the exercise of all in-the-money options at the beginning of
each period are used to repurchase Common Units at average market value during the period.
The amount of Common Units remaining after the proceeds are exhausted represents the
potentially dilutive effect of the securities.

Beginning
in August 2003, we issued new Common Units to satisfy the exercise of a small number of
Unit options by the employees of EPCO (see Note 13). The issuance of new Common Units to
satisfy EPCOs Unit option liability has a dilutive effect on our earnings per Unit.
Prior to August 2003, EPCO had purchased practically all of the Units associated with the
1998 Plan in the open market. As a result, EPCOs Unit option plan did not have any
effect on our fully diluted earnings per Unit in prior periods.

22

---

|                                                | For the Three Months
Ended September 30, |  | For the Nine Months
Ended September 30,
|----------------------------------------------- | ---------------------------------------- |  | ---------------------------------------
|
|Income (loss) before minority interest          |                                          |  | $                                      
|General partner interest                        |                                          |  |                                        
|                                                |                                          |  |                                        
|Income (loss) before minority interest          |                                          |  |                                        
|available to Limited Partners                   |                                          | 
|Minority interest                               |                                          |  |                                        
|                                                |                                          |  |                                        
|Net income (loss) available to Limited Partners |                                          |  | $                                      
|                                                |                                          |  |                                        
|                                               
|BASIC EARNINGS PER UNIT                         |                                          | 
|Numerator                                       |                                          | 
|Income (loss) before minority interest          |                                          | 
|available to Limited Partners                   |                                          |  | $                                      
|                                                |                                          |  |                                        
|Net income (loss) available                     |                                          | 
|to Limited Partners                             |                                          |  | $                                      
|                                                |                                          |  |                                        
|Denominator                                     |                                          | 
|Common Units outstanding                        |                                          |  |                                        
|Subordinated Units outstanding                  |                                          |  |                                        
|                                                |                                          |  |                                        
|Total                                           |                                          |  |                                        
|                                                |                                          |  |                                        
|Basic Earnings per Unit                         |                                          | 
|Income (loss) before minority interest          |                                          | 
|available to Limited Partners                   |                                          |  | $                                      
|                                                |                                          |  |                                        
|Net income (loss) available                     |                                          | 
|to Limited Partners                             |                                          |  | $                                      
|                                                |                                          |  |                                        
|                                               
|DILUTED EARNINGS PER UNIT                       |                                          | 
|Numerator                                       |                                          | 
|Income (loss) before minority interest          |                                          | 
|available to Limited Partners                   |                                          |  | $                                      
|                                                |                                          |  |                                        
|Net income (loss) available                     |                                          | 
|to Limited Partners                             |                                          |  | $                                      
|                                                |                                          |  |                                        
|Denominator                                     |                                          | 
|Common Units outstanding                        |                                          |  |                                        
|Subordinated Units outstanding                  |                                          |  |                                        
|Special Units outstanding                       |                                          |  |                                        
|Incremental Common Units from the assumed       |                                          | 
|exercise of dilutive Unit options               |                                          |  |                                        
|                                                |                                          |  |                                        
|Total                                           |                                          |  |                                        
|                                                |                                          |  |                                        
|Diluted Earnings per Unit                       |                                          | 
|Income (loss) before minority interest          |                                          | 
|available to Limited Partners                   |                                          |  | $                                      
|                                                |                                          |  |                                        
|Net income (loss) available                     |                                          | 
|to Limited Partners                             |                                          |  | $                                      
|                                                |                                          |  |                                        

For
the third quarter of 2003, the following securities were not included in the computation
of diluted earnings per Unit as their effect would have been anti-dilutive (in thousands):
Special Units, 3,370; Incremental Common Units from the assumed exercise of dilutive Unit
options, 595.

23

---

15.    SUBSEQUENT EVENTS

In
October 2003, our Operating Partnership refinanced its 364-Day Revolving Credit facility.
The credit line available under this facility now expires in October 2004. In accordance
with terms of the new credit agreement, we have the option to convert any revolving credit
balance outstanding at maturity to a one-year term loan (due October 2005). In connection
with this refinancing, certain financial ratio covenants of our 364-Day and Multi-Year
Revolving Credit facilities were amended to increase our financial flexibility.

In
October 2003, we purchased from Williams an additional 37.35% interest in Wilprise and
16.67% interest in Tri-States. The initial purchase price of these interests was $26.5
million. As a result of these acquisitions, our ownership interest in Wilprise is now
74.7% and for Tri-States, 50%.

24

---

PART I. FINANCIAL STATEMENTS.
Item 1B. ENTERPRISE PRODUCTS OPERATING L.P.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

|ASSETS                                                                        | September 30,
2003 | December 31,
2002
|----------------------------------------------------------------------------- | ------------------ | -----------------
|Current Assets                                                                |                    |                  
|Cash and cash equivalents (includes restricted cash of $14,655 at             |                    |                  
|September 30, 2003 and $8,751 at December 31, 2002)                           |                    |                  
|Accounts and notes receivable - trade, net of allowance for doubtful accounts |                    |                  
|of $20,372 at September 30, 2003 and $21,196 at December 31, 2002             |                    |                  
|                                                                              |                    |                  
|Accounts receivable - affiliates                                              |                    |                  
|Inventories                                                                   |                    |                  
|Prepaid and other current assets                                              |                    |                  
|                                                                              |                   
|Total current assets                                                          |                    |                  
|Property, Plant and Equipment, Net                                            |                    |                  
|Investments in and Advances to Unconsolidated Affiliates                      |                    |                  
|Intangible assets, net of accumulated amortization of $36,332 at              |                    |                  
|September 30, 2003 and $25,546 at December 31, 2002                           |                    |                  
|Goodwill                                                                      |                    |                  
|Deferred Tax Asset                                                            |                    |                  
|Long-term Receivables                                                         |                    |                  
|Other Assets                                                                  |                    |                  
|                                                                              |                   
|Total                                                                         |                    |                  
|                                                                              |                   
|LIABILITIES AND PARTNERS EQUITY                                             
|Current Liabilities                                                           |                    |                  
|Current maturities of debt                                                    |                    |                  
|Accounts payable - trade                                                      |                    |                  
|Accounts payable - affiliates                                                 |                    |                  
|Accrued gas payables                                                          |                    |                  
|Accrued expenses                                                              |                    |                  
|Accrued interest                                                              |                    |                  
|Other current liabilities                                                     |                    |                  
|                                                                              |                   
|Total current liabilities                                                     |                    |                  
|Long-Term Debt                                                                |                    |                  
|Other Long-Term Liabilities                                                   |                    |                  
|Minority Interest                                                             |                    |                  
|Commitments and Contingencies                                                 |                    |                  
|Partners Equity                                                              |                    |                  
|Limited Partner                                                               |                    |                  
|General Partner                                                               |                    |                  
|Parents Units acquired by Trust                                              |                    |                  
|Accumulated Other Comprehensive Income (Loss)                                 |                    |                  
|                                                                              |                   
|Total Partners Equity                                                        |                    |                  
|                                                                              |                   
|Total                                                                         |                    |                  
|                                                                              |                   

See Notes to Unaudited
Consolidated Financial Statements

25

---

ENTERPRISE PRODUCTS OPERATING L.P.
STATEMENTS OF CONSOLIDATED OPERATIONS
AND COMPREHENSIVE INCOME
(Dollars in thousands)

|                                                                         | For the Three Months
Ended September 30, | For the Nine Months
Ended September 30,
|------------------------------------------------------------------------ | ---------------------------------------- | ---------------------------------------
|
|REVENUES                                                                 |                                          |                                        
|Revenues from consolidated operations                                    |                                          |                                        
|Third parties                                                            |                                          |                                        
|Related parties                                                          |                                          |                                        
|                                                                         |                                         
|Total                                                                    |                                          |                                        
|                                                                         |                                         
|COST AND EXPENSES                                                        |                                          |                                        
|Operating costs and expenses                                             |                                          |                                        
|Third parties                                                            |                                          |                                        
|Related parties                                                          |                                          |                                        
|Selling, general and administrative                                      |                                          |                                        
|Third parties                                                            |                                          |                                        
|Related parties                                                          |                                          |                                        
|                                                                         |                                         
|Total                                                                    |                                          |                                        
|                                                                         |                                         
|EQUITY IN INCOME (LOSS) OF UNCONSOLIDATED AFFILIATES                     |                                          |                                        
|                                                                         |                                         
|OPERATING INCOME                                                         |                                          |                                        
|                                                                         |                                         
|OTHER INCOME (EXPENSE)                                                   |                                          |                                        
|Interest expense                                                         |                                          |                                        
|Dividend income from unconsolidated affiliates                           |                                          |                                        
|Interest income - other                                                  |                                          |                                        
|Other, net                                                               |                                          |                                        
|                                                                         |                                         
|Other income  (expense)                                                  |                                          |                                        
|                                                                         |                                         
|INCOME (LOSS) BEFORE PROVISION FOR INCOME                                |                                          |                                        
|TAXES AND MINORITY INTEREST                                              |                                          |                                        
|PROVISION FOR INCOME TAXES                                               |                                          |                                        
|                                                                         |                                         
|INCOME (LOSS) BEFORE MINORITY INTEREST                                   |                                          |                                        
|MINORITY INTEREST                                                        |                                          |                                        
|                                                                         |                                         
|NET INCOME (LOSS)                                                        |                                          |                                        
|Reclassification of change in value of financial instruments             |                                          |                                        
|recorded as cash flow hedges                                             |                                          |                                        
|Gain on settlement of financial instruments recorded as cash flow hedges |                                          |                                        
|Amortization of gain on settlement of financial instruments to earnings  |                                          |                                        
|                                                                         |                                         
|COMPREHENSIVE INCOME (LOSS)                                              |                                          |                                        
|                                                                         |                                         

See Notes to Unaudited
Consolidated Financial Statements

26

---

ENTERPRISE PRODUCTS OPERATING L.P.
STATEMENTS OF CONSOLIDATED CASH FLOW
(Dollars in thousands)

|                                                              | For the Nine Months
Ended September 30,
|------------------------------------------------------------- | ---------------------------------------
|
|OPERATING ACTIVITIES                                          |                                        
|Net income                                                    |                                        
|Adjustments to reconcile net income to cash flows provided    |                                        
|by (used for) operating activities:                           |                                        
|Depreciation and amortization in operating costs and expenses |                                        
|Depreciation in selling, general and administrative costs     |                                        
|Amortization in interest expense                              |                                        
|Equity in income (loss) of unconsolidated affiliates          |                                        
|Distributions received from unconsolidated affiliates         |                                        
|Operating lease expense paid by EPCO                          |                                        
|Other expenses paid by EPCO                                   |                                        
|Minority interest                                             |                                        
|Loss (gain) on sale of assets                                 |                                        
|Deferred income tax expense                                   |                                        
|Changes in fair market value of financial instruments         |                                        
|Net effect of changes in operating accounts                   |                                        
|                                                              |                                        
|Operating activities cash flows                               |                                        
|                                                              |                                        
|INVESTING ACTIVITIES                                          |                                        
|Capital expenditures                                          |                                        
|Proceeds from sale of assets                                  |                                        
|Business combinations, net of cash received                   |                                        
|Acquisition of intangible asset                               |                                        
|Investments in and advances to unconsolidated affiliates      |                                        
|                                                              |                                        
|Investing activities cash flows                               |                                        
|                                                              |                                        
|FINANCING ACTIVITIES                                          |                                        
|Borrowings under debt agreements                              |                                        
|Repayments of debt                                            |                                        
|Debt issuance costs                                           |                                        
|Distributions paid to partners                                |                                        
|Distributions paid to minority interests                      |                                        
|Contributions from partners                                   |                                        
|Contributions from minority interests                         |                                        
|Parents Units acquired by consolidated Trust                 |                                        
|Settlement of treasury lock financial instruments             |                                        
|Increase in restricted cash                                   |                                        
|                                                              |                                        
|Financing activities cash flows                               |                                        
|                                                              |                                        
|NET CHANGE IN CASH AND CASH EQUIVALENTS                       |                                        
|CASH AND CASH EQUIVALENTS, JANUARY 1                          |                                        
|                                                              |                                        
|CASH AND CASH EQUIVALENTS, SEPTEMBER 30                       |                                        
|                                                              |                                        

See Notes to Unaudited
Consolidated Financial Statements

27

---

ENTERPRISE PRODUCTS OPERATING L.P.
STATEMENTS OF CONSOLIDATED PARTNERS EQUITY
(Dollars in thousands)

|                                      | Limited
Partner | General
Partner | Parents
Units | Accum.
OCI | Total
|------------------------------------- | --------------- | --------------- | -------------- | ---------- | -----
|Balances, December 31, 2002           |                 |                 | $              | 1,211,593  |      
|Net income                            |                 |                 |                | 71,192     |      
|Operating leases paid by EPCO         |                 |                 |                | 6,751      |      
|Other expenses paid by EPCO           |                 |                 |                | 605        |      
|Contributions from partners           |                 |                 |                | 541,563    |      
|Cash distributions to partners        |                 |                 |                | (222,657   | )    
|Treasury Lock financial instruments   |                 |                 |                |            |      
|recorded as cash flow hedges:         |                 |                 |                |            |      
|-   Reclassification of change in     |                 |                 |                |            |      
|fair value                            |                 |                 |                |            |      
|-   Cash gains on settlement          |                 |                 |                |            |      
|-   Amortization of gain as component |                 |                 |                |            |      
|of interest expense                   |                 |                 |                |            |      
|                                      |                
|Balances, September 30, 2003          |                 |                 | $              | 1,609,047  |      
|                                      |                

See Notes to Unaudited
Consolidated Financial Statements

28

---

ENTERPRISE PRODUCTS OPERATING L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

# 1.    GENERAL

In
the opinion of Enterprise Products Operating L.P., the accompanying unaudited consolidated
financial statements include all adjustments consisting of normal recurring accruals
necessary for a fair presentation of its:

| |  | consolidated
financial position as of September 30, 2003;
| | - | ---------------------------------------------------------

| |  | consolidated
results of operations for the three and nine months ended September 30, 2003 and 2002;
| | - | ---------------------------------------------------------------------------------------------------

| |  | consolidated
cash flows for the nine months ended September 30, 2003 and 2002; and
| | - | ----------------------------------------------------------------------------------

| |  | consolidated
partnersequity for the nine months ended September 30, 2003.
| | - | --------------------------------------------------------------------------

Within
these footnote disclosures of Enterprise Products Operating L.P., references to
we, us, our or the Company shall mean the
consolidated financial statements of Enterprise Products Operating L.P. References to
Limited Partner shall mean the consolidated financial statements of our
parent, Enterprise Products Partners L.P., which are included elsewhere in this combined
quarterly report on Form 10-Q.

Although
we believe the disclosures in these financial statements are adequate to make the
information presented not misleading, certain information and footnote disclosures
normally included in annual financial statements prepared in accordance with GAAP have
been condensed or omitted pursuant to the rules and regulations of the SEC. These
unaudited financial statements should be read in conjunction with our annual report on
Form 10-K/A (File No. 333-93239-01) for the year ended December 31, 2002.

The
results of operations for the three and nine months ended September 30, 2003 are not
necessarily indicative of the results to be expected for the full year.

Dollar
amounts presented in the tabular data within these footnote disclosures are stated in
thousands of dollars, unless otherwise indicated.

Certain
abbreviated entity names and other capitalized and industry terms are defined within the
glossary of this quarterly report on Form 10-Q.

Certain
reclassifications have been made to the prior years financial statements to conform
to the current year presentation. These reclassifications had no effect on previously
reported results of consolidated operations.

See
Note 13 for the pro forma effect on net income if we had used the fair-value based method
of accounting for equity-based options.

# 2.    RECENTLY ISSUED
ACCOUNTING STANDARDS

SFAS
No. 143,Accounting for Asset Retirement Obligations. We adopted
this standard as of January 1, 2003. This statement establishes accounting standards for
the recognition and measurement of an asset retirement obligation (ARO)
liability and the associated asset retirement cost. Our adoption of this standard had no
material impact on our financial statements. For a discussion regarding our implementation
of this new standard, see Note 5.

SFAS
No. 145,Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections.  We adopted provisions of this
standard as of January 1, 2003. This statement revised accounting guidance related to the
extinguishment of debt and accounting for certain lease transactions. It also amended
other accounting literature to clarify its meaning, applicability and to make various
technical corrections. Our adoption of this standard has had no material impact on our
financial statements.

SFAS
No. 146, Accounting for Costs Associated with Exit and Disposal
Activities. We adopted this standard as of January 1, 2003. This statement
requires companies to recognize costs associated with exit or

29

---

disposal activities when
they are incurred rather than at the date of an entitys commitment to an exit or
disposal plan. Our adoption of this standard has had no material impact on our financial
statements.

SFAS
No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure. We adopted this standard as of December 31, 2002. This statement
provides alternative methods of transition from a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 in both annual and interim financial
statements. We have provided the information required by this statement under Note 13.
Apart from this additional footnote disclosure, our adoption of this standard has had no
material impact on our financial statements.

SFAS
No. 149,Amendment of Statement 133 on Derivative Instruments and Hedging
Activities. This statement amends and clarifies accounting guidance for
derivative instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS No. 133. This statement is effective for
contracts entered into or modified after June 30, 2003, for hedging relationships
designated after June 30, 2003, and to certain preexisting contracts. We adopted SFAS No.
149 on a prospective basis as of July 1, 2003. Our adoption of this standard has had no
material impact on our financial statements.

SFAS
No. 150, Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity. This standard establishes classification and measurement
standards for financial instruments with characteristics of both liabilities and equity.
It requires an issuer of such financial instruments to reclassify the instrument from
equity to a liability or an asset. The effective date of this standard for us was July 1,
2003. Our adoption of this standard has had no material impact on our financial
statements.

FIN
45,Guarantors Accounting and Disclosure Requirement from Guarantees,
Including Indirect Guarantees of Indebtedness of Others. We implemented this
FASB interpretation as of December 31, 2002. This interpretation of SFAS No. 5, 57 and
107, and rescission of FASB Interpretation No. 34 elaborates on the disclosures to be made
by a guarantor in its interim and annual financial statements about its obligations under
certain guarantees that it has issued. It also clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee. We have provided the information required
by this interpretation under Note 8.

FIN
46,Consolidation of Variable Interest Entities  An Interpretation of
ARB No. 51. This interpretation of ARB No. 51 addresses requirements for
accounting consolidation of a variable interest entity (VIE) with its primary
beneficiary. In general, if an equity owner of a VIE meets certain criteria defined within
FIN 46, the assets, liabilities and results of the activities of the VIE should be
included in the consolidated financial statements of the owner. Our adoption of FIN 46 as
of January 31, 2003 has had no material effect on our financial statements.

# 3.    BUSINESS COMBINATIONS

During
the first nine months of 2003, we acquired EPIKs remaining 50% ownership interest,
the Port Neches Pipeline, and an additional 33.33% interest in BEF. In addition, we began
consolidating the financial statements of OTC beginning August 2003 as a result of our
obtaining control over this entity. We also made minor adjustments to the allocation of
the purchase price we paid to acquire indirect interests in Mid-America and Seminole
pipelines. Due to the immaterial nature of each transaction or event, individually and in
the aggregate, our discussion of each of these transactions is limited to the following:

Acquisition
of remaining 50% interest in EPIK. In March 2003, we purchased the remaining 50%
ownership interests in EPIK. EPIK owns an NGL export terminal located in southeast Texas
on the Houston Ship Channel. As a result of this acquisition, EPIK became a consolidated
wholly-owned subsidiary of ours (previously, it had been an equity-method unconsolidated
affiliate).

Acquisition
of Port Neches Pipeline. In March 2003, we acquired entities owning the Port Neches
Pipeline (formerly known as the Quest Pipeline). The 70-mile Port Neches Pipeline
transports high-purity grade isobutane produced at our facilities in Mont Belvieu to
customers in Port Neches, Texas.

30

---

Acquisition
of 33.33% interest in BEF. At the end of September 2003, we acquired an additional
33.33% partnership interest in BEF, which owns a facility that currently produces MTBE (a
motor gasoline additive that enhances octane and is used in reformulated gasoline). Due to
this acquisition, BEF became a majority-owned consolidated subsidiary of ours on September
30, 2003. Previously, BEF was accounted for as an equity-method unconsolidated affiliate.

Consolidation
of OTC. In August 2003, we became the operator of OTCs above ground polymer
grade propylene storage and export facility located in Seabrook, Texas. We currently own
50% of OTC and represent its major customer. As a result of obtaining significant control
over OTC through our operator, owner and customer relationship with the facility, we began
consolidating OTCs financial statements with ours beginning August 1, 2003.
Previously, OTC was accounted for as an equity-method unconsolidated affiliate.

Other
purchase price adjustments. We made purchase price adjustments relating to our $1.2
billion acquisition of indirect interests in the Mid-America and Seminole pipelines. These
adjustments total a net $4.8 million and primarily relate to liabilities existing at July
31, 2002, which was the closing date of the acquisitions.

The
following table shows our allocation of the purchase price for 2003 acquisitions, effects
of consolidating entities that were formerly accounted for under the equity-method, and
adjustments to purchase price allocations from prior periods.

|                                   | 2003
Business
Acquisitions | Consolidation
of OTC | Other
Purchase
Price
Adjustments | Total  
|---------------------------------- | -------------------------- | -------------------- | -------------------------------- | -------
|Cash and cash equivalents          |                            |                      | $                                | 18,562 
|Accounts receivable                |                            |                      |                                  | 7,819  
|Inventories                        |                            |                      |                                  | 10,593 
|Prepaid and other current assets   |                            |                      |                                  | 5,114  
|Property, plant and equipment, net |                            |                      |                                  | 85,087 
|Investments in and advances to     |                            |                      |                                  |        
|unconsolidated affiliates          |                            |                      |                                  | (43,684
|Other assets                       |                            |                      |                                  | 4,989  
|Accounts payable                   |                            |                      |                                  | (5,007 
|Accrued gas payables               |                            |                      |                                  | (5,370 
|Accrued expenses                   |                            |                      |                                  | (1,734 
|Other current liabilities          |                            |                      |                                  | (4,329 
|Other liabilities                  |                            |                      |                                  | (5,001 
|Minority interest                  |                            |                      |                                  | (26,437
|                                   |                            |                      |                                  |        
|Total net assets recorded          |                            |                      |                                  | 40,602 
|Investee cash balances             |                            |                      |                                  |        
|recorded upon consolidation        |                            |                      |                                  | (18,562
|                                   |                            |                      |                                  |        
|Business combinations, net of      |                            |                      |                                  |        
|cash received                      |                            |                      | $                                | 22,040 
|                                   |                            |                      |                                  |        

# 4.    INVENTORIES

Our
inventories were as follows at the dates indicated:

|                        | September 30,
2003 | December 31,
2002
|----------------------- | ------------------ | -----------------
|Regular inventory       |                    |                  
|Forward-sales inventory |                    |                  
|                        |                    |                  
|Inventory               |                    |                  
|                        |                    |                  

31

---

Our
regular inventory is comprised of inventories of NGLs, certain petrochemical products, and
natural gas that are available for sale through our marketing activities. The forward
sales inventory is comprised of segregated NGL volumes dedicated to the fulfillment of
forward sales contracts.

Due
to fluctuating market conditions in the midstream energy industry in which we operate, we
occasionally recognize lower of cost or market (LCM) adjustments when the
costs of our inventories exceed their net realizable value. These non-cash adjustments are
charged to operating costs and expenses in the period they are recognized. For the three
and nine months ended September 30, 2003, we recognized $0.7 million and $15.1 million,
respectively, of such LCM adjustments. For the three and nine months ended September 30,
2002, we recognized $1.5 million and $6.2 million, respectively, of these adjustments. The
majority of these write-downs were taken against NGL inventories.

# 5.    PROPERTY, PLANT AND
EQUIPMENT

Our
property, plant and equipment and accumulated depreciation were as follows at the dates
indicated:

|                                         | Estimated
Useful Life
in Years | September 30,
2003 | December 31,
2002
|---------------------------------------- | ------------------------------ | ------------------ | -----------------
|Plants and pipelines                     |                                |                    | 5-35             
|Underground and other storage facilities |                                |                    | 5-35             
|Transportation equipment                 |                                |                    | 3-35             
|Land                                     |                                |                    |                  
|Construction in progress                 |                                |                    |                  
|                                         |                                |                    |                  
|Total                                    |                                |                    |                  
|Less accumulated depreciation            |                                |                    |                  
|                                         |                                |                    |                  
|Property, plant and equipment, net       |                                |                    |                  
|                                         |                                |                    |                  

Depreciation
expense for the three months ended September 30, 2003 and 2002 was $24.7 million and $20.7
million, respectively. For the nine months ended September 30, 2003 and 2002, it was $73.1
million and $48.6 million, respectively.

Asset
retirement obligations. SFAS No. 143 establishes accounting standards for the
recognition and measurement of an ARO liability and the associated asset retirement cost.
Under the implementation guidelines of SFAS No. 143, we reviewed our long-lived assets for
ARO liabilities and identified such liabilities in several operational areas. These
include ARO liabilities related to (i) right-of-way easements over property not owned by
us and (ii) regulatory requirements triggered by the abandonment or retirement of certain
currently operated facilities.

As
a result of our analysis of identified AROs, we were not required to recognize such
potential liabilities. Our rights under the easements are renewable and only require
retirement action upon nonrenewal of the easement agreements. We currently expect to renew
all such easement agreements and to use these properties for the foreseeable future.
Therefore, an ARO liability is not estimable for such easements. Should we decide not to
renew these right-of-way agreements, an ARO liability would be recorded at that time. We
also identified potential ARO liabilities arising from regulatory requirements related to
the future abandonment or retirement of certain currently operated facilities. At present,
we currently have no intention or legal obligation to abandon or retire such facilities.
An ARO liability would be recorded if future abandonment or retirement of such facilities
occurred.

Certain
Gulf of Mexico natural gas pipelines owned by our equity method investees, Starfish,
Neptune and Nemo, have identified AROs relating to regulatory requirements. At
present, these entities have no plans to abandon or retire their major transmission
pipelines; however, there are plans to retire certain minor gas gathering lines
periodically through 2013. Should the management of these companies decide to abandon or
retire their major transmission pipelines, an ARO liability would be recorded at that
time. With regard to the minor gas gathering

32

---

pipelines scheduled for retirement, Starfish
and Neptune collectively recorded ARO liabilities during 2003 totaling $2.8 million (on a
gross basis).

# 6.    INVESTMENTS IN AND
ADVANCES TO UNCONSOLIDATED AFFILIATES

We
own interests in a number of related businesses that are accounted for under the equity or
cost methods. The investments in and advances to these unconsolidated affiliates are
grouped according to the business segment to which they relate. For a general discussion
of our business segments, see Note 12. The following table shows our investments in and
advances to unconsolidated affiliates at the dates indicated:

|                                                                            | Ownership
Percentage | September 30,
2003 | December 31,
2002
|--------------------------------------------------------------------------- | -------------------- | ------------------ | -----------------
|Accounted for on equity basis:                                              |                      |                    |                  
|Fractionation:                                                              |                      |                   
|BRF                                                                         |                      |                    |                  
|BRPC                                                                        |                      |                    |                  
|Promix                                                                      |                      |                    |                  
|La Porte                                                                    |                      |                    |                  
|OTC (1)                                                                     |                      |                    |                  
|Pipeline:                                                                   |                      |                    |                  
|EPIK (1)                                                                    |                      |                    |                  
|Wilprise (1)                                                                |                      |                    |                  
|Tri-States (1)                                                              |                      |                    |                  
|Belle Rose                                                                  |                      |                    |                  
|Dixie                                                                       |                      |                    |                  
|Starfish                                                                    |                      |                    |                  
|Neptune                                                                     |                      |                    |                  
|Nemo                                                                        |                      |                    |                  
|Evangeline                                                                  |                      |                    |                  
|Octane Enhancement:                                                         |                      |                    |                  
|BEF (1)                                                                     |                      |                    |                  
|Accounted for on cost basis:                                                |                      |                    |                  
|Processing:                                                                 |                      |                    |                  
|VESCO                                                                       |                      |                    |                  
|                                                                            |                      |                    |                  
|Total                                                                       |                      |                    |                  
|                                                                            |                      |                    |                  
|                                                                           
|(1) See Notes 3 and 14 for a discussion of changes in ownership or control.

33

---

The
following table shows our equity in income (loss) of unconsolidated affiliates for the
periods indicated:

|                    | Ownership | For the Three Months
Ended September 30, | For the Nine Months
Ended September 30,
|------------------- | --------- | ---------------------------------------- | ---------------------------------------
|
|Fractionation:      |           |                                          |                                        
|BRF                 |           |                                          |                                        
|BRPC                |           |                                          |                                        
|Promix              |           |                                          |                                        
|La Porte            |           |                                          |                                        
|OTC                 |           |                                          |                                        
|Pipelines:          |           |                                          |                                        
|EPIK                |           |                                          |                                        
|Wilprise            |           |                                          |                                        
|Tri-States          |           |                                          |                                        
|Belle Rose          |           |                                          |                                        
|Dixie               |           |                                          |                                        
|Starfish            |           |                                          |                                        
|Neptune             |           |                                          |                                        
|Nemo                |           |                                          |                                        
|Evangeline          |           |                                          |                                        
|Octane Enhancement: |           |                                          |                                        
|BEF                 |           |                                          |                                        
|                    |           |                                          |                                        
|Total               |           |                                          |                                        
|                    |           |                                          |                                        

The
following tables present summarized income statement information for our unconsolidated
affiliates accounted for under the equity method (for the periods indicated, on a 100%
basis). We have grouped this information by the business segment to which the entities
relate.

|                   | Summarized Income Statement Information for the Three Months Ended
|------------------ | ------------------------------------------------------------------
|
|
|Pipelines          |                                                                   
|Fractionation      |                                                                   
|Octane Enhancement |                                                                   

|                   | Summarized Income Statement Information for the Nine Months Ended
|------------------ | -----------------------------------------------------------------
|
|
|Pipelines          |                                                                  
|Fractionation      |                                                                  
|Octane Enhancement |                                                                  

Our
initial investment in Promix, La Porte, Dixie, Neptune and Nemo exceeded our share of the
historical cost of the underlying net assets of such entities (the excess
cost). The excess cost of these investments is reflected in our investments in and
advances to unconsolidated affiliates for these entities. That portion of excess cost
attributable to the tangible plant and/or pipeline assets of each entity is amortized
against equity earnings from these entities in a manner similar to depreciation. That
portion of excess cost attributable to goodwill is subject to periodic impairment testing
and is not amortized.

34

---

The
following table summarizes our excess cost information at September 30, 2003 and December
31, 2002 by the business segment to which the unconsolidated affiliates relate:

|                                                                                      |  | Original Excess Cost
attributable to | Unamortized balance at
|------------------------------------------------------------------------------------- |  | ------------------------------------ | ----------------------
|
|Fractionation                                                                         |  |                                      | 20-35 years           
|Pipelines                                                                             |  |                                      | 35 years (1)          
|                                                                                     
|                                                                                     
|(1) Goodwill is not amortized; however, it is subject to periodic impairment testing.

For
each of the three months ended September 30, 2003 and 2002, we recorded $0.4 million of
excess cost amortization, which is reflected in our equity in earnings from unconsolidated
affiliates. We recorded $1.2 million of excess cost amortization for each of the nine
month periods ended September 30, 2003 and 2002.

Purchase
of remaining 50% interest in EPIK

As
discussed in Note 3, we purchased the remaining 50% ownership interest in EPIK in March
2003. As a result of this acquisition, EPIK became a consolidated wholly-owned subsidiary.
We recorded $1.8 million of equity income from EPIK for the two months that it was an
unconsolidated subsidiary during the first quarter of 2003.

Purchase
of an additional 33.33% interest in BEF

As
discussed in Note 3, we purchased an additional 33.33% partnership interest in BEF at the
end of September 2003. As a result of this acquisition, BEF became a majority-owned
consolidated subsidiary of ours. Prior to this acquisition and consolidation, our share of
BEFs losses for the first nine months of 2003 was $27.9 million, which reflects an
impairment charge recorded by BEF prior to our purchase of the additional partnership
interest.

BEF
owns a facility that currently produces MTBE, a motor gasoline additive that enhances
octane and is used in reformulated gasoline. The production of MTBE is primarily driven by
oxygenated fuel programs enacted under the federal Clean Air Act Amendments of 1990. As a
result of environmental concerns, several states have enacted legislation to ban or
significantly limit the use of MTBE in motor gasoline within their jurisdictions. In
addition, federal legislation has been drafted to ban MTBE and replace the oxygenate with
renewable fuels such as ethanol.

As
a result of declining domestic demand and a prolonged period of weak MTBE production
economics, several of BEFs competitors have announced their withdrawal from the
marketplace. Due to the deteriorating business environment and outlook and the completion
of its preliminary engineering studies regarding conversion alternatives, BEF evaluated
the carrying value of its long-lived assets for impairment during the third quarter of
2003. This review indicated that the carrying value of its long-lived assets exceeded
their collective fair value, which resulted in a non-cash impairment charge of $67.5
million. Our share of this loss is $22.5 million and is recorded as a component of
Equity in income (loss) of unconsolidated affiliates in our Statements of
Consolidated Operations and Comprehensive Income for the three and nine months ended
September 30, 2003. Our historical equity (and in the future, consolidated) earnings from
BEF are classified under the Octane Enhancement business segment.

BEFs
assets were written down to fair value, which was determined by independent appraisers
using present value techniques. The impaired assets principally represent the plant
facility and other assets associated with MTBE production. The fair value analysis
incorporates future courses of action being taken (or contemplated to be taken) by BEF
management, including modification of the facility to produce iso-octane and alkylate. If
the underlying assumptions in the fair value analysis change resulting in expected future
cash flows being less than the new carrying value of the facility, additional impairment
charges may result in the future.

35

---

BEF
is currently in the process of preparing detailed engineering plans to convert the
facility to iso-octane production. The project is expected to be complete by mid-2004. The
facility will continue to produce MTBE as market conditions warrant and will be capable of
producing either MTBE or iso-octane once the plant modifications are complete. Depending
on the outcome of various factors (including pending federal legislation) the facility may
be further modified in the future to produce alkylate.

# 7.    INTANGIBLE ASSETS AND
GOODWILL

# Intangible assets

The
following table summarizes our intangible assets at September 30, 2003 and December 31,
2002:

|                                              |  |  | At September 30, 2003 |         | At December 31, 2002
|--------------------------------------------- |  |  | --------------------- | ------- | --------------------
|
|Shell natural gas processing agreement        |  |  | $                     | 206,216 |                     
|Mont Belvieu Storage II contracts             |  |  |                       | 8,127   |                     
|Mont Belvieu Splitter III contracts           |  |  |                       | 53,000  |                     
|Toca-Western natural gas processing contracts |  |  |                       | 11,187  |                     
|Toca-Western NGL fractionation contracts      |  |  |                       | 20,042  |                     
|Venice contracts                              |  |  |                       | 4,635   |                     
|                                              |  |  |                       |         |                     
|Total                                         |  |  | $                     | 303,207 |                     
|                                              |  |  |                       |         |                     

The
following table shows amortization expense associated with our intangible assets for the
three and nine months ended September 30, 2003 and 2002:

|                                              | For the Three Months
Ended September 30, | For the Nine Months
Ended September 30,
|--------------------------------------------- | ---------------------------------------- | ---------------------------------------
|
|Shell natural gas processing agreement        |                                          |                                        
|Mont Belvieu Storage II contracts             |                                          |                                        
|Mont Belvieu Splitter III contracts           |                                          |                                        
|Toca-Western natural gas processing contracts |                                          |                                        
|Toca-Western NGL fractionation contracts      |                                          |                                        
|Venice contracts                              |                                          |                                        
|                                              |                                         
|Total                                         |                                          |                                        
|                                              |                                          |                                        

Goodwill

Our
goodwill is attributable to the excess of the purchase price over the fair value of assets
acquired and is comprised of the following (at September 30, 2003 and December 31, 2002):

|Mont Belvieu Splitter III acquisition |  |  | $ | 73,690 | 
|------------------------------------- |  |  | - | ------ | 
|MBA acquisition                       |  |  |   | 7,857  | 
|                                      | 
|                                      |  |  | $ | 81,547 | 
|                                      | 

Our
goodwill amounts are recorded as part of the Fractionation segment since they are related
to assets classified within this operating segment.

36

---

# 8.    DEBT OBLIGATIONS

Our
debt obligations consisted of the following at the dates indicated:

|                                                         | September 30,
2003 | December 31,
2002
|-------------------------------------------------------- | ------------------ | -----------------
|Borrowings under:                                        |                    |                  
|364-Day Term Loan, variable rate, due July 2003          |                    |                  
|364-Day Revolving Credit facility, variable rate,        |                    |                  
|due November 2004                                        |                    |                  
|Multi-Year Revolving Credit facility, variable rate,     |                    |                  
|due November 2005                                        |                    |                  
|Senior Notes A, 8.25% fixed rate, due March 2005         |                    |                  
|Seminole Notes, 6.67% fixed rate, $15 million due        |                    |                  
|each December, 2002 through 2005                         |                    |                  
|MBFC Loan, 8.70% fixed rate, due March 2010              |                    |                  
|Senior Notes B, 7.50% fixed rate, due February 2011      |                    |                  
|Senior Notes C, 6.375% fixed rate, due February 2013     |                    |                  
|Senior Notes D, 6.875% fixed rate, due March 2033        |                    |                  
|                                                         |                    |                  
|Total principal amount                                   |                    |                  
|Unamortized balance of increase in fair value related to |                    |                  
|hedging a portion of fixed-rate debt                     |                    |                  
|Less unamortized discount on:                            |                    |                  
|Senior Notes A                                           |                    |                  
|Senior Notes B                                           |                    |                  
|Senior Notes D                                           |                    |                  
|Less current maturities of debt                          |                    |                  
|                                                         |                    |                  
|Long-term debt                                           |                    |                  
|                                                         |                    |                  

Letters
of credit. At September 30, 2003 and December 31, 2002, we had $75 million of standby
letter of credit capacity under our Multi-Year Revolving Credit facility. We had $13.9
million of letters of credit outstanding under this facility at September 30, 2003 and
$2.4 million outstanding at December 31, 2002.

Covenants.We were in compliance with the various covenants of our debt agreements at
          September 30, 2003 and December 31, 2002. Certain financial ratio covenants of
          our revolving credit facilities were amended in connection with the refinancing
          of our 364-Day Revolving Credit facility in October 2003 (see Note 14).

Parent-Subsidiary
guarantor relationships. Our parent (which is our Limited Partner) is the guarantor of
certain of our consolidated debt obligations. This parent-subsidiary guaranty provision
exists under all of our consolidated debt obligations, with the exception of the Seminole
Notes. If we were to default on any debt guaranteed by the Limited Partner, our Limited
Partner would be responsible for full repayment of that obligation. The Seminole Notes are
unsecured obligations of Seminole Pipeline Company (of which we own an effective 78.4% of
its ownership interests).

New
senior notes issued during first quarter of 2003

During
the first quarter of 2003, we completed the issuance of $850 million of long-term senior
notes (Senior Notes C and D). Senior Notes C and D are unsecured obligations and rank
equally with our existing and future unsecured and unsubordinated indebtedness and senior
to any future subordinated indebtedness. Senior Notes C and D are guaranteed by our
Limited Partner through an unsecured and unsubordinated guarantee that is non-recourse to
the General Partner. These notes were issued under an indenture containing certain
covenants and are subject to a make-whole redemption right if we elect to call the debt
prior to its scheduled maturity. These covenants restrict our ability, with certain
exceptions, to incur debt secured by liens and engage in sale and leaseback transactions.

37

---

Senior
Notes C. In January 2003, we issued $350 million in principal amount of 6.375%
fixed-rate senior notes due February 1, 2013 (Senior Notes C), from which we
received net proceeds before offering expenses of approximately $347.7 million. These
private placement notes were sold at face value with no discount or premium. We used the
proceeds from this offering to repay a portion of the indebtedness outstanding under the
364-Day Term Loan that we incurred to finance the Mid-America and Seminole acquisitions.
In May 2003, we exchanged 100% of the private placement Senior Notes C for
publicly-registered Senior Notes C.

Senior
Notes D. In February 2003, we issued $500 million in principal amount of 6.875%
fixed-rate senior notes due March 1, 2033 (Senior Notes D), from which we
received net proceeds before offering expenses of approximately $489.8 million. These
private placement notes were sold at 98.842% of their face amount. We used $421.4 million
from this offering to repay the remaining principal balance outstanding under the 364-Day
Term Loan. In addition, we applied $60.0 million of the proceeds to reduce the balance
outstanding under the 364-Day Revolving Credit facility. The remaining proceeds were used
for working capital purposes. In July 2003, we exchanged 100% of the private placement
Senior Notes D for publicly-registered Senior Notes D.

Repayment
of 364-Day Term Loan

In
July 2002, we entered into the $1.2 billion senior unsecured 364-Day Term Loan to
fund the acquisition of indirect interests in Mid-America and Seminole. We used
$178.5 million of the $182.5 million in proceeds from our Limited Partners October
2002 equity offering to partially repay this loan. We also used $252.8 million of the
$258.2 million in proceeds from our Limited Partners January 2003 equity offering
(see Note 9), $347.0 million of the $347.7 million in proceeds from our issuance of Senior
Notes C and $421.4 million in proceeds from our issuance of Senior Notes D to completely
repay the 364-Day Term Loan in February 2003.

Revolving
credit facilities

We
used $60.0 million in proceeds from the issuance of Senior Notes D in February 2003 to
reduce the balance outstanding under our 364-Day Revolving Credit facility. In addition,
we applied $261.2 million in contributions related to our Limited Partners June 2003
equity offering (see Note 9) to reduce the balances then outstanding under our revolving
credit facilities, of which $102 million was applied against the 364-Day Revolving Credit
facility and $159.2 million against the Multi-Year Revolving Credit facility.

At
September 30, 2003, we had $230 million of stand-alone borrowing capacity available under
our 364-Day Revolving Credit facility, with no principal balance outstanding. In addition,
we had $270 million in stand-alone borrowing capacity available under our Multi-Year
Revolving Credit facility at September 30, 2003. We had $145 million of principal and
$13.9 million in letters of credit outstanding under this facility at that date, with
$111.1 million of unused capacity.

The
original credit line available under our 364-Day Revolving Credit facility was set to
expire in November 2003. In late October 2003, we refinanced the term of this facility.
See Note 14 for additional information regarding this subsequent event.

Information
regarding variable interest rates paid

The
following table shows the range of interest rates paid and weighted-average interest rate
paid on our variable-rate debt obligations for the nine months ended September 30, 2003:

|                                                | Range of
interest rates
paid | Weighted-
average
interest rate
paid
|----------------------------------------------- | ---------------------------- | ------------------------------------
|364-Day Term Loan (a)                           |                              |                                     
|364-Day Revolving Credit facility               |                              |                                     
|Multi-Year Revolving Credit facility            |                              |                                     
|                                               
|                                               
|(a)  This facility was repaid in February 2003.

38

---

# 9.    CAPITAL STRUCTURE

We
are owned 98.9899% by our Limited Partner and 1.0101% by our General Partner. The rights
available to our partners are described in the Amended and Restated Agreement of
Limited Partnership. We are managed by our General Partner.

In
January 2003, our Limited Partner completed an equity offering from which we received a
cash contribution of $258.2 million, which includes our General Partners related
capital contribution of $2.6 million. We used $252.8 million of the contribution to repay
a portion of the indebtedness outstanding under the 364-Day Term Loan. The remaining
balance of the contribution was used for working capital purposes.

In
June 2003, our Limited Partner completed an equity offering from which we received a cash
contribution of $261.2 million, which includes our General Partners related capital
contribution of $2.6 million. We used the proceeds from this contribution to reduce
indebtedness outstanding under our revolving credit facilities.

In
August 2003, our Limited Partner contributed $27.4 million to us in connection with
proceeds received primarily from its distribution reinvestment plan. The General Partner
contributed $0.3 million. We used the cash received for general partnership purposes.

# 10.    SUPPLEMENTAL CASH
FLOWS DISCLOSURE

The
net effect of changes in operating accounts is as follows for the periods indicated:

|                                            | For the Nine Months
Ended September 30,
|------------------------------------------- | ---------------------------------------
|
|(Increase) decrease in:                     |                                        
|Accounts and notes receivable               |                                        
|Inventories                                 |                                        
|Prepaid and other current assets            |                                        
|Other assets                                |                                        
|Increase (decrease) in:                     |                                        
|Accounts payable                            |                                        
|Accrued gas payable                         |                                        
|Accrued expenses                            |                                        
|Accrued interest                            |                                        
|Other current liabilities                   |                                        
|Other liabilities                           |                                        
|                                            |                                        
|Net effect of changes in operating accounts |                                        
|                                            |                                        

During
the first nine months of 2003, we completed three business acquisitions; made adjustments
to the purchase price allocation of the Mid-America and Seminole acquisitions; and
consolidated three entities that had been previously accounted for using the
equity-method. These transactions and events affected various balance sheet accounts (see
Note 3). The 2002 period reflects our acquisition of indirect interests in Mid-America and
Seminole pipelines from Williams and propylene fractionation and NGL and petrochemical
storage assets from Diamond-Koch.

We
record certain financial instruments relating to commodity positions and interest rate
hedging activities at their respective fair values using mark-to-market accounting. For
the nine months ended September 30, 2002, we recognized a net $12.8 million in non-cash
mark-to-market decreases in the fair value of these instruments, primarily in our
commodity financial instruments portfolio. We had a limited number of such positions
outstanding during the first nine months of 2003, with the non-cash change in fair value
of these instruments being an increase of $25 thousand.

39

---

Cash
and cash equivalents (as shown on our Statements of Consolidated Cash Flows) exclude
restricted cash held by a brokerage firm both as margin deposits associated with our
financial instruments portfolio and cash deposits pertaining to physical natural gas
purchase transactions we made on the NYMEX exchange. The restricted cash balance at
September 30, 2003 and December 31, 2002 was $14.7 million and $8.8 million, respectively.

During
the second quarter of 2003, we recognized a $6.7 million long-term receivable from a
customer relating to the construction of certain pipeline equipment. Of this amount, $3.9
million relates to charges originally recorded as construction-in-progress and $2.8
million represents deferred revenue classified as a component of other liabilities. This
receivable is expected to be collected over the next ten years and bears an effective
annual interest rate of approximately 12%.

Certain
of our expenses are paid by EPCO, which are accounted for as non-cash related party
expenses in our Statements of Consolidated Operations and Comprehensive Income (with an
offset to Partners Equity on the Consolidated Balance Sheets recorded as a general
contribution to the Company). These expenses include (i) operating leases for which EPCO
has retained the corresponding cash lease payment obligation and (ii) administrative
service costs incurred by EPCO on behalf of us in excess of our actual cash reimbursement
to EPCO. For the nine months ended September 30, 2003 and 2002, operating leases paid by
EPCO totaled $6.8 million and $6.9 million, respectively. EPCOs unreimbursed
administrative service costs for the three and nine months ended September 30, 2003 were
$0.6 million.

# 11.    FINANCIAL INSTRUMENTS

We
are exposed to financial market risks, including changes in commodity prices and interest
rates. We may use financial instruments (i.e., futures, forwards, swaps, options, and
other financial instruments with similar characteristics) to mitigate the risks of certain
identifiable and anticipated transactions, primarily within our Processing segment. In
general, the types of risks we attempt to hedge are those relating to the variability of
future earnings and cash flows caused by changes in commodity prices and interest rates.
As a matter of policy, we do not use financial instruments for speculative (or trading)
purposes.

Commodity
hedging financial instruments

During
the first nine months of 2002, we recognized a loss of $52.3 million from our Processing
segments commodity hedging activities that was recorded as an operating cost in our
Statements of Consolidated Operations and Comprehensive Income. Of this loss, $1.4 million
was recorded during the third quarter of 2002. In March 2002, the effectiveness of our
primary commodity hedging strategy deteriorated due to an unexpected rapid increase in
natural gas prices whereby the loss in value of our fixed-price natural gas financial
instruments was not offset by increased gas processing margins. We exited the strategy
underlying this loss in 2002.

During
the first nine months of 2003, we utilized a limited number of commodity financial
instruments from which we recorded a loss of $0.9 million. Of this loss amount, $6
thousand was recognized during the third quarter of 2003. The fair value of open positions
at September 30, 2003 was a nominal payable amount.

Interest
rate hedging financial instruments

During
the fourth quarter of 2002, we entered into seven treasury lock transactions. Each
treasury lock transaction carried a maturity date of either January 31, 2003 or April 15,
2003. The purpose of these financial instruments was to hedge the underlying U.S. treasury
interest rate associated with our anticipated issuance of debt in early 2003 to refinance
the Mid-America and Seminole acquisitions. The notional amounts of the treasury lock
transactions totaled $550 million, with a total treasury lock rate of approximately 4%.

These
transactions were accounted for as cash flow hedges under SFAS No. 133. The fair value of
these financial instruments at December 31, 2002 was a current liability of $3.8 million
offset by a current asset of $0.2 million. The net $3.6 million non-cash mark-to-market
liability was recorded as a component of comprehensive income on that date, with no impact
on 2002 net income.

40

---

We
settled all of the treasury locks in early February 2003 in connection with our issuance
of Senior Notes C and D (see Note 8). The settlement of these financial instruments
resulted in our receipt of $5.4 million in cash. This amount was recorded as a gain in
other comprehensive income during the first quarter of 2003 and represents the effective
portion of the treasury locks.

Of
the $5.4 million recorded in other comprehensive income during the first quarter of 2003,
$4.0 million is attributable to our issuance of Senior Notes C and is being amortized to
earnings as a reduction in interest expense over the 10-year term of this debt. The
remaining $1.4 million is attributable to our issuance of Senior Notes D and is being
amortized to earnings as a reduction in interest expense over the 10-year term of the
anticipated transaction as required by SFAS No. 133. The estimated amount to be
reclassified from accumulated other comprehensive income to earnings during 2003 is $0.4
million. As a result of settlement of the treasury locks, the $3.6 million non-cash
mark-to-market liability recorded at December 31, 2002 was reclassified out of accumulated
other comprehensive income in Partners Equity to offset the current asset and
liability we recorded at December 31, 2002 with no impact on 2003 net income.

# 12.    SEGMENT INFORMATION

We
have five reportable business (or operating) segments: Pipelines, Fractionation,
Processing, Octane Enhancement and Other. Our reportable segments are generally organized
according to the type of services rendered (or process employed) and products produced
and/or sold, as applicable. The segments are regularly evaluated by the CEO of the General
Partner. Pipelines consists of NGL, petrochemical and natural gas pipeline systems,
storage and import/export terminal services. Fractionation primarily includes NGL
fractionation, isomerization, and polymer-grade and chemical-grade propylene fractionation
services. Processing includes the natural gas processing business and its related NGL
marketing activities. Octane Enhancement represents our investment in BEF, a facility that
produces motor gasoline additives to enhance octane (currently producing MTBE). The Other
business segment consists of fee-based marketing services and various operational support
activities.

We
evaluate segment performance based on the non-GAAP financial measure of gross operating
margin. We define total segment gross operating margin as operating income before: (1)
depreciation and amortization expense; (2) operating lease expenses for which we do not
have the payment obligation; (3) gains and losses on the sale of assets; and (4) selling,
general and administrative expenses. Gross operating margin is exclusive of other income
and expense transactions, provision for income taxes, minority interest and extraordinary
charges. Gross operating margin by segment is calculated by subtracting segment operating
costs and expenses (net of the adjustments noted above) from segment revenues, with both
segment totals before the elimination of intercompany transactions. In accordance with
GAAP, intercompany accounts and transactions are eliminated in consolidation.

Gross
operating margin (either in total or by individual segment) is an important performance
measure of the core profitability of our operations. This non-GAAP financial measure forms
the basis of our internal financial reporting and is used by senior management in deciding
how to allocate capital resources among business segments. We believe that investors
benefit from having access to the same financial measures that our management uses. The
GAAP measure most directly comparable to total segment gross operating margin is operating
income.

41

---

The
following table shows our measurement of total segment gross operating margin for the
periods indicated:

|                                                                                                                                                                                                                                                                                                                                            | For the Three Months
Ended September 30, | For the Nine Months
Ended September 30,
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------- | ---------------------------------------
|
|Revenues (a)                                                                                                                                                                                                                                                                                                                                |                                          |                                        
|Less operating costs and expenses (a)                                                                                                                                                                                                                                                                                                       |                                          |                                        
|Add equity in income (loss) of unconsolidated affiliates (b)                                                                                                                                                                                                                                                                                |                                          |                                        
|                                                                                                                                                                                                                                                                                                                                            |                                         
|Subtotal                                                                                                                                                                                                                                                                                                                                    |                                          |                                        
|Add:    Depreciation and amortization in operating costs and expenses (c)                                                                                                                                                                                                                                                                   |                                          | 28,259                                 
|Retained lease expense, net in operating expenses allocable to us (d)                                                                                                                                                                                                                                                                       |                                          | 2,273                                  
|Loss on sale of assets in operating costs and expenses (c)                                                                                                                                                                                                                                                                                  |                                          | (35                                    
|                                                                                                                                                                                                                                                                                                                                            |                                         
|Total segment gross operating margin                                                                                                                                                                                                                                                                                                        |                                          |                                        
|                                                                                                                                                                                                                                                                                                                                            |                                         
|                                                                                                                                                                                                                                                                                                                                           
|(a)  These amounts are comprised of both third-party and related party totals as shown on our Statements of Consolidated
Operations and Comprehensive Income.                                                                                                                                                                              
|(b)  This amount is taken directly from our Statements of Consolidated Operations and Comprehensive Income.                                                                                                                                                                                                                                
|(c)  This amount is taken directly from the operating activities section of our Statements of Consolidated Cash Flows.                                                                                                                                                                                                                     
|(d)  This non-cash amount represents the value of the operating leases contributed EPCO to us for which EPCO has retained the
cash payment obligation (the retained leases).  This amount is taken from the operating activities section (Operating lease
expense paid by EPCO line item) of our Statements of Consolidated Cash Flows.

The
following table reconciles GAAP operating income as shown on our Statements of
Consolidated Operations and Comprehensive Income to total segment gross operating margin
for the periods indicated:

|                                                              | For the Three Months
Ended September 30, | For the Nine Months
Ended September 30,
|------------------------------------------------------------- | ---------------------------------------- | ---------------------------------------
|
|Operating income                                              |                                          |                                        
|Adjustments to reconcile operating income                     |                                          |                                        
|to total gross operating margin:                              |                                          |                                        
|Depreciation and amortization in operating costs and expenses |                                          |                                        
|Retained lease expense, net in operating costs and expenses   |                                          |                                        
|Loss (gain) on sale of assets in operating costs and expenses |                                          |                                        
|Selling, general and administrative costs                     |                                          |                                        
|                                                              |                                         
|Total segment gross operating margin                          |                                          |                                        
|                                                              |                                         

42

---

Information
by business segment, together with reconciliations to the consolidated totals, is
presented in the following table:

|                                          | Operating Segments | Adjs.   | 
|----------------------------------------- | ------------------ | ------- | 
|
|Revenues from third parties:              |                    |         | 
|Three months ended September 30, 2003     | $                  | 182,559 | 
|Three months ended September 30, 2002     |                    | 173,304 | 
|Nine months ended September 30, 2003      |                    |         | 
|Nine months ended September 30, 2002      |                    |         | 
|                                         
|Revenues from related parties:            |                    |        
|Three months ended September 30, 2003     |                    | 744     | 
|Three months ended September 30, 2002     |                    | 6,477   | 
|Nine months ended September 30, 2003      |                    |         | 
|Nine months ended September 30, 2002      |                    |         | 
|                                         
|Intersegment and intrasegment revenues:   |                    |        
|Three months ended September 30, 2003     |                    | 52,570  | 
|Three months ended September 30, 2002     |                    | 59,737  | 
|Nine months ended September 30, 2003      |                    |         | 
|Nine months ended September 30, 2002      |                    |         | 
|                                         
|Total revenues:                           |                    |        
|Three months ended September 30, 2003     |                    | 235,873 | 
|Three months ended September 30, 2002     |                    | 239,518 | 
|Nine months ended September 30, 2003      |                    |         | 
|Nine months ended September 30, 2002      |                    |         | 
|                                         
|Equity in income (loss) of unconsolidated |                    |        
|affiliates:                               |                    |        
|Three months ended September 30, 2003     |                    | 918     | 
|Three months ended September 30, 2002     |                    | 2,102   | 
|Nine months ended September 30, 2003      |                    |         | 
|Nine months ended September 30, 2002      |                    |         | 
|                                         
|Gross operating margin by individual      |                    |        
|business segment and in total:            |                    |        
|Three months ended September 30, 2003     |                    | 30,617  | 
|Three months ended September 30, 2002     |                    | 34,585  | 
|Nine months ended September 30, 2003      |                    |         | 
|Nine months ended September 30, 2002      |                    |         | 
|                                         
|Segment assets:                           |                    |        
|At September 30, 2003                     |                    |         | 
|At December 31, 2002                      |                    |         | 
|                                         
|Investments in and advances               |                    |        
|to unconsolidated affiliates:             |                    |        
|At September 30, 2003                     |                    |         | 
|At December 31, 2002                      |                    |         | 
|                                         
|Intangible Assets:                        |                    |        
|At September 30, 2003                     |                    |         | 
|At December 31, 2002                      |                    |         | 
|                                         
|Goodwill:                                 |                    |        
|At September 30, 2003 and                 |                    |        
|December 31, 2002                         |                    |         | 

43

---

Our
revenues are derived from a wide customer base. All consolidated revenues during the three
and nine months ended September 30, 2003 and 2002 were earned in the United States. The
increase in period-to-period revenues is primarily due to acquisitions and higher NGL,
propylene and natural gas prices, both of which offset the effects of lower volumes at
many of our pipelines and facilities.

For
the three months ended September 30, 2003 and 2002, total segment gross operating margin
was $68.5 million and $107.2 million, respectively. The $38.7 million decrease in gross
operating margin for the 2003 period is primarily due to weaker Processing segment sales
margins and propylene fractionation results and a $22.5 million impairment charge related
to our investment in BEF, which more than offset higher earnings from the Pipelines
segment. Our Pipelines segment benefited from acquisitions and increased demand for
import-related services.

For
the nine month periods ended September 30, 2003 and 2002, total segment gross operating
margin was $301.5 million and $200.4 million, respectively. The primary reasons for the
increase in total segment gross operating margin between the periods are (a) 2003 includes
gross operating margin from Mid-America and Seminole (acquired in July 2002) and (b) 2002
includes significant commodity hedging losses (see Note 11). Mid-America and
Seminoles gross operating margin is classified under our Pipelines segment while
commodity hedging results are primarily a function of our Processing segment activities.

Segment
assets for Octane Enhancement totaled $39.1 million at September 30, 2003. This amount
reflects the consolidation of BEF at that date due to our acquisition of an additional
33.33% ownership interest in BEF. As a result of this consolidation, our investment in and
advances to BEF recorded under the Octane Enhancement segment was eliminated. The
September 30, 2003 carrying value of segment assets related to BEF reflects the impairment
charge noted previously. For additional information regarding our purchase of the
additional interest in BEF, see Note 3. For additional information regarding BEFs
impairment charge, see Note 6.

# 13.    UNIT OPTION PLAN
ACCOUNTING

During 1998,
EPCO adopted its 1998 Long-Term Incentive Plan (the 1998 Plan). Under the 1998
Plan, non-qualified incentive options to purchase a fixed number of our Limited
Partners Common Units (the Units) may be granted to EPCOs key
employees who perform management, administrative or operational functions for us. The
exercise price per Unit, vesting and expiration terms, and rights to receive distributions
on Units granted are determined by EPCO for each grant. EPCO purchases the Units under the
1998 Plan at fair value either in the open market or from our Limited Partner (in the form
of newly-issued common units or reissued treasury units). In general, our responsibility for reimbursing EPCO for the cash outlay it incurs
when these options are exercised is as follows:

| |  | We pay EPCO for the costs attributable to equity-based awards granted to operations
personnel it employs on our behalf. Our payment to EPCO is in the form of a special
distribution made through our Limited Partner.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | We pay EPCO for the costs attributable to equity-based awards granted to administrative
and management personnel it hires in response to our expansion and business activities.
Our payment to EPCO is in the form of a special distribution made through our Limited
Partner.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | We pay EPCO for our share of the costs attributable to equity-based awards granted to
certain of its employees in administrative and management positions that were active at
the time of our initial public offering in July 1998 who manage our business and affairs.
These costs are reimbursed through the administrative service fees we pay EPCO. EPCO is
responsible for the actual costs of such awards when these options are exercised. To the
extent that EPCOs total administrative costs (including the cost of such
equity-based awards) exceed the annual administrative service fees we pay to them, such
excess costs will result in a charge against our earnings as a non-cash related party
expense with a corresponding credit to Partners Equity recorded as a contribution.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We
account for our share of the cost of these awards using the intrinsic value-based method
in accordance with APB No. 25, Accounting for Stock Issued to Employees. The
exercise price of each option granted is equivalent to or greater than the market price of
the Unit at the date of grant. Accordingly, no compensation expense related to Unit option
grants has been recognized in our Statements of Consolidated Operations and Comprehensive
Income.

44

---

Accounting
principles require us to illustrate the pro forma effect on our net income as if the fair
value-based method of accounting (based on SFAS No. 123, Accounting for Stock Based
Compensation) had been applied to the 1998 Plan. The following table shows these pro
forma effects for the periods indicated:

|                                          | For the Three Months
Ended September 30, | For the Nine Months
Ended September 30,
|----------------------------------------- | ---------------------------------------- | ---------------------------------------
|
|Historical net income (loss)              |                                          |                                        
|Additional Unit option-based compensation |                                          |                                        
|expense estimated using the fair          |                                          |                                        
|value-based method                        |                                          |                                        
|                                          |                                         
|Pro forma net income (loss)               |                                          |                                        
|                                          |                                         

# 14.    SUBSEQUENT EVENTS

In
October 2003, we refinanced our 364-Day Revolving Credit facility. The credit line
available under this facility now expires in October 2004. In accordance with terms of the
new credit agreement, we have the option to convert any revolving credit balance
outstanding at maturity to a one-year term loan (due October 2005). In connection with
this refinancing, certain financial ratio covenants of our 364-Day and Multi-Year
Revolving Credit facilities were amended to increase our financial flexibility.

In
October 2003, we purchased from Williams an additional 37.35% interest in Wilprise and
16.67% interest in Tri-States. The initial purchase price of these interests was $26.5
million. As a result of these acquisitions, our ownership interest in Wilprise is now
74.7% and for Tri-States, 50%.

45

---

# Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.

# For the three and nine
months ended September 30, 2003 and 2002.

Enterprise
Products Partners L.P. is a publicly-traded limited partnership (NYSE, symbol
EPD) that conducts substantially all of its business through its 98.9899%
owned subsidiary, Enterprise Products Operating L.P.(the Operating
Partnership), the Operating Partnerships subsidiaries, and a number of
investments with industry partners. Since the Operating Partnership owns substantially all
of Enterprise Products Partners L.P.s consolidated assets and conducts substantially
all of its business and operations, the information set forth herein constitutes combined
information for the two registrants. Unless the context requires otherwise, references to
we, us, our or the Company are intended to
mean the consolidated business and operations of Enterprise Products Partners L.P., which
includes Enterprise Products Operating L.P. and its subsidiaries.

The
following discussion and analysis should be read in conjunction with the unaudited
consolidated financial statements and notes thereto of the Company and Operating
Partnership included under Part I of this quarterly report on Form 10-Q. Additionally,
certain abbreviated entity names and other capitalized and industry terms are defined
within the glossary of this report.

# Our results of operations

We
have five reportable business (or operating) segments: Pipelines, Fractionation,
Processing, Octane Enhancement and Other. Pipelines consists of NGL, petrochemical and
natural gas pipeline systems, storage and import/export terminal services. Fractionation
primarily includes NGL fractionation, isomerization and propylene fractionation.
Processing includes our natural gas processing business and related NGL marketing
activities. Octane Enhancement represents our investment in a facility that produces
motor gasoline additives to enhance octane (currently producing MTBE). The Other business
segment consists of fee-based marketing services and various operational support
activities.

We
evaluate segment performance based on the non-GAAP financial measure of gross operating
margin. Gross operating margin (either in total or by individual segment) is an important
performance measure of the core profitability of our operations. This measure forms the
basis of our internal financial reporting and is used by senior management in deciding how
to allocate capital resources among business segments. We believe that investors benefit
from having access to the same financial measures that our management uses in evaluating
segment results. The GAAP measure most directly comparable to total segment gross
operating margin is operating income.

We
define total segment gross operating margin as operating income before: (1) depreciation
and amortization expense; (2) operating lease expenses for which we do not have the
payment obligation; (3) gains and losses on the sale of assets; and (4) selling, general
and administrative expenses. Gross operating margin is exclusive of other income and
expense transactions, provision for income taxes, minority interest and extraordinary
charges. Gross operating margin by segment is calculated by subtracting segment operating
costs and expenses (net of the adjustments noted above) from segment revenues, with both
segment totals before the elimination of intercompany transactions. In accordance with
GAAP, intercompany accounts and transactions are eliminated in consolidation. Our non-GAAP
financial measure of total segment gross operating margin should not be considered as an
alternative to GAAP operating income.

We
include equity earnings from unconsolidated affiliates in our measurement of segment gross
operating margin. Our equity investments with industry partners are a vital component of
our business strategy. They are a means by which we conduct our operations to align our
interests with those of our customers, which may be a supplier of raw materials or a
consumer of finished products. This method of operation also enables us to achieve
favorable economies of scale relative to the level of investment and business risk assumed
versus what we could accomplish on a stand-alone basis. Many of these businesses perform
supporting or complementary roles to our other business operations. For additional
information regarding our business segments, please read footnote 12 of our Notes to
Unaudited Consolidated Financial Statements included under Item 1 of this quarterly
report.

46

---

The
following table summarizes our consolidated revenues, costs and expenses, equity in income
(loss) of unconsolidated affiliates and operating income for the periods indicated
(dollars in thousands):

|                                                     | For the Three Months
Ended September 30, | For the Nine Months
Ended September 30,
|---------------------------------------------------- | ---------------------------------------- | ---------------------------------------
|
|Revenues                                             |                                          |                                        
|Operating costs and expenses                         |                                          |                                        
|Selling, general and administrative costs            |                                          |                                        
|Equity in income (loss) of unconsolidated affiliates |                                          |                                        
|Operating income                                     |                                          |                                        

The
following table reconciles consolidated operating income to our measurement of total
segment gross operating margin for the periods indicated (dollars in thousands):

|                                                              | For the Three Months
Ended September 30, |  | For the Nine Months
Ended September 30,
|------------------------------------------------------------- | ---------------------------------------- |  | ---------------------------------------
|
|Operating income                                              |                                          |  | $                                      
|Adjustments to reconcile operating income                     |                                          | 
|to total gross operating margin:                              |                                          | 
|Depreciation and amortization in operating costs and expenses |                                          |  |                                        
|Retained lease expense, net in operating costs and expenses   |                                          |  |                                        
|Loss (gain) on sale of assets in operating costs and expenses |                                          |  |                                        
|Selling, general and administrative costs                     |                                          |  |                                        
|                                                              |                                          |  |                                        
|Total segment gross operating margin                          |                                          |  | $                                      
|                                                              |                                          |  |                                        

EPCO
subleases to us certain equipment located at our Mont Belvieu facility and 100 railroad
tankcars for $1 dollar per year. These subleases (the retained lease
expense in the previous table) are part of the EPCO Agreement we executed with EPCO
at our formation in 1998. EPCO holds these items pursuant to operating leases for which it
has retained the corresponding cash lease payment obligation. Operating costs and expenses
(as shown in the Statements of Consolidated Operations and Comprehensive Income) treat the
lease payments being made by EPCO as a non-cash related party operating expense, with the
offset to Partners Equity on the Consolidated Balance Sheets recorded as a general
contribution to the Company. Apart from the partnership interests we granted to EPCO at
our formation, EPCO does not receive any additional ownership rights as a result of its
contribution to us of the retained leases. In addition, EPCO has assigned to us the
purchase options associated with these leases. For additional information regarding the
EPCO Agreement and the retained leases, please read Related party transactions
 Relationship with EPCO and its affiliates on page 61 and Our
liquidity and capital resources  Capital spending forecasts on page 59 of
this quarterly report.

Our
gross operating margin amounts by segment were as follows for the periods indicated
(dollars in thousands):

|                                     | For the Three Months
Ended September 30, | For the Nine Months
Ended September 30,
|------------------------------------ | ---------------------------------------- | ---------------------------------------
|
|Gross operating margin by segment:   |                                          |                                        
|Pipelines                            |                                          |                                        
|Fractionation                        |                                          |                                        
|Processing                           |                                          |                                        
|Octane enhancement                   |                                          |                                        
|Other                                |                                          |                                        
|                                     |                                         
|Total segment gross operating margin |                                          |                                        
|                                     |                                         

47

---

Our
significant pipeline throughput, plant production and processing volumetric data were
as follows for the periods indicated (on a net basis, taking into account our ownership
interests):

|                                             | For the Three Months
Ended September 30, | For the Nine Months
Ended September 30,
|-------------------------------------------- | ---------------------------------------- | ---------------------------------------
|
|MBPD, net                                    |                                          |                                        
|NGL and petrochemical pipelines              |                                          |                                        
|NGL fractionation                            |                                          |                                        
|Propylene fractionation                      |                                          |                                        
|Isomerization                                |                                          |                                        
|Equity NGL production                        |                                          |                                        
|Octane enhancement                           |                                          |                                        
|                                            
|BBtus per day, net                           |                                          |                                        
|Natural gas pipelines                        |                                          |                                        
|                                            
|Equivalent MBPD, net                         |                                          |                                        
|NGL, petrochemical and natural gas pipelines |                                          |                                        

The
following table illustrates selected average quarterly industry index prices for natural
gas, crude oil, selected NGL and petrochemical products and indicative gas processing
gross spreads since the beginning of 2002:

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | Natural
Gas,
$/MMBtu | Crude Oil,
$/barrel | Ethane,
$/gallon | Propane,
$/gallon | Normal
Butane,
$/gallon | Isobutane,
$/gallon | Natural
Gasoline,
$/gallon | Polymer
Grade
Propylene,
$/pound | Refinery
Grade
Propylene,
$/pound | Indicative
Gas
Processing
Gross
Spread,
$/gallon
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------- | ------------------- | ---------------- | ----------------- | ----------------------- | ------------------- | -------------------------- | -------------------------------- | --------------------------------- | ------------------------------------------------
|
|2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                      |                     |                  |                   |                         |                     |                            |                                  |                                   |                                                 
|1st Quarter                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | $  2.34              | $  21.41            | $  0.22          | $  0.30           | $  0.38                 | $  0.44             | $  0.47                    | $  0.16                          | $  0.12                           | $  0.12                                         
|2nd Quarter                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | $  3.38              | $  26.26            | $  0.26          | $  0.40           | $  0.48                 | $  0.51             | $  0.58                    | $  0.20                          | $  0.17                           | $  0.10                                         
|3rd Quarter                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | $  3.16              | $  28.30            | $  0.26          | $  0.42           | $  0.52                 | $  0.58             | $  0.61                    | $  0.21                          | $  0.16                           | $  0.14                                         
|4th Quarter                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | $  3.99              | $  28.33            | $  0.31          | $  0.49           | $  0.60                 | $  0.63             | $  0.66                    | $  0.20                          | $  0.15                           | $  0.13                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                     
|Average                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | $  3.22              | $  26.08            | $  0.26          | $  0.40           | $  0.50                 | $  0.54             | $  0.58                    | $  0.20                          | $  0.15                           | $  0.12                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                     
|2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                     
|1st Quarter                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | $  6.58              | $  34.12            | $  0.43          | $  0.65           | $  0.76                 | $  0.80             | $  0.85                    | $  0.24                          | $  0.21                           | $  0.05                                         
|2nd Quarter                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | $  5.40              | $  29.04            | $  0.39          | $  0.53           | $  0.58                 | $  0.62             | $  0.65                    | $  0.25                          | $  0.19                           | $  0.04                                         
|3rd Quarter                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | $  4.97              | $  30.21            | $  0.37          | $  0.56           | $  0.67                 | $  0.68             | $  0.73                    | $  0.21                          | $  0.15                           | $  0.10                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                     
|Average                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | $  5.65              | $  31.12            | $  0.40          | $  0.58           | $  0.67                 | $  0.70             | $  0.74                    | $  0.23                          | $  0.18                           | $  0.06                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(a)  Natural gas, NGL, polymer grade propylene and refinery grade propylene prices represent an average of various
commercial index prices including OPIS and CMAI.  Natural gas price is representative  of Henry-Hub I-Ferc.  NGL
prices are representative of Mont Belvieu Non-TET pricing.  Refinery grade propylene represents an average of CMAI
spot prices.  Polymer-grade propylene represents average CMAI contract pricing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(b)  Crude Oil price is representative of an index price for West Texas Intermediate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(c)  The Indicative Gas Processing Gross Spread is a relative  measure used by the NGL industry as an indicator of
the gross economic benefit derived from extracting NGLs from natural gas production on the U.S. Gulf Coast.
Specifically, it is the amount that the economic value of a composite gallon of NGLs exceeds the value of the
equivalent amount of energy of  natural gas based on NGL and natural gas prices on the U.S. Gulf Coast.  It is
assumed that a gallon of NGLs is comprised of 33% ethane, 32% propane, 11% normal butane, 8% isobutane and 16%
natural gasoline. The value of a composite gallon of NGLs is determined by multiplying these component percentages by
industry index prices listed in the table above. The value of the equivalent amount of energy of natural gas to
one gallon of NGLs is 8.9% of the price of a MMBtu of natural gas.  The Indicative Gas
Processing Gross Spread does not consider the operating and fuel costs incurred by a natural gas processing plant
to extract the NGLs nor the transportation and fractionation costs to deliver the NGLs and  natural gas to market.

48

---

Three months ended September 30,
2003 compared to three months ended September 30, 2002

Revenues,
costs and expenses and operating income and total segment gross operating margin.

Revenues
for the three months ended September 30, 2003 increased $291.5 million over those recorded
during the same period in 2002. Costs and expenses for the third quarter of 2003 increased
$305.2 million over those of the third quarter of 2002. The increase in revenues and costs
and expenses is primarily due to higher NGL and natural gas prices quarter-to-quarter,
both of which offset the effects of lower volumes at many of our pipelines and facilities.

In
general, higher selling prices result in increased revenues from our various marketing
activities; however, these same higher prices also increase our cost of sales within these
activities as feedstock and other purchase prices rise. In addition, higher natural gas
prices during the third quarter of 2003 increased energy-related costs for many of our
businesses versus the same period in 2002.

When
compared to the third quarter of 2002, volumes at many of our downstream pipelines and
facilities were lower due to a combination of (i) decreased demand for NGLs by the
petrochemical industry and (ii) lower NGL extraction rates at domestic gas processing
facilities. The most significant determinant of the relative economic value of NGLs is
demand by the petrochemical industry for use in manufacturing plastics and chemicals. When
compared to 2002, this industry has been operating at lower utilization rates during 2003
primarily due to a recession in the domestic manufacturing sector. As a result of the
higher relative cost of NGLs to other crude-based alternatives, the petrochemical industry
has been utilizing less expensive feedstocks such as naphtha for their operations in place
of NGLs such as ethane. The resulting weak demand for NGLs by the petrochemical industry
has limited the ability of NGL producers to increase product prices, which in turn has
resulted in decreased NGL extraction rates during the 2003 period.

Equity
earnings from unconsolidated affiliates decreased $24.0 million quarter-to-quarter
primarily due to a $22.5 million non-cash impairment charge we recorded related to our BEF
investment. The deteriorating business environment and outlook prompted BEF to review the
carrying value of its long-lived assets for impairment during September 2003.

As
a result of items noted in the previous paragraphs, operating income for the third quarter
of 2003 decreased $37.7 million from that of the third quarter of 2002. Total segment
gross operating margin decreased $38.6 million quarter-to-quarter due to the same general
reasons underlying the decrease in operating income. Operating income includes costs such
as depreciation and amortization and selling, general and administrative expenses that are
excluded from the non-GAAP financial measure of total segment gross operating margin.

The
following information highlights the significant quarter-to-quarter variances in gross
operating margin by business segment:

Pipelines.
          Gross operating margin from our Pipelines segment was $66.6 million for the
          third quarter of 2003 compared to $63.9 million for the third quarter of 2002.
          On an energy-equivalent basis where 3.8 MMBtus of natural gas throughput are
          equivalent to one barrel of NGL throughput, net pipeline throughput was 1,678
          MBPD during the third quarter of 2003 versus 1,682 MBPD during the same period
          in 2002.

Gross
operating margin from the Mid-America and Seminole pipeline systems increased $2.6 million
to $32.7 million for the third quarter of 2003 on aggregate net volume of 735 MBPD. Gross
operating margin from these pipelines for the two months that we owned them during the
third quarter of 2002 was $30.1 million on aggregate net volumes of 868 MBPD. Throughput
and gross operating margin for these systems were lower quarter-to-quarter due to
decreased demand for NGLs and weaker gas processing economics, which caused natural gas
processing plants in the Rocky Mountains to reduce the amount of ethane extracted. This
resulted in lower transportation volumes on both the Mid-America and Seminole pipeline
systems.

Gross
operating margin from our Houston Ship Channel NGL import facility (and related HSC
pipeline system) increased $4.7 million quarter-to-quarter primarily due to a 141 MBPD
increase in aggregate volumes. NGL import activity increased as a result of higher
domestic prices for NGLs relative to international prices for such

49

---

products. Our recently
acquired Port Neches Pipeline added $0.7 million in gross operating margin on volumes of
25 MBPD.

Gross
operating margin from our other Gulf Coast region pipeline and storage assets decreased
$5.3 million quarter-to-quarter. Our Louisiana Pipeline System posted a decrease in gross
operating margin of $1.6 million for the third quarter of 2003 primarily due to lower
equity NGL throughput rates. Gross operating margin from Acadian Gas for the third quarter
of 2003 decreased $1.0 million from the same period in 2002 primarily due to lower natural
gas throughput. Gross operating margin from our NGL and petrochemical storage operations
declined $2.1 million quarter-to-quarter due to lower revenues and higher maintenance and
energy-related expenses.

Fractionation.
          Gross operating margin from our Fractionation segment was $30.6 million for the
          third quarter of 2003 compared to $34.6 million for the third quarter of 2002.
          Gross operating margin from NGL fractionation was $5.6 million for both periods.
          Net NGL fractionation volumes decreased to 233 MBPD during the third quarter of
          2003 from 247 MBPD during the same period in 2002. An increase in processing
          volumes and fees at our Mont Belvieu and Norco NGL fractionators were offset by
          lower volumes at our other facilities and higher overall energy-related
          expenses. The decrease in fractionation volumes is primarily due to lower NGL
          extraction rates at gas processing facilities.

Gross
operating margin from propylene fractionation decreased $3.3 million quarter-to-quarter
primarily due to weak demand for polymer-grade propylene and higher operating costs, which
was partially offset by increased sales of refinery-grade propylene. Net propylene
fractionation volumes were 54 MBPD during the third quarter of 2003 versus 55 MBPD during
the third quarter of 2002.

Gross
operating margin from isomerization increased $0.8 million quarter-to-quarter.
Isomerization volumes decreased to 77 MBPD during the third quarter of 2003 from 88 MBPD
during the third quarter of 2002. The increase in gross operating margin from
isomerization is generally attributable to higher isomerization fees, which were partially
offset by the effect of lower volumes and higher energy-related costs. Certain components
of our isomerization fees are indexed to the price of natural gas, which was significantly
higher during the third quarter of 2003 relative to the same period in 2002.

Processing.
           Gross operating margin from our Processing segment was a loss of $6.9
          million for the third quarter of 2003 compared to income of $8.4 million for the
          third quarter of 2002. Gross operating margin from NGL marketing in the third
          quarter of 2003 decreased by approximately $8.0 million from the same period in
          2002. This decrease was primarily due to lower sales margins.

Gross
operating margin from natural gas processing decreased $7.3 million quarter-to-quarter
primarily due to weaker gas processing economics. Equity NGL production at our gas
processing plants was 57 MBPD for the third quarter of 2003 compared to 78 MBPD during the
third quarter of 2002. The decrease in equity NGL production quarter-to-quarter is largely
attributable to reduced demand for NGLs by industry and higher natural gas prices relative
to NGL prices, the combination of which suppressed NGL extraction rates by gas processors.

Beginning in
August 2003, approximately 200 million cubic feet per day of natural gas production
volume flowing into our gas plants for processing (or approximately 10% of the total
amount of gas processing by us) that had been historically processed under keepwhole
arrangements was converted to fee-based arrangements. Unlike a traditional keepwhole
contract, we will receive a tolling fee from the producer based on the volume of gas we
process. NGL volumes under these fee-based arrangements continue to utilize our downstream
pipeline, storage and NGL fractionation services.

We
process approximately 2.1 Bcf of natural gas per day. For the remainder of 2003 and for
2004, we estimate that approximately 49% of this gas will be processed under the margin
band agreement with Shell ( for additional information regarding this agreement, please
read Related party transactions  Relationship with Shell
beginning on page 61 of this quarterly report); approximately 40% will be processed under
percent-of-liquids arrangements; 10% under fee-based arrangements and 1% under legacy
keepwhole arrangements.

50

---

Octane
enhancement. Our equity in earnings from BEF was a loss of $21.2 million for the third
quarter of 2003, which includes a non-cash impairment charge of $22.5 million. This
compares to equity income of $1.2 million for the third quarter of 2002.

BEF
owns a facility that currently produces MTBE, a motor gasoline additive that enhances
octane and is used in reformulated gasoline. The production of MTBE is primarily driven by
oxygenated fuel programs enacted under the federal Clean Air Act Amendments of 1990. As a
result of environmental concerns, several states have enacted legislation to ban or
significantly limit the use of MTBE in motor gasoline within their jurisdictions. In
addition, federal legislation has been drafted to ban MTBE and replace the oxygenate with
renewable fuels such as ethanol.

As
a result of declining domestic demand and a prolonged period of weak MTBE production
economics, several of BEFs competitors have announced their withdrawal from the
marketplace. Due to the deteriorating business environment and outlook and the completion
of its preliminary engineering studies regarding conversion alternatives, BEF evaluated
the carrying value of its long-lived assets for impairment during the third quarter of
2003. This review indicated that the carrying value of its long-lived assets exceeded
their collective fair value, which resulted in a non-cash impairment charge of $67.5
million.

BEFs
assets were written down to fair value, which was determined by independent appraisers
using present value techniques. The impaired assets principally represent the plant
facility and other assets associated with MTBE production. The fair value analysis
incorporates future courses of action being taken (or contemplated to be taken) by BEF
management, including the production of iso-octane and alkylate. If the underlying
assumptions in the fair value analysis change resulting in expected future cash flows
being less than the new carrying value of the facility, additional impairment charges may
result in the future.

BEF
is currently in the process of preparing detailed engineering plans to convert the
facility to iso-octane production. The facility will continue to produce MTBE as market
conditions warrant and will be capable of producing either MTBE or iso-octane once the
plant modifications are complete. Depending on the outcome of various factors (including
pending federal legislation) the facility may be further modified in the future to produce
alkylate.

At
the end of September 2003, we acquired an additional 33.33% partnership interest in BEF.
Due to this acquisition, BEF became a majority-owned consolidated subsidiary of ours on
September 30, 2003. Historically, BEF was accounted for as an equity-method unconsolidated
affiliate. Its results will continue to be reported under our Octane Enhancement segment.

Selling,
general and administrative costs. These expenses were $7.4 million for the third
quarter of 2003 versus $12.3 million for the same period in 2002. The 2002 period included
approximately $4.0 million we paid to Williams for transition services associated with our
acquisition of Mid-America and Seminole. These payments ceased in February 2003 when we
began operating these two systems.

Interest
expense. Interest expense increased to $32.6 million for the third quarter of 2003
from $30.7 million during the same period in 2002. Our average outstanding debt decreased
to $1.9 billion during the third quarter of 2003 from $2.5 billion during the third
quarter of 2002. The increase in expense is generally attributable to higher fixed-rate
interest payments during the 2003 period. At September 30, 2003, approximately 92% of our
debt is at fixed-interest rates compared to 36% at September 30, 2002. For additional
information regarding our debt, please read Our liquidity and capital resources
 Our debt obligations beginning on page 57 of this quarterly report.

Nine months ended September 30,
2003 compared to nine months ended September 30, 2002

Revenues,
costs and expenses, operating income and total segment gross operating margin.

Revenues
for the nine months ended September 30, 2003 increased $1.5 billion over those recorded
during the same period in 2002. Year-to-date costs and expenses for 2003 increased $1.4
billion over those of the first nine months of 2002. As with the quarter-to-quarter
variances noted previously, the increase in year-to-date revenues

51

---

and costs and expenses
between the two nine month periods is primarily due to higher prices and acquisitions,
both of which offset the effects of lower volumes at many of our pipelines and facilities.
In addition, costs and expenses for the nine months ended September 30, 2002 includes a
$52.3 million loss related to commodity hedging activities, which was not repeated during
the 2003 period. Equity earnings from unconsolidated affiliates decreased $38.9 million
period-to-period primarily due to an impairment charge and operating losses incurred by
BEF.

As
a result of the items noted in the previous paragraph, operating income for the first nine
months of 2003 increased $75.0 million over that of the first nine months of 2002. Total
segment gross operating margin increased $101.1 million period-to-period due to the same
general reasons underlying the increase in operating income. On a period-to-period basis,
depreciation and amortization charges increased $25.3 million and selling, general and
administrative costs increased $1.0 million primarily due to acquisitions and other
business expansion activities.

The
following information highlights the significant variances in gross operating margin by
business segment between the nine months ended September 30, 2003 and the same period in
2002:

Pipelines.
          Gross operating margin from our Pipelines segment was $210.5 million for the
          first nine months of 2003 compared to $128.8 million for the same period during
          2002. On an energy-equivalent basis, net pipeline throughput was 1,640 MBPD
          during the 2003 period versus 1,705 MBPD during the 2002 period. The increase in
          gross operating margin is primarily due to our acquisition of Mid-America and
          Seminole. These two systems earned gross operating margin of $120.1 million
          during the first nine months of 2003 on aggregate net volumes of 769 MBPD. Since
          we acquired interests in these systems at the end of July 2002, the 2002 period
          includes $30.1 million we recorded from these systems during August and
          September 2002. When compared to their historical operating rates, net pipeline
          transportation volumes on the Mid-America and Seminole systems for the first
          nine months of 2003 were lower than those reported for the first nine months of
          2002 primarily due to a decreased demand for NGLs by industry and lower NGL extraction rates
          at regional gas processing facilities.

Excluding
the contributions of Mid-America and Seminole, gross operating margin for the Pipelines
segment was $90.4 million for the first nine months of 2003 versus $98.7 million for the
same period in 2002. On an energy-equivalent basis (excluding Mid-America and Seminole),
net pipeline throughput volumes increased to 871 MBPD during the 2003 period from 837 MBPD
during the 2002 period. An increase in gross operating margins from our Houston Ship
Channel NGL import terminal (and related HSC pipeline), the Lou-Tex NGL and Lou-Tex
Propylene pipelines plus the addition of gross operating margin from our recently acquired
Port Neches Pipeline offset a net decline in our other Gulf Coast area pipeline operations
(due in part to lower NGL extraction rates at regional gas processing facilities and
demand for NGLs by industry). The 34 MBPD increase in net volumes was primarily due to
higher throughput rates at our NGL import terminal (and related HSC pipeline). In
addition, 2003 gross operating margin from our NGL and petrochemical storage operations
was $7.0 million lower period-to-period primarily due to higher energy and
maintenance-related costs and net charges associated with the measurement of liquids
volumes held in storage.

Fractionation.
          Gross operating margin from our Fractionation segment was $95.5 million for the
          first nine months of 2003 compared to $92.8 million for the same period in 2002.
          Gross operating margin from NGL fractionation improved $6.4 million
          period-to-period. Net NGL fractionation volumes decreased to 223 MBPD during the
          first nine months of 2003 from 233 MBPD during the same period in 2002. The
          increase in NGL fractionation gross operating margin is primarily due to (i)
          mixed NGL measurement gains we recognized during the second quarter of 2003 at
          our Mont Belvieu facility and (ii) higher in-kind fees during the 2003 period at
          Norco attributable to the general increase in NGL prices, both of which more
          than offset a decline in gross operating margin from our other NGL fractionation
          facilities generally due to lower volumes and higher energy-related costs. The
          decrease in NGL fractionation volumes period-to-period is primarily due to lower
          NGL extraction rates at gas processing facilities and reduced demand for NGLs by
          industry.

Gross
operating margin from propylene fractionation declined $9.8 million period-to-period
primarily due to lower petrochemical marketing margins resulting from higher feedstock and
energy-related costs. Net propylene fractionation volumes were 57 MBPD for the first nine
months of 2003 compared to 55 MBPD for the same period during 2002.

52

---

Gross
operating margin from isomerization increased $6.4 million period-to-period. Isomerization
volumes were 80 MBPD during the 2003 period compared to 82 MBPD during the 2002 period.
The increase in gross operating margin from isomerization is generally attributable to
higher isomerization fees and by-product revenues, which were partially offset by higher
energy-related operating costs.

Processing.
           Gross operating margin from our Processing segment was income of $25.8 million for
          the first nine months of 2003 compared to a loss of $26.1 million for the same
          period in 2002. The first nine months of 2002 includes $52.3 million in
          commodity hedging losses, the underlying strategies of which were discontinued
          in 2002. Our commodity hedging results for the first nine months of 2003 were a
          loss of $0.1 million.

Equity
NGL production at our gas processing plants during the 2003 period averaged 53 MBPD
compared to 78 MBPD during the 2002 period. The decrease in equity NGL production
period-to-period is largely attributable to reduced demand for NGLs by industry and higher
natural gas prices relative to NGL prices, which caused most natural gas processors to
minimize the amount of NGLs extracted at their facilities. In order to meet the natural
gas processing needs of Shell (our largest natural gas processing customer) in this
challenging business environment, we renegotiated certain aspects of the 20-year Shell
natural gas processing agreement during the first quarter of 2003. For a general
discussion of this amendment, please read Related party transactions 
Relationship with Shell beginning on page 61 of this quarterly report.

In
addition, we converted contracts covering approximately 10% of the total amount of natural
gas processed by us from traditional keepwhole contracts to fee-based arrangements during
the third quarter of 2003. For a general discussion of these conversions, please read
Our results of operations  Three months ended September 30, 2003 compared
to three months ended September 30, 2002  Processing on page 50 of this
quarterly report.

Octane
enhancement. Our equity earnings from BEF were a loss of $27.9 million for the first
nine months of 2003 compared to income of $7.0 million for the same period during 2002.
Net MTBE production from this facility decreased to 4 MBPD during the 2003 period versus 5
MBPD during the 2002 period. The $34.9 million decrease in equity earnings is primarily
due to a $22.5 million impairment charge we recorded during the third quarter of 2003 and
increased downtime during 2003 for maintenance and economic reasons and an overall
deterioration of MTBE sales margins. For additional information regarding the impairment
charge we recorded during the third quarter of 2003, please read Our results of
operations  Three months ended September 30, 2003 compared to three months ended
September 30, 2002  Octane Enhancement on page 51 of this quarterly
report.

Selling,
general and administrative costs. These expenses were $28.9 million for the first nine
months of 2003 compared to $28.0 million for the same period during 2002. The increase is
primarily due to additional staff and resources required to support expanded business
activities resulting from acquisitions and other business development.

Interest
expense. Interest expense increased to $107.8 million for the first nine months of
2003 from $68.2 million for the same period in 2002. The increase is primarily due to
additional debt we incurred as a result of business acquisitions. Our weighted-average
debt principal outstanding was $2.0 billion for the 2003 period compared to $1.6 billion
for the 2002 period.

Interest
expense for 2003 includes $11.3 million of loan cost amortization related to the 364-Day
Term Loan, which was fully repaid in February 2003. For additional information regarding
our debt obligations and changes therein since December 31, 2002, please read Our
liquidity and capital resources  Our debt obligations beginning on page 57
of this quarterly report.

Outlook for remainder of
2003

Our
outlook for the remainder of 2003 is largely dependent on demand for NGLs by the
petrochemical industry and an overall recovery in the domestic manufacturing sector;
improved natural gas processing economics in the Rocky Mountains and new natural gas
production from deepwater Gulf of Mexico developments. In general, business conditions
were much better at the end of the third quarter than at its beginning. We are encouraged
by the continued improvement in business conditions that we have seen early in the fourth
quarter of 2003.

53

---

According
to industry publications, petrochemical demand for various NGL products continues to
increase. Ethane demand by the petrochemical industry appears to have bottomed out in June
and July at an average of 574 MBPD, which was 23% below the five-year average of 750 MBPD.
Average ethane demand climbed to approximately 700 MBPD from August through October. This
increase in NGL demand has resulted in a strengthening of natural gas processing
economics, which should result in higher NGL extraction rates at domestic gas processing
facilities. The increase in NGL extraction rates should provide additional volumes for our
pipelines and other downstream facilities during the fourth quarter of 2003 when compared to the
second and third quarters of 2003.

On
October 9, 2003, we published on Form 8-K our forecasts for net income and earnings per
Unit for the fourth quarter of 2003 and full-year 2003 based on our expectations at that
time. Our expectation for net income for the fourth quarter of 2003 was in the range of
$40 million to $50 million, or approximately $0.16 to $0.20 per Unit (on a fully diluted
basis).

# Our liquidity and
capital resources

The
following represents a combined discussion of our liquidity and capital resources and
those of our Operating Partnership. Within this section, references to partnership equity
pertains to limited partner interests issued by us, whereas references to debt pertains to
those obligations entered into by our Operating Partnership or its subsidiaries.

General

Our
primary cash requirements, in addition to normal operating expenses and debt service, are
for capital expenditures (both sustaining and expansion-related), business acquisitions
and distributions to our partners. We expect to fund our short-term needs for such items
as operating expenses and sustaining capital expenditures with operating cash flows.
Capital expenditures for long-term needs resulting from internal growth projects and
business acquisitions are expected to be funded by a variety of sources including (either
separately or in combination) cash flows from operating activities, borrowings under
commercial bank credit facilities, the issuance of additional partnership equity and
public or private placement debt. We expect to fund cash distributions to partners
primarily with operating cash flows. Our debt service requirements are expected to be
funded by operating cash flows and/or refinancing arrangements.

Operating
cash flows primarily reflect the effects of net income adjusted for depreciation and
amortization, equity income and cash distributions from unconsolidated affiliates,
fluctuations in the fair value of financial instruments and changes in operating accounts.
The net effect of changes in operating accounts is generally the result of timing of sales
and purchases near the end of each period. Cash flow from operations is primarily based on
earnings from our business activities. As a result, these cash flows are exposed to
certain risks. The products that we process, sell or transport are principally used as
feedstocks in petrochemical manufacturing, in the production of motor gasoline and as fuel
for residential, agricultural and commercial heating. Reduced demand for our products or
services by industrial customers, whether because of general economic conditions, reduced
demand for the end products made with our products, increased competition from
petroleum-based products due to pricing differences or other reasons, could have a
negative impact on our earnings and thus the availability of cash from operating
activities. Other risks include fluctuations in NGL and energy prices, competitive
practices in the midstream energy industry and the impact of operational and systems
risks. For a more complete discussion of these and other risk factors pertinent to our
business, please read Cautionary statement regarding forward-looking information
and risk factors on page 66 of this quarterly report.

As
noted above, certain of our liquidity and capital resource requirements are fulfilled by
borrowings made under debt agreements and/or proceeds from the issuance of additional
partnership equity. At September 30, 2003, we had approximately $1.9 billion in principal
outstanding under various debt agreements. On that date, total borrowing capacity under
our revolving commercial bank credit facilities was $500 million of which $341.1 million
of capacity was available. For additional information regarding our debt, please read
 Our debt obligations beginning on page 57 of this quarterly
report.

In
February 2001, we filed a universal shelf registration with the SEC covering the issuance
of up to $500 million of partnership equity or public debt obligations. In October 2002,
we sold 9,800,000 Common Units under

54

---

this shelf registration statement which generated
$182.5 million of cash to us (including related capital contributions from our General
Partner). In January 2003, we sold an additional 14,662,500 Common Units under this shelf
registration which generated $258.2 million of cash to us (including related capital
contributions from our General Partner). We used the cash generated by these equity
offerings to reduce debt outstanding under our 364-Day Term Loan and for working capital
purposes. Also, in January and February 2003, we issued Senior Notes C ($350 million
principal amount) and Senior Notes D ($500 million principal amount). For information
regarding our application of cash obtained through these debt offerings, please read
 Our debt obligations beginning on page 57 of this quarterly
report.

In
January 2003, we filed a new $1.5 billion universal shelf registration statement with the
SEC covering the issuance of an unallocated amount of partnership equity or public debt
obligations (separately or in combination). In June 2003, we sold 11,960,000 Common Units
under this shelf registration statement, which generated $261.2 million of cash to us
(including related capital contributions from our General Partner). We used the cash
generated by this equity offering to reduce debt outstanding under our revolving credit
facilities. As a result of meeting certain financial tests, the Subordination Period (as
defined within our partnership agreement) ended on August 1, 2003. With the expiration of
the Subordination Period, we may prudently issue an unlimited number of Units for general
partnership purposes.

In
July 2003, we filed a registration statement with the SEC regarding our Distribution
Reinvestment Plan (the Plan). The Plan provides unitholders of record and
beneficial owners of our Common Units a voluntary means by which they can increase the
number of Common Units they own by reinvesting the quarterly cash distributions they would
otherwise receive in the purchase of additional Common Units. The registration statement
covers the issuance of up to 5,000,000 Common Units under the Plan. As a result of any
future reinvestment proceeds, our General Partner will be required to make cash
contributions to us and our Operating Partnership in order to maintain its ownership
interests. We expect to use the cash generated from this reinvestment program for general
partnership purposes.

Initial
reinvestments under the Plan occurred in August 2003 for those Common Unitholders of
record and beneficial owners on July 31, 2003 who elected to participate with regards to
our August 2003 distribution. We issued 1,268,404 Common Units and received proceeds of
approximately $26.0 million (including related capital contributions from our General
Partner). EPCOs reinvestment accounted for approximately $25 million of the $26
million reinvested during August 2003. To support our growth objectives and financial
flexibility, EPCO has announced that it expects to reinvest under the Plan approximately
$180 million of its cash distributions over the next six fiscal quarters beginning with
the fourth quarter of 2003. As a result, we are preparing to increase the number of Common
Units that can be issued under the Plan to approximately 15,000,000 Common Units.

If
deemed necessary, we believe that additional financing arrangements can be obtained on
reasonable terms. Furthermore, we believe that maintenance of our investment grade credit
ratings combined with a continued ready access to debt and equity capital at reasonable
rates and sufficient trade credit to operate our businesses efficiently provide a solid
foundation to meet our long and short-term liquidity and capital resource requirements.

Nine months ended September 30,
2003 compared to nine months ended September 30, 2002

The
following discussion highlights significant period-to-period comparisons regarding our
consolidated operating, investing and financing activities cash flows:

Operating
activities cash flows. Cash flow from operating activities was an inflow of $228.6
million during the first nine months of 2003 compared to an inflow of $170.1 million
during the first nine months of 2002. The following table summarizes the major components
of operating activities cash flows for first nine months of 2003 and 2002 (dollars in
thousands):

55

---

|                                                                         | For the Nine Months
Ended September 30,
|------------------------------------------------------------------------ | ---------------------------------------
|
|Net income                                                               |                                        
|Adjustments to reconcile net income to cash flows provided by            |                                        
|(used for) operating activities before changes in operating accounts:    |                                        
|Depreciation and amortization                                            |                                        
|Equity in loss (income) of unconsolidated affiliates                     |                                        
|Distributions received from unconsolidated affiliates                    |                                        
|Changes in fair market value of financial instruments                    |                                        
|Other                                                                    |                                        
|                                                                         |                                        
|Cash flow from operating activities before changes in operating accounts |                                        
|Net effect of changes in operating accounts                              |                                        
|                                                                         |                                        
|Operating activities cash flows                                          |                                        
|                                                                         |                                        

As
shown in the table above, cash flow before the net effect of changes in operating accounts
was an inflow of $224.6 million during the first nine months of 2003 versus $142.2 million
during the same period in 2002. We believe that cash flow from operating activities before
the net effect of changes in operating accounts is an important measure of our ability to
generate core cash flows from our assets and other investments. The $82.4 million increase
in this element of our cash flows is primarily due to:

| |  | earnings from acquired businesses present in the 2003 period but not in the 2002 period
(particularly those of Mid-America and Seminole which we acquired in July 2002);
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the 2002 period including $52.3 million of commodity hedging losses versus $0.9 million of
such losses during the 2003 period; offset by,
| | - | -----------------------------------------------------------------------------------------------------------------------------------------

| |  | higher
interest costs associated with debt we incurred and issued since the first quarter of
2002 to finance acquisitions.
| | - | --------------------------------------------------------------------------------------------------------------------------

The
$33.2 million increase in depreciation and amortization is primarily due to businesses we
acquired since the first quarter of 2002. The net effect of changes in operating accounts
is generally the result of timing of cash receipts from sales and cash payments for
inventory, purchases and other expenses near the end of each period. For additional
information regarding changes in operating accounts, please read footnote 10 in our Notes
to Unaudited Consolidated Financial Statements included under Item 1 of this quarterly
report.

Investing activities cash flows. During the first nine months of 2003, we used $153.5
million in cash for investing activities compared to $1.7 billion during the same period
in 2002. We used $26.3 million and $1.6 billion for business acquisitions during the first
nine months of 2003 and 2002, respectively. The 2002 period reflects our acquisition of
indirect interests in Mid-America and Seminole pipelines from Williams and propylene
fractionation and NGL and petrochemical storage assets from Diamond-Koch. The 2003 period
includes only minor acquisitions, specifically those of the Port Neches Pipeline and
additional interests in EPIK and BEF.

Our
capital expenditures were $98.0 million during the first nine months of 2003 versus $47.0
million during the first nine months of 2002. The $51.0 million increase in capital
expenditures is primarily due to (i) expansions of our Norco NGL fractionator and Neptune
gas processing facility and (ii) the rerouting of a 14-mile segment of the Mid-America
pipeline in connection with the development of a dam and reservoir by an agency of the
federal government. In addition, we made investments in and advances to our unconsolidated
affiliates of $29.4 million during the first nine months of 2003 compared to $13.2 million
during the first nine months of 2002. This increase is primarily due to funding our share
of the expansion projects of our Gulf of Mexico natural gas pipeline investments.

Financing
activities cash flows. Our financing activities were a cash outflow of $48.7 million
during the first nine months of 2003 versus a cash inflow of $1.4 billion during the first
nine months of 2002. During the 2003 period, we made net payments on our debt obligations
of $356.8 million primarily due to the use of proceeds from our January and June
equity offerings. The 2003 period reflects our issuance of Senior Notes C ($350 million

56

---

in
principal amount) and Senior Notes D ($500 million in principal amount) and the final
repayment of $1.0 billion that was outstanding under our 364-Day Term Loan. The 2002
period primarily reflects borrowings to fund the Mid-America and Seminole acquisitions and
those of Diamond-Kochs propylene fractionation business.

Proceeds
from our equity offerings during 2003 totaled $540.2 million, which includes our General
Partners related $5.4 million contribution to us. Our General Partner also
contributed $5.5 million to our Operating Partnership in connection with these offerings.
Distributions to our partners and minority interests increased to $223.4 million during
the first nine months of 2003 from $150.7 million during the first nine months of 2002.
The $72.7 million increase in distributions to partners is primarily due to increases in
both the declared quarterly distribution rates and the number of Units eligible for
distributions.

Our debt obligations

Our
debt obligations consisted of the following at the dates indicated:

|                                                         | September 30,
2003 | December 31,
2002
|-------------------------------------------------------- | ------------------ | -----------------
|Borrowings under:                                        |                    |                  
|364-Day Term Loan, variable rate, due July 2003          |                    |                  
|364-Day Revolving Credit facility, variable rate,        |                    |                  
|due November 2004                                        |                    |                  
|Multi-Year Revolving Credit facility, variable rate,     |                    |                  
|due November 2005                                        |                    |                  
|Senior Notes A, 8.25% fixed rate, due March 2005         |                    |                  
|Seminole Notes, 6.67% fixed rate, $15 million due        |                    |                  
|each December, 2002 through 2005                         |                    |                  
|MBFC Loan, 8.70% fixed rate, due March 2010              |                    |                  
|Senior Notes B, 7.50% fixed rate, due February 2011      |                    |                  
|Senior Notes C, 6.375% fixed rate, due February 2013     |                    |                  
|Senior Notes D, 6.875% fixed rate, due March 2033        |                    |                  
|                                                         |                    |                  
|Total principal amount                                   |                    |                  
|Unamortized balance of increase in fair value related to |                    |                  
|hedging a portion of fixed-rate debt                     |                    |                  
|Less unamortized discount on:                            |                    |                  
|Senior Notes A                                           |                    |                  
|Senior Notes B                                           |                    |                  
|Senior Notes D                                           |                    |                  
|Less current maturities of debt                          |                    |                  
|                                                         |                    |                  
|Long-term debt                                           |                    |                  
|                                                         |                    |                  

Letters
of credit. At September 30, 2003 and December 31, 2002, we had $75 million of standby
letter of credit capacity under our Multi-Year Revolving Credit facility. We had $13.9
million of letters of credit outstanding under this facility at September 30, 2003 and
$2.4 million outstanding at December 31, 2002.

Covenants.
          We were in compliance with the various covenants of our debt agreements at
          September 30, 2003 and December 31, 2002. Certain financial ratio covenants of
          our revolving credit facilities were amended in connection with the refinancing
          of our 364-Day Revolving Credit facility in October 2003. For additional
          information regarding our credit facilities, please read 
          Revolving credit facilities beginning on page 58 of this quarterly
          report.

Parent-Subsidiary
guarantor relationships. We act as guarantor of all of our Operating
Partnerships consolidated debt obligations, with the exception of the Seminole
Notes. If the Operating Partnership were to default on any debt we guarantee, we
would be responsible for full repayment of that obligation. The Seminole

57

---

Notes are unsecured
obligations of Seminole Pipeline Company (of which we own an effective 78.4% of its
ownership interests).

New
senior notes issued during first quarter of 2003

During
the first quarter of 2003, we completed the issuance of $850 million of long-term senior
notes (Senior Notes C and D). Senior Notes C and D are unsecured obligations of our
Operating Partnership and rank equally with its existing and future unsecured and
unsubordinated indebtedness and senior to any future subordinated indebtedness. We
guarantee both Senior Notes C and D for our subsidiary through an unsecured and
unsubordinated guarantee that is non-recourse to the General Partner. These notes were
issued under an indenture containing certain covenants and are subject to a make-whole
redemption right if we elect to call the debt prior to its scheduled maturity. These
covenants restrict our ability, with certain exceptions, to incur debt secured by liens
and engage in sale and leaseback transactions.

Senior
Notes C. In January 2003, we issued $350 million in principal amount of 6.375%
fixed-rate senior notes due February 1, 2013 (Senior Notes C), from which we
received net proceeds before offering expenses of approximately $347.7 million. These
private placement notes were sold at face value with no discount or premium. We used the
proceeds from this offering to repay a portion of the indebtedness outstanding under the
364-Day Term Loan that we incurred to finance the Mid-America and Seminole acquisitions.
In May 2003, we exchanged 100% of the private placement Senior Notes C for
publicly-registered Senior Notes C.

Senior
Notes D. In February 2003, we issued $500 million in principal amount of 6.875%
fixed-rate senior notes due March 1, 2033 (Senior Notes D), from which we
received net proceeds before offering expenses of approximately $489.8 million. These
private placement notes were sold at 98.842% of their face amount. We used $421.4 million
from this offering to repay the remaining principal balance outstanding under the 364-Day
Term Loan. In addition, we applied $60.0 million of the proceeds to reduce the balance
outstanding under the 364-Day Revolving Credit facility. The remaining proceeds were used
for working capital purposes. In July 2003, we exchanged 100% of the private placement
Senior Notes D for publicly-registered Senior Notes D.

Repayment
of 364-Day Term Loan

In
July 2002, our Operating Partnership entered into the $1.2 billion senior unsecured
364-Day Term Loan to fund the acquisition of indirect interests in Mid-America
and Seminole. We used $178.5 million of the $182.5 million in proceeds from our October
2002 equity offering to partially repay this loan. We also used $252.8 million of the
$258.2 million in proceeds from the January 2003 equity offering, $347.0 million of the
$347.7 million in proceeds from our issuance of Senior Notes C and $421.4 million in
proceeds from our issuance of Senior Notes D to completely repay the 364-Day Term Loan in
February 2003.

Revolving
credit facilities

We
used $60.0 million in proceeds from the issuance of Senior Notes D in February 2003 to
reduce the balance outstanding under our 364-Day Revolving Credit facility. In addition,
we applied $261.2 million of the net proceeds from our June 2003 equity offering to reduce
the balances then outstanding under our revolving credit facilities, of which $102 million
was applied against the 364-Day Revolving Credit facility and $159.2 million against the
Multi-Year Revolving Credit facility.

At
September 30, 2003, we had $230 million of stand-alone borrowing capacity available under
our 364-Day Revolving Credit facility, with no principal balance outstanding. In addition,
we had $270 million in stand-alone borrowing capacity available under our Multi-Year
Revolving Credit facility at September 30, 2003. We had $145 million of principal and
$13.9 million in letters of credit outstanding under this facility at that date, with
$111.1 million of unused capacity.

In
October 2003, our Operating Partnership refinanced its 364-Day Revolving Credit facility.
The credit line available under this facility now expires in October 2004. In accordance
with terms of the new credit agreement, we have the option to convert any revolving credit
balance outstanding at maturity to a one-year term

58

---

loan (due October 2005). In connection
with this refinancing, certain financial ratio covenants of our revolving credit
facilities were amended to increase our financial flexibility.

Information
regarding variable interest rates paid

The
following table shows the range of interest rates paid and weighted-average interest rate
paid on our variable-rate debt obligations for the nine months ended September 30, 2003:

|                                                | Range of
interest rates
paid | Weighted-
average
interest rate
paid
|----------------------------------------------- | ---------------------------- | ------------------------------------
|364-Day Term Loan (a)                           |                              |                                     
|364-Day Revolving Credit facility               |                              |                                     
|Multi-Year Revolving Credit facility            |                              |                                     
|                                               
|                                               
|(a)  This facility was repaid in February 2003.

Credit ratings

Our
current investment grade credit ratings are Baa2 by Moodys Investor Service and BBB
by Standard and Poors. In October 2003, both agencies affirmed their current ratings;
however, Standard and Poors revised its outlook from stable to negative. Moodys
Investor Service affirmed that its outlook was stable.

Standard
and Poors stated that its negative outlook primarily reflected concerns regarding the
sustainability of the current rebound in the NGL industry. Their advisory stated that if
our near-term financial results do not meet their current expectations, our rating would
be lowered. They are also evaluating what effect, if any, that the purchase of
Shells interest in our General Partner by an affiliate of EPCO might have on our
overall credit quality.

We
believe that the maintenance of an investment grade credit rating is important in managing
our liquidity and capital resource requirements. We maintain regular communications with
these ratings agencies, which independently judge our creditworthiness based on a variety
of quantitative and qualitative factors.

Capital spending forecasts

At
September 30, 2003, we had $2.6 million in estimated outstanding purchase commitments
attributable to capital projects, practically all of which were related to the construction
of assets that will be recorded as property, plant and equipment. During the fourth
quarter of 2003, we expect capital spending on internal growth projects to approximate
$63.9 million, of which $32.8 million is forecasted for various projects within our
Pipelines segment; $12.3 million for the expansion of our Norco NGL fractionator
(completed in October 2003) and $5.7 million for the expansion of our Neptune gas
processing facility (expected completion during fourth quarter of 2003). Our
unconsolidated affiliates forecast a combined $16.4 million in capital expenditures for
the remainder of 2003, the majority of which relate to Gulf of Mexico natural gas pipeline
projects. Our share of these forecasted capital expenditures is approximately $5.4
million.

In
October 2003, we purchased from Williams an additional 37.35% interest in Wilprise and
16.67% interest in Tri-States. The total purchase price of these interests was $26.5
million. The initial purchase price excludes approximately $8.3 million in future
consideration that is contingent upon throughput volumes on these pipeline systems through
2006. As a result of these acquisitions, our ownership interest in Wilprise is now 74.7%
and for Tri-States, 50%.

EPCO
subleases to us all of the equipment it holds pursuant to operating leases relating to an
isomerization unit, a deisobutanizer tower, a cogeneration unit and approximately 100
railcars for one dollar per year and has assigned to us its purchase option under such
leases (the retained leases). EPCO remains liable for the lease payments
associated with these items. We have notified the original lessor of the isomerization
unit of our intent to

59

---

exercise the purchase option assigned to us. The purchase price of
this equipment is expected to be up to $23.1 million and be payable in 2004.

Pipeline Integrity Management Program

In
March 2001, the U.S. Department of Transportation issued safety regulations containing
requirements for the development of integrity management programs for oil pipelines (which
includes NGL and petrochemical pipelines such as ours) in certain high consequence
areas (CFR 195.452). High consequence areas include but are not limited to high
population areas, environmentally-sensitive locations, and areas containing drinking water
supplies. In connection with these regulations, we developed an Integrity Management
Program and identified those segments of our liquids pipelines located in such areas by
the end of 2002. The regulation stipulates that a pipeline company must assess the
condition of its pipeline in such areas and perform any necessary repairs. We are required
to evaluate at least 50% of our identified pipeline mileage in such high consequence areas
by the end of 2004 with the balance completed before April 2008. After this initial
testing is complete, the identified pipeline segments must be reassessed every five years
thereafter.

During
2003, we expect to spend approximately $10 million to comply with this new regulation (of
which $5 million has been spent during the first nine months). During each of the years
2004 through 2008, these costs are expected to be in the range of $15 million to $19
million. Of these forecasted costs, we expect that approximately 90% will be expensed and
the remainder will be recorded as capital expenditures.

# Material contractual
obligations

There
have been no significant changes in our material contractual obligations outside the
ordinary course of business since December 31, 2002 except for the following:

| |  | In February 2003, we completely repaid the $1.0 billion principal balance that was
outstanding under the 364-Day Term Loan at December 31, 2002 using proceeds from debt and
equity offerings we completed during the first quarter of 2003 (which included the
issuance of our Senior Notes C and D discussed below).
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | We
issued our $350 million in principal amount Senior Notes C in January 2003. These notes
mature in 2013.
| | - | ----------------------------------------------------------------------------------------------------------

| |  | We
issued our $500 million in principal amount Senior Notes D in February 2003. These notes
mature in 2033.
| | - | -----------------------------------------------------------------------------------------------------------

| |  | We
used $60 million in proceeds from the issuance of Senior Notes D to repay a portion of
indebtedness then outstanding under our 364-Day Revolving Credit facility.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | We used $261.2 million in proceeds and contributions related to our June 2003 equity
offering to reduce indebtedness outstanding under our 364-Day Revolving Credit and
Multi-Year Revolving Credit facilities.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The
following table summarizes our updated material contractual obligations related to debt at
September 30, 2003:

|Contractual Obligations       | Total | 2003 | 2004
through
2005 | 2006
through
2007 | After
2007
|----------------------------- | ----- | ---- | ----------------- | ----------------- | ----------
|Principal payments to be made |       |      |                   |                   |           
|under debt obligations        |       |      | $                 | 1,894,000         |           

60

---

# Related party
transactions

Relationship with EPCO
and Its Affiliates

We
have an extensive and ongoing relationship with EPCO and its affiliates. EPCO is
controlled by Dan L. Duncan, who is also a director (and Chairman of the Board of
Directors) of our General Partner. In addition, three other members of the Board of
Directors (O.S. Andras, Randa D. Williams and Richard H. Bachmann) and the remaining
executive and other officers of the General Partner are employees of EPCO. The principal
business activity of the General Partner is to act as our managing partner. Collectively,
EPCO and its affiliates owned 55.4% of our limited partnership interests and 100.0% of our
General Partner at September 30, 2003. In September 2003, an affiliate of EPCO purchased
Shells 30.0% interest in our General Partner.

We
have no employees. All of our management, administrative and operating functions are
performed by employees of EPCO. We reimburse EPCO for the costs of its employees who
perform operating functions for us. In addition, we reimburse EPCO for the costs of
certain of its employees who manage our business and affairs.

EPCO
is the operator of certain facilities we own or have an equity interest in. We also have
entered into an agreement with EPCO to provide trucking services for us pertaining to the
loading and transportation of products. Lastly, in the normal course of business, we buy
from and sell NGL products to EPCOs Canadian affiliate.

The
following table shows our related party revenues and operating expenses attributable to
EPCO for the periods indicated:

|                                             | For the Three Months
Ended September 30, | For the Nine Months
Ended September 30,
|-------------------------------------------- | ---------------------------------------- | ---------------------------------------
|
|Revenues from consolidated operations        |                                          |                                        
|Operating costs and expenses                 |                                          |                                        
|Selling, general and administrative expenses |                                          |                                        

Relationship with Shell

We
have a significant commercial relationship with Shell as a partner, customer and vendor.
At September 30, 2003, Shell owned approximately 19.0% of our Common Units. Shell sold its
30.0% interest in our General Partner to an affiliate of EPCO in September 2003.

Shell
and its affiliates are the Companys single largest customer. During the nine months
ended September 30, 2003 and 2002, they accounted for 5.7% and 8.6%, respectively, of our
consolidated revenues. Our revenues from Shell primarily reflect the sale of NGL and
petrochemical products to them and the fees we charge them for pipeline transportation and
NGL fractionation services. Our operating costs and expenses with Shell primarily reflect
the payment of energy-related expenses related to the Shell natural gas processing
agreement and the purchase of NGL products from them.

The
most significant contract affecting our natural gas processing business is the 20-year
Shell processing agreement, which grants us the right to process Shells current and
future production within state and federal waters of the Gulf of Mexico. The Shell
processing agreement includes a life of lease dedication, which may extend the agreement
well beyond its initial 20-year term ending in 2019. This contract was amended effective
March 1, 2003. In general, the amended contract includes the following rights and
obligations:

| |  | the
exclusive right, but not the obligation in all cases, to process substantially all of
Shell's Gulf of Mexico natural gas production; plus
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------

| |  | the exclusive right, but not the obligation in all cases, to process all natural gas
production from leases dedicated by Shell for the life of such leases; plus
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the right to all title, interest and ownership in the mixed NGL stream extracted by our
gas processing plants from Shells natural gas production from such leases; with
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the
obligation to re-deliver to Shell the natural gas stream after any mixed NGLs are
extracted.
| | - | ------------------------------------------------------------------------------------------------

61

---

As
part of our natural gas processing obligations under this contract, we reimburse Shell for
the energy value of (i) the NGLs we extract from the natural gas stream and (ii) the
natural gas we remove from the stream and consume as fuel. This energy value is referred
to as plant thermal reduction (PTR) and is based on the energy content of the
natural gas taken out of the stream (measured in Btus). The amended contract contains a
mechanism (termed Consideration Adjustment Outside of Normal Operations or
CAONO) to adjust the value of the PTR we reimburse to Shell. The CAONO, in
effect, protects us from processing Shells natural gas at an economic loss when the
value of the NGLs we extract is less than the sum of the cost of the PTR reimbursement,
operating costs of the gas processing facility and other costs such as NGL fractionation
and pipeline fees.

In
general, the CAONO adjustment requires the comparison of our average net gas processing
margin to an upper and lower limit (all as defined within the agreement). If our average
net processing margin is below the lower limit, the PTR reimbursement payable to Shell is
decreased by the product of the absolute value of the difference between our average net
processing margin and the specified lower limit multiplied by the volume of NGLs
extracted. To the extent our average net processing margin is higher than the upper limit
, the PTR reimbursement payable to Shell is increased by the product of the difference
between the average net gas processing margin and the specified upper limit multiplied by
the volume of NGLs extracted. The underlying purpose of the CAONO mechanism is to provide
Shell with relative assurance that its gas will continue to be processed during periods
when natural gas prices are high relative to NGL prices (times when we would normally
choose not to process a producers natural gas stream) while continuing to protect us
from processing Shells gas at an economic loss.

The
following table shows our related party revenues and operating expenses attributable to
Shell for the periods indicated:

|                                      | For the Three Months
Ended September 30, | For the Nine Months
Ended September 30,
|------------------------------------- | ---------------------------------------- | ---------------------------------------
|
|Revenues from consolidated operations |                                          |                                        
|Operating costs and expenses          |                                          |                                        

# Recent accounting
developments

SFAS
No. 143,Accounting for Asset Retirement Obligations. We adopted
this standard as of January 1, 2003. This statement establishes accounting standards for
the recognition and measurement of an asset retirement obligation (ARO)
liability and the associated asset retirement cost. Our adoption of this standard had no
material impact on our financial statements. For a discussion regarding our implementation
of this new standard, please read footnote 5 of our Notes to Unaudited Consolidated
Financial Statements under Item 1 of this quarterly report.

SFAS
No. 145,Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections.  We adopted provisions of this
standard as of January 1, 2003. This statement revised accounting guidance related to the
extinguishment of debt and accounting for certain lease transactions. It also amended
other accounting literature to clarify its meaning, applicability and to make various
technical corrections. Our adoption of this standard has had no material impact on our
financial statements.

SFAS
No. 146, Accounting for Costs Associated with Exit and Disposal
Activities. We adopted this standard as of January 1, 2003. This statement
requires companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of an entitys commitment to an exit or
disposal plan. Our adoption of this standard has had no material impact on our financial
statements.

SFAS
No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure. We adopted this standard as of December 31, 2002. This statement
provides alternative methods of transition from a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 in both annual and interim financial
statements. We have provided the information required by this statement in footnote 13 of
the Notes to Unaudited Consolidated

62

---

Financial Statements included under Item 1 of this
quarterly report. Apart from this additional footnote disclosure, our adoption of this
standard has had no material impact on our financial statements.

SFAS
No. 149,Amendment of Statement 133 on Derivative Instruments and Hedging
Activities. This statement amends and clarifies accounting guidance for
derivative instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS No. 133. This statement is effective for
contracts entered into or modified after June 30, 2003, for hedging relationships
designated after June 30, 2003, and to certain preexisting contracts. We adopted SFAS No.
149 on a prospective basis as of July 1, 2003. Our adoption of this standard has had no
material impact on our financial statements.

SFAS
No. 150, Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity. This standard establishes classification and measurement
standards for financial instruments with characteristics of both liabilities and equity.
It requires an issuer of such financial instruments to reclassify the instrument from
equity to a liability or an asset. The effective date of this standard for us was July 1,
2003. Our adoption of this standard has had no material impact on our financial
statements.

FIN
45,Guarantors Accounting and Disclosure Requirement from Guarantees,
Including Indirect Guarantees of Indebtedness of Others. We implemented this
FASB interpretation as of December 31, 2002. This interpretation of SFAS No. 5, 57 and
107, and rescission of FASB Interpretation No. 34 elaborates on the disclosures to be made
by a guarantor in its interim and annual financial statements about its obligations under
certain guarantees that it has issued. It also clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee. We have provided the information required
by this interpretation in footnote 8 of the Notes to Unaudited Consolidated Financial
Statements included under Item 1 of this quarterly report.

FIN
46,Consolidation of Variable Interest Entities  An Interpretation of
ARB No. 51. This interpretation of ARB No. 51 addresses requirements for
accounting consolidation of a variable interest entity (VIE) with its primary
beneficiary. In general, if an equity owner of a VIE meets certain criteria defined within
FIN 46, the assets, liabilities and results of the activities of the VIE should be
included in the consolidated financial statements of the owner. Our adoption of FIN 46 as
of January 31, 2003 has had no material effect on our financial statements.

# Our critical accounting
policies

In
our financial reporting process, we employ methods, estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities as of the date of our financial statements. These methods, estimates and
assumptions also affect the reported amounts of revenues and expenses during the reporting
period. Investors should be aware that actual results could differ from these estimates if
the underlying assumptions prove to be incorrect.

In
general, there have been no significant changes in our critical accounting policies since
December 31, 2002. For a detailed discussion of these policies, please read
Managements Discussion and Analysis of Financial Condition and Results of
Operations  Our critical accounting policies in our annual report on Form
10-K/A for 2002. The following is a condensed discussion of our critical accounting
policies and the estimates and assumptions underlying them.

Depreciation
methods and estimated useful lives of property, plant and equipment

In
general, depreciation is the systematic and rational allocation of an assets cost,
less its residual value (if any), to the periods it benefits. We use the straight-line
method to depreciate our property, plant and equipment. Our estimate of an assets
useful life is based on a number of assumptions including technological changes that may
affect the assets usefulness and the manner in which we intend to physically use the
asset. If we subsequently change our assumptions regarding these factors, it would result
in an increase or decrease in depreciation expense.

At
September 30, 2003 and December 31, 2002, the net book value of our property, plant and
equipment was $2.9 billion and $2.8 billion, respectively. For additional information
regarding our property, plant and

63

---

equipment, please read footnote 5 of the Notes to
Unaudited Consolidated Financial Statements included under Item 1 of this quarterly
report.

Impairment
charges and underlying estimated fair values

If
we determine that an assets undepreciated cost may not be recoverable due to
impairment, this would result in a charge against earnings. Long-lived assets with
recorded values that are not expected to be recovered through future expected cash flows
are written-down to their estimated fair values. An asset is tested for impairment when
events or circumstances indicate that its carrying value may not be recoverable. The
carrying value of a long-lived asset is not recoverable if it exceeds the sum of
undiscounted cash flows expected to result from the use and eventual disposition of the
existing asset. Our estimates of such undiscounted cash flows are based on a number of
assumptions including anticipated margins and volumes; estimated useful life of the asset
or asset group; and salvage values. If we initially determine that an assets
carrying value is recoverable through such undiscounted estimated cash flows and later
revise these assumptions leading to a finding that the opposite is true, we would be
required to ascertain the fair value of the facility, which might ultimately result in an
impairment charge being recorded.

If
the carrying value of an asset exceeds the sum of its undiscounted expected cash flows, an
impairment loss equal to the amount the carrying value exceeds the fair value of the asset
is recognized. The quoted market price of an asset on an active exchange or similar venue
is the best determinant of fair value. However, in many instances, quoted market prices in
such markets are not available. In those instances, the estimate of fair value is based on
the best information available, including prices for similar assets and the results of
using other valuation techniques (including present value techniques).

Since
most of our plant and other fixed and intangible assets are not traded in an active
market, we generally rely on the use of present value techniques when determining the fair
value of such assets for the purpose of impairment testing. These techniques incorporate
our best information and assumptions regarding future cash flows, alternative courses of
action, probabilities of such courses of action occurring and discount rates. To the
extent that any of these underlying assumptions prove incorrect, it may result in
additional future impairment charges.

Due
to a deteriorating business environment and outlook and the completion of its preliminary
engineering studies regarding conversion alternatives, BEF evaluated the carrying value of
its long-lived assets for impairment during the third quarter of 2003. This review
indicated that the carrying value of BEFs long-lived assets exceeded their
collective fair value, which resulted in a non-cash impairment charge of $67.5 million.
Our share of this loss is $22.5 million and is recorded as a component of Equity in
income (loss) of unconsolidated affiliates in our Statements of Consolidated
Operations and Comprehensive Income for the three and nine months ended September 30,
2003. Our historical equity (and in the future, consolidated) earnings from BEF are
classified under the Octane Enhancement business segment. For additional information
regarding this impairment charge, please read footnote 6 of the Notes to Unaudited
Consolidated Financial Statements included under Item 1 of this quarterly report.

Amortization
methods and estimated useful lives of qualifying intangible assets

Our
recorded intangible assets primarily consist of the estimated value assigned to certain
contract-based assets representing the rights we own arising from contractual agreements.
A contract-based intangible asset with a finite useful life is amortized over its
estimated useful life. Our estimate of useful life is based on a number of factors
including the expected useful life of related assets (i.e., fractionation facility,
pipeline, etc.) and the effects of obsolescence, demand, competition and other factors. If
our underlying assumptions regarding the useful life of an intangible asset change, we
then might need to adjust the amortization period of such asset which would increase or
decrease amortization expense. Additionally, if we determine that an intangible
assets unamortized cost may not be recoverable due to impairment, this would result
in a charge against earnings.

At
September 30, 2003 and December 31, 2002, the carrying value of our intangible asset
portfolio was $266.9 million and $277.7 million. For additional information regarding our
intangible assets, please read footnote 7 of the Notes to Unaudited Consolidated Financial
Statements included under Item 1 of this quarterly report.

64

---

Methods
we employ to measure the fair value of goodwill

Our
goodwill is attributable to the excess of the purchase price over the fair value of assets
acquired. Goodwill is not amortized. Instead, goodwill is tested for impairment at a
reporting unit level annually, and more frequently, if circumstances warrant. This testing
involves calculating the fair value of a reporting unit, which in turn is based on our
assumptions regarding the future economic prospects of the reporting unit. If the fair
value of the reporting unit (including related goodwill) is less than its book value, a
charge to earnings would be required to reduce the carrying value of goodwill to its
implied fair value. If our underlying assumptions regarding the future economic prospects
of a reporting unit change, this could impact the fair value of the reporting unit and
result in a charge to earnings to reduce the carrying value of goodwill.

At
September 30, 2003 and December 31, 2002, the carrying value of our goodwill was $81.5
million. For additional information regarding our goodwill, please read footnote 7 of the
Notes to Unaudited Consolidated Financial Statements included under Item 1 of this
quarterly report.

Our
revenue recognition polices

In
general, we recognize revenue from our customers when all of the following criteria are
met: (i) firm contracts are in place, (ii) delivery has occurred or services have been
rendered, (iii) pricing is fixed and determinable and (iv) collectibility is reasonably
assured. When contracts settle (i.e., either physical delivery of product has taken place
or the services designated in the contract have been performed), we determine if an
allowance is necessary and record it accordingly. The revenues that we record are not
materially based on estimates. We believe the assumptions underlying any revenue estimates
that we use will not prove to be significantly different from actual amounts due to the
routine nature of these estimates and the stability of our operations.

Mark-to-market
accounting for certain financial instruments

Our
earnings are also affected by use of the mark-to-market method of accounting for certain
financial instruments. We use short-term, highly liquid financial instruments such as
swaps, forwards and other contracts to manage price risks associated with inventories,
firm commitments and certain anticipated transactions, primarily within our Processing
segment. The use of mark-to-market accounting for financial instruments may cause our
non-cash earnings to fluctuate based upon changes in underlying indexes, primarily those
related to commodity prices. Fair value for the financial instruments we employ is
determined using price data from highly liquid markets such as the NYMEX commodity
exchange.

During
the first nine months of 2002, we recognized a loss of $52.3 million from our commodity
hedging activities. Of this loss, $10.6 million was attributable to the change in fair
value of the portfolio between December 31, 2001 and September 30, 2002. The fair value of
open positions at September 30, 2002 was a payable of $2.7 million. In March 2002, the
effectiveness of our primary commodity hedging strategy deteriorated due to an unexpected
rapid increase in natural gas prices; therefore, the loss in value of our fixed-price
natural gas financial instruments was not offset by increased gas processing margins. We
exited the strategy underlying this loss in 2002.

During
the first nine months of 2003, we utilized a limited number of commodity financial
instruments from which we recorded a loss of $0.9 million. The fair value of open
positions at September 30, 2003 was a nominal payable amount. For additional information
regarding our financial instruments, please read footnote 11 of the Notes to Unaudited
Consolidated Financial Statements included under Item 1 of this quarterly report.

# Other items

Conversion
of EPCO Subordinated Units to Common Units

On
May 1, 2003, 10,704,936 of EPCOs Subordinated Units converted to Common Units as a
result of our satisfying certain financial tests. The remaining 21,409,872 Subordinated
Units converted to Common Units on August 1, 2003. These conversions have no impact upon
our earnings per unit or distributions since Subordinated

65

---

Units are already included in
both the basic and fully-diluted earnings per unit calculations and are
distribution-bearing.

Conversion
of Shell Special Units to Common Units

On
August 1, 2003, the last 10,000,000 of Shells non-distribution bearing Special Units
converted to Common Units. The conversion impacted basic earnings per Unit beginning in
the third quarter of 2003. These units were already included in our fully-diluted earnings
per Unit computations. Since Common Units are distribution-bearing, our limited partner
cash distributions to Shell will increase beginning with the distribution we make in
November 2003.

# Cautionary statement
regarding forward-looking information and risk factors

This
quarterly report contains various forward-looking statements and information that are
based on our beliefs and those of our General Partner, as well as assumptions made by us
and information currently available to us. When used in this document, words such as
anticipate, project, expect, plan,
goal, forecast, intend, could,
believe, may and similar expressions and statements regarding our
plans and objectives for future operations, are intended to identify forward-looking
statements. Although we and our General Partner believe that such expectations reflected
in such forward-looking statements are reasonable, neither we nor our General Partner can
give any assurances that such expectations will prove to be correct. Such statements are
subject to a variety of risks, uncertainties and assumptions. If one or more of these
risks or uncertainties materialize, or if underlying assumptions prove incorrect, our
actual results may vary materially from those anticipated, estimated, projected or
expected. You should not put undue reliance on any forward-looking statements. When
considering forward-looking statements, please read our summarized Risk
Factors below.

Risk Factors

Among
the key risk factors that may have a direct impact on our results of operations and
financial condition are:

| |  | A decrease in the difference between NGL product prices and natural gas prices results in
lower margins on volumes processed, which would adversely affect our profitability.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A reduction in demand for our products by the petrochemical, refining or heating
industries could adversely affect our results of operations.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------

| |  | A
decline in the volume of NGLs delivered to our facilities could adversely affect our
results of operations.
| | - | -------------------------------------------------------------------------------------------------------------

| |  | Our
business requires extensive credit risk management that may not be adequate to protect
against customer nonpayment.
| | - | -----------------------------------------------------------------------------------------------------------------------

| |  | Acquisitions
and expansions may affect our business by substantially increasing the level of our
indebtedness and contingent liabilities and increasing our risks of being unable to
effectively integrate these new operations.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Our
tax treatment depends on our status as a partnership for federal income tax purposes, as
well as our not being subject to entity-level taxation by states. If the IRS treats us as
a corporation or we become subject to entity-level taxation for state tax purposes, it
would substantially reduce distributions to our Unitholders and our ability to make
payments on our debt securities.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | We
have leverage that may restrict our future financial and operating flexibility.
| | - | ----------------------------------------------------------------------------------

| |  | Terrorist
attacks aimed at our facilities could adversely affect our business.
| | - | ------------------------------------------------------------------------------

66

---

# Item
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We
are exposed to financial market risks, including changes in commodity prices and interest
rates. We may use financial instruments (i.e., futures, forwards, swaps, options, and
other financial instruments with similar characteristics) to mitigate the risks of certain
identifiable and anticipated transactions, primarily within our Processing segment. In
general, the types of risks we attempt to hedge are those relating to variability of
future earnings and cash flows caused by changes in commodity prices and interest rates.
As a matter of policy, we do not use financial instruments for speculative (or trading)
purposes.

There
has been no material change in our commodity financial instruments portfolio since
December 31, 2002. During the first quarter of 2003, we settled all interest rate-related
financial instruments that were outstanding at December 31, 2002. For additional
information regarding our interest-rate related financial instruments, please read
 Interest rate-related financial instruments portfolio below and
footnote 11 of our Notes to Unaudited Consolidated Financial Statements included under
Item 1 of this quarterly report.

Commodity
financial instruments portfolio

At
December 31, 2002, the net fair value of this portfolio was a payable of $26 thousand,
based entirely upon quoted market prices. At September 30, 2003, the net fair value of
this portfolio was a nominal payable amount. We continue to have only a limited number of
commodity financial instruments outstanding. The sensitivity of the fair value of our
commodity financial instruments portfolio at September 30, 2003 to a hypothetical 10%
movement in the underlying quoted market prices is negligible.

At
October 29, 2003, the net fair value of this portfolio was a receivable of $0.2 million.
The increase is primarily due to an ethane-related transaction expiring by the
end of November 2003. If underlying market prices were to increase by 10%, the fair value
of the portfolio would decrease to a payable of $0.6 million. If these underlying prices
were to decrease by 10%, the fair value of the portfolio would increase to a receivable of
$1.0 million.

During
the first nine months of 2002, we recognized a loss of $52.3 million from our Processing
segments commodity hedging activities that was recorded as an operating cost in our
Statements of Consolidated Operations and Comprehensive Income. In March 2002, the
effectiveness of our primary commodity hedging strategy deteriorated due to an unexpected
rapid increase in natural gas prices; therefore, the loss in value of our fixed-price
natural gas financial instruments was not offset by increased gas processing margins. We
exited the strategy underlying this loss in 2002.

During
the first nine months of 2003, we recorded a loss of $0.9 million from our commodity
hedging activities, of which $0.8 million is attributable to commodity hedging activities
within the Pipelines segment and the remainder to those within the Processing segment.

Interest
rate-related financial instruments portfolio

Interest
rate swap agreements. At December 31, 2002, we had one interest rate swap outstanding
having a notional amount of $54 million and a fair value at that date of $1.6 million. The
counterparty elected to exercise its option to terminate this swap as of March 1, 2003 and
we received $1.6 million associated with the final settlement of this swap on that date.
The early termination of the swap had no impact on our earnings. At September 30, 2003, we
have no interest rate swap agreements outstanding.

Treasury
Locks. During the fourth quarter of 2002, we entered into seven treasury lock
transactions, each with an original maturity of either January 31, 2003 or April 15, 2003.
A treasury lock is a specialized agreement that fixes the price (or yield) on a specific
U.S. treasury security for an established period of time. The purpose of these financial
instruments was to hedge the underlying treasury interest rate associated with our
anticipated issuance of debt in early 2003 to partially refinance the Mid-America and
Seminole acquisitions. Our treasury lock transactions are accounted for as cash flow
hedges under SFAS No. 133. The notional amounts of the treasury lock transactions totaled
$550 million, with a total treasury lock rate of approximately 4%.

67

---

We
elected to settle all of the treasury locks during the first quarter of 2003 in connection
with our issuance of Senior Notes C and D. For additional information regarding our debt,
please read Our liquidity and capital resources  Our debtobligations on page 57 of this quarterly report. The settlement of the treasury
locks resulted in our receipt of $5.4 million in cash.

The
fair value of these instruments at December 31, 2002 was a current liability of $3.8
million offset by a current asset of $0.2 million. The $3.6 million net liability was
recorded as a component of comprehensive income on that date, with no impact on 2002 net
income. As a result of settlement of the treasury locks, the $3.6 million net liability
was reclassified out of accumulated other comprehensive income in Partners Equity to
offset the current asset and liabilities we recorded at December 31, 2002, with no impact
on 2003 net income. For additional information regarding our treasury lock transactions,
please read our footnote 11 of our Notes to Unaudited Consolidated Financial Statements
included under Item 1 of this quarterly report.

# Item 4.   CONTROLS AND
PROCEDURES.

As
of the end of the period covered by this report, the CEO and CFO of the General Partner of
Enterprise Products Partners L.P. and Enterprise Products Operating L.P. (collectively the
registrants) have evaluated the effectiveness of the registrants
disclosure controls and procedures, including internal control over financial reporting.
These disclosure controls and procedures are those controls and other procedures we
maintain, which are designed to provide reasonable assurance that all of the information
required to be disclosed by the registrants in all of their combined and separate periodic
reports filed with the SEC is recorded, processed, summarized and reported, within the
time periods specified in the SECs rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to provide
reasonable assurance that information required to be disclosed by the registrants in their
reports filed or submitted under the Securities Exchange Act of 1934 is accumulated and
communicated to our management, including the CEO and CFO of the General Partner, as
appropriate to allow those persons to make timely decisions regarding required disclosure.

In
the course of their evaluation of the registrants disclosure controls and
procedures, the CEO and CFO noted no significant deficiencies or material weaknesses in
the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrants ability to record, process, summarize and
report financial information. In addition, no fraud, whether or not material, was detected
involving management or other employees who have a significant role in the
registrants internal control over financial reporting. In addition, there has not
been any change in the registrants disclosure controls and procedures during the
quarter that has materially affected, or is reasonably likely to materially affect, the
registrants internal control over financial reporting. Since no significant
deficiencies or material weaknesses were detected in the registrants disclosure
controls and procedures, no corrective actions regarding these controls and procedures are
currently warranted.

68

---

# PART II. OTHER
INFORMATION.Item 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Exhibits.

|Exhibit No. |  | Exhibit*                                                                                                                                                                                                                                                                                                                                                                                                       
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|           
|2.1         |  | Purchase and Sale Agreement between Coral Energy, LLC and Enterprise Products Operating L.P.
                    dated September 22, 2000 (incorporated by reference to Exhibit 10.1 to Form 8-K filed September
                    26, 2000).                                                                                                                                                                
|2.2         |  | Purchase and Sale Agreement dated January 16, 2002 by and between Diamond-Koch, L.P. and
                    Diamond-Koch III, L.P. and Enterprise Products Texas Operating L.P. (incorporated by reference to
                    Exhibit 10.1 to Form 8-K filed February 8, 2002.)                                                                                                                           
|2.3         |  | Purchase and Sale Agreement dated January 31, 2002 by and between D-K Diamond-Koch, L.L.C.,
                    Diamond-Koch, L.P. and Diamond-Koch III, L.P. as Sellers and Enterprise Products Operating L.P.
                    as Buyer (incorporated by reference to Exhibit 10.2 to Form 8-K filed February 8, 2002).                                                                                   
|2.4         |  | Purchase Agreement by and between E-Birchtree, LLC and Enterprise Products Operating L.P. dated
                    July 31, 2002 (incorporated by reference to Exhibit 2.2 to Form 8-K filed August 12, 2002).                                                                                                                                                                                                
|2.5         |  | Purchase Agreement by and between E-Birchtree, LLC and E-Cypress, LLC dated July 31, 2002
                    (incorporated by reference to Exhibit 2.1 to Form 8-K filed August 12, 2002).                                                                                                                                                                                                                    
|3.1         |  | First Amended and Restated Limited Liability Company Agreement of Enterprise Products GP, LLC
                    dated as of September 17, 1999 (incorporated by reference to Exhibit 99.8 to Form 8-K/A-l
                    filed October 27, 1999).                                                                                                                                                       
|3.2         |  | Amendment No. 1 to the First Amended and Restated Limited Liability Company Agreement of
                    Enterprise Products GP, LLC dated as of September 19, 2002 (incorporated by reference to Exhibit 3.2 to Form
                    10-K filed March 31, 2003).                                                                                                                                      
|3.3         |  | Third Amended and Restated Agreement of Limited Partnership of Enterprise Products Partners L.P.
                    dated May 15, 2002 (incorporated by reference to Exhibit 3.3 to Form 10-Q filed August 13, 2002).                                                                                                                                                                                         
|3.4         |  | Amendment No. 1 to Third Amended and Restated Agreement of Limited Partnership of Enterprise
                    Products Partners L.P. dated August 7, 2002 (incorporated by reference to Exhibit 3.3 to Form
                    10-Q filed August 13, 2002).                                                                                                                                                
|3.5         |  | Amendment No. 2 to Third Amended and Restated Agreement of Limited Partnership of Enterprise
                    Products Partners L.P. dated December 17, 2002 (incorporated by reference to Exhibit 3.5 to Form
                    8-K filed December 17, 2002).                                                                                                                                            
|3.6         |  | Amended and Restated Agreement of Limited Partnership of Enterprise Products Operating L.P. dated
                    as of July 31, 1998 (incorporated by reference to Exhibit 3.2 to Registration Statement on Form
                    S-1/A filed July 21, 1998).                                                                                                                                          
|4.1         |  | Indenture dated as of March 15, 2000, among Enterprise Products Operating L.P., as Issuer,
                    Enterprise Products Partners L.P., as Guarantor, and First Union National Bank, as Trustee
                    (incorporated by reference to Exhibit 4.1 to Form 8-K filed March 10, 2000).                                                                                                     
|4.2         |  | First Supplemental Indenture dated as of January 22, 2003, among Enterprise Products Operating
                    L.P., as Issuer, Enterprise Products Partners L.P., as Guarantor, and Wachovia Bank, National
                    Association, as Trustee (incorporated by reference to Exhibit 4.2 to Registration Statement on
                    Form S-4, Reg. No. 333-102776, filed January 28, 2003).
|4.3         |  | Global Note representing $350 million principal amount of 6.375% Series A Senior Notes due 2013
                    with attached Guarantee (incorporated by reference to Exhibit 4.3 to Registration Statement on
                    Form S-4, Reg. No. 333-102776, filed January 28, 2003).                                                                                                                 
|4.4         |  | Global Note representing $350 million principal amount of 6.375% Series B Senior Notes due 2013
                    with attached Guarantee (incorporated by reference to Exhibit 4.4 to Registration Statement on
                    Form S-4, Reg. No. 333-102776, filed January 28, 2003).                                                                                                                 
|4.5         |  | Registration Rights Agreement dated as of January 22, 2003, among Enterprise Products Operating
                    L.P., Enterprise Products Partners L.P. and the Initial Purchasers named therein (incorporated by
                    reference to Exhibit 4.5 to Registration Statement on Form S-4, Reg. No. 333-102776, filed
                    January 28, 2003).                                    
|4.6         |  | Second Supplemental Indenture dated as of  February 14, 2003, among Enterprise Products Operating
                    L.P., as Issuer, Enterprise Products Partners L.P., as Guarantor, and Wachovia Bank, National
                    Association, as Trustee (incorporated by reference to Exhibit 4.3 to Form 10-K filed March 31,
                    2003).                                              

69

---

|4.7  |  | Rule 144 A Global Note representing $499.2 million principal amount of 6.875% Series A Senior
                    Notes due 2033 with attached Guarantee (incorporated by reference to Exhibit 4.5 to Form 10-K
                    filed March 31, 2003).                                                                                                                                                                                                                                                                                                                                                                  
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.8  |  | Regulation S Global Note representing $800,000 principal amount of 6.875% Series A Senior Notes
                    due 2033 with attached Guarantee (incorporated by reference to Exhibit 4.6 to Form 10-K filed
                    March 31, 2003).                                                                                                                                                                                                                                                                                                                                                                      
|4.9  |  | Form of Global Note representing $500 million principal amount of 6.875% Series B Senior Notes
                    due 2033 with attached Guarantee (incorporated by reference to Exhibit 4.8 to Form 10-K filed
                    March 31, 2003).                                                                                                                                                                                                                                                                                                                                                                       
|4.10 |  | Registration Rights Agreement dated as of February 14, 2003, among Enterprise Products Operating
                    L.P., Enterprise Products Partners L.P. and the Initial Purchasers named therein (incorporated by
                    reference to Exhibit 4.10 to Form 10-K filed March 31, 2003).                                                                                                                                                                                                                                                                                                                    
|4.11 |  | Global Note representing $350 million principal amount of 8.25% Senior Notes due 2005
                    (incorporated by reference to Exhibit 4.2 to Form 8-K filed March 10, 2000).                                                                                                                                                                                                                                                                                                                                                                                                                                      
|4.12 |  | Global Note representing $450 million
principal amount of 7.50% Senior Notes due 2011
(incorporated by reference to Exhibit 4.1 to Form 8-K filed January 25, 2001).                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.13 |  | Form of Common Unit certificate (incorporated by reference to Exhibit 4.1 to Registration
                    Statement on Form S-1/A; File No. 333-52537, filed July 21, 1998).                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.14 |  | $250 Million Multi-Year Revolving Credit Facility dated as of November 17, 2000, among Enterprise
                    Products Operating L.P., First Union National Bank, as Administrative Agent, Bank One, NA, as
                    Documentation Agent, the Chase Manhattan Bank, as Syndication Agent, and the several banks from
                    time to time parties thereto, with First Union Securities, Inc. and Chase Securities Inc. as
                    Joint Lead Arrangers and Joint Book Managers (incorporated by reference to Exhibit 4.2 to Form
                    8-K filed January 24, 2001).
|4.15 |  | $150 Million 364-Day Revolving Credit Facility November 17, 2000, among Enterprise Products
                    Operating L.P., First Union National Bank, as Administrative Agent, Bank One, NA, as
                    Documentation Agent, the Chase Manhattan Bank, as Syndication Agent, and the several banks from
                    time to time parties thereto, with First Union Securities, Inc. and Chase Securities Inc. as
                    Joint Lead Arrangers and Joint Book Managers (incorporated by reference to Exhibit 4.3 to Form
                    8-K filed January 24, 2001).               
|4.16 |  | Guaranty Agreement dated as of November 17, 2000, by Enterprise Products Partners L.P. in favor
                    of First Union National Bank, as Administrative Agent, with respect to the $250 Million
                    Multi-Year Revolving Credit Facility included as Exhibit 4.4 above (incorporated by reference to
                    Exhibit 4.4 to Form 8-K filed January 24, 2001).                                                                                                                                                                                                                       
|4.17 |  | Guaranty Agreement dated as of November 17, 2000, by Enterprise Products Partners L.P. in favor
                    of First Union National Bank, as Administrative Agent, with respect to the $150 Million 364-Day
                    Revolving Credit Facility (incorporated by reference to Exhibit 4.5 to Form 8-K filed January 24,
                    2001).                                                                                                                                                                                                                                                        
|4.18 |  | First Amendment to Multi-Year Credit Facility dated April 19, 2001 (incorporated by reference to
                    Exhibit 4.12 to Form 10-Q filed May 14, 2001).                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|4.19 |  | Second Amendment to Multi-Year Revolving Credit Facility dated April 14, 2002 (incorporated by
                    reference to Exhibit 4.14 to Form 10-Q filed May 14, 2002).                                                                                                                                                                                                                                                                                                                                                                                                                                              
|4.20 |  | Third Amendment to Multi-Year Revolving Credit Facility dated July 31, 2002 (incorporated by
                    reference to Exhibit 4.1 to Form 10-Q filed August 12, 2002).                                                                                                                                                                                                                                                                                                                                                                                                                                              
|4.21 |  | Fourth Amendment to 364-Day Revolving Credit Facility dated effective as of November 15, 2002 (incorporated by
reference to Exhibit 4.19 to Form 10-Q filed November 13, 2002).                                                                                                                                                                                                                                                                                                                                                                                                                                             
|4.22 |  | First Amendment to 364-Day Credit Facility dated November 6, 2001, effective as of November 16,
                    2001 (incorporated by reference to Exhibit 4.13 to Form 10-Q filed August 13, 2002).                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.23 |  | Second Amendment to 364-Day Revolving Credit Facility dated April 24, 2002 (incorporated by
                    reference to Exhibit 4.15 to Form 10-Q filed May 14, 2002).                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.24 |  | Third Amendment to 364-Day Revolving Credit Facility dated July 31, 2002 (incorporated by
                    reference to Exhibit 4.2 to Form 8-K filed August 12, 2002).                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.25 |  | Contribution Agreement dated September 17, 1999 (incorporated by reference to Exhibit "B" to
                    Schedule 13D filed September 27, 1999 by Tejas Energy, LLC).                                                                                                                                                                                                                                                                                                                                                                                                                                               

70

---

|4.26  |                                                                                                                                                                                                                                                        | Registration Rights Agreement dated September 17, 1999 (incorporated by reference to Exhibit "E"
                    to Schedule 13D filed September 27, 1999 by Tejas Energy, LLC).                                                                                                                                                                                                                                                                                                                                      
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.27  |                                                                                                                                                                                                                                                        | Unitholder Rights Agreement dated September 17, 1999 (incorporated by reference to Exhibit "C" to
                    Schedule 13D filed September 27, 1999 by Tejas Energy, LLC).                                                                                                                                                                                                                                                                                                                                        
|4.28  |                                                                                                                                                                                                                                                        | Amendment No. 1, dated September 12, 2003, to Unitholder Rights Agreement dated September 17, 1999 (incorporated by reference to
Exhibit 4.1 to Form 8-K filed September 15, 2003).                                                                                                                                                                                                                                                                                                                                       
|4.29# |                                                                                                                                                                                                                                                        | 364-Day Revolving Credit Agreement dated as of October 30, 2003, among Enterprise Products Operating L.P., Wachovia Bank, National
Association, as Administrative Agent, Bank One, N.A., as Syndication Agent, Royal Bank of Canada, The Bank of Nova Scotia and
Suntrust Bank, as Co-Documentation Agents, and the several lenders from time to time parties thereto, with Wachovia Capital Markets,
LLC and Banc One Capital Markets, Inc., as Joint Lead Arrangers, and Wachovia Capital Markets, LLC, as Sole Manager.
|4.30# |                                                                                                                                                                                                                                                        | Guaranty Agreement dated as of October 30, 2003 by Enterprise Products Partners L.P. in favor of Wachovia Bank, National Association,
as Administrative Agent, with respect to 364-Day Revolving Credit Facility.                                                                                                                                                                                                                                                                                                         
|4.31# |                                                                                                                                                                                                                                                        | Fourth Amendment to Multi-Year Revolving Credit Facility dated October 30, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                          
|31.1# |                                                                                                                                                                                                                                                        | Sarbanes-Oxley Section 302 certification of O.S. Andras for Enterprise Products Partners L.P. for
the September 30, 2003 quarterly report on Form 10-Q.                                                                                                                                                                                                                                                                                                                                                                   
|31.2# |                                                                                                                                                                                                                                                        | Sarbanes-Oxley Section 302 certification of O.S. Andras for Enterprise Products Operating L.P.
for the September 30, 2003 quarterly report on Form 10-Q.                                                                                                                                                                                                                                                                                                                                                                  
|31.3# |                                                                                                                                                                                                                                                        | Sarbanes-Oxley Section 302 certification of Michael A. Creel for Enterprise Products Partners
L.P. for the September 30, 2003 quarterly report on Form 10-Q.                                                                                                                                                                                                                                                                                                                                                              
|31.4# |                                                                                                                                                                                                                                                        | Sarbanes-Oxley Section 302 certification of Michael A. Creel for Enterprise Products Operating
L.P. for the September 30, 2003 quarterly report on Form 10-Q.                                                                                                                                                                                                                                                                                                                                                             
|32.1# |                                                                                                                                                                                                                                                        | Sarbanes-Oxley Section 1350 certification of O.S. Andras for the September 30, 2003 quarterly report
on Form 10-Q.                                                                                                                                                                                                                                                                                                                                                                                                        
|32.2# |                                                                                                                                                                                                                                                        | Sarbanes-Oxley Section 1350 certification of Michael A. Creel for the September 30, 2003 quarterly
report on Form 10-Q.                                                                                                                                                                                                                                                                                                                                                                                                   
|     
|*     | With respect to any exhibits incorporated by reference to any Exchange Act filings, the Commission file number for Enterprise
Products Partners L.P. is 1-14323 and the Commission file number for Enterprise Products Operating L.P. is 333-93239-01.
|#     | Filed with this report.                                                                                                                                                                                                                               

(b) Reports on Form 8-K.

July 16, 2003 filing, Items 5, 9 and 12. On July 16, 2003, we issued a press
release declaring our second quarter 2003 quarterly cash distribution rate and providing
earnings guidance for the three and six month periods ending June 30, 2003. A copy of this
press release was furnished as an exhibit.

July
16, 2003 filing, Items 5 and 7. On May 1, 2003, 10,734,936 of EPCOs Subordinated
Units converted to Common Units. As a result of this conversion, we updated the
description of our Common Units. Exhibits related to our Third Amended and Restated
Agreement of Limited Partnership were incorporated by reference.

July
31, 2003 filing, Items 5, 7 and 12. On July 31, 2003, we issued a press release
regarding our financial results for the six months ended June 30, 2003 and 2002. A copy of
the earnings press release was furnished as an exhibit.

September
15, 2003 filing, Items 5 and 7. On September 12, 2003, an affiliate of EPCO acquired
Shells 30% interest in our General Partner.  As a result of this transaction,
entities controlled by Dan L. Duncan, the Chairman of the General Partner,
own 100% of the membership interests in the General Partner. In connection
with this transaction, our Unitholder Rights Agreement was amended to, among other things,
eliminate Shells right to participate in our policy-making functions and to
eliminate certain preemptive rights of Shell. In addition, the three designees of Shell
that had been serving on the Board of Directors of the General Partner resigned their
positions on September 12, 2003. The amended Unitholder Rights Agreement and a press
release announcing the transaction were attached as exhibits.

71

---

# SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrants have duly caused this combined quarterly report on Form 10-Q to be signed on
their behalf by the undersigned thereunto duly authorized, in the City of Houston, State
of Texas on November 13, 2003.

| |                                    |                                          
| | ---------------------------------- | -----------------------------------------
| |                                    |                                          
| | ENTERPRISE PRODUCTS PARTNERS L.P. 
| | (A Delaware Limited Partnership)  
| | ENTERPRISE PRODUCTS OPERATING L.P.
| | (A Delaware Limited Partnership)  
|
| | By:                                | Enterprise Products GP, LLC,             
| |                                    | as General Partner for both registrants  
|
|
|
| | By:                                | /s/ Michael J. Knesek                    
| | Name:                              | Michael J. Knesek                        
| | Title:                             | Vice President, Controller and Principal 
| |                                    | Accounting Officer of the General Partner

72

---